As filed with the Securities and Exchange Commission
on August 27, 2002
Registration No. _________
=====================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BIO-ONE CORPORATION
(Name of registrant as specified in its charter)
NEVADA 2833 65-0815746
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation Industrial Classification Identification No.)
or Organization) Code Number)
1630 Winter Springs, Blvd. Armand Dauplaise
Winter Springs, Florida 32708 1630 Winter Springs, Blvd.
(407)977-1005 Winter Springs, Florida 32708
(407)977-1005
(Address and telephone number (Name, address, and telephone
of principal executive offices number of agent for service)
Copies to:
Jeffrey G. Klein, Esq.
Newman, Pollock & Klein, LLP
2101 NW Corporate Blvd.
Suite 414
Boca Raton, Florida 33431
Telephone: (561)997-9920
Facsimile: (561) 241-4943
Approximate date of commencement of proposed sale of the securities to the
public: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES
EFFECTIVE.
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 of
1933 check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, 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 of the effective registration
statement for the offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed Proposed
Title of maximum maximum Amount
each class Amount offering aggregate of
of securities to be price per offering Registration
to be registered registered share(1) price Fee
- --------------------------------------------------------------------------------
Common stock, 31,521,740 $ 0.35 $11,032,609 $1,015
$.001 par value to be sold
by selling shareholders
- --------------------------------------------------------------------------------
TOTAL 31,521,740 $ 0.35 $11,032,609 $1,015
================================================================================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933. For the purposes of
this table, we have used the average of the closing bid and asked prices on
August 21, 2002 of $.35.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. We maynot 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 in which the offer
or sale is not permitted.
ii
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED August 27, 2002
BIO-ONE CORPORATION
31,521,740 SHARES OF COMMON STOCK
This prospectus relates to the sale of up to 31,521,740 shares of Bio-One's
common stock by certain persons who are, or will become, stockholders of
Bio-One. Please refer to "Selling Stockholders" beginning on page 10. Of that
total, a single stockholder will sell up to30,000,000 shares of common stock in
this offering that it will receive pursuant to an Equity Line of Credit. Bio-One
is not selling any shares of common stock in this offering and therefore will
not receive any proceeds from this offering. We will, however, receive proceeds
from the sale of common stock under the Equity Line of Credit. All costs
associated with this registration will be borne by us.
The shares of common stock are being offered for sale on a "best efforts" basis
by the selling stockholders at prices established on the Over-the-Counter
Bulletin Board during the term of this offering. There are no minimum purchase
requirements. These prices will fluctuate based on the demand for the shares of
common stock.
The selling stockholders consist of:
o Cornell Capital Partners, L.P., which intends to sell up to
30,000,000 shares of common stock to be purchased under an Equity
Line of Credit Agreement, dated July 25, 2002.
o Westrock Advisor, Inc. which intends to sell up to 43,479 shares
of common stock to be purchased under a Placement Agent
Agreement, dated July 25, 2002.
o Other selling stockholders, which intend to sell up to 1,478,261
shares of common stock purchased in private offerings and issued
pursuant to a consulting agreement.
Cornell Capital Partners, L.P. is an "underwriter" within the meaning of the
Securities Act of 1933 in connection with the sale of common stock under the
Equity Line of Credit Agreement. Cornell Capital Partners, L.P. will pay Bio-One
100% of the market price of our common stock (pursuant to the Equity Line of
Credit Agreement). Bio-One has agreed to pay Cornell Capital Partners, L.P. a
underwriting discount equal to 5% of each Advance under the Equity Line of
Credit Agreement.
Our common stock is quoted on the Over-the-Counter Bulletin Board maintained by
the NASD under the symbol "BICO". On August 21, 2002 the last reported sale
price of our common stock was $.32 per share.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
PLEASE REFER TO "RISK FACTORS" BEGINNING ON PAGE 10.
PRICE TO PROCEEDS TO SELLING
PUBLIC* SHAREHOLDERS
Per share $ .35 $.35
TOTAL $ .35 $11,032,609
===== ===========
- -----------------------
* This includes the sale of 30 million shares of common stock by Cornell Capital
Partners, L.P. All proceeds from the sale of these shares will be paid to the
selling stockholders.
With the exception of Cornell Capital Partners, L.P., which is an "underwriter"
within the meaning of the Securities Act of 1933, no other underwriter or person
has been engaged to facilitate the sale of shares of common stock in this
offering. This offering will terminate 24 months after the accompanying
registration statement is declared effective by the Securities and Exchange
Commission. None of the proceeds from the sale of stock by the selling
stockholders will be placed in escrow, trust or any similar account.
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.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is _________, 2002.
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY ..................................................... 1
THE OFFERING ........................................................... 2
SUMMARY CONSOLIDATED FINANCIAL INFORMATION ............................. 4
RISK FACTORS ........................................................... 5
FORWARD-LOOKING STATEMENTS ............................................. 12
SELLING STOCKHOLDERS ................................................... 14
USE OF PROCEEDS ........................................................ 15
DILUTION ............................................................... 16
EQUITY LINE OF CREDIT .................................................. 16
PLAN OF DISTRIBUTION ................................................... 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION ................................................... 20
DESCRIPTION OF BUSINESS ................................................ 22
MANAGEMENT ............................................................. 35
DESCRIPTION OF PROPERTY ................................................ 38
LEGAL PROCEEDINGS ...................................................... 38
PRINCIPAL SHAREHOLDERS ................................................. 38
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ......................... 39
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS ............................ 39
DESCRIPTION OF SECURITIES .............................................. 40
EXPERTS ................................................................ 42
LEGAL MATTERS .......................................................... 43
AVAILABLE INFORMATION .................................................. 43
FINANCIAL STATEMENTS ................................................... F-1
- --------------------------------------------------------------------------------
i
We intend to distribute to our shareholders annual reports containing audited
financial statements. Our audited financial statements for the fiscal year
December 31, 2001, were contained in our Annual Report on Form 10-KSB.
As used in this prospectus, the terms "we," "us," "our," "the Company," and
"Bio-One" mean Bio- One Corporation, a Nevada corporation. The term "selling
shareholder" means Cornell Capital Partners, L.P., and other selling
shareholders of Bio-One (all of whom are identified in this Registration
Statement) all of which are offering to sell their shares of Bio-One common
stock which are being registered through this prospectus. The term "common
stock" means our common stock, par value $0.001 per share and the term "shares"
means the shares of common stock being registered by us through this prospectus.
The information in this prospectus is qualified in its entirety by reference to
the entire prospectus. Consequently, this prospectus, which is contained as part
of this registration statement, must be read in its entirety. This is especially
important in light of material subsequent events disclosed. Information may not
be considered or quoted out of context or without referencing other information
contained in this report necessary to make the information considered, not
misleading.
You should rely only on the information contained in this document or that we
have referred you to. We have not authorized anyone to provide you with
information that is different. This prospectus does not constitute an offer to
sell or the solicitation of an offer to buy any securities covered by this
prospectus in any state or other jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such state or jurisdiction.
Neither the delivery of this prospectus nor any sales made hereunder shall,
under any circumstances, create an implication that there has been no change in
our affairs since the date hereof.
ii
PROSPECTUS SUMMARY
The following is only a summary of the information, financial statements and the
notes included in this prospectus. You should read the entire prospectus
carefully, including "Risk Factors" and our Financial Statements and the notes
to the Financial Statements before making any investment decision.
OUR COMPANY
BIO-ONE CORPORATION (we, the "Company" or "BIO") is a Nevada corporation and was
incorporated on February 24, 1998 to engage in the nutritional supplement
marketing and internet consulting business. On May 30, 2000, we exchanged
10,000,000 shares of our Common Stock $0.001 (85.47%) for 100% of the issued and
outstanding shares of common stock of Crown Enterprises, Inc., a Florida
corporation ("Crown"), that was incorporated on April 9, 1999, pursuant to an
Agreement and Plan of Share Exchange, dated May 30, 2000, (the "Share
Exchange"). Prior to the Share Exchange, we had 20,000,000 shares of authorized
common stock, of which 1,700,000 shares were issued and outstanding. All of our
outstanding shares were fully paid and non assessable, free of liens,
encumbrances, options, restrictions and legal or equitable rights of others not
a party to the Share Exchange.
The Share Exchange called for the resignation of our original officers and
directors, who no longer have any continued involvement with us, and the
appointing of Armand Dauplaise as President and Chairman of the Board of
Directors and Kevin Lockhart as our secretary and director. Our new board of
directors then consisted of Armand Dauplaise, President and Chairman of the
Board and Kevin Lockhart, Secretary and Director.
We operated Crown Enterprises to pursue its evolving program of microscopic
analysis and nutritional supplement sales. Due to limited financing, we could
not effectively operate the microscopy and vitamin supplement programs.
Differences arose amongst the Board as to the proper course of action. The
matter was settled by transferring assets valued at $5,000 to Mr. Lockhart. Mr.
Lockhart forgave $173,000 in back pay and the Company redeemed 1,750,000 shares
of common stock owned by Mr. Lockhart. Mr. Lockhart also tendered his
resignation as an officer, director and employee of the Company, leaving Mr.
Dauplaise as our sole officer and director.
Our sole focus now is to acquire and operate multiple manufacturing and
marketing businesses in the nutritional supplement industry. We intend to
vertically integrate production, marketing and distribution. Management believes
that the customer base and demands for nutritional supplements is growing
significantly. More than 100 million Americans are taking nutritional
supplements; U.S. nutritional industry sales are approaching $50 billion
annually. The industry is highly fragmented with a majority of the manufacturers
and distributors with revenues under $5 million in annual sales. By implementing
a unique acquisition strategy designed to take advantage of operating
efficiencies, and the fragmented nature of the industry, Bio-One will be able to
establish itself as a significant force in the health and vitamin supplement
market.
Our principal place of business is located at 1630 Winter Springs Boulevard,
Winter Springs, Florida 32708 and our telephone number at that address is (407)
977-1005.
THE OFFERING
This offering relates to the sale of common stock by certain persons who are, or
will become, stockholders of Bio-One. The selling stockholders consist of:
o Cornell Capital Partners, L.P., which intends to sell up to
30,000,000 shares of common stock to be issued under an Equity
Line of Credit Agreement, dated July 25, 2002.
o Westrock Advisor, Inc. which intends to sell up to 43,479 shares
of common stock to be purchased under a Placement Agent
Agreement, dated July 25, 2002.
o Other selling stockholders, who intend to sell up to 1,478,261
shares of common stock purchased in private offerings.
Pursuant to the Equity Line of Credit, we may, at our discretion, periodically
issue and sell to Cornell Capital Partners, L.P. shares of common stock for a
total purchase price of $10 million. Cornell Capital Partners, L.P. will
purchase the shares of common stock for 100% of the lowest closing bid price of
our common stock during the 5 trading days immediately following notice of its
intent to make an Equity Line draw. Cornell Capital Partners, L.P. intends to
sell any shares purchased under the Equity Line of Credit at the then prevailing
market price. We also issued 43,479 shares of common stock to Westrock Advisors,
Inc. Westrock will serve as the placement agent to act as our exclusive agent in
connection with the Equity Credit Line. Among other things, this prospectus
relates to the shares of common stock to be issued under the Equity Line of
Credit.
2
COMMON STOCK OFFERED 31,521,740 shares by selling stockholders
OFFERING PRICE Market price
COMMON STOCK OUTSTANDING
BEFORE THE OFFERING(1) 13,949,846 shares
COMMON STOCK OUTSTANDING
AFTER THE OFFERING (2) 44,621,586 shares
USE OF PROCEEDS We will not receive any of the proceeds from
the sale of stock by any of the selling
stockholders. Any proceeds we receive from
the sale of common stock under the Equity
Line of Credit will be used to finance
acquisitions and general working capital
purposes. See "Use of Proceeds."
RISK FACTORS The securities offered hereby involve a high
degree of risk and immediate substantial
dilution and should not be purchased by
investors who cannot afford the loss of
their entire investment. See "Risk Factors"
and "Dilution."
DIVIDEND POLICY We do not intend to pay dividends on
our common stock. We plan to retain any
earnings for use in the operation of our
business and to find future growth.
OVER-THE-COUNTER
BULLETIN BOARD SYMBOL BICO
- ------------------
(1) Based on shares outstanding as of August 9, 2002.
(2) Assumes that all shares registered by this prospectus are issued under the
equity line of credit. The issuance of 900,000 shares of common stock to three
individuals nominated to serve on our Board of Directors and the redemption of
1,750,000 shares currently owned by a former director.
3
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following is a summary of our Financial Statements, which are included
elsewhere in this prospectus. You should read the following data together with
the "Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of this prospectus as well as with our Financial Statements
and the notes therewith.
FOR THE QUARTER FOR THE YEAR
ENDED ENDED
June 30, December 31,
2002 2001
STATEMENT OF OPERATION DATA:
Revenues $ 1,500 $ 82,943
Cost of Goods Sold 434 39,698
General and administrative expenses 142,771 710,977
Total operating expenses 143,205 750,675
(Loss) from operations (141,705) (667,732)
Net (loss)
Net loss per share - basic and diluted $ (0.00) $ (0.06)
BALANCE SHEET DATA:
June 30, DECEMBER 31,
2002 2001
(Unaudited) (Audited)
Cash $ 353 $ 34,103
Inventory -- 15,153
Accounts Receivable -- 1,672
Total Current Assets 353 50,929
Intangible assets, net
Other receivables- related party
Property and Equipment 6,604 18,242
Total Assets 9,107 70,870
Accounts payable 129,103 16,607
Accrued Expenses 161,949 202,642
Current Installments of Notes
Payable 89,502 74,502
Total current liabilities 380,554 293,181
Common stock 12,812 12,812
Additional paid-in capital 1,030,988 1,030,988
Treasury Stock (1,750) --
Accumulated (deficit) (1,413,497) (1,266,111)
Total stockholders' equity (371,447) (222,311)
Total Liabilities and
Shareholders Equity $ 9,107 $ 70,870
4
RISK FACTORS
THE SECURITIES OFFERED ARE HIGHLY SPECULATIVE. YOU SHOULD PURCHASE THEM ONLY IF
YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT IN US. YOU SHOULD CAREFULLY
CONSIDER THE FOLLOWING RISK FACTORS, AS WELL AS ALL OTHER INFORMATION IN THIS
PROSPECTUS.
CERTAIN IMPORTANT FACTORS MAY AFFECT OUR ACTUAL RESULTS AND COULD CAUSE THOSE
RESULTS TO DIFFER SIGNIFICANTLY FROM ANY FORWARD-LOOKING STATEMENTS MADE IN THIS
PROSPECTUS OR OTHERWISE MADE BY US OR ON OUR BEHALF. FOR THIS PURPOSE, ANY
STATEMENTS CONTAINED IN THIS PROSPECTUS THAT ARE NOT STATEMENTS OF HISTORICAL
FACT SHOULD BE CONSIDERED TO BE FORWARD-LOOKING STATEMENTS. WORDS SUCH AS "MAY,"
"EXPECT," "BELIEVE," "ANTICIPATE," "INTEND," "COULD," "ESTIMATE," OR "CONTINUE"
OR THE NEGATIVES OF THOSE WORDS, IDENTIFY FORWARD-LOOKING STATEMENTS. THESE
STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS PROSPECTUS AND INCLUDE
STATEMENTS AS TO OUR INTENT, BELIEF OR EXPECTATIONS. THESE FORWARD- LOOKING
STATEMENTS ARE SUBJECT TO THE RISKS DETAILED BELOW OR ELSEWHERE IN THIS
PROSPECTUS, OR DETAILED FROM TIME TO TIME IN OUR FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION. SEE "RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS" ON
PAGE 18.
INVESTORS SHOULD ASSUME THAT, EVEN IF NOT SPECIFICALLY STATED WITHIN THIS
DOCUMENT, IF ANY OF THE FOLLOWING RISKS ACTUALLY MATERIALIZE, OUR BUSINESS,
FINANCIAL CONDITION OR RESULTS OF FUTURE OPERATIONS COULD BE MATERIALLY AND
ADVERSELY AFFECTED. IN THAT CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD
DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATED TO OUR BUSINESS
WE HAVE HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE FUTURE
We have a history of losses. We have incurred an operating loss since inception
and had an accumulated deficit of $1,413,497 as of June 30, 2002. We incurred a
net loss of $677,150 or $.06 per share for the year ended December 31, 2001.
Future losses are likely to continue unless we successfully implement our
revised business plan. Our independent auditors have noted that due to the
substantial losses incurred during fiscal year 2001 and 2000, a working capital
deficit as well as a stockholders deficit of $221,311, raise substantial doubts
about our ability to continue as a going concern. Our ability to continue as a
going concern will be dependent upon our ability to draw down the Equity Credit
Line we have established with Cornell Capital Partners. If we incur any problems
in drawing down our credit line, we may experience significant liquidity and
cash flow problems. No assurances can be given that we will be successful in
reaching or maintaining profitable operations. If we are not successful in
reaching and maintaining profitable operations we may not be able to attract
sufficient capital to continue our operations. Our inability to obtain adequate
financing will result in the need to curtail business operations and will likely
result in a lower stock price.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO FINANCE OPERATIONS
We have relied on significant external financing to fund our operations. Such
financing has historically come from a combination of borrowing from third
parties and funds provided by certain officers and directors. We will need to
raise additional capital to fund our anticipated operating expenses and future
expansion. Among other things, external financing may be required to cover our
operating costs. We cannot assure you that financing whether from external
sources or related parties will be available if needed or on favorable terms.
The sale of our common stock to raise capital may cause dilution to our existing
shareholders. Our inability to obtain adequate financing will result in the need
to curtail business operations. Any of these events would be materially harmful
to our business and may result in a lower stock price.
5
WE HAVE BEEN THE SUBJECT OF A GOING CONCERN OPINION FROM OUR INDEPENDENT
AUDITORS, WHICH MEANS THAT WE MAY NOT BE ABLE TO CONTINUE OPERATIONS UNLESS WE
OBTAIN ADDITIONAL FUNDING
Our independent auditors have added in their audit reports for December 31, 2001
and 2000 a going concern statement. Our ability to continue as a going concern
depends on our ability to obtain additional funding. Our inability to obtain
adequate financing will result in the need to curtail business operations and
you could lose your entire investment. Our financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
OUR COMMON STOCK MAY BE AFFECTED BY LIMITED TRADING VOLUME AND MAY FLUCTUATE
SIGNIFICANTLY
Prior to this offering, there has been a limited public market for our common
stock and there can be no assurance that an active trading market for our common
stock will develop. As a result, this could adversely affect our shareholders'
ability to sell our common stock in short time periods, or possibly at all. Our
common stock has experienced, and is likely to experience in the future,
significant price and volume fluctuations which could adversely affect the
market price of our common stock without regard to our operating performance. In
addition, we believe that factors such as quarterly fluctuations in our
financial results and changes in the overall economy or the condition of the
financial markets could cause the price of our common stock to fluctuate
substantially.
OUR COMMON STOCK IS DEEMED TO BE "PENNY STOCK," WHICH MAY MAKE IT
MORE DIFFICULT FOR INVESTORS TO SELL THEIR SHARES DUE TO SUITABILITY
REQUIREMENTS
Our common stock is deemed to be "penny stock" as that term is defined in Rule
3a51-1 promulgated under the Securities Exchange Act of 1934. Penny stocks are
stock:
o With a price of less than $5.00 per share;
o That are not traded on a "recognized" national exchange;
o Whose prices are not quoted on the Nasdaq automated quotation system
(Nasdaq listed stock must still have a price of not less than $5.00
per share); or
o In issuers with net tangible assets less than $2.0 million (if the
issuer has been in continuous operation for at least three years) or
$5.0 million (if in continuous operation for less than three years),
or with average revenues of less than $6.0 million for the last three
years.
Broker/dealers dealing in penny stocks are required to provide potential
investors with a document disclosing the risks of penny stocks. Moreover,
broker/dealers are required to determine whether an investment in a penny stock
is a suitable investment for a prospective investor. These requirements may
reduce the potential market for our common stock by reducing the number of
potential investors. This may make it more difficult for investors in our common
stock to sell shares to third parties or to otherwise dispose of them. This
could cause our stock price to decline.
6
WE COULD FAIL TO ATTRACT OR RETAIN KEY PERSONNEL
Our success largely depends on the efforts and abilities of our key executives
and consultants, including Armand Dauplaise, our President. The loss of the
services of Mr. Dauplaise could materially harm our business because of the cost
and time necessary to recruit and train a replacement. Such a loss would also
divert management attention away from operational issues. We do not presently
maintain a key-man life insurance policy on Mr. Dauplaise.
WE MAY BE UNABLE TO MANAGE GROWTH
Successful implementation of our business strategy requires us to manage our
growth. Growth could place an increasing strain on our management and financial
resources. To manage growth effectively, we will need to:
o Implement changes in certain aspects of our business;
o Enhance our information systems and operations to respond to increased
demand;
o Attract and retain qualified personnel; and o Develop, train and
manage an increasing number of management-level and other employees.
If we fail to manage our growth effectively, our business, financial condition
or operating results could be materially harmed, and our stock price may
decline.
POSSIBLE ISSUANCE OF PREFERRED STOCK
Our Certificate of Incorporation authorizes the issuance of up to 10,000,000
shares of preferred stock, $0.001 par value per share ("Preferred Stock"), with
designations rights, and preferences determined from time to time by our Board
of Directors. Accordingly, our Board of Directors is empowered, without
stockholder approval, to issue Preferred Stock with dividends, liquidation,
conversion, voting, or other rights that could adversely affect the voting power
or other rights of the holders of our common stock. In the event of issuance,
the Preferred Stock could be used, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the company.
WE EXPECT INTENSE COMPETITION IN OUR INDUSTRY
Many of our competitors have significantly greater name recognition and
financial and other resources. We cannot assure you that we will succeed in the
face of strong competition from other neutraceutical companies.
OUR INDUSTRY IS SUBJECT TO GOVERNMENT REGULATION
The manufacturing, processing, formulation, packaging, labeling and advertising
of vitamins and other neutraceutical products are subject to regulation by one
or more federal agencies, including the Food and Drug Administration ("FDA"),
the Federal Trade Commission ("FTC"), the Consumer Product Safety Commission,
the United States Department of Agriculture, the United States Postal Service,
the United States Environmental Protection Agency and the Occupational Safety
and Health Administration. These activities are also regulated by various
agencies of the states and localities, as well as of foreign countries, in which
the Company's products may be sold. We may incur significant costs in complying
with these rules. If we cannot comply, we may be forced to cease operations.
POTENTIAL ACQUISITIONS
Any acquisitions we make could disrupt our business and seriously harm our
financial condition. We intend to consider investments in complementary
companies, products or technologies. While we have no current agreements to do
so, we may buy businesses, products or technologies in the future. In the event
of any future purchases, we could: issue stock that would dilute our current
stockholders' percentage ownership; incur debt; assume liabilities; incur
amortization expenses related to goodwill and other intangible assets; or incur
large and immediate write-offs. Our operation of any acquired business will also
involve numerous risks, including: problems combining the purchased operations,
technologies or products; unanticipated costs; diversion of management's
attention from our core business; adverse effects on existing business
relationships with suppliers and customers; risks associated with entering
markets in which we have limited prior experience; and potential loss of key
employees, particularly those of the purchased organizations.
7
OUR EQUITY CREDIT LINE AGREEMENT COULD HAVE AN ADVERSE AFFECT ON OUR ABILITY TO
MAKE ACQUISITIONS WITH OUR COMMON STOCK.
We cannot predict the actual number of shares of common stock that will be
issued pursuant to the Equity Line of Credit Agreement, in part, because the
purchase price of the shares will fluctuate based on prevailing market
conditions and we have not determined the total amount of advances we intend to
draw. It may be necessary for our shareholders to approve an increase in our
authorized common stock for us to register additional shares of common stock in
order to have sufficient authorized shares available to make acquisitions using
our common stock. As we issue shares of common stock pursuant to the Equity
Credit Line Agreement, we may not have sufficient shares of our common stock
available to successfully attract and consummate future acquisitions.
WE MAY NOT BE ABLE TO ACCESS SUFFICIENT FUNDS UNDER THE EQUITY CREDIT LINE WHEN
NEEDED
We are dependent upon external financing to fund our operations. Our financing
needs are expected to be provided, in large part, by the Equity Credit Line.
However, no assurances can be given that such financing will be available in
sufficient amounts. We are entitled to advances of $500,000 in the aggregate, in
the first 30 calendar days period after the effective date of the Registration
Statement. The amount of each subsequent advance received by us is subject to an
aggregate maximum advance of $500,000 in any 30 day calendar period.
WE DO NOT ANTICIPATE PAYING CASH DIVIDENDS
We have not paid any cash dividends on our capital stock and we anticipate that
our future earnings, if any, will be retained for use in the business, or for
other corporate purposes. It is not anticipated that any cash dividends on the
common stock will be paid in the foreseeable future. See "Dividend Policy" and
"Description of Securities."
8
THERE ARE NO CONCLUSIVE STUDIES REGARDING THE MEDICAL BENEFITS OF NUTRITIONAL
SUPPLEMENTS
Many of the ingredients in our products will be vitamins, minerals, herbs and
other substances for which there is not a long history of human consumption. In
addition, although we believe all of our products to be safe when taken as
directed by us, there is little experience with human consumption of certain of
these product ingredients in concentrated form. Accordingly, no assurance can be
given that our products, even when used as directed, will have the effects
intended or be safe for human consumption. However, because we are highly
dependent upon consumers' perception of the safety and quality of our products
as well as similar products distributed by other companies, we could be
adversely affected in the event any of our products or any similar products
distributed by other companies should prove or be asserted to be harmful to
consumers. In addition, because of our dependence upon consumer perceptions,
adverse publicity associated with illness or other adverse effects resulting
from consumers' failure to consume our products as we suggest or other misuse or
abuse of our products or any similar products distributed by other companies
could have a material adverse effect on the results of our operations and
financial condition.
THE MANUFACTURE AND DISTRIBUTION OF VITAMINS AND OTHER NUTRITIONAL SUPPLEMENTS
COULD RESULT IN PRODUCT LIABILITY CLAIMS
We, like any other retailer, distributor and manufacturer of products that are
designed to be ingested, face an inherent risk of exposure to product liability
claims in the event that the use of our products results in injury. Such claims
may include, among others, that our products contain contaminants or include
inadequate instructions as to use or inadequate warnings concerning side effects
and interactions with other substances. While we intend to obtain product
liability insurance, there can be no assurance that such insurance will continue
to be available at a reasonable cost, or, if available, will be adequate to
cover liabilities. We do not anticipate obtaining contractual indemnification
from parties supplying raw materials or marketing our products. In any event,
any such indemnification if obtained will be limited by our terms and, as a
practical matter, to the creditworthiness of the indemnifying party. In the
event that we do not have adequate insurance or contractual indemnification,
product liabilities relating to defective products could have a material adverse
effect on our operations and financial conditions.
RISKS RELATED TO THIS OFFERING
FUTURE SALES BY OUR STOCKHOLDERS MAY ADVERSELY AFFECT OUR STOCK
PRICE AND OUR ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS
Sales of our common stock in the public market following this offering could
lower the market price of our common stock. Sales may also make it more
difficult for us to sell equity securities or equity-related securities in the
future at a time and price that our management deems acceptable or at all.
9
Of the 13,949,846 shares of common stock outstanding as of August 9, 2002,
2,246,000 are freely tradable without restriction. The remaining 11,703,846
shares of common stock held by existing stockholders are "restricted securities"
and may be resold in the public market only if registered or pursuant to an
exemption from registration. Some of these shares may be resold under Rule 144.
Immediately following the effective date of this prospectus, including the
shares to be issued to Cornell Capital Partners, L.P., 33,767,740 common stock
will be freely tradeable without restriction, unless held by our "affiliates."
Upon completion of this offering, and assuming all shares registered in this
offering are resold in the public market, there will be an additional 31,521,740
shares of common stock outstanding. All of these shares of common stock may be
immediately resold in the public market upon effectiveness of the accompanying
registration statement and the sale to the investor under the terms of the
Equity Line of Credit agreement.
EXISTING SHAREHOLDERS WILL EXPERIENCE SIGNIFICANT DILUTION FROM OUR SALE OF
SHARES UNDER THE EQUITY LINE OF CREDIT
The sale of shares pursuant to the Equity Line of Credit will have a dilutive
impact on our stockholders. As a result, our net income per share could decrease
in future periods, and the market price of our common stock could decline. In
addition, the lower our stock price is the more shares of common stock we will
have to issue under the Equity Line of Credit to draw down the full amount. If
our stock price is lower, then our existing stockholders would experience
greater dilution.
THE SELLING STOCKHOLDERS INTEND TO SELL THEIR SHARES OF COMMON STOCK IN THE
MARKET, WHICH SALES MAY CAUSE OUR STOCK PRICE TO DECLINE
The selling stockholders intend to sell in the public market the shares of
common stock being registered in this offering. That means that up to 31,521,740
shares of common stock, the number of shares being registered in this offering,
may be sold. Such sales may cause our stock price to decline.
THE SALE OF MATERIAL AMOUNTS OF COMMON STOCK UNDER THE ACCOMPANYING REGISTRATION
STATEMENT COULD ENCOURAGE SHORT SALES BY THIRD PARTIES
The significant downward pressure on our stock price caused by the sale of a
significant number of shares under the Equity Line of Credit could cause our
stock price to decline, thus allowing short sellers of our stock an opportunity
to take advantage of any decrease in the value of our stock. Cornell Capital
Partners can cover any short positions only with shares received from us under
the Equity Line of Credit.
10
OUR COMMON STOCK HAS BEEN RELATIVELY THINLY TRADED AND WE CANNOT
PREDICT THE EXTENT TO WHICH A TRADING MARKET WILL DEVELOP
Before this offering, our common stock has traded on the Over-the-Counter
Bulletin Board. Our common stock is thinly traded compared to larger more widely
known companies in our industry. Thinly traded common stock can be more volatile
than common stock trading in an active public market. We cannot predict the
extent to which an active public market for the common stock will develop or be
sustained after this offering.
THE PRICE YOU PAY IN THIS OFFERING WILL FLUCTUATE
The price in this offering will fluctuate based on the prevailing market price
of the common stock on the Over-the-Counter Bulletin Board. Accordingly, the
price you pay in this offering may be higher or lower than the prices paid by
other people participating in this offering.
THE ISSUANCE OF SHARES OF COMMON STOCK UNDER THIS OFFERING COULD
RESULT IN A CHANGE OF CONTROL
We are registering 31,521,740 shares of common stock in this offering. These
shares represent 31.52% of our authorized capital stock and 69.32% of our issued
and outstanding common stock, and we anticipate all such shares will be sold in
this offering. If all or a significant block of these shares are held by one or
more shareholders working together, then such shareholder or shareholders would
have enough shares to exert significant influence on Bio-One in an election of
directors.
WE MAY NOT BE ABLE TO ACCESS SUFFICIENT FUNDS UNDER THE EQUITY LINE
OF CREDIT WHEN NEEDED
We are dependent on external financing to fund our operations. Our president has
loaned us $165,000 to cover our short-term working capital requirements. We
expect that the equity line of credit will meet our financing needs in large
part. However, no assurances can be given that such financing will be available
in sufficient amounts or at all when needed, in part, because the amount of
financing available will fluctuate with the price and volume of our common
stock. As the price and volume decline, then the amount of financing available
under the Equity Line of Credit will decline.
POTENTIAL EFFECT OF ADVERSE PUBLICITY
We believe the growth experienced by the nutritional supplement market is based
in part on national media attention regarding scientific research suggesting
potential health benefits from regular consumption of certain vitamins and other
nutritional products. Such research has been described in major medical
journals, magazines, newspapers and television programs. The scientific research
to date is preliminary.
There can be no assurance that future scientific research or publicity will not
be unfavorable to the nutritional supplement market or any particular product,
or inconsistent with earlier favorable
11
research or publicity. Future reports of research that are perceived as less
favorable or that question such earlier research could have a material adverse
effect on our operations and financial condition. Because of our dependence upon
consumer perceptions, adverse publicity associated with illness or other adverse
effects resulting from the consumption of our products or any similar products
distributed by other companies could have a material adverse effect on our
operations. Such adverse publicity could arise even if the adverse effects
associated with such products resulted from consumers' failure to consume such
products as directed. In addition, we may not be able to counter the effects of
negative publicity concerning the efficacy of our products. Any such occurrence
could have a negative effect on our operations.
OUR TARGETED ACQUISITIONS WILL HAVE TO DEVELOP NEW PRODUCTS IN ORDER
TO KEEP PACE WITH CHANGING CONSUMER DEMANDS
The dietary supplement industry is highly competitive and characterized by
changing consumer preferences and continuous introduction of new products. Our
goal is to expand our portfolio of dietary supplement products through
acquisition of existing companies and introducing new products serving niche
segments of the industry. These products must be introduced in a timely and
regular basis to maintain distributor and consumer interest and appeal to
varying consumer preferences.
We believe that following the acquisition of any marketing company, the
continued success of this entity will depend, in part, on our ability to
anticipate changes in consumer preferences and acquire, manage, develop and
introduce, in a timely manner, new products that adequately address such
changes. There can be no assurance that we will be successful in acquiring,
developing, introducing and marketing new products on a timely and regular
basis. If we are unable to develop and introduce new products or if our new
products are not successful, our sales may be adversely affected as customers
seek competitive products. In addition, our introduction or our announcement of
new products could result in a reduction in sales of our existing products,
requiring us to carefully manage product introductions in order to minimize
disruption in sales of our existing products. There can be no assurance that our
introduction of new product offerings will not cause distributors and consumers
to reduce purchases or consumption of our existing products. Such reduction in
purchases or consumption could have a material adverse effect on our business,
operating results and financial condition.
FORWARD-LOOKING STATEMENTS
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements regarding
management's plans and objectives for future operations including plans and
objectives relating to our planned marketing efforts and future economic
performance. The forward-looking statements and associated risks set forth in
this prospectus include or relate to, among other things, (a) our projected
sales and profitability, (b) our growth strategies, (c) anticipated trends in
our industry, (d) our ability to obtain
12
and retain sufficient capital for future operations, (e) our ability to achieve
adequate intellectual property protection for our future products and (f) our
anticipated needs for working capital. These statements may be found under
"Management's Discussion and Analysis or Plan of Operations" and "Business," as
well as in this prospectus generally. Actual events or results may differ
materially from those discussed in forward-looking statements as a result of
various factors, including, without limitation, the risks outlined under "Risk
Factors" and matters described in this prospectus generally. In light of these
risks and uncertainties, there can be no assurance that the forward-looking
statements contained in this prospectus will in fact occur.
The forward-looking statements herein are based on current expectations that
involve a number of risks and uncertainties. Such forward-looking statements are
based on assumptions that we will be able to make acquisitions on a timely
basis, that we will retain the acquiree's customers, that there will be no
material adverse competitive or technological change in conditions in our
business, that demand for our products will significantly increase, that our
President will remain employed as such, that our forecasts accurately anticipate
market demand, and that there will be no material adverse change in our
operations or business or in governmental regulations affecting us or our
manufacturers and/or suppliers. The foregoing assumptions are based on judgments
with respect to, among other things, future economic, competitive and market
conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control.
Accordingly, although we believe that the assumptions underlying the
forward-looking statements are reasonable, any such assumption could prove to be
inaccurate and therefore there can be no assurance that the results contemplated
in forward-looking statements will be realized. In addition, as disclosed
elsewhere in the "Risk Factors" section of this prospectus, there are a number
of other risks inherent in our business and operations which could cause our
operating results to vary markedly and adversely from prior results or the
results contemplated by the forward-looking statements. Growth in absolute and
relative amounts of cost of goods sold and selling, general and administrative
expenses or the occurrence of extraordinary events could cause actual results to
vary materially from the results contemplated by the forward-looking statements.
Management decisions, including budgeting, are subjective in many respects and
periodic revisions must be made to reflect actual conditions and business
developments, the impact of which may cause us to alter marketing, capital
investment and other expenditures, which may also materially adversely affect
our results of operations. In light of significant uncertainties inherent in the
forward-looking information included in this prospectus, the inclusion of such
information should not be regarded as a representation by us or any other person
that our objectives or plans will be achieved.
Some of the information in this prospectus contains forward-looking statements
that involve substantial risks and uncertainties. Any statement in this
prospectus and in the documents incorporated by reference into this prospectus
that is not a statement of an historical fact constitutes a "forward-looking
statement". Further, when we use the words "may", "expect", "anticipate",
"plan", "believe", "seek", "estimate", "internal", and similar words, we intend
to identify statements and expressions that may be forward- looking statements.
We believe it is important to communicate certain of our expectations to our
investors. Forward-looking statements are not guarantees of future performance.
They involve risks, uncertainties and assumptions that could cause our future
results to differ materially from those expressed in any forward-looking
statements. Many factors are beyond our ability to control or predict. You are
accordingly cautioned not to place undue reliance on such forward-looking
statements. We have no obligation or intent to update publicly any forward-
looking statements whether in response to new information, future events or
otherwise. Important factors that may cause our actual results to differ from
such forward-looking statements include, but are not limited to, the risk
factors discussed below. Before you invest in our common stock, you should be
aware that the occurrence of any of the events described under "Risk Factors"
below or elsewhere in this prospectus could have a material adverse effect on
our business, financial condition and results of operation. In such a case, the
trading price of our common stock could decline and you could lose all or part
of your investment.
13
SELLING STOCKHOLDERS
The following table presents information regarding the selling stockholders.
Pursuant to the Equity Line of Credit, Cornell Capital Partners, L.P. has agreed
to purchase up to $10.0 million of common stock from us. None of the selling
stockholders have held a position or office, or had any other material
relationship, with Bio-One , except as follows:
o Cornell Capital Partners, L.P. is the investor under the Equity
Line of Credit. All investment decisions of Cornell Capital
Partners are made by its general partner, Yorkville Advisors,
LLC. Mark Angelo, the managing member of Yorkville Advisors makes
the investment decisions on behalf of Yorkville Advisors. Neither
Cornell Capital Partners, L.P. nor its agents has a short
position or has had a short position at any time since the Equity
Line of Credit was executed on July 25, 2002.
o Westrock Advisors, Inc. is a registered broker/dealer that has
been retained by us. It has provided advice to us in connection
with the Equity Line of Credit. For its services, Westrock
Advisors, Inc. received a fee of 43,479 shares of Bio-One's
common stock, which is equal to $10,000 at a closing bid of $0.23
on July 25, 2002. Greg Martino, President of Westrock Advisors,
Inc., makes the investment decisions on behalf of Westrock
Advisors.
Percentage of
Outstanding
Shares Shares Shares to be Percentage
Beneficially Beneficially Acquired Ownership
Selling Owned Before Owned Before Under the After
Stockholder Offering (1) Offering (2) Line of Credit Offering
- --------------------------------------------------------------------------------
Cornell Capital
Partners, L.P. 0 0.0% 30,000,000 67.23%
Westrock Advisors, 43,479 * 0 *
Inc.
Howard Salamon 147,826 1.05% 0 *
Mark A. Angelo 266,087 1.91% 0 *
Robert Farrell 266,087 1.91% 0 *
Joseph Donahue 266,087 1.91% 0 *
Matthew Beckman 266,087 1.91% 0 *
Gerald Eicke 133,043 * 0 *
George Kanakis 133,044 * 0 *
* Less than 1%.
(1) Percentage of outstanding shares is based on 13,949,846 shares of common
stock outstanding as of August 9, 2002, together with the shares of common stock
that may be purchased by Cornell Capital Partners, L.P. from us under the Equity
Line of Credit. The shares to be issued to Cornell Capital Partners, L.P. under
the Equity Line of Credit are treated as outstanding for the purpose of
computing Cornell Capital Partners, L.P.'s percentage ownership.
14
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be offered and
sold from time to time by certain selling stockholders. There will be no
proceeds to us from the sale of shares of common stock in this offering.
However, we will receive the proceeds from the sale of shares of common stock to
Cornell Capital Partners, L.P. under the Equity Line of Credit, which we intend
to use for general working capital purposes, including, among other things,
funding anticipated future acquisitions. The purchase price of the shares
purchased under the Equity Line of Credit will be equal to 100% of the lowest
closing bid price of our common stock on the Over-the-Counter Bulletin Board for
the 5 consecutive trading days immediately following the advance date (as
defined in the Equity Line of Credit Agreement).
If we are able to draw down the full amount of the equity line of credit, we
will receive net proceeds of $ 9,500,000.
DETERMINATION OF OFFERING PRICE
The price at which the shares may actually be sold will be determined by the
market price of the common stock as of the date of sale (as defined in the
Equity Line of Credit Agreement).
DIVIDEND POLICY
It is our present policy not to pay cash dividends and to retain future earnings
for use in the operations of the business and to fund future growth. Any payment
of cash dividends in the future will be dependent upon the amount of funds
legally available, our earnings, financial condition, capital requirements and
other factors that the Board of Directors may think are relevant. We do not
contemplate or anticipate paying any dividends on the common stock in the
foreseeable future.
15
DILUTION
The net tangible book value of Bio-One as of June 30, 2002 was ($371,447) or
($0.03) per share of common stock. Net tangible book value is determined by
dividing the tangible book value of Bio- One (total tangible assets less total
liabilities) by the number of outstanding shares of our common stock. Since this
offering is being made solely by the selling stockholders and none of the
proceeds will be paid to Bio-One , our net tangible book value will be
unaffected by this offering. Our net tangible book value, however, will be
impacted by the common stock to be issued under the Equity Line of Credit. The
amount of dilution will depend on the offering price and number of shares to be
issued under the Equity Line of Credit. The following example shows the dilution
to new investors at an offering price of $0.35 per share.
If we assume that Bio-One had issued 30 million shares of common stock under the
Equity Line of Credit at an assumed offering price of $0.35 per share, less
commitment fees of $340,000 and $10,000 of other offering expenses, our net
tangible book value as of June 30, 2002 would have been $10,128,553 or $0.23 per
share. This represents an immediate increase in net tangible book value to
existing shareholders of $0.26 per share and an immediate dilution to new
shareholders of $0.26 per share.
Assumed public offering price per share $ 0.35
Net tangible book value per share before this offering $ (0.03)
Increase attributable to new investors $ 0.26
Net tangible book value per share after this offering $ 0.23
EQUITY LINE OF CREDIT
Pursuant to the Equity Line of Credit, we may, at our discretion, periodically
issue and sell up to 30,000,000 shares of common stock for a total purchase
price of $10 million. If we request an advance under the Equity Line of Credit,
Cornell Capital Partners, L.P. will purchase shares of common stock of our
Company for 100% of the lowest closing bid price on the Over-the-Counter
Bulletin Board or other principal market on which our common stock is traded for
the 5 days immediately following the advance notice date. Cornell Capital
Partners, L.P. intends to sell any shares purchased under the Equity Line of
Credit at the market price. This prospectus primarily relates to the shares of
common stock to be issued to Cornell Capital Partners, L.P. under the Equity
Line of Credit. Cornell Capital Partners, L.P. cannot transfer its interest in
the Equity Line of Credit to any other person.
16
The effectiveness of the sale of the shares under the Equity Line of Credit is
conditioned upon us registering the shares of common stock with the Securities
and Exchange Commission.
ADVANCES. Pursuant to the Equity Line of Credit, we may periodically sell shares
of common stock to Cornell Capital Partners, L.P. to raise capital to fund our
working capital needs. The periodic sale of shares is known as an advance.
Cornell Capital will retain 5% of each Equity Credit Line Advance.
MECHANICS. We may, at our discretion, request advances from Cornell Capital
Partners, L.P. by written notice, specifying the amount requested up to the
maximum advance amount. A closing will be held 7 trading days after such written
notice at which time we will deliver shares of common stock and Cornell Capital
Partners, L.P. will pay the advance amount. We have the ability to determine
when and if we desire to draw an advance.
COMMITMENT PERIOD. We may request an advance at any time during the commitment
period. The commitment period begins on the date the Securities and Exchange
Commission first declares the accompanying registration statement effective. The
commitment period expires on the earliest to occur of (i) the date on which
Cornell Capital Partners, L.P. has made advances totaling $10.0 million or (ii)
two years after the effective date of the accompanying registration statement.
MAXIMUM ADVANCE AMOUNT. We may not request advances in excess of a total of
$10.0 million. The maximum amount of each advance is equal to $175,000.00 per
Advance Notice. In addition, in no event shall the number of shares issuable to
the Investor cause the investor to own in excess of 9.9% of the then outstanding
shares of common stock of the Company.
NUMBER OF SHARES TO BE ISSUED. We cannot predict the actual number of shares of
common stock that will be issued pursuant to the Equity Line of Credit, in part,
because the purchase price of the shares will fluctuate based on prevailing
market conditions and we have not determined the total amount of advances we
intend to draw. Nonetheless, we can estimate the number of shares of common
stock that will be issued using certain assumptions. Assuming we drew down the
entire $10.0 million available under the Equity Line of Credit in a single
advance (which is not permitted under the terms of the Equity Line of Credit)
and the purchase price was equal to $1.00 per share, then we would issue 30
million shares of common stock to Cornell Capital Partners, L.P. These shares
would represent 66% of our outstanding capital stock upon issuance. You should
be aware that there is an inverse relationship between our stock price and the
number of shares to be issued under the Equity Line of Credit. That is, as our
17
stock price declines, we would be required to issue a greater number of shares
under the Equity Line of Credit for a given advance. This inverse relationship
is demonstrated by the following table, which shows the number of shares of our
common stock to be issued to Cornell Capital Partners, LP, under the Equity Line
of Credit, at various prices.
Purchase Price $0.25 $0.50 $1.00
Number of Shares required
to draw full draw down
equity line of credit (1) 40,000,000 20,000,000 10,000,000
Total Outstanding(2): 53,949,846 33,949,846 23,949,846
Percent Outstanding(3): 74.14% 58.91% 41.75%
(1) Represents the number of shares of common stock to be issued to Cornell
Capital Partner, LP under each scenario as a percentage of the total amount
outstanding under such scenario.
(2) Represents the total number of shares of common stock outstanding after the
issuance of the shares to Cornell Capital Partner, LP.
(3) Represents the shares of common stock to be issued as a percentage of the
total number shares outstanding.
In addition to showing the inverse relationship, the above table also shows that
the issuance of shares under the Equity Line of Credit may result in a change of
control. If all or a significant block of these shares are held by one or more
shareholders working together, then such shareholder or shareholders would have
enough shares to assume control of Bio-One by electing its or their own
directors.
In addition, in connection with the Equity Line of Credit, we issued 43,479
shares of our common stock to Westrock Advisors, Inc. as a placement agent fee.
REGISTRATION RIGHTS. We granted to Cornell Capital Partners, L.P. certain
registration rights. The registration statement accompanying this prospectus
will register such shares upon effectiveness. The cost of this registration will
be borne by us.
NET PROCEEDS. We cannot predict the total amount of proceeds to be raised in
this transaction, in part, because we have not determined the total amount of
the advances we intend to draw. However, we expect to incur expenses of
approximately $30,000 consisting primarily of professional fees incurred in
connection with registering 31,521,740 shares in this offering. In addition, we
are obligated to pay an underwriting discount to Cornell Capital equal to 5% of
each advance.
USE OF PROCEEDS. We intend to use the net proceeds received under the Equity
Line of Credit for general corporate purposes. Please see "Use of Proceeds."
18
PLAN OF DISTRIBUTION
The selling stockholders have advised us that the sale or distribution of
Bio-One 's common stock owned by the selling stockholders may be effected
directly to purchasers by the selling stockholders or by pledgees, donees,
transferees or other successors in interest, as principals or through one or
more underwriters, brokers, dealers or agents from time to time in one or more
transactions (which may involve crosses or block transactions) (i) on the
over-the-counter market or in any other market on which the price of Bio-One 's
shares of common stock are quoted or (ii) in transactions otherwise than on the
over-the-counter market or in any other market on which the price of Bio-One 's
shares of common stock are quoted. Any of such transactions may be effected at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at varying prices determined at the time of sale or at
negotiated or fixed prices, in each case as determined by the selling
stockholders or by agreement between the selling stockholders and underwriters,
brokers, dealers or agents, or purchasers. If the selling stockholders effect
such transactions by selling their shares of Bio-One 's common stock to or
through underwriters, brokers, dealers or agents, such underwriters, brokers,
dealers or agents may receive compensation in the form of discounts, concessions
or commissions from the selling stockholders or commissions from purchasers of
common stock for whom they may act as agent (which discounts, concessions or
commissions as to particular underwriters, brokers, dealers or agents may be in
excess of those customary in the types of transactions involved). The selling
stockholders and any brokers, dealers or agents that participate in the
distribution of the common stock may be deemed to be underwriters, and any
profit on the sale of common stock by them and any discounts, concessions or
commissions received by any such underwriters, brokers, dealers or agents may be
deemed to be underwriting discounts and commissions under the Securities Act.
Cornell Capital Partners, L.P. is an "underwriter" within the meaning of the
Securities Act of 1933 in connection with the sale of common stock under the
Equity Line of Credit agreement. Cornell Capital Partners, L.P. will pay our
Company 100% of the lowest closing bid price of Bio-One 's common stock on the
Over-the-Counter Bulletin Board or other principal trading market on which our
common stock is traded for the 6 days immediately following the advance date. On
each Advance Date, we shall pay to Cornell Capital Partners, L.P., 5% of each
Advance as an underwriting discount. In addition, we have issued to Cornell
Capital Partners, L.P. a total of 1,478,261 shares of our common stock
representing a commitment fee of $340,000.
Under the securities laws of certain states, the shares of common stock may be
sold in such states only through registered or licensed brokers or dealers. We
will inform the selling stockholders that any underwriters, brokers, dealers or
agents effecting transactions on behalf of the selling stockholders must be
registered to sell securities in all fifty states. In addition, in certain
states the shares of common stock may not be sold unless the shares have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with.
We will pay all the expenses incident to the registration, offering and sale of
the shares of common stock to the public hereunder other than commissions, fees
and discounts of underwriters, brokers, dealers and agents. We have agreed to
indemnify the selling stockholders and their controlling persons against certain
liabilities, including liabilities under the Securities Act. We estimate that
the expenses of the offering to be borne by us will be approximately $30,000, a
commitment fee of $340,0000 payable in 1,478,261 shares of our common stock, a
placement fee of 43,479 shares of our common stock and and a 5% underwriters
discount of the gross proceeds received under the Equity Line of Credit. We will
not receive any proceeds from the sale of any of the shares of common stock by
the selling stockholders. We will, however, receive proceeds from the sale of
common stock under the Equity Line of Credit.
The selling stockholders should be aware that the anti-manipulation provisions
of Regulation M under the Exchange Act will apply to purchases and sales of
shares of common stock by the selling stockholders, and that there are
restrictions on market-making activities by persons engaged in the distribution
of the shares. Under Registration M, the selling shareholders or their agents
may not bid for, purchase, or attempt to induce any person to bid for or
purchase, shares of common stock of Bio- One while such selling shareholders are
distributing shares covered by this prospectus. Accordingly, except as noted
below, the selling shareholders are not permitted to cover short sales by
purchasing shares while the distribution is taking place. Cornell Capital
Partners can cover any short positions only with shares received from Bio-One
under the Equity Line of Credit. We will advise the selling stockholders that if
a particular offer of common stock is to be made on terms constituting a
material change from the information set forth above with respect to the Plan of
Distribution, then to the extent required, a post-effective amendment to the
accompanying registration statement must be filed with the Securities and
Exchange Commission.
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS OF BIO-ONE AND THE NOTES THERETO APPEARING ELSEWHERE IN
THIS FILING. STATEMENTS IN THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION AND ELSEWHERE IN THIS PROSPECTUS THAT ARE NOT STATEMENTS OF HISTORICAL
OR CURRENT FACT CONSTITUTE "FORWARD-LOOKING STATEMENTS."
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The key to our growth and future viability as an operating company will be to
effectively implement our acquisition strategy. We must be able to selectively
identify from the thousands of companies manufacturing, marketing and
distributing vitamins and other nutritional supplements those which can meet the
parameters we establish for sales and earnings, with particular emphasis on
EBITDA. We will not ignore those companies with poor EBITDA if we identify a
reason for their poor showing. Earnings may be poor for a number of reasons
including poor management, poor marketing, the inability to establish a
successful sales team or establish a cost effective distribution network. By
vertically integrating the manufacturing, marketing and distribution chain,
these companies will be able to take advantage of economies of scale not
otherwise available.
Our principle goal will be to acquire and operate at least one high-level
manufacturing business and several marketing companies that fit the strict
criteria we established. Management believes that the nutritional supplement
market is ripe for selective consolidation. When market valuations support it,
consolidation by aggregation is the most profitable approach. These conditions
apply today in the consumer health care industry and specifically within the
nutritional supplements segment.
When possible, we intend to use our common stock to finance any acquisition and
retain cash for working capital purposes. However, it is likely that a target
company will require cash compensation as part of the sale. As such, our
acquisition strategy will to a certain extent be dependent on our ability to
secure the $10 million in financing from Cornell Capital Partners, LP. If we are
not able to secure the entire $10 million in financing, it is highly unlikely
that we will be able to implement our acquisition strategy
RESULTS OF OPERATIONS
Three months ended June 30, 2002 compared to the three months ended June 30,
2001 and for the six months ended June 30, 2002 as compared to June 30, 2001.
Revenues for the three months ended June 30, 2002 were $1,500 as compared to
$23,077 for the three months ended June 30, 2001 and $22,220 for the six months
period ended June 30, 2002 as compared to $35,867. Our most significant expense
are those costs which we have categorized as selling, general and administrative
expenses. These expenses totaled $142,771 for the three months ended June 30,
2002 as compared to $112,163 during the three months ended June 30, 2001 and
$305,509 and $212,496 for the six month period as of June 30, 2002 as compared
to June 30, 2001.
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We incurred an operating loss for the three months ended June 30, 2002 of
$141,705 as compared to a loss of $102,659. Operating losses for the six months
ended June 30, 2002 were $292,632 as compared to operating losses of $197,086.
Our dramatic drop in revenues was due primarily to our decision to concentrate
on implementing the business strategy which involves the acquisition of
companies engaged in the nutritional supplement industry.
Net income for the three months ended June 30, 2002 was $4,701 as compared to a
loss of $104,719 during a similar period in the prior year and a loss of
$292,632 for the six months ended June 30, 2002 of $147,386 as compared to a
loss of $202,915 for the six months ended June 30, 2001. During the three months
ended June 30, 2002 we realized an extraordinary gain of $146,936 which resulted
from the settlement of a dispute with our prior director, Kevin Lockhart.
Basic and diluted earnings per share were $-0- and ($.01) for the three months
ended June 30, 2002 and 2001 and ($.01) and ($.02) for th six months ended June
30, 2002 and 2001.
FINANCIAL RESOURCES AND LIQUIDITY
June 30, 2002 as compared to December 31, 2001
We had cash and other current assets totaling $353 as of June 30, 2002 as
compared to $50,928. We have no accounts receivable and no inventory as compared
to $1,672 and $15,153. We have approximately $6,600 in property and equipment
and $2,150 in deposits. Total assets were $9,107 as compared to $70,870.
Our accounts payable total approximately $380,000 consisting of accounts payable
of $129,103, accrued expenses of $161,949 and current installments of notes
payable of $89,502. This compares to approximately $293,000 in total current
liabilities as of December 31, 2001 and accounts payable of $16,037, accrued
expenses of $202,642 and $74,502 in current installments of notes payable.
We have an accumulated deficit as of June 30, 2002 of $371,447 as compared to
$222,311 as of December 31, 2001.
GOING CONCERN OPINION
We have insufficient assets to continue our operations. As a result of our
recent losses, negative cash flows from operations, and accumulated deficits at
June 30, 2002, there is doubt about the Company's ability to continue as a going
concern unless we secure the $10 million in long term financing through Cornell
Capital, we will not be able to implement our acquisition strategy. In the
interim, our president has loaned the Company $15,000 and arranged to loan the
Company an additional personal loan of $150,000. Mr. Dauplaise will loan these
funds to the company pursuant to the same terms and conditions so that we will
have working capital to move forward.
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DESCRIPTION OF BUSINESS
OUR BUSINESS
We are seeking to become a leading manufacturer and marketer of brand name
nutritional supplements sold through multiple distribution pipelines. This
strategy will be dependent upon our successfully acquiring manufacturing,
marketing and distribution companies currently engaged in various aspects of
this industry.
THE NUTRITIONAL SUPPLEMENT INDUSTRY
Based on estimates in recent market reports, management believes that the U.S.
retail market for vitamins, minerals and other supplements, including sports
nutrition products and nutritionally enhanced foods and diet products, was
approximately $50 billion in 2000. Of this total, supplement sales (including
vitamin, herbs and minerals ("VMS Products")) accounted for approximately $17
billion. The VMS Products category grew significantly during the 1990's due in
part to widespread publicity surrounding the purported benefits of herbs such as
echinacea, garlic, ginseng, gingko, saw palmetto and St. Johns's Wort.
As the "baby boomer" population ages and life expectancies and discretionary
income increases, more emphasis is being placed on the quality of a person's
health and wellness. People want to live well as they live longer. The Consumer
Health Care Products Association ("CHPA") presented evidence of the strength of
the Self-Care Movement in a recent survey. Among the respondents:
o 73% would rather treat themselves at home then see a doctor.
o 96% say they are generally confident about health care decisions they
make for themselves.
Readers will be very familiar with the statistics on the graying of America and
the enormous impact of the aging baby boomers. This will have a disproportionate
effect on health care expenditure and even more so on nutritional supplement
sales, because of the popularity of those products with older people. It is
estimated that the population of those 65 years and older will double to nearly
25% of the U.S. population by the year 2030. Up to 85% of elderly people have
diseases that could be alleviated with nutritional interventions such as changes
in dietary patterns or supplement use. Nutritional supplement use is prevalent
among the elderly, ranging from 30% to more than 70%, depending on the
population studied and the frequency of supplement use. It is well documented
that elders who take nutritional supplements have higher intakes of vitamins and
minerals and are more likely to meet the recommended dietary allowance for many
vitamins and minerals. A national survey just published by the National
Nutritional Foods Association revealed that 65% of adults aged 50 or older said
they consider nutritional supplements to be essential for people their age.
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In another study, 27% of household expenditures on Vitamins, Minerals and
Supplements ("VMS") were by people aged over 60. We are therefore confident that
over the long-term nutritional supplement sales will grow at over 8% per year,
thus generating more than $1.3 billion in new retail sales each year.
A related trend is the growth in use of Complementary and Alternative Medicine
Services ("CAM"). A recent survey showed that 42% of Americans now routinely use
CAM therapies. 80% of spending on CAM services is out-of-pocket,
non-reimbursable dollars and consumers make almost twice as many visits to CAM
practitioners as they do to primary care practitioners. A powerful recent trend
has been the establishment of so-called Integrative Medicine practices, in which
practitioners use both traditional and alternative methods. A central feature of
CAM and Integrative Medicine is a search for alternatives to drug therapy and in
many cases this leads practitioners to recommending and in some cases selling
nutritional supplements. We believe this trend, which is driven by consumer
demand will further reinforce the growth in sales of consumer health products
such as nutritional supplements.
Not all product categories within nutritional supplements are of equal interest.
While over 100 million Americans report taking a supplement regularly and up to
170 million say they have taken a supplement at some time in the last year, many
are simply taking a multivitamin or a simple letter vitamin. While vitamin sales
should not be overlooked the real growth in the future is likely to be in
products developed to address a particular health condition or to enhance
performance. In 2000, when vitamin sales grew at only 1%, specialty supplements
and sports nutrition products grew at 12% and 10% respectively. Bio-One is
particularly focused upon specialty supplements, which require superior
scientific research and product development expenditure, but which also command
the industry's most attractive margins.
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Vitamins and other nutritional supplements are sold primarily through six
channels of distribution: health food stores, drug stores, supermarkets and
other grocery stores, discount stores, mail order and direct sales
organizations. Mass market retailers (drug stores, grocery stores and discount
stores) account for approximately 40% of sales while health food stores, mail
order, and direct selling account for approximately 60% of sales.
The domestic nutritional supplement industry is highly fragmented with a number
of small competitors involved in manufacturing and marketing vitamins and other
nutritional supplement products to health food retailers and distributors. Most
of these companies are relatively small businesses operating on a local or
regional basis. If we acquire a manufacturing facility and several of these
small local or regional firms, we will then have the foundation to aggressively
move forward with our business strategy. The Company believes that it is
strategically positioned to participate in the consolidation of this market. The
Company's strategy is to increase sales and profits by acquiring companies which
will enable us on a combined basis to become a recognized name in the ever
growing vitamin and nutritional supplement field. We will meet these objectives
by targeting companies which management believes are undervalued. We will look
to acquire a manufacturing facility which will not only produce our vitamins and
supplements but will manufacture product and increase our revenues by offering
services to third party distributors. Once we have acquired the manufacturing
facility, we will focus on the distributors who market nutritional supplements.
Future acquisitions could be financed by internally generated funds,
institutional financing, public or private placement of our debt or equity
securities or a combination of these. There can be no assurance that we will be
able to make acquisitions on favorable terms or provide adequate financing.
THE NUTRITIONAL SUPPLEMENT MARKET
With an aging baby boom population striving to retain their health and vitality,
nutritional supplements and vitamins are in growing demand.
Nutritional supplements are natural, nutritional, biologically active materials
formulated to provide specific health benefits to humans. Nutraceuticals are
biologically active materials, derived from plant, microbial or animal sources,
which are formulated to provide specific health and productivity benefits
including, but not limited to, functional foods, fermented foods,
phytochemicals, microbial feed additives, probiotics, herbal products, vitamins
and health supplements.
PRODUCT RISKS
Although many of the ingredients in the products which we seek to manufacture
and distribute are vitamins, minerals, herbs and other substances which have a
long history of human consumption, there can be no assurance that consumers will
not have an adverse reaction to any of these products.
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We have not conducted our own research of our products, their effects on people
as compared with the desired results, nor any possible side effects that use of
our products may cause. If one of our products or a product which will be
manufactured is found to have adverse side effects, it could seriously impact
our business. We believe that we can limit the potential impact of a product
liability suit by diversifying our product line. We also intend to carry product
liability insurance. However, if we were to be found liable in a product
liability suit, the outcome would have a serious adverse affect on our
operations.
PRINCIPAL PRODUCTS AND SERVICES
We do not currently market any nutritional supplements.
MANUFACTURING
We do not currently manufacture any products. While we believe the acquisition
of a manufacturing facility will be key to our overall business strategy, we may
acquire marketing and distribution companies before we are able to fully
implement our business strategy. Until such time as we can manufacture our own
products, we will continue to use third party manufacturers.
The principal markets in which we compete are competitive and fragmented, with
competitors in both the private label market and health supplements market. The
term "private label market" describes product distributors who have outsourced
the manufacturing of their product. Over ninety percent (90%) of all nutritional
supplements companies have someone else manufacture their products and place
their "private label" on the products. We do not believe that this the most
efficient way to operate.
SOURCE OF RAW MATERIALS
Currently there are in excess of two hundred (200) primary suppliers of raw
materials within the U.S. There are well over one hundred (100) manufacturers in
the U.S. that could manufacture our products.
MARKETING
No current marketing, sales or distribution system is currently in place. During
the last quarter , Mr. Armand Dauplaise's primary effort has been devoted to
negotiating with investment banking sources for the Company and identifying
potential acquisition candidates.
The foregoing discussion is predicated upon us generating significant revenues
and raising additional capital to fully implement our consolidation strategy. We
plan to develop a sales and marketing/customer service department dedicated to
selling our services and proprietary products and technologies to branded
companies in the health supplement industry.
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The primary markets for our services and products are in the preventive and
alternative healthcare fields. Preventive and alternative healthcare programs
and systems establish very specific requirements in helping improve and maintain
citizenry health. We believe that the market is global and growing rapidly.
As nutritional supplements use combined with preventive and alternative
healthcare become more readily accepted, the Company believes physicians and
other healthcare providers will be targeted for marketing purposes.
EFFECT OF UNFAVORABLE PUBLICITY
We believe that the nutritional supplement market is affected by national media
attention regarding the consumption of nutritional supplements. There can be no
assurance that future scientific research or publicity will be favorable to the
nutritional supplement market of any particular product, or consistent with
earlier research or publicity. Future reports or research that are perceived as
less favorable or that question such earlier research could have a material
adverse effect on us. Because of our dependence upon consumer perceptions,
adverse publicity associated with illness or other adverse effects resulting
from the consumption of our products or any similar products distributed by
other companies could have a material adverse impact on the Company. Such
adverse publicity could arise even if the adverse effects associated with such
products resulted from failure to consume such products as directed. In
addition, the Company may not be able to counter the effects of negative
publicity concerning the efficacy of its products.
DEPENDENCE ON NEW PRODUCTS
Our ability to grow will not only be dependent upon the success of our
acquisition program but our ability to introduce new and innovative products
into such markets. We will attempt to introduce additional products in our
existing markets. The success of new products is subject to a number of
conditions, including developing products that will appeal to customers and
comply with existing regulations at the time of introduction. There can be no
assurance that our efforts to develop innovative new products will be
successful, that customers will accept new products, or that we will obtain
regulatory approvals of such new products, if required. In addition, no
assurance can be given that new products currently experiencing strong
popularity and rapid growth will maintain their sales over time.
COMPETITION
Competition in our principal markets and the private label market is intense and
fragmented. Increased competition could have a material adverse effect on us, as
our competitors may have far greater resources available to them and possess
superior manufacturing, distribution and marketing capabilities.
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Nutritional and dietary supplement products involve highly competitive markets.
We are in the process of developing our marketing strategies and product lines
and expect that both will involve an ever-changing and evolving process.
Although we will attempt to competitively price our products, provide superior
quality products, and achieve success through attentive and efficient customer
service and effective marketability strategies, we are limited by a number of
factors, including the developmental character of our company and the
unpredictability and uncertainty of our future revenues. In addition, we are
limited by the competitive nature of the nutritional supplement industry in
which more established companies may offer any combination of the following:
superior service, more competitive pricing, superior product quality and
availability, a variety of marketing strategies and distribution networks and
profitability achieved through sales volume and narrow profit margins. There are
many well-established competitors with substantially greater financial revenues,
as well as, significant new market entrants. Many of these competitors have been
in existence for substantially longer periods of time than we have and may be
better established in the market where we want to operate. Further, they may
have sufficient revenue streams to engage in extensive advertising and
promotional campaigns far in excess of our marketing capabilities. In addition,
many of the competitors in this field are privately held, leading to
lack of available data.
GNC is the industry leader with $1.6 billion in annual sales. Less than twenty
(20) companies are realizing annual revenues in excess of $100 million
including: Leiner Health Products, American Home Products, Rexall Sundown,
Pharmavite, NBTY and TwinLab Corporation.
The Nutrition Business Journal reported that there are nearly 5,000 privately
held companies with under $25 million in annual sales in the retail and
manufacturing segments. Well over 2,000 companies are considered in the "mom &
pop" category, with most being "first generation." Amway's Nutrilite division is
the world's largest manufacturer of branded vitamins and minerals in tablet or
capsule form, according to the company. Over 90% of all supplement-marketing
companies outsource their manufacturing.
SOURCES AND AVAILABILITY OF RAW MATERIALS AND PRINCIPAL SUPPLIERS
We will obtain the raw materials for the manufacture of our products from other
sources. We generally will not have contracts with any entities or persons
committing such suppliers to provide the materials required for the production
of its products. There can be no assurance that suppliers will provide us with
raw materials needed in the quantities requested or at a price we are willing to
pay. Because we do not control the actual production of these raw materials, it
is also subject to delays caused by interruption in production of materials
based on conditions not wholly within our control. Our inability to obtain
adequate supplies of raw materials for our products at favorable prices, or at
all, as a result of any of the foregoing factors or otherwise, could have a
material adverse effect on the Company. However, raw materials include all
natural herbs and minerals and are plentiful worldwide.
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TRADEMARKS
PROPRIETARY PROTECTION
Our business prospects will depend largely upon our ability to capitalize on
favorable consumer recognition of our trade names. We do not currently hold any
trademarks. However, as we pursue our consolidation strategy, we intend to rely
on trademarks obtained from any of our acquired companies or promote the use of
the Bio-One name. Even if we are successful in obtaining trademark, there can be
no assurance that our trademarks will not violate the proprietary rights of
others or that our trademarks would be upheld and not prevented from use, if
challenged, any of which could have an adverse effect on us.
We will also rely on trade secrets and proprietary know-how, and employ various
methods to protect our concepts. However, such methods may not afford complete
protection, and there can be no assurance that others will not independently
develop similar know-how or obtain access to our know-how and concepts.
Unlike pharmaceutical products that rely on specific combinations of drugs and
chemicals, patents cannot protect herbal products. However, management believes
that simply knowing the ingredients of an herbal product does not mean that
other manufacturers can duplicate the product. Failure to adequately protect our
intellectual property rights could harm brand-name recognition, devalue our
proprietary content and adversely affect our ability to compete effectively in
the marketplace. Further, defending the intellectual property rights could
result in the expenditure of significant financial and managerial resources,
which could materially affect the operations of the business. While we believe
that our steps are adequate to secure our intellectual property rights, there
can be no assurance that a third party will not misappropriate any of our
proprietary information.
GOVERNMENTAL REGULATION
Many of our products are either G.R.A.S. (Generally Regarded As Safe) listed by
the Food and Drug Administration ("FDA") or do not currently require extended
regulatory approval. Recent legislation has resulted in a regulatory environment
which sets what we believe to be reasonable limitations and guidelines on health
claims and labeling for natural products. We believe that current and reasonably
foreseeable governmental regulation will have minimal impact on our business.
The Federal Trade Commission ("FTC") oversees claims made by us and other
companies in the nutritional supplement industry. The FTC under the Federal
Trade Commission Act prohibits the use of unfair or deceptive trade practices,
including false or misleading advertising. The FTC in recent years has brought a
number of actions challenging claims by companies. These actions stem from the
Retail Truth In Labeling laws, which are the only laws which currently regulate
the nutritional supplement industry.
28
In the future, we may be subject to additional laws or regulations administered
by the FDA or other federal, state or foreign regulatory authorities, the repeal
of laws or regulations which the Company considers favorable, or more stringent
interpretations of current laws or regulations. In fact, the FDA strictly
regulates dietary supplements, as opposed to nutritional supplements which are
subject only to Truth In Labeling laws.
Should we begin producing nutritional supplements, or should one of our products
be determined by the FDA to be a dietary supplement, more stringent regulation
of our products may take place. Compliance with these additional rules and
regulations may result in a considerable expense or may cause us to have to
discontinue production of some or all of its then current products. We cannot
predict the nature of such future laws, regulations, interpretations or
application, nor can we predict what effect additional governmental regulations
or administrative orders, when and if promulgated, would have on its business in
the future. They could, however, require the reformulation of certain products
to meet new standards, the recall or discontinuance of certain products not able
to be reformulated, imposition of additional record keeping requirements, or
expanded documentation of the properties of certain products, expanded or
different labeling and scientific substantiation. Any or all of such
requirements could have a material adverse effect on our results of operations
and financial condition.
RESEARCH & DEVELOPMENT
In order to stay competitive, we must continually introduce new products. This
involves research and development. To the extent that we have sufficient
revenues, we will more actively pursue the research, development manufacture and
distribution of nutritional supplements.
COMPLIANCE WITH ENVIRONMENTAL LAWS
We believe that we are in full compliance with all relevant environmental laws.
In fact, we believe there are no environmental laws which directly impact our
business. Due to the nature of our operations, the cost of complying with
environmental laws will not have a significant effect on our operations.
EMPLOYEES AND CONSULTANTS
As of July 31, 2002, Mr. Dauplaise was our sole officer, director and employee.
We will employ additional personnel as needed. Our employees are not represented
by a labor union for purposes of collective bargaining.
We have recruited a highly talented group of individuals who have agreed to join
our Board of Directors subject to our securing adequate directors' and liability
insurance. (Please see our discussion under management for additional
information on these individuals.)
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GOVERNMENT APPROVAL AND REGULATION
The manufacturing, processing, formulating, packaging, labeling, distributing,
selling and advertising of our products are subject to regulation by one or more
federal agencies. The most active regulation has been administered by The Food
and Drug Administration (hereinafter the "FDA") which regulates our products
pursuant to the Federal Food, Drug and Cosmetic Act (hereinafter the "FDCA") and
regulations promulgated thereunder. In particular, the FDA regulates the safety,
manufacturing, labeling and distribution of dietary supplements, including
vitamins, minerals and herbs, food additives, food supplements, over-the-counter
drugs and prescription drugs, medical devices and cosmetics. In addition, the
FTC has overlapping jurisdiction with the FDA to regulate the labeling,
promotion and advertising of dietary supplements, over the counter drugs,
cosmetics and foods.
Although the dietary supplement industry is subject to regulation by the FDA and
local authorities, dietary supplements, including vitamins, minerals, herbs and
other dietary ingredients, now have been statutorily affirmed as a "food."
Dietary supplement companies are authorized to make substantiated statements of
nutritional support and, subject to several possible limitations, to market
manufacture substantiated safe dietary supplement products without FDA
pre-clearance. Failure to comply with applicable FDA requirements can result in
sanctions being imposed on the Company or the manufacturers of our products,
including but not limited to fines, injunctions, product recalls, seizures and
criminal prosecution.
Compliance with applicable FDA and any state or local statutes is critical.
Although we believe that we are in compliance with applicable statutes, there
can be no assurance that, should the FDA amend its guidelines or impose more
stringent interpretations of current laws or regulations, we would be able to
comply with these new guidelines. We are unable to predict the nature of such
future laws, regulations, interpretations or applications, nor can we predict
what effect additional governmental regulations or administrative orders, when
and if promulgated, would have on our business in the future. These regulations
could, however, require the reformation of certain products to meet new
standards, market withdrawal or discontinuation of certain products not able to
be reformulated, imposition of additional record keeping requirements, expanded
documentation regarding the properties of certain products, expanded or
different labeling and/or additional scientific substantiation.
The FDCA has been amended several times with respect to dietary supplements,
most recently by the Dietary Supplement Health and Education Act of 1994
(hereinafter "DSHEA"). DSHEA was enacted on October 15, 1994. It provides a new
statutory framework governing the composition and labeling of dietary
supplements. DSHEA provides a regulatory framework to ensure safe, quality
dietary supplements and the dissemination of accurate information about such
products. Under DSHEA, dietary supplements are generally excluded from the legal
definition of "food additive."
With respect to composition, DSHEA 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 DSHEA, dietary ingredients that were on the market before October 15, 1994
30
may be sold without FDA pre-approval and without notifying the FDA. On the other
hand, a new dietary ingredient (one not lawfully on the market before October
15, 1994) requires proof that it has been present in the food supply as an
article used for 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. The FDA must be supplied with such evidence at least seventy-five
(75) days before the initial introduction into interstate commerce use of a new
dietary ingredient. There can be no assurance that the FDA will accept the
evidence of safety for any new dietary ingredients that we may decide to use,
and the FDA's refusal to accept such evidence could result in regulation of such
dietary ingredients as adulterated until such time as reasonable expectation of
safety for the ingredient can be established to the satisfaction of the FDA.
As for labeling, DSHEA permits "statements of nutritional support" for dietary
supplements without FDA pre approval. Such statements may describe how
particular dietary ingredients affect the structure, function or general well
being of the body, or the mechanism of action by which a dietary ingredient may
affect body structure, function or well being (but may not state 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, and, for such statements that are not about the effects on
the body as a result of a dietary supplement used as a tool for its nutritive
value and are not otherwise "health claims," disclose on the label that the FDA
has not reviewed that statement and that the product is not intended for use for
a disease, and notify the FDA of the statement within thirty (30) days after its
initial use. The manner for making the disclosure and notifying the FDA are set
forth in the regulations. However, there can be no assurance that the FDA will
not determine that a given statement of nutritional support that we decide to
make is a drug claim rather than an acceptable nutritional support statement.
Such a determination would require deletion of the drug claim or our submission,
and the FDA's approval of a New Drug Application (hereinafter "NDA"), which
would entail costly and time consuming clinical studies. In addition, DSHEA
allows the dissemination of "third party literature", publications such as
reprints of scientific articles linking particular dietary ingredients with
health benefits. Third party literature is exempted from FDA regulation as
dietary supplement "labeling" and may be used in connection with the sale of
dietary supplements to consumers. Such a publication may be so used if, among
other things, it is not false or misleading, no particular manufacturer or brand
of dietary supplement is promoted and a balanced view of available scientific
information on the subject matter is presented. There can be no assurance,
however, that all pieces of third party literature that may be disseminated in
connection with our products will be determined by the FDA to satisfy each of
these requirements, and any such failure could subject the product involved to
regulation as a new drug or as a "misbranded" product.
DSHEA permits substantiated, truthful and non misleading statements of
nutritional support to be made in labeling, such as statements describing
general well being resulting from consumption of a dietary ingredient or the
role of a nutrient or dietary ingredient in affecting or maintaining structure
or function of the body. Any statement of nutritional support beyond traditional
claims must be accompanied by disclosure that the FDA has not evaluated such
statement and that the product is not intended to cure or prevent any disease.
We anticipate that the FDA will promulgate Good Manufacturing Practices
31
(hereinafter "GMPs"), which are specific to dietary supplements and require at
least some of the quality control provisions contained in the GMPs for drugs.
Management anticipates that the FDA may promulgate GMP regulations authorized by
DSHEA, which are specific to dietary supplements. GMP regulation would require
supplements to be prepared, packaged and held in compliance with such rules, and
may require similar quality control provisions contained in the GMP regulations
for drugs. There can be no assurance that, if the FDA adopts GMP regulations
specific to dietary supplements, that either we or our manufacturers will be
able to comply with such GMP rules upon promulgation or without incurring
material expenses to do so.
Our products and product related activities may also be subject to regulation by
other regulatory agencies, including but not limited to the FTC, the Consumer
Products Safety Commission, the United States Department of Agriculture, the
United States Postal Service, the United States Environmental Protection Agency
and the Occupational Safety and Health Administration. These activities are also
regulated by various agencies of the states and localities in which our products
are sold.
Advertising of dietary supplement products is subject to regulation by the FTC
under the Federal Trade Commission Act (hereinafter the "FTCA"). Section 5 of
the FTCA prohibits unfair methods of competition and unfair or deceptive trade
acts or practices in or affecting commerce. Section 12 of the FTCA provides that
the dissemination or the causing to be disseminated of any false advertising
pertaining to drugs or foods, which would include dietary supplements, is and
unfair or deceptive act or practice. Under the FTC's Substantiation Doctrine, an
advertiser is required to have a "reasonable basis" for all objective product
claims before the claims are made. Pursuant to this FTC requirement, we are
required to have adequate substantiation of all material advertising claims made
for its products. Failure to adequately substantiate claims may be considered
either deceptive or unfair practices.
In recent years the FTC has initiated numerous investigations of dietary
supplement and weight loss products and companies. The FTC has recently issued a
guidance document to assist supplement marketers of dietary supplement products
in understanding and complying with the substantiation requirement.
The FTC is authorized to use a variety of processes and remedies for
enforcement, both administratively and judicially including compulsory process,
cease and desist orders, and injunctions. FTC enforcement can result in orders
requiring, among other things, limits on advertising, corrective advertising,
consumer redress, divestiture of assets, rescission of contracts and such other
relief as may be deemed necessary. State and local authorities can also regulate
advertising and labeling for dietary supplements and conventional foods. There
can be no assurance that state and local authorities will not commence
regulatory action that could restrict the permissible scope of our product
claims.
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OUR ACQUISITION STRATEGY
We intend to become a vertically integrated company in the nutritional
supplement industry. We seek to acquire manufacturing and marketing companies
that demonstrate to us the ability to profitably operate their business and
whose revenues can be substantially increased by means of improved operating
efficiencies in a vertically integrated company. We will initially focus on
companies with EBITDA ("Earnings Before Interest, Taxes, Depreciation and
Amortization") of at least 15%. However, we may seek to acquire companies with
lower EBITDA if management believes that the product, facilities, management or
mix will fit within our overall objective to become a leader in the nutritional
supplement industry. We intend to seek opportunities demonstrating the potential
of long term growth as opposed to short term earnings. Our initial efforts to
identify a prospective Target Business shall be in Florida or the Southeast
United States.
Due to our limited capital resources, the consummation of a Business Combination
will likely involve the acquisition of, or merger or consolidation with
companies that does not need substantial additional capital but one where its
owners see the advantage of becoming one of the few companies in the nutritional
supplement field to be vertically integrated and provide enhanced liquidity for
the Target Business's current shareholders by exchanging their common stock for
stock (and/or cash) in a public vehicle.
UNSPECIFIED TARGET BUSINESS
We will seek to acquire a Target Business in the nutritional supplement field .
Most likely, the Target Business will be located in Florida or the Southeast
United States. We have not as yet reached an agreement with a target Company.
OPPORTUNITY FOR SHAREHOLDER EVALUATION OR APPROVAL OF BUSINESS
COMBINATIONS
Due to nondisclosure and confidentiality agreements which we may be required to
execute, our shareholders will, in all likelihood, not receive nor otherwise
have the opportunity to evaluate any financial or other information which will
be made available to us in connection with selecting a potential Business
Combination until after we have entered into an agreement to effectuate a
Business Combination. Such agreement to effectuate a Business Combination,
however, will be subject to shareholder approval pursuant to applicable law. As
a result, shareholders will be almost entirely dependent on the judgment and
experience of management in connection with our acquisition strategy.
ACQUISITION CRITERIA: COMBINATION.
Management will consider, among other factors, the following factors in
targeting a business which are not listed in any particular order:
- financial condition and results of operation of the Target Business;
33
- the location of the Target Business;
- growth potential and projected financial performance of the Target
Business;
- experience and skill of management and availability of additional
personnel of the Target Business;
- capital requirements of the Target Business;
- competitive position of the Target Business;
- stage of development of the product, process or service of the Target
Business;
- degree of current or potential market acceptance of the product,
process or service of the Target Business;
- possible proprietary features and possible other protection of the
product, process or service of the Target Business; and
- costs associated with effecting the Business Combination;
The foregoing criteria are not intended to be exhaustive; any evaluation
relating to the merits of a particular acquisition will be based, to the extent
relevant, on the above factors as well as other considerations deemed relevant
by us in connection with any acquisition we conclude. . In many instances, it is
anticipated that the historical operations of a Target Business may not
necessarily be indicative of the potential for the future because of the
possible need to shift marketing approaches substantially, expand significantly,
change product emphasis, change or substantially augment management, or make
other changes.
In connection with our evaluation of a prospective Target Business, management
anticipates that it will conduct a due diligence review which will encompass,
among other things, meetings with incumbent management and inspection of
facilities, as well as review of financial or other information which will be
made available to us. The time and costs required to select and evaluate a
Target Business (including conducting a due diligence review) and to structure
and consummate the Business Combination (including negotiating relevant
agreements and preparing requisite documents for filing pursuant to applicable
securities laws and state "blue sky" and corporation laws) cannot presently be
ascertained with any degree of certainty.
We may engage the services of professional firms that specialize in finding
business acquisitions in the nutritional supplement field and pay a finder's fee
or other compensation. No policies have been adopted regarding use of such
consultants or advisors, the criteria to be used in selecting such consultants
or advisors, the services to be provided, the term of service, or regarding the
total amount of fees that may be paid.
34
There are currently no limitations relating to our ability to borrow funds to
increase the amount of capital available to us to effect a Business Combination
or otherwise finance the operations of any acquired company. However, our
current limited resources could make it difficult for us to borrow additional
funds from other sources. The amount and nature of any borrowing by us will
depend on numerous considerations, including our capital requirements, potential
lenders' evaluation of our ability to meet debt service on borrowing and the
then prevailing conditions in the financial markets, as well as general economic
conditions.
If our securities are issued as part of an acquisition, such securities are
required to be issued either in reliance upon exemptions from registration under
applicable federal or state securities laws or registered for public
distribution. We intend to primarily target only those companies where an
exemption from registration would be available; however, since the structure of
the Business Combination has yet to be determined, no assurances can be made
that we will be able to rely on such exemptions. Registration of securities
typically requires significant costs and time delays are typically encountered.
In addition, the issuance of additional securities and their potential sale in
any trading market which might develop in our Common Stock, of which there is
presently no trading market and no assurances can be given that one will
develop, could depress the price of our Common Stock in any market which may
develop in our Common Stock. Further, such issuance of additional securities
would result in a decrease in the percentage ownership of present shareholders.
MANAGEMENT
Directors and Executive Officers
Our directors, executive officers and key employees are as follows:
Name Age Position Director Since
---- --- -------- --------------
Armand Dauplaise 62 President/CEO/ 2000
Sec/Treas/Dir
Frank Clark 68 Director/Nominee 2002
Bernard Shinder 66 Director/Nominee 2002
Irwin Newman 54 Director/Nominee 2002
Each of our directors or those nominated to serve on our Board of Directors will
hold his position until the next annual meeting of shareholders or until his
successor is duly elected and qualified.
ARMAND DAUPLAISE has served as an officer and director of our Company since
1999. He has a extensive experience in all facets of business including 21 years
as a chief executive officer for various companies. From 1999-2002 he served as
president of Crown Enterprises, Inc., a currently
35
inactive subsidiary of Bio-One. From 1998-1999 he served as Chief Operating
Officer of Leffler Enterprises, Inc. and from 1995 through 1997 served as
president of Restoring Services, Inc. During his extensive business career, he
has held executive level positions for such nationally known companies as Burger
King Corporation, Hardee's Restaurants and Hallmark Cards.
FRANK CLARK has been nominated to serve on our Board of Directors. He served as
a former officer and director of several major health care companies. He was
executive vice president and a director of a Johnson & Johnson subsidiary. He
also has served as President and director of R.P. Scherer, Inc. and established
their business worldwide. Mr. Clark has been instrumental in acquiring,
developing and marketing products and services in the health and consumer goods
sectors.
BERNARD SHINDER has been nominated to serve on our Board of Directors. He will
also serve as our Chief Financial Officer. Mr. Shinder has a long record of
success in the practice of international law and finance. He has been engaged as
a professional in most aspects of business finance including initial and
secondary stock offerings, mergers, acquisitions, venture capital, international
taxation strategy, international licensing, technology transfers, strategic
planning and management of the expansion process.
IRWIN NEWMAN has been nominated to serve on our Board of Directors. He also
serves as General Counsel to the Company. Mr. Newman is a practicing attorney in
Boca Raton, Florida and serves as senior partner in the firm of Newman, Pollock
& Klein. He also serves as president of Jenex Financial Services, Inc., a
financial and consulting firm. Mr. Newman has previously held management
positions or served as legal counsel for Boca Raton Capital Corp., Mariner
Venture Capital Corp., Island Investment & Realty, Inc. and Walter E. Heller &
Co., SE.
Upon assuming their role as directors of the Company, Mr. Clark, Mr. Newman and
Mr. Shinder will each be issued 300,000 shares of our restricted common stock in
consideration for their agreement to serve on our Board. In addition, the
directors will be reimbursed for all out of pocket expenses incurred in
connection with the attendance at any Board meeeting or in connection with any
services they provide for and on behalf of the Company.
During the past five years, no Director, executive officer, nominee, or
significant employees have been convicted in a criminal proceeding or been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding, was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
EXECUTIVE COMPENSATION: EMPLOYMENT AGREEMENTS
In May 2000, we entered into an employment agreement with our president, Armand
Dauplaise which provides in part for Mr. Dauplaise to receive an annual
compensation of $120,000 per year plus a car allowance of $350 per month. The
agreement is renewable annually and has been renewed on an annual basis by the
Company.
36
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid to or accrued, during
the fiscal years ended December 31, 2001 and 2000 to Bio-One 's highest paid
executive officers. No salaries were paid prior to 2000. No restricted stock
awards, long-term incentive plan payout or other types of compensation, other
than the compensation identified in the chart below, were paid to these
executive officers during these fiscal years.
Name Year Annual Annual LT
and Post Comp Comp Annual Comp LT All
Salary Bonus Comp Rest Comp LTIP Other
($) Other Stock Options Payouts (1)
- ------------- ---- -------- ------ ------ ----- ------- ------- -----
Armand
Dauplaise,
President
and Vice- 2000 $120,000
Chairman 2001 $120,000
Kevin
Lockhart,
Former
Secretary
and Vice- 2000 $120,000
Chairman 2001 $120,000
- ----------
(1) All other compensation includes certain health and life insurance benefits
paid by us on behalf of our employees and a car allowance.
37
STOCK OPTION GRANTS IN THE PAST FISCAL YEAR
We have not issued any grants of stock options in the past fiscal year to any
officer or director.
DESCRIPTION OF PROPERTY
We currently do not own or lease any real property. Our president provides us
with office space at no charge at 1630 Winter Springs, Blvd., Winter Springs,
Florida 32708. We believe that this space is sufficient for our current
operating requirements until such time as we consummate our first acquisition.
LEGAL PROCEEDINGS
We do not have any pending litigation proceedings.
PRINCIPAL SHAREHOLDERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information about the beneficial ownership of our
common stock as of August 9, 2002 by (i) each person who we know is the
beneficial owner of more than 5% of the outstanding shares of common stock (ii)
each of our directors or those nominated to be directors, and executive
officers, and (iii) all of our directors and executive officers as a group.
- ----------------------------------------------------------------------------------------------------------
Number of Number of Percent Percent
Name and Address of Shares Shares Owned Owned After
Beneficial Owner (1) Owned Owned Before Offering
Before After Offering (2)(3)
Offering Offering
- ----------------------------------------------------------------------------------------------------------
Armand Dauplaise
1630 Winter Springs Blvd
Winter Springs, FL 32708 3,400,000 3,400,000 24.37% 7.61%
Irwin Newman
2101 NW Corporate Blvd
Suite 414
Boca Raton, FL 33431 248,500 548,500(3) 1.78% 1.22%
Bernard Shinder
6361 Brava Way
Boca Raton, FL 33433 0 300,000(3) * *
Frank Clark
7313 Oakleaf Way
Sarasota, FL 34241 23,936 323,936(3) * *
Cornell Capital Partners, LP
101 Hudson Street
Suite 3606
Jersey City, NJ 07302 0 30,000,000(2) * 67.23%
Kevin Lockhart
1253 Glencrest Drive
Heathrow, FL 32746 3,372,000 1,622,000(4) 24.17% 3.63%
All Directors and Executive
Officers as a Group (1 person) 3,400,000 4,572,436 24.37% 10.24%
(one person currently/four
upon completion)
- --------------------------------------------------------------------------------
(1) Unless otherwise noted below, we believe that all persons named in the
table have sole voting and investment power with respect to all shares of
common stock beneficially owned by them. For purposes hereof, a person is
considered to be
38
the beneficial owner of securities that can be acquired by such person within 60
days from the date hereof. upon the exercise of warrants or options or the
conversion of convertible securities. Each beneficial owner's percentage
ownership is determined by assuming that any such warrants, options or
convertible securities that are held by such person (but not those held by any
other person) and which are exercisable within 60 days from the date hereof,
have been exercised.
(2) Assumes the sale of all shares offered through this prospectus.
(3) Assumes the issuance of 300,000 shares to each person nominated to serve as
a director.
(4) Assumes that the shareholder tenders for redemption 1,750,000 shares as per
his agreement with the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
In May 2000, we entered into an employment agreement with our president and
chief executive officer, Armand Dauplaise which calls for payment to him of
$120,000 per year and an auto allowance of $350 per month. The term was for one
year and we have renewed the agreement on each anniversary date.
In June 2002, we borrowed $15,000 from Armand Dauplaise. This obligation is
repayable on demand and provides for interest on the outstanding principal
balance at the rate of 5% per annum.
In August 2002, Mr. Dauplaise secured a personal loan in the amount of $150,000.
As security for the loan, he was required to pledge 1,500,000 shares of his
common stock. Upon funding of this loan, Mr. Dauplaise will loan the Company
$135,000. The Company will be obligated to repay Mr. Dauplaise the principal sum
of $135,000 plus an origination fee of $15,000 incurred by Mr. Dauplaise in
securing the loan. The loan will be for a term of three years. Interest only at
the rate of 5% per annum will be due on the outstanding principal balance with
all principal due on the third anniversary date of the funding by Mr. Dauplaise.
On June 30, 2002 we entered into an agreement with Kevin Lockhart, a former
officer and director, which provided in part for us to transfer certain assets
and intangible property then owned by us or Crown Enterprises, our wholly owned
subsidiary, to Mr. Lockhart in exchange for the redemption of 1,750,000 shares
of our common stock currently owned by Mr. Lockhart.
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
---------------------------------------------------------------
AND OTHER SHAREHOLDER MATTERS
-----------------------------
Our common stock has been listed on the NASDAQ OTC Electronic Bulletin Board
sponsored by the National Association of Securities Dealers, Inc. under the
symbol "BICO" since June 21, 2001. On August 21, 2002, the closing bid price as
reported by the Electronic Bulletin Board was $0.32. As of August 20, 2002, we
believe there were approximately 153 holders of record of our common stock.
39
The following table sets forth the high and low bid prices for the Common Stock
as reported on the Electronic Bulletin Board for each quarter since June 21,
2001 for the periods indicated. Such information reflects inter dealer prices
without retail mark-up, mark down or commissions and may not represent actual
transactions.
The following table sets forth, for the period indicated, the bid price range of
our common stock.
High Bid Low Bid
-------- -------
2001
Quarter Ended June 30, 2001 $ 0.28 $ 0.20
Quarter Ended September 30, 2001 $ 0.80 $ 0.28
Quarter Ended December 31, 2001 $ 0.55 $ 0.37
2002
Quarter Ended March 31, 2002 $ 0.47 $ 0.33
Quarter Ended June 30, 2002 $ 0.40 $ 0.11
DESCRIPTION OF SECURITIES
-------------------------
COMMON STOCK
Our Articles of Incorporation authorize the issuance of 100,000,000 shares of
common stock, $0.001 par value per share. Of this amount, 13,949,846 are
currently issued and outstanding. The following description is a summary of the
capital stock of Bio-One and contains the material terms of the capital stock.
Additional information can be found in Bio-One 's Articles of Incorporation and
Bylaws.
Each holder of our common stock is entitled to one vote per share of common
stock standing in such holder's name on our records on each matter submitted to
a vote of our stockholders, except as otherwise required by law. Holders of our
common stock do not have cumulative voting rights so that the holders of more
than 50% of the combined shares of our common stock voting for the election of
directors may elect all of the directors if they choose to do so and, in that
event, the holders of the remaining shares of our common stock will not be able
to elect any members to our board of directors. Holders of our common stock are
entitled to equal dividends and distributions, per share, when, as and if
declared by our board of directors from funds legally available. Holders of our
common stock do not have preemptive rights to subscribe for any of our
securities nor are any shares of our common stock redeemable or convertible into
any of our other securities. If we liquidate, dissolve or wind up our business
or affairs, our assets will be divided up pro-rata on a share-for-share basis
among the holders of our common stock after creditors and preferred
shareholders, if any, are paid.
40
PREFERRED STOCK
Our Articles of Incorporation authorize the issuance of 10,000,000 Shares of
preferred stock, $0.001 par value per share, the designation and rights of which
are to be determined by our Board of Directors. None of the shares of Preferred
Stock are issued and outstanding.
Our Board of Directors has authority, without action by the shareholders, to
issue all or any portion of the authorized but unissued preferred stock in one
or more series and to determine the voting rights, preferences as to dividends
and liquidation, conversion rights, and other rights of such series. We consider
it desirable to have preferred stock available to provide increased flexibility
in structuring possible future acquisitions and financing and in meeting
corporate needs which may arise. If opportunities arise that would make
desirable the issuance of preferred stock through either public offering or
private placements, the provisions for preferred stock in our Articles of
Incorporation would avoid the possible delay and expense of a shareholder's
meeting, except as may be required by law or regulatory authorities. Issuance of
the preferred stock could result, however, in a series of securities outstanding
that will have certain preferences with respect to dividends and liquidation
over the common stock which would result in dilution of the income per share and
net book value of the common stock. Issuance of additional common stock pursuant
to any conversion right which may be attached to the terms of any series of
preferred stock may also result in dilution of the net income per share and the
net book value of the common stock. The specific terms of any series of
preferred stock will depend primarily on market conditions, terms of a proposed
acquisition or financing, and other factors existing at the time of issuance.
Therefore, it is not possible at this time to determine in what respect a
particular series of preferred stock will be superior to our common stock or any
other series of preferred stock which we may issue. Our Board of Directors may
issue additional preferred stock in future financing, but has no current plans
to do so at this time.
The issuance of Preferred Stock could have the effect of making it more
difficult for a third party to acquire a majority of our outstanding voting
stock. We intend to furnish holders of our common stock annual reports
containing audited financial statements and to make public quarterly reports
containing unaudited financial information.
WARRANTS
We do not have any warrants outstanding.
TRANSFER AGENT
The transfer agent for the common stock is Continental Stock Transfer and Trust
Company of New York, NY and its telephone number is 212-509-4000.
41
DISCLOSURE OF SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Our Articles of Incorporation, as well as our By-Laws provide for the
indemnification of directors, officers, employees and agents of the corporation
to the fullest extent provided by the Corporate Law of the State of Nevada, as
well as is described in the Articles of Incorporation and the By-Laws. These
sections generally provide that the Company may indemnify any person who was or
is a party to any threatened, pending or completed action, suit or proceeding
whether civil, criminal, administrative or investigative except for an action by
or in right of the corporation by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation. Generally, no
indemnification may be made where the person has been determined to be negligent
or guilty of misconduct in the performance of his or her duties to the Company.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or controlling persons of Bio-One, pursuant
to the foregoing provisions, or otherwise, we have been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933, and is,
therefore, unenforceable.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF INCORPORATION
AUTHORIZED AND UNISSUED STOCK. The authorized but unissued shares of our common
and preferred stock are available for future issuance without our shareholders'
approval. These additional shares may be utilized for a variety of corporate
purposes including but not limited to future public or direct offerings to raise
additional capital, corporate acquisitions and employee incentive plans.
EXPERTS
-------
The financial statements of Bio-One incorporated herein have been so
incorporated in reliance upon the report of Parks, Tschopp, Whitcomb & Orr,
P.A., independent certified public accountants, given upon their authority as
experts in auditing and accounting (which contains an explanatory paragraph
regarding Bio-One 's ability to continue as a going concern). With respect to
the unaudited financial information for the period ended June 30, 2002
incorporated herein, the independent public accountants have applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their separate report included in the Bio-One
Quarterly Report on Form 10-QSB for the quarter ended June 30, 2001, and
incorporated herein, they did not audit and they do not express an opinion on
that interim financial information. Because of the limited nature of the review
procedures applied, the degree of reliance on their report on such information
should be restricted. The accountants are not subject to the liability
provisions of Section 11 of the Securities Act of 1933 for their report on the
unaudited interim financial information because that report is not a "report" or
a "part" of the Registration Statement prepared or certified by the accountants
within the meaning of Section 7 and 11 of the 1933 Act.
42
LEGAL MATTERS
-------------
The validity of the shares of common stock offered hereby will be passed upon
for us by Newman, Pollock & Klein, LLP, Boca Raton, Florida.
AVAILABLE INFORMATION
---------------------
We have filed a registration statement under the Securities Act with respect to
the securities offered hereby with the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549. This prospectus, which is a part of the registration
statement, does not contain all of the information contained in the registration
statement and the exhibits and schedules thereto, certain items of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to Bio-One Corporation and the securities
offered hereby, reference is made to the registration statement, including all
exhibits and schedules thereto, which may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N. W.,
Room 1024, Washington, D. C. 20549. You may obtain information on the operation
of the public reference facilities by calling the Commission at 1-800-SEC-0330.
Statements contained in this prospectus as to the contents of any contract or
other document are not necessarily complete, and in each instance reference is
made to the copy of such contract or document filed as an exhibit to the
registration statement, each such statement being qualified in its entirety by
such reference. We will provide, without charge upon oral or written request of
any person, a copy of any information incorporated by reference herein. Such
request should be directed to us at Bio-One Corporation, 1630 Winter Springs,
Blvd., Winter Springs, Florida 32708, Attention: Armand Dauplaise, President. We
will file reports and other information with the Commission. All of such reports
and other information may be inspected and copied at the Commission's public
reference facilities described above. The Commission maintains a web site that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission. The address of
such site is http://www.sec.gov. In addition, we make available to our
shareholders annual reports, including audited financial statements, unaudited
quarterly reports and such other reports as we may determine.
43
BIO-ONE CORPORATION
INDEX TO FINANCIAL STATEMENTS
Page
Number
------
Financial Statements June 30, 2002 and December 31, 2001
Balance Sheets F-2-F-3
June 30, 2002 (Unaudited) and December 31, 2001
Statements of Operations F-4
Three months and six months ended June 30, 2002 (Unaudited)
and June 30, 2001 (Unaudited)
Statements of Cash Flows F-5
Six months ended June 30, 2002 (Unaudited) and
June 30, 2001 (Unaudited)
Notes to Financial Statements (Unaudited) F-6
Consolidated Financial Statements December 31, 2001 and 2000
Independent Auditor's Report F-7
Consolidated Balance Sheets F-8-F-9
December 31, 2001 and 2000
Consolidated Statements of Operations F-10
Years ended December 31, 2001 and 2000
Consolidated Statements of Changes in Stockholders' Equity F-11
Years ended December 31, 2001 and 2000
Consolidated Statements of Cash Flows F-12
Years ended December 31, 2001 and 2000
Notes to Consolidated Financial Statements F-13-F-17
F-1
BIO-ONE CORPORATION
BALANCE SHEETS
ASSETS
------
JUNE 30, 2002 DECEMBER 31,
(UNAUDITED) 2001
------------- ------------
Current assets:
Cash and cash equivalents $ 353 34,103
Accounts receivable -- 1,672
Inventories -- 15,153
------ ------
Total current assets 353 50,928
Property and equipment, at cost, net of accumulated
depreciation and amortization 6,604 18,242
Deposits 2,150 1,700
------ ------
Total assets $9,107 70,870
====== ======
See accompanying notes to financial statements.
F-2
BIO-ONE CORPORATION
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
JUNE 30, 2002 DECEMBER 31,
(UNAUDITED) 2001
------------- ------------
Current liabilities:
Accounts payable $ 129,103 16,037
Accrued expenses 161,949 202,642
Current installments of note payable 89,502 74,502
---------- ------------
Total current liabilities 380,554 293,181
------------ ------------
Shareholders' equity:
Common stock - $.001 par value, authorized
100 million shares; issued 12,812,086 shares 12,812 12,812
Additional paid in capital 1,030,988 1,030,988
Treasury stock, 1,750,000 shares (1,750) -
Accumulated deficit (1,413,497) (1,266,111)
------------ ------------
Total shareholders' equity (371,447) (222,311)
------------ ------------
$ 9,107 70,870
============ ============
See accompanying notes to financial statements.
F-3
BIO-ONE CORPORATION
STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ------------
Revenues:
Net sales $ 1,500 23,077 22,220 35,867
------------ ------------ ------------ ------------
1,500 23,077 22,220 35,867
Costs and expenses:
Cost of goods sold 434 13,573 9,343 20,457
Selling, general and administrative 142,771 112,163 305,509 212,496
------------ ------------ ------------ ------------
143,205 125,736 314,852 232,953
------------ ------------ ------------ ------------
Operating income (loss) (141,705) (102,659) (292,632) (197,086)
Non-operating revenue (expense):
Other Income 146996 -- 146996 --
Interest expense (590) (2,060) (1,750) (5,829)
------------ ------------ ------------ ------------
Income before income taxes 4,701 (104,719) (147,386) (202,915)
Provision for income taxes -- -- -- --
------------ ------------ ------------ ------------
Net income (loss) $ 4,701 (104,719) (147,386) (202,915)
============ ============ ============ ============
Basic earnings per share $ -- (0.01) (0.01) (0.02)
============ ============ ============ ============
Diluted earnings per share $ -- (0.01) (0.01) (0.02)
============ ============ ============ ============
Weighted average number of shares outstanding 12,812,086 10,369,499 12,812,086 10,244,499
============ ============ ============ ============
See accompanying notes to financial statements.
F-4
BIO-ONE CORPORATION
STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
2002 2001
(UNAUDITED) (UNAUDITED)
--------- ---------
Cash flows from operating activities:
Net loss $(147,386) (202,915)
Adjustments to reconcile net income to net cash
provide by operating activities:
Depreciation and amortization 1,000 2,000
Common stock issued for services -- 3,000
Changes in operating assets and liabilities:
Accounts receivable 1,672 (1,472)
Inventories 15,153 1,018
Accounts payable and accrued expenses 83,011 37,981
Other assets (450) --
--------- ---------
Net cash used in operating activities (47,000) (160,388)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment -- (11,013)
--------- ---------
Net cash used in investing activities -- (11,013)
--------- ---------
Cash flows from financing activities:
Purchase of treasury stock (1,750)
Proceeds from sale of common stock -- 150,000
Payment of principal on note payable -- (25,000)
Proceeds from note payable 15,000 75,000
--------- ---------
Net cash provided by financing activities 13,250 200,000
--------- ---------
(Decrease) increase in cash and cash equivalents (33,750) 28,599
Cash and cash equivalents - beginning of period 34,103 19,832
--------- ---------
Cash and cash equivalents - end of period $ 353 48,431
========= =========
See accompanying notes to financial statements.
F-5
BIO-ONE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) PRESENTATION OF UNAUDITED FINANCIAL STATEMENTS
----------------------------------------------
The unaudited financial statements have been prepared in accordance
with rules of the Securities and Exchange Commission and, therefore, do
not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and cash
flows, in conformity with generally accepted accounting principles. The
information furnished, in the opinion of management, reflects all
adjustments (consisting only of normal recurring accruals) necessary to
present fairly the financial position as of June 30, 2002, and results
of operations and cash flows for the six-month periods ended June 30,
2002 and 2001. The results of operations are not necessarily indicative
of results which may be expected for any other interim period, or for
the year as a whole.
(2) SALES TO MAJOR CUSTOMERS
------------------------
During the six months ended June 30, 2002, two customers accounted for
52% and 26% of total revenue.
During the six months ended June 30, 2001, three customers accounted
for 51%, 19% and 17%, respectively, of total revenue.
(3) INVENTORIES
-----------
Inventories consist of the following:
DECEMBER 31, JUNE 30, 2002
2001 (UNAUDITED)
------------ -----------
Finished goods $15,153 --
============ ===========
F-6
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
Bio-One Corporation
We have audited the accompanying consolidated balance sheets of Bio-One
Corporation, as of December 31, 2001 and 2000 and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bio-One Corporation
as of December 31, 2001 and 2000, and the results of their operations and their
cash flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 3 to the
consolidated financial statements, the Company has experienced net operating
losses of $677,150 and $365,213 for the years ended December 31, 2001 and 2000,
respectively. At December 31, 2001, the Company continues to experience a
working capital deficit and also has a stockholders' deficit of $222,311. These
matters raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are described in
note 3. The accompanying consolidated financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.
/s/: PARKS, TSCHOPP, WHITCOMB & ORR, P.A.
- -------------------------------------------
February 8, 2002
Maitland, Florida
F-7
BIO-ONE CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000
ASSETS
------
2001 2000
------- -------
Current assets:
Cash $34,103 19,832
Accounts receivable 1,672 1,930
Inventory 15,153 19,901
------- -------
Total current assets 50,928 41,663
------- -------
Furniture and equipment 26,242 18,035
Less accumulated depreciation 8,000 3,129
------- -------
Net furniture and equipment 18,242 14,906
------- -------
Other assets:
Deposits 1,700 1,700
------- -------
$70,870 58,269
======= =======
(Continued)
See accompanying notes to financial statements.
F-8
BIO-ONE CORPORATION
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND STOCKHOLDERS' DEFICIT
2001 2000
-------- --------
Current Liabilities
Accounts payable $ 16,037 30,160
Notes payable (note 6) 74,502 124,502
Accrued expenses (note 5) 202,642 203,468
-------- --------
Total current liabilities 293,181 358,130
-------- --------
Common stock ($.001 par value; 100 million shares authorized;
12,812,086 shares at December 31, 2001 and 9,970,999 shares
at December 31, 2000 issued and outstanding) 12,812 9,971
Preferred stock ($.001 par value; 10,000,000
shares authorized; none issued) -- --
Additional paid-in capital 1,030,988 279,129
Accumulated deficit (1,266,111) (588,961)
----------- -----------
Total stockholders' deficit (222,311) (299,861)
----------- -----------
$ 70,870 58,269
=========== ===========
See accompanying notes to financial statements.
F-9
BIO-ONE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2001 and 2000
2001 2000
------------ ------------
Revenue:
Product sales $ 82,943 75,447
Cost of goods sold 39,698 35,570
------------ ------------
Gross profit 43,245 39,877
------------ ------------
Selling, general and administrative:
Professional fees 532,409 231,898
Salaries 58,000 115,718
Rent 27,175 16,700
Other administrative 93,393 37,441
------------ ------------
Total selling, general
and administrative 710,977 401,757
------------ ------------
Other income (expense):
Interest expense (9,418) (3,333)
------------ ------------
Net loss $ (677,150) (365,213)
============ ============
Loss per common share:
Basic $ (.06) (0.06)
============ ============
Diluted $ (.06) (0.06)
============ ============
Weighted average number of common
shares outstanding:
Basic 10,653,963 6,232,900
============ ============
Diluted 10,653,963 6,432,900
============ ============
See accompanying notes to financial statements.
F-10
BIO-ONE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 2001 and 2000
ADDITIONAL STOCK
COMMON STOCK PAID-IN TREASURY SUBSCRIPTION ACCUMULATED
SHARES AMOUNT CAPITAL STOCK RECEIVABLE DEFICIT TOTAL
----------- ----------- ----------- ----------- --------- ----------- -----------
Balances, December 31, 1999 4,994,500 $ 4,995 115,505 -- (3,500) (223,748) (106,748)
Common stock issued for cash 450,000 4,500 34,500 -- -- -- 39,000
Common stock issued for services 51,000 510 4,590 -- -- -- 5,100
Common stock subscribed 4,424,500 44,245 (40,745) -- (3,500) -- --
Reverse acquisition 1,700,000 (42,630) 52,130 -- -- -- 9,500
Common stock issued for cash 140,000 140 34,860 -- -- -- 35,000
Stock subscription -- -- -- -- 7,000 -- 7,000
Common stock issued for cash 279,999 280 69,720 -- -- -- 70,000
Common stock issued for services 26,000 26 6,474 -- -- -- 6,500
Shares returned to treasury from
founders (2,095,000) (2,095) 2,095 2,095 -- -- 2,095
Cancellation of treasury shares -- -- -- (2,095) -- -- (2,095)
Net loss -- -- -- -- -- (365,213) (365,213)
----------- ----------- ----------- ----------- --------- ----------- -----------
Balances, December 31, 2000 9,970,999 9,971 279,129 -- -- (588,961) (299,861)
Common stock issued for cash 600,000 600 149,400 -- -- -- 150,000
Common stock issued for services 795,532 795 261,805 -- -- -- 262,600
Conversion of debt to common stock 555,555 556 99,444 -- -- -- 100,000
Exercise of warrants 890,000 890 241,210 -- -- -- 242,100
Net loss -- -- -- -- -- (677,150) (677,150)
----------- ----------- ----------- ----------- --------- ----------- -----------
Balances, December 31, 2001 12,812,086 $ 12,812 1,030,988 -- -- (1,266,111) (222,311)
=========== =========== =========== =========== ========= =========== ===========
See accompanying notes to financial statements.
F-11
BIO-ONE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2001 and 2000
2001 2000
--------- ---------
Cash flows used in operating activities:
Net loss $(677,150) (365,213)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 4,871 2,467
Common stock issued for services 262,600 5,100
Changes in:
Accounts receivable 258 (1,896)
Inventory 4,748 8,240
Other assets -- (1,500)
Accounts payable (14,123) (16,190)
Accrued expenses (826) 124,718
--------- ---------
Net cash used in operating activities (419,622) (244,274)
--------- ---------
Cash flows from investing activities:
Purchase of equipment (8,207) (11,416)
--------- ---------
Net cash used in investing activities (8,207) (11,416)
--------- ---------
Cash flows from financing activities:
Issuance of common stock 392,000 151,000
Proceeds from issuance of notes payable 75,000 124,502
Repayment of principal on notes payable (25,000) --
--------- ---------
Net cash provided by financing activities 442,000 275,502
--------- ---------
Net increase in cash 14,271 19,812
Cash, beginning of period 19,832 20
--------- ---------
Cash, end of period $ 34,103 $ 19,832
========= =========
Supplemental disclosure of cash flows information:
Cash paid during the year for interest $ 9,418 $ 3,333
========= =========
Supplemental disclosure of non-cash financing and investing activities:
During the year ended December 31, 2001 notes payable in the amount of
$100,000 were converted into 555,555 shares of common stock.
See accompanying notes to financial statements.
F-12
BIO-ONE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------------
(A) ORGANIZATION
----------------
The accompanying consolidated financial statements include the accounts
of Bio-One Corporation (Bio-One) and its wholly owned subsidiary, Crown
Enterprises, Inc. (Crown or the Company). All significant intercompany
balances and transactions have been eliminated in consolidation.
Bio-One and subsidiaries have a December 31 fiscal year end.
Bio-One Corporation was incorporated in the State of Nevada, with
capital stock of 20,000,000 shares at $ 0.001 par value, and 1,000,000
shares of preferred stock at $0.001 per value. On July 26, 2000,
Bio-One Corporation approved and ratified an increase in the number of
authorized shares of the Company's common stock from 20,000,000 to
100,000,000. On the same date, the Company approved and ratified an
increase in the number of authorized shares of the Company's preferred
stock from 1,000,000 to 10,000,000.
Crown Enterprises, Inc. was incorporated under the laws of the State of
Florida on April 9, 1999. Crown has developed a complete line of
naturopathic and nutritional supplement products that can be
recommended to address the specific conditions identified by the
Company's Microscopy "Live Blood Cell Analysis" Program. The Company's
"sell through" concept coupled with its Microscopy Program and full
line of naturopathic products places the Company in the forefront of
the preventative and alternative healthcare industry.
The Company's revenues will be generated with strategic acquisitions
within an industry poised for consolidation and also through the
manufacturing and distribution of nutritional supplement products. The
Company is prepared to launch distribution pipelines through
E-Commerce, retail stores, infomercials, microscopy centers, and the
Equine industry.
On May 30, 2000, Crown agreed to exchange shares with Bio-One
Corporation, a Nevada company. Accordingly, Crown exchanged 10,000,000
shares of the company stock for 10,000,000 shares of Bio-One stock in a
business combination accounted for as a reverse acquisition. During the
period Bio-One was in existence, prior to the reverse acquisition, its
only activity was to raise equity capital. For accounting purposes, the
reverse acquisition is reflected as if Crown issued its stock
(10,000,000 shares) for the net assets of Bio-One. The net assets of
Bio-One were not adjusted in connection with the reverse acquisition
since they were monetary in nature.
B) REVENUE RECOGNITION
----------------------
The principal sources of revenues are derived from product sales.
Revenue from product sales is recognized when the product is shipped
(Continued)
F-13
BIO-ONE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
---------------------------------------------------------------
C) INVENTORY
------------
Inventory consists of nutritional supplement products, which are valued
at the lower of cost or market on first-in, first-out basis.
D) PROPERTY AND EQUIPMENT
-------------------------
Property and equipment are stated at cost. Depreciation is computed
over the estimated useful lives of the assets using straight-line
methods.
The Company reviews the carrying value of property and equipment for
impairment whenever events and circumstances indicate that the carrying
value of an asset may not be recoverable from the estimated future cash
flows expected to result from its use and eventual disposition. In
cases where undiscounted expected future cash flows are less than the
carrying value, an impairment loss is recognized equal to an amount by
which the carrying value exceeds the fair value of assets.
E) USE OF ESTIMATES
-------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
F) FAIR VALUE OF FINANCIAL INSTRUMENTS
--------------------------------------
The carrying amount reported in the balance sheet for cash, accounts
receivable and accounts payable approximates fair values due to the
immediate or short-term maturity of these financial instruments. Fair
value for notes payable was based on interest rates that are currently
available to the Company for issuance of debt with similar terms and
remaining maturities, and approximate carrying value.
G) CREDIT RISKS
---------------
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade accounts
receivable. The Company sells its products to customers, at times
extending credit for such sales. Exposure to losses on receivables is
principally dependent on each customer's financial condition. The
Company monitors its exposure for credit losses and maintains
allowances for anticipated losses.
(Continued)
F-14
BIO-ONE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
--------------------------------------------------------------
H) STOCK TRANSACTIONS
---------------------
Shares issued for services performed are valued at either the fair
value of equity instruments issued or the value of services performed,
whichever is more reliably measurable.
I) STOCK-BASED COMPENSATION
---------------------------
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation." This
pronouncement establishes financial accounting and reporting standards
for stock-based compensation. It encourages, but does not require,
companies to recognize compensation expense for grants of stock, stock
options and other equity instruments to employees based on new fair
value accounting rules. Such treatment is required for non-employee
stock-based compensation. The Company has chosen to continue to account
for employee stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employee." Accordingly, compensation expense for
employee stock options or warrants is measured as the difference
between the quoted market price of the Company's stock at the date of
grant and the amount the employee must pay to acquire the stock. SFAS
123 requires companies electing to continue using the intrinsic value
method to make certain pro forma disclosures (see Note 6).
(2) INCOME TAXES
------------
At December 31, 2001, the Company had a net operating loss carryforward
for income tax purposes of approximately $1,000,000, which is available to
offset future taxable income. The loss carryforward expires in the years
beginning in 2019, unless it is utilized sooner. A valuation allowance
equal to the tax benefit of the net operating losses has been established
since it is uncertain that future taxable income will be realized during
the carryforward period. Accordingly, no income tax provision has been
recognized in the accompanying financial statements.
F-15
BIO-ONE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) GOING CONCERN
-------------
The Company's consolidated financial statements have been presented on a
going concern basis which contemplates the realization and the
satisfaction of liabilities in the normal course of business. As more
fully described below, the liquidity of the Company has been adversely
affected by significant losses from operations. The Company reported net
losses of $667,150 and $365,213 for the years ended December 31, 2001 and
2000, respectively. Additionally, there is a stockholders' deficit of
$222,311 at December 31, 2001.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern without additional capital contributions
and/or achieving profitable operations. Management's plans are to
consolidate the nutritional supplement industry through vertical
integration and marketing company acquisitions. There can be no assurance
that the Company will be successful in accomplishing its objectives.
(4) EARNINGS (LOSS) PER SHARE
-------------------------
Effective December 31, 1997, FAS 128 "Earnings per Share" requires a dual
presentation of earnings per share-basic and diluted. Basic loss per
common share has been computed by dividing net loss by the weighted
average number of common shares outstanding of 10,653,963 in 2001 and
6,232,900 in 2000. Diluted earnings per share has been computed by
dividing net loss, reduced by the amount of interest expense on
convertible debt, by the weighted average number of common shares
outstanding, including the dilutive effects of the convertible debt of
10,653,963 and 6,232,900 in 2001 and 2000, respectively.
(5) COMMITMENTS
-----------
The Company has entered into employment agreements with two of its
founding directors requiring aggregate annual salaries of $240,000
beginning in April 1999. At December 31, 2001 and 2000, $202,642 and
$203,468, respectively, remained to be paid.
(6) NOTES PAYABLE
-------------
Note payable to bank, bearing interest at the rate of 9%, due March 1,
2002, collateralized by accounts receivable and inventory.
$ 74,502
========
F-16
BIO-ONE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) STOCK PURCHASE WARRANTS
-----------------------
The Company has issued 390,000 stock purchase warrants to existing
shareholders. These warrants are exercisable at $1.00 per share or 80% of
the average bid price for the first three weeks of public trading,
whichever is lower. These warrants expire twelve months from the date on
which the Company's common stock is quoted on the Over the Counter
Bulletin Board (June 21, 2002).
The Company continues to account for stock-based compensation using the
intrinsic value method prescribed by Accounting Principles Board Opinion
No. 25, under which no compensation cost for stock warrants is recognized
for stock purchase warrants granted at or above fair market value.
Had compensation expense been determined based upon fair values at the
grant date for the award of warrants as described herein in accordance
with SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company's net earnings and earnings per share would not be materially
changed from the amounts as reported in the accompanying financial
statements.
Accordingly, management has not presented the pro forma effects of the
application of SFAS No. 123 herein with respect to net earnings and
earnings per share for the years ended December 31, 2001 and 2000.
F-17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Bio-One 's bylaws provide that we have the power to indemnify any officer or
director against damages if such person acted in good faith and in a manner the
person reasonably believed to be in the best interests of our Company. No
indemnification may be made (i) if a person is adjudged liable unless a Court
determines that such person is entitled to such indemnification, (ii) with
respect to amounts paid in settlement without court approval or (iii) expenses
incurred in defending any action without court approval.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth estimated expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered. All expenses will be paid by Bio-One.
Securities and Exchange Commission Registration Fee $ 1,015
Printing and Engraving Expenses $ 100
Accounting Fees and Expenses $ 500
Legal Fees and Expenses $25,000
Blue Sky Qualification Fees and Expenses $ 1,000
Miscellaneous $ 2,000
-------
TOTAL $29,615
=======
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In May 1998, prior to its acquisition of Crown, the Company sold 1,600,000
shares of its unrestricted common stock to seventy-two (72) investors for
$16,000. Dale B. Finfrock, Jr., the Company's then current sole officer and
director, received 279,960 of such shares. For such offering, the Company relied
upon Section 3(b) of the Securities Act of 1933, as amended (the "Act"), Rule
504 of Regulation D promulgated thereunder ("Rule 504"), Section 517.061(11) of
the Florida Code, Section 10-5-9(13) of the Georgia Code, Section 90.530(11) of
the Nevada code, Section 48-2-103(b)(4) of the Tennessee code and Section
5[581-5]I(c) of the Texas code. No state exemption was necessary for the sales
made to Canadian or French investors.
In May 2000, the Company entered into the Share Exchange with Crown Enterprises.
We issued 10,000,000 shares of its common stock to the shareholders of Crown for
all of the issued and outstanding stock of Crown. As part of the exchange,
Armand
II-1
Dauplaise (the Company's current President and Chairman) ("Dauplaise") and Kevin
Lockhart (the Company's current Secretary) ("Lockhart") each received 4,597,500
shares of the Company's Common Stock. This offering was conducted pursuant to
Section 4(2) of the Act, Rule 506 of Regulation D promulgated thereunder ("Rule
506") and Section 517.061(11) of the Florida Code.
In May 2000, we issued 100,000 shares of our restricted common stock to three
(3) persons for their services to the Company in connection with the Share
Exchange. For such offering, the Company relied upon Section 4(2) of the Act,
Rule 506 and Section 517.061(11) of the Florida Code.
In June 2000, we sold 40,000 shares of our restricted common stock to one (1)
investor for $10,000. For such offering, the Company relied upon Section 4(2) of
the Act, Rule 506 and Section 517.061(11) of the Florida Code.
In July 2000, we sold 100,000 shares of our restricted common stock to one (1)
investor for $25,000. The Company also issued a warrant to purchase an
additional 400,000 shares of the Company's restricted common stock, which
warrant is exercisable at a price of $0.25 per share. The Company received a
total of $25,000 for the investment The warrant has expired. For such offering,
the Company relied upon Section 4(2) of the Act, Rule 506 and Section
517.061(11) of the Florida Code.
In October 2000, we issued a total of 86,000 shares of its common stock to
Bradley Kline, Melvin Correll and Glenna Correll. No contract exists. Richard
Wilson, who received 60,000 of the shares, was inadvertently left off the list
of Crown shareholders when the Share Exchange took place in May 2000. For such
offering, the Company relied upon Section 4(2) of the Act, Rule 506 and Section
517.061(11) of the Florida Code.
In November 2000, we sold 140,000 shares of our common stock to one (1) investor
for $35,000. The Company issued a warrant to purchase an additional 180,000
shares of the Company's common stock at an exercise price of $1.00 per share or
eighty percent (80%) of the average bid price for the first three (3) weeks of
public trading, whichever is lower. The warrants have expired. For such
offering, the Company relied upon Section 4(2) of the Act, Rule 506 and Section
517.061(11) of the Florida Code. See Part II, Item 4. "
In December 2000, the Company executed a convertible promissory note in favor of
Margaret Schrock in the principal amount of $25,000. The note bears interest at
a rate of twelve percent (12%) per annum and is due June 5, 2001. The note is
convertible at the option of the holder to shares of the Company's restricted
common stock at a price of $0.25 per share or fifty percent (50%) of the average
bid price for the first three (3) weeks of public trading, whichever is lower.
For such offering, the Company relied upon Section 4(2) of the Act, Rule 506 and
Section 517.061(11) of the Florida Code. See Part I, In December 2000, the
Company sold a total of 139,999 shares of its common stock to four (4) investors
for a total of $34,999.99. We relied upon Section 4(2) of the Act, Rule 506 and
Section 517.061(11) of the Florida Code. See Part II.
II-2
In March 2001, the Company sold 400,000 and 100,000 shares of its common stock
to John M. Moxen and Ohio Well Management, Inc., an Ohio corporation
respectively for a total of $125,000. The Company issued warrants to purchase an
additional 500,000 shares of the Company's common stock at an exercise price of
$1.00 per share or eighty percent (80%) of the average bid price for the first
three (3) weeks of public trading, whichever is lower. The warrants have
expired. For such offering, the Company relied upon Section 4(2) of the Act,
Rule 506, Section 517.061(11) of the Florida Code and Section 1707.03(X) of the
Ohio Code.
In April 2001, the Company issued 10,000 shares of its common stock to Curt
Jones, who served as a financial consultant to the Company. For such offering,
the Company relied upon Section 4(2) of the Act, Rule 506 and Section
517.061(11) of the Florida Code.
In May 2001, the Company issued 100,000 shares of its common stock and a warrant
to purchase an additional 100,000 shares of its common stock at an exercise
price of $0.29 to Arthur Szatkowski for $25,000. The warrants expired June 22,
2002. For such offering, the Company relied upon the 506 Exemption and the
Florida Exemption.
In June 2001, the Company issued 10,000 shares of its common stock to Curt
Jones, who served as a financial consultant to the Company. For such offering,
the Company relied upon the 506 Exemption and the Florida Exemption.
II-3
In June 2001, the Company issued 2,000 shares of its common stock to Charles A.
Gaudio & MaryAnn Gaudio JTWROS for services in connection with production of the
Company's website. For such offering, the Company relied upon the 506 Exemption
and the Florida Exemption.
In July 2001, the Company filed a Registration Statement on Form S-8 to register
its Year 2001 Employee/Consultant Stock Compensation Plan. The Company
registered 250,000 shares of its common stock, all of which was issued to Donald
F. Mintmire for legal fees.
In July 2001, the Company issued 285,624 shares and 31,735 shares of its
restricted common stock to Irwin Newman and Jeffrey Gerstein respectively, in
connection with a consulting agreement entered into between the Company and Mr.
Newman. For such offering, the Company relied upon the 506 Exemption and the
Florida Exemption. We have also issued additional shares of our common stock to
both Mr. Newman and Mr. Gerstein for consulting services. Following the issuance
of these shares, we have on various dates a total of 94,497 and 10,500 shares
respectively to Mr. Newman and Mr. Gerstein.
In August 2001, the Company issued 416,667 shares of its common stock to John M.
Moxen upon the conversion of Mr. Moxen's promissory note dated May 25, 2001. For
such offering, the Company relied upon the 506 Exemption and the Florida
Exemption.
In August 2001, the Company issued 50,000 shares of its common stock to each of
Richard Friedman and Jeffrey Markowitz for services in connection with certain
financial advisory services rendered to the Company. For such offering, the
Company relied upon the 506 Exemption and the Florida Exemption.
In August 2001, the Company issued 46,296 shares of its common stock to each of
Gloria Burkholder, Julie Gingrich and Sherry Schrock upon the conversion of
Margaret Schrock's promissory note dated December 5, 2000. For such offering,
the Company relied upon the 506 Exemption, the Florida Exemption and filed
required documents in Iowa pursuant to an exemption from registration.
In September 2001, the Company issued 100,000 shares of its common stock to
Robert Gingras upon the exercise of a warrant to purchase shares of its common
stock at an exercise price of $0.25 per share, for a cumulative purchase price
of $25,000. For such offering, the Company relied upon the 506 Exemption and the
Florida Exemption.
In September 2001, the Company issued 90,000 shares of its common stock to the
Margaret F. Schrock Family Trust upon the exercise of a warrant to purchase
shares of its common stock at an exercise 9 9 price of $0.29 per share, for a
cumulative purchase price of $26,100. For such offering, the Company relied upon
the 506 Exemption and the Florida Exemption.
II-4
In November 2001 we issued the following shares:
Name of Shareholder Number of Shares Consideration
- ------------------- ---------------- -------------
Robert Gingras 300,000 Cash
Frank Clark 23,936 Consulting
Richard Wexler 5,000 Consulting
Steve Scott 5,000 Consulting
For such offerings we relied upon Section 4(2) of the Securities Act, the 506
exemption and applicable state exemptions.
In August, 2002 we issued the following shares in connection with the Equity
Credit Line
Name of Shareholder Number of Shares
- ------------------- ----------------
Howard Salamon 147,826
Mark A. Angelo 266,087
Robert Farrell 266,087
Joseph Donahue 266,087
Matthew Beckman 266,087
Gerald Eicke 133,043
George Kanakis 133,044
With respect to the sale of unregistered securities referenced above, all
transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933 (the "1933 ACT"), and Regulation D promulgated under the
1933 Act. In each instance, the purchaser had access to sufficient information
regarding Bio-One so as to make an informed investment decision. More
specifically, Bio-One had a reasonable basis to believe that each purchaser was
an "accredited investor" as defined in Regulation D of the 1933 Act and
otherwise had the requisite sophistication to make an investment in Bio-One 's
common stock.
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ITEM 27. EXHIBIT NO. DESCRIPTION
3.(i).1 [1] Articles of Incorporation of Bio-One Corporation
filed February 24, 1998.
3.(i).2 [1] Certificate of Amendment of Articles of Incorporation
filed August 7, 2000.
3.(ii).1 [1] Bylaws of Bio-One Corporation
5.1 Opinion re: Legality
10.1 [1] Share Exchange Agreement between the Company and
Dated May 20, 2000.
10.2 [1] Employment Agreement between the Company and Armand
Dauplaise Crown Enterprises dated May 30, 2000
10.3 [2] Equity Line of Credit Agreement between the Company
and Capital Partners, LP dated July 25, 2002
10.4 * Placement Agent Agreement between Bio-One Corp and
Westrock Advisors
10.5 * Registration Rights Agreement between Bio-One
Corporation and Cornell Capital Partners, LLP
10.6 * Escrow Agreement between Bio-One Corporation, Cornell
Capital Partners, L.P. Butler Gonzales LLP and
Wachovia Bank, N.A.
10.7 [3] Agreement between the Company and Kevin Lockhart and
General Release in connection with redemption of
shares and resignation as Board Member
23.1 * Consent of Newman, Pollock & Klein (included in
Exhibit 5.1)
23.2 * Consent of Parks, Tschopp, Whitcomb & Orr, P.A.
(* Filed Herewith)
[1] Incorporated by reference to the Company's Registration Statement filed on
Form 10-SB filed November 3, 2000
[2] Incorporated by reference to the Company's Quarterly report filed on Firm
10-QSB for the period ended June 30, 2002 on August 14, 2002
[3] Incorporated by reference to the Company's Form 8-k filed August 2, 2002.
II-6
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To 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 Sections 10(a)(3) of the
Securities Act of 1933 (the "ACT");
(ii) Reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement;
(iii) Include any additional or changed material information on the
plan of distribution;
(2) That, for the purpose of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer 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 small business issuer 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 Act and
will be governed by the final adjudication of such issue.
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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 this Form SB-2 and authorized this
registration statement to be signed on our behalf by the undersigned, in Winter
Springs, Florida August 26, 2002.
BIO-ONE CORPORATION.
By: /s/ Armand Dauplaise
--------------------------------------
Name: Armand Dauplaise
Title: Chief Executive Officer and President
Pursuant to 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.
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INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
5.1 Opinion re: Legality
10.4 Placement Agent Agreement between Bio-One Corp and
Westrock Advisors
10.5 Registration Rights Agreement between Bio-One
Corporation and Cornell Capital Partners, LLP
10.6 Escrow Agreement between Bio-One Corporation, Cornell
Capital Partners, L.P. Butler Gonzales LLP and
Wachovia Bank, N.A.
23.1 Consent of Newman, Pollock & Klein (included in
Exhibit 5.1)
23.2 Consent of Parks, Tschopp, Whitcomb & Orr, P.A.