As filed with the Securities and Exchange Commission on July 21, 2000
Registration No. 333-41990
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
to
FORM SB-2
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
--------------------------
BRAZOS SCIENTIFIC, INC.
(Name of small business issuer in its charter)
Nevada 5499 76-0616462
- ---------------------- ------------------------- ------------------
(State or jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Classification Identification No.)
Organization) Code Number)
510 West Hastings Street, Suite 1010
Vancouver, British Columbia V6B 1L8 CANADA
(604) 818-8777
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(Address and telephone number of principal executive offices)
Agent for Service: With a Copy to:
David Smith, President Warren J. Soloski, Esq.
Brazos Scientific, Inc. 11300 West Olympic Blvd.,Ste. 800
510 West Hastings Street, Ste. 1010 Los Angeles, CA. 90064
Vancouver, B.C., Canada V6B 1L8 (310) 477-9742
(604) 818-8777
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(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. [ ]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please 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. [ ]
1
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
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Title of Proposed Proposed Proposed
each class of Number of Offering Aggregate Amount of
Securities to be Shares to be Price per Offering Registration
registered Registered Share Price Fee
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Common Stock 4,000,000 $0.02 $ 80,000 $ 35.00
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The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date the registrant
shall file a further amendment, which specifically states that this
registration 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.
The registrant 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.
2
PROSPECTUS
BRAZOS SCIENTIFIC, INC.
4,000,000 Shares of Common Stock
This is an initial public offering of our common stock. No public
market currently exists for our common stock. The initial public offering
price is $0.02 per share, which was arbitrarily determined by us. The
offering is being conducted on a best efforts, no minimum basis, which
means there is no minimum number of shares which must be sold. We will
commence selling the shares on the effective date of this prospectus and
continue for a period of 180 days, unless we extend for an additional 90
days, or until we complete the offering, whichever occurs sooner.
THE PURCHASE OF SHARES IN THIS OFFERING IS HIGHLY RISKY AND YOU ARE URGED
TO VERY CAREFULLY AND THOROUGHLY READ THE RISK FACTORS SECTION OF THIS
PROSPECTUS, BEGINNING ON PAGE 6.
These securities have not been approved or disapproved by the Securities
and Exchange Commission or the securities division of any state, nor has
the Commission or any state passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
Prior to this offering, there has been no public market for our common
stock and there is no assurance that a public market will result following
the sale of the shares being offered in this prospectus, or that any
shares in this offering will be sold.
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 Commission is effective. This prospectus is not an offer to sell the
shares and it is not a solicitation of an offer to buy the shares in any
state where the offer or sale is not permitted.
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Price Aggregate Commissions(1) Net Proceeds
Per Share Offering Price to Others To Us
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$0.02 $80,000 $0.00 $80,000
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(1) We do not intend to use an underwriter or other outside party to sell
the shares; the shares will be sold by our officers and directors, who
will receive no commissions.
DATED: , 2001
3
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY 6
Information about our Company 6
The Offering 6
RISK FACTORS 7
Risks Associated with Our Business 7
- We have incurred losses since our incorporation on
August 18, 1999 and expect losses to continue for the
forseeable future. 7
- Changes or interruptions under the terms of our License
Agreement for the Vitamineralherb brand products could
have an adverse effect on our ability to operate. 7
- We may need additional financing, which may not be
available, or which may dilute the value of your
common stock. 7
- Purchasers must rely on our officers and directors
ability to effectively market and sell the
Vitamineralherb brand products. 7
- There is intense competition in the vitamin and herbal
supplement industry and we may not be able to
successfully compete. 7
- Consumers may not accept an online source for
our products. 8
- We depend on third-party shippers to deliver our
products in a timely manner and any interruption in
their service could impact our business operations. 8
- We depend on third-party computer systems to assist us in
all of our business operations and any interruption in
their services could adversely affect our business
operations and/or potential revenues. 8
- Our sole asset could be impaired by third-party actions
or omissions, resulting in a complete loss of our
business. 9
- Extensive governmental regulation could limit our sales
or add significant additional costs to our business. 9
- The sale of vitamineralherb.com products involves product
liability and other risks. 10
- We may become liable for internet commerce taxes, which
could be substantial and negatively impact our revenues. 11
Risks Associated with the Purchase of Our Common Stock 11
- There is a high risk in buying low-priced stocks, which
may limit your ability to resell any shares you purchase
in this offering. 11
- We cannot assure a public trading market will be
established for our common stock, which includes the
shares sold in this offering. 11
- We may need additional financing which may not be
available or which may dilute the value of your
common stock. 11
4
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 12
USE OF PROCEEDS 13
DETERMINATION OF OFFERING PRICE 13
DILUTION 14
PLAN OF DISTRIBUTION; TERMS OF THE OFFERING 15
Offering Period and Expiration Date 15
Procedures for Subscribing 15
Right to Reject Subscriptions 15
LEGAL PROCEEDINGS 16
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 16
Background of Officers and Directors 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 17
DESCRIPTION OF SECURITIES 17
INTEREST OF NAMED EXPERTS AND COUNSEL 18
Experts 18
Legal Matters 18
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION 18
DESCRIPTION OF BUSINESS 19
General 19
Acquisition of License 19
Terms of the License Agreement 19
Background of the Manufacturer and Distributor 21
Implementation of Business Plan; Milestones 21
Industry Background of the vitamin, supplement mineral
And alternative health product market 23
Competition 23
Regulatory Environment 25
Employees 29
Available Information and Reports to Security Holders 29
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 29
Plan of Operation 29
Liquidity and Capital Resources 30
DESCRIPTION OF PROPERTY 30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 30
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 31
EXECUTIVE COMPENSATION 31
FINANCIAL STATEMENTS 32
5
PROSPECTUS SUMMARY
Information about our Company
- -----------------------------
Brazos Scientific, Inc. was incorporated under the laws of the State of
Nevada on August 18, 1999. Our principal executive offices are located at
510 West Hastings Street, Suite 1010, Vancouver, British Columbia, Canada.
To date, our only activities have been organizational, specifically
raising initial capital and developing our business plan. We have not yet
commenced business operations and have received no revenues to date. We
have no employees, other than our officers and directors.
Our business plan is 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, and other similar types of customers via the
Internet for resale to their clients.
We have acquired the exclusive right to distribute Vitamineralherb.com
products to health and fitness professionals for sale to their customers
in South Texas via the Internet. Our goal in becoming a
Vitamineralherb.com licensee is to eliminate the need to develop products,
store inventory, build and maintain a web-site, establish banking
liaisons, and develop a fulfillment system, thereby enabling us to focus
strictly on marketing and sales. All sales will be conducted via the
Internet through the Vitamineralherb.com website. Health and fitness
professionals may order a variety of products, and may have the products
custom-labeled. Products will be shipped directly to the client.
The Offering
- ------------
- - Price Per Share $0.02
- - Number of Shares Offered for Sale 4,000,000
- - Shares Outstanding Prior to Offering 2,500,000
- - Shares Outstanding After Offering (1) 6,500,000
shares
(1) Assumes sale of all shares offered
We intend to use the net proceeds received from this offering for
organizational purposes and to determine the feasibility of selling
Vitamineralherb.com products to specific markets.
6
RISK FACTORS
Risks Associated With Our Business
- ----------------------------------
We have incurred losses since our incorporation on August 18, 1999 and
expect losses to continue for the foreseeable future.
We are in the early stages of development and have incurred losses of
$55,775 since inception. We have only recently acquired our principal
asset, an exclusive license to market and sell Vitamineralherb.com brand
products. We expect to incur additional expenses before becoming
profitable, if we ever become profitable. Our ability to achieve and
maintain profitability and positive cash flow is completely dependent upon
our ability to market and sell the Vitamineralherb.com brand product line.
We cannot guarantee that we will be successful in realizing revenues or
achieving or sustaining positive cash flows in the future and any such
failure could have a material adverse effect on our business, financial
condition and results of operations.
Changes or interruptions under the terms of our License Agreement
for the Vitamineralherb brand products could have an adverse
effect on our ability to operate.
We have entered into a License Agreement with David Mortenson &
Associates, an unrelated third party, and acquired the exclusive right to
market and sell the Vitamineralherb brand products. Under the terms of the
agreement, the licensor will supply all products and fulfill all orders.
If the licensor defaults under the terms of the agreement, we could lose
access to our manufacturing source and our distribution rights would
become meaningless. Similarly, any disputes between us and the licensor
could prevent us from selling or delivering product to our customers. Any
termination or impairment of our license rights and access to products
could prevent us from implementing our business plan, thereby affecting
our profitability and decreasing the value of our common stock.
Purchasers must rely on our officers and directors ability to
effectively market and sell the Vitamineralherb brand products.
The success of our business operations are heavily dependent on the
abilities of David Smith and Brian Griffith, our officers and directors,
who have no experience in marketing and sales of health supplements.
There is intense competition in the vitamin and herbal supplement
industry and we may not be able to successfully compete.
There is currently intense competition worldwide in the marketing and
sale of vitamins and herbal supplements, as the public continues to
experiment with alternative medicines and therapies. Many of our
competitors have greater financial and other resources, better
distribution networks and/or greater name recognition than our brand. We
can't guarantee that we will be able to successfully compete in the
industry and achieve any levels of profitability.
7
Consumers may not accept an online source for our products.
Our success depends on attracting and retaining a high volume of
online customers at a reasonable cost. We may not be able to convert a
large number of consumers from traditional shopping methods to online
shopping. Factors that could prevent or delay the widespread consumer
acceptance of purchasing vitamins, nutritional supplements and minerals
online, and consequently our ability to increase our revenues, include: -
shipping charges, which do not apply to shopping at traditional retail
stores; - delivery time associated with online orders, as compared to the
immediate receipt of products at a physical store; - pricing that does not
meet consumer expectations of finding "the lowest price on the Internet";
- - lack of consumer awareness of our online presence; - customer concerns
about the security of online transactions and the privacy of personal
health information; - product damage from shipping or shipments of wrong
or expired products, which may result in a failure to establish customer
trust in purchasing our products online; - delays in responses to customer
inquiries or in deliveries to customers; and - difficulty in returning or
exchanging products. We expect that competition will continue to increase
because of the relative ease with which new websites may be developed. The
nature of the Internet as an electronic marketplace may facilitate
competitive entry and comparison shopping and may also render online
commerce inherently more competitive than traditional retailing formats.
Increased competition may reduce our gross margins, cause us to lose
market share and decrease the value of our sub-license agreement with the
Vitamineralherb.com brand.
We depend on third-party shippers to deliver our products in
a timely manner and any interruption in their service could
impact our business operations.
Our customers cannot visit physical stores to pick up their products.
Our product distribution relies solely on third-party delivery services,
including the United States Postal Service and United Parcel Service.
Strikes and other interruptions could delay the timely delivery of
customer orders and customers may refuse to purchase our products because
of this loss of convenience, resulting in lost revenues to us.
We depend on third-party computer systems to assist us in
all of our business operations and any interruption in their
services could adversely affect our business operations and/or
potential revenues.
Our success depends on generating a high volume of traffic to
Vitamineralherb.com's website. However, growth in the number of users
accessing the website may strain or exceed the capacity of the computer
systems and lead to declines in performance or system failure. We are
forced to rely on Vitamineralherb.com's assurances that their computer
systems will be adequate to handle consumer demand. Failure to
accommodate increased traffic may decrease levels of customer service and
satisfaction. Vitamineralherb.com must continually improve and enhance
the functionality and performance of its website, order tracking and other
technical systems to provide a convenient shopping experience. Failure to
improve these systems effectively or within a reasonable period of time
may cause customers to visit the website less frequently or not at all.
8
New services or features may contain errors, and there may be delays
or customer service errors while Vitamineralherb.com corrects
them. If customers encounter difficulty with or do not accept
new services or features, they may buy from other online vendors
and cause our sales to decline.
Our sole asset could be impaired by third-party actions
or omissions, resulting in a complete loss of our business.
Our sole asset is a License Agreement with David R. Mortenson &
Associates, an unrelated third party, which is subject to David R.
Mortenson & Associates' licensing agreement with Vitamineralherb.com. If
David R. Mortenson & Associates defaults under its licensing agreement
with Vitamineralherb.com, Inc., our License Agreement may be worthless.
Furthermore, Vitamineralherb.com, Inc. will fulfill our orders pursuant to
arrangements it has with International Formulators and Manufacturers, Inc.
("IFM") and any disagreements or disputes between those parties, or the
inability or refusal of IFM to meet Vitamineralherb.com's orders may
significantly harm our customer relations and harm our business. If there
is a complete breakdown in relations or if IFM goes out of business, then
we may not be able to find alternative suppliers in a timely fashion and
we could lose our business.
Extensive governmental regulation could limit our sales or
add significant additional costs to our business.
Because the online market for vitamins, nutritional
supplements and minerals is relatively new, there is little
common law or regulatory guidance that clarifies the manner in
which government regulation impacts online sales. Governmental
regulation may limit our sales or add significant additional
costs to our business. The two principal federal agencies that
regulate dietary supplements, including vitamins, nutritional
supplements and minerals, are the Food and Drug Administration
and the Federal Trade Commission. Among other matters, FDA
regulations govern claims that assert the health or nutritional
value of a product. Many FDA and FTC remedies and processes,
including imposing civil penalties in the millions of dollars and
commencing criminal prosecution, are available under federal
statutes and regulations if product claims violate the law.
Similar enforcement action may also result from noncompliance
with other regulatory requirements, such as FDA labeling rules.
The FDA also reviews some product claims that companies must
submit for agency evaluation and may find them unacceptable.
State, local and foreign authorities may also bring enforcement
actions for violations of these laws.
In addition, online commerce is new and rapidly changing, and federal
and state regulations relating to the Internet and online commerce
are relatively new and evolving. Due to the increasing popularity
of the Internet, it is possible that laws and regulations may be
enacted to address issues such as user privacy, pricing, content,
copyrights, distribution, antitrust matters and the quality of
products and services. The adoption of these laws or regulations
9
could reduce the rate of growth of the Internet, which could
potentially decrease the usage of our website and result in our
selling fewer products. In addition, the applicability to the
Internet of existing laws governing issues such as property
ownership, copyrights and other intellectual property issues,
libel, obscenity and personal privacy is uncertain. Most of these
laws were adopted prior to the advent of the Internet and do not
contemplate or address the unique issues of the Internet. New
laws applicable to the Internet may impose substantial burdens on
companies conducting online commerce. In addition, the growth and
development of online commerce may prompt calls for more
stringent consumer protection laws in the United States and
abroad. We also may be subject to regulation not specifically
related to the Internet, such as laws affecting catalog sellers.
Several telecommunications carriers have asked the Federal
Communications Commission to regulate telecommunications over the
Internet. Due to the increasing use of the Internet and the
burden it has placed on the telecommunications infrastructure,
telephone carriers have requested the FCC to regulate Internet
and online service providers and to impose access fees on those
providers. If the FCC imposes access fees, the costs of using the
Internet could increase dramatically. In this event, our revenues
could be negatively impacted.
The sale of vitamineralherb.com products involves product
liability and other risks.
Since our activities as a marketer for Vitamineralherb.com products
may leave us open to the argument that is a distributor of those products
then it is possible that we, like any other distributor or manufacturer of
products that are ingested, faces an inherent risk of exposure to product
liability claims if the use of products results in illness or injury. If
we do not have adequate insurance or contractual indemnification, product
liability claims could have a material adverse effect on our business.
Manufacturers and distributors of vitamins, nutritional supplements and
minerals have been named as defendants in product liability lawsuits from
time to time. The successful assertion or settlement of an uninsured
claim, a significant number of insured claims or a claim exceeding the
limits of our insurance coverage would harm us by adding further costs to
our business and by diverting the attention of our senior management
from the operation of our business. Although the manufacturers
may perform research and tests in connection with the formulation
and production of the products that we sell, there are no conclusive
clinical studies regarding many of its products. We depend upon
customer perceptions about the safety and quality of our products and of
similar products distributed by competitors. The mere publication of
reports asserting that a particular product may be harmful may
substantially reduce or eliminate sales of the product, regardless of
whether the reports are scientifically supported and regardless of whether
the harmful effects would be present at recommended dosages.
Vitamins, nutritional supplements and minerals are subject to
sharp increases in consumer interest, which in some cases stems
from discussion of particular products in the popular press. A
significant delay in or disruption of the supply of products to
Vitamineralherb.com from suppliers and distributors may increase
our cost of goods and could result in a substantial reduction or
termination of sales of some products.
10
We may become liable for internet commerce taxes, which
could be substantial and negatively impact our revenues.
Recent federal legislation limits the imposition of state and local
taxes on the Internet. In 1998, Congress passed the Internet Tax Freedom
Act, which places a three-year moratorium on state and local taxes on (1)
Internet access, unless such tax was already imposed prior to October 1,
1998, and (2) discriminatory taxes on online commerce. However, Congress
may not renew this legislation in 2001, in which case state and local
governments would be free to impose Internet-specific taxes on
electronically purchased goods, in addition to any other taxes that may
otherwise be imposed on the transaction. Any such taxes would make our
business more costly to operate. Due to the high level of uncertainty
regarding the imposition of new Internet-related taxes on online commerce,
a number of states and a Congressional advisory commission are reviewing
appropriate tax treatment for online commerce. We cannot predict the
impact of additional laws or regulations on our business.
Risks Associated With The Purchase of Our Common Stock
- ------------------------------------------------------
There is a high risk in buying low-priced stocks, which may limit
your ability to resell any shares you purchase in this offering.
Our common stock is defined as a penny stock under the Securities and
Exchange Act of 1934 and the rules of the Securities and Exchange
Commission. The Exchange Act and such penny stock rules generally impose
additional sales practice and disclosure requirements on broker-dealers
who sell securities to persons other than to certain "accredited
investors" (generally, institutions with assets in excess of $5,000,000 or
individuals with net worth in excess of $1,000,000 or annual income
exceeding $200,000, or $300,000 jointly with a spouse), or in transactions
not recommended by the broker-dealer. For transactions covered by the
penny stock rules, a broker-dealer must make a suitability determination
for each purchaser and receive the purchaser's written agreement prior to
the sale. In addition, the broker-dealer must make certain mandated
disclosures in penny stock transactions, including the actual sale or
purchase price and actual bid and offer quotations, the compensation to be
received by the broker-dealer and certain associated persons, and deliver
certain disclosures required by the Securities and Exchange Commission.
Consequently, the penny stock rules may affect the ability of broker-
dealers to make a market in or trade our shares and may also affect your
ability to resell any shares you may purchase in this offering.
We cannot assure a public trading market will be established for our
common stock, which includes the shares sold in this offering.
There is currently no active trading market for our common stock and
we cannot guarantee that an active trading market will ever be developed,
or, if a trading market is developed, that it can or will continue for any
period of time. There is a high risk that you may not be able to sell any
shares you purchase in this offering at or near the offering price, or at
all in any public market.
11
We may need additional financing which may not be available or
which may dilute the value of your common stock.
Our success is highly dependent on our ability to generate revenues
and raise additional capital when needed. No commitments to provide
additional funds have been made by management or other shareholders. We
have not investigated the availability, source or terms that might govern
the acquisition of additional financing. 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 us. If
we are not able to generate additional funds when needed, our operations
could be severely limited, and our revenues could be impacted.
You should carefully consider the above risk factors and all other
information contained in this prospectus before purchasing the common
stock we are offering. Investing in our common stock involves a high
degree of risk. Any of the above risks could adversely affect our business
operations, financial condition and results of operations and could result
in a complete loss of your investment.
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 our 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 we believe that the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance, or achievements.
12
USE OF PROCEEDS
---------------
We expect to disburse the net proceeds from this offering in the
priority set forth below, during the first 12 months after successful
completion of this offering:
Description Amount
- ----------- ------
Offering Expenses, which include $13,975
legal, accounting and stock transfer
agent fees
Feasibility of License/Market Research $13,500
Legal Fees $10,000
Accounting $ 3,000
Electronic filing/printing $ 2,500
Office/Administrative costs including
office equipment, telephone
system, computers and software $15,000
Recruiting and Salaries $15,000
Working Capital $ 8,025
-------
Total $80,000 (1)
(1) In the event less than all the shares are sold, the amounts above
will be proportionately adjusted according to the amount of net proceeds
received.
While we currently intend to use the proceeds of this offering
substantially in the manner set forth above, we reserve the right to
reassess and reassign such use if, in the judgment of our Board of
Directors, such changes are necessary or advisable. At present, no
material changes are contemplated. Should there be any material changes in
the above projected use of proceeds in connection with this offering, we
will issue an amended prospectus reflecting those changes.
There is no definitive use, at present, for the working capital, other
than for miscellaneous expenses. Until used, the working capital proceeds
may be invested in short-term certificates of deposit or U.S. Treasury
Notes.
DETERMINATION OF OFFERING PRICE
-------------------------------
We arbitrarily determined the price of the shares in this offering in
order for us to raise up to a total of $80,000. The offering price is not
an indication of and is not based upon the actual value of the Company. It
bears no relation to book value, assets, earnings or any other recognized
criteria of value of the Company. The offering price should not be
regarded as an indicator of the future market price of the shares.
13
DILUTION
--------
Dilution represents the difference between the offering price and the
net tangible book value per share immediately after completion of this
offering. Net tangible book value is the amount that results from
subtracting total liabilities and intangible assets from total assets.
Dilution arises mainly as a result of our arbitrary determination of the
offering price of the shares being offered. Dilution of the value of the
shares you purchase is also a result of the lower book value of the shares
held by our existing Stockholders.
As of December 31, 2000, the net tangible book value of our shares
($55,775) or approximately (.021) per share, based upon 6,500,000 shares
issued and outstanding, assuming successful completion of this offering.
The following table illustrates the per share dilution you would incur,
assuming we sell all the shares offered, and does not give any effect to
the results of any operations subsequent to December 31, 2000:
Offering Price per Share $ .02
Net Tangible Book Value Per Share Before the Offering $ (.021)
Net Tangible Book Value After Offering $ .004
Increase in Net Tangible Book Value per Share
Attributable to Current Shareholders $ .025
Immediate Dilution per Share to New Investors $ .016
The following table summarizes the number and percentage of shares
purchased, the amount and percentage of consideration paid and the
average price per Share paid by our existing stockholders and by
new investors in this offering:
Total
Price Number of Percent of Consideration
Per Share Shares Held Ownership Paid
--------- ----------- ---------- -------------
Existing
Stockholders $ .001 2,500,000 62% $ 2,500
Investors in
This Offering $ .02 4,000,000 38% $ 80,000
14
PLAN OF DISTRIBUTION; TERMS OF THE OFFERING
-------------------------------------------
We are attempting to sell a maximum of 4,000,000 shares of our common
stock to the public on a "best efforts" basis. There is no guarantee that
any or all of these shares will be sold. This is a self underwritten
offering, which means the shares will be sold us; we will not engage the
services of an underwriter or any other agent to sell the shares.
We will offer and sell the shares through our officers and directors,
David Smith and Brian Griffith, under the exemption from registration as a
broker dealer 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. We intend to advertise and hold investment
meetings in various states and in Canada where the offering will be
registered and will distribute the prospectus to potential investors at
the meetings. We also intend to distribute the prospectus to our family
members and friends who may be interested in investing in our business.
Funds received in this offering will not be placed in escrow or in a
trust account, and will be immediately available for our use. There is no
minimum number of shares that must be sold to complete this offering. The
costs of this offering will be paid from the proceeds.
Offering Period and Expiration Date
- -----------------------------------
This offering will commence on the date of this prospectus and continue
for a period of 180 days, unless we extend the offering period for an
additional 90 days, or unless the offering is completed or otherwise
terminated by us.
Procedures for Subscribing
- --------------------------
If you decide to subscribe for any shares in this offering, you will be
required to execute a Subscription Agreement and tender it, together with
a check or certified funds, to us for acceptance or rejection.
All checks for subscriptions should be made payable to Brazos
Scientific, Inc.
Right to Reject Subscriptions
- -----------------------------
We have the right to accept or reject subscriptions in whole or in
part, for any reason or for no reason. All monies from rejected
subscriptions will be returned immediately by us to the subscriber,
without interest or deduction. Subscriptions for securities will be
accepted or rejected within 48 hours after we receive them.
15
LEGAL PROCEEDINGS
-----------------
We are not a party to any material pending legal proceedings, and none
of our property is the subject of a pending legal proceeding. Further, the
officers and directors know of no legal proceedings against the company or
our property contemplated by any governmental authority.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
--------------------------------------------------------------
The following table sets forth the name, age and position of each of
our directors and executive officers:
Name Age Position
---- --- --------
David C. Smith 49 President, Director
Brian F. Griffith 51 Secretary/Treasurer,
Director
In April 2000, David Smith was elected president and director, and
Brian F. Griffith was elected secretary/treasurer and director of our
company. Mr. Smith and Mr. Griffith will serve until the first annual
meeting of shareholders and their 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.
Background of Officers and Directors
- ------------------------------------
Since 1983, Mr. Smith has been with Black Tusk Realty, a firm which he
founded and which is the dominant real estate firm in Squamish, British
Columbia, Canada. Additionally, in 1983, he established, and remains with
the real estate development and consulting firm of Lucas Investments,
which builds and sells houses in British Columbia. Since 1993, Mr. Smith
has also worked as a fundraising consultant for several companies in the
high tech industry. He devotes his time as required to our
business.
16
Since 1975, Mr. Griffith has been the owner of Brian F. Griffith & Co.,
an accounting firm in Barbados. He has served on various boards for
private companies and for the Council of the Institute of Chartered
Accountants. In the past, he has also served on the boards of the U.W.I.
Finance Committee at Cave Hill, the Barbados Industrial Development
Corporation, the Barbados National Bank, the Barbados Development Bank and
the Barbados National Trust. Mr. Smith also served on the Council of the
Institute of Chartered Accountants for seventeen years. He devotes his
time as required to our business.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
---------------------------------------------------------------
The following table sets forth, as of December 31, 2000 the issued
and 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 the Company to own beneficially, more than 5% of our 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
their shares.
Shares Percentage of
Name Owned Shares Owned
- ---- ------ -------------
David C. Smith 1,250,000 50%
President and Director
510 West Hastings Street,
Suite 1010
Vancouver, BC Canada V6B 1L8
Brian F. Griffith 1,250,000 50%
Secretary/Treasurer and Director
Harriott House
Spry Street
Bridgetown, Barbados WI
- -----------------------
All Executive Officers and
Directors as a Group
(2 Individuals) 2,500,000 100%
DESCRIPTION OF SECURITIES
-------------------------
The following description of our capital stock is a summary of the
material terms of our capital stock. This summary is subject to and
qualified in its entirety by our articles of incorporation and bylaws,
which are included as exhibits to the registration statement, of which
this prospectus forms a part, and by the applicable provisions of Nevada
law.
17
<PAGE)
Our authorized capital stock consists of 25,000,000 shares of common
stock, par value $.001 per share. Our 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 our common stock.
The holders of shares of common stock are entitled to dividends, out of
funds legally available, 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 to one vote per share on all matters. In
the event of liquidation, dissolution or winding up of our affairs,
holders are entitled to receive, ratably, the net assets available to
shareholders after payment to all of our creditors.
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 our common stock are issued, the relative
interests of existing shareholders may be diluted.
INTEREST OF NAMED EXPERTS AND COUNSEL
--------------------------------------
No Expert or Counsel, as defined by Item 509 or Regulation S-B
promulgated pursuant to the Securities Act of 1933, whose service were
used in the preparation of this prospectus was hired on a contingent basis
or will receive a direct or indirect interest in our company.
Experts
- -------
The financial statements of our company for the year ended December 31,
2000, included in this prospectus have been audited by Manning Elliott,
Chartered Accountants, our independent auditors, as stated in their report
and have been so included in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
Legal Matters
- -------------
An opinion concerning the validity of the shares of common stock
offered in this prospectus has been provided by Warren J. Soloski, Esq.,
11300 West Olympic Blvd., Suite 800, Los Angeles, California 90064, an
independent third party.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
--------------------------------------------------------
Our articles of incorporation and bylaws provide that we will
indemnify our officers and directors to the full extent permitted by
Nevada state law. Our bylaws provide that we will indemnify and hold
18
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 our company, or is
or was serving at our request 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 our company, pursuant to the forgoing provisions or otherwise,
we have been informed 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
- -------
Our company was incorporated under the laws of the State of Nevada on
August 18, 1999 and is in the early developmental and promotional stages.
To date, our only activities have been organizational, directed at
acquiring our principal asset, raising initial capital and developing our
business plan. We have not yet commenced our business operations. We
currently have no full time employees and own no real estate.
Acquisition of License
- ----------------------
On February 14, 2000, Exeter Capital Corporation, in return for a
promissory note for $35,000 from David Smith transferred to us its rights
under a License Agreement with Vitamineralherb.com. The License Agreement
grants an exclusive right to us to distribute Vitamineralherb.com products
to health and fitness professionals in South Texas via the Internet.
Exeter Capital Corporation acquired the license under the terms of a
settlement agreement with David Mortenson & Associates, an affiliate of
Vitamineralherb.com. Under the terms of the settlement agreement,
Vitamineralherb.com, an affiliate of David Mortenson & Associates, granted
to Exeter Capital Corporation the license to distribute
Vitamineralherb.com products in part for their agreement not to pursue
their individual claims against Mortenson & Associates.
Terms of The License Agreement
- ------------------------------
We have 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
19
clients. The license grants us an exclusive license to a specific
territory, defined by the State of Texas, as being south and east of a
line beginning at the point where U.S. Highway 190 crosses the
Texas/Louisiana border, south and west along Highway 190 to the
intersection of Highway 190 and Highway 77 and south along Highway 77 to
the Gulf of Mexico. The license will be automatically renewed unless
either party gives the other notice of its intent not to renew.
As a licensee of Vitamineralherb.com, we eliminate the need to develop
products, store inventory, build and maintain a website, establish banking
liaisons, and develop a fulfillment system, thereby enabling us to focus
strictly on marketing and sales. Initially, we plan to target health and
fitness professionals in South Texas who wish to offer health and fitness
products to their customers.
Our customers will have access to all products offered on the
Vitamineralherb website, as well as the ability to order custom-formulated
and custom-labeled products. Vitamineralherb.com sets the price for
products based on the manufacturer's price, plus a mark up.
Vitamineralherb.com will retain a 10% override on gross sales made through
their web site by us and/or our customers within our license territory.
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, we will show
the client how to access the Vitamineralherb 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 or debit card. All products will be shipped by the manufacturer
directly to the client or its clients.
The website will be maintained by Vitamineralherb.com, for which we
will pay an annual website maintenance fee of $500. All financial
transactions will be handled by Vitamineralherb.com's Internet clearing
bank. The Vitamineralherb webmaster will download e-mail orders several
times a day, check with clearing bank for payment and then submit the
product order and electronic payment to the supplier. Vitamineralherb.com
will then forward the money due to us from sales via electronic funds
transfer. Vitamineralherb's software will track all sales through the
customer's identification number, and at month end, e-mail to us a
detailed report including sales commissions. Vitamineralherb has indicated
that it will use e-commerce advertising such as banner ads on major
servers and websites, as well as try to insure that all major search
engines pick Vitamineralherb.com first. Sales originating from the website
to customers located in South Texas will automatically be assigned to us,
whether or not the sale originated from our marketing efforts.
20
Vitamineralherb.com warrants that the products are fit for the purpose
for which they were produced (except for custom formulated products, which
Vitamineralherb.com warrants will be manufactured in accordance with our
specifications) and comply with all applicable laws; that all labels
correctly and accurately describe the product and comply with all
applicable laws; and that all suppliers' manufacturing facilities comply
with all applicable laws. Vitamineralherb.com has agreed under the license
to indemnify, hold harmless and defend us and our related parties from and
against any loss, claim, and expense incurred as a consequence of breach
of the product warranties.
Vitamineralherb.com has granted distribution rights to 25 other
entities for territories in 32 states and 6 Canadian provinces. We do not
believe that marketing activities conducted by other licensors of the
Vitamineralherb.com products will negatively impact our prospective
business under our License Agreement. We have no plans to acquire the
rights to distribute Vitamineralherb.com products in any other
territories.
Background of 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 OTC Bulletin Board, is 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 our customers at a minimal added cost. Vitamineralherb.com has just
begun developing its vitamin marketing and distributorship business.
Vitamineralherb.com currently offers over 60 products through its
website, through its current supplier, Ives Formulation.
Vitamineralherb.com plans to add other suppliers in the future.
Implementation of Business Plan: Milestones
- -------------------------------------------
Our initial business plan is to determine the feasibility of selling
Vitamineralherb.com products to targeted markets. Should we determine that
our business plan is feasible, we intend 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. We intend to
achieve implementation of our business plan by meeting the following
milestones:
21
- -- Milestone 1: Market Survey. In order to determine the feasibility
of our business plan, we 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 we determine that the
exploitation of the license is feasible, we will then have to engage
salespeople to market the products. We expect that we may hire two
salespeople during our 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.
- - Milestone 3: Establish an Office. We 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, we will attempt to develop our
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 by 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.
22
- - Milestone 6: Achieve Revenues. It is difficult to quantify how long
it will take to convert a sales call into actual sales and
revenues. We will not begin receiving orders until our sales
personnel are able to convince potential clients to begin offering
such products to their customers, or to convert from an existing
supplier. We hope 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 we complete this offering by August 1, 2001,
and assuming an offering period of approximately one month, in a
best case scenario, we could receive our first revenues as early as
February 1, 2002. However, a more realistic estimate of first
revenues would be September 1, 2002 or later.
As discussed more fully in the Management's Discussion and Analysis -
Liquidity and Capital Resources section, the expenses of implementing our
business plan will likely exceed the funds raised by this offering, and we
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 us, if and when needed, or at all.
Industry Background of 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. We believe 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 statutes,
the Dietary Supplement Health and Education Act of 1994.
Competition
- -----------
The electronic commerce industry is new, rapidly evolving and intensely
competitive, and we expect 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.
23
Our 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 our potential competitors have longer operating histories,
larger customer or user bases, greater brand recognition and significantly
greater financial, marketing and other resources than we have. 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 we
do. Increased competition may result in reduced operating margins and loss
of market share.
We believes that the principal competitive factors in our 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.
We believe that we can compete favorably on these factors. However, we
will have no control over how successful our competitors are in addressing
these factors. In addition, with little difficulty, our online competitors
can duplicate many of the products or services offered on the
Vitamineralherb.com site.
We believe that traditional retailers of vitamins, supplements,
minerals and other alternative health products face several challenges in
succeeding:
24
- - 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 attracted 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, we believe 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.
We hope to attract and retain consumers through the following key
attributes of our business:
- - Broad Expandable Product Assortment. Our 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 our affiliation with Vitamineralherb.com and
other licensees. Product prices will also be lower due to our lack
of the need to retain inventory and warehouse space. All products
will be shipped from International Formulation and Manufacturing'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 professionals
can tailor vitamin and dietary supplement regimes to their clients.
Regulatory Environment
- ----------------------
The manufacturing, processing, formulating, packaging, labeling and
advertising of the products we intend to sell 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.
25
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.
26
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, 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 our website may be
determined by the Food and Drug Administration to be drug claims rather
than acceptable statements of nutritional support. In addition, some of
our 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 our 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 we cannot
assure that all pieces of "third party literature" that may be
disseminated in connection with the products we offer 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 our selling methods, interfering with our 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
27
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.
We 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, we cannot assure that the current statutory scheme and
regulations applicable to dietary supplements will remain less
restrictive. Further, we cannot assure 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 our 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.
28
Employees
- ---------
We are a development stage company and currently have no employees. Our
business operations are currently managed by David Smith and Brian
Griffith, our officers and directors. Management plans to use consultants,
attorneys and accountants as necessary and does not plan to engage any
full-time employees in the near future. We may hire marketing employees
based on the projected size of the market and the compensation necessary
to retain qualified sales employees.
Available Information and Reports to Securities Holders
- -------------------------------------------------------
We have 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 our company and our common stock, see the registration
statement and the exhibits and schedules thereto. Any document we file
may be read and copied at the Commission's Public Reference Room located
at 450 Fifth Street N.W., Washington D.C. 20549, and the public reference
rooms in New York, New York, and Chicago, Illinois. Please call the
Commission at 1-800-SEC-0330 for further information about the public
reference rooms. Our 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, we 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 our 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.
Plan of Operation
- -----------------
During the period from August 18, 1999 (inception) through December 31,
2000, we have engaged in no significant operations other than
organizational activities, acquisition of the rights to market
Vitamineralherb.com products and preparation for registration of our
securities for sale under the Securities Act of 1933, as amended. We have
received no revenues during this period.
For the period from August 18, 1999(inception) to December 31, 2000, we
recorded an operating loss of $55,775, consisting primarily of notes
payable to an unrelated third party of (a) $35,000 to obtain our licensing
rights with VitaMineralHerb.com and (b) $15,775 for costs to start up our
business, including legal fees paid for the preparation and filing of the
29
registration statement of which this Prospectus is a part. For the current
fiscal year, we anticipate incurring losses 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 our business plan. We anticipate that until these
procedures are completed, we will not generate revenues other than
interest income, and may continue to operate at a loss thereafter,
depending upon the performance of the business. There is no guarantee
that our business operations will be successful or that we will ever
generate any profitable revenues.
Liquidity and Capital Resources
- -------------------------------
We are currently in the development stage and, since inception, have
experienced no significant change in liquidity or capital resources or
stockholder's equity; consequently, our balance sheet reflects no assets.
Total expenses incurred for organizational expenses and costs associated
with the filing of the registration statement to sell the shares in this
offering and initial start up costs were $20,775.
In order to determine the feasibility of our business plan, during the
next six to twelve months, we intend to conduct research into various
potential target markets. Should we determine that the exploitation of the
license is feasible, we will engage salespeople to market the products.
Based primarily on discussions with the licensor, we believe that during
our first quarter of operations, we will need a capital infusion of
approximately $100,000 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, we will need approximately
$260,000 in the event we determine that our customers will not pay in
advance and we will have to extend credit. These expenses will exceed the
funds raised by this offering, and we will have to obtain additional
financing through additional sales of our equity securities, bank
financing or capital contributions by our current shareholders.
In its Independent Auditor's Report, our accountants state that our
failure to generate revenues and conduct operations since inception raise
substantial doubt about our ability to continue as a going concern. We
will require substantial working capital, and currently have inadequate
capital to fund our proposed business operations. We may be unable to
raise the funds necessary for implementing our business plans, which could
severely limit our operations and cause our stock to be worthless.
DESCRIPTION OF PROPERTY
-----------------------
Our business offices are located at 510 West Hastings, Suite 1010,
Vancouver, B.C, Canada, V6B 1L8, the offices of our President, which we
currently use on a rent-free basis.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
No director, executive office or nominee for election as a director,
and no owner of 5% or more of our outstanding shares, or any member of
their immediate family, has entered into or proposed any transaction with
us. There are no relationships between our officers and directors and
any holder of 5% or more of our outstanding shares or persons from whom we
have acquired our assets. We have no promoters for our business, other
than our officers and directors.
30
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
No established public trading market exists for our securities. We
have no common equity subject to outstanding purchase options or warrants.
We have no securities convertible into our common equity. There is no
common equity that could be sold pursuant to Rule 144 under the Securities
Act or that we have 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, proposed to be offered by us.
As of December 31, 2000, there were 2,500,000 shares of common stock
outstanding, held by two shareholders of record.
To date we have not paid any dividends on its common stock and do not
expect to declare or pay any dividends on our common stock in the
foreseeable future. Payment of any dividends will depend upon our future
earnings, if any, our financial condition, and any other factors as deemed
relevant by the Board of Directors.
EXECUTIVE COMPENSATION
----------------------
At December 31, 2000, and through the date of the filing of this
registration statement, none of our officers or directors has received any
compensation, either in cash or stock, for services rendered. We currently
have no plan to compensate the officers and directors, either in cash or
stock; however, it is possible that, in the future, we will adopt a plan
to pay or accrue compensation to our officers and directors for services.
We currently have 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. We
currently have no employment contract or compensatory plan or arrangement
with any executive officer. There is no compensation committee, and no
compensation policies have been adopted. This compensation discussion
addresses all compensation issues regarding compensation awarded to,
earned by or paid to our offices and directors.
31
FINANCIAL STATEMENTS
--------------------
Brazos Scientific Inc.
(A Development Stage Company)
Index
------
Independent Auditor's Report F-1
Balance Sheets F-2
Statements of Operations F-3
Statements of Cash Flows F-4
Statement of Stockholders' Equity F-5
Notes to the Financial Statements F-6 to F-10
32
Independent Auditor's Report
To the Board of Directors
Brazos Scientific Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of Brazos Scientific Inc.
(A Development Stage Company) as of December 31, 2000 and June 30, 2000
and the related statements of operations, stockholders' equity and cash
flows for the period from August 18, 1999 (Date of Inception) to December
31, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about 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. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the aforementioned financial statements present fairly, in
all material respects, the financial position of Brazos Scientific Inc. (A
Development Stage Company), as of December 31, 2000 and June 30, 2000 and
the results of its operations and its cash flows for the period from
August 18, 1999 (Date of Inception) to December 31, 2000 in conformity
with U.S. 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.
"Manning Elliott"
CHARTERED ACCOUNTANTS
Vancouver, Canada
January 31, 2001
33
Brazos Scientific Inc.
(A Development Stage Company)
Balance Sheets
(expressed in U.S. dollars)
December 31, June 30,
2000 2000
$ $
Assets
License (Note 3) - -
=========== ==========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable 1,200 1,200
Accrued offering costs 2,000 2,000
Notes payable (Note 4) 50,000 50,000
------ ------
53,200 53,200
====== ======
Contingent Liability (Note 1)
Commitment (Note 3)
Stockholders' Equity
Common Stock, 25,000,000 shares authorized
with a par value of $.001; 2,500,000 shares
issued and outstanding respectively 2,500 2,500
Additional Paid-in Capital 75 75
------ -----
2,575 2,575
Deficit Accumulated During the
Development Stage (55,775) (55,775)
------ ------
(53,200) (53,200)
------ ------
- -
====== =======
F-2
(The accompanying notes are an integral
part of the financial statements)
34
Brazos Scientific Inc.
(A Development Stage Company)
Statements of Operations
(expressed in U.S. dollars)
From August 18, Six months From August 18,
(Date of Inception) ended (Date of Inception)
to December 31, December to June 30, 2000
2000 31, 2000
$ $ $
Revenues - - -
-------- ---------- --------
Expenses
Offering costs 17,000 - 17,000
Organization expenses 2,575 - 2,575
Transfer agent 1,200 - 1,200
License written-off 35,000 - 35,000
-------- --------- --------
55,775 55,775
------- --------- -------
Net Loss (55,775) - (55,775)
======= ========= =======
Loss Per Share - basic - (0.022)
========= =======
Weighted Average Shares Outstanding 2,500,000 2,500,000
========= ========
F-3
(The accompanying notes are an integral
part of the financial statements)
35
Brazos Scientific Inc.
(A Development Stage Company)
Statements of Cash Flows
(expressed in U.S. dollars)
From August 18, Six months From August 18,
(Date of Inception) ended (Date of Inception)
to December 31, December to June 30, 2000
2000 31, 2000
$ $ $
Cash Flows to Operating
Activities
Net loss (55,775) - (55,775)
Non cash items
Expenses not paid
with cash 17,575 - 17,575
Accounts payable 1,200 - 1,200
Accrued offering costs 2,000 - 12,000
License written-off 35,000 - 35,000
------- ------- -------
Net Cash Used by
Operating Activities - - -
------- ------- -------
Cash Flows from
Financing Activities
Increase in shares issued - - -
------- ------- -------
Net Cash Provided by
Financing Activities - - -
-------- -------- --------
Change in cash - - -
Cash - beginning of period - - -
-------- -------- --------
Cash - end of period - - -
======== ========= =========
Non-Cash Financing Activities
A total of 2,500,000 shares
were issued at a fair market
value of $0.001 per share
for organization expenses 2,500 - 2,500
Organization expenses paid
for by a director for no
consideration treated as
F-4
(The accompanying notes are an integral
part of the financial statements)
36
additional paid in capital 75 - 75
A note payable was issued to
a non related company at a
fair market value for the
acquisition of a license
(Note 5) 35,000 - 35,000
A note payable was issued to
a non related company for
offering costs paid on
behalf of the Company. 15,000 - 15,000
-------- ------- -------
52,575 - 52,575
======== ======== =======
Supplemental Disclosures
Interest paid - - -
Income tax paid - - -
F-5
(The accompanying notes are an integral
part of the financial statements)
37
Brazos Scientific Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
From August 18, 1999 (Date of Inception) to December 31, 2000
(expressed in U.S. dollars)
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Total Stage
# $ $ $ $
Balance - August 18,
1999 (Date of
Inception) - - - - -
Stock issued for
$2,500 of
organizational
expenses 2,500,000 2,500 - 2,500 -
Additional paid in
capital for
organizational
expenses incurred
by a director on
behalf of the Company - - 75 75 -
Net loss for the
period - - - - (55,775)
---------- ------- ------- -------- -------
Balance -
June 30, 2000 2,500,000 2,500 75 2,575 (55,775)
Net loss for
the period - - - -
--------- ------ ------ ------- -------
Balance -
December 31, 2000 2,500,000 2,500 75 2,575 (55,775)
========= ====== ====== ======= ========
F-6
(The accompanying notes are an integral
part of the financial statements
38
Brazos Scientific Inc.
(A Development Stage Company)
Notes to the Financial Statements
(expressed in U.S. dollars)
1. Development Stage Company
Brazos Scientific Inc. herein (the "Company") was incorporated in the
State of Nevada, U.S.A. on August 18, 1999. The Company acquired a
license to market and distribute vitamins, minerals, nutritional
supplements, and other health and fitness products in the State of
South Texas. The grantor of the license offers these products for sale
from various suppliers on their Web Site.
The Company is in the development stage.
In a development stage company, management devotes most of its
activities in investigating business opportunities. 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.There is no guarantee that the Company will be
able to raise any equity financing. There is substantial doubt regarding
the Company's ability to continue as a going concern.
The Company will offer 4,000,000 shares at $0.02 per share to raise
$80,000 pursuant to an SB-2 Registration Statement filed with the
Securities and Exchange Commission.
2. Summary of Significant Accounting Policies
(a) Year end
The Company's fiscal year end is June 30.
(b) Licenses
The cost to acquire a license is capitalized as incurred. These
costs are being amortized on a straight-line basis over three
years. The carrying value of the License is evaluated in each
reporting period to determine if there were events or circumstances
which would indicate a possible inability to recover the carrying
amount. Such evaluation is based on various analyses including
assessing the Company's ability to bring the commercial
applications to market, related profitability projections and
undiscounted cash flows relating to each application which
necessarily involves significant management judgment.
F-7
(The accompanying notes are an integral
part of the financial statements)
39
(c) Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity
of three months or less at the time of issuance to be cash
equivalents.
(d) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make 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.
(e) Offering Costs
In accordance with SEC staff accounting Bulletin No. 5 offering
costs may properly be deferred and charged against proceeds of the
offering. The Company has elected to charge such offering costs to
operations.
(f) Revenue Recognition
The Company recognizes revenue on a net profit basis after the
grantor of its license receives a 10% override on gross sales.
Revenue will be recorded when the grantor of the license has
received cleared funds, made and paid for the order with the
supplies of the product, and net profit is determined by the
grantor.
F-8
(The accompanying notes are an integral
part of the financial statements)
40
3. License
The Company's only asset is a license to market vitamins, minerals,
nutritional supplements and other health and fitness products in
Southern Texas, through the Grantor's Web Site. The Company desires to
market these products to medical practitioners, alternative health
professionals, martial arts studios and instructors, sports and fitness
trainers, other health and fitness practitioners, school and other fund
raising programs and other similar types of customers. The license was
acquired on February 14, 2000 for a term of three years. 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 10% of the gross sales.
A $35,000 note payable was issued to Exeter Capital Corporation for the
acquisition of this license. Exeter Capital Corporation is not a
related party.
The license was subsequently written off to operations due to 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.
Exeter Capital Corporation originally had acquired a three year license
to distribute and produce an oxygen enriched water product from David
R. Mortenson & Associates by issuing 2,000,000 shares at a fair market
value of $.001 or $2,000. The general partner of David R. Mortenson &
Associates, David R. Mortenson is also a spouse of a former director
and officer of the Company. The President of David Mortenson &
Associates, was a former director and officer of the Company. In
December 1999, David R. Mortenson, David R. Mortenson & Associates'
principal notified Exeter that he was involved in a legal dispute with
NW Technologies and would be unable to fulfill his obligations under
the license to the Company. As a result, David R. Mortenson &
Associates' affiliate, Vitamineralherb.com granted a license to Exeter
at no cost to market vitamins, minerals, nutritional supplements and
other health and fitness products through the Grantor's Web Site. The
President of Vitamineralherb.com, David R. Mortenson is also a spouse
of a former director and officer of the Company.
4. Notes Payable
The notes payable are unsecured, non-interest bearing and repayable by
December 15, 2001.
5. Related Party Transaction
The Company issued 2,500,000 shares having a fair market value of
$0.001 each to the former President of the Company for organizational
expenses and offering costs in the amount of $2,500.
F-9
(The accompanying notes are an integral
part of the financial statements)
41
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
F-10
42
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
==============================================
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Articles of Incorporation provide that it must
indemnify its directors and officers to the fullest extent permitted under
Nevada law against all liabilities incurred by reason of the fact that the
person is or was a director or officer of Registrant or a fiduciary of an
employee benefit plan, or is or was serving at the request of Registrant
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 Registrant'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 Registrant. Pursuant to
Nevada 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 Registrant, filed herein as
Exhibit 3.2, 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 Registrant, absent a finding of negligence
or misconduct in office. Registrant'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 Registrant has the power to indemnify such person against liability
for any of those acts.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of the expenses of this
offering. The amounts set forth are estimates except for the SEC
registration fee:
Amount to
Description Be Paid
----------- ---------
SEC registration fee $ 35
Printing and engraving expenses -0-
Attorneys' fees and expenses 11,000
Accountants' fees and expenses 1,500
Transfer agent's and registrar's fee and
expenses 500
Miscellaneous 965
--------
Total $ 13,975
43
The Registrant will bear all expenses shown above.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Set forth below is information regarding the issuance and sale of
Registrant'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 April 1, 2000, Registrant issued 1,250,000 shares of common stock to
David C. Smith and 1,250,000 shares of common stock to Brian Griffith, its
officers, directors and principal stockholders, as compensation for
organizational expenses advanced by them valued at $1,250 each, or $.001
per share. 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. Smith's and Mr. Griffith's status as the
founders and initial management of Registrant, their status as accredited
investors, and the limited number of investors (two).
ITEM 27. 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 Opinion re: legality
10.1* License Agreement
10.2* Assignment of License Agreement
10.3 Assignment of License Agreement from Exeter
Capital Corp. to Registrant
10.4 Promissory Note
10.5 Promissory Note
23.1 Consent of Independent Auditors
23.2 Consent of Counsel(see Exhibit 5.1)
27 Financial Data Schedule
* Previously filed.
44
ITEM 28. 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.
4. Provide to the Underwriters at the closing specified in the
underwriting agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit
prompt delivery to each purchaser.
5. For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed a part of
this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1)or (4) or 497(h) under the Securities Act as part
of this registration statement as of the time the Commission
declared it effective.
6. For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a
new registration statement for the securities offered in the
registration statement, and the offering of the securities at that
time as the initial bona fide offering of those securities.
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.
45
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.
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 Vancouver, British
Columbia, Canada, on February 13, 2001.
Brazos Scientific, Inc.
/s/ David Smith, 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/ David Smith President, Director Feburary 13,2001
/s/ Brian Griffith Secretary, Treasurer February 14,2001
and Director
46
LAW OFFICES OF
WARREN J. SOLOSKI
A Professional Corporation
11300 West Olympic Blvd., Suite 800
Los Angeles, California 90064
(310) 477-9742
January 27, 2001
Brazos Scientific, Inc.
501 West Hastings, Suite 1010
Vancouver, B.C., Canada V6B 1L8
RE: Registration Statement on Form SB-2 re ,000,000 Shares of Common Stock
(Registration No. 333-41990)
Ladies and Gentlemen:
We have acted as counsel to Brazos Scientific, Inc. a Nevada corporation (the
"Company") in connection with the filing of a Registration Statement to which
this opinion is an Exhibit (the "Registration Statement") with respect to the
offer and sale of up to an aggregate of 4,000,000 shares of the Company's
Common Stock, $.001 par value per share (the "Shares") as described in the
Registration Statement.
We are familiar with the corporate actions take and proposed to be taken by
the Company in connection with the authorization, issuance and sale of the
Shares and have made such other legal and factual inquiries as we deem
necessary for the purpose of rendering this opinion.
We have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as copies, the authenticity of the originals
of such copied documents, and except with respect to the Company, that all
individuals executing and delivering such documents were duly authorized to
do so.
Based on the foregoing and in reliance thereon, and subject to the
qualifications and limitations set forth below, we are of the opinion that
the Shares to be issued have been duly authorized and when issued, upon
payment, will be validly issued, fully paid and non-assessable.
This opinion is limited to the laws of the State of Nevada, including Chapter
78 of the Nevada Revised Statutes, and federal law as in effect on the date
hereof, exclusive of state securities and blue sky laws, rules and regulations,
and to all facts as they presently exist.
We hereby consent to the use of our name under the caption "Legal Matters" in
the Prospectus forming a part of the Registration Statement and to the filing
47
of this opinion as Exhibit 5.1 to the Registration Statement. In giving this
consent, we do not admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as
amended, or the General Rules and Regulations of the Securities and Exchange
Commission.
Very truly yours,
Warren J. Soloski, A Professional Corporation
/s/ Warren J. Soloski
48
ASSIGNMENT OF LICENSE AGREEMENT
FOR VALUE RECEIVED, Exeter Capital Corporation ("Assignor"), for good and
valuable consideration, does hereby sell, assign, and transfer to Brazos
Scientific, Inc. ("Assignee"), all of the rights, title and interest of
Assignor, and delegates to Assignee all of the duties of Assignor under
that certain License Agreement dated February 14, 2000, by and between
Assignor and Vitamineralherb.com Corp., a Nevada corporation, a true
copy of which is annexed hereto and made a part hereof.
Assignor represents that the annexed document is a valid and binding
agreement in all respects, is assignable and the duties hereunder delegable,
and that this assignment and delegation is a valid exercise of the Assignor's
rights.
Assignee hereby assumes and agrees to perform all of Assignor's obligations
under the annexed document. Assignee shall defend, indemnify and hold
harmless Assignor from and against any claim, liability and expense which
Assignee may incur (including without limitation attorneys fees and litigation
expenses) that may arise out of Assignee's performance of, or failure to
perform, according to the terms of the said License Agreement.
Dated this 14 day of February, 2000.
ASSIGNOR: ASSIGNEE:
EXETER CAPITAL CORPORATION BRAZOS SCIENTIFIC, INC.
/s/ /s/ David Smith, President
49
PROMISSORY NOTE
Vancouver, British Columbia, February 14, 2000
$US35,000.00
FOR VALUE RECEIVED, the undersigned promises to pay to the order of Exeter
Capital Corporation, the principal sum of Thirty-Five Thousand Dollars
($US35,000.00) in legal tender as full consideration for all right, title and
interest in and to that certain License Agreement by and between Exeter
Capital Corporation and Vitamineralherb.com dated February 14, 2000.
Payments. The principal on the obligation represented by this promissory
note, will be paid in full on or before December 15, 2001.
Default. If any payment is not paid when due, or if Obligors breach any other
agreement with the holder of this note, Obligors will be in default. Upon
default, the holder may declare the unpaid principal balance and all accrued
interest and unpaid late charges, if any, immediately due and payable,
without notice, and Obligors will then pay that amount. The holder may
employ attorneys or other agents to collect amounts due under this note if
Obligors are in default or to otherwise enforce the terms of this note and any
agreement securing this note, and Obligors agree to pay all fees, costs and
expenses incurred by the holder as a consequence of default by Obligors.
Such fees, costs and expenses include attorneys' fees whether or not litigation
is commenced and including any appeal, fees or expenses incurred in any
bankruptcy, receivership, or other insolvency proceedings, any ancitipated
post-judgment collection charges, and all other costs of collection,
including court costs. The holder may delay enforcing any of its rights
under this note without forfeiting such rights.
Waiver. The Obligors hereby severally waive presentment, demand for payment,
protest, notice of nonpayment or dishonor, and any relief, waiver or
discharge arising from any extension of time for payment granted before, at
or after maturity, or for any other causes.
Obligors. "Obligors" as used in this note means all makers, signers and
co-signers, guarantors, sureties, and endorsers.
/s/ David Smith, President
BRAZOS SCIENTIFIC, INC.
50
PROMISSORY NOTE
Vancouver, British Columbia, February 14, 2000
$US15,000.00
FOR VALUE RECEIVED, the undersigned promises to pay to the order of Exeter
Capital Corporation, the principal sum of Fifteen Thousand Dollars
($US15,000.00) in legal tender as full consideration for payment of legal
costs in the amount of $15,000 on behalf of Brazos Scientific, Inc.
Payments. The principal on the obligation represented by this promissory
note, will be paid in full on or before December 15, 2001.
Default. If any payment is not paid when due, or if Obligors breach any other
agreement with the holder of this note, Obligors will be in default. Upon
default, the holder may declare the unpaid principal balance and all accrued
interest and unpaid late charges, if any, immediately due and payable,
without notice, and Obligors will then pay that amount. The holder may
employ attorneys or other agents to collect amounts due under this note if
Obligors are in default or to otherwise enforce the terms of this note and any
agreement securing this note, and Obligors agree to pay all fees, costs and
expenses incurred by the holder as a consequence of default by Obligors.
Such fees, costs and expenses include attorneys' fees whether or not litigation
is commenced and including any appeal, fees or expenses incurred in any
bankruptcy, receivership, or other insolvency proceedings, any ancitipated
post-judgment collection charges, and all other costs of collection,
including court costs. The holder may delay enforcing any of its rights
under this note without forfeiting such rights.
Waiver. The Obligors hereby severally waive presentment, demand for payment,
protest, notice of nonpayment or dishonor, and any relief, waiver or
discharge arising from any extension of time for payment granted before, at
or after maturity, or for any other causes.
Obligors. "Obligors" as used in this note means all makers, signers and
co-signers, guarantors, sureties, and endorsers.
/s/ David Smith
Brazos Scientific Inc.
51
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Interest of Named
Experts And Counsel" and to the use of our reports dated January 31, 2001, in
the Form SB-2 Registration Statement Amendment No. 1 of Brazos Scientific Inc.
for the regisration of shares of its common stock.
Vancouver, Canada
January 31, 2001
Manning Elliott
CHARTERED ACCOUNTANTS
/s/ Manning Elliott