As filed with the Securities and Exchange Commission on _____, 2004
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
12 to 20 PLUS, INC.
______________________________________________
(Name of small business issuer in its charter)
Nevada 9995 86-0955239
________________________________________________________________________________
State of other jurisdiction (Primary Standard (IRS Employer
of incorporation) Industrial Identification Number)
3450 Broad St. Suite 103
San Luis Obispo, CA 93401
(805) 543 9185
_____________________________________________________________
(Address and telephone number of principal executive offices)
Carol Slavin
3450 Broad St. Suite 103
San Luis Obispo, CA 93401
(805) 543 9185
_________________________________________________________
(Name, address and telephone number of agent for service)
Copies of communications to:
The O'Neal Law Firm, P.C.
William D. O'Neal
668 N. 44th Street
Suite #233
Phoenix, Arizona 85008
(602) 267-3588
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the offering. [ ]
1
If this Form is post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is declared effective. This prospectus is not
an offer to sell these securities, and we are not soliciting offers to buy these
securities, in any state where the offer or sale is not permitted.
CALCULATION OF REGISTRATION FEE
<table>
- --------------------- ----------------------- ------------------------- ------------------------- --------------------
Title of each Proposed Proposed
Class of Maximum Maximum Amount of
Securities to Amount to be Offering Price Aggregate Registration
be registered Registered per unit Offering price Fee
- --------------------- ----------------------- ------------------------- ------------------------- --------------------
Common stock 25,000,000 $0.04 per share (1) $1,000,000 $126.70
- --------------------- ----------------------- ------------------------- ------------------------- --------------------
</table>
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said section 8(a), may determine.
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.(1)
2
PROSPECTUS
12 to 20 PLUS, INC.
This prospectus relates to the sale of up to 25,000,000 shares of our common
stock by a stockholder. We are not selling any securities in this offering and
therefore will not receive any proceeds from this offering. We will, however,
receive proceeds from the sale of securities under an Investment Agreement, also
referred to as an Equity Line of Credit, that we have entered into with Dutchess
Private Equities Fund II, L.P., which permits us to "put" up to $10 million in
shares of Common Stock to Dutchess Private Equities Fund II, L.P. All costs
associated with this registration will be borne by us.
The shares of Common Stock are being offered for sale by the selling stockholder
at prices established on the Over-the-Counter Bulletin Board or in negotiated
transactions during the term of this offering. Our Common Stock is quoted on the
Over-the-Counter Bulletin Board under the symbol TTTP.OB. On June 30, 2004, the
last reported sale price of our Common Stock was $0.04 per share.
Dutchess Private Equities Fund II, L.P. and U.S. Euro Securities are
"underwriters" within the meaning of the Securities Act of 1933, as amended, in
connection with the resale of common stock under the Investment Agreement.
Dutchess will pay us 96% of the average of the three lowest closing bid price of
the common stock during the five consecutive trading day period immediately
following the date of our notice to them of our election to put shares pursuant
to the Equity Line of Credit.
This investment involves a high degree of risk. You should purchase securities
only if you can afford a complete loss. SEE "RISK FACTORS" BEGINNING ON PAGE 8.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Subject to Completion, The date of this Prospectus is June 30, 2004
3
TABLE OF CONTENTS
PART I
PROSPECTUS SUMMARY ........................................................ 5
RISK FACTORS .............................................................. 7
USE OF PROCEEDS .......................................................... 11
DILUTION ................................................................... 12
CAPITALIZATION ............................................................. 12
DIVIDEND POLICY ........................................................... 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .................................. 13
DESCRIPTION OF BUSINESS ................................................... 16
DESCRIPTION OF PROPERTY ................................................... 18
MANAGEMENT .................................................................. 18
EXECUTIVE COMPENSATION ..................................................... 20
RELATED PARTY TRANSACTIONS ................................................ 21
MARKET FOR OUR COMMON STOCK ............................................. 21
REPORTS TO SECURITY HOLDERS ............................................... 21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ....... 22
SELLING STOCKHOLDERS ....................................................... 23
DESCRIPTION OF SECURITIES ................................................. 23
PLAN OF DISTRIBUTION ...................................................... 24
LEGAL PROCEEDINGS .......................................................... 25
LEGAL MATTERS .............................................................. 26
EXPERTS ..................................................................... 26
FINANCIAL STATEMENTS ....................................................... 27
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS ...................................... 55
EXHIBITS .................................................................... 55
UNDERTAKINGS ................................................................ 56
SIGNATURES .................................................................. 25
4
PART I
PROSPECTUS SUMMARY
------------------
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. BECAUSE IT IS A SUMMARY, IT DOES NOT CONTAIN ALL
OF THE INFORMATION YOU SHOULD CONSIDER BEFORE MAKING AN INVESTMENT DECISION.
12 to 20 PLUS, INC.
12 to 20 Plus, Incorporated, a Nevada corporation, is a development stage
company engaged in the research, development and marketing of medicated skin
care products and vitamin supplements. We incorporated in the State of Nevada on
April 29,1996.
Our principal executive offices are located at 3450 Broad St., Suite 103, San
Luis Obispo, CA 93401. Our telephone number is (805) 543 9185.
THE OFFERING
------------
This offering relates to the resale of 25,000,000 shares of our Common Stock by
Dutchess Private Equities Fund II, L.P. who will become our stockholder.
We have entered into an Investment Agreement with Dutchess Private Equities Fund
II, L.P.also referred to as an Equity Line of Credit. That agreement provides
that, following notice to Dutchess, we may put to Dutchess up to $10 million in
shares of our Common Stock for a purchase price equal to 96% of the lowest
closing bid price on the Over-the-Counter Bulletin Board of our common stock
during the five day period following that notice. The number of shares that we
will be permitted to put pursuant to the Investment Agreement will be either:
(A) two hundred percent of the average daily volume of our common stock for the
ten trading days prior to the applicable put notice, multiplied by the average
of the three daily closing best bid prices immediately preceding the day we
issue the put, or (B) $50,000; provided that in no event will the put amount be
more than $1,000,000 with respect to any single Put. In turn, Dutchess has
indicated that it will resell our shares in the open market, resell our shares
to other investors through negotiated transactions or hold our shares in its
portfolio. This prospectus covers the resale of our stock by Dutchess either in
the open market or to other investors through negotiated transactions.
OUR CAPITAL STRUCTURE AND SHARES ELIGIBLE FOR FUTURE SALE
---------------------------------------------------------
The following table outlines our capital stock as of June 30, 2004:
Common Stock outstanding
Before the offering 55,231,4601)
After the offering 80,231,4601)(2)
(1) Assuming:
No exercise of stock options outstanding.
5
THE OFFERING - continued
(2) Assumes that we put 25,000,000 shares to Dutchess during the term of the
Investment Agreement.
USE OF PROCEEDS
---------------
We will not receive any proceeds from this offering. We will receive proceeds
from our Investment Agreement with Dutchess. See "Use of Proceeds."
6
SUMMARY FINANCIAL INFORMATION
-----------------------------
The following summary financial information has been derived from our financial
statements and should be read in conjunction with the financial statements and
the related notes thereto appearing elsewhere in this prospectus.
<table>
<caption>
For the For the For the For the
year ended year ended 3 months ended 3 months ended
31-Dec-03 31-Dec-02 31-Mar-04 31-Mar-03
(unaudited) (unaudited)
Statement of Operations Data
Revenue. . . . . . . . . . . . . . . . $ 159 $ 0.00 $ 0.00 $ 0.00
Operating costs and expenses . . . . . $281,602 $20,916 $88,640 $66,916
Net loss . . . . . . . . . . . . . . . ($281,602) ($20,916) ($88,640) ($66,916)
Loss per share . . . . . . . . . . . . <$0.01 <$0.01 <$0.01 <$0.01
Weighted average # of shares outstanding 29,832,636 19,129,597 32,666,512 29,851,111
Balance Sheet Data
Current assets . . . . . . . . . . . . $102,056 $ 4,529 $ 88,901 $102,056
Total assets . . . . . . . . . . . . . $188,524 $30,779 $417,754 $188,524
Total liabilities. . . . . . . . . . . $126,313 $61,051 $143,183 $126,313
Shareholders' equity . . . . . . . . . $ 62,211 ($30,272) $274,571 $62,211
</table>
RISK FACTORS
------------
An investment in our Common Stock involves a high degree of risk. You should
carefully consider the following risk factors, other information included in
this prospectus and information in our periodic reports filed with the SEC. If
any of the following risks actually occur, our business, financial condition or
results of operations could be materially and adversely affected and you may
lose some or all of your investment.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
-------------------------------------------------
This prospectus contains forward-looking statements that involve risks and
uncertainties. We generally use words such as "believe," "may," "could," "will,"
"intend," "expect," "anticipate," "plan," and similar expressions to identify
forward-looking statements. You should not place undue reliance on these
forward-looking statements. Our actual results could differ materially from
those anticipated in the forward-looking statements for many reasons, including
the risks described below and elsewhere in this report. Although we believe the
expectations reflected in the forward-looking statements are reasonable, they
7
RISK FACTORS - continued
relate only to events as of the date on which the statements are made, and our
future results, levels of activity, performance or achievements may not meet
these expectations. We do not intend to update any of the forward-looking
statements after the date of this document to conform these statements to actual
results or to changes in our expectations, except as required by law.
RISKS RELATED TO OUR BUSINESS
WE HAVE HAD LOSSES SINCE OUR INCEPTION AND EXPECT LOSSES TO CONTINUE IN THE
FUTURE. WE MAY NEVER BECOME PROFITABLE.
We had a net loss of $(281,602) for the year ended December 31, 2003 and a net
loss of $(20,916) for the year ended December 31, 2002. Our future operations
may not be profitable if we are unable to develop our business. Revenues and
profits, if any, will depend upon various factors, including whether we will be
able to receive funding to develop and market new products or find additional
businesses to operate and/or acquire. We may not achieve our business objectives
and the failure to achieve such goals would have an adverse impact on our
business.
IF WE DO NOT CONTINUALLY ENHANCE OUR PRODUCTS, OUR REVENUES WILL DECREASE
SIGNIFICANTLY.
The market for our products is characterized by rapid changes in the competitive
landscape, changing consumer requirements and preferences, new service and
product introductions and evolving industry standards that could render the
Company's products obsolete. Our success will depend, in large part, on our
ability to improve such products, develop new products that address the
increasingly sophisticated and varied needs of our customers, and respond to
medical advances, emerging industry standards and practices, and competitive
product offerings. We may not be successful in responding quickly,
cost-effectively and sufficiently to these developments, which could
significantly reduce our revenues. Our competitors could succeed in developing
or marketing products that are superior to and/or more commercially attractive
than ours. Our success will depend in part on our ability to improve and enhance
our products in a timely manner. If we fail to enhance our products in a timely
manner our revenues could decrease significantly
TO SUCCEED WE WILL NEED TO SECURE AND FILL NEW ORDERS FROM OUR CUSTOMERS BECAUSE
WE ARE NOT LIKELY TO HAVE LONG-TERM AGREEMENTS OR EXCLUSIVE CONTRACTS WITH THEM.
We do not anticipate that we will be able to enter into long-term agreements or
exclusive guaranteed order contracts with many or any of our customers. Our
success will depend on our ability to continually secure new orders from
existing and new customers and to fill such orders in a timely fashion. In most
or all cases, our customers will be free to place orders or do business with our
competitors, and in most if not all cases, our retail customers have a right to
return 100% of unsold product. Therefore, we must maintain positive
relationships with our customers. If we fail to maintain positive relationships
with our customers, we may be unable to generate new orders and our revenues
could decrease significantly.
8
RISK FACTORS - continued
RISKS RELATED TO OUR INDUSTRY
WE FACE INTENSE COMPETITION IN OUR INDUSTRY AND IF WE CANNOT SUCCESSFULLY
COMPETE, OUR REVENUES WILL DECLINE.
Competition relating to our current products is intense and includes various
companies, both within and outside of the United States. Our competitors and
potential competitors include large companies with substantially greater
financial, sales and marketing, and technical resources, larger and more
experienced research and development staffs, more extensive physical facilities
and substantially greater experience in marketing products than us. In addition,
our competitors may be currently developing, or may attempt to develop, products
that are more effective than those being developed and/or sold by us or that
would otherwise render our existing products obsolete or uncompetitive. We may
not be able to compete successfully. If we cannot compete successfully or the
development by our competitors of products that are more effective than those
being developed by us would cause our revenues to decline.
WE OPERATE IN A DEVELOPING MARKET THAT EXPERIENCES OCCASIONAL SLOW DOWNS THAT
COULD DECREASE OUR REVENUES.
The medicated skin care and vitamin supplement market has experienced occasional
slow downs. The market for our products may not develop, and therefore,
consumers may not adopt our products. If the market for our products fail to
develop, or develops more slowly than expected, or if our products do not
achieve market acceptance, Our business, operating results and financial
condition will be materially and adversely affected and our revenues would
significantly decline.
RISKS RELATED TO THIS OFFERING AND OUR STOCK
"PENNY STOCK" RULES MAY MAKE BUYING OR SELLING OUR SECURITIES DIFFICULT.
Trading in our securities is subject to the Securities and Exchange Commission's
"penny stock" rules and it is anticipated that trading in our securities will
continue to be subject to the penny stock rules for the foreseeable future. The
Securities and Exchange Commission has adopted regulations that generally define
a penny stock to be any equity security that has a market price of less than
$5.00 per share, subject to certain exceptions. These rules require that any
broker-dealer who recommends our securities to persons other than prior
customers and accredited investors must, prior to the sale, make a special
written suitability determination for the purchaser and receive the purchaser's
written agreement to execute the transaction. Unless an exception is available,
the regulations require the delivery, prior to any transaction involving a penny
stock, of a disclosure schedule explaining the penny stock market and the risks
associated with trading in the penny stock market. In addition, broker-dealers
must disclose commissions payable to both the broker-dealer and the registered
representative and current quotations for the securities they offer. The
additional burdens imposed upon broker-dealers by such requirements may
discourage broker-dealers from recommending transactions in our securities,
which could severely limit the liquidity of our securities and consequently
adversely affect the market price for our securities.
EXISTING STOCKHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION FROM THE SALE OF
SECURITIES PURSUANT TO OUR INVESTMENT AGREEMENT WITH DUTCHESS.
The sale of shares pursuant to our Investment Agreement with Dutchess will have
a dilutive impact on our stockholders. As a result, our net income per share, if
any, could decrease in future periods, and the market price of our common stock
9
RISK FACTORS - continued
could decline. In addition, the lower our stock price at the time we exercise
our put option, the more shares we will have to issue to Dutchess to draw down
on the full equity line with Dutchess. If our stock price decreases, then our
existing stockholders would experience greater dilution.
DUTCHESS WILL PAY LESS THAN THE THEN-PREVAILING MARKET PRICE OF OUR COMMON
STOCK, WHICH MAY CAUSE OUR STOCK PRICE TO DECLINE.
The common stock to be issued under our agreement with Dutchess will be
purchased at a 4% discount to the lowest closing bid price for the five days
immediately following our notice to Dutchess of our election to exercise our put
right. These discounted sales could cause the price of our Common Stock to
decline and you may not be able to sell our stock for more than you paid for it.
OUR SECURITIES HAVE BEEN THINLY TRADED ON THE OVER-THE-COUNTER BULLETIN BOARD,
WHICH MAY NOT PROVIDE LIQUIDITY FOR OUR INVESTORS.
Our securities are quoted on the Over-the-Counter Bulletin Board. The
Over-the-Counter Bulletin Board is an inter-dealer, over-the-counter market that
provides significantly less liquidity than the NASDAQ Stock Market or national
or regional exchanges. Securities traded on the Over-the-Counter Bulletin Board
are usually thinly traded, highly volatile, have fewer market makers and are not
followed by analysts. The Securities and Exchange Commission's order handling
rules, which apply to NASDAQ-listed securities, do not apply to securities
quoted on the Over-the-Counter Bulletin Board. Quotes for stocks included on the
Over-the-Counter Bulletin Board are not listed in newspapers. Therefore, prices
for securities traded solely on the Over-the-Counter Bulletin Board may be
difficult to obtain and holders of our securities may be unable to resell their
securities at or near their original acquisition price, or at any price.
WE MAY NOT BE ABLE TO ACCESS SUFFICIENT FUNDS UNDER THE EQUITY LINE OF CREDIT
WITH DUTCHESS WHEN NEEDED.
We will depend on external financing to fund our planned expansion. We expect
that these financing needs will be primarily met by our agreement with Dutchess.
However, due to the terms of the Investment Agreement, this financing may not be
available in sufficient amounts or at all when needed. As a result, we may not
be able to grow our business as planned.
INVESTORS MUST CONTACT A BROKER-DEALER TO TRADE OVER-THE-COUNTER BULLETIN BOARD
SECURITIES. AS A RESULT, YOU MAY NOT BE ABLE TO BUY OR SELL OUR SECURITIES AT
THE TIMES THAT YOU MAY WISH.
Even though our securities are quoted on the Over-the-Counter Bulletin Board,
the Over-the-Counter Bulletin Board may not permit our investors to sell
securities when and in the manner that they wish. Because there are no automated
systems for negotiating trades on the Over-the-Counter Bulletin Board, they are
conducted via telephone. In times of heavy market volume, the limitations of
this process may result in a significant increase in the time it takes to
execute investor orders. Therefore, when investors place market orders an order
to buy or sell a specific number of shares at the current market price it is
possible for the price of a stock to go up or down significantly during the
lapse of time between placing a market order and its execution.
10
RISK FACTORS - continued
WE DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE, THEREFORE, YOU MAY
NEVER SEE A RETURN ON YOUR INVESTMENT.
We do not anticipate the payment of cash dividends on our Common Stock in the
foreseeable future. We anticipate that any profits from our operations will be
devoted to our future operations. Any decision to pay dividends will depend upon
our profitability at the time, cash available and other factors. Therefore, you
may never see a return on your investment. Investors who anticipate a need for
immediate income from their investment should not purchase the securities
offered in this prospectus.
USE OF PROCEEDS
---------------
This prospectus relates to shares of our Common Stock that may be offered and
sold from time to time by the selling stockholder. We will not receive proceeds
from the sale of shares of Common Stock in this offering. However, we will
receive the proceeds from the sale of shares of Common Stock to Dutchess under
the Investment Agreement. The purchase price of the shares purchased under the
Investment Agreement will be equal to 96% of the average of the three lowest
closing bid prices of our Common Stock on the Over-the-Counter Bulletin Board
for the five days immediately following the date of our notice of election to
exercise our put.
For illustrative purposes, we have set forth below our intended use of proceeds
for the range of net proceeds indicated below to be received under the
Investment Agreement. The table assumes estimated offering expenses of $25,000.
Proceeds Proceeds
If 100% Sold If 50% Sold
------------ ------------
Gross proceeds $ 10,000,000 $ 5,000,000
Estimated remaining accounting, legal and
associated expenses of Offering $ 25,000 $ 25,000
------------ ------------
Net Proceeds $ 9,975,000 $ 4,975,000
============ ============
Priority Proceeds Proceeds
Business development . . . . . . . . . . . 1st $3,241,875 $1,616,875
Research and development. . . . . . . . . .2nd $1,246,875 $ 621,875
Intellectual property . . . . . . . . . . 3rd $ 997,500 $ 497,500
Acquisitions. . . . . . . . . . . . . . . .4th $1,995,000 $ 995,000
General and Administrative 5th $2,493,750 $1,243,750
------------ ------------
Total $9,975,000 $4,975,000
============ ============
11
USE OF PROCEEDS - continued
Proceeds of the offering which are not immediately required for the purposes
described above will be invested in United States government securities,
short-term certificates of deposit, money market funds and other high-grade,
short-term interest-bearing investments.
DETERMINATION OF OFFERING PRICE
-------------------------------
The shares of Common Stock are being offered for sale by the selling
stockholders at prices established on the Over-the-Counter Bulletin Board or in
negotiated transactions during the term of this offering. These prices will
fluctuate based on the demand for the shares.
DILUTION
--------
Our net tangible book value as of December 31, 2003 was $(17,085) or <$(0.01)
loss per share. Our net tangible book value per share is equal to the amount of
our total assets less intangible assets and less total liabilities, divided by
the number of shares of Common Stock at December 31, 2003.
You should be aware that there is an inverse relationship between our stock
price and the number of shares to be issued under the Investment Agreement to
Dutchess. That is, as our stock price declines, we would be required to issue a
greater number of shares under the Investment Agreement for a given advance.
CAPITALIZATION
--------------
The following sets forth our actual capitalization on December 31, 2003
Shareholders' equity
Common stock, $0.001 par value, authorized 100,000,000 shares
issued and outstanding - 32,612,666 shares . . . . . . . . . . .$ 32,613
Additional paid in capital . . . . . . . . . . . . . . . . . . . .$ (411,489)
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . .$ 384,891
Accumulated other comprehensive income . . . . . . . . . . . . . . .$
---------------
Deferred stock compensation. . . . . . . . . . . . . . . . . . . . .$ 0
---------------
Total Capitalization (cash at year end) . . . . . . . . . . . . . .$ 6,960
===============
DIVIDEND POLICY
---------------
We do not pay dividends on our Common Stock and we do not anticipate paying
dividends on our Common Stock in the foreseeable future. We intend to retain our
future earnings, if any, to finance the growth of our business.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
Introduction
The following discussion is intended to provide an analysis of the Company's
financial condition and Plan of Operation and should be read in conjunction with
the Company's financial statements and the notes thereto set forth herein. The
matters discussed in this section that are not historical or current facts deal
with potential future circumstances and developments. The Company's actual
results could differ materially from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below.
Plan of Operation
12to20 Plus LOB: 12 to 20 Plus, Inc. has researched and developed an innovative
Acne Therapy System(TM), driven by a market void of effective over-the-counter
products that treat acne skin conditions without irritation.
12 to 20 Plus will be taken to market as a complete Acne Therapy System for the
prevention, control and treatment of acne skin conditions. Dual purpose product
benefits will be promoted in advertising that will position the products as
medicated cosmetics which enhance and beautify skin while working to clear and
control acne related skin problems. The current product line:
o Zit Stick
o Pimple Pencil
o 12to20Plus Face and Body Soap
o 12to20Plus Medicated Pads
The Company will capitalize on the incorporation of two super trends in skin
care-high tech and natural positioning in its consumer advertising campaign.
Consumer spending on skin care, cosmetics and fragrances is expected to exceed
$553 million in 2004. The international market for acne remedies is estimated at
another $400 million, bringing the total potential market to around $900 million
worldwide.
The Company will launch an online marketing campaign to dermatologists and back
the campaign up with an educational ecommerce Web site (www.12to20plus.com).
Nutraceutical Research Group LOB: NRG has begun the creation of a "Dispensary"
program for health practitioners that will include more than 20 of its
proprietary and private-labeled products. NRG will market this program to health
practitioners via direct mail programs (NRG recently acquired a database of more
than 45,000 chiropractors in the US), through health provider franchisers in the
United States, Canada, Europe and Eastern Europe. NRG will also market directly
to health practitioners through sponsored seminars showing the health
practitioners how to market, sell and collect from the new "Dispensary"
programs. The NRG ecommerce web site (www.nutraceuticalresearch.com) will be
tailored to the health practitioner, letting them place their bulk orders online
and allowing their clients to re-order directly from the web site (co-branded
with the health practitioner's contact information) so that the health
practitioner actually makes revenue on sales that their clients book themselves
online. We plan on a major "pay per click" Internet campaign that will reach up
to 80% of Internet users, based on "key word" searches.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
In addition to its nutraceutical products for depression (Anaplex), macula
degeneration (VisonKare), its substance abuse systems (Quit system) and nutrient
weight loss therapy system (Trim-A-Way), the dispensary program will include
products for heart health, cholesterol management, diabetes, general good health
(antioxidants like ubiquinine) and more. Most of the new NRG proprietary and
private-label products are so new, that they are not yet named. The products (by
description and purpose) to be included within the NRG Dispensary program
include:
o Ubiquinine/co-enzyme Q10 product in a "melt in your mouth"
formulation. Addresses Cardiovascular function, cancer, powerful
anti-oxidant (part of our Heart Health System)
o Phytonutrients (a Multi-Vitamin) for General Good Health
o Natural Beta-Carotene
o Antioxidant multi-vitamin (General Health)
o Supplement for joints and mental health
o A Glucosamine supplement that supports joints and cartilage-Extra
strength
o Promotes intestinal health (Digestive)
o Calcium with magnesium-to maintain healthy bones
o Highly concentrated trace element supplement (General Good Health)
o Healthy mental function supplement
o Quit-System: Smoker's recovery
o Supplement to Significantly lower cholesterol levels (Cardiovascular
function) and part of our Heart Health System
o Supplement to Promote intestinal balance and good health
o Omega 3-fatty acid (part of our Heart Health System)
o Women's heart health Supplement packs (part of our Heart Health
System)
o DHEA as a Natural steroid hormone
o Ultra protein plus- Energy/sports/fitness, Diabetes (Protein drink in
several flavors)
o Children's health supplements (multi-vitamin)
o VisionKare: Slows down the process of macular degeneration
o Anaplex: Corrects brain chemical imbalances, useful to fight
depression
o Phosphatidly serine, a supplement for Neurological good health and for
senior nutrition
o Women's Supplement Pack for Menopausal and Post-Menopausal life (part
of our healthy heart program for women)
Hinoki Bana LOB: In April 2004, 12 to 20 Plus acquired H. Bana, Ltd., and with
it, its line of hair restoration products. The Hinoki Bana Hair Restoration
System that consists of four products that are effective as individual items,
but more effective as a "system." The four Hinoki Bana products include:
o a topical treatment applied to the scalp;
o an ingestible nutraceutical for "systemic" hair health;
o a thickening nutritive shampoo and
o a thickening and nutritive conditioner.
Distributors in Italy, Switzerland, Germany and Eastern Europe have expressed
interest in reselling the Hinoki Bana Hair Restoration System overseas. The
company will market the system through Internet "key word" searches that may
reach up to 80% of Internet users while only paying for those that actually
visit the Hinoki Bana ecommerce web site (www.hinokibana.com).
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
Results of Operations
Fiscal Year Ended December 31, 2003 as compared to fiscal year ended December
31, 2002.
Total revenues for fiscal 2003 were $159 as compared to $0 in fiscal 2002, an
increase of 15000% $159 mainly due to sales of purchased inventory Product sales
decreased in fiscal 2003 to $159 from $0 due to sales of purchased inventory.
Cost of goods sold of $24,401 for fiscal 2003 increased by 709% to $24,401 from
$3,442 for fiscal 2002, due to purchased inventory.
General and administrative expenses in fiscal 2003 increased by 804% to $81,428
from $10,129 for fiscal 2002 due to Leases, operations consulting and inventory
acquisition
Research and development costs increased for fiscal 2003 to $194,905 from $5,752
for fiscal 2002 primarily due to acquisition of consulting assets from
Neurochemcical research Corp
We had no interest income for fiscal 2003 or fiscal 2002..
The net loss increased by 1346% to $281,602 for fiscal 2003 from $20,916 for
fiscal 2002. The increase is primarily due to Increased R&D, increased
operational costs and insignificant income
Three Months Ended March 31, 2004 as compared to Three Months Ended March 31,
2003.
For the quarter ended March 31, 2004, we had no revenues which represents no
change from the same period in fiscal year 2003.
Cost of services and goods sold was $0 for the period ending March 31, 2004
which represents no change from thesame period in fiscal 2003, due to no sales.
General and administrative expenses decreased by 60% during the quarter ended
March 31, 2004 to $26,149 as compared to $65,976 for the same period in fiscal
2003, due to cost controls.
Research and development costs increased by 6000% during the quarter ended March
31, 2004 to $61,029 from $0 for the same period in fiscal 2003, due to hiring a
consultant.
We had no interest income during the quarter ended March 31, 2004 which
represents no change from the same period in fiscal 2003.
Net loss for the quarter ended March 31, 2004 increased/decreased by 132% to
$88,640 from $66,916 for the same period in fiscal 2003 due to increased
research and development costs
Financial Condition, Liquidity and Capital Resources
At March 31, 2004, we had approximately $10,762 in cash and marketable
securities, as compared to a balance of $1,007 at March 31, 2003. The net
increase of $9,755 in cash and marketable securities is primarily due to cash
used in operations. There were no purchases of property, plant and equipment in
the quarter ended March 31, 2004.
15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - continued
We intend to utilize the funds from our equity line with Dutchess to
manufacture, advertise, and sell product and to develop and market new products
into a new market
We have historically used existing cash and readily marketable securities
balances to fund operating losses and capital expenditures.
We have incurred recurring losses and had net losses aggregating $281,602 in
fiscal years ended December 31, 2003 and 2002. Our business strategy includes
marketing through the Internet and direct to health professionals, using our
database of more than 45,000 chiropractors and to franchisers and suppliers to
health practitioners in North America and Europe. We intend to finance this
business strategy by using our current working capital resources and cash flows
from existing operations. Our sales of Hinoki Bana hair restoration systems may
not be sufficient by itself to offset related expenses.
We anticipate that our cash flow from operations, available cash and marketable
securities will be sufficient to meet our anticipated financial needs for at
least the next 6 months. However, in certain circumstances we may need to raise
additional capital in the future, which might not be available on reasonable
terms or at all. Failure to raise capital when needed could adversely impact our
business, operating results and liquidity. If additional funds are raised
through the issuance of equity securities, the percentage of ownership of
existing stockholders would be reduced. Furthermore, these equity securities
might have rights, preferences or privileges senior to our Common Stock.
Additional sources of financing may not be available on acceptable terms, if at
all.
Our primary capital resource commitments at March 31, 2004 consist of Product
manufacturing, branding, marketing, sales acquisitions and research and
development
We intend to pursue additional customers through the sale and marketing of our
products via the Internet and direct to health practitioners for resale.
Additionally, we may seek partners and acquisition candidates of businesses that
are complementary to our own. Such investments would be subject to our obtaining
financing through issuance of debt or other securities. Any acquisitions may be
dilutive to stockholders.
DESCRIPTION OF BUSINESS
-----------------------
12 to 20 Plus, Inc. currently has three lines of business (LOB): 12 to 20 plus
Acne Therapy System(TM); Hinoki Bana hair restoration system; Nutraceutical
Research Group, nutraceutical products for general good health, heart health,
diabetes management, smoking, stimulant and alcohol abuse systems, macula health
and chemo care products.
12 to 20 Plus LOB: driven by the market void for effective over-the-counter
products that treat acne skin conditions without irritation. The 12 to 20 Plus
concept is counter to the acne treatment industry's marketing of harsh products
which are designed to "strip away" acne and while the acne is being stripped,
the skin is being robbed of its natural moisture and the acne condition is
actually being aggravated in the process.
16
DESCRIPTION OF BUSINESS - continued
12 to 20 Plus products offer the following benefits over typical acne treatment
products:
a. reduced irritation
b. moisture retention properties
c. maintenance of skin's natural pH balance
d. skin healing qualities
The complete system of product use is key to the marketing concept. The 12 to 20
Plus system is gentle enough for daily use and primarily designed to help
control and prevent acne conditions from taking over.
Acne treatment products are constantly in demand, and demand for less-irritating
products is skyrocketing. While teenagers are the primary demographic targets
there has been a shift to develop remedies geared toward adults. Retailers say
adult acne is an area of increased interest and it is an increasing problem due
to environmental stress. Dermatologists report that since adults have more
sensitive skin, their acne needs to be treated differently than teenage
breakouts. The ingredients in the Company's products are gentle enough to treat
adult skin.
The product mix combines high purity drying and peeling agents (for the purpose
of exfoliation), chosen for their gentleness to skin along with biological and
botanical extracts and water-soluble humectants that gently, powerfully and
quickly treat acne conditions. Zit Stick, a handy carry-around remedy in a
pocketsize container is odorless, colorless and greaseless; a product developed
to treat skin blemishes any time of the day. Companion products include Pimple
Pencil(TM), a medicated cover stick in a pencil and soothing Blemish -Free Skin
Enhancer Lotion(TM) containing antioxidants, vitamins and enzymes plus silky
smooth amino acids for beautiful skin.
Nutraceutical Research Group LOB: the division markets highly efficient,
condition-specific dietary supplements containing the most sophisticated
combination of extensively researched nutritional elements available. These
products utilize potent pharmaceutical grade "amino acids", important protein
constituents that serve as neurotransmitter precursors, membrane stabilizers and
enzyme precursors. For energy production and other body functions, the
utilization of amino acids is improved by providing the proper nutrients, such
as antioxidants, to support their activities.
VisionKare(TM) contains advanced beneficial nutrients that are the first
effective treatment to slow the progression of the disease known as age-related
macular degeneration (AMD), according the results of a 9-year National Eye
Institute Study. ChemoKare(TM), containing grape extracts which possess
chemoprotective properties, slows onset and growth of new cancer cells while
promoting growth of healthy cells. NRG also markets QuitSystem(R) neuronutrient
supplementation substance abuse therapies formulated to compensate for
neurochemical imbalances in brain chemistry which are caused by genetics,
long-term abuse and lack of ability to absorb nutrients.
With Anaplex(TM), NRG has created a new class of antidepressants based on a
nutritive-designed therapy and a new category at retail - OTC depression. The
product is an alternative to prescription antidepressant drugs, based on a "no
side effects profile". A lack of specific nutrients, especially amino acids
which make the brain function smoothly, can result in confusion, personality
changes and stress-related depression, a problem which Anaplex addresses.
17
DESCRIPTION OF BUSINESS - continued
Retail sales in the mushrooming dietary supplement business are expected to hit
$21 billion by year 2007, according to Frost & Sullivan.
NRG has begun to develop a proprietary "Heart Health System" specifically
targeting women at or near menopause, since their risk of heart attack is
greatest at that stage of their lives. Only now is this market beginning to be
addressed by the media and the White House (Laura Bush has spoken of this need).
The Company expects to use extensive Internet marketing programs targeting
women's health sites as well as targeting health professionals to become
resellers through our upcoming "dispensary" programs.
The Company has also acquired the rights to private label several new products
for heart health and cholesterol management, such as ubiquinine, the top selling
nutritional product under various brand names (Co-enzyme Q-10, for instance).
The Company will also be packaging more than 20 NRG products in a "Dispensary"
that will be marketed directly to health practitioners (the Company has acquired
a database of more than 45,000 Chiropractors in the United States) and through
health practitioner Franchisers and associations.
The Company is in discussions with several potential distributors of our NRG
products and Dispensary program in Europe and Eastern Europe as well.
Hinoki Bana LOB: In April 2004, 12 to 20 Plus acquired H. Bana, Ltd., and with
it, its line of hair restoration products. The Hinoki Bana Hair Restoration
System that consists of four products that are effective as individual items,
but more effective as a "system." The four Hinoki Bana products include: a
topical treatment applied to the scalp; an ingestible nutraceutical for
"systemic" hair health; a thickening nutritive shampoo and a thickening and
nutritive conditioner.
DESCRIPTION OF PROPERTY
-----------------------
Our corporate office is located in a 2500 square foot office building located at
3450 Broad St., Suite 103 San Luis Obispo, CA 93401 This facility is leased
through April 2009 at a monthly rental of $4850 per month during. This is a full
service lease that includes utilities, maintenance and taxes on the property,
janitorial and security service.
MANAGEMENT
----------
DIRECTORS AND EXECUTIVE OFFICERS
Our executive officers and directors and their ages as of December 31, 2004 are
as follows:
Name Position Director since Age
- ----------------------- --------------------- ----------------- -----
Carol Slavin Director/President 61
Linda Hannon Director/ Secretary 61
Elizabeth Jaeger Director 31
18
MANAGEMENT - continued
Biographies of executive officers and directors
Carol Slavin, 61 Director/President has 26 years experience encompassing every
phase of consumer product development from labeling requirements to source
components and suppliers. In addition, Ms. Slavin has been involved in all
aspects of the nutritional supplement products business for over 10 years. A
former fashion editor, she also has an extensive public relations, promotion and
media writing background. Special assignments she created on a freelance basis
include initiating a liaison with the White House to obtain then First Lady
Betty Ford as honored guest for a City of Hope Medical Center fund raiser and
successful execution of extensive broadcast and print coverage for the National
Father's Day Council and the International Fashion Group programs, Los Angeles
chapter. Ms. Slavin has completed courses in Journalism and English at Cerritos
College, and was previously employed by Neurochemical Research Corporation for
the past 5 years.
Linda Hannon, 61, Director/Secretary, has served for the past 5 years as a
Customer Service Supervisor for AutoDoc Software, a producer of Palm Pilot
software for physicians. Previously, she worked in customer service for LabCo
Pharmaceuticals' hospital, clinical market segment and industrial accounting in
the nutritional supplement and energy industries, as well as with Eagle Energy,
a petroleum business. Ms Hannon has studied business and accounting at Cuesta
College.
Elizabeth Jaeger, 31, Director, is Vice President and Marketing Director for
Cannon Associates, a civil engineering and planning firm whose major client is
UNOCAL and has served in that capacity for the past 5 years. She is a graduate
of the University of Washington with a B.A. degree in communications.
LIMITATIONS ON OFFICER AND DIRECTOR LIABILITY
---------------------------------------------
Our articles of incorporation provide, as permitted by governing Nevada law,
that our officers and directors shall not be personally liable to us or our
shareholders for monetary damages relating to an officer's or director's
position with the exception for liability (i) for breach of the director's duty
of loyalty to us or our stockholders, (ii) for acts or omissions not in good
faith which involve intentional misconduct or a knowing violation of law, (iii)
for any transaction from which the director derived an improper personal
benefit. In addition, our by-laws provide for indemnification of directors to
the full extent of the law.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling us under the
foregoing provisions, we have been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act, and
is unenforceable for that reason.
19
EXECUTIVE COMPENSATION
----------------------
Set forth in the following table is certain information relating to the
approximate remuneration we paid during the past three fiscal years to our
Officers and Directors for the fiscal year ending December 31, 2003.
<table>
<caption>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ----------------
SECURITIES
FISCAL UNDERLYING STOCK
NAME AND PRINCIPAL POSITION YEAR ANNUAL SALARY BONUS OPTIONS
- ---------------------------------- ------ ------------- ------- ----------------
Carol Slavin Director/President 2003 $0.00 $0.00 0.00
Linda Hannon Director/Secretary 2003 $0.00 $0.00 0.00
Elizabeth Jaeger Director 2003 $0.00 $0.00 0.00
- ---------------------------------- ------ ------------- ------- ----------------
</table>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the stock options granted to our executive
officer named during the fiscal year ended December 31, 2003.
INDIVIDUAL GRANTS
------------------------
NUMBER OF SECURITIES % OF TOTAL OPTIONS
(SHARES OF COMMON STOCK) GRANTED TO EXERCISE
UNDERLYING OPTIONS EMPLOYEES/DIRECTORS PRICE EXPIRATION
NAME GRANTED(1) IN FISCAL ($/SHARE) DATE
- -------- ------------------------ -------------------- --------- ----------
NONE
EXERCISE OF STOCK OPTIONS AND YEAR-END OPTION VALUES
There were no exercises of stock options by the named executive officer during
the fiscal year ended December 31, 2003. The following table sets forth certain
information regarding options of the named executive officer outstanding as of
December 31, 2003.
20
EXECUTIVE COMPENSATION - continued
YEAR-END OPTION VALUES
---------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/WARRANTS AT OPTIONS/WARRANTS AT
DECEMBER 31, 2003 DECEMBER 31, 2003 (1)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------- ------------------ ------------------ ------------ -------------
NONE
RELATED PARTY TRANSACTIONS
--------------------------
None.
MARKET FOR OUR COMMON STOCK
---------------------------
Our Common Stock is currently quoted on the over-the-counter bulletin board
under the symbol "TTTP.OB". The following table sets forth the range of high and
low bid prices for our Common Stock during the periods indicated. The prices set
forth below represent inter-dealer prices, which do not include retail mark-ups
and markdowns, or any commission to the broker-dealer, and may not necessarily
represent actual transactions.
YEAR ENDED DECEMBER 31, 2003
QUARTER ENDED March 31, 2004
QUARTER ENDED June 30, 2004
COMMON STOCK
- ------------------------------ -------------------------
HIGH LOW
------------- ----------
December 31, 2003 $0.36 $0.03
March 31, 2004 $0.09 $0.03
June 30, 2004 $0.23 $0.04
NUMBER OF STOCKHOLDERS
As of June 30, 2004, there were approximately 69 qualified record holders of our
Common Stock.
REPORTS TO SECURITY HOLDERS
---------------------------
We are subject to the information requirements of the Securities Exchange Act of
1934, as amended. In accordance with those regulations, we file periodic
reports, and other information with the Securities and Exchange Commission. Our
reports, and other information can be inspected and copied at the SEC's Public
Reference Room at 450 Fifth Street N.W., Washington D.C. 20549. You can obtain
information on the operations of the Public Reference Room by calling the SEC at
(800) SEC-0330. Information also is available electronically on the Internet at
http://www.sec.gov.
21
REPORTS TO SECURITY HOLDERS - continued
We will provide without charge to each person to whom a copy of this prospectus
is delivered, upon oral or written request of such person, a copy of any or all
documents which are incorporated by reference in this prospectus, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Written requests for such documents should be
directed to 12 To 20 Plus, Inc., 3450 Broad St., Suite 103, San Luis Obispo, CA
93401. Telephone requests may be directed to us at (805) 543 9185.
We intend to furnish our shareholders with annual reports containing audited
financial statements and quarterly reports containing unaudited financial
information for the first three quarters of each year.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth, to our knowledge, certain information concerning
the beneficial ownership of our Common Stock as of December 31, 2003 by each
stockholder known by us to be (i) the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each current director, (iii) each of
the executive officers named in the Summary Compensation Table who were serving
as executive officers at the end of the 2003 fiscal year and (iv) all of our
directors and current executive officers as a group:
NAME AND ADDRESS OF
BENEFICIAL OWNER(1) AMOUNT AND NATURE
- ------------------------------- ----------------------
BENEFICIAL OWNERSHIP(2) PERCENT OF CLASS
----------------------- -----------------
Carol Slavin 1,600,000 4.91%
Director/President
2600 Silver Wood Way
Paso Robles, CA 93466
Linda Hannon 540,000 1.66%
Director/Secretary
33 Villa Santa Barbara
Paso Robles, CA 93466
Elizabeth Jaeger 540,000 1.66%
Director
132 Broad St.
San Luis Obispo, CA 93405
Coslabs Ltd. 4.383,738 13.44%
1350 E. Flamingo #1091
las Vegas, NV 89719
North American Equity 4,500,000 13.8%
P.O. Box 101%
Santa Margarita, CA 93453
Philip M. Young & JoAnn Young 4,140,000 12.7%
Family Trust
18036 N. 15th St.
Phoenix, AZ 85022
- --------------------------------------------------------------------------------
Total Director/Officers and 5% Owners: 15,703,738 48.17%
22
SELLING STOCKHOLDERS
--------------------
Based upon information available to us as of June 30, 2004, the following table
sets forth the names of the selling stockholder, the number of shares owned, the
number of shares registered by this prospectus and the number and percent of
outstanding shares that the selling stockholders will own after the sale of the
registered shares, assuming all of the shares are sold. The information provided
in the table and discussions below has been obtained from the selling
stockholders. The selling stockholders may have sold, transferred or otherwise
disposed of, or may sell, transfer or otherwise dispose of, at any time or from
time to time since the date on which it provided the information regarding the
shares beneficially owned, all or a portion of the shares of common stock
beneficially owned in transactions exempt from the registration requirements of
the Securities Act of 1933. As used in this prospectus, "selling stockholder"
includes donees, pledgees, transferees or other successors-in-interest selling
shares received from the named selling stockholder as a gift, pledge,
distribution or other non-sale related transfer.
Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated
by the Commission under the Securities Exchange Act of 1934. Unless otherwise
noted, each person or group identified possesses sole voting and investment
power with respect to the shares, subject to community property laws where
applicable.
<table>
<caption>
Name and address Number of Shares
of beneficial owner Number of Shares Number of Shares Owned After
Beneficially Owned Offered Offering(1)
- ----------------------------------- ------------------ ---------------- -----------------
Dutchess Private Equities Fund , L.P.(2) 0 25,000,000(3) -0-
</table>
(1) This number assumes the selling shareholder sells all of its shares prior
to the completion of the offering.
(2) Michael Novielli and Douglas Leighton, are the Managing Members of Dutchess
Capital Management, which is the General Partner of Dutchess Private
Equities Fund II, L.P..
(3) Consists of shares that may be issued pursuant to an Equity Line Agreement.
DESCRIPTION OF SECURITIES
-------------------------
The following description is a summary of the material terms of our capital
stock. This summary is subject to and qualified in its entirety by our Articles
of Incorporation, as amended, and Bylaws, and by the applicable provisions of
Nevada law.
The authorized capital stock of the company consists of 100,000,000 shares of
common stock having a par value of $0.001 per share. Each outstanding share of
common stock entitles the holder thereof to one vote per share on all matters.
The Articles of Incorporation do not permit cumulative voting for the election
of directors which means that the holders of more than 50% of such outstanding
shares voting for the election of directors can elect all of the directors to be
elected, if they so choose; in such event, the holders of the remaining shares
23
DESCRIPTION OF SECURITIES - continued
will not be able to elect any of our directors. Shareholders do not have
preemptive rights to purchase shares in any future issuance of our common stock.
The holders of shares of common stock are entitled to dividends out of funds
legally available when and as declared by the Board of Directors. The Board of
Directors has never declared a dividend and does not anticipate declaring a
dividend in the foreseeable future. In the event of liquidation, dissolution or
winding up of the affairs of the company, holders are entitled to receive,
ratably, the net assets available to shareholders after payment of all
creditors.
PLAN OF DISTRIBUTION
--------------------
The selling stockholder will act independently of us in making decisions with
respect to the timing, manner and size of each sale. The selling stockholder may
sell the shares from time to time:
- - in transactions on the Over-the-Counter Bulletin Board or on any national
securities exchange or U.S. inter-dealer system of a registered national
securities association on which our Common Stock may be listed or quoted at
the time of sale; or
- - in private transactions and transactions otherwise than on these exchanges
or systems or in the Over-The-Counter market;
- - at prices related to such prevailing market prices, or
- - in negotiated transactions, or
- - in a combination of such methods of sale; or
- - any other method permitted by law.
The selling stockholder may effect such transactions by offering and selling the
shares directly to or through securities broker-dealers, and such broker-dealers
may receive compensation in the form of discounts, concessions or commissions
from the selling stockholder and/or the purchasers of the shares for whom such
broker-dealers may act as agent or to whom the selling stockholder may sell as
principal, or both, which compensation as to a particular broker-dealer might be
in excess of customary commissions.
Dutchess Private Equities Fund II, L.P. and U.S. Euro Securities and any
broker-dealers who act in connection with the sale of its shares will be deemed
to be "underwriters" within the meaning of the Securities Act, and any
discounts, concessions or commissions received by them and profit on any resale
of the shares as principal will be deemed to be underwriting discounts,
concessions and commissions under the Securities Act.
On or prior to the effectiveness of the registration statement to which this
prospectus is a part, we will advise the selling stockholder that they and any
securities broker-dealers or others who may be deemed to be statutory
underwriters will be governed by the prospectus delivery requirements under the
Securities Act. Under applicable rules and regulations under the Securities
Exchange Act, any person engaged in a distribution of any of the shares may not
simultaneously engage in market activities with respect to the Common Stock for
the applicable period under Regulation M prior to the commencement of such
distribution. In addition and without limiting the foregoing, the selling
security owners will be governed by the applicable provisions of the Securities
and Exchange Act, and the rules and regulations thereunder, including without
limitation Rules 10b-5 and Regulation M, which provisions may limit the timing
of purchases and sales of any of the shares by the selling stockholders. All of
the foregoing may affect the marketability of our securities.
24
PLAN OF DISTRIBUTION - continued
On or prior to the effectiveness of the registration statement to which this
prospectus is a part, we will advise the selling stockholder that the
anti-manipulation rules under the Securities Exchange Act may apply to sales of
shares in the market and to the activities of the selling security owners and
any of their affiliates. We have informed the selling stockholder that they may
not:
- - engage in any stabilization activity in connection with any of the shares;
- - bid for or purchase any of the shares or any rights to acquire the shares,
- - attempt to induce any person to purchase any of the shares or rights to
acquire the shares other than as permitted under the Securities Exchange
Act; or
- - effect any sale or distribution of the shares until after the prospectus
shall have been appropriately amended or supplemented, if required, to
describe the terms of the sale or distribution.
We have informed the selling stockholder that it must effect all sales of shares
in broker's transactions, through broker-dealers acting as agents, in
transactions directly with market makers, or in privately negotiated
transactions where no broker or other third party, other than the purchaser, is
involved.
The selling stockholder may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act. Any commissions paid or
any discounts or concessions allowed to any broker-dealers, and any profits
received on the resale of shares, may be deemed to be underwriting discounts and
commissions under the Securities Act if the broker-dealers purchase shares as
principal.
In the absence of the registration statement to which this prospectus is a part,
certain of the selling stockholders would be able to sell their shares only
pursuant to the limitations of Rule 144 promulgated under the Securities Act.
We expect to incur approximately $25,000 in expenses related to this
registration statement. Our expenses consist mainly of accounting and legal
fees.
We engaged U.S. Euro Securities as our placement agent with respect to the
securities to be issued under the Equity Line of Credit. To our knowledge U.S.
Euro Securities has no affiliation or business relationship with Dutchess. U.S.
Euro Securities will be our exclusive placement agent in connection with the
Investment Agreement. We agreed to pay U.S. Euro Securities 1% of the gross
proceeds from each put with an aggregate maximum of $10,000 over the term of our
agreement. The Placement Agent Agreement terminates when our Investment
Agreement with Dutchess terminates pursuant to the terms of that Investment
Agreement.
LEGAL PROCEEDINGS
-----------------
We are not aware of any litigation or potential litigation affecting us or our
assets.
25
LEGAL MATTERS
-------------
The legality of our shares of Common Stock being offered hereby is being passed
upon by William D. O'Neal, Esq. Of The O'Neal Law Firm, P.C.. Mr. O'Neal will
not receive a direct or indirect interest in the small business issuer and has
never been a promoter, underwriter, voting trustee, director, officer, or
employee of our company. Nor does Mr. O'Neal have any contingent based agreement
with us or any other interest in or connection to us.
EXPERTS
-------
The financial statements included in this prospectus, have been audited by
Shelley Int'l, C.P.A., independent auditors, and have been included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing. Shelley Int'l, C.P.A. has no direct or indirect interest in us,
nor were they a promoter or underwriter.
ADDITIONAL INFORMATION
----------------------
We filed with the Securities and Exchange Commission a registration statement on
Form SB-2 under the Securities Act of 1933 for the shares of Common Stock in the
offering, of which this prospectus is a part. This prospectus does not contain
all of the information in the registration statement and the exhibits and
schedule that were filed with the registration statement. For further
information with respect to us and the Units, we refer you to the registration
statement and the exhibits and schedule that were filed with the registration
statement.
Statements contained in this prospectus about the contents of any contract or
any other document that is filed as an exhibit to the registration statement are
not necessarily complete, and we refer you to the full text of the contract or
other document filed as an exhibit to the registration statement. A copy of the
registration statement and the exhibits and schedules that were filed with the
registration statement may be inspected without charge at the Public Reference
Room maintained by the Securities and Exchange Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies of all or any part of the registration
statement may be obtained from the Securities and Exchange Commission upon
payment of the prescribed fee. Information regarding the operation of the Public
Reference Room may be obtained by calling the Securities and Exchange Commission
at 1-800-SEC-0330.
The Securities and Exchange Commission maintains a web site that contains
reports, proxy and information statements, and other information regarding
registrants that file electronically with the SEC. The address of the site is
www.sec.gov.
26
12 to 20, INC.
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS TABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm as of
March 31, 2004, and December 31, 2003 .................................. 28
Balance Sheets as of March 31, 2004, and December 31, 2003 ................. 29
Statements of Operations (Unaudited) Three Months Ended March 31, 2004
and Three Months Ended March 31, 2003 .................................. 30
Statement of Stockholders' Equity (Unaudited) Ended March 31, 2003 .......... 31
Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2004
and Three Months Ended March 31, 2003 .................................. 32
Notes to unaudited financial statements March 31, 2004 and December
31,2003 ........................................................... 33 - 39
Audited balance sheets as of December 31, 2003, and 2002 and the
related statements of operations, stockholders' equity, cash
flows and Notes for the year ended December 31, 2003 ................... 40
27
Report of Independent Registered Public Accounting Firm
----------------------------------------------------------
To the Board of Directors and Audit Committee
12 TO 20 Plus, Inc.
We have reviewed the accompanying interim balance sheets of 12 TO 20 Plus, Inc.,
as of March 31, 2004, and December 31, 2003 and the associated statements of
operations, stockholders' equity and cash flows and for the three-month periods
ended March 31, 2004 and March 31, 2003. These interim financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim financial statements for them to be in
conformity with U.S. generally accepted accounting principles.
Shelley International, CPA
Mesa, Arizona, U.S.A.
March 21, 2004
28
12 TO 20 PLUS, INCORPORATED
BALANCE SHEETS
--------------
(Unaudited)
ASSETS
------
March 31, December 31,
2004 2003
-------------- --------------
CURRENT ASSETS
Cash $ 10,762 $ 6,960
Inventory 24,401 24,401
Lease Deposits 2,869 2,869
Prepaid Expenses 50,869 67,826
-------------- --------------
Total Current Assets 88,901 102,056
-------------- --------------
PROPERTY AND EQUIPMENT (NET) 7,687 7,172
-------------- --------------
OTHER ASSETS
Investment in Subsidiary 240,000
Trademarks, Formulae and Client Files (Net) 81,166 79,296
-------------- --------------
Total Other Assets 321,166 79,296
-------------- --------------
TOTAL ASSETS $ 417,754 $ 188,524
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES
Accounts Payable $ 76,423 $ 60,275
Notes Payable 66,760 66,038
-------------- --------------
TOTAL LIABILITIES 143,183 126,313
-------------- --------------
STOCKHOLDERS' EQUITY
Common Stock authorized is 100,000,000
shares at $0.001 par value. Issued and
outstanding on March 31, 2004 is 38,062,666
and December 31, 2003 is 32,612,666 shares. 38,063 32,613
Additional Paid in Capital 695,039 411,489
Stock Subscribed 15,000 3,000
Retained Earnings (Loss) (473,531) (384,891)
-------------- --------------
Total Stockholders' Equity 274,571 62,211
-------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 417,754 $ 188,524
============== ==============
The accompanying notes are an integral part of these statements
29
12 TO 20 PLUS, INCORPORATED
Statements of Operations
------------------------
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
2004 2003
-------------- --------------
INCOME
Sales
-------------- --------------
EXPENSES
Administrative Expenses $ 26,149 $ 65,976
Professional and Consulting 61,029
Depreciation 740 250
Interest Expense 722 690
-------------- --------------
Total Expenses 88,640 66,916
-------------- --------------
Net (Loss) before Income Taxes (88,640) (66,916)
-------------- --------------
Provision for Income Taxes
NET (LOSS) $ (88,640) $ (66,916)
============== ==============
Primary and Diluted
Net (Loss) per Common Share a a
-------------- --------------
Weighted Average Number of Shares
Common Shares Outstanding 32,666,512 29,851,111
-------------- --------------
a = less than $0.01
The accompanying notes are an integral part of these statements
30
12 TO 20 PLUS, INCORPORATED
Statement of Stockholders' Equity
---------------------------------
(Unaudited)
<table>
<caption>
Common Stock
--------------------- Paid in Stock Accumulated Total
Shares Amount Capital Subscribed (Loss) Equity
----------- --------- ---------- ----------- ------------- ------------
Total as of December 31, 1999 3,070,112 $ 3,070 $ (2,660) $ (410)
Common Stock Issued for Assets 1,668,539 1,669 3,331 $ 5,000
Common Stock Issued for Service 667,416 667 433 1,100
Common Stock Issued for Cash 667,416 667 333 1,000
Net (Loss) (53,295)
----------- --------- ---------- ----------- ------------- ------------
Total as of December 31, 2000 6,073,483 6,073 6,437 (53,705) (41,195)
Net (Loss) (28,668) (28,668)
----------- --------- ---------- ----------- ------------- ------------
Total as of December 31, 2001 6,073,483 6,073 6,437 (82,373) (69,863)
Common Stock Issued for Service 266,966 267 1,733 2,000
Common Stock Issued for Assets 5,005,618 5,006 13,744 18,750
Common Stock Issued to retire Debt 6,674,157 6,674 6,151 12,825
Common Stock Issued to retire Debt 8,342,697 8,343 32,559 40,902
Recapitalization, April 12, 2002
Common Stock Issued 3,337,079 3,337 (20,307) (16,970)
Stock Subscribed $ 3,000 3,000
Net (Loss) (20,916) (20,916)
----------- --------- ---------- ----------- ------------- ------------
Balance, December 31, 2002 29,700,000 29,700 40,317 3,000 (103,289) (30,272)
Common Stock Issued for Cash 866,666 867 122,133 123,000
Common Stock Issued for Service 1,846,000 1,846 227,254 229,100
Common Stock Issued to retire Debt 200,000 200 21,785 21,985
Net (Loss) (281,602) (281,602)
----------- --------- ---------- ----------- ------------- ------------
Balance, December 31, 2003 32,612,666 32,613 411,489 3,000 (384,891) 62,211
Stock Subscribed 12,000 12,000
Common Stock Issued for Services 2,450,000 2,450 46,550 49,000
Common Stock Issued to acquire
Subsidiary 3,000,000 3,000 237,000 240,000
Net (Loss) (88,640) (88,640)
----------- --------- ---------- ----------- ------------- ------------
Balance, March 31, 2004 38,062,666 $ 38,063 $ 695,039 $ 15,000 $ (473,531) $ 274,571
=========== ========= ========== =========== ============= ============
</table>
The accompanying notes are an integral part of these statements
31
12 TO 20 PLUS, INCORPORATED
Statements of Cash Flows
------------------------
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
2004 2003
-------------- --------------
OPERATING ACTIVITIES
Net (Loss) $ (88,640) $ (66,916)
Significant Non-Cash Transactions
Issued 2,450,000 common shares for
services valued at $49,000. 49,000
Issued 3,000,000 common shares to
acquire subsidiary valued at $240,000. 240,000
Changes in Assets and Liabilities
Inventory (20,959)
Prepaid Expense 16,957 (2,869)
Notes Receivable (42,900)
Depreciation Expense 740 250
Accounts Payables 16,148 174,318
-------------- --------------
Net Cash Provided/(Used) by Operating Activities 234,205 40,924
-------------- --------------
INVESTING ACTIVITIES
Purchase of Equipment (1,255) (3,741)
Investment in Subisiiary (240,000)
Trademarks, Formulae, Client Files (1,870) (104,777)
-------------- --------------
Net Cash (Used) by Investing Activities (243,125) (108,518)
-------------- --------------
FINANCING ACTIVITIES
Principle Received on Notes 722 14,514
Common Stock Subscribed 12,000
Proceeds from the sale of Common Stock 400
Paid in Capital 52,600
-------------- --------------
Cash Provided by Financing Activities 12,722 67,514
-------------- --------------
Net Increase in Cash 3,802 (80)
Cash, Beginning of Period 6,960 1,087
-------------- --------------
Cash, End of Period $ 10,762 $ 1,007
============== ==============
Significant Non-Cash Transactions:
For quarter ended March 31, 2004 Common Stock issued included 2,450,000
shares for services valued at $49,000 and 3,000,000 shares to acquire
a subsidiary valued at $240,000.
Supplemental Information:
Interest Paid $ 722 $ 690
The accompanying notes are an integral part of these statements.
32
Notes to Financial Statements
- -----------------------------
12 To 20 Plus, Incorporated
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2004 and December 31,2003
Note 1. OVERVIEW OF OPERATIONS AND ACCOUNTING POLICIES
12 TO 20 PLUS INCORPORATED (originally Loughran/Go Corporation), was
incorporated in April 26, 1996. The Company was organized to manufacture and
market over-the-counter medical remedies and similar products through retail
establishments. During 1996 the Company purchased formulae for the remedies.
During the year 2000 inventory was purchased and additional promotion of
products was begun. Although minimal sales have taken place to date, management
has actively been distributing samples and expects sales to begin soon.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. The Company has a substantial deficit
in retained earnings from losses for the previous years. This raises substantial
doubt about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from this
uncertainty
Product Development
- --------------------
The Company holds the trademarks Zit Stick, QuitSystem, ChemoKare, VisionKare
and Anaplex. The Company holds the rights to manufacture and market the products
Zit Stick, Zit Stick Patch, Pimple Pencil, Zit Stick Facial Wash, Body Cleansing
Bar, Blemish-Free Lotion, QuitSystem (Smokers Recovery Formula), QuitSystem
(Alcohol Abuse Recovery Formula), QuitSystem (Stimulant Abuse Recovery Formula),
Anaplex (Natural Antidepressant Formula), VisionKare (Supplement for Macular
Degeneration), ChemoKare (Natural Cancer Fighting Compound), Male Virility
(Natural Alternative to Viagra) and Trim-A-Way (Weight Control & Body Shaper
Supplement).
Marketing Strategy
- -------------------
The Company plans to market its products through an animated web site designed
by an illustrator who creates special effects for the movie industry. The
Company may also sell to Drugstore.com and other Internet retailers. Magazine
advertising will direct potential customers to retail Internet sites.
Revenue Recognition
- -------------------
The Company will recognize revenue upon shipment to the web site purchaser.
Research and Development
- ------------------------
The Company expenses product research and development costs as they are
incurred. The Company does not expect to have much research and development
costs.
Advertising
- -----------
Advertising costs are expensed as incurred. No advertising expense was incurred
for the three months ended March 31, 2004 and 2003.
33
Notes to Financial Statements - continued
Inventory
- ---------
The Company contracts with a third party to manufacture products and is not
billed nor obligated for any work-in-process costs. Inventory is all finished
goods and is stated at lower of cost or market on a FIFO basis. On February 25,
2003 the Company purchased inventory through the purchase of the assets and
liabilities of NRC Corporation. Detail for the inventory at 3/31/04 and 3/31/03
follows:
3/31/04 3/31/03
Inventory at Cost $24,401 $24,401
========== =========
Equipment
- ---------
Equipment is depreciated using the straight-line method over the estimated
useful lives, which is five years. The Company acquired Leasehold Improvements
through the purchase of the assets and liabilities of NRC Corporation.
Fixed assets consist of the following:
3/31/04 12/31/03
---------- ----------
Leasehold Improvements $3,741 $3,741
Office equipment 8,883 7,628
---------- ----------
Total fixed assets 12,624 11,369
Less: Accumulated depreciation (4,937) (4,197)
---------- ----------
Total $7,687 $7,172
========== ==========
Trademark and Formulae
Formulae $ 5,000 $ 5,000
Trademark 18,750 18,750
Accumulated Amortization or Impairment (3,682) (1,188)
---------- ----------
Net Trademark and Formulae $23,156
==========
The Company purchased the rights to five formulae on July 23, 1996. These were
purchased with stock.
Pre-split Post-split
Name Value Shares Shares
---- -------- --------- ----------
Zit Stick trademark $1,000 10,000 66,742
Zit Stick formula 1,000 10,000 66,742
Facial Wash 1,000 10,000 66,742
Body Cleansing Bar 1,000 10,000 66,742
Blemish-Free Lotion 1,000 10,000 66,740
-------- --------- ----------
Total $5,000 50,000 333,708
======== ========= ==========
34
Notes to Financial Statements - continued
On June 10, 2002 the Company purchased the trademark registration "Zit Stick"
(#1,314,233), from its owner, Daniel Tennant, for 750,000 pre-split, 5,005,618
post-split shares of stock. Value was placed at $18,750. The previous owner is a
company controlled by a major shareholder. No amortization or impairment has
been taken against this value during the year 2002.
Trademark, Formulae and Client Files (NRC)
On February 25, 2003 the Company purchased the following trademark registration,
formulae and client files from Neurochemical Research Corporation (NRC) by
assuming an equal amount of NRC's liabilities. The previous owner is a company
controlled by a major shareholder. No amortization or impairment has been taken
against this value during the year 2002 and the period ending 6/30/03.
Amortization has been taken beginning 7/1/03. On 12/31/03 $59,488 of the assumed
NCR liabilities was forgiven therefore, the value of the corresponding assets
was adjusted.
3/31/04
Trademark $18,548
Formulae 37,104
Client Files 4,637
Accumulated Amortization or Impairment (2,873)
-------
Net Trademark, Formulae and Client Files $81,166
=======
The Company purchased the rights to the following Trademarks and Trade Names.
Name Value
---- -----
QuitSystem, Trademark $4,637
ChemoKare, Trade name 4,637
VisionKare, Trade name 4,637
Anaplex, Trade name 4,637
-----
Total $18,548
=======
The Company purchased the rights to the following Formulae and Client Files.
Name Value
---- -----
QuitSystem, Smokers Recovery Formula $4,637
QuitSystem, Stimulant and Alcohol Abuse Recovery Formula 4,637
AnaplexD, Antidepressant drug alternative Formula 4,637
AnaplexSD, Short Term Anxiety Formula 4,637
VisionKare, Advanced supplement for macular degeneration Formula 4,637
ChemoKare, Natural Cancer Fighting Compound, Formula 4,637
Male Virility, Natural Alternative to Viagra, Formula 4,637
Trim-A-Way, Weight Control & Body Shaper supplements, Formula 4,637
Client List 4,637
Total $41,741
=========
35
Notes to Financial Statements - continued
Use of Estimates
- ----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (GAAP) requires management to
make estimates and assumptions that affect the reported amounts and the
disclosure of contingent amounts in the Company's financial statements and the
accompanying notes. Actual results could differ from those estimates.
Earnings per Share
- ------------------
The basic (loss) per share is calculated by dividing the Company's net income
available to common shareholders by the weighted average number of common shares
during the year.
The Company has no potentially dilutive securities outstanding at the end of the
statement periods. Therefore, the basic and diluted (loss) per share are
presented on the face of the statement of operations as the same number.
Stock Based Compensation
- ------------------------
The Company accounts for its stock based compensation based upon provisions in
SFAS No. 123, Accounting for Stock-Based Compensation. In this statement stock
based compensation is divided into two general categories, based upon who the
stock receiver is, namely: employees/directors and non-employees/directors. The
employees/directors category is further divided based upon the particular stock
issuance plan, namely compensatory and non-compensatory. The employee/directors
non-compensatory securities are recorded at the sales price when the stock is
sold. The compensatory stock is calculated and recorded at the securities' fair
value at the time the stock is given. SFAS 123 also provides that stock
compensation paid to non-employees be recorded with a value which is based upon
the fair value of the services rendered or the value of the stock given,
whichever is more reliable. The common stock paid to non-employees was valued at
the value of the services rendered.
Warranty and Right of Return
- -----------------------------
The Company currently does not have a warranty or right of return policy. The
Company plans to secure product liability insurance as soon as it commences
shipment of goods.
Note 2. NOTES PAYABLE:
Notes payable and capital lease obligations consist of the following:
12/31/03 12/31/02
------------ ------------
Demand Note from shareholder
Interest at 8% $35,000 $35,000
Demand note from shareholder
Interest at 8% 10,000 10,000
Demand note from shareholder
Interest at 8% 10,000 10,000
Accrued Interest 11,760 11,038
------------ ------------
Total Notes Payable $66,760 $66,038
============ ============
36
Notes to Financial Statements - continued
Note 3. STOCKHOLDERS' EQUITY
The Company (Loughran/Go Corporation) was incorporated April 29, 1996 in the
state of Nevada. The Company had 100,000,000 shares of common stock authorized.
Two forward stock splits and one stock retirement have been retroactively and
ratably applied to all share amounts listed below.
Par value is $0.001 per common share.
The Company founders were issued 3,070,112 post-split common shares to cover the
$410 cost of incorporation. Afterward, 6,674,157 post-split common shares were
issued for the purchase of assets valued at $23,750; 5,230,382 post-split common
shares were issued for services valued at $281,200; 15,216,854 post-split common
shares were issued to retire $75,712 of debt and accumulated interest; 3,337,079
post-split common shares were issued to re-capitalize; 1,534,082 shares were
sold for $124,000 and 3,000,000 common shares were issued to acquire subsidiary
valued at $240,000.
Note 4. MERGER WITH LOUGHRAN/GO
On April 12, 2002 the Company merged with Loughran/Go Corporation a Nevada
corporation. Loughran/Go Corporation was the surviving corporation. The merger
was a re-capitalization accounted for as a reverse acquisition. This means that
the historical numbers of 12 TO 20 PLUS, INCORPORATED are to be used for
comparative purposes. The Company name was then changed to 12 TO 20 PLUS,
INCORPORATED. The purpose of the merger was to make the Company more attractive
to investors. The raising of additional capital would enable the Company to
continue to promote its products.
The balance sheet of Loughran/Go prior to the merger was as follows.
Assets $ 0
Payables 16,970
---------
Negative Net Worth $(16,970)
=========
Note 5. INCOME TAXES:
The Company provides for income taxes under Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of
an asset and liability approach in accounting for income taxes. Deferred tax
assets and liabilities are recorded based on the differences between the
financial statement and tax bases of assets and liabilities and the tax rates in
effect currently.
SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. In the
Company's opinion, it is uncertain whether they will generate sufficient taxable
income in the future to fully utilize the net deferred tax asset. Accordingly, a
valuation allowance equal to the deferred tax asset has been recorded. The total
deferred tax asset is $84,676, which is calculated by multiplying a 22%
estimated tax rate by the cumulative NOL of $384,891. The total valuation
allowance is a comparable $84,676. Details for the last three years follow:
37
Notes to Financial Statements - continued
12/31/03 12/31/02 12/31/01
-------- -------- --------
Deferred Tax Asset $61,952 $4,602 $6,307
Valuation Allowance (61,952) (4,602) (6,307)
Current Taxes Payable 0.00 0.00 0.00
-------- -------- --------
Income Tax Expense $ 0.00 $ 0.00 $ 0.00
======== ======== ========
Below is a chart showing the estimated corporate federal net operating loss
(NOL) and the year in which it will expire.
Year Amount Expiration
---- --------- ----------
1999 and prior $ 23,832 2011
2000 29,873 2020
2001 28,668 2021
2002 20,916 2022
2003 281,602 2023
---------
Total NOL $ 384,891
=========
The Company has filed no income tax returns since inception. Management is
planning to complete these during 2004.
Note 6. LEASES AND OTHER COMMITMENTS:
The office rent is month to month. The numbers shown below assume that the
Company will remain in its current office space.
Year 1 Year 2 Year 3 Year 4 Year 5
Office Lease 7,213 7,213 7,213 7,213 7,213
Note 7. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Below is a listing of the most recent accounting standards SFAS 146-150 and
their effect on the Company.
SFAS 146 Accounting for Costs Associated with Exit or Disposal Activities
This statement requires companies to recognize costs associated with exit or
disposal activities, other than SFAS 143 costs, when they are incurred rather
than at the date of a commitment to an exit or disposal plan. Examples of these
costs are lease termination costs, employee severance costs associated with
restructuring, discontinued operation, plant closing, or other exit or disposal
activity. This statement is effective after December 15, 2002.
SFAS 147 Acquisitions of Certain Financial Institutions - an amendment of FASB
Statement No. 72 and 144 and FASB Interpretation No. 9.
38
Notes to Financial Statements - continued
This statement makes the acquisition of financial institutions come under the
statements 141 and 142 instead of statement 72, 144 and FASB Interpretation No.
9. This statement is applicable for acquisition on or after October 1, 2002.
SFAS 148 Accounting for Stock-Based Compensation - Transition and Disclosure
Amends FASB 123 to provide alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee compensation.
SFAS 149 Amendment of Statement 133 on Derivative Instruments and Hedging
Activities
This Statement amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities under FASB Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities.
SFAS 150 Financial Instruments with Characteristics of both Liabilities and
Equity
This statement requires that such instruments be classified as liabilities in
the balance sheet. SFAS 150 is effective for financial instruments entered into
or modified after May 31, 2003.
Interpretation No. 46 (FIN 46)
Effective January 31, 2003, The Financial Accounting Standards Board requires
certain variable interest entities to be consolidated by the primary beneficiary
of the entity if the equity investors in the entity do not have the
characteristics of a continuing financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. The Company has not invested
in any such entities, and does not expect to do so in the foreseeable future.
The adoption of these new Statements is not expected to have a material effect
on the Company's current financial position, results or operations, or cash
flows.
Note 8. COMPLIANCE WITH SARBANES-OXLEY ACT OF 2002
The Company does not currently comply with all of the provisions of the
Sarbanes-Oxley Act of 2002. It is the intention of the Company to comply with
the rules and structure mandated therein. To this end the Company is seeking
potential independent directors.
The new Act also requires an audit committee to consist of at least three
independent members, one of which needs to be a financial and accounting expert.
Currently, the Company has no separate audit committee and is also seeking
potential audit committee members to serve on its future audit committee.
It should be noted that the Company may experience trouble attracting
independent directors because, at this time, it does not have Directors and
Officers Liability Insurance in place.
39
12 to 20, INC.
FINANCIAL STATEMENTS
(Audited)
as of December 31, 2003
FINANCIAL STATEMENTS TABLE OF CONTENTS
Report of independent certified public accountant ........................... 41
Balance Sheets December 31, 2003 and December 31, 2002 ...................... 42
Statements of Operations Years Ended December 31, 2003.
December 31, 2002 and December 31, 2001 ................................ 43
Statement of Stockholders' Equity for the period
December 31, 1999 to December 31, 2003 ................................. 44
Statements of Cash Flows Years Ended December 31, 2003,
December 31, 2002 and December 31, 2001 ........................... 45 - 46
Notes to financial statements December 31, 2003 and 2002 ............... 46 - 54
40
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
-------------------------------------------------
To the Board of Directors and Audit Committee
12 TO 20 Plus, Incorporated.
I have audited the accompanying balance sheets of 12 To 20 Plus, Incorporated,
as of December 31, 2003, and 2002 and the related statements of operations,
stockholders' equity, and cash flows for the years ended December 31, 2003, 2002
and 2001. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that I plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis for
my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of 12 To 20 Plus, Incorporated, as of
December 31, 2003 and 2002 and the related statements of operations,
stockholders' equity, and cash flows for the years ended December 31, 2003, 2002
and 2001 are in conformity with accounting principles generally accepted in the
United States of America.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. The Company is eight years old and has
a substantial deficit in retained earnings from accumulated losses during each
of those years. This raises substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from this uncertainty.
Shelley International, CPA
April 14, 2003
Mesa, Arizona
41
12 TO 20 PLUS, CORPORATION
BALANCE SHEETS
--------------
ASSETS
------
December 31, December 31,
2003 2002
-------------- --------------
CURRENT ASSETS
Cash $ 6,960 $ 1,087
Inventory 24,401 3,442
Lease Deposits 2,869
Prepaid Expenses 67,826
-------------- --------------
Total Current Assets 102,056 4,529
-------------- --------------
PROPERTY AND EQUIPMENT (NET) 7,172 2,500
-------------- --------------
OTHER ASSETS
Trademarks, Formulae and
Client Files (Net) 79,296 23,750
-------------- --------------
Total Other Assets 79,296 23,750
-------------- --------------
TOTAL ASSETS $ 188,524 $ 30,779
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES
Accounts Payable $ 60,275 $ 18,584
Notes Payable 66,038 42,467
-------------- --------------
TOTAL LIABILITIES 126,313 61,051
-------------- --------------
STOCKHOLDERS' EQUITY
Common Stock authorized
is 100,000,000
shares at $0.001 par
value. Issued and
outstanding on December
31, 2003 is
32,612,666, December 31,
2002 is 29,700,000 shares. 32,613 29,700
Additional Paid in Capital 411,489 40,317
Stock Subscribed 3,000 3,000
Retained Earnings (Loss) (384,891) (103,289)
-------------- --------------
Total Stockholders' Equity 62,211 (30,272)
-------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 188,524 $ 30,779
============== ==============
The accompanying notes are an integral part of these statements
42
12 TO 20 PLUS, CORPORATION
Statements of Operations
------------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
2003 2002 2001
-------------- -------------- --------------
INCOME
Sales $ 159
-------------- -------------- --------------
EXPENSES
Administrative Expenses $ 81,428 $ 10,129 $ 22,068
Consulting 194,905 5,752
Depreciation 1,697 1,000 1,000
Interest Expense 3,572 4,035 5,600
-------------- -------------- --------------
Total Expenses 281,602 20,916 28,668
-------------- -------------- --------------
Net (Loss) before Income Taxes (281,602) (20,916) (28,668)
-------------- -------------- --------------
Provision for Income Taxes
NET (LOSS) $ (281,602) $ (20,916) $ (28,668)
============== ============== ==============
Primary and Diluted
Net (Loss) per Common Share a a a
-------------- -------------- --------------
Weighted Average Number of Shares
Common Shares Outstanding 29,832,636 19,129,597 6,073,483
-------------- -------------- --------------
a = less than $0.01
The accompanying notes are an integral part of these statements
43
12 TO 20 PLUS, CORPORATION
Statement of Stockholders' Equity
---------------------------------
for the period December 31, 1999 to December 31, 2003
<table>
<caption>
Common Stock
----------------------- Paid in Stock Accumulated Total
Shares Amount Capital Subscribed (Loss) Equity
----------- ----------- ------------- ------------ ------------ --------------
Total as of December 31, 1999 3,070,112 $ 3,070 $ (2,660) $ (410)
Common Stock Issued for Assets 1,668,539 1,669 3,331 $ 5,000
Common Stock Issued for Service 667,416 667 433 1,100
Common Stock Issued for Cash 667,416 667 333 1,000
Net (Loss) (53,295)
----------- ----------- ------------- ------------ ------------ --------------
Total as of December 31, 2000 6,073,483 6,073 6,437 (53,705) (41,195)
Net (Loss) (28,668) (28,668)
----------- ----------- ------------- ------------ ------------ --------------
Total as of December 31, 2001 6,073,483 6,073 6,437 (82,373) (69,863)
Common Stock Issued for Service 266,966 267 1,733 2,000
Common Stock Issued for Assets 5,005,618 5,006 13,744 18,750
Common Stock Issued to retire Debt 6,674,157 6,674 6,151 12,825
Common Stock Issued to retire Debt 8,342,697 8,343 32,559 40,902
Recapitalization, April 12, 2002
Common Stock Issued 3,337,079 3,337 (20,307) (16,970)
-
Stock Subscribed $ 3,000 3,000
Net (Loss) (20,916) (20,916)
----------- ----------- ------------- ------------ ------------ --------------
Balance, December 31, 2002 29,700,000 29,700 40,317 3,000 (103,289) (30,272)
Common Stock Issued for Cash 866,666 867 122,133 123,000
Common Stock Issued for Service 1,846,000 1,846 227,254 229,100
Common Stock Issued to retire Debt 200,000 200 21,785 21,985
-
Net (Loss) (281,602) (281,602)
----------- ----------- ------------- ------------ ------------ --------------
Balance, December 31, 2003 32,612,666 $ 32,613 $ 411,489 $ 3,000 $ (384,891) $ 62,211
=========== =========== ============= ============ ============ ==============
</table>
The accompanying notes are an integral part of these statements
44
12 TO 20 PLUS, CORPORATION
Statements of Cash Flows
------------------------
<table>
<caption>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
2003 2002 2001
-------------- ------------- -------------
OPERATING ACTIVITIES
Net (Loss) $ (281,602) $ (20,916) $ (28,668)
Significant Non-Cash Transactions
Issued 1,846,000 common shares for
services valued at $229,100 during 2003. 229,100
Issued 200,000 common shares to retire
debt in the amount of $21,785 during 2003. 21,985
Issued 266,966 common shares for
services valued at $2,000 during 2002. 2,000
Changes in Assets and Liabilities
Inventory (20,959) 14,558
Prepaid Expense (70,695) 2,287
Amortization Expense 4,743
Depreciation Expense 1,697 1,000 1,000
Accounts Payables 41,691 (5,003) 5,137
-------------- ------------- -------------
Net Cash (Used) by Operating Activities (74,040) (22,919) (5,686)
-------------- ------------- -------------
INVESTING ACTIVITIES
Purchase of Equipment (6,369) 16,970
Trademarks, Formulae, Client Files (60,289)
-------------- ------------- -------------
Net Cash (Used) by Investing Activities (66,658) 16,970
-------------- ------------- -------------
FINANCING ACTIVITIES
Principle Received on Notes 23,571 4,036 5,600
Proceeds from the sale of Common Stock 867 3,000
Paid in Capital 122,133
-------------- ------------- -------------
Cash Provided by Financing Activities 146,571 7,036 5,600
-------------- ------------- -------------
Net Increase in Cash 5,873 1,087 (86)
Cash, Beginning of Period 1,087 - 86
-------------- ------------- -------------
Cash, End of Period $ 6,960 $ 1,087 $ -
============== ============= =============
</table>
45
Statements of Cash Flows - continued
Significant Non-Cash Transactions:
For year ended December 31, 2003 Common Stock issued included 1,846,000
shares for services valued at $229,100 and 200,000 shares for
retirement of $21,785 notes payable.
For year ended December 31, 2002 Common Stock issued included 266,966
shares for services valued at $2,000; 5,005,618 shares for purchase of
assets valued at $18,750; 15,016,854 shares for retirement of $53,727
debt and 3,337,079 for recapitalization.
Supplemental Information:
The amount of interest for 2003, 2002 and 2001 was $3,572; $4,035 and
$5,600 respectively.
The accompanying notes are an integral part of these statements
46
12 To 20 Plus, Incorporated
NOTES TO FINANCIAL STATEMENTS
December 31, 2003 and 2002
Note 1. OVERVIEW OF OPERATIONS AND ACCOUNTING POLICIES
12 TO 20 PLUS INCORPORATED, was incorporated in April 26, 1996. The Company was
organized to manufacture and market over-the-counter medical remedies and
similar products through retail establishments. During 1996 the Company
purchased formulae for the remedies. During the year 2000 inventory was
purchased and additional promotion of products was begun. Although minimal sales
have taken place to date, management has actively been distributing samples and
expects sales to begin soon.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. The Company has a substantial deficit
in retained earnings from losses for the previous years. This raises substantial
doubt about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from this
uncertainty
Product Development
- -------------------
The Company holds the trademarks Zit Stick, QuitSystem, ChemoKare, VisionKare
and Anaplex. The Company holds the rights to manufacture and market the products
Zit Stick, Zit Stick Patch, Pimple Pencil, Zit Stick Facial Wash, Body Cleansing
Bar, Blemish-Free Lotion, QuitSystem (Smokers Recovery Formula), QuitSystem
(Alcohol Abuse Recovery Formula), QuitSystem (Stimulant Abuse Recovery Formula),
Anaplex (Natural Antidepressant Formula), VisionKare (Supplement for Macular
Degeneration), ChemoKare (Natural Cancer Fighting Compound), Male Virility
(Natural Alternative to Viagra) and Trim-A-Way (Weight Control & Body Shaper
Supplement).
Marketing Strategy
- ------------------
The Company plans to market its products through an animated web site designed
by an illustrator who creates special effects for the movie industry. The
Company may also sell to Drugstore.com and other Internet retailers. Magazine
advertising will direct potential customers to retail Internet sites.
Revenue Recognition
- -------------------
The Company will recognize revenue upon shipment to the web site purchaser.
Research and Development
- ------------------------
The Company expenses product research and development costs as they are
incurred. The Company does not expect to have much research and development
costs.
47
Notes to financial statements - continued
Advertising
- -----------
Advertising costs are expensed as incurred. Advertising expense totaled $7,388
for the year 2003, and $0 for the years 2002 and 2001.
Inventory
- ---------
The Company contracts with a third party to manufacture products and is not
billed nor obligated for any work-in-process costs. Inventory is all finished
goods and is stated at lower of cost or market on a FIFO basis. On February 25,
2003 the Company purchased inventory through the purchase of the assets and
liabilities of NRC Corporation. Detail for the inventory at 12/31/03 and
12/31/02 follows:
12/31/03 12/31/02
-------- --------
Inventory at Cost $24,401 $3,442
======== ========
Equipment
- ---------
Equipment is depreciated using the straight-line method over the estimated
useful lives, which is five years. The Company acquired Leasehold Improvements
through the purchase of the assets and liabilities of NRC Corporation.
Fixed assets consist of the following:
12/31/03 12/31/02
-------- --------
Leasehold Improvements $3,741
Office equipment 7,628 $5,000
-------- --------
Total fixed assets 11,369 5,000
Less: Accumulated depreciation (4,196) (2,500)
-------- --------
Total $7,173 $2,500
======== ========
Trademark and Formulae
Formulae $ 5,000 $ 5,000
Trademark 18,750 18,750
Accumulated Amortization or Impairment (1,188)
-------- --------
Net Trademark and Formulae $23,156 $23,750
======== =========
48
Notes to financial statements - continued
The Company purchased the rights to five formulae on July 23, 1996. These were
purchased with stock.
Pre-split Post-split
Name Value Shares Shares
-------- -------- --------
Zit Stick trademark $1,000 10,000 66,742
Zit Stick formula 1,000 10,000 66,742
Facial Wash 1,000 10,000 66,742
Body Cleansing Bar 1,000 10,000 66,742
Blemish-Free Lotion 1,000 10,000 66,740
-------- -------- --------
Total $5,000 50,000 333,708
======== ======== ========
On June 10, 2002 the Company purchased the trademark registration "Zit Stick"
(#1,314,233), from its owner, Daniel Tennant, for 750,000 pre-split, 5,005,618
post-split shares of stock. Value was placed at $18,750. The previous owner is a
company controlled by a major shareholder. No amortization or impairment has
been taken against this value during the year 2002.
Trademark, Formulae and Client Files (NRC)
- ------------------------------------------
On February 25, 2003 the Company purchased the following trademark registration,
formulae and client files from Neurochemical Research Corporation (NRC) by
assuming an equal amount of NRC's liabilities. The previous owner is a company
controlled by a major shareholder. No amortization or impairment has been taken
against this value during the year 2002 and the period ending 6/30/03.
Amortization has been taken beginning 7/1/03. On 12/31/03 $59,488 of the assumed
NCR liabilities was forgiven therefore, the value of the corresponding assets
was adjusted.
12/31/03
--------
Trademark $18,548
Formulae 37,104
Client Files 4,637
Accumulated Amortization or Impairment (4,743)
--------
Net Trademark, Formulae and Client Files $79,296
========
The Company purchased the rights to the following Trademarks and Trade Names.
Name Value
---------------------- --------
QuitSystem, Trademark $4,637
ChemoKare, Trade name 4,637
VisionKare, Trade name 4,637
Anaplex, Trade name 4,637
--------
Total $18,548
========
49
Notes to financial statements - continued
The Company purchased the rights to the following Formulae and Client Files.
Name Value
--------------------------------------------------------------- -------
QuitSystem, Smokers Recovery Formula $4,637
QuitSystem, Stimulant and Alcohol Abuse Recovery Formula 4,637
AnaplexD, Antidepressant drug alternative Formula 4,637
AnaplexSD, Short Term Anxiety Formula 4,637
VisionKare, Advanced supplement for macular degeneration Formula 4,637
ChemoKare, Natural Cancer Fighting Compound, Formula 4,637
Male Virility, Natural Alternative to Viagra, Formula 4,637
Trim-A-Way, Weight Control & Body Shaper supplements, Formula 4,637
Client List 4,637
-------
Total $41,741
-------
Use of Estimates
- ----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (GAAP) requires management to
make estimates and assumptions that affect the reported amounts and the
disclosure of contingent amounts in the Company's financial statements and the
accompanying notes. Actual results could differ from those estimates.
Earnings per Share
- ------------------
The basic (loss) per share is calculated by dividing the Company's net income
available to common shareholders by the weighted average number of common shares
during the year.
The Company has no potentially dilutive securities outstanding at the end of the
statement periods. Therefore, the basic and diluted (loss) per share are
presented on the face of the statement of operations as the same number.
Stock Based Compensation
- ------------------------
The Company accounts for its stock based compensation based upon provisions in
SFAS No. 123, Accounting for Stock-Based Compensation. In this statement stock
based compensation is divided into two general categories, based upon who the
stock receiver is, namely: employees/directors and non-employees/directors. The
employees/directors category is further divided based upon the particular stock
issuance plan, namely compensatory and non-compensatory. The employee/directors
non-compensatory securities are recorded at the sales price when the stock is
sold. The compensatory stock is calculated and recorded at the securities' fair
value at the time the stock is given. SFAS 123 also provides that stock
compensation paid to non-employees be recorded with a value which is based upon
the fair value of the services rendered or the value of the stock given,
whichever is more reliable. The common stock paid to non-employees was valued at
the value of the services rendered.
50
Notes to financial statements - continued
Warranty and Right of Return
- ----------------------------
The Company currently does not have a warranty or right of return policy. The
Company plans to secure product liability insurance as soon as it commences
shipment of goods.
Note 2. NOTES PAYABLE:
Notes payable and capital lease obligations consist of the following:
12/31/03 12/31/02
-------- --------
Demand Note from shareholder
Interest at 8% $35,000 $35,000
Demand note from shareholder
Interest at 8% 10,000
Demand note from shareholder
Interest at 8% 10,000
Accrued Interest 11,038 7,467
-------- --------
Total Notes Payable $66,038 $42,467
======== ========
Note 3. STOCKHOLDERS' EQUITY
The Company (Loughran/Go Corporation) was incorporated April 29, 1996 in the
state of Nevada. The Company had 100,000,000 shares of common stock authorized.
Two forward stock splits and one stock retirement have been retroactively and
ratably applied to all share amounts listed below.
Par value is $0.001 per common share.
The Company founders were issued 3,070,112 post-split common shares to cover the
$410 cost of incorporation. Afterward, 6,674,157 post-split common shares were
issued for the purchase of assets valued at $23,750; 2,780,382 post-split common
shares were issued for services valued at $232,200; 15,216,854 post-split common
shares were issued to retire $75,712 of debt and accumulated interest; 3,337,079
post-split common shares were issued to re-capitalize and 1,534,082 shares were
sold for $124,000.
Note 4. MERGER WITH LOUGHRAN/GO
On April 12, 2002 the Company merged with Loughran/Go Corporation a Nevada
corporation. Loughran/Go Corporation was the surviving corporation. The merger
was a re-capitalization accounted for as a reverse acquisition. This means that
the historical numbers of 12 TO 20 PLUS, INCORPORATED are to be used for
comparative purposes. The Company name was then changed to 12 TO 20 PLUS,
INCORPORATED. The purpose of the merger was to make the Company more attractive
to investors. The raising of additional capital would enable the Company to
continue to promote its products.
51
Notes to financial statements - continued
The balance sheet of Loughran/Go prior to the merger was as follows.
Assets $ 0
Payables 16,970
--------
Negative Net Worth $(16,970)
========
Note 5. INCOME TAXES:
The Company provides for income taxes under Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of
an asset and liability approach in accounting for income taxes. Deferred tax
assets and liabilities are recorded based on the differences between the
financial statement and tax bases of assets and liabilities and the tax rates in
effect currently.
SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. In the
Company's opinion, it is uncertain whether they will generate sufficient taxable
income in the future to fully utilize the net deferred tax asset. Accordingly, a
valuation allowance equal to the deferred tax asset has been recorded. The total
deferred tax asset is $84,676, which is calculated by multiplying a 22%
estimated tax rate by the cumulative NOL of $384,891. The total valuation
allowance is a comparable $84,676. Details for the last three years follow:
12/31/03 12/31/02 12/31/01
-------- -------- --------
Deferred Tax Asset $61,952 $4,602 $6,307
Valuation Allowance (61,952) (4,602) (6,307)
Current Taxes Payable 0.00 0.00 0.00
-------- -------- --------
Income Tax Expense $ 0.00 $ 0.00 $ 0.00
======== ======== ========
Below is a chart showing the estimated corporate federal net operating loss
(NOL) and the year in which it will expire.
Year Amount Expiration
--------------- ---------- ----------
1999 and prior $ 23,832 2011
2000 29,873 2020
2001 28,668 2021
2002 20,916 2022
2003 281,602 2023
--------------- ----------
Total NOL $384,891
==========
The Company has filed no income tax returns since inception. Management is
planning to complete these during 2004.
52
Notes to financial statements - continued
Note 6. LEASES AND OTHER COMMITMENTS:
The office rent is month to month. The numbers shown below assume that the
Company will remain in its current office space.
Year 1 Year 2 Year 3 Year 4 Year 5
Office Lease 7,213 7,213 7,213 7,213 7,213
Note 7. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Below is a listing of the most recent accounting standards SFAS 145-150 and
their effect on the Company.
SFAS 146 Accounting for Costs Associated with Exit or Disposal Activities
This statement requires companies to recognize costs associated with exit or
disposal activities, other than SFAS 143 costs, when they are incurred rather
than at the date of a commitment to an exit or disposal plan. Examples of these
costs are lease termination costs, employee severance costs associated with
restructuring, discontinued operation, plant closing, or other exit or disposal
activity. This statement is effective after December 15, 2002.
SFAS 147 Acquisitions of Certain Financial Institutions - an amendment of FASB
Statement No. 72 and 144 and FASB Interpretation No. 9.
This statement makes the acquisition of financial institutions come under the
statements 141 and 142 instead of statement 72, 144 and FASB Interpretation No.
9. This statement is applicable for acquisition on or after October 1, 2002.
SFAS 148 Accounting for Stock-Based Compensation - Transition and Disclosure
Amends FASB 123 to provide alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee compensation.
SFAS 149 Amendment of Statement 133 on Derivative Instruments and Hedging
Activities
This Statement amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities under FASB Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities.
SFAS 150 Financial Instruments with Characteristics of both Liabilities and
Equity
This statement requires that such instruments be classified as liabilities in
the balance sheet. SFAS 150 is effective for financial instruments entered into
or modified after May 31, 2003.
Interpretation No. 46 (FIN 46)
Effective January 31, 2003, The Financial Accounting Standards Board requires
certain variable interest entities to be consolidated by the primary beneficiary
of the entity if the equity investors in the entity do not have the
characteristics of a continuing financial interest or do not have sufficient
53
Notes to financial statements - continued
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. The Company has not invested
in any such entities, and does not expect to do so in the foreseeable future.
The adoption of these new Statements is not expected to have a material effect
on the Company's current financial position, results or operations, or cash
flows.
Note 8. COMPLIANCE WITH SARBANES-OXLEY ACT OF 2002
The Company does not currently comply with all of the provisions of the
Sarbanes-Oxley Act of 2002. It is the intention of the Company to comply with
the rules and structure mandated therein. To this end the Company is seeking
potential independent directors.
The new Act also requires an audit committee to consist of at least three
independent members, one of which needs to be a financial and accounting expert.
Currently, the Company has no separate audit committee and is also seeking
potential audit committee members to serve on its future audit committee.
It should be noted that the Company may experience trouble attracting
independent directors because, at this time, it does not have Directors and
Officers Liability Insurance in place.
Note 9. SUBSEQUENCE EVENT
On March 22, 2004, The Company acquired 100% of the issued and outstanding
shares of the common stock of H. Bana Ltd. (HBL), a Delaware Corporation in
exchange for 3,000,000 shares of the Company's restricted common stock. HBL
becomes a wholly-owned subsidiary of the Company.
54
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
--------------------------------------
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Please refer to "MANAGEMENT - Limitations on Officer and Director Liability."
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various costs and expenses in connection with
the sale and distribution of the Common Stock being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates except
the Securities and Exchange Commission registration fee and the National
Association of Securities Dealers filing fees.
Amount to
Be paid
----------
SEC Registration Fee $ 300
Printing and Edgarizing expenses $ 1,500
Legal fees and expenses $ 8,000
Accounting fees and expenses $ 14,000
Transfer agent $ 500
Stock certificates $ 200
Miscellaneous $ 500
----------
Total $ 25,000
==========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
None.
EXHIBITS
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
3.3 Articles and Plan of Merger (1)
3.4 Amendment to Articles of Incorporation (1)
3.5 Amendment to Articles of Incorporation (1)
3.6 Investment Agreement
3.7 Registration Rights Agreement
5.1 Opinion re: Legality/Consent of Counsel
23.1 Consent of Independent Auditors
(1) Incorporated by reference from Form SB-2 filed April 9, 2003.
55
UNDERTAKINGS
------------
The Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
offering price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant under Rule 424(b)(1), or (4) or 497(h) under
the Securities Act as part of this registration statement as of the time the
Commission declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
56
UNDERTAKINGS - continued
and that offering of the securities at that time as the initial bona fide
offering of those securities.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the city of San Luis
Obispo, California, on June 30, 2004.
12 to 20,Inc.
By: /s/ Carol Slavin
----------------------------
Carol Slavin, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
in the dates stated:
SIGNATURE TITLE DATE
- ---------------------- ------------- -------------
/s/ Carol Slavin Director July 15,2004
/s/ Elizabeth Yaeger Director July 15, 2004
/s/ Linda Hannon Director July 15, 2004
57