As filed with the Securities and Exchange Commission
on September 16, 2003
Registration No. 333-107048
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
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, FL 33431
Tel. (561) 997-9920
Fax (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
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Common stock 50,000,000 $.08 $4,000,000 $323.60
$.001 par value to be
sold by selling shareholders.
- ----------------------------------------------------------------------------------------------
(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 used the average of the closing bid and asked prices on July 10,
2003.
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 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 in which the offer
or sale is not permitted.
2
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION
Dated: September 16, 2003
BIO-ONE CORPORATION 50 MILLION SHARES OF COMMON STOCK
This prospectus relates to the sale of up to 50 million shares of Bio-One's
common stock by Cornell Capital Partners, L.P., which intends to sell up to 50
million shares of common stock to be purchased under an Equity Line of Credit
Agreement dated July 25, 2002.
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 by Cornell Capital at prices
established on the Over-the-Counter Bulletin Board during the term of this
offering. These prices will fluctuate based on the demand for the shares of
common stock. Cornell Capital Partner, L.P. is our only selling shareholder.
Cornell Capital Partners, L.P. intends to sell up to 50 million shares of common
stock to be purchased under an Equity Line of Credit Agreement dated July 25,
2002. 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. an
underwriting discount equal to 5% of each Advance under the Equity Line of
Credit Agreement.
We previously registered, pursuant to an SB-2 Registration Statement (File No.
333-98769) filed in August 2002, a total of 31,521,740 shares of our common
stock, of which 30 million were issued to Cornell Capital Partners, L.P.
("Cornell"). All 31,521,740 of these shares have been issued.
Our common stock is quoted on the Over-the-Counter Bulletin Board maintained by
the NASD under the symbol "BICO". On September 15, 2003 the last reported sale
price of our common stock was $0.10 per share.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. PLEASE REFER
TO "RISK FACTORS" BEGINNING ON PAGE 11.
3
PRICE TO PROCEEDS TO SELLING
PUBLIC* SHAREHOLDERS
Per share $ .08 $ .08
TOTAL $ .08 $4,000,000
===== ==========
* This includes the sale of 50 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 stockholder.
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
stockholder 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 September 16, 2003
4
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY..................................................... 6
THE OFFERING .......................................................... 8
SUMMARY CONSOLIDATED FINANCIAL INFORMATION ............................ 10
RISK FACTORS........................................................... 11
FORWARD-LOOKING STATEMENTS............................................. 20
SELLING STOCKHOLDERS................................................... 22
USE OF PROCEEDS........................................................ 22
DILUTION............................................................... 24
EQUITY LINE OF CREDIT.................................................. 24
PLAN OF DISTRIBUTION................................................... 27
MANAGEMENT'S DISCUSSION AND ANALYSIS................................... 28
DESCRIPTION OF BUSINESS................................................ 32
MANAGEMENT............................................................. 45
DESCRIPTION OF PROPERTY................................................ 48
LEGAL PROCEEDINGS...................................................... 48
PRINCIPAL SHAREHOLDERS................................................. 48
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................... 50
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS............................ 50
DESCRIPTION OF SECURITIES.............................................. 51
EXPERTS ............................................................... 53
LEGAL MATTERS.......................................................... 54
AVAILABLE INFORMATION.................................................. 54
FINANCIAL STATEMENTS................................................... F-1
- --------------------------------------------------------------------------------
We intend to distribute to our shareholders annual reports containing audited
financial statements. Our audited financial statements for the fiscal year
December 31, 2002, 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., who is 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.
5
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.
PROSPECTUS SUMMARY
------------------
The following is only a summary of the information, financial statements and the
notes included in this prospectus. We are providing you with the most recent
information available as of the date of 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
manufacturing, 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. Prior to the
execution of this Agreement and Plan of 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 Agreement and Plan of 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. Prior to
the execution of the Agreement and Plan of Share Exchange, Messrs. Dauplaise and
Lockhart each formerly owned 46% of Crown Enterprises, Inc. 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.
6
Differences arose amongst the Board as to the proper course of action. The
matter was settled pursuant to an agreement dated July 19, 2002, which provided
for the transferring of substantially all of the assets of Crown Enterprises,
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. As a result
of the foregoing, we no longer operate Crown Enterprises.
In September 2003, we acquired substantially all of the assets of Physicians
Nutraceutical Laboratories, Inc, a Florida based company, which develops and
distributes its own line of proprietary brand name nutritional products. These
assets were acquired through our wholly-owned subsidiary, PN Labs, Inc. We have
agreed to pay a royalty of 5% of the net monthly sales for a period of five
years. We have committed $50,000 to be used as working capital and an additional
$1.4 million to develop a marketing program. Funding of the marketing program
will be subject to PN Labs, Inc. meeting certain revenue and profitability
levels. Our sole focus now is to continue 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. The Nutrition Business Journal states that
more than 100 million Americans are taking nutritional supplements and more than
80 million take supplements regularly; U.S. nutritional industry sales are
approaching $50 billion annually. The industry is highly fragmented. By
implementing an acquisition strategy designed to take advantage of operating
efficiencies, and the fragmented nature of the industry, Bio-One hopes to
establish itself in the health and vitamin supplement market.
Despite these promising estimates and the consummation of our first transaction,
we cannot assure you that we will be able to implement this strategy.
- We continue to rely on outside financing to meet our
acquisition strategy.
- We have incurred losses since our inception in excess of $2.49
million.
- Until the acquisition of the assets of Physicians
Nutraceutical Labs, Inc., we relied on the efforts of Armand
Dauplaise, our President and will continue to rely heavily on
his efforts.
- We will not know for at least six months whether we will be
able to operate our wholly owned subsidiary, PN Labs, Inc. on
a profitable basis.
- We will not know if we will be able to successfully integrate
Physicians Nutraceutical Labs, Inc. with other business
acquisitions.
7
Our executive offices will remain our principal place of business, which is
located at 1630 Winter Springs Boulevard, Winter Springs, Florida 32708 and our
telephone number at that address is (407) 977-1005. Our operational headquarters
will be at 321 Northlake Blvd., Suite 110, North Palm Beach, Florida 33408.
THE OFFERING
------------
This offering relates to the sale of common stock by Cornell Capital Partners,
L.P., which intends to sell up to 50,000,000 shares of common stock to be issued
under an Equity Line of Credit Agreement, dated July 25, 2002.
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. has to date
advanced us a total of $1.5 million pursuant to this equity credit line, which
resulted in our issuing 30 million shares of common stock. If we wish to draw
down on any remaining portion of our equity line of credit, we will be required
to issue additional shares of our common stock to Cornell Capital. Cornell
Capital 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 all shares purchased under the Equity Line of Credit at the then
prevailing market price.
In view of the fluctuating conversion price and the current price of our common
stock
- We have not registered a sufficient number of shares of our
common stock to cover the remaining $8.5 million available
under our equity credit line.
- Based on a stock price of $.08, the maximum we will be able to
raise under the equity credit line will be $4 million.
- We would have to sell an additional 75 million shares based on
our current price to raise the entire $8.5 million, even
though under our current articles of incorporation we are
authorized to issue a total of 100 million shares.
- We will require shareholder approval to increase the number of
authorized shares. We may not be able to secure shareholder
approval to authorize additional shares due to the dilutive
affect of the financing arrangement.
- After we have drawn down on our Equity Credit Line and issued
the 50 million shares under this offering, we will have to
file another registration statement in order for us to secure
additional draws.
- Our equity credit line agreement could have an adverse affect
on our ability to use our common stock in connection with any
acquisition. In particular, as we issue additional shares of
common stock under the equity credit line, we may not have a
sufficient number of shares authorized to use our common stock
in connection with an acquisition.
8
COMMON STOCK OFFERED 50 million
OFFERING PRICE Market price
COMMON STOCK OUTSTANDING
BEFORE THE OFFERING (1) 44,553,996 shares
COMMON STOCK OUTSTANDING
AFTER THE OFFERING (2) 94,553,996 shares
USE OF PROCEEDS We will not receive any of the proceeds from the sale
of the stock by Cornell Capital. Our sole source of
funding 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 September 9, 2003.
(2) Assumes that all shares registered by this prospectus are issued under the
equity line of credit.
9
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, 2003 December 31, 2002
(Unaudited) (Audited)
STATEMENT OF OPERATION DATA:
Revenues -0- $ 22,220
Cost of goods Sold -0- $ 9.343
General and administrative expenses $ 149,657 $ 1,069,809
Other Income -0- $ 146,997
Net (loss) $ (152,874) $ (920,447)
Net loss per share - basic and diluted $ (.005) $ (0.07)
BALANCE SHEET DATA:
June 30, 2003 December 31, 2002
(Unaudited) (Audited)
Cash $ 388,176 $ 14,752
Total Current Assets $ 446,428 $ 14,752
Property and Equipment $ 4,752 $ 4,099
Deposits $ 53,500 -0-
Total Assets $ 446,428 $ 18,841
Accounts payable $ -0- $ 124,596
Notes Payable $ 3,208 $ 71,008
Accrued Expenses $ 79,375 $ 111,375
Current Installments of Notes Payable $ 74,502 $ 74,502
Total current liabilities $ 157,085 $ 381,481
Common stock $ 38,604 $ 18,855
Additional paid-in capital $ 2,743,928 $ 1,786,377
Accumulated (deficit) $(2,493.189) $(2,167,872)
Total stockholders' equity $ 289,343 $ (362,640)
10
RISK FACTORS
THE SECURITIES OFFERED ARE HIGHLY SPECULATIVE. YOU SHOULD PURCHASE THEM ONLY IF
YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT IN US. WE ARE PROVIDING YOU WITH
ALL MATERIAL RISK FACTORS. YOU SHOULD CAREFULLY CONSIDER THESE FOLLOWING RISK
FACTORS, AS WELL AS ALL OTHER INFORMATION IN THIS PROSPECTUS.
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 $2,493,189 as of June 30, 2003. We incurred a net loss of
($920,447) or ($.07) per share for the year ended December 31, 2002; a net loss
of ($677,150) or ($.06) per share for the year ended December 31, 2001; and a
net loss per share of ($365,213) or ($.06) for the year ended December 31, 2000.
During the quarter ended June 30, 2003, we had a net loss of ($152,874) or
($.005) per share.
We cannot predict the amount of revenues we will generate as a result of our
acquisition of assets of Physicians Nutraceutical Laboratories, Inc.
Consequently, we will in all likelihood have to rely on external financing for
all of our capital requirements. Future losses are likely to continue unless we
successfully implement our revised business plan which calls for us to secure
both debt and equity financing while aggressively pursuing those companies in
the vitamin and nutritional supplement industry. Once we identify and close on
these acquisitions, we believe that we will be able to significantly reduce our
history of ongoing losses.
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. 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.
11
WE HAVE LIMITED EXPERIENCE WITH THE OPERATIONS OF A BUSINESS
We were unable to generate sufficient revenues from the operation of Crown
Enterprises to operate the Company. We may run into similar problems with
Physicians Nutraceutical Laboratories. Our business strategy will be dependent
on our ability to reverse our continuing losses and become a viable company. We
believe that with our equity credit line and debt financing, we will be able to
successfully expand the operations of PN Labs and identify and close on other
acquisitions. If we are incorrect with this assumption, there is little
likelihood that we will be able to continue our operations.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO FINANCE OPERATIONS
As of the date of this Prospectus, our equity credit line has provided us with a
total of $1.5 million to fund our operations. We received these funds in 2003,
during a period in which we had no revenues. Prior to this year, our officers
and directors advanced us approximately $70,000 in 2002 when our revenues were
approximately $20,000.Such financing has historically come from a combination of
borrowing from third parties and funds provided by certain officers. As of June
30, 2003 we have $388,176 in cash and cash equivalents and current liabilities
totaling $157,085. 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. Unless we
obtain profitable operations, it is unlikely that we will be able to obtain
future financing from external sources. If we are not able to secure any other
financing, or we cannot draw down on our equity credit line, we believe that we
have sufficient funds to continue operations for the next twelve months. 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.
Our inability to obtain adequate financing will result in the need to curtail
business operations and you could lose your entire investment. Any of these
events would be materially harmful to our business and may result in a lower
stock price. 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
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.
12
Prior to this offering, there has been a limited public market for our common
stock and we do not know if an active trading market for our common stock will
develop. As a result, this could adversely affect Cornell Capital and other 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.
During the past three months, we have had days we have traded as few as several
thousand shares and over one million shares. The bid price of our common stock
for the last two years has fluctuated between $.55 and $.031.
THE PRICE OF OUR COMMON STOCK WILL AFFECT OUR ABILITY TO DRAW DOWN ON OUR EQUITY
LINE OF CREDIT
We are dependent upon Cornell Capital and our equity credit line to fund ongoing
operations. We previously registered a total of 31,521,740 shares of common
stock and received advances totaling $1.5 million. 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.
There is an inverse relation between the price of our common stock and the
number of shares of common stock, which will be issued to Cornell. However,
because of our current stock price and the limitation on the number of shares
that we are authorized to issue under our articles of incorporation, we may not
be able to access all funds available under the equity credit line. Unless our
common stock increases in price or we amend our articles of incorporation to
provide for the issuance of additional shares of common stock, we will not have
a sufficient number of shares available to issue to Cornell when we request our
advances. If we cannot secure additional funding sources, we will not be able to
fully implement our business strategy.
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.
13
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.
WE COULD FAIL TO ATTRACT OR RETAIN KEY PERSONNEL
Our success largely depends on the efforts and abilities of Armand Dauplaise,
our President, our consultants and the efforts and abilities of those people who
will work at any company we acquire. Mr. Dauplaise has been instrumental in
securing our existing financing arrangements; He has also spent months searching
for prospective acquisition candidates and undertaking due diligence
investigations. Mr. Dauplaise receives a salary of $120,000 per year plus a car
allowance. 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, if we were able to locate a replacement. Such a loss would also
divert our management attention away from operational issues. We do not
presently maintain a key-man life insurance policy on Mr. Dauplaise. We do not
believe that any individual currently working for Physicians Nutraceutical
Laboratories, Inc. has the ability to replace Mr. Dauplaise and carry on with
any future financing rounds.
As we expand our operation, we will need to retain both managerial and
operational employees. The number of staff will be dependent upon the size of
the acquisition. Their skill level and tasks will be dependent upon the nature
of the acquisition. We believe that we will be able to retain and hire these
employees and offer them competitive salaries.
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,
Specifically, respond to the needs of an operating business
and be able to fully integrate management and controls to the
operation of potentially more than one business;
o Enhance our information systems and operations to respond to
increased demand. Mr. Dauplaise principally relies upon a
laptop computer to handle our business affairs. Mr. Dauplaise
will have to be able to access the information technology of
all acquired companies. With a second or third acquisition, we
will have to make certain that our software systems are
compatible;
14
o Attract and retain qualified personnel; and 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.
THE ISSUANCE OF PREFERRED STOCK MAY ENTRENCH MANAGEMENT OR DISCOURAGE A CHANGE
IN CONTROL
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
preferences, 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, or alternatively, granting the holders of the preferred stock such
rights as to entrench management.
If the holders of our common shares were desirous of removing the current
management, it is possible that the Board could issue the preferred shares and
grant the holders thereof, such rights and preferences as to discourage or
frustrate attempts by the holders of the common stock to remove current
management. In so doing, management would be able to severely limit the rights
of the holders of the common stock to elect the Board of Directors.
WE EXPECT INTENSE COMPETITION IN OUR INDUSTRY
Many of our competitors have significantly greater name recognition and
financial and other resources. As a result, we may face greater difficultly in
implementing our business strategy. We cannot assure you that we will succeed in
the face of strong competition from other nutraceutical companies.
OUR INDUSTRY IS SUBJECT TO GOVERNMENT REGULATION
The manufacturing, processing, formulation, packaging, labeling and advertising
of vitamins and other nutraceutical 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
15
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.
UNCERTAINTY OF TARGETED BUSINESS
Our business strategy is to make business acquisitions. Any acquisitions we make
could disrupt our business and seriously harm our financial condition. 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. If we rely on debt financing, we may not
be able to cover our debt costs. Specifically, the use of debt will allow us to
leverage up our assets. If our projections regarding the acquired company are
correct, revenues from the acquired entity will be sufficient to meet the debt
obligation and finance ongoing operations. However, if our projections are not
correct or, there is an unforeseen market downturn, we may not be able to meet
our debt obligations. This may result in a default and the loss in foreclosure
proceedings of the acquired business or the possible bankruptcy of the business.
The use of debt or leverage will allow us to make acquisitions with an amount of
cash in excess of what may be currently available.
The operation of any acquired business will also involve numerous risks,
including:
o Problems combining the purchased operations, technologies or
products;
o unanticipated costs;
o diversion of management's attention from our core business;
o adverse effects on existing business relationships with
suppliers and customers;
o risks associated with entering markets in which we have
limited prior experience; and
o potential loss of key employees, particularly those of the
purchased organizations.
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.
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INVESTORS SHOULD NOT RELY ON THIS INVESTMENT FOR THE PAYMENT OF CASH DIVIDENDS.
We have not paid any cash dividends on our capital stock and we do not
anticipate paying cash dividends in the future. Any return on an investment will
be the result of appreciation in our stock price, if any. Investors requiring
dividend income should not invest in our company.
THERE ARE NO CONCLUSIVE STUDIES REGARDING THE MEDICAL BENEFITS OF NUTRITIONAL
SUPPLEMENTS
Many of the ingredients in nutritional supplements will be vitamins, minerals,
herbs and other substances for which there is not a long history of human
consumption. Although we believe our products to be safe when taken as directed,
there is little experience with human consumption of certain nutraceuticals of
these product ingredients in concentrated form. Accordingly, we may bring to
market a product which is subsequently determined to be of little nutritional
value or detrimental to your health. Our products, even when used as directed,
may not have the intended affect or prove to be safe for human consumption.
However, because we will be are highly dependent upon consumers' perception of
the safety and quality of the products we will offer, 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, its cost and scope of coverage may limit our decision to
secure such coverage. 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.
17
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. Some
of our shareholders, including Mr. Dauplaise and Mr. Newman are the holders of
"restricted securities". These restricted securities 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.
Upon completion of this offering, and assuming all shares registered in this
offering are resold in the public market, there will be an additional 50 million
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. If we issue all 50 million shares of stock, this
will more than double the number of issued and outstanding shares of common
stock. As a result, our net income per share will likely 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 of the equity
credit line. If our stock price is lower, then our existing stockholders would
experience greater dilution.
THE SELLING STOCKHOLDER INTENDS TO SELL THEIR SHARES OF COMMON STOCK IN THE
MARKET, WHICH SALES MAY CAUSE OUR STOCK PRICE TO DECLINE
The selling stockholder intends to sell in the public market the shares of
common stock being registered in this offering. That means that up to 50 million
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.
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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. The presence of
short sellers may further depress the price of our common stock; Cornell Capital
Partners can cover any short positions only with shares received from us under
the Equity Line of Credit.
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.
THE ISSUANCE OF SHARES OF COMMON STOCK UNDER THIS OFFERING COULD RESULT IN A
CHANGE OF CONTROL
We are registering 50 million shares of common stock in this offering. These
shares represent 50% of our authorized capital stock and would upon issuance
represent approximately 55% of the then 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.
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.
If future scientific research or publicity proves to be unfavorable to the
nutritional supplement market or any particular product, or inconsistent with
earlier favorable research or publicity our future operations may be adversely
affected. 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.
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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 is 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. Once we commence distribution of any product, limited working capital
may prevent us from 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 sales of 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. 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 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" 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, the forward-looking statements contained
in this prospectus may in fact occur.
20
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 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.
21
SELLING STOCKHOLDER
We are registering 50 million shares of our common stock for Cornell Capital
Partners, L.P. under our Equity Line of Credit. The following table presents
information regarding the selling stockholder, Cornell Capital Partners, L.P.,
which has agreed to purchase up to $10.0 million of common stock from us of
which $1.5 million has been purchased to date. No officer or director of Cornell
Capital, the selling stockholder, has never 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.
Percentage of
Outstanding
Shares Shares Shares to be Percentage
Beneficially Beneficially Acquired Ownership
Selling Owned Before Owned Before Under the After
Stockholder Offering Offering (1) Line of Credit Offering
- --------------------------------------------------------------------------------------------------------------
Cornell Capital
Partners, L.P. 1,200,000 2.91% 50,000,000 54.3%
(1) Percentage of outstanding shares is based on 44,553,996 shares of common
stock outstanding as of September 10, 2003 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.
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be offered and
sold from time to time by the selling stockholder. 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).
22
We had previously registered a total of 30 million shares of common stock
pursuant to the Equity Line of Credit and said shares were registered pursuant
to a previously filed registration statement, which was declared effective by
the Securities and Exchange Commission. We received a total of $1.5 million
pursuant to the equity credit line and issued a total of 30 million shares of
our common stock to Cornell. As of June 30, 2003, we had approximately $388,000
in cash or cash equivalents on hand and have utilized the remaining $1,112,000
for the following purposes:
Investment Banking: $171,000
Consultants: $106,000
Legal and Accounting: $130,000
Acquisition Deposits: $ 53,000
Investor Relations: $ 40,000
Repayment of Loan* $ 70,000
Operating Expenses** $542,000
* Represents monies repaid to Mr. Dauplaise pursuant to certain
stockholder loans.
** Includes salaries, taxes, insurance, travel, filing fees, utilities and
related expenses.
If we are able to draw down the remaining $8.5 million, we will receive net
proceeds of approximately $8 million. We will only be able to draw this amount
down if there is a substantial increase in the price of our common stock. Based
on our current stock price, we will only be able to draw down an additional $4
million. These funds will be used to assist with the financing of our targeted
acquisitions. Based on the current price of our common stock, we will not be
able to draw down the entire line of credit. To the extent that funds from the
line of credit are not sufficient, we may rely on debt financing, if available
and on terms acceptable to us.
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.
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DILUTION
The net tangible book value of Bio-One as of June 30, 2003 was approximately
$289,000 or $.0074 per share of common stock based on 38.6 million shares issued
and outstanding. 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 stockholder 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 $0.08 per share. If we assume that Bio-One had issued 50 million shares
of common stock under the Equity Line of Credit at an assumed offering price of
$0.08 per share, less commitment fees and other offering expenses totaling
approximately $200,000, we would receive approximately $3.8 million. Since we
currently have approximately 44 million shares issued and outstanding, and using
the same financial information as of June 30, 2003, our net tangible book value
as of June 30, 2003 would have been approximately $4 million or $4,010,783 or
$0.04259 per share. This represents an immediate increase in net tangible book
value to existing shareholders of approximately $0.0359 per share.
Assumed public offering price per share $0.08
Net tangible book value per share before this offering $0.0074 ($0.0003)
Increase attributable to new investors $0.0359
Net tangible book value per share after this offering $0.0429
EQUITY LINE OF CREDIT
Pursuant to the Equity Line of Credit, we may, at our discretion, periodically
issue and sell shares of our common stock to Cornell Capital with a value of up
to $10 million. We have already received $1.5 million pursuant to this equity
credit line and issued 30 million shares. We are registering an additional 50
million shares and assuming no change in the price of our common stock, we will
receive $4 million in exchange for the issuance of the 50 million shares. Unless
there is a significant increase in the price of our common stock, it is unlikely
that we will be able to utilize the remaining $8.5 available under the credit
line. If we request further advances 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 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.
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We previously registered a total of 30 million shares of our common stock for
Cornell Capital Partners pursuant to a Registration Statement (No 333-98769)
which was declared effective by the Commission. We have issued a total of 30
million shares of common stock pursuant to this equity credit line.
We will not receive any further advances pursuant to the Equity Line of Credit
until this Registration Statement is declared effective by the Securities and
Exchange Commission. Based on our current stock price, we will receive
approximately $4 million out of a total of $8.5 million remaining under the
Equity Line of Credit. We are only authorized to issue 100 million shares of
common stock. Upon issuance of the 50 million shares, we will have approximately
94.5 million shares issued and outstanding. As a result, we have decided to
limit the number of shares to be registered in this Registration Statement to 50
million shares.
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 5 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 $10 million total advance includes $1.5 million previously
advanced plus up to $8.5 million which may be issued as a result of the
effective date of this Registration Statement.) 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.
Based on the current price of our common stock, we do not believe that we will
be able to draw down more than an additional $4 million
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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. Based upon the current
offering price of our common stock, we are not registering a sufficient number
of shares of common stock to draw down on the remaining $8.5 million available
under the equity credit line 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 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 $.10 $0.08 $.05 $.01
Number of Shares required
to draw full draw down
equity line of credit (1)(4): 100 million 125 million 200 million 1 billion
Total Outstanding (2): 144,533,996 169,553,996 244,553,996 1,044,621,586
Percent Outstanding (3): 69.17% 73.72% 81.78% 95.72%
(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.
(4) Our current articles of incorporation do not permit us to issue more than
100 million shares of common stock. As a result, unless there is an amendment to
our articles, we would be unable to entirely draw down on our equity credit line
without a significant increase in the price of our common stock.
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.
26
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. We previously registered a total of 30 million shares of our
common stock, which was issued to Cornell.
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 $200,000
consisting primarily of professional fees incurred in connection with
registering 50 million 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."
PLAN OF DISTRIBUTION
Cornell Capital, the selling stockholder, has advised us that the sale or
distribution of Bio-One's common stock owned by the selling stockholder may be
effected directly to purchasers by the selling stockholder. Cornell Capital may
sell the shares (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 stockholder or by agreement between the selling
stockholder and underwriters, brokers, dealers or agents, or purchasers. If the
selling stockholder effects 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 stockholder 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).
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 5 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. To date, we have issued to Cornell or their
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designees a total of 31,478,261 shares of common stock which includes 30 million
pursuant to our equity credit line and 1,478,261 shares of our common stock
representing a commitment fee of $350,000 payable in common stock to certain
individuals who facilitated our securing the Equity Line of Credit.
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 stockholder that any underwriters, brokers, dealers or
agents effecting transactions on behalf of the selling stockholder 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 stockholder 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 $25,000. We
will not receive any proceeds from the sale of any of the shares of common stock
by the selling stockholder. We will, however, receive proceeds from the sale of
common stock under the Equity Line of Credit.
The selling stockholder 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 stockholder, and that there are restrictions on
market-making activities by persons engaged in the distribution of the shares.
Under Registration M, the selling shareholder 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 shareholder is distributing shares
covered by this prospectus. Accordingly, except as noted below, the selling
shareholder is 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 stockholder 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS
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."
28
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. 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.
We have just begun to implement our strategy with the acquisition of
substantially all of the assets of Physicians Nutraceutical Laboratories, Inc.
These assets were acquired by our wholly-owned subsidiary PN Labs, Inc, which
was formed for the purpose of acquiring the assets of Physicians Nutraceutical
Laboratories, Inc. Based on Physicians Nutraceutical Laboratories, Inc.'s
current product line, we believe that there is potential for significant growth.
Its operations to date have been hampered by limited working capital for both
product development and marketing. Assuming, we secure the required financing,
we believe that this acquisition represents the first step to implementing our
business strategy. We have also identified several other companies, which meet
our earnings criteria and appear to fall within our other acquisition criteria.
No binding letters of intent or definitive agreements have been signed as we
continue our due diligence.
Our first acquisition requires us to pay a royalty and commits us to immediately
use $50,000 for working capital. Up to an additional $1.4 million may be
committed depending on future operating results. To the extent possible, we
intend to use as little cash as possible at closing. Rather, preferring to save
as much capital as possible for ongoing operations. We may use our common stock
to finance an acquisition and retain cash for working capital purposes. The
unaudited numbers for Physicians Nutraceutical Laboratories, Inc. indicate
revenues for 2002 of approximately $800,000. The value of the assets that we
have acquired has been set at approximately $108,000.
However, it is likely that future acquisition candidates 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 additional financing from
29
Cornell Capital Partners or other sources. If we are not able to secure the
additional financing or we are unable to draw down on the entire $10 million in
financing, it is highly unlikely that we will be able to implement our
acquisition strategy. To the extent that we are not able to secure the entire
$10 million in equity financing as a result of our stock price, we have had
discussions with a lender to provide debt financing. If we are successful in
securing debt financing, we believe that the equity credit line combined with
debt financing and our stock will enable us to pursue our acquisition strategy.
RESULTS OF OPERATIONS. Six months ended June 30, 2002 compared to the six months
ended June 30, 2001 and for the fiscal year ended December 31, 2002 as compared
to December 31, 2001.
We had no revenues for the six months ended June 30, 2003 as compared to $22,220
for the six three months ended June 30, 2002 and $22,220 for the twelve months
ended December 31, 2002. Our revenues for the year ended March 31, 2001 were
$82,943. The year 2001 was the last full year of operations of Crown
Enterprises, which engaged in a Microscopy Live Blood Cell Program. We no longer
operate Crown Enterprises and have focused our attention on implementing our new
business model. Our most significant expense is those costs which we have
categorized as selling, general and administrative expenses. These expenses
totaled $325,317 for the six months ended June 30, 2003 as compared to $147,386
during the six months ended June 30, 2002. Selling, general and administrative
expenses totaled $1,069,809 for the year ended December 31, 2002 as compared to
$710,977 and $1,069,809 for the twelve months ended December 31, 2001. Most of
these expenses, approximately $531,000 for the year ended December 31, 2002 are
attributable to non-cash expense items paid to various professionals.
For the year ended 2002, some of the areas which we have identified as selling,
general and administrative expenses include: legal and accounting fees totaling
$104,000, consulting fees payable to Health Business Partners $72,000, fee paid
to Cornell Capital $360,000, consulting fees of $181,000, accrued compensation
during this period totaled $150,700 and salaries totaled $48,092. We incurred a
rental charge of $12,563, auto expenses totaling $28,424, travel and
entertainment, $10,087, filing fees of $15,000 and various other charges
totaling approximately $31,000.
We incurred an operating loss for the six months ended June 30, 2003 of $325,317
as compared to an operating loss of $147,386 for the six months ended June 30,
2002. Net loss for the six months ended June 30, 2003 totaled $325,317 as
compared to a loss of $147,386 during the corresponding prior period. We have
historically operated at a loss as we incurred a net loss of $920,447 as
compared to a net loss of $677,150. We will continue to incur greater losses
unless we successfully implement our marketing plan for PN Labs, Inc. We have
incurred losses since inception of $2,167,872.
Basic and diluted loss per share were $(.01) and $(.01) for the six months ended
June 30, 2003, as compared to a basic and diluted loss per share of $(.07) for
the year ended December 31, 2002 and $(.06) for the year ended December 31,
2001.
30
FINANCIAL RESOURCES AND LIQUIDITY
June 30, 2003 as compared to December 31, 2002 and December 31, 2001
We had cash and other current assets totaling $386,1760 as compared to $14,752
as of December 31, 2002 and $50,928. for December 31, 2001. The significant
increase in our cash position is directly attributable to our decision to draw
down a portion of our equity line of credit with Cornell. We had approximately
$4,752 in property and equipment and $53,500 in deposits as compared to $4,099
and $0 as of December 31, 2002 and furniture and equipment valued at $18,242 net
of depreciation for December 31, 2001. Total assets were $446,428 as compared to
$18,841 as of December 31, 2002 and $70,870 for the year ended December 31,
2001. The $53,500 in deposits was obtained by utilizing our equity credit line.
This fee was paid to Universal Nutrition Corporation in connection with a
planned acquisition, which we have not been able to close upon.
Since establishing our equity credit line, we have been able to draw down the
line to pay off existing payables. For example, between December 31, 2002 and
March 31, 2003 we were able to discharge approximately $124,596 in liabilities
including $63,000 to Health Business Partners, legal fees of $29,000, $16,000
payable to Bernard Shinder, $11,000 in accrued auto expense payable to Mr.
Dauplaise and $4,500 for accrued products. The satisfaction of these liabilities
is directly attributable to our decision to draw down on the equity credit line.
Our total liabilities are approximately $157,085 consisting primarily of $79,375
in accounts payable and $74,502 representing the current installment of notes
payable. This compares to total liabilities for the period ended June 30, 2002
of $381,481 consisting primarily of $124,596 in accounts payable and $111,375 of
accrued expenses. For the year ended December 31, 2001 we had total current
liabilities of $70,870, accounts payable of $0, accrued expenses of $103,375,
stockholder loans of $43,408 and current installments of notes payable of
$74,502. This compares to approximately $381,481 in total liabilities as of
December 31, 2002 which consisted of accounts payable of $124,596, accrued
expenses of $111,375, stockholder loans of $71,008 and $74,502 in current
installments of notes payable.
In the absence of outside financing and without any consideration as to the
financial requirements incurred as a result of our acquisition of PN Labs, we
believe that we have sufficient cash to operate for another twelve months.
In order for us to pursue other acquisitions and reduce our reliance on our
Equity Credit Line, we have signed an agreement with Investors Corporation that
provides for a $10 million Term Loan Facility and a $5 million Revolving Line of
Credit and provides us with greater flexibility in structuring acquisitions.
These funds will be available to us to assist in future acquisitions subject to
Investors Corporation's completion of their due diligence with each transaction.
Investors Corporation has offered us a Secured Revolving Credit Facility and a
Term Loan Facility of up to $15 million. The specific funding requirements will
be based on the acquisition candidate.
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It is contemplated that the Revolving Loan Facility of $5 million will be based
upon up to 85% of the accounts receivable financing and up to 50% of the value
of furnished goods inventory and work in progress.
The $10 million Term Loan Facility contemplates advances of up to $10 million or
90% of net liquidation, net of expense, per appraisal with repayment terms of
any funds advanced under the Term Loan Facility based upon a term of 48 months
with payments monthly at 3% above the prime rate. Investors Corporation may file
first security liens against any funds advanced.
We will incur a fee of 1.5% of any monies advanced with a service fee of $1,000
per month for each month during the term of the agreement. The proposal
submitted by Investors Corporation is not a commitment to lend. Rather, it is
subject to satisfactory completion of any field examinations, which Investors
Corporation deems relevant.
If we choose to utilize this funding, we will incur additional expenses and
reporting obligations. Investors Corporation may require us to maintain a
minimum tangible net worth and provide them with monthly financial reports.
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. Our
success will be dependent on our ability to acquire companies in the nutritional
supplement field and to effectively integrate their operations. Until our
acquisition of Physicians Nutraceutical Laboratories, Inc. in September 2003, we
had no operations, products, customers, suppliers, or marketing and sales
distribution system. With the acquisition of Physicians Nutraceutical
Laboratories, Inc. we now have a total of six employees and we have assumed the
leasehold obligation of Physicians Nutraceutical Laboratories, Inc. 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.
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
32
health and wellness. People want to live well as they live longer. 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. 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. In another study, 27% of household expenditures on Vitamins, Minerals
and Supplements were by people aged over 60.
A related trend is the growth in use of Complementary and Alternative Medicine
Services ("CAM"). 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.
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 large
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
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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 rely on our consultant, Health Business Partners, a leading consultant
in the nutritional supplement field as well as two of our director nominees
Frank Clark and Bernard Shinder for assistance in identifying prospective
acquisition candidates and to conduct any required due diligence. We believe
that companies that are typically family owned and are looking for an exit
strategy or those family owned businesses where there are no family successors
or the successors do not want to operate the business are prime acquisition
candidates.
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. However, market conditions,
the trading price and volume of our common stock as well as the uncertainty of
the nature of any acquisition may limit our ability to finance future
operations.
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.
Physicians Nutraceutical Laboratories, Inc.
Physicians Nutraceutical Laboratories, Inc. is a Florida based company. Its
primary focus to date has been on a broad based product line, which targets some
of the largest groups taking nutritional supplements today. Physicians
Nutraceutical Laboratories, Inc. offers a one-month multi vitamin for $29.95.
The multi-vitamin contains a complete daily nutritional regimen formulated as a
unique scientific blend of 41 vitamins, minerals and herbs essential for proper
nutrition. Daily essential nutritional supplements are made simple to take with
convenient daily packets.
Physicians Nutraceutical Laboratories, Inc. has developed a comprehensive
product line to penetrate the target market of adults with above desirable
cholesterol levels. This product is offered under the Choless product line and
was developed to deliver the needed dietary supplements to support health
cholesterol and cardiovascular functions. Other products within this line
promote weight loss, higher energy and a Choless multi-vitamin. A monthly supply
costs $29.95.
With an aging baby boomer population, people are faced with growing arthritic
problems. Traditional medicines have not provided a satisfactory remedy for
these problems. In order to address these problems Physicians Nutraceutical
Laboratories, Inc. has formulated a product, which combines cartilage building
and repair components with the ingredients to form a natural anti-inflammatory
agent within the body. A monthly supply costs $29.95.
34
PRODUCT RISKS
Although many of the ingredients in the products which we intend to manufacture
and distribute are vitamins, minerals, herbs and other substances which have a
long history of human consumption, a consumer may develop an adverse reaction to
any of these products which could result in a claim against us. 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 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 sell a line of nutritional supplements through our new wholly-owned
subsidiary, PN Labs, Inc. The nutritional supplements address problems with
cholesterol, arthritis and basic vitamin needs. Except for those products, which
we have acquired from Physicians Nutraceutical Laboratories, Inc., we do not
market or sell any other 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 rely on 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 is the most
efficient way to operate.
SOURCES AND AVAILABILITY OF RAW MATERIALS AND PRINCIPAL SUPPLIERS
We will obtain the raw materials for the manufacture of our products from other
sources. 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 any product we choose to
produce. We generally will not have contracts with any entities or persons
35
committing such suppliers to provide the materials required for the production
of our products. Because we do not control the actual production of these raw
materials, we may be 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 including all
natural herbs and minerals are plentiful worldwide.
MARKETING
With the recent acquisition of Physicians Nutraceutical Laboratories, Inc., we
will implement a new marketing strategy. However, until this plan is
implemented, we will continue to rely on the marketing and distribution system
currently in place. The acquisition of Physicians Nutraceutical Laboratories,
Inc's assets was due in part to the ongoing efforts of Armand Dauplaise to
identify potential acquisition candidates and utilize current assets to fund the
acquisition and rely on future funding to expand marketing.
The foregoing discussion is predicated upon us generating significant revenues
and raising additional capital to fully implement our consolidation strategy.
With PN Labs as a base, 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.
The primary markets for our services and products will continue to be 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, we believe 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. Future
scientific research may result in adverse publicity to the nutritional
supplement market. This could seriously affect our operations if we were
distributing that product. 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.
36
DEPENDENCE ON NEW PRODUCTS
Our ability to grow will be dependent upon the success of our acquisition
program as well as our ability to introduce new and innovative products into
such 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. Our efforts to develop
innovative new products may not be successful and customers may not accept new
products, or that we will obtain regulatory approvals of such new products, if
required.
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. 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 greater
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.
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 and promote the use of
37
the Bio-One name. Even if we are successful in obtaining trademarks, we may face
challenges to these trademarks or we may encounter competitors encroaching on
the use of any of these trademarks. Our trademarks may violate the proprietary
rights of others and we may be prevented from using these marks. This 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 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.
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 and as a result, we do not anticipate to incur any compliance costs.
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.
38
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. Should
the FDA amend its guidelines or impose more stringent interpretations of current
laws or regulations, we may not 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 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. The FDA may not 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.
39
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, the FDA may 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
(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. If the FDA adopts GMP regulations specific to dietary supplements, we
may not 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
40
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. We believe that any advertising claims
made by PN Labs are in compliance with these regulations.
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.
We believe that any product or supplement we distribute will be 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. 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
41
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 June 30, 2003, Mr. Dauplaise was our sole officer, director and employee.
We will employ additional personnel as needed. With the acquisition of the
assets of Physicians Nutraceutical Laboratories, Inc., we now have a total of
six employees. 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.)
42
OUR ACQUISITION STRATEGY
We intend to become a vertically integrated company in the nutritional
supplement industry. In furtherance thereof, we believe the acquisition of the
assets of Physicians Nutraceutical Laboratories, Inc. represents only the first
step in our acquisition strategy. 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 may seek to
acquire companies with lower EBITDA or earnings, 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
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 targeted businesses in the nutritional supplement field.
Most likely, these businesses will be located in Florida or the Southeast United
States. Except for Physicians Nutraceutical Laboratories, Inc., we have not as
yet reached an agreement with any other companies.
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:
43
- financial condition and results of operation of the Target
Business;
- 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.
There are currently no limitations relating to our ability to borrow funds to
increase the amount of capital available to us to affect 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.
44
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. 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 63 President/ CEO/ 2000
Irwin Newman 55 Sec/Director/Nominee
Frank Clark 69 Director/Nominee
Bernard Shinder 67 Director/Nominee
Roy Lerman 64 Director/Nominee
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. We intend to hold our annual
shareholders meeting on or about November 20, 2003 at which time our director
nominees will begin to serve their respective terms as directors (if elected).
In the event that we are able to secure officers and directors insurance prior
to this meeting, we expect that the director nominees will begin to serve as
directors at that time. Officers serve at the direction of the Board of
Directors. Mr. Dauplaise devotes his full time and efforts to the operations of
the Company while Mr. Newman devotes only such time and effort as may be needed
to perform his responsibility as an officer.
ARMAND DAUPLAISE has served as an officer and director of our Company since
1999. He has 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 company which was previously operated as
a subsidiary of our company. From 1998-1999 he served as Chief Operating Officer
of Leffler Enterprises, a multi-property restoration business Mr. Dauplaise
served as a franchisee regional marketing coordinator for Burger King
Corporation from 1972-1973. He was a Hardee's restaurant franchisee from
1975-1977 and worked as a sales manager and training coordinator for Hallmark
Cards from 1967-1972.
45
IRWIN NEWMAN serves as our Secretary and has been nominated to serve on our
Board of Directors. Mr. Newman is a practicing attorney in Boca Raton, Florida.
Since 2000, he has been a partner with the Law Firm of Newman & Pollock. He has
also since 1993 served as President and Chief Executive Officer of Jenex
Financial Services, Inc., a financial and consulting firm located in Boca Raton,
Florida. From 1988-1993, Mr. Newman served as Vice President for Boca Raton
Capital Corp.
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. From
1992-2003 he has served as an independent consultant. From 2000 to the present
he served on the Board of Directors of Gensci Corp. From 2001 to the present he
served on the Board of Directors of both 800 Healthy and Advanced Therapeutic
Technology. From 1986 through 1992 he worked as a consultant for Right
Management Consultants. During his vast employment, he also served as an
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. Since 1987 he has served as
president of Bernard Shinder Consultants, Inc. whose clients included Lumonics,
Inc., Gandalf Data Communications Inc., Campeau Corporation, Plastic Engine
Technology Corporation and the River Bank Group.
ROY LERMAN has been nominated to serve on our Board of Directors. He has close
to 40 years of experience in the brokerage business and as a member in good
standing with the American Stock Exchange for more than 30 years. He was one of
the first brokers to execute options spreads on the exchange and lobbied in
Washington to have options listed.
Since the beginning of 2003 he has served on the Board of Directors of Rapid
Technology Group. Since 2001 he has served on the Board of Directors of KBF
Pollution Management. Since 1999 he has served on the Board of Directors of
Balaton Power and since 1998 has served on the Board of Directors of Netvoice
Technologies. He has since 1997 served on the Board of Directors of both
Pinnacle Business Management and Paystar. Mr. Lerman's capabilities include
representing Southwest Securities as its New York Representative and Senior Vice
President in charge of all floor activities on The American Stock Exchange; a
full Partner and Director with SDO Securities since 2000, one of the largest
execution firms headquartered in New York; since 1998 he has been a Partner in
R.I.P. Consultants with offices in New York and Hong Kong; and former Chairman
of the Board for Capital Suisse Securities, an international Brokerage firm. Mr.
Lerman also serves as a director of the following public companies: Pinnacle
Business Management, Paystar, KBF Pollution Management, EHT Software, Balaton
Power, CBQ and Netvoice Technologies
46
Upon assuming their role as directors of the Company, Mr. Clark, Mr. Newman, Mr.
Lerman 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 meeting 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.
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid to or accrued, during
the fiscal years ended December 31, 2003, 2002, 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 ANNUAL COMP LT
AND POST COMP COMP COMP REST COMP LTIP
ALL SALARY BONUS OTHER STOCK OPTIONS PAYOUTS
OTHER $
(1)
Armand 2000 $120,000
Dauplaise,
President 2001 $120,000
and Vice-
Chairman 2002 $120,000
2003 $120,000
Kevin
Lockhart,
Former
Secretary
and Vice- 2000 $120,000
Chairman 2001 $120,000
2002 $ -0-
2003 $ -0-
47
(1) All other compensation includes a car allowance of $350 per month.
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
-----------------------
Our president provides us with our executive office space at no charge at 1630
Winter Springs, Blvd., Winter Springs, Florida 32708. With our acquisition of
certain assets of Physicians Nutraceutical Laboratories, Inc., we assumed their
leasehold obligation located in North Palm Beach, Florida.
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 September 10, 2003 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.
48
- -------------------------------------------------------------------------------------------------------------
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 3,630,000(4) 3,630,000 8.07% 3.84
Irwin Newman
2101 NW Corporate Blvd.
Suite 414
Boca Raton, FL 33431 314,262 614,262(3) * *
Bernard Shinder
6361 Brava Way
Boca Raton, FL 33433 0 300,000(3) * *
Frank Clark
7313 Oakleaf Way
Sarasota, FL 34241 203,041 503,041(3) * *
Cornell Capital Partners, LP
101 Hudson Street
Suite 3606
Jersey City, NJ 07302 1,200,000 51,200,000(2) 2.67% 53.9%
Roy Lerman
Orlando, Florida 110,000 410,000 * *
All Directors and Executive
Officers as a Group 3,944,262 5,457,303(5) 8.8% 5.7%
(two persons currently/five
upon completion)
- -------------------------------------------------------------------------------------------------------------
*Less than 1.00%
We currently have 44,553,996 shares issued and outstanding.
(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
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.
49
(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) Includes 900,000 shares held by wife and children
(5) Assumes the issuance of all shares to director nominees.
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. Later that year Mr. Dauplaise advanced an
additional $55,000, which was repayable with interest at the rate of 5% per
annum. All sums advanced by Mr. Dauplaise have been repaid from monies received
under the equity credit line.
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 forgiveness of accrued salaries
and the redemption of 1,750,000 shares of our common stock 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 July 10, 2003, the closing bid price as
reported by the Electronic Bulletin Board was $0.08. As of July 10, 2003, we
believe there were approximately 1100 holders of record of our common stock.
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.
50
The following table sets forth, for the period indicated, the bid price range of
our common stock.
2001 High Bid Low Bid
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
Quarter Ended September 30, 2002 $0.44 $0.05
Quarter Ended December 31, 2002 $0.12 $0.03
2003
Quarter Ended March 31, 2003 $0.18 $0.04
Quarter Ended June 30, 2003 $0.09 $0.04
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, 44,553,996 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.
51
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.
52
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. With respect to the unaudited financial
information for the period ended March 31, 2003 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 March 31, 2003, 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.
53
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.
54
BIO-ONE CORPORATION
(A Development Stage Company)
TABLE OF CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
Independent Auditor's Report.............................................................................F-1
Financial Statements:
Consolidated Balance Sheets.....................................................................F-2
Consolidated Statements of Operations...........................................................F-3
Consolidated Statements of Changes in Stockholders' Equity (Deficit)............................F-4
Consolidated Statements of Cash Flows...........................................................F-5
Notes to Consolidated Financial Statements...............................................................F-6
FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2003 (UNAUDITED)
Financial Statements:
Balance Sheets..................................................................................F-11
Statements of Operations........................................................................F-12
Statements of Cash Flows........................................................................F-13
Notes to Consolidated Financial Statements...............................................................F-14
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Bio-One Corporation
We have audited the accompanying consolidated balance sheets of Bio-One
Corporation (A Development Stage Company), as of December 31, 2002 and 2001 and
the related consolidated statements of operations, changes in stockholders'
equity (deficit) and cash flows for the years then ended and for the cumulative
period from April 9, 1999 (inception) through December 31, 2002. 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, 2002 and 2001, and the results of their operations and their
cash flows for the years then ended and for the cumulative period from April 9,
1999 (inception) through December 31, 2002, in conformity with accounting
principles generally accepted in the United States of America.
/S/ PARKS, TSCHOPP, WHITCOMB & ORR, P.A.
February 6, 2003
Maitland, Florida
F-1
BIO-ONE CORPORATION
(A Development Stage Company)
Consolidated Balance Sheets
December 31, 2002 and 2001
Assets
------
2002 2001
----------- -----------
Current assets:
Cash $ 14,742 34,103
Accounts receivable -- 1,672
Inventory -- 15,153
----------- -----------
Total current assets 14,742 50,928
----------- -----------
Furniture and equipment 9,426 26,242
Less accumulated depreciation 5,327 8,000
----------- -----------
Net furniture and equipment 4,099 18,242
----------- -----------
Other assets:
Deposits -- 1,700
----------- -----------
$ 18,841 70,870
=========== ===========
Liabilities and Stockholders' Deficit
-------------------------------------
Current liabilities:
Accounts payable $ 124,596 16,037
Notes payable (note 6) 74,502 74,502
Notes payable - shareholder 71,008
Accrued expenses (note 5) 111,375 202,642
----------- -----------
Total current liabilities 381,481 293,181
----------- -----------
Stockholder's deficit:
Common stock ($.001 par value; 100 million shares authorized;
18,854,695 shares at December 31, 2002 and 12,812,086 shares
at December 31, 2001 issued and outstanding) 18,855 12,812
Preferred stock ($.001 par value; 10,000,000
shares authorized; none issued) --
Additional paid-in capital 1,786,377 1,030,988
Accumulated deficit (2,167,872) (1,266,111)
----------- -----------
Total stockholders' deficit (362,640) (222,311)
----------- -----------
$ 18,841 70,870
=========== ===========
See accompanying notes to financial statements.
F-2
BIO-ONE CORPORATION
(A Development Stage Company)
Consolidated Statements of Operations
Years ended December 31, 2002 and 2001, and the cumulative
period from April 9, 1999 (date of inception) through December 31, 2002
Period from
April 9, 1999
(inception) through
2002 2001 December 31, 2002
------------ ------------ ------------------
Revenue:
Product sales $ 22,220 82,943 268,035
Cost of goods sold 9,343 39,698 111,660
------------ ------------ ------------
Gross profit 12,877 43,245 156,375
------------ ------------ ------------
Selling, general and administrative:
Professional fees 903,491 532,409 1,824,449
Salaries 48,092 58,000 316,560
Rent 12,563 27,175 56,438
Other administrative 105,663 93,393 250,534
------------ ------------ ------------
Total selling, general and administrative 1,069,809 710,977 2,447,981
------------ ------------ ------------
Other income (expense):
Interest expense (10,512) (9,418) (23,263)
Other income 146,997 -- 146,997
------------ ------------ ------------
Net loss $ (920,447) (677,150) (2,167,872)
============ ============ ============
Loss per common share:
Basic $ (.07) (.06) (.23)
============ ============ ============
Diluted $ (.07) (.06) (.23)
============ ============ ============
Weighted average number of common shares
outstanding:
Basic 14,052,065 10,653,963 9,376,232
============ ============ ============
Diluted 14,052,065 10,653,963 9,376,232
============ ============ ============
See accompanying notes to financial statements.
F-3
BIO-ONE CORPORATION
(A Development Stage Company)
Consolidated Statements of Changes in Stockholders' Equity
Years ended December 31, 2002, 2001, 2000, and the period from
inception (April 9, 1999) through December 31, 2002
Additional
Common Stock Paid-in Treasury
Shares Amount Capital Stock
------------ ------------ ------------ ------------
Balances, April 9, 1999 -- $ -- -- --
Common stock subscribed 4,564,500 4,565 (1,065) --
Common stock issued for cash 430,000 430 116,570 --
Net loss -- -- -- --
------------ ------------ ------------ ------------
Balances, December 31, 1999 4,994,500 4,995 115,505 --
Common stock issued for cash 450,000 4,500 34,500 --
Common stock issued for services 51,000 510 4,590 --
Common stock subscribed 4,424,500 44,245 (40,745) --
Reverse acquisition 1,700,000 (42,630) 52,130 --
Common stock issued for cash 140,000 140 34,860 --
Stock subscription -- -- -- --
Common stock issued for cash 279,999 280 69,720 --
Common stock issued for services 26,000 26 6,474 --
Shares returned to treasury from founders (2,095,000) (2,095) 2,095 2,095
Cancellation of treasury shares -- -- -- (2,095)
Net loss -- -- -- --
------------ ------------ ------------ ------------
Balances, December 31, 2000 9,970,999 9,971 279,129 --
Common stock issued for cash 600,000 600 149,400 --
Common stock issued for services 795,532 795 261,805 --
Conversion of debt to common stock 555,555 556 99,444 --
Exercise of warrants 890,000 890 241,210 --
Net loss -- -- -- --
------------ ------------ ------------ ------------
Balances, December 31, 2001 12,812,086 12,812 1,030,988 --
Common stock issued for cash 5,404,959 5,405 234,595 --
Common stock issued for services 2,387,650 2,388 520,794 --
Purchase and retirement of shares (1,750,000) (1,750) -- --
Net loss -- -- -- --
------------ ------------ ------------ ------------
Balances, December 31, 2002 $ 18,854,695 18,855 1,786,377 --
============ ============ ============ ============
[RESTUBBED]
Stock
Subscription Accumulated
Receivable Deficit Total
------------ ------------ ------------
Balances, April 9, 1999 -- -- --
Common stock subscribed (3,500) -- --
Common stock issued for cash -- -- 117,000
Net loss -- (223,748) (223,748)
------------ ------------ ------------
Balances, December 31, 1999 (3,500) (223,748) (106,748)
Common stock issued for cash -- -- 39,000
Common stock issued for services -- -- 5,100
Common stock subscribed (3,500) -- --
Reverse acquisition -- -- 9,500
Common stock issued for cash -- -- 35,000
Stock subscription 7,000 -- 7,000
Common stock issued for cash -- -- 70,000
Common stock issued for services -- -- 6,500
Shares returned to treasury from founders -- -- 2,095
Cancellation of treasury shares -- -- (2,095)
Net loss -- (365,213) (365,213)
------------ ------------ ------------
Balances, December 31, 2000 -- (588,961) (299,861)
Common stock issued for cash -- -- 150,000
Common stock issued for services -- -- 262,600
Conversion of debt to common stock -- -- 100,000
Exercise of warrants -- -- 242,100
Net loss -- (677,150) (677,150)
------------ ------------ ------------
Balances, December 31, 2001 -- (1,266,111) (222,311)
Common stock issued for cash -- -- 240,000
Common stock issued for services -- -- 523,182
Purchase and retirement of shares -- -- (1,750)
Net loss -- (901,761) (901,761)
------------ ------------ ------------
Balances, December 31, 2002 -- (2,167,872) (362,640)
============ ============ ============
See accompanying notes to financial statements.
F-4
BIO-ONE CORPORATION
(A Development Stage Company)
Consolidated Statements of Cash Flows
Years ended December 31, 2002 and 2001, and the cumulative
period from April 9, 1999 (date of inception) through December 31, 2002
Period from
April 9, 1999
(inception) through
2002 2001 December 31, 2002
---------- ---------- ------------------
Cash flows used in operating activities:
Net loss $ (901,761) (677,150) (2,167,872)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 2,884 4,871 10,884
Common stock issued for services 523,182 262,600 555,232
Changes in:
Accounts receivable 1,672 258 --
Inventory 15,153 4,748 --
Other assets 1,700 -- --
Accounts payable 108,559 (14,123) 124,596
Accrued expenses (78,936) (826) 111,375
---------- ---------- ----------
Net cash used in operating activities (327,547) (419,622) (1,365,785)
---------- ---------- ----------
Cash flows from investing activities:
Purchase of equipment (2,822) (8,207) (14,983)
---------- ---------- ----------
Net cash used in investing activities (2,822) (8,207) (14,983)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from note payable to stockholder 71,008 -- 71,008
Issuance of common stock 240,000 392,000 1,250,000
Proceeds from issuance of notes payable -- 75,000 199,502
Repayment of principal on notes payable -- (25,000) (125,000)
---------- ---------- ----------
Net cash provided by financing activities 311,008 442,000 1,395,510
---------- ---------- ----------
Net change in cash (19,361) 14,271 14,742
Cash, beginning of period 34,103 19,832 --
---------- ---------- ----------
Cash, end of period $ 14,742 34,103 14,742
========== ========== ==========
Supplemental disclosure of cash flows information:
Cash paid during the period for interest $ 10,512 9,418 23,263
========== ========== ==========
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-5
BIO-ONE CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002 and 2001
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------------
(A) ORGANIZATION
----------------
The accompanying consolidated financial statements include the accounts
of Bio-One Corporation (Bio-One or the Company) and its wholly owned
subsidiary, Crown Enterprises, Inc. (Crown). 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 had developed a complete line of
naturopathic and nutritional supplement products that could be
recommended to address the specific conditions identified by Crown's
Microscopy "Live Blood Cell Analysis" Program. Crown's "sell through"
concept coupled with its Microscopy Program and full line of
naturopathic products placed Crown in the forefront of the preventative
and alternative healthcare 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 its 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.
In June 2002, Bio-One disposed of Crown's "Live Blood Cell Analysis"
Program, by purchasing the common stock of a former
shareholder/director. The Company's total focus is on vertically
integrating manufacturing and marketing acquisitions within the
nutritional supplements industry.
Continued)
F-6
BIO-ONE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
--------------------------------------------------------------
(A) ORGANIZATION - (CONTINUED)
------------------------------
In July 2002, the Company signed an agreement with Cornell Capital
Partners, LP for a $10,000,000 Equity Line of Credit investment.
Cornell Capital is a domestic hedge fund, which makes investments in
small-to-mid-sized publicly traded companies. Under the Equity Line
Agreement, Bio-One has the right, but not the obligation to require
Cornell Capital to purchase shares of Bio-One common stock up to a
maximum amount of $10,000,000 over a 24-month period commencing
September 3, 2002. There is no minimum draw down although Bio-One may
make draws, as provided below, during the term of the Equity Line. The
purchase price of the shares will be 100% of the lowest closing bid
price of Bio-One common stock during the six consecutive trading days
immediately following receipt of the Company's notice of its intent to
make an Equity Line draw, which notice may be withdrawn by the Company.
Bio-One paid Cornell Capital a one-time fee equal to $350,000, payable
in 1,478,261 shares of restricted common stock. Cornell Capital is
entitled to retain 5% of each Equity Line advance.
In August 2002 the Company filed a SB-2 Registration Statement with the
SEC and registered 30,000,000 shares of common stock for the purpose of
raising equity capital. On September 3, 2002 the SEC declared the
registration statement effective.
Operations of the Company through the date of these financial
statements have been devoted primarily to identification and targeting
of acquisition candidates, raising capital and administrative
activities.
The Company's revenues will be generated with vertically integrating
manufacturing and marketing acquisitions within the nutritional
supplements industry. The Company is prepared to launch its business
plan upon completion of its capitalization.
(B) REVENUE RECOGNITION
-----------------------
The principal sources of revenues are derived from product sales.
Revenue from product sales is recognized when the product is shipped.
(C) INVENTORY
-------------
Inventory consists of nutritional supplement products, which are valued
at the lower of cost or market on first-in, first-out basis.
(Continued)
BIO-ONE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
--------------------------------------------------------------
(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-7
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, 2002, the Company had a net operating loss carryforward
for income tax purposes of approximately $2,000,000, 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-8
BIO-ONE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) BASIC LOSS PER COMMON SHARE
---------------------------
Basic loss per common share has been computed based upon the weighted
average number of common shares outstanding during the period
presented.
(4) COMMITMENTS
-----------
The Company has entered into an employment agreement with its founding
director requiring aggregate annual salaries of $120,000 beginning in
April 1999. At December 31, 2002 and 2001, $111,375 and $202,642,
respectively, remained to be paid.
(5) NOTES PAYABLE
-------------
Note payable to bank, bearing interest at the rate of 9%, due March 1,
2003, collateralized by accounts receivable and inventory. $ 74,502
========
(6) STOCK BASED COMPENSATION
------------------------
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, 2002 and 2001.
F-9
BIO-ONE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) SUBSEQUENT EVENTS
-----------------
In January 2003 Cornell Capital Partners, LP advanced $500,000 under
the terms of the Equity Line Agreement with the shares to be valued and
issued in twelve puts over a period of 125 days. The Company issued 5
million shares of common stock in connection with this financing. The
shares are being held in escrow subject to pricing.
In January 2003 the Company signed a term sheet with Investors
Corporation for a $10,000,000 Term Loan Facility and a $5,000,000
Revolving Credit Facility. Closing is scheduled within 45 days after
completion of the due diligence. The funds will be used for closing on
a series of scheduled acquisitions.
F-10
BIO-ONE CORPORATION
BALANCE SHEETS
ASSETS
------
JUNE 30, 2003 DECEMBER 31,
(UNAUDITED) 2002
----------- -----------
Current assets:
Cash and cash equivalents $ 388,176 14,742
----------- -----------
Total current assets 388,176 14,742
Property and equipment, at cost, net of accumulated
depreciation and amortization 4,752 4,099
Deposits 53,500 --
----------- -----------
Total assets $ 446,428 18,841
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ -- 124,596
Accrued expenses 79,375 111,375
Stockholder loans 3,208 71,008
Current installments of note payable 74,502 74,502
----------- -----------
Total current liabilities 157,085 381,481
----------- -----------
Shareholders' equity:
Common stock - $.001 par value, authorized 100 million
shares; issued 38,603,994 shares and 18,854,695 shares 38,604 18,855
Additional paid in capital 2,743,928 1,786,377
Accumulated deficit (2,493,189) (2,167,872)
----------- -----------
Total shareholders' equity 289,343 (362,640)
----------- -----------
$ 446,428 18,841
=========== ===========
See accompanying notes to financial statements.
F-11
BIO-ONE CORPORATION
STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ------------
Revenues:
Net sales $ -- 1,500 -- 22,220
------------ ------------ ------------ ------------
-- 1,500 -- 22,220
Costs and expenses:
Cost of goods sold -- 434 -- 9,343
Selling, general and administrative 149,657 142,771 317,318 305,509
------------ ------------ ------------ ------------
149,657 143,205 317,318 314,852
------------ ------------ ------------ ------------
Operating income (loss) (149,657) (141,705) (317,318) (292,632)
Non-operating revenue (expense):
Other Income -- 146,996 -- 146,996
Interest expense (3,217) (590) (7,999) (1,750)
------------ ------------ ------------ ------------
Loss before income taxes (152,874) 4,701 (325,317) (147,386)
Provision for income taxes -- -- -- --
------------ ------------ ------------ ------------
Net loss $ (152,874) 4,701 (325,317) (147,386)
============ ============ ============ ============
Basic loss per share $ (0.005) -- (0.01) (0.01)
============ ============ ============ ============
Diluted loss per share $ (0.005) -- (0.01) (0.01)
============ ============ ============ ============
Weighted average number of shares outstanding 33,055,380 12,812,086 28,729,344 12,812,086
============ ============ ============ ============
See accompanying notes to financial statements.
F-12
BIO-ONE CORPORATION
STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
2003 2002
(UNAUDITED) (UNAUDITED)
--------- ---------
Cash flows from operating activities:
Net loss $(325,317) (147,386)
Adjustments to reconcile net income to net cash
provide by operating activities:
Depreciation and amortization 5,327 1,000
Common stock issued for services 27,300 --
Changes in operating assets and liabilities:
Accounts receivable -- 1,672
Inventories -- 15,153
Accounts payable and accrued expenses (156,596) 83,011
Other assets (53,500) (450)
--------- ---------
Net cash used in operating activities (502,786) (47,000)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment (5,980) --
--------- ---------
Net cash used in investing activities (5,980) --
--------- ---------
Cash flows from financing activities:
Purchase of treasury stock -- (1,750)
Proceeds from sale of common stock 950,000 --
Payment of principal on shareholder loans (67,800) --
Proceeds from note payable -- 15,000
--------- ---------
Net cash provided by financing activities 882,200 13,250
--------- ---------
(Decrease) increase in cash and cash equivalents 373,434 (33,750)
Cash and cash equivalents - beginning of period 14,742 34,103
--------- ---------
Cash and cash equivalents - end of period $ 388,176 353
========= =========
See accompanying notes to financial statements.
F-13
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, 2003 and results
of operations and cash flows for the six-month periods ended June 30,
2003 and 2002. 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.
F-14
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 $ 324
Printing and Engraving Expenses $ 100
Accounting Fees and Expenses $ 500
Legal Fees and Expenses $ 20,000
Blue Sky Qualification Fees and Expenses $ 1,000
Miscellaneous $ 3,000
TOTAL $ 24,924
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 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.
II-1
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. These shares were issued for
services rendered. 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,
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.
II-2
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.
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.
II-3
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 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.
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. These shares were issued in consideration for the $350,000
placement fee as called for under the equity credit line at the instruction of
Cornell.
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
We also issued 43,759 shares to Westrock Advisors in connection with a placement
agent agreement.
In October 2002 we issued shares to the following individuals for services
rendered:
II-4
Name of Shareholder Number of Shares
Irwin Newman 31,090
Jeffrey Gerstein 3,450
Gary Whorle 10,000
In December 2002 we issued 110,000 shares to Roy Lerman for consulting services.
During October 2002 to July 2003 we issued the following shares:
Name of Shareholder Date Acquired Number of Shares
Cornell Capital Partners Various 30,000,000
Irwin Newman 01/03 73,045
Jeffrey Gerstein 01/03 8,115
Frank Clark 02/03 179,105
Scott Sieck 02/03 141,000
Except for the shares issued to Cornell Capital, all other shares were issued
for consulting services.
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.
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
II-5
10.1 [1] Share Exchange Agreement between the Company and Crown Enterprises
Dated May 20, 2000.
10.2 [1] Employment Agreement between the Company and Armand Dauplaise
Dated May 30, 2000
10.3 * Equity Line of Credit Agreement between the Company and Capital
Partners, LP Dated July 25, 2002
10.4 [4] Placement Agent Agreement between Bio-One Corp and Westrock
Advisors
10.5 [5} Registration Rights Agreement between Bio-One Corporation and Cornell
Capital Partners, LLP
10.6 [4] 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
10.8 * Investors Corp. Term Sheet for Financing
10.9 * Acquisition Agreement between PN Labs, Inc. and Physicians
Nutraceutical Laboratories, Inc.
10.10 * Agreement to provide consulting services with Health Business Partners
23.1 [5] Consent of Newman, Pollock & Klein
23.2 [5] 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
[4} Incorporated by reference to the Company's Form SB-2 Registration
Statement filed August 27, 2002
[5] Incorporated by reference to the Company's Form SB-2 Registration
Statement filed July 15, 2003
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 remains 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.
II-7
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-2A-1 and authorized this
registration statement to be signed on our behalf by the undersigned, in Winter
Springs, Florida September 16, 2003.
BIO-ONE CORPORATION.
By: /s/ Armand Dauplaise
- --------------------------------------
Name: Armand Dauplaise
Title: President/ Chief Executive Officer/Chief Financial Officer
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.
II-8