As filed with the Securities and Exchange Commission on August 1, 2005
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3 TO FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(INITIAL STATEMENT)
FIT FOR BUSINESS INTERNATIONAL, INC.
NEVADA 8000 20-2008579
(State or jurisdiction of (Primary Standard Industrial I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
10/27 Mayneview St.
Milton
Australia
61-7-33673355
Telefax 61-7-33673252
(Address and telephone number of principal executive offices)
3155 E. Patrick Lane, Suite 1, Las Vegas, Nevada, 89120-3481
(702)866-2500
Telefax (702)866-2689
(Address of principal place of business or intended principal place of business)
Incorp Services, Inc.
3155 E. Patrick Lane, Suite 1, Las Vegas, Nevada, 89120-3481
(Name, address and telephone number of agent for service)
Copies of communications to:
Richard I. Anslow, Esq.
Anslow & Jaclin, LLP
195 Route 9 South, Suite 204
Manalapan, New Jersey 07726
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
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If any of the securities 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 effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
Proposed
maximum Proposed
Title of each offering maximum Amount of
class of securities Amount to price per aggregate registration
to be registered be registered share offering price fee
- ------------------------------------------------------------------------------------------------------
Common shares, par value $.001 (1) 3,000,000 $1.50 $4,500,000 $529.65
- ------------------------------------------------------------------------------------------------------
Common shares, par value $.001 (2) 2,000,000 $1.50 $3,000,000 $353.10
- ------------------------------------------------------------------------------------------------------
Common shares, par value $.001 (3) 420,000 $1.50 $ 630,000 $ 74.15
- ------------------------------------------------------------------------------------------------------
Common shares, par value $.001 (4) 450,000 $1.50 $ 675,000 $ 79.45
- ------------------------------------------------------------------------------------------------------
Common shares, par value $.001 (5) 914,000 $1.50 $1,371,000 $161.36
Total 6,784,000 $10,176,000 $1,197.71
- ------------------------------------------------------------------------------------------------------
(1) Represents shares being sold to the public. The price of $1.50 per
share is being estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(c) of the Securities Act.
(2) Represents the resale of the shares of common stock issuable in
connection with the conversion of options originally issued to Fort
Street Equity, Inc. Since issuance to Fort Street Equity, it has sold
100,000 options to Ralston Superannuation Fund and 50,000 options to
Bruce Gilling. The price of $1.50 per share is being estimated solely
for the purpose of calculating the registration fee pursuant to Rule
457(c) of the Securities Act.
(3) Represents Selling Security Holder shares being sold to the public.
The price of $1.50 per share is being estimated solely for the purpose
of calculating the registration fee pursuant to Rule 457(c) of the
Securities Act.
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(4) Represents Selling Security Holder shares being sold to the public.
The price of $1.50 per share is being estimated solely for the purpose
of calculating the registration fee pursuant to Rule 457(c) of the
Securities Act.
(5) Represents Selling Security Holder shares of Fort Street Equity, Inc.
being sold to the public. The price of $1.50 per share is being
estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act.
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.
The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until this 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.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED JULY 29, 2005
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FIT FOR BUSINESS INTERNATIONAL, INC.
3,000,000 SHARES OF COMMON STOCK
RESALE OF 2,000,000 SHARES OF COMMON STOCK ISSUABLE IN CONNECTION WITH
THE CONVERSION OF OUTSTANDING OPTIONS
1,784,000 SELLING SECURITY HOLDER COMMON SHARES
Fit For Business International, Inc. is offering, on a "best efforts" basis
3,000,000 shares of our common stock at $1.50 per share. The initial offering
period will end twelve (12) months from the date listed in this prospectus
unless it is terminated earlier. This Offering is being made on a
self-underwritten, no minimum basis by us through our officers and directors.
Since there is no selling commission, all proceeds from the Offering will go to
us. In addition, there are no arrangements to place any proceeds received in an
escrow, trust or similar account. There are no minimum individual purchase
requirements for this offering.
In addition, our Selling Security Holders are offering to sell up to 1,784,000
shares of our common stock, and a further 2,000,000 resale of shares of common
stock issuable in connection with the conversion of outstanding options.
Our shares of common stock are not listed on any stock exchange. There is no
assurance that our shares of common stock will be quoted on any stock exchange
in the future. The selling stockholders will sell their common stock at $1.50
per share until our shares of common stock are quoted on the OTC Bulletin Board.
Thereafter, the selling stockholders may sell their shares at prevailing market
prices or privately negotiated prices.
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE, AND INVOLVE A HIGH DEGREE OF RISK
AND SHOULD NOT BE PURCHASED BY ANYONE WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE INFORMATION SET
FORTH UNDER "RISK FACTORS" ON PAGE 8, BEFORE INVESTING IN SUCH SECURITIES.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until this Registration Statement filed with the
Securities and Exchange Commission is declared effective by the Securities and
Exchange Commission. 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.
Until (insert date), all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
Price to Public Underwriting Commissions Proceeds to Company
--------------- ------------------------ -------------------
Per Share $1.50 -0- $1.50
Total $4,500,000 -0- $4,500,000
The date of this prospectus is ____, 2005
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Table of Contents
PROSPECTUS SUMMARY............................................................6
RISK FACTORS..................................................................8
USE OF PROCEEDS..............................................................15
DETERMINATION OF OFFERING PRICE..............................................18
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.....................18
EQUITY COMPENSATION PLAN INFORMATION.........................................18
DIVIDENDS....................................................................19
PENNY STOCK CONSIDERATIONS...................................................19
COMMISSION'S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES......19
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION....................19
BUSINESS - OUR COMPANY.......................................................33
DESCRIPTION OF PROPERTY......................................................53
LEGAL PROCEEDINGS............................................................53
MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS..................................53
EXECUTIVE COMPENSATION.......................................................56
PRINCIPAL STOCKHOLDERS.......................................................58
DILUTION.....................................................................59
SELLING STOCKHOLDERS.........................................................60
PLAN OF DISTRIBUTION.........................................................63
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................65
DESCRIPTION OF SECURITIES....................................................67
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE........................................................68
TRANSFER AGENT...............................................................68
EXPERTS......................................................................68
LEGAL MATTERS................................................................68
FINANCIAL STATEMENTS.........................................................F-1
SIGNATURES...................................................................74
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PROSPECTUS SUMMARY
About Us
We were established on May 30, 2001, and incorporated in the State of Nevada on
July 31, 2001, under the name Elli Tsab, Inc. We have remained essentially
inactive since incorporation. We changed our name to Patient Data Corporation on
April 15, 2004, and we also increased our authorized capital to 100,000,000
shares of common stock and 10,000,000 shares of preferred stock, each with a par
value of $.001 per share.
On September 14, 2004, we acquired 100% of the issued and outstanding capital
shares of Fit For Business (Australia) Pty Limited ("Subsidiary"), an Australian
company. All shares of Fit For Business (Australia) Pty Limited were owned by
Mark A. Poulsen and Mark A. Poulsen & Associates Pty. Ltd. Currently our
operations are conducted through our Subsidiary which delivers wellness programs
to businesses in Australia. One component of our program includes the provision
of nutritional and health supplements manufactured by Herbalife Ltd.
In exchange for all of the issued and outstanding shares of Subsidiary, we
issued an aggregate of 15,000,000 of our common shares and 1,000,000 of our
preferred shares to the stockholders of Subsidiary, Mark A. Poulsen and Mark A.
Poulsen & Associates Pty. Ltd. Mark A. Poulsen and Mark A. Poulsen & Associates
Pty. Ltd. subsequently transferred some of their common shares to other
individuals and entities.
On January 13, 2005, we changed our name to Fit For Business International, Inc.
("FFBI") in order to better reflect our new business plan.
Our auditors have issued a going concern qualification in their opinion letter.
Where You Can Find Us
Our registered United States office is located at 3155 E. Patrick Lane, Suite 1,
Las Vegas, Nevada, 89120-3481, USA. Our telephone number is (702)866-2500 and
our facsimile number is (702)866-2689. Fit for Business (Australia) Pty Limited
(our operations) is located at 10/27 Mayneview Street, Milton, Queensland, 4064
Australia. Our telephone number in Australia is (011) 61 7 33673355 and our
facsimile number is (011) 61 7 33673252.
Securities Offered By Us
We are offering a maximum amount of 3,000,000 shares of common stock, $.001 par
value, at $1.50 per share. Currently, we have not established an underwriting
arrangement for the sale of these shares. All funds that are received by us in
the offering are available for immediate use. There is no minimum number of
shares that must be sold before we can utilize the proceeds of the offering.
In addition, there are no arrangements to place any proceeds received in an
escrow, trust or similar account. In addition, our Selling Security Holders are
offering to sell up to 1,784,000 shares of our common stock, and a further
2,000,000 resale of shares of common stock issuable in connection with the
conversion of outstanding options. We will not receive any proceeds from the
sale of any common shares by our selling security holders or our option holders.
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SUMMARY FINANCIAL INFORMATION:
As of June 30, As of
-------------------------- March 31,
2004 2003 2005
----------- ----------- -----------
(Audited) (Audited) (Unaudited)
Balance Sheet Items-
Cash and cash equivalent $ 137 $ 54 $ 5,569
Total current assets $ 28,068 $ 1,512 $ 403,644
Total assets $ 52,840 $ 4,507 $ 517,635
Accounts payable and accrued liabilities $ 207,614 $ 156,312 $ 117,877
Loans from related parties $ 96,098 $ 147,684 $ 44,748
Convertible promissory notes $ 185,000 $ -- $ --
Deferred revenues $ -- $ -- $ 470,027
Total current liabilities (also total liabilities) $ 488,712 $ 303,996 $ 632,652
Stockholders' (deficit) $ (435,872) $ (299,489) $ (115,017)
Nine Months Ended
Year Ended June 30, March 31,
---------------------------- ----------------------------
2004 2003 2005 2004
------------ ------------ ------------ ------------
(Audited) (Audited) (Unaudited) (Unaudited)
Statements of Operations and
Comprehensive (loss) items-
Revenues $ 203 $ 363 $ 40,501 $ 95
Cost of Goods Sold 87 242 2,286 82
Gross Profit 116 121 38,215 13
General and administrative expenses 122,220 24,297 338,519 3,877
Other income (expense) (8,160) -- (4,988) (4,081)
Net (loss) $ (130,264) $ (24,176) $ (305,292) $ (7,945)
(Loss) per common share - Basic and Diluted $ (1,608.20) $ (298.47) $ (0.01) $ (0.00)
Weighted Average Number of Common Shares
Outstanding - Basic and Diluted 81 81 20,791,715 20,000,000
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RISK FACTORS
All material risks have been disclosed in this section.
OUR INDEPENDENT AUDITORS HAVE ISSUED A NEGATIVE REPORT WHICH MAY CAUSE OUR
CESSATION, HAVE INVESTORS LOSE THEIR INVESTMENT AND HURT OUR ABILITY TO RAISE
ADDITIONAL FINANCING.
The report of our independent auditors on our financial statements for the year
ended June 30, 2004, contains an explanatory paragraph which indicates that we
have recurring losses from operations, and our working capital is insufficient
to meet our planned business objectives. The deficit accumulated as of March 31,
2005, was $(701,128). This report states that, because of these losses, there is
substantial doubt about our ability to continue as a going concern. This report
and the existence of these recurring losses from operations may make it more
difficult for us to raise additional debt or equity financing needed to run our
business, and is not viewed favorably by analysts or investors. Furthermore,
this may cause our cessation of business resulting in investors losing their
money. We urge potential investors to review this report before making a
decision to invest in us.
OUR OPERATIONS AND FUTURE GROWTH ARE HEAVILY DEPENDENT UPON OUR PRESIDENT, MARK
A. POULSEN, OUR SENIOR VICE PRESIDENT OF SALES, ANTHONY F. HEAD, SANDRA L.
WENDT, OUR VICE PRESIDENT OF ADMINISTRATION, CHIEF FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING OFFICER, AND PRINS A. RALSTON, OUR SENIOR VICE PRESIDENT
AND CHIEF OPERATING OFFICER, AND OTHER MANAGEMENT PERSONNEL. IF WE LOSE THE
SERVICES OF THESE EMPLOYEES WE WILL BE UNABLE TO DEVELOP OUR BUSINESS WITH THE
SAME SPEED THAT WE HAVE ANTICIPATED IN THIS PROSPECTUS. THIS COULD LEAD TO THE
REDUCTION OF PROJECTED REVENUES AND DELAY THE IMPLEMENTATION OF OUR GROWTH
STRATEGIES.
In the event that any of these executives are unable to carry out their services
due to illness, death, or if they decide to leave our employ, these events could
have a material adverse effect on our revenue projections, future success, and
ability to continue to implement our growth strategies. During our development
phase, these key officers formulate and execute the strategy being pursued by us
in our operations. We do not carry key person life insurance on any such
individual. The following are the roles and responsibilities of our executives,
and if one of these executives was unable to perform their role we would need to
have another executive undertake their essential duties while we recruited a
replacement, resulting in further expenses and delay in the implementation of
our growth strategies:
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- ------------------------------- ------------------- ---------------------------------------------
Title Name Role/Responsibility
- ------------------------------- ------------------- ---------------------------------------------
President and Chief Mark A. Poulsen Chairman of the Board Fit for Business
Executive Officer International Inc.;
Managing Director Fit For
Business (Australia) Pty
Limited; Provides the
leadership and direction
for strategy and program
structure of the Company.
- ------------------------------- ------------------- ---------------------------------------------
Senior Vice President Anthony F. Head Leads & Develops Sales initiatives;
of Sales Training of Sales and Customer Service
Staff; Manages key corporate relationships
and accounts; Preparation of Sales Budgets.
- ------------------------------- ------------------- ---------------------------------------------
Vice President of Sandra L. Wendt Accounting Officer;
Administration, Chief Manages Financial Function;
Financial Officer and Oversees personnel & administration;
Principal Accounting Officer Preparation of Forecasts & Budgets.
- ------------------------------- ------------------- ---------------------------------------------
Senior Vice President & Prins A. Ralston Establishes and develops the Fit for
Chief Operating Officer Business personnel, structures, operating
processes, and systems in countries in
which the Company operates;
Leads and manages the personnel of the
Company;
Manages the financial affairs of the
Company;
Manages the legal and governance affairs
of the Company.
- ------------------------------- ------------------- ---------------------------------------------
WE HAVE A LIMITED OPERATING HISTORY AND MAY NOT BE ABLE TO CONTINUE TO
SUCCESSFULLY DEVELOP OUR BUSINESS PLAN OR ACHIEVE PROFITABILITY.
We are a development stage company and have a limited operating history. Our
success will depend largely upon our ability to implement our business plan. Our
ability to identify customers will be crucial to our success. Due to our
development stage, we do not have consistent cash flow.
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SINCE MARK A. POULSEN, OUR PRESIDENT, CHIEF EXECUTIVE OFFICER, AND DIRECTOR,
OWNS A COMPANY THAT RUNS A HERBALIFE DISTRIBUTORSHIP THAT INCLUDES A NETWORK OF
DISTRIBUTORS THAT RESULTS IN THIS COMPANY RECEIVING ADDITIONAL COMMISSIONS AND
INCOME FROM HERBALIFE, MARK A. POULSEN COULD INFLUENCE THE SOURCING OF THE
NUTRITIONAL PRODUCTS REQUIRED FOR OUR PROGRAMS FROM HIS DISTRIBUTORS TO THE
EXCLUSION OF OTHER DISTRIBUTORS, AND AS SUCH, A CONFLICT OF INTEREST CAN ARISE.
Mark A. Poulsen & Associates Pty. Ltd. is a company of which Mark A. Poulsen is
a Director, and through which he runs his Herbalife distributorship. Herbalife
runs a network marketing system, under which Mark A. Poulsen & Associates Pty.
Ltd. directly receives 5% of income from Herbalife, dependant on the volume of
the nutritional products sold through distributors who have been sponsored by
Mark A. Poulsen & Associates Pty. Ltd.
Currently, Mark A. Poulsen & Associates Pty. Ltd. has distributors (21) that it
has sponsored under the Herbalife networking system that are signed up as
independent FFBI account executives (16) and customer service representatives
(5). As such, Mark A. Poulsen should receive some distribution of dividends or
income from Mark A. Poulsen & Associates Pty. Ltd. that have resulted from
commissions paid to Mark A. Poulsen & Associates Pty. Ltd. from Herbalife as a
result of nutritional products sold by FFBI's independent account executives and
customers service representatives. This is a conflict of interest and may result
in his allegiance being swayed.
INVESTORS IN THIS OFFERING WILL SUFFER IMMEDIATE DILUTION OF THEIR INVESTMENT OF
$1.29 PER SHARE.
Investors in this offering are paying $1.50 per share. If the maximum number of
shares of common stock offered in this Offering are sold, our net tangible book
value per share will be $.21 per share. This will result in immediate dilution
in your investment of $1.29 per share.
SINCE WE DEPEND ON HERBALIFE LTD. PRODUCTS AND WE HAVE NO WRITTEN AGREEMENT FOR
SUCH PRODUCT SUPPLY THROUGH THEIR INDEPENDENT DISTRIBUTOR, THIS RELATIONSHIP CAN
TERMINATE WITHOUT NOTICE AND CAUSE THE LOSS OF FUTURE REVENUES AND OPERATIONS.
Our business plan relies upon Herbalife to supply products through its
distributors for our nutritional programs. We do not have a formal agreement
with Herbalife or its distributors. Mark A. Poulsen, the Founder, President, and
Chief Executive Officer of Subsidiary, is an independent distributor of
Herbalife products through Mark A. Poulsen & Associates Pty. Ltd. Each of our
account executives may also be an independent distributor of Herbalife products.
If Mark A. Poulsen & Associates Pty. Ltd. or any of our account executives were
to lose their distributorship with Herbalife, or if any governmental regulations
were to negatively impact Herbalife or its products, our business revenues and
operations would be significantly reduced. In these circumstances, we would need
to find new Herbalife distributors and, or, a new supplier of nutritional
products.
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AS THE NUTRITIONAL COMPONENT OF OUR PROGRAMS INVOLVES THE COMPANY SELLING THE
NUTRITIONAL PRODUCTS OBTAINED THROUGH EXISTING HERBALIFE DISTRIBUTORS, WE MAY BE
IMPACTED BY THE NEGATIVE CONNOTATIONS ASSOCIATED WITH THE NETWORK MARKETING
UNDERTAKEN BY THESE DISTRIBUTORS WITH THE RESULTING LOSS OF CORPORATE CUSTOMERS
AND SUBSEQUENT LOSS OF REVENUES.
Herbalife distributes its nutritional product utilizing a network marketing
model. This style of marketing has been previously and incorrectly associated
with the outlawed pyramid sales models. Due to this incorrect association, we
may be negatively impacted as potential corporate customers may be reluctant to
be associated with products obtained from network marketing based distributors.
We clearly remunerate our employed and independent account executives and
customer service representatives only on the basis of retail sales of our
programs to our customers, and are not involved in any form of pyramid sales, as
follows:
- ------------------------- -------------------------------- --------------------------- ------------------------
Type Salary Commission Bonuses
- ------------------------- -------------------------------- --------------------------- ------------------------
Employed Account Negotiated dependent on Negotiated dependent on Negotiated dependant
Executives qualifications and experience. sales volumes. on budget and key
performance indicators
being achieved.
- ------------------------- -------------------------------- --------------------------- ------------------------
Employed Customer Negotiated dependent on NIL Negotiated dependant
Service qualifications and experience. on budget and key
Representatives performance indicators
being achieved.
- ------------------------- -------------------------------- --------------------------- ------------------------
Independent Account NIL Sliding scale after a NIL
Executives threshold of $100,000
- ------------------------- -------------------------------- --------------------------- ------------------------
Independent Customer NIL 35% of the retail sale of NIL
Service Representatives the customers serviced.
- ------------------------- -------------------------------- --------------------------- ------------------------
The impact of an incorrect association on a new customer may indicate that we
will be unable to sell our programs to them, or if they were an existing
customer, we may lose an existing contract with them. As such, there would be a
resultant decrease in revenues.
OUR BUSINESS AND THE HERBALIFE NUTRITIONAL PRODUCTS ARE SUBJECT TO EXTENSIVE
GOVERNMENT REGULATION, AND OUR FAILURE TO SECURE GOVERNMENTAL APPROVALS WILL
RESULT IN THE LOSS OF THE PRODUCT AND DECREASED REVENUES AND OPERATIONS.
Both the business and the Herbalife products, at the core of the nutrition
components of our programs, are subject to extensive government regulation in
various jurisdictions. For example, we may be subject to regulations pertaining
to: (1) program claims and advertising, including direct claims and advertising
by us, as well as claims and advertising by our account executives or customer
service representatives, for which we may be held responsible; (2) our
distribution system; and (3) transfer pricing and similar regulations that
affect the level of taxable income and customs duties.
11
For example, in the United States, the formulation, manufacturing, packaging,
storing, labeling, promotion, advertising, distribution and sale of our
Herbalife products may be subject to regulation by one or more governmental
agencies, including (1) the Food and Drug Administration ("FDA"), (2) the
Federal Trade Commission ("FTC"), (3) the Consumer Program Safety Commission
("CPSC"), (4) the United States Department of Agriculture ("USDA"), (5) the
Environmental Protection Agency ("EPA") and (6) the United States Postal
Service. Our activities are regulated by various agencies of the states,
localities and other countries in which our programs are distributed and sold.
The FDA, in particular, regulates the formulation, manufacture and labeling of
foods, dietary supplements and over-the-counter ("OTC") drugs, such as those
distributed by us. FDA regulations require Herbalife suppliers to meet relevant
good manufacturing practice ("GMP") regulations for the preparation, packing and
storage of foods and OTC drugs. GMP's for dietary supplements have yet to be
promulgated but are expected to be proposed. In some jurisdictions, we may,
prior to commencing operations, be required to obtain approval, licenses or
certification from the relevant governmental health agency. There is no
guarantee that we will be able to secure the necessary approvals in any of our
targeted markets for the Herbalife products, and we may have to substitute other
approved nutritional products in these markets.
SINCE OUR BUSINESS OPERATIONS ARE PRESENTLY LOCATED IN AUSTRALIA AND SUBJECT TO
THE RULES AND REGULATIONS OF AUSTRALIA, YOU MAY NOT BE FAMILIAR WITH SUCH RULES
AND REGULATIONS AND MAY NOT HAVE THE CAPABILITY TO MAKE AN INFORMED DECISION
REGARDING YOUR INVESTMENT.
Our business operations are based in Australia. Our products and services are
subject to the rules and regulations of Australia as are the operations of our
Subsidiary in Australia. The major areas of Australian Law most likely to impact
FFBI are as follows:
Food:
The Australia New Zealand Food Standards Code is adopted by all the Australian
States and Territories. The Code prescribes labeling requirements for all food.
Certain statements are prohibited and others are regulated and may only be used
in specific circumstances. For example, health and nutrition claims and claims
that a food is a food item for a specific dietary use are strictly regulated.
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Therapeutic goods:
Therapeutic goods must be registered and can only be manufactured by a licensed
manufacturer, and must also be included on the Australian Register of
Therapeutic Goods as either listed or registered goods. There are standards for
the manufacture, composition, handling, labeling and advertising of such goods.
Therapeutic goods may be assessed for safety and efficacy and, depending on the
level of risk and the claims made on the product distributors of therapeutic
goods, must hold the relevant level of evidence to support claims made on
packaging and in advertising.
Australian Securities and Investments Commission:
The Australian Securities and Investments Commission (ASIC) is the single
regulator of Australian registered and foreign companies. The ASIC administers
the Corporations Act (Cth), the law regulating incorporation, operations and
management of companies. The ASIC is therefore responsible for supporting
integrity and fairness in company affairs and in financial markets.
Australian Taxation Office (ATO):
The Australian Taxation Office, under the Commissioner of Taxation, is the
statutory authority responsible for administering Australia's federal taxation
system. Australia's income tax law consists primarily of the Income Tax
Assessment Act 1936 (Cth), the Income Tax Assessment Act 1997 (Cth) and the
Taxation Administration Act 1953 (Cth), as well as ATO administrative taxation
rulings and court decisions. Fringe benefits provided to employees are subject
to a separate regime under the Fringe Benefits Tax Assessment Act 1986 (Cth).
Australia's goods and services taxation law consists primarily of A New Tax
System (Goods and Services Tax) Act 1999 (Cth). The current income tax system
involves taxation of income and capital gains of individuals and businesses.
Actions in respect of defective services or products are likely to be based on:
o the Australian Federal Trade Practices Act and comparable legislation in
the Australian State and Territory jurisdictions; and
o the common law of contract; and
o the common law of negligence.
If you are a United States investor, you may not be knowledgeable about the
above rules and regulations in Australia. This may lead to your inability to
make an informed decision about an investment in us.
OUR BUSINESS OPERATIONS ARE TRANSACTED IN THE AUSTRALIAN DOLLAR AND SUBJECT TO
FOREIGN CURRENCY FLUCTUATIONS WHICH CAN DECREASE THE VALUE OF OUR ASSETS.
We are an Australian based company. Although the financial information in this
document is presented in United States dollars, we transact our business in the
Australian dollar. Any negative price fluctuations in the Australian dollar to
the United States dollar will have the effect of decreasing the value of our
assets and, in turn, decreasing the value of your investment.
SALES BY SELLING SECURITY HOLDERS BELOW THE $1.50 OFFERING PRICE MAY CAUSE OUR
STOCK PRICE TO FALL AND DECREASE DEMAND IN THE PRIMARY OFFERING WHICH MAY
DECREASE THE VALUE OF YOUR INVESTMENT.
Our Selling Security Holders may offer their shares during our offering. All of
our stock owned by the Selling Security Holders will be registered by the
Registration Statement of which this prospectus is a part. The Selling Security
Holders may sell some or all of their shares immediately after they are
registered. In the event that the Selling Security Holders sell some or all of
their shares, which could occur while we are still selling shares directly to
investors in this offering, trading prices for the shares could fall below the
offering price of the shares and result in the loss of part, or all, of your
investment.
YOU MAY NOT BE ABLE TO LIQUIDATE YOUR INVESTMENTS SINCE THERE IS NO ASSURANCE
THAT A PUBLIC MARKET WILL DEVELOP FOR OUR COMMON STOCK OR THAT OUR COMMON STOCK
WILL EVER BE APPROVED FOR TRADING ON A RECOGNIZED STOCK EXCHANGE OR QUOTATION
MEDIUM.
13
There has been no trading market for our common stock and none is anticipated to
develop in the near future. We intend to apply for quotation on the Over the
Counter Bulletin Board concurrently with the filing of this offering. It is
unlikely that our trading market will develop in the near term, or that if
developed, it will be sustained. In the event the regular public trading market
does not develop, any investment in our common stock would be highly illiquid.
Accordingly, an investor in our common stock may not be able to sell the shares
readily, if at all.
OUR CHIEF EXECUTIVE OFFICER AND DIRECTOR CURRENTLY CONTROLS APPROXIMATELY 61.9%
OF OUR ISSUED AND OUTSTANDING SHARES AND, THEREFORE, CONTROLS ALL STOCKHOLDER
DECISIONS RESULTING IN THE REMAINDER OF OUR STOCKHOLDERS HAVING NO CONTROL OVER
OUR CORPORATE ACTIONS.
Mark A. Poulsen, our Chief Executive Officer and Director, beneficially owns, in
the aggregate, approximately 60.25% of our issued and outstanding common stock.
Mr. Poulsen also owns 1,000,000 shares of our preferred stock, which have 50
voting rights per share. Therefore, this individual is in a position to exert
actual or effective control over our business and operations, including the
election of all of our directors and approval of significant corporate
transactions. The remainder of our stockholders will have no control over our
corporate actions.
INVESTORS IN THIS OFFERING WILL BEAR THE MOST RISK OF LOSS EVEN THOUGH OUR
PRESENT CHIEF EXECUTIVE OFFICER AND DIRECTOR WILL CONTROL US.
Our present officers and directors own an aggregate of 14,155,000 shares or
67.82% of our total issued and outstanding shares of common stock (but not
including up to 2,000,000 shares issuable upon the exercise of options) and
1,000,000 preferred shares before the registration and the issuance of
additional shares of common stock from this Offering. This controlling interest
was acquired at a cost substantially below the offering price. Further, some of
our Selling Security Holders acquired their shares at a cost of $0.33 and $0.50
per share. Accordingly, purchasers of the shares of common stock offered will
bear most of the risk of loss although our control will be maintained by the
existing stock owners by virtue of their percentage of stock ownership.
IT IS IMPERATIVE THAT WE PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND THE
FAILURE TO DO SO WILL HAVE A NEGATIVE IMPACT ON OUR BUSINESS DUE TO THE FACT
THAT A NEW COMPETITOR MAY GAIN ENTRY INTO THE MARKETPLACE RESULTING IN A LOSS OF
CUSTOMERS, REVENUE AND A SLOW GROWTH PLAN.
Our business depends on intellectual and property laws to safeguard our assets.
Our intellectual property consists of: (i) computer software and systems design
for our call center, (ii) trademark of Fit For Business, (iii) website design
for management information systems (to be completed), (iv) design for multimedia
training programs (in progress), (v) marketing and promotional literature and
materials (ongoing), (vi) account executive and customer service resources,
customer service representatives, compact disc and training manuals, (vii)
television program pilots and script (initial pilot for thirteen week television
program complete, (viii) and customer and prospects list. Our success in
defending our intellectual property assets and ensuring that we do not infringe
on the intellectual property rights of others can be an expensive process, and
have a significant effect on our business. Our failure to protect our
intellectual property assets, or the infringement on the rights of others could
have a negative material effect on us in that we could lose our market advantage
that we have over our existing competitors, or a new competitor may gain entry
into the market place as a result of obtaining our intellectual property. Due to
the increased competition this would create, we would lose our advantage in
acquiring and obtaining customers with the subsequent loss in revenue and a
slowing down in our growth plans.
We are introducing a new concept to our business plan that may not be successful
resulting in depletion of our resources. Our business plan calls for the
development of a new concept of corporate wellness solutions in which we target
a specific market (i.e., industry, business, government and individuals 45 years
of age and older). This is to be introduced in Australia and other markets.
There is no assurance that we will be successful in introducing this concept.
The introduction of this concept consists of the use of our cash reserves which
will be depleted if the introduction of this concept is not successful.
14
USE OF PROCEEDS
The net proceeds to us from this Offering, after deducting estimated offering
expenses of $100,000, are estimated to be approximately $4,400,000 assuming the
Maximum Offering is sold. We will not receive any proceeds from the sale of
shares by the Selling Security Holders. The following sets forth our use of net
proceeds based on the maximum raise where we net $4,400,000; a raise where we
net $2,700,000; a raise where we net $1,200,000; a raise where we net $700,000;
and, a raise where we net $350,000:
Use of Proceeds Based on Net Raise of $4,400,000:
Approximate Approximate
Dollar Percentage of
Application of Proceeds Amount Net Proceeds
- ----------------------- ----------- -------------
Purchase of Computer Software and Systems $ 350,000 8.0%
Hardware for Call Center (1)
Website Design and Enhancement (2) 260,000 5.9%
Production - Multi Media Training programs (3) 300,000 6.8%
Marketing, Promotional Literature and Brand 300,000 6.8%
Campaign Costs (4)
International market development (5) 1,500,000 34.1%
Working Capital (6)
Rent Expense $ 200,000
Salaries 975,000
Professional Fees 45,000
Admin Expenses 20,000
Cash Flow Funding 450,000 1,690,000 38.4%
----------- ------
Total.................. $ 4,400,000 100.0%
=========== ======
(1) Further development of our web based management system including the
addition of a call center module. This item includes the provision of the
required computing hardware to support the developed software.
(2) Development of a web based portal that will include the ability to
undertake online e-commerce transactions.
(3) Conversion of the current paper based training manuals for our Account
Executives and Customer Service Representatives into a self paced
multi-media training kit.
(4) To secure an advertising and brand building agency to assist FFBI in
ensuring that its brand building activities deliver measurable increases in
sales.
(5) Undertake the research of the potential market, modify the FFBI processes
and systems for the market in question, prepare promotional documentation
in the language of the market, and undertake relationship building visits
to the countries.
(6) Represents amounts to be used for working capital and general corporate
purposes, including rent expense, corporate overhead including salaries of
management, administration and ongoing professional fees. The amount
allocated to cash flow funding will be utilized on a needs basis to fund
any day to day administrative expenditures such as direct program
consumables (the costs of inoculations, pedometers, nutritional
supplements, participant awards, and participant information packs) in the
course of generating revenues. The Working capital amount is required to
fund operations ahead of receiving the revenues that will flow as a
consequence of delivery of these services to customers.
15
Prior to revenues from sales being fully able to fund salaries and bonuses,
working capital will be used to fund the following salaries of management:
- -------------------- ------------------- ----------------------------- --------------------- -----------------
Title Name Salary Bonus Term of contract
- -------------------- ------------------- ----------------------------- --------------------- -----------------
President and Mark A. Poulsen $96,329 Fit For Business Listing bonus Employment
Chief Executive (Australia) Pty Limited; $388,250 contract can be
Officer $192,658 Fit For Business terminated on
International, Inc. four (4) months
notice.
- -------------------- ------------------- ----------------------------- --------------------- -----------------
Senior Vice Anthony F. Head $77,063 On meeting budget Employment
President $11,086 contract can be
of Sales terminated on
four (4) months
notice.
- -------------------- ------------------- ----------------------------- --------------------- -----------------
Vice President of Sandra L. Wendt $42,385 On meeting budget Employment
Administration, $3,695 contract can be
Chief Financial terminated on
Officer, and four (4) months
Principal notice.
Accounting Officer
- -------------------- ------------------- ----------------------------- --------------------- -----------------
Senior Vice Prins A. Ralston $131,007 On meeting budget Employment
President & Chief $14,782 contract can be
Operating Officer terminated on
four (4) months
notice.
- -------------------- ------------------- ----------------------------- --------------------- -----------------
Use of Proceeds Based on Net Raise of $2,700,000:
Approximate Approximate
Dollar Percentage of
Application of Proceeds Amount Net Proceeds
- ----------------------- ------ ------------
Purchase of Computer Software and Systems $ 250,000 9.3%
Hardware for Call Center
Website Design and Enhancement 160,000 6.0%
Production - Multi Media Training programs 90,000 3.3%
Marketing, Promotional Literature and Brand 300,000 11.1%
Campaign Costs
International market development 1,000,000 37.0%
Working Capital (6)
Rent Expense $110,000
Salaries 700,000
Professional Fees 25,000
Admin Expenses 15,000
Cash Flow Funding 50,000 900,000 33.3%
----------- ------
Total.................. $ 2,700,000 100.0%
=========== ======
For the specific breakdown of each category, see the footnotes above under the
category of Net Raise of $4,400,000.
16
Use of Proceeds Based on Net Raise of $1,200,000:
Approximate Approximate
Dollar Percentage of
Application of Proceeds Amount Net Proceeds
- ----------------------- ------ ------------
Purchase of Computer Software and Systems $ 150,000 12.5%
Hardware for Call Center
Website Design and Enhancement 80,000 6.7%
Production - Multi Media Training programs 90,000 7.5%
Marketing, Promotional Literature and Brand 180,000 15.0%
Campaign Costs
International market development 210,000 17.5%
Working Capital (6)
Rent Expense $ 60,000
Salaries 400,000
Professional Fees 0
Admin Expenses 0
Cash Flow Funding 30,000 490,000 40.8%
----------- ------
Total.................. $ 1,200,000 100.0%
=========== ======
Use of Proceeds Based on Net Raise of $700,000*:
Approximate Approximate
Dollar Percentage of
Application of Proceeds Amount Net Proceeds
- ----------------------- ------ ------------
Website Design and Enhancement $ 50,000 7.1%
Marketing, Promotional Literature and Brand 50,000 7.1%
Campaign Costs
International market development 110,000 15.8%
Working Capital (6)
Rent Expense $ 60,000
Salaries 400,000
Professional Fees 0
Admin Expenses 0
Cash Flow Funding 30,000 490,000 70.0%
----------- ------
Total.................. $ 700,000 100.0%
=========== ======
Use of Proceeds Based on Net Raise of $350,000*:
Approximate Approximate
Dollar Percentage of
Application of Proceeds Amount Net Proceeds
- ----------------------- ------ ------------
Working Capital (6)
Rent Expense $ 40,000
Salaries 250,000
Cash Flow Funding 60,000 $ 350,000 100.0%
----------- ------
Total.................. $ 350,000 100.0%
=========== ======
For the specific breakdown of each category, see the footnotes above under the
category of Net Raise of $4,400,000.
The foregoing represents our best estimate of our allocation of the net proceeds
based upon the current state of our business development and management
estimates of current industry conditions. We anticipate, although there can be
no assurance, that the net proceeds from an Offering raising $1,000,000 will
only allow us to sustain our operations for a period of approximately twelve
(12) months. Upon completion of the Maximum Offering of $4,400,000, we believe
we will have sufficient financing to operate our business for approximately
eighteen (18) months.
17
* If we raise less than $350,000, then the expenditures enumerated in this
example will be decreased in a proportionate manner, provided that salaries will
be decreased at a rate twice that of cash flow funding and rent expense.
Employment positions at our company will be eliminated as necessary to
correspond to such a decrease in net proceeds.
DETERMINATION OF OFFERING PRICE
The initial public offering price of the shares of our common stock has been
determined arbitrarily by us and does not necessarily bear any relationship to
our book value, assets, past operating results, financial condition or any other
established criteria of value. Although our common stock is not listed on a
public exchange, we will be filing to obtain a quotation on the OTC Bulletin
Board concurrently with the filing of this prospectus. There is no assurance
that our shares of common stock will be quoted on the OTC Bulletin Board. In
addition, however, there is no assurance that our common stock, once it becomes
publicly quoted or listed, will trade at market prices in excess of the initial
public offering price as prices for the common stock in any public market which
may develop will be determined by the market and may be influenced by many
factors, including the depth and liquidity of the market for the common stock,
investor perception of us, and general economic and market conditions.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is not currently traded on any recognized stock exchange. There
is no current public trading market for our shares of common stock. After this
Registration Statement becomes effective, we intend to apply for a quotation on
the OTC Bulletin Board. There is no assurance that our shares of common stock
will be quoted on the OTC Bulletin Board.
As of July 29, 2005, based on our transfer agent records, we had 84 stockholders
holding an aggregate of 20,870,000 shares of our common stock. In addition,
2,000,000 options convertible into 2,000,000 shares of our common stock are held
by Fort Street Equity, Inc., Ralston Superannuation Fund, and Bruce Gilling.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of July 29, 2005, with
respect to compensation plans under which our equity securities are authorized
for issuance:
(a) (b) (c)
-------------------- -------------------- ------------------------
Number of securities
remaining available
Number of securities for future issuance
to be issued upon Weighted-average under equity
exercise of exercise price of compensation plans
outstanding options, outstanding options, (excluding securities
warrants and rights warrants and rights reflected in column (a))
-------------------- -------------------- ------------------------
Equity compensation
plans approved by
security holders None
Equity compensation
plans not approved
by security holders None
Total None
18
DIVIDENDS
We have never paid a cash dividend on our common stock. It is our present policy
to retain earnings, if any, to finance the development and growth of our
business. Accordingly, we do not anticipate that cash dividends will be paid
until our earnings and financial condition justify such dividends. There can be
no assurance that we can achieve such earnings.
PENNY STOCK CONSIDERATIONS
Trading in our securities is subject to the "penny stock" rules. The SEC has
adopted regulations that generally define a penny stock to be any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. These rules require that any broker-dealer who recommends
our securities to persons other than prior customers and accredited investors,
must, prior to the sale, make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to execute the
transaction. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated with trading
in the penny stock market. In addition, broker-dealers must disclose commissions
payable to both the broker-dealer and the registered representative and current
quotations for the securities they offer. The additional burdens imposed upon
broker-dealers by such requirements may discourage broker-dealers from effecting
transactions in our securities, which could severely limit the market price and
liquidity of our securities. Broker-dealers who sell penny stocks to certain
types of investors are required to comply with the Commission's regulations
concerning the transfer of penny stocks. These regulations require
broker-dealers to:
o Make a suitability determination prior to selling a penny stock to the
purchaser;
o Receive the purchaser's written consent to the transaction; and
o Provide certain written disclosures to the purchaser.
These requirements may restrict the ability of broker-dealers to sell our common
stock and may affect your ability to resell our common stock.
COMMISSION'S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
We have agreed to indemnify each of our directors and certain officers against
certain liabilities, including liabilities under the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the provisions described above, 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. In the event that a claim for
indemnification against such liabilities (other than our payment of expenses
incurred or paid by our director, officer or controlling person 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, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking Statements
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of our results of
operations and financial condition. The discussion should be read in conjunction
with our financial statements and notes thereto appearing in this prospectus.
The following discussion and analysis contains forward-looking statements, which
involve risks and uncertainties. Our actual results may differ significantly
from the results, expectations and plans discussed in these forward-looking
statements.
19
Overview
Fit For Business International, Inc. ("FFBI" or the "Company") is a Nevada
corporation in the development stage having a mission to improve the wellness
and productivity of people in the workplace. FFBI provides products and services
for: (i) corporate wellness programs which address business productivity, stress
and absenteeism issues; and (ii) living well programs directed primarily, but
not exclusively, to individuals over 45 years of age.
Fit For Business (Australia) Pty Limited ("Subsidiary") was organized as an
Australian private company on December 14, 1998, and subsequently began certain
marketing studies and corporate awareness programs to obtain customers for its
products and services. In October 2003, Subsidiary initiated a capital formation
activity through the private placement of certain convertible promissory notes
which provided, through September 14, 2004, proceeds of $365,000. Subsequent to
the completion of the reverse merger between FFBI and Subsidiary, the liability
associated with the convertible promissory notes was assumed by the Company.
Thereafter, all of the promissory notes were converted into shares of common
stock of FFBI.
In addition, in November 2003, Subsidiary commenced a capital formation activity
to effect a reverse merger with a corporation validly organized in the United
States for the purpose of completing a Registration Statement on Form SB-2 with
the Securities and Exchange Commission ("SEC"), and raising capital from the
issuance of common stock in the public markets of up to $4.5 million. The
initial capital formation activity through a deemed reverse merger and the
issuance of common stock was unsuccessful. Subsequently, Subsidiary completed a
reverse merger with FFBI, and FFBI is currently undertaking a second capital
formation activity of the same type.
Prior to September 14, 2004, Subsidiary, aside from the capital formation and
marketing activities described above, incurred other development stage operating
costs and expenses related to its organization as an entity, receipt of a
trademark in Australia for its name and related logo, formation of a management
team, accounting and tax preparation fees, consulting fees, travel, and other
general and administrative expenses.
On September 14, 2004, FFBI entered into a Share Exchange Agreement (the
"Exchange Agreement") with Subsidiary, whereby FFBI acquired all of the issued
and outstanding capital stock of Subsidiary (81 shares) in exchange for
15,000,000 shares of common stock and 1,000,000 shares of preferred stock of the
Company. Both the common stock and the preferred stock of FFBI have a par value
of $.001. The shares of preferred stock are non-participating, but each share is
entitled to fifty (50) votes in a general meeting of the stockholders. As a
result of the Exchange Agreement, the stockholders of Subsidiary control FFBI,
and Subsidiary has been deemed to have effected a reverse merger for financial
reporting purposes as of the date of the Exchange Agreement. The reverse merger
has been recorded as a recapitalization of the Company, with the net assets of
FFBI and Subsidiary brought forward at their historical bases.
In the course of the activities described above, we have sustained operating
losses and expect such losses to continue in the foreseeable future. To date, we
have not generated sufficient revenues to achieve profitable operations or
positive cash flow from operations. As of March 31, 2005, we had a working
capital deficit of $229,008 and an accumulated deficit of $701,128. There is no
assurance that profitable operations, if ever achieved, will be sustained on a
continuing basis. During the nine-month period ended March 31, 2005, we derived
74% of our revenues from recognizing revenue as the result of our license sale
to LR Global Marketing Pty. Ltd., and the remainder from the sale of programs to
corporate and living well customers.
With our main revenues likely to be generated from the sale of our wellness
programs to corporations and government departments, we will be concentrating on
sales efforts with those corporations most likely to purchase our programs.
Market research will be conducted to identify those corporations most likely to
purchase our programs following which the sales process can take anywhere from 3
to 12 months to complete. Corporations and government departments class our
programs as mainly employee benefits programs. If economic circumstances become
tight, corporations tend to reduce their expenditures on employee benefits
programs and this will have a detrimental impact on our revenues.
20
Other trends that have a material effect on our revenues, plan of operations and
the results of our operations include our market's tendency to be aware of
health issues and the desire of the majority of those in our market to maintain
or improve their current level of health and personal well being. Currently,
those in Australia and New Zealand are very much aware of the importance of good
health and physical fitness. Our products and services rely on this awareness
and desire. These trends result in part from government education programs and
also from social pressures to look well and be physically active. While there is
no indication that these trends will decline, there is no assurance that these
trends will continue and if they were to cease or become less prevalent, our
results will be materially affected.
Critical Accounting Policies
Our financial statements are prepared in accordance with accounting
principles generally accepted in the United States ("US GAAP"). In connection
with the preparation of the financial statements, we are required to make
assumptions and estimates about future events, and apply judgments that affect
the reported amounts of assets, liabilities, revenues, expenses and the related
disclosure. We base our assumptions, estimates and judgments on historical
experience, current trends and other factors that management believes to be
relevant at the time the financial statements are prepared. On a regular basis,
management reviews our accounting policies, assumptions, estimates and judgments
to ensure that our financial statements are presented fairly and in accordance
with U.S. GAAP. However, because future events and their effects cannot be
determined with certainty, actual results could differ from our assumptions and
estimates, and such differences could be material.
Our significant accounting policies are discussed in Note 1 of the notes to
financial statements, "Significant Accounting Policies". Certain critical
policies are presented below.
Revenue Recognition
We are in the development stage and have yet to realize significant revenues
from planned operations. We have derived revenues principally from the sale of
literature and training materials, Herbalife nutritional products, services
related to wellness programs, and from a license agreement for Australia and New
Zealand which entitles the licensee to recruit representatives for us, use our
logo and software, and market and promote our products and services. Such
revenues are recognized in accordance with the SEC Staff Accounting Bulletin No.
104, "Revenue Recognition in Financial Statements" ("SAB 104"). Under SAB 104,
revenue is recognized when it is realized or realizable and earned. We consider
revenue realized or realizable and earned when we have persuasive evidence of an
arrangement, and that: (i) the product has been shipped or the services have
been provided to our customer; (ii) the sales price is fixed or determinable;
and (iii) collectibility is reasonable assured. We also reduce revenue for
estimated customer returns. In addition to the aforementioned general policy,
the following are the specific revenue recognition policies for each major
category of revenue:
For sales of literature, training materials, and Herbalife nutritional products,
revenue is realized upon shipment to the customer and there are no unfulfilled
company elements related to a customer's order.
For specific wellness program services and contracts pertaining to such
services, revenue is realized as services are provided.
For license agreements, revenue is realized from licensing activities related to
various countries and geographic regions, which entitle licensees to recruit
representatives for the Company, the use of Company logos, software and training
materials, and the rights to market and promote the services of the Company.
Revenue from such agreements is realized over the term and under the conditions
of each specific license.
Internal Web Site Development Costs
Under Emerging Issues Taskforce Statement 00-2, Accounting for Web Site
Development Costs ("EITF 00-2"), costs and expenses incurred during the planning
and operating stages of our web site are expensed as incurred. Under EITF 00-2,
costs incurred in the web site application and infrastructure development stages
are capitalized by us and amortized to expense over the web site's estimated
useful life or period of benefit.
21
Costs of Computer Software Developed or Obtained for Internal Use
Under State of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use ("SOP 98-1"), we capitalize external
direct costs of materials and services consumed in developing or obtained
internal-use computer software; payroll and payroll-related costs for employees
who are directly associated with and who devote time to the internal-use
computer software project; and, interest costs related to loans incurred for the
development of internal-use software.
Costs of Computer Software to be Sold or Otherwise Marketed
Under Statement of Financial Accounting Standards No. 86, Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed ("SFAS
86"), we capitalize costs associated with the development of certain training
software products held for sale when technological feasibility is established.
Capitalized computer software costs of products held for sale are amortized over
the useful life of the products from the software release date.
Foreign Currency
The Company accounts for foreign currency translation pursuant to SFAS No. 52,
Foreign Currency Translation ("SFAS 52"). The Company's functional currency is
the Australian dollar. All assets and liabilities are translated into United
States dollars using the current exchange rate at the end of each fiscal period.
Revenues and expenses are translated using the average exchange rates prevailing
throughout the period. Translation adjustments are included in accumulated
comprehensive income (loss) for the period. Certain transactions of the Company
are denominated in United States dollars. Translation gains or losses related to
such transactions are recognized for each reporting period in the related
statement of operations and comprehensive income (loss).
As a result of such currency fluctuations and the conversion to United States
dollars for financial reporting purposes, we may experience fluctuations in our
operating results on an annual or quarterly basis going forward. We have not in
the past, but may in the future, hedge against fluctuations in exchange rates.
Future hedging transactions may not successfully mitigate losses caused by
currency fluctuations.
Accounting for Income Taxes
Significant judgment is required in determining our worldwide income tax expense
provision. In the ordinary course of a global business, there are many
transactions and calculations where the ultimate tax outcome is uncertain. Some
of these uncertainties arise as a consequence of cost reimbursement arrangements
among related entities, the process of identifying items of revenue and expense
that qualify for preferential tax treatment and segregation of foreign and
domestic income and expense to avoid double taxation. Although we believe that
our estimates are reasonable, the final tax outcome of these matters may be
different than those presented in our historical income tax provisions and
accruals. Such differences could have a material effect on our income tax
provision and net income (loss) in the period in which such determination is
made.
The Company accounts for income taxes pursuant to SFAS No. 109, Accounting for
Income Taxes ("SFAS 109"). Under SFAS 109, deferred tax assets and liabilities
are determined based on temporary differences between the bases of certain
assets and liabilities for income tax and financial reporting purposes. The
deferred tax assets and liabilities are classified according to the financial
statement classification of the assets and liabilities generating the
differences.
The Company maintains a valuation allowance with respect to deferred tax assets.
The Company establishes a valuation allowance based upon the potential
likelihood of realizing the deferred tax asset and taking into consideration the
Company's financial position and results of operations for the current period.
Future realization of the deferred tax benefit depends on the existence of
sufficient taxable income within the carryforward period under the Federal tax
laws.
Changes in circumstances, such as the Company generating taxable income, could
cause a change in judgment about the realizability of the related deferred tax
asset. Any change in the valuation allowance will be included in income in the
year of the change in estimate.
As of March 31, 2005, the Company had net operating loss carryforwards for
income tax reporting purposes of approximately $701,100 that may be offset
against future taxable income. The net operating loss carryforwards expire in
the years 2021-2025. Current tax laws limit the amount of loss available to be
offset against future taxable income when a substantial change in ownership
occurs or a change in the nature of the business. Therefore, the amount
22
available to offset future taxable income may be limited. No tax benefit has
been reported in the financial statements for the realization of loss
carryforwards, as the Company believes there is high probability that the
carryforwards will not be utilized in the foreseeable future. Accordingly, the
potential tax benefits of the loss carryforwards are offset by a valuation
allowance of the same amount.
RESULTS OF OPERATIONS
NINE-MONTH PERIOD ENDED MARCH 31, 2005, COMPARED TO THE NINE-MONTH PERIOD ENDED
MARCH 31, 2004.
Revenues
Total revenues for the nine-month period ended March 31, 2005, amounted to
$40,501, or a 42,533% increase over revenues of $95 for the same period ended
March 31, 2004. The increase in revenues was primarily due to the completion and
realization of revenue from the first license agreement in Australia and New
Zealand by Subsidiary with L.R. Global Marketing Pty. Ltd. The amount of revenue
realized amounted to $31,827. The remainder of the increase in revenues, or
$8,579, resulted from revenues from wellness programs, and the sale of
nutritional products.
Cost of Goods Sold
Cost of goods sold increased $2,204, or 2,688%, to $2,286 for the nine-month
period ended March 31, 2005, when compared to $82 for the same period ended
March 31, 2004. The increase was due to additional sales of the Company's
Herbalife nutritional products.
General and Administrative Expenses
General and administrative expenses for the nine-month period ended March 31,
2005, increased by 8,631% to $338,519, when compared to $3,877 for the same
period ended March 31, 2004. The increase was primarily attributed to additional
salaries, compensation and related payroll tax expenses resulting from the
addition of administrative staff and the impact of salaries related to
employment agreements with officers and directors, and additional expenses
related to advertising, training, travel, telephone, office expense, and
non-offering related professional, accounting and consulting fees. The Company
also realized $48,562 in foreign exchange expense adjustments during the period
ended March 31, 2005, compared to realized foreign exchange gains of $31,295 for
the same period in 2004.
Other (Expense)
Other (expense) for the nine-months ended March 31, 2005, amounted to $4,988,
compared to $4,081 for the same period ended March 31, 2004. For the period
ended March 31, 2005, other (expense) consisted of interest expense of $6,202
related to accrued interest from convertible promissory notes, offset by
interest income of $1,214. For the same period ended March 31, 2004, other
(expense) consisted of interest expense of $4,081 related to accrued interest
from convertible promissory notes.
Net (Loss)
Net (loss) for the nine-months ended March 31, 2005, amounted to $(305,292),
compared to $(7,945) for the same period ended March 31, 2004. The additional
net (loss) of $(297,347) resulted primarily from the overall increase in general
and administrative expenses, described above, offset by the increase in revenues
for the period.
Net (Loss) Per Share
We incurred a net (loss) per share of $(0.01) for the nine-month period ended
March 31, 2005, compared to a net (loss) per share of $(0.00) for the same
period ended March 31, 2004. The weighted average number of common shares
outstanding for the nine-month period ended March 31, 2005, was 20,791,715,
compared to 20,000,000 shares for the same period in 2004. The weighted average
number of common shares outstanding for the nine-month periods ended March 31,
2005, and 2004, reflects the retroactive restatement of shares outstanding from
the reverse merger between FFBI and Subsidiary effected on September 14, 2004.
YEAR ENDED JUNE 30, 2004, COMPARED TO THE YEAR ENDED JUNE 30, 2003.
Revenues
Total revenues for the year ended June 30, 2004, amounted to $203, or a 44%
decrease from revenues of $363 for the same period ended June 30, 2003. The
decrease in revenues resulted from the development stage nature of the
activities of the Company wherein only minor sales of Herbalife products and
service revenues were realized.
23
Cost of Goods Sold
Cost of goods sold decreased $155, or 64%, to $87 for the year ended June 30,
2004, when compared to $242 for the same period June 30, 2003. The decrease was
due to the development stage nature of the activities of the Company wherein
only minor sales of Herbalife products were experienced.
General and Administrative Expenses
General and administrative expenses for the year ended June 30, 2004, increased
by 403% to $122,220, when compared to $24,297 for the same period ended June 30,
2003. The increase was primarily attributed to additional non-offering
accounting and consulting fees of $9,360, an increase in travel and lodging
expenses of $1,812, the write-off of deferred offering costs related to an
unsuccessful stock offering amounting to $79,685, an increase in depreciation
and amortization expenses of $302, and an increase in other general and
administrative expenses of $934. The increase in overall general and
administrative expenses for the period was offset by a decrease of $2,854 in
advertising and promotion expenses, and realized foreign exchange gains of
$15,046. The amount of $15,046 realized as foreign exchange gains for the year
ended June 30, 2004, represented a decrease of $8,576, or 36%, from the amount
of $23,622 realized as foreign exchange gains for the same period ended June 30,
2003.
Other (Expense)
Other (expense) increased to $8,160 for the year ended June 30, 2004, from $0
for the same period ended June 30, 2003. Other (expenses) for the year ended
June 30, 2004, consisted of interest expense related to accrued interest from
convertible promissory notes.
Net (Loss)
Net (loss) for the year ended June 30, 2004, amounted to $(130,264), compared to
$(24,176) for the same period ended June 30, 2003. The additional net (loss) of
$(106,088) resulted primarily from the overall increases in general and
administrative expenses and other (expense), described above, and the decrease
in revenues for the period.
Net (Loss) Per Share
We incurred a net (loss) per share of $(1,608.20) for the year ended June 30,
2004, compared to a net (loss) per share of $(298.47) for the same period ended
June 30, 2003. The weighted average number of common shares outstanding for the
years ended June 30, 2004, and 2003, was 81. This reflects the capital shares
issued and outstanding of Subsidiary and its operations prior to the reverse
merger between FFBI and Subsidiary effected on September 14, 2004.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2005, our total current assets were $403,644 and our total
current liabilities were $632,652, resulting in a working capital deficit of
$229,008. As of the same date, we also had an accumulated deficit during the
development stage of $701,128. We finance our operations with a combination of
securities issuances and loans from related parties. As discussed below, we
completed a private placement of convertible promissory notes in September 2004,
which provided gross proceeds of $365,000.
Software development expenditures as of March 31, 2005, amounted to $40,502 from
$0 as of March 31, 2004. The increase in software development costs is a result
of the development of our web based management information system. Such system
is not yet operational. We also incurred $5,006 in web site development costs
which have been reflected in our financial statements as of March 31, 2005.
Our management believes that we have sufficient funds to operate until the
end of September 2005,with additional funds anticipated from the performance of
agreements that we have entered into with our current customers, and from
contracts that we expect to execute in the near future. Nonetheless, we may
raise additional funds through equity financings in order to broaden our
financial strength and liquidity.
As of May 31, 2005, we had $6,406 of cash resources. Our current cash resources
are not sufficient to satisfy our cash requirements over the next 12 months. Our
management believes that we have sufficient funds to continue operations through
the end of September 2005.
On August 25, 2004, our Subsidiary entered into a License Agreement (the
"Agreement") with L.R. Global Marketing Pty. Ltd. ("LR Global"), an Australian
corporation acting as trustee for Fit For Business Australia/New Zealand Trust
(the "trust"). The principals of LR are Laraine Richardson and Dianne Waghorne,
and the beneficiaries of the trust are Laraine Richardson and Dianne Waghorne.
24
The principals of LR Global and the beneficiaries of the trust being the same
persons are not related to us, or to our Subsidiary, our officers or directors,
except as described herein. LR Global is a Herbalife distributor. Under the
terms of the Agreement, LR Global has been granted a non-assignable,
non-exclusive license to represent Subsidiary within Australia and New Zealand
for a term of ten (10) years in consideration for the payment of a licensing fee
in the amount of $500,000. Pursuant to the terms of the Agreement, LR Global may
use our logo, our web based management information system, marketing and
promotional literature, processes, systems, intellectual property and attend
FFBI events, for the purpose of generating new customers for us and for training
account executives and customer service representatives. Subsequent to the share
exchange transaction of September 14, 2004, Mark A. Poulsen, our President and
Chief Executive Officer, transferred 500,000 common shares to LR Global. To
date, LR Global has paid us USD $125,365 of the licensing fee and we agreed to
extend to a date within sixty (60) days following the first date on which our
common stock is quoted on the OTC Bulletin Board or other recognized stock
exchange, the balance due us. In addition, the principals of LR Global, Laraine
Richardson and Dianne Waghorne, have executed personal guarantees for the
payment of the balance of the outstanding license fees.
The successful implementation of all aspects of the business plan is subject to
our ability to be able to raise additional funds from an offering of our common
stock through this prospectus. A crucial component of our business strategy is
to implement our sales plan in order that we may secure sufficient sales to
become profitable. It has been estimated that we will require $180,000 for the
marketing, promotion and brand campaign costs, in order to effectively implement
our sales plan.
If we raise less than $1,200,000 through this Offering, we would have to curtail
expenditures on recruitment of staff and or on various projects or delay these
recruitment actions or projects until funds do become available. The delay in
the recruitment of staff or projects will have an impact on our ability to
achieve the sales target we seek to attain, and consequently delay the company
reaching profitability.
Should the funding required to pursue our business strategy not be forthcoming
from the aforementioned sources, we may have to explore other avenues of capital
formation. In any event, our investors should assume that any additional funding
will cause substantial dilution to current stockholders. In addition, we may not
be able to raise additional funds on favorable terms, if at all.
We have estimated that our offering costs will be approximately $100,000. As
noted below in the financial statements, we have already incurred $71,254 of
such offering costs as of March 31, 2005.
For the purposes of providing working capital, subsequent to March 31, 2004, FFB
borrowed $34,305 from Fort Street Equity. This was evidenced by two promissory
notes. This amount will be used to pay the balance of FFBI's estimated offering
costs.
Our independent auditor has indicated that there can be no assurance that we
will be able to raise $4.5 million in equity capital through our planned filing
with the SEC and related activities, or be successful in the sale of our
products and services that will generate sufficient revenues to sustain our
operations.
The notes to our financial statements include an explanatory paragraph
expressing substantial doubt about our ability to continue as a going concern.
Among the reasons cited in the notes as raising substantial doubt as to our
ability to continue as a going concern are the following: we have incurred
operating losses since inception, and our working capital is insufficient to
meet our planned business objectives. Our ability to continue as a going concern
is dependent on our ability to further implement our business plan, raise
additional capital and generate revenues.
Plan of Operation
During the period ended June 30, 2005, we have devoted our activities to the
following:
o Continuing to further develop our operating infrastructure, as follows:
a. Providing input and direction for further wellness program selection,
features, benefits and design of programs planned to be supplied to our various
target markets. We are identifying other similar Occupational Health and Safety
Organizations through internet research and face to face discussions to
determine whether we can include their offerings within our programs. In
determining if their offerings can be included in our programs, we have regard
to such issues as the compatibility, ability to deliver a quality offering, cost
of their offerings, the ease of implementation and the results that their
offering can deliver to potential customers.
25
b. Establishing which market segments are more likely to be willing consumers of
our wellness programs and then developing a marketing approach that is
consistent with their purchasing criteria. Training our sales force in the
marketing approach necessary to consummate sales to these organizations.
c. Recruiting and training further account executives and customer service
representatives; and
d. Sales.
Achievements for the Quarter ended June 2005:
Computer Software and Systems:
- -----------------------------
Continued implementation of our web based management system for final product
release to our Account Executives and Customer Service Representatives.
Our international web-based integrated management system combines online and
standalone features to allow us and our employees, account executives, customer
service representatives and licensees to record, track and report relevant
customer information.
1. Calendar & Appointment Functionality
2. Corporate Profile - including goals
3. Individual Employee Profile - Including Goals of on-going program
4. Employee Follow-up module
a. Including call scripts to collect and record information on how
employee is performing on program, this includes physical,
behaviors, and feelings, measurements on the 1st, 3rd, 7th, 14th
21st, and then weekly
5. Product order and reorder - automated
a. Interface to Herbalife Ordering procedures/system
6. Reporting system
a. To Individual employee for encouragement to show how they are
performing against the goals they set
b. To the corporation at the aggregate level
i. No individual information due to privacy reasons
7. Licensee, Account Executive and Customer Service Representative
management
a. Ensure all customers are being followed up
b. Orders are being placed in a timely manner
c. Contract renewals are followed up
Website Design and Enhancement:
- -------------------------------
Upgraded the Australian Fit For Business web site www.fitforbusiness.com.au to
present better information about our programs that is more consistent with our
marketing approach of using the website as a tool to promote our programs,
especially to corporations.
FFBI identified several areas of our website that were either outdated/changed
and/or required additional information. We reviewed all aspects of our site and
totally redeveloped a more informative and easy to navigate web site. The site
now includes several new sections. We have added further information on the Who
We are, What we do, Our Approach, Our Nutritional Component, Our Physical
Component, Statistical Information. We now have several specific sections
including:
About Us
Employers
Employees
Retirees
Government
Investors
Media
Links
Tools
We believe this now explains to a potential customer or investor, in better
detail what FFBI does and what the FFBI programs consist of and what potential
they have to assist customers.
Marketing, Promotion Literature and Brand:
- ------------------------------------------
Engaged a communications consultant on a short term contract to generate press
articles and media interactions specifically in relation to our target markets.
Updated existing brochures.
26
Speaking Opportunities
- ----------------------
Identified speaking opportunities at business conferences and seminars for the
FFBI Senior Executives, however none occurred in this quarter.
Thought Leadership/ Editorial Opportunities
- -------------------------------------------
- - Identified leading business management and/or health magazines with the
potential for FFBI to contribute a regular column.
- - Wrote letters to the Editor responding to articles on issues of business
health and fitness.
- - Wrote a media release on issues relating to workplace health and fitness.
- - Obtained further Testimonials of local customers using FFBI products and
programs highlighting the benefits achieved and placed on FFBI website.
Pilot TV program
- ----------------
It was envisaged that a TV program consisting of 13 by 30 minute episodes, aimed
at an audience of 45 years and over would form the basis of the marketing
program for the seniors market. The TV program was to cover the following
topics:
o Health: FFBI will lead in this area using a variety of partner
providers and medical experts, including physical, psychological and
associated medical areas.
o Wellness: FFBI will lead this area using Behavioral scientists,
Occupational Therapists, Nutritionists and dieticians and fitness
experts.
o Lifestyle: The people watching this show have the largest interest in
maintaining lifestyle and the finance to keep it - this will include
such segments as holidays, retreats and spas, recreation and so forth.
o Employment: Recognized recruitment agencies to give informative
information on retaining employment, changing roles or re-entering the
workforce.
o Redundancy: We will be using experts from employee groups, Human
relations management companies and financial planers to assist in this
area. Overcoming the effects of redundancy weigh heavily on not just
the bread winner, but also family relationships causing much stress
The process of bringing the TV program to fruition was to initially develop a
program concept, which had been shared with a number of corporations who would
participate as anchor advertisers of the various segments.
Subsequently, a ten minute pilot program has been filmed. The pilot has been
then put in the hands of an advertising agency that has taken it to the major
free to air commercial channels in Australia. The Commercial TV channel
requested an enhanced pilot to be produced.
The enhanced pilot was estimated to cost $15,000 to produce. However, as our
current financial position does not permit us to expend this amount, the project
has been halted pending the completion of capital formation through this
prospectus. There are no production agreements or other contracts in place for
the development or airing of the TV Pilot or the eventual TV program. Once funds
are available as a result of our capital formation activities, we will restart
the project.
Sales:
- ------
- - Identification of market segments that are predisposed to purchasing our
programs.
- - Identifying companies with the purchasing power within that segment.
- - Researching company leads to ensure they meet an identified set of
criteria.
- - Approaching the identified companies via our account executives with our
sales proposal.
- - Winning the business
- - Initiating the implementation program via our customer service
representatives.
- - The above process is taking between 1 to 4 months to finalize sales in
small businesses and can take 6 to 12 months to finalize in large
corporations or government departments.
- - Continually monitoring and reporting to the individuals and corporations
consuming our programs.
- - Continuously improving our internal processes and systems and ensure all
account executives and customer service representatives are fully trained
with respect to these improvements.
27
An additional two licenses were endeavored to be sold in Australia. The FFBI
business and financial modeling has indicated that there should only be three
licenses issued in Australia/New Zealand, due to the size of the corporate
market place. FFBI has already contracted with one licensee being LR Global.
Therefore we are still seeking to sell an additional two licenses.
FFBI short listed a number of potential licensees in Australia and is going
through our selection and interview process to ensure that potential licenses
meet our criteria.
Expenses:
- ---------
It was budgeted that $185,000 would be expended in this quarter, however the
actual expenditure will be approximately $130,000.
Revenues:
- ---------
No substantial revenues were expected in this quarter. Revenues totaling approx
$3,000 were realized.
Quarter ending September 2005:
- ------------------------------
Given the limited resources that we currently have available to us, during the
period ending September 30, 2005, we anticipate undertaking the following
activities:
a. strategic review of mission, vision, strategies, key projects, strengths,
weaknesses, opportunities and threats, competitive advantage;
b. continued focus on increasing the number of qualified corporations being
targeted in order to secure sales by identifying decision makers within
corporations and building relationship with these individuals;
c. continued refinement of the materials supporting the sales process such as
presentation materials, brochures and newsletters as a result of feedback
from sales calls;
d. continuing the process of capital formation via this prospectus; and
e. design and development of version 2 of our web-based integrated management
systems.
Methods of Achieving Objectives
We will be utilizing our current staff and in-house resources to deliver on
items (a) through (c) above, and we have estimated that we require $80,000 in
order to keep the business operating on this basis.
Item (d) will require the assistance of our professional legal and accounting
advisors and auditors.
Item (e) will require the assistance of Insource Pty. Ltd. We entered into a
contract with Insource Pty. Ltd. for software services pertaining to the
development of certain computerized systems for customer service,
administration, and information reporting purposes. The contract price for the
software development services amounted to $40,502 and includes the development
of version 2.
The plan of operations post-September 2005 is highly dependant on our ability to
raise sufficient capital via this prospectus. As such, itemized below is our
plan of operations, anticipated activities and expected costs assuming net
proceeds from capital formation activities of $4,000,000. If a lesser amount is
raised then it will be necessary to reduce both the range and extent of
activities undertaken and some timeframes will extend.
The period ending three months post-capital foramtion:
Our business objectives for this period are as follows:
a. International Market Development - Japan
- ---------------------------------------------
- - Research and test Japanese market for compatibility in accepting the
current configuration of our programs.
- - Develop marketing approach to sell licenses in Japan.
- - Identify potential new licensees in Japan.
- - Sell licenses in Japan.
- - Recruit Account Executives and Customer Service Representatives in
conjunction with the Licensees in Japan.
- - Refine our marketing and sales process in conjunction with the Japanese
Licenses.
28
- - Specify any required changes to our Web presence and our web base
management information system to accommodate Japanese nuances.
b. Sales
- ----------
Recruitment of five full-time employed corporate account executives will
commence. Continued sales efforts by existing independent Account Executives
targeting corporations.
c. Computer Software and Systems
- ----------------------------------
Delivery and implementation of version 2 of our web-based integrated management
system.
d. Program Development
- ------------------------
It is expected in-house permanent staff will increase to include a Development
Director. We will also initiate new product offerings such as: Physical activity
components, (ie walking programs) stress management programs (i.e. yoga,
meditation, Tai Chi) Inoculations, education programs (i.e. meal planning,
cooking lessons) weight management (dietitian, nutritionist) to be included in
the programs identified by our collaborate approach with other Occupational
Health and Safety Providers.
e. Marketing, Promotion Literature and Brand
- ----------------------------------------------
Continue Marketing and Brand building via press releases, targeted media
interaction, and relationship building events.
Methods of Achieving Objectives
We will be utilizing our current staff, in particular the new Development
Director, to deliver on items (a)and (d) and we have estimated that we require
$40,000 for research assistance and travel to Japan.
The Senior Vice President/Chief Operating Officer will be responsible for the
recruitment activity of Item (b) and will engage the services of a professional
recruitment firm to assist in this process. It is anticipated that it will cost
in the order of $60,000.
The sales activity of Item (b) will be achieved by the Senior Vice President of
Sales with the assistance of our Licensee, independent account executives, and
independent customer service representatives.
Item (c) will require the assistance of Insource Pty Ltd. We entered into a
contract with Insource Pty. Ltd. for software services pertaining to the
development of certain computerized systems for customer service,
administration, and information reporting purposes. The contract price for the
software development services amounted to $40,502 and includes the delivery and
implementation assistance for version 2.
Item (e) will be achieved through the efforts of the existing full time staff of
FFBI.
Working Capital Expenses
It is budgeted that $100,000 will be expended in addition to the above.
The period ending 6 months post-capital formation:
- --------------------------------------------------
Our business objectives for this period are as follows:
a. Computer Software and Systems
- ----------------------------------
Specify the call centre module that is to be developed as part of the Web based
management information system.
Enhance the Web Based information system to cater for the Japanese market.
b. Website Design and Enhancement
- -----------------------------------
Specify and implement the e-commerce components of the web presence.
Modify the Web presence to cater for the Japanese market place.
29
c. Multi Media Training programs
- ----------------------------------
Specify the requirements in order to change the paper base training programs for
our account executives and customer service representatives to a Multi Media
base.
d. Marketing, Promotion Literature and Brand:
- -----------------------------------------------
Continue Marketing and Brand building via continued press releases, targeted
media interaction and relationship building events.
Implement an Awards program to recognize businesses that operate corporate
health and awareness programs, particularly those which achieve outstanding
productivity improvements or reductions in absenteeism. Partner with Australian
State and Federal Governments to recognize public sector employers who achieve
in this area.
Commence Marketing and Brand building activities in Japan in which we identify
corporations within market segments that are predisposed to purchasing our
programs and then sell to them.
e. International Market Development
- -------------------------------------
Continue with the preparation to commence business in Japan.
- - Initiate new product offerings to be included in the Fit For Business
Japanese programs
Commence market development for South Korea as follows:
- - Research and test South Korean market for compatibility in accepting the
current configuration of our programs.
- - Develop marketing approach to sell licenses in South Korea.
- - Identify potential new licensees in South Korea. Sell licenses in South
Korea.
- - Recruit account executives and customer service representatives in
conjunction with the Licensees in South Korea.
- - Refine our marketing and sales process in conjunction with the South Korean
Licensees.
- - Specify any required changes to our Web presence and our web base
management information system to accommodate South Korean nuances.
f. TV PROGRAM
- ---------------
Produce the enhanced pilot program. As part of the marketing program, after
acceptance of the enhanced pilot by the Australian TV network, we will enter
into a production and advertising contract with a single advertising agency
specializing in creating and delivering information TV programs, to create and
deliver the 13 episode TV program.
g. Sales
- ----------
The five full-time employed corporate account executives will commence
employment and be trained and start to sell our programs to our target markets.
The sales process and length of time taken to finalize sales will vary depending
on the size and nature of the organization that we are targeting.
New Licensee in Australia and Japan would be joining and bringing on between 10
to 15 Independent Account Executives to assist with the sales effort.
Method of achieving objectives
Items (a) and (b) will require the assistance of Insource Pty Ltd. We will
negotiate a new contract for the delivery of these objectives and anticipate
that the cost for this component will be $40,000.
Item (c) will require the assistance of a specialized elearning content
developer and provider. A specific provider has not been identified at this
time. The cost is expected to be $20,000.
Item (d) will be achieved through the efforts of the existing full time staff of
FFBI and the engagement of a Advertising and Communications agency. The cost is
expected to be $40,000.
Item (e) will be delivered by the Development Director and will require an
estimated $70,000 for research assistance and travel.
Item (f) will require the assistance of an advertising agency at an expected
cost of $15,000 for the production of the enhanced pilot and a further $70,000
as our contribution to the production of the 13 episodes, with the rest of the
costs being funded via the sale of advertising by the chosen advertising agency
to corporations who will be contributing to the TV program.
30
Item g)will be achieved and guided by the Senior Vice President of Sales.
Working Capital Expenses
We have budgeted expenditure for this quarter of $125,000 in addition to the
above.
The period ending 9 months post-capital formation:
- --------------------------------------------------
Our business objectives for this period are as follows:
a. Computer Software and Systems
- ----------------------------------
Develop and implement the call centre module that is part of the Web based
management information system.
Enhance the Web Based information system to cater for the South Korean market.
b. Website Design and Enhancement
- -----------------------------------
Modify the Web presence to cater for the South Korean market place.
c. Multi Media Training programs
- ----------------------------------
Develop and implement the multi media based training programs for our account
executives and customer service representatives.
d. Marketing, Promotion Literature and Brand:
- -----------------------------------------------
Continue marketing and brand building via continued press releases, targeted
media interaction and relationship building events.
Commence marketing and brand building activities in South Korea in which we
identify corporations within market segments that are predisposed to purchasing
our programs and then sell to them.
e. International Market Development
- -------------------------------------
Commence business in Japan.
Continue with the preparation to commence business in South Korea. -- Initiate
new product offerings to be included in the Fit For Business South Korean
programs.
Commence market development for North America as follows:
- - Research and test North American market for compatibility in accepting the
current configuration of our programs.
- - Develop marketing approach to sell licenses into North America.
- - Identify potential new licensees in North America. Sell licenses in North
America.
- - Recruit account executives and customer service representatives in
conjunction with the Licensees in North America.
- - Refine our marketing and sales process in conjunction with the North
American Licensees.
- - Specify any required changes to our Web presence and our web base
management information system to accommodate North American nuances.
f. Sales
- ----------
Sales in Australia are expected to be established with consistent program sales
and first Japanese sales commencing. It is anticipated that a new Licensee would
be joining for Korea and bringing on between 5 and 10 account executives to
assist with the Sales effort.
Method of achieving objectives
Items (a) and (b) will require the assistance of Insource Pty Ltd. We anticipate
that the cost for this component will be $70,000.
Item (c) will require the assistance of a specialized learning content developer
and provider. A specific provider has not been identified at this time. The cost
is expected to be $80,000.
Item (d) will be achieved through the efforts of the existing full time staff of
FFBI and the engagement of a Advertising and Communications agency. The cost is
expected to be $90,000.
Item (e) will be delivered by the Development Director and will require an
estimated $100,000 for research assistance and travel.
Item (f) will be achieved and guided by the Senior Vice President of Sales.
31
Working Capital Expenses
We have budgeted expenditure for this quarter of $150,000 in addition to the
above.
Since we are a development stage company with no significant operating history
and a poor financial condition, we may be unsuccessful in obtaining financing or
the amount of the financing may be minimal, and therefore, inadequate to
implement our full plan of operations. We have developed five alternative plans
of operations depending on financing being raised at the levels of $4.4 million,
$2.7 million, $1.2 million, $700,000 and $350,000. These alternate plans involve
a scaling back or staged implementation of the $4.4 million plan of operations
described. In the event that we do not receive the full, or partial financing,
or our financing is inadequate or if we do not adequately implement an
alternative plan of operations that enables us to conduct operations without
having received adequate financing, we may have to liquidate our business and
undertake any or all of the following actions:
1. Sell or dispose of our assets;
2. Pay our liabilities in order of priority, if we have available cash to pay
such liabilities;
3. If any cash remains after we satisfy amounts due to our creditors,
distribute any remaining cash to our shareholders in an amount equal to the net
market value of our net assets;
4. File a Certificate of Dissolution with the State of Nevada to dissolve our
corporation and close our business;
5. Make the appropriate filings with the Securities and Exchange Commission so
that we will no longer be required to file periodic and other required reports
with the Securities and Exchange Commission, if, in fact, we are a reporting
company at that time; and
6. Make the appropriate filings with the National Association of Security
Dealers to affect a de-listing of our common stock, if, in fact, our common
stock is quoted on the Over-the-Counter Bulletin Board at that time.
If we have any liabilities that we are unable to satisfy and we qualify for
protection under the US Bankruptcy Code, we may voluntarily file for
reorganization under Chapter 11 or liquidation under Chapter 7. Our creditors
may also file a Chapter 7 or Chapter 11 bankruptcy action against us. If our
creditors or we file for Chapter 7 or Chapter 11 bankruptcy, our creditors will
take priority over our shareholders. If we fail to file for bankruptcy under
Chapter 7 or Chapter 11 and we have creditors, such creditors may institute
proceedings against us seeking forfeiture of our assets, if any. We do not know
and cannot determine which, if any, of these actions we may be forced to take.
Material commitments for capital expenditure: We have no material commitments
for capital expenditures.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements.
32
BUSINESS - OUR COMPANY
We were organized on May 30, 2001, and incorporated in the State of Nevada on
July 31, 2001, under the name Elli Tsab, Inc. We have remained essentially
inactive since incorporation except for the issuance of common stock to former
officers and directors for services rendered, and the issuance of options to
purchase common stock for $10,000 in cash as described below.
On May 30, 2001, we issued 5,000,000 shares of our common stock at par value of
$.001 per share to former officers and directors of the Company for
incorporation services rendered valued at $5,000.00 and as founders of the
Company.
We changed our name to Patient Data Corporation on April 15, 2004, and we also
increased our authorized capital to 100,000,000 shares of common stock and
10,000,000 shares of preferred stock, each with a par value of $.001 per share.
On July 25, 2004, we issued 2,000,000 options to Fort Street Equity, Inc. (a
Cayman Islands company) to purchase the same number of shares of our common
stock for $10,000 in cash. The option period is through December 31, 2005. The
exercise price of the options is the higher of $0.50 per share or the average
trading price of our common stock over the preceding ten (10) business days
prior to exercise of the options, less a discount of forty (40%) percent.
On November 10, 2003, our Subsidiary entered into an agreement with Fort Street
Equity, Inc. ("Fort Street"), a Cayman Islands company, whereby Fort Street
would assist with the following: (i) the identification of a corporation validly
organized in the United States with which Subsidiary could realize a deemed
reverse merger; and (ii) the completion and filing of a Registration Statement
on Form SB-2 with the SEC for the purpose of raising capital from the issuance
of common stock in the public markets of up to $4.5 million.
Subsidiary paid Fort Street two deposits against fees and costs amounting to
$130,100. The initial capital formation activity conducted by Subsidiary and
Fort Street was not successful due to the fact that the organization and
completion of a deemed reverse merger with a validly organized corporation in
the United States could not be effected. Further, as a result of the uncompleted
deemed reverse merger, Subsidiary expensed $77,000 of the amount paid to Fort
Street as unsuccessful offering costs. With Fort Street, Subsidiary initiated a
second capital formation activity that resulted in the Exchange Agreement as
described below, and the current activity to file a Registration Statement on
Form SB-2 with the SEC.
On September 14, 2004, we entered into an exchange agreement and acquired 100%
of the issued and outstanding capital shares of Subsidiary. Fit For Business
(Australia) Pty Limited was incorporated on December 14, 1998, in the State of
Queensland, Australia. All shares of Subsidiary were owned by Mark A. Poulsen
and Mark A. Poulsen & Associates Pty. Ltd. Our operations are conducted through
our Subsidiary which delivers services and products to the workplace health and
safety industry in Australia.
In exchange for all of the issued and outstanding shares of Subsidiary, we
issued an aggregate of 15,000,000 of our common shares and 1,000,000 of our
preferred shares to the shareholders of Subsidiary, Mark A. Poulsen and Mark A.
Poulsen & Associates Pty. Ltd. Mark A. Poulsen and Mark A. Poulsen & Associates
Pty. Ltd. subsequently transferred some of their common shares to other
individuals and entities, as detailed herein. In addition, the exchange
agreement included the following terms: (1) Mark A. Poulsen would be elected as
the only director; (2) the company would change its name to "Fit for Business
International, Inc."
On January 13, 2005, we changed our name to FIT For Business International, Inc.
in order to better reflect our new business plan.
Our web site is located at www.fitforbusiness.com.au
Our business model addresses the alarming health statistics of individuals in
westernized countries. For example, the Australian Institute of Health and
Welfare last year revealed that 60 per cent(1) of Australian adults are
overweight and over 90 per cent(2) have at least one modifiable risk factor for
heart, stroke and vascular disease. These statistics are reflected in the
Australian workforce(3). Further, the combination of an aging workforce, falling
birth rates and increased demand for workers makes it imperative that
Corporations guide employees in modifying the risk factors that could prevent
them from making a long and productive contribution within the workforce. The
Australian National Audit Office has reported that, many businesses have
recognized the need to intervene by introducing programs that include absence
management techniques such as leave banks and health initiatives such as
influenza injections, gym programs, yoga and stress management(4).
33
The US Department of Health and Human Services has reported that innovative
employers are providing their employees with a variety of work-site-based health
promotion and disease prevention programs. These programs have been shown to
improve employee health, increase productivity and yield a significant return on
investment for the employer. In their report, "Prevention makes Common Cents"
they profile some of the nationally awarded and successful wellness programs in
America such as those of Motorola, DaimlerChrysler and Caterpillar and some of
the key program features including health risk appraisals, health screenings,
targeted education programs, support for employees throughout the process of
lifestyle change, smoking cessation, weight management, fitness activities,
individual counseling, and tracking/monitoring/reporting(5).
The FFBI approach to promoting wellness amongst employees reflects many of the
features which have proved successful in corporations like Motorola,
DaimlerChrysler and Caterpillar(6). FFBI delivers an integrated work-site based
program tailored to the needs of the business. The FFBI program involves the
following features:
a. health risk assessment,
b. health education focused on the identified health risks,
c. behavior modification techniques,
d. nutritional supplements for optimal nutrition and weight management
e. a walking based fitness program,
f. individual counseling of employees to support and motivate them as they
make positive lifestyle changes,
g. smoking cessation program,
h. preventative measures such as inoculations,
i. regular monitoring of results and reporting.
Potential investors should be aware that to date, FFBI does not have any case
studies to demonstrate the efficacy of our specific programs in delivering
improved wellness to individuals or improved productivity to corporations.
FFBI backs all programs with friendly fully trained customer service
representatives who use state-of-the-art occupational health and safety web
based information and communications systems to support, record and report on
progress of people on the programs. This ensures ongoing support and
encouragement to both the individual and the corporation.
It would be FFBIs analysis that within three to five years, workplace wellness
programs like those being proposed by FFBI will become the norm(7) as businesses
increasingly recognize the benefits of greater productivity, happier employees,
less sickness and absenteeism, and a better profitability(8).
FFBI's business plan sees it licensing prime distributors, known as "Licensees",
in the countries that it targets. The Licensees will need to be very successful
long-term business people with existing networks of account executives and
customer service representatives. Each account executive and customer service
representative will be individually required to contract with FFBI as
independent account executives or customer service representatives. FFBI earns
its revenues through the licensing fees as well as, on average, earning a 15%
margin on programs delivered to corporate customers. The key to the business
model is that corporate customers contract with FFBI and pay for the purchase of
- ---------------------
1 Australian Heart Foundation, "Heart Stroke & Vascular diseases Australian
Facts 2004" pg 2 http://www.heartfoundation.com.au/index.cfm?page=19, visited on
31 May 2005
2 As Above
3 Australian Heart Foundation, "The shifting burden of cardiovascular disease in
Australia 2005"pg 26 http://www.heartfoundation.com.au/index.cfm?page=20
4 The Auditor General Audit Report #52 2002-2003, "Absence management in the
Australian Public Service" pg 68, 30 June 2003,
http://www.anao.gov.au/WebSite.nsf/Publications/BD2FEAB022F0A678CA256D4B000F5DFD
5 US Department of Health and Human Services "Prevention Makes Common Cents",
Executive Summary, September 2003
http://aspe.hhsgov/health/prevention/prevention.pdf visited on 31 May 2005
6 US Department of Health and Human Services "Prevention Makes Common Cents",
Executive Summary, September 2003
http://aspe.hhsgov/health/prevention/prevention.pdf visited on 31 May 2005
7 US Department of Health and Human Services "Prevention Makes Common Cents",
Page 22&23, September 2003 http://aspe.hhsgov/health/prevention/prevention.pdf
visited on 31 May 2005
8 Ozminkowski RJ, Ling D, Goetzel RZ, Bruno JA, Rutter KR, Izaac F, Wang S.
"Long-term impact of Johnson & Johnson`s health and wellness program on health
care utilization and expenditures." Journal of Occupational and Environmental
Medicine. 2002; 44:21-29
34
the programs for their employees. The successful implementation of the business
plan will be dependent on our ability to meet the challenges of developing a
management team capable of not only the development of the various programs but
also brand management and the implementation of specific marketing strategies.
These strategies will include the utilization of specific existing distributors
currently in the business of marketing nutritional and wellness programs. As
well, we will be employing our own account executives to offer our services and
programs to our various target markets.
Additionally, it will be necessary to educate the target market and build
relationships with corporate customers in order to demonstrate the commercial
benefits of the Fit For Business wellness programs.
Our business plan has two major components or programs which involve products
and services for:
(1) "Corporate Wellness;" and
(2) "Living Well."
Market Opportunities
The Fit For Business Programs are currently marketed to two major target
markets:
1. Corporate Wellness Solutions - targeted to small/medium/large
corporations;
2. Living Well Solutions - targeted primarily to retirement village
groups and individual seniors.
Marketing is conducted via several methods:
1. Targeted media advertising and events;
2. Direct mail; and
3. Relationship marketing
Potential investors should be aware that to date FFBI has not conducted any
feasibility studies to demonstrate the efficacy of our business strategy.
CORPORATE WELLNESS SOLUTION PROGRAM
Under this component of the business plan, we are focused on delivering
products and services to make the corporate workplace healthier. The goal is
that a healthier workplace increases productivity and reduces absenteeism and
stress, and therefore, increases bottom line profits for employers. Our main
objective is to be a market leader in the Corporate Wellness arena.
Our approach to tackling the wellness issues faced by corporations employees is
to initially concentrate on nutrition and physical activity to replace bad
eating habits with goods ones. FFBI assists the employee to aim to undertake
this behavior modification within the first 21 days, usually the length of time
taken to break a habit.
Following which FFBI can introduce other wellness components of the corporations
choice, through FFBI, and our partner providers or through working with
providers of the corporations choice - but always monitored and followed up
through our web based information system and customer service representatives.
FFBI delivers an initial Corporate wellness program that includes:
o Profiling of the business including the physical requirements of the
major roles within the work place
o Introductory seminar on the aims and goals of the FFBI program and on
what good nutrition entails
o A profile of all individual employees on the program and referral to
appropriate medical/service providers
o Physical activity program
o Nutrition program including menu planning
o Non-intrusive follow-up/coaching of all individuals at the 1, 3, 7,
14, 28 days and then monthly
o Actively working with employees to monitor and report on progress
o Providing ongoing educational material (as agreed) via electronic or
hardcopy means
35
The balanced nutritional program provided by FFBI and for which the products are
supplied by Herbalife can consist of:
o protein, vitamins, minerals, herbs and dietary fibre
o B6 supplement
o Vitamin and Mineral supplement
o Vitamin C Supplement
Plus we can provide other targeted products from the Herbalife range of
nutritional products:
o Florafibre, Natures Raw Guarana, Chitosan, Lifeline - Omega 3,
Xtra-Cal, RoseOx (antioxidant), Tang Kuei, Protein powder and so on.
FFBI offers a variety of programs which includes the above services
and appropriate products, ranging in price from $85.00 (AUS. $115.00) to $210.67
(AUS. $285.00) per individual employee per month.
The benefits for corporations undertaking the FFBI programs can include:
o that employees feel better about themselves and have more energy;
o reduced absenteeism rates;
o reduced staff turnover; o improved productivity; and
o reduced health services costs.
The benefits for individuals undertaking the FFBI programs can include:
o Reducing the chance of excess unpaid sick leave;
o Improving health which may reduce the cost of personal health/medical
expenses;
o Savings on the costs of meals;
o Having more energy and stamina to meet the demands of work and life in
general; and
o Having the program costs totally paid for by the employer.
Potential corporate customers are identified through a process of
gathering and analyzing business information and data by our marketing and
account executives.
The Corporate Wellness Solution program is then marketed directly to
the target companies ("customers") via the account executives. The account
executives have previous experience in sales and are trained in the Fit For
Business Program methodology on how to approach potential corporate customers,
when information is required by customers, how to best present the information,
and how to close the sale.
We also have a separate training manual, provided on CD to all account
executives, which provides detailed training on how each separate market is to
be targeted, as well as detailed information on follow up, reporting, and other
procedures.
Once a corporate customer has agreed to participate in the program, our
Account Executive prepare an agreement, with our assistance, to be presented to
the customer. On signing of the agreement, the individual employees of the
customer are interviewed by our customer service representative to advise the
correct program for their use. The customer is then invoiced for the full retail
value of three (3) month's program for all employees who will be utilizing the
program. The in principle structure of our pricing policy is as follow:
a. 40% is allocated to direct program consumables, such as inoculations,
pedometer, nutritional supplements, participant rewards, participant
information packs and so forth;
b. 10% is allocated to indirect program cost such an allocation for
overheads, quality assurance, management information systems and so
forth;
c. 35% is allocated to compensate the customer service representatives
who implement the program and coach/monitor the individuals on the
program; and
d. 15% is the gross margin that we aim to attain on any program sales and
out of which we pay sales commissions.
Each corporate customer's employee receives follow-up at the 1, 3, 7,
14, 21 days and then weekly from the fully trained customer service
representative to ensure compliance with the program. This follow-up process
ensures that individual employees obtain positive results, assists them in
forming positive habits, and helps them to stay on the program, which benefits
us as well as the customer.
36
The customer receives initially weekly, and then monthly, reports from the
Account Executive showing the progress of the applicants. This information is
also recorded onto the Web based Fit For Business Customer Follow-up program.
Through the Web based Fit For Business management information system, we are
able to gauge the results achieved by the employees of various customers as well
as our customer service representatives.
CORPORATE WELLNESS SOLUTION PROGRAM
The FFBI business model for delivering the wellness solution program to the
corporate market place sees:
o the FFBI corporate entity delivering the marketing, support and
quality assurance services to the sales team;
o the sales team comprising the licensee and the independent and
employed account executives, undertaking the corporate sales
activities and securing sales;
o the customer service representatives delivering the services and
products to the employees of the corporations.
Typically an Account Executive would source the corporations/retirement
villages, make the initial contact, present the FFB program, and negotiate the
contract.
Once the contract is signed off the customer service representative would then
"take over" the implementation of the contract and the actual service delivery.
The customer service representative would be the one to contact the individual
participants, initiate them onto the program and provide the 1 on 1 customer
support as part of the FFB customer care program. We envisage that each customer
service representative will be able to support up to 150 program participants.
(NB once a contract has been negotiated an independent account executive can
choose to have the dual role of customer service representative for up to a
maximum of 50 program participants at any one time. This has the advantage of
keeping the independent account executive in touch with the customer
experience.)
The directors and officers of FFBI are not Licensees, account executives or
customer service representatives.
Currently, there are 16 Independent Account Executives and 5 independent
customer service representatives out of the total of 67 account executives and
customer service representatives who are affiliated with Mark A. Poulsen &
Associates Pty. Ltd. Mark A. Poulsen, our CEO and President, is a director and
beneficiary of Mark A. Poulsen & Associates. As such Mark A. Poulsen should
receive some distribution of dividends or income from Mark A. Poulsen &
Associates Pty. Ltd. that have resulted from commissions paid to Mark A. Poulsen
& Associates Pty. Ltd. from Herbalife as a result of nutritional products sold
by FFBI's independent account executives and customers service representatives.
No other know affiliations exist between any account executives, customer
service representatives and any officers or directors or employees of FFBI.
The table below expands on the specific roles played by each party to the FFBI
business model.
37
- --------------------------- -------------------- ---------------------- ----------------------
FFBI Staff Licensees Account Customer
Executives services
representatives
- --------------------------- -------------------- ---------------------- ----------------------
o Develops programs for o Provides an o Researches o Contacts each
the market place existing and potential employee of
proven group of customers who are corporations
o Puts in place strategic Account corporations joining the
relationships with executives and program
product providers customer o Builds
service relationships o Conducts the
o Undertakes the Brand representatives with corporations Customer Profile
and market building to ascertain
activities o Generates sales o Does correct
leads for their presentations to program
o Provides all of the Account corporations and for the employee
marketing and executive finalizes sales
promotional collateral o Orders the
o Assists the o Once sales products from
o Generates sales leads account process is Product Supplier
for the account executives complete
executives finalize sales allocates o Delivers
customer services Products and
o Builds relationships o Monitors representatives initiates
with the larger performance of to corporations customer onto the
customer and assist the account to service their program
the account executives executives and employees who are
close sales with Customer on FFBI programs o Performs
these organizations services followup as per
representatives o Monitors customer customer care
o Undertake induction and service program on 1st,
training of licensees, o FFBI intend to representatives 3rd, 7th, 14th,
Account executives and establish a to ensure 21st and
customer services compensation services quality weekly
representatives plan comprising is maintained thereafter
options and
o Monitors performance of cash bonuses o Ensures that
the account executives which will be corporations
and Customer services dependant on renew their
representatives total sales contract with
volumes of FFBI FFBI
o Maintain business model programs
through their o It is intended
o Provision of web distribution that the Account
presence group. Executive service
provide customer
o Provision of Web based service to
information systems at least 50
employees of
o Maintain systems and corporations
process
o Finalizes proposal and
contracts with
customers
o Maintain ISO9001:2000
Quality certification
38
Independent Account Executives have two sources of income:
a. Commission on sales - a sliding scale commission for all contracts that
commences once an agreed cumulative yearly threshold of $100,000 has been
reached. An indicative commission scale is as follows:
o 3% for sales up to $1,000,000
o 2% for further sales between $1,000,000 and $2,000,000
o 1% for any further sales above $2,000,000(no maximum cap)
b. A per participant fee when also acting as Customer Service Representative
for implementing the FFB program for a maximum of 50 participants at any
point in time.
Independent Customer Service Representatives have one source of income:
a. A per participant fee for implementing the FFB program for an agreed number
of participants
Independent Account Executives and Customer Service Representatives receive
compensation from FFB on the basis of every program sold, irrespective of
whether the program involves the nutritional supplement component.
COMPENSATION PLAN FOR LICENSEES, ACCOUNT EXECUTIVES AND CUSTOMER SERVICE REPRESENTATIVES
- ----------------------- --------------------- -------------------- --------------------- --------------------
Fit For Business Licensee Independent Account Independent Customer FFBI Employed
Executives* Service Account Executives
Representative* & Customer Service
Representatives
- ----------------------- --------------------- -------------------- --------------------- --------------------
Budgeted to retain 15% Receives 5% Are to receive a Budgeted to receive FFBI will pay an
of the retail value of commission from sales commission up to 35% of the annual salary
any FFBI Program sales. Herbalife for any which will be retail value of any negotiated at the
nutritional product dependent on total FFBI program sale. time of employment.
sold as a component volume of sales of May also receive 5%
of a FFBI program FFBI programs. May commission from
by their account receive 5% Herbalife for any
executive or commission from products sold as part
customer service Herbalife for any of a FFBI program if
representative who nutritional they are a Herbalife
are Herbalife products sold as distributor.
distributors. part of a FFBI
program.
- ----------------------- --------------------- -------------------- --------------------- --------------------
* Distinction between Account Executive and Customer Service Representative-
typically an Account Executive would source the corporations/retirement
villages, make the initial contact, present the FFB program, and negotiate the
contract phase. Once this is signed off the Customer Service Representative
would then "take over" the contract (NB the Account Executive may choose to
maintain this contract himself if it is a small number of programs) he/she would
then contact the participants, review their program requirements, order &
deliver programs. Initiate them onto the program and provide the 1 on 1 customer
support as part of the FFB customer care program.
39
Illustrative Compensation Tables
The tables below illustrate the compensation that could be received by
independent account executives and independent customer service representatives.
Example 1: In the current year the Account Executive has secured one 12 month
contract for a standard FFBI Wellness Program with Company A for 200 employees
at $1600.00 per participant. The total value of the contract is $320,000. The
Account Executive chooses to take on the role of Customer Service Representative
for 50 participants.
- ------------------------- ---------------- ---------------- ------------------- ------------------ -------------------
Eligible for Value of Sales Number of program Payment per TOTAL REMUNERATION
Sales Commission participants participant
Commission monitored monitored
- ------------------------- ---------------- ---------------- ------------------- ------------------ -------------------
Independent Account
Executive Yes(1) $9600 50 35% x $1600 x 50 $37,600
= $28,000
- ------------------------- ---------------- ---------------- ------------------- ------------------ -------------------
Independent Customer
Service Representative N/A Nil 150 35% x $1600 x 150 $84,000
= $84,000
- ------------------------- ---------------- ---------------- ------------------- ------------------ -------------------
Example 2: In the current year, the Account Executive has secured a 12 month
contract for a FFB Wellness Program (without the nutritional supplements) with
Company B for 200 employees at $200.00 per participant. The total value of the
contract is $40,000. The Account Executive chooses to take on the role of
Customer Service Representative for 50 participants.
- ------------------------- ---------------- ---------------- -------------------- ------------------ -------------------
Eligible for Value of Sales Number of Payment per TOTAL REMUNERATION
Sales Commission participants participant
Commission monitored monitored
- ------------------------- ---------------- ---------------- -------------------- ------------------ -------------------
Independent Account
Executive No(2) Nil 50 35% x $200 x 50 $3,500
= $3,500
- ------------------------- ---------------- ---------------- -------------------- ------------------ -------------------
Independent Customer
Service Representative N/A Nil 150 35% x $200 x 150 $10,500
= $10,500
- ------------------------- ---------------- ---------------- -------------------- ------------------ -------------------
(1) The minimum annual sales threshold of $100,000 has been reached with this
one contract so a Sales Commission applies at the 3% rate. (2) The minimum
annual sales threshold of $100,000 has not been reached in this example so a
Sales Commission does not yet apply.
40
LIVING WELL PROGRAM
This component of our business plan is targeted through programs
directed primarily, but not exclusively, to individuals over 45 years of age.
The programs consist of a wide range of nutritional supplements, personal care,
Physical activity and weight management programs, that promote inner and outer
wellness, and a healthy lifestyle. The nutritional products currently utilized
within the living well programs are manufactured by Herbalife.
2 (a) Retirement Village Groups
Retirement villages and homes are approached directly by Living Well
account executives who have been trained on how to approach the retirement
villages; what information is required; and how to present it.
The Account Executive then organizes a group presentation to the
village at a suitable time. Once the presentation is complete, each attendee
receives a seniors brochure which includes information on the program and an
order form.
Once the order is placed by the customer directly with us or via the
Living Well account executive, the funds are deposited with us. The Living Well
account executive via a customer service representative places the order and
initiates the customer onto the customer care program. The in principle
structure of our pricing policy is as follow:
a. 40% is allocated to direct program consumables, such as inoculations,
pedometer, nutritional supplements, participant rewards, participant
information packs and so forth;
b. 10% is allocated to indirect program cost such an allocation for
overheads, quality assurance, management information systems and so
forth;
c. 35% is allocated to compensate the customer service representatives who
implement the program and coach/monitor the individuals on the program;
and
d. 15% is the gross margin that we aim to attain on any program sales and
out of which we pay sales commission.
2 (b) Individual Seniors
The seniors market is driven solely by our nation wide advertising
campaign. We are currently mass marketing the Fit For Business Program in all
the states of Australia. We are using free to air and television Pay programs,
with advertising slots and a sponsorship campaign.
As well as the TV campaign, we are placing ads in the nationally
recognized "Seniors" newspapers and magazines.
We believe this advertising not only generates customer interest, it
also helps create national brand awareness for us.
The Fit For Business national call center receives the customer calls
in response to the advertisements. Their details are taken by the call center
and entered on to the Fit for Business Web Based management information system.
Fit For Business then distributes the leads, via the management information
system, for each State (there are seven states and two territories in
Australia)in Australia to the customer service representatives randomly,
dependent on geographic location. The customer service representative then
follows up each potential new customer as per the customer follow up program.
Once the customer decides to purchase the program, the funds are
deposited into our account. The customer service representative places the order
and initiates the customer onto the customer care program. The in principle
structure of our pricing policy is as follow:
a. 40% is allocated to direct program consumables, such as inoculations,
pedometer, nutritional supplements, participant rewards, participant
information packs and so forth;
b. 10% is allocated to indirect program cost such an allocation for
overheads, quality assurance, management information systems and so
forth;
c. 35% is allocated to compensate the customer service representatives who
implement the program and coach/monitor the individuals on the program;
and
d. 15% is the gross margin that we aim to attain on any program sales and
out of which we pay sales commission.
41
PRODUCTS AND SERVICES
The Fit For Business Program provides to our customers, and in the case of
corporate customers, to their employees, a unique nutritional component, which
is manufactured and supplied by Herbalife. Herbalife has been selected as our
nutritional supplement provider because we believe its products are safe,
effective, and have a recognized market presence after twenty-four years in the
market place. We also believe that the Herbalife products are effective for our
customers because of their continuing commitment to enhance their products
through research and development. Further, the products manufactured by
Herbalife have been selected because we believe they provide a flexible,
balanced nutrition program based on the core formulated meal replacement
product, which can be tailored to meet individual needs.
FFBI does not directly have any relationship with Herbalife Ltd. There is no
contractual relationship between Herbalife Ltd. and FFBI. From November 10-15,
2002, our President and CEO, Mark A. Poulsen, and Senior Vice President of
Sales, Anthony F. Head, were invited to present the Fit For Business program to
the then CEO and Co-President of Herbalife Ltd., Carole Hannah. Our presentation
and subsequent meetings were received with great excitement and enthusiasm by
all nine Senior Vice Presidents of Herbalife Ltd. As there was no conflict with
Herbalife, they encouraged FFBI to proceed with our business plan into the
market place. They were of the view that the FFBI programs could only enhance
the sales of their product. FFBI is in regular contact with Herbalife Australia
to ensure that product supply can be assured to FFBI corporate customers. Mark A
Poulsen the President and Chief Executive Officer of FFBI is a Herbalife
distributor. Currently the licensees that are being chosen by FFBI to distribute
FFBI programs are Herbalife distributors with existing distributor network
currently distributing Herbalife products to the domestic market. Herbalife Ltd.
utilizes a network marketing model to distribute their products to the domestic
market place. Herbalife distributors are independent business people and are not
restricted in pursuing any other business or employment opportunities. Some of
the Account Executives that the licensees will choose to distribute the FFBI
programs may also be existing Herbalife distributors, as will the customers
service representatives.
OUR BUSINESS STRATEGY
Our business strategy is comprised of the following principal elements:
Program Branding and Wellness
Our initiative is to develop the Fit For Business brand and reputation as
a company focused on a complete wellness program and way of life. To bring this
message across, we plan to undertake a significant advertising, public relations
and branding campaign.
42
Account Executive Expansion, Retention & Training
Employed account executives are recruited as any other corporate employee would
be via newspapers advertisement or via an employment agency. Employed account
executive recruitment is undertaken via selection and interview processes.
Independent account executives are recruited through similar mechanisms by the
licensees. No fees or inducements of any kind are paid by FFBI for the
recruitment of these account executives, other than agreed fees to registered
employment agencies. No employed or independent account executives or customer
service representatives or any employee of FFBI receives any fees, inducements,
or other pecuniary benefits for the recruitment of account executives or any
other employee. There are no revenues that can be attributed to the recruitment
of account executives.
To expand our independent account executive base, we are focusing on
implementing programs to ensure account executive retention. Key areas include:
provision of more qualified leads to account executives; enhancing our customer
service capabilities at our call centers; offering greater business-building
opportunities through our web based management information system; creating
business support initiatives and better training and educational materials for
new account executives to guide them through their first eighteen months; and
offering enriched reward and recognition programs. To further support our
account executives, a cross-functional sales team will help provide account
executives with the best marketing, training, sales and information tools to
ensure their success.
We recognize that in addition to high-quality programs and a proven
account executive compensation plan, the success of our business depends on the
training of our account executives. Extensive training opportunities enable
account executives to not only develop invaluable business-building and
leadership skills, but also to become experts in our programs. By placing a top
priority on training, we will build credibility among our account executives and
be further established in the industry.
We sell account executive kits at a worldwide cost of approximately $59.14
per kit (AUS $80.00), which an individual must purchase in order to become an
account executive. This kit includes:
o FFBI Letterhead (25 copies)
o FFBI Corporate Brochures (6 copies)
o FFBI Nutritional Brochures (Herbalife) 6 copies
o FFBI Corporate Folders (6 copies)
o CD Rom containing all training and proforma documents
o Certificate of Registration of Account Executive or Customer Service
Representative
o Living Well program posters (5 copies) o Living well pamphlets (100
copies)
o Corporate Employee Implementation Brochures (20 copies)
o Web Based Management system Access codes and instructions
o FFBI email address details
Sales of account executive kits are not subject to account executive allowances
and cash incentives, including commissions and bonuses. Accordingly, we receive
the entire retail sales amount from the sale of account executive kits.
FIT FOR BUSINESS PROGRAM RETURN AND BUY-BACK POLICIES
Our programs include an individual customer employee satisfaction guarantee.
Under this guarantee, within 30 days of purchase, any individual employee who is
not satisfied with any FFBI program for any reason may return it or any unused
portion of any nutritional product to the account executive or customer service
representative for a full refund.
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GEOGRAPHIC PROFILES AND SALES TRENDS.
At this time, we have account executives working in Australia and New Zealand.
We hope to enter the following markets in 2005, or as soon as possible: Japan
South Korea and North America, followed by Singapore, and Hong Kong. However
there is no guarantee that we will expand into these markets, or that if we do
that we will obtain significant sales.
In any new country market we initially expect to target corporations that are
favorably disposed to purchasing the FFBI programs. However, subsequent
marketing efforts to corporations that are not as favorably disposed to our
products, will require greater efforts and time to finalize sales.
We believe that a significant factor affecting these sales trends will be the
opening of other new country markets within the same geographic region or with
the same or similar language or cultural bases. As such when new countries are
opened, we expect the sales in existing markets to shift to newly opened
markets, resulting in a plateau in sales in the existing markets. This will be
caused by existing account executive in existing markets viewing the prospect of
being able to market to favorably disposed corporations in the new country
markets as being a relatively easier sales proposition than pursuing less
favorably disposed corporations in existing markets.
a) Our international expansion includes targeting companies that are pre
disposed to purchasing our programs. This is done through research on these
companies to find out which ones are indeed already pro - active in corporate
wellness.
b) We will be entering these new markets with a track record and testimonials,
which should increase our speed to market. c) We will be employing qualified
experienced corporate sales executives that are already connected into the
corporate arena in these international markets.
MANAGEMENT INFORMATION, INTERNET AND TELECOMMUNICATION SYSTEMS
In order to facilitate our continued growth and support account executive
activities, we will continually upgrade our web-based management information
system and supporting internet and telecommunication systems. These systems will
include:
(1) local area networks of personal computers, serving our administrative staff;
(2) an internet website to provide a variety of online services for account
executives, customer service representatives, and potential corporate customers.
(3) an international web-based integrated customer management systems, combining
online and standalone features, to allow Fit For Business and its employees,
account executives, customer service representatives and licensees to record,
track and report relevant customer information.
1. Calendar & Appointment Functionality
2. Corporate Profile - including goals
3. Individual Employee Profile - Including Goals of going on program
4. Employee Follow-up module
a. Including call scripts to collect & record information on how
employee is performing on program, this includes physical,
behaviors, and feelings, measurements on the 1st, 3rd, 7th, 14th
28th, and then monthly
5. Product order and reorder - automated
a. Interface to Herbalife Ordering procedures/system
6. Reporting system
a. To Individual employee for encouragement to show how they are
performing against the goals they set
b. To the corporation at the aggregate level
i. No individual information to privacy reasons
7. Licensee, Account Executive and Customer Service Representative
management
a. Ensure all customers are being followed up
b. Orders are being placed in a timely manner
c. Contract renewals are followed up
44
We will continue to invest in our systems in order to strengthen our operating
platform.
GOVERNMENTAL REGULATION
General. We are affected by extensive laws, governmental regulations,
administrative determinations, court decisions and similar constraints, as
applicable, at the federal, state and local levels, including regulations
pertaining to: (1) program claims and advertising, including direct claims and
advertising by us, as well as claims and advertising by account executives, for
which we may be held responsible; (2) our distribution system; (3) transfer
pricing and similar regulations that affect the level of taxable income and
customs duties; and (4) taxation of account executives, which in some instances
may impose an obligation on us to collect the taxes and maintain appropriate
records.
Programs. While there have been no program sales to date by FFBI in the
United States it is our intention by December 2005 to commence investigating the
North American market place. If our investigations of the north American market
prove to be fruitful it is our intension that we would commence program sales in
2006 in the United States.
In the United States and other markets we intend to operate in , the
formulation, manufacturing, packaging, storing, labeling, promotion,
advertising, distribution of the Herbalife nutritional products will be subject
to regulation by one or more governmental agencies, but these regulations will
need to be complied with by Herbalife - prior to receipt and distribution by
FFBI Account Executives and customer service representatives.
Prior to commencing operations and prior to making or permitting sales of
our programs in some international markets, we may be required to obtain an
approval, license or certification from the country's relevant health agency.
Where a formal approval, license or certification is not required, we may seek a
favorable opinion of counsel regarding our compliance with applicable laws.
Prior to entering a new market in which a formal approval, license or
certificate is required, we will work extensively with local authorities in
order to obtain the requisite approvals. The approval process may require us to
present each program and product ingredient to appropriate regulators and, in
some instances, arrange for testing of products by local technicians for
ingredient analysis. The approvals may be conditioned on reformulation of our
products or may be unavailable with respect to some programs or some
ingredients. Product reformulation or the inability to introduce some programs
or ingredients into a particular market may have an adverse effect on sales. We
must also comply with program advertising, labeling and packaging regulations
that vary from country to country. Our failure to comply with these regulations
can result in our program being removed from sale in a particular market, either
temporarily or permanently.
In the United States, the FTC, which exercises jurisdiction over the
advertising of our programs, has in the past several years instituted
enforcement actions against several dietary supplement companies for false and
misleading advertising of some of their products. These enforcement actions have
resulted in consent decrees and monetary payments by the companies involved. In
addition, the FTC has increased its scrutiny of the use of testimonials, which
we also utilize. We cannot be sure that the FTC will not question our
advertising or other operations. In November 1998, the FTC issued a guide for
the dietary supplement industry, describing how the FTC applies the law that it
administers to advertisements for dietary supplements. It is unclear whether the
FTC will subject advertisements of this kind, including our advertisements, to
increased surveillance to ensure compliance with the principles set forth in the
guide.
45
In some countries, regulations applicable to the activities of our account
executives also may affect our business because in some countries we may be
responsible for our account executives' conduct. In these countries, regulators
may request or require that we take steps to ensure that our account executives
comply with local regulations. The types of regulated conduct may include: (1)
representations concerning our programs; (2) income representations made by us
and/or account executives; (3) public media advertisements, which in foreign
markets may require prior approval by regulators; and (4) sales of programs in
markets in which the products have not been approved, licensed or certified for
sale.
In some markets, it is possible that improper program claims by account
executives could result in our programs being reviewed or re-reviewed by
regulatory authorities and, as a result, being classified or placed into another
category as to which stricter regulations are applicable. For example
inappropriate or improper claims made about nutritional products could see them
being reclassified from being a food to a therapeutic good. Such a
reclassification would require significantly different registration, labeling
and marketing processes being undertaken for such a nutritional product. In
addition, we might be required to make advertising and labeling changes.
Through our manuals, seminars and other training materials and programs, we
attempt to educate our account executives and customer service representatives
as to the scope of permissible and impermissible activities for example
impermissible activities in some markets may include claiming that our programs
can deliver weight reduction or that they will deliver stress relief in the work
place or increase the productivity of the workplace. The account executives and
customer service representatives are trained to ensure that their activities and
claims involving the FFBI programs do not transgress any of the laws of the
market in which they operate.
We also investigate allegations of account executive misconduct. However,
our independent account executives generally are independent contractors, and we
are unable to monitor directly all of their activities. As a consequence, we
cannot be sure that our account executives comply with applicable regulations.
Misconduct by account executives could have a material adverse effect on us in a
particular market or in general. For example if the account executive was
located in Australia and were to make a proven misleading or deceptive claim,
the Australian Trade Practices Act 1974 (Cth) might open FFBI to a claim for
damages consisting of:
o compensatory damages for any injury;
o damages for any expenses incurred to treat an injury or repair damage
to property, including medical expenses;
o compensation for any loss of income because of injury or damage;
o an amount in respect of any costs which will be incurred in the future
to treat an injury or repair damage to property; and
o compensation for any loss of life expectancy or ongoing impairment of
earning capacity.
We are unable to predict the nature of any 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. They could, however, require: (1) the
reformulation of some products not able to be reformulated; (2) imposition of
additional record keeping requirements; (3) expanded documentation of the
properties of some programs; (4) expanded or different labeling; and (5)
additional scientific substantiation regarding product ingredients, safety or
usefulness.
Any or all of these requirements could have a material adverse effect on
our results of operations and financial condition.
Sources of liability for FFBI will depend on the nature of the activity been
undertaken and the jurisdiction that we are operating in. For example in
Australia actions in respect of defective services or products are likely to be
based in one or more of the following three areas of law:
o the Australian Federal Trade Practices Act and comparable legislation
in the Australian State and Territory jurisdictions; and
o the common law of contract; and
o the common law of negligence.
46
Australian Federal Trade Practices Act:
The Trade Practices Act 1974 (Cth) in broad terms, the objectives of the Trade
Practices Act and similar State and Territory legislation are to promote
competition and fair trading and provide for consumer protection. The Trade
Practices Act covers anti-competitive and unfair market practices, company
mergers or acquisitions, product safety and product liability. The section of
the Act most likely to affect FFBI is Section 52 which prohibits corporations
from engaging in misleading or deceptive conduct in trade or commerce. It
prohibits certain false representations, for example, that services or goods are
of a particular standard, quality, value, grade, composition, style or model or
have a particular history or a particular previous use. Labelling and
advertising claims on products are susceptible to challenge under these
provisions and must be capable of substantiation. In assessing whether claims
are misleading, courts will look at whether the express and implied
representations are correct and whether the overall impression is accurate. The
Fair Trading Acts of the Australian States and Territories contain similar
provisions. This extremely wide-ranging provision has established a norm of
conduct which, if breached, can give rise to a variety of remedies for a person
who suffers damage.
The common law of contract:
Where a service or product is supplied by a manufacturer to a supplier or by a
supplier to a consumer there will be a contract between the two parties.
Australian courts will often be prepared to find that those contracts include
implied terms about the quality of the service or product. If those terms are
breached then the party which received the service or product will have an
action for breach of contract.
The common law of negligence:
The common law tort of negligence remains an important source of legal rights
and responsibilities for service or product liability actions under Australian
law. The most significant of the common law remedies against service provider,
manufacturers and distributors of defective goods is the law of negligence.
Under the law of negligence a plaintiff may recover damages from a defendant if:
o the defendant owes the plaintiff a duty of care at law o the defendant
breaches that duty by failing to meet the standard of care required by the law;
and o the plaintiff suffers damage because of the breach of duty. In Australia
it is well settled that a duty of care is owed by the service provider,
manufacturer and supplier of goods to the purchaser or user. The common law
provides that the service provider ought reasonably have the user in
contemplation when considering the issues of design, delivery, safety and
distribution.
Damages:
There are a number of technical differences between the calculation of damages
in contract and negligence and under the TPA. However, in broad terms, a
successful plaintiff in a service or product liability action will be able to
recover:
o compensatory damages for any injury
o damages for any expenses incurred to treat an injury or repair damage
to property, including medical expenses
o compensation for any loss of income because of injury or damage
o an amount in respect of any costs which will be incurred in the future
to treat an injury or repair damage to property; and
o compensation for any loss of life expectancy or ongoing impairment of
earning capacity.
Food:
Another area of Law in Australia that can affect the FFBI are the regulation
affecting Food as the many nutritional products are registered as a food and not
a therapeutic good. The Australian States and Territories have food legislation
to regulate the composition, packaging, advertising and labelling of food and
the hygiene of food premises and equipment.
The Australia New Zealand Food Standards Code is adopted by all the Australian
States and Territories. The Code prescribes labelling requirements for all food.
Certain statements are prohibited and others are regulated and may only be used
in specific circumstances. For example, health and nutrition claims and claims
that a food is a food for a specific dietary use are strictly regulated. There
is also a general prohibition on the addition of substances to food such as
additives, vitamins and minerals, and certain botanicals, unless specifically
permitted for a particular food. In addition to the general requirements, the
Code sets out prescribed standards for particular foods. Some foods must undergo
rigorous safety assessments before they can be made available for sale, for
example, novel and genetically modified food.
47
Therapeutic goods:
Therapeutic goods must be registered and can only be manufactured by a licensed
manufacturer, and must also be included on the Australian Register of
Therapeutic Goods as either listed or registered goods. There are standards for
the manufacture, composition, handling, labelling and advertising of such goods.
Therapeutic goods may be assessed for safety and efficacy, depending on the
level of risk and the claims made on the product. Distributors of therapeutic
goods must hold the relevant level of evidence to support claims made on
packaging and in advertising. The legislation also provides a procedure for
pre-publication clearance for advertisements of certain therapeutic goods. There
are also standards for the labelling of these products.
Trade measurement:
Australian State and Territory trade measurement legislation also imposes
certain labelling requirements for packaged foods and other packaged consumer
products. The requirements of the legislation apply to all goods packed for sale
in Australia and goods fully imported for sale in Australia, unless specifically
exempted from the marking requirements. The legislation also includes offences
in relation to short measure of packaged goods.
Compliance Procedures. We have instituted formal regulatory compliance measures
by developing a system to identify specific complaints against account
executives and to remedy any violations by account executives through
appropriate sanctions, including warnings, suspensions and, when necessary,
terminations. In our manuals, seminars and other training programs and
materials, we emphasize that account executives are prohibited from making
therapeutic claims.
In order to comply with regulations that apply to both us and our account
executives, we will conduct research into the applicable regulatory framework
prior to entering a new market in order to identify all necessary licenses and
approvals and applicable limitations on our operations in that market.
Typically, we would conduct this research with the assistance of local legal
counsel and other representatives. We also research laws applicable to account
executive operations and revise or alter our account executive manuals and other
training materials and programs to provide account executives with guidelines
for operating a business, marketing and distributing our programs and similar
matters, as required by applicable regulations in each market. We are unable to
monitor our supervisors and account executives effectively to ensure that they
refrain from distributing our programs in countries where we have not commenced
operations.
It is part of our business to anticipate and respond to new and changing
regulations and to make corresponding changes in our operations. Although we
will devote resources to maintaining our compliance with regulatory constraints
in each market, we cannot be sure that (1) we would be found to be in full
compliance with applicable regulations in all markets at any given time, or (2)
the regulatory authorities in one or more markets will not assert, either
retroactively or prospectively or both, that our operations are not in full
compliance. Depending upon the severity of regulatory changes in a particular
market and the changes in our operations that would be necessitated to maintain
compliance, these changes could result in our experiencing a material reduction
in sales in the market or determining to exit the market altogether. We cannot
be sure that this transition would not have an adverse effect on our business
and results of operations either in the short or long term.
COMPETITION
We are subject to significant competition for the recruitment of account
executives from network marketing organizations, including those that market
weight management programs, nutritional supplements, and personal care programs,
as well as other types of products. Some of our competitors are substantially
larger than we are, and have available considerably greater financial resources
than we have. HCG Healthcorp Group, Healthwise Australia, and Corporate
Relaxation and Wellness are direct competitors in Australia. Our ability to
remain competitive depends, in significant part, on our success in recruiting
and retaining account executives through an attractive compensation plan and
other incentives. However, we cannot be sure that our programs for recruitment
and retention of account executives will be successful.
The business of marketing weight management programs, nutritional supplements,
and personal care programs also is highly competitive. This market segment
includes numerous manufacturers including: Omega Trend, USANA, Magnatec Inc.,
and other marketers, retailers and physicians that actively compete for the
business of consumers. The market is highly sensitive to the introduction of new
programs or weight management plans, including various prescription drugs that
may rapidly capture a significant share of the market.
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SALES
Sales represent the gross sales amounts reflected on our invoices by our account
executives. Given our pricing policy is as follow:
a. 40% is allocated to direct program consumables, such as inoculations,
pedometer, nutritional supplements, participant rewards, participant
information packs and so forth;
b. 10% is allocated to indirect program cost such an allocation for
overheads, quality assurance, management information systems and so
forth;
c. 35% is allocated to compensate the customer service representatives
who implement the program and coach/monitor the individuals on the
program; and
d. 15% is the gross margin that we aim to attain on any program sales and
out of which we pay sales commission.
We receive the amount reported as "retail sales," and we monitor the actual
retail prices charged for our programs. "Net sales" represent the actual
purchase prices paid to us by our customers , less any costs associated with
items (a) and (b) above. We receive our sales price in cash, check, direct debit
or through credit card payments upon execution of contract with corporations.
Our use of "retail sales" in reporting financial and operating data reflects the
fundamental role of "retail sales" in our accounting systems, internal controls
and operations. The "retail sales" price is used by us to calculate, among other
things, bonuses earned by licensees and sales commissions earned by account
executives. We rely upon "retail sales" data reflected in daily sales reports to
monitor results of operations in each of our markets.
CUSTOMERS
As at the quarter ending June 30 2005 we had 16 customers who had generated
approximately $3,000 of revenue.
EMPLOYEES
As of May 31, 2005, we had in total 5 employees of which 4 are full-time and are
our officers and directors. The part-time employee assists us with office work
and reception duties. We have never had a work stoppage, and no employees are
represented under collective bargaining agreements. We consider our relations
with our employees to be good. We have entered into employment contracts with
our employees.
INDEPENDENT ACCOUNT EXECUTIVES AND CUSTOMER SERVICE REPRESENTATIVES
As of May 31, 2005, we have 67 registered independent account executives and
customer services representatives across Australia. The independent account
executives and customer service representatives are not our agents and have
agreed to abide by our code of conduct and quality assured procedures.
The FFBI Code of Conduct is intended to regulate the conduct of independent and
employed account executives and customers service representatives. FFBI is
responsible for administering the Code.
To ensure compliance with the Code of Conduct, FFBI may impose an administrative
sanction if a breach of the Code is found to have occurred. An administrative
sanction may range from a caution through to suspension or the ultimate sanction
of dismissal if an employee or cancellation of their contract as an independent
contractor.
The Code of Conduct is not intended to displace any duty or liability that an
account executive or a customer service representative may have under the law of
the country in which they are doing business.
The objectives of the Code of Conduct are:
(a) to establish a proper standard for the conduct of business as an account
executive or customer service representative;
(b) to set out the minimum attributes and abilities that a person must
demonstrate to perform as a account executives and customer service
representatives under the Code of Conduct, including:
(i) being of good character;
(ii) knowing the FFBI programs and products, in sufficient depth to offer
sound and comprehensive advice to a customer;
(iii)completing continuing professional development as required;
(iv) being able to perform diligently and honestly;
(v) being able and willing to deal fairly with customers;
49
(vi) having enough knowledge of business procedure to conduct business as
an account executive or customer service representative;
(vii)properly managing and maintaining customer, employee and retiree
records;
(c) to require account executives and customer service representatives to be
accountable to the customer.
The Code of Conduct does not list exhaustively the acts and omissions that may
fall short of what is expected of a competent and responsible account executives
and customer service representatives. However, the Code of Conduct imposes on an
account executives and customer service representatives the overriding duty to
act at all times in the lawful interests of the customer. Any conduct falling
short of that requirement may make the account executives and customer service
representatives liable to dismissal if an employee or cancellation of their
contract as an independent contractor.
In achieving its mission FFBI looks to provide high quality programs and
products to our customers. The quality procedures implemented by FFBI strives to
ensure FFBI meets and exceed customer' needs and expectations through fostering
a culture of continuous improvement, both at the sales and managerial level, and
by cultivating cooperation and mutual respect among employees, independent
contractors, customers, and suppliers.
FFB, has developed a quality assurance process that includes systems, methods,
and work instructions in accordance with our values and to achieve the following
objectives:
o Providing effective programs by working continuously to meet the needs,
desires, and satisfaction of all customers;
o Ensuring that the quality, safety, efficacy, standards are placed,
approved, and adhered to;
o Ensuring that all policies, operational procedures, and work instructions
are constantly revised and evaluated;
o Verifying that adequate steps and procedures are placed and implemented to
ensure an ongoing process of improvement through the participation and
commitment of all employees and independent contractors at all levels;
o Supporting the company's quality assurance procedure, by introducing and
utilizing the latest technology, innovations and research, to make our
programs of the highest quality; and
o Developing programs for customers through following cost-effectiveness,
well-planning, and systematic methods that enable measuring, evaluating,
and achieving program attributes in compliance with the customer
requirements.
FFBI is strongly committed to the FFBI quality procedures and processes and as
proven through the implementation of ISO 9001:2000.
LICENSEE AND THE AUSTRALIAN AND NEW ZEALAND LICENSE AGREEMENT
The licensee assists FFBI enter a new market place by making available their:
o distribution chain;
o experience in the market place;
o existing government and business relationships; and
o their profile within the wellness industry of the market that FFBI is
entering.
The licensee main motivator for becoming part of the FFBI business model is to
gain the increased retail sales volumes of products and services from
corporations and retirement villages, and as such open their existing
distribution business to the corporate market segment in addition to continuing
to target individual retail customers. The licensees by increasing their sales
volumes would increase their revenues and thus their commissions and or overall
profitability. For example where the licensee is an existing Herbalife
nutritional products distributor, such as our exiting licensee, LR Global
Marketing Pty Ltd, they have provided:
o an existing group of Herbalife product distributors, who will primarily be
supplying these products to individual retail customers. A small number of
these distributors have met the selection criteria to become FFBI Account
Executives or Customer Service Representatives;
o an intimate knowledge and an existing profile of doing business in the
Australian and New Zealand market places in which they operate and this has
been demonstrated by their business success in these market place;
o an existing distribution and supply chain already set up as far as the
Herbalife nutritional products are concerned; and
o existing corporate and government relationship that they are starting to
leverage to get the FFBI programs accepted into the workplaces;
50
In the instance that the licensee is a Herbalife distributor they take up an
FFBI license because they see an opportunity to increase their retail sales by
using the FFBI model to market to a single corporation that may have a hundred
employees rather than to individual retail customers. As such getting an
individual corporate customer with a hundred employees can be a more cost and
time effective mechanism of generating greater sales of the Herbalife products
as opposed to gaining a hundred individual retail customers. Those licensees
that are Herbal Life distributors are incentivized to join FFB due to the 5%
commission they will receive through all sales of Herbalife products by their
Account executives and Customer Service representatives, as well as from
receiving 1% of the full value of all contracts signed by their account
executives from FFBI. FFBI is willing to sacrifice these opportunities in
exchange for revenues generated by the licensing fee and the knowledge that they
will be obtaining the service of an established sales force. They will also be
in a position to benefit from the branding expenses undertaken by FFBI in the
form of advertisements, as well as from the television programs FFBI intends to
launch pertaining to its products and services.
The value of the license grant of $500,000 is determined on the basis of FFBI
delivering the following services to the licensee:
[ ] Initial set up fee $50,000
o Assistance with the short listing, interview and selection of up
to 10 account executives and 10 customer service representatives
to join FFB;
o Set up and provision of all office automation and IT systems;
[ ] Initial set up fee $100,000 (this may vary depending on the number of
locations)
o Provision of orientation training for the licensee their 10
Account Executives and 10 customer service representatives
including on the rules of conduct, policies, all Information
Technology systems, corporate process and quality assurance
processes;
o A series of hands on workshops on every element of the FFBI
programs on offer;
o A series of workshop for licensee and Account Executives on
developing corporate sales process of the FFBI program;
o A series of workshop on developing existing corporate or
government relationships and leads of the account executives;
o Assisting licensee and their account executives undertake
corporate and retirement village presentations;
o Generating corporate sales leads for the account executives;
[ ] Ongoing annual fee for 10 years of $35,000
o Developing and releasing updates for all corporate policies,
systems and processes;
o Ongoing training provision;
o Generating corporate sales leads for the account executives; and
o Hosting annual conference.
In August 2004, Subsidiary entered into a non-assignable license agreement with
LR Global Marketing Pty. Ltd. ("LR Global"). The principals of LR Global are
Laraine Richardson and Dianne Waghorne. The principals of LR Global are not
related to FFBI, or to its officers and directors except as described herein.
Pursuant to the license agreement, LR Global has the right, for a period of ten
(10) years, to the use of our logo, our web based management information system,
marketing and promotional literature, processes, systems, intellectual property
and attend FFBI events for the purpose of generating new customers for the
Company and for training account executives and customer service
representatives.
Under the terms of the license agreement, LR Global is obligated to pay $500,000
for the grant of the license. LR Global will as an independent Herbalife
distributor receives a five (5%) percent commission directly from Herbalife on
the sales of the Herbalife products generated by LR Global as part of any FFBI
program sales. The 5% commission is a standard commission paid by Herbalife to
independent distributors such as LR Global. FFBI has no influence, or agreement,
as to what commissions LR Global Pty Ltd will receive from Herbalife. This is a
matter entirely determined independently through LR Global Pty Ltd independent
distributor agreement with Herbalife. In connection with the grant of the
license agreement, Mark A. Poulsen transferred 500,000 shares of our common
stock to LR Global. The value of the shares transferred by Mark A. Poulsen was
estimated to be $250,000, or $.50 per share. Such value was determined based on
the value per share calculated and assigned by the board of directors of the
company to certain promissory notes assumed from subsidiary subsequent to the
execution of the exchange agreement which were converted into shares of common
stock of FFBI in September 2004.
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Through December 31, 2004, LR Global has paid the sum of $117,750. LR Global was
required to pay the balance of the amount owing by December 31, 2004. LR Global
was in default of the terms of the License Agreement balance owing to us. In
June 2005, LR Global paid us an additional USD$7,615 and executed an amended
license agreement. The amended license agreement provides for final payment of
the balance of the license fee within 60 days after our stock is quoted on the
OTC Bulletin Board. In addition, the principals of LR Global, Laraine Richardson
and Dianne Waghorne, executed personal guarantees for the balance of the
outstanding license fee.
FIT FOR BUSINESS IS ISO 9001:2000 CERTIFIED
The International Organization for Standardization (ISO) is a worldwide
federation of national standards bodies from some 100 countries, one from each
country. ISO's work results in international agreements which are published as
International Standards. ISO 9001:2000 provides an internationally recognized
formula for running any operation where quality assurance in the provision of
the service is a requirement. The requirements of the ISO 9001:2000 standard are
organized into the following five sections:
o Quality Management System
o Management Responsibility
o Resource Management
o Product Realization
o Measurement, analysis and improvement
The Company's quality management system puts in place a system whereby quality
has become part of our operation and will continually improve our services and
products.
The implementation of our quality management system was certified to the
Australian/International Standard AS/NZS ISO 9001:2000, and this is the highest
certification that can be awarded for a management system and will satisfy all
government requirements in Australia and internationally.
What makes up our quality management system?
o Quality Policy - The Management's commitment to quality
o Quality Manual - our overall policy and interpretation of the
standard
o Detailed Work Instructions - documented procedures on how to
complete specific task and training
o Job Descriptions - specific tasking to staff members ensuring
responsibility and accountability
o Company Forms - the approved form used within the company
o A procedure for recording and fixing problems
o A regular internal check of the system and processes
o A regular check by independent auditors of the system and
processes
PATENTS OR TRADEMARKS OR LICENCES
FFBI's "Fit For Business" logo was trademarked and registered in Australia on
Oct 15, 1999 for a period of ten (10) years.
FFBI does not have any other trademarks, patents or licenses nor is it currently
seeking any further intellectual property rights.
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DESCRIPTION OF PROPERTY
The Company does not own any real property. We presently lease office space from
Mark Poulsen & Associates Pty. Ltd. ("Associates"). Mark A. Poulsen is one of
our officers and directors. The premises are located at 10/27 Mayneview Street,
Milton, Australia. Associates lease terminated on November 30, 2004 and is on a
month to month basis. We pay approximately 90% of the costs associated with
Associates lease. This is approximately $1,383 per month. We also have an
agreement with Incorp Services, Inc., located at 3155 E. Patrick Lane, Suite 1,
Las Vegas, Nevada. This agreement provides us with a "virtual office program."
The "virtual office program" provides us with registered agent services in
Nevada (since we are a Nevada corporation) and use of certain facilities such as
conference rooms and receipt of mail. We do not operate our business from this
location. We will pay approximately $1,495 per year for the "virtual office
program."
LEGAL PROCEEDINGS
Neither our parent company nor our subsidiary, or any of their properties, is a
party to any pending legal proceeding. We are not aware of any contemplated
proceeding by a governmental authority. Also, we do not believe that any
director, officer, or affiliate, any owner of record or beneficially of more
than five per cent (5%) of the outstanding common stock, or security holder, is
a party to any proceeding in which he or she is a party adverse to us or has a
material interest adverse to us.
MANAGEMENT,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth current information about our executive officers
and directors
Name Age Position
- --------------- ---- --------------------------------------------------
Mark A. Poulsen 44 President, Chief Executive Officer and Chairman of
the Board of Directors
Anthony F. Head 58 Senior Vice President of Sales and Director
Prins A. Ralston 41 Senior Vice President and Chief Operating Officer
Sandra L. Wendt 35 Senior Vice President of Administration, Chief
Financial Officer and Principal Accounting Officer
53
The following table summarizes the information about our executive officers and
Directors previous roles for the last five years.
Date of Date of
Name Title/Relationship Commencement Cessation Company
- --------------- ----------------------- ------------ ----------- --------------------
Mark A. Poulsen Director December- Mark Poulsen &
1989 Ongoing Associates Pty Ltd
Managing Director December- Fit For Business
1998 Ongoing (Australia) Pty Ltd
President, Chief
Executive Officer January- Ongoing Fit For Business
& Chairman of the 2005 International, Inc.
Board of Directors
Personal Assistant September- December- Mark Poulsen &
and Chief 1996 1998 Associates Pty Ltd
Financial Officer
Chief Financial December- Ongoing Fit For Business
Officer 1998 (Australia) Pty Ltd
Sandra L. Wendt Vice President of
Administration, January- Ongoing Fit For Business
Chief 2005 International,Inc.
Financial Officer
and Principal
Accounting Officer
Anthony F. Head Consultant and Jan 1999 July 2001 Independent Consultant
Lecturer
Sales Director July 2001 Ongoing Fit For Business
Senior Vice (Australia) Pty Ltd
President of Sales January- Ongoing Fit For Business
& Director 2005 International, Inc.
Prins A. Ralston Managing Director December- July 2001 Nexus Energy Limited.
1993
Partner July 1999 February- Clayton Utz Solicitors
2001 and Lawyers
Group General Counsel November- November- Ingeus Limited.
and Company Secretary 2001 2004
Senior Vice President January- Ongoing Fit For Business
and Chief Operating 2005 (Austrlaia) Pty Ltd &
Fit For Business
International, Inc.
54
Mark A. Poulsen is our President, Chief Executive Officer and Chairman of the
Board of Directors. Mark started his career as an apprentice carpenter in 1976
in the construction industry. He soon started his own marketing and distribution
company Mark Poulsen & Associates Pty Ltd, on December 6, 1989, distributing
Herbalife products. He has traveled extensively for Herbalife, training over
850,000 individuals from all over the world in areas ranging from sales and
marketing, promotion, administration, leadership, life enhancement, and personal
development. After 20 years as an independent Herbalife distributor, he could
see the market place was changing and could see a need for not only improving
corporate health but a real answer to the growing overweight and obesity issues.
He commenced development of the Fit For Business concept in 1998. He has spent
the last seven years enhancing the Fit for Business concept and programs while
continuing his involvement with Herbalife.
Since 2000, he has spent the last 5 years building and developing Fit For
Business (Australia) Pty Ltd, while still maintaining his Herbalife retail
business (Mark Poulsen & Associates Pty. Ltd.). As Managing Director, his duties
include recruiting and building sales networks in approximately 35 countries.
Anthony (Tony) F. Head is our Senior Vice President of Sales and Director. He
graduated from Monford Sales Personnel Melbourne, he has also completed various
courses in Selling & Sales. He has studied Marketing, Lithographic Arts and
Computer Technology. Tony started his career in advertising, but soon realized
that his vocation was in sales. Commencing his sales career with Cadbury
Confectionary in 1978, he moved through the chain of management to taking on
career paths inside the organization included marketing and administration
roles. Tony moved into the Direct Selling Industry in 1984 working for Shaklee
Australia, a large vitamin supplement and cosmetic company. He was responsible
for the coordination of Regional Sales Leaders. He then joined Mary Kay
Cosmetics from 1986 to 1993 as their Sales Development Director, responsible for
recruitment, motivation and education of consultants, presentations, new product
launches and public relations. He then joined Herbalife Ltd. as their Director
of Communications and Sales for Pacific Rim. Over the next 6 years he was
responsible for sales of Herbalife products in: Taiwan, Thailand, Philippines,
Indonesia, Japan, South Korea, and Australia.
Tony Head worked for Herbalife Ltd. from 1993 to January 1999. His position was
Director of Communications and Sales for the Pacific Rim. His main
responsibilities were liaison with Herbalife Distributors, Event Coordination
and Reporting. From 1999 to 2001, Tony was consulting to independent marketing
distributors, doing guest speaking at meetings and advising on methods of
advancement in the direct selling industry. In 2001, he started working for Fit
For Business Australia (Pty) Ltd on a consulting basis. He has helped build and
train the sales team, prepare presentations and event coordination.
Prins A. Ralston is our Senior Vice President and Chief Operating Officer. Mr.
Ralston holds the degrees of : Bachelor of Business Computing, Bachelor of
Business Accounting, Bachelor of Laws and Master of Laws. Mr. Ralston is a
Certified Practicing Accountant in Australia. Mr. Ralston is a Fellow of the
Australian Society of Certified Public Accountants, Australian Institute of
Company Directors and the Australian Computer Society. Mr. Ralston is also an
admitted Barrister and Solicitor of the Supreme courts of the Northern Territory
and Queensland, in Australia.
Mr. Ralston was the General Counsel and Company Secretary of Ingeus Limited
(Public unlisted Company in Australia) and its group of companies (which
included recruitment company - Clements Recruitment Pty Ltd, corporate health
and occupational health and rehabilitation provider - Inergise Australia Pty
Ltd, outsourced government unemployment services provider - Work Directions
Australia, UK , France and training provider- Invisage Australia Pty Ltd)from
2001 to 2004. Mr. Ralston was a National Partner of the Australian legal firm
Clayton Utz from 1999 to 2001. In 2001, he resigned as the Managing Director of
an Australian Stock Exchange Listed company, Nexus Energy Limited (Australian
Stock Exchange: NXS). Mr Ralston was a Director of Nexus Energy Limited from
1993 to 2001.
55
Mr. Ralston has a significant industry profile being the Chairman of
Publications of the UNESCO based International Federation of Information
Processing (IFIP) as well as having been Vice President of IFIP and a past
President of the Australian Computer Society and the South East Asian Computer
Confederation.
Sandra L. Wendt is our Senior Vice President of Administration, Chief Financial
Officer and Principal Accounting Officer. Sandra graduated from high school in
1978, and immediately began working in a stockbroker's office, working her way
up to international settlements and accounts department. She then worked in
office management for a real estate office, managing their office, and rentals
list, dealing with trust accounts and leases. She then moved into the
Superannuation Industry, working her way up from Accounts, to Senior
Administrator of their in-house Employer Superannuation Fund, and was
responsible for over 200 employers and 4,000 employees. Sandra was then promoted
to oversee this position as Assistant
Manager with over 25 staff under supervision. She started working for Mark A.
Poulsen and Associates Pty Ltd. in 1996; with duties in office management,
training and accounting. She attended courses in Web Development and data base
design and management, and has used both these skills to her advantage, she has
developed business planning, cash flow reporting, budgeting and forecasting,
cash management and customer liaison skills. She has developed accounting
procedures and is responsible for the financial control (managing cash flow,
budgets, income and expense reports and financial and tax reporting) for
Kamaneal Investments Pty Ltd and Mark Poulsen & Associates Pty Ltd.. She has the
task of budget forecasting as well as account management on a daily basis. She
has also developed and implemented the IS0 9000 :2000 system and maintains this
as the Quality Manager of the Company.
PROMOTERS
Jason Farrell and Dawn Farrell were our founders and, therefore, are deemed to
be our promoters.
EXECUTIVE COMPENSATION
The following table sets forth information concerning annual and long-term
compensation, on an annualized basis for the last three fiscal years, for our
President and for each of our other executive officers (the "Named Executive
Officers") whose compensation on an annualized basis is anticipated to exceed
$100,000 during fiscal 2005.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION SECURITIES
RESTRICTED UNDERLYING
NAME AND PRINCIPAL FISCAL ANNUAL STOCK OPTIONS ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARDS (NO. OF SHARES) COMPENSATION
- -------- ---- ------ ----- ------------ ------ -------------- ------------
1. Mark Poulsen 2004 $288,986 0 $288,986 0 0
2003 $ 0 0 0 0 0
2. Tony Head 2004 $ 77,063 0 $ 77,063 0 0
2004 $ 0 0 0 0 0
3. Prins Ralston 2004 $131,007 0 $131,007 0 30,000
2004 $ 0 0 0 0 0
4. Sandra Wendt 2004 $ 42,385 0 $ 42,385 0 0
2004 $ 0 0 0 0 0
56
Compensation of Directors
Our directors will not receive compensation for services provided as a member of
our Board of Directors or any committee thereof, but directors may be reimbursed
for certain expenses incurred in connection with attendance at Board and
committee meetings.
Employment Agreements
We presently have entered into the following employment agreements with our
management personnel to retain their services. The employment agreements were
all entered into on November 29, 2004. However, all of the employees commenced
their work for us in 2005. Therefore, no salaries accrued prior to January 2005.
Where bonuses are to be paid dependent on meeting budget, the meeting of budget
refers to the annual fiscal budget which forecast our sales, revenues, expenses
and profit. The annual budget is approved prior to the start of the fiscal year
by our Board of Directors. At the end of the fiscal year, our Board of Directors
will approve bonuses based on whether the forecast in the budget was met.
We entered into an employment agreement with Mark A. Poulsen to serve as our
President and Chief Executive Officer. Under the terms of the agreement, Mr.
Poulsen will be compensated at the annual rate of $289,986 for services. He will
also be paid 5 percent of the value of each country or geographic-area license
sold. In addition, on December 1, 2004, the Board of Directors awarded a bonus
of approximately $388,250 to be paid to Mr. Poulsen within 30 days after the
listing of our common stock on the over-the-counter bulletin board. This bonus
was awarded and calculated on the basis that Mr. Poulsen would not have drawn a
salary or received any remuneration from the inception of him founding the Fit
for Business Australia Pty Ltd. in December 1998. As the view of our board of
directors was that Mr. Poulsen spent approximately two-thirds of his time over
the last six years building the Australian business, the bonus was calculated
using Mr. Poulsen's current Australian salary and applied on an approximately
two-thirds basis over a period of six years. The payment of the bonus was made
contingent on the listing of the common stock and capital raising as this would
be the source of funds for the payment of the bonus. Mr. Poulsen's employment
agreement does not contemplate the payment of any other bonuses.
We entered into an employment agreement with Prins Ralston to serve as our
Senior Vice President and Chief Operating Officer. Under the terms of the
agreement, Mr. Ralston will be compensated at the annual rate of $131,007. He
shall receive an annual bonus of $14,782 if we meet our budget each fiscal year.
In addition, Mr. Ralston will be granted options to purchase 30,000 shares of
our common stock under an option plan, when and if established. Mr. Ralston
services were acquired through one of the largest recruiting companies in
Australia and the world, Hudson Global Resources, who have office world wide.
Hudson Global Resources undertook a extensive global search and advertising
campaign to generate a short list of candidates, from which Mr. Ralston was
selected following an exhaustive series of tests and interviews. We will be
obligated to pay a recruiting fee for the placement of Mr. Ralston to Hudson
Global Resources amounting to approximately $21,100. Mr. Ralston has no
affiliation with Hudson Global Resources other than that he was placed at Ingeus
Limited, his previous employer, by them.
We entered into an employment agreement with Anthony F. Head to serve as our
Senior Vice President of Sales. Mr. Head is also our Director. Under the terms
of the agreement, Mr. Head will be compensated at the annual rate of $77,063. He
shall receive an annual bonus of $11,086 if we meet our budget each fiscal year.
He will also be paid 5 percent of the value of each country or geographic-area
license sold.
We entered into an employment agreement with Sandra Wendt to serve as our Vice
President of Administration, Chief Financial Officer and Principal Accounting
Officer. Under the terms of the agreement, Ms. Wendt will be compensated at the
annual rate of $42,385. She shall receive an annual bonus of $3,695 if we meet
our budget each fiscal year.
The Board of FFBI adopted a conflict of interest policy on January 4, 2005. This
policy is intended to minimize conflicts of interest by requiring each director
to disclose all material interests which may lead to a conflict of interest
involving the director or officer's role with FFBI, and has been filed as an
exhibit to this Form SB-2.
Under the policy, a conflict that has been noted is that:
Mark Poulsen & Associates Pty Ltd is a company which Mark A Poulsen is a
Director of and through which he runs his Herbalife distributorship. Herbalife
runs a network marketing systems, under which Mark Poulsen & Associates Pty Ltd
directly receives 5% of income from Herbalife, dependant on the volume of the
nutritional products sold through distributors who have been sponsored by Mark
Poulsen & Associates Pty Ltd.
57
Currently, Mark A. Poulsen & Associates Pty. Ltd. has 21 distributors that it
has sponsored under the Herbalife networking systems that are also independent
FFBI account executives (16) and customer service representatives (5). As such
Mark A. Poulsen should receive some distribution of dividends or income from
Mark A. Poulsen and Associates Pty. Ltd. that have resulted from commissions
paid to Mark A. Poulsen and Associates Pty. Ltd. from Herbalife as a result of
nutritional products sold by FFBI's independent account executives and customers
service representatives.
STOCK OPTIONS
To date, we have agreed in the employment agreement with Mr. Ralston to grant
him at a future date 30,000 stock options. We have not granted or agreed to
grant any other stock options to our directors or officers. On July 25, 2004 we
issued 2,000,000 options to purchase common shares to Fort Street Equity Inc. in
consideration for $10,000 or $0.005 per option. The options grant Fort Street
Equity, Inc. the right to purchase 2,000,000 common shares of our stock at the
greater of the market price, as determined under the agreement, less a discount
of 40%, or $0.50 per share. The options expire on December 31, 2005. Fort Street
Equity, Inc. subsequently sold 100,000 options to the Ralston Superannuation
Fund, a related party, for $19,305, and 50,000 options to Bruce Gilling, an
unrelated party, for $15,000.
We have not issued any stock options to any officers, directors or staff.
PRINCIPAL STOCKHOLDERS
The following are the only persons beneficially owning, directly or indirectly,
or exercising control or direction over more than 5% of voting rights attached
to the shares of our common stock both prior to the Offering and after giving
effect to the Offering and the exercise of the options being registered in this
Registration Statement:
Name and Address Amount and Nature Percent of Percent
of Beneficial Owner of Beneficial Class (4)(5) of Class
Ownership including
Preferred
Shares(6)
- --------------------------------------------------------------------------------
Mark A. Poulsen 13,780,000(1) 60.25% 57.53%
10/27 Mayneview Street
Milton, Queensland, Australia
Anthony F. Head 275,000(2) 1.20% 1.15%
18 Ti Tree Grove
Mornington, Victoria, Australia
Sandra Wendt 100,000 0.44% 0.42%
30 Cambridge Crescent
Forest Lake, Queensland, Australia
Prins Ralston 100,000(7) 0.44% 0.42%
10/27 Mayneview Street
Milton, Queensland, Australia
Fort Street Equity, Inc.
Box 866 3,626,500(3) 15.86% 15.19%
George Town, Grand Cayman Islands
Executive Officers and 14,255,000 62.33% 59.72%
Directors as a Group
(4 Persons)
(1) Includes 10,700,000 shares issued to Kamaneal Investments Pty Ltd as trustee
for Mark Poulsen Family Trust;1,540,000 issued to Mark Poulsen; 1,540,000 issued
to Karen Poulsen.
(2) Includes 25,000 shares held by Brenda Head, Anthony Head's wife.
(3) Mitchell Stough is the principal of Fort Street Equity, Inc. Fort Street
owns 914,000 shares, Mitchell Stough owns 750,000 shares and Kellie Stough,
Mitchell's wife, owns 112,500 shares. The line indicating 3, 626,500 shares is
based on the 2,000,000 options that Fort Street Equity holds that convert into
2,000,000 shares of our common stock. The percentage is based on 22,870,000
shares of common stock issued and outstanding as of July 29, 2005 including the
2,000,000 shares underlying the options. Fort Street sold options as follows:
100,000 to Ralston Superannuation Fund; Bruce Gilling - 50,000. Therefore, the
total amount of shares of common stock underlying options included in the table
for Fort Street Equity is 1,850,000.
58
(4) Based on 20,870,000 shares of common stock issued and outstanding as of July
29, 2005. Fort Street Equity owns 2,000,000 options. Therefore, its calculation
is based on 22,870,000.
(5) Excludes 1,000,000 Series "A" Preferred Shares held by Mark A. Poulsen, each
preferred share having the right to 50 votes in annual or special meetings of
shareholders.
(6) Based on 22,870,000 shares of common stock issued and outstanding as of July
29, 2005 plus Mr. Poulsen's 1,000,000 Series "A" Preferred Shares.
(7) The Ralston Superannuation Fund (which is beneficially owned by Mr.
Ralston's family owns 100,000 options that are convertible into 100,000 shares
of our common stock.
DILUTION
As of March 31, 2005, the Company had a pro forma net tangible book value of
approximately $884,983, or $0.04 per share of common stock outstanding, after
giving effect to the assumed exercise of 2,000,000 options held by Fort Street
Equity, Inc. to acquire a like number of shares of Common Stock. Net tangible
book value equals the tangible net worth of the Company (total tangible assets
less total liabilities) divided by the number of shares of Common Stock
outstanding. After giving effect to the sale by the Company of shares of Common
Stock at various levels of proceeds as presented in this Offering at the initial
offering price of $1.50 per share, after deducting the estimated Offering
expenses (of which $71,254 of related expenses have been paid prior to March 31,
2005), the pro forma net tangible book value of the Company and amount per share
as of March 31, 2005, would have been approximately as presented in the table
below. The following table shows the immediate increase in pro forma net
tangible book value to current stockholders and an immediate dilution to new
investors. The following table illustrates the per share dilution at various
levels of proceeds from the Offering:
Assumed Net Proceeds Raised Under Offering
--------------------------------------------------------------
$4,400,000 $2,700,000 $1,200,000 $ 700,000 $ 350,000
---------- ---------- ---------- ---------- ----------
Assumed initial public offering price per share (1) $ 1.50 $ 1.50 $ 1.50 $ 1.50 $ 1.50
---------- ---------- ---------- ---------- ----------
Pro forma net tangible book value before the Offering 0.04 0.04 0.04 0.04 0.04
Increase attributable to new investors 0.17 0.11 0.05 0.03 0.02
---------- ---------- ---------- ---------- ----------
Pro forma net tangible book value after the Offering 0.21 0.15 0.09 0.07 0.06
---------- ---------- ---------- ---------- ----------
Dilution per share to new investors $ 1.29 $ 1.35 $ 1.41 $ 1.43 $ 1.44
========== ========== ========== ========== ==========
- -------------------------------------
(1) Represents the initial public offering price per share of Common Stock
before deducting Offering expenses payable by the Company.
[See table on next page].
59
Assumed Net Proceeds Raised Under Offering
-------------------------------------------------------------------
$ 4,400,000 $ 2,700,000 $ 1,200,000 $ 700,000 $ 350,000
----------- ----------- ----------- ----------- -----------
Shares Purchased:
Existing stockholders 22,870,000 22,870,000 22,870,000 22,870,000 22,870,000
New Investors 3,000,000 1,866,667 866,667 533,333 300,000
----------- ----------- ----------- ----------- -----------
Totals 25,870,000 24,736,667 23,736,667 23,403,333 23,170,000
=========== =========== =========== =========== ===========
Percentage:
Existing Stockholders 88% 92% 96% 98% 99%
New Investors 12% 8% 4% 2% 1%
----------- ----------- ----------- ----------- -----------
Totals 100% 100% 100% 100% 100%
=========== =========== =========== =========== ===========
Total Consideration:
Existing stockholders $ 884,983 $ 884,983 $ 884,983 $ 884,983 $ 884,983
New Investors 4,500,000 2,800,000 1,300,000 800,000 450,000
----------- ----------- ----------- ----------- -----------
Totals $ 5,384,983 $ 3,684,983 $ 2,184,983 $ 1,684,983 $ 1,334,983
=========== =========== =========== =========== ===========
Percentage:
Existing Stockholders 16% 24% 41% 53% 66%
New Investors 84% 76% 59% 47% 34%
----------- ----------- ----------- ----------- -----------
Totals 100% 100% 100% 100% 100%
=========== =========== =========== =========== ===========
Average Price Per Share:
Existing Stockholders $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.04
New Investors 1.50 1.50 1.50 1.50 1.50
The foregoing table reflects the exercise of 2,000,000 options held by Fort
Street Equity, Inc. and others to purchase a like number of shares of Common
Stock at an assumed purchase price of $0.50 per share.
SELLING STOCKHOLDERS
We are registering 1,784,000 shares of our common stock by our existing
shareholders and an additional 2,000,000 shares of our common stock issuable in
connection with outstanding common stock. The following table sets forth the
name of each Selling Security Holder, the number of shares of common stock
beneficially owned by the Selling Security Holders as of July 29, 2005, and the
number of shares being offered by each Selling Security Holder. None of the
selling security holders listed below are broker-dealers or affiliates of
broker-dealers. Any changes to this list of selling security holders will be
disclosed via an amendment to this form SB-2.
60
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Name of Selling Stockholder Shares of Percent of Shares of Common Number of Percent
Common Stock Common Stock to be sold Shares of
Owned Prior to Shares in the Offering owned after Shares
the Offering Owned Prior the Offering owned
to the after
Offering (1) Offering (3)
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Junay Pty Ltd Trustee for (KL
Notaras Family Trust) (4) 95,000 * 95,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Mushroom Systems International 15,000 * 15,000 0 0
Pty Ltd (10)
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Dean Harrison Family Trust (5) 30,000 * 30,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Jaroluin Pty Ltd (11) 30,000 * 30,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Leigh Troy 30,000 * 30,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Kendal Robinson 15,000 * 15,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Mark Hoey 120,000 * 120,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
GL Ray Enterprises (12) 15,000 * 15,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Roan Lee 30,000 * 30,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
The Credence Superannuation 60,000 * 60,000 0 0
Fund (6)
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Vexa Superannuation Fund (7) 20,000 * 20,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Boyana & Dragan Aralica 10,000 * 10,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Heather Kraus 10,000 * 10,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Wibcara Pty Ltd As Trustee For 10,000 * 10,000 0 0
Kraus Superannuation Fund (8)
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Maria Corry 20,000 * 20,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Clifford Henkel 20,000 * 20,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Helen Hughes 40,000 * 40,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Linda Wild 70,000 * 70,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Ann Maree Wood 10,000 * 10,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Walter Puawai McDermott 20,000 * 20,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Zainon Binte Ismail 10,000 * 10,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
James & Joan Stewart as
Trustees of the R Stewart Pty
Ltd Superannuation Fund (9) 40,000 * 40,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Maxwell Spackman 10,000 * 10,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Benjamin David Spackman 20,000 * 20,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Lily Lee Lee Lee 20,000 * 20,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Roslina Binte Mohamed Sa'ad 20,000 * 20,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Robert E. & Valda J. Bradley 20,000 * 20,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Donald Howell Wild 50,000 * 10,000 40,000 .19%
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Denise Linsley-Hayles 10,000 * 10,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Wayne Jobson 40,000 * 40,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Fort Street Equity, Inc. (2) 1,776,500 8.51% 2,764,000 862,500 3.33%
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Bruce Gilling (13) 0 0 50,000 0 0
- --------------------------------- ----------------- ------------- -------------------- ------------- -------
Ralston Superannuation Fund (14) 0 0 100,000 0 00
61
* - Less than 1%
(1) Assumes all of the shares of common stock offered in this prospectus
are sold and no other shares of common stock are sold during the
offering period. The percentage of shares is based on 20,870,000
shares issued and outstanding as of July 29, 2005.
(2) Fort Street Equity, Inc. owns 1,850,000 options which may be converted
into 1,850,000 shares of our common stock. Up to 1,850,000 of such
options are being registered in this prospectus and are not included
in the amount of shares owned prior to the offering. Mitchell Stough
is the beneficial owner. Fort Street Equity, Inc. holds 914,000
shares; Mitchell Stough owns 750,000 shares and Kellie Stough,
Mitchell's wife owns 112,500 shares. The shares being registered are
the 914,000 owned by Fort Street and the 1,850,000 shares of common
stock Underlying the options.
(3) Based on 25,870,000 shares issued and outstanding including the
2,000,000 options held by Fort Street Equity, Inc. and the 3,000,000
shares to be offered hereunder.
(4) The beneficial owners who have voting and investment control are John
Kriedemann and Kathleen Notaras.
(5) The beneficial owner who has voting and investment control is Dean
Harrison.
(6) The beneficial owners who have voting and investment control are Mark
and Beverly Sullivan.
(7) The beneficial owners who have voting and investment control are
Larisa Markiza Olszewaka and Nicole Louise Lawrence.
(8) The beneficial owners who have voting and investment control are Peter
and Heather Kraus.
(9) The beneficial owners who have voting and investment control are James
and Joan Stewart.
(10) The beneficial owner who has voting and investment control is Warrick
Prince.
(11) The beneficial owner who has voting and investment control is Inez
Hanson.
(12) The beneficial owner who has voting and investment control is Graham
Ray.
(13) Mr. Gilling purchased 50,000 options from Fort Street Equity, Inc. The
50,000 shares being registered represents the shares underlying the
options.
(14) Ralston Superannuation Fund purchased 100,000 options from Fort Street
Equity, Inc. The 100,000 shares being registered represents the shares
underlying the options. The beneficial owners who have voting and
investment control are Prins and Leanne Ralston.
Shares Eligible for Future Sale
As of July 29, 2005, there are no shares of common stock currently issued and
outstanding which are freely tradable without restrictions under the Securities
Act. In general, under Rule 144 as currently in effect, any of our affiliates
and any person (or persons whose sales are aggregated) who has beneficially
owned his or her restricted shares for at least one year, is entitled to sell in
the open market within any three-month period a number of shares of common stock
that does not exceed the greater of (i) 1% of our then outstanding shares of
common stock, or (ii) the average weekly trading volume in our common stock
during the four calendar weeks preceding such sale. Sales under Rule 144 also
are subject to certain limitations on manner of sale, notice requirements, and
the availability of current public information about us. Our non-affiliates, who
have held their restricted shares for two years are entitled to all their shares
under Rule 144 without regard to any of the above limitations, provided they
have not been affiliates for the three months preceding such sale.
62
Shares held by shareholders who were promoters or affiliates of the blank check
company even after a merger with us, may not be sold in reliance on Rule 144.
We are not quoted on the Over-the-Counter Bulletin Board. Following this
offering, no predictions can be made of the effect, if any, of future public
sales of restricted securities or the availability of restricted securities for
sale in the public market. Moreover, we cannot predict the number of shares of
our common stock that may be sold in the future pursuant to Rule 144 because
such sales will depend on, among other factors, the market price of our common
stock and the individual circumstances of the holders thereof. The availability
for sale of substantial amounts of our common stock under rule 144 could
adversely affect prevailing market prices for our securities.
PLAN OF DISTRIBUTION
The offering of a maximum of 3,000,000 of our common shares is being made on a
self-underwritten basis by us through Mark Poulsen and Prins Ralston, our
officers and director who will not be paid any commission or other compensation
and without the use of securities brokers.
Currently, we have not established an underwriting arrangement for the sale of
these shares. Messrs. Poulsen and Ralston will be the only persons that will
conduct the direct public offering. They intend to offer and sell the shares in
the primary offering through their business and personal contacts. There is a
possibility that no proceeds will be raised or that if any proceeds are raised,
they may not be sufficient to cover the cost of the offering.
Messrs. Poulsen and Ralston are the only persons that plan to sell our shares of
common stock. They are not registered broker-dealers. They intend to claim
reliance on Exchange Act Rule 3a4-1 which provides an exemption from the
broker-dealer registration requirements of the Exchange Act for persons
associated with an issuer. Specifically, each of them (i) at the time of sale,
will not be subject to a statutory disqualification as that term is defined in
section 3(a)39 of the Securities Act; (ii) will not be compensated in connection
with his participation in the offering by payment of commissions or other
remuneration; at the time of participation in the sale of shares, he will not be
an associated person of a broker or a dealer; (iii) at the time of
participation, will not be an associated person of a broker or dealer; and (iv)
pursuant to Rule 3a4-1(a)(4)(ii), each of them will meet all of the following
requirements: at the end of the offering, they will perform substantial duties
for us, other than in connection with transactions in securities; each of them
was not a broker or dealer, or an associated person of a broker or dealer within
the last 12 months; and each of them has not participated in, or does not intend
to participate in, selling an offering of securities for any issuer more than
once every 12 months other than in reliance on paragraph(a)(4)(i) or (iii) of
Rule 3a4-1.
63
Our Selling Security Holders may offer their shares during our offering. The
Selling Security Holders may sell some or all of their shares immediately after
they are registered. There is no restriction on the Selling Security Holders to
address the negative effect on the price of your shares due to the concurrent
primary and secondary offering. In the event that the Selling Security Holders
sell some or all of their shares, which could occur while we are still selling
shares directly to investors in this offering, trading prices for the shares
could fall below the offering price of the shares. In such event, we may be
unable to sell all of the shares to investors, which would negatively impact the
offering. As a result, our planned operations may suffer from inadequate working
capital.
The selling stockholders will sell their common stock at $1.50 per until our
shares of common stock are quoted on the OTC Bulletin Board (or any other
recognized exchange). Thereafter, the selling stockholders may sell their shares
at prevailing market prices or privately negotiated prices. Based on this, the
purchasers in this offering may be receiving an illiquid security.
The selling option holder shares may be sold or distributed from time to time by
the selling optionholder or by pledges, donees or transferees of, or successors
in interest to, the selling optionholder, directly to one or more purchasers
(including pledges) or through brokers, dealers or underwriters who may act
solely as agents or may acquire shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices, which may be changed. The
distribution of the shares may be effected in one or more of the following
methods:
o ordinary brokers transactions, which may include long or short sales,
o transactions involving cross or block trades on any securities or
market where our common stock is trading,
o purchases by brokers, dealers or underwriters as principal and resale
by such purchasers for their own accounts pursuant to this prospectus,
"at the market" to or through market makers or into an existing market
for the common stock,
o in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected
through agents,
o through transactions in options, swaps or other derivatives (whether
exchange listed or otherwise), or
o any combination of the foregoing, or by any other legally available
means.
In addition, the selling stockholders may enter into hedging transactions with
broker-dealers who may engage in short sales, if short sales were permitted, of
shares in the course of hedging the positions they assume with the selling
stockholders. The selling stockholders may also enter into option or other
transactions with broker-dealers that require the delivery by such
broker-dealers of the shares, which shares may be resold thereafter pursuant to
this prospectus.
Brokers, dealers, underwriters or agents participating in the distribution of
the shares may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders and/or the purchasers of shares for
whom such broker-dealers may act as agent or to whom they may sell as principal,
or both (which compensation as to a particular broker-dealer may be in excess of
customary commissions). The selling stockholders and any broker-dealers acting
in connection with the sale of the shares hereunder may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act of 1933,
and any commissions received by them and any profit realized by them on the
resale of shares as principals may be deemed underwriting compensation under the
Securities Act of 1933. Neither the selling stockholders nor we can presently
estimate the amount of such compensation. We know of no existing arrangements
between the selling stockholders and any other stockholder, broker, dealer,
underwriter or agent relating to the sale or distribution of the shares.
We will not receive any proceeds from the sale of the shares of the Selling
Security Holders pursuant to this prospectus. We have agreed to bear the
expenses of the registration of the shares, including legal and accounting fees,
and such expenses are estimated to be approximately $100,000.
64
We have informed the Selling Security Holders that certain anti-manipulative
rules contained in Regulation M under the Securities Exchange Act of 1934 may
apply to their sales in the market and have furnished the selling stockholders
with a copy of such rules and have informed them of the need for delivery of
copies of this prospectus. The selling stockholders may also use Rule 144 under
the Securities Act of 1933 to sell the shares if they meet the criteria and
conform to the requirements of such rule.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 14, 2004, we acquired all of the issued and outstanding shares of
Subsidiary from Mark A. Poulsen and Mark A. Poulsen & Associates Pty. Ltd. in
exchange for 15,000,000 shares of our common stock and 1,000,000 shares of our
Series "A" preferred stock which were issued to Mark A. Poulsen and to Mark
Poulsen & Associates Pty Ltd. Mark A. Poulsen subsequently transferred the
following common shares in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933:
Sandra L. Wendt (employee) 100,000
Brenda Head (employee) 25,000
Jim Cooper (employee) 25,000
Tony Head & Associates Pty Ltd. (director) 250,000
Andrew Flannigan (former employee) 30,000
Evan Kalaitzis (independent contractor) 10,000
----------
Total 440,000
==========
In addition, Mark A. Poulsen transferred shares to the following persons and
corporations in reliance on the exemption from registration provided by Section
4(2) of the Securities Act of 1933:
Donald Howell Wild 40,000
LR Global Marketing Pty. Ltd. 500,000
Kellie Stough 112,500
Louise Murray 112,500
----------
Total 765,000
==========
On September 14, 2004, an advance to us of $7,500 by a former director, Wayne
Hoskins, was satisfied by the issuance of 15,000 shares of our common stock
provided personally by Mark Poulsen, our officer and director.
On September 14, 2004, accrued consulting services of $20,000 for Donald Howell
Wild was satisfied by the issuance of 40,000 shares of common stock provided
personally by Mark Poulsen, our officer and director.
On August 25, 2004, Fit For Business (Australia) Pty Limited entered into a
License Agreement (the "Agreement") with LR Global Marketing Pty Ltd. ("LR
Global"), an Australian Corporation acting as trustee for Fit For Business
Australia/New Zealand Trust (the "trust"). The principals of LR Global Marketing
Pty Ltd are Laraine Richardson and Dianne Waghorne, and the beneficiaries of the
trust are Laraine Richardson and Dianne Waghorne. The principals of LR Global
Marketing Pty Ltd. and the beneficiaries of the trust being the same persons are
not related to the Company, or to Australia, or to its officers and directors
except as described herein. Under the terms of the Agreement, LR Global has been
granted a non-assignable license to represent Fit For Business (Australia) Pty
Limited within Australia and New Zealand for a term of ten (10) years in
consideration for the payment of a licensing fee in the amount of USD $500,000.
Pursuant to the terms of the Agreement, LR Global may use the Company's logo our
web based management information system, marketing and promotional literature,
processes, systems, intellectual property and attend FFBI events, for the
purpose of generating new customers for the Company and for training Account
Executives and Customer Service Representatives. Subsequent to the share
exchange transaction of Sept 14, 2004, Mark A. Poulsen transferred 500,000
common shares to LR Global. To date, LR Global has paid USD $117,750 and we
agreed to extend until May 31, 2005 the deadline for the payment of the balance
of the amount owing to us. In June 2005, LR Global paid us an additional
USD$7,615 and executed an amended license agreement. The amended License
agreement provides for final payment of the balance of the license fee within 60
days after our stock is quoted on the OTC Bulletin Board. In addition, the
principals of LR Global, Laraine Richardson and Dianne Waghorne, executed
personal guarantees for the balance of the outstanding license fee.
65
Mitchell Stough is the principal of Fort Street Equity Inc. ("Fort Street").
Fort Street entered into an option agreement with us and has the option after
sales of 150,000 options later described herein to purchase up to 1,850,000
shares of our common stock. In addition, Kellie Stough, the spouse of Mitchell
Stough, holds 112,500 shares of our common stock. The shares were transferred to
Kellie Stough by Mark Poulsen in consideration for consulting services by
Mitchell Stough provided to Subsidiary. In addition, Fort Street Equity Inc.
holds 914,000 common shares, and Mitchell Stough holds a further 750,000 shares.
Mark A. Poulsen also transferred 40,000 shares to Mr. Donald Wild. Mr. Wild has
assisted Subsidiary in raising capital and has also purchased convertible
promissory notes ($10,000).
We presently lease office space from Mark Poulsen & Associates Pty Ltd. Mr.
Poulsen is one of our officers and directors.
Mark A. Poulsen & Associates Pty. Ltd. is a company which Mark A Poulsen is a
Director of and through which he runs his Herbalife distributorship. Herbalife
runs a network marketing system. Mark Poulsen & Associates Pty Ltd directly
receives 5% commission from Herbalife, dependant on the volume of the
nutritional products sold through distributors who have been sponsored by Mark
Poulsen & Associates Pty Ltd directly or indirectly through distributors in his
network. Sales for the last 2 financial years from July 1, 2002 to June 30,
2004, totaled $591. The total commission paid to Mark Poulsen & Associates from
Herbalife Ltd. for such sales amounted to $30.
Currently, Mark A. Poulsen & Associates Pty. Ltd. has 21 distributors that it
has sponsored under the Herbalife networking systems that are signed up as
independent FFBI account executives (16) and customer service representatives
(5). As such Mark A. Poulsen should receive some distribution of dividends or
income from Mark A. Poulsen and Associates Pty. Ltd. that have resulted from
commissions paid to Mark A. Poulsen and Associates Pty. Ltd. from Herbalife as a
result of nutritional products sold by FFBI's independent account executives and
customers service representatives. This is a conflict of interest and may result
in his allegiance being swayed.
Mark A. Poulsen & Associates Pty. Ltd. is an Australian private entity and a
shareholder. It is wholly owned by Mark A. Poulsen, our President and Chief
Executive Officer. See the table below for amounts owed by (due to) the Company.
Kamaneal Investments Pty. Ltd. is an Australian private company and stockholder
of the Company owned by Mark A. Poulsen, our President and Chief Executive
Officer, and Karen Poulsen, his wife. The purpose of this company is to hold
investments for Mr. and Mrs. Poulsen. See the table below for amounts owed by
(due to) the Company.
Mark A. and Karen Poulsen incur expenses on behalf of the Company from time to
time. Mark A. Poulsen is the President and Chief Executive Officer of the
Company. See the table below for amounts owed by (due to) the Company.
Mr. GL Ray is a shareholder of FFBI. Mr. Ray has provided a working capital loan
to the Company as described in the table below.
For the amounts due to (from) related parties in the following table, all of the
related party transactions presented are for working capital, are non-interest
bearing, and have no terms for repayment.
Loans Due to (From) Related Parties
-----------------------------------
June 30,
March 31, --------------------
2005 2004 2003
-------- -------- --------
Mark A. Poulsen & Associates $(12,286) $ 88,261 $132,075
Kamaneal Investments Pty. Ltd. 39,326 (26,880) 3,943
Mark A. and Karen Poulsen 377 337 326
GL Ray 5,045 -- --
Wayne Hoskin -- 7,500 11,341
-------- -------- --------
Total $ 32,462 $ 69,218 $147,685
======== ======== ========
66
Donald Howell Wild, a former note holder and current stockholder, is the uncle
of Linda Wild, also a former note holder and current stockholder. In addition,
Mr. Wild is the father of Laraine Richardson, a principal in L.R. Global
Marketing Pty. Ltd., which entity entered into a License Agreement us on August
24, 2004. Mr. Wild also assisted us with the private placement of the notes by
marketing the placement, and was responsible for the subscription agreements of
several note holders. Mr. Wild's services were valued at $20,000. The liability
to Mr. Wild was satisfied by the transfer of 40,000 shares of our common stock
directly to him from the shares received from the Exchange Agreement by Mark A.
Poulsen, at a value of $.50 per share. We credited paid-in capital for the value
of the accrued liability satisfied by Mr. Poulsen.
We completed a private placement of promissory notes to thirty individuals and
entities and received proceeds of $365,000. The noteholders subsequently
converted the promissory notes to 870,000 shares of our common stock. Of the
thirty individuals and entities that subscribed to the private placement
offering, twelve parties are considered both account executives (part of our
independent marketing group) and independent Herbalife distributors, and six of
the parties are only independent Herbalife distributors. Mark A. Poulsen is also
an independent Herbalife distributor.
DESCRIPTION OF SECURITIES
The following is a summary description of our capital stock and certain
provisions of our certificate of incorporation and by-laws, copies of which have
been incorporated by reference as exhibits to the registration statement of
which this prospectus forms a part. The following discussion is qualified in its
entirety by reference to such exhibits.
Common Stock
We are presently authorized to issue 100,000,000 shares of $.001 par value
common stock. As of July 29, 2005, we had 20,870,000 shares of common stock
outstanding. The holders of our common stock are entitled to equal dividends and
distributions when, as, and if declared by the Board of Directors from funds
legally available therefore. No holder of any shares of common stock has a
preemptive right to subscribe for any of our securities, nor are any common
shares subject to redemption or convertible into other of our securities, except
for outstanding options described above. Upon liquidation, dissolution or
winding up, and after payment of creditors and preferred stockholders, if any,
the assets will be divided pro-rata on a share-for-share basis among the holders
of the shares of common stock. Each share of common stock is entitled to one
vote with respect to the election of any director or any other matter upon which
shareholders are required or permitted to vote. Holders of our common stock do
not have cumulative voting rights, so the holders of more than 50% of the
combined shares 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 will not be able to elect any members to the Board of
Directors.
Preferred Stock
We are authorized to issue up to 10,000,000 shares of $.001 par value preferred
stock. As of July 29, 2005, we have issued 1,000,000 preferred shares to Mark
Poulsen. Each of the preferred shares carry no dividend rights, no liquidation
rights, no pre-emptive rights, no conversion rights and no redemption rights but
carry 50 votes in general and special meetings. The remaining 9,000,000
preferred shares have not been issued. Under our Certificate of Incorporation,
the Board of Directors will have the power, without further action by the
holders of the common stock, to designate the relative rights and preferences of
the preferred stock, and to issue the preferred stock in one or more series as
designated by the Board of Directors. The designation of rights and preferences
could include preferences as to liquidation, redemption and conversion rights,
voting rights, dividends or other preferences, any of which may be dilutive of
the interest of the holders of the common stock or the preferred stock of any
other series. The issuance of preferred stock may have the effect of delaying or
preventing a change in control of our company without further shareholder action
and may adversely affect the rights and powers, including voting rights, of the
holders of common stock. In certain circumstances, the issuance of preferred
stock could depress the market price of the common stock.
67
Options
On July 25, 2004, we issued a total of 2,000,000 options to Fort Street Equity,
Inc., which options we are registering under this prospectus. Each option
provides the option holder the right to purchase one share of our common stock
at the greater of:
(1) a 40% discount from the average closing bid price of our common stock
on a public exchange during the 10 trading days immediately prior to the
exercise of the option or
(2) $0.50 per share. The options can be exercised at any time until
December 31, 2005. To date, no options have been exercised.
Subsequent to July 25, 2004, Fort Street Equity, Inc. has sold 50,000 options to
Bruce Gilling and 100,000 options to the Ralston Superannuation Fund.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
During the two most recent fiscal years and the nine-month interim period
subsequent to March 31, 2005, there have been no disagreements with Davis
Accounting Group P.C., our independent auditor, on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
TRANSFER AGENT
The transfer agent for our common stock is NW Securities Transfer Agent and
Registrar Inc., 14780 SW Osprey Drive, Suite 240, Beaverton Oregon, 97009.
EXPERTS
The financial statements included in this prospectus have been audited by Davis
Accounting Group, P.C., independent auditors, as stated in their reports
appearing herein and elsewhere in the registration statement (which report
expresses an unqualified opinion and includes an explanatory paragraph referring
to our recurring losses from operations which raise substantial doubt about our
ability to continue as a going concern), and have been so included in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
LEGAL MATTERS
The validity of our common shares offered will be passed upon for us by Anslow &
Jaclin, LLP, Manalapan, New Jersey 07726.
68
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
MARCH 31, 2005, AND 2004
Financial Statements-
Balance Sheet as of March 31, 2005 (Unaudited)............................F-2
Statements of Operations and Comprehensive (Loss) for the Nine-month
Periods Ended March 31, 2005, and 2004, and
Cumulative from Inception (Unaudited) ..................................F-3
Statements of Stockholder's (Deficit) for the Periods from Inception
Through March 31, 2005 (Unaudited) .....................................F-4
Statements of Cash Flows for the Nine-month Periods Ended March 31,
2005, and 2004, and Cumulative from Inception (Unaudited) ..............F-5
Notes to Financial Statements for the Periods
Ended March 31, 2005, and 2004 (Unaudited)..............................F-7
F-1
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET (NOTE 2)
AS OF MARCH 31, 2005
(Unaudited)
ASSETS
------
2005
----------
Current Assets:
Cash and cash equivalent $ 5,569
Accounts Receivable-
License fee 382,250
Related party - Mark Poulsen & Associates Pty. Ltd. 12,286
Other 1,106
Inventory 2,433
----------
Total current assets 403,644
----------
Property and Equipment:
Office and computer equipment 1,832
Furniture and fixtures 185
Web site development costs 5,006
----------
7,023
Less - Accumulated depreciation and amortization (4,868)
----------
2,155
Software development in progress 40,502
----------
Net property and equipment 42,657
----------
Other Assets:
Trademark 231
Less - Accumulated amortization (151)
Deferred offering costs 71,254
----------
Total other assets 71,334
----------
Total Assets $ 517,635
==========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
---------------------------------------
Current Liabilities:
Accounts payable - trade $ 50,272
Accrued liabilities 67,605
Loans from related parties 44,748
Deferred revenue - License fee 470,027
----------
Total current liabilities 632,652
----------
Total liabilities 632,652
----------
Commitments and Contingencies
Stockholders' (Deficit):
Preferred stock, par value $.001 per share; 10,000,000 shares
authorized; 1,000,000 shares issued and outstanding 1,000
Common stock, par value $.001, 100,000,000 shares
authorized; 20,870,000 shares issued and outstanding 20,870
Additional paid-in capital 604,482
Accumulated other comprehensive (loss) (40,241)
(Deficit) accumulated during the development stage (701,128)
----------
Total stockholders' (deficit) (115,017)
----------
Total Liabilities and Stockholders' (Deficit) $ 517,635
==========
The accompanying notes to financial statements
are an integral part of this balance sheet.
F-2
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) (NOTE 2)
FOR THE NINE-MONTH PERIODS ENDED
MARCH 31, 2005, AND 2004, AND CUMULATIVE FROM INCEPTION
(DECEMBER 14, 1998) THROUGH MARCH 31, 2005
9 Months Ended
March 31, Cumulative
---------------------------- From
2005 2004 Inception
------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
Revenues:
Revenues from sales and license fees $ 40,501 $ 95 $ 48,796
------------ ------------ ------------
Total revenues 40,501 95 48,796
------------ ------------ ------------
Cost of Goods Sold:
Cost of goods sold 2,286 82 6,010
------------ ------------ ------------
Gross Profit (Loss) 38,215 13 42,786
------------ ------------ ------------
Expenses:
General and administrative-
Wages, compensation and related taxes 85,989 29,161 282,605
Legal, accounting and consulting fees 88,374 2,836 110,041
Advertising and promotion 30,294 138 38,687
Depreciation and amortization 1,485 1,140 4,421
Write-off of deferred offering costs -- -- 79,685
Training and development 25,299 -- 25,299
Travel, meals and lodging 29,288 -- 31,697
Other 29,228 1,897 148,914
Realized foreign exchange adjustments 48,562 (31,295) 9,418
------------ ------------ ------------
Total general and administrative expenses 338,519 3,877 730,767
------------ ------------ ------------
(Loss) from Operations (300,304) (3,864) (687,981)
Other Income (Expense) (4,988) (4,081) (13,147)
Provision for income taxes -- -- --
------------ ------------ ------------
Net (Loss) $ (305,292) $ (7,945) $ (701,128)
------------ ------------ ------------
Comprehensive (Loss):
Australian currency translation (155) (39,644) (40,241)
------------ ------------ ------------
Total Comprehensive (Loss) $ (305,447) $ (47,589) $ (741,369)
============ ============ ============
(Loss) Per Common Share:
(Loss) per common share - Basic and Diluted $ (0.01) $ (0.00)
============ ============
Weighted Average Number of Common Shares
Outstanding - Basic and Diluted 20,791,715 20,000,000
============ ============
The accompanying notes to financial statements are
an integral part of this statement.
F-3
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' (DEFICIT) (NOTE 2)
FOR THE PERIODS FROM INCEPTION (DECEMBER 14, 1998)
THROUGH MARCH 31, 2005
(Deficit)
Accumulated Accumulated
Preferred Stock Common stock Additional Other During the
--------------------- ---------------------- Paid-in Comprehensive Development
Description Shares Amount Shares Amount Capital (Loss) Stage Totals
- --------------------------- --------- --------- ---------- --------- ---------- ------------- ----------- ----------
Balance - December 14, 1998 -- $ -- -- $ -- $ -- $ -- $ -- $ --
Issuance of capital stock
for cash -- -- -- -- -- -- -- --
Australian currency
translation -- -- -- -- -- (534) -- (534)
Net (loss) for the period -- -- -- -- -- -- (16,961) (16,961)
--------- --------- ---------- --------- ---------- ------------- ----------- ----------
Balance - June 30, 1999 -- -- -- -- -- (534) (16,961) (17,495)
Australian currency
translation -- -- -- -- -- 7,472 -- 7,472
Net (loss) for the period -- -- -- -- -- -- (138,322) (138,322)
--------- --------- ---------- --------- ---------- ------------- ----------- ----------
Balance - June 30, 2000 -- -- -- -- -- 6,938 (155,283) (148,345)
Issuance of common stock
for services -- -- 5,000,000 5,000 -- -- (5,000) --
Australian currency
translation -- -- -- -- -- 25,453 -- 25,453
Net (loss) for the period -- -- -- -- -- -- (53,529) (53,529)
--------- --------- ---------- --------- ---------- ------------- ----------- ----------
Balance - June 30, 2001 -- -- 5,000,000 5,000 -- 32,391 (213,812) (176,421)
Australian currency
translation -- -- -- -- -- (20,804) -- (20,804)
Net (loss) for the period -- -- -- -- -- -- (32,584) (32,584)
--------- --------- ---------- --------- ---------- ------------- ----------- ----------
Balance - June 30, 2002 -- -- 5,000,000 5,000 -- 11,587 (246,396) (229,809)
Australian currency
translation -- -- -- -- -- (45,554) -- (45,554)
Net (loss) for the period -- -- -- -- -- -- (24,176) (24,176)
--------- --------- ---------- --------- ---------- ------------- ----------- ----------
Balance - June 30, 2003 -- -- 5,000,000 5,000 -- (33,967) (270,572) (299,539)
Australian currency
translation -- -- -- -- -- (6,119) -- (6,119)
Net (loss) for the period -- -- -- -- -- -- (130,264) (130,264)
--------- --------- ---------- --------- ---------- ------------- ----------- ----------
Balance - June 30, 2004 -- -- 5,000,000 5,000 -- (40,086) (400,836) (435,922)
Stock options issued for
cash -- -- -- -- 10,000 -- -- 10,000
Preferred and common
stock issued for deemed
reverse merger with FFB
Australia 1,000,000 1,000 15,000,000 15,000 (30,950) -- 5,000 (9,950)
Employee compensation
paid by issued shares -- -- -- -- 220,000 -- -- 220,000
Loan from former director
paid by issued shares -- -- -- -- 7,500 -- -- 7,500
Consulting services paid
by issued shares -- -- -- -- 20,000 -- -- 20,000
Promissory notes converted
to common stock -- -- 870,000 870 377,932 -- -- 378,802
Australian currency
translation -- -- -- -- -- (155) -- (155)
Net (loss) for the period -- -- -- -- -- -- (305,292) (305,292)
--------- --------- ---------- --------- ---------- ------------- ----------- ----------
Balance - March 31, 2005 1,000,000 $ 1,000 20,870,000 $ 20,870 $ 604,482 $ (40,241) $ (701,128) $ (115,017)
========= ========= ========== ========= ========== ============= =========== ==========
The accompanying notes to financial statements are
an integral part of these statement.
F-4
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (NOTE 2)
FOR THE NINE-MONTH PERIODS ENDED MARCH 31, 2005, AND 2004,
AND CUMULATIVE FROM INCEPTION (DECEMBER 14, 1998)
THROUGH MARCH 31, 2005
Nine Months Ended
March 31, Cumulative
------------------------ From
2005 2004 Inception
---------- ---------- ----------
(Unaudited) (Unaudited) (Unaudited)
Operating Activities:
Net (loss) $ (305,292) $ (7,945) $ (701,128)
Adjustments to reconcile net (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization 1,891 1,450 5,019
Write-off of deferred offering costs -- -- 77,000
Employee compensation paid by issued shares 23,384 30,276 220,000
Consulting services paid by issued shares 20,000 -- 20,000
Interest on promissory notes converted to paid-in capital 5,698 4,180 13,801
Changes in net assets and liabilities-
Accounts receivable 117,696 1,098 116,645
Inventory (2,433) -- (2,433)
Accounts payable - trade 47,377 -- 50,272
Accrued liabilities and other 67,605 -- 67,605
Deferred revenue (29,973) -- (29,973)
---------- ---------- ----------
Net Cash Provided by (Used in) Operating Activities (54,047) 29,059 (163,192)
---------- ---------- ----------
Investing Activities:
Purchases of computer and office equipment (1,811) (225) (2,017)
Payment for Australian trademark (24) (26) (231)
Expenditures for web site development costs (519) (563) (5,006)
Expenditures for software development in progress (40,502) -- (40,502)
---------- ---------- ----------
Net Cash (Used in) Investing Activities (42,856) (814) (47,756)
---------- ---------- ----------
Financing Activities:
Proceeds from the issuance of convertible notes 180,000 140,000 365,000
Checks in excess of bank balance -- (64) --
Proceeds from loans - related parties 121,908 5,788 302,662
Payments on loans - related parties (151,164) (29,801) (270,200)
Proceeds from loan - former director -- 1,472 7,500
Payments of deferred offering costs (48,254) (100,000) (148,254)
Proceeds from the issuance of capital stock -- -- 50
---------- ---------- ----------
Net Cash Provided by Financing Activities 102,490 17,395 256,758
---------- ---------- ----------
Effect of Exchange Rate Changes on Cash (155) (39,644) (40,241)
---------- ---------- ----------
Net Increase (Decrease) in Cash 5,432 5,996 5,569
Cash - Beginning of Period 137 54 --
---------- ---------- ----------
Cash - End of Period $ 5,569 $ 6,050 $ 5,569
========== ========== ==========
The accompanying notes to financial statements are
an integral part of these statement.
F-5
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (NOTE 2)
FOR THE NINE-MONTH PERIODS ENDED MARCH 31, 2005, AND 2004,
AND CUMULATIVE FROM INCEPTION (DECEMBER 14, 1998)
THROUGH MARCH 31, 2005
(Unaudited)
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ -- $ -- $ --
========== ========== ==========
Income taxes $ -- $ -- $ --
========== ========== ==========
Supplemental Information of Noncash Investing and Financing Activities:
On September 14, 2004, the Company entered into an Exchange Agreement with FFB
Australia whereby FFBI acquired all of the issued and outstanding capital
stock of FFB Australia (81 shares) in exchange for 15,000,000 shares of common
stock and 1,000,000 shares of preferred stock of the Company. As a result of
the Exchange Agreement, the stockholders of FFB Australia control FFBI, and
FFB Australia has been deemed to have effected a reverse merger for financial
reporting purposes. The deemed reverse merger has been recorded as a
recapitalization of the Company, with the net assets of FFBI and FFB Australia
brought forward at their historical bases.
On September 20, 2004, the Company issued 420,000 shares of common stock with
value of $140,000 in connection with the conversion of certain Notes and
accrued interest.
On September 29, 2004, the Company issued 450,000 shares of common stock with
a value of $225,000 in connection with the conversion of the remainder of the
Notes and accrued interest.
On September 14, 2004, accrued employee compensation of $220,000 was satisfied
with the issuance 440,000 shares of common stock provided personally by an
officer and director of the Company.
On September 14, 2004, a loan to the Company of $7,500 by a former director
was satisfied with the issuance of 15,000 shares of common stock provided
personally by an officer and director of the Company.
On September 14, 2004, accrued consulting services of $20,000 was satisfied
with the issuance of 40,000 shares of common stock provided personally by an
officer and director of the Company.
The accompanying notes to financial statements are
an integral part of these statement.
F-6
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005, AND 2004
(Unaudited)
(1) Summary of Significant Accounting Policies
Basis of Presentation and Organization
Fit For Business International, Inc. ("FFBI" or the "Company") is a Nevada
corporation in the development stage of providing products and services for: (i)
corporate wellness programs which address business productivity, stress and
absenteeism issues; (ii) living well programs directed primarily, but not
exclusively, to individuals over 45 years of age; and, (iii) nutritional
supplements manufactured and supplied by Herbalife Ltd. ("Herbalife"). The
accompanying financial statements of FFBI were prepared from the accounts of the
Company under the accrual basis of accounting in United States dollars. In
addition, the accompanying financial statements reflect the completion of a
deemed reverse merger between FFBI and Fit For Business (Australia) Pty Limited
("FFB Australia"), which was effected on September 14, 2004.
Prior to the completion of the deemed reverse merger, FFBI was a dormant
corporation with no assets or operations (essentially since its organization on
May 30, 2001, and incorporation on July 31, 2001). The Company was originally
incorporated under the name of Elli Tsab, Inc. On April 7, 2004, the name of the
Company was changed to Patient Data Corporation. On January 13, 2005, the name
of the Company was again changed to Fit For Business International, Inc. in
order to better reflect the current business plan.
FFB Australia was organized as an Australian private company on December 14,
1998, and subsequently began certain marketing studies and corporate awareness
programs to obtain customers for its products and services. In October 2003, FFB
Australia initiated a capital formation activity through the private placement
of certain convertible promissory notes which provided, through September 14,
2004, proceeds of $365,000. Subsequent to the completion of the deemed reverse
merger, the liability associated with the convertible promissory notes was
assumed by the Company. Thereafter, all of the promissory notes were converted
into shares of common stock of FFBI.
In addition, in November 2003, FFB Australia commenced a capital formation
activity to effect a deemed reverse merger with a corporation validly organized
in the United States for the purpose of completing a Registration Statement on
Form SB-2 with the Securities and Exchange Commission ("SEC"), and raising
capital from the issuance of common stock in the public markets of up to $4.5
million. The initial capital formation activity through a deemed reverse merger
and the issuance of common stock was unsuccessful. Subsequently, FFB Australia
completed a deemed reverse merger with the Company, and FFBI is currently
undertaking a second capital formation activity of the same type.
Prior to September 14, 2004, FFB Australia, aside from the capital formation and
marketing activities described above, incurred other development stage operating
costs and expenses related to its organization as an entity, receipt of a
trademark in Australia for the name and related logo of Fit For Business,
formation of a management team, accounting and tax preparation fees, consulting
fees, travel, and other general and administrative expenses. For additional
information relating to the development stage activities of the Company, see
Note 2.
Given that FFB Australia is considered to have acquired FFBI by a deemed reverse
merger through an Exchange Agreement (see Note 4), and its stockholders
currently have voting control of FFBI, the accompanying financial statements and
related disclosures in the notes to financial statements present the financial
position as of March 31, 2005, and the operations for the periods ended March
31, 2005, and 2004, and from the period from the inception date (December 14,
1998) through March 31, 2005, of FFB Australia under the name of FFBI. The
deemed reverse merger has been recorded as a recapitalization of the Company,
with the net assets of FFB Australia and FFBI brought forward at their
historical bases. The costs associated with the reverse merger have been
expensed as incurred.
F-7
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005, AND 2004
(Unaudited)
Unaudited Interim Financial Statements
The interim financial statements as of March 31, 2005, and for the periods ended
March 31, 2005, and 2004, and cumulative from inception (December 14, 1998)
through March 31, 2005, are unaudited. However, in the opinion of management,
the interim and cumulative financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
Company's financial position as of March 31, 2005, and the results of its
operations for the periods ended March 31, 2005, and 2004, and cumulative from
inception (December 14, 1998) through March 31, 2005, and cash flows for the
periods ended March 31, 2005, and 2004, and cumulative from inception (December
14, 1998) through March 31, 2005. These results are not necessarily indicative
of the results expected for the fiscal year ending June 30, 2005. The
accompanying financial statements and notes thereto do not reflect all
disclosures required under accounting principles generally accepted in the
United States. Refer to FFB Australia's audited financial statements contained
in Form SB-2/A for the period ended June 30, 2004, and 2003, for additional
information, including significant accounting policies.
Cash and Cash Equivalents
For purposes of reporting within the statement of cash flows, the Company
considers all cash on hand, cash accounts not subject to withdrawal restrictions
or penalties, and all highly liquid debt instruments purchased with a maturity
of three months or less to be cash and cash equivalents.
Accounts Receivable
Accounts receivable consist of amounts due from a license agreement, employees
and related parties, and value added tax refunds. The Company establishes an
allowance for doubtful accounts in amounts sufficient to absorb potential losses
on accounts receivable. As of March 31, 2005, no allowance for doubtful accounts
was deemed necessary. While management uses the best information available upon
which to base estimates, future adjustments to the allowance may be necessary if
economic conditions differ substantially from the assumptions used for the
purpose of analysis.
Revenue Recognition
The Company is in the development stage and has yet to realize significant
revenues from planned operations. It has derived revenues principally from the
sale of literature and training materials, Herbalife nutritional products,
services related to wellness programs, and from a license agreement for
Australia and New Zealand which entitles the licensee to recruit representatives
for the Company, use its logo and software, and market and promote its products
and services. Such revenues are recognized in accordance with the SEC Staff
Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements" ("SAB
104"). Under SAB 104, revenue is recognized when it is realized or realizable
and earned. FFBI considers revenue realized or realizable and earned when it has
persuasive evidence of an arrangement, and that: (i) the product has been
shipped or the services have been provided to its customer; (ii) the sales price
is fixed or determinable; and (iii) collectibility is reasonable assured. The
Company also reduces revenue for estimated customer returns. In addition to the
aforementioned general policy, the following are the specific revenue
recognition policies for each major category of revenue:
F-8
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005, AND 2004
(Unaudited)
For sales of literature, training materials, and Herbalife nutritional products,
revenue is realized upon shipment to the customer and there are no unfulfilled
company elements related to a customer's order.
For specific wellness program services and contracts pertaining to such
services, revenue is realized as services are provided.
For license agreements, revenue is realized from licensing activities related to
various countries and geographic regions, which entitle licensees to recruit
representatives for the Company, the use of Company logos, software and training
materials, and the rights to market and promote the services of the Company.
Revenue from such agreements is realized over the term and under the conditions
of each specific license.
Internal Web Site Development Costs
Under Emerging Issues Taskforce Statement 00-2, Accounting for Web Site
Development Costs ("EITF 00-2"), costs and expenses incurred during the planning
and operating stages of the Company's web site are expensed as incurred. Under
EITF 00-2, costs incurred in the web site application and infrastructure
development stages are capitalized by the Company and amortized to expense over
the web site's estimated useful life or period of benefit. As of March 31, 2005,
FFBI had capitalized $5,006 related to its web site development.
Costs of Computer Software Developed or Obtained for Internal Use
Under Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use ("SOP 98-1"), the Company capitalizes
external direct costs of materials and services consumed in developing or
obtained internal-use computer software; payroll and payroll-related costs for
employees who are directly associated with and who devote time to the
internal-use computer software project; and, interest costs related to loans
incurred for the development of internal-use software. As of March 31, 2005, the
Company had capitalized $40,502 for projects related to the development of
internal-use software.
Costs of Computer Software to be Sold or Otherwise Marketed
Under Statement of Financial Accounting Standards No. 86, Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed ("SFAS
86"), the Company capitalizes costs associated with the development of certain
training software products held for sale when technological feasibility is
established. Capitalized computer software costs of products held for sale are
amortized over the useful life of the products from the software release date.
As of March 31, 2005, the Company had not undertaken any projects related to the
development of software products held for sale or to be otherwise marketed.
Trademark
The Company obtained a trademark from the government of Australia effective
October 15, 1999. The trademark covers the name "Fit For Business" and the logo
of the Company. The cost of obtaining the trademark has been capitalized by the
Company, and is being amortized over a period of ten years.
F-9
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005, AND 2004
(Unaudited)
Advertising Costs
Advertising costs are charged to operations when incurred, except for television
or magazine advertisements, which are charged to expense when the advertising
first takes place. For the nine-month periods ended March 31, 2005, and 2004,
advertising costs amounted to $30,294 and $138, respectively.
Property and Equipment
The components of property and equipment are stated at cost. Property and
equipment costs are depreciated or amortized for financial reporting purposes
over the useful lives of the related assets by the straight-line method. Useful
lives utilized by the Company for calculating depreciation or amortization are
as follows:
Computer and office equipment 5 years
Furniture and fixtures 10 years
Internal web site development costs 3 years
Upon disposition of an asset, its cost and related accumulated depreciation or
amortization are removed from the accounts, and any resulting gain or loss is
recognized.
Impairment of Long-Lived Assets
Under Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
("SFAS 121"), the Company evaluates the recoverability of long-lived assets and
the related estimated remaining lives at each balance sheet date. The Company
records an impairment or change in useful life whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable or the
useful life has changed.
Loss Per Common Share
Basic loss per share is computed by dividing the net loss attributable to the
common stockholders by the weighted average number of shares of common stock
outstanding during the period. Fully diluted loss per share is computed similar
to basic loss per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive.
Deferred Offering Costs
The Company defers as other assets the direct incremental costs of raising
capital until such time as the offering is completed. At the time of the
completion of the offering, the costs are charged against the capital raised.
Should the offering be terminated, deferred offering costs are charged to
operations during the period in which the offering is terminated (see Note 4).
F-10
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005, AND 2004
(Unaudited)
Comprehensive Income (Loss)
The Company presents comprehensive income (loss) in accordance with Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"). SFAS 130 states that all items that are required to be recognized under
accounting standards as components of comprehensive income (loss) be reported in
the financial statements. For the interim periods ended March 31, 2005, and
2004, and cumulative from inception (December 14, 1998) through March 31, 2005,
the only components of comprehensive income (loss) were the net (loss) for the
periods, and the foreign currency translation adjustments.
Income Taxes
The Company accounts for income taxes pursuant to SFAS No. 109, Accounting for
Income Taxes ("SFAS 109"). Under SFAS 109, deferred tax assets and liabilities
are determined based on temporary differences between the bases of certain
assets and liabilities for income tax and financial reporting purposes. The
deferred tax assets and liabilities are classified according to the financial
statement classification of the assets and liabilities generating the
differences.
The Company maintains a valuation allowance with respect to deferred tax assets.
The Company establishes a valuation allowance based upon the potential
likelihood of realizing the deferred tax asset and taking into consideration the
Company's financial position and results of operations for the current period.
Future realization of the deferred tax benefit depends on the existence of
sufficient taxable income within the carryforward period under the Federal tax
laws.
Changes in circumstances, such as the Company generating taxable income, could
cause a change in judgment about the realizability of the related deferred tax
asset. Any change in the valuation allowance will be included in income in the
year of the change in estimate.
Foreign Currency Translation
The Company accounts for foreign currency translation pursuant to SFAS No. 52,
Foreign Currency Translation ("SFAS 52"). The Company's functional currency is
the Australian dollar. All assets and liabilities are translated into United
States dollars using the current exchange rate at the end of each fiscal period.
Revenues and expenses are translated using the average exchange rates prevailing
throughout the respective periods. Translation adjustments are included in other
comprehensive income (loss) for the period. Certain transactions of the Company
are denominated in United States dollars. Translation gains or losses related to
such transactions are recognized for each reporting period in the related
statement of operations and comprehensive income (loss).
Fair Value of Financial Instruments
The Company estimates the fair value of financial instruments using the
available market information and valuation methods. Considerable judgment is
required in estimating fair value. Accordingly, the estimates of fair value may
not be indicative of the amounts the Company could realize in a current market
exchange. As of March 31, 2005, the Company did not have any financial
instruments requiring the estimate of fair value.
F-11
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005, AND 2004
(Unaudited)
Stock-Based Compensation
The Company uses the fair value method to account for non-employee stock-based
compensation in accordance with SFAS No. 123, Accounting for Stock-Based
Compensation, and FASB Emerging Issues Task Force, or EITF, Issue No. 96-18,
Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services. Under the fair
value method, all transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted for based on the
fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measurable.
Concentrations of Risk
As of March 31, 2005, the Company had a material off-balance sheet risk with
regards to its dependence upon Herbalife as its sole source of supply for the
purchase of nutritional supplements related to its planned wellness programs.
Fiscal Year End of the Company
The fiscal year end of the Company is June 30 of each year.
Estimates
The financial statements are prepared on the basis of accounting principles
generally accepted in the United States. The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities as of March 31, 2005, and expenses for the periods ended March 31,
2005, and 2004. Actual results could differ from those estimates made by
management.
(2) Development Stage Activities and Going Concern
The Company is in the development stage of providing products and services for
corporate business wellness programs; living well programs directed primarily,
but not exclusively, to individuals over 45 years of age; and, nutritional
supplements manufactured and supplied by Herbalife. As of March 31, 2005, and
subsequent thereto, FFBI had completed organization and reverse merger
transactions, initial marketing and corporate awareness programs designed to
obtain customers for its products and services, the receipt of a trademark in
Australia for the name "Fit For Business", formation of a management team, and
other activities related to capital formation and initial operations. Management
of the Company is pursuing various sources of equity financing, and plans to
raise approximately $4.5 million through a best efforts self-underwritten public
offering of its common stock. The public offering and sale of common stock by
officers and directors of the Company will be conducted subsequent to the filing
and approval of a Registration Statement on Form SB-2 with the SEC. The proceeds
F-12
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005, AND 2004
(Unaudited)
from the public offering will be used by the Company for the development and
production of multi-media training programs, marketing and promotional
literature and programs, web site enhancement, purchase of inventory, customer
call center and computer hardware and software programs to be used to aid the
Company's customer service representatives, and working capital required to hire
additional staff and provide for an expected increase in operations.
While management of the Company believes that the Company will be successful in
its capital formation and operating activities, there can be no assurance that
the Company will be able to raise $4.5 million in equity capital through its
planned filing with the SEC and related activities, or be successful in the sale
of its products and services that will generate sufficient revenues to sustain
the operations of the Company.
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States, which contemplate
continuation of the Company as a going concern. The Company has incurred
operating losses since inception, had negative working capital as of March 31,
2005, and the cash resources of the Company are insufficient to meet its planned
business objectives. These and other factors raise substantial doubt about the
Company's ability to continue as a going concern. The accompanying financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the possible inability of the
Company to continue as a going concern.
(3) Convertible Debt
In November 2003, FFBI began a capital formation activity through the private
placement of up to 200 unsecured convertible promissory notes (the "Note" or
"Notes"). Under the terms of the private placement subscription agreement, the
minimum unit participation was one unit per Note valued at $5,000. Multiple
units could be acquired under the terms of a single Note. The Notes issued for
the units stated a maturity date of November 30, 2004, and provided for an
interest rate of ten percent (10%) per annum, payable upon redemption. None of
the Notes were issued to officers, directors, or employees of FFBI.
The Notes were convertible into 10,000 shares of common stock per unit at any
time prior to maturity at the option of the note holder, or, if called by FFBI,
then automatically in the event of a public offering of shares. No value was
associated with the conversion feature of the Notes. FFBI structured an
incentive program with the first eleven subscribers to the private placement for
the Notes, and provided an additional 1/2 unit of value for each unit
subscribed. As such, as of September 14, 2004, FFBI had received and recorded
proceeds of $365,000 under the private placement in exchange for the Notes with
87 units for the calculation of conversion into common stock (870,000 shares of
common stock), and accrued interest in the amount of $13,801. The liability for
the Notes was assumed by the Company as a result of the Exchange Agreement.
On September 20, 2004, the Company, pursuant to a planned public offering of its
common stock, called and converted Notes with a unit value of 42 units into
420,000 shares of common stock. The transaction was valued at $0.33 per share of
common stock for a total of $140,000. Further, on September 29, 2004, the
remaining Notes with a unit value of 45 units were called and converted by the
Company into 450,000 shares of common stock. The transaction was valued at $0.50
F-13
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005, AND 2004
(Unaudited)
per share of common stock for a total of $225,000. The value of the conversion
transactions in excess of the par value of the common stock issued, including
accrued interest, has been presented as additional paid-in capital in the
accompanying balance sheet as of March 31, 2005.
(4) Common Stock Transactions and Capital Formation
Issuance of Common Stock
On May 30, 2001, FFBI issued 5,000,000 shares of its common stock to former
officers and directors of the Company for services rendered. The value of the
services rendered was $5,000. This transaction, along with the accumulated
(deficit) of FFBI, made up the components of the reverse merger related to the
recapitalization of FFBI common stock.
Stock Option Agreement
On July 25, 2004, the Company issued 2,000,000 options to Fort Street Equity,
Inc. (see below) to purchase the same number of shares of its common stock for
$10,000 in cash. The option period is through December 31, 2005. The exercise
price of the options is the higher of $0.50 per share or the average trading
price of the Company's common stock over the preceding ten business days prior
to exercise of the options, less a discount of 40 percent.
Stock Exchange Agreement
On September 14, 2004, the Company entered into a Share Exchange Agreement (the
"Exchange Agreement") with FFB Australia, whereby FFBI acquired all of the
issued and outstanding capital stock of FFB Australia (81 shares) in exchange
for 15,000,000 shares of common stock and 1,000,000 shares of preferred stock of
the Company. Both the common stock and preferred stock of FFBI have a par value
of $.001. The shares of preferred stock are non-participating, but each share is
entitled to fifty (50) votes in a general meeting of the stockholders. As a
result of the Exchange Agreement, the stockholders of FFB Australia control
FFBI, and FFB Australia has been deemed to have effected a reverse merger for
financial reporting purposes as of the date of the Exchange Agreement. The
deemed reverse merger has been recorded as a recapitalization of the Company,
with the net assets of FFBI and FFB Australia brought forward at their
historical bases.
Conversion of Notes
On September 20, 2004, the Company issued 420,000 shares of its common stock
with a value of $140,000 in connection with the conversion of certain Notes and
accrued interest (see Note 3).
On September 29, 2004, the Company issued 450,000 shares of its common stock
with a value of $225,000 in connection with the conversion of the remainder of
the Notes and accrued interest (see Note 3).
F-14
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005, AND 2004
(Unaudited)
Other Transactions
From the common stock issued to Mark A. Poulsen, President and Chief Executive
Officer of the Company, under the Exchange Agreement, L.R. Global received
500,000 shares of common stock (see Note 8). Mr. Poulsen also issued shares of
common stock that he received from the Exchange Agreement to satisfy the
liabilities of the Company assumed by FFBI related to the compensation of six
individuals (see Note 9). FFBI recognized the satisfaction of such liabilities
by Mr. Poulsen as additional paid-in capital.
The Company also owed Wayne Hoskin, a former director of the Company, the amount
of $7,500 as of September 14, 2004. The obligation resulted from a loan made to
the Company. Mr. Hoskin agreed to accept 15,000 shares of common stock of FFBI
in full satisfaction of this obligation. From the common stock issued to Mark A.
Poulsen, President and Chief Executive Officer of the Company, under the
Exchange Agreement, Mr. Hoskin received 15,000 shares of common stock valued at
$7,500. FFBI recognized the satisfaction of this liability by Mr. Poulsen as
additional paid-in capital.
The Company also owed Donald Howell Wild, a former note holder and current
stockholder of the Company, the amount of $20,000 for services rendered related
to the private placement of Notes (see Note 3). From the common stock issued to
Mark A. Poulsen, President and Chief Executive Officer of the Company, under the
Exchange Agreement, on September 14, 2004, Mr. Wild received 40,000 shares of
common stock valued at $20,000. FFBI recognized the satisfaction of this
liability by Mr. Poulsen as additional paid-in capital.
Capital Formation Activity
On November 10, 2003, FFBI entered into an agreement with Fort Street Equity,
Inc. ("Fort Street"), a Cayman Islands company, whereby Fort Street would assist
FFBI with the following: (i) the identification of a corporation validly
organized in the United States with which the Company could realize a deemed
reverse merger; and (ii) the completion and filing of a Registration Statement
on Form SB-2 with the SEC for the purpose of raising capital from the issuance
of common stock in the public markets of up to $4.5 million.
FFBI paid Fort Street two deposits against fees and costs amounting to $130,100.
The initial capital formation activity conducted by FFBI and Fort Street was not
successful due to the fact that the organization and completion of a deemed
reverse merger with a validly organized corporation in the United States could
not be effected. Further, as a result of the uncompleted deemed reverse merger,
FFBI expensed $77,000 of the amount paid to Fort Street as unsuccessful offering
costs. FFBI and Fort Street initiated a second capital formation activity that
resulted in the Exchange Agreement as described above, and the current activity
to file a Registration Statement on Form SB-2 with the SEC. During the period
ended March 31, 2005, the Company paid an additional $18,154 in legal and
accounting fees related to the second capital formation activity. As a result,
as of March 31, 2005, the Company had $71,254 of deferred offering costs which
were comprised of legal and accounting fees paid, and other professional and
filing fees incurred to complete the Form SB-2 registration process.
F-15
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005, AND 2004
(Unaudited)
(5) Income Taxes
The provision (benefit) for income taxes for the periods ended March 31, 2005,
and 2004, was as follows (using a 34 percent effective Federal income tax rate):
2005 2004
---------- ----------
Current Tax Provision:
Federal-
Taxable income $ -- $ --
---------- ----------
Total current tax provision $ -- $ --
========== ==========
Deferred Tax Provision:
Federal-
Loss carryforwards 103,852 16,180
Change in valuation allowance (103,852) (16,180)
---------- ----------
Total deferred tax provision $ -- $ --
========== ==========
The Company had deferred income tax assets as of March 31, 2005, as follows:
Loss carryforwards $ 238,384
Less - Valuation allowance (238,384)
----------
Total net deferred tax assets $ --
==========
As of March 31, 2005, the Company had net operating loss carryforwards for
income tax reporting purposes of approximately $701,100 that may be offset
against future taxable income. The net operating loss carryforwards expire in
the years 2021-2025. Current tax laws limit the amount of loss available to be
offset against future taxable income when a substantial change in ownership
occurs or a change in the nature of the business. Therefore, the amount
available to offset future taxable income may be limited. No tax benefit has
been reported in the financial statements for the realization of loss
carryforwards, as the Company believes there is high probability that the
carryforwards will not be utilized in the foreseeable future. Accordingly, the
potential tax benefits of the loss carryforwards are offset by a valuation
allowance of the same amount.
(6) Related Party Transactions
Mark A. Poulsen & Associates Pty. Ltd. is an Australian private entity and
stockholder of the Company. It is wholly owned by Mark A. Poulsen, President and
Chief Executive Officer of the Company. As of March 31, 2005, the Company was
owed $12,286 by this entity. This amount owed to the Company was for working
capital, is non-interest bearing, and has no terms for repayment.
F-16
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005, AND 2004
(Unaudited)
Kamaneal Investments Pty. Ltd. is an Australian private company and stockholder
of the Company owned by Mark A. Poulsen, President and Chief Executive Officer
of the Company, and Karen Poulsen, his wife. The purpose of this company is to
hold investments for Mr. and Mrs. Poulsen. As of March 31, 2005, the Company
owed $39,326 to this entity. This amount owed was for working capital, is
non-interest bearing, and has no terms for repayment.
As of March 31, 2005, the Company owed $377 to Mark A. and Karen Poulsen for
expenses incurred on behalf of the Company. Mr. Poulsen is the President and
Chief Executive Officer of the Company. This amount owed was for working
capital, is non-interest bearing, and has no terms for repayment.
As of March 31, 2005, the Company owed $5,045 to Mr. GL Ray, a stockholder of
the Company, for an advance made. This amount owed was for working capital, is
non-interest bearing, and has no terms for repayment.
Donald Howell Wild, a former note holder and current stockholder of the Company
(see Note 3), is the uncle of Linda Wild, also a former note holder and current
stockholder of the Company. In addition, Mr. Wild is the father of Laraine
Richardson, a principal in the Company of L.R. Global Marketing Pty. Ltd., which
entity entered into a License Agreement with the Company on August 24, 2004 (see
Note 8). Mr. Wild also assisted the Company with the private placement of the
Notes by marketing the placement, and was responsible for the subscription
agreements of several note holders. Mr. Wild's services were valued at $20,000.
The liability to Mr. Wild was satisfied by the transfer of 40,000 shares of
common stock of FFBI directly to him from the shares received from the Exchange
Agreement by Mark A. Poulsen, President and Chief Executive Officer of the
Company, at a value of $.50 per share. FFBI credited paid-in capital for the
value of the accrued liability satisfied by Mr. Poulsen.
As described in Note 3, the Company completed a private placement of Notes to
thirty individuals and entities with proceeds amounting to $365,000, and
subsequently converted the Notes to 870,000 shares of common stock of FFBI. Of
the thirty individuals and entities that subscribed to the private placement
offering of Notes, twelve parties are considered both account executives (part
of the independent marketing group of the Company) and independent Herbalife
distributors, and six of the parties are only independent Herbalife
distributors. Mark A. Poulsen, President and Chief Executive Officer of the
Company, is also an independent Herbalife distributor.
(7) Recent Accounting Pronouncements
In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51 ("FIN 46"). The FASB
issued a revised FIN 46 in December 2003, which modified and clarified various
aspects of the original interpretations. A Variable Interest Entity ("VIE") is
created when (i) the equity investment at risk is not sufficient to permit the
entity to finance its activities without additional subordinated financial
support from other parties or (ii) equity holders either (a) lack direct or
indirect ability to make decisions about the entity, (b) are not obligated to
absorb expected losses of the entity or (c) do not have the right to receive
expected residual returns of the entity if they occur. If an entity is deemed to
be a VIE, pursuant to FIN 46, an enterprise that absorbs a majority of the
expected losses of the VIE is considered the primary beneficiary and must
consolidate the VIE. For VIE's created before January 31, 2003, FIN 46 was
F-17
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005, AND 2004
(Unaudited)
deferred to the end of the first interim or annual period ending after March 15,
2004. The adoption of FIN 46 did not have a material impact on the financial
position or results of operations of the Company.
In May 2003, the FASB issued Statement of Financial Accounting Standard No. 150,
Accounting for Certain Financial Instruments With Characteristics of Both
Liabilities and Equity, ("SFAS 150"). This standard requires issuers to classify
as liabilities the following three types of freestanding financial instruments:
(1) mandatory redeemable financial instruments, (2) obligations to repurchase
the issuer's equity shares by transferring assets; and (3) certain obligations
to issue a variable number of shares. The adoption of SFAS 150 did not have a
material impact on the financial position or results of operations of the
Company.
In December 2003, the SEC issued Staff Accounting Bulletin No. 104 ("SAB 104"),
Revenue Recognition, which supersedes SAB 101, Revenue Recognition in Financial
Statements. SAB 104's primary purpose is to rescind the accounting guidance
contained in SAB 101 related to multiple element revenue arrangements,
superseded as a result of the issuance of EITF 00-21. The Company adopted the
provisions of SAB 104, and it did not have a material impact on the financial
position or results of operations of the Company.
(8) License Agreement
On August 24, 2004, the Company entered into a non-assignable license agreement
(the "License Agreement") with L.R. Global Marketing Pty. Ltd. ("L.R. Global").
Pursuant to the License Agreement, L.R. Global has the right or license, for a
period of ten years, to use of the Company's logo, management information
system, and other material within Australia and New Zealand. L.R. Global will
assist in identifying new clients for the Company, and recruiting account
executive and customer service representatives. Under the terms of the License
Agreement, L.R. Global was obligated to pay the Company $500,000 on or before
December 31, 2004, for the grant of the license. As of December 31, 2004, L.R.
Global had only paid $117,750 toward the fee for the license, and was in default
under the License Agreement. On January 14, 2005, the Company and L.R. Global
entered into an extension agreement whereby the terms of the License Agreement
for payment of the remaining amount of the $500,000 license fee were extended to
May 31, 2005. As of May 31, 2005, the balance of the License Agreement fees had
not been paid, and L.R. Global was in default under the License Agreement and
amendment. Subsequently, on June 14, 2005, the Company and L.R. Global entered
into a second extension whereby the terms of the License Agreement were amended
as follows: (i) for consideration of $7,615 paid by L.R. Global as a partial
payment of the license fee, the due date for the payment of the remaining
balance of the license fee was extended to a date within sixty (60) days
following the first date on which the common stock of the Company is quoted on
the OTC Bulletin Board or other recognized stock exchange; and, (ii) the two
principals of L.R. Global, Laraine Richardson and Dianne Waghorne, provided
personal guarantees to the Company for payment of the remaining balance of the
license fee in the event that the balance owed is not repaid by L.R. Global.
The Company recognized $4,973 of income related to the License Agreement in the
accompanying statement of operations and comprehensive (loss) for the period
ended September 30, 2004. For each of the three-month periods ended March 31,
F-18
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005, AND 2004
(Unaudited)
2005, and December 31, 2004, the Company recognized $12,500 of license fee
income, respectively.
(9) Commitments and Contingencies
For each fiscal year since inception, the Company has recognized as compensation
expense the ongoing contribution of time and effort of six individuals, two of
which, currently serve as officers of the Company. Such individuals have
provided their time and effort without formal compensation by the Company which
in certain instances dates back to 1998. For the nine-month period ended March
31, 2004, the Company recorded accrued compensation expense amounting to
$30,195. Through September 14, 2004, the total liability for employee
compensation amounted to $220,000. This obligation was satisfied by the transfer
of 440,000 shares of common stock of FFBI directly to the individuals from the
shares received from the Exchange Agreement by Mark A. Poulsen, President and
Chief Executive Officer of the Company, at a value of $.50 per share. FFBI
credited paid-in capital for the value of the accrued compensation satisfied by
Mr. Poulsen.
On September 21, 2004, the Company entered into a contract with Insource Pty.
Ltd. for software services pertaining to the development of certain computerized
systems for customer service, administration, and information reporting
purposes. The contract price for the software development services amounted to
approximately $30,500, which was subsequently increased by approximately
$10,000, and the estimated duration of the contract term was 14 weeks. Further,
under the terms of the contract, a down payment of $3,500 was to be made,
followed by weekly progress payments of approximately $1,930. The estimated term
of the contract was subsequently extended to the end of June 2005, and certain
additional features were added to the computerized systems applications. The
Company has classified the costs incurred through March 31, 2005, amounting to
$40,502, as "Software development in progress" in the accompanying balance
sheet.
The Company entered into a lease arrangement with Mark A. Poulsen & Associates
Pty. Ltd. for office space which expired on November 30, 2004. The lease
arrangement is currently on a month-to-month basis. On February 1, 2005, the
Company also entered into a registered agent arrangement with Incorp. Services,
Inc. whereby Incorp. agreed to act as the registered agent for the State of
Nevada, and to provide certain virtual office, office facility use, and
administrative services to the Company for a fee of $1,495 per year.
The following transactions were dated November 29, 2004, or as otherwise
indicated:
The Company entered into an employment agreement with Mark A. Poulsen to serve
as its President and Chief Executive Officer. Under the terms of the agreement,
Mr. Poulsen will be compensated at the annual rate of approximately $289,000 for
services to FFBI. He will also be paid 5 percent of the value of each country or
geographic-area license sold. In addition, on December 1, 2004, the Board of
Directors of FFBI awarded a bonus of approximately $388,250 to be paid to Mr.
Poulsen within 30 days after the listing of the common stock of FFBI on the
over-the-counter bulletin board of the NASD.
F-19
FIT FOR BUSINESS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005, AND 2004
(Unaudited)
The Company entered into an employment agreement with Prins A. Ralston to serve
as its Senior Vice President and Chief Operating Officer. Under the terms of the
agreement, Mr. Ralston will be compensated at the annual rate of approximately
$131,000, plus benefits and bonus. In addition, Mr. Ralston will be granted
options to purchase 30,000 shares of common stock of FFBI under an option plan,
when and if established. The Company will also be obligated to pay a recruiting
fee for the employment of Mr. Ralston to Hudson Global Resources, an executive
personnel placement firm, amounting to approximately $21,100.
The Company entered into an employment agreement with Anthony F. Head to serve
as its Senior Vice President of Sales. Mr. Head is also a Director of the
Company. Under the terms of the agreement, Mr. Head will be compensated at the
annual rate of approximately $77,000, plus benefits and bonus. He will also be
paid 5 percent of the value of each country or geographic-area license sold.
The Company entered into an employment agreement with Sandra L. Wendt to serve
as its Vice President of Administration and Chief Financial Officer. Under the
terms of the agreement, Ms. Wendt will be compensated at the annual rate of
approximately $42,400, plus benefits and bonus.
(10) Other Subsequent Events
On May 10, 2005, the Ralston Superannuation Fund ("Ralston Fund") entered into
an Option Purchase Agreement with Fort Street Equity whereby the Ralston Fund
agreed to purchase 100,000 stock options of the Company held by Fort Street for
$19,410. The stock options entitle the holder to purchase a like number of
shares of common stock of the Company. The Trustee for the Ralston Fund is
Leanne Ralston, the wife of Prins A. Ralston. Mr. Ralston is the Senior Vice
President and Chief Operating Officer of the Company.
Fort Street subsequently loaned the proceeds from the sale of the stock options
to the Company under the terms of a promissory note dated May 11, 2005. The
promissory note is unsecured, and carries an interest rate of five (5) percent
per annum. The maturity date of the note, together with any remaining interest,
is December 31, 2009. Interest payments on the promissory note are payable to
Fort Street bi-annually and at the maturity date of the obligation.
On June 14, 2005, Mr. Bruce Gilling, an unrelated party, entered into an Option
Purchase Agreement with Fort Street whereby the Mr. Gilling agreed to purchase
50,000 stock options of the Company held by Fort Street for $15,000. The stock
options entitle the holder to purchase a like number of shares of common stock
of the Company.
Fort Street subsequently loaned the proceeds from the sale of the stock options
to the Company under the terms of a promissory note dated June 19, 2005. The
promissory note is unsecured, and carries an interest rate of five (5) percent
per annum. The maturity date of the note, together with any remaining interest,
is December 31, 2009. Interest payments on the promissory note are payable to
Fort Street bi-annually and at the maturity date of the obligation.
F-20
FIT FOR BUSINESS INTERNATIONAL, INC.
(FORMERLY PATIENT DATA CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
JUNE 30, 2004, AND 2003
Report of Independent Auditors..............................................F-22
Financial Statements-
Balance Sheets as of June 30, 2004 and 2003..............................F-23
Statements of Operations for the Years
Ended June 30, 2004 and 2003 and Cumulative from Inception.............F-24
Statements of Stockholder's Equity for the Years
Ended June 30, 2004 and 2003, and Cumulative from Inception............F-25
Statements of Cash Flows for the Years
Ended June 30, 2004 and 2003 ..........................................F-26
Notes to Financial Statements for the Years
Ended June 30, 2004 and 2003 ..........................................F-27
F-21
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors of
Fit For Business International, Inc. (Formerly Patient Data Corporation):
We have audited the accompanying balance sheets of Fit For Business
International, Inc. (formerly Patient Data Corporation), a Nevada corporation in
the development stage, as of June 30, 2004 and 2003, and the related statements
of operations, stockholder's equity, and cash flows for the periods 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.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). 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
audits provide 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 Fit For Business International,
Inc. as of June 30, 2004 and 2003, and the results of its operations and its
cash flows for the periods then ended, in conformity with accounting principles
generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is in the development stage, has no assets,
liabilities or operations, and has been essentially inactive since inception.
These and other factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans regarding these matters are also
described in Note 2 to the financial statements. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Respectfully submitted,
/s/ Davis Accounting Group P.C.
Cedar City, Utah,
February 17, 2005.
F-22
FIT FOR BUSINESS INTERNATIONAL, INC.
(FORMERLY PATIENT DATA CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS (NOTE 2)
AS OF JUNE 30, 2004, AND 2003
ASSETS
------
2004 2003
---------- ----------
Current Assets:
Sundry and other current assets $ -- $ --
---------- ----------
Total current assets -- --
---------- ----------
Total Assets $ -- $ --
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Sundry and other current liabilities $ -- $ --
---------- ----------
Total current liabilities -- --
---------- ----------
Total liabilities -- --
---------- ----------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, par value $.001 per share; authorized 10,000,000
shares in 2004; no shares issued or outstanding -- --
Common stock, par value $.001 per share; authorized 100,000,000
shares and 5,000,000 shares in 2004 and 2003, respectively;
5,000,000 shares issued and outstanding in 2004 and
2003, respectively 5,000 5,000
(Deficit) accumulated during the development stage (5,000) (5,000)
---------- ----------
Total stockholders' equity -- --
---------- ----------
Total Liabilities and Stockholders' Equity $ -- $ --
========== ==========
The accompanying notes to financial statements are
an integral part of these balance sheets.
F-23
FIT FOR BUSINESS INTERNATIONAL, INC.
(FORMERLY PATIENT DATA CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS (NOTE 2)
FOR THE YEARS ENDED JUNE 30, 2004, AND 2003,
AND CUMULATED FROM INCEPTION (JULY 31, 2001)
THROUGH JUNE 30, 2004
Cumulative
From
2004 2003 Inception
----------- ----------- -----------
Revenues:
Revenues $ -- $ -- $ --
----------- ----------- -----------
Total revenues -- -- --
----------- ----------- -----------
Cost of Goods Sold:
Cost of goods sold -- -- --
----------- ----------- -----------
Gross Profit (Loss) -- -- --
----------- ----------- -----------
Expenses:
General and administrative -- -- 5,000
----------- ----------- -----------
Total general and administrative expenses -- -- 5,000
----------- ----------- -----------
(Loss) from Operations -- -- (5,000)
----------- ----------- -----------
Other Income (Expense) -- -- --
Provision for income taxes -- -- --
----------- ----------- -----------
Net (Loss) $ -- $ -- $ (5,000)
=========== =========== ===========
(Loss) Per Common Share:
(Loss) per common share - Basic and Diluted $ -- $ --
=========== ===========
Weighted Average Number of Common Shares
Outstanding - Basic and Diluted 5,000,000 5,000,000
=========== ===========
The accompanying notes to financial statements are
an integral part of these balance sheets.
F-24
FIT FOR BUSINESS INTERNATIONAL, INC.
(FORMERLY PATIENT DATA CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (NOTE 2)
FOR THE PERIODS FROM INCEPTION (JULY 31, 2001)
THROUGH JUNE 30, 2004
Accumulated
Common Stock, (Deficit)
Par Value $.001 During the
------------------------- Development
Description Shares Amount Stage Totals
- ------------------------------------- ----------- ----------- ----------- -----------
Balance - July 31, 2001 -- $ -- $ -- $ --
Issuance of common stock for services 5,000,000 5,000 -- 5,000
Net (loss) for the period -- -- (5,000) (5,000)
----------- ----------- ----------- -----------
Balance - June 30, 2001 5,000,000 $ 5,000 $ (5,000) $ --
Net (loss) for the period -- -- -- --
----------- ----------- ----------- -----------
Balance - June 30, 2002 5,000,000 5,000 (5,000) --
Net (loss) for the period -- -- -- --
----------- ----------- ----------- -----------
Balance - June 30, 2003 5,000,000 5,000 (5,000) --
Net (loss) for the period -- -- -- --
----------- ----------- ----------- -----------
Balance - June 30, 2004 5,000,000 $ 5,000 $ (5,000) $ --
=========== =========== =========== ===========
The accompanying notes to financial statements are
an integral part of these balance sheets.
F-25
FIT FOR BUSINESS INTERNATIONAL, INC.
(FORMERLY PATIENT DATA CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (NOTE 2)
FOR THE PERIOD FROM INCEPTION (MAY 5, 2004)
THROUGH JUNE 30, 2004
Cumulative
From
2004 2003 Inception
----------- ----------- -----------
Operating Activities:
Net (loss) $ -- $ -- $ (5,000)
Adjustments to reconcile net (loss) to net cash (used in)
operating activities:
Common stock issued for services -- -- 5,000
----------- ----------- -----------
Net Cash Provided by (Used in) Operating Activities -- -- --
----------- ----------- -----------
Investing Activities:
Sundry investing activities -- -- --
----------- ----------- -----------
Net Cash (Used in) Investing Activities -- -- --
----------- ----------- -----------
Financing Activities:
Sundry financing activities -- -- --
----------- ----------- -----------
Net Cash Provided by Financing Activities -- -- --
----------- ----------- -----------
Net Increase (Decrease) in Cash -- -- --
Cash - Beginning of Period -- -- --
----------- ----------- -----------
Cash - End of Period $ -- $ -- $ --
=========== =========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ -- $ -- $ --
=========== =========== ===========
Income taxes $ -- $ -- $ --
=========== =========== ===========
In 2001, the Company issued 5,000,000 shares of its common stock, par value
$.001 per share, to two former officers and directors for services rendered.
The accompanying notes to financial statements are
an integral part of these balance sheets.
F-26
FIT FOR BUSINESS INTERNATIONAL, INC.
(FORMERLY PATIENT DATA CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
(1) Summary of Significant Accounting Policies
Basis of Presentation and Organization
Fit For Business International, Inc. ("FFB International" or the "Company") is a
Nevada corporation in the development stage. The Company has no assets,
liabilities or operations, and has been essentially inactive since inception.
The Company was organized on May 30 2001, and subsequently incorporated on July
31, 2001, under the name of Elli Tsab, Inc. On April 15, 2004, the name of the
Company was changed to Patient Data Corporation. On January 13, 2005, the name
of the Company was again changed to Fit For Business International, Inc. in
order to better reflect the current business plan, as explained below. The
accompanying financial statements of FFB International were prepared from the
accounts of the Company under the accrual basis of accounting.
On September 14, 2004, FFB International entered into a Share Exchange Agreement
(the "Exchange Agreement") with Fit For Business Australia Pty Limited ("FFB
Australia"), an Australian private company, whereby FFB International acquired
all of the issued and outstanding capital stock of FFB Australia in exchange for
shares of common and preferred stock of the Company. As a result of the Exchange
Agreement, the stockholders of FFB Australia control FFB International, and FFB
Australia has been deemed to have effected a reverse merger for financial
reporting purposes as of the date of the Exchange Agreement. The deemed reverse
merger will be recorded as a recapitalization of the Company, with the net
assets of FFB International and FFB Australia brought forward at their
historical bases.
Cash and Cash Equivalents
For purposes of reporting within the statement of cash flows, the Company
considers all cash on hand, cash accounts not subject to withdrawal restrictions
or penalties, and all highly liquid debt instruments purchased with a maturity
of three months or less to be cash and cash equivalents.
Revenue Recognition
The Company is in the development stage and has yet to realize any revenues.
Since the Company is essentially inactive, the determination of the recognition
of revenue will commence at the time the Company has revenue producing
operations.
F-27
FIT FOR BUSINESS INTERNATIONAL, INC.
(FORMERLY PATIENT DATA CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
Impairment of Long-lived Assets
The Company has no assets. However, the Company has adopted the policy of
evaluating the recoverability of long-lived assets and the related estimated
remaining lives at each balance sheet date. As such, the Company will record any
impairment or change in useful life whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable or the useful life has
changed.
Loss Per Common Share
Basic loss per share is computed by dividing the net loss attributable to the
common stockholders by the weighted average number of shares of common stock
outstanding during the period. Fully diluted loss per share is computed similar
to basic loss per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive.
Comprehensive Income (Loss)
The Company has adopted SFAS No. 130, Reporting Comprehensive Income ("SFAS
130"). As such, the Company will present comprehensive income (loss), as
required. SFAS 130 states that all items that are required to be recognized
under accounting standards as components of comprehensive income (loss) be
reported in the financial statements. For the period ended June 30, 2004, and
2003, the Company had no elements of comprehensive income (loss).
Income Taxes
The Company accounts for income taxes pursuant to SFAS No. 109, Accounting for
Income Taxes ("SFAS 109"). Under SFAS 109, deferred tax asset and liabilities
are determined based on temporary differences between the bases of certain
assets and liabilities for income tax and financial reporting purposes. The
deferred tax assets and liabilities are classified according to the financial
statement classification of the assets and liabilities generating the
differences.
The Company maintains a valuation allowance with respect to deferred tax assets.
The Company establishes a valuation allowance based upon potential likelihood of
realizing the deferred tax asset and taking into consideration the Company's
current financial position and results of operations for the current period.
Future realization of the deferred tax benefit depends on the existence of
sufficient taxable income within the carryforward period under the Federal tax
laws.
F-28
FIT FOR BUSINESS INTERNATIONAL, INC.
(FORMERLY PATIENT DATA CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
Changes in circumstances, such as the Company generating taxable income, could
cause a change in judgment about the realizability of the related deferred tax
asset. Any change in the valuation allowance will be included in income in the
year of the change in estimate.
Stock-Based Compensation
The Company uses the fair value method to account for non-employee stock-based
compensation in accordance with SFAS No. 123, Accounting for Stock-Based
Compensation, and FASB Emerging Issues Task Force, or EITF, Issue No. 96-18,
Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services. Under the fair
value method, all transactions in which goods or services are the consideration
received for the issuance of equity instruments shall be accounted for based on
the fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measurable.
Concentration of Credit Risk
As of June 30, 2004, and 2003, the Company did not have any material off-balance
sheet risks or credit concentrations. any is June 30 of each year.
Estimates
The financial statements are prepared on the basis of accounting principles
generally accepted in the United States. The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities, The Company had no assets, liabilities or operations as of June 30,
2004, and 2003, that required the use of estimates.
(2) Development Stage Activities and Going Concern
Since its inception, the Company has been essentially inactive, and has remained
a shell entity. The Company was initially incorporated under the name of Elli
Tsab, Inc. On April 15, 2004, the name of the Company was changed to Patient
Data Corporation, and the authorized capital structure revised to provide for
preferred stock, as well as additional authorized shares of common stock.
The Company was in the development stage as of June 30, 2004, and 2003, and
operations had not commenced. The business purpose of the Company is to provide
a corporate entity, validly organized within the Unite States, with which a
foreign company may complete a reverse merger transaction for the purpose of
conducting a capital formation activity through the issuance of common stock
registered with the Securities and Exchange Commission ("SEC").
F-29
FIT FOR BUSINESS INTERNATIONAL, INC.
(FORMERLY PATIENT DATA CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
As explained in Notes 1 and 4, on September 14, 2004, the Company entered into
the Exchange Agreement with FFB Australia whereby FFB International acquired all
of the issued and outstanding capital stock of FFB Australia in exchange for
shares of common and preferred stock. As a result of the Exchange Agreement, the
stockholders of FFB Australia control FFB International, and FFB Australia has
been deemed to have effected a reverse merger for financial reporting purposes
as of the date of the Exchange Agreement. FFB Australia is in the business of
providing products and services for: (i) corporate wellness programs which
address business productivity, stress and absenteeism issues; (ii) living well
programs directed primarily, but not exclusively, to individuals over 45 years
of age; and (iii) nutritional supplements manufactured and supplied by Herbalife
International, Inc.
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States, which contemplate
continuation of the Company as a going concern. The Company has incurred
operating losses since inception, and had no cash or working capital as of June
30, 2004, and 2003. These and other factors raise substantial doubt about the
Company's ability to continue as a going concern. The accompanying financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the possible inability of the
Company to continue as a going concern.
(3) Convertible Debt
In November 2003, FFB Australia began a capital formation activity through the
private placement of up to 200 unsecured convertible promissory notes (the
"Note" or "Notes"). Under the terms of the private placement subscription
agreement, the minimum unit participation was one unit per Note valued at
$5,000. Multiple units could be acquired under the terms of a single Note. The
Notes issued for the units stated a maturity date of November 30, 2004, and
provided for an interest rate of ten percent (10%) per annum, payable upon
redemption. None of the Notes were issued to officers, directors, or employees
of FFB Australia or FFB International.
The Notes were convertible into 10,000 shares of common stock per unit at any
time prior to maturity at the option of the note holder, or, if called by FFB
Australia, then automatically in the event of a public offering of shares. No
value was associated with the conversion feature of the Notes. FFB Australia
structured an incentive program with the first eleven subscribers to the private
placement for the Notes, and provided an additional 1/2 unit of value for each
unit subscribed. As such, as of September 14, 2004, FFB Australia had received
F-30
FIT FOR BUSINESS INTERNATIONAL, INC.
(FORMERLY PATIENT DATA CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
and recorded proceeds of $365,000 under the private placement in exchange for
the Notes with 87 units for the calculation of conversion into common stock
(870,000 shares of common stock), and accrued interest in the amount of $13,801.
The liability for the Notes was assumed by the FFB International as a result of
the Exchange Agreement.
On September 20, 2004, the Company, pursuant to a planned public offering of its
common stock, called and converted Notes with a unit value of 42 units into
420,000 shares of common stock. The transaction was valued at $0.33 per share of
common stock for a total of $140,000. Further, on September 29, 2004, the
remaining Notes with a unit value of 45 units were called and converted by the
Company into 450,000 shares of common stock. The transaction was valued at $0.50
per share of common stock for a total of $225,000. The value of the conversion
transactions in excess of the par value of the common stock issued, including
accrued interest, was recorded as additional paid-in capital.
(4) Common Stock Transactions and Capital Formation
Issuance of Common Stock
On May 30, 2001, FFB International issued 5,000,000 shares of its common stock
to former officers and directors of the Company for services rendered. The value
of the services rendered was $5,000. This transaction, the accumulated (deficit)
of the Company, the value of the stock options issued (see below) and consulting
expenses paid to a former officer and director of the Company made up the
components of the reverse merger related to the recapitalization of FFB
International common stock effected as of September 13, 2004.
Stock Option Agreement
On July 25, 2004, the Company issued 2,000,000 options to Fort Street Equity,
Inc. ("Fort Street"), a Cayman Islands company (see below), to purchase the same
number of shares of its common stock for $10,000 in cash. The option period is
through December 31, 2005. The exercise price of the options is the higher of
$0.50 per share or the average trading price of the Company's common stock over
the preceding ten business days prior to exercise of the options, less a
discount of 40 percent. The proceeds received by the Company were paid to a
former officer and director of the Company for services rendered.
Stock Exchange Agreement
On September 14, 2004, the Company entered into the Exchange Agreement with FFB
Australia and acquired all of the issued and outstanding capital stock of FFB
Australia (81 shares) in exchange for 15,000,000 shares of common stock and
1,000,000 shares of preferred stock of the Company. Both the common stock and
preferred stock of FFB International have a par value of $.001. The shares of
preferred stock are non-participating, but each share is entitled to fifty (50)
F-31
FIT FOR BUSINESS INTERNATIONAL, INC.
(FORMERLY PATIENT DATA CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
votes in a general meeting of the stockholders. As a result of the Exchange
Agreement, the stockholders of FFB Australia control FFB International, and FFB
Australia has been deemed to have effected a reverse merger for financial
reporting purposes as of the date of the Exchange Agreement. The deemed reverse
merger has been recorded as a recapitalization of the Company, with the net
assets of the Company and FFB Australia brought forward at their historical
bases.
Conversion of Notes
On September 20, 2004, the Company issued 420,000 shares of its common stock
with a value of $140,000 in connection with the conversion of certain Notes and
accrued interest (see Note 3).
On September 29, 2004, the Company issued 450,000 shares of its common stock
with a value of $225,000 in connection with the conversion of the remainder of
the Notes and accrued interest (see Note 3).
Other Transactions
For each fiscal year since 1998, FFB Australia recognized as compensation
expense the ongoing contribution of time and effort of six individuals, two of
which, currently serve as officers of the Company. Such individuals provided
their time and effort without formal compensation by FFB Australia. Through
September 14, 2004, the total liability for employee compensation amounted to
$220,000, which was assumed by the Company under the Exchange Agreement. This
obligation was satisfied by the transfer of 440,000 shares of common stock of
FFB International directly to the individuals from the shares received from the
Exchange Agreement by Mark A. Poulsen, President and Chief Executive Officer of
the Company, at a value of $.50 per share. The Company credited paid-in capital
for the value of the accrued compensation satisfied by Mr. Poulsen.
As of June 30, 2004, FFB Australia owed Wayne Hoskin, a former director of that
company, the amount of $7,500. The obligation resulted from a loan made to FFB
Australia. Mr. Hoskin agreed to accept 15,000 shares of common stock of FFB
International in full satisfaction of this obligation. On September 13, 2004,
from the common stock issued to Mark A. Poulsen, President and Chief Executive
Officer of the Company, under the Exchange Agreement, Mr. Hoskin received 15,000
shares of common stock valued at $7,500. FFB International recognized the
satisfaction of this liability by Mr. Poulsen as additional paid-in capital.
F-32
FIT FOR BUSINESS INTERNATIONAL, INC.
(FORMERLY PATIENT DATA CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
FFB Australia also owed Donald Howell Wild, a former note holder and current
stockholder of the Company, the amount of $20,000 for services rendered related
to the private placement of Notes (see Note 3). From the common stock issued to
Mark A. Poulsen, President and Chief Executive Officer of the Company, under the
Exchange Agreement, on September 14, 2004, Mr. Wild received 40,000 shares of
common stock valued at $20,000. FFB International recognized the satisfaction of
this liability by Mr. Poulsen as additional paid-in capital.
Capital Formation Activity
On November 10, 2003, FFB Australia entered into an agreement with Fort Street
to provide services and assistance with the following: (i) the identification of
a corporation validly organized in the United States with which the Company
could realize a deemed reverse merger; and (ii) the completion and filing of a
Registration Statement on Form SB-2 with the SEC for the purpose of raising
capital from the issuance of common stock in the public markets of up to $4.5
million. Subsequent to the completion of the reverse merger under the Exchange
Agreement, the Company is continuing with this capital formation activity.
(5) Income Taxes
The provision (benefit) for income taxes for the periods ended June 30, 2004,
and 2003, was as follows (using a 34 percent effective Federal income tax rate):
2005 2004
---------- ----------
Current Tax Provision:
Federal-
Taxable income $ -- $ --
---------- ----------
Total current tax provision $ -- $ --
========== ==========
Deferred Tax Provision:
Federal-
Loss carryforwards -- --
Change in valuation allowance -- --
---------- ----------
Total deferred tax provision $ -- $ --
========== ==========
The Company had deferred income tax assets as of June 30, 2004, and 2003, as
follows:
2005
----------
Loss carryforwards $ 1,700
Less - Valuation allowance (1,700)
----------
Total net deferred tax assets $ --
==========
F-33
FIT FOR BUSINESS INTERNATIONAL, INC.
(FORMERLY PATIENT DATA CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
As of June 30, 2005, the Company had net operating loss carryforwards for income
tax reporting purposes of approximately $5,000 that may be offset against future
taxable income. The net operating loss carryforwards expire in the year 2021.
Current tax laws limit the amount of loss available to be offset against future
taxable income when a substantial change in ownership occurs or a change in the
nature of the business. Therefore, the amount available to offset future taxable
income may be limited. No tax benefit has been reported in the financial
statements for the realization of loss carryforwards, as the Company believes
there is high probability that the carryforwards will not be utilized in the
foreseeable future. Accordingly, the potential tax benefits of the loss
carryforwards are offset by a valuation allowance of the same amount.
(6) Recent Accounting Pronouncements
In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51 ("FIN 46"). The FASB
issued a revised FIN 46 in December 2003, which modified and clarified various
aspects of the original interpretations. A Variable Interest Entity ("VIE") is
created when (i) the equity investment at risk is not sufficient to permit the
entity to finance its activities without additional subordinated financial
support from other parties or (ii) equity holders either (a) lack direct or
indirect ability to make decisions about the entity, (b) are not obligated to
absorb expected losses of the entity or (c) do not have the right to receive
expected residual returns of the entity if they occur. If an entity is deemed to
be a VIE, pursuant to FIN 46, an enterprise that absorbs a majority of the
expected losses of the VIE is considered the primary beneficiary and must
consolidate the VIE. For VIE's created before January 31, 2003, FIN 46 was
deferred to the end of the first interim or annual period ending after March 15,
2004. The adoption of FIN 46 did not have a material impact on the financial
position or results of operations of the Company.
In May 2003, the FASB issued Statement of Financial Accounting Standard No. 150,
Accounting for Certain Financial Instruments With Characteristics of Both
Liabilities and Equity, ("SFAS 150"). This standard requires issuers to classify
as liabilities the following three types of freestanding financial instruments:
(1) mandatory redeemable financial instruments, (2) obligations to repurchase
the issuer's equity shares by transferring assets; and (3) certain obligations
to issue a variable number of shares. The adoption of SFAS 150 did not have a
material impact on the financial position or results of operations of the
Company.
In December 2003, the SEC issued Staff Accounting Bulletin No. 104 ("SAB 104"),
Revenue Recognition, which supersedes SAB 101, Revenue Recognition in Financial
Statements. SAB 104's primary purpose is to rescind the accounting guidance
contained in SAB 101 related to multiple element revenue arrangements,
superseded as a result of the issuance of EITF 00-21. The Company adopted the
provisions of SAB 104, and it did not have a material impact on the financial
position or results of operations of the Company.
F-34
FIT FOR BUSINESS INTERNATIONAL, INC.
(FORMERLY PATIENT DATA CORPORATION)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
(7) Commitments and Contingencies
The following transactions were dated November 29, 2004:
The Company entered into an employment agreement with Mark A. Poulsen to serve
as its President and Chief Executive Officer. Under the terms of the agreement,
Mr. Poulsen will be compensated at the annual rate of approximately $289,000 for
services to FFB International. He will also be paid 5 percent of the value of
each country or geographic-area license sold. In addition, on December 1, 2004,
the Board of Directors of the Company awarded a bonus of approximately $388,250
to be paid to Mr. Poulsen within 30 days after the listing of the common stock
of FFB International on the over-the-counter bulletin board of the NASD.
The Company entered into an employment agreement with Prins A. Ralston to serve
as its Senior Vice President and Chief Operating Officer. Under the terms of the
agreement, Mr. Ralston will be compensated at the annual rate of approximately
$131,000, plus benefits and bonus. In addition, Mr. Ralston will be granted
options to purchase 30,000 shares of common stock of FFB International under an
option plan, when and if established. The Company will also be obligated to pay
a recruiting fee for the employment of Mr. Ralston to Hudson Global Resources,
an executive personnel placement firm, amounting to approximately $21,100.
The Company entered into an employment agreement with Anthony F. Head to serve
as its Senior Vice President of Sales. Mr. Head is also a Director of the
Company. Under the terms of the agreement, Mr. Head will be compensated at the
annual rate of approximately $77,000, plus benefits and bonus. He will also be
paid 5 percent of the value of each country or geographic-area license sold.
The Company entered into an employment agreement with Sandra Wendt to serve as
its Vice President of Administration and Chief Financial Officer. Under the
terms of the agreement, Ms. Wendt will be compensated at the annual rate of
approximately $42,400, plus benefits and bonus.
F-35
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
Report of Independent Auditors..............................................F-37
Financial Statements-
Balance Sheets as of June 30, 2004 and 2003..............................F-38
Statements of Operations and Comprehensive (Loss) for the Years
Ended June 30, 2004, and 2003, and Cumulative from Inception ..........F-39
Statements of Stockholders' (Deficit) for the Periods from
Inception through June 30, 2004........................................F-40
Statements of Cash Flows for the Years
Ended June 30, 2004, and 2003, and Cumulative from Inception ..........F-41
Notes to Financial Statements for the Years
Ended June 30, 2004 and 2003 ..........................................F-42
F-36
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors of
Fit For Business (Australia) Pty Limited:
We have audited the accompanying balance sheets of Fit For Business (Australia)
Pty Limited, an Australian private company in the development stage, as of June
30, 2004 and 2003, and the related statements of operations and comprehensive
(loss), stockholders' (deficit), and cash flows for the periods 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.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). 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
audits provide 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 Fit For Business (Australia)
Pty Limited as of June 30, 2004 and 2003, and the results of its operations and
its cash flows for the periods then ended, in conformity with accounting
principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is in the development stage, is conducting its
capital formation activities, has experienced an operating loss since inception,
and its working capital is insufficient to meet planned business objectives.
These and other factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans regarding these matters are also
described in Note 2 to the financial statements. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Respectfully submitted,
/s/ Davis Accounting Group P.C.
Cedar City, Utah,
February 17, 2005.
F-37
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS (NOTE 2)
AS OF JUNE 30, 2004, AND 2003
ASSETS
2004 2003
---------- ----------
Current Assets:
Cash on hand and in bank $ 137 $ 54
Accounts Receivable-
Due from Kamaneal Investments Pty. Ltd. - Related party 26,880 --
Goods and services tax refund 1,051 1,458
---------- ----------
Total current assets 28,068 1,512
---------- ----------
Property and Equipment:
Office and computer equipment 206 --
Web site development costs 4,487 4,336
---------- ----------
4,693 4,336
Less - Accumulated depreciation and amortization (3,009) (1,446)
---------- ----------
Net property and equipment 1,684 2,890
---------- ----------
Other Assets:
Trademark 207 200
Less - Accumulated amortization (119) (95)
Deferred offering costs 23,000 --
---------- ----------
Total other assets 23,088 105
---------- ----------
Total Assets $ 52,840 $ 4,507
========== ==========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities:
Checks in excess of bank balance $ -- $ 64
Accounts payable - trade 2,895 --
Accrued interest 8,103 --
Accrued compensation 196,616 156,248
Convertible promissory notes 185,000 --
Loans from related parties 96,098 147,684
---------- ----------
Total current liabilities 488,712 303,996
---------- ----------
Total liabilities 488,712 303,996
---------- ----------
Commitments and Contingencies
Stockholders' (Deficit):
Capital stock, 81 shares authorized, issued and outstanding 50 50
Accumulated other comprehensive (loss) (40,086) (33,967)
(Deficit) accumulated during the development stage (395,836) (265,572)
---------- ----------
Total stockholders' (deficit) (435,872) (299,489)
---------- ----------
Total Liabilities and Stockholders' (Deficit) $ 52,840 $ 4,507
========== ==========
The accompanying notes to financial statements are
an integral part of these balance sheets.
F-38
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) (NOTE 2)
FOR THE YEARS ENDED JUNE 30, 2004, AND 2003,
AND CUMULATED FROM INCEPTION (DECEMBER 14, 1998)
THROUGH JUNE 30, 2004
Cumulative
From
2004 2003 Inception
---------- ---------- ----------
Revenues:
Revenues $ 203 $ 363 $ 8,295
---------- ---------- ----------
Total revenues 203 363 8,295
---------- ---------- ----------
Cost of Goods Sold:
Cost of goods sold 87 242 3,724
---------- ---------- ----------
Gross Profit 116 121 4,571
---------- ---------- ----------
Expenses:
General and administrative 122,220 24,297 392,247
---------- ---------- ----------
Total general and administrative expenses 122,220 24,297 392,247
---------- ---------- ----------
(Loss) from Operations (122,104) (24,176) (387,676)
---------- ---------- ----------
Other Income (Expense):
Interest income -- -- 1
Interest (expense) (8,160) -- (8,160)
Provision for income taxes -- -- --
---------- ---------- ----------
Net (Loss) $ (130,264) $ (24,176) $ (395,835)
---------- ---------- ----------
Comprehensive (Loss):
Australian currency translation (6,119) (45,554) (40,086)
---------- ---------- ----------
Total Comprehensive (Loss) $ (136,383) $ (69,730) $ (435,921)
========== ========== ==========
(Loss) Per Common Share:
(Loss) per common share - Basic and Diluted $(1,608.20) $ (298.47)
========== ==========
Weighted Average Number of Common Shares
Outstanding - Basic and Diluted 81 81
========== ==========
The accompanying notes to financial statements are
an integral part of these balance sheets.
F-39
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' (DEFICIT) (NOTE 2)
FOR THE PERIODS FROM INCEPTION (DECEMBER 14, 1998)
THROUGH JUNE 30, 2004
(Deficit)
Accumulated Accumulated
Capital Stock Other During the
------------------------- Comprehensive Development
Description Shares Amount (Loss) Stage Totals
- ---------------------------------- ----------- ----------- ------------- ----------- -----------
Balance - December 14, 1998 -- $ -- $ -- $ -- $ --
Issuance of capital stock for cash 81 50 -- -- 50
Australian currency translation -- -- (534) -- (534)
Net (loss) for the period -- -- -- (16,961) (16,961)
----------- ----------- ------------- ----------- -----------
Balance - June 30, 1999 81 $ 50 $ (534) $ (16,961) $ (17,445)
Australian currency translation -- -- 7,472 -- 7,472
Net (loss) for the period -- -- -- (138,322) (138,322)
----------- ----------- ------------- ----------- -----------
Balance - June 30, 2000 81 50 6,938 (155,283) (148,295)
Australian currency translation -- -- 25,453 -- 25,453
Net (loss) for the period -- -- -- (53,529) (53,529)
----------- ----------- ------------- ----------- -----------
Balance - June 30, 2001 81 50 32,391 (208,812) (176,371)
Australian currency translation -- -- (20,804) -- (20,804)
Net (loss) for the period -- -- -- (32,584) (32,584)
----------- ----------- ------------- ----------- -----------
Balance - June 30, 2002 81 50 11,587 (241,396) (229,759)
Australian currency translation -- -- (45,554) -- (45,554)
Net (loss) for the period -- -- -- (24,176) (24,176)
----------- ----------- ------------- ----------- -----------
Balance - June 30, 2003 81 50 (33,967) (265,572) (299,489)
Australian currency translation -- -- (6,119) -- (6,119)
Net (loss) for the period -- -- -- (130,264) (130,264)
----------- ----------- ------------- ----------- -----------
Balance - June 30, 2004 81 $ 50 $ (40,086) $ (395,836) $ (435,872)
=========== =========== ============= =========== ===========
The accompanying notes to financial statements are
an integral part of these balance sheets.
F-40
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (NOTE 2)
FOR THE YEARS ENDED JUNE 30, 2004, AND 2003, AND
CUMULATIVE FROM INCEPTION (DECEMBER 14, 1998)
THROUGH JUNE 30, 2004
Cumulative
From
2004 2003 Inception
---------- ---------- ----------
Operating Activities:
Net (loss) $ (130,264) $ (24,176) $ (395,835)
Adjustments to reconcile net (loss) to net cash (used in)
operating activities:
Depreciation and amortization 1,587 1,477 3,128
Write-off of deferred offering costs 77,000 -- 77,000
Changes in net assets and liabilities-
Accounts receivable (26,601) (748) (27,931)
Accounts payable - trade 2,894 (4,030) 2,894
Accrued interest 8,103 -- 8,103
Other accrued liabilities 40,368 40,260 196,616
---------- ---------- ----------
Net Cash Provided by (Used in) Operating Activities (26,913) 12,783 (136,025)
---------- ---------- ----------
Investing Activities:
Purchases of property and equipment (213) (31) (413)
Expenditures for web site development costs (151) (672) (4,487)
---------- ---------- ----------
Net Cash (Used in) Investing Activities (364) (703) (4,900)
---------- ---------- ----------
Financing Activities:
Proceeds from the issuance of convertible notes 185,000 -- 185,000
Checks in excess of bank balance 65 (65) --
Loans from related parties -- 33,547 96,098
Payment of deferred offering costs (100,000) -- (100,000)
Payments on loans from related parties (51,586) -- --
Proceeds from the issuance of capital stock -- -- 50
---------- ---------- ----------
Net Cash Provided by Financing Activities 33,479 33,482 181,148
---------- ---------- ----------
Effect of Exchange Rate Changes on Cash (6,119) (45,554) (40,086)
---------- ---------- ----------
Net Increase in Cash 83 8 137
Cash - Beginning of Period 54 46 --
---------- ---------- ----------
Cash - End of Period $ 137 $ 54 $ 137
========== ========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ -- $ -- $ --
========== ========== ==========
Income taxes $ -- $ -- $ --
========== ========== ==========
The accompanying notes to financial statements are
an integral part of these balance sheets.
F-41
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
(1) Summary of Significant Accounting Policies
Basis of Presentation and Organization
Fit For Business (Australia) Pty Limited ("FFB Australia" or the "Company") is
an Australian private company in the development stage of providing products and
services for: (i) corporate wellness programs which address business
productivity, stress and absenteeism issues; (ii) living well programs directed
primarily, but not exclusively, to individuals over 45 years of age; and, (iii)
nutritional supplements manufactured and supplied by Herbalife Ltd.
("Herbalife"). The accompanying financial statements of FFB Australia were
prepared from the accounts of the Company under the accrual basis of accounting
in United States dollars.
FFB Australia was organized as an Australian private company on December 14,
1998, and subsequently began certain marketing studies and corporate awareness
programs to obtain customers for its products and services. In October 2003, the
Company initiated a capital formation activity through the private placement of
certain convertible promissory notes which provided, through June 30, 2004,
proceeds of $185,000. Subsequent to June 30, 2004, the continuation of the
activity for the private placement of the convertible promissory notes provided
an additional $180,000 in proceeds.
In addition, in November 2003, the Company commenced a capital formation
activity to effect a deemed reverse merger with a corporation validly organized
in the United States for the purpose of completing a Registration Statement on
Form SB-2 with the Securities and Exchange Commission ("SEC"), and raising
capital from the issuance of common stock in the public markets of up to $4.5
million. The initial capital formation activity through a deemed reverse merger
and the issuance of common stock was unsuccessful. Subsequently, FFB Australia
completed a deemed reverse merger effective September 14, 2004, with Fit For
Business International, Inc. ("FFB International"), and is currently undertaking
a second capital formation activity of the same type as part of the operations
of that entity.
Prior to June 30, 2004, FFB Australia, aside from the capital formation and
marketing activities described above, incurred other development stage operating
costs and expenses related to its organization as an entity, receipt of a trade
mark in Australia for the name and related logo of Fit For Business, formation
of a management team, accounting and tax preparation fees, consulting fees,
travel, and other general and administrative expenses. For additional
information relating to the development stage activities of the Company, see
Note 2.
Cash and Cash Equivalents
For purposes of reporting within the statement of cash flows, the Company
considers all cash on hand, cash accounts not subject to withdrawal restrictions
or penalties, and all highly liquid debt instruments purchased with a maturity
of three months or less to be cash and cash equivalents.
F-42
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
Accounts Receivable
Accounts receivable consist of amounts due from employees, related parties, and
value added tax refunds. The Company establishes an allowance for doubtful
accounts in amounts sufficient to absorb potential losses on accounts
receivable. As of June 30, 2004, and 2003, no allowance for doubtful accounts
was deemed necessary. While management uses the best information available upon
which to base estimates, future adjustments to the allowance may be necessary if
economic conditions differ substantially from the assumptions used for the
purpose of analysis.
Revenue Recognition
The Company is in the development stage and has yet to realize any significant
revenues from planned operations. However, the Company is in the business of
providing products and services for corporate and living well programs, as well
as from the sale of nutritional products manufactured and supplied by Herbalife.
After the commencement of planned operations, revenues will be realized from
such products and services at the time of completion of each product sale, and
as services are rendered.
Revenues will also be realized from licensing activities related to various
countries and geographic regions, which entitle licensees to recruit
representatives for the Company, and market and promote the products and
services. Such revenues will be realized over the term and under the conditions
of each specific license.
Internal Web Site Development Costs
Under Emerging Issues Taskforce Statement 00-2, Accounting for Web Site
Development Costs ("EITF 00-2"), costs and expenses incurred during the planning
and operating stages of the Company's web site are expensed as incurred. Under
EITF 00-2, costs incurred in the web site application and infrastructure
development stages are capitalized by the Company and amortized to expense over
the web site's estimated useful life or period of benefit. As of June 30, 2004,
the FFB Australia had capitalized $4,487 related to its web site development.
Costs of Computer Software Developed or Obtained for Internal Use
Under Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use ("SOP 98-1"), the Company capitalizes
external direct costs of materials and services consumed in developing or
obtained internal-use computer software; payroll and payroll-related costs for
employees who are directly associated with and who devote time to the
internal-use computer software project; and, interest costs related to loans
incurred for the development of internal-use software. As of June 30, 2004, and
2003, the Company had not undertaken any projects related to the development of
internal-use software.
F-43
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
Costs of Computer Software to be Sold or Otherwise Marketed
Under Statement of Financial Accounting Standards No. 86, Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed ("SFAS
86"), the Company capitalizes costs associated with the development of certain
training software products held for sale when technological feasibility is
established. Capitalized computer software costs of products held for sale are
amortized over the useful life of the products from the software release date.
As of June 30, 2004, and 2003, the Company had not undertaken any projects
related to the development of software products held for sale or to be otherwise
marketed.
Trademark
The Company obtained a trademark from the government of Australia effective
October 15, 1999. The trademark covers the name "Fit For Business" and the logo
of the Company. The cost of obtaining the trademark has been capitalized by the
Company, and is being amortized over a period of ten years.
Advertising Costs
Advertising costs are charged to operations when incurred, except for television
or magazine advertisements, which are charged to expense when the advertising
first takes place. For the years ended June 30, 2004, and 2003, advertising
expense amounted to $681 and $3,535, respectively.
Property and Equipment
The components of property and equipment are stated at cost. Property and
equipment costs are depreciated or amortized for financial reporting purposes
over the useful lives of the related assets by the straight-line method. Useful
lives utilized by the Company for calculating depreciation or amortization are
as follows:
Computer and office equipment 5 years
Internal web site development costs 3 years
Upon disposition of an asset, its cost and related accumulated depreciation or
amortization are removed from the accounts, and any resulting gain or less is
recognized.
F-44
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
Impairment of Long-lived Assets
Under Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
("SFAS 121"), the Company evaluates the recoverability of long-lived assets and
the related estimated remaining lives at each balance sheet date. The Company
records an impairment or change in useful life whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable or the
useful life has changed.
Loss Per Common Share
Basic loss per share is computed by dividing the net loss attributable to the
common stockholders by the weighted average number of shares of common stock
outstanding during the period. Fully diluted loss per share is computed similar
to basic loss per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive.
Deferred Offering Costs
The Company defers as other assets the direct, incremental costs of raising
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 in which the offering is
terminated (see Note 4).
Comprehensive Income (Loss)
The Company presents comprehensive income (loss) in accordance with Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"). SFAS 130 states that all items that are required to be recognized under
accounting standards as components of comprehensive income (loss) be reported in
the financial statements. For the periods ended June 30, 2004, and 2003, the
only components of comprehensive (loss) were the net (loss) for the periods, and
the foreign currency translation adjustments.
Income Taxes
The Company accounts for income taxes pursuant to SFAS No. 109, Accounting for
Income Taxes ("SFAS 109"). Under SFAS 109, deferred tax asset and liabilities
are determined based on temporary differences between the bases of certain
assets and liabilities for income tax and financial reporting purposes. The
deferred tax assets and liabilities are classified according to the financial
statement classification of the assets and liabilities generating the
differences.
F-45
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
The Company maintains a valuation allowance with respect to deferred tax assets.
The Company establishes a valuation allowance based upon potential likelihood of
realizing the deferred tax asset and taking into consideration the Company's
current financial position and results of operations for the current period.
Future realization of the deferred tax benefit depends on the existence of
sufficient taxable income within the carryforward period under the Federal tax
laws.
Changes in circumstances, such as the Company generating taxable income, could
cause a change in judgment about the realizability of the related deferred tax
asset. Any change in the valuation allowance will be included in income in the
year of the change in estimate.
Foreign Currency Translation
The Company accounts for foreign currency translation pursuant to SFAS No. 52,
Foreign Currency Translation ("SFAS 52"). The Company's functional currency is
the Australian dollar. All assets and liabilities are translated into United
States dollars using the current exchange rate at the end of each fiscal year.
Revenues and expenses are translated using the average exchange rates prevailing
throughout the respective periods. Translation adjustments are included in other
comprehensive income (loss) for the period. Certain transactions of the Company
are denominated in United States dollars. Translation gains or losses related to
such transactions are recognized for each reporting period in the related
statement of operations and comprehensive (loss).
Fair Value of Financial Instruments
The Company estimates the fair value of financial instruments using the
available market information and valuation methods. Considerable judgment is
required in estimating fair value. Accordingly, the estimates of fair value may
not be indicative of the amounts the Company could realize in a current market
exchange. As of June 30, 2004, and 2003, the Company did not have any financial
instruments requiring the estimate of fair value.
Stock-Based Compensation
The Company uses the fair value method to account for non-employee stock-based
compensation in accordance with SFAS No. 123, Accounting for Stock-Based
Compensation, and FASB Emerging Issues Task Force, or EITF, Issue No. 96-18,
Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services. Under the fair
value method, all transactions in which goods or services are the consideration
received for the issuance of equity instruments shall be accounted for based on
the fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measurable.
F-46
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
Concentrations of Risk
As of June 30, 2004, and 2003, the Company had a material off-balance sheet risk
with regards to its dependence upon Herbalife as its sole source of supply for
the purchase of nutritional supplements related to its planned wellness
programs.
Fiscal Year End of the Company
The fiscal year end of the Company is June 30 of each year.
Estimates
The financial statements are prepared on the basis of accounting principles
generally accepted in the United States. The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities as of June 30, 2004, and 2003, and expenses for the periods then
ended. Actual results could differ from those estimates made by management.
(2) Development Stage Activities and Going Concern
FFB Australia is an Australian private company in the development stage of
providing products and services for corporate business wellness programs; living
well programs directed primarily, but not exclusively, to individuals over 45
years of age; and, nutritional supplements manufactured and supplied by
Herbalife. As of June 30, 2004, and subsequent thereto, the Company had
completed organization and reverse merger transactions, initial marketing and
corporate awareness programs designed to obtain customers for its products and
services, the receipt of a trademark in Australia for the name "Fit For
Business" The Company was organized as an Australian private company on December
14, 1998, and subsequently began certain marketing studies and corporate
awareness programs to obtain customers for its products and services. As of June
30, 2004, the Company had not realized significant revenues from its development
stage activities, nor had it commenced its primary operations.
In October 2003, the Company initiated a capital formation activity through the
private placement of certain unsecured promissory notes, convertible into common
stock, which provided, through June 30, 2004, proceeds of $185,000. Subsequent
to June 30, 2004, the continuation of the activity for the private placement of
the unsecured convertible promissory notes provided an additional $180,000 in
proceeds.
In addition, in November 2003, the Company commenced a capital formation
activity to effect a deemed reverse merger with a corporation validly organized
in the United States for the purpose of completing a Registration Statement on
F-47
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
Form SB-2 with the SEC, and raising capital from the issuance of common stock in
the public markets of up to $4.5 million. The initial capital formation activity
through a deemed reverse merger and the issuance of common stock was
unsuccessful. Subsequently, FFB Australia completed a deemed reverse merger
effective September 14, 2004, with FFB International, and is currently
undertaking a second capital formation activity of the same type as part of the
operations of that entity.
Prior to June 30, 2004, and through September 14, 2004, which was the date of
the deemed reverse merger transaction with FFB International, FFB Australia,
aside from the reverse merger, capital formation and marketing activities
described above, incurred other development stage operating costs and expenses
related to its organization as an entity, receipt of a trade mark in Australia
for the name and related logo of Fit For Business, formation of a management
team, accounting and tax preparation fees, consulting fees, travel, and other
general and administrative expenses. Through the use of the proceeds from the
private placement of the convertible promissory notes described above and loans
from related parties, the Company has been able to continue its development
stage business activities, as described herein.
While management of the Company believes that the Company will be successful in
its capital formation and operating activities, there can be no assurance that
the Company will be able to raise $4.5 million in equity capital through its
filing with the SEC and related activities, or be successful in the sale of its
products and services that will generate sufficient revenues to sustain the
operations of the Company.
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States, which
contemplates continuation of the Company as a going concern. The Company has
incurred operating losses since inception, the working capital as of June 30,
2004, was negative, and the cash resources of the Company are insufficient to
meet its planned business objectives. These and other factors raise substantial
doubt about the Company's ability to continue as a going concern. The
accompanying financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
(3) Convertible Debt
In November 2003, the Company began a capital formation activity through the
private placement of up to 200 unsecured convertible promissory notes (the
"Note" or "Notes"). Under the terms of the private placement subscription
agreement, the minimum unit participation was one unit per Note valued at
$5,000. Multiple units could be acquired under the terms of a single Note. The
Notes issued for the units stated a maturity date of November 30, 2004, and
provided for an interest rate of ten percent (10%) per annum, payable upon
redemption. None of the Notes issued were to officers, directors, or employees
of the Company.
F-48
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
The Notes were convertible into 10,000 shares of common stock per unit at any
time prior to maturity at the option of the note holder, or if called by the
Company, then automatically in the event of a public offering of shares with
which the Company was involved through a merger transaction. The Company
structured an incentive program with the first eleven subscribers to the private
placement for the Notes, and provided an additional 1/2 unit of value for each
unit subscribed for. As such, as of June 30, 2004, the Company had received and
recorded proceeds of $185,000 under the private placement in exchange for the
Notes with 51 units for the calculation of conversion into common stock (510,000
shares of common stock), and related accrued interest in the amount of $8,103.
These amounts are presented in the accompanying balance sheet as of June 30,
2004, as current liabilities. No value has been associated with the conversion
feature of the Notes in the accompanying financial statements. See Note 9 for
additional information on the convertible debt subsequent to June 30, 2004.
(4) Capital Stock Transactions and Capital Formation
Outstanding Capital Stock
As of June 30, 2004, and 2003, the Company had two stockholders that held a
total of 81 shares (100 percent of the outstanding shares) of ordinary or
capital stock. The shareholders were: (i) Mark Poulsen & Associates Pty. Ltd. -
79 shares, a company owned by Mark A. Poulsen, the President and Chief Executive
Officer of the Company; and, (ii) Mark A. Poulsen - 2 shares, the President and
Chief Executive Officer of the Company.
Stock Exchange Agreement
On September 14, 2004, the Company entered into a Share Exchange Agreement (the
"Exchange Agreement") with FFB International (formerly Patient Data
Corporation), a Nevada corporation, whereby FFB International acquired all of
the issued and outstanding capital stock of FFB Australia (81 shares) in
exchange for 15,000,000 shares of common stock and 1,000,000 shares of preferred
stock. Both the common stock and preferred stock of FFB International have a par
value of $.001. The business combination was valued at $16,000, or par value of
the shares issued by FFB International. The shares of preferred stock are
non-participating, but each share is entitled to fifty (50) votes in a general
meeting of the stockholders. As a result of the Exchange Agreement, FFB
Australia controls FFB International, and has been deemed to have effected a
reverse merger for financial reporting purposes as of the date of the Exchange
Agreement.
F-49
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
Capital Formation Activity
On November 10, 2003, the Company entered into an agreement with Fort Street
Equity Inc. ("Fort Street"), a Cayman Islands company, whereby Fort Street would
assist the Company in the following: (i) the identification of a corporation
validly organized in the United States with which the Company could realize a
deemed reverse merger; and (ii) the completion and filing of a Registration
Statement on Form SB-2 with the SEC for the purpose of raising capital from the
issuance of common stock in the public markets of up to $4.5 million.
The Company paid Fort Street a deposit against fees and costs of $100,000. The
initial capital formation activity conducted by the Company and Fort Street was
not successful due to the fact that the organization and completion of a deemed
reverse merger with a validly organized corporation in the United States could
not be effected. Further, as a result of the uncompleted merger, the Company
expensed $77,000 of the amount paid to Fort Street as unsuccessful offering
costs. The Company and Fort Street initiated a second capital formation activity
which resulted in the Exchange Agreement with FFB International as described
above, and the current activity to file a Registration Statement on Form SB-2
with the SEC. As of June 30, 2004, the Company had $23,000 of deferred offering
costs which were comprised of legal and accounting fees paid to complete the
Form SB-2 registration process.
(5) Income Taxes
The provision (benefit) for income taxes for the periods ended June 30, 2004,
and 2003, was as follows (using a 34 percent effective Federal income tax rate):
2004 2003
---------- ----------
Current Tax Provision:
Federal-
Taxable income $ -- $ --
---------- ----------
Total current tax provision $ -- $ --
========== ==========
Deferred Tax Provision:
Federal-
Loss carryforwards 44,290 8,220
Change in valuation allowance (44,290) (8,220)
---------- ----------
Total deferred tax provision $ -- $ --
========== ==========
F-50
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
The Company had deferred income tax assets as of June 30, 2004, and 2003, as
follows:
Loss carryforwards $ 134,600 $ 90,300
Less - Valuation allowance (134,600) (90,300)
---------- ----------
Total net deferred tax assets $ -- $ --
========== ==========
As of June 30, 2004, and 2003, the Company had net operating loss carry forwards
for income tax reporting purposes of approximately $396,000, and $265,600,
respectively, that may be offset against future taxable income. The net
operating loss carryforwards expire in various years through 2024. Current tax
laws limit the amount of loss available to be offset against future taxable
income when a substantial change in ownership occurs or a change in the nature
of the business. Therefore, the amount available to offset future taxable income
may be limited. No tax benefit has been reported in the financial statements for
the realization of loss carryforwards as the Company believes there is high
probability that the carryforwards will not be utilized in the foreseeable
future. Accordingly, the potential tax benefits of the loss carry forwards are
offset by a valuation allowance of the same amount.
(6) Related Party Transactions
Mark Poulsen & Associates Pty Ltd. is an Australian private entity and majority
shareholder of the Company. It is wholly owned by Mark A. Poulsen, President and
Chief Executive Officer of the Company. As of June 30, 2004, and 2003, the
Company owed $88,261, and $132,075 to this entity, respectively. The amounts
owed are for working capital, are non-interest bearing, and have no terms for
repayment.
Kamaneal Investments Pty Ltd. is an Australian private company owned by Mark A.
Poulsen, President and Chief Executive Officer of the Company, and Karen
Poulsen, his wife. The purpose of this company is to hold investments for Mr.
and Mrs. Poulsen. As of June 30, 2004, Kamaneal Investments Pty Ltd. owed the
Company the amount of $26,880. As of June 30, 2003, the Company owed this entity
the amount of $3,943. The amounts due from or due to are related to general
working capital purposes, are non-interest bearing, and have no terms for
repayment.
As of June 30, 2004, and 2003, the Company owed $337 and $326, respectively to
Mark A. and Karen Poulsen for expenses incurred on behalf of the Company. Mr.
Poulsen is the President and Chief Executive Officer of the Company. The amounts
owed are for working capital purposes, are non-interest bearing, and have no
terms for repayment.
Donald Howell Wilde, a Note holder of the Company, is the uncle of Linda Wilde,
also a Note holder of the Company. In addition, Mr. Wilde is the father of
Laraine Richardson, a principal in the Company of L.R. Global Marketing Pty.
Ltd., which entity entered into a License Agreement with the Company on August
24, 2004 (see Note 8). Mr. Wilde also assisted the Company with the private
placement of the Notes by marketing the placement, and being responsible for the
subscription agreements of several Note holders. Mr. Wilde's services were
valued at $10,000, and were accrued in the accompany balance sheet subsequent to
of June 30, 2004.
F-51
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
As described in Notes 3 and 9, subsequent to June 30, 2004, the Company
completed a private placement of Notes to thirty individuals and entities with
proceeds amounting to $365,000. Of the thirty individuals and entities that
subscribed to the private placement offering of Notes, twelve parties are
considered both account executives (part of the independent marketing group of
the Company) and independent Herbalife distributors, and six of the parties are
only independent Herbalife distributors. Mark A. Poulsen, President and Chief
Executive Officer of the Company, is also an independent Herbalife distributor.
From the common stock issued to Mr. Mark A. Poulsen, President and Chief
Executive Officer of the Company, under the Exchange Agreement, L.R. Global
received 500,000 shares of common stock (see Note 8). Mr. Poulsen also issued
shares of common stock that he received from the Exchange Agreement to satisfy
the liabilities of the Company assumed by FFB International related to the
compensation of six individuals (see Note 8). FFB International recognized the
satisfaction of such liabilities by Mr. Poulsen as additional paid-in capital.
The Company also owes Mr. Wayne Hoskins, a former director of the Company, the
amount of $7,505 as of June 30, 2004. Mr. Hoskins has agreed to accept 15,000
shares of common stock of FFB International as full satisfaction of this
obligation.
(7) Recent Accounting Pronouncements
In January 2003, the FASB issued FASB Interpretation No. 46 Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51 ("FIN 46"). The FASB
issued a revised FIN 46 in December 2003, which modified and clarified various
aspects of the original interpretations. A Variable Interest Entity ("VIE") is
created when (i) the equity investment at risk is not sufficient to permit the
entity to finance its activities without additional subordinated financial
support from other parties or (ii) equity holders either (a) lack direct or
indirect ability to make decisions about the entity, (b) are not obligated to
absorb expected losses of the entity or (c) do not have the right to receive
expected residual returns of the entity if they occur. If an entity is deemed to
be a VIE, pursuant to FIN 46, an enterprise that absorbs a majority of the
expected losses of the VIE is considered the primary beneficiary and must
consolidate the VIE. For VIE's created before January 31, 2003, FIN 46 was
deferred to the end of the first interim or annual period ending after March 15,
2004. The adoption of FIN 46 did not have a material impact on the financial
position or results of operations of the Company.
F-52
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
In May 2003, the FASB issued Statement of Financial Accounting Standards No.
150, Accounting for Certain Financial Instruments With Characteristics of Both
Liabilities and Equity, ("SFAS 150"). This standard requires issuers to classify
as liabilities the following three types of freestanding financial instruments:
(1) mandatory redeemable financial instruments, (2) obligations to repurchase
the issuer's equity shares by transferring assets; and (3) certain obligations
to issue a variable number of shares. The Company adopted SFAS 150 in May 2004.
The adoption of SFAS 150 did not have a material impact on the financial
position or results of operations of the Company.
In December 2003, the SEC issued Staff Accounting Bulletin No. 104 ("SAB 104"),
Revenue Recognition, which supersedes SAB 101, Revenue Recognition in Financial
Statements. SAB 104's primary purpose is to rescind the accounting guidance
contained in SAB 101 related to multiple element revenue arrangements,
superseded as a result of the issuance of EITF 00-21. The Company adopted the
provisions of SAB 104, and it did not have a material impact on the financial
position or results of operations of the Company.
(8) Commitments and Contingencies
On August 24, 2004, the Company entered into a non-assignable license agreement
(the "License Agreement) with L.R. Global Marketing Pty. Ltd. ("L.R. Global").
Pursuant to the License Agreement, L.R. Global has the right, for a period of
ten years, to use of the Company logo, the Company management information
system, and other Company material. L.R. Global will assist in identifying new
clients for the Company, and recruiting account executive and customer service
representatives. Under the terms of the License Agreement, L.R. Global was
obligated to pay the Company $500,000 on or before December 31, 2004, for the
grant of the license. As of December 31, 2004, L.R. Global had paid $117,750
toward the fee for the license. As such, L.R. Global was in default under the
License Agreement. On January 14, 2005, the Company and L.R. Global entered into
an extension agreement whereby the terms of the License Agreement for payment of
the remaining amount of the $500,000 license fee were extended to May 31, 2005.
As of June 30, 2004, and 2003, the Company recognized as compensation expense
the ongoing contribution of time and effort of six individuals, two of which
serve as officers of the Company. Such individuals have provided their time and
effort without formal compensation in certain instances since 1998. For the
years ended June 30, 2004, and 2003, the Company recorded compensation expense
amounting to $40,370, and $40,259, respectively. As of June 30, 2004, the
liability for employee compensation amounted to $196,616. Through September 14,
2004, the total obligation for employee compensation amounted to $220,000. This
obligation was satisfied by the issuance of 440,000 shares of common stock of
FFB International from the shares personally held by Mr. Mark A. Poulsen,
President and Chief Executive Officer of the Company, at a value of $.50 per
share. FFB International credited paid-in capital for the value of the
compensation satisfied.
F-53
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
The following transactions were dated November 29, 2004, or as otherwise
indicated:
The Company entered into an employment agreement with Mr. Mark A. Poulsen to
serve as the Company's and FFB International's President and Chief Executive
Officer. Under the terms of the agreement, Mr. Poulsen will be compensated at
the annual rate of approximately $97,000 for services to the Company, and
approximate $192,000 for services to FFB International. He will also be paid 5
percent of the value of each country or geographic-area license sold. In
addition, on December 1, 2004, the Board of Directors of FFB International
awarded a bonus of approximately $388,250 to be paid to Mr. Poulsen within 30
days after the listing of the common stock of FFB International on the
over-the-counter bulletin board of the NASD.
On November 29, 2004, the Company entered into an employment agreement with
Prins A. Ralston to serve as the Company's and FFB International's Senior Vice
President and Chief Operating Officer. Under the terms of the agreement, Mr.
Ralston will be compensated at the annual rate of approximately $131,000, plus
benefits and bonus. In addition, Mr. Ralston will be granted options to purchase
30,000 shares of common stock of FFB International under an option plan, when
and if established. The Company will also be obligated to pay a recruiting fee
for the placement of Mr. Ralston to Hudson Global Resources, an executive
personnel placement firm, amounting to approximately $21,100.
The Company entered into an employment agreement with Mr. Anthony F. Head to
serve as the Company's and FFB International's Senior Vice President of Sales.
Mr. Head is also a Director of the Company. Under the terms of the agreement,
Mr. Head will be compensated at the annual rate of approximately $77,000, plus
benefits and bonus. Mr. Head will also be paid 5 percent of the value of each
country or geographic-area license sold.
The Company entered into an employment agreement with Ms. Sandra Wendt to serve
as the Company's and FFB International's Vice President and Chief Financial
Officer. Under the terms of the agreement, Ms. Wendt will be compensated at the
annual rate of approximately $42,400, plus benefits and bonus.
(9) Subsequent Events
As described in Note 4, on September 14, 2004, the Company completed an Exchange
Agreement whereby FFB International acquired all of the issued and outstanding
capital stock of FFB Australia (81 shares) in exchange for 15,000,000 shares of
its common stock and 1,000,000 shares of its preferred stock. Both the common
F-54
FIT FOR BUSINESS (AUSTRALIA) PTY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004 and 2003
stock and preferred stock of FFB International have a par value of $.001. The
business combination was valued at $16,000, or par value of the shares issued by
FFB International. The shares of preferred stock are non-participating, but each
share is entitled to fifty (50) votes in a general meeting of the stockholders.
As a result of the Exchange Agreement, FFB Australia controls FFB International,
and has been deemed to have effected a reverse merger for financial reporting
purposes as of the date of the Exchange Agreement.
Subsequent to June 30, 2004, the Company continued the private placement of
Notes and received proceeds of $180,000. The total amount of proceeds raise from
the private placement of Notes amounted to $365,000, with a value of 87 units,
convertible into 870,000 shares of common stock, as described above. Subsequent
to the completion of the Exchange Agreement on September 14, 2004, and the
assumption of the debt pertaining to the Notes by FFB International, on
September 20, 2004, FFB International issued 420,000 shares of common stock with
a value of $.33 per share to convert 42 units owned by Note holders. In
addition, on September 29, 2004, FFB International issued 450,000 shares of
common stock with a value of $.50 per share to convert the remaining 45 units
owned by Note holders, and thus, completed the conversion of all Notes and
related accrued interest to common stock. The value of the Notes converted in
excess of the par value of the common stock issued was considered as additional
paid-in capital by FFB International.
F-55
FIT FOR BUSINESS INTERNATIONAL, INC.
3,000,000 SHARES OF COMMON STOCK
RESALE OF 2,000,000 SHARES OF COMMON STOCK ISSUABLE IN CONNECTION WITH
THE CONVERSION OF OUTSTANDING OPTIONS
1,784,000 SELLING SECURITY HOLDER COMMON SHARES
PROSPECTUS
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 IS NOT AN OFFER TO SELL COMMON
STOCK AND IS NOT SOLICITING AN OFFER TO BUY COMMON STOCK IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Our Certificate of Incorporation and By-laws provide that we shall indemnify to
the fullest extent permitted by Nevada law any person whom we may indemnify
thereunder, including our directors, officers, employees and agents. Such
indemnification (other than as ordered by a court) shall be made by us only upon
a determination that indemnification is proper in the circumstances because the
individual met the applicable standard of conduct i.e., such person acted in
good faith and in a manner he reasonably believed to be in or not opposed to our
best interest. Advances for such indemnification may be made pending such
determination. Such determination shall be made by a majority vote of a quorum
consisting of disinterested directors, or by independent legal counsel or by the
stockholders. In addition, our Certificate of Incorporation provides for the
elimination, to the extent permitted by Nevada, of personal liability of our
directors and our stockholders for monetary damages for breach of fiduciary duty
as directors.
We have agreed to indemnify each of our directors and certain officers against
certain liabilities, including liabilities under the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the provisions described above, 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. In the event that a claim for
indemnification against such liabilities (other than our payment of expenses
incurred or paid by our director, officer or controlling person 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, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses in connection with the issuance and
distribution of the securities being registered hereby. All such expenses will
be borne by the registrant; none shall be borne by any selling stockholders.
Securities and Exchange
Commission registration fee $ 1,200
Legal fees and expenses (1) 50,000
Accounting fees and expenses (1) 25,000
Blue Sky Fees(1) 12,500
Miscellaneous Administrative Costs (1) 3,800
Printing Costs (1) 7,500
---------
Total(1) $ 100,000
=========
(1) Estimated.
69
Item 26. Recent Sales of Unregistered Securities.
On September 14, 2004, we issued 15,000,000 shares of our restricted common
stock and 1,000,000 shares of our preferred stock to Mark Poulsen & Associates
Pty Ltd. in accordance with an Exchange Agreement with Fit For Business
(Australia) Pty Limited (our "Subsidiary") whereby we acquired all of the issued
and outstanding capital stock of the Subsidiary (81 shares). The issuance was
valued at $16,000. Our shares were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933. No
commissions were paid for the issuance of such shares. The above issuance of
shares of our common stock qualified for exemption under Section 4(2) of the
Securities Act of 1933 since the issuance of such shares by us did not involve a
public offering. Mark Poulsen & Associates Pty Ltd. was a sophisticated investor
and had access to information normally provided in a prospectus regarding us.
The offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, Mark Poulsen & Associates Pty Ltd. had the necessary investment
intent as required by Section 4(2) since she agreed to and received a share
certificate bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act. These restrictions ensure that these shares
would not be immediately redistributed into the market and therefore not be part
of a "public offering." Based on an analysis of the above factors, we have met
the requirements to qualify for exemption under Section 4(2) of the Securities
Act of 1933 for the above transaction.
On September 14, 2004 we issued 440,000 shares of our restricted common stock to
Mark A. Poulsen in consideration for accrued employee compensation. The issuance
was valued at $.50 per share or $220,000. Our shares were issued in reliance on
the exemption from registration provided by Section 4(2) of the Securities Act
of 1933. No commissions were paid for the issuance of such shares. The above
issuance of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. Mr. Poulsen was a sophisticated investor and had
access to information normally provided in a prospectus regarding us. The
offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, Mr. Poulsen had the necessary investment intent as required by
Section 4(2) since she agreed to and received a share certificate bearing a
legend stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On September 14, 2004 we issued 15,000 shares of our restricted common stock to
Mark A. Poulsen in consideration for a loan of $7,500 made by Mr. Poulsen. The
issuance was valued at $.50 per share or $7,500. Our shares were issued in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act of 1933. No commissions were paid for the issuance of such
shares. The above issuance of shares of our common stock qualified for exemption
under Section 4(2) of the Securities Act of 1933 since the issuance of such
shares by us did not involve a public offering. Mr. Poulsen was a sophisticated
investor and had access to information normally provided in a prospectus
regarding us. The offering was not a "public offering" as defined in Section
4(2) due to the insubstantial number of persons involved in the deal, size of
the offering, manner of the offering and number of shares offered. We did not
undertake an offering in which we sold a high number of shares to a high number
of investors. In addition, Mr. Poulsen had the necessary investment intent as
required by Section 4(2) since she agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. These restrictions ensure that these shares would not
be immediately redistributed into the market and therefore not be part of a
"public offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
70
On September 14, 2004, we issued 40,000 shares of our restricted common stock to
Mark A. Poulsen in consideration for accrued consulting services. The issuance
was valued at $.50 per share or $20,000. Our shares were issued in reliance on
the exemption from registration provided by Section 4(2) of the Securities Act
of 1933. No commissions were paid for the issuance of such shares. The above
issuance of shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance of such shares by us did
not involve a public offering. Mr. Poulsen was a sophisticated investor and had
access to information normally provided in a prospectus regarding us. The
offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which we sold a high number of shares to a high number of investors.
In addition, Mr. Poulsen had the necessary investment intent as required by
Section 4(2) since she agreed to and received a share certificate bearing a
legend stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for the above transaction.
On September 20, 2004, we issued shares of our common stock based on a
conversion of our promissory notes. Specifically, we converted units into
420,000 shares of our common stock. The transaction was valued at $0.33 per
share of common stock for a total of $140,000. The shares were issued to the
following:
Investor Shares Consideration Per Share Value
- --------------------------------------------------------------------------------
Junay Pty Ltd Trustee for
KL Notaras Family Trust 75,000 $25,000 $0.33
Mushroom Systems International
Pty Ltd. 15,000 $ 5,000 $0.33
Jaroulin Pty Ltd. 30,000 $10,000 $0.33
Dean Harrison Family Trust 30,000 $10,000 $0.33
Leigh Troy 30,000 $10,000 $0.33
Kendal Robinson 15,000 $ 5,000 $0.33
Mark Hoey 120,000 $40,000 $0.33
GL Ray Enterprises 15,000 $ 5,000 $0.33
Roan Lee 30,000 $10,000 $0.33
The Credence Superannuation Fund 60,000 $20,000 $0.33
On September 29, 2004, we issued shares of our common stock based on a
conversion of our promissory notes. Specifically, we converted units into
450,000 shares of our common stock. The transaction was valued at $0.50 per
share of common stock for a total of $225,000. The shares were issued to the
following:
Per Share
Investor Shares Consideration Value
- ----------------------------------------------------------------------
Vexa Superannuation Fund 20,000 $10,000 $0.50
Junay Pty Ltd Trustee for
KL Notaras Family Trust 20,000 $10,000 $0.50
Maria Corry 20,000 $10,000 $0.50
Boyana & Dragan Aralica 10,000 $ 5,000 $0.50
Heather Kraus 10,000 $ 5,000 $0.50
Wibcara Pty Ltd. Trustee for
Kraus Superannuation Fund 10,000 $ 5,000 $0.50
Clifford Henkel 20,000 $10,000 $0.50
Helen Hughes 40,000 $20,000 $0.50
Robert E. and Valda J. Bradley 20,000 $10,000 $0.50
Donald Howell Wild 10,000 $ 5,000 $0.50
Maxwell Spackman 10,000 $ 5,000 $0.50
Benjamin David Spackman 20,000 $10,000 $0.50
Lily Lee Lee Lee 20,000 $10,000 $0.50
Roslina Binte Mohamed Sa'ad 20,000 $10,000 $0.50
Zainon Binte Ismail 10,000 $ 5,000 $0.50
James and Joan Stewart as
Trustees of the R Stewart
Pty Ltd Superannuation Fund 40,000 $20,000 $0.50
Ann Maree Wood 10,000 $ 5,000 $0.50
Walter Puawai McDermott 20,000 $10,000 $0.50
Linda Wild 70,000 $35,000 $0.50
Denise Linsley-Hayles 10,000 $ 5,000 $0.50
Wayne Jobson 40,000 $20,000 $0.50
71
Our shares were issued in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act of 1933. The offerings were not a "public
offering" as defined in Section 4(2) due to the insubstantial number of persons
involved in the deal, size of the offering, manner of the offering and number of
shares offered. We did not undertake an offering in which we sold a high number
of shares to a high number of investors. In addition, the above-referenced
parties had the necessary investment intent as required by Section 4(2) since
they agreed to and received a share certificate bearing a legend stating that
such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. The
purchasers were sophisticated investors and had access to information normally
provided in a prospectus regarding us.
These restrictions ensure that these shares would not be immediately
redistributed into the market and therefore not be part of a "public offering."
Based on an analysis of the above factors, we have met the requirements to
qualify for exemption under Section 4(2) of the Securities Act of 1933 for the
above transaction.
Item 27. Exhibits.
3.1. Certificate of Incorporation (1)
3.1(a) Amendments to Certificate of Incorporation (2)
3.2 Bylaws (3)
5.1 Opinion and Consent of Anslow & Jaclin, LLP
10.1 Exchange Agreement dated September 5th, 2004 between us and Fit For
Business (Australia) Pty Limited (1)
10.2 Stock Option Agreement dated July 25, 2004 between us and Fort Street
Equity, Inc. (subscription agreement) (1)
10.3 License Agreement with L.R. Global Marketing Pty Ltd. and Extension
Agreement
10.4 Employment Agreement - Mark Poulsen (1)
10.5 Employment Agreement - Anthony Head (1)
10.6 Employment Agreement - Prins Ralston (1)
10.7 Employment Agreement - Sandra Wendt (1)
10.8 Agreement with Insource Pty Ltd. (1)
10.9 Promissory Notes with Fort Street Equity
21.1 Subsidiaries (1)
23.1 Consent of Davis Accounting Group, P.C., independent auditors.
24.1 Power of Attorney (included on signature page of Registration Statement)
99.1 Conflict of Interest Policy
99.2 Letter Evidencing Non-Association between Fit For Business International
and Fit For Business Family Trust
(1) Originally submitted with Form SB-2 registration statement on March 7, 2005
(SEC File No. 333-123176).
(2) submitted with Amendment No. 1 to Form SB-2 registration statement on May 4,
2005 (SEC File No. 333-123176).
(3) Our updated By-Laws have been filed with this document.
72
Item 28. Undertakings.
(A) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
(ii) Reflect in the prospectus any facts or events which, individually or
together, 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) 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 a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii)Include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(B) Undertaking Required by Regulation S-B, Item 512(e).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or controlling persons pursuant to
the foregoing provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel that the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
73
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Milton, Country of
Australia, on the 29th day of July, 2005.
FIT FOR BUSINESS INTERNATIONAL, INC.
BY: /s/ Mark A. Poulsen
--------------------------------------
Mark A. Poulsen
Chief Executive Officer, President and
Chairman of the Board of Directors
POWER OF ATTORNEY
The undersigned directors and officers of Fit For Business International Inc.
hereby constitute and appoint Mark A. Poulsen, with full power to act without
others and with full power of substitution and re-substitution, our true and
lawful attorneys-in-fact with full power to execute in our name and behalf in
the capacities indicated below any and all amendments (including post-effective
amendments and amendments thereto) to this registration statement under the
Securities Act of 1933 and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
and hereby ratify and confirm each and every act and thing that such attorney-
in-fact, or his substitutes, shall lawfully do or cause to be done by virtue
thereof.
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 indicated.
- --------------------------- ------------------------------ ---------------------
SIGNATURE TITLE DATE
- --------------------------- ------------------------------ ---------------------
/s/ Mark A. Poulsen Chief Executive Officer, July 29, 2005
- ----------------------- President and Chairman of
Mark A. Poulsen the Board of Directors
- --------------------------- ------------------------------ ---------------------
/s/ Sandra Wendt Senior Vice President of July 29, 2005
- ----------------------- Administration, Chief
Sandra Wendt Financial Officer and
Principal Accounting Officer
- --------------------------- ------------------------------ ---------------------
/s/ Prins Ralston Senior Vice President and July 29, 2005
- ----------------------- Chief Operating Officer
Prins Ralston
- --------------------------- ------------------------------ ---------------------
/s/ Anthony F. Head Senior Vice President of July 29, 2005
- ----------------------- Sales and Director
Anthony F. Head
- --------------------------- ------------------------------ ---------------------
74