U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB - Amendment 1
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
--------------------------------------------------------
(Name of Small Business Issuer in its charter)
NEVADA 65-0815746
------------------------------ --------------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
310 Waymont Court, Suite 100 Lake Mary, Florida 32746
-------------------------------------------------------
(Address of principal executive offices) (zip code)
Issuer's telephone number: (407) 328-1611
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 -
------------------------- ------------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 par value
------------------------------------------------------------------
(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
<PAGE>
SUMMARY TABLE OF CONTENTS
PART I ...................................................................3
Item 1. Description of Business............................................ 3
Item 2. Management's Discussion and Analysis and Plan of Operation.........32
Item 3. Description of Property............................................35
Item 4. Security Ownership of Certain Beneficial Owners and Management.....35
Item 5. Directors, Executive Officers, Promoters and Control Persons.......36
Item 6. Executive Compensation.............................................39
Item 7. Certain Relationships and Related Transactions.....................40
Item 8. Description of Securities..........................................41
PART II ..................................................................42
Item 1. Market for Common Equity and Other Shareholder Matters.............42
Item 2. Legal Proceedings..................................................43
Item 3. Changes and Disagreements with Accountants.........................43
Item 4. Recent Sales of Unregistered Securities............................43
Item 5. Indemnification of Directors and Officers..........................46
PART F/S Financial Statements
PART III.....................................................................50
Item 1. Index to Exhibits..................................................60
Item 2. Description of Exhibits............................................60
SIGNATURES
<PAGE>
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, who no longer have any
continued involvement in 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 310 Waymont
Court, Suite 100 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.
There can be no assurance that such application will be accepted.
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. Dale B. Finfrock, Jr., the Company's then current sole officer and
director, received 279,960 of such shares. For such offering, the Company relied
upon Section 3(b) of the Securities Act of 1933, as amended (the "Act"), Rule
504 of Regulation D promulgated thereunder ("Rule 504"), Section 517.061(11) of
the Florida Code, Section 10-5-9(13) of the Georgia Code, Section 90.530(11) of
the Nevada code, Section 48-2-103(b)(4) of the Tennessee code and Section
5[581-5]I(c) of the Texas code. No state exemption was necessary for the sales
made to Canadian or French investors. See Part I, Item 7.
3
<PAGE>
"Certain Relationships and Related Transactions." 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 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 2.
"Management's Discussion and Analysis and Plan of Operation, Results of
Operations - Full Fiscal Years - December 31, 1999 and December 31, 1998,
Stockholders' Equity"; 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 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 for their services to the Company in
connection with the Share Exchange. For such offering, the Company relied upon
Section 4(2) of the Act, Rule 506 and Section 517.061(11) of the Florida Code.
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."
4
<PAGE>
In June 2000, the Company received a commitment by VFM Venture Fund
Management, LLC ("VFM") to invest $1,000,000 in the Company. VFM has agreed to
pay $1.00 per share or seventy percent (70%) of the daily average bid price for
the first three (3) weeks after the stock begins trading publicly, whichever is
lower. The Company must raise a minimum of an additional $1,000,000 from other
sources besides VFM. VFM is entitled to appoint one (1) member to serve on the
Company's board of directors. VFM also will be entitled to purchase an
additional 1,000,000 shares for an exercise price of $1.50 per share for a
period of two (2) years from the date of the commitment. The commitment expires
one (1) year from its date of issuance.
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."
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 was
due November 30, 2000, however the maker and the holder orally agreed to extend
maturity for an additional ninety (90) days, based upon the terms and conditions
of the original note. No additional documentation was produced in connection
with such extension. 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 - 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 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"; and Part I, Item 7. "Certain
Relationships and Related Transactions."
5
<PAGE>
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."
In November 2000, the Company sold 140,000 shares of its Common Stock
to one (1) investor for $35,000. The Company issued a warrant to purchase an
additional 180,000 shares of the Company's Common Stock at an exercise price of
$1.00 per share or eighty percent (80%) of the average bid price for the first
three (3) weeks of public trading, whichever is lower. The warrants expire
twelve (12) months from the date on which the Company's Common Stock is approved
for quotation on the Over the Counter Bulletin Board. 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 December 2000, the Company executed a convertible promissory note
in favor of Margaret Schrock in the principal amount of $25,000. The note bears
interest at a rate of twelve percent (12%) per annum and is due June 5, 2001.
The note is convertible at the option of the holder to shares of the Company's
restricted Common Stock at a price of $0.25 per share or fifty percent (50%) of
the average bid price for the first three (3) weeks of public trading, whichever
is lower. For such offering, the Company relied upon Section 4(2) of the Act,
Rule 506 and Section 517.061(11) of the Florida Code. See Part I, 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 December 2000, the Company sold a total of 99,999 shares of its
Common Stock to three (3) investors for a total of $24,999.99. No memorandum was
used in connection with the sale. 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."
(b) BUSINESS OF THE COMPANY
GENERAL
Since its inception, the Company intended to market and distribute
nutritional supplements, which are natural, nutritional, biologically active
materials formulated to provide specific health benefits to humans and animals.
The Company was incorporated in February 1998 to conduct any lawful business,
but with the express intent to enter into the nutritional supplement marketing
and internet consulting businesses. Its then current management, located in
Florida, had little or no experience in these fields. In May 1998, the Company
attempted to raise money through the use of a private placement memorandum to
fund its operations. The Company was only able to raise a total of $16,000,
which was not enough to launch planned operations.
6
<PAGE>
It was not until May 2000, through the acquisition of the Company's
wholly owned subsidiary, Crown Enterprises, Inc., that the Company introduced a
line of private label nutritional supplements and/or nutraceuticals it has
trademarked as, GREEN PEARLS(TM). One of the Company's products, Blue Green
Manna(TM) includes Blue Green Algae harvested from Klamath Lake, Oregon. 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 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 fifteen (15) 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, one (1) of the Company's products contain within its 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 product, even when used as directed,
will have the effects intended. Although the Company tests the formulation and
production of its product to ensure that it is 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.
7
<PAGE>
Cell Tech, Klamath Valley Botanicals, Drugstore.com, Vision, Inc. and
Bio-One Corporation are the only distributors of products containing Klamath
Lake blue green algae known to the Company.
PRINCIPAL PRODUCTS AND SERVICES
KLAMATH LAKE BLUE GREEN ALGAE - HUMAN APPLICATIONS
BLUE GREEN MANNA (TM)- Classified as a supernutritional designed to
deliver nutrients needed for peak performance.
The Blue Green Algae from Oregon's Upper Klamath Lake is one of the
richest sources of chlorophyll and all essential Amino Acids in any known food
source or supplement. It has been more than twenty (20) years since humans,
hoofed animals and pets have been realizing benefits from consuming Blue Green
Algae from Klamath Lake. Currently, human applications account for approximately
sixteen percent (16%) of the Company's revenues, while animal applications
account for approximately eleven percent (11%).
Daryl and Marla Kollman began conducting extensive research in 1974.
After years of experimentation growing varieties of freshwater algae, the
Kollman's discovered an exclusive source for the most remarkable blue-green
algae of all Aphanizomenon flos-aquae. They found it growing abundantly in a
natural environment that proved to be the richest producer of biomass on the
planet: Upper Klamath Lake in Klamath Falls, Oregon. The Kollmans began
harvesting this extraordinary Algae, named it Super Blue Green(R) and Cell Tech
was born in 1982. Their 1999 sales exceeded $500 million.
OTHER SUPPLEMENT PRODUCTS
There are now ten (10) other natural supplement products which the
Company has designed and presently markets through its wholly owned subsidiary
Crown Enterprises. Each aims to achieve a specific goal:
1 PEARLNOGENOL - This Super antioxidant is designed to boost the
immune system, protect against degenerative diseases, and provide nutritional
support to tissues and cell system.
2 ACIDOPHILUS PLUS LACTOBACILLUS - This friendly blend of bacterial
flora helps control harmful bacteria in the intestinal tract.
3 DIGEST PLUS - Helps to bring the body into nutritional balance.
4 TRACE MINERALS LIQUID - Assists the body to fight against stress,
high blood pressure and chronic fatigue.
5 INTERNAL CLEANSE - A natural herbal formula that cleans and
detoxifies the colon.
6 FIBERTOX - Needed for digestive purposes this product helps lower
cholestrol, helps break up saturated fats and provides nutritional fiber.
8
<PAGE>
7 VITAMINS PLUS - provides essential daily requirements and other
powerful nutrients beneficial to maintaining a healthy immune and circulatory
system.
8 PROTOSOLVE - assists in keeping blood vessels clear by dissolving
and removing undigested proteins.
9 CHROMOLIPE - Chromium Picolinate promotes permanent fat loss
through re- establishing healthy metabolic and insulin levels.
10 GARLIC/CAYENNE PLUS - 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.
All of the Company's products and formulations are made specifically
and solely for the Company.
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 fifty (50) blood borne conditions. This program will
be licensed on a fee basis to prospective health field related customers and
include all required equipment and training. The program will be 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 will allow the Company to provide clients with a number of natural
supplements as preventative and alternative healthcare choice.
Live Blood Cell Analysis is an examination and study of the blood
under a microscope. It began in the late 1600's with the invention of the
microscope. Microscopy procedures launched many medical discoveries. William
Harvey (1668) and the Father of Microscopy, Dr. Vanleeuwenhoek (1706) were
Fellows of the Royal College of Science and reported to the Royal Society of
London. Dr. Vanleeuwenhoek is noted for his discovery of the nucleus of life
force within the blood cell structure. Live Blood Cell Analysis is a clinical
laboratory examination and diagnosis of the cellular structure. This includes
platelet activity, formation and activation of essential factors - for
preventive evidence and disease control.
The modern day Father of Live Blood Microscopy is Dr. Gunther
Enderline, whose work is done at Enderline Institute. His work was the basis for
the beginning of the microscopy program at Bio-One. A Certified Microscopist,
Dale Sams, and Dr. Fred Valdes of City College of Florida were retained to
develop advanced training manuals on Live Blood Cell Analysis for the purpose of
launching the Bio-One program. Kevin Lockhart, Bio-One Vice-Chairman and
Secretary is a Certified Microscopist.
9
<PAGE>
Bio-One Corporation will license local Nutritional Microscopy Centers
that offer "Live Blood Cell Analysis" and an extensive line of high quality
nutritional supplements. Targeting medical providers (i.e., physicians,
dentists, physical therapists, and other healthcare specialists) and alternative
healthcare professionals (i.e., chiropractors, acupuncturists, nutritionists,
etc.), as well as individual operators (i.e., business persons), a nutritional
Microscopy Center can be an additional profit generator for healthcare
professionals. Existing medical practices can access the alternative healthcare
market by adding Nutritional Microscopy services and proprietary nutritional
products through the Bio-One program. This alternative medicine (holistic)
component will not only achieve a higher patient care and service level, it
should result in net profits and provide long-term residual income.
Nutritional Microscopy is the science involving the microscopic
identification of blood disorders and their correction through the application
of specific nutritional-based therapies. Nutritional Microscopy is used to make
"qualitative" analysis of a blood sample at a specific point in time
(traditional blood testing takes a "quantitative" approach to blood analysis,
providing specific counts of blood components and their chemical composition in
numerical form to determine if any level is "abnormal"). The improvement (or
deterioration) of blood conditions can be monitored through the comparison of
future samples to the original or progressive samples. The specific therapies
recommended for correction of conditions can then be evaluated for
effectiveness. Many disorders that cannot be detected by standard blood testing
can be discovered and corrected through live blood cell analysis. Nutritional
Microscopy employs a testing technique called "live cell blood analysis" in
which a small sample of blood (i.e., a single droplet extracted from a lancet
pierced finger) is immediately examined under a special phase contrast/darkfield
microscope. The phase- contrast/darkfield microscope provides a means of
studying the living cell in action without the use of dyes. The
phase-contrast/darkfield microscope has made nutritional microscopy possible and
has revolutionized Cytology, (the branch of biology concerned with the study of
the structure and function of cells as individual units). For Nutritional
Micrscopy, phase-contrast/darkfield is useful in differentiating fungal and
bacterial forms as well as verifying crystalline structures in which accurate
identification is otherwise limited in other microscope modes. Through
Nutritional Microscopy, numerous specific blood conditions can be visually
identified. These conditions relate to specific disorders which can be
alleviated through the use of specific nutritionally based therapies (i.e.,
intake of food-based supplements, minerals, vitamins, or gastro-intestinal tract
agents).
Bio-One Corporation will provide a microscopy course designed to
provide sufficient knowledge to operate a Nutritional Microscopy Center.
Following a one (1) week certification seminar, the microscopist will be ready
to provide field analysis. The course is not intended to provide a complete
nutritional education. Microscopists that are certified by the Company will have
demonstrated proficiency in the accurate identification of blood disorders from
visual scans on the phase-contrast/darkfield microscope, a knowledge of the
Company's product line and its application in relation to the correction of
specific conditions, and the ability to provide general background nutrition
information to clients.
Bio-One Corporation has developed a blood component identification
system that is used in live cell blood analysis. The system provides the on-site
microscopist the ability to analyze conditions following a scan of the sample.
Using proper techniques to avoid damaging or contaminating the sample, the
microscopist removes the sample through natural adhesion to the underside of a
standard glass slide. A slide cover immediately placed over the droplet results
in a sample approximately 12mm in diameter, ready for examination. Scanning the
center of the sample, the microscopist identifies general conditions of the
blood, and upon discover of disorders,
10
<PAGE>
photographically captures specific conditions for further analysis. The scan is
visible to the client on a video monitor, and as the analysis progresses, the
mircorscopist provides basic blood identification and nutritional education to
the client. Following the examination and analysis, the microscopist using a
consultative sales technique, makes recommendations for the use of specific
nutritional products and the lifestyle changes needed to positively effect the
conditions discovered. Nutritional Microscopy Centers will sell proprietary
food-based nutritional products. In addition to improving general health, the
specially-formulated products were designed to correspond to the requirements
for alleviating conditions identified during the live-cell blood analysis. The
supplements feature Crystalloid Electrolyte Minerals, a special formulation of
trace minerals developed through 30 years of research conducted by a team of
naturopathic doctors. Trace Minerals, are more readily absorbed by the body in
their crystalloid form. The Bio-One products are superior to the degree that
results are visible when the clients are re-tested within 30 days. Specific
products are promoted for use in general health well-being. Several of the
products are more effective when used in a full program, which is initially
recommended for all clients and repeated periodically. Bio-One Nutritional
Microscopy Centers will operate in territories defined by geographic boundaries
and determined by demographic factors. With space requirements of approximately
250 square feet, microscopists can set up an office in an executive suite-type
office center or a medical complex. Having a tile floor area surrounding the
microscopy station and immediate access to a sink is the only special
consideration when leasing. This restricted office size also makes a Center's
inclusion in a traditional medical practice very practical. Executive suite
services and existing medical offices can provide common access to a waiting
area, telephone reception and appointment scheduling, as well as a phone system,
fax machine, and copier.
The Microscopy Center has limited equipment requirements consisting
primarily of office furnishings, a computer station, and a microscopy station.
The Company's first Nutritional Microscopy Center is operated by James J. Brown;
an experienced microscopist. A Microscopy Center operation is also maintained at
Bio-One headquarters. Nutritional Testing is offered to one hundred percent
(100%) of the clients. The microscopist spends approximately one (1) hour with
each client during an initial evaluation in which a history is taken, a
background in live-cell blood analysis and nutrition is provided, the blood
sample is analyzed, and products are presented. Clients are provided with a
compact disk based record of the various conditions identified during the test.
This information is re-evaluated for improvement during subsequent re-tests,
which are scheduled in one-half hour appointments as needed per client. A
comparative analysis is performed annually to determine client progress. Clients
normally purchase tests in packages to reduce overall costs. Typically, the
initial test is charged at $60.00 and subsequent re-testing fees are reduced to
$40.00 Credit is applied toward product purchases over each 12-month period. In
conjunction with testing, Microscopy Centers sell nutritional products at
retail. Initially, a fast-start program that includes the use of multiple
products is recommended together with products specific to identified
conditions. Typically clients leave initial appointments with approximately
$149.00 of retail product. The full line of products will always be on display
at the Center and will be available for retail purchase during initial testing
and re-testing appointments. Bio-One will provide the Center with the following
equipment on a licensing basis. The Center will pay the Company a deposit, which
will cover the cost of equipment and microscopist training.
Materials Necessary to Conduct Live Blood Cell Analysis
* Microscope
* Computer
* Video Camera
* Video Monitor
* Video Capture Card
* CD-Writer
* Color Printer
* Foot Pedal
11
<PAGE>
Bio-One sells to both distributors and consumers. There are currently
no distributor contracts in place. Therefore all distributors work on an invoice
basis. The company's "sell through" rather than "sell to" marketing plan is
based upon the following strategy:
Bio-One Corporation will launch an aggressive targeted audience
campaign during "Plan" year one. It will include awareness, point of purchase,
repeat buyer incentives, an awards program, etc. Bio-One Corporation's overall
advertising and promotional objectives are to:
o Coordinate sales literature, demonstration materials, telemarketing programs,
and direct response promotions in order to stimulate repeat purchases. o
Generate qualified sales leads and potential new distributors for field sales
organization. o Increase company awareness and brand name recognition among
business managers and retailers, buyers, customers.
o Develop, through market research, significant information to create immediate
and long-term marketing plans. o Create product advertising programs supporting
the Company's products. o Differentiate the company as a value-added provider of
high quality nutritional products.
EQUINE SUPPLEMENTS
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 currently sells the above-listed equine supplements both
wholesale and retail. The Company plans to expand sales of these products to
additional customers as such customers are identified by the Company.
NUTRACEUTICAL BASED HEALTH SUPPLEMENTS FOR THE HUMAN HEALTH
MARKET
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
12
<PAGE>
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 term "private label market"
describes product distributors who have outsourced the manufacturing of their
product. Over ninety percent (90%) of all nutritional supplements companies have
someone else manufacture their products and place their "private label" on the
products.
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 LACTOBACILLUS and DIGEST PLUS AND ACIDOPHILUS PLUS include
Chris Hansen, Rhone-Poulenc and Lallemand.
Currently there are in excess of 200 primary suppliers of raw
materials within the U.S. There are well over 100 manufacturers in the U.S. that
could manufacture the Company's products. Bio- One utilizes six (6)
manufacturers for its products. The six (6) manufacturers, the Company products
manufactured by each, and the raw materials for each are as follows:
CEBA-TEK
1) Acidophilus Plus: Contains: Two billion viable units of lactobacillus
acidophilus, dextrin, maltodextrin, with Crystalloid Electrolyte Trace Minerals.
2)Digest Plus: Contains: Amylase, cellulase, protease, lipase, lactase, pepsin,
papain, trypsin, barley, alfalfa, spinach, kelp, parsley, celery seed,
watercress, dandelion, with Crystalloid Electrolyte Trace Minerals.
3) Fibertox: Contains: Apple Pectin, Citrus Pectin, Russian Black Radish,
Cellulase, Pectinase, Protease, with Crystalloid Electrolyte Trace Minerals.
13
<PAGE>
4) Internal Cleanse: Contains: Psyllium husk, ginger root, celery seed, aloe
vera, lactobacillus, red raspberry leaf, cascara sagrada, fennel, apple pectin,
barberry turkey rhubarb, papain, slippery elm, with Crystalloid Electrolyte
Trace Minerals.
GLOBAL NUTRITION
1) Chromolipe: Contains: Black Currant Extract, Milk Thistle Seed, Lipase,
Garlic, Phosphatidyl Choline, Cellulase, Chromium GTF, Chromium Picolinate,
Protease, Amylase, with Crystalloid Electrolyte Trace Minerals.
2) Garlic/Cayenne Plus: Contains: Garlic, Cayenne pepper 40,000 H.U., with
Crystalloid Electrolyte Trace Minerals.
3) Protosolve: Contains: Protease, Monopotassium Phosphate. Valerian Root,
Lycopenes, Vitamin B3, Licorice Root, Potassium (Citrate), Lipase, with
Crystalloid Electrolyte Trace Minerals.
4) Vitamins Plus: Contains: Essential daily requirements of vitamins and
minerals, along with Chromium, Potassium and Lecithin.
NATURES PATH
1) Trace Minerals Liquid: Contains: Organic copper, Iodine, Manganese, Zinc,
Potassium, Sodium Selenium, Chromium & Silica in trace amounts. A Broad-scope
Electrolyte Solution.
UCKELE HEALTH & NUTRITION
1) Pearlnogenol: Contains: Grape Seed Extract and Crystalloid Electrolyte
Minerals.
VISION, INDUSTRIES
1) Blue Green Manna(TM)( "Superfood from upper KLAMATH LAKE"): Contains: 490 mg
of Blue Green Algae plus 10 mg of Plant-Source Enzymes (i.e., Protease,
Cellulase, Amylase, and Lipase), Calcium, Chromium, Iodine, Iron, Magnesium,
Manganese, Potassium, Selenium, Zinc, Boron, Cobalt, Copper, Fluorine,
Germanium, Molybdendum, Nickel, Phosphorus, Silicon, Sodium, Tin, Titanium and
Vanadium.
MARKETING, SALES AND DISTRIBUTION
No current marketing, sales or distribution system is currently in
place. The Company's two (2) officers and directors, Armand Dauplaise and Kevin
Lockhart currently sell the Company's products. Additionally, two (2)
independent sales representatives sell and services customers of the Company's
animal health care products. No contracts are in place between the Company and
the independent sales representatives. They operate on an invoice basis.
The foregoing discussion is predicated upon the Company generating
revenues or raising additional capital to fund implementation of such system.
Animal Health Products. The Company will rely upon independent sales
representatives to sell and service customers of its animal health products. The
Company also anticipates marketing and selling private label equine focused
products directly to branded companies involved in horse breeding.
14
<PAGE>
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
internationally.
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 fifty (50) blood borne conditions.
This program will be 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, anticipates
serving as an ambassador to business, industry and governmental agencies to
effectively contribute to the healthcare needs of a global humanity.
15
<PAGE>
Bio-One Corporation will license local Nutritional Microscopy Centers
that offer "Live Blood Cell Analysis" and an extensive line of high quality
nutritional supplements. Targeting medical providers (i.e., physicians,
dentists, physical therapists, and other healthcare specialists) and alternative
healthcare professionals (i.e., chiropractors, acupuncturists, nutritionists,
etc.), as well as individual operators (i.e., business persons), a nutritional
Microscopy Center can be an additional profit generator for healthcare
professionals. Existing medical practices can access the alternative healthcare
market by adding Nutritional Microscopy services and proprietary nutritional
products through the Bio-One program. This alternative medicine (holistic)
component will not only achieve a higher patient care and service level, it
should result in net profits and provide long-term residual income.
Nutritional Microscopy is the science involving the microscopic
identification of blood disorders and their correction through the application
of specific nutritional-based therapies. Nutritional Microscopy is used to make
"qualitative" analysis of a blood sample at a specific point in time
(traditional blood testing takes a "quantitative" approach to blood analysis,
providing specific counts of blood components and their chemical composition in
numerical form to determine if any level is "abnormal"). The improvement (or
deterioration) of blood conditions can be monitored through the comparison of
future samples to the original or progressive samples. The specific therapies
recommended for correction of conditions can then be evaluated for
effectiveness. Many disorders that cannot be detected by standard blood testing
can be discovered and corrected through live blood cell analysis. Nutritional
Microscopy employs a testing technique called "live cell blood analysis" in
which a small sample of blood (i.e., a single droplet extracted from a lancet
pierced finger) is immediately examined under a special phase contrast/darkfield
microscope. The phase- contrast/darkfield microscope provides a means of
studying the living cell in action without the use of dyes. The
phase-contrast/darkfield microscope has made nutritional microscopy possible and
has revolutionized Cytology, (the branch of biology concerned with the study of
the structure and function of cells as individual units). For Nutritional
Micrscopy, phase-contrast/darkfield is useful in differentiating fungal and
bacterial forms as well as verifying crystalline structures in which accurate
identification is otherwise limited in other microscope modes. Through
Nutritional Microscopy, numerous specific blood conditions can be visually
identified. These conditions relate to specific disorders which can be
alleviated through the use of specific nutritionally based therapies (i.e.,
intake of food-based supplements, minerals, vitamins, or gastro-intestinal tract
agents).
Bio-One Corporation will provide a microscopy course designed to
provide sufficient knowledge to operate a Nutritional Microscopy Center.
Following a one-week certification seminar, the microscopist will be ready to
provide field analysis. The course is not intended to provide a complete
nutritional education. Microscopists that are certified by the Company will have
demonstrated proficiency in the accurate identification of blood disorders from
visual scans on the phase-contrast/darkfield microscope, a knowledge of the
Company's product line and its application in relation to the correction of
specific conditions, and the ability to provide general background nutrition
information to clients.
Bio-One Corporation has developed a blood component identification
system that is used in live cell blood analysis. The system provides the on-site
microscopist the ability to analyze conditions following a scan of the sample.
Using proper techniques to avoid damaging or contaminating the sample, the
microscopist removes the sample through natural adhesion to the underside of a
standard glass slide. A slide cover immediately placed over the droplet results
in a sample approximately 12mm in diameter, ready for examination. Scanning the
center of the sample, the microscopist identifies general conditions of the
blood, and upon discover of disorders, photographically captures specific
conditions for further analysis. The scan is visible to the client
16
<PAGE>
on a video monitor, and as the analysis progresses, the mircorscopist provides
basic blood identification and nutritional education to the client. Following
the examination and analysis, the microscopist using a consultative sales
technique, makes recommendations for the use of specific nutritional products
and the lifestyle changes needed to positively effect the conditions discovered.
Nutritional Microscopy Centers will sell proprietary food-based nutritional
products, in addition to improving general health, the specially-formulated
products were designed to correspond to the requirements for alleviating
conditions identified during the live-cell blood analysis. The supplements
feature Crystalloid Electrolyte Minerals, a special formulation of trace
minerals developed through 30 years of research conducted by a team of
naturopathic doctors. Trace Minerals, are more readily absorbed by the body in
their crystalloid form. The Bio-One products are superior to the degree that
results are visible when the clients are re-tested within 30 days. Specific
products are promoted for use in general health well-being. Several of the
products are more effective when used in a full program, which is initially
recommended for all clients and repeated periodically. Bio-One Nutritional
Microscopy Centers will operate in territories defined by geographic boundaries
and determined by demographic factors. With space requirements of approximately
250 square feet, microscopists can set up an office in an executive suite-type
office center or a medical complex. Having a tile floor area surrounding the
microscopy station and immediate access to a sink is the only special
consideration when leasing. This restricted office size also makes a Center's
inclusion in a traditional medical practice very practical. Executive suite
services and existing medical offices can provide common access to a waiting
area, telephone reception and appointment scheduling, as well as a phone system,
fax machine, and copier.
The Microscopy Center has limited equipment requirements consisting
primarily of office furnishings, a computer station, and a microscopy station.
The Company's first Nutritional Microscopy Center is operated by James J. Brown;
an experienced microscopist. A Microscopy Center operation is also maintained at
Bio-One headquarters. Nutritional Testing is offered to 100% of the clients. The
microscopist spends approximately one hour with each client during an initial
evaluation in which a history is taken, a background in live-cell blood analysis
and nutrition is provided, the blood sample is analyzed, and products are
presented. Clients are provided with a CD based record of the various conditions
identified during the test. This information is re-evaluated for improvement
during subsequent re-tests, which are scheduled in one-half hour appointments as
needed per client. A comparative analysis is performed annually to determine
client progress. Clients normally purchase tests in packages to reduce overall
costs. Typically, the initial test is charged at $60.00 and subsequent
re-testing fees are reduced to $40.00 Credit is applied toward product purchases
over each 12-month period. In conjunction with testing, Microscopy Centers sell
nutritional products at retail. Initially, a fast-start program that includes
the use of multiple products is recommended together with products specific to
identified conditions. Typically clients leave initial appointments with
approximately $149.00 of retail product. The full line of products will always
be on display at the Center and will be available for retail purchase during
initial testing and re-testing appointments. Bio-One will provide the Center
with the following equipment on a licensing basis. The Center will pay the
Company a deposit, which will cover the cost of equipment and microscopist
training.
Microscope
Computer
Video Camera
Video Monitor
Video Capture Card
CD-Writer
Color Printer
Foot Pedal
17
<PAGE>
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
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.
Although all future employees are expected to be required to 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.
GNC is the industry leader with $1.6 billion in annual sales. Less
than twenty (20) companies are realizing annual revenues in excess of 100
million. The Nutrition Business Journal reported in July 1997 that there are
nearly 5,000 privately held companies with under $25 million in annual sales in
the retail and manufacturing segments. Well over 2,000 companies are considered
in the "mom & pop" category, with most being "first generation." Amway's
Nutrilite division is the world's largest manufacturer of branded vitamins and
minerals in tablet or capsule form, according to the company. Over 90% of all
supplement-marketing companies outsource their manufacturing. See the following
list:
18
<PAGE>
Top U.S. Supplement Manufacturing / Marketing Companies
Manufacturer / Marketer Revenues ($Million)
Leiner Health Products 580
American Home Products 540
Rexall Sundown 531
Pharmavite 410
NBTY 350
TwinLab Corporation 321
General Nutrition Products, Inc. 320
Weider Nutrition Group 290
Perrigo 178
Bristol-Myers Squibb (Mead Johnson) 160
Bayer Corporation 150
Experimental & Applied Sciences (EAS) 135
Murdock Madaus Schwabe 130
Powerfoods Inc. 115
IVC Industries Inc. 113
Country Life 110
MET-Rx USA 108
Nutraceutical International 105
Supplement Manufacturing / Marketing Companies Total # of Companies
Greater than $100 Million 18
20-100 Million 48
Less than $20 Million 994
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.
INTELLECTUAL PROPERTY
As of August 31, 2000, the Company had two (2) trademark applications
pending with the State of Florida 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.
19
<PAGE>
Trademark Name State
-------------- -------
GREEN PEARLS(TM) Florida
BLUE GREEN MANNA(TM) Florida
GOVERNMENTAL REGULATION
Many of the Company's products are either G.R.A.S. (Generally
Regarded As Safe) listed by the Food and Drug Administration ("FDA") or do not
currently require extended regulatory approval. Recent legislation has resulted
in a regulatory environment which sets what 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 nutritional
supplement products are subject to regulation by the Federal Trade Commission
("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.
These actions stem from the Retail Truth In Labeling laws, which are the only
laws which currently regulate the nutritional supplement industry.
In the future, 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, or more stringent interpretations of current laws or
regulations. In fact, the FDA strictly regulates dietary supplements, as opposed
to nutritional supplements which are subject only to Truth In Labeling laws.
Should the Company begin producing dietary supplements, which it currently has
no plans to do, or should one of the Company's products be determined by the FDA
to be a dietary supplement, more stringent regulation of the Company's products
may take place. Compliance may, at that time, cost the Company considerable
expense or may cause the Company to have to discontinue production of some or
all of its then current products. 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 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
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.
20
<PAGE>
COMPLIANCE WITH ENVIRONMENTAL LAWS
The Company believes that it is in full compliance with all relevant
environmental laws. In fact, there are no (0) environmental laws which directly
impact the Company's business. 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 2. "Management's Discussion and Analysis and Plan of Operation, Results of
Operations - Full Fiscal Years - December 31, 1999 and December 31, 1998,
Stockholders' Equity"; 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 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 for their services to the Company in
connection with the Share Exchange. For such offering, the Company relied upon
Section 4(2) of the Act, Rule 506 and Section 517.061(11) of the Florida Code.
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 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,
21
<PAGE>
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"; 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."
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.
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
22
<PAGE>
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
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.
23
<PAGE>
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 plans, in the future, to 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. Currently, the
Company conducts no such activities. The Company intends to expand its sales
force and activities.
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.
24
<PAGE>
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).
RISK FACTORS
Before making an investment decision, prospective investors should
carefully consider, along with other matters referred to herein, the following
risk factors inherent in and affecting the business of the Company.
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
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
25
<PAGE>
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
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.
26
<PAGE>
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
27
<PAGE>
with the Company in 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, one (1) 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 one (1) of these product ingredients or
combinations thereof.
28
<PAGE>
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, 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.
29
<PAGE>
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 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
30
<PAGE>
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 the Board of Directors as an anti-takeover
measure or device to prevent a change in control of the Company.
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.
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 31 "Financial Statements." The
<PAGE>
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. Company management estimates that $2 million will be
needed to purchase an existing manufacturing facility. The monies needed are
expected to be raised by the Company through private placement efforts to the
investment community.
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) to several customers in the second quarter of 1999.
Since acquiring Crown, the Company has begun to make preparations for
a period of growth, which may require it to significantly increase the scale of
its operations. This increase will include the hiring of additional personnel in
all functional areas and will result in significantly higher operating expenses.
The increase in operating expenses is expected to be matched by a concurrent
increase in revenues. However, the Company's net loss may continue even if
revenues increase and operating expenses may still continue to increase.
Expansion of the Company's operations may cause a significant strain on the
Company's management, financial and other resources. The Company's ability to
manage recent and any possible future growth, should it occur, will depend upon
a significant expansion of its accounting and other internal management systems
and the implementation and subsequent improvement of a variety of systems,
procedures and controls. There can be no assurance that significant problems in
these areas will not occur. Any failure to expand these areas and implement and
improve such systems, procedures and controls in an efficient manner at a pace
consistent with the Company's business could have a material adverse effect on
the Company's business, financial condition and results of operations. As a
result of such expected expansion and the anticipated increase in its operating
expenses, as well as the difficulty in forecasting revenue levels, the Company
expects to continue to experience significant fluctuations in its revenues,
costs and gross margins, and therefore its results of operations.
32
<PAGE>
Results of Operations - Nine months ended September 30, 2000 and the period from
inception of the Company's subsidiary (April 9, 1999) through December 31, 1999
Results of Operations have been prepared by the Company for the nine
(9) months ended September 30, 2000 and the period from inception of the
Company's subsidiary (April 9, 1999) through December 31, 1999 because a
comparison of full fiscal years would not be meaningful in light of the May 2000
share exchange and may have been misleading.
Revenues
Revenues for the nine (9) months ended September 30, 2000 were
$52,626 and the period from inception of the Company's subsidiary (April 9,
1999) through December 31, 1999 were $87,425.
The main reason for the decline in revenues was that no consulting
revenues were generated by Armand Dauplaise in year 2000. This is because he
spent one hundred percent (100%) of his time working for the Company, rather
than consulting for outside companies.
Operating Expenses
Selling, General and Administrative Expenses for the nine (9) months
ended September 30, 2000 were $316,992 and the period from inception of the
Company's subsidiary (April 9, 1999) through December 31, 1999 were $284,124.
Net loss was $282,387 and $223,748 respectively.
Assets and Liabilities
Assets were $32,523 as of September 30, 2000, and $28,195 as of
December 31, 1999. As of September 30, 2000, assets consisted primarily of
inventory and accounts receivable. As of December 31, 1999, assets consisted
primarily of inventory. Liabilities were $334,214 and $141,100 as of September
30, 2000 and December 31, 1999 respectively. As of September 30, 2000,
liabilities consisted primarily of accrued expenses based on its employment
agreements with Armand Dauplaise and Kevin Lockhart, who remained to be paid..
Stockholders' Equity
Stockholders' equity was ($287,035) as of September 30, 2000 and
($106,748) as of December 31, 1999. The Company had 11,700,000 and 4,994,500
shares of Common Stock issued and outstanding at September 30, 2000 and December
31, 1999, respectively.
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 7. "Certain Relationships and Related Transactions"; and Part II, Item
4. "Recent Sales of Unregistered Securities."
33
<PAGE>
Interest and Other Income (Expense), Net
The Company did not report foreign currency gains or losses for the
periods ended September 30, 2000 and December 31, 1999 since the Company has had
no foreign transactions to date. In the event that the Company contracts with a
foreign entity for the purchase of its products, the Company may in the future
be exposed to the risk of foreign currency gains or losses depending upon the
magnitude of a change in the value of a local currency in an international
market. The Company does not currently engage in foreign currency hedging
transactions, although it may implement such transactions in the future.
Financial Condition, Liquidity and Capital Resources
At September 30, 2000 the Company had cash of $851 as compared to $20
at December 31, 1999.
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.
The equity financing of $35,000 plus subsequent equity financing of
$95,000 will be adequate to fund current operations for nine (9) months. The
company intends to raise additional equity capital totaling approximately $5
million. The first $1 million has been committed to with contingencies.
The Company plans to finance its future operations through the sale
of its products and services. In the event the Company is unable to fund
operations from revenues alone, the Company may raise additional capital through
private and/or public sales of securities in the future but has no commitments
at this time which are contingent upon the occurrence of some future event.
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 was
due November 30, 2000, however the maker and the holder orally agreed to extend
maturity for an additional ninety (90) days, based upon the terms and conditions
of the original note. No additional documentation was produced in connection
with such extension. 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."
In December 2000, the Company executed a convertible promissory note
in favor of Margaret Schrock in the principal amount of $25,000. The note bears
interest at a rate of twelve percent (12%) per annum and is due June 5, 2001.
The note is convertible at the option of the holder to shares of the Company's
restricted Common Stock at a price of $0.25 per share or fifty percent (50%) of
the average bid price for the first three (3) weeks of public trading, whichever
is lower. For such offering, the Company relied upon Section 4(2) of the Act,
Rule 506 and Section 517.061(11) of the Florida Code. See Part II, Item 4.
"Recent Sales of Unregistered Securities."
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,
34
<PAGE>
2000. The Company makes monthly payments in advance in the amount of $2,250. At
the expiration of the lease, the Company continued occupancy of the premises as
a month-to-month tenant.
The Company moved to a larger facility next door and with the same
landlord. The Company and the landlord agreed to let the terms and conditions of
the old lease control the new location as well. All activities including
research and development, order fulfillment, and administrative management are
conducted at this location. All manufacturing is done off premises.
See Part I, Item 1. "Manufacturing."
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information as of December 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 35.1%
310 Waymont Court
Suite 100
Lake Mary, Florida 32746
Kevin Lockhart(1)(3)(4) Common 3,500,000 35.1%
310 Waymont Court
Suite 100
Lake Mary, Florida 32746
All Executive Officers and
Directors as a Group Common 7,000,000 70.2%
(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 7.
"Certain Relationships and Related Transactions"; and Part II, Item 4. "Recent
Sales of Unregistered Securities."
35
<PAGE>
(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"; and Part I, Item 7. "Certain
Relationships and Related Transactions."
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
--------------------------------------------------------
ARMAND DAUPLAISE
Mr. Dauplaise's career of thirty (30) years as a professional manager
spans four (4) different industries in food products and services, with senior
management responsibilities at the CEO and COO level. He has extensive
experience in management, operations, marketing, mergers and acquisitions. Mr.
Dauplaise has received numerous industry awards for service, performance and
leadership. He has served in leadership positions with the Burger King
Corporation, Hardees, Hallmark Cards, National Coffee, Coffee Butler, and
Premier Services. Prior to his current position as President of Bio-One, he
served as the Chief Operating Officer at Leffler Enterprises where he developed
and updated policies, procedures, systems, and the business plan to facilitate
growth from
36
<PAGE>
$11 million to $20 million annually while also identifying $60,000 in annual
savings. He also designed the Client Service Program, Preferred Client Rebate
Program and the Property Enhancement Program, which differentiated the company
from its competition.
As President of Restoring Services, Mr. Dauplaise led a floundering
franchise through an industry crisis, assuming complete responsibility for
management, administration, marketing, and employee supervision. He also guided
the franchise to a top-five ranking out of two hundred fifty (250) nationwide
locations. While President of Premier Services Mr. Dauplaise built and managed a
snack and beverage vending leader encompassing five divisions, 100+ employees,
and branch operations in four states by utilizing an industry consolidation
concept. He created a "total refreshment service" concept, which represented
thirty five percent (35%) of company sales. He devised a strategy that added
four new markets and augmented sales by three million dollars ($3,000,000). He
also constructed a marketing plan for an institutional food division that
bolstered sales by five hundred percent (500%) and profits by seven hundred
percent (700%).
KEVIN LOCKHART
As President of Green Pearls International, Kevin Lockhart launched a
marketing and promotional program to sell and distribute natural health products
direct to retail consumers through approximately fifty to seventy five (50-75)
authorized distributors, including the formulation of new products and designs
to address basic nutritional needs. In addition, he provided seminars to advance
and educate consumers on supplements and natural alternatives, such as Live
Blood Cell Microscopy. He also founded Green Supreme Labs which developed the
proprietary formulas for the nutritional supplements product line. As the
founder of Crown Institute, he developed the microscopy testing program and its
training procedures. At Crown Institute, he also developed and improved the
procedures for training and the equipment utilized for the microscopy testing.
Additionally, he formed an alliance with City College of Florida to train and
provide competency Certification for professionals in Live Blood Analysis
Microscopy. This was Mr. Lockhart's contribution to the formation of Bio-One
Corporation.
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."
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.
37
<PAGE>
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 7. "Certain Relationships and Related Transactions."
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 1999. Mr.
Dauplaise's career of thirty (30) years as a professional manager spans four (4)
different industries in food products and services, with senior management
responsibilities at the CEO and COO level. He has extensive experience in
management, operations, marketing, mergers and acquisitions. Mr. Dauplaise has
received numerous industry awards for service, performance and leadership. He
has served in leadership positions with the Burger King Corporation, Hardees,
Hallmark Cards, National Coffee, Coffee Butler and Premier Services. 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
38
<PAGE>
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.
ITEM 6. EXECUTIVE COMPENSATION
(a) GENERAL
Item 6. Executive Compensation
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Name Year Annual Annual LT
and Post Comp Comp Annual Comp LT All
Salary Bonus Comp Rest Comp LTIP Other
(2)(3)(4) ($) Other Stock Options Payouts (1)
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) 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.
(3) 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."
(4) 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."
39
<PAGE>
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 1998, prior to its acquisition of Crown, the Company sold
1,600,000 shares of its unrestricted Common Stock to seventy-two (72) investors
for $16,000. Dale B. Finfrock, Jr., the Company's then current sole officer and
director, received 279,960 of such shares. For such offering, the Company relied
upon Section 3(b) of the Act, 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 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 for their services to the Company in
connection with the Share Exchange. For such offering, the Company relied upon
Section 4(2) of the Act, Rule 506 and Section 517.061(11) of the Florida Code.
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
40
<PAGE>
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."
ITEM 8. DESCRIPTION OF SECURITIES
Description of Capital Stock
The Company's authorized capital stock consists of 100,000,000 shares
of Common Stock, $0.001 par value per share and 10,000,000 shares of Preferred
Stock, $0.001 par value per share. As of December 31, 2000, the Company had
9,970,999 shares of its Common Stock outstanding and none of its Preferred Stock
outstanding.
Description of Common Stock
All shares of Common Stock have equal voting rights and, when validly
issued and outstanding, are entitled to one (1) vote per share in all matters to
be voted upon by shareholders. The shares of Common Stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as
fully-paid and non-assessable shares. Cumulative voting in the election of
directors is not permitted; which means that the holders of a majority of the
issued and outstanding shares of Common Stock represented at any meeting at
which a quorum is present will be able to elect the entire Board of Directors if
they so choose and, in such event, the holders of the remaining shares of Common
Stock will not be able to elect any directors. In the event of liquidation of
the Company, each shareholder is entitled to receive a proportionate share of
the Company's assets available for distribution to shareholders after the
payment of liabilities and after distribution in full of preferential amounts,
if any, to be distributed to holders of the Preferred Stock. All shares of the
Company's Common Stock issued and outstanding are fully-paid and nonassessable.
Description of Preferred Stock
Shares of Preferred Stock may be issued from time to time in one or
more series as may be determined by the Board of Directors. The voting powers
and preferences, the relative rights of each such series and the qualifications,
limitations and restrictions thereof shall be established by the Board of
Directors, except that no holder of Preferred Stock shall have preemptive
rights.
While the Company currently has no anti-takeover provisions in its
Articles of Incorporation or Bylaws, its preferred stock may potentially be used
for this purpose. The Company is authorized to issue shares of preferred stock
("Preferred Stock") although none has been issued to date. The issuance of
Preferred Stock may not require approval by the shareholders of the Company's
Common Stock. The Board of Directors, in its sole discretion, may have 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 the Board of Directors as an anti-takeover measure or device to
prevent a change in control of the Company.
41
<PAGE>
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 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.
42
<PAGE>
As of December 31, 2000, there were ninety-one (91) holders of record
of the Company's Common Stock.
As of December 31, 2000, the Company had issued and outstanding
9,970,999 shares of Common Stock. Of this total, 8,370,999 were 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.
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
43
<PAGE>
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 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. Dale B. Finfrock, Jr., the Company's then current sole officer and
director, received 279,960 of such shares. For such offering, the Company relied
upon Section 3(b) of the 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.
44
<PAGE>
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 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 for their services to the Company in
connection with the Share Exchange. For such offering, the Company relied upon
Section 4(2) of the Act, Rule 506 and 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
45
<PAGE>
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 was
due November 30, 2000, however the maker and the holder orally agreed to extend
maturity for an additional ninety (90) days, based upon the terms and conditions
of the original note. No additional documentation was produced in connection
with such extension. 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.
In November 2000, the Company sold 140,000 shares of its Common Stock
to one (1) investor for $35,000. The Company issued a warrant to purchase an
additional 180,000 shares of the Company's Common Stock at an exercise price of
$1.00 per share or eighty percent (80%) of the average bid price for the first
three (3) weeks of public trading, whichever is lower. The warrants expire
twelve (12) months from the date on which the Company's Common Stock is approved
for quotation on the Over the Counter Bulletin Board. For such offering, the
Company relied upon Section 4(2) of the Act, Rule 506 and the Florida Exemption.
In December 2000, the Company executed a convertible promissory note
in favor of Margaret Schrock in the principal amount of $25,000. The note bears
interest at a rate of twelve percent (12%) per annum and is due June 5, 2001.
The note is convertible at the option of the holder to shares of the Company's
restricted Common Stock at a price of $0.25 per share or fifty percent (50%) of
the average bid price for the first three (3) weeks of public trading, whichever
is lower. For such offering, the Company relied upon Section 4(2) of the Act,
Rule 506 and the Florida Exemption.
In December 2000, the Company sold a total of 99,999 shares of its
Common Stock to three (3) investors for a total of $24,999.99. No memorandum was
used in connection with the sale. 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
46
<PAGE>
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, 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
47
<PAGE>
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, 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
48
<PAGE>
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>
PTWO | 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.
/s/ Parks, Tschopp, Whitcomb & Orr, P.A.
October 19, 2000
Maitland, Florida
F-1
<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:
Professional fees 166,202 156,651
Salaries 108,718 94,750
Rent 9,950 -
Other administrative 32,122 32,723
----------------- ----------------
Total selling, general and administrative 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) - -
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. Therefore, the
accompanying statement of Stockholder's Equity represents the share activity of
Crown and the legally outstanding shares 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 one-time
consulting fees. Revenue from product sales is recognized when the product is
shipped. Provisions for discounts and rebates to customers, and returns and
other adjustments are provided for in the same period the related sales are
recorded. Consulting fees were recognized when the service was performed.
F-6
(Continued)
<PAGE>
BIO-ONE CORPORATION
Notes to Consolidated Financial Statements
(1) Organization and Significant Accounting Policies - (Continued)
c) Inventory
Inventory consists of nutritional supplement products, which are valued at the
lower of cost or market on first-in, first-out basis.
d) Property and Equipment
Property and equipment are stated at cost. Depreciation is computed over the
estimated useful lives of the assets using straight-line methods.
The Company reviews the carrying value of property and equipment for impairment
whenever events and circumstances indicate that the carrying value of an asset
may not be recoverable from the estimated future cash flows expected to result
from its use and eventual disposition. In cases where undiscounted expected
future cash flows are less than the carrying value, an impairment loss is
recognized equal to an amount by which the carrying value exceeds the fair value
of assets.
e) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
f) Fair Value of Financial Instruments
The carrying 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.
g) 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.
F-7
(Continued)
<PAGE>
BIO-ONE CORPORATION
Notes to Consolidated Financial Statements
(1) Organization and Significant Accounting Policies - (Continued)
h) Stock Transactions
Shares issued for services performed are valued at either the fair value of
equity instruments issued or the value of services performed, whichever is more
reliably measurable.
i) Stock Options
The Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations.
Accordingly, compensation cost of stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of the grant
over the option exercise price and is charged to operations over the vesting
period. Income tax benefits attributable to stock options exercised are credited
to capital in excess of par value.
(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.
(4) 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.
F-8
(Continued)
<PAGE>
BIO-ONE CORPORATION
Notes to Consolidated Financial Statements
(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
----------
$ 99,502
==========
(6) Subsequent Event
In October 2000, two of the founding shareholders returned 2,095,000 shares of
common stock to the Company. The shares will be recorded at the fair market
value on the date of donation as treasury stock and corresponding contributed
capital which will have no effect on total stockholders' equity.
F-9
<PAGE>
<TABLE>
<CAPTION>
PART III
Item 1. Index to Exhibits
-------------- ---------------------------------
<S> <C> <C>
3.(i).1 [1] Articles of Incorporation of Bio-One Corporation filed February 24, 1998.
3.(i).2 [1] Certificate of Amendment of Articles of Incorporation increasing authorized
capital stock filed August 7, 2000.
3.(ii).1 [1] Bylaws of Bio-One Corporation
4.1 [1] Form of Private Placement Offering of 1,600,000 common shares at $0.01 per
share.
4.2 [1] Promissory Note in favor of Kevin Thomas dated August 8, 2000.
4.3 * Convertible Note in favor of Margaret Schrock dated December 5, 2000.
10.1 [1] Share Exchange Agreement between the Company and Crown Enterprises, Inc.
dated May 20, 2000.
10.2 [1] Employment Agreement between the Company and Armand Dauplaise dated May
30, 2000.
10.3 [1] Employment Agreement between the Company and Kevin Lockhart dated May
30, 2000.
10.4 [1] Lease Agreement between Crown Enterprises and Daniel Jack Co. dated August
15, 2000.
10.5 * Commitment letter from VFM Venture Fund Management, LLC dated June 29,
2000.
----------------
</TABLE>
(* Filed herewith)
[1] Incorporated herein by reference to the Company's Registration Statement on
Form 10-SB filed November 3, 2000.
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:
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: January 5, 2001 By: /s/ Armand Dauplaise
----------------------------
Armand Dauplaise, President & Chairman
By: /s/ Kevin Lockhart
-----------------------------
Kevin Lockhart, Secretary
62
