UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE
EXCHANGE ACT OF 1934
From the transition period from __________ to ___________
Commission file number 000-30074
APO HEALTH, INC.
(Exact name of registrant as specified in its charter)
Nevada 86-0871787
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
3590 Oceanside Road, Oceanside, New York 11575
(Address of principal executive offices)
(800) 365-2839
(Issuer's Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period of time that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of August 6, 2004, 35,106,045 shares of Common Stock of the issuer were
issued and outstanding.
APO HEALTH, INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
TABLE OF CONTENTS
Page
PART I - Financial Information
Item 1 Financial Statements.
Consolidated Balance Sheet as of
June 30, 2004 and September 30, 2003. 2
Consolidated Statement of Income for the three and nine
months ended June 30, 2004 and 2003. 3
Consolidated Statement of Cash Flows for the
nine months ended June 30 2004 and 2003. 4
Notes to Consolidate Financial Statements. 5 - 9
Item 2 Management's Discussion and Analysis
Or Plan of Operations. 10 - 11
Item 3 Quantitative and Qualitative Disclosures About 12
Market Risk.
Item 4 Controls and Procedures. 12
PART II - Other Information
Item 1 Legal Proceedings. 12
Item 2 Changes in Securities and Use of Proceeds. 13
Item 3 Defaults upon Senior Securities. 13
Item 4 Submission of Matters to a Vote of Security Holders. 13
Item 5 Other Information. 13
Item 6 Exhibits and Reports on Form 8-K. 13
Signatures 14
1
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
APO HEALTH, INC.
CONSOLIDATED BALANCE SHEET
June 30, September 30,
2004 2003
-------------- -------------
(Unaudited)
ASSETS
Current Assets:
Cash $ 509,030 $ 405,153
Accounts Receivable, net of allowance for
doubtful accounts of $70,000 and $50,000 1,445,094 1,702,741
Inventory 1,331,971 1,396,205
Due from Officers 40,000 108,905
Notes and Other receivables - 4,566
Other Current Assets 175,145 55,013
-------------- -------------
Total Current Assets 3,501,240 3,672,583
-------------- -------------
Property and Equipment, net of accumulated
Depreciation of $81,036 and $98,992 10,593 18,003
Deposits 7,500 7,500
-------------- -------------
Total Assets $ 3,519,333 $ 3,698,086
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Cash Overdraft $ 71,558 $ -
Bank Notes Payable 826,911 1,008,123
Accounts Payable 893,298 924,029
Accrued Compensation 180,997 248,483
Customer Deposits 233,323 294,587
-------------- -------------
Total Current Liabilities 2,206,087 2,475,222
-------------- -------------
Stockholders' Equity:
Common stock, $.0002 par value,
125,000,000 shares authorized, 35,106,045
and 32,106,045 shares issued and outstanding 7,021 6,421
Paid-in Capital 2,130,072 1,920,672
Retained Earnings (Deficit) (823,847) (704,229)
-------------- -------------
Total Stockholders' Equity 1,313,246 1,222,864
-------------- -------------
Total Liabilities and Stockholders' Equity $ 3,519,333 $ 3,698,086
============== =============
2
APO HEALTH, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
JUNE 30, 2004 AND 2003 (UNAUDITED)
Three Months Nine Months
---------------- -----------------
2004 2003 2004 2003
------------- ------------- ------------ -------------
Revenue $ 8,204,667 $ 17,367,339 $29,448,197 $ 39,602,840
Cost of Revenue 8,071,884 16,631,937 28,073,903 37,733,214
------------- ------------- ------------ -------------
Gross Margin 132,783 735,402 1,374,294 1,869,626
------------- ------------- ------------ -------------
Operating Expenses
Selling Expense 107,107 171,298 481,718 438,586
General and Administrative Expenses 267,658 488,072 1,027,657 1,348,478
------------- ------------- ------------ -------------
374,765 659,370 1,509,375 1,787,064
------------- ------------- ------------ -------------
Income from Operations (241,982) 76,032 (135,081) 82,562
Other Income (Expense)
Recovery of Litigation Costs - - 92,755 -
Interest Expense (27,230) (14,540) (77,292) (69,946)
------------- ------------- ------------ -------------
(27,230) (14,540) 15,463 (69,946)
------------- ------------- ------------ -------------
Income (loss) before Provision for
Income Taxes (269,212) 61,492 (119,618) 12,616
Provision for (Recovery of)
Income Taxes - - - -
------------- ------------- ------------ -------------
Net Income $ (269,212) $ 61,492 $ (119,618) $ 12,616
============= ============= ============ =============
Basic and Diluted Earnings
Per Common Share: $ (.01) $ .00 $ (.00) $ .00
============= ============= ============ =============
Weighted Average Common Shares
Outstanding 35,106,145 27,536,910 33,570,589 25,890,925
============= ============= ============ =============
3
APO HEALTH, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED
JUNE 30, 2004 AND 2003 (UNAUDITED)
2004 2003
------------- ------------
Cash Flow from Operating Activities:
Net Income (Loss) $ (119,618) $ 12,616
Adjustments to Reconcile Net Income to
Net Cash Flows from Operating Activities:
Depreciation and Amortization 7,410 7,872
Stock Issued for Services - 151,477
Allowance for Doubtful Accounts 20,000 20,000
Changes In:
Accounts Receivable 237,647 (2,669,109)
Other Receivables - 168,350
Inventory 64,234 619,010
Other Current Assets (132) (62,516)
Accounts Payable (30,731) 2,188,803
Accrued Expenses (18,581) 151,274
Customer Deposits Payable (61,264) (488,012)
------------- ------------
Cash Flows from Operating Activities 98,965 99,765
------------- ------------
Cash Flows from Financing Activities:
Cash Overdraft 71,558 52,110
Notes Receivable 4,566 -
Advances from Officers, Net 20,000 (15,000)
Net Proceeds Issuance Stock 90,000 -
Proceeds (Payment) on Bank Notes Payable, Net (181,212) (562,814)
------------- ------------
Cash Flows from Financing Activities 4,912 (525,704)
------------- ------------
Net Increase (Decrease) in Cash 103,877 (425,939)
------------- ------------
Cash Balances:
Beginning of Period 405,153 520,618
------------- ------------
End of Period $ 509,030 $ 94,679
============= ============
4
APO HEALTH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following financial information is submitted in response to the requirements
of Form 10-Q and does not purport to be financial statements prepared in
accordance with generally accepted accounting principles. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted, although the Company believes the disclosures that are made are
adequate to make the information presented not misleading. Further, in the
opinion of management, the interim financial statements reflect fairly the
financial position and results of operations for the periods indicated.
It is suggested that these interim consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10K containing the Company's audited financial statements as of
and for the year ended September 30, 2003 filed with the Securities and Exchange
Commission.
The results of operations for the nine months ended June 30, 2004 are not
necessarily indicative of results to be expected for the entire fiscal year
ending September 30, 2004.
Note 1 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. APO 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. 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 month or less.
Revenue recognition occurs when products are shipped.
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.
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.
5
APO HEALTH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Earnings Per Share. 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.
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
2004 2003
---------- ----------
Cash paid during the year for:
Interest $ 77,292 $ 69,946
Non-cash transaction:
Common Stock Issued for Consulting
And Professional Fees $ 120,000 $ 151,477
Repayment of Officers' Loan by reduction
In Accrued Compensation 60,000
Note 3 - BANK NOTES PAYABLE
On October 29, 2002, the Company entered into a financing agreement with
Rosenthal & Rosenthal, Inc. The financing agreement provides the Company with a
maximum credit facility not to exceed $3,000,000. The credit facility is
collateralized by substantially all the Company's assets and $500,000 of the
facility is personally guaranteed by Dr. Jan Stahl, Chairman and CEO of the
Company. Interest is payable monthly on the average daily loan balance at the
announced prime rate of JP Morgan Chase bank plus 2.5%. This agreement is for a
period of three years through October 31, 2005 and may be extended on a year to
year basis thereafter unless terminated as provided in the agreement.
Note 4 - INCOME TAXES
Income taxes (benefit) consist of the following:
2004 2003
----------- -----------
Current $ - $ -
Utilization of net operating loss - -
Deferred - -
----------- -----------
Total $ - $ -
=========== ===========
6
APO HEALTH INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of income taxes at the federal statutory income tax rate to
total income taxes is as follows:
2004 2003
----------- -----------
Computed at federal statutory rate of 34% $ - $ -
State income tax - -
Utilization of net operating loss - -
----------- -----------
Total $ - $ -
The components of deferred taxes are as follows:
June 30, September 30,
2004 2003
----------- -------------
Deferred tax assets
Allowance for doubtful accounts $ 28,000 $ 20,000
Depreciation 12,000 12,000
Net operating loss carryover, less valuation
allowance of $176,900 and $221,200 - -
Reversal of valuation allowance (40,000) (32,000)
----------- -------------
Total Deferred tax asset $ - $ -
=========== =============
The Company has a net operating loss carryover of approximately $265,000 to
offset future taxable income. The carryover expires 2018. The Company has offset
the deferred tax asset by a valuation allowance of $176,900, since it cannot be
determined more likely than not whether the Company will be able to utilize such
net operating loss carryover.
Note 5 - COMMON STOCK
On April 1, 2004, the Company issued 1,000,000 shares of restricted shares of
common stock in a private placement for $90,000 net of fees of $10,000 paid to
its investment banker.
On January 29, 2004, the Company entered into an Investment Banking agreement
with Sloan Securities Corp. ("SSC") to provide financing and advisory and
investment banking services for a period of one year from the date of the
agreement. In consideration for these services, the Company issued to an
affiliate of SSC 2,000,000 share of restricted common stock in the Company
valued at $120,000.
In January of 2004, the Company authorized the creation of 3,500,000 bonus
compensation warrants exercisable at $0.025 per share, for an exercise period of
three years, to be issued to designated recipients approved by the Board. On
January 9, 2004, the Board authorized the issuance of 2,300,000 of compensation
warrants to various officers and professionals for services rendered.
On July 22 2002, the Company adopted a Bonus Compensation Warrant Agreement,
whereby, the Company would issue Bonus Compensation Warrants equivalent to 10%
of the price of any merger or acquisition brought to the Company. All of the
warrants being exercisable into shares of common stock at 80% of the 20 day
average bid and ask price of the Company's common stock. The Company authorized
up to a maximum aggregate of 3,000,000 shares of common stock available for any
Bonus Compensation Warrants. To date none of these shares have been issued.
7
APO HEALTH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - COMMON STOCK (continued)
On July 22 2002 the Company issued a common stock purchase warrant for 260,000
shares of common stock exercisable at $.10 per share and on September 27, 2002,
a common stock purchase warrant for 1,875,000 shares exercisable at $.04 per
share, both expiring on August 31, 2007.
In April, 2001, investors in a private placement received warrants to acquire
1,500,000 shares of Common stock at $1.00 per share. These warrants expired on
April 24, 2004.
In June, 2001, consultants received warrants to acquire 1,350,000 shares of
Common stock at prices ranging from $1.00 to $2.00 that expire on September 14,
2004. To date none of these warrants have been exercised.
In June, 2001. a consultant received warrants to acquire 1,000,000 shares of
Common stock at prices ranging from $1.00 to $2.00 that expire on June 5, 2006.
These warrants were subsequently returned to the Company
Note 6 - LEASES
The Company leases 12,000 square feet in New York. The lease is on a
month-to-month basis with an affiliated company owned by the Company's officers
and shareholders. The affiliate's underlying New York lease expires in 2004.
Lease payments made by the Company approximate the payments due by the
affiliated companies. On December 1, 2002 the Company entered into a sublease
agreement to lease approximately 2,000 square feet of its warehouse through
November 30, 2004.
Future minimum lease payments are as follows:
Year ended December 31, 2004 $34,060
Note 7 - COMMITMENTS AND CONTINGENCIES
Litigation
There was an action 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., Cause No. 490120101CP000016." The lawsuit involved
unsolicited broadcast faxes sent in the state and had been certified as a class
action suit.
On January 28, 2004 the Company announced that it had reached an out of court
settlement in the unsolicited broadcast fax class action lawsuit by Kenro, Inc.
The Company's attorneys agreed to settle the litigation for up to $4.5 million
that will be placed in a settlement fund created and completely covered by the
Company's insurer. As a result of the settlement, the Company will have no out
of pocket expenses related to the creation or management of the Settlement Fund.
8
APO HEALTH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - COMMITMENTS AND CONTINGENCIES (continued)
On or about July 7, 2004, APO Health, Inc. was served with process in a
suit commenced by The Proctor & Gamble Company ("P&G") in the US District Court
for the Eastern District of New York, against it and a number of other parties.
P&G claimed that APO Health, as well as others were involved in the sale of
Pantene and Head and Shoulders products which were not manufactured by P&G. APO
purchased abroad several shipments of these products and, unknown to it, some
non P&G products were included in these shipments. APO has cooperated with P&G
as well as the federal regulatory agencies and has supplied P&G with all of its
documentation in order to assist P&G in its efforts to remove these products
from the marketplace and to allow it to trace back the source of these improper
products. The lawsuit is seeking, among other relief, a request for a temporary
and permanent injunction from selling such products. APO continues to cooperate
with and assist the Federal Drug Administration in its inquiry and has
undertaken a voluntary recall of these products. As a result of APO's continuing
cooperation with P&G and the FDA and its lack of knowing culpability, its
counsel believes that this proceeding will terminate without any adverse
consequence to APO.
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 8 - CONCENTRATION OF CREDIT RISK
The Company maintains cash balances at various financial institutions. At times,
such balances exceed the insured limits of the financial institution. The
Company has not experienced any losses in such accounts and does not believe it
is exposed to any significant credit risk on cash balances. As of June 30, 2004,
the Company had $528,501 on deposit, in excess of the $100,000 in each bank,
which is insured under federal law.
9
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Revenue for the nine months ended June 30, 2004 was $29,448,197, a decrease
of $10,154,643, or 25.6%, in revenue from the nine months ended June 30, 2003.
Revenue for the three months ended June 30,2004 were $8,204,667, a decrease of
$9,167,672, or 52.7%, in revenue from the three months ended June 30,2003. The
decrease in the three month period ended June 30, 2004 accounted for almost 90%
of the decrease for the nine months ended June 30, 2004. Revenue for the three
months ended June 30, 2003 was $17,367,339, which had been an increase of
$8,958,289 over the three months ended June 30, 2002. Revenue in the three
months ended June 30, 2004 decreased because the strong Euro caused the price of
product from overseas to increase and preclude the sale of the Company's
products at competitive prices.
The Company is in the process of preparing a new catalogue for medical
supplies, which it anticipates will be completed by the middle of September
2004. It anticipates that with the distribution of this new catalogue, sales of
medical supplies will increase. The gross profits on products included in the
catalogue are a minimum of 20% to 25% and any increase in revenue will increase
the overall profit margins of the Company.
Cost of sales for the nine months ended June 30, 2004 were $28,073,903, a
decrease of $9,659,311, or 25.6%, from the nine months ended June 30, 2003. The
decrease in cost of sales is the same as the percentage in revenue. The gross
profit percentage for the nine months ended June was 4.7%, the same as in the
nine months ended June 30,2003. For the three months ended June 30, 2004, the
gross profit and gross percentage was reduced by $225,883, or 2.7%, as a result
of a recall of potentially unsaleable health and beauty aid products (see "Note
7 - Commitments and Contingencies, Litigation"). Excluding this write down, the
gross profit for the nine months ended June 30, 2004 would have been 4.3%.
Selling expenses for the nine months ended June 30, 2004 were $481,718 an
increase of $43,132 over the nine months ended June 30, 2003. Freight costs for
the nine months ended June 30,2004 increased by $44,905 due to fuel surcharges.
Commissions to outside sales representatives increased by $66,396 as the Company
used these outside representatives to augment the internal sales staff.
Advertising and related costs for the nine months ended June 30, 2004 declined
by $40,115 from the nine months ended June 30, 2003. Advertising and related
costs are expected to increase approximately $75,000 in the fiscal year ending
September 30,2005 with the completion and distribution of the Company's new
medical catalogue. Travel and entertainment expense for the nine months ended
June 30, 2004 declined by $31,163 from the nine months ended June 30,2003
General and administrative expenses for the nine months ended June 30, 2004
were $1,027,657, a decrease of $320,821 from the nine months ended June 30,
2003. Total compensation, including payroll taxes and employee benefits
decreased by $255,882 through June 30, 2004. This decrease was predominantly
caused by a bonus of $268,000 paid during the same period of 2003 to one of the
officers for attaining sales levels included in his employment agreement. The
2004 compensation does not include any bonuses. Professional fees, including
legal, accounting, and consulting, decreased by approximately $57,000.
Consulting fees, specifically towards mergers and acquisitions, decreased by
$67,000 while other professional fees increased by approximately $10,000 so the
Company could be in compliance with the provisions of the Sarbanes-Oxley Act. In
the quarter ended June 30, 2003, the Company cancelled a consulting agreement
and wrote off $58,200, the remaining balance of compensation
10
under the consulting agreement. All other general and administrative expenses
decreased by approximately $8,000.
During January 2004, the Company settled a lawsuit against it involving
unsolicited broadcast faxes. The Company settled the lawsuit for $4.5 million,
the entire amount of which was covered by the Company's insurer. As a result,
the Company was reimbursed for all legal expenses that it had incurred from the
lawsuit in prior years.
Interest expense for the nine months ended June 30, 2004 was $77,292, an
increase of $7,346 from the nine month period ended June 30, 2003. The increase
in interest expense is due to an increase in the average daily balance
outstanding on our credit facility with Rosenthal & Rosenthal, Inc.
Financial Condition
As of June 30, 2004, the Company had net working capital of $1,295,153, an
increase of $97,792 from September 30, 2003. The Company also has approximately
$2,030,000 of financing available under a $3,000,000 credit facility with
Rosenthal & Rosenthal, Inc. to finance additional receivables and inventory. The
term of the credit facility expires on October 31, 2005 and may be extended on a
year to year basis thereafter unless it is terminated.
Based upon the above factors, the Company believes that it has sufficient
funds for operations for the next fiscal year.
During the past year, because of the decrease in the exchange rate of the
U.S. dollar against the Euro and Canadian dollar, the Company has not been able
to purchase merchandise at favorable prices from distributors in Europe and
Canada. In addition, other product lines are no longer accessible to the
Company. Consequently, the Company's sales of products has decreased.
Liquidity
In connection with a lawsuit commenced on July 7, 2004 by The Proctor &
Gamble Company, the Company returned certain product to its distributor and
recorded a receivable of approximately $180,000. To date, the Company has
received $80,000 of this receivable, and the balance will be reduced by credits
issued by the distributor by each container of product purchased by the Company.
The Company expects to recoup the remaining balance with credits on purchases at
the rate of $10,000 per month.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that are
likely to have a current or future effect on the Company's financial condition,
revenues or expenses, results of operations or capital resources.
11
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Exchange Rate Risk. 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. As a result, our financial results could be affected by
factors such as changes in foreign currency exchange rates or weak economic
conditions in foreign markets.
Credit Risk. The Company maintains cash balances at various financial
institutions. At times, such balances exceed the insured limits of the financial
institution. To date, the Company has not experienced any losses in such
accounts. As of June 30, 2004, the Company had $528,501 on deposit, in excess of
the $100,000 in each bank, which is insured under federal law.
ITEM 4 CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company conducted
an evaluation, under the supervision and with the participation of its principal
executive officer and principal financial officer, of the Company's disclosure
controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the
Exchange Act). Based upon this evaluation, the Company's principal executive
officer and principal financial officer concluded that the Company's disclosure
controls and procedures are effective to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Commission's rules and forms. There was no significant
change in the Company's internal controls or in other factors that could
significantly affect these controls subsequent to the date of the evaluation.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On or about July 7, 2004, APO Health, Inc. was served with process in a
lawsuit commenced by The Proctor & Gamble Company ("P&G") in the U.S. District
Court for the Eastern District of New York, against it and a number of other
parties. P&G claimed that APO Health, as well as others, were involved in the
sale of Pantene and Head and Shoulders products that were not manufactured by
P&G. APO purchased abroad several shipments of these products and, unknown to
it, some non P&G products were included in these shipments. APO has cooperated
with P&G as well as the Federal regulatory agencies and has supplied P&G with
all of its documentation in order to assist P&G in its efforts to remove these
products from the marketplace and to allow it to trace back the source of these
improper products. The lawsuit is seeking, among other relief, a request for a
temporary and permanent injunction from selling such products. APO continues to
cooperate with and assist the Federal Drug Administration in its inquiry and has
undertaken a voluntary recall of these products. As a result of APO's continuing
cooperation with P&G and the FDA and its lack of knowing culpability, its
counsel believes that this proceeding will terminate without any adverse
consequence to APO.
12
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
Sales of Unregistered Securities during the Quarter ended June 30, 2004.
On April 1, 2004, the Company issued 1,000,000 shares of restricted shares
of common stock in a private placement for $90,000 net of fees of $10,000 paid
to its investment banker. The issuance is considered exempt from registration by
reason of Section 4(2) and/or Regulation D of the Securities Act of 1933.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit Number Description
- ------------------ ------------------------------------------------------------------------------------------------
2.1 Tax-Free Reorganization Agreement between the Company and InternetFinancialCorp.com, Inc.,
effective June 13, 2001, incorporated by reference to Form 8-K/A filed with the Securities and
Exchange Commission on July 23, 2001.
3.1 Restated Articles of Incorporation, incorporated by reference to Form 8-K filed with the
Securities and Exchange Commission on October 12, 2001.
3.2 Certificate of Amendment to Articles of Incorporation, changing name to
Interfinancialcorp.com, Inc., incorporated by reference to Form 8-K filed with the Securities
and Exchange Commission on October 12, 2001.
3.3 Certificate of Amendment to Articles of Incorporation, changing name to APO Health, Inc.,
incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on
October 12, 2001.
3.4 By-laws of the Company, incorporated by reference to registration statement on Form 10 (File
No. 000-30074) filed with the Securities and Exchange Commission on February 19, 1999.
10.1 Employment Agreement between the Company and Dr. Jan Stahl, incorporated by reference to Form
S-2 (File No. 333-76736) filed with the Securities and Exchange Commission on January 15, 2002.
31.1 Certification by Dr. Jan Stahl, Chief Executive Officer and Chief Financial Officer, pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification by Dr. Jan Stahl, Chief Executive Officer and Chief Financial Officer, pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
None.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APO HEALTH, INC.
Date: August 12, 2004 By: /s/Jan Stahl
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Dr. Jan Stahl, Chief Executive
Officer, Chief Financial Officer,
Secretary and Chairman
(Principal Executive Officer and
Principal Financial Officer)
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