BIO AQUA SYSTEMS INC, SB-2/A, 1999-10-28

BIO AQUA SYSTEMS INC
SB-2/A, 1999-10-28
BLANK CHECKS

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As filed with the Securities and Exchange Commission on October 28, 1999 Registration No. 333-81829

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 3 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

BIO-AQUA SYSTEMS, INC.
(Name of Small Business Issuer in its Charter)

FLORIDA ____ 65-0926223
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Numbers) Identification No.)

1900 Glades Road, Suite 351
Boca Raton, Florida 33431 1900 Glades Road, Suite 351
(561) 416-8930 Boca Raton, Florida 33431
(Address and Telephone Number of (Address of Principal Place of Business or
Principal Executive Offices) Intended Principal Place of Business)
David Mayer
BIO-AQUA SYSTEMS, INC.
1900 Glades Road, Suite 351
Boca Raton, Florida 33431
(561) 416-8930
(Name, address and telephone number of agent for service)

Copies to:
Charles B. Pearlman, Esq. Nancy J. Van Sant, Esq.
Brian A. Pearlman, Esq. Sacher, Zelman, Paul, Beiley & Van Sant, P.A.
Atlas, Pearlman, Trop & Borkson, P.A. 1401 Brickell Avenue, Suite 700
200 East Las Olas Boulevard, Suite 1900 Miami, Florida 33131
Fort Lauderdale, Florida 33301 Telephone (305) 371-8797
Telephone (954) 763-1200 Facsimile (305) 374-2605
Facsimile (954) 766-7800
</TABLE>

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the registration statement becomes effective.

If any of the securities being registered on this form are to be offered on a
delayed or continuous basis under Rule 415 under the Securities Act of 1933, as
amended, check the following box: [X]

If this form is filed to register additional securities for an offering under
Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering: [ ]

If this form is a post-effective amendment filed under Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ]

If this form is a post-effective amendment filed under Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ]

If delivery of the prospectus is expected to be made under Rule 434, please
check the following box: [ X ]

CALCULATION OF REGISTRATION FEE
============================================================================================================================
Title of Each Class of Amount Proposed Proposed Amount of
Securities to be Registered to be Maximum Maximum Registration
Registered Offering Price Aggregate Fee
per Security Offering Price(1)
============================================================================================================================
<S> <C> <C> <C> <C>
Class A Common Stock 1,380,000(2) $5.625 $7,762,500 $2,157.98
- ----------------------------------------------------------------------------------------------------------------------------
Warrants 1,380,000(3) $.125 $172,500 $47.96
- ----------------------------------------------------------------------------------------------------------------------------
Class A Common Stock issuable
upon exercise of the Warrants 1,380,000(4) $7.30 $10,074,000 $2,800.57
- ----------------------------------------------------------------------------------------------------------------------------
Representative's Warrants 120,000(5) $0.001 $120 $.02
- ----------------------------------------------------------------------------------------------------------------------------
Class A Common Stock 120,000(6) $9.28 $1,113,600 $309.58
- ----------------------------------------------------------------------------------------------------------------------------
Warrants issuable upon the exercise of
the Representative's Warrants 120,000(7) $.206 $24,720 $6.87
- ----------------------------------------------------------------------------------------------------------------------------
Class A Common Stock issuable upon
the exercise of the Representative's
Warrants 120,000(8) $12.045 $1,445,400 $401.82
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL $20,592,840 $5,724.81(9)
============================================================================================================================
</TABLE>

(1) Estimated solely for purposes of calculating the amount of the
registration fee under Rule 457 under the Securities Act of 1933, as
amended.

(2) Includes 180,000 shares of class A voting common stock issuable under the
underwriter's over-allotment option.

(3) Includes 180,000 redeemable common stock purchase warrants issuable under
the over-allotment option.

(4) Represents shares of class A common stock issuable upon exercise of the
warrants registered together with such additional indeterminate number of
shares as may be issued upon exercise of such warrants by reason of the
anti-dilution provisions contained therein.

(5) Includes 120,000 representative's purchase warrants.

(6) Represents shares of class A common stock issuable upon exercise of the
representative's warrants together with such additional indeterminate
number of shares of class A common stock as may be issued upon exercise of
such representative's warrants by reason of the anti-dilution provisions
contained therein.

(7) Represents warrants issuable upon exercise of the representative's
warrants, together with such additional indeterminate number of warrants
as may be issued by reason of the anti-dilution provisions contained in
the registration statement.

(8) Represents shares of class A common stock issuable upon exercise of the
warrants included within the representative's warrants together with such
additional indeterminate number of shares of class A common stock as may
be issued upon exercise of such warrants by reason of the anti-dilution
provisions contained in the registration statement.

(9) Fee has been paid.

The registrant will amend this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Securities and Exchange Commission, acting
under Section 8(a), may determine.

<PAGE>

SUBJECT TO COMPLETION, DATED October 28, 1999

BIO-AQUA SYSTEMS, INC.
1,200,000 Shares of Class A Common Stock and
1,200,000 Redeemable Common Stock Purchase Warrants

We are offering shares of class A common stock and redeemable common
stock purchase warrants. Our class A common stock and our warrants are being
offered separately and not as units, and each is separately transferable. Each
warrant entitles the holder to purchase one share of class A common stock at
$7.30 per share, subject to adjustment, until ________, 2004.

Prior to this offering, there has been no public market for our class A
common stock or our warrants.

Investing in our class A common stock and our warrants involves certain
risks. See Risk Factors on page 6.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus.

<TABLE>
<CAPTION>
Per Share of Class A Per Warrant of Class A
Common Stock Common Stock Total
------------ ------------ -----
<S> <C> <C> <C>
Public Offering Price $5.6250 $0.125 $5.750
Underwriting Discounts and
Commissions $0.5625 $0.0125 $0.575
Proceeds to Bio-Aqua
Systems, Inc. $5.0625 $0.1125 $5.175
</TABLE>

The underwriters may, under some circumstances, for 45 days after the
date of this prospectus, purchase up to an additional 180,000 shares of common
stock and 180,000 warrants from us at the public offering price, less
underwriting discounts and commissions.

It is expected that delivery of our class A common stock and our
warrants will be made, in a firm commitment offering, against payment ^on or
about ____________, 1999.

NUTMEG SECURITIES, LTD. Emerson Bennett &
Associates, Inc.

Prospectus __________, 1999

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

TABLE OF CONTENTS

Page

<S> <C>
Prospectus Summary............................................................................... 3

Risk Factors..................................................................................... 5

Use of Proceeds ................................................................................. 10

Dividend Policy.................................................................................. 12

Dilution......................................................................................... 12

Capitalization................................................................................... 13

Exchange Rates................................................................................... 14

Selected Financial Data.......................................................................... 15

Management's Discussion and Analysis of Financial Condition
Results of Operations...................................................................... 16

Business......................................................................................... 22

Additional Information........................................................................... 50

Management....................................................................................... 51

Certain Relationships and Related Transactions................................................... 58

Bridge Financing................................................................................. 59

Principal Shareholders........................................................................... 60

Description of Securities........................................................................ 61

Shares Eligible for Future Sale.................................................................. 64

Underwriting..................................................................................... 65

Legal Matters.................................................................................... 69

Experts.......................................................................................... 69

Index to Financial Statements.................................................................... F-1
</TABLE>

Until _________, 1999 (25 days after the commencement of this
offering), all dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the obligations of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

<PAGE>

PROSPECTUS SUMMARY

Our Company

Overview

Bio Aqua is presently an international broker of animal nutrition
products, including fish, feather and krill meal. We currently sell and
distribute an automatic control system for fish meal processing and have
developed and sold poultry vaccines in Peru and Chile.

We are currently developing red tide detection kits and cleansing
equipment to remove toxins from contaminated shell fish. We are also testing
immune stimulants for salmon and shrimp.

Our strategy

Our strategy is to continue to expand as a niche participant in the
worldwide specialized animal feed and immunology market by capitalizing on the
commercialization of our research and development expertise.

Our history and structure

We were incorporated in Florida in March 1999 as a holding company to
acquire a 99% interest in Tepual S.A., a Chilean corporation. At closing of this
offering we will purchase our interest in Tepual S.A. from its shareholders.^ We
will acquire the rights to the Inual(TM) and Tepual(TM) brands at closing by
acquiring ^all of the issued and outstanding stock of Profeed, Inc., a Bahamian
company.^

Our principal executive offices are located at General Ekdhal 159,
Santiago, Chile, and our telephone number is 011 (562) 777-0262. Our U.S.
offices are located at 1900 Glades Road, Suite 351, Boca Raton, Florida 33431,
and our telephone number is (561) 416-8930. ^When we use the terms "Bio-Aqua,"
"Tepual," "we," "our" and similar terms, this includes Bio-Aqua Systems, Inc.
and Tepual S.A., our 99% subsidiary.

<PAGE>

The Offering

The share numbers in the information below and elsewhere in this
prospectus, unless otherwise stated, assumes no exercise of the over-allotment
option, our warrants, the representative's warrants, the securities underlying
the representative's warrants, or the issuance of up to 300,000 shares of class
A common stock reserved for issuance under our stock option plan. The share
numbers also assume that we have issued all the shares of our class B common
stock included in the purchase of the 99.9% interest in Tepual S.A. from its
shareholders.

Class A common stock offered......................... 1,200,000 shares
Warrants offered..................................... 1,200,000 warrants
Shares of class A common stock
underlying warrants.............................. 1,200,000 shares
Class A common stock outstanding
after the offering:.............................. 1,286,294
Class B common stock outstanding
after the offering............................... 1,700,000
Warrants outstanding
after the offering............................... 1,200,000

We may redeem our warrants beginning _______, 2000 for $.05 per warrant subject
to prior exercise of the warrant, if the closing bid price for our class A
common stock has been at least $9.00 per share for thirty consecutive trading
days. We are presently seeking listing of our securities on the American Stock
Exchange.

Proposed Amex symbols are:
Class A common stock...............................SEA
Warrants ..........................................SEAW

<PAGE>

RISK FACTORS

Because we have changed our business strategy, we may not be able to
successfully manage our new business operations. To date, we have engaged in
little or no commercial business outside of brokerage of fish meal, feather meal
and krill meal. Results of operations in the future will be influenced by
numerous factors. We will need significant operating expenditures arising from
technological developments, regulatory impediments, increases in expenses
associated with sales and marketing growth and maintenance of quality control.
Many of our marketing efforts have been untested in the market place, and may
not result in successful sales of our products and services.

We have a net loss for the period ending June 30, 1999 and we expect a
similar loss for the period ending September 30, 1999. We incurred a net loss of
$12,559 for the six months ended June 30, 1999, and anticipate losses for the
nine months ended September 30, 1999. We cannot be certain when we will achieve
profitability. If losses continue, this would have a negative impact on our
future operations.

Our costs of operations are subject to wide fluctuations depending on
the cost of fish meal and feather meal. The costs of fish meal and feather meal
are subject to wide fluctuations due to factors such as:

1. seasonality;
2. economic conditions; and
3. government restrictions.

Our inability to purchase these products on reasonable commercial terms could
significantly impact our financial results.

Failure to adapt our poultry vaccines to specific countries and regions
could limit our business success. Our current vaccines are limited to use in
specific countries. and regions. Animal pathogens in general are unique to
specific regions. Vaccines for poultry in Peru and Chile that we have produced
are developed to combat specific diseases to the region in which these bacterial
and viral strains are found. We will be required to commit considerable time,
effort and resources to develop vaccines for areas other than Peru and Chile.
Our success will depend upon, in part, the ability of new vaccines to meet
targeted performance.

If we are unable to successfully bring our red tide detection and
cleansing system to market because of our inability to meet technological and
regulatory compliance, we may not receive revenue from these products which
will adversely affect our financial condition. We anticipate that our paralytic
shellfish poisoning red tide detection kit will be available for sale during the
first quarter of 2000. Our red tide cleansing kit system is still in the
preliminary stages of product development and we anticipate that it will not be
ready for commercial sale for approximately two years. Our red tide detection
and cleansing is expected

<PAGE>

to be subject to regulation by agencies that administer laws governing health,
safety and the protection of the environment, or any other government agency in
which we may seek to distribute our products. Our success will depend, in part,
upon our ability to comply with regulatory agencies and make timely and
cost-effective developments of this product.

Failure to protect our technology could permit others to appropriate
our technology, adversely affecting our financial condition. Our current patent
and patent applications are limited in scope to specific areas of application.
Patent protection for our poultry vaccines is limited to Chile and currently
only protects our Chilean vaccine for bronchitis infection. As of the date of
this offering, we have not filed nor received patent protection for any other
Chilean vaccines and we do not have any patent protection for our immune
stimulants.

We have only applied for patent protection for our red tide paralytic
shellfish poisoning detection kit and our red tide paralytic shellfish poisoning
detoxification process in the United States, Chile, Canada and the European
Community. An additional patent application for red tide paralytic shellfish
poisoning detoxification has been filed in Australia. We have not received any
confirmation of our applications as of the date of this offering. Failure to
obtain patent protection could have an adverse effect on our financial
condition. In addition, if the legal and other costs of obtaining patent
protection in any other country or on an international basis exceeds our
financial capabilities, we may have to limit our patent applications.

Failure to trademark our Inual(TM) and Tepual(TM) brands may reduce
the value of our products and impact our financial condition. We currently only
have trademark protection over the Tepual(TM) and Inual(TM) brands in Chile,
Colombia, Taiwan, China, Ecuador, Mexico (only for Tepual(TM)), Japan, Peru and
South Africa. Our brand name is critical to our success. Failure to obtain
trademark protection in countries in which we presently operate may reduce the
value of our branded product and impact our financial condition.

The loss of significant customers in our brokerage of fish meal could
adversely effect our business. The loss of Bradwell Business Corp., Agribrand
Purina, Bio Mar, Nor Aqua, Pinar Yem Sanayi ve Pazarlama A.S., Alitec and Enos
Canada could materially effect our business. During the first two quarters of
1999, these customers accounted for an aggregate of approximately 80% of our
fish meal sales.

We may not be able to recover our investment in Kelor Trading, Ltd. if
their harvesting efforts are not successful, which could cause a financial loss.
To date, we have loaned an aggregate of $860,000 to Kelor Trading, Ltd. for the
preparation of a vessel to operate in Antarctic waters and working capital. This
advance is not evidenced by a promissory note and we have not received a
mortgage on the fishing vessel. Kelor Trading, Ltd. will repay us principally
through profits it receives from our joint venture as it harvests krill. If we
and Kelor are unsuccessful in harvesting krill and selling it at a profit, Kelor
Trading, Ltd. may be unable to repay us funds advanced under our agreement. We
are not the primary beneficiaries of the insurance that has been obtained on the
vessel and equipment used to harvest krill. If there is a

<PAGE>

catastrophe or damage to the vessel or its equipment we may not be able to
collect any insurance proceeds.

Limits on krill harvesting established by the Commission for the
Conservation of Antarctic Marine Living Resources may limit our revenue. The
commission limits the amount of krill that may be harvested in Antarctic waters
to 1.5 million tons. Presently 70,000 tons are being harvested. The commission
has established limits because increases in krill catches could have a negative
effect on the ecosystem, including other marine life, particularly birds, seals
and fish which mainly depend on krill for food.

We do not have product liability insurance which in the event of any
legal action by third parties could result in significant legal defense fees as
well as damages for liability adversely affecting our financial condition. We do
not have product liability insurance. While we may seek to obtain such insurance
in the future, the cost may exceed our financial capabilities. Therefore, we may
have to rely on unrelated companies to whom we may license our products to
provide such liability insurance. Companies that we license our products may not
be able to obtain product liability insurance.

The loss of third party manufacturers for the production of our
Peruvian vaccines and our red tide detection kit could impact on our ability to
market these products and reduce our revenues. The loss of one of our third
party manufacturers would have a negative effect on our ability to manufacture
our products. Tepual has contracted with Biosur S.A.C., a Peruvian company, to
manufacture and produce our Peruvian poultry vaccines. Tepual has also entered
into a joint venture with R-Biopharm GmbH, a German company, to manufacture a
Paralytic Shellfish Poisoning (PSP) red tide detection kit. These third parties
may not meet or satisfy their contractual obligations. While Tepual has entered
into agreements with these companies, these contracts may not be fulfilled or
internal problems within these third parties may affect production or
productivity in the future.

If we are unable to comply with government regulation, our ability to
produce and distribute our vaccines may be restricted or could increase our
costs of doing business. Our vaccines are subject to regulatory compliance
within the countries in which they are manufactured and distributed. Our poultry
vaccines are currently approved by the Peruvian government, and we received
re-approval from the Chilean government on June 22, 1999. While we are in
compliance with Peruvian regulations and Chilean regulations, the enactment of
stricter laws or regulations, or the implementation of more aggressive
enforcement policies could adversely affect our operations or financial
conditions.

The loss of Max Rutman's services could have a material adverse
effect on our business. Our success is highly dependent upon the continued
services of Mr. Rutman who continues to devote a substantial amount of his time
to our business. Although we currently have a 3 year employment agreement
through our subsidiary, Tepual, with Mr. Rutman for his services, the loss of
his services could have a material adverse effect on our business.

<PAGE>

You may be limited in your ability to enforce civil liabilities against
us since most of our assets and operations are abroad. Enforcement by investors
of civil liabilities under the U.S. Federal securities laws may adversely be
affected by the fact that while Bio-Aqua is located in the U.S., our principal
subsidiary is located in Chile. While we are a U.S. corporation, our subsidiary,
Tepual is a Chilean corporation. For the foreseeable future, substantially all
of our assets will be held or used outside the United States (primarily in
Chile), and approximately 95% of the net proceeds from this offering will used
in Chile. Our current executive officers, directors (excluding David Mayer) and
management are residents of Chile, and substantially all of our assets and the
assets of our executive officers, directors and management are located outside
the United States.

Considerations relating to Chile

Since we are subject to risks associated with foreign operations, we
may incur additional costs and disruptions to our operations. Our business is
currently conducted almost exclusively outside of the United States. We
consequently are subject to a number of significant risks associated with
foreign operations. Our operating profits may be negatively affected by changes
in the value of local currencies in the countries in which operations are
conducted or products are sold, by hyperinflationary conditions, or recession
such as those which have occurred in the past in several of such countries.
Other risks and considerations include:

o the effect of foreign income and withholding taxes and the
U.S. tax implications of foreign source income and losses;

o the possibility of expropriation or confiscatory taxation
or price controls;

o adverse changes in local investment or exchange control
regulations;

o difficulties inherent in operating in less developed legal
systems;

o political instability, government corruption and civil
unrest; and

o potential restrictions on the flow of international capital.

In many developing countries, such as Chile and Peru where our business is
conducted, there has not been significant governmental regulation relating to
the environment, occupational safety, employment practices or other business
matters routinely regulated in the United States. As such economies develop, it
is possible that new regulations may increase the expense and risk of doing
business in such countries. In addition, social legislation in Chile may result
in significantly higher expenses associated with terminating employees or
distributors or closing manufacturing facilities.

In the event of long-term restrictions on repatriation with respect to
investments, shareholders may find it difficult to realize value on their
investment through the receipt of

<PAGE>

dividends or in the appreciation of the value of their equity. Equity
investments in Chile by persons who are not Chilean residents may not be freely
repatriated for one year starting after the date the funds were brought into
Chile. After one year, equity investments may be freely repatriated only if the
investment is channeled through the Formal Exchange Market (Mercado Cambiario
Formal) under an investment contract entered into with the Chilean government
under Decree-Law No. 600 of 1974, as amended.

<PAGE>

USE OF PROCEEDS

The gross proceeds from the sale of the 1,200,000 shares of class A
common stock and 1,200,000 warrants offered will be approximately $6,900,000,
assuming an initial public offering price of $5.625 per share of class A common
stock and $.125 per warrant. The net proceeds, without giving effect to the
exercise of the over-allotment option, will be approximately $5,650,000 after
giving effect to:

o the representative's discounts of $690,000,

o a 3% non-accountable expense allowance to the representative
of $207,000, and

o offering costs and expenses of approximately $353,000.

Approximately 27% of our proceeds will be used for reduction of a
portion of debt due to Banco Do Brasil, Banco Santander, Banco Sudamericano,
Corpbanca and Hemisphere National Bank which have maturity dates through^ 2005.
The interest rates for these debts range from 9.259% to 13.8%. As of June 30,
1999, $2,151,509 was outstanding under these debt obligations.

Approximately 14% of our proceeds will be used for working capital,
including:

o overhead;

o administrative expenses; and

o general corporate purposes.

The Tepual(TM) and Inual(TM) brands are held by Profeed, Inc., which is
equally owned and controlled by Max, Paulina and Andrea Rutman. We will acquire
Profeed, Inc. by purchasing all of the issued and outstanding shares of Profeed,
Inc. for an aggregate of $1.3 million. We will pay the shareholders of Profeed,
Inc. $400,000 from the proceeds of this offering. The balance shall be paid, at
the board of directors' option, out of:

o 5% of our gross revenues per quarter, but in no event greater
than 20% of our net income per quarter, from the sale of
products sold under the Tepual(TM) and Inual(TM) brands;

o third party financing; or

o proceeds from the offering.

<PAGE>

Approximately 95% of our proceeds will be used in Chile. We intend to
use the net proceeds of this offering, during the twelve months following the
effective date, approximately as follows:
<TABLE>
<CAPTION>

Anticipated Use of Net Proceeds Approximate Amount Percentage of Proceeds
- ------------------------------- ------------------ ----------------------
<S> <C> <C>
Reduction of Bank Loans $1,500,000 27.0%
Initial Payment for the Purchase of Brands $400,000 7.0%
Contingent Payment for the Purchase of Brands $900,000 16.0%
Development of Red Tide Kits $700,000 12.0%
Development of Immune
Stimulants $550,000 10.0%
Research and Development of Poultry
Vaccines $450,000 8.0%
Marketing $200,000 3.5%
Repayment of Bridge Loans $150,000 2.5%
Working Capital $800,000 14.0%
----------- --------
TOTAL $5,650,000 100.0%
</TABLE>

Between April and May 1999 we received bridge loans in the aggregate
amount of $150,000 from third party accredited investors. These loans are
evidenced by promissory notes bearing interest at 8% per year with maturity
dates ranging from October 31, 1999 through January 1, 2001.

Our anticipated use of net proceeds are based upon our current status
of operations and anticipated business plans. It is possible that the
application of funds may vary depending on numerous factors including, but not
limited to, changes in the economic climate or unanticipated complications,
delay and expenses. We currently estimate that the net proceeds from this
offering will be sufficient to meet our liquidity and working capital
requirements for the next 12 months. However, there can be no assurance that the
net proceeds of this offering will satisfy our requirements for any particular
period of time. Additional financing may be required to implement our long-term
business plan. There can be no assurance that any such additional financing will
be available when needed on terms acceptable to us, if at all. Pending use of
the proceeds of this offering, we may make temporary investments in bank
certificates of deposit, interest bearing savings accounts, prime commercial
paper, U.S. Government obligations and money market funds. Any income derived
from these short term investments will be used for working capital.

We have wide discretion in the use of our proceeds. We reserve the
right to use the funds obtained from this offering for other purposes not
presently contemplated which we deem to be in our best interest and the best
interest of our shareholders. As a result, our success will be substantially
dependent upon the discretion and judgment of our management. The application
and allocation of the net proceeds of the offering are determined by discretion
and judgment of our management.

<PAGE>

DIVIDEND POLICY

While Tepual has previously paid dividends to its shareholders, we do
not anticipate paying dividends in the foreseeable future.

DILUTION

At June 30, 1999, we had a net tangible book value of $667,800 or
approximately $.37 per share of outstanding class A and B common stock after
giving effect to the stock issuances. Net tangible book value per share
represents the amount of our total tangible assets less our total liabilities,
divided by the number of shares of common stock outstanding. After giving effect
to the receipt of the estimated net proceeds from our sale of the 1,200,000
shares of class A common stock we are offering, at an assumed initial public
offering price of $5.625 per share of class A common stock (after deducting
underwriting discounts and estimated offering expenses payable by us), the net
tangible book value of us at June 30, 1999, would have been approximately
$6,317,800 or $2.12 per share of common stock. This would represent an immediate
increase in the net tangible book value per share of common stock of $1.75 to
existing shareholders and an immediate dilution of $3.51 per share to new
investors purchasing shares of class A common stock in the offering. Dilution is
determined by subtracting net tangible book value per share after the offering
from the offering price to investors.

The following table illustrates this per share dilution:

<S> <C>
Initial offering price per share of class A common stock $5.625
Net tangible book value per share of
Class A and B common stock before the offering $ .370
Increase attributable to new investors $1.750

Proforma net tangible book value after the offering $2.120
Dilution to new investors $3.510

Percentage of dilution to new investors 62.000%
</TABLE>

The following table summarizes the number of shares of common stock
purchased from Bio-Aqua, the total consideration paid and the average price per
share paid by our existing shareholders at June 30, 1999 and new investors
purchasing shares of class A common stock in this offering, before deducting the
underwriting discounts and our estimated offering expenses. The table excludes
the sale of 1,200,000 warrants we have offered.

The table, with respect to new investors, gives effect to the 51,000
shares issued on our formation in March 1999 and 35,294 shares of class A common
stock issued in April and May, 1999 in connection with the bridge financing.
<TABLE>
<CAPTION>

Shares Purchased Consideration Paid Average Price
Number Percentage Amount Percentage Per Share
------ ---------- ------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing Shareholders 1,786,294 59.82% $ 529,623 7.28% $0.30
New Investors 1,200,000 40.18% $6,750,000 92.72% $5.625
--------- ----- ---------- -----
Total 2,986,294 100.00% $7,279,623 100.00% $2.44

</TABLE>
12

<PAGE>

CAPITALIZATION

The following table sets forth as of June 30, 1999, our actual
capitalization and as adjusted for the issuance and sale of the 1,200,000 shares
of class A common stock (assuming an initial public offering price of $5.625 per
share of class A common stock and the receipt of the net proceeds from the sale
of 1,200,000 warrants) after deducting estimated offering expenses and
underwriting discounts and the initial application of the proceeds.
<TABLE>
<CAPTION>

Actual As Adjusted
------ -----------
<S> <C> <C>
Long-term Debt...................................................... $ 408,642 $ 408,642

Stockholders' equity:
Class A common stock ($.0001 par value)
20,000,000 shares authorized; 86,294 shares issued
and outstanding (actual) and 1,286,294 (as adjusted)............. 9 129
Class B common stock ($.0001 par value)
2,000,000 shares authorized; 1,700,000 shares issued
and outstanding (actual) and 1,700,000 (as adjusted)............. 170 170
Preferred Stock, $.0001 par value; 5,000,000 shares
authorized; no shares issued and outstanding (actual)
and as adjusted.................................................. -0- -0-

Additional paid-in capital.......................................... 529,444 6,179,324(1)
Retained earnings................................................... 349,541 349,541
Cumulative translation adjustment
from the Chilean pesos into U.S. dollars......................... (211,364) (211,364)
Total stockholders' equity.......................................... $ 667,800 $6,317,800
------------ ----------
Total capitalization................................................ $ 1,076,442 $6,726,442

- -------------------

(1) Reconciliation: Issuance of 1,200,000 shares at $5.625 $ 6,750,000
Issuance of 1,200,000 warrants at $.125 $ 150,000
Less offering costs (353,000)
representative's discounts (690,000)
3% non-accountable expense to representative (207,000)
------------
Total Proceeds $ 5,650,000
less 1,200,000 shares at $.0001 par value 120
------------
$ 5,649,880
Plus actual additional paid in capital 529,444
------------
Total: $ 6,179,324

</TABLE>

<PAGE>

EXCHANGE RATES

Unless otherwise specified, references to U.S. dollars, dollars, $, or
U.S.$ are to United States dollars and references to pesos or Ch$ are to Chilean
pesos, the legal currency of Chile, and peso-denominated monetary unit. As of
June 30, 1999, the exchange rate was one U.S. dollar to 518.90 pesos. No
representation is made that the peso or U.S. dollar amounts shown in this
prospectus could have been or could be converted into U.S. dollars or pesos, as
the case may be, at such rate or at any other rate.

Chile's Ley Organica Constitucional del Banco Central de Chile No.
18.840, the Central Bank Act of Chile, enacted in 1989, liberalized the rules
that govern the ability to buy and sell foreign exchange. Prior to 1989, the law
permitted the purchase and sale of foreign exchange only in those cases
explicitly authorized by the Central Bank of Chile. The Central Bank Act now
provides that the Central Bank of Chile may determine that certain purchases and
sales of foreign exchange may be exercised by the banks and other entities so
authorized by the Central Bank of Chile.

The following table sets forth the annual high, low, average and
year-end observed exchange rate for U.S. dollars for each year starting in 1997
as reported by the Central Bank of Chile. The table reflects the actual high and
low exchange rates on a month-to-month basis for each period and the average
monthly rates during the period.
<TABLE>
<CAPTION>

Exchange Rates of Ch$ per U.S.$
Year Low High Average
---- --- ---- -------
<S> <C> <C> <C> <C>
1997 411.85 439.81 419.31
1998 439.18 460.33 465.25
1999 (first quarter) 472.41 501.15 487.30
1999 (second quarter) 472.41 518.90 491.26
------ ------ ------
</TABLE>

Source: Central Bank of Chile
- ---------------

<PAGE>

SELECTED FINANCIAL DATA

The statement of operations data as set forth below for the years ended
December 31, 1997 and 1998 and the balance sheet data at December 31, 1997 and
1998, have been derived from our combined financial statements and notes, which
have been audited by Spear, Safer, Harmon & Co., P.A., independent auditors,
whose report is included in this prospectus. The statement of operations data
for the six months ended June 30, 1999 and 1998, and the balance sheet data at
June 30, 1999 are derived from our unaudited financial statements included
elsewhere in this prospectus. In the opinion of management, the unaudited
financial statements have been prepared on the same basis as the audited
financial statements and included all adjustments (consisting only of normal
recurring adjustments) necessary for the fair presentation of our financial
condition and results of operations for such periods. The results of operations
for the six months ended June 30, 1999 are not necessarily indicative of results
to be expected for any other interim period or the entire year.

The following financial data should be read in conjunction with the
consolidated financial statements and notes and management's discussion and
analysis of financial condition and results of operations included in this
prospectus. The proforma statement of operations data assumes our president and
chief financial officer received an annual base salary of $200,000 and $100,000,
respectively, for the periods indicated.
<TABLE>
<CAPTION>

Proforma Six Proforma
Years Ended December 31, Six Months Ended June 30, Months Ended Year Ended
1997 1998 1998 (Unaudited) 1999 June 30, 1999 December 31, 1998
---- ---- --------------------- ------------- -----------------
Statement of Operations
- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 5,238,299 $ 6,873,512 $ 3,201,998 $ 2,963,040 $ 2,963,040 $ 6,873,512
Cost of Operations $ 3,571,678 $ 4,853,553 $ 2,393,983 $ 1,968,756 $ 1,968,756 $ 4,853,553
Selling and Administrative
Expenses $ 1,516,974 $ 1,555,661 $ 741,947 $ 946,774 $ 1,096,774 $ 1,855,661
Other Income (Expenses) $ (93,220) $ (224,325) $ (89,133) $ (60,069) $ (60,069) $ (224,325)
Net Income $ 56,427 $ 239,973 $ (23,065) $ (12,559) $ (162,559) $ (60,027)
Net Income per common share $ 0.03 $ 0.14 $ (.01) $ (.01) $ (.09) $ (.04)
Weighted average common
shares outstanding 1,700,000 1,700,000 1,700,000 1,739,882 1,739,882 1,700,000
</TABLE>

Balance Sheet Data
- ------------------

The as adjusted balance sheet data as of June 30, 1999, reflects the
sale of 1,200,000 shares of class A common stock including receipt of net
proceeds from the sale of 1,200,000 warrants, but excludes the exercise of our
warrants and the exercise of the representative's warrants and the
over-allotment option.
<TABLE>
<CAPTION>

June 30, 1999
Period Ended Actual As Adjusted
December 31, (Unaudited) (Unaudited)(2)
------------------------------- ----------- --------------
1997 1998
<S> <C> <C> <C> <C>
Working capital $617413 $ 984,937 $ (666,538) $ 4,983,462
Total assets $4,089,157 $ 5,693,991 $ 6,466,279 $ 10,066,279
Total long-term liabilities $ 355,014 $ 478,813 $ 408,642 $ 408,642
Total liabilities $2,348,531 $ 3,678,546 $ 5,798,479 $ 3,748,479
Stockholders' equity $1,740,626 $ 2,015,445 $ 667,800 $ 6,317,800
</TABLE>

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

General

Management's discussion and analysis contains various "forward looking
statements." Such statements consist of any statement other than a recitation of
historical fact and can be identified by the use of forward-looking terminology
such as "may," "expect," "anticipate," "estimate" or "continue" or use of
negative or other variations or comparable terminology.

We caution that these statements are further qualified by important
factors that could cause actual results to differ materially from those
contained in the forward-looking statements, that these forward-looking
statements are necessarily speculative, and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements.

Overview

We generate substantially all of our revenues from the sale of certain
products such as fish meal, feather meal and krill meal which we purchase from
third parties under our own brand for resale to our customers throughout the
world. As of December 31, 1998, we have sold two of our automatic control
systems for fish meal processing, certain immune stimulants on a testing basis,
as well as vaccines which we have developed. Management anticipates that we will
sell three more automatic control systems, however, as of the date of this
prospectus, we have not made any additional sales.

Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998

Results of operations

Gross revenues for the six months ended June 30, 1999 decreased
$238,458 from the six months ended June 30, 1998 from $3,201,998 to $2,963,040,
a decrease of approximately 7%. This is primarily due to the translation
exchange rate. Sales have remained relatively constant between the periods.

Cost of operations decreased from $2,393,983 in the six months ended
June 30, 1998 to $1,968,756 for the six months ended June 30, 1999. This
decrease of $425,227 (18%) was directly related to management's efforts to
control costs. Further, we sold more fish meal, as opposed to feather meal,
during this period, which requires less costs. Our cost of operations will
continue to fluctuate on a quarterly basis based upon the price of feather or
fish meal.

Selling and administrative expenses for the six months ended June 30,
1999 increased $204,827 in comparison to the six months ended June 30, 1998 from
$741,947 to $946,774, an increase of approximately 28%. This increase is
principally attributed to research and

<PAGE>

development costs associated with the development of software products used in
our automatic control system for fish meal processing. The increase in selling
and administrative expenses is also related to an increase in staff relating to
the production of poultry vaccines in Chile. For the immediate future, we will
continue to incur costs in excess of revenues associated with the expansion of
our poultry vaccine business.

Other income (expenses) decreased from $(89,133) at June 30, 1998 to
$(60,069) at June 30, 1999, a decrease of $29,064 or approximately 33%. The
decrease is due to an increase in tax credits based on the export of certain
commodities.

As a result of the above items, we incurred a net loss for the six
months ended June 30, 1999 was ($12,559) compared to ($23,065) for the six
months ended June 30, 1998, a decrease of $10.506 or approximately 46%.

Year Ended December 31, 1998 Compared to Year End December 31, 1997

Results of operations

Gross revenues for the year ended December 31, 1998 increased
$1,635,213 over the year ended December 31, 1997 from $5,238,299 to $6,873,512,
an increase of approximately 31%. The increase in gross revenues may be
attributed to our broader base trading activities during 1998 as compared to
1997, which included the additional products of feather meal and krill meal. In
addition, during 1998, we sold two automatic control systems for approximately
$641,000 which accounted for approximately 39% of the increase in gross
revenues.

During 1997 we were unable to purchase fish meal products to trade and
broker due to the effects of El Nino and Chilean laws restricting fishing. Prior
to 1997, we purchased a portion of our krill products from Russian and Polish
fleets, however, due to political situations in those countries in 1997, the
fleets did not travel to Antarctica and thus there was no krill available.
During this time we also began to trade poultry feather meal. In 1997, the
selling price of feather meal was much less than in 1998 because it was a new
product and we offered it at a reduced price to generate demand. In 1998, prices
were increased as demand increased.

Cost of operations increased from $3,571,678 in 1997 to $4,853,553 in
1998. This increase of $1,281,875 (36%) is attributable to the additional
product sold in our fish, feather and krill meal business. In particular, there
were increased costs associated with the purchase of feather meal from Brazil
which led to increased shipping costs and import tariffs.

Selling and administrative expenses for the year ended December 31,
1998 increased $38,687 in comparison to the year ended December 31, 1997 from
$1,516,974 to $1,555,661, an increase of approximately 3%. During 1998, we began
selling more poultry feather meal which was purchased from Brazil. As a result,
we incurred more selling expenses including cost of travel to and from Brazil.
In addition, we hired a new chief financial officer in 1998, thus increasing
administrative salaries.

<PAGE>

Other expenses increased from ($93,220) for the year ended December 31,
1997 to ($224,325) at the year ended December 31, 1998, an increase of $131,105
or approximately 141%. The increase is due to the reduction in royalty income
for use of one of our products; increase in interest expense and gain on sale of
fixed assets. Interest expense increased as a result of the increase in average
outstanding loan balances.

As a result of the above items, our net income for the year ended
December 31, 1998 was $239,973 compared to $56,427 for the year ended December
31, 1997, an increase of $183,546 or approximately 325%.

Liquidity and capital resources

To date, our liquidity has been principally supplied by bank financings
and internal cash generated from existing operations. In April and May 1999, we
received loans from six (6) third party investors for an aggregate $150,000.
These loans are evidenced by promissory notes bearing interest at 8% per annum.
As additional consideration, the third party investors received an aggregate of
35, 294 shares of our class A common stock. We will incur an expense at such
time as the loans are repaid. Through September 30, 1999, we have incurred an
expense of $36,133 attributable to the loans.

At June 30, 1999, accounts receivable decreased by $95,560 to
$2,886,114 from $2,981,674 at December 31, 1998. This decrease is a result of
certain outstanding invoices being paid during the period. Payment terms and
conditions, which among other factors, are dependent on the customer, credit
histories, economic conditions and country payment standards. In particular,
approximately $120,000 is owed from the sale of the two automatic control
systems. Management anticipates we will receive payment of the balance due for
these two automatic control systems by September 30, 1999. However, under the
terms of sale, each customer was given a period of time beyond installation of
the equipment for testing before final payment was due. Further, management has
provided extended terms up to six months to several of its fish meal and feather
meal customers.

On June 30, 1999, we had outstanding receivables of $2,886,114 of which
$111,782 were in excess of six months old. Half of the amount outstanding in
excess of six months is payable on a yearly term and therefore not delinquent.
We believe that we can collect substantially all these receivables. We believe
that many of the extended receivables are consistent with the payee's payment
policies. From June 30, 1999 to September 15, 1999, we collected $2,517,000 in
period-end receivables.

At June 30, 1999, inventory increased $31,217 to $793,086 as compared
to $761,869 at December 31, 1998. This increase is due to purchases in excess of
sales in the second quarter of 1999.

At June 30, 1999, other assets increased by $342,387 to $867,032 from
$524,645 at December 31, 1998. This increase is due to advances made to Kelor
Trading Ltd., a krill fishing

<PAGE>

and research operation. Under this agreement with Kelor, we have agreed to lend
them up to $2 million, payable over 18 months at an interest rate of 13.5% in
return for the exclusive rights to sell all of the vessel's krill products and
right to perform certain research and development on board the vessel located in
Antarctic waters. Additionally, Kelor has agreed to pay us a brokerage
commission of 3% over the F.O.B. sales and $20 per ton of krill meal and 5% for
krill oil. In order to make these advances to Kelor, we borrowed approximately
$800,000 from Banco Do Brasil, thus increasing our current obligations with
banks.

Due to maritime regulatory requirements and a delay in receiving
certain equipment, the fishing vessel was delayed and did not depart until
August 1999. The first unloading of the krill catch occurred in mid October and
repayment of the loan should begin in late 1999 or early 2000. No other adverse
factors have occurred which would cause us to believe there is any uncertainty
on the recovery of these advances, especially since the sale of all krill
products from this venture is under our control. We have not advanced Kelor any
additional monies since June 30, 1999.

Accounts payable increased $309,696 from $990,749 at December 31, 1998
to $1,300,445 at June 30, 1999. This is due to purchases made in the period
which were on extended payment terms of up to four months.

Long term debt has decreased from $478,813 at December 31, 1998 to
$408,642 at June 30, 1999, a decrease of $70,171. This decrease is due to timely
payments on our outstanding loans.

Under employment agreements with two of our executive officers we are
required to pay annual salaries of $300,000 plus up to an additional $120,000 in
bonuses. We have a 10 year consulting agreement with one of our directors for an
annual fee of $30,000 and a two year consulting agreement with the
representative of the underwriters of this offering for $60,000 per annum
commencing with the closing of this offering. We will also enter into a two year
lease agreement with Andean Financial Corporation for $30,000 per annum, to use
a portion of Andean Financial Corporation's facilities in Boca Raton, Florida,
for our corporate U.S. offices. The sole shareholder and director of Andean
Financial Corporation is one of our directors. We have facility lease agreement
payments for approximately $220,000 for the next 12 months.

We shall acquire Profeed, Inc. for $1.3 million, as evidenced by the
increase in due to shareholder because of payable due to the related party
nature of the transaction, of which $400,000 will be paid to its shareholders at
closing and the balance, under the discretion of the board of directors, out of:
5% of the gross revenues per quarter, but in no event greater than 20% of the
net income per quarter, of the sale of products sold under the Tepual(TM) and
Inual(TM) brand names, third party financing or working capital.

<PAGE>

Year 2000 issue

Many currently installed computer systems and software are coded to
accept only two digit entries in the date code fields. These date code fields
will need to accept four-digit entries to distinguish whether "00" means 1900 or
2000. This problem could result in system failures or miscalculations causing
disruptions of business operations (including, among other things, a temporary
inability to process transactions, send invoices or engage in other similar
business activities). As a result, many companies' computer systems and software
will need to be upgraded or replaced in order to comply with year 2000
requirements. The potential global impact of the year 2000 problem is not known.
If year 2000 problems are not corrected in a timely manner, they could affect
us.

We have formed a project team to address internal year 2000 issues. Our
internal financial and other computer systems have been reviewed to assess and
remediate year 2000 problems. Our assessment of internal systems includes our
information technology systems as well as other systems which include embedded
technology in equipment containing microprocessors or other similar circuitry.
Our year 2000 compliance program includes the following phases:

o identifying systems that need to be modified or replaced;

o carrying out remediation work to modify existing systems or
convert to new systems; and

o conducting validation testing of systems and applications to
ensure compliance.

The amount of remediation work required to address internal year 2000
problems is expected to be minimal. Our use of operational systems, personal
computers and software is limited. We installed our personal computers and
hardware in June 1999. We are in the process of implementing a new operational
system and installing new software provided by Softland, a Chilean computer
company. We believe that this equipment and software was designed to address
year 2000 issues and does not have to be modified in order to function properly
in the year 2000.

Our automatic control systems utilize software designed by Advantage, a
U.S. company and software and hardware designed by Opto 22, a U.S. Company. This
software and hardware is certified as year 2000 compatible.

Our present and future costs to address year 2000 issues should be
minimal. However, there can be no assurance that these estimates are correct or
that future costs, if any, will not be materially greater than anticipated.

In addition, we are in the process of surveying our major suppliers
throughout our business lines and evaluating their plans to address potential
year 2000 issues. We anticipate that

<PAGE>

this evaluation will be completed by December 31, 1999. We will rely primarily
on our suppliers' commitments to accomplish this task but have no contractual
commitments from the suppliers regarding year 2000 issues. It is impossible to
fully assess the potential consequences in the event interruptions from supplier
occur or in the event that there are disruptions in infrastructure areas such as
utilities, communications, transportation, banking or government.

We have also sent questionnaires to our customers requesting that they
notify us of their plans to address year 2000 issues. We have informed all of
our customers that if they do not respond by October 31, 1999, we will take
necessary actions to insure that their possible problems with year 2000 issues
do not effect us. We are prepared to suspend transactions with our customers
that do not respond to our questionnaire.

Based on our assessments to date, we believe we will not experience any
material disruptions as a result of year 2000 problems in internal processes,
information processing, and interfaces with major customers or with processing
orders and billing. However, our ability to timely ship products to our
customers wold be disrupted if suppliers or other third-party providers, such as
those providing electricity, water or telephone services, experience
difficulties in providing product or services to us. These difficulties could
seriously harm our business. In addition, if our information technology systems
are not year 2000 compliant, we would have to devote significant resources to
correct such problems and we may be unable to process customer orders, which
could lead to shipment delays. Assuming no major disruption in service from
suppliers or other third parties, we believe that we will be able to manage our
total year 2000 transition without any material effect on our results of
operations or financial condition.

We have also developed a contingency plan for the following areas as
follows:

o Administration and accounting. We have retained back-up files
of all material information. Softland, provider of our new
operational system and software, has agreed to support and
help us if we have any problems in relation to the year 2000.

o Automatic control. We have retained back-up files for all
hardware and software for our automatic control systems in
operation. We also have commitments from Advantage and Opto 22
to support and help us in the event of any problems in
relation to the year 2000.

<PAGE>

BUSINESS

General

Bio-Aqua Systems, Inc. was organized in March 1999 as a holding company
to acquire a 99.9% interest in Tepual, S.A., a Chilean corporation established
in 1982 with its principle offices in Santiago, Chile. Before the effective
date, Tepual, S.A. is owned 90% by Flagship Import Export LLC, a company
wholly-owned by Max Rutman and 10% owned by Atik, S.A., a company owned by
Paulina Rutman and Andrea Rutman.

Since inception, our major source of revenue has been generated through
the branded sale of various products for animal nutrition, including fish meal,
feather meal and krill. These products are sold worldwide as a nutrient additive
for fish, poultry and livestock raised for human consumption with the
recognition that there is a direct correlation between the health of the animals
raised for human consumption and the consumer. We sell these nutrient products
under the Tepual(TM) and Inual(TM) brands. These brands are held by Profeed,
Inc., a Bahamian company, equally owned by Max Rutman, Andrea Rutman and Paulina
Rutman. We will acquire 100% of the issued and outstanding shares of Profeed,
Inc. at the effective date.

Our success in this area has been predicated on our ability to certify
to nutrient levels and ecological standards of fish and feather meals. For our
fish, feather and krill meal business we have more than 100 customers in
approximately 25 countries.

Recently, by virtue of our relationships with our suppliers and
customers, we have identified specific problems relating to farmed fish and
poultry. Together with cooperative relationships with academic, private and
government research institutions, we have engaged in research and development
programs to find commercially viable solutions for feed and food producers as
follows:

- automatic control for fish meal processing
- salmon and shrimp immune stimulants
- poultry vaccines
- red tide detection and cleansing process

Our U.S. offices are located at 1900 Glades Road, Suite 351, Boca
Raton, Florida 33431, and our telephone number is (561) 416-8930. Our offices in
Chile are located at General Ekdhal 159, Santiago, Chile, and our telephone
number is 011 (562) 777-0262. Our fiscal year end is December 31.

<PAGE>

Background

Tepual, organized in 1982 as a Chilean limited partnership, was
incorporated in 1996 when Tepual began commercial operations which capitalized
on research and development projects initiated by Inual, a Chilean company.
Inual, wholly owned by Max Rutman and Paulina Rutman, was organized in 1973.
Inual is currently a non-operating entity, with no assets. Prior to 1985 Tepual
and Inual generated revenues through grants from various government entities and
private foundations. These grants decreased starting in 1985, due in part to
privatization in Chile and an overall decrease in grants from private
foundations. We expanded our brokerage division to replace the revenues lost
from the decrease in the aforementioned grants to aid in the continuous funding
required to support our research and development department.

As our brokerage business began to grow, we developed relationships
which have given us a first hand view of the biological and processing factors
that affect the business of our customers and suppliers. Through years of
research and development we have developed and are developing commercially
viable solutions to these biological and processing factors in automatic control
for fish meal processing, salmon and shrimp immune stimulants, poultry vaccines
and red tide detection and cleansing process. Through our work on nutrient
quality, we have developed a unique automatic control processing system which
facilitates the production of the highest nutrient level fish meal while
avoiding toxicity for the fish meal industry. Through research in animal health
we have developed poultry vaccines and salmon immune stimulants. Through
research in marine toxins, we have developed new and potential methods for
detecting and cleansing toxins found in red tide.

We will consolidate ourselves on the effective date through the
following transactions:

1. A stock exchange agreement shall be effectuated where Bio-Aqua
receives Flagship Import Export LLC's 90% interest in Tepual in return for
1,529,910 shares of class B common stock. Also, two stock purchase agreements
shall be simultaneously effectuated where Atik S.A. shall purchase 169,990
shares of class B common stock of Bio-Aqua and Bio-Aqua shall purchase Atik
S.A.'s 10% in Tepual. Tepual shall then become our majority owned (99.9%)
subsidiary. Due to Chilean law, which requires that a Chilean corporation be
owned by not less than two shareholders, 15 shares of Tepual stock will continue
to be owned by Max Rutman, through his ownership interest in Flagship Import
Export LLC.

2. We will acquire the rights to the Tepual(TM) and Inual(TM) brands by
purchasing all of the issued and outstanding shares of Profeed, Inc., for an
aggregate of $1,300,000.

<PAGE>

Corporate structure and affiliations of Bio-Aqua Systems, Inc. on the
effective date:

<TABLE>
<CAPTION>
<S> <C> <C>
Flagship Import Export Atik S.A., a Chilean PUBLIC SHAREHOLDERS
LLC, a Nevada LLC (sole corporation (shareholders are
member is Max Rutman) Paulina and Andrea Rutman)

Bio-Aqua Systems, Inc.

100% 99.9%

Profeed, Inc. (previously Tepual S.A. (previously
owned by Max, Andrea owned by Flagship Import
and Paulina Rutman) Export LLC and Atik S.A.)

</TABLE>

Overview

As we approach the millennium, our environment is fraught with a myriad
of ecological and health problems which effect the entire world population.
These problems stem from changing weather patterns (El Nino), pollution of the
atmosphere and water, and new and localized strains of viral and bacterial
disease. Together each of these factors has placed an enormous strain on our
ability to produce, by farming or otherwise, a supply of food that is healthy,
nutritional and not exorbitant in cost. It is in the context of this worldwide
problem that companies such as ourselves have and must continue to develop
commercially viable solutions in the areas of animal nutrition and health, as
well as fish meal processing.

The changing weather patterns, among other things, have caused severe
droughts in many areas, which has affected the farming of essential food
products. Overall global warming has had a negative impact on the fishing
industry, reducing the amount and size of fish caught. These problems have
presented a niche market for the sale of our automatic fish meal processing
systems, which automatically produces fish meal with the highest nutrient levels
at the lowest cost. Additionally, as fishing waters have been depleted, we began
seeking viable alternatives and began selling feather meal as a partial
replacement for fish meal. The sale of these products, led to the formation of
relationships with local poultry producers which led us to the development of
vaccines for certain diseases found in Chilean and Peruvian poultry. The
production and sale of these vaccines has a direct impact on the population of
both countries by ensuring that production levels are maintained and disease
free poultry is produced.

<PAGE>

The cultivation and farming of fish has become an important element in
the world's food supply. Farmed fish are subject to diseases, which on occasion
have wiped out an entire two years production of farmed salmon. Our immune
stimulant, as it relates to salmon farming, in test results we have conducted,
has reduced the mortality rate from approximately 30% to between 8% and 10%.
Since these tests were conducted by ourselves on a limited basis, there cannot
be any assurances that such test results will be indicative of future commercial
results.

Red tide has affected the waters of every coastal country in the world
and has intensified over the past two decades. The Chilean coastline has
produced significant amounts of shellfish which on occasion has been effected by
red tide. In 1992 we began an intensive research and development program
designed to provide solutions to certain forms of red tide. As a result of this
research and development we have developed a detection systems to test shellfish
for certain red tide toxins, and a system to cleanse shellfish by lowering
certain toxin levels.

We will continue to utilize research and development skills of our own
scientists and those of various consultants from the world of academia,
government and private industry, as well as the proceeds from this offering to
develop viable solutions to problems relating to the food chain, caused by
today's ever changing world, that one way or another effects all of humanity.

Business strategy

Our strategy is to continue to expand as a niche participant in the
specialized animal feed and immunology market worldwide. We intend to continue
to turn our research and development in automatic processing controls, immune
stimulants, poultry vaccines and red tide detection and cleansing systems into
commercially viable profit centers. In addition to our internal staff, we will
continue the use of outside consultants, laboratories, universities and
governmental research facilities worldwide to consult on specific projects. In
the majority of bio-technical companies an inordinate amount of funds are
initially expended on research and development, however, we have already
accounted for the majority of our research and development costs. As described
in our use of proceeds, approximately 30% of the proceeds from this offering
will be used for the further development of certain immune stimulants, vaccines,
and red tide detection and cleansing systems. Further, as we have done in the
past and should the need arise, we will seek strategic partnerships for the
production and marketing of our products.

Overview of our operations

Principal executive management, financing, marketing and operations
support functions are conducted at the Company's Santiago, Chile headquarters.
Upon closing we will maintain an office in Boca Raton, Florida which will be
used for shareholder relations as well as conducting and assisting with U.S.
business matters.

<PAGE>

Our experience within the animal feed industry and the strong linkage
between the animal feed market and nutrition, health and research created an
opportunity and natural transition to commence research and development in areas
such as automatic control, poultry vaccines, immune stimulants and red tide.
Attempting to alleviate the problems that effect our suppliers and customers,
our numerous research and projects have led to the development of automatic
control processing for fish meal, viral vaccines for localized poultry disease,
immune boosters to be applied in the salmon industry (which may be applied to
the farm shrimp industry) and red tide toxin diagnostic and cleansing kits.

Brokerage business

We believe that we may be the only broker/purveyor in the world that
incorporates technical knowledge in the field of fish meal, feather meal and
krill meal. We not only trade these products, but more importantly, have a
selection procedure based on our knowledge and laboratory testing so as to
provide the correct nutrient blended product on a market by market basis. In
addition, we have and will continue to send our technical staff to the producers
of these products in order to assure quality control and to advise them on how
to produce the Tepual(TM) and Inual(TM) branded products.

Fish meal sales

Fish meal is a powder obtained from cooking, drying and grinding raw
fish. Fish meal is a rich protein source and an essential ingredient in
feedstuffs in pet food, animal feed and fish feed. Depending upon the customer
and its use, the nutrient levels of fish meal are extremely important.

Our locations in Chile and Peru place us within close proximity to one
of the largest sources of fish meal in the world. Chile and Peru (which borders
Chile) are responsible for over one-fourth of the fish meal produced worldwide
and for 65% of all fish meal exported. The International Fishmeal and Oil
Manufacturers Association (IFOMA) reported 4,749 thousand tons (TT) or $1.5
billion of fish meal was produced and sold in 1998. We have developed and
maintained long term relationships with Chilean and Peruvian fish meal
processing companies that benefit our brokerage and trading which to date,
account for a substantial amount of our revenues.

Through our Tepual(TM) and Inual(TM) brands we certify that the fish
meal we sell has the highest possible nutrient levels and lowest toxicity
levels. Our Tepual(TM) and Inual(TM) branded products are sold to customers
worldwide. There are many suppliers of fish meal in Chile and Peru. We are only
limited by our certification standards, in our ability to use all of these
production sources.

Currently we purchase our fish meal from ten fish meal producers in
Chile and five fish meal producers in Peru. All of these companies adhere to our
certification standards. There are approximately 165 other fish meal producers
in Chile and Peru of whom we could also use to

<PAGE>

satisfy our fish meal supply needs, assuming that these producers can meet our
high nutrient and low toxicity standards.

Additional products

Due to El Nino and fishing restrictions, resulting in a lack of fish
meal, we began researching alternative sources of animal feed protein. This
research resulted in the application of chicken feathers and krill as a rich
source of protein.

Feather meal sales

We began selling chicken feather meal in 1997. Feather meal is a rich
source of protein and therefore, we have found that feather meal can be a
partial replacement for fish meal. Today we are selling feather meal to animal
feed producers in Chile and other countries. We initially researched the
potential value of this poultry byproduct when fish meal prices increased
significantly. Since we introduced feather meal as a source of protein, this
product has become an acceptable alternative for feed producers. In 1997 we
began (and continue today) to process and certify feather meal. Today we sell
approximately 600 tons of feather meal per month with Chile and Brazil providing
us with sources for our feather meal. Our principal customers are: Alitec,
Alimentos Technicos Limitada, Biomaster S.A. and Ecofeed. These customers are
farmed salmon feed producers and are all located in Chile.

Although present feather meal sales are limited, we believe that as
this product gains wider acceptance it may replace up to 5% to 10% of the fish
meal market worldwide. We believe, that regardless of the future price of fish
meal, there will remain a commercially viable market for feather meal due to its
excellent quality and nutritional value.

Our supply of feathers comes from approximately five poultry farms in
Brazil. These feathers are a byproduct of the poultry industry. We believe our
supply of feathers is unlimited.

Krill

Krill are tiny shrimp-like creatures found in the Antarctic waters. We
have found that krill, in addition to being a source of protein, has additional
nutritional values. Krill may be used as an additive to feed to improve taste
and as a color enhancer. Due to its nutritional and other benefits, we believe
that krill will be widely used and in high demand throughout the shrimp and
salmon feed industries.

We have initiated a research and development program to blend krill
with certain agricultural products, mainly as a complement to vegetable
proteins, to produce a cost effective product with nutrient levels similar to or
higher than quality fish meal. Krill meal also provides pigmentation (red
coloring) to salmon. As of June 30, 1999, the cost of producing krill meal is
approximately $700 per metric ton and it is sold for approximately $1,300 per
metric ton. We believe that in the future the cost of producing krill meal will
decrease which will allow krill

<PAGE>

meal to compete with fish meal. We also believe that the price of fish meal will
increase in the future due to possible shortages in aquaculture supply (such as
mackerel and anchovies). In the future we may also expect an increase in krill
meal production and an improvement in krill meal processing, which would likely
contribute to a drop in the price of krill meal. Under these scenarios krill
meal would become an important ingredient for the animal feed industry.
Accordingly, we believe our present involvement with krill will provide us with
an opportunity to become significantly involved in the krill meal business.

We have begun to open markets in countries throughout Europe, Asia and
Japan and to insure a consistent supply of krill Tepual has entered into a joint
venture with Kelor Trading, Ltd., an Irish fishing company. Under this agreement
Tepual has provided financing for Kelor Trading's krill fishing operations. This
financing is for the preparation of a Kelor Trading vessel to operate in
Antarctic waters. Tepual has agreed to lend Kelor Trading up to $2 million,
repayable over 18 months at an interest rate of 13.5%, and provide specialized
krill fishing technology, machinery and equipment for a Kelor Trading vessel in
return for the exclusive rights to broker 100% of Kelor Trading's sales of krill
and related products and conduct research and development projects on Kelor
Trading's vessels. As of June 30, 1999, Tepual has lent Kelor Trading
approximately $860,000. Kelor Trading has agreed to pay Tepual a brokerage
commission of 3% over the F.O.B. sales and $20.00 per ton of krill meal and 5%
for krill oil. This agreement gives Tepual the right to utilize Kelor Trading's
krill fishing operations and facilities to perform research and development
relating to krill. The use of Kelor Trading's operations and facilities enables
Tepual, and will enable us, to perform research and development in this area at
a minimal cost.

Competition within the nutrient industry

There are many companies that are larger and have better resources than
us that are producers and sellers of fish meal. We believe that based on our
reputation for selling high nutrient and low toxicity fish meal under the
Inual(TM) and Tepual(TM) brands we are able to retain our market share.

All of our feather meal sales to date have been to animal feed
producers in Chile. We believe we are the premier seller of feather meal in
Chile. We believe that we may face competition from other companies that could
have better resources than us if we expand our feather meal business outside of
Chile and Brazil.

Future of the nutrient industry

The demand for nutrient supply will continue to grow, only limited by
the availability of high quality ingredients. Today's shortage of fish meal
drives the market to look for substitutes. This will require a strong input in
research and development to develop better proteins and more efficient
processing. Furthermore, increased awareness into the components of animal feed
and their impact on human health should have an effect on the quality of
ingredients in demand. We believe that we have a strong position in the market,
because of our long history in research and

<PAGE>

development, and quality assurance. We believe that we have an enviable
reputation in today's animal nutrition market. Moreover, our international
customer list should provide us with an opportunity to capitalize on the current
strengths and weaknesses in this market. Set forth below is a substantial list
of our past and present customers.
<TABLE>
<CAPTION>

Past and Present Partial Customer List
--------------------------------------

Customer Name Country Product
- ------------- ------- -------
<S> <C> <C>
Ridley Agriproducts Australia Fish Meal
Agribrands Purina Do Brazil Ltda. Brazil Fish Meal
Ewos Canada Ltd. Canada Fish Meal and Krill Meal
Alitec, Alimentos Tecnicos Limitada Chile Feather Meal
Biomaster S.A. Chile Feather Meal
Cultivos Marinos Chile Feather Meal
Ecofeed Chile Feather Meal
Ewos Chile Chile Feather Meal
Trouw Chile S.A. Chile Feather Meal
Acondesa (Alimentos Concentrados del Caribe S.A.) Columbia Fish Meal
Albatez S.A. Columbia Fish Meal
Concentrados del Norte S.A. Columbia Fish Meal
Concentrados S.A. Columbia Fish Meal
Finca S.A. Columbia Fish Meal
Nutridias Columbia Fish Meal
Purina Colombiana S.A. Columbia Fish Meal
Aller Aqua AS Denmark Fish Meal
Agrinpaca C.A. Ecuador Fish Meal
Alimentos Balanceados S.A. Ecuador Fish Meal
Alimentsa, Dletas y Alimentos S.A. Ecuador Fish Meal
Diamante Del Mar S.A. Diamasa Ecuador Fish Meal
El Rosario S.A. Ecuador Fish Meal
Procesadora Nacional de Aves, Pronaca Ecuador Fish Meal
Propellets S.A. Ecuador Fish Meal
Pan Animal Feed Egypt Fish Meal
Collvi Spain Fish Meal
Sopropeche France Krill Meal and Fish Meal
Zootechniki Korinthias S.A. Greece Fish Meal
Provimi B.V. Holland Fish Meal
Tesgofarm Aqua B.V. Holland Fish Meal
Grupo Alcon, S.A., Division Nutricion Animal Honduras Fish Meal
Higashimaru Feeds (India) Ltd. India Fish Meal
Livestock Feed Limited Moriches Islands Fish Meal
Maruehni Corp. Japan Fish Meal and Krill Meal
Mitsubishi Corporation Tokyo Japan Fish Meal
Nagase Co., Ltd. Japan Fish Meal
Shintoa Corp. Japan Fish Meal and Krill Meal
Transpac Fisheries, Ltd. Japan Fish Meal
Easy System, Inc. Korea Fish Meal and Krill Meal
Aceitera La Junta, S.A. de C.V. Mexico Fish Meal
Agribrands Purina Mexico, S.A. de C.V. Mexico Fish Meal
Proteinas Marinas Y Agropecuarias, S.A. de C.V. Mexico Fish Meal
Bio Mar Norway Krill Meal
Nor Aqua Innovation AS Norway Fish Meal and Krill Meal
Moulin de St. Vincent New Caladonia Fish Meal
Sica - NC New Caladonia Fish Meal

<PAGE>

Customer Name Country Product
- ------------- ------- -------

Epol Pty Ltd. South Africa Fish Meal
Hochfeld Commodities (Pty) Limited South Africa Fish Meal
Meadow Feed Pietermaritzburg South Africa Fish Meal
C.P. Thailand Krill Meal
Great Wall Enterprise Co., Ltd. Taiwan Fish Meal
Harinas Co., Ltd. Taiwan Fish Meal
Ye Cherng Industrial Products Co., Ltd. Taiwan Fish Meal
Pinar Yem Sanayi ve Pazarlama A.S. Turkey Fish Meal
Wilbur Ellis Company U.S.A. Krill Meal
Bio Products, Inc. U.S.A. Fish Meal
H. J. Baker U.S.A. Krill Meal
Bocm Pauls Ltd. U.K. Fish Meal
Dalgety U.K. Fish Meal
Trouw U.K. Krill Meal
Chinfon (VN) Livestock Co., Ltd. Vietnam Fish Meal
</TABLE>

Material Customers

Our principle revenues are generated through our sale of fish meal,
feather meal and krill meal. Our material brokerage customers are the principle
source of our total revenues. Listed below are our material customers for the
first two quarters of 1999 and an approximate percentage of our total revenues
that they each accounted:
<TABLE>
<CAPTION>

Customer Percentage of Total Revenues
-------- ----------------------------
<S> <C>
Bradwell Business Corp. 20%
Agribrand Purina 10%
Bio Mar 10%
Nor Aqua 10%
Pinar Yem Sanayi ve Pazarlama A.S. 10%
Alitec 10%
Ewos Canada 10%

</TABLE>
Automatic control

The current worldwide market for fish meal, according to IFOMA, is
approximately $1.5 billion. Fish meal plants are principally located in Chile,
Peru and, to a lesser extent, in Equador. We believe there are approximately 180
fish meal plants throughout Chile and Peru.

In the fish meal industry higher nutrient levels have a direct
relationship with higher prices and profits for the producer. Our automatic fish
meal processing control system facilitates the production of the highest
nutrient level fish meal, while avoiding toxicity, and therefore, we believe
provides the highest possible profit margin for the producer.

Through our involvement as a purveyor of fish meal on a worldwide
basis, we have been developing and manufacturing a computerized process for the
processing of fish meal since

<PAGE>

1993. Our research for developing an automatic processing system began with
studying the general processing conditions for the fish meal industry. We
developed simple strategies based on normal conditions of a fish meal processing
plant, while taking into account the skilled operator's working procedures. By
developing and manufacturing an automatic control process for fish meal
production we have developed a system that produces quality fish meal while
assuring efficiencies in a production process which has been subject to a high
level of spoilage and has been subject to different variables. These different
variables are largely due to the variety of fish and composition of raw
materials used to produce fish meal, which change daily depending on
availability.

The fish meal industry currently incorporates little automatic control
within its production process. Automatic control has not been a main concern for
the fish meal industry, giving priority to other aspects, such as plant capacity
increases and fleet increases. This common pattern shown by the industry gives
us a vast field of application because the automatic control becomes crucial for
high capacity plant operation in order to maximize efficiencies and maintain or
improve quality. Today most fish meal processors manually control quality
throughout all stages of production, a flawed and inefficient process. Under
normal operating conditions, fish meal must be produced and samples must be
tested prior to any adjustments being made.

Our computerized and centralized automatic control system allows fish
meal processors to determine the composition and quality of fish meal before it
is produced, rather than adjusting processing equipment after the final product
is tested. The current process requires constant taking and analyzing of samples
and monitoring of machinery by a processing plant's labor force. Our
computerized and centralized control system reduces the number of employees
needed, and allows for full supervision of the production process from a
centralized location rather than multiple locations throughout the process. We
believe that our automatic control will enable a producer of fish meal to ensure
the quality of its product, increase speed, maximize efficiencies and reduce
labor.

During 1998, we began marketing and selling our automatic control
system to the fish meal industry. These units currently sell for $400,000 to
$800,000. There are two installations in operation today - both in the South of
Chile which were sold during the latter part of 1998. The purchasers of these
systems have not encountered any significant problems. Issues which have arose
have been mostly related to adjustments, such as water and heating levels. Since
completion of the installations, we have expended approximately $9,000
on both systems relating to adjustments and general maintenance.

We are presently negotiating to install another system in Chile which
should be completed in 12 months and we anticipate an additional two sales in
1999. Chile has approximately 40 fish meal processing plants and Peru has
approximately 140 fish meal processing plants. We anticipate additional sales in
both of these markets. We are not aware of any other competitive automatic
control system currently being produced in these markets.

<PAGE>

Immune stimulants

Salmon farming

As reported by the Aquaculture Magazine in 1999, in its Chile
aquaculture report: A Focus on Salmon, Chile is the second largest salmon
producer in the world, with yearly sales of more than $600,000,000. While salmon
are not native to Chile, today the country accounts for 60% of the U.S. salmon
market and over 40% of the world's salmon production, with predictions reaching
50% to 60% within the next five years. The cultivation of salmon is a two year
process. It has flourished in the south of Chile because of the region's ideal
weather and environmental conditions. Today there are approximately 55
companies, operating over 300 individual salmon farm projects in Chile.

The Chilean salmon market, as with any aquaculture project, has to
contend with various diseases which are unique to Chilean salmon. The rickettsia
bacteria is one of these unique diseases. We believe that to date there is no
vaccine available to successfully combat this bacteria. Chilean salmon fisheries
have reported losing approximately 15% to 35% of its stock to disease and it is
possible for a farm to lose the majority of its stock to disease. We began
researching and developing immune stimulants in an attempt to reduce these high
mortality rates. We performed our initial tests on 200,000 salmon ranging in age
from 6 to 8 months. These tests were performed at two salmon farms located in
Southern Chile. Based on our internal test results our management believes that
we have developed oral and injectable immune stimulants which reduce the
mortality rates in farmed salmon to approximately 8% to 10%. We continue to
evaluate our immune stimulant test results from the salmon farms in Southern
Chile.

We believe our immune stimulant will decrease the use of antibiotics on
farmed salmon. In December 1998, "Revista Aqua Noticias," a Chilean salmon
producer trade periodical, reported the use of antibiotics in Chile for disease
control in salmon was over 85,000 kg. This figure, in comparison to Norway, is
very high. Revista Aqua Noticias also reported that Norway, with almost twice
the production of salmon, uses only 300 kg. of antibiotics. The high use of
antibiotics has created serious problems in Chilean salmon farming, such as
higher bacterial resistance, higher doses applied, higher number of treatments
to get similar efficiency, and continuous replacement of antibiotics.
Regulations also forbid farmers to harvest fish when antibiotic treatment is
being applied and growing regulations in this area are being established in the
other major fish farming countries. We believe that immune stimulants can
significantly reduce the use of antibiotics, therefore eliminating the problems
the overuse of antibiotics has created and avoiding government regulation that
controls the use of antibiotics.

32
<PAGE>

Immune stimulants are a recent phenomena and are 100% natural.
Therefore, oral immune stimulants are not presently subject to specific
government regulation. The commercial production of injectable immune stimulants
must be done in Chilean veterinarian laboratories that meet government
specifications. These specifications are established by the Servicio Agricola y
Ganadero, the Chilean department of agriculture. Immune stimulants produced in
these labs must also individually meet specifications. Upon commencement of our
commercial production of injectable immune stimulants we will enter into an
agreement with a qualified veterinary laboratory. We intend to file patent
applications for our immune stimulants.

As of June 30, 1999, there were no sales of our salmon immune
stimulants. During the past three months we have continued to test these immune
stimulants with three salmon farms. These tests will continue. On completion of
these tests we will sell our immune stimulants throughout Chile, however, we
cannot provide any assurances that the test results will be successful.
Depending on the success of the salmon immune stimulants, we will expand our
research and development to other farm aquaculture production industries. We
have already commenced a research and development project for shrimp immune
stimulants.

We believe that we do not face any competition with respect to our
injectable immune stimulants. There is a Norwegian company and a U.S. company
that have developed oral immune stimulants and are attempting to sell immune
stimulants to salmon farmers in Chile.

Shrimp farming

Should the initial immune stimulant testing with salmon prove to be
successful then we will continue to expand our research and development to
shrimp farming. We have observed, through direct contact with our Asian fish
meal customers and other sources, that the mortality rates for farm raised
shrimp are significantly higher than those for salmon. As reported in 1992 by
Dr. Douglas Andersen in his article "Immunostimulants, Ajuvants, and Vaccine
Carriers in Fish: Applications to Aquaculture," illnesses such as Yellow Head
Virus or Taura Virus, have caused economic disasters throughout the Asian and
South American farmed shrimp market. The first country destroyed by an epidemic
was Taiwan, where the production fell in 1988 from 100,000 tons per year to only
30,000 tons per year, and eventually disappeared.

Thirty percent of worldwide production of shrimp comes from cultivation
and reaches 700,000 tons yearly. The largest worldwide production (550,000 tons)
is found in Asia, in countries such as: Indonesia, China, India and Vietnam. The
remaining production (150,000 tons) is found in South America (Ecuador and
Colombia) and Central America (Mexico, Honduras and Panama). However over the
last few years there have been strong variations in the production levels due to
bacterial and viral illnesses.

The mortality rate in farmed shrimp, as reported by Dr. Douglas
Andersen, ranges from 30% to 70% and current methods to control disease, such as
vaccines and antibiotics, have not been successful. We believe that current
vaccines and antibiotics available for pathogens of major commercial impact are
ineffective. Therefore, genetic selection in order to obtain a more resistant
shrimp to illness, better cultivation strategies, and immune stimulants seem to
be the future tools for disease prevention and reducing mortality rates.

The immune system in shrimp is less developed than in vertebrates and
research in this area is very recent. Shrimp are primarily dependent on
non-specific immune processes for their resistance to infection. They do not
produce antibodies as in the case of mammals. Therefore,

<PAGE>

substances like immune stimulants, might become an important tool to reduce
diseases of crustaceans in aquaculture due to their role as "alarm molecules"
that activate the non-specific immune system in shrimp.

We are working on developing an effective immune stimulant for shrimp.
Research is presently in the preliminary stage. A multiprofessional team in the
field of shrimp and immunology led by our researchers will analyze shrimp immune
responses and will identify the main factors affecting these responses. We have
worked with distinguished professionals in this field. In the area of basic
immunology we have worked with Professor Rolf Seljelid (University of Tromso in
Norway) and with Dr. Elizabeth Cruz (Universidad de Nuevo Leon in Mexico). Dr.
Seljelid and Dr. Cruz have expressed interest of being part of our research
team. It is anticipated that their employment and compensation will be discussed
within the next few months.

Poultry vaccines

We have supplied poultry feed manufacturers, mostly located in Peru and
Chile, with certified fish meal since 1989. This ongoing relationship alerted us
to specific diseases that have not been cured by the use of conventional vaccine
products offered in the market.

As a result of our research and laboratory testing, we believe that the
major weakness with conventional vaccines are that they are not specific to the
regions in which a disease is found. We have determined that the specific
strains of diseases affecting poultry are unique to each region and therefore
need specific responses and treatment. We have developed vaccines along with
diagnostic and production laboratories to address the specific needs of Chilean
poultry producers and have become the first Chilean producer of poultry
vaccines. These vaccines have been registered in Chile and in June 1999 we
received re-approval (we opened a new laboratory in Santiago, Chile which
required separate approval) by the Chilean government to sell vaccines
throughout Chile.

We began developing poultry vaccines by isolating the viruses and
bacteria in diseased poultry. The isolated strains of virus and bacteria was
then modified through chicken embrio passages. Through this process we developed
non-pathogenic strains that remained immunogenic. These strains are vaccines.

Today we are producing niche vaccines to treat the following diseases:

-Bronchitis Infection in two presentations for two different
pathologies
-Hepatitis
-Coriza infection
-Salmonella enteritidis and its combinations
-Combinations of all of the above

<PAGE>

In order to market our vaccine sales in Chile, in April 1997 Tepual
entered into a marketing agreement with Biosur S.A., a Chilean corporation 95%
owned by Paulina and Andrea Rutman through their interest in Atik and 5% owned
by Max Rutman. Biosur S.A. is engaged in the distribution of veterinary products
throughout Chile. Under this agreement, Biosur S.A. has agreed to buy and
distribute 100% of the vaccines that Tepual produces in Chile. In consideration
of this exclusive right to buy and distribute, they will purchase from Tepual a
minimum of $40,000 of Chilean vaccines per month. From January 1999 through June
1999, there were not any sales of Chilean vaccines while Tepual was waiting for
re-approval of its new laboratory. Tepual received the requisite approval during
June 1999, and Tepual intends to commence sales September 1999. Tepual believes
that the new facility is more than adequate to meet the sales anticipated from
the sale of these vaccines.

In 1995 we began the production of vaccines specific to the unique
strains of disease found in Peru, utilizing a laboratory similar to their
Chilean counterpart. To accomplish this, Tepual entered into a licensing
agreement with Biosur, S.A.C., a Peruvian company (Biosur S.A.C. is an
unaffiliated third party). Under the terms of this agreement, Biosur, S.A.C.
will manufacture and market all of our poultry vaccines in Peru and will pay
Tepual a 13% royalty on gross sales. As of June 30, 1999, Biosur S.A.C. had sold
approximately $200,000 of Peruvian vaccines. Our vaccines have been approved for
sale by the Peruvian Ministry of Agriculture. There is currently no patent
protection for the Peruvian vaccines. Tepual has also given Biosur S.A.C. the
right to manufacture and market poultry vaccines in Ecuador and Bolivia if and
when such vaccines are developed.

We believe the same pathologies exist in Argentinean, Brazilian,
Ecuadorian and Bolivian poultry, and therefore are studying the production and
sales possibilities of vaccines in these countries. Based upon our preliminary
testing, we plan to expand research within Argentina, Brazil, Ecuador and
Bolivia in the future. The chart below indicates the size of the poultry market
in countries in which we have developed or may develop vaccines for commercial
sales. This information was taken from Empresas Lideras 99, a Chilean business
journal.

1998 Poultry Production Levels
------------------------------
Chickens

Argentina 360,000,000
Bolivia 41,000,000
Brazil 3,000,000,000
Chile(1) 156,000,000
Ecuador 67,000,000
Peru(1) 220,000,000
--------------
Totals 3,884,000,000

- ----------------

(1) Peru and Chile are currently the only countries in which we have
developed or produced vaccines for commercial use.

<PAGE>
Red tide detection and cleansing

Blooms of toxic or harmful microalgae blooms, commonly called red tide,
occur when either natural or human factors cause a rapid increase in the
production of one-celled organisms (dinoflagellates and diatomeas), which
ordinarily grow in water rich in nitrogen and phosphorus. Red tide has occurred
in every coastal country in the world. Litoral contamination by man is one of
the major causes for the stimulation of microalgal blooms. Microalgae play an
important role in the marine biological system. With their photosynthetic
ability, they are the major producer of biomass and organic compounds in the
ocean. In most cases, the proliferation of plankton algae is beneficial
aquaculture and wild fisheries. However, some plankton algae have the capacity
to produce potent toxins and in some circumstances these algal blooms produce
negative effects, causing severe economic losses to aquaculture, fisheries and
tourism, with environmental and health impacts.

The term red tide is generally a misnomer because they are not
associated with tides; are not usually harmful; and those algal blooms that are
harmful may never even reach the densities required to discolor the water.
Unfortunately, however, a small number of algal blooms produce potent toxins
that can be transferred through the food web where they can affect and even kill
humans. Humans are principally exposed to the naturally occurring toxins
produced by the harmful algae through the consumption of contaminated shellfish.
According to the U.S. National Office for Marine Biotoxins and Harmful Algal
Blooms, the most significant public health problems caused by harmful algae are:

Paralytic Shellfish Poisoning (PSP)
Diarrhetic Shellfish Poisoning (DSP)
Ciguatera Fish Poisoning (CSP)
Neurotoxic Shellfish Poisoning (NSP)
Amnesic Shellfish Poisoning (ASP)

Each of these syndromes are caused by different species of toxic algae
which occur in coastal waters all over the world. Common impact of red tide
includes mass mortalities of wild and farmed fish. However, humans may be
severely effected by red tide illnesses.

Human consumption of PSP toxic shellfish may result in death or
paralysis in extreme cases. Paralytic toxins are responsible for PSP and they
comprise a collection of different toxins. The main toxins found in shellfish
can be classified in three main groups:

- Saxitoxin group (STX and neoSTX),
- Gonyautoxin group (GTX1, GTX2, GTX3 and GTX4) and
- N-sulfocarbamoyl group (C1, C2, C3 and C4).

<PAGE>

Human consumption of DSP toxic shellfish may cause severe diarrhea,
nausea, vomiting, cramps and chills. Diarrhetic toxins are responsible for DSP
and they comprise a collection of four different toxins. These toxins are:

- Okadaic acid (OA),
- Dinophysis toxin 1 (DTX1),
- Dinophysis toxin 2 (DTX2) and
- Dinophysis toxin 3 (DTX3).

Countries With Red Tide and Their Nominal Catches of Shellfish*
====================================================================================================================================
Country Red Tide(1) Catches (metric tons)*(2) % World(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
China PSP 1,041,709 30.86
USA PSP 660,766 19.57
Japan PSP DSP 411,413 12.19
Philippines PSP 150,861 4.47
Canada PSP DSP 120,497 3.57
Korea Republic PSP 120,004 3.55
Denmark PSP DSP 106,864 3.17
Thailand PSP 101,916 3.02
Chile PSP DSP 96,151 2.85
Italy PSP DSP 65,523 1.94
United Kingdom PSP 56,954 1.69
Indonesia PSP DSP 51,766 1.53
Netherlands DSP 44,423 1.32
Mexico PSP DSP 36,469 1.08
France PSP DSP 33,313 0.99
Turkey 28,618 0.85
Venezuela PSP 28,496 0.84
Peru 24,993 0.74
Australia PSP DSP 24,529 0.73
Vietnam PSP DSP 23,110 0.68
Norway PSP DSP 12,264 0.36
Iceland DSP 12,080 0.36
Malaysia PSP 11,017 0.33
Russian Fed. PSP 10,009 0.30
Portugal PSP DSP 8,861 0.26
Greece 7,801 0.23
New Zealand PSP DSP 6,810 0.20
Ireland PSP DSP 6,734 0.20
Spain PSP DSP 6,279 0.19
TOTAL 3,310,187 98.05
- ------------------------------------------------------------------------------------------------------------------------------------
World Total 3,375,997 98.05
====================================================================================================================================
</TABLE>
*average of nominal catches 1987-1996
(1) Source: J.J. Landsberg: Shellfish RES, 1996
(2) Source: Food Agricultural Organization (FAO): 1997 Fishery Statistics

<PAGE>

Currently there is not any way to prevent red tide and not any way to
clean or detoxify contaminated shellfish. Today the only acceptable detection
method for PSP and DSP is a mouse bioassay test. PSP mouse bioassay is used as
the official testing method worldwide, however, the DSP mouse bioassay is only
used in a few countries as the official method. These tests consist of injecting
a mouse with shellfish extracts under laboratory conditions and waiting for a
reaction. If the mouse dies, the sample is considered toxic. While this method
is considered the official testing method for red tide, it has weaknesses. Some
countries do not permit testing on animals and therefor prohibit the mouse
bioassay test. In countries that do permit animal testing for toxin detection,
animal regulations require that this test only be administered under laboratory
conditions. Therefor the mouse bioassay test does not allow on site testing and
does not permit immediate results. Moreover, the DSP mouse bioassay is not a
specific nor sensitive assay.

We have been working for seven years in red tide research for the
development of DSP and PSP red tide detection kits with more practical
applications than the mouse bioassay test and a decontaminating/cleansing
technology to remove toxins from contaminated shellfish. The advantages of our
testing methods for detecting PSP and DSP over other current processes are
twofold. Our methods allow for testing without the use of animals. Since our
tests do not require the use animals, the laboratory space our testing methods
require is smaller.

Red tide detection kits

DSP

We have developed, for laboratory use, a diagnostic kit for the
detection of DSP toxins. This kit determines DSP toxicity based on a
colorimetric evaluation. Under this method, toxins are detected though samples
extracted from the shellfish's hepatopancreas.

Our DSP kit is an enzymatic assay of a protein phosphatase. A protein
phosphatase is a macro molecule that is responsible for releasing phosphate
within living cells. It is an enzyme used by a living cell to control
metabolism. An enzyme is a protein produced by living animal cells that enable
chemical reactions. Our DSP kit uses an isolated protein phosphatase for
detecting toxicity. Since DSP toxins inhibit a protein phosphatase at an
extremely low level, we have developed our colorimetric assay to inhibit sample
enzyme extracts in proportion to the levels that toxins are present. Reactions
in the colorimetric assay will produce a color to indicate toxicity.

Our DSP kit can detect all diarrhetic toxins. Our conclusions have
recently been presented by Mario Chong, one of our researchers, at the
International Meeting on Red Tide. This meeting was held in Puerto Varas, Chile,
during the first two weeks of August 1999.

This kit is being introduced in the Chilean market and was presented in
1998 at the Second Convention of Harmful Algae Blooms (Segundo Taller de
Floraciones de Algas Nocivas), an international conference on red tide,
sponsored by the National Oceanographic

<PAGE>

Committee, a division of the Chilean Navy. We are preparing our
marketing and commercialization of the kit and there is currently no patent for
this technology. While we intend to file for patents, there can be no assurances
that we will obtain patent protection.

PSP

We are also developing PSP diagnostic kits. To that effect we have
developed techniques using antibodies to isolate PSP toxins as well as
analytical and toxicological methods using antibodies to quantify and qualify
PSP toxins. These methods involve extracting acid fluids from a shellfish to
detect whether the shellfish contains PSP toxins through the analyzation of the
fluids. These methods will detect PSP toxins from the acid extracts of shellfish
determining whether the specific shellfish actually contains toxins. We have
developed certain procedures to isolate and purify the three main groups of PSP
toxins (saxitoxin, gonyautoxins, and sulfocarbamoyl) as well as analytical and
toxicological methods to quantify and to qualify each PSP toxin.

Our PSP kit consists of an immunoassay. In our immunoassay, toxins are
bound to a biopolimer to make the PSP toxin conjugates. Conjugates are necessary
to generate antibodies. PSPtoxin specific antibodies were developed using these
conjugates. These antibodies are used to detect PSP toxins in shellfish,
gastropods and crustacean extracts. This kit also is a colorimetric assay and
the color is correlated to the amount of toxin present in the sample extract. We
have developed antibodies against saxitoxin, gonyaulatoxin and sulfocarbamoyl
toxins that are used in our kit to detect all PSP toxins. Until now, PSP toxins
and correlating conjugates have been impossible to obtain. We believe that
before our technology, no one has developed antibodies which cover the three
major groups of PSP toxins (saxitoxin, gonyaulatoxin and sulfocarbamoyl toxin
groups).

Production of kits

Through a joint venture with Centro de Estudios Cientificos de Santiago
(CECS), a Chilean private non-profit research company, we have produced an
antitoxin test system. This antitoxin test system was developed from the
antitoxin "saxitoxin," of which the intellectual rights to the antitoxin
saxitoxin are exclusively held by CECS. We have acquired a 50% ownership
interest in this antitoxin test system. We believe this antitoxin test system
has enabled us to develop a PSP detection test for specific PSP toxins which can
be used in specialized laboratories. This method, consistent with our
methodology described above, will extract and analyze acid fluids from a
shellfish to detect whether the shellfish contains specific PSP toxins. We are
solely responsible for the commercialization of this antitoxin test system. By
contract with CECS we will receive 60% of all the benefits of any licensing,
royalties or sales limited to this antitoxin test system while the remaining 40%
shall accrue to CECS.

By agreement, dated June 20, 1998, between Tepual/CECS and R-Biopharm
GmbH, a German company, Tepual and CECS have agreed to supply R-Biopharm GmbH
with antibodies necessary to produce PSP ELISA Test Kit. R-Biopharm GmbH will
manufacture and distribute

<PAGE>

the PSP ELISA Test Kit under the trademark "RIDASCREEN." This agreement provides
that Tepual and CECS will receive royalties of 12.5% of the net sales of the PSP
ELISA Test Kit, of which Tepual will receive 60% (consistent with our agreement
with CECS), for 10 years dated from the execution of the agreement. We believe
that this PSP ELISA Test Kit will begin to be sold commercially during the first
quarter of 2000. R-Biopharm GmbH will also pay a minimum royalty of $5,000
during 1999 and a minimum of $15,000 for each remaining year under this
agreement. This payment constitutes minimum royalties against the 12.5% of net
sales on an annual basis.

Under a separate agreement, dated June 20, 1998, between Inual and
R-Biopharm GmbH, Inual has agreed to supply R-Biopharm GmbH with all toxins and
conjugates necessary to produce the PSP ELISA Test Kit. This agreement provides
that Inual shall receive royalties of 12.5% of the net sales of the PSP ELISA
Test Kit for 10 years dated from the execution of the agreement. R-Biopharm GmbH
will also pay a minimum royalty of $5,000 during 1999 and a minimum of $15,000
for each remaining year under the agreement. This payment constitutes minimum
royalties against the 12.5% of net sales on an annual basis. In addition to this
12.5% royalty, Inual shall receive $400,000, from R-Biopharm GmbH in
consideration for supplying R-Biopharm GmbH with a customer list for the future
potential sales of the PSP ELISA Test Kit. This payment is due two years from
the date of the agreement. Inual transferred this contract to Tepual in July
1999, and we shall receive 100% of its benefits.

Through a separate agreement between R-Biopharm GmbH and Inual dated
May 20, 1998, of which Inual also transferred to Tepual in July, 1999,
R-Biopharm GmbH agreed to supply Inual on a continuous demand with commercial
PSP ELISA Test Kits at a price equivalent to those of R-Biopharm GmbH's other
future distributers. This agreement will permit us to sell the PSP ELISA Test
Kit in countries including, but not limited to, Chile, the United States and
Japan, where we have the ability to market this product.

Together with CECS we have jointly applied for patents in Chile, USA,
Canada and the European Community for our antitoxin test kit, under a patent
application titled "immunoassay forthe detection and quantitation of toxins
causing paralytic shellfish poisoning." While we may apply for worldwide patents
with CECS there can be no assurances that we will obtain these patents. As of
October 25, 1999 we have not received any patent protection for our antitoxin
test kit.

Future developments

on site testing kits

Having developed detection kits that have shown successful results in
the laboratory, we plan to focus our efforts on the development of on site
testing kits for PSP and DSP. We believe that our current research and
development may lead to a commercial testing kit that would enable commercial
shell fishers, recreational fisherman or restaurants to test shellfish for
toxicity levels

<PAGE>

on location with a fast, economical, reliable and comprehensive kit to perform
on site PSP or DSP detection tests.

cleansing of shellfish

Through continuous research we have also developed and tested at the
laboratory level, an innovative multi-step procedure for decontaminating or
cleansing potentially PSP tainted shellfish, which may be applied in processing
plants or restaurants. We have developed technology which has enabled us in
laboratory testing to chemically remove toxins, without changing the
organolleptic (flavor, texture and color) characteristic of the shellfish or
introducing negative environmental effects. We believe this process, which
involves dipping entire shellfish stocks in a cleansing solution can be used in
pre-cooked or canned shellfish, reducing toxicity to acceptable consumption
levels. We believe that this preventative process may be used to guarantee safe
human consumption of canned or cooked shellfish, regardless of whether the
shellfish has even been tested for PSP toxins. We have applied for patents in
Chile, the United States, Canada, Australia and the European Community and may
apply for worldwide patents.

Trademarks and patents

We currently have trademark rights over the Tepual and Inual brands in
Chile, Columbia, Taiwan, China, Ecuador, Mexico (only for Tepual(TM)), Japan,
Peru and South Africa. As of the date of this offering we have not applied for
further trademark protection.

Patent protection for our poultry vaccines is limited to Chile and
currently only protects our Chilean vaccine for bronchitis infection. We intend
to patent our other Chilean vaccines, however, as of the date of this offering,
we have not filed nor received patent protection for any of our other Chilean
vaccines. As of the date of this offering we do not have any patent protection
for our immune stimulants.

We have applied for patent protection for our red tide paralytic
shellfish poisoning detection kit (antitoxin test kit) and our red tide
paralytic shellfish poisoning detoxification process. These patent applications
have been made in the United States, Chile, Canada, and the European Community.
An additional patent application for red tide paralytic shellfish poisoning
detoxification has been filed in Australia. We have also applied for patent
protection in Chile for a procedure to obtain krill oil.

We have received comments to our patent filings in the United States
for our red tide paralytic shellfish poisoning detection kit (antitoxin test
kit) and our red tide paralytic shellfish poisoning detoxification process and
anticipate filing responses in the U.S. Patent Office later this year. We are
unable to predict the timing of the grants of any patents or if any patent
protection can be obtained.

<PAGE>

Product distribution
- --------------------

Nutrient products

We have our own five person sales staff plus our chief executive
officer located in our offices in Santiago that sells all of our nutrient
products directly to customers. While our sales staff may travel throughout the
world to see clients, today's communications allows our staff to remain in
constant contact with our customers while operating out of our offices in
Santiago.

Automatic control systems

Our automatic control systems will be sold through our own internal
sales staff located in our Santiago offices.

Immune stimulants

Our salmon immune stimulants will be sold through our own internal
sales staff located in our Santiago offices. We have not established any
distribution method for our shrimp immune stimulants. Future distribution of
shrimp immune stimulants may be through agents located in the countries in which
we sell our shrimp immune stimulants or through our own internal sales staff.

Poultry vaccines

We have contracted with Biosur S.A. for the distribution of our Chilean
poultry vaccines. Biosur S.A. has the exclusive right to distribute our Chilean
poultry vaccines. We have contracted with Biosur S.A.C. for the distribution of
our Peruvian poultry vaccines.

Red tide

Our DSP kit will be distributed directly through our own internal sales
staff for all products distributed in Chile. Upon the commercial viability of
our DSP kit, we will contract with agents or independent sales forces wherever
we intend to market our DSP kit.

R-Biopharm GmbH has an exclusive option to distribute our PSP detection
kit, with the exception of Chile, the United States and Japan. In these
countries, we will determine our method of distribution at a later date. We
anticipate that we will distribute our PSP detection kit through our own
internal sales staff for PSP kits sold in Chile. Distribution of our PSP kits in
the United States and Japan may be through independent sales agents.

<PAGE>

Government regulation
- ---------------------

Nutrition

Our brokerage business is subject to general import and export
regulations that are not specific to our nutrient products.

Chilean and international fishing laws have and may place restrictions
and limitations on the catching of fish. Future restrictions and limitations can
have an effect on the availability of fish used in fish meal.

Krill catches are limited by the Convention of the Commission for the
Conservation of Antarctic Marine Living Resources. The aim of the convention is
to conserve marine life. This does not exclude harvesting as long as such
harvesting is carried out in a rational manner. This international body limits
the total amount of krill that can be harvested in Antarctic waters to 1.5
million tons. The total amount of krill that is currently being harvested in
Antarctic waters is about 70,000 tons.

Although we have developed numerous products, specific government
regulation of which we are subject to, and responsible for obtaining or
maintaining compliance, is limited to the products we manufacture ourselves.
Material government regulation for our self-produced products include:

Immune stimulants

The commercial production of our injectable immune stimulants is
subject to regulatory approval by the Servicio Agricola y Ganadero. The Servicio
Agricola y Ganadero is the Chilean equivalent to the USDA. We will be regulated
by Servicio Agricola y Ganadero in two ways:

1) veterinary laboratory approval; and

2) final product approval.

Once our injectable immune stimulants are ready for commercial sale, we
will seek approval from the Servicio Agricola y Ganadero. There is no regulation
for our oral immune stimulants.

Chilean poultry vaccines

The commercial production of our Chilean poultry vaccines also requires
laboratory and product approval from the Servicio Agricola y Ganadero. We have
received its approval.

<PAGE>

Other products

Our other products, such as our Peruvian poultry vaccines and red tide
detection kits are subject to government regulation in the countries in which
they are produced. Receiving government approval and satisfying government
regulation, however, is the responsibility of the companies that are
manufacturing our products.

We also incur government regulation when we sell our products outside
of Chile. We are subject to import and export restrictions in every country that
we sell our nutrient products. No import or export law has had a material effect
on our brokerage business.

Research and development

Our research and development division includes cooperative efforts with
academic, private and government institutions and our own highly qualified
scientists. Our internal research and development staff includes 36 employees.
Of these employees 33 are full-time employees. We believe we are able to recruit
these highly qualified employees though incentives relating to productivity. ^We
intend to enter into employment agreements with certain of our researchers.
These researchers will receive a royalty for products they have developed.
During 1998 and 1997, respectively, we spent $426,195 and $232,128 on research
and development (does not include software development costs).

Key personnel

Our key personnel include the following:

Nutrition and immune stimulant research

Dr. Jenny Blamey - Dr. Blamey graduated from the University of Georgia
with a Bachelor degree in science. She also received a Masters degree and Ph.D.
in biochemistry from the University of Georgia. Dr. Blamey has been a research
scientist for Tepual since 1994 and our research manager since 1996. Prior to
her employment with us, Dr. Blamey was a researcher of enzymes at the Center for
Metallo at the University of Georgia from 1984 until 1994. Today Dr. Blamey's
research areas include the study of hyperthermophile enzymes, protein
purification, enzymology and enzyme technology. Dr. Blamey is a member of the
Chilean Society of Biology and the Society of Molecular Biology and
Biochemistry.

Claudia Lopez - Ms. Lopez graduated from the Universidad Catolica de
Chile with a degree in biochemistry. Ms. Lopez has also received post-graduate
training from the Fermentation Research Institute in Tsukuba, Japan and the
University of Washington where she studied aquaculture. Her research areas
within Bio-Aqua include fish nutrition, fish immunology, fish pathology,
immunostimulants, feed formulation and marine pigments.

<PAGE>

Maria Teresa Millan - Ms. Millan graduated from the Universidad
Catolica de Valparaiso in Chile with a degree in biochemical engineering. She
has been working for us since 1990 and is currently in charge of our product
development division. Her research areas within Bio-Aqua include enzyme
technology, feed formulation and seafood solids.

Vaccine research

Dr. Ricardo Gallardo - Dr. Gallardo is a licensed doctor in animal
sciences and veterinary medicine. He has been involved in poultry vaccine
research for over 25 years. He is a specialist in the fields of poultry
production and poultry pathology. Dr. Gallardo is also a professor of poultry
production and pathology at the Universidad Mayor in Chile and was a professor
at the Universidad de Chile. He is a member of numerous professional
organizations, including, the College of Doctors in Veterinary Medicine, the
Society of Doctors in Veterinary Medicine and the Association of Doctors in
Veterinary Medicine. Dr. Gallardo has been working for us for 12 years where he
is our lead researcher for poultry vaccines.

Automatic control processing

Oscar Cornejo - Mr. Cornejo graduated from the Universidad de
Concepcion and Universidad Cathlica Valparaiso with degrees in chemistry and
chemical engineering. Mr. Cornejo is the head of our automatic control division.
He is a member of the International Fishmeal and Oil Association (IFOMA) and an
international consultant for the Food Agricultural Organization (FAO). Prior to
working with us, Mr. Cornejo was the technical director and general manager of
Boher Chile, a leading fructose and corn syrup processor in South America. Mr.
Cornejo also served as the managing director of Compania Pesquera San Pedro, a
fish meal and canning company in Chile, for 14 years.

Pedro Sayes - Mr. Sayes graduated from the Universidad de Santiago in
Santiago, Chile with a degree in electronic engineering. He has been working for
us for 10 years in our automatic control division. Mr. Sayes designs and
develops automatic control equipment and systems for us.

Red tide

Dr. Sergio Lavandero - Dr. Lavandero graduated from the Universidad de
Chile with a degree in pharmaceutical chemistry and a Ph.D. in biochemistry. He
has been leading our toxin research projects and is the project manager for our
toxic research division. Dr. Lavandero is a professor of the Universidad de
Chile and his areas of specialty within our research divisions include
polyclonal and monoclonal antibody production, toxin pharmacology and the study
of tissue culture.

Dr. Nestor Lagos - Dr. Lagos graduated from the Universidad de Chile
where he received a degree in biochemistry, a Masters degree in biochemistry and
a Ph.D. in biology. He has also received post-doctoral training at the
University of California, Los Angeles. Dr. Lagos has led

<PAGE>

Tepual's red tide research division since 1994. His areas of research also
include marine toxins and the isolation and purification of toxic biomolecules.
Dr. Lagos is also a professor of membrane physiology at the Universidad de
Chile.

Mario Chiong - Mr. Chiong graduated from the Universidad de Chile with
a degree in biochemistry and has been a researcher and biochemist for us since
1994. Mr. Chiong's area of research includes red tide and marine toxins.

Technical Network

We have also developed an international network of scientists who are
called upon from time to time to consult with us. A partial list of our
technical network and their areas of expertise is as follows:
<TABLE>
<CAPTION>

Nutrition

Aquaculture

<S> <C> <C>
Professor Ron Hardy Idaho University, USA.
Professor Addison Lawrence Texas A&M University, USA.
Dr. Dean Akiyama Technical Director of Japfa, Indonesia.
Dr. Lucia Elizabeth Cruz Facility of Biological Sciences, Universidad Autonoma
Nuevo Leon, U.A.N.L., Mexico.
Dr. Heinrich Kossman Former R&D Director of Ewos Fish Feed Company,
Sweden.
Dr. Elinar Watne R&D Director of NorAqua, aquiculture company,
Norway.

Pigs

Professor Froseth Washington State University, USA.
Dr. Ad van Wessel Provimi, animal feed producer, Holland.

Poultry

Dr. Barry Hundley Nutrition Expert; Former Director of Rainbow Chicken,
South Africa.

Immunology

Professor Rolf Sejlelid Head of Pathology Department, Tromso University,
Norway.
Professor Douglas Anderson Former Director National Fish Health Research Lab,
USA.

<PAGE>

Biotechnology & automatic control processing

Professor Tung Ching Lee Food Science Department, Rutgers University, USA.
Dr. Alfredo de Ioannes Universidad Catolica de Chile, Centro de Estudios
Cientificos de Santiago, Chile.
Dr. Ralf Dreher R-Biopharm GmbH, development company, Germany.
Dr. Eugene T. Smith Hammline University, USA.
Dr. Mario Perez Won Food Engineering Department, Universidad de la
Serena, Chile.
</TABLE>

Foreign Corrupt Practices Act

Substantially all of our operations are transacted in South America. To
the extent that we conduct operations and sell our products outside the U.S., we
are subject to the Foreign Corrupt Practices Act which makes it unlawful for any
issuer to pay or offer to pay, any money or anything of value to any foreign
official, foreign political party or foreign political party official or any
candidate for foreign political office (foreign official) or any person with
knowledge that all or a portion of such money or thing of value will be offered,
given, or promised, directly or indirectly, to any foreign official.

We have not made any offers, payments, promises to pay, or
authorization of any money or anything of value to any foreign official and have
implemented a policy to be followed by our officers, directors, employees and
anyone acting on its behalf, that no such payments can and will be made. We have
made all employees cognizant of the need for compliance with the Foreign Corrupt
Practices Act and any violation of our policy will result in dismissal. Further,
we conduct periodic reviews of this policy with all employees to ensure full
compliance.

Foreign investment laws and regulations

The Chilean Constitution establishes that any Chilean or foreigner may
freely develop any activity in Chile so long as the securities activity in Chile
does not contravene existing laws dealing with public morals, public safety or
national security and follows the laws that regulate such activity. It also
establishes the principle of non-discrimination, thus guaranteeing foreign
investors equal protection under Chilean law. Additionally, Chilean law
prohibits any discretionary acts by the Chilean government or other entities
against the rights of persons or property in derogation of this principle.
Foreign investors may transfer capital and net profits abroad. There are no
exchange control regulations which restrict the repatriation of the investment
or earnings except that the remittance of capital may take place starting a year
after the date the funds were brought into the country, but net profits can be
remitted at any time, after deduction of applicable withholding income taxes.
Therefore, equity investments in Chile by persons who are not Chilean residents
follow the same rules as investments made by Chilean citizens.

<PAGE>

These principles are the basis for the DL 600. Based on DL 600, the
foreign investor and the government sign a legally-binding investment contract
which may only be modified by mutual consent. The contract sets forth the
current tax and foreign exchange laws as each relates to the specific
investments by that investor in Chile. Thus, the investor is protected against
any subsequent changes in the law which could adversely affect the investor or
his investments in Chile. Although the Chilean government has been successful in
keeping this principle in place forthe last 23 years, there can be no assurances
that a breach by the Chilean government will not occur in the future or that it
would not adversely affect our rights to do business in Chile. Moreover, while
there has been no precedent that political changes had determined changes in
these rules, no assurances can be made that such changes will not occur in the
future. We intend to enter into an investment contract with the Government of
Chile on or around the closing of this offering.

Employees

As of June 30, 1999, we employed 67 employees, of which 8 were
full-time salaried employees in administration, 8 were full-time salaried
employees in trading and brokering positions and 36 were involved in research
and development. Substantially all of our management and employees who reside in
Chile speak Spanish and our senior management team in Chile also communicates in
English. None of our employees are covered by a collective bargaining agreement.
We believe that the dedication of its employees is critical to our success, and
that our relations with our employees are good.

Properties

We own approximately 1,420 square feet of executive office space and
research facilities in Santiago, Chile. This property was purchased by Tepual in
1992 for a purchase price of approximately $110,000.

We also lease four (4) facilities in Santiago, Chile. We lease
approximately 1,400 square feet of office space which is used by our trading,
quality control, finance and accounting departments at a rate of $1,439 per
month. The lease is for two (2) years, commencing April 30, 1998, and provides
for an automatic renewal term of one (1) year, unless leasee or leasor
terminates in writing. We also hold an option to buy this facility in the event
the leasor decides to sell the property.

We lease approximately 2,670 square feet of laboratory space for
production and quality control of poultry vaccines at a rate of $5,200 per
month. The lease contract commenced in March 1999, and is for an indefinite
term, terminable on four months notice by either party. We are responsible for
obtaining and maintaining proper government authorization for producing
biological products within the facility.

We lease two buildings containing approximately 2,070 square feet of
laboratory space for bio-toxilogical testing, aquaculture research and
development and a pilot plant for research

<PAGE>

and development at a total rate of $1,604 per month. The lease was for an
initial term of one and one-half (1 1/2) years, commencing in November 1995, and
automatically renews, unless there is a written request for termination by
either party.

We lease approximately 6,000 square feet of warehouse space within two
buildings in Santiago, Chile at a total rate of $7,400 per month. These spaces
are used to store feather meal and for processing and packaging of these
products. The lease contracts do not include a termination date, although either
party must provide thirty (30) days notice to terminate either agreement.

Chilean law provides that a landlord may not evict a tenant without a
court hearing, although the tenant is responsible for all costs related to such
a hearing.

Upon the effective date, we will enter into a two year lease with
Andean Financial Corporation for its corporate U.S. offices in Boca Raton,
Florida, which lease may be renewed for an additional two year term. David
Mayer, a member of our board of directors, is the sole shareholder, officer and
director of Andean Financial Corporation. The annual lease amount will be
$30,000 annually, payable semi-annually, which includes all telephone and
facsimile, secretarial and other expenses. These terms were negotiated on an
arm's length basis and such terms are competitive with current lease terms for
similar arrangements in the South Florida area.

Legal proceedings

We are not a party to any pending legal proceeding the resolution of
which, our management believes, would have a material adverse effect on our
results of operations or financial condition, nor to any other pending legal
proceedings other than ordinary, routine litigation incidental to its business.

ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a
registration statement in Washington, D.C., on Form SB-2 under the Securities
Act, with respect to the securities we are offering. This prospectus does not
contain all the information set forth in the registration statement and its
exhibits. For further information about us and the securities we offer,
reference is made to the registration statement and to the exhibits filed. The
statements contained in this prospectus as to the contents of any contract or
other document identified as exhibits in this prospectus are not necessarily
complete, and in each instance, reference is made to a copy of such contract or
document filed as an exhibit to the registration statement, each statement being
qualified in any and all respects by such reference.

The registration statement, including exhibits, may be inspected
without charge at the principal reference facilities maintained by the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549; at its Northeast Regional Office, 7 World Trade Center, Suite 1300, New
York, New York 10048; and at its Midwest Regional Office, 500 West

<PAGE>

Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and copies of such
materials can be obtained from the Public Reference Section of the Securities
and Exchange Commission at its principal office in Washington, D.C. set forth
above or by calling the Securities and Exchange Commission at 1-800-SEC-0330
upon payment of prescribed fees. Additionally, the Securities and Exchange
Commission maintains a Web sit that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the Securities and Exchange Commission and the address of such site is
(http://www.sec.gov).

We intend to furnish our shareholders with annual reports containing
audited financial statements and such other periodic reports as we may from time
to time deem appropriate or as may be required by law.

MANAGEMENT

Directors and executive officers of Bio-Aqua Systems, Inc.
<TABLE>
<CAPTION>

Name Age Position
- ---- --- --------
<S> <C> <C>
Max Rutman (1) 59 Chief Executive Officer, President,
Chairman of the board of directors
Guillermo Quiroz (2) 49 Chief Financial Officer, Vice President of
Finance and Administration, Director
Nestor Lagos (2) 48 Director
Sergio Vivanco (2) 46 Director
David Mayer (1) 57 Director, Assistant Secretary
</TABLE>

- -------------
(1) Has served in his position since our inception in March 1999.
(2) Will commence serving as a director upon the effective date.

Max Rutman has served as chief executive officer, president and
chairman of the board of directors of Bio-Aqua since its inception in March 1999
and as the chief executive officer and Chairman of the board of directors of
Tepual since its incorporation. Mr. Rutman has served as general manager of
Tepual since 1989. Mr. Rutman has received a degree in chemical engineering from
the Universidad de Santiago and a Masters in food science from Massachusetts
Institute of Technology (MIT). Mr. Rutman has served as the head of
bio-engineering division and former director of the Protein Group at I.F.O.P.
(Chilean Institute of Fisheries Development), and visiting professor at the
following Universities: Universidad Catolica, Universidad Catolica de Valparaiso
and Universidad de Santiago, in food science, and biotechnology. Mr. Rutman has
also been consultant to the World Bank, the Interamerican Development Bank, the
Ford Foundation, MIT and Colorado State University's International Development
Agency. Mr. Rutman is a member of the Academy of Science and the Institute of
Food Technology.

Guillermo Quiroz has served as chief financial officer, vice president
of finance and administration of Bio-Aqua since inception and will serve as a
member of the board of directors

<PAGE>

of Bio-Aqua as of the effective date. Mr. Quiroz has served as president, chief
financial officer and vice president of finance and administration of Tepual
since October 1998 and as member of the board of directors of Tepual since May
1999. Mr. Quiroz has also been a financial advisor for Tepual since 1994. From
1985 through 1994 Mr. Quiroz served as the general manager and legal
representative for Salmosur S.A., a fish farming company. From 1994 through
April 1997 Mr. Quiroz was the chief executive officer for Soalva S.A., a Chilean
dairy producer and distributor and also a financial advisor for Varmontt S.A., a
Chilean transportation company. From May 1997 through September 1998 Mr. Quiroz
was the chief financial officer for Empresas Dicsa S.A., a Chilean company
engaged in the import, distribution and service of construction and mining
equipment where he was responsible for financial planning and corporate
administration throughout Chile, Peru, Argentina and Bolivia. Mr. Quiroz is a
commercial engineer and auditor.

Nestor Lagos will serve as a member of Bio-Aqua's board of directors as
of the effective date and has been a member of Tepual's board of directors since
April 1999. Dr. Lagos has led Tepual's red tide research department since 1994.
Dr. Lagos is also a professor of membrane physiology at the Universidad de Chile
located in Santiago, Chile. Dr. Lagos is a biochemist with a Ph.D. in biology
and has also received post-doctoral training at the University of California,
Los Angeles (UCLA).

Sergio Vivanco has served as a member of Bio-Aqua's board of directors
as of the effective date. Since November 1997, Mr. Vivanco has served as a
member of the board of directors of Uniservice Corporation (NASDAQ SmallCap:
"UNSRA," "UNSRW"). Since 1991, Mr. Vivanco has served as a member of the board
of directors of Kentucky Foods Chile, S.A., the Kentucky Fried Chicken
franchisee in Chile. Mr. Vivanco has been an attorney since 1979 and has served
as general counsel to Tepual since 1998. Mr. Vivanco is a partner in the law
firm of Abud, Vivanco and Vergara in Santiago, Chile, which serves as Tepual's
and our legal counsel in Chile.

David Mayer has served as a member of Bio-Aqua's board of directors and
assistant secretary of Bio-Aqua since March 1999 and has entered into a ten (10)
year consulting agreement with the Bio-Aqua. Since July 1997, Mr. Mayer has
served as the president of Andean Financial Corporation. Since November 1997,
Mr. Mayer has also served as a member of the board of directors and assistant
secretary of Uniservice Corporation (NASDAQ SmallCap: "UNSRA," "UNSRW"). From
January 1992 to March 1996, Mr. Mayer was a consultant to various companies
where he assisted with mergers and acquisitions.

<PAGE>

Directors and Executive Officers of Tepual

The directors and executive officers of Tepual are as follows:
<TABLE>
<CAPTION>

Name Age Position
- ---- --- --------
<S> <C> <C>
Max Rutman(1) 59 Chief Executive Officer, Director
Guillermo Quiroz(1) 49 Chief Financial Officer, President, Director
Nestor Lagos (1) 48 Director
</TABLE>

(1) See "Directors and executive officers of Bio-Aqua Systems, Inc."

Election of directors

Each of our directors are elected at our annual meeting of shareholders
and holds office until the next annual meeting of shareholders, or until his or
her successor is elected and qualified. The bylaws permit the board of directors
to fill any vacancy and such director may serve until the next annual meeting of
shareholders or until his successor is elected and qualified.

We have agreed that for a period of three years after the effective
date, if requested by the representative, we will use our best efforts to cause
one individual designated by the representative to be elected to our board of
directors, which individual may be a director, officer, employee or affiliate of
the representative. The representative has not, to date, selected a designee to
our board of directors. Alternatively, the representative may designate a person
to attend meetings of our board of directors as an observer for three years
following the effective date.

Directors' compensation

Upon the effective date, our non-employee Directors, David Mayer and
Sergio Vivanco, will receive $100 plus expenses, for attendance at each meeting
of the board of directors, as well as reimbursement of reasonable out-of-pocket
expenses incurred in connection with their attendance at the meetings. We intend
to purchase directors and officers insurance as soon as practicable to the
extent that it is available and cost effective to do so.

Committees of the board of directors

Our audit committee will be established upon the effective date and
will consist solely of Sergio Vivanco. Our audit committee will review the work
of the audit staff and direct reports covering such work to be prepared. Our
audit committee will oversee our continuous audit program to attempt to protect
against improper and unsound practices and to attempt to furnish adequate
protection for its assets and records. Our audit committee also will act as
liaison to our independent certified public accountants, and will

<PAGE>

conduct such work as is necessary and will receive written reports, supplemented
by such oral reports as it deems necessary, from our independent certified
public accountants.

Our compensation and stock option committee will be established upon
the effective date and will consist of Messrs. Rutman, Quiroz and Mayer. The
compensation and stock option committee will make recommendations with respect
to compensation of senior officers and granting of stock options and stock
awards.

Our nominating committee will be established upon the effective date
and will consist of Messrs. Rutman, Vivanco and Quiroz. The nominating committee
will make recommendations with respect to qualified individuals to become
members of our board of directors.

Of the five members of the board of directors, Messrs. Vivanco and
Mayer are non- employee directors. However, we have entered into a consulting
agreement with Mr. Mayer and Mr. Vivanco serves as our Chilean counsel.

Appointment of officers

Officers are elected annually by the our board of directors and their
terms of office are, except to the extent governed by employment contracts, at
the discretion of the board of directors. Our officers devote full time to the
business.

Executive compensation and employment agreements

The following table sets forth compensation awarded to, earned by or
paid to our chief executive officer and each executive officer whose
compensation exceeded $100,000 for the year ended December 31, 1998. We did not
grant any stock options, restricted stock awards or stock appreciation rights or
make any long-term incentive plan payments during 1998. This table is based
solely upon compensation received from Tepual. It also includes payments under
Chilean social security provisions.
<TABLE>
<CAPTION>

Summary Compensation Table
--------------------------

Other Annual
Name and Principal Position Year Salary($) Bonus ($) Compensation($)
- --------------------------- ---- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Max Rutman CEO, 1998 $ 48,000 $ -0- $ -0-
President and Chairman 1997 48,000 -0- -0-
1996 48,000 -0- -0-
</TABLE>

Employment agreements

Max Rutman, Chief Executive Officer, President and Chairman. Tepual,
our subsidiary, has entered into a written three-year employment agreement with
Mr. Rutman, which shall

<PAGE>

commence upon the effective date. Under the terms and conditions of his
employment agreement, Mr. Rutman shall receive an initial annual base salary of
$200,000, annual bonuses of up to $100,000, as determined by Tepual's board of
directors. Mr. Rutman shall be reimbursed for his ordinary and necessary
business expenses including fees for membership in one business or social club,
up to a maximum of $10,000 per year, and in other clubs and organizations as
Tepual and Mr. Rutman shall mutually agree are necessary and appropriate. In any
event Mr. Rutman terminates his employment contract within 12 months after a
change in control, he will be entitled, for the remaining term of his employment
contract, to:

1. earned, but unpaid salary;

2. benefits to which he is entitled as a former employee under
our benefit and compensation plans;

3. continued health benefits;

4. monetary payments under severence plans; and

5. all cash and stock payments he would have been entitled to,
had his employment not terminated.

We intend to obtain a $1,000,000 key man life insurance policy, of which we will
be the beneficiary on the life of Mr. Rutman.

Guillermo Quiroz, Chief Financial Officer. Tepual, our subsidiary, has
entered into a written two year employment agreement with Guillermo Quiroz,
which shall commence upon the effective date. Under the terms and conditions of
his employment agreement, Mr. Quiroz shall receive an initial annual base salary
of $100,000, bonuses of up to $20,000 per year, as determined by Tepual's board
of directors, as well as $7,500 for automobile expenses. Prior to the effective
date, Mr. Quiroz entered into a written employment agreement with Tepual. This
employment agreement will terminate upon the effective date of the written
employment agreement with Tepual that we have described.

Chilean Social Security/AFP and ISAPRE. Messrs. Rutman and Quiroz are
also entitled to receive certain social security benefits under Chilean law. The
Social Security laws in Chile were established as a private system that requires
all companies to retain approximately 20% of the gross salaries of its
employees, up to a maximum of $4,408.95 per year, which is used to pay both
Administrators of Pension Funds Companies (AFP) and Institutions of Provisional
Health (ISAPRE).

<PAGE>

The allocation of this 20% to each service is approximately as follows:

(a) 10% to the AFP: This amount is deposited in an individual
interest-bearing account of each employee to cover their retirement. In
Chile, the age of retirement is 60 for women and 65 for men.

(b) 3% to the AFP: This amount covers any partial or permanent
disability and, in the case of death, will provide a monthly amount to
the deceased's spouse. The amount paid corresponds to 70% of an
employee's average salary, based upon the last 10 years of the
employee's life.

(c) 7% to ISAPRE: This amount covers medical fees, hospitalization and
clinical examinations. This percentage may be voluntarily increased by
the employee according to the employee's contractual agreement with the
employee's ISAPRE. In many instances it may be necessary to pay
additional costs for health care.

Additionally, Chilean law requires the payment of one month salary (up
to a maximum of approximately $2,736.00) for each year (or portion of salary in
excess of six months worked in the last year), worked by the employee when he is
dismissed without cause, subject to a maximum of eleven months (up to a maximum
of $2,736.00 per month, or an aggregate of $30,104.00). When the employee
terminates his or her employment, no compensation is legally required.

Bonuses. Bonuses will be determined by our compensation committee based
on our results of operations and individual performance. Our compensation
committee has not established any specific formula or criteria for determining
bonuses.

Stock options

During fiscal year 1998, there were no option or SAR grants to any
persons, including any of our executive officers or directors.

Incentive and non-qualified stock option plan

On June 1, 1999, the board of directors and a majority of our
shareholders adopted our stock option plan. The purpose of our stock option plan
is to increase our employees', advisors', consultants', and directors'
proprietary interest in Bio-Aqua and Tepual, to align more closely their
interests with the interests of our shareholders, and to enable us to attract
and retain the services of experienced and highly qualified employees and
directors. We have reserved an aggregate of 300,000 shares of class A common
stock under the stock option plan.

Our board of directors, or a committee of our board of directors,
administers and interprets the stock option plan and is authorized to grant
options under the stock option plan to all our eligible employees, including our
officers and directors (whether or not employees). The

<PAGE>

stock option plan provides for the granting of incentive stock options (as
defined in Section 422 of the Internal Revenue Code), non-statutory stock
options and reload options. Options may be granted under the stock option plan
on such terms and at such prices as determined by the board of directors, or a
committee, except that in the case of an incentive stock option granted to a 10%
shareholder, the per share exercise price will not be less than 110% of such
fair market value.

The exercise price for any option under the stock option plan may be
paid in cash, in shares of class A common stock or such other consideration that
is acceptable to the board of directors or any committee. If the exercise price
is paid in whole or in part in class A common stock, such exercise may result in
the issuance of additional options, known as reload options, for the same number
of shares of class A common stock surrendered upon the exercise of the
underlying option. The reload option would be generally subject to the same
provisions and restrictions set forth in the stock option plan with respect to
the underlying option except as varied by the board of directors or any
committee. A reload option enables the optionee to ultimately own the same
number of shares as the optionee would have owned if the optionee had exercised
all options for cash.

Options granted under the stock option plan will be exercisable after
the period or periods specified in the option agreement. Options granted under
the stock option plan are not exercisable after the expiration of five years
from the date of grant and are not transferable other than by will or by the
laws of descent and distribution. The stock option plan also authorizes us to
make loans to optionees to enable them to exercise their options.

As of the effective date, no options have been granted under our stock
option plan. Furthermore, to the extent that any options granted within the
first year are exercised, the underlying shares of class A common stock will be
subject to a 24 month lock-up period commencing on the effective date.

Option exercises and holdings

To date, we have not issued any options or SARs to any persons thus,
during fiscal year 1998, no options or SARs were exercised or unexercised during
fiscal year 1998.

Indemnification of officers and directors

The Florida Business Corporation Act permits the indemnification of
directors, employees, officers and agents of Florida corporations. However, the
provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of non-monetary relief will remain available. Our articles of incorporation and
bylaws provide that we shall indemnify our directors and officers to the fullest
extent permitted by the Florida Business Corporation Act. To the extent
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling us under these
provisions, we have been informed that, in the opinion of the Securities and
Exchange

<PAGE>

Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.

Limitation of liability

Under Florida law, our directors are protected against personal
liability for monetary damages from breaches of their duty of care. As a result,
our directors will not be liable in an action by us or a shareholder for
monetary damages alleging negligence or gross negligence in the performance of
their duties. In such actions, our directors remain liable for monetary damages
for willful misconduct, conscious disregard of our best interest, and for
transactions from which a director derives an improper personal benefit. Our
directors also remain liable under another provision of Florida law which makes
directors personally liable for unlawful distributions and which expressly sets
forth a negligence standard with respect to such liability. The liability of our
directors under federal or applicable state securities laws is also unaffected.

While our directors have protection from awards of monetary damages for
breaches of fiduciary duty, that does not eliminate their fiduciary duty.
Equitable remedies, such as an injunction or rescission based upon a director's
breach of fiduciary duty, are still available.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Upon the effective date, a stock exchange agreement shall be
effectuated where Bio-Aqua receives Flagship Import Export LLC's 90% interest in
Tepual in return for 1,529,910 shares of class B common stock. Also, two stock
purchase agreements shall be simultaneously effectuated where Atik S.A. shall
purchase 169,990 shares of class B common stock of Bio-Aqua and Bio- Aqua shall
purchase Atik S.A.'s 10% in Tepual. Tepual shall then become our majority owned
(99.9%) subsidiary. Due to Chilean law, which requires that a Chilean
corporation be owned by not less than two shareholders, 15 shares of Tepual
stock will continue to be owned by Max Rutman, through his ownership interest in
Flagship Import Export LLC.

The current shareholders of Tepual are Flagship Import Export LLC
(8,573 shares) and Atik (952 shares). Mr. Rutman, through his ownership interest
in Flagship Import Export LLC, will retain a .01% interest (15 shares) in Tepual
in order to comply with Chilean law. Flagship Import Export LLC's sole
shareholder is Max Rutman. Atik's shareholders are Paulina and Andrea Rutman,
daughters of Max Rutman.

On the effective date, we will acquire the rights to the brands and
patents Inual(TM) and Tepual(TM) by acquiring Profeed, Inc., equally owned and
controlled by Max, Andrea and Paulina Rutman, by acquiring all of the issued and
outstanding shares of Profeed, Inc., in consideration of an aggregate of $1.3
million, of which $400,000 will be paid from the proceeds of this offering and
the balance, under the discretion of the board of directors, out of: 5% of the
gross revenues per quarter, but in no event greater than 20% of the net income
per quarter, of the sale of products sold under the Tepual(TM) and Inual(TM)
brands; third party financing; or working capital. We believe that the terms of
these acquisitions are competitive with the going rates.

<PAGE>

Upon the effective date, we will enter into a two year lease, which
lease may be renewed for an additional term of two years, with Andean Financial
Corporation to use a portion of Andean Financial Corporation's facilities in
Boca Raton, Florida, for our corporate U.S. offices. David Mayer, our director,
is the sole shareholder, officer and director of Andean Financial Corporation.
The annual lease amount will be $30,000 payable semi-annually. These terms were
negotiated on an arm's length basis and such terms are competitive with the
going rates.

As of the effective date and unless otherwise agreed upon, we will
enter into a ten year agreement with David Mayer, one of our directors. Under
this agreement, Mr. Mayer shall perform certain services for us, including
advising in the preparation and implementation of our business plan, research,
evaluation and negotiations with strategic partners and alternative sources of
credit and financial opportunities, assisting in conducting market surveys,
assisting in shareholder and investor relations, assisting in the preparation of
reports to shareholders and investors, and acting as our U.S. liaison. In
consideration for these services, Mr. Mayer receives an annual fee of
approximately $30,000.00, or as otherwise agreed upon by the parties, commencing
as of the effective date.

We will receive a minimum of $40,000 monthly from Biosur S.A., a
Chilean corporation in consideration for giving Biosur S.A. an exclusive right
to buy and distribute our Chilean poultry vaccines. Biosur S.A. is 95% owned by
Atik and 5% owned by Max Rutman. The shareholders of Atik are Paulina and Andrea
Rutman. Atik is a shareholder of Bio-Aqua.

Sergio Vivanco, a member of our board of directors upon the effective
date, serves as our Chilean legal counsel and has served as legal counsel for
Tepual since 1998.

We believe that all transactions with our officers, shareholders and
each of our affiliated companies have been made on terms no less favorable to
the Company than those available from unaffiliated parties. In the future, we
intend to handle transactions of a similar nature on terms no less favorable to
Bio-Aqua than those available from unaffiliated parties.

BRIDGE FINANCING

Between April and May 1999, we received loans in the aggregate amount
of $150,000 from six third party accredited investors. These loans are evidenced
by promissory notes bearing interest at 8% per year. We are obligated to repay
five of these loans on the earlier of the closing of this offering or January 1,
2001. A loan from Inversiones Kau Kau, S.A., a Chilean corporation, for $50,000
is due on the earlier of the closing of this offering or October 31, 1999. As
additional consideration, the investors that loaned us $150,000 received an
aggregate of 35,294 shares of class A common stock.

<PAGE>

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the common
stock beneficially owned as of the date of this prospectus by each person who we
know by to own beneficially 5% or more of our common stock; by each of our
executive officers and directors; and by all of our executive officers and
directors as a group. After the offering, the shares held by Mr. Rutman,
Flagship Import Export LLC and Atik, directly or indirectly, will represent an
aggregate 58.8% of the outstanding common stock issued and will represent an
aggregate approximately 87% of our voting interest, since Mr. Rutman, Flagship
Import Export LLC and Atik, as holders of class B common stock, are entitled to
5 votes for each share of class B common stock held. Andrea and Paulina Rutman,
daughters of Max Rutman, are the shareholders of Atik S.A. Max Rutman disclaims
any beneficial ownership of these shares. Unless otherwise set forth, the
mailing addresses for the individuals named below is General Ekdhal 159,
Santiago, Chile.
<TABLE>
<CAPTION>

Number of Shares
of Common Stock Ownership Voting
Beneficially Owned Percentage Percentage
Name and Address of Before and After Before After Before After
Beneficial Owner Offering Offering Offering Offering Offering
- ---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Flagship Import Export LLC 1,529,910 85.7% 53.000% 89.1% 78.2%
Atik, S.A. 169,990 9.5% 5.800% 9.9% 8.8%
Max Rutman 1,530,010(1)(2) 85.7% 53.000% 89.1% 78.2%
Guillermo Quiroz -0- -0- -0- -0- -0-
David Mayer(3) 51,000 2.9% 1.600% .6% .6%
Nestor Lagos -0- -0- -0- -0- -0-
Sergio Vivanco -0- -0- -0- -0- -0-
All executive officers and directors
as a group (5 persons) 1,581,010(1)(2) 88.5% 54.600% 89.7% 78.9%
</TABLE>
- --------------------

(1) Includes 1,529,910 shares of class B common stock issued to Flagship Import
Export LLC.
(2) Includes 100 shares of class B common stock issued to Mr. Rutman as founders
shares.
(3) Mr. Mayer's address is 1900 Glades Road, Suite 351, Boca Raton, Florida
33301.

<PAGE>

DESCRIPTION OF SECURITIES

Common stock

We are currently authorized to issue up to 22,000,000 shares of common
stock.^ 20,000,000 shares are designated as class A common stock and 2,000,000
shares are designated as class B common stock. As of the effective date, there
were 86,294 shares of class A common stock outstanding and 1,700,000 shares of
class B common stock outstanding.

We have^ reserved up to an aggregate of 300,000 shares of class A
common stock under our stock option plan, under which we may issue options
subject to the approval of the representative for a period of twelve months from
the effective date, and to the extent any granted options are exercised, the
underlying shares of class A common stock shall be subject to a 24-month lock-up
period from the effective date.

Upon our liquidation, dissolution or winding up, after payment to our
creditors and holders of any senior securities, including preferred stock, as
applicable, our assets will be divided pro rata on a per share basis among the
holders of the shares of common stock. The common stock has no preemptive or
other subscription rights, and there are no conversion rights or redemption or
sinking fund provisions with respect to such shares. All outstanding shares of
common stock are, and the shares of class A common stock we are offering will
be, upon completion of this offering, fully paid and non-assessable.

Subject to the dividend rights of the holders of any other class of
common stock or preferred stock, if applicable, holders of shares of common
stock are entitled to share, on a ratable basis, such dividends as may be
declared by the board of directors out of funds legally available. We have never
paid dividends on any class of common stock since our inception in March 1999.

Class A common stock and class B common stock

Holders of shares of class A common stock are entitled to one vote per
share on all matters to be voted on by the shareholders. Holders of shares of
class B common stock are entitled to five votes per for each share of class B
common stock on all matters to be voted on by the shareholders. Neither holders
of class A common stock nor class B common stock have cumulative voting rights.
The holders of more than 50% of the voting rights for the election of directors
can elect all of the directors if they choose to do so, and in such event, the
holders of the remaining shares will not be able to elect any directors.
Following this offering, management will have the ability to vote directly or
indirectly 1,581,010 shares of our common stock or approximately 79% of our
voting power, without giving effect to the exercise of the over-allotment option
or the representative's warrants. Our bylaws require that only a majority of the
issued and outstanding voting shares of common stock need be represented to
constitute a quorum and to transact business at a shareholders' meeting.

<PAGE>

Subject to the approval of the representative, for the first 24 months
following the effective date, holders of class B common stock have the right to
transfer or sell shares of class B common stock and/or convert shares of class B
common stock into shares of class A common stock on a "one share for one share"
basis, provided that any shares ^converted, but not sold or transferred, will
only be entitled to one vote per share. Any persons acquiring shares of class B
common stock in a private transaction, either by means of a transfer or sale,
shall be entitled to 5 votes for each one share of class B common stock held.
Each certificate representing shares of class B common stock contains a legend
setting for the restrictions imposed by the representative.

Preferred stock

Our board of directors has the authority to issue up to 5,000,000
shares, par value $.0001, of our preferred stock and to fix the dividend,
liquidation, conversion, redemption and other rights, preferences and
limitations of such shares without any further vote or action of the
shareholders, but subject to the approval of the representative for a period of
one year from the effective date, but which shares shall be subject to a lock-up
period of twenty-four months from the effective date.

Warrants

Our warrants will be issued in registered form in an agreement dated as
of the effective date, between us and American Stock Transfer & Trust Company,
as warrant agent. The following discussion of certain terms and provisions of
our warrants is qualified in its entirety by reference to the warrant agreement.
A form of the certificate representing our warrants which form a part of the
warrant agreement has been filed as an exhibit to the registration statement of
which this prospectus forms a part.

Each of our warrants entitles the registered holder to purchase one
share of class A common stock. Our warrants are exercisable at a price of $7.30
subject to certain adjustments. Our warrants are entitled to the benefit of
adjustments in their exercise prices and in the number of shares of class A
common stock or other securities deliverable upon their exercise ^in the event
of a stock dividend, stock split, reclassification, reorganization,
consolidation or merger.

Our warrants may be exercised, in whole or in part, for a period of
five years from the effective date, unless we extend such period. After the
expiration date, warrant holders shall have no further rights.

Warrant holders do not have any voting or any other rights as our
shareholders. Our warrants will not be redeemable for a period of twelve months
following the effective date, at which time our warrants may be redeemed by us
for $0.05 per warrant on not less than thirty days prior written notice, subject
to exercise by the warrant holder, if the closing bid price for our class A
common stock has been at least $9.00 per share for thirty consecutive trading
days. If we exercises our right to redeem warrants, such warrants may still be
exercised by the holder

<PAGE>

until the close of business on the day immediately before the date fixed for
redemption. If any warrant is not exercised by such time, it will not be
exercisable, and the holder will only be entitled to the redemption price.

We may not redeem our warrants at any time that a current registration
statement under the Securities Act covering the shares of class A common stock
issuable upon exercise of our warrants is not in effect. The issuance of such
shares to the holder must be registered, qualified or exempt under the laws of
the state in which the holder resides. If required, we will file a new
registration statement with the Securities and Exchange Commission with respect
to the securities underlying our warrants prior to the exercise of such warrants
and will deliver a prospectus with respect to such securities to all holders of
our warrants as required by Section 10(a)(3) of the Securities Act.

Certain Florida legislation

Florida has enacted legislation that may deter or frustrate takeovers
of Florida corporations. The provisions of the Florida Control Share Act,
relating to control share acquisitions, provide that shares acquired in excess
of certain specified thresholds will not possess any voting rights unless such
voting rights are approved by a majority of the board of directors or a majority
of a corporation's disinterested shareholders. The provisions of the Florida
Control Share Act apply to us. The provisions of the Florida Affiliated
Transaction Act, relating to affiliated transactions do not apply to us because
we has opted out of such act.

Our articles of incorporation and bylaws also authorize us to indemnify
our directors, officers, employees and agents. In addition, our articles of
incorporation and Florida law presently limit the personal liability of
corporate directors for monetary damages, except where the directors breach
their fiduciary duties and such breach constitutes or includes certain
violations of criminal law, a transaction from which the directors derived an
improper personal benefit, certain unlawful distributions or certain other
reckless, wanton or willful acts or misconduct.

Anti-takeover effects of certain provisions of the our articles of incorporation
and bylaws.

Certain provisions of our articles of incorporation and bylaws
described below may delay, defer or prevent a tender offer or takeover attempt,
including attempts that might result in a premium being paid over the market
price for the shares held by shareholders. Such provisions could result in us
being less attractive to a potential acquiror or in shareholders receiving less
for their shares in the event of a take-over attempt.

Class B common stock.

Holders of class B common stock are entitled to five votes for each
share of class B common stock held. Upon the effective date, Max Rutman will own
or control, directly or indirectly, approximately 53% of the common stock and
will have the right to cast 78% of the

<PAGE>

votes. The class B common stock could be utilized under certain circumstances,
as a method of discouraging, delaying or preventing a change in our control.

Preferred shares

The board of directors is empowered, without shareholder approval, to
issue preferred stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the voting power or the rights of the
holders of common stock. In the event of issuance, the preferred stock could be
utilized under certain circumstances, as a method of discouraging, delaying or
preventing a change in our control. Although we have no present intention to
issue any shares of our preferred stock, there can be no assurance that we will
not do so in the future.

Special meeting of shareholders.

Our articles of incorporation and bylaws provide that special meetings
of our shareholders may be called only by a majority of the board of directors,
our chief executive officer or holders of not less than ten percent of our
outstanding voting stock.

Transfer Agent and Registrar

The transfer agent, warrant agent, and registrar for our class A common
stock and our warrants is American Stock Transfer & Trust Company, 40 Wall
Street, New York, New York 10005.

SHARES ELIGIBLE FOR FUTURE SALE

Upon the consummation of this offering, we will have 1,286,294 shares
of class A common stock outstanding,1,466,294 shares if the over-allotment
option is exercised in full but without giving effect to the exercise of our
warrants and 1,700,000 shares of class B common stock outstanding, of which
35,294 shares of class A common stock and all of the class B common stock
outstanding are restricted securities as the term is defined under the
Securities Act. Prior to the consummation of this offering our class A common
stock was held by seven entities and our class B stock was held by three
entities.

The 1,200,000 shares of class A common stock sold in this offering,
1,380,000 shares if the over-allotment option is exercised in full will be
freely tradeable without restriction or further registration under the
Securities Act, except for any shares purchased by our affiliate in general, a
person who has a control relationship with us, which shares will be subject to
the resale limitations of Rule 144 under the Securities Act. An additional
1,200,000 shares of class A common stock have been registered,1,380,000 shares
if the over-allotment option is exercised in full, and reserved for issuance
upon exercise of our warrants.

In general, Rule 144 promulgated under the Securities Act permits a
shareholder of ours who has beneficially owned restricted shares of any class of
common stock for at least one year

<PAGE>

to sell without registration, within a three-month period, such number of shares
not exceeding the greater of one percent of the then outstanding shares of any
class of common stock or, generally, the average weekly trading volume during
the four calendar weeks preceding the sale, assuming our compliance with certain
reporting requirements of Rule 144. Furthermore, if the restricted shares of any
class of common stock is held for at least two years by a person not affiliated
with us (in general, a person who is not our executive officer, director or
principal shareholder during the three month period prior to resale), such
restricted shares can be sold without any volume limitation. Since we were not
organized until March 18, 1999, the 51,000 shares of class A common stock issued
on March 18, 1999, will not be eligible to be resold until March 18, 2000,
subject to the lock-up provisions described below. Any sales of shares under
Rule 144 may have a depressive effect on the price of our class A common stock.

Notwithstanding the foregoing, all of the holders of common stock prior
to the closing of this offering, including Flagship Import Export LLC and Atik,
who will acquire 1,699,900 shares of our class B common stock as of the
effective date, have agreed not to, directly or indirectly, offer to sell,
contract to sell, sell, transfer, assign, encumber, grant an option to purchase
or otherwise dispose of any beneficial interest in such securities for a period
of 24 months from the closing of this offering, with the exception of 35,294
shares of class A common stock issued in connection with the bridge financing,
which are subject only to a six month lock-up period, without the prior written
consent of the representative. Additionally, holders of any securities issued by
us for a period of twelve months from the effective date, other than those
securities offered, the representative's warrants and the underlying securities
will also be subject to a 24- month lock-up period from the date of issuance. An
appropriate legend referring to these restrictions will be marked on the face of
the certificates representing all such securities.

UNDERWRITING

Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representative, Nutmeg Securities, Ltd.
have severally agreed to purchase from us and we have agreed to sell to the
underwriters, the respective number of shares of class A common stock and
warrants set forth opposite their respective names at the initial public
offering price, less the underwriting discounts set forth on the cover page of
this prospectus:
<TABLE>
<CAPTION>

Underwriters Number of Shares Number of Warrants
------------ ---------------- ------------------
<S> <C> <C>
Nutmeg Securities, Ltd.
Emerson Bennett & Associates, Inc.

TOTAL 1,200,000 1,200,000
</TABLE>

The underwriting agreement provides that the obligations of the
underwriters to pay for and accept delivery of the shares of class A common
stock and our warrants are subject to approval of certain legal matters by
counsel to the underwriter and to certain other events. The underwriters are
obligated to purchase all shares of common stock and ^warrants we are offering

<PAGE>

(other than those covered by the over-allotment option described below), if any
such shares are purchased.

We have been advised by the representative of the underwriters that the
underwriters propose initially to offer the shares of common stock and warrants
to the public at the offering price set forth on the cover page of this
prospectus and through members of the NASD. The representative has also advised
us that the underwriters may allow a concession, not in excess of $___ per share
of class A common stock and $____ per warrant, in their discretion, to certain
domestic dealers who are members of the NASD and which domestic dealers agree to
sell our securities in conformity with the NASD Conduct Rules. No NASD member
will receive 10% or more of the net proceeds of this offering. The initial
public offering price and concessions will not be changed by the representative
until after the offering has been completed.

At the closing of the sale of our securities that we are offering, we
will sell to the representative, the representative's warrants, for nominal
consideration, entitling the representative to purchase an aggregate of 120,000
shares of class A common stock and 120,000 warrants, similar but not identical
to our warrants. The representative's warrants shall be non-exercisable and
non-transferable, other than a transfer to affiliates of the representative or
members of the selling group for a period of twelve months following the
effective date. The representative's warrants and the underlying securities
shall contain anti-dilution provisions and are redeemable. The representative's
warrants will be exercisable for a period of four years commencing one year
following the effective date and, if the representative's warrants are not
exercised during such period, they shall, by their own terms, automatically
expire.

The exercise price of each representative warrant shall be:

o $9.28 per share of class A common stock,

o $.206 per warrant, and

o $12.045 per share of class A common stock for each share
underlying the warrant,

which are 165% of the public offering price of our class A common stock, our
warrants and the shares of class A common stock underlying our warrants.

In addition, we have granted to the representative a single demand
registration right and unlimited piggy back registration rights with respect to
our class A common stock and our warrants underlying the representative's
warrants for a period commencing at the beginning of the second year and
concluding at the end of the fifth year following the effective date.

The warrants will not be redeemable for a period of twelve months
following the effective date, at which time the warrants may be redeemed by us
for $0.05 per warrant on not less than thirty days prior written notice, subject
to exercise by the representative, if the closing bid price for our class A
common stock has been at least $9.00 per share for thirty consecutive trading
days. If we exercise our right to redeem warrants, the warrants may still be
exercised by the representative until the close of business on the day
immediately before the date fixed for

<PAGE>

redemption. If any warrant called for redemption is not exercised by such time,
it will not be exercisable, and the representative will be entitled only to the
redemption price.

We may not redeem the warrants at any time that a current registration
statement under the Securities Act covering the shares of class A common stock
issuable upon exercise of our warrants is not in effect. The issuance of such
shares to the representative must be registered, qualified or exempt under the
laws of the state in which the representative resides. If required, we will file
a new registration statement with the Securities and Exchange Commission with
respect to the securities underlying the warrants prior to the exercise of such
warrants and will deliver a prospectus with respect to such securities to the
representative as required by Section 10(a)(3) of the Securities Act.

Under Rule 2710(a)(7)(A) of the NASD Conduct Rules, the warrants
acquired by the representative will be restricted from sale, transfer,
assignment or hypothecation for a period of one year from the effective date of
this offering, except to officers or partners (not directors) of the
representative and members of the selling group and their officers or partners.

In addition to the above, we have granted to the representative an
option exercisable for 45 days from the effective date, to purchase up to an
additional 180,000 shares of class A common stock and an additional 180,000
warrants at the initial public offering price, less the underwriting discount
set forth on the cover page of this prospectus. The underwriters, or the
representative individually at its option, may exercise this option solely to
cover over-allotments in the sale of our securities being offered by this
prospectus.

We have agreed to pay the representative a warrant solicitation fee of
4% of the difference between the initial offering price and the aggregate
exercise price of our warrants. The fee will only be paid upon the
representative's compliance with applicable law and other specified obligations.
The warrant solicitation fee may only be received by brokers we designate in
writing to the representative. The fee will not be paid before 12 months after
the effective date of the offering.

Prior to this offering, there has been no public market for our
securities and there can be no assurances that an active public market for our
securities will be developed or, if developed, sustained after this offering.
The initial public offering price of the class A common stock we are offering
and the exercise price and terms of our warrants has been arbitrarily determined
by negotiations between us and the representative and may bear no relationship
to our current earnings, book value, net worth or other established valuation
criteria. The factors considered in determining the initial public offering
prices included:

o an evaluation by our management and the representative of the
history of and prospects for the industry in which we
compete,
o an assessment of management,
o our prospects,
o our capital structure, and
o certain other factors deemed relevant.

<PAGE>

The initial public offering prices do not necessarily bear any
relationship to our assets, book value, earnings or other established criterion
of value. Such prices are subject to change as a result of market conditions and
other factors, and no assurance can be given that a public market for the shares
of class A common stock and/or warrants will develop after the close of the
public offering, or if a public market in fact develops, that such public market
will be sustained, or that the shares of class A common stock and/or warrants
can be resold at any time at the initial public offering prices or any other
prices.

We have agreed to pay our underwriters an underwriting discount as a
commission of ten percent of the gross proceeds of this offering, including the
gross proceeds from the sale of the over-allotment option, if exercised. We have
also agreed to reimburse the representative on a non-accountable basis for their
expenses in the amount of three percent of the gross proceeds of this offering,
including proceeds from any securities purchased under the over-allotment
option. The representative's expenses in excess of the non-accountable expense
allowance will be paid by the representative. To the extent that the expenses of
the representative are less than the amount of the non-accountable expense
allowance received, such excess shall be deemed to be additional compensation to
the representative.

We have agreed to engage Nutmeg Securities, Ltd. and Emerson Bennett &
Associates, Inc. as consultants for a period of two years from the closing of
this offering, at a fee of $60,000 per annum payable to the representative,
commencing on the effective date and continuing for a period of two years. As a
consultant, Nutmeg Securities, Ltd. and Emerson Bennett & Associates, Inc., will
provide us with:

o general financial consulting services and advice pertaining
to our business affairs;

o assistance in developing, studying and evaluating financing
and capital structure;

o mergers and acquisitions activity and corporate financing
proposals;

o prepare reports and studies; and

o assist in negotiations and discussions pertaining to the
above.

We have agreed to indemnify the underwriters against any costs or
liabilities incurred by the representative by reasons of misstatements or
omissions to state material facts in connection with statements made in the
registration statement or the prospectus. The representative has, in turn agreed
to indemnify us against any liabilities by reason of misstatements or omissions
to state material facts in connection with the statements made in the
prospectus, based on information relating to the representative and furnished in
writing by the representative. To the extent that this indemnification may
purport to provide exculpation from possible liabilities arising from the
federal securities laws, in the opinion of the Securities and Exchange
Commission, such indemnification is contrary to public policy and therefore
unenforceable.

<PAGE>

Shares of common stock held by our existing shareholders immediately
prior to the effective date and any other securities issued for a period of
twelve months from the effective date (other than those offered in this
prospectus, including the underlying securities, the representative's warrants
and the underlying the securities), are subject to a 24-month lock-up period,
with the exception of 35,294 shares of class A common stock issued in connection
with bridge financing in the principal amount of $150,000, which are subject
only to a six month lockup period. The lock-up periods begin on the later of the
date of issuance or the effective date, and are subject to early termination at
the sole discretion of the representative. An appropriate legend referring to
these restrictions will be marked on the face of the certificates representing
all such securities. Moreover, for a period of twelve months from the effective
date, we will not sell or otherwise dispose of any securities without the prior
written consent of the representative.

The representative of the underwriters shall have the right to
designate of a member of the board of directors, or at the representative's
option, to designate one individual to attend the meetings of our board of
directors for a period of three years after the effective date.

The foregoing is a summary of the principal terms of the agreement
described above and does not purport to be complete. Reference is made to the
underwriting agreement which is filed as an exhibit to the registration
statement.

Certain persons participating in this offering may engage in
transactions that stabilize, maintain or otherwise affect the price of our
common stock and warrants, including stabilizing transactions in accordance with
Rule 104 of Regulation M. Under Regulation M persons may bid for or purchase of
common stock for the purpose of stabilizing its market price.

LEGAL MATTERS

Legal matters in connection with our class A common stock and our
warrants being offered in this prospectus will be passed upon for us by Atlas,
Pearlman, Trop & Borkson, P.A., Fort Lauderdale, Florida. Affiliates of the firm
own 1,176 shares of our class A common stock. We are being represented as to
matters of Chilean law by the law firm of Abud, Vivanco and Vergara, Santiago,
Chile. Certain legal matters will be passed upon for the underwriters by the law
firm of Sacher, Zelman, Paul, Beiley & Van Sant, P.A., Miami, Florida. Atlas,
Pearlman, Trop & Borkson, P.A. has from time to time provided legal
representation to Emerson Bennett & Associates, one of the underwriters.

EXPERTS

Our balance sheets, including our subsidiary, Tepual, as of December
31, 1998 and 1997, and the related statements of income, stockholders' equity
and cash flows for the years then ended, included in this prospectus have been
so included in reliance upon the report of Spear, Safer, Harmon & Co., P.A.,
independent accountants, given on authority of Spear, Safer, Harmon & Co., P.A.
as experts in auditing and accounting.

<PAGE>

BIO-AQUA SYSTEMS, INC.

INDEX TO FINANCIAL STATEMENTS

Page
----

Independent Auditors' Report.................................... F-2

Combined Balance Sheets......................................... F-3, F-4

Combined Statements of Income................................... F-5

Combined Statements of Stockholders' Equity..................... F-6

Combined Statements of Cash Flows............................... F-7, F-8

Notes to Combined Financial Statements.......................... F-9

F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT
----------------------------

Board of Directors
Bio-Aqua Systems, Inc.
Boca Raton, Florida

We have audited the accompanying combined balance sheets of Bio-Aqua Systems,
Inc. (the "Company") as of December 31, 1998 and 1997, and the related combined
statements of income, stockholders' equity and cash flows for the years ended
December 31, 1998 and 1997. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined 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 audits to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined 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.

The combined financial statements give retroactive effect to the tax free
exchange of shares between the Company and Tepual, S.A., which will be
effectuated at the time of the closing of a public offering of the Company's
stock, which has been accounted for as a combination of entities under common
control as described in Note 1 to the combined financial statements. Generally
accepted accounting principles prescribe giving effect to a consummated business
combination in financial statements that do not include the date of consummation
as if the business combination occurred for the periods presented. In addition,
they will become the historical combined financial statements of the Company
after financial statements covering the date of consummation of the business are
issued.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Bio-Aqua Systems,
Inc. as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles applicable after financial statements are issued for a
period which includes the date of consummation of the business combination.

Miami, Florida
February 26, 1999

F-2

BIO-AQUA SYSTEMS, INC.

Combined Balance Sheets

A S S E T S

June 30, December 31,
--------------------- --------------------------------------
1999 1998 1997
--------------------- ----------------- ------------------
(Unaudited)
<S> <C> <C> <C>
Current Assets:
Cash $ 131,695 $ 136,489 $ 29,168
Accounts receivable 2,886,114 2,981,674 1,583,271
Due from related parties (Note 2) 5,865 - 250,672
Other receivables - 69,082 65,646
Inventory 793,086 761,869 297,946
Income taxes receivable (Note 3) 37,192 52,231 134,949
Offering costs 205,127 - -
Other current assets (Note 4) 664,220 183,325 249,278
-------------- -------------- ----------------

Total Current Assets 4,723,299 4,184,670 2,610,930
-------------- -------------- ----------------

Property and Equipment, net (Note 5) 875,948 984,676 1,393,603
-------------- -------------- ----------------

Other assets (Note 6) 867,032 524,645 84,624
-------------- -------------- ----------------

$ 6,466,279 $ 5,693,991 $ 4,089,157
============== ============== ================

</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-3

BIO-AQUA SYSTEMS, INC.

Combined Balance Sheets (Continued)

LIABILITIES AND STOCKHOLDERS' EQUITY

June 30, December 31,
--------------------- --------------------------------------
1999 1998 1997
--------------------- ----------------- ------------------
(Unaudited)
<S> <C> <C> <C>
Current Liabilities:
Accounts payable $ 1,300,445 $ 990,749 $ 294,023
Obligations with banks: (Note 7)
Lines-of-credit 2,151,509 1,525,968 1,193,338
Current portion 135,547 158,603 106,320
Notes payable (Note 8) 100,864 124,775 -
Bridge loan payable 150,000 - -
Accrued expenses and other current
liabilities (Note 9) 251,472 399,638 399,836
Due to stockholder 1,300,000 - -
-------------- -------------- ---------------

Total Current Liabilities 5,389,837 3,199,733 1,993,517
-------------- -------------- ----------------

Long-Term Liabilities:
Obligations with banks, excluding
current portion (Note 7) 408,642 478,813 355,014
-------------- -------------- ----------------

Stockholders' Equity:
Class A common stock, $.0001 par value;
20,000,000 shares authorized, 86,294,
0, and 0 shares issued and outstanding at June 30, 1999,
December 31, 1998 and 1997, respectively 9 - -
Class B common stock, $.0001 par value;
2,000,000 shares authorized; 1,700,000
shares issued and outstanding 170 170 170
Preferred stock, $.0001 par value;
5,000,000 shares authorized; no shares
issued and outstanding - - -
Additional paid-in capital 529,444 411,331 411,331

Retained earnings 349,541 1,662,100 1,422,127

Cumulative translation adjustment (211,364) (58,156) (93,002)
-------------- -------------- ----------------

Total Stockholders' Equity 667,800 2,015,445 1,740,626
-------------- -------------- ----------------

$ 6,466,279 $ 5,693,991 $ 4,089,157
============== ============== ================

</TABLE>
The accompanying notes are an integral part of these combined financial
statements.

F-4

BIO-AQUA SYSTEMS, INC.

Combined Statements of Income

Six Months Ended Years Ended
June 30, December 31,
------------------------------------ ----------------------------------
1999 1998 1998 1997
------------------ --------------- ----------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues $ 2,963,040 $ 3,201,998 $ 6,873,512 $ 5,238,299
Cost of Operations 1,968,756 2,393,983 4,853,553 3,571,678
-------------- -------------- -------------- -------------

Gross Profit 994,284 808,015 2,019,959 1,666,621

General and Administrative Expenses 946,774 741,947 1,555,661 1,516,974
-------------- -------------- -------------- -------------
Income from Operations 47,510 66,068 464,298 149,647
-------------- -------------- -------------- -------------

Other Income (Expenses):
Other, net 153,618 33,312 24,060 203,353
Interest expense (213,687) (122,445) (280,266) (231,805)
Loss on investment in related parties - - (23,082) (64,768)
Gain on sale of property and equipment - - 54,963 -
-------------- -------------- -------------- ------------

(60,069) (89,133) (224,325) (93,220)
-------------- -------------- -------------- -------------

Net Income (Loss) $ (12,559) $ (23,065) $ 239,973 $ 56,427
====== ============== ============== ============== =============

Net Income (Loss) Per Common Share $ (.01) $ (.01) $ 0.14 $ 0.03
====== ============== ============== ============== =============

Weighted Average Common
Shares Outstanding 1,739,882 1,700,000 1,700,000 1,700,000
============== ============== ============== =============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.

F-5

BIO-AQUA SYSTEMS, INC.
Combined Statements of Stockholders' Equity

Class A Class B Additional Cumulative Total
Common Common Paid-in Retained Translation Stockholders'
Stock Stock Capital Earnings Adjustment Equity
---------- ---------- --------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>

Balance at December 31, 1996 $ - $ 170 $ 411,331 $ 1,365,700 $ (403,628) $ 1,373,573

Net income - - - 56,427 - 56,427

Translation adjustment - - - - 310,626 310,626
----------- ---------- -------------- ------------ ------------- --------------

Balance at December 31, 1997 - 170 411,331 1,422,127 (93,002) 1,740,626

Net income - - - 239,973 - 239,973

Translation adjustment - - - - 34,846 34,846
----------- ---------- -------------- ------------ ------------- --------------

Balance at December 31, 1998 - 170 411,331 1,662,100 (58,156) 2,015,445

Issuance of common stock 9 - 118,113 - - 118,122

Net income (loss) (unaudited) - - - (12,559) - (12,559)
======

Distribution to stockholder (unaudited) - - - (1,300,000) - (1,300,000)

Translation adjustment (unaudited) - - - - (153,208) (153,208)
----------- ---------- -------------- ------------ ------------- --------------

Balance at June 30, 1999 (unaudited) $ 9 $ 170 $ 529,444 $ 349,541 $ (211,364) $ 667,800
=========== ========== ============== ============ ============= ==============

</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-6

BIO-AQUA SYSTEMS, INC.

Combined Statements of Cash Flows

Net income (loss) $ (12,559) $ (23,065) $ 239,973 $ 56,427
======

Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:

Depreciation and amortization 117,777 132,460 227,732 283,588

Loss on investment in related party - - 23,082 64,768
Gain on sale of property and
equipment - - (54,963) -
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable 95,560 (359,496) (1,398,403) 1,322,729
Other receivables 69,082 (196,987) (3,436) 59,354
Inventory (31,217) (167,913) (463,923) 749,054
Income taxes receivable 15,039 71,109 82,718 4,051
Other current assets (375,013) 242,640 65,953 (62,278)
Other assets (342,387) (42,692) (463,103) (6,392)
Increase (decrease) in:
Accounts payable 309,696 50,973 696,726 (502,977)
Accrued expenses and other
current (148,166) 106,864 90,218 (1,868,164)
------------- ------------- ------------- --------------
liabilities

Net Cash (Used in) Provided by
Operating Activities (302,188) (186,107) (957,426) 100,160
------------- ------------- ------------- --------------

Cash Flows from Investing Activities:
Acquisition of property and equipment (9,049) (8,519) (195,761) (28,618)
Proceeds from sale of property
and equipment - - 431,919 -
------------- ------------- ------------- -------------

Net Cash (Used in) Provided by
Investing Activities (9,049) (8,519) 236,158 (28,618)
------------- ------------- ------------- --------------

</TABLE>
The accompanying notes are an integral part of these combined financial
statements.

F-7

BIO-AQUA SYSTEMS, INC.

Combined Statements of Cash Flows (Continued)

Six Months Ended Years Ended
June 30, December 31,
------------------------------------ ------------------------------------
1999 1998 1998 1997
------------------ ---------------- ------------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash Flows from Financing Activities:
Net proceeds (payments) of
lines-of-credit $ 625,541 $ (61,269) $ 332,630 $ 90,338
Net proceeds from related parties (5,865) 95,679 250,672 54,328
Proceeds from bridge loan 150,000 - - -
Costs of public offering (192,887) - - -
Proceeds of long-term debt - - 236,161 -
Payments of long-term debt (117,138) (116,303) (25,720) (500,666)
-------------- ------------- ------------- --------------

Net Cash Provided by (Used in)
Financing Activities 459,651 (81,893) 793,743 (356,000)
-------------- ------------- ------------- --------------

Effect of Exchange Rate Changes
on Cash (153,208) 277,236 34,846 310,626
-------------- ------------- ------------- --------------

(Decrease) Increase in Cash (4,794) 717 107,321 26,168

Cash - Beginning of Period 136,489 29,168 29,168 3,000
-------------- ------------- ------------- --------------

Cash - End of Period $ 131,695 $ 29,885 $ 136,489 $ 29,168
============== ============= ============= ==============

Supplemental Disclosure of Cash
Flow Information:
Cash paid during the year for interest $ 202,868 $ 122,445 $ 280,266 $ 231,805

Supplemental Disclosure of Non-Cash
Financing Activities:
Issuance of Class A common stock
in connection with offering 118,122 - - -

</TABLE>
The accompanying notes are an integral part of these combined financial
statements.

F-8

<PAGE>

BIO-AQUA SYSTEMS, INC.

Notes to Combined Financial Statements

(Unaudited) With Respect to June 30, 1999 and 1998

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization - Bio-Aqua Systems, Inc., (the "Company"), is a
Florida corporation incorporated in March 1999 as a holding
company to acquire Tepual, S.A., a Chilean corporation. Tepual,
S.A. is in the business of researching and developing of
production and control systems related to animal nutrition. The
Company provides brokerage services and technical advice in the
production of meals for feed for aquaculture, poultry and cattle
farming. In addition, the Company researches poultry vaccines.

Basis of Presentation - Subsequent to December 31, 1998, the
Company entered into an agreement to acquire 99.9% of the issued
and outstanding common stock of Tepual, S.A., in exchange for
1,700,000 shares of Class B common stock which will be effective
as of the closing of the initial public offering of the Company's
stock. (See Note 11 for more details.) In order to comply with
Chilean law and the requirements of the Central Bank of Chile for
foreign investments, two stock purchase agreements will be
effectuated at the time of the closing of the initial public
offering of the Company's stock whereby (i) Atik, S.A. ("Atik"), a
Chilean corporation and Flagship Import Export LLC ("Flagship"), a
Nevada limited liability company, shall purchase 1,699,900 shares
of Class B common stock and, (ii) the Company shall purchase Atik
and Flagship's 99.9% interest in Tepual, S.A. and Tepual, S.A.
shall then become a majority owned (99.9%) subsidiary of the
Company. The substance of this transaction is an exchange of
shares between the Company and Atik and Flagship which is
accounted for as a combination of entities under common control.
Generally accepted accounting principles prescribe giving effect
to a consummated business combination in financial statements that
do not include the date of consummation as if the business
combination occurred at the beginning of the first period
presented. Accordingly, the combined financial statements for all
periods presented have been prepared assuming the acquisition by
the Company took place on January 1, 1997, that the Company was
incorporated on that date, and the exchange of shares was
effectuated at that time. Because the Company was not formed until
March 1999, historical and proforma financial statements are not
included herein because the assets, liabilities, revenues and
expenses and net income of Bio-Aqua Systems, Inc. are not material
to the information presented. These financial statements will
become the historical combined financial statements of the Company
after financial statements covering the date of consummation of
the business combination are issued.

Functional Currency - The financial statements have been
translated in accordance with the provisions set forth in
Statement of Financial Accounting Standards No. 52, from Chilean
pesos (the functional currency) into US dollars (the reporting
currency). The exchange rate used at June 30, 1999, December 31,
1998 and 1997, respectively, was 518.90 pesos to U.S. $1, 473.77
pesos to U.S. $1 and 439.18 pesos to U.S. $1. The weighted average
exchange rate used in June 30, 1999 and 1998, December 31, 1998
and 1997 was 485.72 pesos to U.S. $1, 443.26 pesos to U.S. $1,
465.98 pesos to U.S. $1 and 420.69 pesos to U.S. $1, respectively.

F-9
<PAGE>

BIO-AQUA SYSTEMS, INC.

Notes to Combined Financial Statements (Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Revenue Recognition - The Company earns revenues principally from
the sale of different types of meals (fish, feather, and krill)
used in the production of animal feed as well as its automatic
fish meal processing control system. The Company also researches
vaccines and other types of meals for its customers. In the case
of meal sales, revenue is recognized at the point of sale of goods
to its customers. Revenue associated with research services are
recognized when the services are performed.

Revenue from contracts to install automatic control devices are
recognized upon completion of the installation.

Royalty income in included in other income and is recognized on
the basis of terms specified in contractual agreements, normally
as earned.

Concentrations of Credit Risk - Financial instruments which
potentially subject the Company to concentrations of credit risk
consist principally of cash and trade receivables. The Company
places its cash with high credit quality financial institutions. A
significant portion of the Company's sales are to several large
customers and, as such, the Company is directly affected by the
well-being of those customers. However, the credit risk associated
with trade receivables is mitigated due to the Company's customer
base and ongoing control procedures which monitor the credit
worthiness of customers. Historically, the Company has not
experienced losses on trade receivables. Therefore, no allowance
for bad debts is deemed necessary. At June 30, 1999, December 31,
1998 and 1997, approximately 22%, 20% and 20%, respectively, of
the Company's consolidated accounts receivable was attributable to
one customer.

Inventory - Inventory consists primarily of fish, feather, and
krill meal and are stated at the lower of cost or market. Cost is
determined using the weighted average method.

Property and Equipment - Property and equipment are recorded at
cost. Depreciation is provided on the straight-line method based
on the estimated useful life of the asset ranging from three to
ten years.

Software Development Cost - The Company develops and manufacturers
a computerized process to facilitate the production of the highest
nutrient level in fish meal. In accordance with Statement of
Financial Accounting Standards No. 86, "Accounting for the Costs
of Computer Software to be Sold, Leased or Otherwise Marketed,"
the Company expensed all research and development costs associated
with the development of software products used in the processing
of fish meal. Initial costs were charged to operations as research
prior to the development of a detailed program design or a working
model. Costs incurred subsequent to the development of a working
model were immaterial and thus not capitalized. Research and
development costs of approximately $359,000, $581,000 and $564,000
for the six months ending June 30, 1999 and the years ending
December 31, 1998 and 1997, respectively, are charged to
operations and included in general and administrative expenses.

F-10

<PAGE>

BIO-AQUA SYSTEMS, INC.

Notes to Combined Financial Statements (Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Income Taxes - In February 1992, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
No. 109 ("SFAS 109"), Accounting for Income Taxes. Under the asset
and liability method of SFAS 109, deferred tax assets and
liabilities are recognized for the future income tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Under SFAS 109, the effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.

Foreign Operations - As the Company operates almost exclusively
outside of the United States, one must be aware of the potential
for both economic and political change in the business
environment, different than that of the United States. The success
of the Company depends on the success of its foreign operations
and a stable economic and political environment of those
countries.

Earnings Per Common Share - Earnings per common share are based on
the weighted average number of shares outstanding of 1,739,882 and
1,700,000 for the periods ended June 30, 1999 and 1998 and
1,700,000 for the years ended December 31, 1998 and 1997, giving
effect to common stock equivalents, none of which existed in the
aforementioned periods.

Recent Pronouncements - In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
No. 128 "Earnings per Share" and Statement of Financial Accounting
Standards No. 129 "Disclosure of Information About Capital
Structure" which are both effective for fiscal years beginning
after December 15, 1997. SFAS No. 128 simplifies the current
required calculation of earnings per share ("EPS") under APB No.
15, "Earnings per Share", by replacing the existing calculation of
primary EPS with a basic EPS calculation. It requires a dual
presentation for complex capital structures of basic and diluted
EPS on the face of the income statement and requires a
reconciliation of basic EPS factors to diluted EPS factors. SFAS
No. 129 requires disclosure of the Company's capital structure.
There was no material impact to the Company's EPS calculation or
financial statement presentation and disclosure due to the
adoption of SFAS No. 128 and SFAS No. 129.

In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 "Reporting
Comprehensive Income" which is effective for fiscal years
beginning after December 15, 1997. SFAS No. 130 establishes
standards for the reporting and display of comprehensive income
and its components in a full set of general purpose financial
statements which requires the Company to (i) classify items of
other comprehensive income by their nature in a financial
statement and (ii) display the accumulated balance of other
comprehensive income separately from retained earnings and
additional paid-in-capital in the equity section of the balance
sheet. There was no material impact to the Company's financial
reporting or presentation due to the adoption of SFAS No. 130.

F-11
<PAGE>

BIO-AQUA SYSTEMS, INC.

Notes to Combined Financial Statements (Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Also in June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131 "Disclosures
About Segments of an Enterprise and Related Information" which is
effective for fiscal years beginning after December 15, 1997. SFAS
No. 131 supersedes SFAS No. 14, "Financial Reporting for Segments
of a Business Enterprise", and amends SFAS No. 94, "Consolidation
of All Majority-Owned Subsidiaries". SFAS No. 131 requires annual
financial statements to disclose information about products and
services, geographic areas, and major customers based on a
management approach, along with interim reports. The management
approach requires disclosing financial and descriptive information
about an enterprise's reportable operating segments based on
reporting information the way management organizes the segments
for making business decisions and assessing performance. It also
eliminates the requirement to disclose additional information
about subsidiaries that were not consolidated. This new management
approach may result in more information being disclosed than
presently practiced and require new interim information not
previously presented. There was no material impact to the
Company's financial reporting or presentation due to the adoption
of SFAS No. 131.

In February 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132 "Employers'
Disclosures About Pensions and Other Postretirement Benefits - An
Amendment of FASB Statements No. 87, 88, and 106" which is
effective for fiscal years beginning after December 15, 1997. SFAS
No. 132 revises only the employers' disclosures about pension and
other postretirement benefit plans; it does not change the
measurement or recognition of such plans. Since the Company does
not have such plans, there is no impact to the Company's financial
reporting or presentation due to the adoption of SFAS No. 132.

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 of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

Interim Financial Statements - The accompanying interim unaudited
combined financial information has been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although management
believes that the disclosures are adequate to make the information
presented not misleading. In the opinion of management, all
adjustments and eliminations consisting only of normal recurring
adjustments, necessary to present fairly the combined financial
position of the Company as of June 30, 1999 and the combined
results of its operations and cash flows for the six months ended
June 30, 1999 and 1998, have been included. The results of
operations for such interim period are not necessarily indicative
of the results for the full year.

F-12
<PAGE>

BIO-AQUA SYSTEMS, INC.

Notes to Combined Financial Statements (Continued)

NOTE 2 - RELATED PARTY TRANSACTIONS

During 1998 and 1997, the Company earned royalty income of
approximately $9,000 and $57,000, respectively from an affiliated
company. As of December 31, 1997, $123,186 was due from this
affiliate. No amounts were due as of June 30, 1999 and 1998 and
December 31, 1998.

Also during 1998 and 1997, the Company made advances to other
affiliated companies. As of June 30, 1999, December 31, 1998 and
1997, $5,865, $-0- and $250,672, respectively, were due from these
affiliates.

NOTE 3 - INCOME TAXES

In Chile, the Company is subject to income taxes at a statutory
rate of 15% of taxable income, as defined. For the period ended
June 30, 1999 and the years ended December 31, 1998 and 1997, the
Company had no taxable income due to various credits and
incentives provided by the government of Chile. In addition, the
Company made estimated income tax payments during those years and
is due a refund.

<TABLE>
<CAPTION>
The following is a reconciliation of the statutory tax rates:

Years Ended
Period Ended December 31,
June 30, ---------------------------
1999 1998 1997
----------- ---------- ---------
(Unaudited)
<S> <C> <C> <C>
Statutory tax rate 15% 15% 15%
Credits and incentives from government (15) (15) (15)
-------- -------- ------

Effective tax rate 0 % 0% 0%
======== ======== ======

</TABLE>
As mentioned above, while the Company has incurred no income taxes
for the period ended June 30, 1999 and the years ended December
31, 1998 and 1997, it has made monthly estimated tax payments in
excess of the tax due which coupled with the aforementioned
credits has yielded income tax recoverables.

The Company was not liable for U.S. income taxes for the years
ended December 31, 1998 and December 31, 1997, because all
earnings were generated by the Chilean subsidiary and no earnings
were repatriated to the Company for these reporting periods.
Therefore, no deferred tax assets or liabilities are attributable
to these years other than those reported by the subsidiary in its
regional operations. A deferred tax liability was recognized at
June 30, 1999, December 31, 1998 and 1997 for approximately
$74,000, $74,000 and $80,000, respectively and is included in
accrued expenses and other current liabilities.

F-13
<PAGE>
BIO-AQUA SYSTEMS, INC.

Notes to Combined Financial Statements (Continued)

NOTE 4 - OTHER CURRENT ASSETS

Other current assets consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
-------------------- ---------------------------------
1999 1998 1997
-------------------- ------------- ---------------
(Unaudited)
<S> <C> <C> <C>
Prepaid expenses $ 568,024 $ 183,325 $ 243,877
Bridge loan financing 96,196 - -
Other - - 5,401
------------ ------------- ------------

$ 664,220 $ 183,325 $ 249,278
============ ============= ============

</TABLE>
Prepaid expenses include deposits on orders placed with vendors of
approximately $551,000, $175,000 and $234,000 as of June 30, 1999,
December 31, 1998 and 1997, respectively.

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:
<TABLE>
<CAPTION>

June 30, December 31,
-------------------- ---------------------------------
1999 1998 1997
-------------------- ------------- ---------------
(Unaudited)
<S> <C> <C> <C>
Furniture and fixtures $ 154,928 $ 154,928 $ 154,701
Machinery and equipment 1,517,561 1,508,512 1,503,316
Buildings and improvements 238,053 238,053 238,053
Land 39,511 39,511 317,523
Other 95,531 95,531 91,605
Vehicles 94,446 94,446 94,446
------------ ------------- -------------

2,140,030 2,130,981 2,399,644
Less accumulated depreciation (1,264,082) (1,146,305) (1,006,041)
------------ ------------- -------------

$ 875,948 $ 984,676 $ 1,393,603
============ ============= =============
</TABLE>

Depreciation expense was $117,777, $132,460, $227,732 and $283,588
for the six months ended June 30, 1999 and 1998 and the years
ended December 31, 1998 and 1997, respectively.

During 1998, the Company sold land with a cost basis of
approximately $278,000.

F-14
<PAGE>
BIO-AQUA SYSTEMS, INC.

Notes to Combined Financial Statements (Continued)

NOTE 6 - OTHER ASSETS

The Company has advanced approximately $860,000 and $500,000 to a
fishing vessel company as of June 30, 1999 and December 31, 1998,
respectively, (see Note 10).

NOTE 7 - OBLIGATIONS WITH BANKS

Obligations with banks consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
-------------------- -----------------------------------
1999 1998 1997
-------------------- ----------------- --------------
(Unaudited)
<S> <C> <C> <C>
Lines-of-credit with monthly, semi-annual
and annual maturity dates and interest
rates ranging from 9% to 13.8% APR.;
fully collateralized by a personal
guarantee from a stockholder and
certain assets of the Company.
Currency: Chilean Pesos and UF $ 2,151,509 $ 1,525,968 $ 1,193,338
============= ============ ============

</TABLE>

Long-term debt consists of the following:

<TABLE>
<CAPTION>
June 30, December 31,
-------------------- -----------------------------------
1999 1998 1997
-------------------- ----------------- --------------
(Unaudited)
<S> <C> <C> <C>
Note payable to bank with maturity
date in January 2005 and fully
collateralized by a personal guarantee
from a stockholder and certain assets
of the Company, bearing interest at
13.7%. Currency: Chilean Pesos
and UF $ 544,189 $ 637,416 $ 461,334

Less: Current portion (135,547) (158,603) (106,320)
------------ ----------- ------------

$ 408,642 $ 478,813 $ 355,014
============ =========== ============
</TABLE>

The note payable was refinanced in October 1998 increasing the
debt by approximately $236,000.

F-15
<PAGE>
BIO-AQUA SYSTEMS, INC.

Notes to Combined Financial Statements (Continued)

NOTE 7 - OBLIGATIONS WITH BANKS (Continued)

Interest rates on all of these loans are based on the Asociacion
de Bancos y Entidades Financieras, (T.A.B.) rate, which represents
a daily average of the interest paid by banks on its deposits. The
rate is then adjusted upwards approximately 1.5% for the banks
profit, and then an additional 1.0%-1.7% reflecting the individual
risk of the bank on the individual loan. There are no covenants or
restrictions imposed on the aforementioned obligations with any of
the banks involved.

The UF is an indexed unit of account expressed in pesos and
adjusted according to inflation (CPI).

Future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>

Year Ending
December 31,
------------

<S> <C> <C>
1999 $ 158,603
2000 81,521
2001 88,594
2002 97,670
2003 102,947
2004 and thereafter 108,081
-------------

$ 637,416
=============
</TABLE>

NOTE 8 - NOTES PAYABLE

Notes payable consist of various short-term loans bearing interest
at rates ranging from 12% to 14% per annum. The notes are secured
by approximately $274,000 of accounts receivable.

NOTE 9 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>

Accrued expenses and other current liabilities consist of the following:

December 31,
June 30, ----------------------------------
1999 1998 1997
-------------------- -------------- -------------
(Unaudited)
<S> <C> <C> <C>
Salaries and employee related payables $ 90,697 $ 120,925 $ 105,155
Sales and other taxes payable 16,527 87,367 195,248
Deferred taxes 73,932 73,932 79,755
Other 70,316 117,414 19,678
------------ ------------ ------------

$ 251,472 $ 399,638 $ 399,836
============ ============ ============

</TABLE>

F-16

<PAGE>
BIO-AQUA SYSTEMS, INC.

Notes to Combined Financial Statements (Continued)

NOTE 10 - COMMITMENTS AND CONTINGENCIES

Operating Leases - The Company leases various offices in Santiago,
Chile pursuant to operating leases. Monthly rental payments were
approximately $3,000 during 1998 and 1997. Rent expense for the
six months ended June 30, 1999 and 1998 and the years ended
December 31, 1998 and 1997 totaled approximately $73,000, $48,000,
$119,000 and $73,000, respectively.

Future minimum rental payments under the lease are as follows:
<TABLE>
<CAPTION>
Year Ending Annual
December 31, Payments
------------ ----------------
<S> <C> <C>
1999 $ 144,648
2000 17,484
----------------

$ 162,132
================
</TABLE>

Commercial Agreement - During 1998, the Company entered into an
agreement with Kelor Trading Ltd. ("Kelor") a fishing vessel
company, for the exclusive rights to Kelor's krill products.
Pursuant to the agreement, the Company has committed to advance
Kelor up to $2,000,000 for its exploration. In return, Kelor
agrees to pay the Company the following; (i) a 3% commission of
sales, (ii) $20 per ton of krill meal sold and (iii) 5% of krill
oil produced on board by the Company's technological package.

As of June 30, 1999 and December 31, 1998, the Company advanced
approximately $860,000 and $500,000, respectively, to Kelor which
is included in other assets on the accompanying 1999 and 1998
combined balance sheets. This agreement is due within 18 months
with interest at a rate of 13.5%.

NOTE 11 - OTHER MATTERS

Initial Public Offering - The Company signed a letter of intent
with an underwriter to offer 1,200,000 shares of Class A common
stock and 1,200,000 redeemable common stock purchase warrants to
the public in an initial public offering, being made on a firm
commitment basis. Each of the warrants entitles the registered
holder to purchase one share of Class A common stock. Total
anticipated funds being raised will be approximately $6,900,000.
The net proceeds will be used for the continued development of the
Company.

F-17

<PAGE>
BIO-AQUA SYSTEMS, INC.

Notes to Combined Financial Statements (Continued)

NOTE 11 - OTHER MATTERS (Continued)

Royalty Agreements - In June 1998, the Company and a non-profit
corporation (CECS) entered into a 10-year agreement with
R-Biopharm GMBH (Biopharm), a German company, in which the Company
and CECS has agreed to provide technology it possesses with
respect to a red-tide detection kit. In exchange for this
technology, the Company and CECS will receive 12.5% royalties of
net sales of the detection kit. Biopharm will pay a minimum of
$5,000 in 1999 and a minimum of $15,000 for each remaining year
under the agreement. Sales of this red tide detection kit are
expected to begin in the first quarter of 2000. The royalties,
including the minimum payments, will be shared 60% by the Company
and 40% by CECS.

Under a separate agreement, dated June 20, 1998, between Inual (a
company related through common ownership) and Biopharm, Inual has
agreed to supply Biopharm with all toxins and conjugates necessary
to produce the red-tide detection test kit. This agreement
provides that Inual shall receive royalties of 12.5% of the net
sales of the test kit for 10 years dated from the execution of the
agreement. Biopharm will pay a minimum royalty of $5,000 during
1999 and a minimum of $15,000 for each remaining year under the
agreement. This payment constitutes minimum royalties against the
12.5% of net sales on an annual basis. In addition to this 12.5%
royalty, Inual shall receive $400,000 from Biopharm in
consideration for supplying Biopharm with a customer list for the
future potential sales of the test kit. This payment is due two
years from the date of the agreement. Inual transferred this
contract to the Company in July 1999 and the Company shall receive
100% of its benefits.

NOTE 12 - YEAR 2000 ISSUE

Computer programs used by businesses worldwide were written using
two digits rather than four digits to define the applicable year.
Accordingly, these programs recognize the dates "00" and "01" as
the years 1900 and 1901 rather than the years 2000 and 2001. The
Company recognizes the need to ensure its operations will not be
adversely impacted by year 2000 computer program failures arising
from program processes and calculations misinterpreting the year
2000 date. The Company has evaluated its financial and operational
systems to determine the impact the year 2000 issue will have on
its operations. The Company also plans to communicate with its
significant suppliers, dealers, financial institutions, and others
with which it conducts business to determine the extent the
Company may be impacted by third parties' failure to address the
year 2000 issue. Although the Company plans to be year 2000
compliant prior to December 31, 1999 and expects no material
impact to the Company's operations, there can be no assurance that
the failure of the Company or such third parties to successfully
address their respective year 2000 issues will not have a material
adverse effect on the Company's business, financial condition,
cash flows, and result of operations.

F-18
<PAGE>
BIO-AQUA SYSTEMS, INC.

Notes to Combined Financial Statements (Continued)

NOTE 13 - INDUSTRY SEGMENT AND OPERATIONS BY GEOGRAPHIC AREAS

The Company operates predominantly in one industry segment - that
being the production, research, and development of animal
nutrition and related products. During 1998 and 1997, sales to the
top five customers amounted to approximately 65% and 52%,
respectively, of total sales.

Customers outside Chile are worldwide, but primarily in South
America, United States, Asia, Europe and Australia. No single
country or geographic region is significant to the overall
operations of the Company. All the Company's assets are located
within Chile.

NOTE 14 - SUBSEQUENT EVENTS

Bridge Loan - In April and May 1999, the Company entered into
several bridge loans totaling $150,000 with investors which was
used for short-term operations. These loans are evidenced by
promissory notes bearing interest at 8% per year. The Company is
obligated to repay these notes the earlier of (i) the closing date
of the aforementioned initial public offering, or (ii) ranging
from October 30, 1999 to January 15, 2001. As additional
consideration, the investors received 35,294 shares of Class A
common stock valued at $3 per share. The Company has capitalized
these costs and are included in other current assets and are being
amortized over the term of the loans. Interest expense relating to
these loans amounted to approximately $13,000 for the six months
ending June 30, 1999.

Trademarks - In June 1999, the Company entered into an agreement
to purchase the outstanding common stock of Profeed, Inc., an
entity related through common control, upon completion of the
initial public offering ("IPO"). Profeed's sole assets consist of
the Tepual and Inual trademarks and has had no other activity
since its inception. The Company will purchase Profeed for
$1,300,000, of which $400,000 will be paid out of the proceeds of
the IPO. The balance will be paid either from sales of products
sold under the Tepual and Inual brands, third party financing, or
other working capital.

Through June 30, 1999, Profeed has not received any royalties or
commissions for its ownership of these trademarks. Additionally,
no material changes in the Company's revenues and expenses are
expected through its ownership of these trademarks.

As the above transaction is between related parties under common
control, the above mentioned assets must be accounted for at
historical cost. Such amount is immaterial and therefore, not
reflected in the financial statements. Due to the related party
nature of this transaction, the purchase price of $1,300,000 is
recorded as a distribution and a liability, due to stockholder, in
the accompanying June 30, 1999 (unaudited) combined financial
statements.

Rental and Consulting Agreement - In 1999, the Company entered
into an agreement with an affiliate of one of the Company's
directors to perform certain services including acting as the U.S.
liaison, rental of office space and certain financial, advisory
and consulting services, at an annual payment of $30,000.

F-19
<PAGE>
BIO-AQUA SYSTEMS, INC.

Notes to Combined Financial Statements (Continued)

NOTE 14 - SUBSEQUENT EVENT (Continued)

Employment Agreements - In 1999, the Company entered into a three
year employment agreement with the Company's President and Chief
Financial Officer. Pursuant to the terms and conditions of the
employment agreements, the President shall receive an initial
annual base salary of $200,000 and the Chief Financial Officer
shall receive an initial annual base salary of $100,000. In
addition to the base salaries, they are entitled to receive
various incentives and other compensation amounting up to $100,000
and $20,000 as President and Chief Financial Officer,
respectively.

Stock Option Plan - Subsequent to year end, the Board of Directors
of the Company and a majority of the Company's shareholders
adopted a Stock Option Plan (the "Plan"). The Company will reserve
a small amount of shares (not yet determined) of Class A common
stock for issuance under this Plan.
No options have been issued under the Plan.

F-20

<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representations not contained in this prospectus. You
must not rely on any unauthorized information or representations. Neither the
delivery of this prospectus nor any sale made under this prospectus, implies
that there has been no change in our affairs since the date of this prospectus
or that the information contained in this prospectus is correct as of any date
subsequent to the date of this prospectus. This prospectus is an offer to sell
only the securities offered in this prospectus, but only under circumstances and
in jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.

--------------------

TABLE OF CONTENTS

Page
----

Prospectus Summary.............................
Risk Factors...................................
Use of Proceeds................................
Dividend Policy ...............................
Dilution.......................................
Capitalization.................................
Exchange Rates.................................
Selected Financial Data........................
Management's Discussion and Analysis
of Financial Condition and Results of
Operations ..................................
Business.......................................

Additional Information ........................

Management.....................................
Certain Relationships and
Related Transactions.........................
Bridge Financing...............................
Principal Shareholders.........................
Description of Securities......................
Shares Eligible for
Future Sale..................................
Underwriting...................................
Legal Matters..................................
Experts........................................
Index to Financial Statements.................. F-1

1,200,000 SHARES OF
CLASS A COMMON STOCK

1,200,000 REDEEMABLE
COMMON STOCK
PURCHASE WARRANTS

Bio-Aqua Systems, Inc.

-----------------------

PROSPECTUS
-----------------------

NUTMEG SECURITIES, LTD.

EMERSON BENNETT &
ASSOCIATES, INC.

_________, 1999

<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of directors and officers.

The Florida Business Corporation Act permits the indemnification of
directors, employees, officers and agents of Florida corporation. Our articles
of incorporation and bylaws provides that we shall indemnify to the fullest
extent permitted by the Florida Business Corporation Act any person whom it may
indemnify thereunder.

The provisions of Florida law that authorize indemnification do not
eliminate the duty of care of a director, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available. In addition, each director will continue to be subject to
liability for (a) violations of criminal laws, unless the director has
reasonable cause to believe that his or her conduct was lawful or had no
reasonable cause to believe his conduct was unlawful, (b) deriving an improper
personal benefit from a transaction, (c) voting for or assenting to an unlawful
distribution and (d) willful misconduct or conscious disregard for our best
interests in a proceeding by or in our right to procure a judgment in its favor
or in a proceeding by or in the right of a shareholder. The statute does not
affect a director's responsibilities under any other law, such as the federal
securities laws.

The effect of Florida law, our articles of incorporation and our bylaws
is to require us to indemnify our officers and directors for any claim arising
against such persons in their official capacities if such person acted in good
faith and in a manner that he or she reasonably believed 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 or her conduct was
unlawful.

Under the terms of the underwriting agreement, our directors and
officers also are indemnified against certain civil liabilities that they may
incur under the Securities Act.

To the limit indemnification for liabilities arising under the
Securities Act, may be permitted to our directors, officers or control persons
control, we have been informed that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.

Item 25. Other expenses of issuance and distribution.

The following table sets forth the expenses (other than underwriting
discounts expected to be incurred in connection with the offering described in
this registration statement. All amounts are estimated except the registration
fee, NASD Fee and the underwriters' non-accountable expense allowance.

II-1

<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission/Registration fee and other documents*............................. $ 5,700
NASD filing fee*..................................................................................... 2,500
AMEX filing fee*..................................................................................... 20,000
Printing and engraving expenses*..................................................................... 65,000
Accounting fees and expenses*........................................................................ 50,000
Legal fees and expenses*............................................................................. 200,000
Blue Sky fees and expenses*.......................................................................... 9,000
Transfer Agent fees and expenses* ................................................................... 800
-------------
Total* .............................................................................................. $353,000
*Estimated
</TABLE>

We will pay all of the above expenses of this offering.

Item 26. Recent sales of unregistered securities.

On March 18, 1999, we issued 100 shares of class B common stock to Mr.
Rutman, our president, chief executive officer and chairman of the board for par
value, as promotional shares. The issuance of the shares of class B common stock
were exempt from registration under Section 4(2) of the Securities Act.

Between April and May 1999, six (6) accredited investors loaned us
$150,000 at an interest rate of 8% per year. As consideration for this loan, the
investors received an aggregate of 35,294 shares of class A common stock. These
investors had access to, or were otherwise provided with, our information,
including financial. On March 18, 1999, we issued 51,000 shares of class A
common stock to David Mayer at our formation. Accordingly, the issuance of the
shares of class A common stock were exempt from registration under Section 4(2)
of the Securities Act.

As of the effective date, Flagship Import Export LLC, wholly-owned and
controlled by Mr. Rutman and Atik, owned and controlled by Paulina and Andrea
Rutman, will acquire 1,699,900 shares of class B common stock. The shareholders
of Flagship Import Export LLC and Atik were provided with, or otherwise had
access to, our information, including financial. Accordingly, the issuances of
the shares of class B common stock to Flagship Import Export LLC and Atik will
be exempt from registration under Section 4(2) of the Securities Act.

Item 27. Exhibits.

II-2

<PAGE>

2.1 Stock Exchange Agreement between Flagship Import Export LLC and Bio-Aqua
for the exchange of class B common stock of Bio-Aqua for shares of Tepual
S.A.(1)
2.3 Stock Purchase Agreement between Atik, S.A. and Bio-Aqua for the purchase of
class B common stock (1)
2.4 Stock Purchase Agreement between Bio-Aqua and Atik, S.A. for the purchase of
shares of Tepual S.A.(1)
2.5 Stock Purchase Agreement between Profeed, Inc. and Bio-Aqua for the
acquisition of Profeed, Inc. and the rights to the Tepual(TM)and Inual(TM)brands and
trademarks(1)
3.1 Bio-Aqua's Articles of Incorporation(1)
3.1(a) Articles of Amendment to the Articles of Incorporation of Bio-Aqua(1)
3.2 Bio-Aqua's Bylaws(1)
4.1 Form of warrant agreement together with the form of warrant certificate(1)
4.2 Form of representative's warrant agreement together with the form of
representative's purchase warrant certificate(1)
4.3 Form of class A common stock certificate (1)
5.1 Opinion of Atlas, Pearlman, Trop & Borkson, P.A.(1)
10.1 Stock Option Plan(1)
10.2 Association Agreement between Tepual S.A. and Centro de Estudios Cientificos
de Santiago and Implementation Agreement (1)
10.3 Agreement between Tepual S.A., Centro de Estudios Cientificos de Santiago and
R-Biopharm (1)
10.4 Agreement Between Inual S.A. and R-Biopharm (1)
10.5 Distribution Agreement between Inual S.A. and R-Biopharm (1)
10.6 License Agreement between Tepual S.A. and Biosur S.A.C. (1)
10.7 Marketing Agreement between Tepual S.A. and Biosur S.A. (1)
10.8 Commercial Agreement between Tepual S.A. and Kelor Trading Ltd. (1)
10.9 Form of Bridge Loan Documents(1)
10.10 Employment Agreement between Tepual S.A. and Max Rutman(1)
10.11 Employment Agreement between Tepual S.A. and Guillermo Quiroz(1)
10.12 Consulting Agreement between Bio-Aqua and David Mayer(1)
10.13 Recognition of Bank Note with Hemisphere National Bank(1)
10.14 Recognition of Bank Note with Corpbanca(1)
10.15 Recognition of Bank Note with Banco Sud Americano(1)
10.16 Recognition of Bank Note with Banco Santander(1)
10.17 Recognition of Bank Note with Banco do Brasil(1)
10.18 Lease Agreement between Bio-Aqua and Andean Financial Corporation(1)
10.19 Lease Agreement between Tepual and Kaman Construcciones Limitada(1)
10.20 Lease Agreement between Tepual and Don Lindor Ltda.(1)
10.21 Lease Agreement between Tepual and Centrovet Ltda.(1)
10.22 Lease Agreement between Tepual and Turteltaub(1)
21 Subsidiaries of Registrant(1)

II-3

<PAGE>

23.1 Consent of Atlas, Pearlman, Trop & Borkson, P.A. (to be included in its opinion
filed as Exhibit 5.1)(1)
23.2 Consent of Spear, Safer, Harmon & Co. P.C.(2)
27 Financial Data Schedule(2)
99.3 U.S. Patent Application for PSP Red Tide Detection Kit(1)
99.4 U.S. Patent Application for Red Tide Cleansing System(1)
99.5 Consent of Guillermo Quiroz(1)
99.6 Consent of Nestor Lagos(1)
99.7 Consent of Sergio Vivanco(1)
</TABLE>
- --------------------
(1) Previously filed
(2) Filed herein

Item 28. Undertakings.

We undertake that:

(a) we will file, during any period in which we offer or sell our
securities, a post-effective amendment to this registration statement to:

(1) include any prospectus required by section 10(a)(3) of the
Securities Act;

(2) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and

(3) include any additional or changed material information on
the plan of distribution;

(4) for determining liability under the Securities Act, we
will treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering.

(5) we will file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.

(6) we will provide to the underwriter at the closing of this
offering certificates in such denominations and registered in such names as
required by the underwriter to permit prompt delivery to each purchaser.

(b) As indemnification for liability arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant under the above provisions, or otherwise, we have been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is unenforceable.
In the event that a claim for indemnification against such liabilities (other
than

II-4

<PAGE>

our the payment of expenses incurred or paid by a director, officer or
controlling person in the successful defense of any action, suit or proceeding)
is asserted by any director, officer or controlling person in connection with
the securities being registered, we will, unless in the opinion of our counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

(1) For determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by us under Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as of
the time it was declared effective.

(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered in the prospectus, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering of the securities.

II-5

<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements of filing on Form SB-2 and authorizes this
amendment to be signed on its behalf by the undersigned, in the City of Ft.
Lauderdale, State of Florida, on this 28th day of October, 1999.

Bio-Aqua Systems, Inc.

By: /s/ Max Rutman
------------------
President and Chief Executive Officer

In accordance with the requirements of the Securities Act of 1933, this
amendment to the registration statement was signed by the following persons in
the capacities and on the dates stated.
<TABLE>
<CAPTION>

Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/Max Rutman President and Chief October 28, 1999
--------------------
Max Rutman Executive Officer and
Director (Principal
Executive Officer)

/s/Guillermo Quiroz Chief Financial Officer October 28, 1999
-------------------
Guillermo Quiroz (Principal Financial and
Accounting Officer)

/s/David Mayer Director October 28, 1999
-------------------
David Mayer

</TABLE>

II-6

EXHIBIT INDEX

Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
1.1 Form of Underwriting Agreement(2)
1.2 Form of Agreement Among Underwriters(1)
1.3 Form of Selected Dealers Agreement(1)
1.4 Lock-Up Agreement (1)
2.1 Stock Exchange Agreement between Flagship Import Export LLC and Bio-Aqua
for the exchange of class B common stock of Bio-Aqua for shares of Tepual
S.A.(1)
2.3 Stock Purchase Agreement between Atik, S.A. and Bio-Aqua for the purchase of
class B common stock (1)
2.4 Stock Purchase Agreement between Bio-Aqua and Atik, S.A. for the purchase of
shares of Tepual S.A.(1)
2.5 Stock Purchase Agreement between Profeed, Inc. and Bio-Aqua for the
acquisition of Profeed, Inc. and the rights to the Tepual(TM)and Inual(TM)brands and
trademarks(1)
3.1 Bio-Aqua's Articles of Incorporation(1)
3.1(a) Articles of Amendment to the Articles of Incorporation of Bio-Aqua(1)
3.2 Bio-Aqua's Bylaws(1)
4.1 Form of warrant agreement together with the form of warrant certificate(1)
4.2 Form of representative's warrant agreement together with the form of
representative's purchase warrant certificate(1)
4.3 Form of class A common stock certificate (1)
5.1 Opinion of Atlas, Pearlman, Trop & Borkson, P.A.(1)
10.1 Stock Option Plan(1)
10.2 Association Agreement between Tepual S.A. and Centro de Estudios Cientificos
de Santiago and Implementation Agreement (1)
10.3 Agreement between Tepual S.A., Centro de Estudios Cientificos de Santiago and
R-Biopharm (1)
10.4 Agreement Between Inual S.A. and R-Biopharm (1)
10.5 Distribution Agreement between Inual S.A. and R-Biopharm (1)
10.6 License Agreement between Tepual S.A. and Biosur S.A.C. (1)
10.7 Marketing Agreement between Tepual S.A. and Biosur S.A. (1)
10.8 Commercial Agreement between Tepual S.A. and Kelor Trading Ltd. (1)
10.9 Form of Bridge Loan Documents(1)
10.10 Employment Agreement between Tepual S.A. and Max Rutman(1)
10.11 Employment Agreement between Tepual S.A. and Guillermo Quiroz(1)
10.12 Consulting Agreement between Bio-Aqua and David Mayer(1)
10.13 Recognition of Bank Note with Hemisphere National Bank(1)
10.14 Recognition of Bank Note with Corpbanca(1)
10.15 Recognition of Bank Note with Banco Sud Americano(1)
10.16 Recognition of Bank Note with Banco Santander(1)
10.17 Recognition of Bank Note with Banco do Brasil(1)
10.18 Lease Agreement between Bio-Aqua and Andean Financial Corporation(1)
10.19 Lease Agreement between Tepual and Kaman Construcciones Limitada(1)
10.20 Lease Agreement between Tepual and Don Lindor Ltda.(1)
10.21 Lease Agreement between Tepual and Centrovet Ltda.(1)
10.22 Lease Agreement between Tepual and Turteltaub(1)
21 Subsidiaries of Registrant(1)
23.1 Consent of Atlas, Pearlman, Trop & Borkson, P.A. (to be included in its opinion
filed as Exhibit 5.1)(1)
23.2 Consent of Spear, Safer, Harmon & Co. P.C.(2)
27 Financial Data Schedule(2)
99.3 U.S. Patent Application for PSP Red Tide Detection Kit(1)
99.4 U.S. Patent Application for Red Tide Cleansing System(1)
99.5 Consent of Guillermo Quiroz(1)
99.6 Consent of Nestor Lagos(1)
99.7 Consent of Sergio Vivanco(1)
</TABLE>
- --------------------
(1) Previously filed
(2) Filed herein

UNDERWRITING AGREEMENT

TABLE OF CONTENTS
-----------------
Page
----
<S> <C>
Underwriting Agreement............................................................................................1

SECTION 1.........................................................................................................1

Description of Securities.........................................................................................1

SECTION 2.........................................................................................................1

Representations and Warranties of the Company.....................................................................1
2.01. Registration Statement and Prospectus.............................................................2
2.02. Accuracy of Registration Statement and Prospectus.................................................2
2.03. Financial Statements..............................................................................3
2.04. Independent Public Accountant.....................................................................3
2.05. No Material Adverse Change........................................................................3
2.06. No Defaults.......................................................................................3
2.07. Incorporation and Standing........................................................................4
2.08. Legality of Outstanding Stock.....................................................................4
2.09. Legality of Stock, Warrants and Representative's Warrants.........................................4
2.10. Prior Sales.......................................................................................4
2.11. Litigation........................................................................................4
2.12. Warrants and Representative's Warrants............................................................5
2.13. Finder............................................................................................5
2.14. Exhibits..........................................................................................5
2.15. Tax Returns.......................................................................................5
2.16. Property..........................................................................................5
2.17. Patents & Trademarks..............................................................................6
2.18. Authority.........................................................................................6
2.19. Environmental Laws................................................................................6
2.20. ERISA.............................................................................................6
2.21. No NASD Affiliation...............................................................................6
2.22. Foreign Corrupt Practices Act.....................................................................7

SECTION 3.........................................................................................................7

Purchase and Sale of the Stock....................................................................................7
3.01. Purchase of Stock and Over-Allotment Option.......................................................7
3.01.01. Default by an Underwriter......................................................................7
3.01.02. Liability of Defaulting Underwriter............................................................8
3.01.03. Right of Remaining Underwriters................................................................8
3.02. Public Offering Price.............................................................................8
3.02.01. Payment For Stock..............................................................................8
3.02.02. Closing........................................................................................8

-i-

<PAGE>

3.02.03. Inspection of Certificates.....................................................................9
3.03. Sale of Warrants..................................................................................9
3.04. Representative's Expense Allowance................................................................9
3.05. Representations of the Parties...................................................................10
3.06. Post-Closing Information.........................................................................10
3.07. Re-Offers By Selected Dealers....................................................................10

SECTION 4........................................................................................................10

Registration Statement and Prospectus............................................................................10

4.01. Delivery of Registration Statements.......................................................................10
4.02. Delivery of Preliminary Prospectus...............................................................10
4.03. Delivery of Prospectus...........................................................................11
4.04. Further Amendments and Supplements...............................................................11
4.05. Use of Prospectus................................................................................11

SECTION 5........................................................................................................12

Covenants of the Company.........................................................................................12
5.01. Objection of Representative to Amendments or Supplements........................................12
5.02. Company's Best-Efforts to Cause Registration
Statement to Become Effective................................................................12
5.03. Preparation and Filing of Amendments and Supplements.............................................12
5.04. Blue-Sky Qualification...........................................................................13
5.05. Financial Statements.............................................................................13
5.06. Reports and Financial Statements to the
Representative and Co-Manager................................................................13
5.07. Expenses Paid by the Company.....................................................................13
5.08. Reports to Shareholders..........................................................................14
5.09. Section 11(a) Financials.........................................................................14
5.10. Post-Effective Availability of Prospectus........................................................14
5.11. Application of Proceeds..........................................................................14
5.12. Undertakings of Certain Shareholders.............................................................14
5.13. Delivery of Documents............................................................................15
5.14. Cooperation With Representative's Due Diligence.................................................15
5.15. No Sale Period...................................................................................15
5.16. Appointment of Transfer Agent....................................................................15
5.17. Compliance With Conditions Precedent.............................................................15
5.18. Filings of Form SR...............................................................................15
5.19. Registration Under the Exchange Act..............................................................15
5.20. Designation of Member of Company's Board of Directors............................................16
5.21. Key Man Insurance................................................................................16
5.22. Application to Moody's or Standard & Poors.......................................................16
5.23. AMEX Listing.....................................................................................16
5.24. Consulting.....................................................................................17

-ii-

<PAGE>

SECTION 6........................................................................................................17

Indemnification..................................................................................................17
6.01. Indemnification By Company.......................................................................17
6.02. Indemnification By Underwriters..................................................................18

SECTION 7........................................................................................................19

Effectiveness of Agreement.......................................................................................19

SECTION 8........................................................................................................19

Conditions of the Underwriters' Obligations......................................................................19
8.01. Effectiveness of Registration Statement..........................................................19
8.02. Accuracy of Registration Statement...............................................................19
8.03. Casualty and Other Calamity......................................................................20
8.04. Litigation and Other Proceedings.................................................................20
8.05. Lack of Material Change and Other Conditions.....................................................20
8.06. AMEX Listing Approval............................................................................20
8.07. Accountant's Comfort Letter and Update...........................................................20
8.08. Review By and Opinion of Underwriter's Counsel...................................................21
8.09. Opinion of Counsel...............................................................................21
8.10.01. Accountant's Letter...........................................................................23
8.10.02. Conformed Copies of Accountant's Letter.......................................................24
8.11. Officer's Certificate............................................................................24
8.12. Tender of Delivery of Stock......................................................................25
8.13. Blue-Sky Qualification...........................................................................25
8.14. Approval of Representative's Counsel.............................................................25
8.15. Officers' Certificate As a Company Representative................................................25

SECTION 9........................................................................................................25

Termination......................................................................................................25
9.01. Termination Because of Non-Compliance............................................................25
9.02. Market Out Termination...........................................................................26
9.03. Company's Right to Terminate.....................................................................26
9.04. Effect of Termination Hereunder..................................................................26

SECTION 10.......................................................................................................26

Underwriter's Representations and Warranties.....................................................................26
10.01. Registration as Broker-Dealer and Member of NASD................................................26
10.02. No Pending Proceedings..........................................................................27

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<PAGE>

SECTION 11.......................................................................................................27

Rights and Obligations...........................................................................................27
11.01. Consultation With Representative................................................................27
11.02. Exercise of Warrants............................................................................27

SECTION 12.......................................................................................................28

Notice ........................................................................................................28
12.01. Notice to the Company...........................................................................28
12.02. Notice to the Underwriters......................................................................28

SECTION 13.......................................................................................................29

Miscellaneous....................................................................................................29
13.01. Benefit.........................................................................................29
13.02. Survival........................................................................................29
13.03. Governing Law...................................................................................29
13.04. Underwriters' Information.......................................................................29
13.05. Counterparts....................................................................................29
ANNEX A ......................................................................1
CONSULTING AGREEMENT.....................................................................................1

</TABLE>
-iv-

<PAGE>

Underwriting Agreement

Nutmeg Securities, Ltd.
495 Post Road East
Westport, CT 06880

Emerson Bennett & Associates, Inc.
6261 Northwest 6th Way, Suite 207
Fort Lauderdale, FL 33309

Ladies and Gentlemen:

Bio-Aqua Systems, Inc. and its subsidiaries (the "Company'), a Florida
company, of 1900 Glades Road, Suite 351, Boca Raton, Florida, hereby confirms
its agreement with the representative of the Underwriters, Nutmeg Securities
Ltd. ("Representative"), Emerson Bennett & Associates, Inc. ("Co-Manager") and
other members of the Underwriting Group (hereinafter the "Underwriting Group" or
"Underwriters") as follows:

SECTION 1
Description of Securities

The Company's authorized and outstanding capitalization when the
offering of the securities contemplated hereby is permitted to commence and at
the Closing Date (hereinafter defined), will be as set forth in the Registration
Statement and Prospectus included therein (hereinafter defined). The Company
proposes to issue and sell to the Underwriting Group an aggregate of 1,200,000
Class A Voting Stock par value $.0001 at $5.625 per share ("Stock") and
1,200,000 Redeemable Common Stock Purchase Warrants at $.125 per Warrant
("Warrants") and Redeemable Representative's Warrants entitling Representative
to 120,000 shares of Stock at $9.28 and 120,000 warrants at $.206 exercisable
for Stock at $12.045 ("Representative's Warrants").The Underwriting Group shall
also have an over-allotment option to purchase up to an additional 180,000
shares of Class A Common Stock and 180,000 Warrants at initial public offering
minus the Underwriter's discount as provided in Section 3.01 hereof.

SECTION 2
Representations and Warranties of the Company

In order to induce the Underwriting Group to enter into this Agreement
the Company hereby represents and warrants to and agrees with the Underwriting
Group as follows:

2.01. Registration Statement and Prospectus. A registration statement
on Form SB-2 (File No. 33-81829) (the "Registration Statement") with respect to
the Stock and Warrants, including the related Prospectus, copies of which have
heretofore been

<PAGE>

delivered by the Company to the Underwriter, has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations ("Rules and Regulations") of the
Securities and Exchange Commission (the "'Commission") thereunder, and said
Registration Statement has been filed with the Commission under the Act; one or
more amendments to said Registration Statement, copies of which have heretofore
been delivered to the Representative, has or have heretofore been filed; and the
Company may file on or prior to the effective date additional amendments to said
Registration Statement, including the final Prospectus. Included in such
Registration Statement of the Company's Common Stock, are which shares are
reserved against exercise of the Underwriter's Warrants to be granted by the
Company, as more particularly described hereinafter.

As used in this Agreement: the term "Registration Statement" refers to
and means said Registration Statement on Form SB-2 and all amendments thereto,
including the Prospectus, all exhibits and financial statements, as it becomes
effective; the term "Prospectus" refers to and means the Prospectus included in
the Registration Statement when it becomes effective; and the term "Preliminary
Prospectus" refers to and means any prospectus included in said Registration
Statement before it becomes effective. The terms "Effective Date" and
"Effective" refer to the date the Commission declares the Registration Statement
filed with the Electronic Data Gathering, Analysis and Retrieval system
("EDGAR") effective pursuant to Section 8 of the Act.

2.02. Accuracy of Registration Statement and Prospectus. The Commission
has not issued any order preventing or suspending the use of any Preliminary
Prospectus with respect to the Stock and Warrants, and each Preliminary
Prospectus has conformed in all material respects with the requirements of the
Act and the applicable Rules and Regulations of the Commission thereunder, and
to the best of the Company's knowledge, has not included at the time of filing
any untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein not misleading. When the Registration
Statement becomes Effective and on the Closing Date (as hereinafter defined),
the Registration Statement and Prospectus, and any further amendments or
supplements thereto, will contain all statements which are required to be stated
therein in accordance with the Act and the Rules and Regulations for the
purposes of the proposed public offering of the Stock and Warrants, and all
statements of material fact contained in the Registration Statement and
Prospectus will be true and correct, and neither the Registration Statement nor
the Prospectus will include any untrue statement of a material fact or omit to
state any material fact required to be stated therein necessary to make the
statements therein not misleading; provided, however, the Company does not make
any representations or warranties as to information contained in or omitted from
the Registration Statement or the Prospectus in reliance upon written
information furnished by the Representative on behalf of the Underwriters
specifically for use therein.

2.03. Financial Statements. The financial statements of the Company
together with related schedules and notes as set forth in the Registration
Statement and Prospectus will present fairly the financial position of the
Company and the results of its operations and

<PAGE>

the changes in its financial position at the respective dates and for the
respective periods for which they apply; such financial statements have been
prepared in accordance with generally accepted principles of accounting
consistently applied throughout the periods concerned except as otherwise stated
therein or with respect to quarterly periods, normal recurring adjustments.

2.04. Independent Public Accountant. Spear, Safer, Harmon & Co., P.A. ,
which has certified, or shall certify, certain of the financial statements
filed, or to be filed, with the Commission as part of the Registration Statement
and Prospectus, are independent certified public accountants within the meaning
of the Act and the Rules and Regulations.

2.05. No Material Adverse Change. Except as may be reflected in or
contemplated by the Registration Statement or the Prospectus, subsequent to the
dates as of which information is given in the Registration Statement and
Prospectus, and prior to the Closing Date, (i) there shall not be any material
adverse change in the condition, financial or otherwise, of the Company or in
its business taken as a whole; (ii) there shall not have been any material
transaction entered into by the Company or its subsidiaries other than
transactions in the ordinary course of business; (iii) neither the Company nor
any of its subsidiaries shall have incurred any material obligations, contingent
or otherwise, which are not disclosed in the Prospectus; (iv) there shall not
have been, nor will there be, any change in the capital stock or long-term debt
(except current payments) of the Company; (v) the Company has not, and will not,
have paid or declared any dividends or other distributions on its common stock;
and (vi) there are no currency exchange control laws or withholding taxes of any
applicable country which govern the payment of dividends on the stock of the
Company or the stock of any of the subsidiaries of the Company except as set
forth in the Prospectus and Registration Statement.

2.06. No Defaults. Neither the Company nor any of its subsidiaries is
in any default which has not been waived in the performance of any material
obligation, agreement or condition contained in any debenture, note or other
evidence of indebtedness or any indenture or loan agreement of the Company. The
execution and delivery of this Agreement and the consummation of the
transactions herein contemplated, and compliance with the terms of this
Agreement will not conflict with or result in a breach of any of the terms,
conditions or provisions of, or constitute a default under, the articles of
incorporation, as amended, or bylaws of the Company, any note, indenture,
mortgage, deed of trust or other agreement or instrument to which the Company is
a party or by which it or any of its property is bound, or any existing law,
order, rule, regulation, writ, injunction, or decree of any government,
governmental instrumentality, agency or body, arbitration tribunal or court,
domestic or foreign, having jurisdiction over the Company or its property. The
consent, approval, authorization, or order of any court or governmental
instrumentality, agency or body is not required for the consummation of the
transactions herein contemplated except such as may be required under the Act or
under the blue sky or securities laws of any state or jurisdiction.

<PAGE>

2.07. Incorporation and Standing. The Company is, and at the Closing
Date will be, duly incorporated and validly existing in good standing as a
corporation under the laws of the State of Florida and the Company and/or its
subsidiaries is duly is authorized to do business in all other states and
applicable foreign jurisdictions, including Chile^, with authorized and
outstanding capital stock as set forth in the Registration Statement and the
Prospectus, and with full power and authority (corporate and other) to own its
property and conduct its business, present and proposed, as described in the
Registration Statement and Prospectus; the Company has full power and authority
to enter into this Agreement; and the Company is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which it owns or
leases real property or transacts business requiring such qualification except
where failure to so qualify would not have a material adverse effect on the
Company. The Company has no subsidiaries other than as shown in Exhibit 21 to
the Registration Statement.

2.08. Legality of Outstanding Stock. The outstanding common stock of
the Company has been duly and validly authorized, issued and is fully paid and
non-assessable and will conform in all material respect to all statements with
regard thereto contained in the Registration Statement and Prospectus. No sales
of securities have been made by the Company in violation of the registration
provisions of the Securities Act of 1933.

2.09. Legality of Stock, Warrants and Representative's Warrants. The
Stock, Warrants, and Representative's Warrants have been duly and validly
authorized and, when issued and delivered against payment therefor as provided
in this Agreement, will be validly issued, fully paid and non-assessable. The
Stock, Warrants, and Representative's Warrants upon issuance will not be subject
to the preemptive rights of any shareholders of the Company. The Warrants and
Representative's Warrants when sold and delivered, will constitute valid and
binding obligations of the Company enforceable in accordance with the terms
thereof subject to bankruptcy, insolvency, auditors' rights generally and
equitable principles of law. A sufficient number of shares of Common Stock and
Warrants have been reserved for issuance upon exercise of the Warrants and
Representative's Warrants. The Stock, Warrants, and Representative's Warrants
will conform to all statements with regard thereto in the Registration Statement
and Prospectus.

2.10. Prior Sales. No securities of the Company, of an affiliate or of
a predecessor of the Company have been sold within one year prior to the date
hereof, except as set out in the Registration Statement.

2.11. Litigation. Except as set forth in the Registration Statement and
Prospectus, there is, and at the Closing Date there will be, no action, suit or
proceeding before any court or governmental agency, authority or body pending or
to the knowledge of the Company threatened which might result in judgments
against the Company not adequately covered by insurance or which collectively
might result in any material adverse change in

<PAGE>

the condition (financial or otherwise), the business or the prospects of the
Company, or would materially affect the properties or assets of the Company.

2.12. Warrants and Representative's Warrants. Upon delivery of and
payment for the Warrants and Representative's Warrants to be sold by and to the
Company as set forth in Section 3.03 of this Agreement, the Underwriter and the
Underwriter's designees will receive good and marketable title thereto, free and
clear of all liens, encumbrances, charges and claims whatsoever, except for any
encumbrances imposed under Securities laws or as contained in this Agreement;
and the Company will have on the Effective Date of the Registration Statement
and at the time of delivery of such Warrants or Representative's Warrants full
legal right and power and all authorization and approval required by law to
sell, transfer and deliver such Warrants or Representative's Warrants in the
manner provided hereunder subject to certain "lock up" provisions set forth in
the Registration Statement and Prospectus.

2.13. Finder. The Company knows of no outstanding claims for services
in the nature of a finder's fee or origination fee with respect to the sale of
the Stock and Warrants hereunder resulting from its acts for which the
Representative may be responsible.

2.14. Exhibits. There are no contracts or other documents which are
required to be filed as exhibits to the Registration Statement by the Act or by
the Rules and Regulations which have not been so filed and each contract to
which the Company or any of its subsidiaries is a party and to which reference
is made in the Prospectus has been duly and validly executed, is or will be at
the Effective Date, in full force and effect in all material respects in
accordance with their respective terms, including but not limited to the
Employment Agreement between the Company and Max Rutman, Exhibit No. 10.10, the
Employment Agreement between Guillermo Quiroz and the Company, Exhibit No.
10.11, and the various distribution and licensing agreements in Exhibits
10.2-10.8, and none of such contracts have been assigned by the Company; and the
Company knows of no present situation or condition or fact which would prevent
compliance with the terms of such contracts, as amended to date. Except for
amendments or modifications of such contracts in the ordinary course of
business, the Company has no intention of exercising any right which it may have
to cancel any of its obligations under any of such contracts, and has no
knowledge that any other party to any of such contracts has any intention not to
render full performance under such contracts.

2.15. Tax Returns. The Company has filed all federal and state tax
returns which are required to be filed by it and has paid all taxes shown on
such returns and on all assessments received by it to the extent such taxes have
become due. The Company has filed all tax returns required by it in any foreign
jurisdictions. All taxes with respect to which the Company is obligated have
been paid or adequate accruals have been set up to cover any such unpaid taxes.

<PAGE>

2.16. Property. Except as otherwise set forth in or contemplated by the
Registration Statement and Prospectus, the Company has good title, free and
clear of all liens, encumbrances and defects, except liens for current taxes not
due and payable, to all property and assets which are described in the
Registration Statement and the Prospectus as being owned by the Company, subject
only to such exceptions as are not material and do not adversely affect the
present or prospective business of the Company.

2.17. Patents & Trademarks. Except as disclosed in the Registration
Statement or Prospectus, the Company has sufficient licenses, permits and other
governmental authorizations currently necessary for the conduct of its business
or the ownership of its properties as described in the Prospectus and is in all
material respects complying therewith and owns or possesses adequate rights to
use all material patents, patent applications, trademarks, service marks,
trade-names, trademark registrations, service mark registrations, copyrights and
licenses necessary for the conduct of such business and had not received any
notice of conflict with the asserted rights of others in respect thereof. To the
best knowledge of the Company, none of the activities or business of the Company
are in violation of, or cause the Company to violate, any law, rule, regulation
or order of the United States, any state, county or locality, or of any agency
or body of the United States or of any state, county or locality, the violation
of which would have a material adverse effect.

2.18. Authority. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and this
Agreement is the valid, binding and legally enforceable obligation of the
Company.

2.19. Environmental Laws. Neither the Company nor any of its
subsidiaries has violated any foreign, federal, state or local law relating to
the protection of human health and safety, the environmental or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental Laws"),
or incurred costs or liabilities associated with these Environmental Laws,
except for such violations which singly or in the aggregate would not have a
material adverse effect on the business, prospects, financial condition or
results of the Company and its subsidiaries taken as a whole.

2.20. ERISA. Neither the Company nor any of its subsidiaries has
violated any provisions or the Employee Retirement Income Security Act of 1974,
as amended, or the rules and regulations promulgated thereunder, in each case
that is applicable to the Company or such subsidiary, except for such violations
which singly or in the aggregate would not have a material adverse effect on the
business, ^financial condition or results of the Company and its subsidiaries
taken as a whole.

2.21. No NASD Affiliation. Except as previously disclosed in writing by
the Company to the Representative, no officer, director or 10% stockholder of
the company has any National Association of Securities Dealers, Inc. (the
"NASD") affiliation.

<PAGE>

2.22. Foreign Corrupt Practices Act. The Company has not, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution in violation
of law or (ii) made any payment to any state, federal or foreign governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments or contributions required or allowed by applicable
law. The Company's internal accounting controls and procedures are sufficient to
cause the Company to comply in all material respects with the Foreign Corrupt
Practices Act of 1977, as amended.

SECTION 3
Purchase and Sale of the Stock

3.01. Purchase of Stock and Over-Allotment Option. The Company hereby
agrees to sell to members of the Underwriting Group named in Schedule I hereto
(for all of whom the Representative is acting), severally and not jointly, and
each member of the Underwriting Group, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
agrees to purchase from the Company, severally and not jointly, the number of
shares of Stock set forth opposite their respective names in Schedule I hereto
at a purchase price of $5.625 per share, less the underwriting discounts, and
the number of Warrants set forth opposite their respective names in Schedule I
hereto at a purchase price of $.125 per Warrant, less the underwriting
discounts. The Representative is also granted Representative's Warrants
entitling them to purchase 120,000 Warrants ^at a purchase price of $.001,
entitling the Representative to 120,000 shares of Stock at $9.28 per share of
Stock, and 120,000 warrants exercisable at a price of $.206 per Warrant. These
warrants are exercisable for Stock at $12.045 per share for five years following
the Effective Date subject to a twelve month lock-up. Pursuant to NASD Rule
2710(c)(7)(A) the Representative Warrants and warrants acquired by the
Representative and Co-Manager will be restricted from sale, transfer,
assignment, or hypothecation for a period of one year from the Effective Date of
the Registration Statement except to officers or members of the Representative
or Co-Manager and members of the selling group and/or their officers or
partners.

The Company hereby grants to the Representative an over allotment
option (the "Over- allotment Option") for a period of forty-five days after the
Effective Date to purchase at the initial public offering price of $5.625 per
share up to 180,000 additional shares of Stock and 180,000 Warrants at $.125 per
Warrant, less the underwriting discounts, in order to cover over-allotments.

3.01.01. Default by an Underwriter. If any of the Underwriters shall
fail to purchase the entire number of shares of Stock and Warrants set opposite
its name in Schedule I hereto, and such failure to purchase shall constitute a
default by such Underwriter in the performance of its obligations under this
Agreement, the remaining Underwriters shall have the right and shall be
obligated to take up and pay for (in the respective proportions which the number
of shares of Stock and Warrants set opposite the

<PAGE>

names of the several remaining Underwriters bears to the aggregate number of
shares of Stock and Warrants set opposite the names of all the remaining
Underwriters) the entire amount of shares of Stock and Warrants which the
defaulting Underwriter agreed but failed to purchase, provided, however, that
the aggregate amount of all such increases for all non-defaulting Underwriters
shall not exceed 120,000 shares of Stock or 120,000 Warrants and provided,
further, that in the event that such additional shares of Stock or Warrants
shall exceed the foregoing maximum, the remaining Underwriters shall have the
right, but shall not be obligated, to take up and pay for (in such proportions
as may be agreed upon among them) the entire amount (but not less than all) of
remaining shares of Stock or Warrants which all defaulting Underwriters agreed
but failed to purchase.

3.01.02. Liability of Defaulting Underwriter. Nothing contained in this
Section 3.01 shall relieve any defaulting Underwriter of its liability, if any,
to the Company or to the remaining Underwriters for damages occasioned by its
default hereunder.

3.01.03. Right of Remaining Underwriters. If any of the Underwriters
shall fail to purchase the entire number of shares of Stock and Warrants set
opposite its name and such failure to purchase shall not constitute a default by
such Underwriter in the performance of its obligations under this Agreement, the
remaining Underwriters shall have the right, but shall not be obligated, to take
up and pay for (in such proportions as in be agreed upon among them) the entire
amount (but not less than all) of the shares of Stock and Warrants which all
withdrawing Underwriters agreed but failed to purchase.

3.02. Public Offering Price. After the Commission notifies the Company
that the Registration Statement has become Effective, the Underwriters propose
to offer the Stock to the public at a public offering price of $5.625 per share,
and the Warrants at $.125 per Warrant, as set forth in the Prospectus. The
Underwriters may allow a discount of $.5625 upon sales of Stock and $.0125 upon
sales of Warrants to selected dealers as may be determined from time to time by
the Representative.

3.02.01. Payment For Stock. Payment for the Stock and Warrants
(including the Over-allotment Option Stock and Warrants) which the Underwriters
agree to purchase shall be made to the Company or its order by wire transfer,
certified or official bank check or checks (in immediately available funds), in
the amount of the purchase price by or on behalf of the Representative at the
offices of the Representative in Westport, Connecticut, upon delivery to the
Representative of certificates for shares and Warrants in definitive form in
such numbers and registered in such names as the Representative requests in
writing at least one full business day prior to such delivery.

3.02.02. Closing. The time and date of delivery and payment hereunder
is herein called the "Closing Date" and shall take place at the office of the
Representative at 495 Post Road East, Westport, Connecticut 06880, or at such
other place that shall be agreed upon by the Company and the Underwriters, on
the third business day following the effective date of this Agreement(unless
postponed in accordance with Section 9) or such

<PAGE>

other time not later than ten business days after such date as shall be agreed
upon by the Representative and the Company. Should the Representative elect to
exercise any part of the Over-allotment Option pursuant to Section 3.01 herein
above, the time and date of delivery and payment for said over-allotment Stock
and Warrants shall be as mutually agreed, but not later than the 45th calendar
day after the Effective Date. Said date is hereinafter referred to, as the
"Over-Allotment Closing Date."

3.02.03. Inspection of Certificates. For the purpose of expediting the
checking and packaging of the certificates for Stocks and Warrants, the Company
agrees to make the certificates available for inspection by the Representative
at the office of the Representative, set forth above in Westport, Connecticut at
least one full business day prior to the proposed delivery date.

3.03. Sale of Warrants. The Company will sell and deliver to the
Representative, at a purchase price of $0.125 per Warrant less the underwriting
discounts, 1,200,000 Warrants, dated on the Closing Date, substantially in the
form of Exhibit A, attached hereto and by this reference incorporated herein,
evidencing the right of the Representative to purchase 1,200,000 shares of Stock
at the price of $5.625 per share and upon the terms and conditions provided in
the Warrants. The Company shall not be obligated to sell and deliver the
Warrants, and the Underwriter will not be obligated to purchase and pay for the
Warrants, except upon payment for the shares pursuant to Subsection 3.02.01
hereof.

The Representative may purchase for nominal consideration, at the
closing of the sale of all the Stock and Warrants contemplated by this
Underwriting Agreement, Representative's Warrants entitling Representative to
120,000 shares of Stock and 120,000 Warrants, which shall not be exercisable or
transferable for a twelve month period following the Effective Date. The
Representative's Warrants shall be exercisable for a period of five years at
$9.28 per share of Stock and $.206 per Warrant exercisable for Stock at $12.045,
upon the terms and conditions provided in the Representative's Warrants. The
Company shall not be obligated to sell and deliver the Representative's
Warrants, and the Representative will not be obligated to purchase and pay for
the Representative's Warrants, except upon payment for the shares pursuant to
Subsection 3.02.01 hereof.

3.04. Representative's Expense Allowance. It is understood that the
Company shall reimburse the Representative and Co-Manager for its expenses on a
non-accountable basis in the total amount of 3% of the gross proceeds from the
offering, including proceeds from the sale of the over-allotment shares, if
exercised. At the Closing and, if applicable, on the Over-Allotment Closing
Date, the Company shall pay to the Representative and Co-Manager the unpaid
balance of such allowance to defray the expenses incurred by the Representative
and Co-Manager in connection with the offering. The Representative shall be
solely responsible for all expenses incurred by it in connection with the
offering including, but not limited to, the expenses of its own counsel except
as set forth in subsection 5.07 hereof.

<PAGE>

3.05. Representations of the Parties. The parties hereto respectively
represent that as of the Closing Date the representations herein contained and
the statements contained in all the certificates theretofore or simultaneously
delivered by any party to another, pursuant to this Agreement, shall in all
material respects be true and correct.

3.06. Post-Closing Information. The Representative covenants that
reasonably promptly after the Closing Date, it will supply the Company with all
information required from the Underwriters for the completion of any applicable
forms and such additional information as the Company may reasonably request to
be supplied to the securities commissions of such states in which the Stock and
Warrants have been qualified for sale.

3.07. Re-Offers By Selected Dealers. On each sale by the Underwriters
of any of the Stock to selected dealers, the Representative shall require the
selected dealer purchasing any such Stock to agree to re-offer the same on the
terms and conditions of the offering set forth in the Registration Statement and
Prospectus.

SECTION 4
Registration Statement and Prospectus

4.01. Delivery of Registration Statements. The Company shall deliver to
the Representative without charge two signed copies of the Registration
Statement, including all financial statements and exhibits filed therewith and
any amendments or supplements thereto, and shall deliver without charge to the
Representative five conformed copies of the Registration Statement and any
amendment or supplement thereto, including such financial statements and
exhibits. The signed copies of the Registration Statement so furnished to the
Representative will include signed copies of any and all consents and
certificates of the independent public accountant certifying to the financial
statements included in the Registration Statement and Prospectus and signed
copies of any and all consents and certificates of any other persons whose
profession gives authority to statements made by them and who are named in the
Registration Statement or Prospectus as having prepared, certified, or reviewed
any part thereof.

4.02. Delivery of Preliminary Prospectus. The Company will deliver to
the Representative, without charge, as many copies of each Preliminary
Prospectus filed with the Commission bearing in red ink the statement required
by Regulation S-B Item 501(6) and (7) as may be required by the Underwriters.
The Company consents to the use of such documents by the Underwriters and by
dealers prior to the Effective Date of the Registration Statement. The Company
will deliver at its expense such copies of the Preliminary Prospectus as the
Representative may deem necessary in order to recirculate the Preliminary
Prospectus and/or to permit compliance with the provisions of Rule 15c2- 11. For
purposes of the paragraph, the term "Preliminary Prospectus" shall be deemed to
include after the Effective Date of the Registration Statement a Rule 430A
subject to completion prospectus and the Company will deliver to the
Representative, after the

<PAGE>

effective date at its expense such copies of the Rule 430A prospectus subject to
completion as the Representative deems necessary in connection with the
offering.

4.03. Delivery of Prospectus. The Company will deliver, at its expense,
as many printed copies of the Prospectus as the Underwriter may require for the
purposes contemplated by this Agreement and shall deliver said printed copies of
the Prospectus to the Representative as soon as practicable on effectiveness of
this Agreement, but in no event more than one business day after the effective
date of this Agreement. The Company will deliver such additional copies at its
expense as may be necessary to permit dealers to comply with the requirements of
Rule 174. If the Representative determines to use a Term Sheet together with a
prospectus subject to completion in accordance with Rule 434 to satisfy the
delivery of prospectus requirement, the Company shall furnish the Representative
with such number of copies of the Term Sheet meeting the requirements of Rule
434 and will file such number of copies with the Commission as required by Rule
424(b) to permit the Representative to deliver the final prospectus to
purchasers in the offering in this manner.

4.04. Further Amendments and Supplements. If, during such period of
time as in the opinion of the Representative or its counsel a Prospectus
relating to this financing is required to be delivered under the Act, any event
occurs or any event known to the Company relating to or affecting the Company
shall occur as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made not misleading, or if it is necessary
at any time after the Effective Date of the Registration Statement to amend or
supplement the Prospectus to comply with the Act, the Company will forthwith
notify the Representative thereof and prepare and file with the Commission such
further amendment to the Registration Statement or supplemental or amended
Prospectus as may be required and furnish and deliver to the Representative and
to others whose names and addresses are designated by the Representative, all at
the cost of the Company, the number of copies of the amended or supplemented
Prospectus designated by the Representative, which is so amended or supplemented
to not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the Prospectus not misleading in the
light of the circumstances when it is delivered to a purchaser or prospective
purchaser, and which will comply in all respects with the Act.

4.05. Use of Prospectus. The Company authorizes the Underwriters in
connection with the distribution of the Stock and Warrants and all dealers to
whom any of the Stock and Warrants may be sold by the Underwriters to use the
Prospectus as from time to time amended or supplemented, in connection with the
offering and sale of the Stock and Warrants, and in accordance with the
applicable provisions of the Act and the applicable Rules and Regulations and
applicable state blue sky or securities laws.

<PAGE>

SECTION 5
Covenants of the Company

The Company covenants and agrees with the Underwriters that:

5.01. Objection of Representative to Amendments or Supplements. After
the date hereof, the Company will not at any time, whether before or after the
Effective Date of the Registration Statement, file any amendment or supplement
to the Registration Statement or Prospectus, unless and until a copy of such
amendment or supplement has been previously furnished to the Representative
within a reasonable time period prior to the proposed filing thereof, or of
which the Representative or counsel for the Representative has reasonably
objected to, in writing, on the ground that such amendment or supplement is not
in compliance with the Act or the Rules and Regulations.

5.02. Company's Best-Efforts to Cause Registration Statement to Become
Effective. The Company will use its best efforts to cause the Registration
Statement and any post-effective amendment subsequently filed, to become
effective as promptly as reasonably practicable and will promptly advise the
Representative, and will confirm such advice in writing (i) when the
Registration Statement shall have become effective and when any amendment
thereto shall have become Effective and when any amendment of or supplement to
the Prospectus shall be filed with the Commission; (ii) when the Commission
shall make a request or suggestion for any amendment to the Registration
Statement or the Prospectus or for additional information and the nature and
substance thereof; and (iii) of the issuance by the Commission of an order
suspending the effectiveness of the Registration Statement pursuant to Section 8
of the Act or of the initiation of any proceedings for that purpose; (iv) of the
happening of any event which in the judgment of the Company makes any material
statement in the Registration Statement or Prospectus untrue or which requires
the making of any changes in the Registration Statement or Prospectus in order
to make the statements therein not misleading; and (v) of the refusal to qualify
or the suspension of the qualification of the Stock and Warrants for offering or
sale in any jurisdiction, or of the institution of any proceedings for any of
such purposes. The Company will use every reasonable effort to prevent the
issuance of any such order or of any order preventing or suspending such use, to
prevent any such refusal to qualify or any such suspension, and to obtain as
soon as possible a lifting of any such order, the reversal of any such refusal
and the termination of any such suspension.

5.03. Preparation and Filing of Amendments and Supplements. The Company
will prepare and file promptly with the Commission, upon request of the
Representative, such amendments or supplements to the Registration Statement or
Prospectus, in form satisfactory to counsel to the Company, as in the opinion of
counsel to the Representative and of counsel to the Company, may be necessary in
connection with the offering or distribution of the Stock and Warrants and will
use its best efforts to cause the same to become effective as promptly as
possible.

<PAGE>

5.04. Blue-Sky Qualification. The Company will, when and as requested
by the Representative and Co-Manager, use reasonable efforts to qualify the
Stock and Warrants or such part thereof as the Representative and Co-Manager may
determine for sale under the so-called blue sky laws of the State of Florida,
and of so many other states as the Representative may reasonably request, and to
continue such qualification in effect so long as required for the purposes of
the distribution of the Stock and Warrants.

5.05. Financial Statements. The Company at its own expense will prepare
and give and will continue to give such financial statements and other
information to and as may be required by the Commission, or the proper public
bodies of the states in which the Stock and Warrants may be qualified.

5.06. Reports and Financial Statements to the Representative and Co-
Manager. During the period of five years from the Closing Date, the Company will
deliver to the Representative and Co-Manager, copies of each annual report of
the Company and (i) within 105 days after the close of each fiscal year of the
Company, a financial report of the Company and its subsidiaries, if any, on a
consolidated basis, and a similar financial report of all unconsolidated
subsidiaries, if any, all such reports to include a balance sheet as of the end
of the preceding fiscal year, an income statement, a statement of changes in
financial condition and an analysis of shareholders' equity covering such fiscal
year, and all to be in reasonable detail and certified by independent public
accountants for the Company; (ii) within 50 days after the end of each quarterly
fiscal period of the Company other than the last quarterly fiscal period in any
fiscal year, copies of the consolidated income statement and statement of
changes in financial condition for that period, and the balance sheet as of the
end of that period of the Company and its subsidiaries, if any, and the income
statement, statement of changes in financial condition and the balance sheet of
each unconsolidated subsidiary, if any, of the Company for that period, all
subject to year-end adjustment, certified by the principal financial or
accounting officer of the Company; (iii) copies of all other statements,
documents, or other information which the Company shall mail or otherwise make
available to any class of its security holders, or shall file with the
Commission; and (iv) upon request in writing from the Underwriter, furnish to
the Underwriter such other information as may reasonably be requested and which
may be properly disclosed to the Representative with reference to the property,
business and affairs of the Company and its subsidiaries, if any.

5.07. Expenses Paid by the Company. The Company will pay, whether or
not the transactions contemplated hereunder are consummated or this Agreement is
prevented from becoming effective or is terminated, all costs and expenses
incident to the performance of its obligations under this Agreement including:
all expenses incident to the authorization of the Stock and Warrants and their
issue and delivery to the Representative; any original issue taxes in connection
therewith; all transfer taxes, if any, incident to the initial sale of the Stock
and Warrants to the public; the Blue Sky fees and expenses of the
Representative's and Co-Manager's counsel and accountants; the costs and
expenses incident to the preparation, printing and filing under the Act and with
the

<PAGE>

National Association of Securities Dealers, Inc. of the Registration Statement,
any Preliminary Prospectus and the Prospectus and any amendments or supplements
thereto; the cost of printing, reproducing and filing all exhibits to the
Registration Statement, the underwriting documents and the Selected Dealers
Agreement, the cost of printing and furnishing to the Representative copies of
the Registration Statement and copies of the Prospectus as herein provided; and,
the cost of qualifying the Stock and Warrants under the state securities or Blue
Sky laws as provided in Section 5.04 herein, including expenses and
disbursements of the Representative and the Co-Manager incurred in connection
with such qualification.

5.08. Reports to Shareholders. During the period of five years from the
Closing Date, the Company will, as promptly as possible, not to exceed 120 days,
after each annual fiscal period render and distribute reports to its
shareholders which will include audited statements of its operations and changes
of financial position during such period and its balance sheet as of the end of
such period, as to which statements the Company's independent certified public
accountants shall have rendered an opinion.

5.09. Section 11(a) Financials. The Company will make generally
available to its security holders and will deliver to the Representative and the
Co-Manager, as soon as practicable, but in no event later than the first day of
the sixteenth full calendar month following the Effective Date of the
Registration Statement, an earnings statement (as to which no opinion need be
rendered but which will satisfy the provisions of Section 11(a) of the Act)
covering a period of at least 12 months beginning after the Effective Date of
the Registration Statement.

5.10. Post-Effective Availability of Prospectus. Within the time during
which the Prospectus is required to be delivered under the Act, the Company will
comply, at its own expense, with all requirements imposed upon it by the Act, as
now or hereafter amended, by the Rules and Regulations, as from time to time may
be in force, and by any order of the Commission, so far as necessary to permit
the continuance of sales or dealings in the Stock and Warrants.

5.11. Application of Proceeds. The Company will apply the net proceeds
from the sale of the Stock and Warrants substantially in the manner set forth in
the Registration Statement and Prospectus. No NASD member shall receive 10% or
more of the net proceeds.

5.12. Undertakings of Certain Shareholders. The Company will deliver to
the Representative, prior to or simultaneously with the execution of this
Agreement, the undertaking of each officer, director, and each employee of the
Company who owns 5% or more of shares of the Company (based on the number of
shares to be outstanding prior to the completion of the offering) that such
person shall not directly or indirectly offer or sell to the public any portion
of the shares of common stock owned prior to the effective date of this
Agreement or hereafter acquired by exercise of an option for a period of
twenty-four

<PAGE>

months or privately for a period of twelve months from the Effective Date of the
Registration Statement without the Representative's prior written consent.

5.13. Delivery of Documents. At the Closing, the Company will deliver
to the Representative true and correct copies of the articles of incorporation
and certificate of incorporation of the Company and all amendments thereto, all
such copies to be certified by the Secretary of State of the State of Florida;
true and correct copies of the bylaws of the Company and of the minutes of all
meetings of the directors and shareholders of the Company held prior to the
Closing Date which in any way relate to the subject matter of this Agreement;
and true and correct copies of all material contracts to which the Company is a
part, other than contracts for the sale of products or services in the normal
course of business.

5.14. Cooperation With Representative's Due Diligence. At all times
prior to the Closing Date, the Company will cooperate with the Representative
and the Co- Manager in such investigation as the Representative may make, or
cause to be, made of all the properties, business and operations of the Company
in connection with the purchase and public offering of the Stock and Warrants,
and the Company will make available to the Representative in connection
therewith such information in its possession as the Representative and the
Co-Manager may reasonably request.

5.15. No Sale Period. No offering, sale or other disposition of any
common stock, equity or long-term debt will be made within one year after the
Effective Date of the Prospectus, directly or indirectly, by the Company,
otherwise than hereunder or with the Representative's consent.

5.16. Appointment of Transfer Agent. The Company has appointed American
Stock Transfer Trust Company as Transfer Agent for the Stock and Warrants
subject to the Closing. The Company will not change or terminate such
appointment for a period of three years from the Effective Date without first
obtaining the written consent of the Representative, which consent shall not be
unreasonably withheld.

5.17. Compliance With Conditions Precedent. The Company will use all
reasonable efforts to comply or cause to be complied with the conditions
precedent to the several obligations of the Underwriters in Section 8 hereof.

5.18. Intentionally left blank.

5.19. Registration Under the Exchange Act. The Company shall, within 90
days after the Effective Date, register the class of equity securities which
constitutes the Stock and Warrants by filing with the Securities and Exchange
Commission a Registration Statement (and such copies thereof as the Commission
may require) with respect to such securities, containing such information and
documents as the Commission may specify

<PAGE>

comparable to that which is required in an application to register a security
pursuant to subsection (g) of Section 12 of the Act, as amended.

5.20. Designation of Member of Company's Board of Directors. The
Representative and the Co-Manager shall have the right to designate as a member
of the Board of Directors or at the Representative's option, an individual to
attend the meetings of the Board of Directors of the Company for a period of
three years after the Effective Date. The attending individual shall not be
compensated for attendance in excess of any fee paid to any other members of the
Board of Directors.

5.21. Key Man Insurance. The Company as of the Effective Date, will use
its best efforts and in good faith attempt to obtain one million dollar
($1,000,000) key man life insurance policy, from a qualified insurance company,
on Max Rutman the Chief Executive Officer, President and Chairman of the Board
of the Company , for which the Company will be the beneficiary. The Company will
use its best efforts to maintain such insurance for 5 years from Effective Date.

5.22. Application to Moody's or Standard & Poors. The Company shall,
within 120 days after the Effective Date, apply for listing in either Moody's
Over-the-Counter Manual or Standard & Poors and shall use its best efforts to
have the Company listed in such manual.

5.23. AMEX Listing. For a period of five years from the Effective Date
of the Registration Statement, the Company will use its best efforts at its cost
and expense to effect and maintain the quotation of the Stock and Warrants on
the American Stock Exchange and will file with the American Stock Exchange all
documents and notices required by the American Stock Exchange for companies that
have securities that are traded in the over the counter market and quotations
for which are reported by the American Stock Exchange.

**** 5.24. Consulting. The Company has agreed to engage the Representative and
the Co-Manager as a consultant for a period of two (2) years from the closing of
the offering at a fee of $60,000 per annum payable to each of the Representative
and the Co- Manager commencing on the Effective Date and continuing for a period
of twenty-four consecutive months. The Representative and the Co-Manager agree
to provide (1) general financial consulting services and advice pertaining to
the Company's business affairs, (2) assistance in developing, studying and
evaluating financing and capital structure, (3) merger and acquisition activity,
(4) reports and studies, and (5) negotiations pertaining to the above. The
Company shall execute and deliver to the Representative and Co-Manager a
Financial Consulting Agreement, in form attached as Annex A.

<PAGE>

SECTION 6
Indemnification

6.01. Indemnification By Company. The Company agrees to indemnify and
hold harmless the Underwriters and each person who controls any underwriter
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act or any other statute
or at common law and to reimburse persons indemnified as above for any legal or
other expenses (including the cost of any investigation and preparation)
incurred by them in connection with any litigation, whether or not resulting in
any liability, but only insofar as such losses, claims, damages, liabilities and
litigation arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendment thereto or any application or other document filed in order to qualify
the Stock and Warrants under the blue sky or securities laws of the states where
filings were made, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, all as of the date when the Registration Statement or
such amendment, as the case may be, becomes effective, or any untrue statement
or alleged untrue statement of a material fact contained in the Prospectus (as
amended or supplemented if the Company shall have filed with the Commission any
amendments thereof or supplements thereto), or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the indemnity agreement contained in this
subsection 6.01 shall not apply to amounts paid in settlement of any such
litigation if such settlements are effected without the consent of the Company,
nor shall it apply to the Underwriter or any person controlling the Underwriters
in respect of any such losses, claims, damages, liabilities or actions arising
out of or based upon any such untrue statements or alleged untrue statement, or
any such omission or alleged omission, if such statement or omission was made in
reliance upon information peculiarly within the knowledge of the Underwriter and
furnished in writing to the Company by the Underwriter specifically for use in
connection with the preparation of the Registration Statement and Prospectus or
any such amendment or supplement thereto. This indemnity agreement is in
addition to any other liability which the Company may otherwise have to the
Underwriters. The Underwriters agree within ten days after the receipt by them
of written notice of the commencement of any action against them or against any
person controlling them as aforesaid, in respect of which indemnity may be
sought from the Company on account of the indemnity agreement contained in this
subsection 6.01 to notify the Company in writing of the commencement thereof.
The failure of the Underwriters so to notify the Company of any such action
shall relieve the Company from any liability which it may have to the
Underwriters or any person controlling them as aforesaid on account of the
indemnity agreement contained in this subsection 6.01, but shall not relieve the
Company from any other liability which it may have to the Underwriters or such
controlling person. In case any such action shall be brought against the
Underwriters or any such controlling person and the Underwriters shall notify
the Company of the commencement thereof, the Company shall be entitled to
participate in

<PAGE>

(and, to the extent that it shall wish, to direct) the defense thereof at its
own expense, but such defense shall be conducted by counsel of recognized
standing and reasonably satisfactory to the Representative or such controlling
person or persons, defendant or defendants in such litigation. The Company
agrees to notify the Representative and the Co-Manager promptly of commencement
of any litigation or proceedings against it or any of its officers or directors,
of which it may be advised, in connection with the issue and sale of any of its
securities and to furnish to the Representative and the Co-Manager, at its
request, copies of all pleadings therein and permit the Representative and the
Co-Manager to be an observer therein and appraise the Representative and the
Co-Manager of all developments therein, all at the Company's expense. Provided,
however, that in no event shall the indemnification agreement contained in this
Section 6.01 inure to the benefit of the Representative (or any person
controlling the Representative) on account of any losses, claims, damages,
liabilities or actions arising from the sale of the Stock and Warrants upon the
public offering to any person by such Representative if such losses, claims,
damages, liabilities or actions arise out of, or are based upon, an untrue
statement or omission or alleged untrue statement or omission in a Preliminary
Prospectus and if the Prospectus shall correct the untrue statement or omission
or the alleged untrue statement or omission which is the basis of the loss,
claim, damage, liability or action for which indemnification is sought and a
copy of the Prospectus had not been sent or given to such person at or prior to
the confirmation of such sale to him in any case where such delivery is required
by the Securities Act, unless such failure to deliver the Prospectus was a
result of non-compliance by the Company with Section 4.03 hereof.

6.02. Indemnification By Underwriters. The Underwriters severally
agree, to the extent of and only to the extent of their commitment pursuant to
Schedule I, in the same manner as set forth in subsection 6.01 above, to
indemnify and hold harmless the Company, the directors of the Company and each
person, if any, who controls the Company with respect to any statement in or
omission from the Registration Statement or any amendment thereto, or the
Prospectus (as amended or as supplemented, if amended or supplemented as
aforesaid) or any application or other document filed in any state or
jurisdiction in order to qualify the Stock and Warrants under the blue sky or
securities laws thereof, or any information furnished pursuant to Section 3.05
hereof, if such statement or omission was made in reliance upon information
peculiarly within its knowledge and furnished in writing to the Company by the
Representative on its behalf specifically for use in connection with the
preparation thereof or supplement thereto. The Underwriters shall not be liable
for amounts paid in settlement of any such litigation if such settlement was
effected without the consent of the Representative. In case of commencement of
any action in respect of which indemnity may be sought from the Underwriters on
account of the indemnity agreement contained in this subsection 6.02, each
person agreed to be indemnified by the Underwriters shall have the same
obligation to notify the Underwriters as the Underwriters have toward the
Company in subsection 6.01 above, subject to the same loss of indemnity in the
event such notice is not given, and the Underwriters shall have the same right
to participate in (and, to the extent that they shall wish, to direct) the
defense of such action at their own expense, but such defense shall be conducted
by counsel of recognized standing and satisfactory to the Company. The
Underwriters agree

<PAGE>

to notify the Company promptly of the commencement of any litigation or
proceeding against the Underwriters or against any such controlling person, of
which it may be advised, in connection with the issue and sale of any of the
securities of the Company, and furnish to the Company at its request copies of
all pleadings therein and apprize it of all the developments therein, all at the
Company's expense, and permit the Company to be an observer therein.

SECTION 7
Effectiveness of Agreement

This Agreement shall become effective upon release by the
Representative of the Stock and Warrants for offering after the Effective Date.
The time of the release by the Representative of the Stock and Warrants for
offering, for the purposes of this Section 7, shall mean the time of the release
by the Representative of the Stock and Warrants for public sale pursuant to the
Registration Statement. The Representative agrees to notify the Company
immediately after the Representative shall have released the Stock and Warrants,
that this Agreement has become effective. This Agreement shall nevertheless,
become effective at such time earlier than the time specified above, after the
Effective Date, as the Representative may determine by notice to the Company.

SECTION 8
Conditions of the Underwriters' Obligations

The Underwriters' obligations hereunder to purchase the Stock and
Warrants and to make payment to the Company hereunder on the Closing Date shall
be subject to the accuracy, as of the Closing Date, of the representations and
warranties on the part of the Company herein contained, to the performance by
the Company of all its agreements herein contained, to the fulfillment of or
compliance by the Company with all covenants and conditions hereof, and to the
following additional conditions:

8.01. Effectiveness of Registration Statement. The Registration
Statement shall have become effective on or prior to 12:00 Noon EST time, on the
Effective Date hereof, or such later date as the Underwriter may agree to. On or
prior to the Closing Date, no order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission or be pending; any
request for additional information on the part of the Commission (to be included
in the Registration Statement or Prospectus or otherwise) shall have been
complied with to the satisfaction of the Commission; and neither the
Registration Statement or the Prospectus nor any amendment thereto shall have
been filed to which counsel to the Representative shall have reasonably objected
in writing or have not given their consent.

8.02. Accuracy of Registration Statement. The Representative shall not
have disclosed in writing to the Company that the Registration Statement or the
Prospectus or

<PAGE>

any amendment thereof or supplement thereto contains an untrue statement of a
fact which, in the opinion of counsel to the Representative, is material, or
omits to state a fact which, in the opinion of such counsel, is material and is
required to be stated therein, or is necessary to make the statements therein
not misleading.

8.03. Casualty and Other Calamity. Between the date hereof and the
Closing Date, the Company shall not have sustained any loss on account of fire,
explosion, flood, accident, calamity or any other cause, of such character as
materially adversely affects its business or property considered as an entire
entity, whether or not such loss is covered by insurance and ^the President of
the Company ^of the Company shall not have suffered any injury or disability of
a nature which would materially adversely affect his ability to properly
function as an officer and director of the Company.

8.04. Litigation and Other Proceedings. Between the date hereof and the
Closing Date, there shall be no litigation instituted or threatened against the
Company and there shall be no proceeding instituted or threatened against the
Company before or by any federal or state commission, regulatory body or
administrative agency or other governmental body, domestic or foreign, wherein
an unfavorable ruling, decision or finding would materially adversely affect the
business, franchises, licenses, patents, operations or financial condition or
income of the Company considered as an entity.

8.05. Lack of Material Change and Other Conditions. Except as
contemplated herein or as set forth in the Registration Statement and
Prospectus, during the period subsequent to the date of the last audited balance
sheet included in the Registration Statement and prior to the Closing Date, the
Company (A) shall have conducted its business in the usual and ordinary manner
as the same was being conducted on the date of the last audited balance sheet
included in the Registration Statement, (B) except in the ordinary course of its
business, the Company shall not have incurred any liabilities or obligations
(direct or contingent) or disposed of any of its assets, or entered into any
material transaction or suffered or experienced any substantially adverse change
in its condition, financial or otherwise.

8.06. AMEX Listing Approval. The American Stock Exchange shall have
approved the Company's listing application under the symbols "SEA" for the Stock
and "SEAW" for the Warrants.

8.07. Accountant's Comfort Letter and Update. At the Closing the
Representative shall have received from Spear, Safer, Harmon & Co. a letter
dated such date, in form and substance satisfactory to the representative
containing statements and information of the type ordinarily included in
accountants' "comfort letter" to underwriters with respect to the financial
statements and certain financial information contained in the Registration
Statement and Prospectus; and, at the Closing, the Representative shall also
have received from Spear, Safer Harmon & Co. a letter, dated at the Closing
Date, to the effect that they reaffirm the statements made in the letter
furnished pursuant to the

<PAGE>

previous clause, except that the specified date referred to shall be a date not
more than three days prior to the Closing Date. At the Closing Date, the capital
stock and surplus accounts of the Company shall be substantially the same as at
the date of the last audited balance sheet included in the Registration
Statement, without considering the proceeds from the sale of the Stock, other
than as may be set forth in the Prospectus.

8.08. Review By and Opinion of Underwriter's Counsel. The authorization
of the Stock, the Warrants, the Warrant Stock, the Representative's Warrants,
the Registration Statement, the Prospectus and all corporate proceedings and
other legal matters incident thereto and to this Agreement shall be reasonably
satisfactory in all respects to counsel to the Representative and the
Co-Manager. The Representative and the Co-Manager shall have received an opinion
dated as of the Closing Date from its counsel, substantially in the form of the
opinion called for by Section 8.07(viii), qualified in such manner as the
Representative may deem acceptable.

8.09. Opinion of Counsel. The Company (which term shall include any
subsidiaries of the Company) shall have furnished to the Representative the
opinions, dated the Closing Date, addressed to the Representative, from Atlas,
Pearlman, Trop & Borkson, P.A. and Abud, Vivanco & Vergara, counsels to the
Company, to the effect that based upon a review by them of the Registration
Statement, Prospectus, the Company's certificate of incorporation, bylaws, and
relevant corporate proceedings, an examination of such statutes they deem
necessary and such other investigation by such counsel as they deem necessary to
express such opinion:

(i) Bio-Aqua Systems, Inc. has been duly incorporated and is a
validly existing corporation in good standing under the laws of Florida, with
full corporate power and authority to own and operate its properties and to
carry on its business as set forth in the Registration Statement and Prospectus.

(ii) The Company is duly qualified or registered as a foreign
corporation in any applicable state or foreign jurisdiction cognizant that the
Company's ownership of property and its conduct of business requires such
qualification or registration and that the failure to so qualify would have a
material adverse effect on its operations.

(iii) To its knowledge, Bio-Aqua Systems, Inc. has authorized
an outstanding capital stock as set forth in the Registration Statement and
Prospectus; the outstanding common stock of the Company, the Stock, and the
Warrants conform in all material respects to the statements concerning them in
the Registration Statement and Prospectus; the outstanding common stock of
Bio-Aqua Systems, Inc. has been duly and validly issued and is fully-paid and
nonassessable and to its knowledge contains no preemptive rights; the Stock has
been, and the shares of Warrant Stock issuable upon exercise of the Warrants
will be, duly and validly authorized and, upon issuance thereof and payment
therefor in accordance with this Agreement and the Warrants, will be duly and
validly issued, fully paid and nonassessable, and to its knowledge will not be
subject to the preemptive rights of any shareholder of Bio-Aqua Systems, Inc.

<PAGE>

(iv) The Warrants and Representative's Warrants have been duly
and validly authorized and issued and are valid and binding instruments
enforceable in accordance with their terms.

(v) To the Company's knowledge, a sufficient number of shares
of Stock and Warrants have been duly reserved for issuance upon exercise of the
Warrants and the Representative's Warrants.

(vi) No consents, approvals, authorizations or orders of
agencies, officers or other (United States) regulatory authorities are known to
such counsel which are necessary for the valid authorization, issue or sale of
the Stock and Warrants hereunder, except as required under the Act or blue sky
or state securities laws.

(vii) The issuance and sale of the Stock, the Warrants,
Representative's Warrants and the consummation of the transactions herein
contemplated and compliance with the terms of this Agreement will not conflict
with or result in a breach of any of the terms, conditions, or provisions of or
constitute a default under the certificate of incorporation, or bylaws of
Bio-Aqua Systems, Inc., or any note, indenture, mortgage, deed of trust, or
other agreement or instrument known to such counsel to which the Company is a
party or by which the Company or any of its property is bound or any existing
law (provided this paragraph shall not relate to federal or state securities
laws), order, rule, regulation, writ, injunction, or decree known to such
counsel of any government, governmental instrumentality, agency, body,
arbitration tribunal, or court domestic or foreign, having jurisdiction over the
Company or its property.

(viii) The Registration Statement has become effective under
the Act and, to the best of the knowledge of such counsel after such counsel has
conducted a reasonable investigation, no order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending ^by the Commission under the Act; and the
Registration Statement and Prospectus, and each amendment and supplement
thereto, comply as to form in all material respects with the requirements of the
Act and the Rules and Regulations thereunder, and nothing has come to such
counsel's attention that either the Registration Statement or the Prospectus or
any such amendment or supplement contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which made (except that no opinion need be expressed as to
financial statements and the notes thereto contained in the Registration
Statement or Prospectus).

(ix) Such counsel is familiar with all contracts referred to
in the Registration Statement or Prospectus and such contracts are sufficiently
summarized or disclosed therein or filed as exhibits thereto as required, and
such counsel ^does not know of any contracts required to be summarized or
disclosed or filed, and such counsel ^does not know of any legal or governmental
proceedings pending or threatened to which the

<PAGE>

Company is the subject of such a character required to be disclosed in the
Registration Statement or the Prospectus which are not disclosed and properly
described therein.

(x) This Agreement has been duly authorized and executed by
the Company and is a valid and binding agreement of the Company.

As to routine factual matters such as the issuance of stock
certificates and receipt of payment therefor, the states and countries in which
the Company transacts business, the adoption of resolutions reflected by the
Company's minute book and the like, such counsel may rely on the certificate of
an appropriate officer of the Company. Such opinion shall also cover such other
matters incident to the transactions contemplated by this Agreement as the
Underwriter or their Counsel shall reasonably request.

8.10.01. Accountant's Letter. The Underwriter shall have received a
letter addressed to it and dated the date of this Agreement and the Closing
Date, respectively, from Spear, Safer, Harmon & Co. independent public
accountants for the Company, stating that (i) with respect to the Company they
are independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and the response to Item
509 of Regulation S-K as reflected by the Registration Statement is correct
insofar as it relates to them; (ii) in their opinion, the financial statements
examined by them of the Company at all dates and for all periods referred to in
their opinion and included in the Registration Statement and Prospectus, comply
in all material respects with the applicable accounting requirements of the Act
and the published Rules and Regulations thereunder with respect to registration
statements on Form S-B2; (iii) on the basis of certain indicated procedures (but
not an examination in accordance with generally accepted accounting principles),
including examinations of the instruments of the Company set forth under
"Capitalization" in the Prospectus, a reading of the latest available interim
unaudited financial statements of the Company, whether or not appearing in the
Prospectus, inquiries of the officers of the Company or other persons
responsible for its financial and accounting matters regarding the specific
items for which representations are requested below and a reading of the minute
books of the Company, nothing has come to their attention which would cause them
to believe that during the period from the last audited balance sheet included
in the Registration Statement to a specified date not more than five days prior
to the date of such letter (a) there has been any change in the capital stock or
other securities of the Company or any payment or declaration of any dividend or
other distribution in respect thereof or exchange therefor from that shown on
its audited balance sheets or in the debt of the Company from that shown or
contemplated under "Capitalization" in the Registration Statement or Prospectus
other than as set forth in or contemplated by the Registration Statement or
Prospectus; (b) there have been any material decreases in net current assets or
net assets as compared with amounts shown in the last audited balance sheet
included in the Prospectus so as to make said financial statements misleading;
and (c) on the basis of the indicated procedures and discussions referred to in
clause (iii) above, nothing has come to their attention which, in their
judgment, would cause them to believe or indicate that (1) the unaudited
financial statements and schedules set forth in the Registration Statement and
Prospectus do not

<PAGE>

present fairly the financial position and results of the Company, for the
periods indicated, in conformity with the generally accepted accounting
principles applied on a consistent basis with the audited financial statements,
and (2) the dollar amounts, percentages and other financial information set
forth in the Registration Statement and Prospectus under the captions
"Prospectus Summary," "Risk Factors," "Dilution," "Capitalization," "Exchange
Rates", "Remuneration," "Bridge Financing", "Business", "Principal
Shareholders," and Certain Relationships and Related Transactions are not in
agreement with the Company's general ledger, financial records or computations
made by the Company therefrom.

8.10.02. Conformed Copies of Accountant's Letter. The Representative
shall be furnished without charge, in addition to the original signed copies,
such number of signed or photostatic or conformed copies of such letters as the
Representative shall reasonably request.

8.11. Officer's Certificate. The Company shall have furnished to the
Representative and to the Co-Manager its certificate by the Chief Executive
Officer and the Chief Financial Officer, dated as of the Closing Date, to the
effect that:

(i) The representations and warranties of the Company in this
Agreement are true and correct at and as of the Closing Date, and the Company
has complied in all material respects with all the agreements and has satisfied
all the conditions on its part to be performed or satisfied at or prior to the
Closing Date.

(ii) The Registration Statement has become effective and no
order suspending the effectiveness of the Registration Statement has been issued
and to the best of the knowledge of the respective signers, no proceeding for
that purpose has been initiated or is threatened by the Commission.

(iii) The respective signers have each carefully examined the
Registration Statement and Prospectus and any amendments and supplements
thereto, and to the best of their knowledge the Registration Statement and the
Prospectus and any amendments and supplements thereto contain all statements
required to be stated therein, and all statements contained therein are true and
correct in all material respects, and neither the Registration Statement nor
Prospectus nor any amendment or supplement thereto includes any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein in light of the
circumstances when made not misleading and, since the effective date of the
Registration Statement, there has occurred no event required to be set forth in
an amended or a supplemented Prospectus which has not been so set forth.

(iv) Except as set forth in the Registration Statement and
Prospectus since the respective dates as of which the periods for which
information is given in the Registration Statement and Prospectus and prior to
the date of such certificate, (A) there has not been any material adverse
change, financial or otherwise, in the affairs or condition

<PAGE>

of the Company, and (B) the Company has not incurred any liabilities, direct or
contingent, or entered into any transactions, otherwise than in the ordinary
course of business.

(v) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, no dividends or
distribution whatever have been declared and/or paid on or with respect to the
common stock of the Company.

8.12. Tender of Delivery of Stock. All of the Stock and Warrants being
offered by the Company and the Warrants being purchased from the Company by the
Representative shall be tendered for delivery in accordance with the terms and
provisions of this Agreement.

8.13. Blue-Sky Qualification. The Stock shall be qualified in such
states as the Underwriters through their Representative may reasonably request
pursuant to Section 5.04, and each such qualification shall be in effect and not
subject to any stop order or other proceeding on the Closing Date.

8.14. Approval of Representative's Counsel. All opinions, letters,
certificates and evidence mentioned above or elsewhere in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they are in
form and substance satisfactory to counsel to the Representative and to the
Co-Manager, whose approval shall not be unreasonably withheld. The suggested
form of such documents shall be provided to the counsel for the Representative
and to the Co-Manager, at least one business day before the Closing Date. The
Representative's and to the Co-Manager's counsel will provide a written
memorandum stating such closing documents which they deem necessary for their
review. Such memorandum shall be delivered at least three business days before
the Closing Date to counsel for the Company.

8.15. Officers' Certificate As a Company Representative. Any
certificate signed by an officer of the Company and delivered to the
Representative or to counsel for the Representative will be deemed a
representation and warranty by the Company to the Representative as to the
statements made therein.

SECTION 9
Termination

9.01. Termination Because of Non-Compliance. This Agreement may be
terminated by the Representative by notice to the Company in the event that
there has been, since the time of execution of this Agreement or since the
respective dates as of which the information is given in the Prospectus, any
material adverse change in the financial condition, ^or business affairs of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or if, the Company shall have failed
or been unable to comply with any of the terms, conditions or provisions of this
Agreement on the part of the Company to be performed, complied with

<PAGE>

or fulfilled (including but not limited to those specified in Sections 2, 3, 4,
5, and 8 hereof) within the respective times herein provided for, unless
compliance therewith or performance or satisfaction thereof shall have been
expressly waived by the Representative in writing.

9.02. Market Out Termination. This Agreement may be terminated by the
Representative by notice to the Company at any time if payment for and delivery
of the Stock and Warrants is rendered impracticable or inadvisable because (i)
trading in securities generally on the New York Stock Exchange, American Stock
Exchange, or NASDAQ (including NASDAQ SmallCap) shall have been suspended or
materially limited, (ii) a general moratorium on commercial banking activities
in New York or Florida shall have been declared by either federal or state
authorities, or (iii) there has occurred a material adverse change in the
financial markets in the United States or elsewhere including, but not limited
to: a war, new outbreak of hostilities or escalation thereof, or any other
national calamity shall have occurred, or any development involving a crisis or
change in political, financial, or economic conditions, the effect of which on
the financial markets of the United States or overseas is such as it would be
^impracticable or inadvisable for the Representative to proceed or continue with
this Agreement or with the public offering. Notice of such termination may be
given to the Company by telegram, telecopy or telephone and shall subsequently
be confirmed by letter.

9.03. Company's Right to Terminate. In the event any action or
proceeding of the type referred to in subparagraph 9.02 above shall be
instituted or threatened against the Underwriters at any time prior to the
effective date hereunder, the Underwriters fail to comply with subparagraphs
10.01 and 10.02, or in the event there shall be filed by or against the Company
in any court pursuant to any federal, state, local or municipal statute, a
petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of its assets or if it makes an assignment
for the benefit of creditors, the Company shall have the right on three days'
written notice to the Representative to terminate this Agreement without any
liability to the Underwriters of any kind except for the payment of all expenses
as provided herein.

9.04. Effect of Termination Hereunder. Any termination of this
Agreement pursuant to this Section 9 shall be without liability of any character
(including, but not limited to, loss of anticipated profits or consequential
damages) on the part of any party thereto; except that the Company shall remain
obligated to pay the costs and expenses provided to be paid by it specified in
Section 5.07 unless terminated under 9.03; and the Company and the
Representative shall be obligated to pay, respectively, all losses, claims,
damages or liabilities, joint or several, under Section 6.01 in the case of the
Company and Section 6.02 in the case of the Representative.

<PAGE>

SECTION 10
Underwriter's Representations and Warranties

The Underwriters represent and warrant to and agree with the Company
that:

10.01. Registration as Broker-Dealer and Member of NASD. Each
underwriter is registered as a broker-dealer with the Securities and Exchange
Commission and is registered as a broker-dealer in all states in which it
conducts business and is a member in good standing of the National Association
of Securities Dealers, Inc.

10.02. No Pending Proceedings. There is not now pending or threatened
against the Underwriters any action or proceeding of which it has been advised,
either in any court of competent jurisdiction, before the Securities and
Exchange Commission or any state securities commission concerning its activities
as a broker or dealer, nor have any of the Underwriters been named as a "cause"
in any such action or proceeding.

SECTION 11
Rights and Obligations

11.01. Consultation With Representative. See Section 5.24. Consulting.
In reference to the rights and obligations of the Representative provided in the
Consulting Agreement, the Company shall not be required to consult with the
Underwriter concerning any borrowings from banks and institutional lenders or
concerning financing under any equipment leasing or similar arrangements.

11.02. Exercise of Warrants. Upon the exercise of any Warrants after
the Effective Date, the Company will pay the Representative, as principal and
not in its representative capacity, a fee of four percent (4%) of the difference
between the initial offering price and the aggregate exercise price of the
Warrants if: (i) the market price of the Company's Stock is greater than the
exercise price of the Warrants on the date of exercise; (ii) the exercise of the
Warrants was solicited by a member of the NASD; (iii) the Warrants are not held
in a discretionary account; (iv) the disclosure of compensation arrangements has
been made in documents provided to customers, both as part of the original
offering and at the time of the exercise; (v) the solicitation of the exercise
of the Warrants was not in violation of Regulation M promulgated under the
Exchange Act; and (vi) the solicitation of the exercise of the Warrants is in
compliance with NASD Notice to Members 81-38. The warrant solicitation fee is to
be received only by brokers designated in writing by the Company. The Company
agrees not to solicit the exercise of any Warrants through brokers or dealers
other than through the Representative and the Co-Manager provided that the
Company shall not be required to pay the Representative and Co-Manager any
solicitation fee as to any Warrants solicited solely by the Company without any
action on the part of the Representative and the Co-Manager and provided the
Company is permitted by applicable laws to so solicit the exercise of the
Warrants. The Company will not authorize any other dealer to engage in such
solicitation without the prior written consent

<PAGE>

of the Representative and the Co-Manager. The exercise of the Warrants other
than through the Representative and the Co-Manager will be presumed to be
unsolicited unless the customer has indicated in writing that the transaction
was not unsolicited and has designated the broker/dealer which is to receive
compensation for the exercise. The warrant solicitation fee to be paid upon the
exercise of the warrants will not be paid before (12) twelve months after the
effective date of the offering.

SECTION 12
Notice

Except as otherwise expressly provided in this Agreement:

12.01. Notice to the Company. Whenever notice is required by the
provisions of this Underwriting Agreement to be given to the Company, such
notice shall be in writing addressed to the Company as follows:

BIO-AQUA SYSTEMS, INC.
1900 Glades Road, Suite 351
Boca Raton, FL 33431
Telephone: (561) 416-8930
Attention: David Mayer

With a copy to:

Charles B. Pearlman, Esq.
Brian Pearlman, Esq.
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Blvd., Suite 1900
Fort Lauderdale, FL 33301
Telephone: (954) 763-1200
Telefax: (954) 766-7800

12.02. Notice to the Underwriters. Whenever notice is required by the
provisions of this Agreement to be given to the Underwriters, such notice shall
be given in writing addressed to the Representative at the address set out at
the beginning of this Agreement, with a copy to:

Nutmeg Securities, Ltd.
495 Post Road East
Westport, CT 06880
Attention: Dan Guilfoile

<PAGE>

Emerson Bennett & Associates, Inc.
6261 Northwest 6th Way, Suite 207
Fort Lauderdale, FL 33309
Attention: Brentley Martin

With a copy to:

Nancy Van Sant, Attorney
Sacher, Zelman, ^Paul, Beiley & Van Sant P.A.
1401 Brickell, Suite 700
Miami, FL 33133
Telephone: (305) 371-8797
Telefax: (305) 374-2605

SECTION 13
Miscellaneous

13.01. Benefit. This Agreement is made solely for the benefit of the
Underwriters, the Company, their respective officers and directors and any
controlling person, and their respective successors and assigns, and no other
person shall acquire or have any right under or by virtue of this Agreement. The
term "successor" or the term "successors and assigns" as used in this Agreement
shall not include any purchasers, as such, of any of the Stock or Warrants.

13.02. Survival. The respective indemnities, agreements,
representations, warranties, covenants and other statements of the Company or
its officers as set forth in or made pursuant to this Agreement and the
indemnity agreements of the Company and the Underwriters contained in Section 6
hereof shall survive and remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company or the Underwriters or any
such officer or director thereof or any controlling person of the Company or of
the Underwriters, (ii) delivery of or payment for the Stock, (iii) the Closing
Date, and (iv) any successor of the Company and the Underwriters or any
controlling person, officer or director thereof, as the case may be, shall be
entitled to the benefits hereof.

13.03. Governing Law. The validity, interpretation and construction of
this Agreement and of each part hereof will be governed by the laws of the State
of Florida.

13.04. Underwriters' Information. The statements with respect to the
public offering of the Stock on the cover page of the Prospectus and under the
caption "Underwriting"' in the Prospectus constitute the written information
furnished by or on behalf of the Underwriters referred to in subsection 2.02
hereof, in subsection 6.01 hereof and subsection 6.02 hereof.

<PAGE>

13.05. Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original and all of which together
will constitute one and the same instrument.

Please confirm that the foregoing correctly sets forth our Agreement.

Very truly yours,

Bio-Aqua Systems, Inc.

By:________________________

ATTEST:

________________________
Secretary

WE HEREBY CONFIRM AS OF THE DATE HEREOF THAT THE ABOVE LETTER SETS FORTH THE
AGREEMENT BETWEEN THE COMPANY AND US.

NUTMEG SECURITIES, LTD.

By:________________________

EMERSON BENNETT & ASSOCIATES, INC.

By:________________________

BIO-AQUA SYSTEMS, INC.

By:________________________

<PAGE>

ANNEX A
-------

NUTMEG SECURITIES, LTD.
495 Post Road East
Westport, Connecticut 06880

CONSULTING AGREEMENT
--------------------

_____________, 1999

Bio-Aqua Systems, Inc.
1900 Glades Road, Suite 351
Boca Raton, Florida 33431

Attention: Mr. Max Rutman
Chairman of the Board, President and Chief Executive Officer

Dear Sirs:

This will confirm the arrangements, terms and conditions pursuant to
which Nutmeg Securities, Ltd. (the "Representative") and Emerson Bennett &
Associates, Inc. (collectively the "Consultant") have been retained to serve as
consultants and advisors to Bio-Aqua Systems, Inc., a Florida corporation (the
"Company"), for the term set forth in Section 3 below. The undersigned hereby
agree to the following terms and conditions:

1. Engagement. The Company hereby retains the Consultant to perform
consulting and advisory services, and the Consultant hereby accepts such
retention and agrees to do and perform consulting and advisory services, upon
the terms and conditions set forth herein.

2. Duties of the Consultant.

(a) Consulting Services. The Consultant will provide such
general financial consulting services and advice pertaining to the Company's
business affairs (as further set forth below), as and when the Company may from
time to time reasonably request upon reasonable notice. Without limiting the
generality of the foregoing, the Consultant will assist the Company in
developing, studying and evaluating financing and capital structure, mergers and
acquisitions activity and corporate financing proposals, prepare reports and
studies thereon when advisable, and assist in negotiations and discussions
pertaining thereto.

(b) Financing. The Consultant will assist and represent the
Company in obtaining both short and long-term financing, when so requested by
the Company in the

<PAGE>

Company's sole discretion. The Consultant will be entitled to additional
compensation under such terms as may be agreed to by the parties in connection
therewith.

(c) Wall Street Liaison. The Consultant will, when
appropriate, arrange meetings between representatives of the Company and
individuals and financial institutions in the investment community, such as
security analysts, portfolio managers and market makers.

The services described in this Section 2 shall be rendered by the
Consultant in consultation with the Company at such time and place and in such
manner (whether by conference, telephone, letter or otherwise) as the Consultant
and the Company may reasonably determine.

3. Term. The term of this Agreement shall commence on the date hereof
and continue for a period of two years from the date hereof (the "Term").

4. Compensation. As compensation in full for the Consultant's services
hereunder during the Term, the Company shall pay to the Consultant $60,000 per
annum, payable to the Representative, commencing on the effective date.

5. Expenses. The Company shall pay and reimburse the Consultant for all
reasonable out-of-pocket expenses incurred by the Consultant and approved in
advance in writing by the Company in the performance of its services under this
Agreement.

6. Relationship. Nothing herein shall constitute the Consultant as an
employee or agent of the Company. Except as might hereinafter be expressly
agreed, the Consultant shall not have the authority to obligate or commit the
Company in any manner whatsoever. Nothing herein shall preclude the Company from
enjoying the services of any other investment banking firm during the term of
this Agreement or any entity providing similar services as the consultant.

7. Confidentiality. Except in the course of the performance of its
duties hereunder, and in such case, only upon express written consent of the
Company, the Consultant agrees that it shall not disclose any trade secrets,
know-how, or other proprietary information not in the public domain learned as a
result of this Agreement unless and until such information becomes generally
known or is in the public domain.

8. Finder's or Broker's Fees. The Company acknowledges and agrees that,
with the written agreement and at the request of the Company, the Consultant may
act as a finder or financial consultant in various business transactions in
which the Company or any of its subsidiaries may be involved, such as mergers,
acquisitions, joint ventures or investments and that the Consultant may be
entitled to receive a finder's fee or brokerage commission or other rights,
profits or payments in connection with such transactions provided, however, that
the Company and the Consultant have entered into an agreement prior thereto
regarding the services to be performed by and the fee to be paid to the
Consultant.

<PAGE>

9. Permitted Activities. Nothing contained in this Agreement shall
limit or restrict the right of the Consultant or of any officer, director,
shareholder, employee, agent or representative of the Consultant to be a
partner, owner, director, officer, employee, agent or representative of, or
engage in, any other business, whether of a similar nature or not, or limit or
restrict the right of the Consultant to render services of any kind to any other
corporation, firm, individual or other entity. Nothing contained in this
Agreement shall limit or restrict the right of the Company to retain the
services of other investment bankers or financial consultants.

10. Assignment and Termination. This Agreement shall not be assignable
by any party except to a successor to all or substantially all of the business
of either party without the prior written consent of the other party, which
consent may be arbitrarily withheld by the party whose consent is required.

11. Notices. All notices hereunder shall be in writing and shall be
validly given, made or served if in writing and delivered in person or when
received by facsimile transmission, or five days after being sent first class
certified or registered mail, postage prepaid or one day after being sent by
nationally recognized overnight courier to the party for whom intended at the
addresses as set forth above or at such other address as may be provided.

12. Governing Law; Submission to Jurisdiction. This agreement shall be
interpreted, construed, governed and enforced according to the laws of the State
of Florida without giving effect to the conflicts of law rules thereof. The
Company and the Consultant hereby agree that any action, proceeding or claim
against it arising out of, or relating in any way to, this Agreement shall be
brought and enforced in the courts of the State of Florida or of the United
States of America in Florida, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company and the Consultant hereby
irrevocably waive any objection to such exclusive jurisdiction or inconvenient
forum and also hereby irrevocably waive any right or claim to trial by jury in
connection with any such action, proceeding or claim.

13. Amendments. No amendment or modification of the terms or conditions
of this Agreement shall be valid unless in writing and signed by the parties
hereto.

14. Indemnification. As a consultant for the Company, the Consultant
must at times rely upon the information supplied to the Consultant by the
Company's officers, directors, agents and employees as to accuracy and
completeness. Therefore, the Company agrees to indemnify, hold harmless and
defend the Consultant, its directors, officers, employees and agents from and
against any and all claims, actions, proceedings, losses, liabilities, costs and
expenses (including without limitation, reasonable attorneys' fees) incurred by
any of them in connection with or as a result of any inaccuracy, incompleteness
or omission of information given to the Consultant in writing by the Company's
officers, directors, agents or employees in connection with the rendering of
services by the Consultant requested by the Company hereunder.

<PAGE>

15. Counterparts. This Agreement may be executed in one or more
counterparts which, taken together, shall constitute one and the same
instrument, and this Agreement shall become effective when one or more
counterparts have been signed by each of the parties. It shall not be necessary
in making proof of this Agreement or any counterpart hereof to account for more
than one such counterpart.

Very truly yours,

NUTMEG SECURITIES, LTD.

By:________________________________
Name:
Title:

EMERSON BENNETT & ASSOCIATES, INC.

By:________________________________
Name:
Title:

AGREED AND ACCEPTED:

BIO-AQUA SYSTEMS, INC.

By:_______________________________________
Max Rutman
Chairman of the Board, President and
Chief Executive Officer

CONSENT OF INDEPENDENT AUDITORS

We consent to the inclusion in Amendment 3 to Form SB-2 being filed under the
Securities Exchange Act of 1933 by Bio-Aqua Systems, Inc. of our report dated
February 26, 1999, relating to our audits of the combined financial statements
of Bio-Aqua Systems, Inc. as of December 31, 1998 and 1997 and appearing in the
aforementioned Amendment 3 to Form SB-2.

SPEAR, SAFER, HARMON & CO.
Certified Public Accountants

Miami, Florida
August 24, 1999

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