SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
APO HEALTH, INC.
(Exact Name of Registrant as Specified in its Charter)
Nevada 5047 86-0871787
(State of Incorporation) (Primary Standard Industrial Code No.) (IRS Employer
Identification No.)
3590 Oceanside Rd.
Oceanside, New York 11575
(516) 594-9612
(Address and Telephone Number of Principal Executive Offices)
Dr. Jan Stahl
Chief Executive Officer
APO Health, Inc.
3590 Oceanside Rd.
Oceanside, New York 11575
(516) 594-9612
(Name, Address, and Telephone Number of Agent for Service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /x/
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this Form, check the following box. /x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
CALCULATION OF REGISTRATION FEE
Title of Shares Amount Proposed Maximum Proposed Maximum Amount of
to be to be Offering Price Aggregate Registration
Registered Registered (2) Per Unit Offering Price (1) Fee
- --------------------------------------------------------------------------------------------------
Common 4,655,110 $0.51 $2,374,106.10 $593.52
<FN>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) of the Securities Act, and based on the average of
the closing bid price and asked price reported on the OTC Bulletin Board on
January 9, 2002.
(2) Represents 2,304,208 presently issued shares of common stock, and
2,350,902 warrants; Each warrant to be converted to 1 share of common stock.
</FN>
The registrant amends this Registration Statement on such date or dates as may
be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
PROSPECTUS
4,655,110 shares
of
APO HEALTH, INC.
Common Stock
Offering Price: The shares will be offered for sale from time to time at
market or negotiated prices.
Selling Shareholders: The APO Health shareholders identified on page 11 of
this prospectus, not APO itself, are offering all of the shares to be sold in
the offering. The selling shareholders are acting individually, not as a
group. Except as otherwise disclosed herein, APO Health will not receive any
proceeds from sales of shares by these selling shareholders.
The 4,655,110 shares being offered for registration represents 2,304,208
presently issued shares of common stock, and 2,350,902 warrants; Each warrant
to be converted to 1 share of common stock.
Trading Market: APO Health common stock is traded on the Over The Counter
Bulletin Board (the "OTCBB") stock exchange under the symbol "APOA".
Investing in our common stock involves a high degree of risk.
See "RISK FACTORS" beginning on page 6.
Neither the Securities and Exchange Commission nor any state securities
regulators has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
Prospectus dated January 10, 2002
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TABLE OF CONTENTS
PART I
Page
SUMMARY 4
RISK FACTORS 6
FORWARD-LOOKING STATEMENTS 8
MANAGEMENT'S DISCUSSION AND ANALYSIS AND
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
USE OF PROCEEDS 9
DILUTION 11
SELLING SHAREHOLDERS 11
PLAN OF DISTRIBUTION 16
DESCRIPTION OF CAPITAL STOCK 18
LEGAL MATTERS 19
EXPERTS 19
WHERE YOU CAN FIND MORE INFORMATION 20
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE 20
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF OFFICERS AND DIRECTORS 22
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA 23
UNDERTAKINGS 37
SIGNATURES 38
INDEX TO EXHIBITS 39
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You should rely only on the information contained in this prospectus and the
accompanying materials delivered with it. We have not authorized anyone to
provide you with information different from that contained in this prospectus.
The selling shareholders listed on page 11 are offering to sell, and seeking
offers to buy, shares of common stock only in jurisdictions where offers and
sales are permitted. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of delivery of
this prospectus or of any sale of our common stock.
SUMMARY INFORMATION
This summary highlights information contained elsewhere in this prospectus.
It contains a summary of the most significant aspects of the offering that you
should consider before investing in our common stock. The securities offered
hereby involve a high degree of risk. Prior to making an investment decision,
potential investors should carefully review the entire prospectus, with
special attention given to the information under "RISK FACTORS" beginning at
page 6. As used throughout this prospectus, the terms "APO," "we," "us," and
"our" refer to APO HEALTH, INC.
Our Business
APO distributes medical, dental and veterinary supplies which are manufactured
by others. These products include protective garments such as disposable
isolation gowns, face masks and gauzes as well as other medical disposable
items including latex gloves, needles, syringes and health and beauty aids and
pharmaceuticals. Products are marketed and sold primarily (i) on a wholesale
basis to other distributors (approximately 70% of total revenues); (ii)
directly to doctors, dentists, institution and veterinarians (approximately
30% of total revenues).
Our History
The Company was incorporated in 1987 under the name of Xetal, Inc. In 1994,
Xetal Inc. was acquired by Insurance Kingdom, Inc., a Utah public company. In
connection with that transaction Insurance Kingdom changed its name to Xetal,
Inc., and Xetal, Inc., the New York corporation changed its name to APO
Health, Inc. APO became a wholly owned subsidiary of Xetal, Inc., the Utah
corporation.
The present operations of the Company's predecessor commenced about 1987 and
presently, through its subsidiaries, APO is a distributor, supplier of
disposable medical products principally to dental, medical and veterinary
professionals. These products include 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 pharmaceuticals.
Management has elected to concentrate the Company's efforts in specialized
markets for disposable dental, medical and veterinary products. The Company
currently distributes over 6,000 different products. Products are marketed
and sold primarily (i) to other distributors (accounting for approximately 70%
of revenues) (ii) directly to doctors, dentists and veterinarians (accounting
for approximately 30% of revenues).
Universal, APO's veterinary division, is a full service veterinary supply
company generated through direct marketing trade shows and mail order.
Pursuant to a Tax-Free Reorganization Agreement effective June 13, 2001 (a
copy of which is attached hereto as Exhibit "10.1"),
Internetfinancialcorp.com, Inc. ("IFAN"), a Nevada corporation, acquired
3,046,300 of the 3,209,563 outstanding shares of common stock of APO Health,
Inc, which represent approximately 91%. Whereupon, IFAN became the sole
owner and operator of the business and properties of APO Health, Inc.
APO Health, Inc. presently trades on the Over The Counter Bulletin Board stock
exchange under the symbol "APOA".
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Products and Services
Currently, APO distributes approximately 6,000 different products within the
medical, dental and veterinary markets. Several of the principal products are
described below:
Dental: APO markets and distributes protective gloves, needles, prophy
angles, barrier protection products, gowns, face masks, gauze products,
topical anesthetics and infection control chemicals to the dental industry.
Some of the more prominent products are: FloamTM - This product is a topical
fluoride treatment in a foam format which is offered in four flavors and is
marketed as a dental hygiene product for direct consumer use. Prophy Jet
Powder: This product, marketed and distributed to the dental industry, is
used primarily to prevent clogging and ensure even flow through prophy jet
units; and the GobbleTM. This product, also marketed and distributed to the
dental industry, is a bacterial product which forms a potent biofilm that
adheres to evacuation in dental equipment which causes organic waste to be
reduced to carbon dioxide and water.
Medical: APO markets and distributes protective gloves, tapes, syringes,
needles, protective barrier gowns and gauze products and instruments and
pharmaceuticals to the medical and health care industry.
Veterinarian: APO markets and distributes protective gloves, needles, gowns,
tapes, and full line of veterinary products to the veterinary industry.
Dr. Stahl's Dental First Aid Product: This is a new proprietary product which
the Company plans to market and distribute for direct consumer use. This kit
is designed to allow the consumer to perform limited emergency dental
functions such as replacing lost fillings and repairing broken dentures.
In addition to the foregoing, which represent the most popular product lines,
APO distributes a wide range of other medical, dental and veterinary supplies
and products. APO obtains its products from third party manufacturers and
suppliers. At the present time, APO does not have any contractual
arrangements with any of its suppliers or manufacturers. Although APO does
not have any such contractual arrangements, APO believes that there are
adequate alternative manufactures which would be able to provide adequate
manufacturing capabilities in the event its present manufacturers were unable,
or unwilling to continue to provide APO with manufacturing services.
Our Address
We maintain our principal executive offices 3590 Oceanside Avenue, Oceanside,
New York 11572. The Company's telephone number is (516) 594-0005. Our web
site is located at www.apohealth.com. Information contained on our web
site is not part of this prospectus.
The Offering
Common stock offered (1) 4,655,110 shares
Common stock outstanding before the Offering (2) 23,210,413 shares
Common stock outstanding after the Offering (3) 23,210,413 shares
Over the Counter Bulletin Board symbol: "APOA"
(1) Based upon a Registration Rights Agreement which was included in a
Regulation D, Rule 506 Offering completed on May 31, 2001, (Exhibit "10.2"),
whereupon 499,997 shares were issued. Pursuant to other agreements as are set
forth in the "USE OF PROCEEDS" section and, in the "SELLING SECURITY HOLDERS"
section, sub-heading, "Certain Relationships and Related Transactions", the
Company is registering a total of 4,655,110 shares restricted common stock of
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which 2,350,902 are shares available through the purchase of Company warrants,
the terms of which are set forth below herein.
(2) As of November 29, 2001.
(2)(3) Does not include shares of common stock that are issuable upon the
exercise of outstanding warrants.
RISK FACTORS
Any investment in our shares of common stock involves a high degree of risk.
You should carefully consider the following information about these risks,
together with the other information contained in this prospectus before you
decide to buy our common stock. If any of the following risks actually occur,
our business, results of operations, and financial condition would likely
suffer. In such circumstances, the market price of our common stock could
decline, and you may lose all or a part of the money you paid to buy our
common stock.
Narrow Operating Margins
The Company's sales are typically of low profit margin items, with net
operating margins averaging between 2% and 4% of gross revenues. As such, any
downturn in sales could adversely affect the Company's ability to operate
profitably and could result in operating losses in the future.
Potential Impact of Changing Economic Factors in the Health Care Markets
The health care industry has been typified in recent years by strict cost
containment measures imposed by federal and state governments, private
insurers and other "third party" payers of medical costs. In response to
these pressures, virtually all segments of the health care market have become
extremely cost sensitive and in many cases hospitals and other health care
providers have become affiliated with purchasing consortiums which are charged
with obtaining large quantities of needed products at the lower possible cost.
These factors in combination have had an adverse impact upon smaller suppliers
and manufactures, such as the Company, which are either unable to supply the
large quantities sought by the purchasing consortiums or which are unable to
respond to the need for lower product pricing. Although management believes
that its planned expansion program will enable it to meet the demand for large
quantity orders, and despite management's belief that the dramatic increased
demand for safety oriented products, such as the disposable products offered
by the Company, will offset these factors, there can be no assurance that the
Company will be able to overcome the negative impact of these conditions in
the health care marketplace.
Potential Impact of FDA and Governmental Regulation
Some of the Company's products may be regulated as medical devices by the
federal Food and Drug Administration (the "FDA") pursuant to the federal Food
and Drug Cosmetic Act (the "ACT") and are, or may be, subject to regulation by
other federal and state governmental agencies. The FDA has comprehensive
authority to regulate the development, production, distribution and promotion
of medical devices. Furthermore, certain states impose additional
requirements on the distribution of medical devices. The FDA may require
pre-market approval of some of the Company's proposed products, requiring
extensive testing and a lengthy review process. The cost of complying with
present and future regulations may be significant. Furthermore, the
regulatory approval process and attendant costs may delay or prevent the
marketing of products developed by the Company in the future. The Mandatory
Device Reporting ("MDR") regulation obligates manufactures including, in some
cases, distributors such as the Company, to provide information to the FDA on
injuries alleged to have been associated with the use of a product or certain
products failures which could cause injury. The FDA is empowered to take
action against manufacturers of regulated products including both civil and
criminal remedies, and may also prohibit or suspend the marketing of products
if circumstances so warrant. Any such action by the FDA could result in a
disruption of the Company's operations for an undetermined time.
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Product Liability; Cost and Availability of Insurance
Providers of medical products to hospitals and other health care institutions
may encounter liability for damages to patients in the event that their
products prove to be defective. Certain of the Company's products and
proposed products will be utilized in medical procedures where the Company
could be subject to claims for such injuries resulting from the use of its
products. Recent developments in the insurance industry have reduced the
availability and increased the cost of liability insurance coverage. At
present, the Company maintains product liability insurance coverage in the
amount of $1,000,000 with an umbrella to $4,000.000. However, as a result of
the continuing changes in insurance coverage and premiums, no assurance can be
given that such insurance will be adequate to fully protect the Company in the
future or that product liability insurance can be maintained at a reasonable
cost.
Lack of Patent Protection
At present, the Company does not rely upon patent protection for any of its
products and such protection is not believed to be essential by management
because of the character of its products. Furthermore, there is little
likelihood that it will develop patentable products or processes in the
foreseeable future. In the absence of such protection, the Company will
primarily rely upon trade secrets and proprietary techniques, where applicable
to attain or maintain any commercial advantage. There is no assurance that
competitors will not independently develop and market, or obtain patent
protection for, products similar to those designed or produced by the Company,
and thus negate any advantage of the Company with respect to any such
products. Even if patent protection becomes available to the Company, there
can be no assurance that such protection will be commercially beneficial.
Competition
The dental medical and veterinary products supply businesses are intensely
competitive. At present, the Company estimates that there are over 20
companies whose products compete with many of the Company's present and
proposed products. These companies range from major multinational companies
to enterprises which are smaller in size and financial ability than the
Company. The Company's present and prospective competitors also include the
numerous manufactures and suppliers of reusable medical products and
manufacturers of raw material used by the Company. Many of the Company's
competitors have far greater financial resources, larger staffs, and more
established market recognition in both the domestic and international markets
than the Company.
Dependence Upon Third Party Manufacturers/Suppliers
The Company does not directly manufacture any of the products it presently
sells. The products distributed by the Company are, for the most part,
manufactured by third parties in the United States, the Far East, Mexico and
Canada. In general, the Company does not have long-term contracts with its
manufacturers. Although the Company believes alternative sources for
virtually all of its products are readily available, there can be no assurance
that the available supply from such alternative sources would be adequate to
meet the increased demand for production that would most likely result from
any significant disruption in the Company's traditional manufacturers and
suppliers of its products.
Foreign Manufacturing
Foreign manufacturing is subject to a number of risks, including
transportation delays and interruptions, political and economic disruptions,
the imposition of tariffs and similar import/export controls and changes in
governmental policies. Although, to date, the Company has not experienced any
material adverse effects due to such risks, there can be no assurance that
such events will not occur in the future with the result of possible increases
in product costs and/or delays in product delivery which would, in all
likelihood, result in the loss of revenues and goodwill by the Company.
Agreements with Management
Dr. Jan Stahl, Chief Executive Officer presently has an employment agreement
with the Company which pays him an annual salary, a bonus if certain net sales
goals have been achieved and, an auto allowance (Exhibit "10.4"). In the
years
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1999 and 2000, Dr. Stahl and Mr. Steil each received 300,000 shares of the
Company's common stock in lieu of cash as performance bonuses pursuant to
their current employment agreements. In March 2001, Dr. Stahl and Mr. Steil
have each received 150,000 shares of the Company's stock in lieu of cash as
performance bonuses pursuant to previous employment agreements.
We are dependent upon the ongoing services of certain of our executives, the
loss of whom could have a detrimental effect on our profitability and the
market price of our stock.
We are principally dependent upon the personal efforts and abilities of Dr.
Jan Stahl and Mr. Peter Steil, its principal operating officers. The loss of
either of these individual could have a materially adverse effect upon the
Company's ability to successfully carry on its business. In addition,
although APO Health is contemplating obtaining "keyman" life insurance upon
the lives of Dr. Stahl and Mr. Steil in the amount of not less than $1,000,000
each, if the Company were to lose the services of either Dr. Stahl or Mr.
Steil, the Company's business could be adversely affected and there can be no
assurance that the proceeds of such insurance would be adequate to secure an
adequate replacement or to fully compensate the Company for such loss.
Furthermore, as the Company expands its present operations, it will require
the services of additional skilled personnel. There can be no assurance that
it will be able to attract persons with the requisite skills and training to
meet future needs or, even if suitable persons are found that they will be
available on terms acceptable to the Company.
We do not intend to pay dividends, and so the only return on your investment,
if any, will occur upon the appreciation and sale of our common stock.
We have not paid any dividends and there are presently no plans to pay any
such dividends in the foreseeable future. The declaration and payment of
dividends in the future will be determined by the Board of Directors in light
of conditions then existing, including earning, financial condition, capital
requirements and other factors. There are no contractual restrictions on the
Company's present or future ability to pay dividends. Further, there are no
restrictions on any of the Company's subsidiaries, which would, in the future,
adversely affect the Company's ability to pay dividends to its shareholders.
(See "DILUTION")
The limitations on director liability contained in our articles of
incorporation and bylaws may discourage suits against directors for breach of
fiduciary duty.
As permitted by Nevada law, our articles of incorporation and bylaws provide
that members of our Board of Directors are not personally liable to you or APO
for monetary damages resulting from a breach of their fiduciary duties. These
limitations on director liability may discourage shareholders from suing
directors for breach of fiduciary duty and may reduce the likelihood of
derivative litigation brought against a director by shareholders on APO's
behalf. Furthermore, our bylaws, as amended, provide for mandatory
indemnification of directors and officers to the fullest extent permitted by
Nevada law. All of these provisions limit the extent to which the threat of
legal action against our directors for any breach of their fiduciary duties
will prevent such breach from occurring in the first instance.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus and in the documents
incorporated by reference in this prospectus are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. These forward-looking statements
can be identified by the use of the future tense or by predictive or
forward-looking terminology, such as "believes," "anticipates," "expects,"
"estimates," "may," or similar terms. Forward-looking statements also include
projections of financial performance, statements regarding management's
plans and objectives and statements concerning any assumption relating to the
foregoing. Important factors regarding APO's business, operations, and
competitive environment which may cause actual results to vary materially from
these forward-looking statements are discussed under the caption "RISK
FACTORS."
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MANAGEMENTS DISCUSSION AND ANALYSIS AND FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
- ---------------------
Net sales for fiscal year 2001 were $25.51 million compared with $30.23
million in fiscal year 2000, a decrease of 15.6%. The decrease of sales was
primarily a result of a decrease in the wholesale business. Retail dental,
medical and veterinary sales increased by approximately 15% while sales to
wholesalers decreased by approximately 21%.
Gross margin for fiscal year 2001 was $2.77 million compared with $3.00
million in fiscal year 2000, but as a percentage of sale the gross margin
increased to 10.86% in fiscal year 2001 compared to 9.94% in fiscal year 2000.
Then increase in gross margin reflects a greater percentage of retail sales,
which has a higher gross profit margin than wholesale sales.
Operating expenses include selling expenses and general and administrative
expenses. Selling expenses for fiscal 2001 were $805,209 compared to $819,145
in fiscal year 2000, a decrease of 1.7%. General and administrative costs in
fiscal 2001 were $1,685,007 compared to $2,044,602 in fiscal year 2000, a
decrease of 17.6 %. Officer compensation in 2001 was $425,600 compared to
$592,900 in fiscal year 2000, a decrease of 28.2%. In fiscal year 2000
officers compensation included stock bonuses of approximately $305,000
compared to a stock bonus in fiscal year 2001 of $86,100. In fiscal year
2001, the Company recorded contribution to the profit sharing plan of $50,000.
The Company determined that the year 2000 contribution would not be made and
recognized a $50,000 reduction in general and administrative expenses. As
a result of the reduction in revenue, other office expenses including mailing,
printing and stationary, and telephone decrease by approximately $66,500 in
fiscal year 2001 from fiscal year 2000.
Other expenses in fiscal year 2001 include $340,225 of business acquisition
costs including professional and consulting fees to acquire a inactive public
company. In fiscal year 2000, the Company spun off its holding company
incurring professional and consulting fees of $137,135.
Liquidity and Capital Resources
- -------------------------------
As of year end September 30, 2001, the Company has a net current working
capital of $1,053,050, an increase of $363,808 from September 30, 2000. The
aforementioned business acquisition costs of $284,467 were financed by private
placement proceeds. Excluding the business acquisition costs, the Company
would have had cash flow from operations of approximately $290,000. The
Company presently has a $2,000,000 credit facility which is sufficient to fund
the operations for the next fiscal year.
The Company currently has 3,000,850 million warrants outstanding, each warrant
entitling holders to purchase one share of the Company's common stock at an
exercise price of either $1.00, $1.50 or $2.00 per share. There is no
guarantee that any warrants will be exercised. Any proceeds from the exercise
of warrants could be used to pay down the debt, expand and enhance current
operations or be used for further acquisitions.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock by the
selling shareholders. However, in addition to the warrants available to
the aforementioned Regulation D, Rule 506 April 24, 2001 offering subscribers,
the Company entered into several warrant agreements (See "SELLING SECURITY
HOLDERS", sub-heading, "Certain Relationships and Related Transactions" on
page 15), which, should they be exercised, would result in the following:
- - One million (1,000,000) warrants are being registered pursuant to a June 5,
2001 agreement between APO and Columbia Financial Group, Inc. (Exhibit
"10.3"), each warrant equaling one share of common stock. Should Columbia
Financial Group, Inc. exercise their option to purchase the 1,000,000 APO
warrants, APO would realize $333,333 from the exercise of the initial 333,333
warrants, the exercise price being $1.00 per share of common stock;
$499,999.50 from the exercise of an additional 333,333 warrants, the exercise
price being $1.50 per share of common stock; and, $666,668 if the remaining
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333,334 warrants were to be exercised, the exercise price being $2.00 per
share of common stock. The purchase of all 1,000,000 APO warrants would
result in the Company realizing a sum of $1,500,000.50.
- - The 58 shareholders who subscribed to the April 24, 2001 APO Regulation D,
Rule 506 Offering, and whose shares are being registered pursuant to a
Registration Rights Agreement, and who are enumerated below in section,
"SELLING SHAREHOLDERS", have the option to purchase up to 3 APO warrants per
Unit purchased, each warrant entitling the holder to purchase 1,667 shares of
the Company's common stock at an exercise price of $1.00 per share. Should
each subscriber elect to exercise his/her/their option regarding the warrants,
the Company would realize approximately $1,503,634.
- - BAF Consulting, Inc. has an option to purchase 200,000 APO warrants, each
warrant equaling one share of common stock. Should BAF Consulting, and/or
assigns, exercise their option on their 200,000 warrants, APO would realize
$66,666 from the initial 66,666 warrant exercise, the exercise price being
$1.00 per share, $99,999 from the exercise of an additional 99,999 shares, the
exercise price being $1.50 per share, and $133,334 if the remaining 66,667
shares were to be exercised, the exercise price being $2.00 per share.
Should BAF Consulting, Inc., and/or assigns, decide to exercise their option
on all 200,000 warrants, APO would realize a sum total of $299,999.
- - Starr Consulting, Inc. has an option to purchase 200,000 APO warrants, each
warrant equaling one share of common stock. Should Starr Consulting, Inc.,
and/or assigns, exercise their option on their 200,000 warrants, APO would
realize $66,666 from the initial 66,666 warrant exercise, the exercise price
being $1.00 per share, $99,999 from the exercise of an additional 99,999
shares, the exercise price being $1.50 per share, and $133,334 if the
remaining 66,667 shares were to be exercised, the exercise price being $2.00
per share of common stock. Should Starr Consulting, Inc. and/or assigns
decide exercise their option on all 200,000 warrants, APO would realize a sum
total of $299,999.
- - Denora Corporation, AEC has an option to purchase 154,000 APO warrants,
each warrant equaling one share of common Should Denora Corporation, AEC,
and/or assigns, exercise their option to purchase their 154,000 warrants, APO
would realize $51,333 from the initial 51,333 warrant exercise, the exercise
price being $1.00 per share, $76,999.50 from the exercise of an additional
51,333 shares, the exercise price being $1.50 per share, and $102,666 if the
remaining 66,667 shares were to be exercised, the exercise price being $2.00
per share of common stock. Should Denora Corporation, AEC, and/or assigns,
decide exercise their option on all 154,000 warrants, APO would realize a sum
total of $230,998.50.
- - Dr. Jan Stahl, CEO and Secretary of the Company, has an option to purchase
of 250,000 APO warrants, each warrant equaling one share of APO common stock
at an exercise price of $0.25 per share. Should Jan Stahl exercise his option
to purchase all 250,000 APO shares, the Company would realize a sum total of
$62,500.
- - On June 13, 2001, APO entered into a Warrant Agreement with CSC Cornerstone
Capital Corp., for the purchase of 11,000 APO shares at an exercise price of
$2.00 per share. Should CSC Cornerstone Capital Corp. exercise its option to
purchase all 11,000 APO warrants, the Company would realize a sum total of
$22,000.
- - On June 13, 2001, APO entered into a Warrant Agreement with R. B. Source
Marketing Ltd., for the purchase of 136,000 APO shares at an exercise price of
$1.00 per share for the first 61,000 shares; $1.50 per share for an additional
25,000 shares; and, $2.00 per share for the remaining 50,000 shares. Should
R.B Source Marketing Ltd exercise its option to purchase all 136,000 APO
warrants, the Company would realize a sum total of $161,037.50.
- - On June 13, 2001, APO entered into a Warrant Agreement with Karen Zeidel,
for the purchase of 75,000 APO shares at an exercise price of $1.00 per share
for the first 25,000 shares; $1.50 per share for an additional 25,000 shares;
and, $2.00 per share for the remaining 25,000 shares. Should Karen Zeidel
exercise her option to purchase all 75,000 APO warrants, the Company would
realize a sum total of $112,500.
- - On June 13, 2001, APO entered into a Warrant Agreement with JVO Consulting,
Inc., for the purchase of 100,000 APO shares at an exercise price of $1.00 per
share for the first 33,333 shares; $1.50 per share for an additional 33,333
shares; and, $2.00 per share for the remaining 33,334 shares. Should JVO
Consulting, Inc. exercise its option to purchase all 100,000 APO warrants, the
Company would realize a sum total of $150,000.50.
-10-
- - On June 13, 2001, APO entered into a Warrant Agreement with ARB Consulting,
Inc., for the purchase of 113,000 APO shares at an exercise price of $1.00 per
share for the first 37,666 shares; $1.50 per share for an additional 37,666
shares; and, $2.00 per share for the remaining 37,667 shares. Should ARB
Consulting, Inc. exercise its option to purchase all 113,000 APO warrants, the
Company would realize a sum total of $225,998.
- - On June 13, 2001, APO entered into a Warrant Agreement with Robert Barton
for the purchase of 86,000 APO shares at an exercise price of $1.50 per share
for the first 50,000 shares; and, $2.00 per share for the remaining 36,000
shares. Should Robert Barton exercise his option to purchase all 86,000 APO
warrants, the Company would realize a sum total of $147,000.
- - On June 13, 2001, APO entered into a Warrant Agreement with Dominic Spooner
for the purchase of 25,000 APO shares at an exercise price of $1.00 per share.
Should Robert Barton exercise his option to purchase all 86,000 APO warrants,
the Company would realize a sum total of $25,000.
Should the purchase of all the warrants be exercised as set forth herein, the
Company would realize a sum total of $4,336,167. There is no guarantee that
any warrants will be exercised. Any proceeds from the exercise of warrants
could be used to pay down the debt, expand and enhance current operations or
be used for further acquisitions.
DILUTION
The shares offered in this Prospectus are validly issued, fully paid and
nonassessable shares of the Company's Common Stock. The sale by the selling
stockholders will not serve to dilute current equity positions in the Company.
SELLING SHAREHOLDERS
We issued 499,997 shares of common stock in a Regulation D, Rule 506 private
placement dated April 24, 2001. The following sets forth, to our knowledge,
certain information about the selling stockholders as of November 29, 2001.
The percentage of beneficial ownership set forth in the table is based on a
total of 23,210,413 shares of common stock outstanding as of November 29,
2001. Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes voting or investment power
with respect to shares. Shares of common stock issuable under warrants and
options that are exercisable after January 9, 2002, are deemed outstanding
for computing the percentage ownership of the stockholder holding the warrants
or options but are not deemed outstanding for computing the percentage
ownership of any other stockholder. Unless otherwise indicated below, to our
knowledge, all persons named in the table have sole voting and investment
power with respect to their shares of common stock, except to the extent
authority is shared by spouses under applicable law. The inclusion of any
shares in this table does not constitute an admission of beneficial ownership
for the person named below. APO will receive no proceeds from the sale of the
common stock by the selling shareholders. APO would receive proceeds should
the shareholders who have warrants, as set forth herein, decide to exercise
those warrants.
- --------------------------- ------------- ---------- ------------ -------------- ---------- ---------
NAME: SHARES OF PERCENTAGE NUMBER OF SHARES OF PERCENTAGE WARRANTS
COMMON OF SHARES COMMON STOCK OF
STOCK OWNERSHIP OFFERED BY BENEFICIALLY OWNERSHIP
BENEFICIALLY BEFORE SELLING OWNED AFTER
OWNED OFFERING SHAREHOLDERS AFTER OFFERING OFFERING
BEFORE
OFFERING
- --------------------------- ------------- ---------- ------------ -------------- ---------- ---------
Betty Greco 8,333 * 8,333 0 * 15
George Rosati 16,667 * 16,667 0 * 30
Helana Stone 3,333 * 3,333 0 * 6
Michael Saporsky 16,667 * 16,667 0 * 30
Mario Branchinelli 16,667 * 16,667 0 * 30
-11-
Ron Leatherman 8,333 * 8,333 0 * 15
Chris Damakas 3,333 * 3,333 0 * 6
Dick Levenson 8,333 * 8,333 0 * 15
John & Wilma Schoenmaker 16,667 * 16,667 0 * 30
Moses Hasson 16,667 * 16,667 0 * 30
John Mitchell 16,667 * 16,667 0 * 30
Herman Logsdon 3,333 * 3,333 0 * 6
Salvatore Sparacino 8,333 * 8,333 0 * 15
Andrew Mcveigh 10,000 * 10,000 0 * 18
Izhar Brill 16,667 * 16,667 0 * 30
James Bernardo 6,667 * 6,667 0 * 12
Peter Spano (2) 8,333 * 8,333 0 * 15
Barry Calvagna 8,333 * 8,333 0 * 15
Stefan Spano 13,333 * 13,333 0 * 24
Thomas Willey 8,333 * 8,333 0 * 15
Kenneth A. Wright &
Marguerite F. Wright Living
Trust 8,333 * 8,333 0 * 15
Dr. Dorthy Scarpinato 8,333 * 8,333 0 * 15
Margret Greco 25,000 * 25,000 0 * 45
USR Management Corp. 8,333 * 8,333 0 * 15
George Greco, Sr. 25,000 * 25,000 0 * 45
David Londin 16,667 * 16,667 0 * 30
Tim Stacy 5,000 * 5,000 0 * 9
Joe Mansi 5,000 * 5,000 0 * 9
Rachael Lynch 4,167 * 4,167 0 * 8
Mike Manzella 3,333 * 3,333 0 * 6
Mark Pellettieri 8,333 * 8,333 0 * 15
Edna Lescrinier 4,167 * 4,167 0 * 8
John Buffa 1,667 * 1,667 0 * 3
Dominick Spadaro 8,333 * 8,333 0 * 15
Giovanna Morelli 10,000 * 10,000 0 * 18
Pasquale Cioffi 5,000 * 5,000 0 * 9
Leslie Torino 16,667 * 16,667 0 * 30
Anthony Aleixo 21,667 * 21,667 0 * 39
Vicki Barak 5,000 * 5,000 0 * 9
James Ho 8,333 * 8,333 0 * 15
Henry Smith 5,000 * 5,000 0 * 9
Bernard Schunicht 5,000 * 5,000 0 * 9
Dr, Gayle Mullanox 11,667 * 11,667 0 * 21
Warren Heydorn 5,000 * 5,000 0 * 9
Lenny Liebman 3,333 * 3,333 0 * 6
F. Laurence Gosnell 5,000 * 5,000 0 * 9
Don Kalogeras 5,000 * 5,000 0 * 9
Herbert Kalish 7,500 * 7,500 0 * 14
Michael Mennella 3,333 * 3,333 0 * 6
Cornelius & Jenette Keyser 5,000 * 5,000 0 * 9
Brian Levine 1,667 * 1,667 0 * 3
Diane Orandello 5,000 * 5,000 0 * 9
George Garrambone 5,000 * 5,000 0 * 9
Donna Garrambone 3,333 * 3,333 0 * 6
Paul Greco IRA (14) 3,333 * 3,333 0 * 6
Denise Greco IRA (14) 3,333 * 3,333 0 * 6
-12-
Denise Greco (14) 158,333 * 8,333 0 * 15
Altice Capital Corp. (14) 200,833 * 833 0 * 2
Total 849,997 * 499,997 0 * 902
The above listed 58 shareholders represent the subscribers in the Company's
April 24, 2001 Regulation D, Rule 506 Offering wherefrom 499,997 shares of
APO common stock was issued. Each Warrant equals 1,667 shares of APO's common
stock.
- --------------------------- ------------- ---------- ------------ -------------- ---------- ---------
NAME: SHARES OF PERCENTAGE NUMBER OF SHARES OF PERCENTAGE WARRANTS
COMMON OF SHARES COMMON STOCK OF
STOCK OWNERSHIP OFFERED BY BENEFICIALLY OWNERSHIP
BENEFICIALLY BEFORE SELLING OWNED AFTER
OWNED OFFERING SHAREHOLDERS AFTER OFFERING OFFERING
BEFORE
OFFERING
- --------------------------- ------------- ---------- ------------ -------------- ---------- ---------
Dr. Jan Stahl (1) 9,065,796 34% 0 9,065,796 34% 250,000
Paul Greco Family Ltd.
Partnership (14) 500,000 * 500,000 0 * 0
Columbia Financial
Group (3) 279,167 * 0 0 * 1,000,000
Diversified Consulting,
LLC (15) 363,156 363,156 0 * 0
Corrina Pollak 150,000 * 150,000 0 * 0
R.E. Hanna 3,500 * 3,500 0 * 0
Patrick Moan 1,000 0 1,000 0 * 0
Robert Barton (4)(5)(16) 191,666 * 191,666 191,666 * 86,000
R. B. Source Marketing
Ltd. (4)(5)(16) 0 * 0 0 * 136,000
Karen Zeidel (6)(16) 216,611 * 0 0 * 75,000
CSC Cornerstone Capital
Corp. (4)(7) 0 * 0 0 * 11,000
Dominic Spooner 0 * 0 0 * 25,000
BAF Consulting, Inc. (8) 0 * 0 0 * 200,000
Denora Corporation, AE (10) 0 * 0 0 * 154,000
JVO Consulting, Inc. (9) 0 * 0 0 * 100,000
ARB Consulting, Inc. (11) 182,944 * 182,944 0 * 113,000
Starr Consulting, Inc. (12)(17) 0 * 0 0 * 200,000
Altice CapitalCorp (14) 200,833 * 200,000 0 * 0
Netresolutions.com, Inc. 49,000 * 49,000 0 * 0
Seville Consulting, LLC (17) 162,945 * 162,945 0 * 0
Total 11,366,618 1,804,211 2,350,000
<FN>
Total previously issued shares being registered is 2,304,208; Total warrants
being registered is 2,350,902; Each warrant to be converted to 1 share of
common stock.
</FN>
<FN>
* = less than 1% of the total issued and outstanding.
</FN>
<FN>
(1) Dr. Stahl is an officer and director of the Company.
</FN>
-13-
<FN>
(2) Five Thousand (5,000) shares were issued to Peter Spano and Three
Thousand Three Hundred Thirty Three (3,333) were issued to "Peter Spano IRA".
</FN>
<FN>
(3) One million (1,000,000) of warrants being registered are pursuant are
being registered pursuant to a June 5, 2001 agreement between the Company and
Columbia Financial Group, a copy of which is attached hereto as Exhibit
"10.3".
</FN>
<FN>
(4) Robert Barton, 4284 Morgan Crescent, West Vancouver, BC, Canada V7V2N9,
is the husband of shareholder, Karen Zeidel. He is also the President of R.
B. Source Marketing.
</FN>
<FN>
(5) R. B. Source Marketing Ltd., 900-1055 West Georgia, Vancouver, BC, Canada
V6E2N9; President APO shareholder, Robert Barton.
</FN>
<FN>
(6) Karen Zeidel, 4282 Morgan Crescent, West Vancouver, BC, Canada V7V2N9, is
the wife of shareholder Robert Barton.
</FN>
<FN>
(7) CSC Cornerstone Capital Corp., 900-1055 West Georgia, Vancouver, BC,
Canada V6E2N9; Officers and Directors, Michael Harrison and APO shareholder,
Robert Barton.
</FN>
<FN>
(8) BAF Consulting, Inc., 115 East Main St., Florence, CO 81226, Daniel
Motsinger, President.
</FN>
<FN>
(9) JVO Consulting, Inc., 1020 Brookstown Ave., Ste. 30, Winston-Salem, NC
27101. Joe Overcash, the President, is also a shareholder in the Company.
</FN>
<FN>
(10) Denora Corporation, Corporation,c/o Ian Muirhead, 29th Floor, Three
Bentall Centre, 595 Burrard St., Vancouver, B.C. V7X 1J5.
</FN>
<FN>
(11) ARB Consulting, Inc., 12807 Valleyhill Street, Woodbridge, VA 22192,
Ashleigh Good, President.
</FN>
<FN>
(12) Starr Consulting, Inc., 932 Burke St., Winston-Salem, NC 27101, Daniel
Starczewski, President.
</FN>
<FN>
(13) Diversified Consulting, LLC, Main Street, Box 1298, Duck Creek Village,
Utah 84762.
</FN>
<FN>
(14) Paul Greco Family Ltd. Partnership, 500 No. Broadway, Ste. 129, Jericho,
New York 11750. Paul Greco and Denise Greco are husband and wife.
</FN>
<FN>
(15) APO shareholder, Paul Greco is Secretary and Treasurer of Altice Capital
Corp., 500 N. Broadway, #129, Jericho, New York 11750.
The shares being offered for registration do not come from the 506
offering. The 200,000 shares were issued for consulting services.
</FN>
<FN>
(16) Robert Barton has 167,361unrestricted shares of the Company's Common
Stock; Karen Zeidel, the wife of Robert Barton has 189,528 unrestricted shares
of the Company's common stock; Robert Barton is holding 50,000 shares of the
Company's common stock on behalf of Dana Barton, the minor child of Robert
Barton and Karen Zeidel.
</FN>
<FN>
(17) Dan Starczewski, who is the sole officer and director of Starr
Consulting, is also the sole officer of and director of Seville Consulting,
Inc., a Colorado corporation whose address is 413 N. Petroleum Street,
Florence, CO 81226.
</FN>
We do not know when or in what amounts a selling stockholder may offer shares
for sale. The selling stockholders may not sell any or all of the shares
offered by this Prospectus. Because the selling stockholders may offer all or
some of the shares pursuant to this Offering, and because there are currently
no agreements, arrangement or understandings with respect to the sale of any
of the shares, we cannot estimate the number of shares that will be held by
the selling stockholders after the completion of the Offering. However, for
purposes of this table, we have assumed that after completion of the Offering
none of the shares covered by this Prospectus will be held by the selling
stockholders.
Certain Relationships and Related Transactions
1. Columbia Financial Group ("Columbia"): Columbia is an investor relations,
direct marketing, publishing, public relations and advertising firm. On June
5, 2001, APO entered into a consulting agreement with Columbia effective June
5, 2001 for an initial term of twelve months whereby Columbia will provide
assistance with advertising campaigns, marketing campaigns, dealing with
institutional investors, preparation of press releases and news announcements.
APO agreed to compensate Columbia 1,000,000 shares of restricted common stock;
and, a total of 1,000,000 warrants to be exercised as follows: (a) 334,000
warrants with an exercise price of $1.00 per warrant; (b) 333,000 warrants
with an exercise price of $1.50 per warrant, and (c) 333,000 warrants with an
exercise price of $2.00, available for exercise within five years from June 5,
2001.
2. On March 28, 2001, APO Health, Inc., the private company, entered into an
independent contracting agreement with Worldwide Capital Corp. ("WWC"),
whereby WWC would provide general consulting services assisting APO in its
desire to be a publically trading entity. The services to be provided
specifically do not include any fund raising or promotional activities. In
return for these general consulting services, APO agreed to pay WWC the sum of
$20,000 and issue to WWC
-14-
and/or its assigns, 850,000 restricted shares of APO common stock. That
issuance has been broken down as follows: 500,000 shares to Paul Greco Family
Partnership, 200,000 shares to Altice Capital Corp. and, 150,000 shares to
Denise Greco, wife of Paul Greco.
3. On March 21, 2001, APO Health, Inc., the private company, entered into an
independent contracting agreement with Paladin & Associates ("P&A"), whereby
P&A would provide general business consulting services assisting APO in its
desire to be a publically trading entity. The services to be provided
specifically do not include any fund raising or promotional activities. In
return for these services, APO agreed to issue to P&A and/or its assigns,
300,000 restricted shares of APO common stock.
4. On June 13, 2001, APO entered into a Warrant Agreement with Dr. Jan
Stahl, CEO and Secretary of the Company, for the purchase of 250,000 APO
warrants, each warrant entitling the holder to purchase one share of APO
common stock, at an exercise price of $1.00 per share.
5. On June 13, 2001, APO entered into a Warrant Agreement with CSC
Cornerstone Capital Corp., for the purchase of 11,000 APO warrants, each
warrant entitling the holder to purchase one share of APO common stock, at an
exercise price of $2.00 per share.
6. On June 13, 2001, APO entered into a Warrant Agreement with R. B. Source
Marketing Ltd., for the purchase of 136,000 APO warrants, each warrant
entitling the holder to purchase one share of APO common stock, at an exercise
price of $1.00 per share for the first 61,000 shares; $1.50 per share for an
additional 25,000 shares; and, $2.00 per share for the remaining 50,000
shares.
7. On June 13, 2001, APO entered into a Warrant Agreement with Karen Zeidel,
for the purchase of 75,000 APO warrants, each warrant entitling the holder to
purchase one share of APO common stock, at an exercise price of $1.00 per
share for the first 25,000 shares; $1.50 per share for an additional 25,000
shares; and, $2.00 per share for the remaining 25,000 shares.
8. On June 13, 2001, APO entered into a Warrant Agreement with BAF
Consulting, Inc., for the purchase of 200,000 APO warrants, each warrant
entitling the holder to purchase one share of APO common stock, at an exercise
price of $1.00 per share for the first 66,666 shares; $1.50 per share for an
additional 66,666 shares; and, $2.00 per share for the remaining 66,666
shares.
9. On June 13, 2001, APO entered into a Warrant Agreement with Starr
Consulting, Inc., for the purchase of 200,000 APO warrants, each warrant
entitling the holder to purchase one share of APO common stock, at an exercise
price of $1.00 per share for the first 66,666 shares; $1.50 per share for an
additional 66,666 shares; and, $2.00 per share for the remaining 66,666
shares.
10. On June 13, 2001, APO entered into a Warrant Agreement with JVO
Consulting, Inc., for the purchase of 100,000 APO warrants, each warrant
entitling the holder to purchase one share of APO common stock, at an exercise
price of $1.00 per share for the first 33,333 shares; $1.50 per share for an
additional 33,333 shares; and, $2.00 per share for the remaining 33,334
shares.
11. On June 13, 2001, APO entered into a Warrant Agreement with Denora
Corporation AEC, for the purchase of 154,000 APO warrants, each warrant
entitling the holder to purchase one share of APO common stock, at an exercise
price of $1.00 per share for the first 51,333 shares; $1.50 per share for an
additional 51,333 shares; and, $2.00 per share for the remaining 51,334
shares.
12. On June 13, 2001, APO entered into a Warrant Agreement with ARB
Consulting, Inc., for the purchase of 113,000 APO warrants, each warrant
entitling the holder to purchase one share of APO common stock, at an exercise
price of $1.00 per share for the first 37,666 shares; $1.50 per share for an
additional 37,666 shares; and, $2.00 per share for the remaining 37,667
shares.
-15-
13. On June 13, 2001, APO entered into a Warrant Agreement with Robert Barton
for the purchase of 86,000 APO warrants, each warrant entitling the holder to
purchase one share of APO common stock, at an exercise price of $1.50 per
share for the first 50,000 shares; and, $2.00 per share for the remaining
36,000 shares.
14. On June 13, 2001, APO entered into a Warrant Agreement with Dominic
Spooner for the purchase of 25,000 APO warrants, each warrant entitling the
holder to purchase one share of APO common stock, at an exercise price of
$1.00 per share.
On November 29, 2001, the Company filed a Form S-8 registering 600,000 shares
of the Company's common stock pursuant to a Consultant's Compensation Plan.
The stock was valued at $.88 per share.
PLAN OF DISTRIBUTION
The selling stockholders, or their pledgees, donees, transferees or any of
their successors-in-interest selling shares received from a named selling
stockholder as a gift, partnership distribution or other non sale-related
transfer after the date of this Prospectus (all of whom may be selling
stockholders), may sell the shares of common stock from time to time on any
stock exchange or automated interdealer quotation system on which the shares
of common stock are listed, in the over-the-counter market, in privately
negotiated transactions or otherwise, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at prices otherwise negotiated. The selling stockholders may
sell the shares of common stock by one or more of the following methods,
without limitation:
o block trades in which the broker or dealer so engaged will attempt to
sell the shares of common stock as agent but may position and resell a
portion of the block as principal to facilitate the transaction;
o purchases by a broker dealer as principal and resale by the broker or
dealer for its own account pursuant to this Prospectus;
o an exchange distribution in accordance with the rules of any stock
exchange on which the shares are listed;
o ordinary brokerage transactions and transactions in which the broker
solicits purchases;
o privately negotiated transactions;
o short sales;
o through the writing of options on the shares of common stock, whether
or not the options are listed on an options exchange;
o through the distribution of the shares by any selling stockholder to
its partners, members or stockholders;
o one or more underwritten offerings on a firm commitment or best
efforts basis; and
o any combination of any of these methods of sale.
The selling stockholders may also transfer the shares of common stock by gift.
The Company does not know of any arrangements by the selling stockholders for
the sale of any of the shares.
The selling stockholder may engage brokers and dealers, and any brokers or
dealers may arrange for other brokers or dealers to participate in effecting
sales of the shares of common stock. These brokers, dealers or underwriters
may act as principals, or as an agent of a selling stockholder. Broker-dealers
may agree with a selling stockholder to sell a specified number of the
securities at a stipulated price per share. If the broker-dealer is unable to
sell shares acting as agent for a selling stockholder, it may purchase as
principal any unsold shares of common stock at the stipulated price.
-16-
Broker-dealers who acquire shares as principals may thereafter resell the
shares from time to time in transactions in any stock exchange or automated
interdealer quotation system on which the shares are then listed, at prices
and on terms then-prevailing at the time of sale, at prices related to the
then-current market price or in negotiated transactions. Broker-dealers may
use block transactions and sales to and through broker-dealers, including
transactions of the nature described above.
From time to time, one or more of the selling stockholders may pledge,
hypothecate or grant a security interest in some or all of the shares owned by
them. The pledgees, secured parties or persons to whom the shares have been
hypothecated will, upon foreclosure in the event of default, be deemed to be
selling stockholders. The number of selling stockholder's shares offered
under this Prospectus will decrease as and when it takes such actions. The
plan of distribution for that selling stockholder's shares will otherwise
remain unchanged. In addition, a selling stockholder may, from time to time,
sell the shares of common stock short, and, in those instances, this
Prospectus may be delivered in connection with the short sales and the shares
offered under this Prospectus may be used to cover short sales.
To the extent required under the Securities Act, the aggregate amount of
selling stockholders' shares being offered and the terms of the Offering, the
names of any agents, brokers, dealers or underwriters and any applicable
commission with respect to a particular offer will be set forth in an
accompanying prospectus supplement. Any underwriters, dealers, brokers or
agents participating in the distribution of the shares may receive
compensation in the form of underwriting discounts, concessions, commissions
or fees from a selling stockholder and/or purchaser of selling stockholders'
shares of securities, for whom them may act (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
The selling stockholders and any underwriters, brokers, dealers or agents that
participate in the distribution of the shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any discounts,
concessions, commissions or fees received by them and any profit on the resale
of the shares sold by them may be deemed to be underwriting discounts and
commissions.
A selling stockholder may enter into hedging transactions with broker-dealers
and the broker-dealers may engage in short sales of the shares in the course
of hedging the positions they assume with that selling stockholder, including,
without limitation, in connection with distributions of the shares by those
broker-dealers. A selling stockholder may enter into option or other
transactions with broker-dealers that involve the delivery of the shares of
common stock offered hereby to the broker-dealers, who may then resell or
otherwise transfer those shares. A selling stockholder may also loan or
pledge the shares offered hereby to a broker-dealer and the broker-dealer may
sell the shares of common stock offered hereby so loaned or, upon a default,
may sell or otherwise transfer the pledged shares that are being offered
hereby.
The selling stockholders and other persons participating in the sale or
distribution of the shares of common stock will be subject to applicable
provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder, including Regulation M. This
regulation may limit the timing of purchases and sales of any of the shares by
the selling stockholders and their affiliates. Furthermore, Regulation M may
restrict the ability of any person engaged in the distribution of the
securities to engage in market-making activities with respect to the
particular securities being distributed for a period of up to five business
days before the distribution. These restrictions may affect the marketability
of the shares and the ability of any person or entity to engage in
market-making activities with respect to the securities.
In accordance with a Registration Rights Agreement, which was executed
pursuant to a Regulation D, Rule 506 Offering dated April 24, 2001, the
Company agreed to cause the Registration Statement to include a resale
Prospectus that would permit the selling stockholders to sell the offered
shares without restriction and to keep the Registration Statement continuously
effective for a certain period. The Company has agreed to pay certain
reasonable expenses in connection with such registration. The Company will
not be responsible for any underwriting fees, discounts or commissions in
connection with an underwritten offering and broker-dealer concessions,
commissions and allowances and marketing expenses.
In addition, any shares that qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than pursuant to this
Prospectus.
-17-
Except as otherwise noted elsewhere in this registration, the Company will not
receive any proceeds from the sales of any of the shares by the selling
stockholders.
The Company cannot assure you that the selling stockholders will sell all or
any portion of the shares of common stock offered hereby.
DESCRIPTION OF CAPITAL STOCK
A brief summary of our capital stock follows.
Authorized and Outstanding Capital Stock
Our authorized capital consists of 125,000,000 shares of capital stock with a
par value of $0.002, all of which have been designated as common stock. The
Company has no authorized Preferred Stock. Pursuant to authority granted it
by APO's Articles of Incorporation, our Board of Directors, without any action
by the shareholders, may designate and issue shares in such classes or series
(including other classes or series of preferred stock) as it deems appropriate
and establish the rights, preferences, and privileges of such shares,
including dividends, liquidation, and voting rights. The rights of holders
of other classes or series of preferred stock that may be issued could be
superior to the rights of holders of common stock. Our Board's ability to
designate and issue such undesignated shares could impede or deter an
unsolicited tender offer or takeover proposal.
As of the date of this prospectus, we have 23,210,413 shares of common stock
outstanding.
Common Stock
Holders of APO common stock are entitled to one vote for each share held, are
not entitled to cumulative voting for the purpose of electing directors and
have no preemptive or similar right to subscribe for, or to purchase, any
shares of common stock or other securities to be issued by APO in the future.
Accordingly, the holders of more than 50% in voting power of the shares of
common stock voting generally for the election of directors will be able to
elect all of APO's directors.
Holders of APO common stock have no exchange, conversion, or preemptive
rights, and such shares are not subject to redemption. All outstanding shares
of APO common stock are, and upon issuance the Common Stock offered hereby
will be, duly authorized, validly issued, fully paid and nonassessable.
Subject to the prior rights, if any, of holder of any outstanding class or
series of capital stock having a preference in relation to the common stock as
to distributions upon the dissolution, liquidation and wind-up of APO and as
to dividends, holder of APO common stock are entitled to share ratably in all
assets of APO that remain after payment in full of all debts and liabilities
of APO, and to receive ratably such dividends, if any, as may be declared by
APO' board of directors from time to time out of funds and other assets
legally available for such purpose.
APO common stock currently trades on Nasdaq's OTC Bulletin Board stock
exchange ("OTCBB") under the symbol "APOA".
Dividend Policy
APO intends to retain its earnings to provide funds for reinvestment in its
business and, therefore, does not anticipate declaring or paying cash
dividends in the foreseeable future. Any payment of the dividends by APO will
be subject to the then existing business conditions and the business results,
cash requirements and financial condition of APO, and will be at the
discretion of its board of directors.
-18-
Certain Effects of Authorized But Unissued Stock
As the description of the APO common indicates, APO has shares of common stock
available for future issuance without stockholder approval. These additional
shares may be utilized for a variety of corporate purposes, including use in
future public offerings to raise additional capital, corporate acquisitions or
being paid as dividends on APO outstanding capital stock.
LEGAL MATTERS
An action was commenced against the Company in the Circuit/Superior Court of
Marion Count, Indiana, entitled "Kenro, Inc., on behalf of itself and all
others similarly situated vs APO Health, Inc., case no. 490120191CP000016"
This lawsuit involves the receipt by Kenro, Inc., of one unsolicited fax sent
by the Company and seeks damages under the Telephone Consumer Protection Act.
Following a hearing the Circuit/Superior Court certified the action as a class
action proceeding. The Company has retained counsel in and is vigorously
defending the action. In addition, the Company commenced Third Party
proceedings against the company which provided the mailing list used by the
APO Health, Inc., and the company which transmitted the faxes. In the Third
Party action, the Company seeks indemnification and/or contribution from these
third parties. It is the Company's belief that it will prevail in these
proceedings; but in the unlikely event that a judgment is entered against the
Company, that the damages are covered by insurance up to the limits of the
Company's insurance policies.
However, on October 24, 2001, Merchants & Business Men's Insurance Company,
the insurance company which insures the Company and extended coverage to the
Company in the Kenro, Inc., law suit, commenced an action for a Declaratory
Judgment against the Company in the Supreme Court, New York County, State of
New York. That action which is entitled "Merchant's & Business Men's Mutual
Insurance Company vs APO Health, Inc., case number 01-605091" seeks a
determination by the New York Supreme Court as to the extent of insurance
coverage, if any, which Merchants is required to extend in the Kenro, Inc.,
law suit. Merchants claims that it is not obligated to extend insurance
coverage to the Company. However, until such time as there is a determination
adverse to the Company's interests, Merchants has continued provide a defense
for the Company. The Company has retained counsel to protect its interests
and believes that based upon the terms of its policy of insurance with
Merchants, the Court will find in its favor.
On August 13, 2001, the Company was named as a defendant in an action in the
United States District Court for the Northern District of New York. That
action, entitled "Ivoclar Vivadent, Inc., vs APO Health, Inc., under case no.
01CV0576" claims that the Company sold Ivoclar Vivadent products without the
necessary material safety data sheets which Ivoclar claims is necessary. The
action also claims that the Company sold its products utilizing improper
packaging. The Company denies these claims and has negotiated a settlement
the terms of which the Company's counsel believes, will result in the action
being discontinued under terms that will not require the payment of any
monetary consideration by the Company.
The legality of the issuance of the shares offered hereby will be passed upon
for us by the law offices of Carmine J. Bua, San Diego, California. (Exhibit
"5")
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this Prospectus by reference from the APO Health, Inc. on Form
10-QSB, filed on August 17, 2001 for the period ended June 30, 2001, have been
unaudited by Malone & Bailey, PLLC, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing. (The Company recently changed its year-end to
September 30th.)
-19-
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires APO to file information with the Securities
and Exchange Commission concerning its business and operations. Accordingly,
we file annual, quarterly, and special reports, proxy statements, and other
information with the Commission. You can inspect and copy this information at
the Public Reference Room maintained by the Securities and Exchange Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549.
You can receive additional information about the operation of the Securities
and Exchange Commission's Public Reference Rooms by calling the Commission at
1-800-SEC-0330. The Securities and Exchange Commission also maintains a web
site at http://www.sec.gov which contains reports, proxy and information
statements, and other information regarding companies that file information
electronically with the Securities and Exchange Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by reference"
information that has been filed with it, which means that we can disclose
important information to you by referring you to the other information we have
already filed with the SEC. The information that we incorporate by reference
is considered to be part of this prospectus, and related information that we
file with the SEC will automatically update and supersede information we have
included in this prospectus. We also incorporate by reference any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, until the selling shareholders
sell all of their shares or until the registration rights of the selling
shareholders expire. This prospectus is part of a registration statement that
we filed with the SEC (Registration No. 333- ). The following documents
previously filed with the SEC are specifically incorporated herein by
reference:
1. Report on Form 8-K filed with the SEC on June 28, 2001;
2. Registration on Form S-8 with the SEC on July 30, 2001;
3. The quarterly report on Form 10-QSB for APO Health, Inc. for the quarter
ended June 30, 2001, filed with the SEC on August 17, 2001;
4. The quarterly report on Form 10-QSB/A for APO Health, Inc. for the quarter
ended June 30, 2001, filed with the SEC on September 13, 2001;
5. Report on Form 8-K filed with the SEC on October 12, 2001;
6. Report on Form 8-K/A filed with the SEC on October 25, 2001; and
7. Registration on Form S-8 filed with the SEC on November 29, 2001.
Pursuant to SEC rules, copies of items 3 and 4 above are being furnished with
this prospectus, and should be considered a part of this prospectus. In
addition, you may request a free copy of any of the above filings, or any
filings subsequently incorporated by reference into this prospectus, by
writing or calling us at the following address:
3590 Oceanside Rd.
Oceanside, New York 11575
(800) 365-2839
Attn: Jan Stahl, CEO
IMPORTANT NOTE: You should rely only on the information incorporated by
reference or provided in this prospectus or any supplement or amendment to
this prospectus. We have not authorized anyone else to provide you with
different information or additional information. Selling shareholders will not
make an offer of our common stock in any state where the offer is not
permitted.
-20-
4,644,110 Shares
of
Common Stock
of
APO HEALTH, INC.
------------------------------
PROSPECTUS
------------------------------
Prospectus dated January 10, 2002
-21-
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Other Expenses of Issuance and Distribution
The estimated expenses in connection with the issuance and distribution of the
securities registered hereby are set forth in the following table:
Itemization. Amount
SEC registration fee $ 593.52
Transfer Agency fees $1,250.00
Accounting fees and expenses $5,000.00
Printing $ 500.00
Miscellaneous $ 500.00
Total $7,843.52
INDEMNIFICATION OF OFFICES AND DIRECTORS
Our Articles of Incorporation authorize the Board of Directors, on behalf of
us, and without shareholder action, to exercise all of our powers of
indemnification to the maximum extent permitted under the applicable statute
as amended permits us to indemnify our directors, officers, employees
fiduciaries and agents as follows:
The State of Nevada permits a corporation to indemnify such persons for
reasonable expenses in defending against liability incurred in any legal
proceeding if:
(a) The person conducted himself or herself in good faith;
(b) The person reasonably believed:
(1) In the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation's best
interests; and
(2) In all other cases, that his or her conduct was at least not
opposed to the corporation's best interests.
(c) In the case of any criminal proceeding, the person had no reasonable
cause to believe that his or her conduct was unlawful.
The indemnification discussed herein is not exclusive of any other rights to
which those indemnified may be entitled under the Articles of Incorporation,
any Bylaw, agreement, vote of shareholders, or disinterested directors, or
otherwise, and any procedure provided for by any of the foregoing, both as to
action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of heirs,
executors, and administrators of such a person.
-22-
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to our directors, officers, and controlling persons under the
foregoing provisions, or otherwise, we have been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by us of expense incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any
action, suit, or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, we
will, unless in the opinion of our counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue. Provisions regarding indemnification of officers and directors of
APO are contained in APO's bylaws.
Exhibits
See "INDEX TO EXHIBITS" below.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
APO Health, Inc. is providing the following information to assist you in your
financial analysis of the Company. The table below represents selected
historical consolidated statement of operations and balance sheet data of APO
Health, Inc. and subsidiaries. The consolidated statement of operations data
set forth below for the year ended September 30, 2001 and the consolidated
balance sheet data as of September 30, 2001 are derived from, and are
qualified by reference to, the unaudited consolidated financial statements of
APO Health, Inc. and subsidiaries, included elsewhere in this prospectus.
In APO Health, Inc.'s opinion, the audited consolidated information for the
year ended September 30, 2001 reflects all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the results of
operations and financial condition. Results from interim periods should not
be considered indicative of results for any other periods or for the year.
This information is only a summary. You should read it in conjunction with
APO Health, Inc.'s historical financial statements and related notes and the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," which are included elsewhere in this prospectus.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
-23-
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
APO Health, Inc. (formerly Xetal, Inc.)
Oceanside, New York
We have audited the accompanying consolidated balance sheet of APO Health,
Inc. as of September 30, 2001 and the related consolidated statements of
operations, stockholders' equity and cash flows for the years ended September
30, 2001 and 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 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 APO
Health, Inc. as of September 30, 2001 and the results of their operations and
their cash flows for the years ended September 30, 2001 and 1999, in
conformity with accounting principles generally accepted in the United States.
Our audits were made to form an opinion on the basic financial statements
taken as a whole. The supplemental schedule listed in the index to the
financial statements and schedule are presented to comply with the rules and
regulations under the Securities and Exchange Act of 1934 and are not
otherwise a required part of the basic financial statements. The supplemental
schedule for the years ended September 30, 2001 and 1999 have been subjected
to the auditing procedures applied in the audits of the basic financial
statements. In our opinion, the supplemental schedule referred to above
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
Linder & Linder
Certified Public Accountants
Dix Hills, New York
December 3, 2001
-24-
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
APO Health, Inc. (formerly Xetal, Inc.)
Oceanside, New York
We have audited the accompanying consolidated balance sheet of APO Health,
Inc. as of September 30, 2000 and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 APO
Health, Inc. as of September 30, 2000 and the results of its operations and
its cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States.
Our audit was made to form an opinion on the basic financial statements taken
as a whole. The supplemental schedule listed in the index to the financial
statements and schedule are presented to comply with the rules and regulations
under the Securities and Exchange Act of 1934 and are not otherwise a required
part of the basic financial statements. The supplemental schedule for the
year ended September 30, 2000 has been subjected to the auditing procedures
applied in the audit of the basic financial statements. In our opinion, the
supplemental schedule referred to above fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
MALONE & BAILEY, PLLC
April 5, 2001
Houston, Texas
-25-
APO HEALTH, INC.
(formerly Xetal, Inc.)
CONSOLIDATED BALANCE SHEETS
September 30, 2001 and 2000
2001 2000
---------- ----------
ASSETS
Current Assets
Cash $ 179,167 $ 90,732
Accounts receivable, net of allowance
for doubtful accounts of $29,000 and $59,800 1,768,501 2,167,261
Inventory 1,692,209 1,895,334
Due from officers 99,844 15,294
Deferred tax asset 36,020 34,563
Other current assets 165,935 30,242
---------- ----------
Total Current Assets 3,941,676 4,233,426
Property and Equipment, net of accumulated
depreciation of $76,606 and $78,001 40,389 57,289
Goodwill, less accumulated amortization
of $53,802 and $53,802 125,537 125,537
Deposits 7,500 7,500
---------- ----------
TOTAL ASSETS $4,115,102 $4,423,752
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Bank notes payable $1,736,224 $1,892,670
Accounts payable 1,056,117 1,449,550
Accrued expenses 50,776 203,964
Due to officer 45,509
----------- ----------
Total Current Liabilities 2,888,626 3,546,184
----------- ----------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 2,000,000
shares authorized, 0 shares issued
Common stock, $.0002 par value, 125,000,000
shares authorized, 23,132,089 and 14,216,422
shares issued and outstanding 4,626 2,843
Paid in capital 1,452,530 983,345
Retained earnings (deficit) (230,680) (108,620)
---------- ----------
Total Stockholders' Equity 1,226,476 877,568
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,115,102 $4,423,752
========== ==========
See accompanying auditors' report and notes to financial statements.
-26-
APO HEALTH, INC.
(formerly Xetal, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000, AND 1999
2001 2000 1999
----------- ----------- -----------
Revenues $25,513,303 $30,232,347 $32,147,128
Cost of revenues 22,742,103 27,225,517 29,315,258
----------- ----------- -----------
Gross Margin 2,771,200 3,006,830 2,831,870
----------- ----------- -----------
Operating Expenses
Selling 805,029 819,145 833,764
General and administrative 1,685,007 2,044,602 1,795,606
----------- ----------- -----------
2,490,036 2,863,747 2,629,370
----------- ----------- -----------
Income from operations 281,164 143,083 202,500
Interest expense 153,698 141,704 91,759
Holding company spinoff costs 137,135
Business acquisition costs 340,225
----------- ----------- -----------
Income before provision for income
taxes and extraordinary item (212,759) (135,756) 110,741
Provision (benefit) for income tax (90,699) 46,569 50,840
----------- ----------- -----------
Income (loss) before extraordinary item (122,060) (182,325) 59,901
Extraordinary item, net
- debt forgiveness (58,575) 211,323
----------- ----------- -----------
NET INCOME (LOSS) $ (122,060) $ (240,900) $ 271,224
=========== =========== ===========
Basic and diluted
Earnings per common share
- before extraordinary item $ (.01) $ (.02) $ 0.01
- from extraordinary item .00 0.04
----------- ----------- -----------
Net income per common share $ (.01) $ (.02) $ 0.05
=========== =========== ===========
Weighted average common shares
outstanding 21,532,814 13,217,660 5,261,432
See accompanying auditors' report and notes to financial statements.
-27-
APO HEALTH, INC.
(formerly Xetal, Inc.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000, AND 1999
Retained
Common Stock Paid in Earnings Treasury
Shares Amount Capital (Deficit) Stock Totals
---------- ---------- ---------- ---------- ---------- ----------
Balances,
September 30, 1998 928,263 $ 928 $ 614,012 $ (235,208) $ 379,732
Retroactive
Stock split 4,585,619 175 (175)
Stock acquired with
Debt forgiveness $ (180) (180)
Net income 271,224 271,224
---------- ---------- ---------- ---------- ---------- ----------
Balances,
September 30, 1999 5,513,882 1,103 613,837 36,016 (180) 650,776
Retroactive
Stock split 7,221,240 259 (259)
Cancellation of
Treasury stock (180,000) (180) 180
Spin-off of Xetal, Inc. (96,264) 96,264
Issuance of stock for
Debt 600,000 600 161,438 162,038
Issuance of stock for
Services 1,061,300 1,061 304,593 305,654
Net (loss) (240,900) (240,900)
---------- ---------- ---------- ---------- ---------- ----------
Balances,
September 30, 2000 14,216,422 2,843 983,345 (108,620) 0 877,568
Retroactive
Stock split 1,470,000 54 (54)
Issuance of stock for
Officers' bonus 300,000 300 86,100 86,400
Sale of stock 500,000 100 279,900 280,000
Recapitalization
Reverse acquisition 2,500,000 500 (500)
Issuance of stock for
Services 4,145,667 829 103,739 104,568
Net loss (122,060) (122,060)
---------- ---------- ---------- ---------- ---------- ----------
Balances,
September 30, 2001 23,132,089 $ 4,626 $1,452,530 $ (230,680) $ 0 $1,226,476
========== ========== ========== ========== ========== ==========
See accompanying auditors' report and notes to financial statements.
-28-
APO HEALTH, INC.
(formerly Xetal, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000, AND 1999
2001 2000 1999
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (122,060) $ (240,900) $ 271,044
Adjustments to reconcile net income to
net cash flows from operating activities
Depreciation and amortization 16,900 30,370 29,545
Bad debts (30,800) (29,400) (5,200)
Deferred taxes (1,457) 6,937 (18,500)
Stock issued for services 190,969 305,654
Write off of a deposit 20,000
Gain on asset retirement 3,105
Gain on debt forgiveness (314,643)
Write-off of registration costs 49,523
Changes in:
Accounts receivable 429,560 344,857 123,956
Inventory 203,124 (619,757) (299,245)
Other current assets (135,693) 22,694 (31,777)
Accounts payable (393,433) (449,002) (38,897)
Accrued expenses (153,188) (330,309) (120,625)
Income taxes payable (107,491) 101,491
----------- ----------- -----------
CASH FLOWS PROVIDED BY (USED IN
OPERATING ACTIVITIES 3,922 (1,043,242) (253,328)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (7,187) (6,225)
Increase in deposits (2,543)
----------- ----------- -----------
CASH FLOWS (USED IN)
INVESTING ACTIVITIES 0 (9,730) (6,225)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of loans payable (135,357)
Advances from officer, net (39,041) 116,645 116,335
Proceeds from bank notes payable, net (156,446) 985,820 293,878
Proceeds from sale of stock 280,000
----------- ----------- -----------
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES 84,513 1,102,465 274,856
----------- ----------- -----------
Net increase (decrease) in cash 88,435 49,493 15,303
Cash balances
Beginning of period 90,732 41,239 25,936
----------- ----------- -----------
End of period $ 179,167 $ 90,732 $ 41,239
=========== =========== ===========
See accompanying auditors' report and notes to financial statements.
-29-
APO HEALTH, INC.
(formerly Xetal, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
Nature of business and basis of consolidation. APO Health, Inc. ("APO") was
incorporated under the laws of the state of New York in August 1978. The
Company and its wholly-owned subsidiary, Universal Medical Distributors, Inc.
("Universal") distribute disposable medical products principally to dental,
medical and veterinary professionals and wholesalers in the United States,
principally on the East Coast. In September 1994, APO had acquired an
inactive public company, Xetal, Inc. ("Xetal") in a reverse acquisition
transaction. On December 23, 1999, APO assumed all of the assets and
liabilities of Xetal and 100% of the Company shares held by Xetal were
distributed to the existing shareholders of Xetal on a pro rata basis as a
stock dividend. The spin-off is treated as a reverse spin-off, as if APO had
spun off Xetal, in order to reflect the substance of the transaction. These
consolidated financial statements reflect consolidated accounts of all three
companies up to December 23, 1999, the effective date of the spin-off, and of
APO and Universal thereafter.
Effective June 13, 2001, InternetFinancialCorp.com, Inc., ("IFAN"), a Nevada
corporation, which is an inactive public company acquired APO, (collectively,
the "Company"), pursuant to a tax-free reorganization agreement. The
acquisition was accounted for by the purchase method under business
combinations in a reverse acquisition transaction. Concurrently, IFAN changed
its name to APO Health, Inc., a Nevada corporation.
Cash and cash equivalents. For purposes of the statements of cash flows, cash
equivalents include all highly liquid investments with original maturities of
three months or less.
Revenue recognition occurs when products are shipped.
Advertising is expensed as incurred. For the years ended September 30, 2001,
2000 and 1999 advertising expense amounted to $196,173, $238,767 and $143,676,
respectively.
Merchandise inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
Property and equipment is stated at cost. Depreciation is provided for on the
straight-line method over the useful estimated life. The cost of maintenance
and repairs is expensed as incurred.
Goodwill represents the excess of the cost of two companies acquired over the
fair value of their net assets at the dates of acquisition in 1996 and is
being amortized using the straight line method over 15 years. Effective to
the issuance of FASB No. 142 the Company discontinued amortizing goodwill.
The Company follows Statement of Financial Accounting Standards No. 121,
Impairment of Long-lived Assets, by reviewing such assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable.
Shipping and handling is expensed as incurred. Shipping and handling is
included in selling expense and amounted to $240,709, $215,510 and $241,419
for the years ended September 30, 2001, 2000 and 1999, respectively.
Income taxes are computed using the tax liability method of accounting,
whereby deferred income taxes are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates that will be in effect when the differences
reverse.
-30-
Basic net income per share has been calculated based on the weighted average
number of shares of common stock outstanding during the period. Diluted net
income per share is computed by dividing the net income by the weighted
average number of common shares outstanding plus potential dilutive
securities. Effective to the June 13, 2001 acquisition, the weighted average
number of shares of common stock have been retroactively restated to give
effect for the 5.94 to 1 stock split.
Reclassifications. Certain reclassifications of certain prior year amounts
were made to conform to the current year presentation.
Estimates and assumptions. Preparing financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenue and expenses at the balance sheet date and for the period then ended.
Actual results could differ from these estimates.
NOTE 2 - SUPPLEMENTAL CASH FLOW STATEMENT DISCLOSURES
2001 2000 1999
---------- ---------- ----------
Cash paid during the year for
Interest $ 143,901 $ 144,381 $ 84,721
Income taxes 65,000 65,349
Non-cash transactions:
Spinoff of Xetal, Inc. $ 96,624
Note payable paid by issuance of stock 162,038
NOTE 3 - BANK NOTES PAYABLE
On April 2, 2001, the Company renewed its credit facility with HSBC Bank USA
that provides for total borrowings that may not exceed $2,000,000. Bankers
acceptances and letters of credit, which relate to specific importation
transactions, may not exceed $500,000 each and own-note borrowing, which does
not relate to specific transactions, may not exceed $1,500,000. The credit
facility is collateralized by substantially all of the Company's assets and is
personally guaranteed by the two majority Company stockholders. Interest of
prime + 1% on the own-note borrowings is payable monthly and the bankers
acceptance fees of 200 basis points above the discount rate are paid at the
inception of the bankers acceptance. Borrowings on the credit facility are
payable on demand, or upon maturity, which is up to 180 days after the
initiation of a bankers acceptance or March 31, 2002, for own-note borrowings,
whichever is earlier. On April 2, 2001, the date the credit facility was
renewed, outstanding own-note borrowings were $1,949,000, and the $449,600
excess over the sub-limit was converted to a term loan payable over one year
in monthly installments of $37,467. Interest will be at the bank's prime rate
plus 1%.
Own-note borrowings were $1,370,000 and $1,121,600 as of September 30, 2001
and 2000, respectively. As of September 30, 2001 and 2000, bankers
acceptances totaled $103,958 and $771,070, respectively, and there were
$113,179 and $0 respectively, letters of credit outstanding. As of September
30, 2001 and 2000, the term loan amounted to $262,266 and $449,600,
respectively.
The credit facility matures March 31, 2002.
-31-
NOTE 4 - DEBT FORGIVENESS
During 1996 and 1997, the Company raised $500,000 in total notes payable to
several individuals. In connection with the 1997 offering, 200,000 shares of
common stock and warrants to purchase 2,500,000 shares of common at $5 were
issued.
During 1999 and 1998, the Company settled the above debts for $150,357 and
return of 180,000 shares and 2,250,000 warrants, and recorded extraordinary
gains of $211,323 and $36,533, net of tax of $103,500 and $12,000,
respectively. During fiscal 2000, APO cancelled the 180,000 shares of common
stock.
During 2000, several note-holders demanded a renegotiation of the settlement
and the Company paid another $88,750, which is shown as an extraordinary
expense.
NOTE 5 - RELATED PARTY NOTES PAYABLE
As of September 30, 1999, $162,038 of notes payable owed to the two majority
stockholders was outstanding. In October 2000, these stockholders exchanged
the notes for 600,000 shares of Company stock.
Advances due to/from officers are non-interest bearing and due on demand.
NOTE 6 - INCOME TAXES
Income taxes (benefit) consist of the following:
2001 2000 1999
---------- ---------- ----------
Current $ (89,242) $ 76,273 $ 62,766
Deferred ( 1,457) (29,704) (11,926)
---------- ---------- ----------
$ (90,699) $ 46,569 $ 50,840
========== --======== =--=======
A reconciliation of income tax at the federal statutory income tax rate to
total income taxes is as follows:
2001 2000 1999
---------- ---------- ----------
Computed at the federal
statutory rate of 34% $ (72,338) $ 7,641 $ 29,004
State income tax (benefit) (12,560) 8,146 20,000
Valuation allowance adjustment 22,300 30,782
Other adjustments (28,101) 1,836
---------- ---------- ----------
$ (90,699) $ 46,569 $ 50,840
========== ========== ==========
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The components of deferred taxes are as follows:
2001 2000
---------- ----------
Deferred tax assets
Allowance for doubtful accounts $ 11,600 $ 59,268
Depreciation 8,520 4,563
Net operating loss carryover, less
valuation allowance of $22,300 20,000
Miscellaneous (4,100) 125
---------- ----------
36,020 63,956
---------- ----------
Deferred tax liabilities
Deferred officer compensation 4,299
Goodwill 18,702
State franchise taxes 6,392
---------- ----------
29,394
---------- ----------
Current net deferred tax assets $ 36,020 $ 34,563
========== ==========
The Company has a net operating loss carryover of approximately $106,000 to
offset future taxable income. The carryover expires 2016.
NOTE 7 - COMMON STOCK ISSUANCES
During the fiscal year ended September 30, 2001, 300,000 shares of stock
valued at $86,400 were issued to two officers as a bonus and the Company sold
500,000 shares in a private placement which provided net proceeds to the
Company of $280,000. The investors of the private placements received
warrants to acquire 1,500,000 shares of Company stock at $1.00 per share.
Such warrants expire April 24, 2004.
On June 13, 2001, the Company acquired IFAN in a transaction accounted for as
a reverse acquisition, whereby the Company is treated as the acquirer for
accounting purposes. Accordingly, the Company's stockholders' equity has been
retroactively restated to give effect to the acquisition. In conjunction with
the reverse acquisition, the Company's shareholders other than the
shareholders that purchased the 500,000 shares in the private placement
received 5.9 IFAN shares for each APO share held, and 2,500,000 shares were
issued to the existing IFAN shareholders.
In conjunction with the acquisition 3,145,667 shares were issued to
consultants associated with the acquisition. The consultants also received
warrants to purchase 1,350,000 shares of the Company's stock at prices ranging
from $1 to $2 that expire September 13, 2004.
In addition, a consultant was issued 1,000,000 shares pursuant to a contract
to provide investor relations services over the next twelve months. The
investment relations consultant received warrants to purchase 1,000,000 shares
of Company stock at prices ranging from $1 to $2 per share. Such warrants
expire June 5, 2006.
During the year ended September 30, 2000, the Company issued 600,000 shares of
stock to extinguish $162,038 of notes payable and 1,061,300 shares valued at
$.288 per share, which is a multiple of earnings less a marketability
discount, as bonuses to officers.
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NOTE 8 - HOLDING COMPANY SPINOFF COSTS AND BUSINESS ACQUISITION COSTS
$137,135 in legal and accounting fees was incurred in connection with the
spinoff of Xetal in December 1999.
The Company incurred $340,225 of non-recurring costs associated with the
acquisition of APO.
NOTE 9 - LEASES
The Company leases 11,800 square feet in New York and a small sales office in
Florida. Both leases are month-to-month with affiliated companies owned by
the Company's officers and shareholders.
The affiliate's underlying New York lease expires in 2004 and the affiliate's
underlying Florida lease expires in September 2001. Lease payments made by
the Company approximate the payments due by the affiliated companies. Rental
expense was $73,183, $76,665, and $53,752 for the years ended September 30,
2001, 2000, and 1999, respectively.
Future minimum lease payments are $69,468 in 2002, $71,916 in 2003, $74,364 in
2004, and $18,744 in 2005.
NOTE 10 - PROFIT SHARING PLAN
The Company established a profit sharing plan in 1992. All full-time
employees as defined within the plan are eligible to participate.
Contributions to the plan are discretionary and are determined at the
Company's year end. The amount contributed or accrued to the profit sharing
plan for the years ended September 30, 2001, 2000, and 1999, were $0, $50,000
and $99,011, respectively. During 2001, the Company determined it will not
make its 2000 pension contribution and recognized such contribution as income.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Litigation
There is an action pending in the Circuit/Superior Court of Marion County,
Indiana entitled Kenro, Inc., on behalf of itself and all others similarly
situated against APO Health, Inc. The lawsuit involves unsolicited broadcast
faxes sent in the state and has been certified as a class action suit. The
Company has petitioned the court to certify its class action certification
order for interlocutory appeal. If the Company can defeat the class
certification, then the plaintiff is limited to a single violation with a
maximum potential recovery of $1,500. If the class certification issue is
lost then the Company's exposure can range in the millions of dollars. The
Company has filed a suit seeking indemnification by or contribution from the
vendors who sent the faxes on behalf of the Company. It is the Company's
belief and contention that damages, if any, which may be awarded to the
plaintiff are covered by insurance up to policy limits.
However, on October 24, 2001, the Company was named as a defendant in
Merchant's & Business Men's Mutual Insurance Company vs. APO Health, Inc.
Merchant's & Business Men's Mutual Insurance Company issued a Commercial
Blanket Excess Liability insurance policy to the Company for one year
commencing February 27, 2000 up through February 27, 2001. Merchant's &
Business Men's Mutual Insurance Company alleges in its complaint that policy
coverage with the Company does not extend to the allegations set forth in the
aforementioned Kenro suit. The Company, however, disagrees and contends that
the policy issued by Merchant's & Business Men's Mutual Insurance Company
obligates them to cover any damages that the Company may incur, as a result of
a unfavorable verdict in the Kenro suit.
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Employment Agreement
Effective October 1, 2001, the Company has entered into a three-year
employment agreement with its chief executive officer that provides for a
minimum annual salary of $250,000 with incentives based on the Company's
attainment of specified levels of sales and earnings as defined in the
agreement. The employment agreement expires September 30, 2004 and shall
be automatically renewed for successive periods of one year unless either
party gives written notice to terminate the agreement.
NOTE 12 - CONCENTRATION OF CREDIT RISK
The Company maintains bank accounts at one bank. As of September 30, 2001,
The Company had $397,280 on deposit, and only $100,000 in each bank is insured
under federal law.
The concentration of credit risk due to receivables is minimal due to the
Company's diverse customer base. Two customers account for approximately 27%
and 34% of sales for the years ended September 30, 2001 and 2000,
respectively. No single customer accounted for greater than 10% of sales in
the year ended September 30, 1999. No single vendor accounts for greater than
10% of purchases.
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APO HEALTH, INC.
(formerly Xetal, Inc.)
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000, AND 1999
Balance, Balance,
Year Ended Beginning of End of
September 30, Account Period Additions Reduction Period
- ------------- -------------------- ---------- ---------- ---------- ----------
1999 Allowance for
doubtful accounts $ 94,400 $ - $ (5,200) $ 89,200
========== ========== ========== ==========
2000 Allowance for
doubtful accounts $ 89,200 $ - $ (29,400) $ 59,800
========== ========== ========== ==========
2001 Allowance for
doubtful accounts $ 59,800 $ - $ (30,800) $ 29,000
========== ========== ========== ==========
Allowance for
deferred taxes $ - $ 22,300 $ - $ 22,300
========== ========== ========== ==========
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UNDERTAKINGS
The undersigned small business issuer hereby undertakes:
1. To file, during any period in which offers or sales are being made, a post-
effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement;
(iii) Include any additional or changed material information on the plan
of distribution;
2. That, for determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new registration statement of
the securities offered, and the offering of the securities at that time shall
be deemed to be the initial bona fide offering.
3. To file a post-effective amendment to remove from registration any of the
securities being registered which remain unsold at the end of the Offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by
a director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities
being registered, the small business issuer will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
final adjudication of such issue.
-37-
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Oceanside, State of New York, on January 10, 2002.
/S/ DR. JAN STAHL
- ------------------------
Dr. Jan Stahl, President,
Chief Executive Officer, Chairman
&Director
/S/ PETER STEIL
- ------------------------
Peter Steil, President &
Director
/S/ KEN LEVENTHAL
- ------------------------
Ken Leventhal, Director
-38-
INDEX TO EXHIBITS
Exhibit Number: Description:
5 Opinion of Carmine Bua, Esq.
10.1 Tax-Free Reorganization Agreement between
the Company and InternetFinancialCorp.com,
Inc., effective June 13, 2001,
incorporated herein by this reference to
the Current Report on Form 8-K/A filed
with the SEC on July 30, 2001.
10.2 A Registration Rights Agreement which
coincided with a Regulation D, Rule 506
Offering dated April 24, 2001
10.3 Contractual agreement for investor
relations services between Company and
Columbia Financial Group, Inc.
10.4 Employment agreement between APO Health,
Inc. and Dr. Jan Stahl, CEO and Secretary
of the Company
23.1 Consent of Malone & Bailey, PLLC
23.2 Consent of Linder & Linder
----------------------------------------------------------------------------
The following documents previously filed with the SEC are specifically
incorporated herein by reference:
1. The quarterly report on Form 10-QSB for APO Health, Inc. for the quarter
ended June 30, 2001, filed with the SEC on August 17, 2001;
2. The quarterly report on Form 10-QSB/A for APO Health, Inc. for the quarter
ended June 30, 2001, filed with the SEC on September 13, 2001;
3. Report on Form 8-K filed with the SEC on June 28, 2001;
4. Registration on Form S-8 with the SEC on July 30, 2001;
5. Report on Form 8-K filed with the SEC on October 12, 2001;
6. Report on Form 8-K/A filed with the SEC on October 25, 2001; and
7. Registration on Form S-8 filed with the SEC on November 29, 2001.
-39-