U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
BIO-ONE CORPORATION
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(Name of Small Business Issuer in its charter)
NEVADA 65-0815746
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
290 Waymont Court, Suite 120 Lake Mary, Florida 32746
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(Address of principal executive offices) (zip code)
Issuer's telephone number: (407) 328-1611
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
- None - - None -
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 par value
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(Title of class)
Copies of Communications Sent to:
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696 - Fax: (561) 659-5371
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SUMMARY TABLE OF CONTENTS
PART I
Item 1 Description of Business.
Item 2 Management's Discussion and Analysis or Plan of Operation.
Item 3 Description of Property.
Item 4 Security Ownership of Certain Beneficial Owners and
Management.
Item 5 Directors, Executive Officers, Promoters and Control Persons.
Item 6 Executive Compensation.
Item 7 Certain Relationships and Related Transactions.
Item 8 Description of Securities.
PART II
Item 1 Market Price of and Dividends on the Registrant's Common Equity
and Other Shareholder Matters.
Item 2 Legal Proceedings.
Item 3 Changes In and Disagreements With Accountants.
Item 4 Recent Sales of Unregistered Securities.
Item 5 Indemnification of Directors and Officers.
PART F/S Financial Statements.
PART III
Item 1 Index to Exhibits.
Item 2 Description of Exhibits.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) BUSINESS DEVELOPMENT
BIO-ONE CORPORATION (the "Company" or "BIO") was incorporated on February
24, 1998 in Nevada to engage in the nutritional supplement marketing and
internet consulting business. BIO and Crown Enterprises, Inc., an unaffiliated
Florida corporation ("Crown"), entered into an Agreement and Plan of Share
Exchange, dated May 30, 2000, (the "Share Exchange") pursuant to which the
shareholders of Crown on May 30, 2000 (the "Exchange Date") were issued
10,000,000 shares of Common Stock of BIO, par value $.001 in exchange for 100%
of the issued and outstanding shares of Crown. Prior to the exchange, the
authorized capital stock of BIO consisted of 20,000,000 shares of Common Stock,
par value $.001, of which 1,700,000 shares were issued and outstanding and
1,000,000 shares of preferred stock, par value $.001, of which no shares were
outstanding. All outstanding shares were fully paid and non assessable, free of
liens, encumbrances, options, restrictions and legal or equitable rights of
others not a party to the Share Exchange. The Share Exchange called for the
resignation of the original officers and directors of the Company and the
appointing of a new board and officers. The new board of directors consisted of
Armand Dauplaise, President and Chairman of the Board until ratified by the
election a majority of the shareholders of the Company and Kevin Lockhart,
Secretary and Director until ratified by the election a majority of the
shareholders of the Company. As of the Exchange Date, Crown became a
wholly-owned subsidiary of the Company. For accounting purposes, the transaction
was treated as a reverse acquisition, with the Company as the acquiring entity.
The Company currently operates as Bio-One Corporation. Unless the context
indicates otherwise, references hereinafter to "the Company" includes both
Bio-One Corporation and its wholly owned subsidiary, Crown Enterprises, Inc. The
Company's principal place of business is 290 Waymont Court, Suite 120 Lake Mary,
Florida 32746, and its telephone number at that address is (407) 328-1611.
The Company is not presently trading on an exchange, but intends to apply
to have its Common Stock quoted on the Over the Counter Bulletin Board upon the
Commission reaching a point of "no further comment" on its Registration
Statement on Form 10-SB.
The Company is filing this Form 10-SB on a voluntary basis so that the
public will have access to the required periodic reports on BIO's current status
and financial condition. The Company will file periodic reports in the event its
obligation to file such reports is suspended under the Securities and Exchange
Act of 1934 (the "Exchange Act".)
In May 1998, prior to its acquisition of Crown, the Company sold 1,600,000
shares of its unrestricted Common Stock to seventy-two (72) investors for
$16,000. For such offering, the Company relied upon Section 3(b) of the
Securities Act of 1933, as amended (the "Act"), Rule 504 of Regulation D
promulgated thereunder ("Rule 504"), Section 517.061(11) of the Florida Code,
Section 10-5-9(13) of the Georgia Code, Section 90.530(11) of the Nevada code,
Section 48-2- 103(b)(4) of the Tennessee code and Section 5[581-5]I(c) of the
Texas code. No state exemption was necessary for the sales made to Canadian or
French investors. See Part II, Item 4. "Recent Sales of Unregistered Securities.
In May 2000, the Company entered into the Share Exchange with Crown and its
shareholders which had been formed in April 1999. The exchange was made whereby
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the Company issued 10,000,000 shares of its Common Stock to the shareholders of
Crown for all of the issued and outstanding stock of Crown. As part of the
exchange, Armand Dauplaise (the Company's current President and Chairman)
("Dauplaise") and Kevin Lockhart (the Company's current Secretary) ("Lockhart")
each received 4,597,500 shares of the Company's Common Stock. This offering was
conducted pursuant to Section 4(2) of the Act, Rule 506 of Regulation D
promulgated thereunder ("Rule 506") and Section 517.061(11) of the Florida Code.
See Part I, Item 1. "Employees and Consultants"; Part I, Item 4. "Security
Ownership of Certain Beneficial Owners and Management"; Part I, Item 5.
"Directors, Executive Officer, Promoters and Control Persons"; Part I, Item 6.
"Executive Compensation"; Part I, Item 7. "Certain Relationships and Related
Transactions"; and Part II, Item 4. "Recent Sales of Unregistered Securities."
In May 2000, the Company issued 100,000 shares of its restricted Common
Stock to three (3) persons in connection with their services to the Company in
connection with the Share Exchange. For such offering, the Company relied upon
Section 4(2) of the Act, Rule 506 and Section 517.061(11) of the Florida Code.
See Part I, Item 1. "Employees and Consultants"; Part I, Item 7. "Certain
Relationships and Related Transactions"; and Part II, Item 4. "Recent Sales of
Unregistered Securities."
In May 2000, the Company entered into an employment agreement with Armand
Dauplaise to be the Company's Vice-Chairman and President. Mr. Dauplaise draws a
base salary of $120,000 annually and is entitled to a monthly vehicle allowance
of $350 per month. The term of the agreement is for a period of one (1) year and
automatically renews for successive one (1) year terms. See Part I, Item 1.
"Employees and Consultants"; Part I, Item 4. "Security Ownership of Certain
Beneficial Owners and Management"; Part I, Item 5. "Directors, Executive
Officer, Promoters and Control Persons"; Part I, Item 6. "Executive
Compensation"; and Part I, Item 7. "Certain Relationships and Related
Transactions."
In May 2000, the Company entered into an employment agreement with Kevin
Lockhart to be the Company's Vice-Chairman and Secretary. Mr. Lockhart draws a
base salary of $120,000 annually and is entitled to a monthly vehicle allowance
of $350 per month. The term of the agreement is for a period of one (1) year and
automatically renews for successive one (1) year terms. See Part I, Item 1.
"Employees and Consultants"; Part I, Item 4. "Security Ownership of Certain
Beneficial Owners and Management"; Part I, Item 5. "Directors, Executive
Officer, Promoters and Control Persons"; Part I, Item 6. "Executive
Compensation"; and Part I, Item 7. "Certain Relationships and Related
Transactions."
In June 2000, the Company sold 40,000 shares of its restricted Common Stock
to one (1) investor for $10,000. For such offering, the Company relied upon
Section 4(2) of the Act, Rule 506 and Section 517.061(11) of the Florida Code.
See Part II, Item 4. "Recent Sales of Unregistered Securities."
In July 2000, the Company sold 100,000 shares of its restricted Common
Stock to one (1) investor. The Company also issued a warrant to purchase an
additional 400,000 shares of the Company's restricted Common Stock, which
warrant is exercisable at a price of $0.25 per share. The warrants expire six
(6) months from the date on which the Company's Common Stock is quoted on the
Over the Counter Bulletin Board. The Company received a total of $25,000 for the
investment. For such offering, the Company relied upon Section 4(2) of the Act,
Rule 506 and Section 517.061(11) of the Florida Code. See Part II, Item 4.
"Recent Sales of Unregistered Securities."
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On July 26, 2000, at a director's meeting duly convened, the Company's
Certificate of Incorporation was amended by the board of directors to increase
its authorized capital stock to 100,000,000 shares, par value $0.001, and
10,000,000 shares of preferred stock, par value $0.001, issuable as authorized
by the Board of Directors. Such an amendment to the Company's Articles was
consented to and approved by a majority vote of the stockholders holding at
least a majority of each class of stock outstanding and entitled to vote
thereon.
In August 2000, the Company executed a promissory note in the amount of
twenty-five thousand dollars ($25,000) in favor of Kevin Thomas, which note is
convertible in the sole discretion of the holder, into shares of the Company's
restricted Common Stock at a conversion price of $0.25 per share. The note bears
interest at a rate of twelve percent (12%) per annum. The note is due November
30, 2000. For such offering, the Company relied upon Section 4(2), Rule 506 and
Section 517.061(11) of the Florida Code. See Part I, Item 2. "Management's
Discussion and Analysis or Plan of Operation Financial Condition, Liquidity and
Capital Resources"; and Part II, Item 4. "Recent Sales of Unregistered
Securities."
In August 2000, Crown entered into a lease with Daniel Jack Co. for the
premises located at 310 Waymont Court, Suite 100, Lake Mary, FL 32746. The
property consists of approximately 1,500 square feet and serves as the Company's
headquarters. The term is through December 31, 2000. The Company makes monthly
payments in advance in the amount of $2,250. See Part I, Item 1. "Facilities";
and Part I, Item 3. "Description of Property."
In October 2000, Armand Dauplaise, the Company's current Vice-Chairman and
President and Kevin Lockhart, the Company's current Vice-Chairman and Secretary
donated 1,047,500 shares each back to the Company in an effort to reduce the
issued and outstanding stock of the Company. See Part I, Item 1. "Employees and
Consultants"; Part I, Item 4. "Security Ownership of Certain Beneficial Owners
and Management"; Part I, Item 5. "Directors, Executive Officer, Promoters and
Control Persons"; Part I, Item 6. "Executive Compensation"; and Part I, Item 7.
"Certain Relationships and Related Transactions."
In October 2000, the Company issued a total of 86,000 shares of its Common
Stock to three (3) persons. Bradley Kline has served as a financial consultant
to Crown since October 1999. No contract between either Crown or the Company and
Mr. Kline exists. Melvin Correll and Glenna Correll have also served as
consultants to Crown. They introduced Crown to several doctors in the Orlando,
Florida area who are interested in Crown's live blood microscopy work. No
contract exists. Richard Wilson, who received 60,000 of the shares, was
inadvertently left off the list of Crown shareholders when the Share Exchange
took place in May 2000. For such offering, the Company relied upon Section 4(2)
of the Act, Rule 506 and Section 517.061(11) of the Florida Code. See Part I,
Item 1. "Employees and Consultants"; Part I, Item 7. "Certain Relationships and
Related Transactions"; and Part II, Item 4. "Recent Sales of Unregistered
Securities."
(b) BUSINESS OF THE COMPANY
GENERAL
Since its inception, the Company has been in the business of marketing and
distributing nutritional supplements, which are natural, nutritional,
biologically active materials formulated to provide specific health benefits to
humans and animals. Through the acquisition of the Company's wholly owned
subsidiary, Crown Enterprises, Inc., the Company introduced a line of private
label nutritional supplements and/or nutraceuticals it has trademarked as, GREEN
PEARLS(TM), which include Blue Green Algae harvested from Klamath Lake, Oregon.
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The Klamath Lake Blue Green Algae is considered to be, in the Company's opinion,
one of nature's truly miraculous nutritional and healing foods. Klamath Lake
Blue Green Algae is directly assimilated by the body with its glucose cell wall
unlike other forms of man-made photosynthesized algae such as chlorella which
has a cellulose cell wall. A cellulose cell wall is undigestible and must be
broken down through protracted artificial heat processing. Lake Klamath Blue
Green Algae is considered by the Company to be a foundational superfood for
humans and animals alike. The Company's wholly owned subsidiary, Crown
Enterprises, Inc. has developed a variety of products which include the base
component of Lake Klamath Blue Green Algae.
The Company has designed and is providing a blood analysis test which it
has branded as its "Live Blood Cell Analysis" program. This blood work-up
identifies the specific blood composition of individuals and attempts to
identify, in the Company's opinion, a normal range and associated nutritional
value after which it is able to tailor various naturopathic and nutritional
supplement products to address specific conditions which have been identified by
the test. The Company is utilizing its Live Blood Cell Analysis examination as a
marketing approach by which it will be able to sell its full line of nutritional
products. The Company's goal is to serve people worldwide who desire to live
well as they live longer. In administering the above test and tailoring specific
nutritional strategies and nutraceuticals to address what the Company's blood
work-up has perceived as deficiencies, the Company believes it will be able to
provide preventative and alternative healthcare options, programs, systems and
naturopathic products which may provide one with a better quality of life.
Nutraceuticals are biologically active materials, derived from plant, microbial
or animal sources, which are formulated to provide specific health and
productivity benefits for humans and animals including, but not limited to,
pharma foods, functional foods, fermented foods, phytochemicals, microbial feed
additives, probiotics, herbal products, vitamins and health supplements.
Prior to the Company's acquisition of Crown it focused solely on the
building of a business model aimed at the distribution and sale of primarily
nutraceutical based products. Since May 30, 2000, and the acquisition of Crown
the Company added an established 16 product line of nutraceutical based health
supplements for the human and animal health market.
Although many of the ingredients in the Company's products are vitamins,
minerals, herbs and other substances for which there is a long history of human
consumption, many of the Company's products contain within their base
formulation Klamath Lake Blue Green Algae. While the Company believes all of its
products to be safe when taken as directed there is little long-term experience
with human consumption of Klamath Lakes' Blue Green Algae. Accordingly, no
assurance can be given that the Company's products, even when used as directed,
will have the effects intended. Although the Company tests the formulation and
production of its products to ensure that they are safe when consumed as
directed, they have not sponsored clinical studies on the long-term effect of
human consumption. However, several other organizations have sponsored studies,
including Cell Tech, The World Health Organization and the Food and Drug
Administration.
PRINCIPAL PRODUCTS AND SERVICES
KLAMATH LAKE BLUE GREEN ALGAE - HUMAN APPLICATIONS
The Blue Green Algae from Oregon's Upper Klamath Lake is one of the richest
sources of biomass in the world. It has been more than 20 years since humans,
hoofed animals and pets have been realizing benefits from consuming Blue Green
Algae from Klamath Lake. The Company has taken this extremely nutritious algae
and has added various combinations and amounts of additional nutritional
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supplements and trace minerals to meet and achieve various health objectives in
not only humans but in animals, and specifically horses.
There are now sixteen(16) natural supplement products which the Company has
designed and presently markets through its wholly owned subsidiary Crown
Enterprises. Each aims to achieve specific goal; however, these stated goals and
objectives:
1. BLUE GREEN MANNA (TM)- Classified as a supernutritional designed to
deliver nutrients needed for peak performance.
2. PEARLNOGENOL (TM) - This Super antioxidant is designed to boost the
immune system, protect against degenerative diseases, and provide
nutritional support to tissues and cell system.
3. SUPER PEARLS (TM) - Taken as a dietary supplement, this nutrient
helps metabolize fats stored in the body.
4. PEARL-LYTE (TM) - Taken as a dietary supplement, this nutrient acts
as an appetite suppressant.
5. ACIDOPHILUS PLUS (TM) LACTOBACILLUS - This friendly blend of
bacterial flora helps control harmful bacteria in the intestinal tract.
6. DIGEST PLUS (TM) - Helps to bring the body into nutritional
balance.
7. TRACE MINERALS LIQUID - Assists the body to fight against stress,
high blood pressure and chronic fatigue.
8. INTERNAL CLEANSE (TM) - A natural herbal formula that cleans and
detoxifies the colon.
9. FIBERTOX (TM) - Needed for digestive purposes this product helps
lower cholestrol, helps break up saturated fats and provides nutritional
fiber.
10. VITAMINS PLUS (TM) - provides essential daily requirements and
other powerful nutrients beneficial to maintaining a healthy immune and
circulatory system.
11. PROTOSOLVE (TM) - assists in keeping blood vessels clear by
dissolving and removing undigested proteins.
12. CHROMOLIPE (TM) - Chromium Picolinate promotes permanent fat loss
through re- establishing healthy metabolic and insulin levels.
13. ADAM'S ASSURANCE (TM) - Assists in toning and strengthening the
male reproductive system while noticeably reducing prostrate enlargement
and infection.
14. CALCIUM/MAGNESIUM PLUS (TM) - Helps the production of metabolic
enzymes and the utilization of vitamins.
15. EVE'S SERENITY (TM) - Effective against painful menstrual cramping
and is useful in the avoidance of unpleasant PMS side effects.
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16. GARLIC/CAYENNE PLUS (TM)- Garlic has been shown to be valuable in
lowering blood pressure and serum cholesterol, assists in thinning the
blood and aiding one's digestion. Cayenne has been shown to also aid
digestion as well as improve one's circulation.
LIVE BLOOD CELL ANALYSIS
The Company has developed a Blood Work-up examination for individuals which
it markets as its "Live Blood Cell Analysis" Program. This Program is designed
to identify up to 50 blood borne conditions. This program is licensed on a fee
basis to prospective health field related customers and includes all required
equipment and training. The program is coupled with a nutritional maintenance
and monitoring program which focuses on an individual and families. Once a Live
Blood Cell Analysis is performed at the licensee's facility, a certified
Microscopist makes tailored recommendations as to the appropriate naturopathic
products and supplements to be used in addressing identified conditions. These
naturopathic products and supplements are ultimately purchased through Crown
Enterprises. In addition, this tailored program includes periodic testing,
re-testing and monitoring of an individual's progress through skilled and
advanced microscopic analysis. It is by the preceding analysis and related
recommendations as to which specific naturopathic products to purchase that the
Company will utilize its "sell through" concept. This concept allows the Company
to provide clients with a number of natural supplements as preventative and
alternative healthcare choice.
The Company estimates that it will be able to play a substantial role in
what some experts have identified as a sixty(60) billion dollar industry that
the Company believes to be prepared to grow at a twenty percent(20%) annual rate
over the next five(5) years. See: The Wall Street Journal, July 12, 1999.
However, there is no assurance that despite the substantial size of this
potential market that the Company will be able to successfully capture a
material share since it has had no substantial product sales from which it can
extrapolate a projected growth rate.
KLAMATH LAKE BLUE GREEN ALGAE - EQUINE APPLICATIONS
In addition to the human marketing and consumption of the above listed
natural supplements Crown also distributes to Equine owners the following
products:
1. SUPER BLUE GREEN ALGAE (FREEZE DRIED) - Helps heal horses who
develop tender heals from white line disease.
2. BLUE GREEN ALGAE(LIQUID )- Helps suppress and reverse the effects
of debalitating laminitis in horses.
3. DIGEST PLUS AND ACIDOPHILUS PLUS - Helps strengthen animal immune
systems resulting in less sick and lethargic animals and a quicker, more
effective healing process.
The Company anticipates adding additional revenue and royalty generating
agreements through future sublicenses. The Company plans to provide its complete
line of nutritional supplements on a selective private label basis to other
marketers of health supplements and directly to the public via the Internet
under the Company's GREEN PEARLS(TM) brand. As a nutritional supplement, limited
claims can be made as to results. The Company cannot estimate the effect of
these limitations on the sales potential of the product. NUTRACEUTICAL BASED
HEALTH SUPPLEMENTS FOR THE HUMAN HEALTH MARKET
<PAGE>
Specific nutraceuticals have been shown to affect bodily functions in
targeted ways, such as by reducing anxiety (St. John's Wort) or by lowering
cholesterol (soy extracts) and assisting in sleep (Valerian). The active
ingredients in nutraceuticals may include complex mixtures of organic molecules,
small molecules, oligosaccharides, lactic acid bacteria, fungi, minerals and
other microbial secondary metabolites. Lactobacillus acidophilus cultures are
classic nutraceuticals which have long been components of yogurt and fermented
food. Published literature has shown lactic acid bacteria to exert positive
gastrointestinal health benefits beyond their nutritional value.
The Company believes that the market for nutraceuticals will continue to
grow because of an ever increasing, longer-lived aging population. Medical
challenges associated with aging such as chronic diseases, allergy,
inflammation, cancer, and thrombotic diseases, will most likely cause an even
greater emphasis on health care delivery. The development and identification of
new nutraceutical products and markets may require combining interdisciplinary
technologies, including plant science, microbiology, biochemistry and nutrition.
MANUFACTURING
Animal Health Products
The Company has its proprietary formulas manufactured by Vision Industries.
Private Label Heath Supplement Manufacturing.
The Company has its proprietary formulas manufactured by Ceba-Tek, Global
Nutrition, Natures Path, Uckele Health & Nutrition and Vision Industries.
The principal markets in which the Company competes are competitive and
fragmented, with competitors in the private label market, the human health
supplements market and the equine market. The Company's competitors in the
private label manufacture of health supplements include, Montana Naturals,
Chemins, and Pacific Nutritional.
The Company's competitors in the manufacture of lactic acid bacteria for
inclusion in ACIDOPHILUS PLUS(TM) LACTOBACILLUS and DIGEST PLUS AND ACIDOPHILUS
PLUS include Chris Hansen, Rhone-Poulenc and Lallemand.
MARKETING, SALES AND DISTRIBUTION
Animal Health Products. The Company relies on independent sales
representatives to sell and service customers of its animal health products. The
Company also anticipates marketing and selling private label equine focused
Green Algae based products directly to branded companies involved in horse
breeding.
Human Health Products. The Company anticipates developing a sales and
marketing/customer service department dedicated to selling the Company's
services and proprietary products and technologies to branded companies in the
health supplement industry.
The primary markets for Crown Enterprises' services and products are in the
preventive and alternative healthcare fields. Preventive and alternative
healthcare programs and systems establish very specific requirements in helping
improve and maintain citizenry health. The Company believes that the market is
global for both Microscopy and nutritional supplements. In addition to domestic
sales efforts, the Company is currently pursuing strategic alliances
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internationally. Licensing agreement sales and related naturopathic supplement
sales should grow significantly within the now multi-billion dollar preventive
and alternative healthcare market.
The Company's primary target markets in the both the preventive and
alternative healthcare industry will include:
*Osteopaths *Specialty Healthcare Centers *Chiropractors
*Nutritionists *Physical Therapists *Weight Loss Centers
*Preventive & Alternative Healthcare Professionals/Naturopathic Doctors
As nutritional supplements use combined with preventive and alternative
healthcare are more readily accepted, the Company believes Physicians and other
healthcare providers will be targeted for marketing purposes. Crown Enterprises
has developed a Microscopy "Live Blood Cell Analysis" program designed to
identify up to 50 blood borne conditions. This program is licensed on a fee
basis to prospective health field related customers and includes all required
equipment and training. However, analysis must be coupled with a nutritional
maintenance and monitoring program tailored for the individuals and families.
Once a "Live Blood Cell Analysis" is performed at the licensee's facility, a
certified Microscopist makes recommendations as to the appropriate naturopathic
products and supplements to be used in the addressing of the identified
conditions. Subsequently, those naturopathic products and supplements will be
purchased through Crown Enterprises.
The Microscopy "Live Blood Cell Analysis" concept of identifying health
deficiencies is growing at an accelerating rate, and the Company believes it
will become the quickest window into one's health condition around the world.
The Company believes it will succeed in its role in the preventive and
alternative healthcare market place because of the "sell through" approach of
the Microscopy program training and education first, and naturopathic products
and supplements sales second. Once the "Live Blood Cell Analysis" is performed,
a tailored maintenance program is then implemented for individuals and families.
This tailored program includes periodic testing, re-testing, and monitoring of
their progress through skilled and advancing technologies. The Company
anticipates that meaningful Microscopy revenues may be generated through the
establishing of Microscopy Centers, sales of equipment, training, continuing
education, and licensing fees. In addition the Company believes that
Naturopathic products and supplements revenues will be generated through
wholesale distribution and retail sales in both the domestic and international
markets. The Company's wholly owned subsidiary, Crown Enterprises, will serve as
an ambassador to business, industry and governmental agencies to effectively
contribute to the healthcare needs of a global humanity.
The concept of training, education, monitored programs and systems, aligned
with recurring naturopathic product sales the Company believes will position it
to capture an increasing share of the health conscious consumer's demand for
nutritional supplements.
EFFECT OF UNFAVORABLE PUBLICITY
The Company believes the nutritional supplement market is affected by
national media attention regarding the consumption of nutritional supplements.
There can be no assurance that future scientific research or publicity will be
favorable to the nutritional supplement market of any particular product, or
consistent with earlier research or publicity. Future reports of research that
are perceived as less favorable or that question such earlier research could
have a material adverse effect on the Company. Because of the Company's
dependence upon consumer perceptions, adverse publicity associated with illness
or other adverse effects resulting from the consumption of the Company's
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products or any similar products distributed by other companies could have a
material adverse impact on the Company. Such adverse publicity could arise even
if the adverse effects associated with such products resulted from failure to
consume such products as directed. In addition, the Company may not be able to
counter the effects of negative publicity concerning the efficacy of its
products.
DEPENDENCE ON NEW PRODUCTS
The Company believes its ability to grow in its existing markets is
partially dependent upon its ability to introduce new and innovative products
into such markets. Although the Company seeks to introduce additional products
each year in its existing markets, the success of new products is subject to a
number of conditions, including developing products that will appeal to
customers and comply with existing regulations at the time of introduction.
There can be no assurance that the Company's efforts to develop innovative new
products will be successful, that customers will accept new products, or that
the Company will obtain regulatory approvals of such new products, if required.
In addition, no assurance can be given that new products currently experiencing
strong popularity and rapid growth will maintain their sales over time.
COMPETITION
The principal markets in which the Company competes are competitive and
fragmented, with competitors in the private label market, the human and animal
health supplements market. Increased competition could have a material adverse
effect on the Company, as competition may have far greater financial and other
resources available to them and possess extensive manufacturing, distribution
and marketing capabilities far greater than those of the Company.
The Company believes that its primary competitive advantage will result
from its ability to create a recognizable global brand that the market readily
associates with quality. Additionally, the Company believes that other principal
competitive factors in the sale of health supplements for animal and human
consumption are quality, technical and manufacturing capability and timely
delivery and service. The Company believes that its strong and stable customer
relationships evidence that it competes favorably with respect to each of these
factors.
Although all employees sign confidentiality agreements, there is no
guarantee either that trade secrets won't be shared with competitors or that the
Company could enforce these agreements. Such disclosures, if made, could
negatively affect the Company's competitiveness.
SOURCES AND AVAILABILITY OF RAW MATERIALS AND PRINCIPAL SUPPLIERS
The Company obtains all its raw materials for the manufacture of its
products from other sources. The Company generally does not have contracts with
any entities or persons committing such suppliers to provide the materials
required for the production of its products. There can be no assurance that
suppliers will provide the raw materials needed by the Company in the quantities
requested or at a price the Company is willing to pay. Because the Company does
not control the actual production of these raw materials, it is also subject to
delays caused by interruption in production of materials based on conditions not
wholly within its control. The inability of the Company to obtain adequate
supplies of raw materials for its products at favorable prices, or at all, as a
result of any of the foregoing factors or otherwise, could have a material
adverse effect on the Company. However, raw materials include all natural herbs
and minerals and are plentiful worldwide.
<PAGE>
INTELLECTUAL PROPERTY
The Company relies on common law trademark rights to protect its
unregistered trademarks. Common law trademark rights do not provide the Company
with the same level of protection as afforded by a United States federal
registration of a trademark. In addition, common law trademark rights are
limited to the geographic area in which the trademark is actually used, while a
United States federal registration of a trademark enables the registrant to stop
the unauthorized use of the trademark by any third party anywhere in the United
States even if the registrant has never used the trademark in the geographic
area wherein the unauthorized use is being made (provided, however, that an
unauthorized third party user has not, prior to the registration date, perfected
its common law rights in the trademark in that geographic area). The Company
also intends to register its trademarks in certain foreign jurisdictions where
the Company's products are sold. However, the protection available in such
jurisdictions may not be as extensive as the protection available to the Company
in the United States.
As of August 31, 2000, the Company had approximately two (2) trademark
applications pending with the United States Patent and Trademark Office. The
Company's policy is to pursue registrations for all of the trademarks associated
with its key products.
Following is a list of the Company's registered and pending trademarks.
Trademark Name Country
-------------- -------
GREEN PEARLS(TM) USA
BLUE GREEN MANNA(TM) USA
GOVERNMENTAL REGULATIONS
Many of the Company's products are either G.R.A.S. (Generally Regarded As
Safe) listed by the FDA or do not currently require extended regulatory
approval. Recent legislation has resulted in a regulatory environment which sets
what the Company considers to be reasonable limitations and guidelines on health
claims and labeling for natural products. Thus the Company believes that current
and reasonably foreseeable governmental regulation will have minimal impact on
its business.
Statements of the Company and its customers regarding dietary supplement
products are subject to regulation by the FTC under the Federal Trade Commission
Act, which prohibits unfair or deceptive trade practices, including false or
misleading advertising. The FTC in recent years has brought a number of actions
challenging claims by companies.
In the future, the Company may be subject to additional laws or regulations
administered by the FDA or other federal, state or foreign regulatory
authorities, the repeal of laws or regulations which the Company considers
favorable, such as the DSHEA, or more stringent interpretations of current laws
or regulations. The Company is unable to predict the nature of such future laws,
regulations, interpretations or application, nor can it predict what effect
additional governmental regulations or administrative orders, when and if
promulgated, would have on its business in the future. They could, however,
require the reformulation of certain products to meet new standards, the recall
or discontinuance of certain products not able to be reformulated, imposition of
additional record keeping requirements, or expanded documentation of the
<PAGE>
properties of certain products, expanded or different labeling and scientific
substantiation. Any or all of such requirements could have a material adverse
effect on the company's results of operations and financial condition.
RESEARCH & DEVELOPMENT
To date, the Company has spent in excess of $100,000 in the development of
its microscopy program and its proprietary product line. Management has budgeted
approximately $190,000 to be spent on research and development in 2001. The
Company funds these activities internally.
Health Supplement Development: The Company develops products requested by
customers, and/or develops new product concepts which it licenses to customers.
The Company also actively seeks and reviews new nutraceutical materials and
delivery technologies developed by independent researchers. There is no
assurance that this research and development effort will result in marketable
products or services.
COMPLIANCE WITH ENVIRONMENTAL LAWS
The Company believes that it is in full compliance with all relevant
environmental laws. Due to the nature of the Company's operations, to date, the
cost of complying with environmental laws does not have a significant effect on
the Company's operations.
EMPLOYEES AND CONSULTANTS
As of October 31, 2000, the Company employs two (2) full time employees.
None of the Company's employees are represented by labor unions. The Company
believes its relationship with employees is excellent.
The Company believes that its success depends to a significant extent on
the management and other skills of Armand Dauplaise, its President and Kevin
Lockhart, its Secretary, as well as its ability to attract other skilled
personnel. The loss or unavailability of the services of Mr. Dauplaise or Mr.
Lockhart could have a material adverse effect on the Company.
In May 2000, the Company entered into the Share Exchange with Crown and its
shareholders which had been formed in April 1999. The exchange was made whereby
the Company issued 10,000,000 shares of its Common Stock to the shareholders of
Crown for all of the issued and outstanding stock of Crown. As part of the
exchange, Dauplaise and Lockhart each received 4,597,500 shares of the Company's
Common Stock. This offering was conducted pursuant to Section 4(2) of the Act,
Rule 506 and Section 517.061(11) of the Florida Code. See Part I, Item 4.
"Security Ownership of Certain Beneficial Owners and Management"; Part I, Item
5. "Directors, Executive Officer, Promoters and Control Persons"; Part I, Item
6. "Executive Compensation"; Part I, Item 7. "Certain Relationships and Related
Transactions"; and Part II, Item 4. "Recent Sales of Unregistered Securities."
In May 2000, the Company issued 100,000 shares of its restricted Common
Stock to three (3) persons in connection with their services to the Company in
connection with the Share Exchange. For such offering, the Company relied upon
Section 4(2) of the Act, Rule 506 and Section 517.061(11) of the Florida Code.
See Part I, Item 7. "Certain Relationships and Related Transactions"; and Part
II, Item 4. "Recent Sales of Unregistered Securities."
In May 2000, the Company entered into an employment agreement with Armand
Dauplaise to be the Company's Vice-Chairman and President. Mr. Dauplaise draws a
<PAGE>
base salary of $120,000 annually and is entitled to a monthly vehicle allowance
of $350 per month. The term of the agreement is for a period of one (1) year and
automatically renews for successive one (1) year terms. See Part I, Item 4.
"Security Ownership of Certain Beneficial Owners and Management"; Part I, Item
5. "Directors, Executive Officer, Promoters and Control Persons"; Part I, Item
6. "Executive Compensation"; and Part I, Item 7. "Certain Relationships and
Related Transactions."
In May 2000, the Company entered into an employment agreement with Kevin
Lockhart to be the Company's Vice-Chairman and Secretary. Mr. Lockhart draws a
base salary of $120,000 annually and is entitled to a monthly vehicle allowance
of $350 per month. The term of the agreement is for a period of one (1) year and
automatically renews for successive one (1) year terms. See Part I, Item 4.
"Security Ownership of Certain Beneficial Owners and Management"; Part I, Item
5. "Directors, Executive Officer, Promoters and Control Persons"; Part I, Item
6. "Executive Compensation"; and Part I, Item 7. "Certain Relationships and
Related Transactions."
In October 2000, Armand Dauplaise, the Company's current Vice-Chairman and
President and Kevin Lockhart, the Company's current Vice-Chairman and Secretary
donated 1,047,500 shares each back to the Company in an effort to reduce the
issued and outstanding stock of the Company. See Part I, Item 4. "Security
Ownership of Certain Beneficial Owners and Management"; Part I, Item 5.
"Directors, Executive Officer, Promoters and Control Persons"; Part I, Item 6.
"Executive Compensation"; and Part I, Item 7. "Certain Relationships and Related
Transactions."
In October 2000, the Company issued a total of 86,000 shares of its Common
Stock to three (3) persons. Bradley Kline has served as a financial consultant
to Crown since October 1999. No contract between either Crown or the Company and
Mr. Kline exists. Melvin Correll and Glenna Correll have also served as
consultants to Crown. They introduced Crown to several doctors in the Orlando,
Florida area who are interested in Crown's live blood microscopy work. No
contract exists. Richard Wilson, who received 60,000 of the shares, was
inadvertently left off the list of Crown shareholders when the Share Exchange
took place in May 2000. For such offering, the Company relied upon Section 4(2)
of the Act, Rule 506 and Section 517.061(11) of the Florida Code. See Part I,
Item 7. "Certain Relationships and Related Transactions"; and Part II, Item 4.
"Recent Sales of Unregistered Securities."
Facilities
In August 2000, Crown entered into a lease with Daniel Jack Co. for the
premises located at 310 Waymont Court, Suite 100, Lake Mary, FL 32746. The
property consists of approximately 1,500 square feet and serves as the Company's
headquarters. The term is through December 31, 2000. The Company makes monthly
payments in advance in the amount of $2,250. See Part I, Item 3. "Description of
Property."
RISK FACTORS
TRENDS IN THE NUTRITIONAL INDUSTRY; NEW PRODUCT SUPPORT
The nutritional industry is subject to rapidly changing consumer demands
and preferences. There can be no assurance that customers will continue to favor
the products provided and manufactured by the Company. A significant shift in
customer preferences could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, products
that gain wide acceptance with consumers may result in a greater number of
competitors entering the market which could result in downward price pressure
which could adversely impact the Company's gross profit margins. In addition,
many of the ingredients for the Company's products require long lead times for
<PAGE>
growth and production for which the Company must buy or commit to buy long
before ultimate sale to its customers. There can be no assurance that sufficient
consumer demand will still exist at the time the final product is available for
sale or that gross profit margins will be maintained.
The Company believes its growth will be materially dependent upon its
ability to develop new techniques, processes and technical capabilities
necessary to meet the needs of its customers and potential customers. The
inability of the Company to anticipate and respond to these rapidly changing
demands could have an adverse effect on the Company.
GOVERNMENT REGULATION
The manufacture, packaging, labeling, advertising, promotion, distribution
and sale of the Company's products are subject to regulation by numerous
governmental agencies. The most active of these is the U.S. Food and Drug
Administration (the "FDA"). Through regulations promulgated, the FDA regulates
the Company's products under the Federal Food, Drug and Cosmetic Act (the
"FDCA") and the Dietary Supplement Health and Education Act (the "DSHEA"). The
Company's products are also subject to regulation by, among other regulatory
entities, the Consumer Product Safety Commission (the "CPSC"), and the U.S.
Department of Agriculture (the "USDA"). In addition, the Company's
manufacturers' facilities are regulated by the Environmental Protection Agency
(the "EPA") and the Occupational Safety and Health Administration (the "OSHA").
Advertising and other forms of promotion and methods of marketing of the
Company's products are subject to regulation by the U.S. Federal Trade
Commission (the "FTC"), which regulates these activities under the Federal Trade
Commission Act (the "FTCA"). The manufacturing, labeling and advertising of the
Company's products are also regulated by various states and local agencies as
well as those of each foreign country to which the Company distributes its
products. In particular, California's Safe Drinking Water and Toxic Enforcement
Act of 1986 ("Proposition 65") requires warnings on labels of dietary
supplements that contain chemicals listed by the state which are known to cause
cancer or reproductive toxicity.
The Company's manufactured products are generally regulated as dietary
supplements under the FDCA and DSHEA. Unless a claim is made that a dietary
supplement may be used to treat, mitigate, cure, prevent or diagnose a specific
disease, the Company's manufactured products are not subject to pre- market
approval by the FDA. However, these products are nonetheless subject to
extensive regulation by the FDA relating to adulteration and misbranding. For
instance, the Company is responsible for ensuring that all dietary ingredients
in a supplement are safe, must notify the FDA in advance of putting a product
containing a new dietary ingredient (i.e., an ingredient not marketed for use as
a supplement before October 15, 1994) on the market and furnish adequate
information to provide reasonable assurance of the ingredient's safety. Further,
if the Company makes statements about the supplement's effects on the structure
or function of the body, the Company must, among other things, have
substantiation that the statements are truthful, accurate and not misleading. In
addition, the Company's product labels must bear proper ingredient and
nutritional labeling and the Company's supplements must be manufactured in
accordance with current Good Manufacturing Practice regulations ("GMPs") for
foods. The FDA has issued an advance notice of proposed rulemaking to consider
whether to develop specific GMP regulations for dietary supplements and dietary
supplement ingredients. Such regulations, if promulgated, may be significantly
more rigorous than current requirements and may contain quality assurance
requirements similar to GMPs for drug products. A product can be removed from
the market if it is shown to pose a significant or unreasonable risk of illness
or injury. Moreover, if the manufacturer makes claims, or the FDA determines,
that the "intended use" of any of the Company's products is for the diagnosis,
cure, mitigation, treatment or prevention of disease, the product would meet the
definition of a drug and would require pre-market approval of safety and
<PAGE>
effectiveness prior to its manufacture and distribution. Failure of the Company
to comply with applicable FDA regulatory requirements may result in, among other
things, injunctions, product withdrawals, recalls, product seizures, fines and
criminal prosecutions.
Advertising of the Company's nutritional products will be subject to
regulation by the FTC under the FTCA. Section 5 of the FTCA prohibits unfair
methods of competition and unfair or deceptive acts or practices in or affecting
commerce. Section 12 of the FTCA provides that the dissemination or the causing
to be disseminated of any false advertisement pertaining to, among other things,
drugs or foods, which includes nutritional supplements, is an unfair or
deceptive act or practice. Under the FTC's "substantiation doctrine," an
advertiser is required to have a "reasonable basis" for all product claims at
the time the claims are first used in advertising or other promotions. Failure
to adequately substantiate claims may be considered either as a deceptive or
unfair practice. Pursuant to this FTC requirement, the Company or the customers
to which it provides manufactured products will be required to have adequate
substantiation for all advertising claims made about its products. The type of
substantiation will be dependent upon the product claims made. For example, a
health claim normally would require competent and reliable scientific evidence,
while a taste claim would require only survey evidence.
In recent years the FTC has initiated numerous investigations of
nutritional supplement and weight loss products and companies. The FTC is
reexamining its regulation of advertising for nutritional supplements and has
announced that it will issue a guidance document to assist nutritional
supplement marketers in understanding and complying with the substantiation
requirement. Upon release of this guidance document, the Company or the
customers to which it provides manufactured product will be required to evaluate
its compliance with the guideline and may be required to change its advertising
and promotional practices.
Governmental regulations in foreign countries where the Company sells and
plans to commence or expand sales may prevent or delay entry into the market or
prevent or delay the introduction, or require the reformulation, of certain of
the Company's products. Compliance with such foreign governmental regulations is
generally the responsibility of the Company's distributors in those countries.
These distributors are independent contractors over whom the Company has limited
control.
The Company may be subject to additional laws or regulations by the FDA or
other federal, state or foreign regulatory authorities, the repeal of laws or
regulations which the Company considers favorable, such as DSHEA, or more
stringent interpretations of current laws or regulations, from time to time in
the future. The Company is unable to predict the nature of such future laws,
regulations, interpretations or applications, nor can it predict what effect
additional governmental regulations or administrative orders, when and if
promulgated, would have on its business in the future. Such laws or regulations
could, however, require the Company to reformulate certain products to meet new
standards or recall or discontinuance of certain products that cannot be
reformulated, impose additional recordkeeping requirements, require expanded
documentation of the properties of certain products or expand or change
requirements as to labeling or scientific substantiation. Any or all of these
requirements could have a material adverse effect on the Company's business,
financial condition and results of operations.
COMPETITION
The nutritional industry is highly competitive. Numerous companies, many of
which are significantly larger than the Company, have greater financial,
personnel, distribution and other resources than the Company and may be better
able to withstand volatile market conditions, compete with the Company in
<PAGE>
supplying herbs and extracts and in the development, manufacture and marketing
of nutritional supplements. The Company's principal competition comes from
domestic and foreign manufacturers and other wholesale distribution companies.
With generally low barriers to entry, additional competitors could enter the
market. There can be no assurance that national or international companies will
not seek to enter, or increase their presence in, the industry or that existing
or potential customers will not expand, whether horizontally or vertically and
whether by acquisition or otherwise. In addition, large nationally known
companies (such as Weider Nutritional International, Inc., Twinlab Corporation,
Solgar Vitamin and Holding Company, Rexall Sundown, Inc., Nature's Way Products,
Botanicals International, Inc., Pure World, Inc. and Triarco Industries, Inc.)
and, on a limited basis, pharmaceutical and packaged food and beverage
companies, compete with the Company in this industry. Competition from any of
these companies could have a material adverse effect on the Company. See
"Business--Competition."
PRODUCT LIABILITY; POTENTIAL ADVERSE PRODUCT PUBLICITY
The Company, like any other wholesaler, retailer or distributor of products
that are designed to be ingested, faces an inherent risk of exposure to product
liability claims in the event that the use of its products results in injury.
The Company faces the risk that materials used in the manufacture of final
products may be contaminated with substances that may cause sickness or injury
to persons who have used the products, or that sickness or injury to persons may
occur if products distributed by the Company are ingested in dosages which
exceed the dosage recommended on the product label. In the event that insurance
coverage or contractual indemnification is not adequate, product liability
claims could have a material adverse effect on the Company. The successful
assertion or settlement of any uninsured claim, a significant number of insured
claims, or a claim exceeding the Company's insurance coverage could have a
material adverse effect on the Company.
The Company is highly dependent upon consumers' perception of the safety
and quality of its products as well as similar products distributed by other
companies. Thus, the mere publication of reports asserting that such products
may be harmful could have a material adverse effect on the Company, regardless
of whether such reports are scientifically supported and regardless of whether
the harmful effects would be present at the dosages recommended for such
products.
Management believes the nutritional industry is affected by national media
attention regarding the consumption of supplements. There can be no assurance
that future scientific research or publicity will be favorable to the
nutritional industry or any particular product. Future reports of research that
are perceived as unfavorable could have a material adverse effect on the
Company. Because of the Company's dependence upon consumer perceptions, adverse
publicity associated with illness or other adverse effects of consumption of the
Company's products, or any similar products distributed by other companies could
have a material adverse impact on the Company. Such adverse publicity could
arise even if the adverse effects associated with such products resulted from
con sumers' failure to consume such products as directed. The Company may not be
able to counter the effects of negative publicity concerning its products or raw
materials.
LIMITED AVAILABILITY OF CONCLUSIVE CLINICAL STUDIES
Although many of the ingredients in the Company's products are vitamins,
minerals, herbs and other substances for which there is a long history of human
consumption, some of the Company's products contain innovative ingredients or
combinations of ingredients. Although the Company believes all of its products
to be safe when used as directed, there is little long-term experience with
human consumption of certain of these product ingredients or combinations
thereof. Accordingly, no assurance can be given that the Company's products,
<PAGE>
even when used as directed, will have the effects intended. Although the Company
tests the formulation and production of its products, it has not sponsored or
conducted clinical studies on the effects of human consumption. See "--Product
Liability; Potential Adverse Product Publicity."
RISKS ASSOCIATED WITH MANUFACTURING AND PROCESSING
The Company's results of operations are dependent upon the continued
operation of its manufacturers' processing facilities in Florida, New Jersey and
Pennsylvania at their current levels. The operation of nutritional supplement
manufacturing plants involves many risks, including the breakdown, failure or
substandard performance of equipment, natural and other disasters, and the need
to comply with the requirements of government agencies, including the FDA. All
of the Company's products and ingredients are processed by outside contractors.
The Company's profit margins on these products and its ability to deliver these
products on a timely basis are dependent on the ability of the outside
contractors to continue to supply products that meet the Company's quality
standards in a timely and cost-efficient manner. The occurrence of significant
operational problems at the facilities of its outside suppliers could have a
material adverse effect on the Company's business, financial condition and
results of operations during the period of such operational difficulties.
INTELLECTUAL PROPERTY PROTECTION
The Company relies on common law trademark rights to protect its
unregistered trademarks as well as its trade dress rights. Common law trademark
rights generally are limited to the geographic area in which the trademark is
actually used, while a United States federal registration of a trademark enables
the registrant to stop the unauthorized use of the trademark by any third party
anywhere in the United States. The protection available, if any, in
jurisdictions other than the United States may not be as extensive as the
protection available to the Company in the United States.
Although the Company seeks to avoid infringement on the intellectual
property rights of others, there can be no assurance that third parties will not
assert intellectual property infringement claims against the Company. Any
infringement claims by third parties against the Company may have a material
adverse effect on the Company's business, financial condition and results of
operations.
DEPENDENCE ON KEY PERSONNEL
The success of the Company will be largely dependent on the continuing
efforts of Armand Dauplaise, the Company's President and Vice Chairman and Kevin
Lockhart, the Company's Secretary and Vice Chairman. The Company has entered
into employment and non-competition agreements with each of these individuals.
Additionally, the Company likely will depend on the senior management of any
significant business it acquires in the future. The business or prospects of the
Company could be adversely affected if any of these people, current or future,
do not continue in their management role until the Company is able to attract
and retain qualified replacements. The success of the Company will also depend
on its ability to attract and retain other qualified personnel.
NO ASSURANCE OF FUTURE INDUSTRY GROWTH
There is limited reliable, comprehensive data available regarding the size
of the nutritional industry and the historic and future expected growth of such
industry. Industry data and projections
<PAGE>
are inherently uncertain and subject to change. There can be no assurance that
the industry is as large as some publicly available reports indicate or that
projected growth will occur or continue. In addition, underlying market
conditions are subject to change based on economic conditions, consumer
preferences and other factors that are beyond the Company's control. There can
be no assurance that an adverse change in the size or growth rate of the
nutritional product market will not have a material adverse effect on the
Company.
ACQUISITIONS MAY ADVERSELY AFFECT THE BUSINESS
As part of the Company's business strategy it expects to make acquisitions
of businesses that offer complementary products, services and technologies.
Acquisitions are and will be accompanied by the risks commonly encountered in
acquisitions of businesses. Such risks include, among other things, the
possibility that the Company pay much more than the acquired business is worth,
the difficulty of integrating the operations and personnel of the acquired
business into that of the Company, the potential product liability associated
with the sale of the acquired business' products, the potential disruption of
our ongoing business, the distraction of management from the Company's business,
the inability of management to maximize the Company's financial and strategic
position, and the impairment of relationships with employees and customers.
Management has limited experience acquiring businesses and cannot assure anyone
that they will identify appropriate targets, will acquire such businesses on
favorable terms, or will be able to integrate such organizations into the
business successfully. Further, the financial consequences of acquisitions and
investments may include potentially dilutive issuances of equity securities,
one-time write-offs, amortization expenses related to goodwill and other
intangible assets and the incurrence of contingent liabilities. These risks
could have a material adverse effect on our business, financial condition and
results of operations.
CONTROL BY PRESENT SHAREHOLDERS
The present shareholders of the Company's Common Stock will, by virtue of
their percentage share ownership and the lack of cumulative voting, be able to
elect the entire Board of Directors, establish the Company's policies and
generally direct its affairs. Accordingly, persons investing in the Company's
Common Stock will have no significant voice in Company management, and cannot be
assured of ever having representation on the Board of Directors. (See Part I,
Item 4. "Security Ownership of Certain Beneficial Owners and Managers.")
POTENTIAL ANTI-TAKEOVER AND OTHER EFFECTS OF ISSUANCE OF
PREFERRED STOCK MAY BE DETRIMENTAL TO COMMON SHAREHOLDERS
The Company is authorized to issue up to 10,000,000 shares of preferred
stock. $.0001 par value per share (hereinafter referred to as the "Preferred
Stock"); none of which shares has been issued. The issuance of Preferred Stock
does not require approval by the shareholders of the Company's Common Stock. The
Board of Directors, in its sole discretion, has the power to issue shares of
Preferred Stock in one or more series and to establish the dividend rates and
preferences, liquidation preferences, voting rights, redemption and conversion
terms and conditions and any other relative rights and preferences with respect
to any series of Preferred Stock. Holders of Preferred Stock may have the right
to receive dividends, certain preferences in liquidation and conversion and
other rights; any of which rights and preferences may operate to the detriment
of the shareholders of the Company's Common Stock. Further, the issuance of any
shares of Preferred Stock having rights superior to those of the Company's
Common Stock may result in a decrease in the value of market price of the Common
Stock provided a market exists, and additionally, could be used by theBoard of
Directors as an anti-takeover measure or device to prevent a change in control
of the Company.
<PAGE>
NO SECONDARY TRADING EXEMPTION
In the event a market develops in the Company's shares, of which there can
be no assurance, secondary trading in the Common Stock will not be possible in
each state until the shares of Common Stock are qualified for sale under the
applicable securities laws of the state or the Company verifies that an
exemption, such as listing in certain recognized securities manuals, is
available for secondary trading in the state. There can be no assurance that the
Company will be successful in registering or qualifying the Common Stock for
secondary trading, or availing itself of an exemption for secondary trading in
the Common Stock, in any state. If the Company fails to register or qualify, or
obtain or verify an exemption for the secondary trading of, the Common Stock in
any particular state, the shares of Common Stock could not be offered or sold
to, or purchased by, a resident of that state. In the event that a significant
number of states refuse to permit secondary trading in the Company's Common
Stock, a public market for the Common Stock will fail to develop and the shares
could be deprived of any value.
POSSIBLE ADVERSE EFFECT OF PENNY STOCK REGULATIONS ON LIQUIDITY
OF COMMON STOCK IN ANY SECONDARY MARKET
In the event a market develops in the Company's shares, of which there can
be no assurance, then if a secondary trading market develops in the shares of
Common Stock of the Company, of which there can be no assurance, the Common
Stock is expected to come within the meaning of the term "penny stock" under 17
CAR 240.3a51-1 because such shares are issued by a small company; are low-priced
(under five dollars); and are not traded on NASDAQ or on a national stock
exchange. The Securities and Exchange Commission has established risk disclosure
requirements for broker- dealers participating in penny stock transactions as
part of a system of disclosure and regulatory oversight for the operation of the
penny stock market. Rule 15g-9 under the Securities Exchange Act of 1934, as
amended, obligates a broker-dealer to satisfy special sales practice
requirements, including a requirement that it make an individualized written
suitability determination of the purchaser and receive the purchaser's written
consent prior to the transaction. Further, the Securities Enforcement Remedies
and Penny Stock Reform Act of 1990 require a broker-dealer, prior to a
transaction in a penny stock, to deliver a standardized risk disclosure
instrument that provides information about penny stocks and the risks in the
penny stock market. Additionally, the customer must be provided by the
broker-dealer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and the salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. For so long as the Company's Common Stock is considered
penny stock, the penny stock regulations can be expected to have an adverse
effect on the liquidity of the Common Stock in the secondary market, if any,
which develops.
SEASONALITY
Management believes the nutritional industry experiences lower product net
sales during the months of June, July and August. Accordingly, as a supplier to
such industry, the Company expects its operations generally will be lower in the
months of June, July and August resulting in lower revenues and operating
results in the second and third fiscal quarters.
<PAGE>
INDUSTRY OVERVIEW
A 1997 market report, "The U.S. Market For Vitamins, Supplements and
Minerals," prepared by the independent consumer marketing research firm of
Packaged Facts (the "Packaged Facts Report"), reported that the retail market
for vitamins, minerals and other dietary and nutritional supplements (excluding
sports nutrition and diet products) grew at a compound annual rate of 15% from
$3.7 billion in 1992 to $6.5 billion in 1996. A large portion of this growth is
attributable to an increase in sales of such other supplements (primarily herbal
products), which grew from $570 million in 1992 to $2.3 billion in 1996. This
growth has been fueled by the popularity of such herbs as echinacea, garlic,
ginseng, ginkgo biloba and, more recently, saw palmetto, St. John's wort and
kava kava. The Packaged Facts Report forecasts 13.6% compound annual growth in
the retail market for vitamins, minerals and other supplements (excluding sports
nutrition and diet products), including 25% compound annual growth in the market
for other supplements, through 2001.
According to the Packaged Facts Report, compound annual growth rates from
1992 through 1996 for vitamins, minerals and other supplements were 8.0%, 5.2%
and 41.7%, respectively.
The Company believes that growth in the nutritional supplement industry
will continue for the foreseeable future due to, among other things, the aging
of the American population combined with the tendency of consumers to purchase
more nutritional supplements as they mature, liberalized labeling laws under the
Dietary Supplements and Health Education Act of 1994 (DSHEA), academic studies
supporting the positive correlation between health and nutritional
supplementation, increased focus on preventative healthcare in general and as a
contributing factor in controlling healthcare costs and increasing media
attention and acceptance of alternative medicine, which often includes
nutritional supplementation as part of an overall treatment plan. Growth may
also result from potential new products and increasing awareness of existing
products.
Although there are several large participants in the nutritional supplement
industry such as Weider Nutritional International, Inc., Twinlab Corporation,
Solgar Vitamin and Holding Company, Rexall Sundown, Inc., Nature's Way Products,
Botanicals International, Inc., Pure World, Inc. and Triarco Industries, Inc.,
the industry continues to include numerous small companies. The Nutrition
Business Journal reported in July 1997 that there are nearly 5,000 privately
held companies with under $25 million in annual sales in the retail and
manufacturing segments of the nutritional industry. These businesses typically
are owner-operated and have similar profiles, including limited access to the
capital necessary to develop and maintain inventory of large volume and wide
selections, expand product offerings, implement advanced management information
systems, incorporate the use of sophisticated technological equipment, conduct
research and development and service national and regional accounts.
GROWTH STRATEGY
The Company was formed to capitalize on opportunities to integrate and
consolidate the highly fragmented nutritional industry. The Company's strategy
is to (i) support and expand the operations of the Company, (ii) capitalize on
operating synergies and cost savings available through consolidation, and (iii)
pursue an acquisition program designed to further vertical integration and to
expand existing operations. The acquisition of Crown Enterprises, Inc. is an
early step in this process.
The Company will identify and pursue future acquisition prospects based on
a variety of factors including profitable operating history, entrepreneurial
management, a pattern of sales growth and industry reputation. In order to
preserve the entrepreneurial culture of the Company, future
<PAGE>
acquisitions will be operated as separate subsidiaries of the Company following
the Mergers, each continuing to be led by current management. Certain common
administrative and developmental functions will be integrated at the parent
company level. The Company intends to grow the businesses of each operating
subsidiary through cross-selling opportunities, sharing of technical expertise,
research and development and the other initiatives.
Growth Through Acquisitions.
The Company intends to pursue an acquisition program designed both to
further its vertical integration and to expand the existing operations of the
Founding Companies. The Company believes that there are many attractive
acquisition candidates in the nutritional industry. This is due principally to
the highly fragmented nature of the industry and the large number of smaller
companies in the industry having under $25 million in annual sales. In many
cases, these companies have needs that are difficult for small businesses to
meet, such as capital for growth and expansion, owners' desires for liquidity,
the ability to attract high caliber management talent and other factors that
motivate these owners to consider alternatives. The Company intends to pursue
additional vertical integration through acquisition or construction of a
manufacturing operation, an herbal extraction facility and the addition of
distribution capabilities. The Company will seek to consolidate and enhance its
position in its current markets through strategic acquisitions.
The Company believes it will be regarded by acquisition candidates as an
attractive acquirer because of (i) the Company's strategy of retaining the
operational integrity of businesses that it acquires and its progressive
philosophy of fostering entrepreneurial initiative, (ii) the potential for
acquisition candidates' increased visibility and access to the Company's
financial resources as a public company, (iii) the potential for the owners of
the businesses acquired to achieve liquidity, an exit strategy and potential
equity appreciation, (iv) the Company's ability to provide centralized
administrative functions, enhanced systems capabilities and access to increased
marketing resources, (v) potential cross-selling opportunities, and (vi) the
Company's experience in and commitment to quality control and assurance.
CUSTOMERS
Presently, the Company markets its products and services to companies
primarily in the nutritional industry and, to a lesser extent, the equine
industry. The Company's customers vary in size, complexity, product
sophistication and price sensitivity requirements. The Company will provide
contract manufacturing service to specialty food retailers, mass market drug
stores, multi- level marketers, catalog marketers, retail distributors, direct
mail sellers, infomercial marketers, and international distributors. In
addition, the Company will supply herbs and extracts to other manufacturers,
marketers with manufacturing capabilities and wholesale brokers. No single
customer accounted for more than 10% of the Company's combined 1999 revenues.
SALES AND MARKETING
The Company will use a variety of methods to market its products and
services, including sales personnel, referrals, trade show participation, trade
journal advertising and press publicity as well as reliance on name recognition
and reputation in the industry. The Company intends to expand its sales force
and activities to capitalize on untapped cross-selling opportunities.
<PAGE>
QUALITY CONTROL
The Company's quality assurance program is designed to promote uniform
product quality and potency to meet customer demand. Management believes the
Company's manufacturers' standards and procedures meet or exceed Good
Manufacturing Practices ("GMP") promulgated by the FDA. Company manufacturers
have implemented additional quality assurance procedures that surpass current
GMP requirements for its herbal processing and extraction operations, by
utilizing sophisticated testing methods and equipment, including thin layer
chromatography ("TLC"), gas chromatography ("GC") and high performance liquid
chromatography ("HPLC"). TLC is used to produce a specific constituent compound
model of the material being tested which identifies it in terms of genus and
species. HPLC procedures are used to quantify the presence and concentration of
specific constituent compounds identified by the model. Although no
standardization of testing procedures exists in the nutritional industry, the
Company's testing procedures are designed to give the Company's customers
confidence in receiving an accurate analysis of the products delivered.
The Company's manufacturers currently conducts inspections and detailed
record keeping throughout the manufacturing process, including, when and as
applicable, quantity verification, label validation, hardness, weight,
friability and disintegration measurements and package quality sampling.
MATERIALS AND SOURCES OF SUPPLY
The Company has established numerous sources of supply and attempts to
cultivate strong relationships with its suppliers. The Company will seek to
employ centralized purchasing where cost efficiencies can be obtained without
compromising existing supply relationships; in other cases, the Company will
source materials independently. Management has extensive knowledge and
experience related to sourcing of raw materials and other product ingredients.
More than 50% of the Company's raw materials currently come from outside the
U.S. Raw materials include all natural herbs and minerals and are plentiful
worldwide.
RISK MANAGEMENT
The sales of the Company's products include an inherent risk that product
liability claims may be asserted against the Company. See "Risk Factors--Product
Liability; Potential Adverse Product Publicity." The Company intends to maintain
product liability insurance coverage in the minimum amount of $2.0 million per
occurrence and $5.0 million in the aggregate. There can be no assurance that the
Company will be able to maintain product liability insurance on acceptable terms
or that its insurance will provide adequate coverage against potential claims.
While the Company has not experienced any product liability claims, if such
claims should arise in the future, they could have a material adverse effect on
the Company's business, financial condition and results of operations.
Reports to Security Holders
The Company will send out audited annual reports to its shareholders if
required by applicable law. Until such time, the Company does not foresee
sending out such reports.
The Company will make certain filings with the SEC as needed, and any
filings the Company makes to the SEC are available and the public may read and
copy any materials the Company files with SEC at the SEC's Public Reference Room
at 450 Fifth Street, N.W. Washington, D.C. 20549. The public may also obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet site that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC at (http://www.sec.gov).
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
Discussion and Analysis
The following discussion and analysis should be read in conjunction with
the financial statements of the Company and the accompanying notes appearing
subsequently under the caption "Financial Statements." The following discussion
and analysis contains forward-looking statements, which involve risks and
uncertainties in the forward-looking statements. The Company's actual results
may differ significantly from the results, expectations and plans discussed in
the forward- looking statements.
The Company's growth is expected to come primarily from the private label
manufacture and wholesale distribution of human and animal health supplements
and supply of ingredients (nutraceutical based health supplements) for inclusion
in health supplements and foods. This pattern of growth will closely correlate
to increases in the Company's health supplement manufacturing and distribution
capacity and its development of proprietary health supplement technologies.
On May 30, 2000, the Company acquired the assets of Crown Enterprises, Inc.
By purchasing the assets of Crown, a "cottage" private label distributor of
health supplements, the Company acquired technology and a proprietary
nutritional supplements product line. The operation produced only nominal
revenues in 1999. Operations for private label manufacturing and distribution
will begin in 2001 after assembling a staff experienced in the health supplement
industry.
In addition to private label distribution, the Company also benefitted from
its development of its Live Blood Cell Analysis program the second half of 1999
and first half of 2000. The Company conducted extensive experimentation to
develop the trademarked GREEN PEARLS(TM) product line and the process for the
capsuling of BLUE GREEN ALGAE FROM UPPER LAKE KLAMATH with extended shelf-life.
GREEN PEARLS(TM) is a unique natural food source, which is a standard health
food supplement for maintaining individual health. By mid-1999, the Company had
perfected a process for producing GREEN PEARLS(TM) with a two (2) year
shelf-life. The Company began distribution of GREEN PEARLS(TM) for several
customers in the second quarter of 1999.
Financial Condition, Capital Resources and Liquidity
At September 30, 2000, the Company had assets totaling $32,523 and
liabilities of $334,214 mostly attributable to accrued expenses due to related
parties. Since the Company's inception, it has received $51,000 in cash
contributed as consideration for the issuance of shares of Common Stock.
The Company's working capital is presently minimal and there can be no
assurance that the Company's financial condition will improve. The Company is
expected to continue to have minimal working capital or a working capital
deficit as a result of current liabilities.
In May 1998, the Company issued and sold an aggregate of 1,600,000 shares
of Common Stock to seventy-two (72) investors for cash consideration totaling
$16,000. No underwriter was employed in connection with the offering and sale of
the shares. The Company claimed the exemption from registration in connection
with the offering provided under Section 3(b) of the Act and Rule 504 of
Regulation D promulgated thereunder.
Since May 2000, the date of the Share Exchange, the Company issued and sold
an aggregate of 140,000 shares of Common Stock (and issued warrants to purchase
an additional 400,0000 shares)
<PAGE>
to two (2) investors for cash consideration totaling $35,000. No underwriter was
employed in connection with the offering and sale of the shares. The Company
claimed the exemption from registration in connection with each of the offerings
provided under Section 4(2) of the Act and Rule 506. Even though management
believes, without assurance, that it will obtain sufficient capital with which
to implement its business plan on a limited scale, the Company is not expected
to continue in operation without an infusion of capital. In order to obtain
additional equity financing, management may be required to dilute the interest
of existing shareholders or forego a substantial interest of its revenues, if
any.
The ability of the Company to continue as a going concern is dependent upon
its ability to obtain clients who will purchase the Company's products and
services and whether the Company can attract an adequate number of clients.
In August 2000, the Company executed a promissory note in the amount of
twenty-five thousand dollars ($25,000) in favor of Kevin Thomas, which note is
convertible in the sole discretion of the holder, into shares of the Company's
restricted Common Stock at a conversion price of $0.25 per share. The note bears
interest at a rate of twelve percent (12%) per annum. The note is due November
30, 2000. For such offering, the Company relied upon Section 4(2), Rule 506 and
Section 517.061(11) of the Florida Code. See Part II, Item 4. "Recent Sales of
Unregistered Securities."
(LOSS) PER SHARE
Net loss per share for the nine (9) months ended September 30, 2000 was
($.05), while net loss per share from inception through December 31, 1999 was
($.05). It should be noted that these figures were somewhat impacted by the
acquisition of Crown on May 30, 2000 and the issuance of additional shares in
connection with this acquisition.
LIQUIDITY AND CAPITAL RESOURCES
Cash increased $831 at September 30, 2000 to $851 from $20 at December 31,
1999 and the Company received equity financing of $35,000.
The Company believes that it has adequate cash resources to fund current
operations. There can be no assurance, however, that the Company's actual
capital needs will not exceed anticipated levels, or that the Company will
generate sufficient revenues to fund its operations in the absence of other
sources. To finance its growth plan in human health, the Company is considering
a number of alternatives, including additional equity financing and research and
development partnerships. There can be no assurance that any such transactions
will be available at terms acceptable to the Company or that the Company will
have sufficient working capital to fund its growth plan in human health markets.
YEAR 2000 IMPACT STATEMENT
The Company has not encountered any problems resulting from the year 2000
with any of its computer, distribution systems, major vendors or suppliers.
POTENTIAL SALES AND EARNING VOLATILITY
The Company's sales and earnings continue to be subject to potential
volatility based upon, among other things: (i) the adverse effect of
distributors' or the Company's failure, and allegations of their failure, to
comply with applicable regulations, which have in the past and could again in
the
<PAGE>
future result in the removal of certain products from sale in certain countries,
either temporarily or permanently; (ii) the negative impact of changes in or
interpretations or regulations that may limit or restrict the sale of certain of
the Company's products, the expansion of its operations into new markets and the
introduction of its products into each such market; (iii) the inability of the
Company to introduce new products or the introduction of more products by the
Company's competitors; (iv) general conditions in the nutritional supplement
industry; and (v) consumer perceptions of the Company's products and operations.
In particular, because the Company's products are ingested by consumers, the
Company is highly dependent upon consumers' perception of the safety and quality
of its products. As a result, substantial negative publicity concerning one or
more of the Company's products or other nutritional supplements similar to the
Company's products could adversely affect the Company results of operations or
financial condition.
Forward-Looking Statements
This Form 10-SB includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-SB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), demand
for the Company's products and services, expansion and growth of the Company's
business and operations, and other such matters are forward-looking statements.
These statements are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of historical trends,
current conditions and expected future developments as well as other factors it
believes are appropriate in the circumstances. However, whether actual results
or developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, general economic market and
business conditions; the business opportunities (or lack thereof) that may be
presented to and pursued by the Company; changes in laws or regulation; and
other factors, most of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form 10-SB are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequence to
or effects on the Company or its business or operations.
ITEM 3. DESCRIPTION OF PROPERTY
In August 2000, Crown entered into a lease with Daniel Jack Co. for the
premises located at 310 Waymont Court, Suite 100, Lake Mary, FL 32746. The
property consists of approximately 1,500 square feet and serves as the Company's
headquarters. The term is through December 31, 2000. The Company makes monthly
payments in advance in the amount of $2,250.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of October 31, 2000, the Company had issued and outstanding 9,731,000
shares of its Common Stock. The following table sets forth, as of October 31,
2000, certain information regarding beneficial ownership of the Common Stock by
those persons known by the Company to be officers, directors and those
beneficially holding more than five percent (5%) of the Company's Common Stock.
<PAGE>
Item 4. Security Ownership of Certain Beneficial Owners and Management:
The following table sets forth information as of October 31, 2000,
regarding the ownership of the Company's Common Stock by each shareholder known
by the Company to be the beneficial owner of more than five percent (5%) of its
outstanding shares of Common Stock, each director and all executive officers and
directors as a group. Except as otherwise indicated, each of the shareholders
has sole voting and investment power with respect to the share of Common Stock
beneficially owned.
Name and Address of Title of Amount and Nature of Percent of
Beneficial Owner Class Beneficial Owner Class
------------------------- ---------- ---------------------- --------
Armand Dauplaise(1)(2)(4) Common 3,500,000 36.0%
Kevin Lockhart(1)(3)(4) Common 3,500,000 36.0%
All Executive Officers and
Directors as a Group Common 7,000,000 71.9%
(Two (2) persons)
-------------------------------------------------------------------------------
(1) In May 2000, the Company entered into the Share Exchange with Crown and its
shareholders which had been formed in April 1999. The exchange was made whereby
the Company issued 10,000,000 shares of its Common Stock to the shareholders of
Crown for all of the issued and outstanding stock of Crown. As part of the
exchange, Dauplaise and Lockhart each received 4,597,500 shares of the Company's
Common Stock. This offering was conducted pursuant to Section 4(2) of the Act,
Rule 506 and Section 517.061(11) of the Florida Code. See Part I, Item 5.
"Directors, Executive Officer, Promoters and Control Persons"; Part I, Item 6.
"Executive Compensation"; Part I, Item 7. "Certain Relationships and Related
Transactions"; and Part II, Item 4. "Recent Sales of Unregistered Securities."
(2) In May 2000, the Company entered into an employment agreement with Armand
Dauplaise to be the Company's Vice-Chairman and President. Mr. Dauplaise draws a
base salary of $120,000 annually and is entitled to a monthly vehicle allowance
of $350 per month. The term of the agreement is for a period of one (1) year and
automatically renews for successive one (1) year terms. See Part I, Item 5.
"Directors, Executive Officer, Promoters and Control Persons"; Part I, Item 6.
"Executive Compensation"; and Part I, Item 7. "Certain Relationships and Related
Transactions."
(3) In May 2000, the Company entered into an employment agreement with Kevin
Lockhart to be the Company's Vice-Chairman and Secretary. Mr. Lockhart draws a
base salary of $120,000 annually and is entitled to a monthly vehicle allowance
of $350 per month. The term of the agreement is for a period of one (1) year and
automatically renews for successive one (1) year terms. See Part I, Item 5.
"Directors, Executive Officer, Promoters and Control Persons"; Part I, Item 6.
"Executive Compensation"; and Part I, Item 7. "Certain Relationships and Related
Transactions."
(4) In October 2000, Armand Dauplaise, the Company's current Vice-Chairman and
President and Kevin Lockhart, the Company's current Vice-Chairman and Secretary
donated 1,047,500 shares each back to the Company in an effort to reduce the
issued and outstanding stock of the Company. See Part I, Item 5. "Directors,
Executive Officer, Promoters and Control Persons"; Part I, Item 6. "Executive
Compensation"; and Part I, Item 7. "Certain Relationships and Related
Transactions."
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information with respect to each of
our executive officers and directors. Our directors are generally elected at the
annual shareholders' meeting and hold office until the next annual shareholders'
meeting or until their successors are elected and qualified. Executive officers
are elected by our board of directors and serve at its discretion. Our bylaws
authorize the board of directors to be constituted of not less than one and such
number as our board of directors may determine by resolution or election. Our
board of directors currently consists of four members.
NAME AGE POSITION
--------------------------- --- --------
1. Armand Dauplaise 60 President & Chairman
2. Kevin Lockhart 48 Secretary
---------------------------
In May 2000, the Company entered into the Share Exchange with Crown and its
shareholders which had been formed in April 1999. The exchange was made whereby
the Company issued 10,000,000 shares of its Common Stock to the shareholders of
Crown for all of the issued and outstanding stock of Crown. As part of the
exchange, Dauplaise and Lockhart each received 4,597,500 shares of the Company's
Common Stock. This offering was conducted pursuant to Section 4(2) of the Act,
Rule 506 and Section 517.061(11) of the Florida Code. See Part I, Item 6.
"Executive Compensation"; Part I, Item 7. "Certain Relationships and Related
Transactions"; and Part II, Item 4. "Recent Sales of Unregistered Securities."
In May 2000, the Company entered into an employment agreement with Armand
Dauplaise to be the Company's Vice-Chairman and President. Mr. Dauplaise draws a
base salary of $120,000 annually and is entitled to a monthly vehicle allowance
of $350 per month. The term of the agreement is for a period of one (1) year and
automatically renews for successive one (1) year terms. See Part I, Item 6.
"Executive Compensation"; and Part I, Item 7. "Certain Relationships and Related
Transactions."
In May 2000, the Company entered into an employment agreement with Kevin
Lockhart to be the Company's Vice-Chairman and Secretary. Mr. Lockhart draws a
base salary of $120,000 annually and is entitled to a monthly vehicle allowance
of $350 per month. The term of the agreement is for a period of one (1) year and
automatically renews for successive one (1) year terms. See Part I, Item 6.
"Executive Compensation"; and Part I, Item 7. "Certain Relationships and Related
Transactions."
In October 2000, Armand Dauplaise, the Company's current Vice-Chairman and
President and Kevin Lockhart, the Company's current Vice-Chairman and Secretary
donated 1,047,500 shares each back to the Company in an effort to reduce the
issued and outstanding stock of the Company. See Part I, Item 6. "Executive
Compensation"; and Part I, Item 7. "Certain Relationships and Related
Transactions."
<PAGE>
Family Relationships
There are no family relationships between or among the executive officer
and director of the Company.
Compliance with Section 16(a) of the Securities Exchange Act of 1934:
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors and persons who own more than 10%
of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission (hereinafter referred to as the "Commission")
initial statements of beneficial ownership, reports of changes in ownership and
annual reports concerning their ownership, of Common Stock and other equity
securities of the Company on Forms 3, 4 and 5, respectively. Executive officers,
directors and greater than 10% shareholders are required by Commission
regulations to furnish the Company with copies of all Section 16(a) reports they
file. To the Company's knowledge, Armand Dauplaise and Kevin Lockhart comprise
all of the Company's executive officers, directors and greater than 10%
beneficial owners of its common Stock, and have complied with Section 16(a)
filing requirements applicable to them during the Company's fiscal year ended
December 31, 1999 up to the 2nd Quarter quarter ended June 30, 2000.
Business Experience
Officers and Directors
The following is a brief description of the business background of our
executive officers, and directors:
Armand Dauplaise has served as an officer and director of Bio-One Corporation
since it acquired Crown Enterprises, Inc. on May 30, 2000. Prior to the
Company's acquisition of Crown, he served as Crown's President since 1998. Crown
marketed a brand of natural supplements nationwide. Prior to his employment by
Crown and between 1995 and 1997, Mr. Dauplaise was the Chief Operating Officer
of Leffler Enterprises, Inc. Mr. Dauplaise attended Rochester Institute of
Technology between 1964 and 1967 where he majored in business and accounting.
Kevin Lockhart has served as Secretary of Bio-One Corporation since it acquired
Crown Enterprises, Inc. in May 2000. Prior to the Company's acquisition of Crown
and between 1998 and 1999, he served as the President of Green Pearls
International. Between 1996 and 1998, he served as President of Green Supreme
Labs. From 1995 to 1996, he was the President of Crown Institute. Mr. Lockhart
did not attend college.
Director's Compensation
The Company has no standard arrangements for compensating the directors of
the Company for their attendance at meetings of the Board of Directors.
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
(a) GENERAL
Item 6. Executive Compensation
<TABLE>
<CAPTION>
Name Year Annual Annual LT
and Post Comp Comp Annual Comp LT All
Salary Bonus Comp Rest Comp LTIP Other
(3) ($) Other Stock Options Payouts (1)
------------- ---- -------- ------ ------ ----- ------- ------- -----
<S> <C> <C>
Armand 1998 $0
Dauplaise,
President 1999 $120,000
and Vice-
Chairman
Kevin 1998 $0
Lockhart,
Secretary 1999 $120,000
and Vice-
Chairman
</TABLE>
(1) All other compensation includes certain health and life insurance benefits
paid by the Company on behalf of its employee.
(2) In May 2000, the Company entered into the Share Exchange with Crown and its
shareholders which had been formed in April 1999. The exchange was made
whereby the Company issued 10,000,000 shares of its Common Stock to the
shareholders of Crown for all of the issued and outstanding stock of Crown.
As part of the exchange, Dauplaise and Lockhart each received 4,597,500
shares of the Company's Common Stock. This offering was conducted pursuant
to Section 4(2) of the Act, Rule 506 and Section 517.061(11) of the Florida
Code. See Part I, Item 7. "Certain Relationships and Related Transactions";
and Part II, Item 4. "Recent Sales of Unregistered Securities."
(3) Approximately eighty percent (80%) of the executive compensation past due
the officers of the Company has not been paid to date, but has been
accounted for as monies owed by the Company to Dauplaise and Lockhart.
(4) In May 2000, the Company entered into an employment agreement with Armand
Dauplaise to be the Company's Vice-Chairman and President. Mr. Dauplaise
draws a base salary of $120,000 annually and is entitled to a monthly
vehicle allowance of $350 per month. The term of the agreement is for a
period of one (1) year and automatically renews for successive one (1) year
terms. See Part I, Item 7. "Certain Relationships and Related
Transactions."
(5) In May 2000, the Company entered into an employment agreement with Kevin
Lockhart to be the Company's Vice-Chairman and Secretary. Mr. Lockhart
draws a base salary of $120,000 annually and is entitled to a monthly
vehicle allowance of $350 per month. The term of the agreement is for a
period of one (1) year and automatically renews for successive one (1) year
terms. See Part I, Item 7. "Certain Relationships and Related
Transactions."
<PAGE>
(6) In October 2000, Armand Dauplaise, the Company's current Vice-Chairman and
President and Kevin Lockhart, the Company's current Vice-Chairman and
Secretary donated 1,047,500 shares each back to the Company in an effort to
reduce the issued and outstanding stock of the Company. See Part I, Item 7.
"Certain Relationships and Related Transactions."
EMPLOYMENT CONTRACTS
The Company has entered into employment agreements with both of its
officers and directors, the terms of which are listed in numbers four (4) and
five (5) above.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 2000, the Company entered into the Share Exchange with Crown and its
shareholders which had been formed in April 1999. The exchange was made whereby
the Company issued 10,000,000 shares of its Common Stock to the shareholders of
Crown for all of the issued and outstanding stock of Crown. As part of the
exchange, Dauplaise and Lockhart each received 4,597,500 shares of the Company's
Common Stock. This offering was conducted pursuant to Section 4(2) of the Act,
Rule 506 and Section 517.061(11) of the Florida Code. See Part II, Item 4.
"Recent Sales of Unregistered Securities."
In May 2000, the Company issued 100,000 shares of its restricted Common
Stock to three (3) persons in connection with their services to the Company in
connection with the Share Exchange. For such offering, the Company relied upon
Section 4(2) of the Act, Rule 506 and Section 517.061(11) of the Florida Code.
See Part II, Item 4. "Recent Sales of Unregistered Securities."
In May 2000, the Company entered into an employment agreement with Armand
Dauplaise to be the Company's Vice-Chairman and President. Mr. Dauplaise draws a
base salary of $120,000 annually and is entitled to a monthly vehicle allowance
of $350 per month. The term of the agreement is for a period of one (1) year and
automatically renews for successive one (1) year terms.
In May 2000, the Company entered into an employment agreement with Kevin
Lockhart to be the Company's Vice-Chairman and Secretary. Mr. Lockhart draws a
base salary of $120,000 annually and is entitled to a monthly vehicle allowance
of $350 per month. The term of the agreement is for a period of one (1) year and
automatically renews for successive one (1) year terms.
In October 2000, Armand Dauplaise, the Company's current Vice-Chairman and
President and Kevin Lockhart, the Company's current Vice-Chairman and Secretary
donated 1,047,500 shares each back to the Company in an effort to reduce the
issued and outstanding stock of the Company.
In October 2000, the Company issued a total of 86,000 shares of its Common
Stock to three (3) persons. Bradley Kline has served as a financial consultant
to Crown since October 1999. No contract between either Crown or the Company and
Mr. Kline exists. Melvin Correll and Glenna Correll have also served as
consultants to Crown. They introduced Crown to several doctors in the Orlando,
Florida area who are interested in Crown's live blood microscopy work. No
contract exists. Richard Wilson, who received 60,000 of the shares, was
inadvertently left off the list of Crown shareholders when the Share Exchange
took place in May 2000. For such offering, the Company relied upon Section 4(2)
of the Act, Rule 506 and Section 517.061(11) of the Florida Code. See Part II,
Item 4. "Recent Sales of Unregistered Securities."
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
The Company has authorized 100,000,000 shares of common stock, par value
$0.001. Each outstanding share of Common Stock is entitled to one vote, either
in person or by proxy, on all matters that may be voted upon by the owners
thereof at meetings of the stockholders.
The holders of Common Stock (i) have equal ratable rights to dividends from
funds legally available therefore, when, and if declared by the Board of
Directors of the Company; (ii) are entitle to Share ratably in all of the assets
of the Company available for distribution to holders of Common Stock upon
liquidation, dissolution or winding up of the affairs of the Company; (iii) do
not have preemptive, subscription or conversion rights, or redemption or sinking
fund provisions applicable thereto; and (iv) are entitled to one non-cumulative
vote per share on all matters on which stockholders may vote at all meetings of
stockholders.
PREFERRED STOCK
The Company has authorized 10,000,000 shares of preferred stock, par value
$0.001, with such rights and preferences as may be determined by the Board of
Directors. The Board of Directors of the Company has not declared any voting,
dividend, preemption or other rights or privileges of its preferred stock. No
preferred stock of Nutraceutix, Inc. is currently issued or outstanding.
PART II
ITEM 1. MARKET FOR COMMON EQUITY AND OTHER SHAREHOLDER
MATTERS.
No shares of the Company's common stock have previously been registered
with the Securities and Exchange Commission (the "Commission") or any state
securities agency or authority. The Company intends to make application to the
NASD for the Company's shares to be quoted on the OTC Bulletin Board. The
application to the NASD will be made during the Commission comment period for
this Form 10-SB or immediately thereafter. The Company's application to the NASD
will consist of current corporate information, financial statements and other
documents as required by Rule 15c211 of the Securities Exchange Act of 1934, as
amended. Inclusion on the OTC Bulletin Board permits price quotation for the
Company's shares to be published by such service.
The Company is not aware of any existing trading market for its common
stock. The Company's common stock has never traded in a public market. There are
no plans, proposals, arrangements or understandings with any person(s) with
regard to the development of a trading market in any of the Company's
securities.
If and when the Company's common stock is traded in the
over-the-counter market, most likely the shares will be subject to the
provisions of Section 15(g) and Rule 15g-9 of the Exchange Act, commonly
referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15g9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity security
that has a market price less than $5.00 per share, subject to certain
exceptions. Rule 3a51-1 provides that any equity
<PAGE>
security is considered to be a penny stock unless that security is: registered
and traded on a national securities exchange meeting specified criteria set by
the Commission; authorized for quotation on The NASDAQ Stock Market; issued by a
registered investment company; excluded from the definition on the basis of
price (at least $5.00 per share) or the issuer's net tangible assets; or
exempted from the definition by the Commission. If the Company's shares are
deemed to be a penny stock, trading in the shares will be subject to additional
sales practice requirements on broker- dealers who sell penny stocks to persons
other than established customers and accredited investors, generally persons
with assets in excess of $1,000,000 or annual income exceeding $200,000, or
$300,000 together with their spouse.
For transactions covered by these rules, broker-dealers must make a
special suitability determination for the purchase of such securities and must
have received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock market. A broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, and current quotations for the securities. Finally,
the monthly statements must be sent disclosing recent price information for the
penny stocks held in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker dealers to
trade and/or maintain a market in the Company's common stock and may affect the
ability of shareholders to sell their shares.
As of October 31, 2000, there were eighty-eight (88) holders of record of
the Company's Common Stock.
As of October 31, 2000, the Company had issued and outstanding 9,731,000
shares of Common Stock. Of this total, 8,131,000 are restricted pursuant to the
terms of Rule 144 ("Rule 144") of the Act, 1,600,000 are free-trading and no
shares which are restricted have been held for a period of one (1) year or more.
Dividend Policy
The Company has not declared or paid cash dividends or made distributions
in the past, and the Company does not anticipate that it will pay cash dividends
or make distributions in the foreseeable future. The Company currently intends
to retain and reinvest future earnings, if any, to finance its operations.
Public Quotation of Stock
The Company has not as of this date, but intends to request in the
immediate future a broker- dealer who has not been identified at this time, to
act as a market maker for the Company's securities. Thus far the Company has not
requested a market maker to submit the Company's Form 10-SB to the National
Association of Securities Dealers ("NASD") and to serve as a market maker for
the Company's Common Stock. The Company anticipates that other market makers may
be requested to participate at a later date. The Company will not use
consultants to obtain market makers. There have been no preliminary discussions
between the Company, or anyone acting on its behalf, and any market maker
regarding the future trading market for the Company. It is anticipated that the
market maker will be contacted prior to an acquisition or merger and only by
management of the Company.
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
The Company is currently not a party to any pending legal proceedings and
no such action by, or to the best of its knowledge, against the Company has been
threatened.
ITEM 3. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has had no changes in or disagreements with accountants on
accounting or financial disclosure which fall within the scope of Item 304 of
Regulation S-B.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The Company relied upon Section 3(b) of the Act and Rule 504 for several
transactions regarding the issuance of its unregistered securities. In each
instance, such reliance was based on the following: (i) the aggregate offering
price of the offering of the shares of Common Stock and warrants did not exceed
$1,000,000, less the aggregate offering price for all securities sold with the
twelve months before the start of and during the offering of shares in reliance
on any exemption under Section 3(b) of, or in violation of Section 5(a) of the
Act; (ii) no general solicitation or advertising was conducted by the Company in
connection with the offering of any of the shares; (iii) the fact the Company
has not been since its inception (a) subject to the reporting requirements of
Section 13 or 15(d) of the Securities Act of 1934, as amended, (b) and
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or (c) a development stage company that either has no specific
business plan or purpose or has indicated that its business plan is to engage in
a merger or acquisition with an unidentified company or companies or other
entity or person.
The Company relied upon Section 4(2) of the Act and Rule 506 for several
transactions regarding the issuance of its unregistered securities. In each
instance, such reliance was based upon the fact that (i) the issuance of the
shares did not involve a public offering, (ii) there were no more than 35
investors (excluding "accredited investors"), (iii) each investor who was not an
accredited investor either alone or with his purchaser representative(s) has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the prospective investment, or the
issuer reasonably believes immediately prior to making any sale that such
purchaser comes within this description, (iv) the offers and sales were made in
compliance with Rules 501 and 502, (v) the securities were subject to Rule 144
limitation on resale and (vi) each of the parties is a sophisticated purchaser
and had full access to the information on the Company necessary to make an
informed investment decision by virtue of the due diligence conducted by the
purchaser or available to the purchaser prior to the transaction.
The Company relied upon Florida Code Section 517.061(11) for several
transactions. In each instance, such reliance is based on the following: (i)
sales of the shares of Common Stock were not made to more than 35 persons; (ii)
neither the offer nor the sale of any of the shares was accomplished by the
publication of any advertisement; (iii) all purchasers either had a preexisting
personal or business relationship with one or more of the executive officers of
the Company or, by reason of their business or financial experience, could be
reasonably assumed to have the capacity to protect their own interests in
connection with the transaction; (iv) each purchaser represented that he was
purchasing for his own account and not with a view to or for sale in connection
with any distribution of the shares; and (v) prior to sale, each purchaser had
reasonable access to or was furnished all material books and records of the
Company, all material contracts and documents relating to the proposed
transaction, and had an opportunity to question the executive officers of the
Company. Pursuant to Rule 3E-500.005, in offerings made under Section
517.061(11) of the Florida
<PAGE>
Statutes, an offering memorandum is not required; however each purchaser (or his
representative) must be provided with or given reasonable access to full and
fair disclosure of material information. An issuer is deemed to be satisfied if
such purchaser or his representative has been given access to all material books
and records of the issuer; all material contracts and documents relating to the
proposed transaction; and an opportunity to question the appropriate executive
officer. In the regard, the Company supplied such information and was available
for such questioning (the "Florida Exemption").
In May 1998, prior to its acquisition of Crown, the Company sold 1,600,000
shares of its unrestricted Common Stock to seventy-two (72) investors for
$16,000. For such offering, the Company relied upon Section 3(b) of the Act,
Rule 504, the Florida Exemption, Section 10-5-9(13) of the Georgia Code, Section
90.530(11) of the Nevada code, Section 48-2-103(b)(4) of the Tennessee code and
Section 5[581-5]I(c) of the Texas code. No state exemption was necessary for the
sales made to Canadian or French investors.
The facts upon which the Company relied in Geogia are: (i) the number of
Georgia purchasers did not exceed fifteen (15); (ii) the securities were not
offered for sale by means of any form of general or public solicitations or
advertisements; (iii) a legend was placed upon the certificates; and (iv) each
purchaser represented that he purchased for investment.
The facts upon which the Company relied in Nevada are as follows: the
transaction was part of an issue in which (a) there were no more than
twenty-five (25) purchasers in Nevada, other than those designated in subsection
ten (10), during any twelve (12) consecutive months; (b) no general solicitation
or general advertising is used in connection with the offer to sell or sale of
the securities; (c) no commission or other similar compensation is paid or
given, directly or indirectly, to a person, other than a broker-dealer licensed
or not required to be licensed under this chapter, for soliciting a prospective
purchaser in Nevada; and (d) one of the following conditions was satisfied: (1)
the seller reasonably believed that all the purchasers in Nevada, other than
those designated in subsection ten (10), were purchasing for investment; or (2)
immediately before and immediately after the transaction, the Company reasonably
believed that its securities were held by fifty (50) or fewer beneficial owners,
other than those designated in subsection ten (10), and the transaction was part
of an aggregate offering that does not exceed five hundred thousand dollars
($500,000) during any twelve (12) consecutive months.
The facts upon which the Company relied in Tennessee are as follows: (A)
The aggregate number of persons in Tennessee purchasing the securities from the
Company and all affiliates of the Company pursuant to this exemption during the
twelve month period ending on the date of such sale did not exceed fifteen (15)
persons, exclusive of persons who acquired the securities in transactions which
were not subject to this exemption or which were otherwise exempt from
registration under the provisions of this exemption or which have been
registered pursuant to Sec. 48-2-105 or Sec. 48- 2-106. (B) The securities were
not offered for sale by means of publicly disseminated advertisements or sales
literature; and (C) All purchasers in Tennessee purchased such securities with
the intent of holding such securities for investment for their own accounts and
without the intent of participating directly or indirectly in a distribution of
such securities.
The facts upon which the Company relied in Texas are as follows: The sale
during the period of twelve (12) months ending with the date of the sale in
question was to not more than fifteen (15) persons and such persons purchased
such securities for their own account and not for distribution.
In May 2000, the Company entered into the Share Exchange with Crown and its
shareholders which had been formed in April 1999. The exchange was made whereby
the Company issued
<PAGE>
10,000,000 shares of its Common Stock to the shareholders of Crown for all of
the issued and outstanding stock of Crown. As part of the exchange, Dauplaise
and Lockhart each received 4,597,500 shares of the Company's Common Stock. This
offering was conducted pursuant to Section 4(2) of the Act, Rule 506 and the
Florida Exemption.
In May 2000, the Company issued 100,000 shares of its restricted Common
Stock to three (3) persons in connection with their services to the Company in
connection with the Share Exchange. For such offering, the Company relied upon
Section 4(2) of the Act, Rule 506 and the Florida Exemption.
In June 2000, the Company sold 40,000 shares of its restricted Common Stock
to one (1) investor for $10,000. For such offering, the Company relied upon
Section 4(2) of the Act, Rule 506 and the Florida Exemption.
In July 2000, the Company sold 100,000 shares of its restricted Common
Stock to one (1) investor. The Company also issued a warrant to purchase an
additional 400,000 shares of the Company's restricted Common Stock, which
warrant is exercisable at a price of $0.25 per share. The warrants expire six
(6) months from the date on which the Company's Common Stock is quoted on the
Over the Counter Bulletin Board. The Company received a total of $25,000 for the
investment. For such offering, the Company relied upon Section 4(2) of the Act,
Rule 506 and the Florida Exemption.
In August 2000, the Company executed a promissory note in the amount of
twenty-five thousand dollars ($25,000) in favor of Kevin Thomas, which note is
convertible in the sole discretion of the holder, into shares of the Company's
restricted Common Stock at a conversion price of $0.25 per share. The note bears
interest at a rate of twelve percent (12%) per annum. The note is due November
30, 2000. For such offering, the Company relied upon Section 4(2), Rule 506 and
the Florida Exemption.
In October 2000, the Company issued a total of 86,000 shares of its Common
Stock to three (3) persons. Bradley Kline has served as a financial consultant
to Crown since October 1999. No contract between either Crown or the Company and
Mr. Kline exists. Melvin Correll and Glenna Correll have also served as
consultants to Crown. They introduced Crown to several doctors in the Orlando,
Florida area who are interested in Crown's live blood microscopy work. No
contract exists. Richard Wilson, who received 60,000 of the shares, was
inadvertently left off the list of Crown shareholders when the Share Exchange
took place in May 2000. For such offering, the Company relied upon Section 4(2)
of the Act, Rule 506 and the Florida Exemption.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provide that: Nevada Revised
Statutes ("NRS") 78.037 shall be part of these Articles of Incorporation.
The Company's Bylaws provide that: The Corporation hereby indemnifies each
person (including the heirs, executors, administrators, or estate of such
person) who is or was a director or officer of the Corporation to the fullest
extent permitted or authorized by current or future legislation or judicial or
administrative decision against all fines, liabilities, costs and expenses,
including attorneys' fees, arising out of his or her status as a director,
officer, agent, employee or representative. The foregoing right of
indemnification shall not be exclusive of other rights to which those seeking an
indemnification may be entitled. The Corporation may maintain insurance, at its
expense, to protect itself and all officers and directors against fines,
liabilities, costs and expenses,
<PAGE>
wither or not the Corporation would have the legal power to indemnify them
directly against such liability.
The Nevada Revised Statutes provide that: (1) A corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the corporation, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action, suit or
proceeding if he acted in good faith and in a manner which he reasonably
believes to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order settlement, conviction or upon plea of nolo
contendere or its equivalent, does not, of itself, create a presumption that the
person did not act in good faith and in a manner which he reasonably believes to
be in or not opposed to the best interests of the corporation, and that, with
respect to any criminal action or proceeding, he had reasonable cause to believe
that his conduct was unlawful and (2) A corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys' fees actually and
reasonably incurred by him in connection with the defense or settlement of the
action or suit if he acted in good faith and in a manner which he reasonably
believes to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which such
a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitles to
indemnify for such expenses as the court deems proper.
To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections 1 and 2, or in defense of any claim, issue
or matter therein, the corporation shall indemnify him against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
with the defense.
The statutes also provide that any discretionary indemnification under NRS
78.7502 unless ordered by a court or advanced pursuant to subsection 2, may be
made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances. The determination must be made: (1) by the
stockholders; (2) by the board of directors by majority vote of a quorum
consisting of directors who were not parties to the action, suit or proceeding;
(3) if a majority vote of a quorum consisting of directors who were not parties
to the action, suit or proceeding so orders, by independent legal counsel in a
written opinion; or (4) if a quorum consisting of directors who were not parties
to the action, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
The articles of incorporation, the bylaws or an arrangement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action,
<PAGE>
suit or proceeding must be paid by the corporation as they are incurred and in
advance of the final disposition of the action, suit or proceeding, upon receipt
of an undertaking by or on behalf of the director or officer to repay the amount
if it is ultimately determined by a court of competent jurisdiction that he is
not entitled to be indemnified by the corporation. The provisions of this
subsequent do not affect any rights to advancement of expenses to which
corporate personnel other than directors or officers may be entitled under any
contract or otherwise by law.
The indemnification and advancement of expenses authorized in or ordered by
a court pursuant to this section: (1) does not exclude any other rights to which
a person seeking indemnification or advancement of expenses may be entitled
under the articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an action in
his official capacity or an action in another capacity while holding his office,
except that indemnification, unless ordered by a court pursuant to NRS 78.7502
or for the advancement of expenses made pursuant to subsection 2, may not be
made to or on behalf of any director if a final adjudication establishes that
his acts or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action and (2) continues
for a person who has ceased to be a director, officer, employee or agent and
inures to the benefit of the heirs, executors and administrators of such a
person.
PART F/S
BIO-ONE CORPORATION
Consolidated Financial Statements
September 30, 2000 and December 31, 1999
<PAGE>
BIO-ONE CORPORATION
Table of Contents
Independent Auditor's Report.............................................F-1
Financial Statements:
Consolidated Balance Sheets.....................................F-2
Consolidated Statements of Operations...........................F-3
Consolidated Statements of Changes in Stockholders' Equity......F-4
Consolidated Statements of Cash Flows...........................F-5
Notes to Consolidated Financial Statements...............................F-6
<PAGE>
PARKS, TSCHOPP,
WHITCOMB 2600 Maitland Center Parkway
& ORR Suite 330
P.A. Maitland, Florida 32751
Certified Public Accountants Telephone: 407 875-2760
Fax: 407 875-2762
Independent Auditors' Report
The Board of Directors and Stockholders
Bio-One Corporation
We have audited the accompanying consolidated balance sheets of Bio-One
Corporation, as of September 30, 2000 and December 31, 1999 and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the nine months ended September 30, 2000 and the period from inception
(April 9, 1999) through December 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bio-One Corporation
as of September 30, 2000 and December 31, 1999, and the results of their
operations and their cash flows for the nine months ended September 30, 2000 and
the period from inception (April 9, 1999) through December 31, 1999, in
conformity with generally accepted accounting principles.
Parks, Tschopp, Whitcomb & Orr. P.A.
October 19, 2000
Maitland, Florida
<PAGE>
<TABLE>
<CAPTION>
BIO-ONE CORPORATION
Consolidated Balance Sheets
September 30, 2000 and December 31, 1999
Assets
2000 1999
----------------- ----------------
<S> <C> <C>
Current assets:
Cash $ 851 20
Accounts receivable 1,735 34
Inventory 29,937 28,141
----------------- ----------------
Total current assets 32,523 28,195
Equipment 14,780 6,619
Less accumulated depreciation 1,824 662
----------------- ----------------
Net equipment 12,956 5,957
Other assets:
Deposits 1,700 200
----------------- ----------------
$ 47,179 34,352
================= ================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 38,244 $ 46,350
Notes payable (note 5) 99,502 -
Accrued expenses (note 4) 196,468 $ 94,750
----------------- ----------------
Total current liabilities 334,214 141,100
----------------- ----------------
Stockholder's equity:
Common stock ($.001 par value; 100 million shares authorized; 11,700,000
shares at September 30, 2000 and 4,994,500 shares at December 31, 1999 issued
and
outstanding) 11,700 49,945
Preferred stock ($.001 par value; 1,000,000 shares authorized; - -
none issued
Additional paid-in capital 207,400 70,555
Stock subscriptions receivable - (3,500)
Accumulated deficit (506,135) (223,748)
----------------- ----------------
Total stockholders' equity (287,035) (106,748)
----------------- ----------------
$ 47,179 $ 34,352
================= ================
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
BIO-ONE CORPORATION
Consolidated Statements of Operations
Nine months ended September 30, 2000 and the period from inception
(April 9, 1999) through December 31, 1999
2000 1999
------------------ -------------------
<S> <C> <C>
Revenue:
Product sales $ 52,626 47,425
Consulting fees - 40,000
------------------ -------------------
Total sales 52,626 87,425
Cost of goods sold 18,021 27,049
------------------ -------------------
Gross profit 34,605 60,376
Selling, general and administrative expenses 316,992 284,124
------------------ -------------------
Net loss $ (282,387) (223,748)
================== ===================
Loss per common share $ (.05) (0.05)
================== ===================
Weighted average number of common shares outstanding 6,179,600 4,924,900
================== ===================
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
BIO-ONE CORPORATION
Consolidated Statements of Changes in Stockholders' Equity
Nine months ended September 30, 2000 and the period from
inception (April 9, 1999) through December 31, 1999
Additional Stock
Common Stock Paid-in Subscription Accumulated
Shares Amount Capital Receivable Deficit Total
---------------------- ----------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balances, April 9, 1999 - $ - - - - -
Common stock subscribed 4,564,500 45,645 (42,145) (3,500) - -
Common stock issued for cash 430,000 4,300 112,700 - - 117,000
Net loss - - - - (223,748) (223,748)
----------- --------- ----------- ------------ ------------ ----------
Balances, December 31, 1999 4,994,500 49,945 70,555 (3,500) (223,748) (106,748)
Common stock issued for cash 390,000 3,900 35,100 - - 39,000
Common stock issued for services 51,000 510 4,590 - - 5,100
Common stock subscribed 4,424,500 44,245 (40,745) (3,500) - -
Recapitalization, including impact of
reverse acquisition 1,700,000 (88,300) 104,300 - - 16,000
Common stock issued for cash 140,000 1,400 33,600 - - 35,000
Stock subscription - - - 7,000 - 7,000
Net loss - - - - (282,387) (282,387)
----------- --------- ----------- ------------ ------------ ----------
Balances, September 30, 2000 11,700,000 $ 11,700 207,400 - (506,135) (287,035)
=========== ========= =========== ============ ============ ==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
BIO-ONE CORPORATION
Consolidated Statements of Cash Flows
Nine months ended September 30, 2000 and the
period from inception (April 9, 1999) through December 31, 1999
2000 1999
----------------- -----------------
<S> <C> <C>
Cash flows used in operating activities:
Net loss $ (282,387) (223,748)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 17,162 662
Common stock issued for services 5,100 -
Changes in:
Accounts receivable (1,701) (34)
Inventory (1,796) (28,141)
Other assets (1,500) (200)
Accounts payable (8,106) 46,350
Accrued expenses 101,718 94,750
----------------- -----------------
Net cash used in operating activities (171,510) (110,361)
----------------- -----------------
Cash flows from investing activities:
Purchase of equipment (8,161) (6,619)
----------------- -----------------
Net cash used in investing activities (8,161) (6,619)
----------------- -----------------
Cash flows from financing activities:
Issuance of common stock 81,000 117,000
Proceeds from notes payable 99,502 -
----------------- -----------------
Net cash provided by financing activities 180,502 117,000
----------------- -----------------
Net increase in cash 831 20
Cash, beginning of period 20 -
----------------- -----------------
Cash, end of period $ 851 $ 20
================= =================
Supplemental disclosure of cash flows information:
Cash paid during the year for interest $ - -
================= =================
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
BIO-ONE CORPORATION
Notes to Consolidated Financial Statements
September 30, 2000
(1) Organization and Significant Accounting Policies
(a) Organization
The accompanying consolidated financial statements include the accounts of
Bio-One Corporation (Bio-One) and its wholly owned subsidiary, Crown
Enterprises, Inc. (Crown or the Company). All significant intercompany balances
and transactions have been eliminated in consolidation. Bio-One and subsidiaries
have a December 31 fiscal year end.
Bio-One Corporation was incorporated in the State of Nevada, with capital stock
of 20,000,000 shares at $ 0.001 par value.
Crown Enterprises, Inc. was incorporated under the laws of the State of Florida
on April 9, 1999. Crown has developed a complete line of naturopathic and
nutritional supplement products that can be recommended to address the specific
conditions identified by the Company's Microscopy "Live Blood Cell Analysis"
Program. The Company's "sell through" concept coupled with its Microscopy
Program and full line of naturopathic products places the Company in the
forefront of the preventative and alternative healthcare industry.
The Company's revenues will be generated with strategic acquisitions within an
industry poised for consolidation and also through the manufacturing and
distribution of nutritional supplement products. The Company is prepared to
launch distribution pipelines through E-Commerce, retail stores, infomercials,
microscopy centers, and the Equine industry.
On May 30, 2000, Crown agreed to exchange shares with Bio-One Corporation, a
Nevada company. Accordingly, Crown exchanged 10,000,000 shares of the company
stock for 10,000,000 shares of Bio-One stock in a business combination accounted
for as a reverse acquisition. During the period Bio-One was in existence, prior
to the reverse acquisition, its only activity was to raise equity capital. For
accounting purposes, the reverse acquisition is reflected as if Crown issued its
stock (10,000,000 shares) for the net assets of Bio-One. The net assets of
Bio-One were not adjusted in connection with the reverse acquisition since they
were monetary in nature.
(b) Revenue Recognition
The principal sources of revenues are derived from product sales and consulting
fees. Revenue from product sales is recognized when the product is shipped.
Consulting fees are recognized when the service is performed. Income from
royalties is recognized as earned.
(Continued)
F-6
<PAGE>
BIO-ONE CORPORATION
Notes to Consolidated Financial Statements
Organization and Significant Accounting Policies - (Continued)
(b) Revenue Recognition (Continued)
Revenue from licensing of a franchise is recognized when the franchise commences
operations.
Inventory
Inventory consists of nutritional supplement products, which are valued at the
lower of cost or market on first-in, first-out basis.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed over the
estimated useful lives of the assets using straight-line methods.
The Company reviews the carrying value of property and equipment for impairment
whenever events and circumstances indicate that the carrying value of an asset
may not be recoverable from the estimated future cash flows expected to result
from its use and eventual disposition. In cases where undiscounted expected
future cash flows are less than the carrying value, an impairment loss is
recognized equal to an amount by which the carrying value exceeds the fair value
of assets. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Fair Value of Financial Instruments
The carrying value of the Company's financial instruments approximates fair
value due to the short-term nature of such assets. Deposits payable are not
current; however, in the case of deposits, no defined maturity exists. As such,
the carrying value and the fair value are assumed to be equal.
(Continued)
F-7
<PAGE>
BIO-ONE CORPORATION
Notes to Consolidated Financial Statements
Organization and Significant Accounting Policies - (Continued)
Credit Risks
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of trade accounts and notes receivable. The
Company sells its products to customers, at times extending credit for such
sales. Exposure to losses on receivables is principally dependent on each
customer's financial condition. The Company monitors its exposure for credit
losses and maintains allowances for anticipated losses.
(2) Income Taxes
At September 30, 2000, the Company had a net operating loss carryforward for
income tax purposes of approximately $500,000, which is available to offset
future taxable income. The loss carryforward expires in the years beginning in
2019, unless it is utilized sooner. A valuation allowance equal to the tax
benefit of the net operating losses has been established since it is uncertain
that future taxable income will be realized during the carryforward period.
Accordingly, no income tax provision has been recognized in the accompanying
financial statements.
(3) Earnings (loss) per Share
Earnings (loss) per share of common stock in 2000 and 1999 were based on the
weighted average number of shares outstanding during those periods.
Commitments
The Company has entered into employment agreements with two of its founding
directors requiring aggregate annual salaries of $240,000 beginning in April
1999. At September 30, 2000 and December 31, 1999, $196,468 and $94,750,
respectively, remained to be paid.
(5) Notes Payable
Note payable to bank, bearing interest at
the bank's prime rate (9.5% at September
30, 2000), due November 30, 2000, collateralized
by accounts receivable and inventory. $ 74,502
Note payable to individual, bearing interest
at 12%, due November 30, 2000. 25,000
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$ 99,502
F-8
<PAGE>
PART III
<TABLE>
<S> <C>
Item 1. Index to Exhibits
3.(i).1 * Articles of Incorporation of Bio-One Corporation filed February 24, 1998.
3.(i).2 * Certificate of Amendment of Articles of Incorporation
increasing authorized capital stock filed August 7, 2000.
3.(ii).1 * Bylaws of Bio-One Corporation
4.1 * Form of Private Placement Offering of 1,600,000 common shares at $0.01 per
share.
4.2 * Promissory Note in favor of Kevin Thomas dated August 8, 2000.
10.1 * Share Exchange Agreement between the Company and Crown Enterprises, Inc.
dated May 20, 2000.
10.2 * Employment Agreement between the Company and Armand Dauplaise dated May
30, 2000.
10.3 * Employment Agreement between the Company and Kevin Lockhart dated May
30, 2000.
10.4 * Lease Agreement between Crown Enterprises and Daniel Jack Co. dated August
15, 2000.
27.1 * Financial Data Schedule.
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</TABLE>
(* Filed herewith)
Item 2. Description of Exhibits
The documents required to be filed as Exhibits Number 2 and 6 and in
Part III of Form 1-A filed as part of this Registration Statement on Form 10-SB
are listed in Item 1 of this Part III above. No documents are required to be
filed as Exhibit Numbers 3 , 5 or 7 in Part III of Form 1- A and the reference
to such Exhibit Numbers is therefore omitted. The following additional exhibits
are filed hereto:
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<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
BIO-ONE CORPORATION
--------------------------------------
(Registrant)
Date: November 1, 2000 By: /s/ Armand Dauplaise
----------------------------------
Armand Dauplaise, President & Chairman
By: /s/ Kevin Lockhart
-------------------------------
Kevin Lockhart, Secretary
