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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 December 31, 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 February 8, 2005, 35,773,045 shares of Common Stock of the issuer
were issued and outstanding.
APO HEALTH, INC.
FORM 10-Q
QUARTER ENDED DECEMBER 31, 2004
TABLE OF CONTENTS
Page
PART I - Financial Information
Item 1 Financial Statements.
Consolidated Balance Sheets as of
December 31, 2004 and September 30, 2004. 2
Consolidated Statements of Income for the three
months ended December 31, 2004 and 2003. 3
Consolidated Statements of Cash Flows for the
three months ended December 31, 2004 and 2003. 4
Notes to Consolidated Financial Statements. 5 - 9
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations. 10 - 11
Item 3 Quantitative and Qualitative Disclosures About 11
Market Risk.
Item 4 Controls and Procedures. 12
PART II - Other Information
Item 1 Legal Proceedings. 12
Item 2 Unregistered Sales of Equity 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. 13
Signatures 14
1
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS.
APO HEALTH, INC.
CONSOLIDATED BALANCE SHEET
December 31, September 30,
2004 2004
--------------- --------------
(Unaudited)
ASSETS
Current Assets:
Cash $ 339,487 $ 574,732
Accounts Receivable, net of allowance for
doubtful accounts of $430,000 and $380,000 805,174 1,179,078
Inventory 545,936 583,040
Other Current Assets 118,910 186,274
-------------- --------------
Total Current Assets 1,809,507 2,523,124
-------------- --------------
Property and Equipment, net of accumulated
Depreciation of $89,963 and $88,430 6,591 8,124
Deposits 7,500 7,500
-------------- --------------
Total Assets $ 1,823,598 $ 2,538,748
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank Notes Payable $ 238,675 $ 609,185
Accounts Payable 899,088 1,168,278
Deferred Compensation 89,223 89,224
Customer Deposits 305,903 259,675
-------------- -------------
Total Current Liabilities 1,532,889 2,126,362
-------------- -------------
Stockholders' Equity:
Common stock, $.0002 par value,
125,000,000 shares authorized, 35,773,045
and 35,673,045 shares issued and outstanding 7,155 7,135
Paid-in Capital 2,164,288 2,158,308
Retained Earnings (Deficit) (1,880,734) (1,175,057)
-------------- -------------
Total Stockholders' Equity 290,709 412,386
-------------- -------------
Total Liabilities and Stockholders' Equity $ 1,823,598 $ 2,538,748
============== =============
2
APO HEALTH, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED
December 31, 2004 AND 2003 (UNAUDITED)
Three Months
2004 2003
-------------- --------------
Revenue $ 4,711,957 $ 7,389,987
Cost of Revenue 4,325,561 6,746,816
-------------- --------------
Gross Margin 386,396 637,171
-------------- --------------
Operating Expenses
Selling Expense 123,211 163,845
General and Administrative Expenses 376,957 336,831
-------------- --------------
500,168 503,676
-------------- --------------
Income (loss) from Operations (113,172) 133,495
Interest Expense 13,906 22,730
-------------- --------------
Income (loss) before Provision for
Income Taxes (127,678) 110,765
Provision for (Recovery of)
Income Taxes - -
-------------- --------------
Net Income $ (127,678) $ 110,765
============== ==============
Basic and Diluted Earnings
Per Common Share: $(.00) $.00
============== ==============
Weighted Average Common Shares
Outstanding 35,768,601 32,106,045
============== ==============
3
APO HEALTH, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
December 31, 2004 AND 2003 (UNAUDITED)
2004 2003
-------------- --------------
Cash Flow from Operating Activities:
Net Income (Loss) $ (127,678) $ 12,616
Adjustments to Reconcile Net Income to
Net Cash Flows from Operating Activities:
Depreciation and Amortization 1,533 7,872
Stock Issued for Services 6,000 151,477
Allowance for Doubtful Accounts 50,000 20,000
Changes In:
Accounts Receivable 323,904 (2,669,109)
Other Receivables - 168,350
Inventory 37,104 619,010
Other Current Assets 67,364 (62,516)
Accounts Payable (269,190) 2,188,803
Accrued Expenses - 151,274
Customer Deposits Payable 46,228 (488,012)
-------------- --------------
Cash Flows from Operating Activities 135,265 99,765
-------------- --------------
Cash Flows from Financing Activities:
Advances from Officers, Net - (15,000)
Proceeds (Payment) on Bank Notes Payable, Net (370,510) (562,814)
-------------- --------------
Cash Flows from Financing Activities (370,510) (525,704)
-------------- --------------
Net (Decrease) in Cash (235,245) (425,939)
Cash Balances:
Beginning of Period 574,732 520,618
-------------- --------------
End of Period $ 339,487 $ 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. 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 10-K containing the Company's audited financial statements as of
and for the year ended September 30, 2004 filed with the Securities and Exchange
Commission.
The results of operations for the three months ended December 31, 2004 are not
necessarily indicative of results to be expected for the entire fiscal year
ending September 30, 2005.
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 and medical
professionals, and wholesalers in the United States, principally on the East
Coast. Effective June 13, 2001, InternetFinancialCorp.com, Inc., ("IFAN"), a
Nevada corporation, which was 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.
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.
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 $ 13,906 $ 22,730
Non-cash transaction:
Common Stock Issued for Professional Fees $ 6,000
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. On September 1, 2004 the
credit facility was amended by mutual consent and reduced the maximum amount of
credit under the facility to $1,000,000. 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% (7.75% as of December 31, 2004).
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. The credit facility provides that the Company maintain certain
financial covenants.
Bank Notes Payable are as follows December 31 September 30
2004 2004
---- ----
Own note borrowing $ 238,675 $ 609,185
============== ==============
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:
December 31, September 30,
2004 2004
-------------- --------------
Deferred tax assets
Allowance for doubtful accounts $ 172,000 $ 152,000
Depreciation 20,000 21,250
Deferred Compensation 50,400 50,400
Net operating loss carryover 430,425 404,025
Valuation allowance (672,825) (627,675)
-------------- --------------
Total Deferred tax asset $ - $ -
============== ==============
The Company has a net operating loss carryover of approximately $1,139,000 to
offset future taxable income. The carryover expires at various times through
2024. The Company has offset the deferred tax asset by a valuation allowance of
$672,825, 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
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 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 warrants have been issued.
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.
7
APO HEALTH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - COMMON STOCK (continued)
In October, 2004, the Company issued 100,000 shares of common stock to a
professional for services valued at $6,000.
Note 6 - LEASES
The Company's offices are located at 3590 Oceanside Road, Oceanside, New York.
The premises contain approximately 9,800 square feet under a five-year lease
(the "Lease") which expired on November 30, 2004 (the "Lease Term"). The Lease
Term has been extended for an additional five years through November 30, 2009.
These premises are occupied under a Lease between the landlord, who is an
unaffiliated third party, and an affiliated company PJS Trading, Corp., a New
York corporation ("PJS") owned by Dr. Stahl formed for the express purpose of
entering into the Lease. The Company occupies these premises under an oral
agreement with PJS and Dr. Stahl whereby the Company has agreed to discharge all
of the Lease obligations with the landlord. The annual lease payment under the
new lease starts at approximately $77,300 per year and increases to $80,000 in
the fifth year with additional increases for real estate taxes over the Lease
Term. Neither PJS nor Dr. Stahl derives any profit from the Lease nor will they
during the balance of the Lease Term. Management of the Company believes the
current facility is adequate for its current operations. Effective December 1,
2004, the Company has subleased for a one year period approximately 2,000 square
feet of the warehouse space at approximately $30,000 per year. Rental expense
net of subleases was $50,261, $59,429 and $73,881 for each of the three years
ended September 30, 2004.
Future minimum lease payments are as follows:
For the years ended September 30,
2005 $ 70,411
2006 70,571
2007 71,225
2008 75,825
2009 79,405
After 2009 13,337
--------
Total $380,774
--------
Note 7 - COMMITMENTS AND CONTINGENCIES
Litigation
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, as well as others were involved in the sale of Pantene and
Head and Shoulders products which were not manufactured
8
APO HEALTH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - COMMITMENTS AND CONTINGENCIES (continued)
by P&G. APO purchased several shipments of these products abroad and unbeknownst
to APO, 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. The
Company continues to cooperate with and assist the Food and Drug Administration
("FDA") 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 the Company.
On or about December 3, 2004, APO Health, Inc. and Dr. Jan Stahl were served
with process in a suit commenced by Alcoa, Inc. ("Alcoa") in the US District
Court for the Eastern District of New York, against them and a number of other
parties. Alcoa claimed that APO, as well as others, were involved in the sale of
products which were not manufactured by Alcoa. APO purchased several shipments
of these products abroad and unbeknownst to APO, some non Alcoa products were
included in these shipments. APO is cooperating with Alcoa as well as the
federal regulatory agencies and is supplying Alcoa with all of its documentation
in order to assist Alcoa 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. The Company continues to
cooperate with and assist the FDA in its inquiry and has undertaken a voluntary
recall of these products. As a result of APO's continuing cooperation with Alcoa
and the FDA and its lack of knowing culpability, its counsel believes that this
proceeding will terminate without any adverse consequence to the Company.
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 expired on 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 December 31,
2004, the Company had $321,805 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 OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Forward-Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. This Act
provides a "safe harbor" for forward-looking statements to encourage companies
to provide prospective information about themselves so long as they identify
these statements as forward looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to differ from the
projected results. All statements other than statements of historical fact made
in this report are forward looking. In particular, the statements herein
regarding industry prospects and future results of operations or financial
position are forward-looking statements. Forward-looking statements reflect
management's current expectations and are inherently uncertain. The Company's
actual results may differ significantly from management's expectations.
Results of Operations
Revenue for the three months ended December 31, 2004 was $4,477,957, a decrease
of $2,627,030, or 36.2%, from $7,389,987 for the three months ended December 31,
2003. There were several factors which contributed to the decline in revenue.
(1) The Company no longer conducted business with several wholesale customers
that were sold products that were subsequently determined to be counterfeit.
Sales to these customers for the quarter ended December 31, 2003 were in excess
of $1,300,000. (2) A second factor which contributed to the reduction in revenue
was the cost of products that the Company had previously imported from Canada
and Europe increased substantially because of the United States dollars decline
against those currencies. The Company was unable to pass along any price
increase, and, therefore reduced or eliminated purchases of many imported
products
The Company is in the process of preparing a new catalogue for medical supplies.
The distribution of the catalogue has been delayed into the second or third
quarter of fiscal 2005. The Company 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 revenue for the three months ended December 31, 2004 were $4,432,561, a
decrease of $2,421,225, or 35.9%, from $6,746,816 for the three months ended
December 31, 2003. The decrease in cost of sales is proportionate with the
decrease in revenue described above. The gross profit percentage for the three
months ended December 31, 2004 was 8.2% compared to 8.6% for the three months
ended December 31, 2003. The lower gross profit percentage is a result of
increased costs that the Company was unable to pass on to customers.
Selling expenses for the three months ended December 31, 2004 were $123,211, a
decrease of $40,634 from the three months ended December 31, 2003. Commissions
decreased by approximately $17,000 for the quarter ended December 31, 2004 due
to the decrease in revenue from wholesale customers. Advertising and related
costs declined by approximately $19,000 as the Company reduced its mailing of
advertising materials. There were minor increases and decreases in other selling
expenses that resulted in an overall decrease which was directly related to the
decrease in revenue.
10
General and administrative expenses for the three months ended December 31, 2004
were $376,957, an increase of $40,126 from $336,831 for the three months ended
December 31, 2003. Total compensation, including payroll taxes and employee
benefits, decreased by $27,100 as the Company reduced salaries for its executive
officers and other salaried individuals to reduce costs. Consulting fees, under
an agreement entered into in January 2004, were $30,000. There was no comparable
cost in 2003. The consulting agreement expired in January 2005. The Company
reserved an additional $50,000 to its allowance for bad debts in the quarter
ended December 31, 2004. There was no comparable cost in 2003. Banking fees and
credit card processing fees decreased in the quarter ended December 31, 2004 by
approximately $12,000 as it reduced the available line of credit with its
lender. There were minor increases or decreases in all other general and
administrative expenses.
Interest expense for the three months ended December 31, 2004 was $13,905, a
decrease of $8,824 from the three-month period ended December 31, 2003. The
decrease in interest expense is due to a reduction of the credit facility with
Rosenthal & Rosenthal, Inc. which reduced the Company's monthly minimum interest
expense.
Liquidity and Capital Resources
As of December 31, 2004, the Company had net working capital of $276,618, a
decrease of $120,144 from September 30, 2004. The Company has approximately
$750,000 of financing available under a $1,000,000 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.
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.
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, the Company's 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 December 31, 2004, the Company had $321,805 on deposit, in
excess of the $100,000 in each bank, which is insured under federal law.
11
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 change in
the Company's internal controls or in other factors that could affect these
controls during the Company's last fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS.
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, 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
several shipments of these products abroad and unbeknownst to APO, 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. The Company continues to
cooperate with and assist the Food and Drug Administration ("FDA") 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 the Company.
On or about December 3, 2004, APO Health, Inc. and Dr. Jan Stahl were
served with process in a suit commenced by Alcoa, Inc. ("Alcoa") in the US
District Court for the Eastern District of New York, against them and a number
of other parties. Alcoa claimed that APO, as well as others were involved in the
sale of products which were not manufactured by Alcoa. APO purchased several
shipments of these products abroad and unbeknownst to APO, some non Alcoa
products were included in these shipments. APO is cooperating with Alcoa as well
as the federal regulatory agencies and is suppying Alcoa with all of its
documentation in order to assist Alcoa 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. The Company continues to
cooperate with and assist the FDA in its inquiry and has undertaken a voluntary
recall of these products. As a result of APO's continuing cooperation with Alcoa
and the FDA and its lack of knowing culpability, its counsel believes that this
proceeding will terminate without any adverse consequence to the Company.
12
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITES AND USE OF PROCEEDS.
In October 2004, the Company issued 100,000 shares of common stock to a
professional for services valued at $6,000.
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.
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.
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: February 14, 2005 By: /s/ Dr. Jan Stahl
-------------------
Dr. Jan Stahl, Chief Executive
Officer, Chief Financial Officer,
Secretary and Chairman
(Principal Executive Officer and
Principal Financial Officer)