10-Q 1 apo_10-q.txt 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 June 30, 2003 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 August 6 , 2003, 30,156,045 shares of Common Stock of the issuer were issued. APO HEALTH, INC. FORM 10-Q QUARTER ENDED JUNE 30, 2003 TABLE OF CONTENTS -----------------
PAGE ---- PART I - FINANCIAL INFORMATION ITEM 1 Financial Statements. Consolidated Balance Sheet as of June 30, 2003 and September 30, 2002. 3 Consolidated Statement of Income for the three and nine months ended June 30, 2003 and 2002. 4 Consolidated Statement of Cash Flows for the nine months ended June 30, 2003 and 2002. 5 Notes to Consolidated Financial Statements. 6 - 11 ITEM 2 Management's Discussion and Analysis or Plan of Operations. 12 - 13 PART II - OTHER INFORMATION ITEM 1 Legal Proceedings. 14 ITEM 2 Changes in Securities and Use of Proceeds. 14 ITEM 3 Default upon Senior Securities. 14 ITEM 4 Submission of Matters to a Vote of Security Holders. 14 ITEM 5 Other Information. 14 ITEM 6 Exhibits and Reports on Form 8-K. 14 SIGNATURES 15
-2- PART I - FINANCIAL INFORMATION APO HEALTH, INC. CONSOLIDATED BALANCE SHEET
JUNE 30, SEPTEMBER 30, 2003 2002 ----------- ----------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash $ 94,679 $ 520,618 Accounts Receivable, net of allowance for doubtful accounts of $50,000 and $30,000 4,160,404 1,511,295 Inventory 1,623,599 2,242,609 Due from Officers 128,905 113,905 Notes and Other receivables 90,150 258,500 Deferred Tax Assets 20,000 12,000 Other Current Assets 80,813 18,297 ----------- ----------- Total Current Assets 6,198,550 4,677,224 ----------- ----------- Property and Equipment, net of accumulated Depreciation of $96,368 and $88,496 20,627 28,499 Deferred tax asset 51,200 61,563 Deposits 7,500 7,500 ----------- ----------- Total Assets $ 6,277,877 $ 4,774,786 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Cash Overdraft $ 52,110 $ -- Bank Notes Payable 787,186 1,350,000 Accounts Payable 3,307,091 1,118,288 Accrued Expenses 351,992 200,718 Customer Deposits 177,584 665,596 ----------- ----------- Total Current Liabilities 4,675,963 3,334,602 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock, $.0002 par value, 125,000,000 shares authorized, 30,156,045 and 24,554,227 shares issued and outstanding 6,005 4,904 Paid-in Capital 1,772,359 1,621,983 Retained Earnings (Deficit) (176,450) (186,703) ----------- ----------- Total Stockholders' Equity 1,601,914 1,440,184 ----------- ----------- Total Liabilities and Stockholders' Equity $ 6,277,877 $ 4,774,786 =========== ===========
-3- APO HEALTH, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2003 AND 2002 (UNAUDITED)
THREE MONTHS NINE MONTHS 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Revenue $ 17,367,339 $ 8,409,050 $ 39,602,840 $ 21,798,465 Cost of Revenue 16,631,937 7,859,873 37,733,214 19,974,012 ------------ ------------ ------------ ------------ Gross Margin 735,402 549,177 1,869,626 1,824,453 ------------ ------------ ------------ ------------ Operating Expenses Selling Expense 171,298 191,488 438,586 589,351 General and Administrative Expenses 488,072 378,429 1,348,478 1,175,150 ------------ ------------ ------------ ------------ 659,370 569,917 1,787,064 1,764,501 ------------ ------------ ------------ ------------ Income from Operations 76,032 (20,740) 82,562 59,952 Interest Expense 14,540 22,908 69,946 85,101 ------------ ------------ ------------ ------------ Income (loss) before Provision for Income Taxes 61,492 (43,648) 12,616 (25,149) Provision for (Recovery of) Income Taxes 2,363 (9,515) 2,363 (2,685) ------------ ------------ ------------ ------------ Net Income Before Discontinued Operations 59,129 (34,133) 10,253 (22,464) Discontinued Operations Gain on Sale of Discontinued Operations Net of Taxes -- 2,812 -- 317,687 Income (loss) from Discontinued Operations Net of Taxes -- 300 -- 35,819 ------------ ------------ ------------ ------------ Discontinued Operations -- 3,112 -- 353,506 ------------ ------------ ------------ ------------ Net Income $ 59,129 $ (31,021) $ 10,253 $ 331,042 ============ ============ ============ ============ Basic and Diluted Earnings Per Common Share: From Continuing Operations $ .00 $ (.00) $ .00 $ (.00) From Discontinued Operations .00 .00 .00 .01 ------------ ------------ ------------ ------------ Total $ .00 $ .00 $ .00 $ .01 ============ ============ ============ Weighted Average Common Shares Outstanding 27,536,910 23,754,874 25,890,925 23,637,943 ============ ============ ============ ============
-4- APO HEALTH, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 30, 2003 AND 2002 (UNAUDITED) 2003 2002 ----------- ----------- CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 10,253 $ 331,042 Adjustments to Reconcile Net Income to Net Cash Flows from Operating Activities: Depreciation and Amortization 7,872 20,742 Deferred Taxes 2,353 15,118 Write-off Goodwill Discontinued Operations -- 125,537 Stock Issued for Services 151,477 5,047 Allowance for Doubtful Accounts 20,000 -- Changes In: Accounts Receivable (2,669,109) (376,436) Other Receivables 168,350 (250,000) Inventory 619,010 (840,720) Other Current Assets (62,516) 117,600 Cash Overdraft 52,110 Accounts Payable 2,188,803 373,544 Accrued Expenses 151,274 (5,759) Income Taxes Payable -- 97,750 Customer Deposits Payable (488,012) 780,227 Other Current Liabilities -- 17,096 ----------- ----------- Cash Flows from Operating Activities 151,875 410,788 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Investment In Subsidiary -- (25,000) Assets Acquired Net of Cash Investment -- (17,891) ----------- ----------- Net Cash From Investing Activities -- (42,891) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Advances from Officers, Net (15,000) (44,570) Proceeds (Payment) on Bank Notes Payable, Net (562,814) 42,030 ----------- ----------- Cash Flows from Financing Activities (577,814) (2,540) ----------- ----------- Net Increase (Decrease) in Cash (425,939) 365,357 ----------- ----------- CASH BALANCES: Beginning of Period 520,618 179,167 ----------- ----------- End of Period $ 94,679 $ 544,524 =========== =========== -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, 2002 filed with the Securities and Exchange Commission. The results of operations for the nine months ended June 30, 2003 are not necessarily indicative of results to be expected for the entire fiscal year ending September 30, 2003. 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. 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 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. -6- APO HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 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 2003 2002 -------- -------- Cash paid during the year for: Interest $ 69,946 $ 85,101 Non-cash transaction: Common Stock Issued for Consulting And Professional Fees $151,477 $ 5,047 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. -7- APO HEALTH INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - INCOME TAXES Income taxes (benefit) consist of the following:
2003 2002 --------- --------- Continuing Operations $ 2,363 $ (2,685) Discontinued Operations -- 182,901 --------- --------- $ 2,363 $ 180,216 ========= ========= A reconciliation of income tax at the federal statutory income tax rate to total income taxes is as follows: 2003 2002 --------- --------- Computed at the federal statutory rate of 34% $ 4,289 $ 173,828 State income tax 165 46,013 Operating loss carry forward (2,363) (46,112) Other adjustments 272 6,487 --------- --------- $ 2,363 $ 180,216 ========= ========= The components of deferred taxes are as follows: June 30, September 30, 2003 2002 --------- --------- Deferred tax assets Allowance for doubtful accounts $ 20,000 $ 12,000 Depreciation 18,800 11,963 Net operating loss carryover, 10,100 27,300 Reversal of valuation allowance 22,300 22,300 --------- --------- Total deferred tax assets 71,200 73,563 Less Current Portion (20,000) (12,000) --------- --------- Non current deferred tax asset $ 51,200 $ 61,563 ========= =========
The Company has a net operating loss carryover of approximately $ 81,000 to offset future taxable income. The carryover expires 2017. NOTE 5 -DISCONTINUED OPERATIONS In February 2002, the Company sold the veterinary division of Universal Medical Distributors, Inc. The financial statements for 2001 have been restated to reflect the discontinued operations of this division. In connection with the sale of the veterinary division, the Company received a note in the amount of $250,000 which was due on January 31,2003. In January 2002, the Company acquired Envirotech Air Quality Services, Inc. ("Envirotech"). The Company sold "Envirotech" in August 2002 which included a note in the amount of $8,500 receivable over a period of 19 months with interest at the rate of 18% per annum. -8- APO HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6 - COMMON STOCK Stock Option Plan 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. On October 1, 2002, the Company filed a form S-8 authorizing the issuance of up to 1,000,000 shares of common stock for consultants and professionals. In January the Company issued 650,000 of those shares valued at $.03 per share or $19,500 for consulting for business development, including mergers and acquisitions. On March 14, 2003, the Company filed another form S-8 authorizing the issuance of up to 2,750,000 shares of common stock for consultants and professionals. On March 26, 2003, 1,200,000 shares of common stock valued at $.03 per share or $36,000 for consulting and professional fees for business development including mergers and acquisitions. On April 8 and on May 20, 2003, the Company issued an additional 2,040,000 shares of common stock for consultants and professional valued at $.03 per share or $61,200. On June 19, 2003 the Company issued 1,711,818 shares of restricted common stock in lieu of cash payments of bonuses earned. The restricted shares of common stock were valued at $.02 per share for a total of $34,776. NOTE 7 - LEASES The Company leases 11,800 square feet of office and warehouse space in New York. The lease is month-to-month with affiliated companies 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. Rent expense for the nine months ended June 30, 2003 and 2002 was $46,399 and $56,038 respectively. Future minimum lease payments are as follows: Year ended March 31, 2004 $72,450 2005 $56,175 -9- APO HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 - 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 an unfavorable verdict in the Kenro suit. On July1, 2002, the Court granted the intervention motion of the Kenro plaintiffs, and, as a matter of law, denied Merchant's motion for summary judgement and granted the Company's cross-motion for summary judgement, and finding that the claims asserted against the Company in the Kenro lawsuit fell within the terms of the Merchant's policies. As a result, the Court ordered that Merchant's has a duty to defend and indemnify the Company in the Kenro lawsuit. Additionally, the Court found alternatively, that the disclaimer of coverage by Merchant's was untimely, so that Merchant's would not be allowed to rely upon or raise any coverage defenses. The Court also found that the Company is entitled to be reimbursed for the legal fees that it incurred, and ordered that a hearing be conducted to determine the amount that Merchant's owed. Merchant's subsequently filed a motion for reargument of its unsuccessful summary judgement motion, and papers in opposition have been submitted by the Company and the Kenro plaintiffs to the Court. The Company and the Kenro plaintiffs have argued that the Court should adhere to its original decision for a variety of reasons. Merchant's has also filed an appeal to the Appellate Division from the Court's July 1, 2002 Order, and in the event the Court adheres to its decision, it is expected that Merchant's will again notice an appeal, and move to have the two appeals consolidated. -10- APO HEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 - COMMITMENTS AND CONTINGENCIES (continued) 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 9 - 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 31, 2003, the Company had $155,500 on deposit, in excess of the $100,000 that is insured under federal law. -11- ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION RESULTS OF OPERATIONS Results of operations for the three and six months ended June 30, 2002 have been restated to reflect the sale of the veterinary division and Envirotech. Revenue for the nine months ended June 30, 2003 were $39,602,840, an increase of $17,804,195 or 81.7% in revenue over the nine months ended June 30, 2002. Revenue for the three months ended June 30, 2003 were $17,367,339, an increase of $8,958,289 or 106.5% in revenue over the three months ended June 30, 2002.The increase in revenue for both the three and nine months was due to large increases in the distribution of products to wholesale distributors. The Company does not know if they will be able to sustain this growth in future periods. Cost of sales for the nine months ended June 30, 2003 was $37,733,214, an increase of $17,759,202 or 88.9% over the nine months ended June 30, 2002. Cost of sales for the three months ended June 30, 2003 was $16,631,937, an increase of $8,772,064 or 111.6% over the three months ended June 30, 2002. As a result the gross margin for the nine months ended June 30, 2003 was $1,869,626 or 4.72% compared to $1,824,453 or 8.37% for the nine months ended June 30, 2002. The gross margin for the three months ended June 30, 2003 was $735,402 or 4.23% compared to $549,177 or 6.53% for the three months ended June 30, 2002. The decrease in the gross profit margins are a result of increased revenue from wholesale products which have significantly lower profit margins than retail sales and the decrease in revenue from retail dental sales. Medical supply sales which have a higher gross profit margin than the wholesale products have increased but have not yet made up for the decrease in the dental sales. The Company expects that the increases in sales of medical supplies will make up for the loss in dental sales and increase the Company's overall gross profit margin. Selling expenses for the nine months ended June 30, 2003 were $438,586 a decrease of $150,765 or 25.6% compared to the nine months ended June 30, 2002. The Company has reduced shipping costs by $20,607; commissions by $40,915; and advertising costs by $127,951. Advertising costs in the next three to six months will increase as the Company brings out several new catalogues. Travel and entertainment expenses increased by $47,215, which is related directly to increased contact with medical and wholesale purchasers. General and administrative expenses for the nine months ended June 30, 2003 increased by $173,328 or 14.7% over the nine months ended June 30, 2002. Total compensation including payroll taxes increased by approximately, $123,700 which included a bonus of $268,000 for one of the officers for attaining sales levels included in his employment agreement. Without this bonus, employment expenses would have decreased by approximately $144,200 which includes the reduction of two employees and voluntary salary reductions by the three officers of the Company. Other increases included consulting fees which increased by $77,582, as the Company was exploring the possibilities of an acquisition or merger. The consulting agreements have been cancelled and this nonrecurring item will be eliminated in the future. Professional and financing expenses decreased by approximately $21,900 as legal expenses in defending the litigation decreased by approximately $40,000 while the cost of the new financing agreement increased financing costs by approximately $20,000. All other general and administrative expenses decreased by approximately $6,000. -12- Interest expense for the nine months ended June 30, 2003 was $69,946 a decrease of $15,155 from the nine month period ended June 30, 2002. This was accomplished by entering into a new financing agreement where all collections are applied against the line of credit on a daily basis and proceeds from the line of credit are only taken when needed to pay down liabilities. As a result the average daily balance outstanding on the line of credit has been reduced. The new financing agreement allows the Company greater flexibility in its ability to finance increased sales and additional inventory. FINANCIAL CONDITION As of June 30, 2003, The Company had net working capital of $1,522,587, an increase of $179,965 from September 30, 2002. The increase came from net income earned during the nine months ended June 30, 2003 and expenses incurred but paid through the issuance of common stock for consulting services. On October 29, 2002, the Company entered into a new financing agreement which increased its credit facility by $1,000,000 to $3,000,000 giving the Company greater flexibility to finance larger receivables and inventory allowing for increased sales. For fiscal 2003, the Company has reduced its budget for both selling and general and administrative expenses by approximately $255,000 eliminating unnecessary expenses and revising some of the operations. In addition the Company expects that consulting and other professional fees will be reduced by approximately $150,000 which it estimated were non-recurring items. The above reductions would provide the Company with income from operations based on the current sales volume. Based upon the above factors, the Company believes that it has sufficient funds for operations for the next fiscal year. -13- 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 31.1 Principal Executive Officer certification pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herein. 31.2 Principal Financial Officer certification pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herein. 32.1 Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herein. 32.2 Chief Financial Officer certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herein. 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: August 11, 2003 By: /s/ Dr. Jan Stahl ------------------ Dr. Jan Stahl, Chairman Chief Executive Officer And Secretary (Principal Executive Officer) Date: August 11, 2003 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: August 11, 2003 By: /s/ Dr. Jan Stahl ------------------ Dr. Jan Stahl, Director Date: August 11, 2003 By: /s/ Peter Steil ---------------- Peter Steil, Director Date: August 11, 2003 By: /s/ Kenneth Leventhal ---------------------- Kenneth Leventhal, Director -15-