SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
__________________
Date of Report: SEPTEMBER 11, 2003
------------------
BIO-ONE CORPORATION
-------------------
(Exact Name of Registrant as Specified in Charter)
NEVADA 000-31889 65-0815746
------ --------- ----------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1630 WINTER SPRINGS BOULEVARD, WINTER SPRINGS, FLORIDA 32708
- ------------------------------------------------------ -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (407) 977-1005
--------------
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 11, 2003, Bio-One Corporation, a Nevada corporation
("Bio-One"), entered into an Asset Purchase and Sale Agreement (the "Purchase
Agreement") among Bio-One, PNLabs, Inc., a Nevada corporation and wholly-owned
subsidiary of Bio-One ("PNLabs") and Physicians Nutraceutical Laboratories,
Inc., a Florida corporation ("Physicians Nutraceutical"). Pursuant to the
Purchase Agreement, PNLabs purchased the assets of Physicians Nutraceutical,
which included inventory, accounts receivable, office furniture, the rights to
the five (5) products marketed by Physicians Nutraceutical and all rights to the
operational business of Physicians Nutraceutical. The consideration given for
the purchase of the assets of Physicians Nutraceutical was a five-year, 5%
royalty on all monthly net sales of PNLabs.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Bio-One is filing the financial statements required by Regulation S-X
as a result of the purchase of the assets of Physicians Nutraceutical.
(A) FINANCIAL STATEMENTS
Attached herewith.
(B) PRO FORMA FINANCIAL INFORMATION
Attached herewith.
(C) EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
Exhibit 16.1 Asset Purchase and Sale Agreement, dated September 11, Provided herewith
2003, by and among Bio-One, PNLabs, Inc. and
Physicians Nutraceutical Laboratories, Inc.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BIO-ONE CORPORATION
Date: January 7, 2004 By: /s/ Armand Dauplaise
---------------------------------------------
Name: Armand Dauplaise
Its: President, Chief Executive Officer,
Principal Accounting Officer and Director
3
PHYSICIANS NUTRACEUTICAL LABORATORIES
FINANCIAL STATEMENTS AS OF JULY 31, 2003
PHYSICIANS NUTRACEUTICAL LABORATORIES
UNAUDITED INTERIM FINANCIAL STATEMENTS
JULY 31, 2003
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
Balance Sheet
July 31, 2003 and 2002
Assets
------
2003 2002
----------- -----------
Current assets:
Cash $ 1,757 6,884
Accounts receivable 17,735 34,647
Inventory 70,119 51,006
----------- -----------
Total current assets 89,611 92,537
----------- -----------
Property and equipment, net (note 3) 19,806 33,064
Other assets 4,202 18,752
----------- -----------
$ 113,619 144,353
=========== ===========
Liabilities and stockholders' (deficit)
---------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 389,685 260,947
Due to affiliate 321,346 189,600
Note payable, officer (note 4) 607,416 548,726
----------- -----------
Total current liabilities 1,318,447 999,273
----------- -----------
Stockholders' (deficit):
Preferred stock, Series A convertible, $.001 par value,
10,000,000 shares authorized, 514,162 shares issued
and outstanding 514 514
Preferred stock, undesignated, 9,000,000 shares authorized -- --
Common stock, $.001 par value, 100,000,000 shares
authorized, 2,925,848 shares issued and outstanding 2,926 2,926
Additional paid-in capital 2,728,124 2,728,124
Accumulated (deficit) (3,936,392) (3,586,484)
----------- -----------
(1,204,828) (854,920)
----------- -----------
$ 113,619 144,353
=========== ===========
See accompanying note to the financial statements.
F-1
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
Statement of Operations
For the seven months ended July 31, 2003 and 2002
2003 2002
----------- -----------
Revenue $ 505,089 514,134
----------- -----------
Operating expenses:
Cost of sales 197,901 169,266
Selling, general and administrative expenses 522,343 379,147
----------- -----------
720,244 548,413
----------- -----------
Net (loss) $ (215,155) (34,279)
=========== ===========
Per share information - basic and fully diluted:
Weighted average shares outstanding 2,925,848 2,925,848
=========== ===========
Net (loss) per share $ (0.07) (0.01)
=========== ===========
See accompanying notes to the financial statements.
F-2
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
Statements of Cash Flows
For the seven months ended July 31, 2003 and 2002
2003 2002
--------- ---------
Net (loss) $(215,155) (34,279)
Adjustment to reconcile net (loss) to net cash
(used in) operating activities:
Depreciation 6,061 6,679
Changes in operating assets and liabilites:
Accounts receivable (4,611) (1,923)
Inventory (54,205) 8,706
Prepaid expenses 15,000 64,800
Other assets (2,950) (6,971)
Accounts payable and accrued expenses (156,169) (164,219)
--------- ---------
Net cash (used in) operating activities (412,029) (127,207)
--------- ---------
Cash flows from financing activities:
Proceeds from amounts due to affiliate (7,251) (150,839)
Payments, notes payable - officer 418,972 356,573
--------- ---------
Net cash provided by financing activities 411,721 205,734
--------- ---------
Net (decrease) increase in cash (308) 78,527
Beginning - cash balance 2,065 85,411
--------- ---------
Ending - cash balance $ 1,757 6,884
========= =========
Supplemental cash flow information:
Cash paid for income taxes $ -- --
========= =========
Cash paid for interest $ -- --
========= =========
Supplemental schedule of non cash investing and financing activity: During the
year end December 31, 2002, the Company and NSS agreed to convert $20,748
of previous capital contributions to advance from affiliate.
See accompanying notes to the financial statements.
F-3
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
July 31, 2003 and 2002
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
(A) ORGANIZATION
------------
The Company was incorporated on October 26, 1999 in the State of
Florida and is in the business of marketing and distributing
nutritional products.
The Company had been a wholly owned subsidiary of Nutrition
Superstores.com, Inc. ("NSS"). During February 2001 the Company agreed
to issue to NSS 2,898,348 shares of common stock and 440,416 shares of
preferred stock. The issuance was conditioned upon NNS's approval of a
spin off of the Company to the shareholders of NSS, which was also
approved in February 2001 (see note 5).
(B) REVENUE RECOGNITION
-------------------
The Company recognizes revenue when its products are shipped or
services are provided.
(C) PRODUCT DEVELOPMENT COSTS
-------------------------
The Company's web site will comprise multiple features and offerings
that are currently under development, and it is anticipated that the
offerings will require future development and refinement. In connection
with the development of its products, the Company will incur external
costs for hardware, software, and consulting services, and internal
costs for payroll and related expenses of its technology employees
directly involved in the development. All hardware costs will be
capitalized. Purchased software costs will be capitalized in accordance
with Statement of Position 98-1 Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. All other costs will
be reviewed for determination of whether capitalization or expense as
product development cost is appropriate.
(D) INVENTORY
---------
Inventory, which consists principally of finished goods, is stated at
the lower of cost or market using the first-in, first-out method.
F-4
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
July 31, 2003 and 2002
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
-----------------------------------------------------------
(E) PROPERTY, EQUIPMENT AND DEPRECIATION
------------------------------------
Property and equipment are stated at cost. Depreciation is calculated
using the straight-line method over the following estimated useful
lives:
YEARS
-----
Equipment 5
Furniture and fixtures 5
Automotive equipment 5
(F) CASH AND CASH EQUIVALENTS
-------------------------
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
(G) ADVERTISING COSTS
-----------------
The Company expenses all costs of advertising as incurred. Advertising
costs included in selling, general and administrative expenses
aggregated $144,096 for the seven months ended July 31, 2003.
(H) FINANCIAL INSTRUMENTS
---------------------
Fair value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management as of
July 31, 2003. The respective carrying value of certain
on-balance-sheet financial instruments approximated their fair values.
These financial instruments include, cash, accounts receivable,
accounts payable and accrued expenses and notes payable. Fair values
were assumed to approximate carrying values for these financial
instruments because they are short term in nature and their carrying
amounts approximate fair values or they are receivable or payable on
demand. The fair value of the Company's long-term debt is estimated
based upon the quoted market prices for the same or similar issues or
on the current rates available to the Company for debt of the same
remaining maturities.
F-5
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
July 31, 2003 and 2002
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
----------------------------------------------------------------------
(I) LONG-LIVED ASSETS
-----------------
The carrying value of long lived assets is reviewed on a regular basis
for the existence of facts and circumstances that suggest impairment.
To date, no such impairment has been indicated. Should there be an
impairment in the future, the Company will measure the amount of the
impairment based on the undiscounted expected future cash flows from
the impaired assets.
(J) NET INCOME (LOSS) PER COMMON SHARE
----------------------------------
The Company calculates net income (loss) per share as required by
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
per share." Basic earnings (loss) per share is calculated by dividing
net income (loss) by the weighted average number of common shares
outstanding for the period. Diluted earnings (loss) per share is
calculated by dividing net income (loss) by the weighted average number
of common shares and dilutive common stock equivalents outstanding.
During periods when they are anti dilutive common stock equivalents, if
any, are not considered in the computation.
(K) USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
F-6
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
July 31, 2003 and 2002
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
-----------------------------------------------------------------------
(L) INCOME TAXES
------------
The Company follows SFAS 109, "Accounting for Income Taxes" for
recording the provision for incomes taxes. Deferred tax assets and
liabilities are computed based upon the difference between the
financial statement and income tax basis of assets and liabilities
using the enacted marginal tax rate applicable when the related asset
or liability is expected to be realized or settled. Deferred income tax
expenses or benefits are based on the changes in the asset or liability
each period. If available evidence suggests that it is more likely than
not that some portion or all of the deferred tax assets will not be
realized, a valuation allowance is required to reduce the deferred tax
assets to the amount that is more likely than not to be realized.
Future changes in such valuation allowance are included in the
provision for deferred income taxes in the period of change.
(M) DEFERRED OFFERING COSTS
-----------------------
The Company defers costs associated with the raising of capital until
such time as the offering is completed, at which time the costs are
charged against the capital raised. Should the offering be terminated
the costs are charged to operations during the period when the offering
is terminated.
(N) STOCK BASED COMPENSATION
------------------------
The Company accounts for equity instruments issued to employees for
services based on the fair value of the equity instruments issued and
accounts for equity instruments issued to other than employees based on
the fair value of the consideration received or the fair value of the
equity instruments, whichever is more reliably measurable.
The Company accounts for stock based compensation in accordance with
SFAS No. 123, "Accounting for Stock-Based Compensation." The provisions
of SFAS No. 123 allow companies to either expense the estimated fair
value of stock options or to continue to follow the intrinsic value
method set forth in Accounting Principles Board (APB) Opinion 25,
"Accounting for Stock Issued to Employees" but disclose the pro forma
effects on net income (loss) had the fair value of the options been
expensed. The Company has elected to continue to apply APB 25 in
accounting for its stock option incentive plans.
F-7
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
July 31, 2003 and 2002
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
-----------------------------------------------------------------------
(O) 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 July 31, 2003 and results
of operations and cash flows for the seven month period ended July 31,
2003. 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) BASIS OF PRESENTATION
---------------------
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern which contemplates the
recoverability of assets and the satisfaction of liabilities in the
normal course f business. The Company incurred net losses during the
seven months ended July 31, 2003 of $215,155. In addition, the Company
has a working capital deficit of $1,228,836 and a stockholders' deficit
of $1,204,828 at July 31, 2003.
The ability of the Company to continue as a going concern is dependent
upon its ability to raise additional capital from the sale of common
stock and the achievement of profitable operations. The Company is in
the process of attempting to raise additional equity capital through a
private placement.
The accompanying financial statements do not include any adjustment
that might be required should the Company be unable to recover the
value of its assets or satisfy its liabilities.
F-8
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
July 31, 2003 and 2002
(3) PROPERTY AND EQUIPMENT
----------------------
Property and equipment consists of the following at July 31, 2003 and
2002:
2003 2002
------- -------
Furniture and fixtures $ 8,031 8,031
Equipment 17,890 31,751
Automotive equipment 23,472 23,472
------- -------
49,393 63,254
Less: accumulated depreciation 29,587 30,190
------- -------
$19,806 $33,064
======= =======
Depreciation expense charged to operations was $6,061 during the seven
months ended July 31, 2003.
(4) Notes Payable - Officer
-----------------------
At December 31, 2003 and 2002 note payable - officer consisted of the
following:
2003 2002
---- ----
Notes payable with interest at 5% per annum,
due on demand or if demand is not made, on
December 31, 2003 $ 607,416 548,726
========= =======
(5) Stockholders' (Deficit)
-----------------------
PREFERRED STOCK
---------------
The Board of Directors has authorized the issuance of 1,000,000 shares
of $.001 par value convertible preferred stock designated as Series A.
Commencing on June 1, 2001 the holders of Series A shall be entitled to
an 8.75% annual non-cumulative dividend in cash or at the option of the
Company shares of the Company's common stock. No dividends were
declared by the board of directors for the year ended December 31,
2002. Each share of Series A shall be convertible into common stock at
the conversion price of 1/3 of the initial public offering price of the
Company's common stock, provided however, that in the event the Company
does not complete a public offering the Series A will be convertible at
$5 per share but only at the expiration date of the Series A on May 31,
2004.
F-9
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
July 31, 2003 and 2002
(5) STOCKHOLDERS' (DEFICIT) (CONTINUED)
-----------------------------------
SHARE ISSUANCE
--------------
During February 2001 in exchange for the 100,000 common shares held by
the Parent the Company agreed to issue to its Parent 2,898,348 shares
of common stock and 440,416 shares of preferred stock. The issuance was
conditioned upon the Parent's approval of a spin off of the Company to
the shareholders of the Parent, which was approved in February 2001.
All share and per share amounts have been retroactively restated to
reflect the issuance.
STOCK BASED COMPENSATION
------------------------
The Company agreed to issue options to purchase 27,500 shares of common
stock at an exercise price of $2.00 per share and options to purchase
35,000 shares at an exercise price of $5.00 per share.
The Company accounts for stock-based compensation plans by applying APB
25 and related interpretations. Under APB 25, because the exercise
price of the Company's employee stock options approximates or exceeds
the market price of the underlying stock at the date of grant, no
compensation cost is recognized.
SFAS 123 requires the Company to provide pro forma information
regarding net income and earnings per share as if compensation cost for
the Company's stock option plans had been determined in accordance with
the fair value based method prescribed in SFAS 123. The fair value of
the option grants is estimated on the date of grant utilizing the
minimum value method with the following weighted average assumptions
for grants during the years ended December 31, 2001 and 2000; expected
life of options of 10 years, expected volatility of 0%, risk-free
interest rate of 1.5% and no dividend yield. The weighted average fair
value at the date of grant for options granted during the years ended
December 31, 2001 and 2000 was $0.00.
Under the provisions of SFAS 123, the Company's net loss and loss per
share would not have been effected.
F-10
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
July 31, 2003 and 2002
(5) STOCKHOLDERS' (DEFICIT) (CONTINUED)
-----------------------------------
STOCK BASED COMPENSATION (CONTINUED)
------------------------------------
A summary of stock option activity is as follows:
Number Of Weighted-Average Weighted-Average
Shares Exercise Price Fair Value
------- -------------- ---------------
Balance at December 31, 2001 62,500 $ 3.65 $ --
Granted in current year -- -- --
------- ------- -------
Balance at December 31, 2002 62,500 $ 3.65 $ --
======= ======= =======
The following tables summarizes information about fixed-price stock
options at December 31, 2002:
OUTSTANDING EXERCISABLE
----------- -----------
Weighted-Average Weighted-Average
Exercise Number Contractual Weighted-Average Number Exercise
Price Outstanding Life Exercise Price Exercisable Price
------------- ----------------- ---------------- ---------------- ---------------- --------------
$5.00 35,000 8 years $5.00 27,000 $5.00
$2.00 27,500 9 years $2.00 -- $2.00
(6) INCOME TAXES
------------
At December 31, 2002, the Company had a net operating loss carryforward
for income tax purposes of approximately $3,600,000, 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-11
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
July 31, 2003 and 2002
(7) COMMITMENTS AND CONTINGENCIES
-----------------------------
EMPLOYMENT CONTRACT
-------------------
During January 2001, the Company entered into an employment contract
with its vice president of marketing, which provides for a salary of
$80,000 for 2001 and $125,000 in 2002, and 10,000 options to purchase
the Company's common stock (see note 5). The contract may be terminated
upon 90 days notice.
PRODUCT DISTRIBUTION AGREEMENT
------------------------------
During November 2001, the Company entered into a three year exclusive
agreement for distribution of substantially all of its products to the
mass retail outlets in the United States, Puerto Rico Guam and the U.S.
Virgin Islands. This agreement is renewable for a one year period
provided that the distributor purchases at least $4,000,000 in product
during the final year of the initial three year term and for additional
one year periods provided that the distributor purchases at least
$4,000,000 in product adjusted for price increases by the Company
during the proceeding one year term. In addition, the Company has
agreed to issue three year warrants to purchase its common stock should
the distributor pre pay for an order. For each advance payment the
Company will issue the number of warrants determined by multiplying the
amount of the advance by 7.5% and dividing by 4 and then dividing by
the exercise price of the warrants. The resulting number will then be
multiplied by 150%. The exercise price of the warrants is $1.50. During
December 2001, the distributor prepaid an order in the amount of
$244,020 and received 4,576 warrants, which expire during December
2004. This amount was recognized as revenue in January 2002. In
conjunction with this order the Company advanced its supplier $64,800
for product to be delivered to the distributor. Had the Company
computed the value of the warrants issued in accordance with the
provisions of SFAS No. 123 there would be no change in the reported net
loss or loss per share.
(8) RELATED PARTY TRANSACTIONS
--------------------------
During 2002 the Company's president was not paid the salary due to him
aggregating $120,000. The total unpaid salary due to this officer
amounts to $252,000 and is included in accrued expenses in the
accompanying balance sheet.
In addition, through December 31, 2002 NSS made working capital
advances aggregating $328,597 to the Company. These amounts are
included in amounts due to affiliate in the accompanying balance sheet.
F-12
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 2002
INDEPENDENT AUDITORS' REPORT
----------------------------
Shareholders and Board of Directors
Physicians Nutraceutical Laboratories, Inc.
We have audited the accompanying balance sheet of Physicians
Nutraceutical Laboratories, Inc. as of December 31, 2002 and the
related statements of operations, stockholders' (deficit) and cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
Except as discussed in the following paragraph, we conducted our audit
in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
Because we were not engaged as auditors until after December 31, 2001,
we were not present to observe the physical inventory taken at that
date and we were unable to satisfy ourselves regarding inventory
quantities by means of other audit procedures. The amount of inventory
at December 31, 2001 (stated as $59,712), materially affects the
determination of the results of operations and cash flows for the year
ended December 31, 2002.
Because of the matter discussed in the preceding paragraph, the scope
of our work was not sufficient to enable us to express, and we do not
express, an opinion on the results of operations and cash flows for the
year ending December 31, 2002.
In our opinion, the balance sheet of Physicians Nutraceutical
Laboratories, Inc. as of December 31, 2002, presents fairly, in all
material respects, the financial position of Physicians Nutraceutical
Laboratories, Inc. as of December 31, 2002, in conformity with
accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2,
the Company has incurred substantial losses during the year ended
December 31, 2002 and has working capital and stockholder deficits at
December 31, 2002. Realization of the Company's assets is dependent
upon the Company's ability to meet its future financing requirements,
and the success of future operations. These factors raise substantial
doubt about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts
and classifications of liabilities that might be necessary in the event
that the Company cannot continue in existence.
/s/ Tschopp, Whitcomb & Orr, P.A.
November 17, 2003
Maitland, Florida
F-13
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
BALANCE SHEET
December 31, 2002
ASSETS
------
Current assets:
Cash $ 2,065
Accounts receivable 13,124
Inventory 15,914
Prepaid expenses 15,000
-----------
Total current assets 46,103
-----------
Property and equipment, net (note 3) 25,867
Other assets 1,252
-----------
$ 73,222
===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
---------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 545,854
Due to affiliate 328,597
Note payable, officer (note 4) 188,444
-----------
Total current liabilities 1,062,895
-----------
Stockholders' (deficit):
Preferred stock, Series A convertible, $.001 par value,
10,000,000 shares authorized, 514,162 shares issued
and outstanding 514
Preferred stock, undesignated, 9,000,000 shares authorized --
Common stock, $.001 par value, 100,000,000 shares
authorized, 2,925,848 shares issued and outstanding 2,926
Additional paid-in capital 2,728,124
Accumulated (deficit) (3,721,237)
-----------
(989,673)
-----------
$ 73,222
===========
See accompanying note to the financial statements.
F-14
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
STATEMENT OF OPERATIONS
For the year ended December 31, 2002
Revenue $ 807,229
----------
Operating expenses:
Cost of sales 283,647
Selling, general and administrative expenses 689,913
----------
973,560
----------
Net (loss) $ (166,331)
==========
Per share information - basic and fully diluted:
Weighted average shares outstanding 2,925,848
==========
Net (loss) per share $ (0.05)
==========
See accompanying notes to the financial statements.
F-15
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
STATEMENT OF STOCKHOLDERS' (DEFICIT)
For the year ended December 31, 2002
COMMON STOCK PREFERRED STOCK
-------------------- --------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT)
--------- ------ ------- ------ --------- -----------
Balances,
December 31, 2001 2,925,848 $2,926 514,162 514 2,748,872 (3,554,906)
Conversion of equity
to debt -- -- -- -- (20,748) --
Net loss -- -- -- -- -- (166,331)
--------- ------ ------- --- --------- ----------
Balances,
December 31, 2002 2,925,848 $2,926 514,162 514 2,728,124 (3,721,237)
========= ====== ======= === ========= ==========
See accompanying notes to the financial statements.
F-16
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
For the year ended December 31, 2002
Net (loss) $(166,331)
Adjustment to reconcile net (loss) to net cash
(used in) operating activities:
Depreciation 11,176
Write off of deferred offering costs 10,000
Loss on disposal of equipment 2,700
Changes in operating assets and liabilites:
Accounts receivable 19,600
Inventory 43,798
Prepaid expenses 49,800
Other assets 529
Deferred revenue (244,020)
Accounts payable and accrued expenses 232,708
---------
Net cash (used in) operating activities (40,040)
---------
Cash flows from financing activities:
Proceeds from amounts due to affiliate (39,597)
Payments, notes payable - officer (3,709)
---------
Net cash provided by financing activities (43,306)
---------
Net (decrease) increase in cash (83,346)
Beginning - cash balance 85,411
---------
Ending - cash balance $ 2,065
=========
Supplemental cash flow information:
Cash paid for income taxes $ --
=========
Cash paid for interest $ --
=========
Supplemental schedule of non cash investing and financing activity:
During the year end December 31, 2002, the Company and NSS agreed to
convert $20,748 of previous capital contributions to advance from
affiliate.
See accompanying notes to the financial statements.
F-17
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) ORGANIZATION
The Company was incorporated on October 26, 1999 in the State of Florida and is
in the business of marketing and distributing nutritional products.
The Company had been a wholly owned subsidiary of Nutrition Superstores.com,
Inc. ("NSS"). During February 2001 the Company agreed to issue to NSS 2,898,348
shares of common stock and 440,416 shares of preferred stock. The issuance was
conditioned upon NNS's approval of a spin off of the Company to the shareholders
of NSS, which was also approved in February 2001 (see note 5).
(B) REVENUE RECOGNITION
The Company recognizes revenue when its products are shipped or services are
provided.
(C) PRODUCT DEVELOPMENT COSTS
The Company's web site will comprise multiple features and offerings that are
currently under development, and it is anticipated that the offerings will
require future development and refinement. In connection with the development of
its products, the Company will incur external costs for hardware, software, and
consulting services, and internal costs for payroll and related expenses of its
technology employees directly involved in the development. All hardware costs
will be capitalized. Purchased software costs will be capitalized in accordance
with Statement of Position 98-1 Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. All other costs will be reviewed for
determination of whether capitalization or expense as product development cost
is appropriate.
(D) INVENTORY
Inventory, which consists principally of finished goods, is stated at the lower
of cost or market using the first-in, first-out method.
(Continued)
F-18
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(E) PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost. Depreciation is calculated using the
straight-line method over the following estimated useful lives:
YEARS
-----
Equipment 5
Furniture and fixtures 5
Automotive equipment 5
(F) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
(G) ADVERTISING COSTS
The Company expenses all costs of advertising as incurred. Advertising costs
included in selling, general and administrative expenses aggregated $27,603
during 2002.
(H) FINANCIAL INSTRUMENTS
Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management as of December 31, 2002. The
respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values. These financial instruments include, cash,
accounts receivable, accounts payable and accrued expenses and notes payable.
Fair values were assumed to approximate carrying values for these financial
instruments because they are short term in nature and their carrying amounts
approximate fair values or they are receivable or payable on demand. The fair
value of the Company's long-term debt is estimated based upon the quoted market
prices for the same or similar issues or on the current rates available to the
Company for debt of the same remaining maturities.
(Continued)
F-19
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(I) LONG-LIVED ASSETS
The carrying value of long lived assets is reviewed on a regular basis for the
existence of facts and circumstances that suggest impairment. To date, no such
impairment has been indicated. Should there be an impairment in the future, the
Company will measure the amount of the impairment based on the undiscounted
expected future cash flows from the impaired assets.
(J) NET INCOME (LOSS) PER COMMON SHARE
The Company calculates net income (loss) per share as required by Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per share." Basic
earnings (loss) per share is calculated by dividing net income (loss) by the
weighted average number of common shares outstanding for the period. Diluted
earnings (loss) per share is calculated by dividing net income (loss) by the
weighted average number of common shares and dilutive common stock equivalents
outstanding. During periods when they are anti dilutive common stock
equivalents, if any, are not considered in the computation.
(K) USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
(Continued)
F-20
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(L) INCOME TAXES
The Company follows SFAS 109, "Accounting for Income Taxes" for recording the
provision for incomes taxes. Deferred tax assets and liabilities are computed
based upon the difference between the financial statement and income tax basis
of assets and liabilities using the enacted marginal tax rate applicable when
the related asset or liability is expected to be realized or settled. Deferred
income tax expenses or benefits are based on the changes in the asset or
liability each period. If available evidence suggests that it is more likely
than not that some portion or all of the deferred tax assets will not be
realized, a valuation allowance is required to reduce the deferred tax assets to
the amount that is more likely than not to be realized. Future changes in such
valuation allowance are included in the provision for deferred income taxes in
the period of change.
(M) DEFERRED OFFERING COSTS
The Company defers costs associated with the raising of capital until such time
as the offering is completed, at which time the costs are charged against the
capital raised. Should the offering be terminated the costs are charged to
operations during the period when the offering is terminated.
(N) STOCK BASED COMPENSATION
The Company accounts for equity instruments issued to employees for services
based on the fair value of the equity instruments issued and accounts for equity
instruments issued to other than employees based on the fair value of the
consideration received or the fair value of the equity instruments, whichever is
more reliably measurable.
The Company accounts for stock based compensation in accordance with SFAS No.
123, "Accounting for Stock-Based Compensation." The provisions of SFAS No. 123
allow companies to either expense the estimated fair value of stock options or
to continue to follow the intrinsic value method set forth in Accounting
Principles Board (APB) Opinion 25, "Accounting for Stock Issued to Employees"
but disclose the pro forma effects on net income (loss) had the fair value of
the options been expensed. The Company has elected to continue to apply APB 25
in accounting for its stock option incentive plans.
(Continued)
F-21
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
(2) BASIS OF PRESENTATION
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern which contemplates the recoverability
of assets and the satisfaction of liabilities in the normal course of business.
The Company incurred net losses during the year ended December 31, 2002 of
$166,331. In addition, the Company has a working capital deficit of $1,016,792
and a stockholders' deficit of $989,673 at December 31, 2002.
The ability of the Company to continue as a going concern is dependent upon its
ability to raise additional capital from the sale of common stock and the
achievement of profitable operations. The Company is in the process of
attempting to raise additional equity capital through a private placement.
The accompanying financial statements do not include any adjustment that might
be required should the Company be unable to recover the value of its assets or
satisfy its liabilities.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 2002:
Furniture and fixtures $ 8,031
Equipment 17,890
Automotive equipment 23,472
---------
49,393
Less: accumulated depreciation 23,526
---------
$25,867
=========
Depreciation expense charged to operations was $11,176 during 2002.
(Continued)
F-22
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
(4) NOTES PAYABLE - OFFICER
At December 31, 2002 note payable - officer consisted of the following:
Notes payable with interest at 5% per annum, due on demand
or if demand is not made, on December 31, 2003 $188,444
========
(5) STOCKHOLDERS' (DEFICIT)
PREFERRED STOCK
The Board of Directors has authorized the issuance of 1,000,000 shares of $.001
par value convertible preferred stock designated as Series A. Commencing on June
1, 2001 the holders of Series A shall be entitled to an 8.75% annual
non-cumulative dividend in cash or at the option of the Company shares of the
Company's common stock. No dividends were declared by the board of directors for
the year ended December 31, 2002. Each share of Series A shall be convertible
into common stock at the conversion price of 1/3 of the initial public offering
price of the Company's common stock, provided however, that in the event the
Company does not complete a public offering the Series A will be convertible at
$5 per share but only at the expiration date of the Series A on May 31, 2004.
SHARE ISSUANCE
During February 2001 in exchange for the 100,000 common shares held by the
Parent the Company agreed to issue to its Parent 2,898,348 shares of common
stock and 440,416 shares of preferred stock. The issuance was conditioned upon
the Parent's approval of a spin off of the Company to the shareholders of the
Parent, which was approved in February 2001. All share and per share amounts
have been retroactively restated to reflect the issuance.
(Continued)
F-23
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
(5) STOCKHOLDERS' (DEFICIT) (CONTINUED)
STOCK BASED COMPENSATION
The Company agreed to issue options to purchase 27,500 shares of common stock at
an exercise price of $2.00 per share and options to purchase 35,000 shares at an
exercise price of $5.00 per share.
The Company accounts for stock-based compensation plans by applying APB 25 and
related interpretations. Under APB 25, because the exercise price of the
Company's employee stock options approximates or exceeds the market price of the
underlying stock at the date of grant, no compensation cost is recognized.
SFAS 123 requires the Company to provide pro forma information regarding net
income and earnings per share as if compensation cost for the Company's stock
option plans had been determined in accordance with the fair value based method
prescribed in SFAS 123. The fair value of the option grants is estimated on the
date of grant utilizing the minimum value method with the following weighted
average assumptions for grants during the years ended December 31, 2001 and
2000; expected life of options of 10 years, expected volatility of 0%, risk-free
interest rate of 1.5% and no dividend yield. The weighted average fair value at
the date of grant for options granted during the years ended December 31, 2001
and 2000 was $0.00.
Under the provisions of SFAS 123, the Company's net loss and loss per share
would not have been effected.
A summary of stock option activity is as follows:
Number Weighted- Weighted-
Of Average Exercise Average
Shares Price Fair Value
------------- ----------------- -----------
Balance at December 31, 2001 62,500 $ 3.65 $ --
Granted in current year -- -- --
-------- -------- -------
Balance at December 31, 2002 62,500 $ 3.65 $ --
======== ======= =======
(Continued)
F-24
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
(5) STOCKHOLDERS' (DEFICIT) (CONTINUED)
STOCK BASED COMPENSATION (CONTINUED)
The following tables summarizes information about fixed-price stock options at
December 31, 2002:
OUTSTANDING EXERCISABLE
----------- -----------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life Price Exercisable Price
- -------------------- ----------------- ----------------- ---------------- ---------------- ---------------
$5.00 35,000 8 years $5.00 27,000 $5.00
$2.00 27,500 9 years $2.00 -- $2.00
(6) INCOME TAXES
At December 31, 2002, the Company had a net operating loss carryforward for
income tax purposes of approximately $3,600,000, 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.
(7) COMMITMENTS AND CONTINGENCIES
EMPLOYMENT CONTRACT
During January 2001, the Company entered into an employment contract with its
vice president of marketing, which provides for a salary of $80,000 for 2001 and
$125,000 in 2002, and 10,000 options to purchase the Company's common stock (see
note 5). The contract may be terminated upon 90 days notice.
(Continued)
F-25
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
(7) COMMITMENTS AND CONTINGENCIES (CONTINUED)
PRODUCT DISTRIBUTION AGREEMENT
During November 2001, the Company entered into a three year exclusive agreement
for distribution of substantially all of its products to the mass retail outlets
in the United States, Puerto Rico Guam and the U.S. Virgin Islands. This
agreement is renewable for a one year period provided that the distributor
purchases at least $4,000,000 in product during the final year of the initial
three year term and for additional one year periods provided that the
distributor purchases at least $4,000,000 in product adjusted for price
increases by the Company during the proceeding one year term. In addition, the
Company has agreed to issue three year warrants to purchase its common stock
should the distributor pre pay for an order. For each advance payment the
Company will issue the number of warrants determined by multiplying the amount
of the advance by 7.5% and dividing by 4 and then dividing by the exercise price
of the warrants. The resulting number will then be multiplied by 150%. The
exercise price of the warrants is $1.50. During December 2001, the distributor
prepaid an order in the amount of $244,020 and received 4,576 warrants, which
expire during December 2004. This amount was recognized as revenue in January
2002. In conjunction with this order the Company advanced its supplier $64,800
for product to be delivered to the distributor. Had the Company computed the
value of the warrants issued in accordance with the provisions of SFAS No. 123
there would be no change in the reported net loss or loss per share.
(8) RELATED PARTY TRANSACTIONS
During 2002 the Company's president was not paid the salary due to him
aggregating $120,000. The total unpaid salary due to this officer amounts to
$252,000 and is included in accrued expenses in the accompanying balance sheet.
In addition, through December 31, 2002 NSS made working capital advances
aggregating $328,597 to the Company. These amounts are included in amounts due
to affiliate in the accompanying balance sheet.
F-26
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Physicians Nutraceutical Laboratories, Inc.
We have audited the accompanying balance sheet of Physicians
Nutraceutical Laboratories, Inc. as of December 31, 2001, and the
related statements of operations, stockholders' (deficit) and cash
flows for the year ended December 31, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audit.
We conducted our audit in accordance with 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 by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Physicians
Nutraceutical Laboratories, Inc. as of December 31, 2001, and the
results of its operations, and its cash flows for the year ended
December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America.
As discussed in Note 9, the Company has restated the financial
statements for the year ended December 31, 2001 to correct an error in
recording certain capital contributions.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2
the Company has incurred substantial losses during the year ended
December 31, 2001 and has working capital and stockholder deficits at
December 31, 2001. Realization of the Company's assets is dependent
upon the Company's ability to meet its future financing requirements,
and the success of future operations. These factors raise substantial
doubt about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts
and classifications of liabilities that might be necessary in the event
that the Company cannot continue in existence.
Stark Winter Schenkein & Co., LLP
Denver, Colorado
February 25, 2002, except for Note 9 as
To which the date is March 15, 2002
F-27
Physicians Nutraceutical Laboratories, Inc.
Balance Sheet
December 31, 2001
(restated)
Assets
Current assets:
Cash $ 85,411
Accounts receivable 32,724
Inventory 59,712
Prepaid expenses 64,800
Other current assets 1,781
-----------
Total current assets 244,428
-----------
Property and equipment, net 39,743
-----------
Other assets:
Deferred offering costs 10,000
-----------
$ 294,171
===========
Liabilities and stockholders' (deficit)
Current liabilities:
Accounts payable and accrued expenses $ 181,146
Deferred revenue 244,020
Notes payable - officer 192,153
Amounts due to officer 132,000
Amounts due to affiliate 347,446
-----------
Total current liabilities 1,096,765
-----------
Stockholders' (deficit):
Preferred stock, Series A convertible,
$.001 par value,10,000,000 shares authorized,
514,162 shares issued and outstanding 514
Preferred stock, undesignated, 9,000,000 shares authorized --
Common stock, $.001 par value,
40,000,000 shares authorized,
2,925,848 shares issued and outstanding 2,926
Additional paid in capital 2,748,872
Accumulated (deficit) (3,554,906)
-----------
(802,594)
-----------
$ 294,171
===========
See the accompanying notes to the financial statements.
F-28
Physicians Nutraceutical Laboratories, Inc.
Statements of Operations
For the Year Ended December 31, 2001
2001
----------
Revenue $ 309,861
----------
Operating expenses:
Cost of sales 130,787
Selling, general and administrative expenses 1,143,987
----------
1,274,744
----------
Net (loss) $ (964,913)
==========
Per share information - basic and fully diluted:
Weighted average shares outstanding 2,925,848
==========
Net (loss) per share $ (0.33)
==========
See the accompanying notes to the financial statements.
F-29
Physicians Nutraceutical Laboratories, Inc.
Statement of Stockholders' (Deficit)
For the Year Ended December 31, 2001
(restated)
Common Stock Preferred Stock
-------------------- --------------- Paid in Accumulated
Shares Amount Shares Amount Capital (Deficit) Total
--------- ------ ------- ------ --------- ----------- ---------
Balance
December 31, 2000 2,898,348 $2,898 440,416 $440 $2,707,661 $(2,589,993) $ 121,006
Common shares issued
for services 27,500 28 -- -- -- -- 28
Gifted preferred share -- -- 73,746 74 -- -- 74
Capital contribution
by affiliate -- -- -- -- 412,211 -- 41,211
Net (Loss) for the year -- -- -- -- -- (964,913) (964,913)
--------- ------ ------- ---- ---------- ----------- ---------
Balance
December 31, 2001 2,925,848 $2,926 514,162 $514 $2,748,872 $(3,554,906) $(802,594)
========= ====== ======= ==== ========== =========== =========
See the accompanying notes to the financial statements.
F-30
Physicians Nutraceutical Laboratories, Inc.
Statements of Cash Flows
For the Year Ended December 31, 2001
(restated)
2001
---------
Net (loss) $(964,913)
Adjustments to reconcile net (loss) to net cash
(used in) operating activities:
Depreciation 11,534
Capital contribution of officer's salary --
Write off of deferred offering costs 115,640
Common shares issued for non cash items 102
(Increase) in accounts receivable (32,724)
(Increase) in inventory (17,718)
Decrease in prepaid expenses 75,289
(Increase) in other current assets (1,781)
Decrease in cash - escrow --
Increase in deferred revenue 244,020
Increase in amounts due to officer 132,000
Increase in accounts payable and accrued expenses 17,822
---------
Net cash (used in) operating activities (420,729)
---------
Cash flows from investing activities:
Acquisition of property and equipment (9,364)
---------
Net cash (used in) investing activities (9,364)
---------
Cash flows from financing activities:
Repayment of long term debt (9,163)
Increase in cash - escrow --
Capital contributions 41,211
Increase in deferred offering costs (89,865)
Proceeds from amounts due to affiliate 327,446
Proceeds from notes payable - officer 192,153
---------
Net cash provided by financing activities 461,782
---------
Net increase in cash 31,689
Beginning - cash balance 53,722
---------
Ending - cash balance $ 85,411
=========
Supplemental cash flow information:
Cash paid for income taxes $ --
Cash paid for interest $ --
Non cash investing and financing activities:
Deferred offering costs paid from cash - escrow $ --
See the accompanying notes to the financial statements.
F-31
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Company was incorporated on October 26, 1999 in the State of Florida and is
in the business of marketing and distributing nutritional products. The Company
was in the development stage through December 31, 2000.
The Company had been a wholly owned subsidiary of Nutrition Superstores.com,
Inc. ("Parent"). During February 2001 the Company agreed to issue to its Parent
2,898,348 shares of common stock and 440,416 shares of preferred stock. The
issuance was conditioned upon the Parent's approval of a spin off of the Company
to the shareholders of the Parent, which was also approved in February 2001 (See
Note 5).
REVENUE RECOGNITION
The Company recognizes revenue when its products are shipped or services are
provided.
PRODUCT DEVELOPMENT COSTS
The Company's web site will comprise multiple features and offerings that are
currently under development, and it is anticipated that the offerings will
require future development and refinement. In connection with the development of
its products, the Company will incur external costs for hardware, software, and
consulting services, and internal costs for payroll and related expenses of its
technology employees directly involved in the development. All hardware costs
will be capitalized. Purchased software costs will be capitalized in accordance
with Statement of Position 98-1 Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. All other costs will be reviewed for
determination of whether capitalization or expense as product development cost
is appropriate.
INVENTORY
Inventory, which consists principally of finished goods, is stated at the lower
of cost or market using the first-in, first-out method.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost. Depreciation is calculated using the
straight-line method over the following estimated useful lives:
Years
-----
Equipment 5
Furniture and Fixtures 5
Automotive Equipment 5
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
F-32
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
ADVERTISING COSTS
The Company expenses all costs of advertising as incurred. Advertising costs
included in selling, general and administrative expenses aggregated $77,877
during 2001.
FINANCIAL INSTRUMENTS
Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management as of December 31, 2001. The
respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values. These financial instruments include cash,
accounts receivable, accounts payable and accrued expenses and notes payable.
Fair values were assumed to approximate carrying values for these financial
instruments because they are short term in nature and their carrying amounts
approximate fair values or they are receivable or payable on demand. The fair
value of the Company's long-term debt is estimated based upon the quoted market
prices for the same or similar issues or on the current rates available to the
Company for debt of the same remaining maturities.
LONG LIVED ASSETS
The carrying value of long lived assets is reviewed on a regular basis for the
existence of facts and circumstances that suggest impairment. To date, no such
impairment has been indicated. Should there be an impairment in the future, the
Company will measure the amount of the impairment based on the undiscounted
expected future cash flows from the impaired assets.
NET INCOME (LOSS) PER COMMON SHARE
The Company calculates net income (loss) per share as required by Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." Basic
earnings (loss) per share is calculated by dividing net income (loss) by the
weighted average number of common shares outstanding for the period. Diluted
earnings (loss) per share is calculated by dividing net income (loss) by the
weighted average number of common shares and dilutive common stock equivalents
outstanding. During periods when they are anti dilutive common stock
equivalents, if any, are not considered in the computation.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
SEGMENT INFORMATION
The Company follows SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information." Certain information is disclosed, per SFAS No. 131,
based on the way management organizes financial information for making operating
decisions and assessing performance. The Company currently operates in a single
segment and will evaluate additional segment disclosure requirements as it
expands its operations.
F-33
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
INCOME TAXES
The Company follows SFAS 109, "Accounting for Income Taxes" for recording the
provision for income taxes. Deferred tax assets and liabilities are computed
based upon the difference between the financial statement and income tax basis
of assets and liabilities using the enacted marginal tax rate applicable when
the related asset or liability is expected to be realized or settled. Deferred
income tax expenses or benefits are based on the changes in the asset or
liability each period. If available evidence suggests that it is more likely
than not that some portion or all of the deferred tax assets will not be
realized, a valuation allowance is required to reduce the deferred tax assets to
the amount that is more likely than not to be realized. Future changes in such
valuation allowance are included in the provision for deferred income taxes in
the period of change.
DEFERRED OFFERING COSTS
The Company defers costs associated with the raising of capital until such time
as the offering is completed, at which time the costs are charged against the
capital raised. Should the offering be terminated the costs are charged to
operations during the period when the offering is terminated.
STOCK BASED COMPENSATION
The Company accounts for equity instruments issued to employees for services
based on the fair value of the equity instruments issued and accounts for equity
instruments issued to other than employees based on the fair value of the
consideration received or the fair value of the equity instruments, whichever is
more reliably measurable.
The Company accounts for stock based compensation in accordance with SFAS No.
123, "Accounting for Stock-Based Compensation." The provisions of SFAS No. 123
allow companies to either expense the estimated fair value of stock options or
to continue to follow the intrinsic value method set forth in Accounting
Principles Board (APB) Opinion 25, "Accounting for Stock Issued to Employees"
but disclose the pro forma effects on net income (loss) had the fair value of
the options been expensed. The Company has elected to continue to apply APB 25
in accounting for its stock option incentive plans.
RECENT PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS 141,
Business Combinations, and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is
effective for all business combinations completed after June 30, 2001. SFAS 142
is effective for the year beginning January 1, 2002; however certain provisions
of that Statement apply to goodwill and other intangible assets acquired between
July 1, 2001, and the effective date of SFAS 142. The Company does not believe
the adoption of these standards will have a material impact on the Company's
financial statements.
In July 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations. This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This Statement applies to all entities. It
applies to legal obligations associated with the retirement of long-lived assets
that result from the acquisition, construction, development and (or) the normal
operation of a long-lived asset, except for certain obligations of lessees. This
Statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. The Company is evaluating the impact of the
adoption of this standard and has not yet determined the effect of adoption on
its financial position and results of operations.
In August 2001, the FASB issued SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. This statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and supersedes
SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. The provisions of the statement are effective for
financial statements issued for fiscal years beginning after December 15, 2001.
The Company is evaluating the impact of the adoption of this standard and has
not yet determined the effect of adoption on its financial position and results
of operations.
F-34
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 2. BASIS OF PRESENTATION
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern which contemplates the recoverability
of assets and the satisfaction of liabilities in the normal course of business.
The Company incurred net losses during the year ended December 31, 2001 of
$964,913. In addition, the Company has a working capital deficit of $852,337 and
a stockholders' deficit of $802,594 at December 31, 2001.
The ability of the Company to continue as a going concern is dependent upon its
ability to raise additional capital from the sale of common stock and the
achievement of profitable operations. The Company is in the process of
attempting to raise additional equity capital through a private placement.
The accompanying financial statements do not include any adjustments that might
be required should the Company be unable to recover the value of its assets or
satisfy its liabilities.
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 2001:
Furniture and fixtures $ 8,031
Equipment 31,749
Automotive equipment 23,472
----------
63,252
Less: accumulated depreciation 23,509
----------
$ 39,743
==========
Depreciation expense charged to operations was $11,534 during 2001.
NOTE 4. NOTES PAYABLE - OFFICER
At December 31, 2001 notes payable - officer consisted of the following:
Notes payable with interest at 5% per annum, due
on demand or if demand is not made, on December 31, 2002 $ 192,153
=========
F-35
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 5. STOCKHOLDERS' (DEFICIT)
On September 26, 2000 the Company amended its Articles of Incorporation to
authorize 10,000,000 shares of $.001 par value preferred stock and 40,000,000
shares of $.001 par value common stock.
PREFERRED STOCK
The Board of directors has authorized the issuance of 1,000,000 shares of $.001
par value convertible preferred stock designated as Series A. Commencing on June
1, 2001 the holders of Series A shall be entitled to an 8.75% annual
non-cumulative dividend in cash or at the option of the Company shares of the
Company's common stock. Each share of Series A shall be convertible into common
stock at the conversion price of 1/3 of the initial public offering price of the
Company's common stock, provided however, that in the event the Company does not
complete a public offering the Series A will be convertible at $5 per share but
only at the expiration date of the Series A on May 31, 2004.
SHARE ISSUANCES
During February 2001 in exchange for the 100,000 common shares held by the
Parent the Company agreed to issue to its Parent 2,898,348 shares of common
stock and 440,416 shares of preferred stock. The issuance was conditioned upon
the Parent's approval of a spin off of the Company to the shareholders of the
Parent, which was approved in February 2001. All share and per share amounts
have been retroactively restated to reflect this issuance.
During the year ended December 31, 2001 the Parent contributed $41,211 to the
capital of the Company.
During January 2001 the Company adopted an employee stock option plan and
allocated 500,000 common shares to the plan.
During February 2001 the Company filed a Form 1-A Regulation A Offering
Statement to sell a minimum of 166,667 shares and a maximum of 1,666,666 shares
of its common stock at an offering price of $3 per share. This offering was
withdrawn during January 2002. No shares were sold pursuant to this offering and
the Company charged $115,640 of deferred offering costs related to the offering
to operations during 2001.
STOCK BASED COMPENSATION
The Company agreed to issue options to purchase 27,500 shares of common stock at
an exercise price of $2.00 per share and options to purchase 35,000 shares at an
exercise price of $5.00 per share.
The Company accounts for stock-based compensation plans by applying APB 25 and
related Interpretations. Under APB 25, because the exercise price of the
Company's employee stock options approximates or exceeds the market price of the
underlying stock at the date of grant, no compensation cost is recognized.
SFAS 123 requires the Company to provide pro forma information regarding net
income and earnings per share as if compensation cost for the Company's stock
option plans had been determined in accordance with the fair value based method
prescribed in SFAS 123. The fair value of the option grants is estimated on the
date of grant utilizing the minimum value method with the following weighted
average assumptions for grants during the year ended December 31, 2001: expected
life of options of 10 years, expected volatility of 0%, risk-free interest rate
of 1.5% and no dividend yield. The weighted average fair value at the date of
grant for options granted during the year ended December 31, 2001 was $0.00.
These results may not be representative of those to be expected in future years.
F-36
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
Under the provisions of SFAS 123, the Company's net (loss) and (loss) per share
would not have been effected.
A summary of stock option activity is as follows:
Weighted- Weighted-
Number average average
of shares exercise price fair value
--------- ------------- ----------
Balance at December 31, 2000 35,000 $ 5.00 $ --
Granted at above market value 27,750 2.00 --
------ -------- ---------
Balance at December 31, 2001 62,750 $ 3.65 $ --
====== ======== =========
The following table summarizes information about fixed-price stock options at
December 31, 2001:
Outstanding Exercisable
------------------------------------ --------------------------------------
Weighted-Average Weighted-Average Weighted-Average
Exercise Price Number Outstanding Contractual Life Exercise Price Number Exercisable Exercise Price
- -------------- ------------------ ---------------- -------------- ------------------ --------------
$5.00 35,000 9 years $5.00 27,000 $5.00
$2.00 27,750 10 years $2.00 -- $2.00
NOTE 6. INCOME TAXES
The Company accounts for income taxes under SFAS 109, which requires use of the
liability method. SFAS 109 provides that deferred tax assets and liabilities are
recorded based on the differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes,
referred to as temporary differences. Deferred tax assets and liabilities at the
end of each period are determined using the currently enacted tax rates applied
to taxable income in the periods in which the deferred tax assets and
liabilities are expected to be settled or realized.
The provision for income taxes differs from the amount computed by applying the
statutory federal income tax rate to income before provision for income taxes.
The sources and tax effects of the differences for all periods presented are as
follows:
F-37
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
Income tax provision at the federal statutory rate 34 %
Effect of operating losses (34)%
---
--
===
As of December 31, 2001, the Company has a net operating loss carryforward of
approximately $3,500,000, which will be available to offset future taxable
income. If not used, these carryforwards will expire in 2019 2020 and 2021. The
deferred tax asset relating to the operating loss carryforward of approximately
$1,200,000 has been fully reserved at December 31, 2001.
NOTE 7. COMMITMENTS AND CONTINGENCIES
EMPLOYMENT CONTRACT
During January 2001 the Company entered into an employment contract with its
vice president of marketing, which provides for a salary of $80,000 for 2001 and
$125,000 in 2002, and 10,000 options to purchase the Company's common stock (see
Note 5). The contract may be terminated upon 90 days notice.
PRODUCT DISTRIBUTION AGREEMENT
During November 2001 the Company entered into a three year exclusive agreement
for distribution of substantially all of its products to the mass retail outlets
in the United States, Puerto Rica, Guam and the U.S. Virgin Islands. This
agreement is renewable for a one year period provided that the distributor
purchases at least $4,000,000 in product during the final year of the initial
three year term and for additional one year periods provided that the
distributor purchases at least $4,000,000 in product adjusted for price
increases by the Company during the proceeding one year term. In addition, the
Company has agreed to issue three year warrants to purchase its common stock
should the distributor pre pay for an order. For each advance payment the
Company will issue the number of warrants determined by multiplying the amount
of the advance by 7.5% and dividing by 4 and then dividing by the exercise price
of the warrants. The resulting number will then be multiplied by 150%. The
exercise price of the warrants is $1.50. During December 2001 the distributor
prepaid an order in the amount of $224,020 and received 4,576 warrants, which
expire during December 2004. In conjunction with this order the Company advanced
its supplier $64,800 for product to be delivered to the distributor. Had the
Company computed the value of the warrants issued in accordance with the
provisions of SFAS No. 123 there would be no change in the reported net loss or
loss per share.
F-38
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
OTHER
During August 2000 the Company entered into an agreement with International
Monetary Group, Inc. ("IMG") whereby the Company engaged IMG to act as a
financial advisor and to make introductions to licensed broker-dealers, in the
Company's efforts to sell up to 1,000,000 shares of common stock at an amount of
up to $5,000,000. This agreement was voided during April 2001 and replaced with
a new agreement whereby the Company engaged IMG to act as a financial advisor
and to make introductions to licensed broker-dealers, in the Company's efforts
to sell up to 1,666,666 shares of common stock at an amount of up to $5,000,000.
As compensation IMG is to receive a fee of $200,000 upon acceptance of the
funding from sources introduced by IMG. The Company expensed approximately
$200,000 in conjunction with this agreement for offering costs and other
operating expenses. The agreement expires in April 2002 and it is the Company's
intent not to renew it. The Company has charged the offering costs related to
this attempted funding to operations during 2001 (see Note 5).
During December 2001 the Company entered into a one year financial advisory
agreement whereby the financial advisor agreed to provide the Company with
financial consulting services and assist the Company in obtaining capital
funding. In exchange for these services the Company agreed to pay a fee
aggregating $55,000 and in the event of a financing for the Company by the
financial advisor, an additional mutually agreed upon fee. Should the financial
advisor introduce the Company to another entity which completes a capital
funding the Company agreed to pay a finders fee as follows:
5% of the amount up to $1,000,000
4% of the amount between $1,000,000 and $2,000,000
3% of the amount between $2,000,000 and $3,000,000
2% of the amount between $3,000,000 and $4,000,000
1% of the amount in excess of $4,000,000
In conjunction with this agreement the Company paid the financial advisor
$10,000 during 2001, which has been recorded as deferred offering costs in the
accompanying financial statements.
NOTE 8. RELATED PARTY TRANSACTIONS
Through December 31, 2000 the Company had no significant revenue generating
operations. and substantially all of the Company's operations were funded by the
Parent and contributed to the Company's capital.
During 2001 the Company's president was not paid the salary due to him
aggregating $120,000. This amount is included in Amounts due to officer in the
accompanying balance sheet.
In addition, during the year ended December 31, 2001 the Parent made working
capital advances aggregating $327,446 to the Company. These amounts are included
in Amounts due to affiliate in the accompanying balance sheet.
NOTE 9. CORRECTION OF AN ERROR
During March 2002 the Company determined that it had incorrectly recorded
$112,701 as contributed capital from the Parent. This amount has been
reclassified to Amounts due to affiliates in the accompanying financial
statements. The adjustment had no effect on the net loss or net loss per share
for the year ended December 31, 2001.
F-39
UNAUDITED PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements give effect to
the acquisition by BIO-ONE Corporation of Physicians Nutraceutical Laboratories,
Inc. in a transaction to be accounted for using the purchase method of
accounting. The unaudited pro forma balance sheet is based on the historical
balance sheets of BIO-ONE Corporation and Physicians Nutraceutical Laboratories,
Inc. appearing elsewhere in this registration statement or incorporated by
reference. The unaudited pro forma statements of operations are based on the
historical statement of operations of BIO-ONE Corporation and of Physicians
Nutraceutical Laboratories, Inc. appearing elsewhere in the registration
statement or incorporated by reference and combine the results of operations of
BIO-ONE Corporation and Physicians Nutraceutical Laboratories, Inc. for the year
ended December 31, 2002 and the year ended December 31, 2001 as if the
acquisition occurred at the beginning of the period.
The unaudited pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the financial position or
operation results that would have been achieved if the merger had been
consummated as of the beginning of the period presented, nor are they
necessarily indicative of future operating or financial position of BIO-ONE
Corporation.
BIO-ONE Corporation will account for the merger with Physicians
Nutraceutical Laboratories, Inc. using the purchase method of accounting.
F-40
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
Unaudited Pro Forma Consolidated Balance Sheet
December 31, 2002
Physicians
BIO-ONE Nutraceutical Proforma
Corporation Laboratories, Inc. Adjustments Proforma
----------- ----------------- ----------- -----------
Assets
------
Current assets:
Cash $ 14,742 2,065 -- 16,807
Accounts receivable -- 13,124 -- 13,124
Inventory -- 15,914 -- 15,914
Deposits and prepaid expenses -- 15,000 -- 15,000
----------- ----------- ----------- -----------
Total current assets 14,742 46,103 -- 60,845
----------- ----------- ----------- -----------
Furniture and equipment, net 4,099 25,867 -- 29,966
Other assets -- 1,252 -- 1,252
----------- ----------- ----------- -----------
Total assets $ 18,841 73,222 -- 92,063
=========== =========== =========== ===========
Liabilities and Stockholder's Equity
------------------------------------
Current liabilities:
Current portion of notes payable $ 145,510 188,444 (188,444) 145,510
Accounts payable and accrued expenses 235,971 874,451 (801,229) 309,193
----------- ----------- ----------- -----------
Total current liabilities 381,481 1,062,895 (989,673) 454,703
----------- ----------- ----------- -----------
Stockholder's Equity:
Common stock 18,855 2,926 (2,926) 18,855
Preferred stock -- 514 (514) --
Additional paid-in capital 1,786,377 2,728,124 (2,728,124) 1,786,377
Retained earnings (2,167,872) (3,721,237) 3,721,237 (2,167,872)
----------- ----------- ----------- -----------
Total stockholder's equity (362,640) (989,673) 989,673 (362,640)
----------- ----------- ----------- -----------
Total liabilities and stockholder's equity $ 18,841 73,222 -- 92,063
=========== =========== =========== ===========
See accompanying note to the financial statements.
F-41
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
Unaudited Pro Forma Consolidated Balance Sheet
July 31, 2003
Physicians
BIO-ONE Nutraceutical Proforma
Corporation Laboratories, Inc. Adjustments Proforma
----------- ----------------- ------------ ----------
Assets
------
Current assets:
Cash $ 388,176 1,757 -- 389,933
Accounts receivable -- 17,735 -- 17,735
Inventory -- 70,119 -- 70,119
Deposits and prepaid expenses -- -- -- --
----------- ----------- ----------- -----------
Total current assets 388,176 89,611 -- 477,787
----------- ----------- ----------- -----------
Furniture and equipment, net 4,752 19,806 -- 24,558
Other assets 53,500 4,202 -- 57,702
----------- ----------- ----------- -----------
Total assets $ 446,428 113,619 -- 560,047
=========== =========== =========== -----------
Liabilities and Stockholder's Equity
------------------------------------
Current liabilities:
Current portion of notes payable $ 74,502 607,416 (607,416) 74,502
Accounts payable and accrued expenses 82,583 711,031 (597,412) 196,202
----------- ----------- ----------- -----------
Total current liabilities 157,085 1,318,447 (1,204,828) 270,704
----------- ----------- ----------- -----------
Stockholder's Equity:
Common stock 38,604 2,926 (2,926) 38,604
Preferred stock -- 514 (514) --
Additional paid-in capital 2,743,928 2,728,124 (2,728,124) 2,743,928
Retained earnings (2,493,189) (3,936,392) 3,936,392 (2,493,189)
----------- ----------- ----------- -----------
Total stockholder's equity 289,343 (1,204,828) 1,204,828 289,343
----------- ----------- ----------- -----------
Total liabilities and stockholder's equity $ 446,428 113,619 -- 560,047
=========== =========== =========== ===========
See accompanying note to the financial statements.
F-42
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
Unaudited Pro Forma Consolidated Statement of Operations
Year Ended December 31, 2001
Physicians
BIO-ONE Nutraceutical Proforma
Corporation Laboratories, Inc. Adjustments Proforma
------------ ----------------- ----------- ------------
Revenue $ 82,943 309,861 -- 392,804
Cost of sales 39,698 130,787 -- 170,485
------------ ------------ ----------- ------------
Gross profit 43,245 179,074 -- 222,319
Operating expenses:
General and administrative 710,977 1,143,987 -- 1,854,964
------------ ------------ ----------- ------------
Operating Income (667,732) (964,913) -- (1,632,645)
Interest expense 9,418 -- -- 9,418
Other income -- -- -- --
------------ ------------ ----------- ------------
Income before taxes (677,150) (964,913) -- (1,642,063)
Provision for income taxes -- -- -- --
------------ ------------ ----------- ------------
Net income $ (677,150) (964,913) -- (1,642,063)
============ ============ =========== ============
Basic earnings per share (0.15)
Basic weighted average shares outstanding 10,653,963 2,925,848 10,653,963
Diluted earnings per share (0.15)
Diluted weighted average shares outstanding 10,653,963 2,925,848 10,653,963
See accompanying notes to the financial statements.
F-43
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
Unaudited Pro Forma Consolidated Statement of Operations
Year Ended December 31, 2002
Physicians
BIO-ONE Nutraceutical Proforma
Corporation Laboratories, Inc. Adjustments Proforma
------------ ------------------ --------------- ------------
Revenue $ 22,220 807,229 -- 829,449
Cost of sales 9,343 283,647 -- 292,990
------------ ------------ --------------- ------------
Gross profit 12,877 523,582 -- 536,459
Operating expenses:
General and administrative 1,069,809 689,913 -- 1,759,722
------------ ------------ --------------- ------------
Operating Income (1,056,932) (166,331) -- (1,223,263)
Interest expense (10,512) -- -- (10,512)
Other income 146,997 -- -- 146,997
------------ ------------ --------------- ------------
Income before taxes (920,447) (166,331) -- (1,086,778)
Provision for income taxes -- -- -- --
------------ ------------ --------------- ------------
Net income $ (920,447) (166,331) -- (1,086,778)
============ ============ =============== ============
Basic earnings per share (0.07)
Basic weighted average shares outstanding 14,052,065 2,925,898 14,052,065
Diluted earnings per share (0.07)
Diluted weighted average shares outstanding 14,052,065 2,925,898 14,052,065
See accompanying notes to the financial statements.
F-44
PHYSICIANS NUTRACEUTICAL LABORATORIES, INC.
Unaudited Pro Forma Consolidated Statement of Operations
Seven Months Ended July 31, 2003
Physicians
BIO-ONE Nutraceutical Proforma
Corporation Laboratories, Inc. Adjustments Proforma
------------ ----------------- ------------- ------------
Revenue $ -- 505,089 -- 505,089
Cost of sales -- 197,901 -- 197,901
------------ ------------ ------------- ------------
Gross profit -- 307,188 -- 307,188
Operating expenses:
General and administrative 149,657 522,343 -- 672,000
------------ ------------ ------------- ------------
Operating Income (149,657) (215,155) -- (364,812)
Interest expense 3,217 -- -- 3,217
Other income -- -- -- --
------------ ------------ ------------- ------------
Income before taxes (152,874) (215,155) -- (368,029)
Provision for income taxes -- -- -- --
------------ ------------ ------------- ------------
Net income $ (152,874) (215,155) -- (368,029)
============ ============ ============= ============
Basic earnings per share (0.01)
Basic weighted average shares outstanding 33,055,380 2,925,848 33,055,380
Diluted earnings per share (0.01)
Diluted weighted average shares outstanding 33,055,380 2,925,848 33,055,380
See accompanying notes to the financial statements.
F-45