-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E+afq/GFo+CkJfLB4TIBZW1iJkmnLVrFFLOmt/8VhoR4sX1axKZtH4srDVynlm+z YeBTnNIS/GuSXFf4RSnygg== 0001111865-02-000169.txt : 20020516 0001111865-02-000169.hdr.sgml : 20020516 20020516162722 ACCESSION NUMBER: 0001111865-02-000169 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APO HEALTH INC /NV/ CENTRAL INDEX KEY: 0001076607 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047] IRS NUMBER: 860871787 STATE OF INCORPORATION: NV FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-30074 FILM NUMBER: 02655106 BUSINESS ADDRESS: STREET 1: 3590 OCEANSIDE ROAD STREET 2: - CITY: OCEANSIDE STATE: NY ZIP: 11572 BUSINESS PHONE: 8003652839 MAIL ADDRESS: STREET 1: 2080 E. FLAMINGO RD STREET 2: SUITE 112 CITY: LAS VEGAS STATE: NV ZIP: 89119 FORMER COMPANY: FORMER CONFORMED NAME: CARIBBEAN VENTURES INC /NV/ DATE OF NAME CHANGE: 19990112 FORMER COMPANY: FORMER CONFORMED NAME: INTERNETFINANCIALCORP COM INC DATE OF NAME CHANGE: 20000229 10-Q 1 apo10q_033102.txt FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002 U.S. 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 March 31, 2002 OR [ ] TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934 From the transition period from __________ to ___________ Commission file number 00030074 ---------- 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) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes __X__ No _____ As of May 10, 2002, 23,754,081 shares of Common Stock of the issuer were issued. APO HEALTH, INC. FORM 10-Q QUARTER ENDED MARCH 31, 2002 TABLE OF CONTENTS ----------------- Page ---- PART I - Financial Information Item 1 Financial Statement. Consolidated Balance Sheet as of March 31, 2002 and September 30, 2001. 3 Consolidated Statement of Income for the three and six months ended March 31, 2002 and 2001. 4 Consolidated Statement of Cash Flows for the three and six months ended March 31, 2002 and 2001. 5 Notes to Consolidated Financial Statements. 6 - 11 Item 2 Management's Discussion and Analysis Or Plan of Operations. 12 PART II - Other Information Item 1 Legal Proceedings. 13 Item 2 Changes in Securities and Use of Proceeds. 13 Item 3 Default 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 - 2 - PART I - FINANCIAL INFORMATION
APO HEALTH, INC. CONSOLIDATED BALANCE SHEET March 31, 2002 September 30, 2001 -------------- ------------------ (Unaudited) ASSETS ------ Current Assets: Cash $ 108,333 $ 179,167 Accounts Receivable, net of allowance for doubtful accounts of $29,363 and $29,000 1,819,966 1,768,501 Other Receivables 302,102 - Inventory 2,084,691 1,692,209 Due from Officers 98,905 99,844 Deferred Tax Assets 23,383 36,020 Other Current Assets 40,401 165,935 ------------ ------------ Total Current Assets 4,477,871 3,941,676 ------------ ------------ Property and Equipment, net of accumulated Depreciation of $119,823 and $76,606 116,692 40,389 Goodwill, less accumulated amortization Of $ - and $53,802 64,100 125,537 Deposits 7,500 7,500 ------------ ------------ Total Assets $ 4,666,073 $ 4,115,102 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities: Bank Notes Payable $ 1,720,003 $ 1,736,224 Accounts Payable 839,894 1,056,117 Accrued Expenses 70,033 50,776 Due to Officer - 45,509 Income Taxes Payable 126,211 - Customer Deposits 238,700 - Other Current Liabilities 47,346 - ------------ ------------ Total Current Liabilities 3,042,487 2,888,626 ------------ ------------ Stockholders' Equity: Common stock, $.0002 par value, 125,000,000 shares authorized, 23,754,081 and 23,132,089 shares issued and outstanding 4,744 4,626 Paid-in Capital 1,621,494 1,452,530 Retained Earnings (Deficit) 131,383 (230,680) Less Treasury Stock (134,035) - ------------ ------------ Total Stockholders' Equity 1,623,586 1,226,476 ------------ ------------ Total Liabilities and Stockholders' Equity $ 4,666,073 $ 4,115,102 ============ ============
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APO HEALTH, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2002 AND 2000 (UNAUDITED) Three Months Six Months ------------ ---------- 2002 2001 2002 2001 ------------- ------------- ------------- ------------- Revenue $ 7,026,039 $ 6,248,267 $ 13,516,329 $ 12,272,889 Cost of Revenue 6,338,801 5,647,119 12,154,439 10,955,405 ------------- ------------- ------------- ------------- Gross Margin 687,238 606,148 1,361,890 1,317,484 ------------- ------------- ------------- ------------- Operating Expenses Selling Expense 194,808 186,740 402,120 336,200 General and Administrative Expenses 469,742 456,415 847,877 884,457 ------------- ------------- ------------- ------------- 664,550 643,155 1,249,997 220,657 ------------- ------------- ------------- ------------- Income from Operations 22,688 (37,007) 111,893 96,827 Interest Expense 31,988 47,745 62,193 93,047 ------------- ------------- ------------- ------------- Income (loss) before Provision for Income Taxes (9,300) (84,752) 49,700 3,780 Provision for Income Taxes - (121) 18,350 1,271 ------------- ------------- ------------- ------------- Net Income Before Discontinued Operations (9,300) (84,631) 31,350 2,509 Discontinued Operations Gain on Sale of Discontinued Operations Net of Taxes 314,875 - 314,875 - Income (loss) from Discontinued Operations Net of Taxes (4,234) 15,510 15,838 24,026 ------------- ------------- ------------- ------------- Discontinued Operations 310,641 15,510 332,713 24,026 ------------- ------------- ------------- ------------- Net Income $ 301,341 $ (69,121) $ 362,063 $ 26,535 ============= ============= ============= ============= Basic and Diluted Earnings Per Common Share: From Continuing Operations $(.00) $(.00) $.00 $.00 From Discontinued Operations .01 .00 .01 .00 ------------- ------------- ------------- ------------- Total $ .01 $(.00) $.01 $.00 ============= ============= ============= ============= Weighted Average Common Shares Outstanding 23,754,874 15,150,344 23,579,874 14,758,304 ============= ============= ============= =============
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APO HEALTH, INC. CONSOLIDATED STATEMENT OF CASH FLOW FOR THE SIX MONTHS ENDED MARCH 31, 2002 AND 2001 (UNAUDITED) 2002 2001 ----------- ---------- Cash Flow From Operating Activities: Net Income $ 362,063 $ 26,535 Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities: Depreciation and Amortization 11,733 13,394 Deferred Taxes 12,637 14,880 Write-off Goodwill Discontinued Operations 125,537 - Stock Issued for Services - 89,400 Changes In: Accounts Receivable (51,645) 144,690 Other Receivables (302,102) - Inventory (394,482) 324,598 Other Current Assets 120,487 23,461 Accounts Payable (206,747) (525,257) Accrued Expenses 19,257 (115,835) Income Taxes Payable 126,211 - Customer Deposits Payable 238,000 - Other Current Liabilities 41,482 - ----------- ----------- Cash Flows from Operating Activities 102,431 (7,133) ----------- ----------- Cash Flows From Investing Activities: Investment In Subsidiary (25,000) - Assets Acquired Net of Cash Investment (9,100) - ----------- ----------- Net Cash From Investing Activities (34,100) - ----------- ----------- Cash Flows from Financing Activities: Advances from Officers, Net (46,448) (4,232) Proceeds (Payment) on Bank Notes Payable, Net (92,717) 56,930 ----------- ----------- Cash Flows from Financing Activities (139,165) 52,698 ----------- ----------- Net Increase (Decrease) in Cash (70,834) 45,565 ----------- ----------- Cash Balances: Beginning of Period 179,167 90,732 ----------- ----------- End of Period $ 108,333 $ 136,297 =========== ===========
- 5 - 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 the 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, 2001 filed with the Securities and Exchange Commission. The results of operations for the six months ended March 31, 2002 are not necessarily indicative of results to be expected for the entire fiscal year ending September 30, 2002. 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. Effective June 13, 2001, Internet Financial Corp.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. On January 2, 2002, the Company acquired 100% of the outstanding stock of Envirotech Air Quality Services, Inc. ("Envirotech") a Florida corporation specializing in indoor air quality testing, sanitation, sterilization and filtration. The purchase price was $25,000 plus the Company will issue 50,000 shares of its restricted common stock to the former shareholders of Envirotech. In addition, the Company will issue 100,000 common stock purchase warrants to the former shareholders of Envirotech exercisable for a period of two years at a purchase price of $.75 per share.The excess of the cost of the acquisition over the net assets acquired gives rise to goodwill of $64,100. - 6 - APO HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Inventory Merchandise inventory is stated at the lower of cost or market. Cost is determined using the first-in, first-out method. Property and Equipment 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 expenses as incurred. Intangibles Goodwill represents the excess of the cost of companies acquired over the fair value of their net assets at the dates of acquisition and was being amortized using the straight-line method over 15 years. Effective to the issuance of FASB No. 142, the Company discontinued amortizing goodwill. Impairment The Company follows Statement of Financial Accounting Standards No. 121, Impairment of Long-lived Assets, by reviewing such assets for the impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Income taxes 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. 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. 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. Reclassification Certain reclassifications of certain prior year amounts were made to conform to the current year presentation. - 7 - APO HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 - ----------------------------------------------------- 2002 2001 ------------ ------------ Cash Paid During the Year for: Interest $ 62,193 $ 93,047 Income Taxes - 65,000 Common Stock Issued for Consulting and Professional Fees 139,083 Common Stock Issued in Acquisition of Envirotech 30,000 Common Shares returned to Treasury 134,050 Note 3 - Discontinued Operations - -------------------------------- On February 1,2002, the Company sold the veterinary division of Universal for $550,000 including the customer lists and catalogs. In addition the Company sold its inventory related to the veterinary business. The Company wrote off the remaining goodwill associated with the veterinary business. The financial statements have been restated to reflect the results from the discontinued operations in prior periods. Note 4 - 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 transaction, 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 Company's two majority 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 - 8 - APO HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 - Bank Notes Payable (continued) - --------------------------------------- on demand, or upon maturity, which is up to 180 days after the initiation of a bankers acceptance or March 31, 2001, 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 was $1,500,000 as of March 31, 2002; acceptances totaled $111,316 and there were $72,217 letters of credit outstanding. As of March 31, 2002, the term loan amounted to $37,467. The credit facility matured March 31, 2002 and is in the process of being extended for an additional year with the same terms . The Company assumed approximately $75,000 in connection with the acquisition of Envirotech Note 5 - Related Parties - ------------------------ Advances due to/from officers are non-interest bearing and due on demand. Note 6 - Income Taxes - --------------------- Income taxes (benefit) consist of the following: 2002 2001 ------------ ------------ Continuing Operations $ 18,350 $ 1,271 Discontinued Operations 185,345 12,172 ------------ ------------ $ 203,695 $ 13,443 ============ ============ A reconciliation of income tax at the federal statutory income tax rate to total income taxes is as follows: 2002 2001 ------------ ------------ Computed at the federal statutory rate of 34% $ 203,712 $ 13,592 State income tax 25,399 2,175 Operating loss carryforward (25,416) - Other adjustments - (2,324) ------------ ------------ $ 203,695 $ 13,443 ============ ============ The components of deferred taxes are as follows: 2002 2001 ------------ ------------ Deferred tax assets Allowance for doubtful accounts $ 10,730 $ 11,000 Depreciation 8,520 8,500 Net operating loss carryover 4,133 16,395 Miscellaneous - 125 ------------ ------------ $ 23,383 $ 36,020 ============ ============ - 9 - APO HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 7 - Common Stock Issuances - ------------------------------- On November 28, 2001, the Company issued 463,610 shares of common stock, par value $.0002, registered on Form S-8, to three consultants and an attorney for the Company. The shares were valued at $.30 per share based on services to be provided by the consultants and attorney. On January 1,2002 the Company issued 50,000 restricted shares of its common stock in the acquisition of Envirotech. In March 2002 several agreements with outside consultants were cancelled and 739,000 shares of common stock were returned ,which the Company is holding as Treasury Stock. The Company recorded this transaction at the value of shares originally issued. Note 8 - Lease - -------------- The Company leases approximately 11,800 square feet in New York on a month-to-month basis with an affiliated company owned by two officers of the Company. The affiliates lease underlying the New York lease expires on December 31, 2004. Lease payments made by the Company approximate lease payments by the affiliated company. Future minimum lease payments are as follows: Year ended September 31, ------------------------ 2002 $ 35,000 2003 72,450 2004 74,900 2005 17,500 ----------- Total $ 199,850 =========== Note 9 - 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 other 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. - 10 - APO HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Litigation (continued) 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 an unfavorable verdict in the Kenro suit Employment Agreement Effective October 1, 2001, the Company 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 9 - Concentration of Credit Risk - ------------------------------------- The Company maintains bank accounts at several banks. As of March 31, 2002, the Company had $172,400 on deposit, in excess of the $100,000 limitation per account insured under federal law. - 11 - ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - --------------------------------------------------------------------------- Results of Operations - --------------------- The results of operations for the three and six months ended March 31, 2001 have been restated to reflect the sale of the veterinary division of Universal. Revenue for the six months ended March 31, 2002 increased by $1,243440 or 10.1% over the six months ended March 31, 2001. The increase was due to an increase in the sales to wholesalers and distributors while retail sales were flat. As a result, the gross profit margin declined from 10.7% to 10.0%. For the three months ended March 31, 2002,revenue increased by $777,772 or 12.4% over the three months ended March 31,2001.The gross profit margin for the three months ended March 31, 2002 was 9.8% compared to 9.7% for the three months ended March 31, 2001. Operating expenses including selling and general and administrative expenses for the six months ended March 31, 2002 were $1,249,997, an increase of $29,340 or 2.4% over the six months ended March 31, 2001. Selling expenses during the six month period increased by approximately $66,000 or 19.6%. Shipping expense increased by $32,000 and advertising increased by $23,000 accounting for the majority of the increase in selling expenses. General and Administrative expenses decreased by approximately $37,000 in the six months ended March 31, 2002 from the corresponding period in 2001. In 2001,bonuses to officers were $86,400 to the reflect the value of stock issued to them. In 2002 there was a bonus of $19,500, the net effect of these bonuses being a decrease of approximately $67,000 in 2002. Included in general and administrative expenses were consulting fees that were being written off over the term of the contracts. For the six months ended the Company recorded an expense of $36,000.The net effect of these two changes was a decrease in general and administrative expenses of $31,000. Interest expense for the six months ended March 31, 2002 was $62,193, a decrease of $30,854 compared to the six months ended March 31, 2001. The Company paid down a $500,000 term loan during the year ended March 31, 2002 and the interest rate on the line of credit decreased as the prime rate decreased over the last twelve months. On February 1, 2002, the Company sold the veterinary division of Universal resulting in an after tax gain of $314,875 after giving effect to a write-off of goodwill of $125,537. Financial Condition - ------------------- As of March 31, 2002, the Company had current working capital of $1,467,384. In addition, the Company has available approximately $275,000 in unused credit facilities, including bankers acceptances and letters of credit. The Company has issued a total of 3,703,634 common stock purchase warrants exercisable at prices ranging from $.25 to $2.00 per share and 250,000 common stock purchase warrants to Dr. Jan Stahl exercisable at $.25 per share. If these warrants are exercised, the net proceeds to the Company would be in excess of $4,500,000. These proceeds could be used for acquisitions and or major capital expansion. At the current time, the Company has no immediate plans for a material acquisition or major capital expenditures and, therefore, has sufficient working capital for its current operations. - 12 - PART II - OTHER INFORMATION APO HEALTH, INC. ITEM 1 - LEGAL PROCEEDINGS - ----------------------------- 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., Cause No. 490120101CP000016." 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 for interlocutory appeal. 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., Case No. 01-605-091, Supreme Court of the State of New York, County of New York. 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 and 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 monetary damages that the Company may incur, as a result of an unfavorable verdict in the Kenro suit. ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS - ----------------------------------------------------------- None. ITEM 3 - DEFAULT 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 - ------------------------------------------------- None. - 13 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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: May 14, 2002 By: /s/ Dr. Jan Stahl ----------------------- Dr. Jan Stahl, Chairman Chief Executive Officer and Secretary (Principal Executive Officer) Date: May 14, 2002 By: /s/ Peter Steil ----------------------- Peter Steil, President and Treasurer (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Date: May 14, 2002 By: /s/ Dr. Jan Stahl ----------------------- Dr. Jan Stahl, Director Date: May 14, 2002 By: /s/ Peter Steil ----------------------- Peter Steil, Director Date: May 14, 2002 By: /s/ Kenneth Leventhal ----------------------- Kenneth Leventhal, Director - 14 - -----END PRIVACY-ENHANCED MESSAGE-----