10QSB 1 bioone-10qsb.txt QUARTERLY REPORT ENDED MARCH 31, 2004 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB (MARK ONE) |X| Quarterly Report Pursuant to Section 13 or 15(d) of Securities Exchange Act of 1934 For the quarterly period ended MARCH 31, 2004 [ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______ to _______ Commission File No. 000-31889 --------- BIO-ONE CORPORATION ------------------- (Name of Small Business Issuer in Its Charter) NEVADA 65-0815746 ------ ---------- (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) 1630 WINTER SPRINGS BOULEVARD, WINTER SPRINGS, FLORIDA 32708 ------------------------------------------------------ ----- (Address of Principal Executive Offices) (Zip Code) (407) 977-1005 -------------- (Issuer's Telephone Number, Including Area Code) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] There were 59,515,870 shares of common stock outstanding as of May 10, 2004. PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BIO-ONE CORPORATION INDEX OF FINANCIAL STATEMENTS Page Number ------ FINANCIAL STATEMENTS Balance Sheets March 31, 2004 (Unaudited) and December 31, 2003 2 Statements of Operations Three months ended March 31, 2004 (Unaudited) and March 31, 2003 (Unaudited) 3 Statements of Cash Flows Three months ended March 31, 2004 (Unaudited) and March 31, 2003 (Unaudited) 4 Notes to Financial Statements (Unaudited) 5 1 BIO-ONE CORPORATION BALANCE SHEETS
ASSETS ------ MARCH 31, 2004 DECEMBER 31, UNAUDITED) 2003 ------------- ------------ Current assets: Cash and cash equivalents $ 4,389,467 210,021 Accounts receivable 3,036,703 16,652 Inventory 3,871,430 23,537 Prepaid expense 164,086 35,437 ------------ ------------ Total current assets 11,461,686 285,647 Property and equipment, at cost, net of accumulated depreciation and amortization 1,049,981 38,003 Deposits and other assets 24,252 152,276 Loan commitment fees, net 2,516,400 150,000 Goodwill 21,696,856 -- ------------ ------------ Total assets $ 36,749,175 625,926 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable $ 3,364,841 32,659 Accrued expenses 1,734,991 151,761 Current installments of note payable 4,442,502 574,502 Convertible debentures 15,000,000 -- ------------ ------------ Total current liabilities 24,542,334 758,922 ------------ ------------ Notes payable, less current installments 9,532,000 Shareholders' equity: Common stock - $.001 par value, authorized 100 million shares; issued 56,532,232 shares and 44,238,915 shares 56,532 44,238 Additional paid in capital 6,069,456 3,081,750 Accumulated deficit (3,451,147) (3,258,984) ------------ ------------ Total shareholders' equity 2,674,841 (132,996) ------------ ------------ $ 36,749,175 625,926 ============ ============
See accompanying notes to financial statements 2 BIO-ONE CORPORATION STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2004 2003 (UNAUDITED) (UNAUDITED) ----------------------------- Revenues: Net sales $ 4,673,504 -- ------------ ------------ Costs and expenses: Cost of goods sold 3,308,468 -- Selling, general and administrative 1,539,485 167,661 ------------ ------------ 4,847,953 167,661 ------------ ------------ Operating loss (174,449) (167,661) Non-operating revenue (expense): Interest expense (4,577,714) (4,782) ------------ ------------ Loss before income taxes (4,752,163) (172,443) Provision for income taxes -- -- ------------ ------------ Net loss $ (4,752,163) (172,443) ============ ============ Basic earnings per share $ (0.09) (0.01) ============ ============ Diluted earnings per share $ (0.09) (0.01) ============ ============ Weighted average number of shares outstanding 50,385,573 21,682,092 ============ ============ See accompanying notes to financial statements. 3 BIO-ONE CORPORATION STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2004 2003 (UNAUDITED) (UNAUDITED) ------------ ------------- Cash flows from operating activities: Net loss $ (4,752,163) (172,443) Adjustments to reconcile net income to net cash provide by operating activities: Stock issued for services -- 24,300 Depreciation and amortization 153,012 5,327 Value of beneficial conversion feature 4,560,000 -- Changes in operating assets and liabilities, net of acquisitions: Accounts receivable 16,652 -- Inventories 23,537 -- Accounts payable and accrued expenses (1,940,814) (132,596) Deposits 125,349 (53,500) ------------ ------------ Net cash used in operating activities (1,814,427) (328,912) ------------ ------------ Cash flows from investing activities: Purchase of property and equipment (6,127) (5,980) Cash paid for acquisitions (11,500,000) -- ------------ ------------ Net cash used in investing activities (11,506,127) (5,980) ------------ ------------ Cash flows from financing activities: Proceeds from sale of common stock -- 500,000 Proceeds (repayments) of note payable, stockholder -- (27,600) Proceeds from debentures 15,000,000 -- Proceeds from notes payable 5,000,000 -- Payments for loan financing cost (2,500,000) -- ------------ ------------ Net cash provided by financing activities 17,500,000 472,400 ------------ ------------ (Decrease) increase in cash and cash equivalents 4,179,446 137,508 Cash and cash equivalents - beginning of period 210,021 14,742 ------------ ------------ Cash and cash equivalents - end of period $ 4,389,467 152,250 ============ ============ Supplemental disclosure of non cash financing and investing activities:
See accompanying notes to financial statements. 4 BIO-ONE CORPORATION NOTES TO FINANCIAL STATEMENTS (1) PRESENTATION OF UNAUDITED FINANCIAL STATEMENTS The unaudited financial statements have been prepared in accordance with rules of the Securities and Exchange Commission and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows, in conformity with generally accepted accounting principles. The information furnished, in the opinion of management, reflects all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of March 31, 2004, and results of operations and cash flows for the three month periods ended March 31, 2004 and 2003. The results of operations are not necessarily indicative of results which may be expected for any other interim period, or for the year as a whole. (2) INVENTORIES Inventories consist of the following: DECEMBER 31, MARCH 31, 2004 2004 (UNAUDITED) -------------------------------- Finished goods $ 3,871,430 23,537 ============ ====== (3) CONVERTIBLE DEBT During the three months ended March 31, 2004, the Company issued $15,000,000 of convertible notes with interest at 5%. The notes are convertible at a rate of the Lesser of (i) an amount equal to seventy-five cents ($0.75) or (ii) an amount equal to 80% of the lowest daily volume weighted average price for the 5 trading days immediately preceding the conversion date. The Company recorded interest expense of approximately $4,560,000 as a result of discounts amortized relating to these notes. The notes are convertible for a period of 6 months after the effective date through September, 2004. On February 5, 2004, the Company executed a Secured Promissory Note payable to Cornell Capital Partners, LP in the principal amount of $5,000,000. The Promissory Note accrues interest at an annual rate of 12% and is payable out of the Company's cash or out of the net proceeds received by the Company under its Equity Line of Credit Agreement, dated July 25, 2002 with Cornell Capital Partners. The Company must pay all amounts due under the Promissory Note by August 3, 2004, regardless of the availability of proceeds under the Equity Line of Credit Agreement. The Promissory Note is secured by all of the assets of the Company. As of March 31, 2004, $3,500,000 of this Promissory Note had been converted into equity. 5 ITEM 2. MANAGEMENT'S PLAN OF OPERATION AND DISCUSSION AND ANALYSIS INTRODUCTORY STATEMENTS Forward-Looking Statements and Associated Risks. This filing contains forward-looking statements, including statements regarding, among other things, (a) our Company's projected sales and profitability, (b) our Company's business plan and growth strategies, (c) our Company's future financing plans and (d) our Company's anticipated needs for working capital. In addition, when used in this filing, the words "believes," "anticipates," "intends," "in anticipation of," "expects," and similar words are intended to identify forward-looking statements. These forward-looking statements are based largely on our Company's expectations and are subject to a number of risks and uncertainties, many of which are beyond our Company's control. Actual results could differ materially from these forward-looking statements as a result of changes in trends in the economy and any industry in which the Company enters, competition, the availability of financing and other factors. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. OUR BUSINESS We are seeking to become a leading manufacturer and marketer of brand name nutritional supplements sold through multiple distribution pipelines. Our success will be dependent on our ability to acquire companies in the nutritional supplement field and to effectively integrate their operations. Until our acquisition of the assets of Physicians Nutraceutical Laboratories, Inc. in September 2003, we had no operations, products, customers, suppliers, or marketing and sales distribution system. Since that time, we have acquired (i) 80% of the issued and outstanding capital stock of American Nutritional Exchange, (ii) all of the issued and outstanding capital stock of Interactive Nutrition Inc., (iii) and a 51% interest in a Chinese joint venture with Weifang Shengtai Pharmaceuticals. We now have a total of approximately six hundred (600) employees. Our strategy will be dependent upon our successfully integrating the acquired businesses and to continue acquiring manufacturing, marketing and distribution companies currently engaged in various aspects of this industry. THE NUTRITIONAL SUPPLEMENT INDUSTRY As the "baby boomer" population ages and life expectancies and discretionary income increases, we believe that more emphasis is being placed on the quality of a person's health and wellness. People want to live well as they live longer. We believe that this will have a disproportionate effect on health care expenditure and even more so on nutritional supplement sales, because of the popularity of those products with older people. It is estimated that the population of those 65 years and older will double to nearly 25% of the U.S. population by the year 2030. It is documented that elders who take nutritional supplements have higher intakes of vitamins and minerals and are more likely to meet the recommended dietary allowance for many vitamins and minerals. A related trend is the growth in use of complementary and alternative medicine services. A powerful recent trend has been the establishment of so-called Integrative Medicine practices, in which practitioners use both traditional and alternative methods. A central feature of complementary and alternative medicine and integrative medicine is a search for alternatives to drug therapy and in many cases this leads practitioners to recommending and in some cases selling nutritional supplements. We believe this trend, which is driven by consumer demand will further reinforce the growth in sales of consumer health products such as nutritional supplements. Not all product categories within nutritional supplements are of equal interest. While vitamin sales should not be overlooked, we believe that the real growth in the future is likely to be in products developed to address a particular health condition or to enhance performance. Bio-One intends to focus upon specialty supplements, which require superior scientific research and product development expenditure, but which also command the industry's most attractive margins. Vitamins and other nutritional supplements are sold primarily through six channels of distribution: health food stores, drug stores, supermarkets and other grocery stores, discount stores, mail order and direct sales organizations. The domestic nutritional supplement industry is highly fragmented with a large number of small competitors involved in manufacturing and marketing vitamins and other nutritional supplement products to health food retailers and distributors. Most of these companies are relatively small businesses operating on a local or regional basis. With the acquisitions of the assets of Physicians Nutraceutical Laboratories, Inc., 80% of the capital stock of American Nutritional Exchange, all of the issued and outstanding capital stock of Interactive Nutrition, Inc and the joint venture with Weifang Shengtai Pharmaceuticals, we believe that we have the foundation to move forward with our business strategy. Our strategy is to increase sales and profits by acquiring companies, which we anticipate will allow us on a combined basis to become a 6 recognized name in the growing vitamin and nutritional supplement field. We intend to meet these objectives by targeting additional companies which management believes are undervalued. We will rely on our consultant, Health Business Partners, as well as Armand Dauplaise, our President and Chief Executive Officer, and our directors for assistance in identifying prospective acquisition candidates and to conduct any required due diligence. We believe that companies that are typically family owned and are looking for an exit strategy or those family owned businesses where there are no family successors or the successors do not want to operate the business are prime acquisition candidates. On June 20, 2003, we entered into an agreement with Health Business Partners, pursuant to which Health Business Partners will assist Bio-One in identifying acquisition candidates. Heath Business Partners is a merger and acquisition advisory firm specializing in the nutrition and customer healthcare industries. As an advisor, principal or general partner, Health Business Partners has been involved in more than 25 transactions in the nutrition and/or customer healthcare industries. Pursuant to the agreement, Bio-One is obligated to pay Health Business Partners $2,000 per day with a $10,000 cap per month and a success fee based upon the size of future acquisitions. We have acquired a manufacturing facility pursuant to our acquisition of Interactive Nutrition, which should allow us to produce our vitamins and supplements, as well as manufacture products and increase our revenues by offering services to third party distributors who market nutritional supplements. Now that we have acquired the manufacturing facility, we intend to focus on the distributors who market nutritional supplements. Future acquisitions could be financed by internally generated funds, institutional financing, public or private placement of our debt or equity securities or a combination of these. However, market conditions, the trading price and volume of our common stock as well as the uncertainty of the nature of any acquisition may limit our ability to finance future operations. THE NUTRITIONAL SUPPLEMENT MARKET With an aging baby boom population striving to retain their health and vitality, nutritional supplements and vitamins are in growing demand. Nutritional supplements are natural, nutritional, biologically active materials formulated to provide specific health benefits to humans. Nutraceuticals are biologically active materials, derived from plant, microbial or animal sources, which are formulated to provide specific health and productivity benefits including, but not limited to, functional foods, fermented foods, phytochemicals, microbial feed additives, probiotics, herbal products, vitamins and health supplements. PNLABS, INC. Bio-One's focus is to manufacture and market products in the nutritional supplement industry. We intend to vertically integrate production, marketing, and distribution. On September 11, 2003, our wholly-owned subsidiary, PNLabs, Inc., successfully consummated the acquisition of the assets of Physicians Nutraceutical Laboratories, Inc. from Physicians Nutraceutical Laboratories, Inc. The purchased assets included inventory, accounts receivable, office furniture, the rights to the 5 products marketed by Physicians Nutraceutical Laboratories and all rights to the operational business. Physicians Nutraceutical Laboratories did not retain any assets. The consideration given for the purchase of the assets of Physicians Nutraceutical Laboratories was a five-year, 5% royalty on all monthly net sales of PNLabs. Currently, Physicians Nutraceutical Laboratories' only business activity is to distribute these royalty payments to its shareholders. Physicians Nutraceutical Laboratories has signed a Non-Compete Agreement whereby it has agreed that it will not compete with Bio-One, PNLabs or any of our products. Physicians Nutraceutical Laboratories has been in business since 1999 and prior to the acquisition it employed five people. PNLabs has retained five of these people, which include an accounting manager, a general manager, an administrative assistant and two office staff personnel. PNLabs markets five products: (1) Choless(TM); (2) Choless(TM) Test Kit; (3) Hormone Health; (4) Arthritis Health; and (5) Basic Essentials Multi-Vitamin. Physicians Nutraceutical Laboratories developed the product formulas and previously marketed these products to healthcare practitioners and retail stores. Choless(TM) ($29.95) is designed to support healthy HDL, LDL, triglyceride and homocyteine levels. The Choless(TM) Test Kit ($39.95) is designed to be a home cholesterol test kit with results in approximately 15 minutes. Hormone Health ($19.95), designed by physicians, is intended to address symptoms of menopause, bone loss prevention, as well as promote healthy heart functions. Arthritis Health ($29.95) is designed to combine cartilage building and repair components with ingredients to promote the natural formation within the body of a natural anti-inflammatory agent. Basic Essentials Multi-Vitamin ($29.95) is designed as a daily regimen to promote proper nutrition. PNLabs' primary focus is to offer a broad-based product line, which we anticipate will target some of the largest groups currently taking nutritional supplements. We intend to continue to market these five products through PNLabs, as well as add new products to our product lines, and further develop a comprehensive marketing plan for all of our products. 7 The acquisition by our wholly-owned subsidiary, PNLabs, of substantially all of the assets of Physicians Nutraceutical Laboratories requires us to pay a five-year royalty to Physicians Nutraceutical Laboratories equal to 5% of the net monthly sales of PNLabs and committed us to immediately use $50,000 for working capital. Further, pursuant to our agreement with Physicians Nutraceutical Laboratories, up to an additional $1.4 million of development capital may be committed depending on future operating results. The $1.4 million of development capital was at the rate of $50,000 per month from September through December 2003. It is now at the rate of $100,000 per month through December 2004, subject to the business operating according to its projections for revenues and profits. The development capital is being allocated to develop products distribution channels for direct mail, infomercials, e-commerce, retail, radio, and a physician's network. There is no negative implication to Bio-One if we do not meet the $1.4 million capital referenced above. The audited numbers for Physicians Nutraceutical Laboratories indicate revenues for 2002 of approximately $800,000. The value of the assets that we have acquired has been set at approximately $108,000. The table below compares revenues, total expenses and net loss of Physicians Nutraceutical Laboratories for the six months ended June 30, 2003, and the years ended December 31, 2002 and 2001, respectively. PERIOD REVENUES TOTAL EXPENSES NET LOSS ------ ---------- --------------- ---------- Six Months ended June 30, 2003 (unaudited) $ 505,088 $ 720,243 $ 215,155 Year ended December 31, 2002 (unaudited) $ 807,229 $ 973,560 $ 166,331 Year ended December 31, 2001 (audited) $ 309,861 $1,274,774 $ 964,913 MANUFACTURING We have acquired a manufacturing facility pursuant to our acquisition of Interactive Nutrition, which should allow us to produce our vitamins and supplements, as well as manufacture products and increase our revenues by offering services to third party distributors who market nutritional supplements. Now that we have acquired the manufacturing facility, we intend to focus on the distributors who market nutritional supplements Our management believes that the principal markets in which we compete are competitive and fragmented, with competitors in both the private label market and health supplements market. The term "private label market" describes distributors' products that are manufactured by others. We do not believe that this is the most efficient way to operate. SOURCES AND AVAILABILITY OF RAW MATERIALS AND PRINCIPAL SUPPLIERS We obtain the raw materials for the manufacture of our products from other sources. We believe that there are currently in excess of two hundred (200) primary suppliers of raw materials within the U.S. We do not anticipate having contracts with any entities or persons committing such suppliers to provide the materials required for the production of our products. Raw materials including all natural herbs and minerals are plentiful worldwide. MARKETING We now have marketing, sales and distribution systems in place within each of our subsidiaries. The following discussion is predicated upon us generating significant revenues and raising additional capital to fully implement our consolidation strategy. Through each of our subsidiaries, we now have a sales and marketing/customer service department dedicated to selling our services and proprietary products and technologies to branded companies in the health supplement industry. The primary markets for our services and products are in the preventive and alternative healthcare fields. Preventive and alternative healthcare programs and systems establish very specific requirements in helping improve and maintain citizenry health. We believe that the market is global and growing rapidly. As nutritional supplements use combined with 8 preventive and alternative healthcare become more readily accepted, we believe physicians and other healthcare providers will be targeted for marketing purposes. DEPENDENCE ON NEW PRODUCTS Our ability to grow will be dependent upon the success of our acquisitions integration program and our ability to introduce new and innovative products into such markets. We will attempt to introduce additional products in our existing markets. The success of new products is subject to a number of conditions, including developing products that will appeal to customers and comply with existing regulations at the time of introduction. COMPETITION Management of Bio-One believes that competition in our principal markets and the private label market is intense and fragmented. We are in the process of continually developing our marketing strategies and product lines and expect that both will involve an ever-changing and evolving process. We will continually attempt to competitively price our products, provide superior quality products, and achieve success through attentive and efficient customer service and effective marketability strategies. We believe that there are many well-established competitors with substantially greater financial revenues, as well as, significant new market entrants in the nutritional supplement industry. NBTY is the industry leader with $1.2 billion in annual sales. Less than twenty (20) companies are realizing annual revenues in excess of $100 million, including: Leiner Health Products, American Home Products, and Pharmavite. TRADEMARKS PROPRIETARY PROTECTION Our business prospects depend largely upon our ability to capitalize on favorable consumer recognition of our trade names. Except for the trademarks held by our recent acquisitions, we do not currently hold any other trademarks. However, as we pursue our consolidation strategy, we intend to rely on trademarks obtained from any of our acquired companies or promote the use of the Bio-One name. In addition, we anticipate that we will also rely on trade secrets and proprietary know-how, and employ various methods to protect our concepts. Unlike pharmaceutical products that rely on specific combinations of drugs and chemicals, patents cannot protect herbal products. However, management believes that simply knowing the ingredients of an herbal product does not mean that other manufacturers can duplicate the product. GOVERNMENTAL REGULATION The manufacturing, processing, formulating, packaging, labeling, distributing, selling and advertising of our products are subject to regulation by one or more federal agencies. The most active regulation has been administered by the Food and Drug Administration ("FDA") which regulates our products pursuant to the Federal Food, Drug and Cosmetic Act ("FDCA") and regulations promulgated thereunder. In particular, the FDA regulates the safety, manufacturing, labeling and distribution of dietary supplements, including vitamins, minerals and herbs, food additives, food supplements, over-the-counter drugs and prescription drugs, medical devices and cosmetics. In addition, the FTC has overlapping jurisdiction with the FDA to regulate the labeling, promotion and advertising of dietary supplements, over the counter drugs, cosmetics and foods. Although the dietary supplement industry is subject to regulation by the FDA and local authorities, dietary supplements, including vitamins, minerals, herbs and other dietary ingredients, now have been statutorily affirmed as a "food." Dietary supplement companies are authorized to make substantiated statements of nutritional support and, subject to several possible limitations, to market manufacture substantiated safe dietary supplement products without FDA pre-clearance. Failure to comply with applicable FDA requirements can result in sanctions being imposed on Bio-One or the manufacturers of our products, including but not limited to fines, injunctions, product recalls, seizures and criminal prosecution. Compliance with applicable FDA and any state or local statutes is critical. Although we believe that we are in compliance with applicable statutes, should the FDA amend its guidelines or impose more stringent interpretations of current laws or regulations, we may not be able to comply with these new guidelines. We are unable to predict the nature of such future laws, regulations, interpretations or applications, nor can we predict what effect additional governmental regulations or administrative orders, when and if promulgated, would have on our business in the future. These regulations could, however, 9 require the reformation of certain products to meet new standards, market withdrawal or discontinuation of certain products not able to be reformulated, imposition of additional record keeping requirements, expanded documentation regarding the properties of certain products, expanded or different labeling and/or additional scientific substantiation. The FDCA has been amended several times with respect to dietary supplements, most recently by the Dietary Supplement Health and Education Act of 1994 ("DSHEA"). DSHEA was enacted on October 15, 1994. It provides a new statutory framework governing the composition and labeling of dietary supplements. DSHEA provides a regulatory framework to ensure safe, quality dietary supplements and the dissemination of accurate information about such products. Under DSHEA, dietary supplements are generally excluded from the legal definition of "food additive." With respect to composition, DSHEA created a new class of "dietary supplements", consisting of vitamins, minerals, herbs, amino acids and other dietary substances for human use to supplement the diet, as well as concentrates, metabolites, extracts or combinations of such dietary ingredients. Generally, under DSHEA, dietary ingredients that were on the market before October 15, 1994 may be sold without FDA pre-approval and without notifying the FDA. On the other hand, a new dietary ingredient (one not lawfully on the market before October 15, 1994) requires proof that it has been present in the food supply as an article used for food without being chemically altered, or evidence of a history of use or other evidence of safety establishing that it is reasonably expected to be safe. The FDA must be supplied with such evidence at least seventy-five (75) days before the initial introduction into interstate commerce use of a new dietary ingredient. The FDA may not accept the evidence of safety for any new dietary ingredients that we may decide to use, and the FDA's refusal to accept such evidence could result in regulation of such dietary ingredients as adulterated until such time as reasonable expectation of safety for the ingredient can be established to the satisfaction of the FDA. As for labeling, DSHEA permits "statements of nutritional support" for dietary supplements without FDA pre approval. Such statements may describe how particular dietary ingredients affect the structure, function or general well being of the body, or the mechanism of action by which a dietary ingredient may affect body structure, function or well being (but may not state that a dietary supplement will diagnose, mitigate, treat, cure or prevent a disease). A company making a statement of nutritional support must possess substantiating evidence for the statement, and, for such statements that are not about the effects on the body as a result of a dietary supplement used as a tool for its nutritive value and are not otherwise "health claims," disclose on the label that the FDA has not reviewed that statement and that the product is not intended for use for a disease, and notify the FDA of the statement within thirty (30) days after its initial use. The manner for making the disclosure and notifying the FDA are set forth in the regulations. However, the FDA may determine that a given statement of nutritional support that we decide to make is a drug claim rather than an acceptable nutritional support statement. Such a determination would require deletion of the drug claim or our submission, and the FDA's approval of a New Drug Application ("NDA"), which would entail costly and time-consuming clinical studies. In addition, DSHEA allows the dissemination of "third party literature", publications such as reprints of scientific articles linking particular dietary ingredients with health benefits. Third party literature is exempted from FDA regulation as dietary supplement "labeling" and may be used in connection with the sale of dietary supplements to consumers. Such a publication may be so used if, among other things, it is not false or misleading, no particular manufacturer or brand of dietary supplement is promoted and a balanced view of available scientific information on the subject matter is presented. There can be no assurance, however, that all pieces of third party literature that may be disseminated in connection with our products will be determined by the FDA to satisfy each of these requirements, and any such failure could subject the product involved to regulation as a new drug or as a "misbranded" product. DSHEA permits substantiated, truthful and non misleading statements of nutritional support to be made in labeling, such as statements describing general well being resulting from consumption of a dietary ingredient or the role of a nutrient or dietary ingredient in affecting or maintaining structure or function of the body. Any statement of nutritional support beyond traditional claims must be accompanied by disclosure that the FDA has not evaluated such statement and that the product is not intended to cure or prevent any disease. We anticipate that the FDA will promulgate Good Manufacturing Practices ("GMPs"), which are specific to dietary supplements and require at least some of the quality control provisions contained in the GMPs for drugs. Management anticipates that the FDA may promulgate GMP regulations authorized by DSHEA, which are specific to dietary supplements. GMP regulation would require supplements to be prepared, packaged and held in compliance with such rules, and may require similar quality control provisions contained in the GMP regulations for drugs. If the FDA adopts GMP regulations specific to dietary supplements, we may not be able to comply with such GMP rules upon promulgation or without incurring material expenses to do so. Our products and product related activities may also be subject to regulation by other regulatory agencies, including but not limited to the Federal Trade Commission ("FTC"), the Consumer Products Safety Commission, the United States Department of Agriculture, the United States Postal Service, the United States Environmental Protection Agency and the Occupational Safety and Health Administration. These activities are also regulated by various agencies of the states and 10 localities in which our products are sold. The products and product-related activities of Interactive Nutrition Inc. and our Chinese joint venture are regulated by the applicable regulatory agencies in Canada and China. Advertising of dietary supplement products is subject to regulation by the FTC under the Federal Trade Commission Act ("FTCA"). Section 5 of the FTCA prohibits unfair methods of competition and unfair or deceptive trade acts or practices in or affecting commerce. Section 12 of the FTCA provides that the dissemination or the causing to be disseminated of any false advertising pertaining to drugs or foods, which would include dietary supplements, is and unfair or deceptive act or practice. Under the FTC's Substantiation Doctrine, an advertiser is required to have a "reasonable basis" for all objective product claims before the claims are made. Pursuant to this FTC requirement, we are required to have adequate substantiation of all material advertising claims made for its products. Failure to adequately substantiate claims may be considered either deceptive or unfair practices. In recent years the FTC has initiated numerous investigations of dietary supplement and weight loss products and companies. The FTC has recently issued a guidance document to assist supplement marketers of dietary supplement products in understanding and complying with the substantiation requirement. The FTC is authorized to use a variety of processes and remedies for enforcement, both administratively and judicially including compulsory process, cease and desist orders, and injunctions. FTC enforcement can result in orders requiring, among other things, limits on advertising, corrective advertising, consumer redress, divestiture of assets, rescission of contracts and such other relief as may be deemed necessary. State and local authorities can also regulate advertising and labeling for dietary supplements and conventional foods. We believe that any product or supplement we distribute will be either G.R.A.S. (Generally Regarded As Safe) listed by the FDA or do not currently require extended regulatory approval. Recent legislation has resulted in a regulatory environment, which sets what we believe to be reasonable limitations and guidelines on health claims and labeling for natural products. We believe that current and reasonably foreseeable governmental regulation will have minimal impact on our business. The FTC oversees claims made by us and other companies in the nutritional supplement industry. The FTC under the Federal Trade Commission Act prohibits the use of unfair or deceptive trade practices, including false or misleading advertising. The FTC in recent years has brought a number of actions challenging claims by companies. These actions stem from the Retail Truth In Labeling laws. In the future, we may be subject to additional laws or regulations administered by the FDA or other federal, state or foreign regulatory authorities, the repeal of laws or regulations, which Bio-One considers favorable, or more stringent interpretations of current laws or regulations. In fact, the FDA strictly regulates dietary supplements, as opposed to nutritional supplements, which are subject only to Truth In Labeling laws. Should we begin producing nutritional supplements in the United States, or should one of our products be determined by the FDA to be a dietary supplement, more stringent regulation of our products may take place. Compliance with these additional rules and regulations may result in a considerable expense or may cause us to have to discontinue production of some or all of our then current products. New laws and regulations could, however, require the reformulation of certain products to meet new standards, the recall or discontinuance of certain products not able to be reformulated, imposition of additional record keeping requirements, or expanded documentation of the properties of certain products, expanded or different labeling and scientific substantiation. COMPLIANCE WITH ENVIRONMENTAL LAWS We believe that we are in compliance with all relevant environmental laws. In fact, we believe there are no environmental laws, which directly impact our business. Due to the nature of our operations, we believe that the cost of complying with environmental laws will not have a significant effect on our operations. RESEARCH & DEVELOPMENT In order to stay competitive, we must continually introduce new products. This involves research and development. To the extent that we have sufficient capital, we intend to actively pursue the research, development, manufacture and distribution of nutritional supplements. OUR ACQUISITION STRATEGY We intend to become a vertically integrated company in the nutritional supplement industry. In furtherance thereof, we believe the acquisition of the assets of Physicians Nutraceutical Laboratories, 80% of the capital stock of American Nutritional Exchange, the stock of Interactive Nutrition Inc. and our 51% interest in our Chinese joint venture represents the first steps in our acquisition strategy. We intend to continually seek to acquire additional manufacturing, distribution and 11 marketing companies that we believe have the ability to profitably operate their business and whose revenues can be substantially increased by means of improved operating efficiencies in a vertically integrated company. We may seek to acquire companies with lower earnings, if management believes that the product, facilities, management or mix will fit within our overall objective to become a leader in the nutritional supplement industry. We intend to seek opportunities which we believe have the potential of long-term growth as opposed to short-term earnings. Due to our limited capital resources, the consummation of a business combination will likely involve the acquisition of, or merger or consolidation with a company that does not need substantial additional capital but one where its owners see the advantage of becoming one of the few companies in the nutritional supplement field to be vertically integrated and provide enhanced liquidity for the target business' current shareholders by exchanging their common stock for stock and/or cash in a public vehicle. NO OPPORTUNITY FOR SHAREHOLDER EVALUATION OR APPROVAL OF BUSINESS COMBINATIONS Due to nondisclosure and confidentiality agreements which we may be required to execute, our shareholders will, in all likelihood, not receive nor otherwise have the opportunity to evaluate any financial or other information which will be made available to us in connection with selecting a potential business combination until after we have entered into an agreement to effectuate a business combination. As a result, shareholders will be almost entirely dependent on the judgment and experience of management in connection with our acquisition strategy. ACQUISITION CRITERIA Management intends to consider, among other factors, the following factors in targeting a business, which are not listed in any particular order: o financial condition and results of operation of the target business; o the location of the target business; o growth potential and projected financial performance of the target business; o experience and skill of management and availability of additional personnel of the target business; o capital requirements of the target business; o competitive position of the target business; o stage of development of the product, process or service of the target business; o degree of current or potential market acceptance of the product, process or service of the target business; o possible proprietary features and possible other protection of the product, process or service of the target business; and o costs associated with effecting the business combination. The foregoing criteria are not intended to be exhaustive; any evaluation relating to the merits of a particular acquisition will be based, to the extent relevant, on the above factors as well as other considerations deemed relevant by us in connection with any acquisition we conclude. In many instances, it is anticipated that the historical operations of a target business may not necessarily be indicative of the potential for the future because of the possible need to shift marketing approaches substantially, expand significantly, change product emphasis, change or substantially augment management, or make other changes. In connection with our evaluation of a prospective target business, management anticipates that it will conduct a due diligence review which will encompass, among other things, meetings with incumbent management and inspection of facilities, as well as review of financial or other information which will be made available to us. The time and costs required to select and evaluate a target business (including conducting a due diligence review) and to structure and consummate the business combination (including negotiating relevant agreements and preparing requisite documents for filing pursuant to 12 applicable securities laws and state "blue sky" and corporation laws) cannot presently be ascertained with any degree of certainty. If our securities are issued as part of an acquisition, such securities are required to be issued either in reliance upon exemptions from registration under applicable federal or state securities laws or registered for public distribution. We intend to primarily target only those companies where an exemption from registration would be available; however, since the structure of the business combination has yet to be determined, no assurances can be made that we will be able to rely on such exemptions. Registration of securities typically requires significant costs and time delays are typically encountered. In addition, the issuance of additional securities and their potential sale could depress the price of our common stock in. Further, such issuance of additional securities would result in a decrease in the percentage ownership of present shareholders. CODE OF ETHICS Bio-One has adopted a formal code of ethics that applies to our principal executive officer and principal accounting officer, all other officers, directors and employees. This code of ethics is filed with the Securities and Exchange Commission as an exhibit to our 10KSB for the fiscal year ended December 31, 2003. RECENT DEVELOPMENTS On February 4, 2004, Bio-One consummated a stock acquisition with American Nutritional Exchange, Inc., a Florida corporation. Pursuant to the Stock Purchase Agreement, Bio-One purchased shares of American Nutritional's capital stock representing 80% of the votes of all issued and outstanding shares of American Nutritional's capital stock for: (1) a purchase price in an amount equal to $1,000,000 payable in installments and (2) a credit line to be made available to American Nutritional in the principal amount of $1,000,000, which may be drawn down by American Nutritional in traunches during 2004. Pursuant to the Stock Purchase Agreement, Bio-One is entitled to receive 30% of any future distribution of profits of American Nutritional and/or 30% of any future distribution of proceeds from a sale of American Nutritional. American Nutritional is a Florida-based business that is a wholesale distributor of nationally branded nutritional supplements. American Nutritional sells nutritional supplement products to retail stores representing independents, large and small chain vitamin outlets, health clubs and convenience stores throughout the Southeast United States. American Nutritional has achieved distribution rights with approximately 25 of the manufacturers of nutritional brands in the natural products industry. The 35-employee business will continue to be operated with its present management team. On February 5, 2004, Bio-One executed a Secured Promissory Note payable to Cornell Capital Partners, LP in the principal amount of $5,000,000. The Promissory Note accrues interest at an annual rate of 12% and is payable out of Bio-One's cash or out of the net proceeds received by Bio-One under our Equity Line of Credit Agreement, dated July 25, 2002 with Cornell Capital Partners. Bio-One must pay all amounts due under the Promissory Note by August 3, 2004, regardless of the availability of proceeds under the Equity Line of Credit Agreement. The Promissory Note is secured by all of the assets of Bio-One. As of March 31, 2004, $3,500,000 of this Promissory Note had been converted into equity. On March 31, 2004, we consummated the acquisition of all the issued and outstanding capital stock of Interactive Nutrition Inc., a company organized under the laws of Canada. Pursuant to a Share Purchase Agreement, we acquired all of the issued and outstanding capital stock of Interactive Nutrition for an aggregate purchase price of C$30,000,000. We issued a Convertible Promissory Note in the principal amount of C$15,000,000, which we are obligated to pay 57 consecutive monthly installments of C$263,158 commencing on July 1, 2004. Interactive Nutrition is a manufacturer and distributor of branded, specialty nutritional supplements, which are currently marketed in the United States, Canada and Hong Kong. Interactive Nutrition specializes in providing research, development and custom formulation of premium nutritional supplement private-label formulas, including over-the-counter, pharmaceutical grade, private-label formulations. Interactive Nutrition's products include: SoyOne(TM) Protein for Women, SoyOne(TM) Nutrition Bars, ISOWhey(TM) Protein Powder, Creative Blast(TM) and Total Whey. Interactive Nutrition is a Current Good Manufacturing Practices manufacturer. Interactive Nutrition operates in a 40,000 square-foot facility in Ottawa, Canada. The 75-employee business will continue to be operated with this present management team. On April 4, 2004, we consummated a joint venture transaction with Weifang Shengtai Pharmaceuticals Co. Ltd., a company organized under the laws of the People's Republic of China and located in Changle County, Shandong Province. Pursuant to the Joint Venture Agreement, we acquired 51% of the joint venture entity with Weifang Shengtai Pharmaceuticals for a cash payment equal to $2,000,000 and 2,090,000 shares of our Series A Preferred Stock. 13 Weifang Shengtai Pharmaceuticals is a manufacturer and distributor of glucose in China and holds those patents. This product distribution is conducted through direct sales from the Sales Department and sales branches with offices in nine major cities and is a supplier of glucose to many of China's major pharmaceutical companies. In January, Shengtai moved into their newly constructed 35-acre facility and are now one of the top three employers in their county. The 450-employee business will continue to be operated with its present management team. On March 26, 2004, we entered into a Standby Equity Distribution Agreement with Cornell Capital Partners. Pursuant to the Standby Equity Distribution Agreement, we may, at our discretion, periodically issue and sell shares of our common stock for a total purchase price of $50 million. If we request advances under the Standby Equity Distribution Agreement, Cornell Capital partners will purchase shares of common stock of Bio-One for 100% of the lowest closing bid price on the Over-the-Counter Bulletin Board or other principal market on which our common stock is traded for the 5 days immediately following the advance notice date. Cornell Capital Partners will retain 5% of each advance under the Standby Equity Distribution Agreement. We may not request advances in excess of a total of $50 million. The maximum of each advance is equal to $525,000 and up to a maximum of $2,100,000 in any thirty-day period. As of March 31, 2004, we issued a Secured Convertible Debenture in the principal amount of $15 million. The convertible debenture is convertible into shares of our common stock as a price per share that is equal to the lesser of (i) an amount equal to $0.75 or (ii) an amount equal to 80% of the average of the lowest daily volume weighted average price of our common stock for the five trading days immediately preceding the conversion date. The convertible debenture accrues interest at a rate of 5% per year and is convertible at the holder's option. The convertible debenture has a term of 7 months. At Bio-One's option, the convertible debenture may be paid in cash or converted into shares of our common stock unless converted earlier by the holder. The payment terms are $1,000,000 per week for five weeks commencing after May 1, 2004, resuming after July 1, 2004 and after September 1, 2004. Except after an event of default, as set forth in the Secured Convertible Debenture be entitled to convert such debenture for a number of shares of common stock of Bio-One in excess of that number of shares which, upon giving effect to such conversion, would cause the aggregate number of shares of common stock beneficially held by such holder and its affiliated to exceed 4.99% of the outstanding shares of common stock of Bio-One. EMPLOYEES We currently have approximately six hundred (600) employees employed within our subsidiaries and joint venture. We are currently reviewing our personnel needs for the remainder of 2004 and beyond. As of the date hereof, we anticipate hiring additional employees in 2004, which should include management, marketing and support staff. CRITICAL ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make a wide variety of estimates and assumptions that affect (i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and (ii) the reported amounts of revenues and expenses during the reporting periods covered by the financial statements. Our management routinely makes judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increases, these judgments become even more subjective and complex. We have identified certain accounting policies that are most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are disclosed in Note 1 of the Notes to the Financial Statements. Several of those critical accounting policies are as follows: This discussion and analysis of the Company's financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to allowance for doubtful accounts and deferred income tax assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company's management has discussed the selection and development of its critical accounting policies, estimates and related disclosure below with the Audit Committee of the Board of Directors. 14 RECENT ACCOUNTING PRONOUNCEMENTS New accounting pronouncements that have a current or future potential impact on our financial statements are as follows: In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." The Statement amends and clarifies accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This Statement is effective for contracts entered into or modified after September 30, 2003, except as stated below and for hedging relationships designated after September 30, 2003. In addition, except as stated below, all provisions of this Statement should be applied prospectively. The provisions of this Statement that relate to SFAS No. 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. In addition, paragraphs 7(a) and 23(a), which relate to forward purchases or sales of when-issued securities or other securities that do not yet exist, should be applied to both existing contracts and new contracts entered into after September 30, 2003. Adoption of this Statement on July 1, 2003 did not have a significant impact on the financial position or results of operations of the Company. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability, or an asset in some circumstances. Many of those instruments were previously classified as equity. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. Adoption of this Statement on July 1, 2003 did not have a significant impact on the financial position or results of operations of the Company. In May 2003, the Emerging Issues Task Force ("EITF") of the FASB reached a consensus on Issue No. 00-21, "Accounting For Revenue Arrangements with Multiple Deliverables", which establishes criteria for whether revenue on a deliverable can be recognized separately from other deliverables in a multiple deliverable arrangement. The criteria considers whether the delivered item has stand-alone value to the customer, whether the fair value of the delivered item can be reliably determined and the customer's right of return for the delivered item. This Issue applies to multiple deliverable revenue arrangements initiated in reporting periods beginning after June 15, 2003. Adoption of this Issue did not have a significant impact on the financial position or results of operations of the Company. In May 2003, the EITF reached a consensus on Issue No. 01-8, "Determining Whether an Arrangement Contains a Lease", which requires capital lease treatment for arrangements containing an embedded lease, thereby conveying the right to control the use of property, plant or equipment (collectively, "property") whether the right to control the use of the property is explicitly or implicitly specified. The right is conveyed if the purchaser (lessee) obtains physical or operational control of the underlying property or takes substantially all of its output. This Issue applies prospectively to new or modified arrangements beginning after May 28, 2003. Adoption of this Issue did not have a significant impact on the financial position or results of operations of the Company. In December 2003, the FASB issued SFAS No. 132 (revised 2003), "Employers' Disclosures about Pensions and Other Postretirement Benefits - an amendment of FASB Statements No. 87, 88 and 106". This Standard revises employers' disclosures about pension plans and other postretirement benefit plans. It does not change the measurement or recognition of those plans required by SFAS No. 87, "Employers' Accounting for Pensions", No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits", and No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". The new rules require additional disclosures about the assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other postretirement benefit plans. The required information should be provided separately for pension plans and for other postretirement benefit plans. This Statement is effective for financial statements with fiscal years ending after December 31, 2003, with a delayed effective date for certain disclosures and for foreign plans. Adoption of this Statement on December 31, 2003 did not have a significant impact on the financial position or results of operations of the Company. In December, 2003, the Staff of the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 104. This SAB's primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, superseded as a result of the issuance of EITF Issue No. 00-21. Additionally, the SAB rescinded the SEC's Revenue Recognition in Financial Statements Frequently Asked Questions and Answers (the "FAQ") issued with SAB 101 that had been codified in SEC Topic 13, Revenue Recognition. Selected portions of the FAQ have been incorporated into this SAB. While the wording of this SAB has changed to reflect the issuance of EITF Issue 15 No. 00-21, the revenue recognition principles of SAB 101 remain largely unchanged. Adoption of this SAB on December 31, 2003 did not have a significant impact on the financial position or results of operations of the Company. RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2004, AS COMPARED TO THE THREE-MONTH PERIOD ENDED MARCH 31, 2003 NET SALES. For the three months ended March 31, 2004, we had net sales of $4,673,504, as compared to net sales of $0 for the three months ended March 31, 2003, an increase of $4,673,504. This increase is attributable to the acquisition by our wholly-owned subsidiary, PNLabs, Inc., in September 2003, of substantially all of the assets of Physicians Nutraceutical Laboratories, Inc. and our acquisition of eighty percent (80%) of all of the issued and outstanding shares of American Nutritional Exchange. COST OF GOODS SOLD. For the three months ended March 31, 2004, we had cost of goods sold of $3,308,468, as compared to cost of goods sold of $0 for the three months ended March 31, 2003, an increase of $3,308,468. This increase is attributable to the third-party manufacturing costs incurred by our wholly-owned subsidiary, PNLabs, Inc. and American Nutritional Exchange in connection with the marketing and sales of their nutritional supplement products. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the three months ended March 31, 2004, we incurred selling, general and administrative expenses of $1,539,485, as compared to selling, general and administrative expenses of $167,661 for the three months ended March 31, 2003, an increase of $1,371,824 or 818.2%. This increase is primarily attributable to the operations of PNLabs and American Nutritional Exchange. OPERATING INCOME (LOSS). For the three months ended March 31, 2004, we incurred an operating loss of $174,449, as compared to an operating loss of $167,661 for the three months ended March 31, 2003, an increase of $6,788 or 4%. This increase is primarily attributable to the operations of PNLabs and American Nutritional Exchange. NET LOSS. For the three months ended March 31, 2004, we incurred a net loss of $4,752,163 as compared to $172,443 for the three months ended March 31, 2003, an increase of $4,579,720 or 2,655.8%. This increase is primarily attributable to the Company recording interest expense of approximately $4,560,000 as a result of discounts amortized relating to a $5 million secured promissory note and a $15 million secured convertible debenture. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2004, we had cash and other current assets totaling $11,461,686 as compared to $285,647 as of March 31, 2003. The significant increase in our cash position is directly attributable to our decision to draw down a portion of a previous Equity Line of Credit, dated July 25, 2002 with Cornell Capital Partners and the sale of a Secured Convertible Debenture in the principal amount of $15 million and a Secured Promissory Note in the principal amount of $5 million, each discussed below. As of March 31, 2004, we had approximately $1,049,981 in property and equipment, as compared to $38,003 as of March 31, 2003. As of March 31, 2004, our total current liabilities were $24,542,334, consisting primarily of accounts payable of $3.364.841, accrued expenses of $1,734,991, current installments of a note payable of $4,452,502 and convertible debentures of $15,000,000. On February 5, 2004, Bio-One executed a Secured Promissory Note payable to Cornell Capital Partners in the principal amount of $5,000,000. The Secured Promissory Note accrues interest at an annual rate of 12% and is payable out of cash of Bio-One or out of the net proceeds received by Bio-One under our previous Equity Line of Credit Agreement, dated July 25, 2002 with Cornell Capital Partners. Bio-One must pay all amounts due under the Promissory Note by August 3, 2004, regardless of the availability of proceeds under the Equity Line of Credit. The Promissory Note is secured by all of the assets of Bio-One. As of March 31, 2004, $3,500,000 of this Promissory Note had been converted into equity. On March 26, 2004, we entered into a Standby Equity Distribution Agreement with Cornell Capital Partners. Pursuant to the Standby Equity Distribution Agreement, we may, at our discretion, periodically issue and sell shares of our common stock for a total purchase price of $50 million. If we request advances under the Standby Equity Distribution Agreement, Cornell Capital partners will purchase shares of common stock of Bio-One for 100% of the lowest closing bid price on the Over-the-Counter Bulletin Board or other principal market on which our common stock is traded for the 5 days immediately following the advance notice date. Cornell Capital Partners will retain 5% of each advance under the Standby Equity Distribution Agreement. We may not request advances in excess of a total of $50 million. The maximum of each advance is equal to $525,000 and up to a maximum of $2,100,000 in any thirty-day period. 16 As of March 31, 2004, we issued a Secured Convertible Debenture in the principal amount of $15 million. The convertible debenture is convertible into shares of our common stock at a price per share that is equal to the lesser of (i) an amount equal to $0.75 or (ii) an amount equal to 80% of the average of the lowest daily volume weighted average price of our common stock for the five trading days immediately preceding the conversion date. The convertible debenture accrues interest at a rate of 5% per year and is convertible at the holder's option. The convertible debenture has a term of 7 months. At Bio-One's option, the convertible debenture may be paid in cash or converted into shares of our common stock unless converted earlier by the holder. The payment terms are $1,000,000 per week for five weeks commencing after May 1, 2004, resuming after July 1, 2004 and after September 1, 2004. Except after an event of default, as set forth in the Secured Convertible Debenture be entitled to convert such debenture for a number of shares of common stock of Bio-One in excess of that number of shares which, upon giving effect to such conversion, would cause the aggregate number of shares of common stock beneficially held by such holder and its affiliated to exceed 4.99% of the outstanding shares of common stock of Bio-One. In the absence of outside financing and without any consideration as to the financial requirements incurred as a result of our acquisitions of: (i) the assets of Physicians Nutraceutical Laboratories, (ii) 80% the capital stock of American Nutritional Exchange, (iii) the capital stock of Interactive Nutrition or (iv) a 51% interest in a Chinese joint venture with Weifang Shengtai Pharmaceuticals, as of April 1, 2004, we believe that we have sufficient cash to operate for approximately twelve months. In order for us to pursue other acquisitions and reduce our reliance on our Standby Equity Distribution Agreement, we are pursuing additional sources of equity and debt capital. This should provide us with greater flexibility in structuring acquisitions. CERTAIN BUSINESS RISK FACTORS We are subject to various risks, which may have a material adverse effect on our Company's business, financial condition and results of operations. Certain risks are discussed below: WE HAVE HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE FUTURE We have a history of losses. We have incurred an operating loss since inception and had an accumulated deficit of $3,258,984 as of December 31, 2003. For the years ended December 31, 2003, 2002 and 2001, we incurred a net loss of $1,383,112, $609,761 and $677,150, respectively. For the three months ended March 31, 2004, we incurred a net loss of $174,449. We cannot predict the amount of revenues, if any, we may generate as a result of our acquisitions of: (i) all of the assets of Physicians Nutraceutical Laboratories, Inc., (ii) 80% of the capital stock of American Nutritional Exchange, (iii) all of the capital stock of Interactive Nutrition, or (iv) a 51% interest in Weifang Shengtai Pharmaceuticals. Consequently, we will in all likelihood, have to rely on external financing for all of our capital requirements. Future losses are likely to continue unless we successfully implement our revised business plan, which calls for us to secure both debt and equity financing while aggressively pursuing acquisitions and/or joint ventures with companies in the nutritional supplement industry. Our ability to continue as a going concern will be dependent upon our ability to draw down on our Standby Equity Distribution Agreement that we have established with Cornell Capital Partners. If we incur any problems in drawing down our Standby Equity Distribution Agreement, we may experience significant liquidity and cash flow problems. If we are not successful in reaching and maintaining profitable operations, we may not be able to attract sufficient capital to continue our operations. Our inability to obtain adequate financing will result in the need to curtail business operations and will likely result in a lower stock price. WE WILL NEED TO RAISE ADDITIONAL CAPITAL TO FINANCE OPERATIONS We have relied on significant external financing to fund our operations. As of March 31, 2004, we had received a total of $5 million under our previously existing Equity Line of Credit that we entered into July 25, 2002 with Cornell Capital Partners. We received these proceeds in fiscal years 2002, 2003 and 2004. Prior to our previously existing Equity Line of Credit, our officers and directors advanced us approximately $70,000 in 2002 during a period in which we had approximately $20,000 in revenues. As of March 31, 2004, we had $4,389,467 in cash and cash equivalents and our total current assets were $11,461,686. Our current liabilities were $24,542,334 as of March 31, 2004. We will need to raise additional capital to fund our anticipated operating expenses and future expansion. Among other things, external financing may be required to cover our operating costs. Unless we obtain profitable operations, it is unlikely that we will be able to secure additional financing from external sources. As of May 10, 2004, we estimate that we will require $960,000 to fund our anticipated corporate operating expenses and approximately $15,000,000 to fund our expansion plans for the next twelve months. The sale of our common stock to raise capital may cause dilution to our existing shareholders. Our inability to obtain adequate financing will result in the need to curtail business operations. Any of these events would be materially harmful to our business and may result in a lower stock price. Our inability to obtain adequate 17 financing will result in the need to curtail business operations and you could lose your entire investment. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. WE MAY NOT BE SUCCESSFUL IN INTEGRATING THE BUSINESS OF OUR RECENT ACQUISITIONS On September 11, 2003, our wholly-owned subsidiary, PNLabs, Inc., acquired substantially all of the assets of Physicians Nutraceutical Laboratories, Inc. The purchased assets included, among other things, the rights to market the 5 products marketed by Physicians Nutraceutical Laboratories and all rights to the operational business of Physicians Nutraceutical Laboratories. On February 4, 2004, we acquired shares of American Nutritional Exchange, Inc. representing 80% of the votes of all issued and outstanding shares of American Nutritional Exchange. American Nutritional Exchange is a wholesale distributor of nationally branded nutritional supplements. On March 31, 2004, we acquired all of the issued and outstanding capital stock of Interactive Nutrition, Inc. Interactive Nutritional is a manufacturer and distributor of branded, specialty nutritional supplements, which are currently marketed in the United States, Canada and Hong Kong. On April 4, 2004, we acquired a 51% interest in Weifang Shengtai Pharmaceuticals Co. Ltd., a Chinese joint venture. Weifang Shengtai Pharmaceuticals is a manufacturer and distributor of glucose in China. We may fail to successfully market our new products and/or integrate the operations of Physicians Nutraceutical Laboratories, American Nutritional Exchange, Interactive Nutrition or the Chinese joint venture into Bio-One. The integration of our new operations could place an increasing strain on our management and financial resources. If we fail to integrate the products and operations of Physicians Nutraceutical Laboratories, American Nutritional Exchange, Interactive Nutrition or Weifang Shengtai Pharmaceuticals into our business, we may be forced to curtail or cease our business operations. OUR COMMON STOCK MAY BE AFFECTED BY LIMITED TRADING VOLUME AND MAY FLUCTUATE SIGNIFICANTLY Our common stock is traded on the Over-the-Counter Bulletin Board. Prior to this offering, there has been a limited public market for our common stock and there can be no assurance that an active trading market for our common stock will develop. As a result, this could adversely affect our shareholders' ability to sell our common stock in short time periods, or possibly at all. Our common stock is thinly traded compared to larger, more widely known companies in the nutritional supplement industry. Thinly traded common stock can be more volatile than common stock traded in an active public market. The average daily trading volume of our common stock in March 2004 was 1,971,415 shares. The high and low bid price of our common stock for the last two years has been $0.50 and $0.04, respectively. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. WE MAY NOT BE ABLE TO ACCESS SUFFICIENT FUNDS WHEN NEEDED UNDER THE STANDBY EQUITY DISTRIBUTION AGREEMENT AND THE PRICE OF OUR COMMON STOCK WILL AFFECT OUR ABILITY TO DRAW DOWN ON THE STANDBY EQUITY DISTRIBUTION AGREEMENT Currently, we are dependent upon external financing to fund our operations. Our financing needs are expected to be provided, in large part, by our Standby Equity Distribution Agreement. The amount of each advance under the Standby Equity Distribution Agreement is subject to a maximum amount equal to $525,000 and up to an aggregate maximum advance amount equal to $2,100,000 in any thirty-calendar-day period. Because of this maximum advance restriction, we may not be able to access sufficient funds when needed. In addition, there is an inverse relationship between the price of our common stock and the number of shares of common stock which will be issued under the Standby Equity Distribution Agreement. Based on our recent stock price of $0.17, we would have to issue to Cornell Capital Partners 294,117,647 shares of our common stock in order to draw down the entire $50 million available to us under the Standby Equity Distribution Agreement. We registered 250,000,000 shares of our common stock under the Standby Equity Distribution Agreement in a registration statement on Form SB-2 that was declared effective by the Securities and Exchange Commission on May 11, 2004. Our Articles of Incorporation currently authorize Bio-One to issue 500 million shares and, as of May 10, 2004, we had 59,515,870 shares of common stock issued and outstanding. In the event we desire to draw down any available amounts remaining under the Standby Equity Distribution Agreement after we have issued the 250,000,000 shares that were registered with the Securities and Exchange Commission, we will have to file a new registration statement to cover such additional shares that we would issue for 18 additional draw downs on the Standby Equity Distribution Agreement. Unless we obtain profitable operations, it is unlikely that we will be able to secure additional financing from external sources other than our Standby Equity Distribution Agreement. Therefore, if we are unable to draw down on our Standby Equity Distribution Agreement, we may be forced to curtail or cease our business operations. OUR COMMON STOCK IS DEEMED TO BE "PENNY STOCK," WHICH MAY MAKE IT MORE DIFFICULT FOR INVESTORS TO SELL THEIR SHARES DUE TO SUITABILITY REQUIREMENTS Our common stock is deemed to be "penny stock" as that term is defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934. Penny stocks are stock: o With a price of less than $5.00 per share; o That are not traded on a "recognized" national exchange; o Whose prices are not quoted on the Nasdaq automated quotation system (Nasdaq listed stock must still have a price of not less than $5.00 per share); or o In issuers with net tangible assets less than $2.0 million (if the issuer has been in continuous operation for at least three years) or $5.0 million (if in continuous operation for less than three years), or with average revenues of less than $6.0 million for the last three years. Broker/dealers dealing in penny stocks are required to provide potential investors with a document disclosing the risks of penny stocks. Moreover, broker/dealers are required to determine whether an investment in a penny stock is a suitable investment for a prospective investor. These requirements may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of them. This could cause our stock price to decline. WE COULD FAIL TO ATTRACT OR RETAIN KEY PERSONNEL Our success largely depends on the efforts and abilities of Armand Dauplaise, our President and Chief Executive Officer. Mr. Dauplaise has been instrumental in securing our existing financing arrangements. In addition, Mr. Dauplaise's efforts resulted in our acquisitions of: (i) all of the assets of Physicians Nutraceutical Laboratories, (ii) 80% of the issued and outstanding capital stock of American Nutritional Exchange, (iii) all of the issued and outstanding capital stock of Interactive Nutrition, and (iv) a 51% interest in Weifang Shengtai Pharmaceuticals. Mr. Dauplaise is also primarily responsible for identifying additional acquisition candidates with the assistance of Health Business Partners LLC and undertaking due-diligence investigations. Mr. Dauplaise receives a salary of $180,000 per year and a car allowance pursuant to his employment agreement with Bio-One. The employment agreement is for one year and is renewable annually. The loss of the services of Mr. Dauplaise could materially harm our business because of the cost and time necessary to recruit and train a replacement. Such a loss would also divert management attention away from operational issues. We do not presently maintain a key-man life insurance policy on Mr. Dauplaise. In addition, in order to continue to implement our business strategy, we believe that we will need to attract and retain a Chief Financial Officer, a Director of Marketing, a Director of Operations, an Information Technology Officer and additional administrative support staff as our company grows. WE MAY BE UNABLE TO MANAGE GROWTH Successful implementation of our business strategy requires us to manage our growth. Growth could place an increasing strain on our management and financial resources. To manage growth effectively, we will need to: o Respond to the needs of an operating business and be able to fully integrate management and controls to our acquisition of: (i) all of the assets of Physicians Nutraceutical Laboratories, Inc., (ii) 80% of the issued and outstanding capital stock of American Nutritional Exchange, (iii) all of the issued and outstanding capital stock of Interactive Nutrition, and (iv) a 51% interest in Weifang Shengtai Pharmaceuticals, as well as any future acquisitions; and 19 o Attract and retain qualified personnel, as well as, develop, train and manage management-level and other employees. If we fail to manage our growth effectively, our business, financial condition or operating results could be materially harmed, and our stock price may decline. THE ISSUANCE OF PREFERRED STOCK MAY ENTRENCH MANAGEMENT OR DISCOURAGE A CHANGE OF CONTROL Our Articles of Incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock with designations rights, and preferences determined from time to time by our Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividends, liquidation, conversion, voting, or other rights that could adversely affect the voting power or other rights of the holders of our common stock. In the event of issuance, the preferred stock could be used, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the company or, alternatively, granting the holders of preferred stock such rights as to entrench management. We currently have 2,090,000 shares of Series A Preferred Stock outstanding. If the holders of our common stock desired to remove current management, it is possible that our Board of Directors could issue preferred stock and grant the holders thereof such rights and preferences so as to discourage or frustrate attempts by the common stockholders to remove current management. In doing so, management would be able to severely limit the rights of common stockholders to elect the Board of Directors. WE EXPECT INTENSE COMPETITION IN OUR INDUSTRY Many of our competitors have significantly greater name recognition and financial and other resources. If we are not able to compete effectively against our competitors, we will be forced to curtail or cease our business operations. Our main competitors are NBTY, Natrol, Herbalife and Nutraceuticals. We believe the products that compete with ours, include Cholesterol Success, Cholesterol Free Fish Oil, Complete Balance, Dong Quai, Arthritis Pain Relief and Bone Core, Centrum and ABC Plus. Our market share in the nutrition supplement industry is very small at this time. OUR INDUSTRY IS SUBJECT TO GOVERNMENT REGULATION The manufacturing, processing, formulation, packaging, labeling and advertising of vitamins and other Nutraceutical products are subject to regulation by one or more federal agencies, including the Food and Drug Administration, the Federal Trade Commission, the Consumer Product Safety Commission, the United States Department of Agriculture, the United States Postal Service, the United States Environmental Protection Agency and the Occupational Safety and Health Administration. These activities are also regulated by various agencies of the states and localities, as well as of foreign countries, in which our products may be sold. We may incur significant costs in complying with these regulations. In the event we cannot comply with government regulations affecting our business and products, we may be forced to curtail or cease our business operations. FUTURE ACQUISITIONS MAY DISRUPT OUR BUSINESS AND DEPLETE OUR FINANCIAL RESOURCES Any future acquisitions we make could disrupt our business and seriously harm our financial condition. We intend to consider investments in complementary companies, products and technologies. We anticipate buying businesses, products and/or technologies in the future in order to fully implement our business strategy. In the event of any future acquisitions, we may: o issue stock that would dilute our current stockholders' percentage ownership; o incur debt; o assume liabilities; o incur amortization expenses related to goodwill and other intangible assets; or o incur large and immediate write-offs. The use of debt or leverage to finance our future acquisitions should allow us to make acquisitions with an amount of cash in excess of what may be currently available to us. If we use debt to leverage up our assets, we may not be able to 20 meet our debt obligations if our internal projections are incorrect or if there is a market downturn. This may result in a default and the loss in foreclosure proceedings of the acquired business or the possible bankruptcy of our business. Our operation of any acquired business will also involve numerous risks, including: o integration of the operations of the acquired business and its technologies or products; o unanticipated costs; o diversion of management's attention from our core business; o adverse effects on existing business relationships with suppliers and customers; o risks associated with entering markets in which we have limited prior experience; and o potential loss of key employees, particularly those of the purchased organizations. OUR STANDBY EQUITY DISTRIBUTION AGREEMENT COULD HAVE AN ADVERSE EFFECT ON OUR ABILITY TO MAKE ACQUISITIONS WITH OUR COMMON STOCK We cannot predict the actual number of shares of common stock that will be issued pursuant to our Standby Equity Distribution Agreement, in part, because the purchase price of the shares will fluctuate based on prevailing market conditions and we have not determined the total amount of advances we intend to draw. It may be necessary for our shareholders to approve an increase in our authorized common stock for us to register additional shares of common stock in order to have sufficient authorized shares available to make acquisitions using our common stock. As we issue shares of common stock pursuant to the Standby Equity Distribution Agreement, we may not have sufficient shares of our common stock available to successfully attract and consummate future acquisitions. INVESTORS SHOULD NOT RELY ON AN INVESTMENT IN OUR STOCK FOR THE PAYMENT OF CASH DIVIDENDS We have not paid any cash dividends on our capital stock and we do not anticipate paying cash dividends in the future. Investors should not make an investment in our common stock if they require dividend income. Any return on an investment in our common stock will be as a result of any appreciation, if any, in our stock price. THERE ARE NO CONCLUSIVE STUDIES REGARDING THE MEDICAL BENEFITS OF NUTRITIONAL SUPPLEMENTS Many of the ingredients in our current products, and we anticipate in our future products, will be vitamins, minerals, herbs and other substances for which there is not a long history of human consumption. Although we believe all of our products to be safe when taken as directed by us, there is little experience with human consumption of certain of these product ingredients in concentrated form. In addition, we are highly dependent upon consumers' perception of the safety and quality of our products as well as similar products distributed by other companies, we could be adversely affected in the event any of our products or any similar products distributed by other companies should prove or be asserted to be harmful to consumers. In addition, because of our dependence upon consumer perceptions, adverse publicity associated with illness or other adverse effects resulting from consumers' failure to consume our products as we suggest or other misuse or abuse of our products or any similar products distributed by other companies could have a material adverse effect on the results of our operations and financial condition. THE MANUFACTURE AND DISTRIBUTION OF VITAMINS AND OTHER NUTRITIONAL SUPPLEMENTS COULD RESULT IN PRODUCT LIABILITY CLAIMS We, like any other retailer, distributor and manufacturer of products that are designed to be ingested, face an inherent risk of exposure to product liability claims in the event that the use of our products results in injury. Such claims may include, among others, that our products contain contaminants or include inadequate instructions as to use or inadequate warnings concerning side effects and interactions with other substances. We do not anticipate obtaining contractual indemnification from parties supplying raw materials or marketing our products. In any event, any such indemnification if obtained will be limited by our terms and, as a practical matter, to the creditworthiness of the indemnifying party. In the event that we do not have adequate insurance or contractual indemnification, product liabilities relating to defective products could have a material adverse effect on our operations and financial conditions. 21 POTENTIAL EFFECT OF ADVERSE PUBLICITY We believe the growth experienced by the nutritional supplement market is based in part on national media attention regarding scientific research suggesting potential health benefits from regular consumption of certain vitamins and other nutritional products. Such research has been described in major medical journals, magazines, newspapers and television programs. The scientific research to date is preliminary. In the future, scientific research and/or publicity may not be favorable to the nutritional supplement market or any particular product, or may be inconsistent with earlier favorable research or publicity. Future reports of research that are perceived as less favorable or that question such earlier research could have a material adverse effect on our operations and financial condition. Because of our dependence upon consumer perceptions, adverse publicity associated with illness or other adverse effects resulting from the consumption of our products or any similar products distributed by other companies could have a material adverse effect on our operations. Such adverse publicity could arise even if the adverse effects associated with such products resulted from consumers' failure to consume such products as directed. In addition, we may not be able to counter the effects of negative publicity concerning the efficacy of our products. Any such occurrence could have a negative effect on our operations. ANY FUTURE ACQUISITIONS WILL HAVE TO DEVELOP NEW PRODUCTS IN ORDER TO KEEP PACE WITH CHANGING CONSUMER DEMANDS The dietary supplement industry is highly competitive and characterized by changing consumer preferences and continuous introduction of new products. Our goal is to expand our portfolio of dietary supplement products through acquisition of existing companies and/or products serving niche segments of the industry. New products must be introduced in a timely and regular basis to maintain distributor and consumer interest and appeal to varying consumer preferences. We believe that any future success of our company will depend, in part, on our ability to anticipate changes in consumer preferences and acquire, manage, develop and introduce, in a timely manner, new products that adequately address such changes. If we are unable to develop and introduce new products or if our new products are not successful, our sales may be adversely affected as customers seek competitive products. In addition, our introduction or our announcement of new products could result in a reduction in sales of our existing products, requiring us to carefully manage product introductions in order to minimize disruption in sales of our existing products. Any reduction in purchases or consumption of our existing products could have a material adverse effect on our business, operating results and financial condition. ITEM 3. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Within 90 days prior to the filing date of this report, the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. This evaluation was done under the supervision and with the participation of the Company's President and Chief Financial Officer. Based upon that evaluation, he concluded that the Company's disclosure controls and procedures are effective in gathering, analyzing and disclosing information needed to satisfy the Company's disclosure obligations under the Exchange Act. CHANGES IN INTERNAL CONTROLS. There were no significant changes in the Company's internal controls or in other factors that could significantly affect those controls since the most recent evaluation of such controls. 22 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are not aware of any legal proceedings involving our Company. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (a) None. (b) None. (c) On February 5, 2004, we issued a Secured Promissory Note in the principal amount of $5 million. The Note accrues interest at an annual rate of 12% and is due and payable by August 3, 2004. On March 31, 2004, we issued a Secured Convertible Debenture in the principal amount of $15 million, which we are obligated to pay or convert into equity over a seven month period. With respect to the sale of unregistered securities referenced above, all transactions were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 (the "1933 Act"), and Regulation D promulgated under the 1933 Act. In each instance, the purchaser had access to sufficient information regarding Bio-One so as to make an informed investment decision. More specifically, Bio-One had a reasonable basis to believe that each purchaser was an "accredited investor" as defined in Regulation D of the 1933 Act and otherwise had the requisite sophistication to make an investment in Bio-One's common stock. (d) None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER INFORMATION Not applicable. 23 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS.
EXHIBIT NO. DESCRIPTION LOCATION ----------- ------------------------------------------------ ------------------------------------------------ 3.(i).1 Articles of Incorporation of Bio-One Corporation Incorporated by reference to the Company's filed February 24, 1998 Registration Statement filed on Form 10-SB filed November 3, 2000 3.(i).2 Certificate of Amendment of Articles of Incorporated by reference to the Company's Incorporation filed August 7, 2000 Registration Statement filed on Form 10-SB filed November 3, 2000 3.(ii).1 Bylaws of Bio-One Corporation Incorporated by reference to the Company's Registration Statement filed on Form 10-SB filed November 3, 2000 10.1 Share Exchange Agreement between the Company and Incorporated by reference to the Company's Crown Enterprises dated May 20, 2000 Registration Statement filed on Form 10-SB filed November 3, 2000 10.2 Employment Agreement between the Company and Incorporated by reference to the Company's Armand Dauplaise dated May 30, 2000 Registration Statement filed on Form 10-SB filed November 3, 2000 10.3 Equity Line of Credit Agreement between the Incorporated by reference to the Company's Company and Capital Partners, LP dated July 25, Quarterly report filed on Firm 10-QSB for the 2002 period ended June 30, 2002 on August 14, 2002 10.4 Placement Agent Agreement between Bio-One Corp and Incorporated by reference to the Company's Form Westrock Advisors SB-2 Registration Statement filed August 27, 2002 10.5 Registration Rights Agreement between Bio-One Incorporated by reference to the Company's Form Corporation and Cornell Capital Partners, LLP SB-2 Registration Statement filed August 27, 2002 10.6 Escrow Agreement between Bio-One Corporation, Incorporated by reference to the Company's Form Cornell Capital Partners, L.P. Butler Gonzales LLP SB-2 Registration Statement filed August 27, 2002 and Wachovia Bank, N.A. 10.7 Agreement between the Company and Kevin Lockhart Incorporated by reference to the Company's and General Release in connection with redemption Form 8-K filed August 2, 2002 of shares and resignation as Board Member 31.1 Certification Pursuant to Section 302 Provided herewith 31.2 Certification Pursuant to Section 302 Provided herewith 32.1 Certification Pursuant to 18 U.S.C. Section 1350 Provided herewith 32.2 Certification Pursuant to 18 U.S.C. Section 1350 Provided herewith
24 (B) REPORTS ON FORM 8-K. On January 9, 2004, the Company filed a Current Report on Form 8-K with respect to Items 2 and 7. On February 13, 2004, the Company filed a Current Report on Form 8-K with respect to Items 2 and 7. 25 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: May 14, 2004 BIO-ONE CORPORATION By: /s/ Armand Dauplaise Armand Dauplaise President, Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer 26