As filed with the Securities and Exchange Commission on March 22, 2001 Registration No.______ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________ FORM SB-2 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 __________________ DBDH INTERNET INC. (Exact name of small business issuer in its charter) Washington 5499 91-2094425 (State or other jurisdiction of (primary standard (I.R.S. Employer incorporation or organization) industrial code) Identification Number) 450 Camino Monte Vista Santa Fe, New Mexico 87501 (505) 820-6171 (Address and telephone number of principal executive offices) __________________ Agent for Service: With a Copy to: Donald Bosch President James L. Vandeberg DBDH Internet Inc. Ogden Murphy Wallace, PLLC 450 Camino Monte Vista 1601 Fifth Avenue, Suite 2100 Santa Fe, New Mexico 87501 Seattle, Washington 98101 (505) 820-6171 (206) 447-7000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [_] CALCULATION OF REGISTRATION FEE ========================================================================================= Proposed Proposed Amount maximum maximum Title of each class of to be offering price aggregate Amount of securities to be registered registered per unit offering price registration fee - --------------------------- ---------- -------------- -------------- ---------------- Class A Common Stock . . . . 5,000,000 $ .01 $ 50,000.00 $ 12.50 ========================================================================================= The registration hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. SUBJECT TO COMPLETION-[enter date, 2001] PROSPECTUS , 2001 DBDH Internet Inc. 450 Camino Monte Vista Santa Fe, New Mexico 87501 (505) 820-6171 5,000,000 Shares of Common Stock This is the initial public offering of common stock of DBDH Internet Inc., and no public market currently exists for shares of DBDH's common stock. The initial public offering price is $0.01 per share of common stock which was arbitrarily determined. The offering is on a best efforts-no minimum basis. There is no minimum purchase requirement and no arrangement to place funds in an escrow, trust, or similar account. The latest date on which this offering will close will be 90 days after the date of this prospectus. _________________ This investment involves a high degree of risk. See "Risk Factors" beginning on Page 2. _________________ Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. We will amend and complete the information in this prospectus. The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. TABLE OF CONTENTS PAGE ---- PART I-PROSPECTUS Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Determination of Offering Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Plan of Distribution .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Directors, Executive Officers, Promoters and Control Persons .. . . . . . . . . . . . 4 Security Ownership of Certain Beneficial Owners and Management .. . . . . . . . . . . 4 Description of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Interest of Named Experts and Counsel . . . . . . . . . . . . . . . . . . . . . . . . 5 Disclosure of Commission Position on Indemnification for Securities Act Liabilities. . 5 Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Management's Discussion and Analysis or Plan of Operation . . . . . . . . . . . . . . 12 Description of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Certain Relationships and Related Transactions .. . . . . . . . . . . . . . . . . . . 13 Market for Common Equity and Related Stockholder Matters .. . . . . . . . . . . . . . 13 Executive Compensation .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Changes In and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Financial Statements .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1 PROSPECTUS SUMMARY DBDH INTERNET INC. DBDH Internet Inc. is a corporation formed under the laws of the State of Washington, whose principal executive offices are located in Santa Fe, New Mexico. The primary objective of the business is designed to market high-quality, low-cost vitamins, minerals, nutritional supplements, and other health and fitness products to medical professionals, alternative health professionals, martial arts studios and instructors, sports and fitness trainers, other health and fitness professionals, school and other fund raising programs and other similar types of customers via the Internet for sale to their clients in Connecticut and Rhode Island. NAME, ADDRESS, AND TELEPHONE NUMBER OF REGISTRANT DBDH Internet Inc. 450 Camino Monte Vista Santa Fe, New Mexico 87501 (505) 820-6171 THE OFFERING Price per share Offered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$0.01 Common Stock Offered by DBDH . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,000,000 shares Common Stock Outstanding Prior to Offering. . . . . . . . . . . . . . . . . . . . .5,500,000 shares Common Stock Outstanding After Offering Assuming 50% of the Offering is Sold . . . . .8,000,000 shares Common Stock Outstanding After Offering Assuming 100% of the Offering is Sold . . . . 10,500,000 shares DBDH expects to use the net proceeds for organizational purposes and to determine the feasibility of selling Vitamineralherb.com products to specific markets. 1 RISK FACTORS DBDH Internet Has Incurred Losses Since Its Inception May 10, 2000 and Expects Losses to Continue For the Foreseeable Future DBDH is in the extreme early stages of development and could fail before implementing its business plan. It is a "start up" venture that will incur net losses for the foreseeable future. DBDH has only recently acquired its principal asset. DBDH will incur additional expenses before becoming profitable, if it ever becomes profitable. It is a relatively young company that has no history of earnings or profit. There is no assurance that it will operate profitably in the future or provide a return on investment in the future. Changes or Interruptions to DBDH's Arrangements with Its Supplier May Have an Adverse Effect on Its Ability to Operate If DBDH's licensor defaults under its agreement with its supplier, DBDH could lose access to its manufacturing source, and DBDH distribution rights would become meaningless. Similarly, any dispute between the supplier and licensor could prevent DBDH from selling or delivering product to its customers. Any termination or impairment of DBDH's license rights and access to products could prevent DBDH from implementing its business plan, thereby limiting its profitability and decreasing the value of its stock. If the Vitamineralherb.com Business Plan Does Not Prove To Be Feasible, DBDH May Be Considered a Blank Check Company Which Would Restrict Resales of Its Stock If the Vitamineralherb.com business plan does not prove to be economically feasible, and DBDH does not otherwise have a specific business plan or purpose, DBDH would be considered a "blank check company", which could limit an investor's ability to sell its stock, thereby decreasing the value of the stock. A "blank check company" is subject to Rule 419 of the Securities Act. Pursuant to Rule 419, all funds raised by and securities issued in connection with a public offering by a blank check company must be held in escrow, and any such securities may not be transferred. Many states have also enacted statutes, rules and regulations limiting the sale of securities of blank check companies within their respective jurisdictions. As a result, DBDH would have great difficulty raising additional capital. In addition, there would be a limited public market, if any, for resale of the shares of DBDH common stock issued in this offering. DBDH May Need Additional Financing Which May Not Be Available, or Which May Dilute the Ownership Interests of Investors DBDH's ultimate success will depend on its ability to raise additional capital. No commitments to provide additional funds have been made by management or other shareholders. DBDH has not investigated the availability, source or terms that might govern the acquisition of additional financing. DBDH may raise additional funds through the issuance of equity, equity-related or convertible debt securities. The issuance of additional common stock will dilute existing stockholders. DBDH may issue securities with rights, preferences or privileges senior to those of the rights of its common stock and its stockholders may experience additional dilution. When additional capital is needed, there is no assurance that funds will be available from any source or, if available, that they can be obtained on terms acceptable to DBDH. If not available, DBDH's operations would be severely limited, and it would be unable to implement its business plan. Purchasers Must Rely on Mr. Bosch's Abilities For All Decisions As He Will Control the Majority of the Stock After the Offering. DBDH Has No Employment Agreement With Mr. Bosch and He Spends Only Part-time On Its Business. His Leaving May Adversely Effect DBDH's Ability To Operate Mr. Bosch is serving as DBDH's sole officer and director. DBDH will be heavily dependent upon Mr. Bosch's entrepreneurial skills and experience to implement its business plan and may, from time to time, find that his inability to devote full time and attention to its affairs will result in delay(s) in progress towards the implementation of its business plan or in a failure to implement its business plan. Moreover, DBDH does not have an employment agreement with Mr. Bosch and as a result, there is no assurance that he will continue to manage its affairs in the future. Nor has DBDH obtained a key man life insurance policy on Mr. Bosch. DBDH could lose the services of Mr. Bosch, or Mr. Bosch could decide to join a competitor or otherwise compete directly or indirectly with DBDH, which would have a significant adverse effect on its business and could cause the price of its stock to be worthless. The services of Mr. Bosch would be difficult to replace. 2 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Some of the statements under "Prospectus Summary", "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Description of Business", and elsewhere in this prospectus constitute forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimated", "predicts", "potential", or "continue" or the negative of such terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause DBDH's actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. These factors include, among other things, those listed under "Risk Factors" and elsewhere in this prospectus. Although DBDH believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance, or achievements. USE OF PROCEEDS The net proceeds to DBDH from the sale of the 5,000,000 shares of common stock offered by DBDH hereby at an assumed initial public offering price of $.01 per share are estimated to be $50,000. DBDH expects to use the net proceeds as follows: PURPOSE ASSUMING SALE OF ASSUMING SALE OF ------- ------------------ ------------------- 50% OF STOCK BEING 100% OF STOCK BEING ------------------ ------------------- OFFERED OFFERED ------- ------- Organizational Purposes . . . . . . . . . $ 1,000 $ 1,000 Feasibility of License/Market Research. . $ 13,500 $ 13,500 Operational Expenses. . . . . . . . . . . $ 10,500 $ 35,500 DBDH continually evaluates other business opportunities that may be available to it, whether in the form of assets acquisitions or business combinations. DBDH may use a portion of the proceeds for these purposes. DBDH is not currently a party to any contracts, letters of intent, commitments or agreements and is not currently engaged in active negotiations with respect to any acquisitions. DBDH has not yet determined the amount of net proceeds to be used specifically for any of the foregoing purposes. Accordingly, DBDH's management will have significant flexibility in applying the net proceeds of the offering. DETERMINATION OF OFFERING PRICE DBDH arbitrarily determined the price of the Units in this Offering. The offering price is not an indication of and is not based upon the actual value of DBDH. It bears no relationship to the book value, assets or earnings of DBDH or any other recognized criteria of value. The offering price should not be regarded as an indicator of the future market price of the securities. PLAN OF DISTRIBUTION DBDH will offer and sell its common stock through its sole officer and director, Donald Bosch, pursuant to and in compliance with Rule 3a4-1 of the Exchange Act. All sales will be made in compliance with the securities laws of local jurisdictions. LEGAL PROCEEDINGS DBDH is not a party to any pending legal proceeding or litigation and none of its property is the subject of a pending legal proceeding. Further, the officer and director knows of no legal proceedings against DBDH or its property contemplated by any governmental authority. 3 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS The following table sets forth the name, age and position of each director and executive officer of DBDH: NAME AGE POSITION ---- --- -------- Donald Bosch . 50 President, Secretary, Treasurer, Director In May, 2000, Mr. Bosch was elected as the sole officer and director of DBDH, of which he is the sole stockholder. He will serve until the first annual meeting of DBDH's shareholders and his successors are elected and qualified. Thereafter, directors will be elected for one-year terms at the annual shareholders' meeting. Officers will hold their positions at the pleasure of the board of directors, absent any employment agreement. Mr. Bosch is a co-founder of Find Me An Artist Inc., an international art portal which was launched in February 2000. Mr. Bosch served as President, Director, and Chairman of the Board of HMC Holdings, Inc., a multi-state mortgage banker from 1998 until June 2000. He was previously with Homebuyers Mortgage Corporation, which was acquired by HMC Holdings in 1998, where he served in various capacities since 1990. He has been involved in the development, testing and implementation of many of the new technologies used in today's mortgage industry, working with FNMA, FHLMC, GE-Mortgage and others. Mr. Bosch has been in the mortgage industry for over 14 years. During the 1990's Mr. Bosch served as an officer and board member for the Colorado Association of Mortgage Brokers (CAMB) and has also served on its ethics committee. From 1995-97 he was a county planning commissioner and co-founded the Regional Affordable Living Foundation in 1996, a nonprofit corporation in Routt County, Colorado. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of November 30, 2000, DBDH's outstanding common stock owned of record or beneficially by each Executive Officer and Director and by each person who owned of record, or was known by DBDH to own beneficially, more than 5% of its common stock, and the shareholdings of all Executive Officers and Directors as a group. Each person has sole voting and investment power with respect to the shares shown. SHARES PERCENTAGE OF NAME OWNED SHARES OWNED ---- --------- -------------- Donald Bosch .. . . . . . . . . . . . . . . . . . 5,500,000 100% President, Secretary, Treasurer, and Director 450 Camino Monte Vista Santa Fe, New Mexico 87501 All Executive Officers and Directors as a Group (1 Individual) . . . . . . . . . . . . . . . . 5,500,000 100% DESCRIPTION OF SECURITIES The following description of DBDH's capital stock is a summary of the material terms of its capital stock. This summary is subject to and qualified in its entirety by DBDH's articles of incorporation and bylaws, and by the applicable provisions of Washington law. The authorized capital stock of DBDH consists of 120,000,000 shares: 100,000,000 shares of Common Stock having a par value of $0.0001 per share and 20,000,000 shares of Preferred Stock. The articles of incorporation do not permit cumulative voting for the election of directors, and shareholders do not have any preemptive rights to purchase shares in any future issuance of DBDH's common stock. The holders of shares of common stock of DBDH do not have cumulative voting rights in connection with the election of the Board of Directors, which means that the holders of more than 50% of such outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in such event, the holders of the remaining shares will not be able to elect any of DBDH's directors. The holders of shares of common stock are entitled to dividends, out of funds legally available therefor, when and as declared by the Board of Directors. The Board of Directors has never declared a dividend and does not anticipate declaring a dividend in the future. Each outstanding share of common stock entitles the holder thereof to one vote per share on all matters. The holders of the shares of common stock have no preemptive or subscription rights. In the event of liquidation, dissolution or winding up of the affairs of DBDH, holders are entitled to receive, ratably, the net assets of DBDH available to shareholders after payment of all creditors. 4 All of the issued and outstanding shares of common stock are duly authorized, validly issued, fully paid, and non-assessable. To the extent that additional shares of DBDH's common stock are issued, the relative interests of existing shareholders may be diluted. INTEREST OF NAMED EXPERTS AND COUNSEL Neither Ron Lambrecht, C.P.A. PLLC nor Ogden Murphy Wallace, PLLC was employed on a contingent basis in connection with the registration or offering of DBDH's common stock. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES DBDH's articles of incorporation provide that it will indemnify its officers and directors to the full extent permitted by Washington state law. DBDH's bylaws provide that it will indemnify and hold harmless each person who was, is or is threatened to be made a party to or is otherwise involved in any threatened proceedings by reason of the fact that he or she is or was a director or officer of DBDH or is or was serving at the request of DBDH as a director, officer, partner, trustee, employee, or agent of another entity, against all losses, claims, damages, liabilities and expenses actually and reasonably incurred or suffered in connection with such proceeding. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of DBDH pursuant to the forgoing provisions or otherwise, DBDH has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in that Act and is, therefore, unenforceable. DESCRIPTION OF BUSINESS General DBDH was incorporated under the laws of the State of Washington on May 10, 2000, and is in its early developmental and promotional stages. To date, DBDH's only activities have been organizational, directed at acquiring its principal asset, raising its initial capital and developing its business plan. DBDH has not commenced commercial operations. DBDH has no full time employees and owns no real estate. Acquisition of The License On May 10, 2000, DBDH's sole shareholder, Donald Bosch, in return for 3,500,000 shares of DBDH's common, transferred to DBDH his rights under that certain License Agreement with Vitamineralherb.com. The License Agreement grants an exclusive right to distribute Vitamineralherb.com products to health and fitness professionals in Connecticut and Rhode Island via the Internet. Mr. Bosch acquired the license from Vitamineralherb.com for $35,000. The License DBDH has a three year license to market and sell vitamins, minerals, nutritional supplements, and other health and fitness products to medical professionals, alternative health professionals, martial arts studios and instructors, sports and fitness trainers, other health and fitness professionals, school and other fund raising programs and other similar types of customers via the Internet for sale to their clients. DBDH's territory is Connecticut and Rhode Island. The license will be automatically renewed unless DBDH or Vitamineralherb.com gives the other notice of its intent not to renew. 5 Vitamineralherb.com has agreed to provide certain business administrative services to DBDH, including product development, store inventory, website creation and maintenance, establishment of banking liaisons, and development and maintenance of an order fulfillment system, thereby enabling DBDH to focus strictly on marketing and sales. Some services, such as development of the website and the order fulfillment system, will be provided by Vitamineralherb.com, while others, such as product development and store inventory, will be provided by the product supplier. Vitamineralherb.com sets the price for products based on the manufacturer's price, plus a mark up which Vitamineralherb.com and DBDH share equally. DBDH and its customers will also be able to request quotes for and order custom-formulated and custom-labeled products via the website. Three different labeling options are available to customers: First, products may be ordered with the manufacturer's standard label with no customization. Second, the fitness or health professional may customize the labels by adding its name, address, and phone number to the standard label. In most cases, these labels would be a standardized label with product information and a place on the label for the wording "Distributed by." This gives these health and fitness professionals a competitive edge. Third, labels may be completely customized for the health or fitness professional. When a fitness or health professional becomes a client, DBDH's salesperson will show the client how to access the Vitamineralherb.com website. The client is assigned an identification number that identifies it by territory, salesperson, and business name, address, and other pertinent information. The health or fitness professional may then order the products it desires directly through the Vitamineralherb.com website. It is anticipated that the customer will pay for the purchase with a credit card, electronic check ("e-check"), or debit card. All products will be shipped by the manufacturer directly to the professional or its clients. The website is maintained by Vitamineralherb.com, and each licensee pays an annual website maintenance fee of $500. All financial transactions are handled by Vitamineralherb.com's Internet clearing bank. The Vitamineralherb.com webmaster downloads e-mail orders several times a day, checks with clearing bank for payment and then submits the product order and electronic payment to Ives Formulation Co. Vitamineralherb.com then forwards the money due DBDH via electronic funds transfer. Vitamineralherb.com's software tracks all sales through the customer's identification number, and at month end, e-mails to DBDH and customer a detailed report including sales commissions. Vitamineralherb.com has indicated that it will use e-commerce advertising such as banner ads on major servers and websites, as well as trying to insure that all major search engines pick Vitamineralherb.com first. Sales originating from the website to customers located in Connecticut and Rhode Island will automatically be assigned to DBDH. Background on the Manufacturer and Distributor Vitamineralherb.com entered into a Manufacturing Agreement, dated June 9, 2000, with Ives Formulation Co., of San Diego, California. Ives Formulation is a wholly-owned subsidiary of Ives Health Company, Inc., a public company traded on the Bulletin Board under the symbol "IVEH". Ives Formulation has been a contract manufacturer of vitamin, mineral, nutritional supplement, and alternative health products for various marketing organizations. In addition to a line of standard products, Ives Formulation is able to manufacture custom blended products for customers, and to supply privately labeled products for DBDH's customers at a minimal added cost. Vitamineralherb.com has just begun developing its vitamin marketing and distributorship business. Implementation of Business Plan: Milestones DBDH's business plan is to determine the feasibility of selling Vitamineralherb.com products to targeted markets. Should DBDH determine that its business plan is feasible, it intends to employ salespeople to call on medical professionals, alternative health professionals, martial arts studios and instructors, sports and fitness trainers, other health and fitness professionals, school and other fund raising programs and other similar types of customers to interest these professionals in selling to their clients high-quality, low-cost vitamins, minerals, nutritional supplements, and other health and fitness products. These professionals would sell the products to their clients via the Internet. DBDH will achieve implementation of its business plan by meeting the following milestones: - MILESTONE 1-MARKET SURVEY. In order to determine the feasibility of its business plan, DBDH must conduct research into the various potential target markets. The market analysis research will likely consist of a telephone survey to 100-200 potential clients, focusing on three or four of the core target markets, such as chiropractors, health clubs, and alternative medicine practitioners. The survey would likely contain questions which would determine the marketing approach and acceptability of specific products. The survey would take approximately four to six weeks. The cost of the survey is estimated to range from $10,000-$13,500, which would be paid for in part out of the proceeds of this offering. - MILESTONE 2:-HIRE SALESPEOPLE. Should DBDH determine that the exploitation of the license is feasible, it will then have to engage salespeople to market the products. DBDH expects that it may hire two salespeople during its first year of operation. The hiring process would include running advertisements in the local newspaper and conducting interviews. It is anticipated that hiring the salespeople may take four to eight weeks. The cost of hiring the salespeople, not including compensation, is estimated at $20,000. 6 - MILESTONE 3: ESTABLISH AN OFFICE. DBDH would then have to establish an office or offices for the sales force in the appropriate market or markets. This would include an office, equipment such as computers and telephones, and sample inventory for the salespeople. It is anticipated that it may take eight to twelve weeks to locate acceptable office space and select and purchase equipment. The expense of office rental, equipment and inventory samples is estimated to be $45,000 per year. - MILESTONE 4: DEVELOPMENT OF ADVERTISING CAMPAIGN. The next step would be to develop an advertising campaign, including establishing a list of prospects based on potential clients identified in the market survey, and designing and printing sales materials. It is anticipated that it would take approximately six to ten weeks to develop the advertising campaign, although, depending on the availability of resources, DBDH will attempt to develop its advertising campaign concurrently with establishing an office. The cost of developing the campaign is estimated at approximately $12,000 per year. - MILESTONE 5: IMPLEMENTATION OF ADVERTISING CAMPAIGN/SALES CALLS. Implementation of the advertising campaign would begin with mailing the sales materials to the identified list of prospects. Approximately two to four weeks thereafter, the salespeople would begin telephone follow ups and scheduling of sales calls. Although it will be necessary to make sales calls throughout the life of the company, it is estimated that the first round of sales calls will take approximately eight to twelve weeks to complete. The cost of salary and expenses for two salespeople is estimated at $248,000 per year. - MILESTONE 6: ACHIEVE REVENUES. It is difficult to quantify how long it will take to convert a sales call into actual sales and revenues. DBDH will not begin receiving orders until its sales force is able to convince potential clients to begin offering such products to their customers, or to convert from an existing supplier. DBDH hopes that clients would begin placing orders within weeks of a sales call, but it may take several months before people begin to purchase products. Moreover, customers may not be willing to pay for products at the time they order, and may insist on buying on account, which would delay receipt of revenues another month or two. Assuming DBDH has received all necessary approvals to begin raising funds by May 1, 2001, and assuming an offering period of approximately one month, in a best case scenario DBDH may receive its first revenues as early as November 1, 2001. However, a more realistic estimate of first revenues would be June 1, 2002 or later. As discussed more fully in the Management's Discussion and Analysis-Liquidity and Capital Resources section, the expenses of implementing DBDH's business plan will likely exceed the funds raised by this offering, and DBDH will have to obtain additional financing through an offering or through capital contributions by current shareholders. No commitments to provide additional funds have been made by management or shareholders. Accordingly, there can be no assurance that any additional funds will be available on terms acceptable to DBDH or at all. Industry Background Growth of the Internet and electronic commerce. The Internet has become an increasingly significant medium for communication, information and commerce. According to NUA Internet Surveys, as of February 2000, there were approximately 275.5 million Internet users worldwide. At the IDC Internet Executive Forum held on September 28-29, 1999, IDC stated that in 1999 US $109 billion in purchases were impacted by the Internet. IDC's vice president, Sean Kaldor, indicated that figure is expected to increase more than ten-fold over the next five years to US $1.3 trillion in 2003, with $842 million completed directly over the Web. DBDH believes that this dramatic growth presents significant opportunities for online retailers. The vitamin, supplement, mineral and alternative health product market. In recent years, a growing awareness of vitamins, herbs, and other dietary supplements by the general public has created a whole new segment in the field of medicine and health care products. According to Jupiter Communications, online sales of such products are expected to be US $434 million in the year 2003, up from $1 million in 1998. DBDH believes that several factors are driving this growth, including a rapidly growing segment of the population that is concerned with aging and disease, a growing interest in preventative health care, favorable consumer attitudes toward alternative health products and a favorable regulatory statute, the Dietary Supplement Health and Education Act of 1994. 7 Competition The electronic commerce industry is new, rapidly evolving and intensely competitive, and DBDH expects competition to intensify in the future. Barriers to entry are minimal and current and new competitors can launch sites at a relatively low cost. In addition, the vitamin, supplement, mineral and alternative health product market is very competitive and highly fragmented, with no clear dominant leader and increasing public and commercial attention. DBDH's competitors can be divided into several groups including: - traditional vitamins, supplements, minerals and alternative health products retailers; - the online retail initiatives of several traditional vitamins, supplements, minerals and alternative health products retailers; - online retailers of pharmaceutical and other health-related products that also carry vitamins, supplements, minerals and alternative health products; - independent online retailers specializing in vitamins, supplements, minerals and alternative health products; - mail-order and catalog retailers of vitamins, supplements, minerals and alternative health products, some of which have already developed online retail outlets; and - direct sales organizations, retail drugstore chains, health food store merchants, mass market retail chains and various manufacturers of alternative health products. Many of DBDH's potential competitors have longer operating histories, larger customer or user bases, greater brand recognition and significantly greater financial, marketing and other resources than DBDH has. In addition, an online retailer may be acquired by, receive investments from, or enter into other commercial relationships with, larger, well-established and well-financed companies as use of the Internet and other electronic services increases. Competitors have and may continue to adopt aggressive pricing or inventory availability policies and devote substantially more resources to website and systems development than DBDH does. Increased competition may result in reduced operating margins and loss of market share. DBDH believes that the principal competitive factors in its market are: - ability to attract and retain customers; - breadth of product selection; - product pricing; - ability to customize products and labeling; - quality and responsiveness of customer service. DBDH believes that it can compete favorably on these factors. However, DBDH will have no control over how successful its competitors are in addressing these factors. In addition, with little difficulty, DBDH's online competitors can duplicate many of the products or services offered on the Vitamineralherb.com site. DBDH believes that traditional retailers of vitamins, supplements, minerals and other alternative health products face several challenges in succeeding: - Lack of convenience and personalized service. Traditional retailers have limited store hours and locations. Traditional retailers are also unable to provide consumers with product advice tailored to their particular situation. - Limited product assortment. The capital and real estate intensive nature of store-based retailers limit the product selection that can be economically offered in each store location. - Lack of Customer Loyalty. Although the larger traditional retailers often attract customers, many of these customers are only one-time users. People are often attractive to the name brands, but find the products too expensive. It is understood that these are quality products and have value, but the multilevel structure of marketing often employed by large retailers mandate high prices. As a result of the foregoing limitations, DBDH believes there is significant unmet demand for an alternative shopping channel that can provide consumers of vitamins, supplements, minerals and other alternative health products with a broad array of products and a convenient and private shopping experience. DBDH hopes to attract and retain consumers through the following key attributes of its business: 8 - Broad Expandable Product Assortment. DBDH's product selection is substantially larger than that offered by store-based retailers. - Low Product Prices. Product prices can be kept low due to volume purchases through DBDH's affiliation with Vitamineralherb.com and other licensees. Product prices will also be lower due to DBDH's lack of need of inventory and warehouse space. All products are shipped from Ives Formulation Company's inventory. - Accessibility to Customized Products. At minimal cost, health and fitness practitioners may offer their customers customized products. - Access to Personalized Programs. Health or fitness professional can tailor vitamin and dietary supplement regimes to their clients. Regulatory Environment The manufacturing, processing, formulating, packaging, labeling and advertising of the products DBDH sells may be subject to regulation by one or more U.S. federal agencies, including the Food and Drug Administration, the Federal Trade Commission, the United States Department of Agriculture and the Environmental Protection Agency. These activities also may be regulated by various agencies of the states, localities and foreign countries in which consumers reside. The Food and Drug Administration, in particular, regulates the formulation, manufacture, labeling and distribution of foods, including dietary supplements, cosmetics and over-the- counter or homeopathic drugs. Under the Federal Food, Drug, and Cosmetic Act, the Food and Drug Administration may undertake enforcement actions against companies marketing unapproved drugs, or "adulterated" or "misbranded" products. The remedies available to the Food and Drug Administration include: criminal prosecution; an injunction to stop the sale of a company's products; seizure of products; adverse publicity; and "voluntary" recalls and labeling changes. Food and Drug Administration regulations require that certain informational labeling be presented in a prescribed manner on all foods, drugs, dietary supplements and cosmetics. Specifically, the Food, Drug, and Cosmetic Act requires that food, including dietary supplements, drugs and cosmetics, not be "misbranded." A product may be deemed an unapproved drug and "misbranded" if it bears improper claims or improper labeling. The Food and Drug Administration has indicated that promotional statements made about dietary supplements on a company's website may constitute "labeling" for purposes of compliance with the provisions of the Food, Drug, and Cosmetic Act. A manufacturer or distributor of dietary supplements must notify the Food and Drug Administration when it markets a product with labeling claims that the product has an effect on the structure or function of the body. Noncompliance with the Food, Drug, and Cosmetic Act, and recently enacted amendments to that Act discussed below, could result in enforcement action by the Food and Drug Administration. The Food, Drug, and Cosmetic Act has been amended several times with respect to dietary supplements, most recently by the Nutrition Labeling and Education Act of 1990 and the Dietary Supplement Health and Education Act of 1994. The Dietary Supplement Health and Education Act created a new statutory framework governing the definition, regulation and labeling of dietary supplements. With respect to definition, the Dietary Supplement Health and Education Act created a new class of dietary supplements, consisting of vitamins, minerals, herbs, amino acids and other dietary substances for human use to supplement the diet, as well as concentrates, metabolites, extracts or combinations of such dietary ingredients. Generally, under the Dietary Supplement Health and Education Act, dietary ingredients that were on the market before October 15, 1994 may be sold without Food and Drug Administration pre-approval and without notifying the Food and Drug Administration. In contrast, a new dietary ingredient, i.e., one not on the market before October 15, 1994, requires proof that it has been used as an article of food without being chemically altered or evidence of a history of use or other evidence of safety establishing that it is reasonably expected to be safe. Retailers, in addition to dietary supplement manufacturers, are responsible for ensuring that the products they market for sale comply with these regulations. Noncompliance could result in enforcement action by the Food and Drug Administration, an injunction prohibiting the sale of products deemed to be noncompliant, the seizure of such products and criminal prosecution. The Food and Drug Administration has indicated that claims or statements made on a company's website about dietary supplements may constitute "labeling" and thus be subject to regulation by the Food and Drug Administration. With respect to labeling, the Dietary Supplement Health and Education Act amends, for dietary supplements, the Nutrition Labeling and Education Act by providing that "statements of nutritional support," also referred to as "structure/function claims," may be used in dietary supplement labeling without Food and Drug Administration pre-approval, provided certain requirements are met. These statements may describe how particular dietary ingredients affect the structure or function of the body, or the mechanism of action by which a dietary ingredient may affect body structure or function, but may not state a drug claim, i.e., a claim that a dietary supplement will diagnose, mitigate, treat, 9 cure or prevent a disease. A company making a "statement of nutritional support" must possess substantiating evidence for the statement, disclose on the label that the Food and Drug Administration has not reviewed the statement and that the product is not intended for use for a disease and notify the Food and Drug Administration of the statement within 30 days after its initial use. It is possible that the statements presented in connection with product descriptions on DBDH' site may be determined by the Food and Drug Administration to be drug claims rather than acceptable statements of nutritional support. In addition, some of DBDH' suppliers may incorporate objectionable statements directly in their product names or on their products' labels, or otherwise fail to comply with applicable manufacturing, labeling and registration requirements for over-the-counter or homeopathic drugs or dietary supplements. As a result, Vitamineralherb.com may have to remove objectionable statements or products from its site or modify these statements, or product names or labels, in order to comply with Food and Drug Administration regulations. Such changes could interfere with DBDH' marketing of products and could cause us to incur significant additional expenses. In addition, the Dietary Supplement Health and Education Act allows the dissemination of "third party literature" in connection with the sale of dietary supplements to consumers at retail if the publication meets statutory requirements. Under the Dietary Supplement Health and Education Act, "third party literature" may be distributed if, among other things, it is not false or misleading, no particular manufacturer or brand of dietary supplement is promoted, a balanced view of available scientific information on the subject matter is presented and there is physical separation from dietary supplements in stores. The extent to which this provision may be used by online retailers is not yet clear, and DBDH cannot assure you that all pieces of "third party literature" that may be disseminated in connection with the products DBDH offers for sale will be determined to be lawful by the Food and Drug Administration. Any such failure could render the involved product an unapproved drug or a "misbranded" product, potentially subjecting us to enforcement action by the Food and Drug Administration, and could require the removal of the noncompliant literature from Vitamineralherb.com's website or the modification of DBDH' selling methods, interfering with DBDH continued marketing of that product and causing us to incur significant additional expenses. Given the fact that the Dietary Supplement Health and Education Act was enacted only five years ago, the Food and Drug Administration's regulatory policy and enforcement positions on certain aspects of the new law are still evolving. Moreover, ongoing and future litigation between dietary supplement companies and the Food and Drug Administration will likely further refine the legal interpretations of the Dietary Supplement Health and Education Act. As a result, the regulatory status of certain types of dietary supplement products, as well as the nature and extent of permissible claims will remain unclear for the foreseeable future. Two areas in particular that pose potential regulatory risk are the limits on claims implying some benefit or relationship with a disease or related condition and the application of the physical separation requirement for "third party literature" as applied to Internet sales. In addition to the regulatory scheme under the Food, Drug and Cosmetic Act, the advertising and promotion of dietary supplements, foods, over-the-counter drugs and cosmetics is subject to scrutiny by the Federal Trade Commission. The Federal Trade Commission Act prohibits "unfair or deceptive" advertising or marketing practices, and the Federal Trade Commission has pursued numerous food and dietary supplement manufacturers and retailers for deceptive advertising or failure to substantiate promotional claims, including, in many instances, claims made via the Internet. The Federal Trade Commission has the power to seek administrative or judicial relief prohibiting a wide variety of claims, to enjoin future advertising, to seek redress or restitution payments and to seek a consent order and seek monetary penalties for the violation of a consent order. In general, existing laws and regulations apply fully to transactions and other activity on the Internet. The Federal Trade Commission is in the process of reviewing its policies regarding the applicability of its rules and its consumer protection guides to the Internet and other electronic media. The Federal Trade Commission has already undertaken a new monitoring and enforcement initiative, "Operation Cure-All," targeting allegedly bogus health claims for products and treatments offered for sale on the Internet. Many states impose their own labeling or safety requirements that differ from or add to existing federal requirements. DBDH cannot predict the nature of any future U.S. laws, regulations, interpretations or applications, nor can it determine what effect additional governmental regulations or administrative orders, when and if promulgated, would have on its business in the future. Although the regulation of dietary supplements is less restrictive than that of drugs and food additives, DBDH cannot assure you that the current statutory scheme and regulations applicable to dietary supplements will remain less restrictive. Further, DBDH cannot assure you that, under existing laws and regulations, or if more stringent statutes are enacted, regulations are promulgated or enforcement policies are adopted, it is or will be in compliance with these existing or new statutes, regulations or enforcement policies without incurring material expenses or adjusting its business strategy. Any laws, regulations, enforcement policies, interpretations or applications applicable to DBDH' business could require the reformulation of certain products to meet new standards, the recall or discontinuance of certain products not capable of reformulation, additional record keeping, expanded documentation of the properties of certain products, expanded or different labeling or scientific substantiation. 10 Regulation of the Internet In general, existing laws and regulations apply to transactions and other activity on the Internet; however, the precise applicability of these laws and regulations to the Internet is sometimes uncertain. The vast majority of such laws were adopted prior to the advent of the Internet and, as a result, do not contemplate or address the unique issues of the Internet or electronic commerce. Nevertheless, numerous federal and state government agencies have already demonstrated significant activity in promoting consumer protection and enforcing other regulatory and disclosure statutes on the Internet. Additionally, due to the increasing use of the Internet as a medium for commerce and communication, it is possible that new laws and regulations may be enacted with respect to the Internet and electronic commerce covering issues such as user privacy, freedom of expression, advertising, pricing, content and quality of products and services, taxation, intellectual property rights and information security. The adoption of such laws or regulations and the applicability of existing laws and regulations to the Internet may impair the growth of Internet use and result in a decline in DBDH's sales. A number of legislative proposals have been made at the federal, state and local level, and by foreign governments, that would impose additional taxes on the sale of goods and services over the Internet, and certain states have taken measures to tax Internet-related activities. Although Congress recently placed a three-year moratorium on new state and local taxes on Internet access or on discriminatory taxes on electronic commerce, existing state or local laws were expressly excepted from this moratorium. Further, once this moratorium is lifted, some type of federal and/or state taxes may be imposed upon Internet commerce. Such legislation or other attempts at regulating commerce over the Internet may substantially impair the growth of commerce on the Internet and, as a result, adversely affect DBDH' opportunity to derive financial benefit from such activities. Employees DBDH is a development stage company and currently has no employees. DBDH is currently managed by Donald Bosch, its sole officer and director. DBDH looks to Mr. Bosch for his entrepreneurial skills and talents. Management plans to use consultants, attorneys and accountants as necessary and does not plan to engage any full-time employees in the near future. DBDH may hire marketing employees based on the projected size of the market and the compensation necessary to retain qualified sales employees. A portion of any employee compensation likely would include the right to acquire stock in DBDH, which would dilute the ownership interest of holders of existing shares of its common stock. Available Information and Reports to Securities Holders DBDH has filed with the Securities and Exchange Commission a registration statement on Form SB-2 with respect to the common stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules which are part of the registration statement. For further information with respect to DBDH and its common stock, see the registration statement and the exhibits and schedules thereto. Any document DBDH files may be read and copied at the Commission's Public Reference Room located at 450 Fifth Street N.W., Washington D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information about the public reference room. DBDH's filings with the Commission are also available to the public from the Commission's website at http://www.sec.gov. Upon completion of this offering, DBDH will become subject to the information and periodic reporting requirements of the Securities Exchange Act and, accordingly, will file periodic reports, proxy statements and other information with the Commission. Such periodic reports, proxy statements and other information will be available for inspection and copying at the Commission's public reference rooms, and the website of the Commission referred to above. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The following discussion and analysis of DBDH's financial condition and results of operations should be read in conjunction with the Financial Statements and accompanying notes and the other financial information appearing elsewhere in this Prospectus. This prospectus contains forward-looking statements, the accuracy of which involve risks and uncertainties. Words such as "anticipates," "believes," "plans," "expects," "future," "intends" and similar expressions are used to identify forward-looking statements. This prospectus also contains forward-looking statements attributed to certain third parties relating to their estimates regarding the potential markets for Vitamineralherb.com products. Prospective investors should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus. DBDH's actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by DBDH described in "Risk Factors" and elsewhere in this prospectus. The following discussion and analysis should be read in conjunction with DBDH's Financial Statements and Notes thereto and other financial information included elsewhere in this prospectus. 11 Results of Operations During the period from May 10, 2000 through December 31, 2000, DBDH has engaged in no significant operations other than organizational activities, acquisition of the rights to market Vitamineralherb.com and preparation for registration of its securities under the Securities Act of 1933, as amended. No revenues were received by DBDH during this period. For the current fiscal year, DBDH anticipates incurring a loss as a result of organizational expenses, expenses associated with registration under the Securities Act of 1933, and expenses associated with setting up a company structure to begin implementing its business plan. DBDH anticipates that until these procedures are completed, it will not generate revenues, and may continue to operate at a loss thereafter, depending upon the performance of the business. DBDH's business plan is to determine the feasibility of marketing the Vitamineralherb.com products in various markets, and, if the products prove to be in demand, begin marketing and selling Vitamineralherb.com products. Liquidity and Capital Resources DBDH remains in the development stage and, since inception, has experienced no significant change in liquidity or capital resources or shareholders' equity. Consequently, DBDH's balance sheet as of December 31, 2000, reflects total assets of $0, in the form of a license and capitalized organizational costs. Legal expenses of $20,000 were paid for by the sole shareholder and expensed to operations. The sole shareholder received 2,000,000 shares of stock for the $20,000 paid in capital. In addition, the sole shareholder received 3,500,000 shares of stock for the contribution of the Vitamineralherb.com license valued at $35,000. DBDH's business plan is to determine the feasibility of selling Vitamineralherb.com products to targeted markets. Should DBDH determine that its business plan is feasible, it intends to employ salespeople to call on medical professionals, alternative health professionals, martial arts studios and instructors, sports and fitness trainers, other health and fitness professionals, school and other fund raising programs and other similar types of customers to interest these professionals in selling to their clients high-quality, low-cost vitamins, minerals, nutritional supplements, and other health and fitness products. These professionals would sell the products to their clients via the Internet. In order to determine the feasibility of its business plan, DBDH plans, during the next six to twelve months, to conduct research into these various potential target markets. Should DBDH determine that the exploitation of the license is feasible, it will engage salespeople to market the products. Based primarily on discussions with the licensor, DBDH believes that during its first operational quarter, it will need a capital infusion of approximately $45,000 to achieve a sustainable sales level where ongoing operations can be funded out of revenues. This capital infusion is intended to cover costs of advertising, hiring and paying two salespeople, and administrative expenses. In addition, DBDH will need approximately $260,000 in the event it determines that its market will not pay in advance and it will have to extend credit. These expenses will exceed the funds raised by this offering, and DBDH will have to obtain additional financing through an offering or capital contributions by current shareholders. DBDH is conducting this offering, in part, because it believes that an early registration of its equity securities will minimize some of the impediments to capital formation that otherwise exist. By having a registration statement in place, DBDH believes it will be in a better position, either to conduct a future public offering of its securities or to undertake a private placement with registration rights, than if it were a completely private company. Registering its shares will help minimize the liquidity discounts DBDH may otherwise have to take in a future private placement of its equity securities, because investors will have a high degree of confidence that the Rule 144(c)(1) public information requirement will be satisfied, and a public market will exist to effect Rule 144(g) broker transactions. DBDH believes that the cost of registering its securities, and undertaking the affirmative disclosure obligations that such a registration entails, will be more than offset by avoiding deep liquidity discounts in future sales of securities. No specific private investors have been identified, but DBDH's management has general knowledge of an investor class interested in investing in companies that can demonstrate a clear path to an early liquidity event. No commitments to provide additional funds have been made by management or shareholders. Accordingly, there can be no assurance that any additional funds will be available on terms acceptable to DBDH or at all. DBDH expects to begin earning revenues shortly after a sales force is in place. 12 In addition, DBDH may engage in a combination with another business. DBDH cannot predict the extent to which its liquidity and capital resources will be diminished prior to the consummation of a business combination or whether its capital will be further depleted by the operating losses (if any) of the business entity with which DBDH may eventually combine. DBDH has engaged in discussions concerning potential business combinations, but has not entered into any agreement for such a combination. DBDH will need additional capital to carry out its business plan or to engage in a business combination. No commitments to provide additional funds have been made by management or other shareholders. Accordingly, there can be no assurance that any additional funds will be available on terms acceptable to DBDH or at all. DBDH has no commitments for capital expenditures. DESCRIPTION OF PROPERTY DBDH currently maintains limited office space, occupied by Donald Bosch, for which it pays no rent. Its address is 450 Camino Monte Vista, Santa Fe, New Mexico 87501 and its phone number is (505) 820-6171. DBDH does not believe that it will need to obtain additional office space at any time in the foreseeable future until its business plan is more fully implemented. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS No director, executive officer or nominee for election as a director of DBDH, and no owner of five percent or more of DBDH's outstanding shares or any member of their immediate family has entered into or proposed any transaction in which the amount involved exceeds $60,000. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS No established public trading market exists for DBDH's securities. DBDH has no common equity subject to outstanding purchase options or warrants. DBDH has no securities convertible into its common equity. There is no common equity that could be sold pursuant to Rule 144 under the Securities Act or that DBDH has agreed to register under the Securities Act for sale by shareholders. Except for this offering, there is no common equity that is being, or has been publicly proposed to be, publicly offered by DBDH. As of March 1, 2001, there were 5,500,000 shares of common stock outstanding, held by 1 shareholder of record. To date DBDH has not paid any dividends on its common stock and does not expect to declare or pay any dividends on its common stock in the foreseeable future. Payment of any dividends will depend upon DBDH's future earnings, if any, its financial condition, and other factors as deemed relevant by the Board of Directors. EXECUTIVE COMPENSATION No officer or director has received any remuneration from DBDH. Although there is no current plan in existence, it is possible that DBDH will adopt a plan to pay or accrue compensation to its officers and directors for services related to the implementation of DBDH's business plan. DBDH has no stock option, retirement, incentive, defined benefit, actuarial, pension or profit-sharing programs for the benefit of directors, officers or other employees, but the Board of Directors may recommend adoption of one or more such programs in the future. DBDH has no employment contract or compensatory plan or arrangement with any executive officer of DBDH. The director currently does not receive any cash compensation from DBDH for his service as a member of the board of directors. There is no compensation committee, and no compensation policies have been adopted. See "Certain Relationships and Related Transactions." CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS None. 13 DBDH INTERNET INC. ------------------ (A DEVELOPMENT STAGE ENTERPRISE) AUDIT REPORT ------------ DECEMBER 31, 2000 RON LAMBRECHT, C.P.A.,PLLC Certified Public Accountant 610 9th Street East Kalispell, Montana 59901 14 DBDH INTERNET INC (A Development Stage Company) Index Independent Auditors Report. . . . . . . . . . . . . . . . .F-1 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . .F-2 Statement of Operations. . . . . . . . . . . . . . . . . . .F-3 Statement of Cash Flows. . . . . . . . . . . . . . . . . . F-4 Statement of Stockholders' Equity. . . . . . . . . . . . . F-5 Notes to the Financial Statements. . . . . . . . . . . . .F-6,F-7 15 Ron Lambrecht,C.P.A.,PLLC Certified Public Accountant 610 9th Street East Kalispell, Montana 59901 (406) 752-5533 INDEPENDENT AUDITORS'S REPORT To the Board of Directors DBDH INTERNET INC. 450 Camino Monte Vista Santa Fe, NM. 87501 I have audited the accompanying Balance Sheet of DBDH INTERNET INC. ( A Development Stage Enterprise) as of December 31, 2000 and the Statements of Operations, Stockholders' Equity, and Cash Flows for the period May 11,2000 (Inception) through December 31,2000. These financial statements are the responsibility of the Company management. My responsibility is to express an opinion on these financial statements based on my audit. My audit was made in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audits to obtain reasonable assurance as to whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of DBDH INTERNET INC. (a development stage enterprise) as of December 31, 2000, and the results of its operations and changes in its cash flows for the period from May 11,2000 (inception) through, December 31 2000, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has not generated any revenues or conducted any operations since inception. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Ron Lambrecht, C.P.A. - -------------------------- Ron Lambrecht, C.P.A. February 12, 2001 F-1 DBDH INTERNET INC. (A DEVELOPMENT STAGE ENTERPRISE) BALANCE SHEET DECEMBER 31 ASSETS Current Assets Cash $ 0 Total Current Assets 0 --------- Other Assets Vitamineralherb.com License Rights (Notes 1 and 3) 0 --------- Total Other Assets 0 --------- Total Assets $ 0 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities $ 0 Stockholders' Equity: COMMON STOCK, $0.0001 PAR VALUE; 100,000,000 SHARES Authorized, and 5,500,000 Shares Issued and Outstanding 550 Additional Paid-In Capital 54,450 (Deficit) Accumulated During the Development Stage (55,000) Total Stockholders' Equity (Deficit) 0 --------- Total Liabilities And Stockholders' Equity $ 0 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS F-2 DBDH INTERNET INC. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENT OF OPERATIONS FOR THE PERIOD MAY 11,2000 (INCEPTION) THROUGH DECEMBER 31, 2000 REVENUES $ 0 Operating Expenses Accounting and Legal Fees 20,000 License written-off 35,000 Total Operating Expenses 55,000 Net (Loss) for the Period $ (55,000) Net (Loss) per Share $ (0.01) Weighted Average Number of Common Shares Outstanding 5,500,000 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS F-3 DBDH INTERNET INC (A Development Stage Enterprise) STATEMENT OF CASH FLOWS FOR THE PERIOD MAY 11,2000 (INCEPTION) THROUGH DECEMBER 31,2000 CASH FLOWS PROVIDED BY (USED FOR) CASH FLOWS FROM (BY) OPERATING ACTIVITIES: NET INCOME (LOSS) FOR THE PERIOD (55,000) NON-CASH ITEMS LEGAL AND ORGANIZATIONAL EXPENSES 20,000 LICENSE WRITTEN-OFF 35,000 CASH FLOWS FROM(TO) FINANCING ACTIVITIES: 0 NON-CASH FINANCING ACTIVITIES A total of 2,000,000 shares were issued to the sole director at a fair market value of $0.01 per share for legal and organizational expenses paid 20,000 A total of 3,500,000 shares were issued at a fair market value of $0.01 per share for the acquisition of a License to the sole director (Note 3) 35,000 Total 55,000 INCREASE (DECREASE) IN CASH FOR THE PERIOD 0 CASH BEGINNING OF PERIOD 0 CASH END OF PERIOD 0 F-4 DBDH INTERNET INC. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENT OF STOCKHOLDERS; EQUITY (DEFICIT) FOR THE PERIOD MAY 11,2000 THROUGH DECEMBER 31,2000 (Deficit) Accumulated Common Common Additional During the Stock Stock Paid-in Development Number of Amount Capital Total Stage Balance May 11,2000 (Date of Inception) 0 0 0 0 0 Issuance of Common Stock for Legal and Organizational expenses at a fair market value of $0.01 per share 2,000,000 200 19,800 20,000 Stock issued for the acquisition of a license at a fair market value of $0.01 per share 3,500,000 350 34,650 35,000 Net (Loss) for the period (55,000) Balance December 31 2000 5,500,000 550 54,450 55,000 (55,000) THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS F-5 DBDH INTERNET INC. (A Development Stage Enterprise) NOTES TO FINANCIAL STATEMENTS December 31, 2000 NOTE 1-ORGANIZATION AND HISTORY, DEVELOPMENT STAGE COMPANY DBDH INTERNET INC. herein (the "Company") was incorporated in the State of Washington on May 11,2000.The Company acquired a license to market and distribute vitamins, minerals, nutritional supplements, and other health and fitness products in Connecticut and Rhode Island, in which the grantor of the license offers these products for sale from various suppliers on the Web Site. The Company is in the development stage. In a development stage company, management devotes most of its activities in developing a market for its products. Planned principal activities have not yet begun. The ability of the Company to emerge from the development stage with respect to any planned principal business activity is dependent upon its successful efforts to raise additional equity financing and/or attain profitable operations. There is no guarantee that the Company will be able to raise any equity financing or sell any of its products at a profit. There is substantial doubt regarding the Company's ability to continue as a going concern. NOTE 11-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Year end The Company's fiscal year end is December 31. (b) Accounting Method The Company records income and expenses on the accrual method. (c) Cash and Cash Equivalents The Company considers all highly liquid instruments with a maturity of three months or less at the Time of the issuance to be cash equivalents. (d) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to made estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods. Actual results could differ from those estimates. NOTE 111-LICENSE The Company's only asset is a license to market vitamins, minerals, nutritional supplements and other health and fitness products through the Grantor's Web Site. The license was acquired on May 11,2000 for a three year term. The Company must pay an annual fee of $500 for maintenance of the Grantor's Web Site commencing on the anniversary date. The Grantor of the license retains 50% of the profits. F-6 The Company issued 3,500,000 shares to the sole director with a fair market value of $0.01 per share for a total consideration of $35,000. The license has been written-off to operations as of December 31,2000 due to the lack of historical cash flow of Vitamineralherb.com. However, it is the Company's intention to determine if it is economically feasible to commercially exploit a business plan. (THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS) F-7 Prospectus [DATE, 2001] DBDH Internet Inc. 450 Camino Monte Vista Santa Fe, New Mexico 87501 (505) 820-6171 5,000,000 Shares of Common Stock DBDH has not authorized any dealer, salesperson or other person to give you written information other than this prospectus or to make representations as to matters not stated in this prospectus. You must not rely on unauthorized information. This prospectus is not an offer to sell these securities or a solicitation of your offer to buy the securities in any jurisdiction where that would not be permitted or legal. Neither the delivery of this prospectus nor any sales made hereunder after the date of this prospectus shall create an implication that the information contained herein or the affairs of DBDH have not changed since the date hereof. Until _____________ ___, 2001 (90 days after the date of this prospectus), all dealers that effect transactions in these shares of common stock may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions. 23 PART II-INFORMATION NOT REQUIRED IN PROSPECTUS INDEMNIFICATION OF DIRECTORS AND OFFICERS DBDH's Articles of Incorporation provide that it must indemnify its directors and officers to the fullest extent permitted under Washington law against all liabilities incurred by reason of the fact that the person is or was a director or officer of DBDH or a fiduciary of an employee benefit plan, or is or was serving at the request of DBDH as a director or officer, or fiduciary of an employee benefit plan, of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. The effect of these provisions is potentially to indemnify DBDH's directors and officers from all costs and expenses of liability incurred by them in connection with any action, suit or proceeding in which they are involved by reason of their affiliation with DBDH. Pursuant to Washington law, a corporation may indemnify a director, provided that such indemnity shall not apply on account of: (a) acts or omissions of the director finally adjudged to be intentional misconduct or a knowing violation of law; (b) unlawful distributions; or (c) any transaction with respect to which it was finally adjudged that such director personally received a benefit in money, property, or services to which the director was not legally entitled. The bylaws of DBDH provide that it will indemnify its officers and directors for costs and expenses incurred in connection with the defense of actions, suits, or proceedings against them on account of their being or having been directors or officers of DBDH, absent a finding of negligence or misconduct in office. DBDH's Bylaws also permit it to maintain insurance on behalf of its officers, directors, employees and agents against any liability asserted against and incurred by that person whether or not DBDH has the power to indemnify such person against liability for any of those acts. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The amounts set forth are estimates except for the SEC registration fee: Amount to be Paid ------- SEC registration fee . . . . . . . . . . . . . . . . $ 20 Printing and engraving expenses .. . . . . . . . . . 1,500 Attorneys' fees and expenses . . . . . . . . . . . . 20,000 Accountants' fees and expenses . . . . . . . . . . . 1,500 Transfer agent's and registrar's fees and expenses. . 500 Miscellaneous .. . . . . . . . . . . . . . . . . . . -0- Total .. . . . . . . . . . . . . . . . . . . . . . . $ 23,520 The Registrant will bear all expenses shown above. RECENT SALES OF UNREGISTERED SECURITIES Set forth below is information regarding the issuance and sales of DBDH's securities without registration since its formation. No such sales involved the use of an underwriter and no commissions were paid in connection with the sale of any securities. On May 10, 2000, DBDH issued 5,500,000 shares of common stock to Mr. Bosch: 3,500,000 in compensation for the license of Vitamineralherb.com rights valued at $35,000, and 2,000,000 for Mr. Bosch's contribution of $20,000 for payment of legal fees. The issuance of the shares was exempt from registration under Rule 506 of Regulation D, and sections 3(b) and 4(2) of the Securities Act of 1933, as amended, due to Mr. Bosch's status as the founder and initial management of DBDH, and his status as an accredited investor, and the limited number of investors (one). II-1 EXHIBITS The following exhibits are filed as part of this Registration Statement: Exhibit Number Description - -------- ----------- 3.1 Articles of Incorporation 3.2 Bylaws 4.1 Specimen Stock Certificate 4.2 Stock Subscription Agreement 5.1 Opinion re: legality 10.1 License Agreement 10.2 Assignment of License Agreement 23.1 Consent of Independent Auditors 23.2 Consent of Counsel (see Exhibit 5.1) UNDERTAKINGS The Registrant hereby undertakes that it will: (1) File, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: (i) Include any prospectus required by section 10(a)(3) of the Securities Act; (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and (iii) Include any additional or changed material information on the plan of distribution. (2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the Offering of the securities of the securities at that time to be the initial bona fide Offering. (3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the Offering. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-2 SIGNATURES In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Santa Fe, New Mexico, on March 6, 2001. DBDH INTERNET INC. By: /s/ Donald Bosch ----------------------------------- Donald Bosch President In accordance with the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates stated. Signature Title Date --------- ----- ---- /s/ Donald Bosch President, Secretary, Treasurer, and March 6, 2001 - ------------------- Donald Bosch Director II-3 LIST OF EXHIBITS The following exhibits are filed as part of this Registration Statement: Exhibit Number Description - -------- ----------- 3.1 Articles of Incorporation 3.2 Bylaws 4.1 Specimen Stock Certificate 4.2 Stock Subscription Agreement 5.1 Opinion re: legality 10.1 License Agreement 10.2 Assignment of License Agreement 23.1 Consent of Independent Auditors 23.2 Consent of Counsel (see Exhibit 5.1)