SEC Info - Balance Bar Co - IPO: ‘424B4’ on 6/2/98

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Balance Bar Co – IPO: ‘424B4’ on 6/2/98

As of: Tuesday, 6/2/98 · Accession #: 944209-98-1123 · File #: 333-49651

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 6/02/98  Balance Bar Co                    424B4                  1:260K                                   RR Donelley Financial/FA

Initial Public Offering (IPO): Prospectus — Rule 424(b)(4)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B4       Final Prospectus                                      73    456K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Additional Information Advertising Balance Bar Company Business Capitalization Certain Transactions Competition Consumer Trends Contract Manufacturers and Quality Assurance Dependence on Significant Retail Customers and Distributors Dependence on Third Party Manufacturers Description of Capital Stock Dilution Dividend Policy Experts General and administrative Government Regulation Gross profit Growth Strategy Index to Financial Statements Industry Overview Interest (income) expense Legal Matters Legal Proceedings Liquidity and Capital Resources Litigation by Competitor Management Management's Discussion and Analysis of Financial Condition and Results of Operations Marketing Notes to Financial Statements Offering, The Possible Anti-Takeover Effect of Certain Charter Provisions Potential Sales and Earnings Volatility Principal and Selling Stockholders Product Liability; Other Potential Liabilities and Insurance Prospectus Summary Registration Rights Agreement Report of Independent Public Accountants Risk Factors Risk of Adverse Publicity Risks Associated with Advertising Sales Sales and Distribution Selected Financial Data Selling and marketing Shares Eligible for Future Sale Stock Options and Stock Plans The offering Underwriting Use of proceeds Year 2000 Compliance 1998 Performance Award Plan 401(k) Plan
1	1st Page - Filing Submission
3	Prospectus Summary
4	The offering
5	Risk Factors
"	Potential Sales and Earnings Volatility
6	Dependence on Third Party Manufacturers
7	Risk of Adverse Publicity
"	Dependence on Significant Retail Customers and Distributors
8	Competition
"	Product Liability; Other Potential Liabilities and Insurance
9	Risks Associated with Advertising
"	Litigation by Competitor
12	Government Regulation
13	Possible Anti-Takeover Effect of Certain Charter Provisions
14	Shares Eligible for Future Sale
"	Year 2000 Compliance
15	Use of proceeds
"	Dividend Policy
16	Capitalization
17	Dilution
18	Selected Financial Data
19	Management's Discussion and Analysis of Financial Condition and Results of Operations
22	Sales
"	Gross profit
"	Advertising
"	Selling and marketing
"	General and administrative
"	Interest (income) expense
25	Liquidity and Capital Resources
27	Business
"	Consumer Trends
28	Industry Overview
29	Growth Strategy
31	Sales and Distribution
34	Marketing
"	Contract Manufacturers and Quality Assurance
37	Legal Proceedings
40	Management
43	401(k) Plan
44	Stock Options and Stock Plans
"	1998 Performance Award Plan
48	Certain Transactions
49	Principal and Selling Stockholders
51	Description of Capital Stock
52	Registration Rights Agreement
55	Underwriting
56	Legal Matters
57	Experts
"	Additional Information
58	Balance Bar Company
"	Index to Financial Statements
59	Report of Independent Public Accountants
64	Notes to Financial Statements

424B4 1st Page of 73 TOC ↑Top Previous Next ↓Bottom Just 1st
FILED PURSUANT TO RULE 424(b)(4)
REGISTRATION NO. 333-49651

PROSPECTUS

2,400,000 SHARES

[LOGO OF BALANCE BAR COMPANY]

COMMON STOCK

Of the 2,400,000 shares of Common Stock offered hereby, 1,003,372 shares are
being sold by Balance Bar Company ("Balance Bar Company" or the "Company") and
1,396,628 shares are being sold by the Selling Stockholders. The Company will
not receive any of the proceeds from the sale of shares by the Selling
Stockholders. Following this offering, the Chairman of the Company, together
with directors and executive officers, will have 56% of the voting power of
the Company. See "Principal and Selling Stockholders." Of the 2,400,000 shares
to be sold in this offering, the Company has reserved up to 142,000 shares to
offer directly to persons having a relationship with the Company.

Prior to this offering, there has been no public market for the Common Stock
of the Company. See "Underwriting" for a discussion of the factors considered
in determining the initial public offering price. The Common Stock has been
approved for quotation on the Nasdaq National Market under the symbol BBAR.

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

THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 5.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

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

PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT (1) COMPANY (2) STOCKHOLDERS (2)
---------------------------------------------------------------------------------------------

Per Share..................... $10.50 $0.735 $9.765 $9.765
---------------------------------------------------------------------------------------------
Total (3)..................... $25,200,000 $1,764,000 $9,797,928 $13,638,072
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------

(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses payable by the Company and the Selling
Stockholders estimated at $700,000.
(3) The Selling Stockholders have granted the Underwriters a 30-day option to
purchase up to 360,000 additional shares of Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discount, and Proceeds to Selling Stockholders
will be $28,980,000, $2,028,600, and $17,153,472, respectively.
See "Underwriting."

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

The shares of Common Stock are offered by the several Underwriters subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about June 5, 1998, at the office of the agent of Hambrecht
& Quist LLC in New York, New York.

HAMBRECHT & QUIST ADAMS, HARKNESS & HILL, INC.

June 1, 1998

424B4 2nd Page of 73 TOC 1st Previous Next ↓Bottom Just 2nd
[Picture showing Company Products]

The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent auditors for each
fiscal year and will make available copies of quarterly reports containing
unaudited financial information for each of the first three quarters of each
fiscal year.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."

"BALANCE, THE COMPLETE NUTRITIONAL FOOD"(R) bar is a registered trademark of
the Company. "40-30-30 BALANCE"TM, is a trademark of the Company. The
prospectus also includes tradenames and trademarks of companies other than the
Company which are the property of their respective owners.

424B4 3rd Page of 73 TOC 1st Previous Next ↓Bottom Just 3rd
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto appearing elsewhere
in this Prospectus. The Common Stock offered hereby involves a high degree of
risk. See "Risk Factors."

THE COMPANY

Balance Bar Company develops and markets branded food and beverage products
in convenient, good-tasting, balanced nutritional formulations that appeal to a
broad consumer base. The Company has targeted its products, the Balance bar and
the 40-30-30 Balance powdered drink mix, at the healthy snack and meal
replacement market and believes that by marketing its products as "nutritious
snacks that taste great" it is highlighting their benefits over typical snacks
and meal replacements. In addition, the Company has targeted other markets
consisting of consumers with specific dietary or nutritional requirements,
including the fitness, weight management and diabetic markets. In order to make
its products available wherever people shop, the Company sells its products
through multiple distribution channels, including natural foods, mass
merchandise, club, grocery, convenience, health and fitness, and drug stores.
Balance Bar Company has experienced significant growth as sales have grown from
$1.3 million in 1995 to $39.6 million in 1997.

Consumers have become increasingly health conscious over the last decade, as
reflected in the surge of activities aimed at maintaining and improving health,
including exercising, dieting and quitting smoking. Despite this concern for
health and nutrition, today's consumers find themselves with less time for
three nutritious meals a day and are seeking healthy snacks and meal
substitutes that can be consumed at any time or place. In response to these
trends, many new food and beverage products have been introduced to satisfy
consumer demand for nutritious snacks and meal replacements and have achieved
increasingly broad distribution. The Company believes that the consumer trends
towards health and nutrition will continue to drive the broad distribution of
convenient, healthy snacks and meal replacements.

The Company has differentiated its brand from other snack products and meal
replacements by focusing on the combination of nutrition, good taste and
convenience. The Company's current product lines are based on balanced
proportions of 40% carbohydrates, 30% protein and 30% dietary fat, a
formulation designed to sustain energy and satisfy hunger. The Company
currently sells ten flavors of Balance bars in two sizes and five flavors of
powdered drinks in canisters or single serving envelopes. Although the
Company's current products are based upon the 40-30-30 concept, a Company
survey indicates that the popularity of its products extends to a much broader
consumer base.

The Balance bar has significantly penetrated the natural foods channel with
approximately 69% of the Company's 1997 sales in this channel. According to
SPINS data from Spence Information Services, the Balance bar was the number one
selling brand of nutrition bar in the natural foods channel, achieving a 31.0%
share in 1997 and a 34.6% share in the January/February 1998 reporting period.
In 1997 and the first quarter of 1998, the Company expanded its strategic focus
to the wider mass market, including mass merchandise, club, grocery,
convenience, health and fitness and drug stores. The Company had the top two
selling nutrition bar flavors per point of distribution in grocery stores for
the November/December 1997 reporting period and the top selling nutrition bar
flavor per point of distribution in grocery stores for the January/February
1998 reporting period. In addition the leading Balance bar flavor outsold the
nearest competitor flavor per point of distribution in grocery stores by 56.6%
in December 1997 and by 40.0% in February 1998. According to ACNielsen Scan
Track: SPINS Natural Track, the Balance bar market share in the energy bars
category of grocery store natural products increased from 2% in the
November/December 1996 reporting period to 16% in the November/December 1997
reporting period and to 17% in the January/February 1998 reporting period. The
Company believes that expanding distribution within the mass market represents
a significant growth opportunity.

The Company's goal is to become a recognized leader in providing nutritious,
good tasting and convenient snack and meal replacement products for a wide
variety of consumer needs. In order to achieve its goal, the Company's strategy
is to: (i) continue positioning Balance products as good tasting, nutritious
snacks and meal replacements; (ii) expand the Company's consumer base and brand
awareness through increased advertising and promotional activities; (iii)
expand existing and new channels of distribution; (iv) focus on in-store
promotion and marketing; (v) continue to promote the nutritional qualities of
Balance products; (vi) introduce new products and product line extensions; and
(vii) acquire complimentary companies or product lines.

The Company's principal executive office is located at 1015 Mark Avenue,
Carpinteria, California 93013. Its telephone number is (805) 566-0234.

424B4 4th Page of 73 TOC 1st Previous Next ↓Bottom Just 4th
THE OFFERING

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Common Stock offered by the Company................. 1,003,372 shares
Common Stock offered by the Selling Stockholders.... 1,396,628 shares
Common Stock to be outstanding after the offering... 10,687,174 shares (1)
Use of proceeds..................................... To retire short and long-term
debt and for working capital and
other general corporate purposes
(which could include the
acquisition of companies or
product lines).
Nasdaq National Market symbol....................... BBAR

SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

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YEAR ENDED SEVEN MONTHS YEAR ENDED THREE MONTHS
MAY 31, ENDED DECEMBER 31, ENDED MARCH 31,
--------------- DECEMBER 31, ----------------------- ---------------
1993 1994 1994 1995 1996 1997 1997 1998
------- ------ ------------ ------ ------- ------- ------- -------

STATEMENT OF OPERATIONS
DATA:
Sales.................. $ 481 $ 692 $ 576 $1,262 $10,544 $39,634 $ 6,136 $17,457
Income (loss) before
income taxes.......... (1,262) (312) 7 (84) 1,840 2,876 775 2,176
Net income (loss)...... (1,263) (313) 6 (85) 1,615 1,660 447 1,284
Earnings (loss) per
diluted share (2)..... (0.22) (0.04) -- (0.01) 0.17 0.15 0.04 0.11
Weighted average number
of shares outstanding
(2)................... 5,828 7,670 7,713 7,800 9,343 11,043 11,434 11,683

[Download Table]

MARCH 31, 1998
----------------------
ACTUAL AS ADJUSTED(3)
------- --------------

BALANCE SHEET DATA:
Cash................................................... $ 89 $ 6,246
Working capital........................................ 4,122 13,865
Total assets........................................... 14,694 20,414
Long-term debt, net of current portion................. 202 10
Total shareholders' equity............................. 5,561 15,059

--------
(1) Based on the number of shares outstanding at March 31, 1998. Excludes (i)
1,800,000 shares of Common Stock reserved for issuance under the Company's
1998 Performance Award Plan (the "1998 Plan"), of which no shares were
subject to outstanding options as of March 31, 1998, and (ii) 2,615,502
shares of Common Stock issuable upon the exercise of options outstanding at
March 31, 1998 at a weighted average exercise price of $0.74 per share.
Since March 31, 1998, 365,232 shares of Common Stock have been issued upon
exercise of stock options. See "Capitalization," "Management--Stock Options
and Stock Plans" and Note 8 of Notes to Financial Statements.
(2) See Note 3 of Notes to Financial Statements for an explanation of the
determination of shares used in computing earnings (loss) per diluted
share.
(3) Adjusted to reflect the sale of 1,003,372 shares of Common Stock offered by
the Company hereby at the initial public offering price of $10.50 per
share, the receipt of the net proceeds therefrom, and the retirement of
$3.7 million of outstanding debt. See "Use of Proceeds" and
"Capitalization."

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

Unless otherwise indicated, all information in this Prospectus assumes no
exercise of the underwriters' over-allotment option and gives effect to (i) the
conversion of all shares of Series A Preferred Stock into Common Stock, and
(ii) the six for one stock split effected in May 1998 (the "Stock Split"). See
"Description of Capital Stock," "Underwriting" and Notes to Financial
Statements.

424B4 5th Page of 73 TOC 1st Previous Next ↓Bottom Just 5th
RISK FACTORS

Market data used throughout this Prospectus were obtained from internal
surveys and from industry publications, including Info Scan(R) data compiled
by Information Resources, Inc. ("IRI"). The Company has acknowledged to IRI
that IRI compiles its data used in this Prospectus based on data received by
it from supermarkets and other retail outlets. As a result, IRI has stated
that it cannot guarantee the accuracy or completeness of such data. IRI has
made no representations or warranties, express or implied, as to the
merchantability or fitness for a particular purpose of the data or results to
be obtained by the Company or others from the use of such data. The Company
has agreed to indemnify IRI for any third party claims that may arise out of
the use of such data in this Prospectus. In no event will IRI be liable to the
Company for any damages, whether direct, indirect, special or consequential,
arising out of or in connection with the furnishing by IRI of such data to the
Company.

Challenges of Maintaining Trade and Consumer Acceptance in New Distribution
Channels. Until recently, virtually all of the Company's sales were made in
natural food stores. In 1997 and the three months ended March 31, 1998, sales
to natural food stores accounted for approximately 69% and 59%, respectively,
of the Company's sales. The Company's growth will depend on its ability to
expand other channels of distribution, including mass merchandise, club,
grocery, convenience, and drug stores, without significant impact on current
channels. As of December 31, 1997, the Company had four of its ten Balance bar
flavors in approximately 40% of mass merchandise stores, 13% of grocery
stores, 10% of convenience stores (in honey peanut flavor only), and 9% of
drug stores in the United States according to Info Scan(R) data by IRI, and
25% of club stores, according to Company estimates. These new channels of
distribution have presented, and will continue to present, competitive and
marketing challenges, risks, and marketing and distribution costs that are
different from those faced by the Company in the natural foods channel. In
addition, the Company's expansion in these new channels of distribution will
require it to attract and retain consumers in broader demographic and
geographic markets. Although the Company has initiated distribution through
new nationwide distribution channels, there can be no assurance that the
Company will achieve the same success with consumers in other demographic and
geographic markets. In addition, the Company's expansion into new markets and
the introduction of its products into each such market have in the past and
could cause sales and earnings to fluctuate from period to period. Such
fluctuations and the inability to obtain consumer acceptance in new markets
could have a material adverse effect on the Company's business, results of
operations, and financial condition. See "Business--Growth Strategy" and "--
Sales and Distribution."

Potential Sales and Earnings Volatility. The Company has experienced, and
will continue to experience, period-to-period fluctuations in its operating
results. Results from any quarter are not necessarily indicative of results
that the Company may achieve for any subsequent fiscal quarter or full fiscal
year and may cause the price of the Company's Common Stock to fluctuate,
perhaps substantially. In addition, in recent years, the stock market in
general, and shares of high growth companies in particular, have experienced
extreme price fluctuations, often for reasons unrelated to the performance of
a company's particular business, or in response to general economic or
industry-wide conditions. These fluctuations could have a material adverse
effect on the price of the Company's Common Stock and the Company's business,
results of operations, and financial condition. The Company has a limited
operating history, and therefore it is difficult to predict the Company's
future sales or its ability to identify and adapt its products successfully to
meet changing dietary trends and other elements that affect the Company's
results of operations.

The Company has increased its expense levels to support its recent growth,
particularly expenses associated with advertising, marketing, promotions, and
employees. The Company expects to continue to increase its operating expenses
in these areas. If the Company does not achieve increased levels of sales
commensurate with these increased operating expenses, or if the Company's
revenues decrease or do not meet the Company's expectations for a particular
period, the Company's business, results of operations, and financial condition
may be materially and adversely affected.

424B4 6th Page of 73 TOC 1st Previous Next ↓Bottom Just 6th
Dependence on Third Party Manufacturers. The Company does not own or operate
any manufacturing facilities and is, therefore, dependent on third parties for
the manufacture of its products. The Company currently relies and expects to
continue to rely on two contract manufacturers to produce all of its products.
These contract manufacturers also produce products for some of the Company's
competitors, and the Company competes with these and other companies for
production capacity. If either of the Company's contract manufacturers were
unable or unwilling to produce and ship the Company's products in a timely
manner or to produce sufficient quantities to support the Company's growth, if
any, the Company would have to identify and qualify new contract
manufacturers. However, a limited number of contract manufacturers have the
ability to produce a high volume of the Company's products, and it could take
a significant period of time to locate and qualify such alternative production
sources. There can be no assurance that the Company would be able to identify
and qualify new contract manufacturers in a timely manner or that such
manufacturers would allocate sufficient capacity to the Company in order to
meet its requirements, which could adversely affect the Company's ability to
make timely deliveries of its products. In addition, there can be no assurance
that the capacity of the Company's current contract manufacturers will be
sufficient to fulfill the Company's orders, and any supply shortfall could
materially and adversely affect the Company's business, results of operations,
and financial condition. The Company's contract manufacturers each store the
Company's products in a warehouse prior to shipment to distributors. Shipments
to and from the warehouses could be delayed for a variety of reasons including
weather conditions, strikes, and shipping delays. Any significant delay in
shipments of the Company's products would have a material adverse effect on
the Company's business, results of operations, and financial condition and
could cause the Company's sales and earnings to fluctuate during a particular
period or periods. The Company has from time to time experienced, and may in
the future experience, delays in the production and delivery of its products.

In addition, the contract manufacturers are contractually required to
maintain the quality of the Company's products and to comply with applicable
laws and regulations relating to the production of food products. There can be
no assurance that the Company's contract manufacturers will continue to
produce products that are consistent with the Company's standards. The Company
has occasionally received, and might from time to time receive, shipments of
products that fail to conform to the Company's standards. The failure of any
contract manufacturer to produce products that conform to the Company's
standards could materially and adversely affect the Company's reputation in
the marketplace and result in product recalls, product liability claims, and
severe economic loss. See "--Government Regulation" and "Business--Contract
Manufacturers and Quality Assurance."

Potential Inability to Anticipate Changes in Dietary Trends. The snack food
industry in general and the nutritional food industry in particular are
subject to changing consumer trends, demands, and preferences. Trends within
the nutritional food industry change often, and the failure of the Company to
anticipate, identify or react to changes in these trends could lead, among
other things, to reduced demand and price reductions, and could have a
material adverse effect on the Company's business, results of operations, and
financial condition. These changes might include consumer demand for new
products or formulations that include health promoting ingredients such as
nutraceuticals. The Company's success depends, in part, on its ability to
anticipate the tastes and dietary habits of consumers and to offer products
that appeal to their preferences on a timely and affordable basis. The Company
believes that its growth to date has been due, to some extent, to the
popularity of the "40-30-30" nutritional concept, which was popularized in
1995 in a nationally best selling book, The Zone, and has attracted
significant media attention and scientific controversy. All of the Company's
current and planned future products are based on a 40-30-30 ratio, and the
ratio is mentioned on all of the Company's packaging and in most of its
advertising and promotional materials. Although the 40-30-30 concept has
achieved a measure of popularity in some consumer groups, it has also received
significant criticism from certain portions of the scientific and nutritional
communities. Although the Company's surveys indicate that a majority of its
products are purchased by consumers for reasons other than adherence to the
40-30-30 concept, there can be no assurance that the popularity of the
Company's products will continue to grow or remain at current levels if the
40-30-30 concept declines in popularity, or that the Company's products will
continue to receive the same level of acceptance in consumer groups that are
making

424B4 7th Page of 73 TOC 1st Previous Next ↓Bottom Just 7th
purchasing decisions for reasons other than the 40-30-30 concept. Negative
consumer perception of the Company's products could cause the Company's sales
to fluctuate from period to period. Such fluctuations could have a material
adverse effect on the price of the Company's Common Stock and the Company's
business, results of operations, and financial condition. See "Business--
Consumer Trends" and "--Industry Overview."

Risk of Adverse Publicity. The Company is highly dependent upon consumers'
perception of the safety, quality, and possible dietary benefits of its
products. As a result, substantial negative publicity concerning the 40-30-30
concept, one or more of the Company's products, or other nutritional foods
similar to the Company's products could lead to a loss of consumer confidence
in the Company's products, removal of the Company's products from retailers'
shelves and reduced sales and prices of the Company's products. Any of these
events could have a material adverse effect on the Company's business, results
of operations, and financial condition.

Narrow Product Line; Dependence on New Products. The Company currently has
only two product lines: nutrition bars (in ten flavors and two sizes) and
powdered drink mixes (in five flavors and two sizes), both of which are based
on a 40-30-30 formulation. In 1997, Balance bars accounted for approximately
92% of sales and powdered drink mixes accounted for approximately 8% of sales
and approximately 90% and 10%, respectively, of sales in the three months
ended March 31, 1998. There can be no assurance that the Company's existing
products will continue to achieve market acceptance. Any such failure could
have a material adverse effect on the Company's business, results of
operations, and financial condition. The Company believes its ability to
increase sales is partially dependent upon its ability to introduce new and
innovative products into its existing markets. The success of new products
depends on a number of factors, including the Company's ability to develop
products that appeal to consumers and that are priced competitively. There can
be no assurance that the Company's efforts to develop new products will be
successful, that consumers will accept new products, or that the Company's
competitors will not introduce products that achieve greater market acceptance
than the Company's products. In addition, the Company's introduction of new
products or any delay in the introduction after its announcement or the mix of
products sold has in the past and could cause sales and earnings to fluctuate
from period to period. Such fluctuations could have a material adverse effect
on the price of the Company's Common Stock and the Company's business, results
of operations, and financial condition. See "Business--Growth Strategy" and
"--Competition."

Dependence on Significant Retail Customers and Distributors. A limited
number of distributors and retail customers have historically accounted, and
are likely to continue to account in the future, for a substantial portion of
the Company's revenues. Most of the Company's sales are made to distributors
(with the assistance of commissioned brokers) that resell to retail customers.
The Company's two largest retail customers in 1997 were Trader Joe's and
General Nutrition Companies ("GNC") and two largest distributor customers were
Tree of Life and United Natural Foods. Trader Joe's and GNC accounted for
approximately 25% and 7%, respectively, of the Company's sales in 1997 and 21%
and 7%, respectively, of the Company's sales in the three months ended March
31, 1998. In addition, sales to Costco in the three months ended March 31,
1998 accounted for approximately 16% of the Company's sales in that period.
United Natural Foods acquired one of the Company's other natural foods
distributors in October 1997. Including sales to the acquired distributor as
if it had been owned for all of 1997, sales to United Natural Foods accounted
for approximately 14% of the Company's sales in 1997. Tree of Life accounted
for approximately 9% of the Company's sales in 1997. Sales to United Natural
Foods and Tree of Life accounted for approximately 13% and 5%, respectively,
of the Company's sales in the three months ended March 31, 1998. The Company's
distributors and retail customers typically purchase the Company's products
with standard purchase orders and, in general, are not bound by long-term
contracts. There can be no assurance that Trader Joe's, GNC, Costco, Tree of
Life or United Natural Foods will continue their relationships with the
Company. The loss of Trader Joe's, GNC, or Costco as a retail customer or the
loss of a significant number of other major customers, the loss of major
distributors such as Tree of Life or United Natural Foods, or a significant
reduction in purchase volume by or financial difficulty of such customers or
distributors could have a material adverse effect on the Company's business,
results of operations, and financial condition. See "Business--Sales and
Distribution," and "--Marketing."

424B4 8th Page of 73 TOC 1st Previous Next ↓Bottom Just 8th
Competition. The Company competes across a number of markets with a variety
of competitors, including other makers of nutrition bars and beverages, both
powdered and ready-to-drinks, and many other snacks and meal substitutes. Many
of the Company's competitors are large, multinational companies with well
established, branded products, and significantly greater financial,
distribution, and marketing resources and greater market share than the
Company, including large advertising and promotion budgets. These competitors
may also have a significantly greater ability to influence or control product
placement in retail stores. In addition, those of the Company's competitors
selling products containing less than 3 grams of fat per serving are permitted
by FDA regulations to use the term "low fat" in connection with their products
and competitors' products meeting FDA requirements may use the term "healthy"
in connection with their products. These competitors may have a competitive
advantage in marketing to certain consumer markets. Several companies with
strong brand names and substantially greater financial resources than the
Company have announced plans to launch or have launched directly competitive
nutrition bar and powdered drink mix products during the past several months.
All of these competitors also compete for shelf space in all distribution
channels and for suppliers and contract manufacturers. Increased competition
from such companies could have a material adverse effect on the Company's
business, results of operations, and financial condition. In addition,
competitive pricing pressures and any competitor's introduction of new
products could cause the Company's sales and earnings to fluctuate in a
particular period. Such fluctuation could have a material adverse effect on
the price of the Company's Common Stock and the Company's business, results of
operations, and financial condition. See "Business--Competition."

Product Liability; Other Potential Liabilities and Insurance. The Company,
like any marketer, distributor or manufacturer of products that are designed
to be ingested, faces an inherent risk of exposure to product liability claims
if the use of its products results, or is alleged to result, in injury or
death. With respect to product liability claims, the Company has $1.0 million
per occurrence and $2.0 million in aggregate liability insurance. The Company
has excess umbrella liability insurance of up to $8.0 million. There can be no
assurance that such insurance will continue to be available at a reasonable
cost, or, if available, will be adequate to cover the Company's liabilities.
In addition, the Company is heavily dependent on its contract manufacturers
for compliance with sound and lawful production of its products. The Company's
contract manufacturers are required to indemnify the Company for product
liability claims, arising out of the manufacturing of the Company's products,
and the Company must indemnify the manufacturers for claims arising out of the
labeling and packaging of its products. Although the Company has contractual
indemnification from its contract manufacturers, and is included as a named
insured on each of their product liability insurance policies, any such
indemnification is limited as a practical matter to the creditworthiness of
the indemnifying party, the availability of such insurance, and such
manufacturers' continued maintenance of such insurance. Therefore, if the
Company does not have adequate insurance or contractual indemnification,
product liabilities relating to defective products could have a material
adverse effect on the Company's business, results of operations, and financial
condition. See "--Dependence on Third Party Manufacturers," "--Government
Regulation," and "Business--Legal Proceedings."

In August 1997, the Company, together with one of its contract manufacturers
and a retailer of its products, was named in a lawsuit, filed but not served
on the Company, for a death allegedly resulting from the ingestion of a
Balance bar that allegedly contained nuts. This lawsuit was dismissed without
prejudice in December 1997. However, no assurance can be given that other
product liability lawsuits will not be served on the Company from time to time
, and no assurance can be given that an outcome adverse to the Company in such
a lawsuit would not have a material adverse effect on the business, results of
operations, and financial condition of the Company. See "Business--Legal
Proceedings."

The Company maintains general liability (including claims based on the
Company's advertising and packaging), inland marine, director and officer, and
excess liability insurance. There can be no assurance, however, that an
existing or future claim or claims will not exceed the limits of the Company's
insurance coverage, or that such coverage will be available with sufficient
limits and at a reasonable cost, or at all, to insure adequately and
economically the Company's operations in the future. A judgment against the
Company that exceeds its insurance coverage or is not covered by insurance
could have a material adverse effect on the Company's business, results of
operation, and financial condition.

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Risks Associated with Advertising. The Company's advertising is subject to
regulation by the Federal Trade Commission (the "FTC") under the Federal Trade
Commission Act, which prohibits dissemination of false or misleading
advertising. In addition, the National Advertising Division of the Council of
Better Business Bureaus, Inc. ("NAD") administers a self-regulatory program of
the advertising industry to ensure truth and accuracy in national advertising.
NAD both monitors national advertising and entertains inquiries and challenges
from competing companies and consumers.

In October 1997, the Company received a letter from NAD inquiring about the
accuracy of and support for certain advertising claims regarding the health
benefits of the Company's Balance bars. This inquiry was prompted by a
complaint by two of the Company's competitors, including PowerBar, Inc.
("PowerBar"). In February 1998, NAD found a reasonable basis for certain
claims and recommended that other claims be discontinued. At NAD's request,
the Company issued a statement that the Company has voluntarily modified or
discontinued certain of its advertisements either before the determination or
for reasons unrelated to it, and that although it disagreed with other
findings, the Company would consider NAD's recommendation in its future
advertising.

Although the Company does not believe that the changes to its advertising
have had or will have an adverse effect on its marketing success, any future
changes to the Company's advertising resulting from compliance with an adverse
NAD determination or any FTC action or fines or penalties assessed in
connection therewith, or from lawsuits alleging false advertising, could
materially or adversely affect the Company's product marketing efforts. There
can be no assurance that any required changes in advertising would not have a
material adverse effect on the Company's business, results of operation, and
financial condition. See "--Litigation by Competitor" and "Business--
Government Regulation."

Television advertising is relatively expensive compared to other forms of
advertising in terms of dollar outlays, and the Company's increased emphasis
and reliance on this medium could adversely affect its business, results of
operations, and financial condition if its advertisements are not successful.
See "Business--Marketing."

In addition, fluctuations in the Company's promotional, advertising and
promotional expenditures and unanticipated changes in the timing of customer
promotions have in the past and could cause sales and earnings to fluctuate
from period to period. Such fluctuations could have a material adverse effect
on the price of the Company's Common Stock and the Company's business, results
of operations, and financial condition.

Litigation by Competitor. On April 8, 1998, the day the Company filed the
initial registration statement relating to this offering, PowerBar filed a
complaint against the Company and its Senior Vice President of Sales in U.S.
District Court for the Northern District of California. The complaint alleges
in general that the Company engaged in false advertising, unfair competition,
and, with its Senior Vice President of Sales who previously worked for
PowerBar, misappropriated trade secrets. PowerBar also alleges that the sales
executive tortiously interfered with PowerBar's business relationships by
inducing distributors, brokers, athletes, and sponsors to terminate their
business relationships with PowerBar. The factual allegations against the
Company's advertising are similar to those already reviewed by NAD at
PowerBar's request. See "--Risks Associated with Advertising."

PowerBar seeks, among other things, injunctive relief prohibiting the
allegedly false advertising, corrective advertising in various print media,
compensatory damages in an unspecified amount, disgorgement of the Company's
profits, treble and punitive damages as to certain claims, attorneys' fees,
and restitution of revenues obtained from the sale of Balance bars. The
Company intends to vigorously contest PowerBar's claims. On April 30, 1998,
the Company and the sales executive answered the allegations in PowerBar's
complaint. In addition, the Company moved the court to dismiss PowerBar's
claim for relief under California's common law of unfair competition, on the
ground that PowerBar had failed as a matter of law to make out such a claim.
However, the Company cannot predict the ultimate outcome of this litigation,
and no assurance can be given that this lawsuit will not be determined
adversely to the Company. An outcome adverse to the

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Company, costs associated with defending the lawsuit, payment of damages and
costs associated with any indemnification of its sales executive, the
significant diversion of management's time and resources to defend the
lawsuit, a substantial settlement or award of damages, to the extent in excess
of any insurance coverage, or negative publicity resulting from the lawsuit
could have a material adverse effect on the Company's business, results of
operations, and financial condition. See "--Risk of Adverse Publicity" and
"Business--Legal Proceedings."

Potential Weaknesses in Intellectual Property Protection. The Company relies
on a combination of common law trademark rights, U.S. federal registration
rights, and trade secret laws to protect its proprietary rights. The Company
uses the word "balance" in its corporate name and in each of its two current
product line names. The term "balance" and variations thereof are widely used
for many food products other than those sold by the Company. Such widespread
use may weaken the Company's trademark rights and may dilute
any unique, distinctive significance the word "balance" may have as a means of
identifying the Company's products. In addition, the Company uses "40-30-30"
on all of its product packaging and in advertising and promotional materials.
There can be no assurance that the Company will be able to enforce its
trademark rights for current products or register trademarks or obtain common
law trademark rights using "balance" or "40-30-30" for any new product lines
it may introduce. Such inability to have exclusive use of the word "balance"
or "40-30-30" in new product names could weaken the Company's ability to
create a strong "balance" brand in existing and new product categories.

In addition, the Company only has one federally registered trademark,
"BALANCE, THE COMPLETE NUTRITIONAL FOOD" and 18 applications for federal
registration of marks in the United States. Common law trademark rights do not
provide the Company with the same level of protection as afforded by a United
States federal registration of a trademark. In addition, common law trademark
rights are limited to the geographic area in which the trademark is actually
used plus a reasonable zone of future expansion, while U.S. federal
registration on the Principal Register gives the registrant superior rights
throughout the United States, subject to certain exceptions. The Company has
registered its trademarks in certain foreign jurisdictions where the Company's
products are or will be sold. The protection available in such jurisdictions
may not be as extensive as the protection available to the Company in the
United States.

The Company and one of its largest distributors, Tree of Life, which uses
"Balanced--The Total Nutritional Drink" for an existing beverage, have agreed
to limit their use of the term "balance," "balanced" and variations thereof.
Under the contract, the Company and Tree of Life may continue to use the
current names for their respective products. However, the Company may not use
the trademark or tradename "balanced" in connection with any goods or services
or the term "balance" at the beginning of any name of a nutritional drink
product or certain processed foods and meals produced by Tree of Life. Tree of
Life may not use the trademark or tradename "balance" in connection with any
goods or services or the term "balanced" in connection with nutritional bar
products. These restrictions could adversely affect the Company's ability to
successfully expand into new product categories or strengthen its brand name.

Although the Company's formula for its products is a trade secret, it may be
independently developed or duplicated. In addition, the Company does not have
any proprietary rights in the 40-30-30 nutritional concept. The Company
protects its proprietary formula and processes, in part, by confidentiality
agreements with its employees and contract manufacturers. There can be no
assurance that these agreements will not be breached, that the Company would
have adequate remedies for any breach, or that the Company's trade secrets or
those of its contract manufacturers will not otherwise become known or
discovered independently by competitors. The Company owns the formula for the
products produced by its two contract manufacturers, Bariatrix International,
Inc. ("Bariatrix") and Nellson Nutraceutical, Inc. ("Nellson"). However,
pursuant to the terms of the Company's agreement with Nellson, Nellson will
obtain all rights to the nutritional bar formula if the Company does not meet
certain minimum purchase volumes. However, the Company's current purchase
volumes significantly exceed these minimum guaranteed purchase volumes. If the
Company fails to meet the purchase requirements, it has an option to buy out
any remaining purchase requirements to maintain ownership of the formula.
Although the Company believes that it will meet these purchase volumes or be

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able to buy out any remaining purchase requirements, there can be no assurance
that the Company will retain ownership of this formula. If the Company were to
lose ownership of this formula or lose its relationships with Bariatrix and
Nellson, it could have a material adverse effect on the Company's business,
results of operations, and financial condition.

No Assurance of Future Growth. The Company is currently experiencing a
period of rapid growth and expansion that has placed, and could continue to
place, a significant strain on the Company's management, customer and consumer
service and support, operations, sales and administrative personnel, and other
resources. To serve the needs of its existing and future customers and
consumers, the Company has substantially increased and will continue to
increase its work force, which requires the Company to attract, train,
motivate, and manage a substantially larger number of qualified employees.
Additionally, to effectively manage currently anticipated levels of future
demand, the Company may be required to continue to expand its existing, or
implement new, operating procedures and operating, management, information,
and financial systems, all of which may significantly increase its operating
expenses and cause disruptions in the Company's operations while the Company
implements such systems. The Company is currently implementing an inventory
control system. Until such system is fully operational, the Company will
continue on a monthly basis to reconcile its inventory records to actual
quantities owned. There can no assurance that the Company will be able to
achieve its growth as planned, increase its work force, or successfully
implement new systems to manage its anticipated growth, and any failure to do
so could have a material adverse effect on the Company's business, results of
operations, and financial condition. See "Business--Growth Strategy."

Risks Associated with and Potential Dilution from Possible Acquisitions. To
date, the Company has not had significant discussions about or evaluated the
potential acquisition of companies due largely to inadequate financial
resources. In the future, the Company may consider making an investment in or
acquiring companies or product lines that complement its existing business.
The Company is not able to predict when a prospective acquisition candidate
might become available, if ever, the terms of the financing of any transaction
or when any transaction might be closed. Future acquisitions by the Company
may result in potentially dilutive issuances of equity securities, the
incurrence of debt and contingent liabilities, and amortization expenses
related to goodwill and other intangible assets, which could materially
adversely affect Company profitability. In addition, acquisitions involve
numerous risks, including difficulties in the assimilation of the operations,
products, and employees of the acquired companies, the diversion of
management's attention from other business concerns, risks of entering markets
in which the Company has no or limited direct prior experience, and the
potential loss of key employees of the acquired company. If any such
acquisition occurs, there can be no assurance as to the effect thereof on the
Company's business, results of operations, and financial condition. See "Use
of Proceeds" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."

Potential Unavailability and Increased Cost of Raw Materials. Most of the
key ingredients used in the Company's products are obtained by its contract
manufacturers from third party suppliers. As with most food products, the
availability and cost of raw materials used in the Company's products can be
affected by a number of factors beyond its control, such as general economic
conditions affecting growing decisions, weather conditions such as frosts,
drought, and floods, and plant diseases, pests, and other acts of nature.
Because the Company does not control the production of raw materials, it is
also subject to delays caused by interruption in production of materials based
on conditions not within its control. Such conditions include job actions or
strikes by employees of suppliers, weather, crop conditions, transportation
interruptions, natural disasters or other catastrophic events. There can be no
assurance that the Company's contract manufacturers will be able to obtain
alternative sources of raw materials at favorable prices, or at all, if either
of them experience supply shortages. The inability of the Company's contract
manufacturers to obtain adequate supplies of raw materials for its products at
favorable prices, or at all, as a result of any of the foregoing factors or
otherwise could cause an increase in the Company's cost of sales and a
corresponding decrease in gross margin, could cause the Company's sales and
earnings to fluctuate from period to period and could have a material adverse
effect on the Company's business, results of operations, and financial
condition.

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Dependence on Key Personnel. The success of the Company is significantly
dependent on the personal efforts, performance, abilities, and continued
service of a small number of key managerial and marketing personnel. The loss
of service of any such key personnel could have a material adverse effect on
the Company's business, results of operations, and financial condition. The
Company has not and does not presently intend to enter into employment
agreements with any of its employees. In addition, the future success of the
Company depends upon its ability to attract and retain highly qualified
personnel in the future. Competition for such personnel is intense and there
can be no assurance that the Company will be able to attract and retain such
qualified personnel. A failure to do so could have a material adverse effect
on the Company's business, results of operations, and financial condition. See
"Management."

Government Regulation. The manufacturing, packaging, labeling, advertising,
distribution, and sale of the Company's products are subject to regulation by
various governmental agencies, principally the Food and Drug Administration
(the "FDA"). The FDA regulates the Company's products under the Federal Food,
Drug, and Cosmetic Act (the "FDCA"), and related regulations. The Company's
products are also subject to regulation by the FTC, as well as various
agencies of the states, localities, and foreign countries to which the Company
distributes its products and in which the Company's products are sold. The
Company believes that it presently complies in all material respects with the
foregoing laws and regulations. There can be no assurance that future
compliance with such laws or regulations, or failure to comply, will not have
a material adverse effect on the Company's business, results of operations,
and financial condition and future compliance or inability to comply could
cause the Company's sales and earnings to fluctuate from period to period. See
"Business--Government Regulation."

In September 1996, pursuant to a complaint related to a product safety issue
concerning Balance bars and at the FDA's request, the Company voluntarily
withheld product shipments temporarily. Upon completion of government
inspection of facilities of the Company and one of its contract manufacturers,
and sampling and testing of products, product shipments were resumed. However,
there can be no assurance that the FDA will not again request that the Company
cease product shipment due to any future regulatory matter, causing a loss of
sales and potentially severe damage to the Company's reputation. Any
withholding of product could have a material adverse effect on the Company's
business, results of operations, and financial condition. See "--Product
Liability; Other Potential Liabilities and Insurance."

The Company might be subject to additional laws or regulations administered
by the FDA or other federal, state or foreign regulatory authorities or more
stringent interpretations of current laws or regulations from time to time in
the future. The Company is unable to predict the nature of such future laws,
regulations, interpretations or applications, nor can it predict what effect
additional governmental regulations or administrative orders, when and if
promulgated, would have on its business in the future. They could, however,
require the reformulation of certain products to meet new standards, the
recall or discontinuance of certain products that cannot be reformulated,
imposition of additional record-keeping requirements, expanded documentation
of the properties of certain products, expanded or different labeling, and
scientific substantiation. Any or all of such requirements could cause the
Company's sales and earnings to fluctuate from period to period and could have
a material adverse effect on the Company's business, results of operations,
and financial condition.

Governmental regulations in foreign countries where the Company plans to
commence or expand sales might prevent or delay entry into the market or
prevent or delay the introduction, or require the reformulation, of certain of
the Company's products. Compliance with such foreign governmental regulations
is generally controlled by the Company's distributors for those countries.
These distributors are independent contractors over which the Company has
limited control. See "Business--Government Regulation."

Risks Associated with International Markets. In 1997 and the three months
ended March 31, 1998, 2.9% and 0.7%, respectively, of the Company's sales were
in markets outside of the United States. Although the Company intends to
continue to focus primarily on the domestic market in the near term, it also
intends to continue to test its products in foreign markets. The Company might
experience difficulty entering new

424B4 13th Page of 73 TOC 1st Previous Next ↓Bottom Just 13th
international markets due to greater regulatory barriers, the necessity of
adapting to new regulatory systems, and problems related to entering new
markets with different dietary habits, cultural bases, and political systems.
In addition, the Company has been and will be required to re-formulate its
products to comply with foreign regulatory standards. Operating in
international markets exposes the Company to certain risks, including, among
other things: (i) changes in or interpretations of foreign regulations that
might limit the Company's ability to sell certain products or repatriate
profits to the United States; (ii) exposure to currency fluctuations; (iii)
the potential imposition of trade or foreign exchange restrictions or
increased taxes or tariffs; and (iv) political instability. As the Company
continues to expand its international operations, these and other risks
associated with international operations will increase. See "Business--Growth
Strategy" and "--Government Regulation."

No Prior Public Market; Possible Volatility of Stock Price. Before this
offering, there has been no public market for the Common Stock of the Company,
and there can be no assurance that an active trading market will develop as a
result of the offering or, if a trading market does develop, that it will be
sustained or that the shares of Common Stock can be resold at or above the
initial public offering price. The initial public offering price of the Common
Stock offered hereby has been determined through negotiations between the
Company and the several Underwriters based on factors described in this
Prospectus under "Underwriting" and may not be indicative of the price at
which the Common Stock will actually trade after the offering. The Common
Stock has been approved for quotation on the Nasdaq National Market, which has
experienced, and is likely to continue to experience, significant price and
volume fluctuations which could adversely effect the market price of the
Common Stock without regard to the operating performance of the Company. In
addition, the market price for shares of common stock issued in initial public
offerings have historically been volatile as have shares of natural food
companies. The market price of the Common Stock could be subject to
significant variation due to fluctuations in the Company's operating results,
changes in earnings estimates by securities analysts, the degree of success
the Company achieves in implementing its business strategy, changes in
business or regulatory conditions affecting the Company, its customers, or its
competitors, and other factors.

Control by Principal Stockholders. Following completion of the offering, the
Chairman of the Company will beneficially own approximately 45% of the
outstanding shares of the Company's Common Stock, and he, together with other
directors and executive officers, will control 56% of the shares of the
Company's Common Stock. Accordingly, the Chairman, together with directors and
executive officers, will have 56% of the voting power of the Company (61%
assuming the exercise of all stock options) and will be able to elect all of
the directors and exercise significant control over the business, policies,
and affairs of the Company and determine the disposition of practically all
matters submitted to a vote of the Company's stockholders, including mergers,
going private transactions and other extraordinary corporate transactions and
the terms thereof. Further, these stockholders will be in a position to
prevent a takeover of the Company by one or more third parties, or sell or
otherwise transfer their stock to a third party, which could deprive the
Company's stockholders of a control premium that might otherwise be realized
by them in connection with an acquisition of the Company. See "Principal and
Selling Stockholders."

Possible Anti-Takeover Effect of Certain Charter Provisions. The Company's
Amended and Restated Bylaws (the "Bylaws") require that stockholders give
advance notice to the Company's Secretary of any nominations of directors made
or other business to be brought by stockholders at any stockholders' meeting.
The Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") requires the approval of 75% of the Company's voting stock to
amend certain of its provisions. The Company's Board of Directors has the
authority to issue shares of Preferred Stock in one or more series and to
determine the price, rights, preferences, and privileges of those shares
without any further vote or action by the stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of Preferred Stock that may be issued in the future.
The concentration of ownership by the Board of Directors and management, the
issuance of Preferred Stock, and other charter provisions may discourage
certain types of transactions involving an actual or potential change in
control of the Company, including

424B4 14th Page of 73 TOC 1st Previous Next ↓Bottom Just 14th
transactions in which the stockholders might otherwise receive a premium for
their shares over then current market prices, and may limit the ability of the
stockholders to approve transactions that they may deem to be in their best
interests. See "Description of Capital Stock."

In addition, the Company's Board of Directors is divided into three classes
of directors serving staggered terms. One class of directors will be elected
at each annual meeting of stockholders for a three-year term. At least two
annual meetings of stockholders, instead of one, could be required to change
the majority of the Company's Board of Directors, so it is more difficult for
the stockholders of the Company to change the management of the Company than
if the Board of Directors were not classified. In addition, the presence of a
classified Board of Directors could make it more difficult for a third party
to acquire, or could discourage a third party from attempting to acquire,
control of the Company and, therefore, may limit the price that certain
investors might be willing to pay in the future for shares of Common Stock.
See "Description of Capital Stock--Possible Anti-Takeover Effect of Certain
Charter Provisions."

Shares Eligible for Future Sale. Sales of substantial amounts of Common
Stock in the public market after the offering or the anticipation of such
sales could have a material adverse effect on then-prevailing market prices.
See "Description of Capital Stock" and "Shares Eligible for Future Sale."

Immediate and Substantial Dilution. Investors participating in this offering
will incur immediate and substantial dilution of $9.09 per share based on the
initial public offering price of $10.50 per share and net tangible book value
before this offering of $0.53 per share. To the extent outstanding options to
purchase Common Stock are exercised, there will be further dilution. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

Year 2000 Compliance. Many currently installed computer systems and software
products are coded to accept only two digit entries in the date code field.
Beginning in the year 2000, these date code fields will need to accept four
digit entries to distinguish 21st century dates from 20th century dates. As a
result, in less than three years, computer systems and software used by many
companies may need to be upgraded to comply with such "Year 2000"
requirements. Significant uncertainty exists concerning the potential effects
associated with such compliance. The Company is currently implementing a new
sales, inventory and accounting system that the software vendor has
represented to be Year 2000 compliant. Any Year 2000 compliance problem of
either the Company or its customers could result in a material adverse effect
on the Company's business, operating results, and financial condition.

Broad Discretion Over Use of Proceeds. The Company intends to use the net
proceeds of this offering to retire a revolving line of credit in the amount
of $3.4 million and a term loan in the amount of $278,000 (at March 31, 1998),
for general corporate purposes, including working capital to increase
marketing and advertising, and to add personnel and other resources to
accommodate its anticipated growth. The amount and timing of any expenditures
will vary significantly depending on a number of factors, including the amount
of cash generated by the Company's operations, the progress of the Company's
product development activities, and the market response to the introduction of
any new products. The Company may also use the net proceeds from this offering
to acquire companies or product lines that complement the Company's existing
product lines. To date, however, the Company has no specific agreements or
commitments regarding any acquisitions. Accordingly, the Company's management
will retain broad discretion as to the allocation of the net proceeds of this
offering. See "Use of Proceeds."

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USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,003,372 shares of
Common Stock offered by the Company hereby at the initial public offering
price of $10.50 per share are estimated to be $9.5 million. The Company will
not receive any proceeds from the sale of Common Stock by the Selling
Stockholders.

The Company intends to use the net proceeds to retire a revolving line of
credit in the amount of $3.4 million and a term loan in the amount of $278,000
(at March 31, 1998), for general corporate purposes, including working capital
to increase marketing and advertising, and to add personnel and other
resources to accommodate its anticipated growth. The Company may also use the
net proceeds from this offering to acquire companies or product lines that
complement the Company's existing product lines. To date, however, the Company
has not had significant discussions about or evaluated the potential
acquisition of any such companies or product lines. At March 31, 1998, the
line of credit and the term loan each bore interest at prime plus 3/4%. The
line of credit matures in April 2000 and the term loan matures in installments
through 2001.

DIVIDEND POLICY

The Company has neither declared nor paid any cash dividends on its capital
stock. The Company intends to retain its earnings for use in its business and
does not plan to pay any cash dividends in the foreseeable future.
Furthermore, the Company's line of credit contains certain covenants that,
among other things, preclude the payment of cash dividends by the Company.

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CAPITALIZATION

The following table sets forth the capitalization of the Company as of March
31, 1998 (i) on an actual basis, (ii) as adjusted to give effect to the sale
by the Company of the 1,003,372 shares of Common Stock offered by the Company
hereby at the initial public offering price of $10.50 per share, the
application of the estimated net proceeds therefrom, and the retirement of
$3.7 million of outstanding debt. This table should be read in conjunction
with the Financial Statements of the Company and Notes thereto, together with
Management's Discussion and Analysis of Financial Condition and Results of
Operations, included elsewhere in this Prospectus.

[Download Table]

MARCH 31, 1998
-------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)

Current portion of long-term debt.......................... $ 88 $ 2
Short-term borrowings...................................... 3,400 --
Long-term debt, less current portion....................... 202 10
------- -------
Shareholders' equity:
Common Stock, $0.01 par value, 24,000,000 shares
authorized, 9,683,802 shares issued and outstanding and
10,687,174 shares issued and outstanding as adjusted
(1)..................................................... 97 107
Additional paid-in capital............................... 2,593 12,081
Retained earnings........................................ 2,871 2,871
------- -------
Total shareholders' equity............................. 5,561 15,059
------- -------
Total capitalization.................................. $ 9,251 $15,071
======= =======

--------
(1) Excludes (i) 1,800,000 shares of Common Stock reserved for issuance under
the Company's 1998 Plan, of which no shares were subject to outstanding
options as of March 31, 1998, and (ii) 2,615,502 shares of Common Stock
issuable upon exercise of options outstanding at March 31, 1998 at a
weighted average exercise price of $0.74 per share. See "Management--Stock
Options and Stock Plans" and Note 8 of Notes to Financial Statements.

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DILUTION

As of March 31, 1998, the Company had a net tangible book value of
approximately $5.1 million or $0.53 per share of Common Stock. Net tangible
book value represents the amount of total tangible assets less total
liabilities divided by the number of shares of Common Stock outstanding.
Without taking into account any other changes in the net tangible book value
after March 31, 1998, other than to give effect to the receipt by the Company
of the net proceeds from the sale of the 1,003,372 shares of Common Stock
offered by the Company hereby at the initial public offering price of $10.50
per share, the pro forma net tangible book value of the Company as of March
31, 1998 would have been approximately $15.1 million or $1.41 per share. This
represents an immediate increase in net tangible book value of $0.88 per share
to existing stockholders and an immediate dilution of $9.09 per share to new
investors. The following table illustrates this per share dilution:

[Download Table]

Initial public offering price per share........................... $10.50

Net tangible book value per share before the offering........... $0.53
Increase per share attributable to new investors................ 0.88
-----
Pro forma net tangible book value per share after the offering.... 1.41
------
Dilution per share to new investors............................... $ 9.09
======

The following table summarizes, on a pro forma basis as of March 31, 1998,
the differences between existing stockholders and the new investors with
respect to the number of shares of Common Stock purchased from the Company,
the total consideration paid and the average price per share paid:

[Download Table]

SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE
NUMBER PERCENT AMOUNT PERCENT PRICE PER SHARE
---------- ------- ----------- ------- ---------------

Existing stockholders
(1).................... 9,683,802 90.6% $ 1,957,000 15.7% $ 0.20
New investors (1)....... 1,003,372 9.4 10,535,406 84.3 10.50
---------- ----- ----------- -----
Total.................. 10,687,174 100.0% $12,492,406 100.0%
========== ===== =========== =====

Other than as noted above, the foregoing computations assume the exercise of
no stock options after March 31, 1998. As of March 31, 1998, options to
purchase 2,615,502 shares of Common Stock were outstanding, with a weighted
average exercise price of $0.74 per share. To the extent these options are
exercised, there will be further dilution to new investors. See "Management--
Stock Plans" and Note 8 of Notes to Financial Statements.
--------

(1) Sales by Selling Stockholders in this offering will reduce the number of
shares of Common Stock held by existing stockholders to 8,287,174 or
approximately 77.5% (7,927,174 shares or approximately 74.2% if the
Underwriters' over-allotment option is exercised in full) and will
increase the number of shares held by new investors to 2,400,000 or
approximately 22.5% (2,760,000 shares or approximately 25.8% if the
Underwriters' over-allotment option is exercised in full) of the total
number of shares of Common Stock outstanding after this offering. See
"Principal and Selling Stockholders."

424B4 18th Page of 73 TOC 1st Previous Next ↓Bottom Just 18th
SELECTED FINANCIAL DATA

The following selected statements of operations data for each of the three
years in the period ended December 31, 1997, and the balance sheet data as of
December 31, 1996 and 1997, are derived from the financial statements and
notes thereto included elsewhere herein audited by Arthur Andersen LLP,
independent public accountants, as set forth in their report also included
elsewhere herein. The balance sheet data as of December 31, 1995, are derived
from financial statements audited by Arthur Andersen LLP not included herein.
The selected statements of operations data for the years ended May 31, 1993
and 1994 and the seven months ended December 31, 1994, and the balance sheet
data as of May 31, 1993 and 1994 and as of December 31, 1994, are derived from
unaudited financial statements of the Company, not included herein. The
statements of operations data for the three months ended March 31, 1997 and
1998 have been derived from the unaudited interim financial statements of the
Company included elsewhere in this Prospectus. The unaudited financial
statements were prepared on the same basis as the audited financial statements
and, in the opinion of management, include all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the
Company's financial position and results of operations. The results of
operations for any interim period are not necessarily indicative of results to
be expected for a full year. The following data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Financial Statements of the Company and the Notes
thereto included elsewhere in this Prospectus.

[Enlarge/Download Table]

YEAR ENDED SEVEN MONTHS YEAR ENDED THREE MONTHS
MAY 31, ENDED DECEMBER 31, ENDED MARCH 31,
--------------- DECEMBER 31, ----------------------- ----------------
1993 1994 1994 1995 1996 1997 1997 1998
------- ------ ------------ ------ ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS
DATA:
Sales................... $ 481 $ 692 $ 576 $1,262 $10,544 $39,634 $ 6,136 $17,457
Cost of Sales........... 141 217 219 593 5,272 19,801 2,970 9,014
------- ------ ----- ------ ------- ------- ------- -------
Gross profit......... 340 475 357 669 5,272 19,833 3,166 8,443
------- ------ ----- ------ ------- ------- ------- -------
Expenses:
Advertising............ 134 47 87 157 1,083 7,481 849 1,630
Selling and marketing.. 587 295 109 355 1,536 7,204 1,130 3,522
General and
administrative........ 881 444 154 237 797 2,299 417 1,057
Interest (income)
expense............... -- 1 -- 4 16 (27) (5) 58
------- ------ ----- ------ ------- ------- ------- -------
Total expenses....... 1,602 787 350 753 3,432 16,957 2,391 6,267
------- ------ ----- ------ ------- ------- ------- -------
Income (loss) before
income taxes........ (1,262) (312) 7 (84) 1,840 2,876 775 2,176
Income Taxes............ 1 1 1 1 225 1,216 328 892
------- ------ ----- ------ ------- ------- ------- -------
Net income (loss).... $(1,263) $ (313) $ 6 $ (85) $ 1,615 $ 1,660 $ 447 $ 1,284
======= ====== ===== ====== ======= ======= ======= =======
Earnings (loss) per
share:
Basic................ $ (0.22) $(0.04) -- $(0.01) $ 0.19 $ 0.18 $ 0.05 $ 0.13
======= ====== ===== ====== ======= ======= ======= =======
Diluted.............. $ (0.22) $(0.04) -- $(0.01) $ 0.17 $ 0.15 $ 0.04 $ 0.11
======= ====== ===== ====== ======= ======= ======= =======
Weighted average number
of shares outstanding:
Basic................ 5,828 7,670 7,713 7,800 8,410 9,302 9,268 9,599
======= ====== ===== ====== ======= ======= ======= =======
Diluted.............. 5,828 7,670 7,713 7,800 9,343 11,043 11,434 11,683
======= ====== ===== ====== ======= ======= ======= =======

[Download Table]

MAY 31, DECEMBER 31,
--------- --------------------------
MARCH 31,
1993 1994 1994 1995 1996 1997 1998
---- ---- ---- ---- ------ ------- ---------
(IN THOUSANDS)

BALANCE SHEET DATA:
Cash.......................... $238 $ 11 $ 12 $ 34 $1,119 $ 89 $ 89
Working capital (deficit)..... 107 (44) (50) (39) 2,087 2,974 4,122
Total assets.................. 453 161 139 185 3,374 10,796 14,694
Long-term debt, net of current
portion...................... 5 9 5 -- -- 228 202
Total shareholders' equity.... 265 35 16 3 2,162 4,104 5,561

424B4 19th Page of 73 TOC 1st Previous Next ↓Bottom Just 19th
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the Company's Financial Statements and Notes
thereto included elsewhere in this Prospectus. Except for the historical
information contained herein, the discussion in this Prospectus contains
certain forward-looking statements that involve risks and uncertainties, such
as statements of the Company's plans, objectives, expectations and intentions.
These statements can be identified by the use of forward-looking terminology
such as "believes," "expects," "intends," "plans," "may," "will," "should," or
"anticipation" or the negative thereof or other variations thereon or
comparable terminology. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this Prospectus. The Company's actual results could
differ materially from those discussed here. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors," as
well as those discussed elsewhere herein.

OVERVIEW

Balance Bar Company develops and markets branded food and beverage products
in convenient, good-tasting, balanced nutritional formulations. The Company's
current and planned product lines are targeted to a broad consumer base in the
healthy food and beverage market. The Company markets its products to
consumers for a wide variety of uses, including snacking, meal replacement,
fitness, weight management and diabetic nutrition. The Company sells its
products in natural foods, mass merchandise, club, grocery, convenience,
health and fitness, and drug stores. The Company's existing product lines, the
Balance bar and the 40-30-30 Balance powdered drink mix, accounted for
approximately 92% and 8%, respectively, of the Company's 1997 sales and
approximately 90% and 10%, respectively, of sales in the three months ended
March 31, 1998. The United States accounted for approximately 97% of 1997
sales and approximately 99% of sales in the three months ended March 31, 1998.
The Company currently sells ten flavors of Balance bars (in two sizes) and
five flavors of powdered drinks (in canisters and single serving envelopes).

The Company was founded in 1992 to market a 40-30-30 nutrition bar to the
weight loss and sports performance market. From 1992 to 1995, the Company
relied heavily on direct sales to consumers through network marketing and
direct response advertising. In 1995, the Company obtained its first major
wholesale customer, Tree of Life, a national natural foods distributor. By the
end of 1996, the Company had developed a nationwide network of natural foods
brokers and distributors and was selling its products, through distributors
and direct to retailers, to a broad consumer base. In 1997 and 1998, as a
result of a strategic decision to broaden distribution, the Company expanded
its broker network and distribution into mass merchandise, club, grocery,
convenience, health and fitness, and drug stores.

According to SPINS(/1/) data from Spence Information Services, the Balance
bar was the number one selling nutrition bar in the natural foods channel
achieving a 31.0% market share in 1997 and a 34.6% market share in the
January/February 1998 reporting period. In addition, the Balance Bar accounted
for five of the top ten selling nutrition bar flavors in the natural foods
channel in the November/December 1997 reporting period and six of the top ten
flavors in the same channel during the January/February 1998 reporting period.

According to ACNielsen ScanTrack: SPINS Natural Track(/2/), the Balance bar
market share in the energy bars category of grocery store natural products
increased from 2% in the November/December 1996
--------
(1) SPINS data is based on actual sales from seven significant natural foods
distributor warehouses (primarily United Natural Foods warehouses), but
does not include sales from one of the Company's significant natural foods
distributors, Tree of Life.

(2) ACNielsen Scan Track: SPINS Natural Track data is based on actual sales in
two-month reporting periods from a sample of grocery stores across the
United States.

424B4 20th Page of 73 TOC 1st Previous Next ↓Bottom Just 20th
reporting period to 16% in the November/December 1997 reporting period and to
17% in the January/February 1998 reporting period. In addition, the Company
had the top two selling nutrition bar flavors per point of distribution(/1/)
in grocery stores for the November/December 1997 reporting period and the top
selling nutrition bar flavor per point of distribution in grocery stores for
the January/February 1998 reporting period. The leading Balance bar flavor
outsold the nearest competitor flavor per point of distribution in grocery
stores by 56.6% in December 1997 and 40.0% in February 1998.

In 1997, the natural foods channel accounted for approximately 69% of the
Company's sales. For the three months ended March 31, 1998, the natural foods
channel accounted for approximately 59% of the Company's sales. The Company
expects this percentage to continue to decline in 1998 as the Company expands
sales at mass merchandise, club, grocery, convenience, and drug stores. By
December 31, 1997, the Company had up to four of its ten Balance bar flavors
in approximately 40% of mass merchandise stores, 25% of club stores, 13% of
grocery stores, 10% of convenience stores (represents penetration of honey
peanut flavor only), and 9% of drug stores in the United States.(/2/) The
Company's goal is to continue to expand its nationwide distribution by
increasing the number of Balance bar flavors in each store and further
penetrating each distribution channel.

Sales increased 736% in 1996 and 276% in 1997. The Company believes that its
rapid sales growth is the result of a number of factors, including increased
consumer awareness and trial of Balance products and increased consumer
awareness of the role a healthy diet plays in their lives, expanded
distribution channels, increased advertising, marketing and promotional
efforts, improved packaging graphics, the products' good taste and broad
consumer appeal, introduction of new products and product line extensions, and
the rapid growth of the nutrition bar category. As awareness of the Company's
brand has increased, the Company has continued to add major customers across a
number of distribution channels including Tree of Life, GNC, Trader Joe's,
United Natural Foods, and Costco.

The Company believes that increasing consumer awareness and trial of Balance
products will continue to be a major factor in its ability to grow.
Accordingly, the Company has increased selling, marketing, and advertising
expenditures significantly in each year since 1995. The Company anticipates
that its 1998 advertising and marketing expenditures will increase
significantly over 1997 advertising and marketing expenditures.

COMPONENTS OF SALES AND EXPENSES

Sales consists of invoiced sales less promotional discounts and estimated
returns and allowances. The Company sells its products both directly to retail
customers and to distributors who then resell the products to retailers. The
Company uses commissioned brokers to provide sales support at customer
headquarters and at retail locations. Backlog is not significant as the
Company ships its products against binding purchase orders that are filled
within a short period after the order.
--------
(1) Sales per point of distribution is defined as dollar sales per flavor per
grocery store selling that flavor.

(2) The mass merchandise, grocery, convenience, and drug store data was
provided by Information Resources, Inc., and is based on actual sales from
a sample of mass merchandise, grocery, convenience, and drug stores. The
club store data is estimated by the Company.

424B4 21st Page of 73 TOC 1st Previous Next ↓Bottom Just 21st
Cost of sales consists of product costs and freight and are recognized as
the related revenues are recorded. The Company does not own or operate any
manufacturing facilities, and sources its products through third-party
contract manufacturers. The Company believes that outsourcing allows the
Company to enhance production flexibility and capacity, while substantially
reducing capital expenditures and avoiding the costs of managing a production
work force. Outsourcing also enables the Company to leverage working capital,
transfer risk and focus resources on advertising, marketing, and sales.
However, because the Company uses third party contract manufacturers, the
Company does not expect to benefit from the economies of scale typically
experienced by manufacturers.

Expenses consist of advertising costs, selling and marketing costs, general
and administrative costs, and interest income and expense. Advertising costs
consist of television, radio and print expenses and are recognized when the
advertising takes place. Selling and marketing costs consist of payroll
expenses, brokers' commissions, slotting allowances, public relations costs,
special events, product sampling costs and other promotional items. Special
events and product sampling costs are recognized when promotional events are
held and promotional materials are distributed. General and administrative
costs consist of payroll expenses, facility rentals, stock option and common
stock expense and other overhead costs. Stock option and common stock expense
consists of the excess of the fair market value over the exercise price of
stock options and the issue price of common stock. This expense is recognized
over the period stock options vest or in the period the common stock was
issued.

The Company has experienced, and will continue to experience, period-to-
period fluctuations in its operating results as a result of a variety of
factors, including: (i) fluctuations in promotional, advertising, and
marketing expenditures; (ii) the introduction of new products or delays in
such introductions; (iii) the introduction or announcement of new products by
the Company's competitors; (iv) customer acceptance of new products; (v)
shipment delays; (vi) consumer perceptions of the Company's products and
operations, including the 40-30-30 nutritional concept; (vii) competitive
pricing pressures; (viii) the adverse effect of distributors', suppliers', or
the Company's failure, and allegations of their failure, to comply with
applicable regulations; (ix) the availability and cost of raw materials; (x)
economic conditions in general and in the food industry in particular; (xi)
the negative effect of changes in or interpretations of regulations that may
limit or restrict the sale of certain of the Company's products; (xii) the
expansion of its operations into new markets, (xiii) the introduction of its
products into each such market; (xiv) mix of products sold; and (xv)
unanticipated changes in the timing of customer promotions, any of which could
have a material adverse effect on the Company's business, results of
operations, and financial condition.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
relationship of certain items from the Company's statement of operations to
sales:

[Download Table]

PERCENTAGE OF SALES
----------------------------------
THREE
MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
-------------------- ------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----

Sales.................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Sales............................ 47.0 50.0 50.0 48.4 51.6
----- ----- ----- ----- -----
Gross profit......................... 53.0 50.0 50.0 51.6 48.4
Expenses:
Advertising............................ 12.5 10.3 18.9 13.9 9.3
Selling and marketing.................. 28.1 14.6 18.1 18.4 20.2
General and administrative............. 18.8 7.5 5.8 6.8 6.1
Interest (income) expense.............. 0.3 0.1 (0.1) (0.1) 0.3
----- ----- ----- ----- -----
Total expenses....................... 59.7 32.5 42.7 39.0 35.9
----- ----- ----- ----- -----
Income (loss) before income taxes.... (6.7) 17.5 7.3 12.6 12.5
Income Taxes............................. -- 2.2 3.1 5.3 5.1
----- ----- ----- ----- -----
Net income (loss).................... (6.7)% 15.3% 4.2% 7.3% 7.4%
===== ===== ===== ===== =====

424B4 22nd Page of 73 TOC 1st Previous Next ↓Bottom Just 22nd
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 AND 1998

Sales. Sales increased 185% from $6.1 million in the first quarter of 1997
to $17.5 million in the first quarter of 1998. The increase was primarily
attributable to increased sales at mass merchandise, club and grocery stores.
Sales also increased in 1998 at natural foods stores. Four significant
customers ran special sales promotions in the first quarter of 1998 and
approximately $2.8 million of the increase was due to increased sales to those
customers. The introduction of a powdered drink mix during the 1997 quarter
and the addition of three new Balance bar flavors in December 1997 also
favorably impacted sales in the first quarter of 1998.

Gross Profit. Gross profit dollars increased from $3.2 million in the first
quarter of 1997 to $8.4 million in the first quarter of 1998. Gross profit
margin declined from 51.6% in the first quarter of 1997 to 48.4% in the first
quarter of 1998 due primarily to a change in product and channel mix. The
Company's gross profit margin has fluctuated between approximately 48% and 52%
over the last eight quarters due to changes in product and channel mix.

Advertising. Advertising expenses increased from $849,000 in the first
quarter of 1997 to $1.6 million in the first quarter of 1998. This increase
was due to the Company's strategic decision to build brand awareness and
increase sales through substantial increases in radio and print advertising
and the addition of television advertising.

Selling and Marketing. Selling and marketing expenses increased from $1.1
million in the first quarter of 1997 to $3.5 million in the first quarter of
1998. The increase was due to higher personnel-related costs as the Company
built its sales organization and higher broker commissions related to the
increase in sales. The increase was also due to increases in special events
and product sampling to build customer awareness of the Company's products.
Selling and marketing expenses as a percentage of sales increased from 18.4%
of sales in the first quarter of 1997 to 20.2% in the first quarter of 1998.

General and Administrative. General and administrative expenses increased
from $417,000 in the first quarter of 1997 to $1.1 million in the first
quarter of 1998. As a percentage of sales, general and administrative expenses
decreased to 6.1% in the first quarter of 1998 from 6.8% in the first quarter
of 1997. The dollar increase in 1998 was due to increased payroll and facility
rentals to support the Company's increased sales.

Interest (income) expense. Interest (income) expense increased from $5,000
of interest income in the first quarter of 1997 to $58,000 of interest expense
in the first quarter of 1998. The interest expense in the first quarter of
1998 was due to borrowings under the Company's line of credit and term loan
agreements.

Provision for Income Taxes. The effective tax rate in the first quarter of
1997 was 42.3% and the effective tax rate in the first quarter of 1998 was
41.0%. The decline in the effective tax rate was due to lower non-deductible
expenses projected for 1998.

COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1997

Sales. Sales increased 276% from $10.5 million in 1996 to $39.6 million in
1997. The increase was primarily attributable to increased sales at natural
foods and mass merchandise stores and to a lesser extent at club and grocery
stores. Sales also increased in 1997 as the Company gained more retail shelf
space and increased the number of flavors sold to existing customers. In
addition, the introduction of a powdered nutritional drink in 1997 accounted
for approximately $2.6 million of the increase. The addition of three new
Balance bar flavors in December 1997 did not have a significant effect on
sales in 1997.

Gross Profit. Gross profit dollars increased from $5.3 million in 1996 to
$19.8 million in 1997. Gross profit margin was 50.0% in both 1996 and 1997,
and, therefore, gross profit dollars increased as sales increased.

Advertising. Advertising expenses increased from $1.1 million in 1996 to
$7.5 million in 1997. This increase was due to the Company's strategic
decision to build brand awareness and increase sales through substantial
increases in radio and print advertising and the introduction of television
advertising.

424B4 23rd Page of 73 TOC 1st Previous Next ↓Bottom Just 23rd
Selling and Marketing. Selling and marketing expenses increased from
$1.5 million in 1996 to $7.2 million in 1997. The increase was due to higher
personnel-related costs as the Company built its sales organization, higher
broker commissions related to increased sales and additional expenditures for
slotting allowances as products were introduced to grocery stores. The
increase was also due to increases in special events and product sampling to
build customer awareness of the Company's products. Selling and marketing
expenses as a percentage of sales increased from 14.6% of sales in 1996 to
18.1% in 1997.

General and Administrative. General and administrative expenses increased
from $797,000 in 1996 to $2.3 million in 1997. As a percentage of sales,
general and administrative expenses decreased to 5.8% in 1997 from 7.5% in
1996. The dollar increase in 1997 was due to higher personnel-related costs
and facility rentals to support the increased sales.

Provision for Income Taxes. The Company's effective tax rate in 1996 was
12.2% due to the utilization of net operating loss carryforwards incurred from
1992 to 1995. As of December 31, 1996 the Company had fully utilized its net
operating loss carryforwards. In 1997, the Company's effective tax rate was
42.3%.

COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1996

Sales. Sales increased 736% from $1.3 million in 1995 to $10.5 million in
1996, due primarily to a change in marketing strategy to nationwide retail
distribution from that of network marketing and direct response marketing. The
addition of several major natural foods customers including Trader Joe's in
late 1996 and Tree of Life beginning in late 1995 accounted for most of the
increase.

Gross Profit. Gross profit dollars increased from $669,000 in 1995 to $5.3
million in 1996. Gross profit margin decreased from 53.0% in 1995 to 50.0% in
1996. This decrease in gross profit margin was primarily attributable to the
change in marketing strategy to that of retail distribution through
distributors and direct to retail customers requiring wholesale pricing and
promotional discounts.

Advertising. Advertising expenses increased from $157,000 in 1995 to $1.1
million in 1996. This increase was due to efforts to build brand awareness and
increase sales through substantially higher levels of radio and print
advertising.

Selling and Marketing. Selling and marketing expenses increased from
$355,000 in 1995 to $1.5 million in 1996. The increase was due to higher
personnel-related costs as the Company built its sales organization and higher
broker commissions related to increased sales. The increase was also due to
increases in special events and product sampling to build customer awareness
of the Company's products. As a percentage of sales, selling and marketing
expenses decreased from 28.1% in 1995 to 14.6% in 1996.

General and Administrative. General and administrative expenses increased
from $237,000 in 1995 to $797,000 in 1996. As a percentage of sales, general
and administrative expenses decreased to 7.5% in 1996 from 18.8% in 1995. The
dollar increase in 1996 was due primarily to $342,000 of additional stock
option and common stock expense and increased payroll costs as additional
personnel were hired to support expanded operations.

Provision for Income Taxes. Because of the Company's loss in 1995, the
provision for income taxes consisted solely of the California minimum tax. The
effective tax rate in 1996 was 12.2% due to the utilization of net operating
loss carryforwards created from 1992 to 1995.

The Company believes that inflation has not had a significant effect on the
Company's results of operations in 1995, 1996, 1997 or the first quarter of
1998.

424B4 24th Page of 73 TOC 1st Previous Next ↓Bottom Just 24th
SELECTED QUARTERLY OPERATING RESULTS

The following table presents selected financial information for the last
eight quarters. This information has been derived from unaudited quarterly
financial statements that, in the opinion of management, reflect all
adjustments (consisting only of normal recurring adjustments) necessary to
fairly present this information and is presented on the same basis as the
audited financial statements appearing elsewhere herein. This information
should be read in conjunction with the financial statements and notes thereto
appearing elsewhere in this Prospectus. The results of operations in any
quarter are not necessarily indicative of results to be expected in any future
period.

[Enlarge/Download Table]

QUARTER ENDED
----------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1996 1996 1996 1997 1997 1997 1997 1998
-------- --------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Sales................... $1,813 $2,346 $5,693 $6,136 $11,095 $10,134 $12,269 $17,457
Cost of Sales........... 901 1,126 2,928 2,970 5,499 5,180 6,152 9,014
------ ------ ------ ------ ------- ------- ------- -------
Gross profit......... 912 1,220 2,765 3,166 5,596 4,954 6,117 8,443
------ ------ ------ ------ ------- ------- ------- -------
Expenses:
Advertising............ 158 273 555 849 1,627 2,650 2,355 1,630
Selling and
marketing............. 342 423 594 1,130 1,906 2,052 2,116 3,522
General and
administrative........ 109 270 310 417 554 596 732 1,057
Interest (income)
expense............... 4 5 3 (5) (9) (17) 4 58
------ ------ ------ ------ ------- ------- ------- -------
Total expenses....... 613 971 1,462 2,391 4,078 5,281 5,207 6,267
------ ------ ------ ------ ------- ------- ------- -------
Income (loss) before
income taxes........ 299 249 1,303 775 1,518 (327) 910 2,176
Income Taxes............ 37 30 157 328 641 (138) 385 892
------ ------ ------ ------ ------- ------- ------- -------
Net income (loss).... $ 262 $ 219 $1,146 $ 447 $ 877 $ (189) $ 525 $ 1,284
====== ====== ====== ====== ======= ======= ======= =======
Earnings (Loss) Per
Share:
Basic................ $ 0.03 $ 0.03 $ 0.14 $ 0.05 $ 0.09 $ (0.02) $ 0.06 $ 0.13
====== ====== ====== ====== ======= ======= ======= =======
Diluted.............. $ 0.03 $ 0.02 $ 0.11 $ 0.04 $ 0.08 $ (0.02) $ 0.05 $ 0.11
====== ====== ====== ====== ======= ======= ======= =======
Weighted average number
of shares outstanding:
Basic................ 8,414 8,418 8,434 9,268 9,294 9,306 9,340 9,599
====== ====== ====== ====== ======= ======= ======= =======
Diluted.............. 8,575 9,809 10,580 11,434 11,660 9,306 11,774 11,683
====== ====== ====== ====== ======= ======= ======= =======

PERCENTAGE OF SALES
----------------------------------------------------------------------------------

Sales................... 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0% 100.0 %
Cost of Sales........... 49.7 48.0 51.4 48.4 49.6 51.1 50.1 51.6
------ ------ ------ ------ ------- ------- ------- -------
Gross profit......... 50.3 52.0 48.6 51.6 50.4 48.9 49.9 48.4
------ ------ ------ ------ ------- ------- ------- -------
Expenses:
Advertising............ 8.7 11.7 9.8 13.9 14.6 26.2 19.2 9.3
Selling and
marketing............. 18.9 18.0 10.4 18.4 17.2 20.2 17.3 20.2
General and
administrative........ 6.0 11.5 5.4 6.8 5.0 5.9 6.0 6.1
Interest (income)
expense............... 0.2 0.2 0.1 (0.1) (0.1) (0.2) -- 0.3
------ ------ ------ ------ ------- ------- ------- -------
Total expenses....... 33.8 41.4 25.7 39.0 36.7 52.1 42.5 35.9
------ ------ ------ ------ ------- ------- ------- -------
Income (loss) before
income taxes........ 16.5 10.6 22.9 12.6 13.7 (3.2) 7.4 12.5
Income Taxes............ 2.0 1.3 2.8 5.3 5.8 (1.3) 3.1 5.1
------ ------ ------ ------ ------- ------- ------- -------
Net income (loss).... 14.5 % 9.3 % 20.1 % 7.3 % 7.9 % (1.9)% 4.3 % 7.4%
====== ====== ====== ====== ======= ======= ======= =======

424B4 25th Page of 73 TOC 1st Previous Next ↓Bottom Just 25th
Sales. Sales increased sequentially each quarter of 1996 and 1997, except
for the third quarter of 1997. The decline in the third quarter of 1997 was
caused by unusually high sales to two significant natural foods customers near
the end of the second quarter of 1997. Reduced sales to these two customers in
the third quarter of 1997 were partially offset by a significant increase in
sales to one mass merchandise customer. In addition, sales increased in the
fourth quarter due to a significant increase in sales to another mass
merchandise customer.

The Company has not observed seasonality in sales in 1995, 1996 or 1997 due
to the significant expansion of distribution and resulting sales increases
during this period. The Company believes that there may be some seasonally
reduced sales in the fourth quarter due to retailers' emphasis on holiday
merchandise in that quarter.

Gross Profit. The Company's gross profit margin has fluctuated between
approximately 48% and 52% over the last eight quarters due to changes in
product and channel mix and was 50% in years 1996 and 1997. The Company
expects that gross profit will continue to fluctuate in future periods.

Expenses. Expenses increased as sales increased in each quarter of 1996 and
1997, except for the fourth quarter of 1997. Advertising expenses were reduced
in the fourth quarter of 1997 to bring them in line with annual objectives.
Advertising and selling and marketing expenses as a percentage of sales were
higher in the third quarter of 1997 than other quarters due to the
unanticipated decline in sales from the second to the third quarter of 1997.
Advertising and selling and marketing expenses as a percentage of sales
fluctuate from quarter to quarter because substantially all advertising
expenses and a significant part of marketing expenses are not directly related
to the level of sales in the current quarter. These expenses have fluctuated
and are expected to continue to fluctuate depending on the level of
investments that are made each quarter to build customer awareness of the
Company's products and increase future sales.

Future purchase commitments of certain advertising and marketing expenses
are made based on expectations about future sales levels. If actual sales vary
from expectations then the percentage relationship of these expenses to sales
will vary and the period to period variances could be material. See "Risk
Factors--Potential Sales and Earnings Volatility."

LIQUIDITY AND CAPITAL RESOURCES

Prior to this offering, the Company's operations and capital requirements
were financed through private sales of common and preferred stock and
convertible bonds, internally generated funds, and borrowings under various
credit agreements.

Since late 1995, the Company has experienced substantial growth. Prior to
1995, the Company had insignificant amounts of working capital and cash. Since
1995, the Company's operations have improved significantly and the Company has
achieved increases in annual net income. In 1996, cash generated from
operations was largely used to fund increases in accounts receivable,
inventory and prepaid advertising expenses. In 1997 and the first quarter of
1998, cash generated from operations was not sufficient to fund increases in
accounts receivable and inventory, prepaid advertising expenses and the
purchase of property and equipment. The Company entered into two credit
agreements in 1997 that were used to finance working capital and capital
investment needs in 1997 and the first quarter of 1998.

The increase in inventory and receivables in 1996 of $1.9 million was offset
by an increase in accounts payable of $505,000. The increase in accounts
receivable, inventory and prepaid advertising expenses of $6.2 million in 1997
was offset by increased accounts payable of $3.6 million. The increase in
accounts receivable, inventory and prepaid advertising expenses of $1.3
million and $4.2 million in the three months ended March 31, 1997 and 1998,
respectively, was offset in 1997 by an increase in accounts payable of
$679,000 and was increased in 1998 by a decrease in accounts payable of
$377,000. Cash flow from (used in) operating activities was $(41,000) in 1995,
$935,000 in 1996 and $(1.2) million in 1997 and $104,000 and $(1.8) million in
the three months ended March 31, 1997 and 1998, respectively.

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Cash used in investing activities was for the purchase of property and
equipment. Purchases of property and equipment in 1995, 1996 and 1997 were,
$3,000, $51,000 and $1.1 million, respectively and $78,000 and $310,000 in the
three months ended March 31, 1997 and 1998, respectively. The higher level of
expenditures in 1997 reflects the Company's 1997 facility and personnel
expansion to support higher sales volume. The 1997 capital investments were
for computer hardware and software, office furniture and equipment, warehouse
leasehold improvements and packaging design plates and drums. The capital
investments in the first quarter of 1998 were for leasehold improvements to
complete its Santa Barbara County warehouse and office facilities, and for
additional furniture and fixtures and computer hardware and software as new
personnel were hired.

Cash provided by financing activities was $66,000, $201,000 and $1.3 million
for 1995, 1996 and 1997, respectively, and $0 and $2.2 million in the three
months ended March 31, 1997 and 1998, respectively. The primary source of
funds in all periods was borrowings by the Company. The 1995 and 1996
financing sources were from the issuance of convertible bonds. These bonds
were converted to common stock in the year they were sold. The 1997 sources
were from a line of credit and term loan (each described below) under which a
total of $1.4 million was borrowed, net of $159,000 of costs related to the
Company's initial public offering. The 1998 sources were from a line of credit
under which $2.3 million was borrowed, net of $174,000 of costs related to the
Company's initial public offering. In April and May 1998, 365,232 shares of
Common Stock were issued in connection with the exercise of stock options. The
aggregate proceeds to the Company from such exercises were not material. The
Company expects to need to continue borrowing through the closing of this
offering to fund increases in accounts receivable, inventory, prepaid
advertising expenses and to purchase property and equipment.

As of March 31, 1998, the Company had a $9.0 million revolving line of
credit, of which $4.4 million was available (based upon 75 percent of the
Company's eligible accounts receivable), and $3.4 million of which was
outstanding. The line of credit is secured by all of the Company's assets. At
March 31, 1998, the line of credit, which expires in April 2000, bore interest
at the bank's prime rate (8.5% at March 31, 1998) plus 3/4%. The Company also
has a $300,000 three year term loan of which $278,000 was outstanding at March
31, 1998. The term loan is secured by all of the Company's assets and bears
interest at the bank's prime rate plus 1.0%. The term loan is due in the
following installments: $82,000 in 1998, $99,000 in 1999, $109,000 in 2000 and
$10,000 in 2001.

To date, the Company has not had significant discussions about or evaluated
the potential acquisition of companies due largely to inadequate financial
resources. In the future, the Company may consider making an investment in or
acquiring companies or product lines that complement the Company's existing
product lines. The Company is not able to predict when a prospective
acquisition candidate might become available, the terms of the financing, or
when any transaction might be closed or the effect of any acquisition on the
Company's business, results of operation or financial condition. See "Risk
Factors--Possible Acquisitions."

The Company believes that following the consummation of the offering, the
Company will have adequate capital resources and liquidity to meet anticipated
cash needs for working capital and capital expenditures for at least the next
12 months.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income" (SFAS 130) and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 130 and SFAS 131 are
effective in 1998. The Company does not have any items of other comprehensive
income and, accordingly, SFAS 130 does not have any effect on the Company's
financial reporting. The adoption of SFAS 131 in the first quarter of 1998 did
not have a material effect on the Company's financial reporting.

EXPENSES ASSOCIATED WITH YEAR 2000 COMPLIANCE

The Company is currently implementing a new sales, inventory and accounting
system that the software vendor has represented to be Year 2000 compliant. The
Company does not anticipate any significant expenses associated with Year 2000
compliance problems. See "Risk Factors--Year 2000 Compliance."

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BUSINESS

COMPANY OVERVIEW

Balance Bar Company develops and markets branded food and beverage products
in convenient, good-tasting, balanced nutritional formulations. The Company's
current and planned product lines are targeted to a broad consumer base in the
healthy food and beverage market. The Company markets its products to consumers
for a wide variety of uses, including snacking, meal replacement, fitness,
weight management and diabetic nutrition. The Company sells its products in
natural foods, mass merchandise, club, grocery, convenience, health and
fitness, and drug stores. The Company's existing product lines, the Balance bar
and the 40-30-30 Balance powdered drink mix, are based on balanced proportions
of 40% carbohydrates, 30% protein and 30% dietary fat, a formulation designed
to sustain energy and satisfy hunger. The Company currently sells ten flavors
of Balance bars (in two sizes) and five flavors of powdered drinks (in
canisters and single serving envelopes).

The Balance bar has significantly penetrated the natural foods channel, and
approximately 69% of the Company's 1997 total sales were to this channel.
According to SPINS data from Spence Information Services, the Balance bar was
the number one selling brand of nutrition bar in the natural foods channel,
achieving a 31.0% share in 1997 and a 34.6% share in the January/February 1998
reporting period. In 1997 and the first quarter of 1998, the Company expanded
its strategic focus to the mass market and expanded its broker network and
distribution into mass merchandise, club, grocery, convenience, health and
fitness, and drug stores. The Company had the top two selling nutrition bar
flavors per point of distribution in grocery stores for the November/December
1997 reporting period and the top selling nutrition bar flavor per point of
distribution in grocery stores for the January/February 1998 reporting period.
In addition, the leading Balance bar flavor outsold the nearest competitor
flavor per point of distribution in grocery stores by 56.6% in December 1997
and by 40.0% in February 1998. According to ACNielsen Scan Track: SPINS Natural
Track, the Balance bar market share in the energy bars category of grocery
store natural products increased from 2% in the November/December 1996
reporting period to 16% in the November/December 1997 reporting period and to
17% in the January/February 1998 reporting period.

The Company's sales have grown from $1.3 million in 1995 to $10.5 million in
1996 and $39.6 million in 1997. Sales of the Company's Balance bar and 40-30-30
powdered drink mix represented approximately 92% and 8%, respectively, of 1997
sales, and approximately 90% and 10%, respectively, of sales in the three
months ended March 31, 1998.

CONSUMER TRENDS

Consumers have become increasingly health conscious over the last decade, as
reflected in the surge of activities aimed at maintaining and improving health,
including exercising, dieting, and quitting smoking. Consumers have also become
more aware of the nutritional content of the foods they eat. Company estimates
indicated that 54% of grocery shoppers "almost always read the nutrition label
before buying a product for the first time." Next to taste, nutrition is the
second most important reason a shopper selects food products, according to
Company estimates. In addition, Company estimates indicate that 79% of
Americans believe nutrition affects their health. The Company believes that
this consumer interest has resulted in significant changes in the food industry
and is the cause of the substantial growth of the healthy food and beverage
market. The Company also believes that as members of the Baby Boom generation
age, their increased interest in prolonging life and improving their quality of
life is resulting in growth in consumer knowledge of nutrition and interest in
healthy foods and beverages.

Despite this concern for health and nutrition, today's consumers find
themselves with less time for three nutritious meals a day. Company estimates
indicate that the number of people who skip a meal "very often" or "quite a
bit" increased from 21% in 1995 to 28% in 1997, and that 21% of Americans view
time as a major barrier to achieving a healthful eating style. The Company
believes that today's lifestyle demands have led to an increasing need for
convenient, nutritious snacks and meal replacements that can be consumed by
consumers at any time or place.

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INDUSTRY OVERVIEW

Because of their many uses, Balance products compete with a diverse group of
food products across a number of sizable markets, some of which overlap,
including natural foods, healthy foods, nutraceuticals and snacks in general.
According to Nutrition Business Journal, consumer sales of natural foods
through natural food stores, health chains and mass merchandise stores reached
$6.9 billion in 1996 and were projected to grow annually at a rate of 8% to
12% from 1997 to 2000. A recent market report by Packaged Facts, published by
Find/SVP, Inc. (New York, NY), projects retail sales of certain processed
healthy foods, defined to include granola and grain based snacks, fruit
snacks, and nutrition bars, to reach approximately $3.8 billion in 1998. The
snack and meal replacement segment of the nutraceutical market, which includes
products that contain health promoting ingredients or omit unhealthy
ingredients, totaled $49 billion in 1997. The Company believes that these
markets for natural and healthy foods will continue to grow as more health
conscious consumers seek nutritious snacks and meal replacements. In addition,
the Company believes that the traditional snack market represents a
substantial opportunity for penetration by healthy snacks. In 1996, consumers
spent approximately $60 billion on salted snacks, baked snacks, candy and
other specialty snacks, and approximately 5% of total dollars spent by
consumers in U.S. grocery stores was spent on snacks.

As consumers have become increasingly health conscious, new food and
beverage products have been introduced to satisfy the demand for nutritious
snacks and meal replacements. For example, reduced fat and salt versions of
existing products have been introduced, including low- or no-fat, lower sodium
and lower cholesterol cookies and crackers, potato chips and candy bars. New
types of granola and grain-based snacks, rice cakes, and nutrition bars have
also been introduced, as have new powdered drinks and ready-to-drink
beverages. These beverage products are typically formulated based on consumer
dietary or nutritional requirements such as weight management. The Company
believes that demand for healthy snack and meal replacement products will
continue to increase, and the Company and other companies will continue to
introduce new products to satisfy growing consumer demand.

Initially, healthy foods and beverages were sold primarily in natural food
stores and certain specialty retailers such as GNC. The Company believes that
the continued growth in consumer demand for convenient, healthy foods has
resulted in the introduction of these products, which include energy bars,
into mass merchandise, club, grocery, convenience and drug stores. Info
Scan(R) data indicates that dollar sales of nutrition bars by mass
merchandise, grocery and drug stores at the total U.S. level increased
approximately 252%, 47% and 50%, respectively, from 1996 to 1997. The Company
believes that consumer trends towards health and nutrition will continue to
drive the broad distribution of convenient, healthy snacks and meal
replacements.

BALANCE BAR ADVANTAGE

Balance Bar Company develops and markets branded food and beverage products
in convenient, good-tasting, balanced nutritional formulations that appeal to
a broad consumer base. The Company has targeted its products at the healthy
snack and meal replacement market and believes that by marketing its products
as "nutritious snacks that taste great," it is highlighting their benefits
over typical snacks and meal replacements. In addition, the Company has
targeted other markets consisting of consumers with specific dietary or
nutritional requirements, including the fitness, weight management and
diabetic markets. In order to make its products available wherever people
shop, the Company sells its products through multiple distribution channels,
including natural foods, mass merchandise, club, grocery, convenience, health
and fitness, and drug stores.

The Company has differentiated its brand from other meal replacement and
snack products by offering products based on balanced proportions of 40%
carbohydrates, 30% protein, and 30% dietary fat. This concept, which has been
promoted by recent articles and books, such as the best selling book The Zone,
is based on the theory that the rise in blood sugar after a 40-30-30 snack or
meal can be moderated by the presence of balanced proportions of dietary fat
and protein, resulting in sustained energy and hunger

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satisfaction. A 1997 Company consumer survey shows that, although consumers
that are familiar with the 40-30-30 concept are an important component of the
Company's current consumer base, the popularity of its products extends to a
much broader market.

The Balance bar has significantly penetrated the natural foods channel and
approximately 69% of the Company's 1997 sales were to that channel. According
to SPINS data from Spence Information Services, the Balance bar was the number
one selling brand of nutrition bar in the natural foods channel, achieving a
31.0% share in 1997 and a 34.6% share in the January/February 1998 reporting
period. In addition, the Balance bar accounted for five of the ten top selling
nutrition bar flavors in the natural foods channel in the November/December
1997 reporting period and six of the top ten flavors in the same channel
during the January/February 1998 reporting period.

The Company expects sales in 1998 outside of the natural foods channel to
increase as a percentage of the Company's total sales. Higher sales to mass
merchandise, club, grocery, convenience and drug stores are expected to
account for the increase. By December 31, 1997, the Company had one to four of
its ten Balance bar flavors in approximately 40% of mass merchandise stores,
25% of club stores (based on Company estimates), 13% of grocery stores, 10% of
convenience stores (represents penetration of honey peanut flavor only), and
9% of drug stores in the United States. The Company's goal is to continue to
expand nationwide distribution by increasing the number of Balance bar flavors
in each store and further penetrating each distribution channel. According to
ACNielsen Scan Track: SPINS Natural Track, the Balance bar market share in the
energy bars category of grocery store natural products increased from 2% in
November/December 1996 reporting period to 16% in the November/December 1997
reporting period and to 17% in the January/February 1998 reporting period.

GROWTH STRATEGY

Position Balance Products as Good Tasting, Nutritious Snacks and Meal
Replacements. The Company's products are already well known among natural
foods consumers for balanced nutrition, convenience, and good taste. To
further penetrate the much larger snack and meal replacement market, the
Company is positioning its products as the "nutritious snack that tastes
great," highlighting their differences from typical snacks and meal
replacements. This message is being communicated to a broad audience of health
conscious consumers of all ages through advertising, marketing and product
sampling.

Expand Consumer Base and Brand Awareness Through Increased Advertising and
Promotional Activities. The Company intends to further increase consumer
awareness of and demand for its products by increasing its advertising and
promotional activities in conjunction with the Company's further penetration
of new distribution channels. The Company anticipates that its 1998
advertising and marketing expenditures will significantly increase over 1997
expenditures, primarily due to the Company's increased emphasis on television
advertising. In addition, the Company believes that one of its most effective
marketing tools is product sampling combined with the dissemination of
educational information explaining the nutritional qualities of its products.
Accordingly, the Company intends to increase its sponsorship of sporting
events and tours, and its participation in musical events, festivals, health
fairs, and charitable events.

Expand Distribution. The Company's goal is to increase the number of Balance
bar flavors in each store and further penetrate each distribution channel. To
make its products available wherever people shop, the Company expects to also
expand into new channels of distribution, such as vending and food service.
Although the Company intends to continue to focus primarily on the domestic
market in the near term, it also intends to continue to test its products in
foreign markets by establishing relationships with leading overseas
distributors.

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Focus on In-store Promotion and Marketing. The Company, through its brokers
and internal sales force, works with each distributor and retail customer to
ensure that the Company's products are effectively promoted. The Company
employs periodic in-store promotions that can include informational materials
about its products, sale pricing, product sampling, store advertising and
special product displays to generate consumer interest in its products. The
Company also works to ensure that enough product is available on each
retailer's shelf and that the presentation is attractive to customers.

Continue to Promote the Nutritional Qualities of Balance Products. The
nutritional qualities of Balance products are important to significant
consumer segments including the fitness, weight management and diabetic
markets. The Company intends to continue to advertise in health and fitness
magazines, in American Diabetes Association publications and in various other
magazines with wider circulation to promote consumer interest within these
markets. The Company will continue to distribute educational materials that
promote interest in the Company's brand, its products and the 40-30-30
nutritional concept.

Introduce New Products and Product Line Extensions. The Company initially
focused on nutrition bars, followed by its introduction of powdered drink
mixes in 1997. The Company intends to introduce further extensions of its most
popular bar and drink products, such as its recently introduced new Balance
bar flavors Almond Butter Crunch, Chocolate Raspberry Fudge and Yogurt Honey
Peanut and its new Balance mini-bars. The Company also intends to introduce
related new products.

Acquire Complimentary Companies or Product Lines. To grow sales outside of
existing product lines and related products, the Company will consider
strategic acquisitions. The Company intends to focus on acquisitions of
product lines or companies with product lines that are marketed to the natural
foods or broader healthy food and beverage markets. The Company may also
consider possible acquisitions of or investments in manufacturers of healthy
foods and beverages.

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PRODUCTS

The Company's current products, each based on the 40-30-30 balanced
nutrition concept, are vitamin and mineral fortified and are made of high
quality ingredients and contain no artificial colors, flavors or
preservatives. The Company develops its nutritional bar and beverage flavors
in conjunction with its contract manufacturers. The Company from time to time
hires outside consultants and intends to hire in-house product development
personnel to develop future products.

BALANCE BAR COMPANY BRANDED PRODUCTS

[Enlarge/Download Table]

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ESTIMATED RETAIL
PRODUCT FLAVORS DESCRIPTION PRICE RANGE (1)
-------------------------------------------------------------------------------------------------------

BARS
Balance Bar Honey Peanut, 1.76 ounces; sold both $.99 to
Chocolate, Yogurt individually and in $1.99 per bar
Honey Peanut, 15 bar packs
Almond Brownie, Toasted
Crunch, Chocolate
Raspberry Fudge, Almond
Butter Crunch, Mocha,
Banana Coconut and Cranberry

Balance Mini-Bar Honey Peanut, Chocolate, Half the size of a $.59 to
and Almond Brownie Balance Bar; designed $1.19 per bar
as a snack or child's
serving; sold both
individually and in
15 bar packs

Club Store Display Honey Peanut and Chocolate 15 bars in a shrink- $12.99 for
Pack Balance Bars wrapped pack 15 bar pack

DRINKS
Canister of 40-30-30
Chocolate, Strawberry, 15 serving canisters of $10.95 to
Balance Powdered Vanilla, Banana Coconut powdered drink mix to $19.95 per canister
Drink Mix and Mocha be blended with milk or
water

Single Serving Chocolate, Strawberry, Single serving; $1.29 to
Envelope of 40-30 Vanilla and Banana Coconut sold in individual envelopes $1.69 per envelope,
-30 Balance Powdered and six pack box $5.79 to
Drink Mix $11.99 per
box

(1) The retail price varies depending on the nature of the retail outlet
selling the product.

In addition to its branded products, the Company sells full size bars under
a private label to one of its significant customers.

The recommended maximum shelf life of Balance bars generally is nine months,
although factors such as exposure to heat during transportation or storage can
cause a deterioration in the taste or quality of the Balance bars. To date,
the Company has not experienced any significant complaints with respect to
product quality or shelf life.

SALES AND DISTRIBUTION

The Company sells its products directly to certain large retail customers
and to distributors who then resell the products to retailers. The Company
uses commissioned brokers to provide sales support at customer headquarters
and at retail locations. As of March 31, 1998, the Company had 11 brokers in
the natural foods

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channel and 16 brokers to support its expansion into new distribution
channels. These 27 brokers have approximately 45 offices across the United
States.

As of March 31, 1998, the Company's internal sales force and sales support
staff consisted of 18 employees responsible for direct selling efforts to its
retail customers and for supervising and assisting its commissioned brokers
and distributors in sales activities. The Company plans to increase its sales
force and sales support staff to continue to support its strategy of expanding
distribution.

Natural Foods Channel. In 1995, the Company obtained its first major
customer, Tree of Life, a national natural foods distributor. According to
SPINS data, in the natural foods channel, the Balance bar was the number one
selling nutrition bar, achieving a 31.0% share in 1997 and a 34.6% market
share in the January/February 1998 reporting period. In addition, the Balance
bar accounted for five of the top ten selling nutrition bar flavors in the
natural food channel in 1997 and six of the top ten flavors in the same
channel in the January/February 1998 reporting period. In 1997, the Company
increased its sales to this channel by increasing the number of natural food
stores carrying its products, gaining more retail shelf space, and adding
additional flavors of its products.

The Company's primary direct natural foods customers are Trader Joe's, Tree
of Life, GNC and United Natural Foods. Trader Joe's accounted for
approximately 25% of the Company's sales in 1997 and was the only retail
customer that accounted for more than 10% of sales in 1997 and the first three
months of 1998. Sales to Trader Joe's in the first three months of 1998
accounted for approximately 21% of the Company's sales. In February 1998, the
Company entered into a two-year exclusive supply agreement with Trader Joe's.
The agreement guarantees product pricing and supply availability for the term
of the agreement. Whole Foods and Wild Oats, important natural foods retailers
of the Company's products, purchase the Company's products through
distributors. The Company's two largest natural foods distributors in 1997
were United Natural Foods and Tree of Life, which accounted for approximately
14% and 9%, respectively, of the Company's 1997 sales and approximately 13%
and 5%, respectively, of the Company's sales in the first quarter of 1998. See
"Risk Factors--Dependence on Significant Retail Customers and Distributors."

New Distribution Channels. In 1997 and 1998, as part of an aggressive
strategy to broaden its markets, the Company began entering new distribution
channels, including mass merchandise, club, grocery, convenience, health and
fitness, and drug stores. The Company's principal customers within these new
distribution channels include grocery stores (Fred Meyer, Albertson's, and
Kroger), mass merchandisers and club stores (Costco, Sam's Club, and Wal-Mart)
and convenience stores (Circle-K and 7-Eleven). Sales to Costco in the first
three months of 1998 accounted for approximately 16% of the Company's sales in
that period. See "Risk Factors--Trade and Consumer Acceptance in New
Distribution Channels."

According to ACNielsen ScanTrack: SPINS Natural Track, the Balance bar
market share in the energy bars category of grocery store natural products
increased from 2% in the November/December 1996 reporting period to 16% in the
November/December 1997 reporting period and 17% in the January/February 1998
reporting period. In addition, the Company had the top two selling nutrition
bar flavors per point of distribution in grocery stores for the
November/December 1997 reporting period and the top selling nutrition bar
flavor per point of distribution in grocery stores for the January/February
1998 reporting period. The leading Balance bar flavor outsold the nearest
competitor flavor per point of distribution in grocery stores by 56.6% in
December 1997 and by 40.0% in February 1998.

THE COMPANY'S TARGET CONSUMER

The Company targets people of all ages who seek a meal replacement for
breakfast, lunch, or dinner, a convenient, nutritious snack, an energy
enhancement before or after exercise, or a convenient means of helping to
manage their weight.

The following tables, based on Company surveys, demonstrate the broad usage
patterns for Balance bars.

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Balance Bar Product Usage (/1/)(/2/)

(Percentage of Consumers Polled)
LOGO
-----------------
(1) Based on responses to a 1997 Company survey of approximately 1,100 heads
of household who either sent in wrappers for a rebate or requested a
sample pack.

(2) Consumers could respond more than once to the survey question regarding
the time they eat Balance bars.

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MARKETING

The Company markets its products as "nutritious snacks that taste great."
Its marketing and advertising efforts are designed to increase consumer
awareness of and demand for its products. The Company's marketing strategy has
the following three main components.

Advertising. The Company intends to increase significantly its 1998
advertising expenditures to create greater awareness of the convenience,
taste, and nutritional attributes of its products. The Company plans to use a
combination of television, print, and radio advertising, with primary emphasis
on television to reach a larger number of target consumers. However, the
Company will continue to spend a significant portion of its advertising budget
on print advertising as print ads enable the Company to reach target audiences
in a cost-effective manner. In addition to advertising in magazines with wide
circulation, the Company also places advertisements in special interest
publications targeted to groups such as health food consumers, athletes and
diabetics. The Company intends to use radio advertising primarily to support
its event marketing. The Company has advertised on television programs such as
Baywatch, CNN Headline News, ESPN SportsCenter, and Entertainment Tonight, in
magazines such as Prevention, Readers' Digest, People, Sports Illustrated,
U.S. News & World Report and Glamour, and on radio shows such as The Howard
Stern Show. See "Risk Factors--Risks Associated with Advertising."

Promotions and Sponsorships. The Company believes that one of its most
effective marketing tools is product sampling combined with the on-site
dissemination of information explaining the nutritional attributes of its
products. The Company participates in numerous trade shows targeted at buyers
in the health and fitness, food, and sports markets, in addition to consumer
health fairs. The Company also purchases sponsorships and samples its products
at sporting events and tours, musical events, health conferences, festivals,
and charitable events. The Company has been a sponsor of golf and tennis
tournaments, including the Nuveen senior men's tennis tour, and will be the
presenting sponsor for the 1998 Los Angeles Open Tennis Tournament. It also
sponsors the Associated Volleyball Players tour. In addition, the Company
utilizes endorsements of its products from highly visible sports and
entertainment personalities and actively markets to their personal fitness
trainers and professional sports teams.

Customer and Consumer Service. The Company is committed to providing
superior service to its customers and consumers. Its sales and marketing team
continually gathers information and feedback from consumers and retailers to
enable the Company to better tailor its consumer support to meet changing
consumer needs. The Company provides access to nutritionists and consumer
service representatives through its toll free number to answer questions and
educate consumers on balanced nutrition, new products and developments. In
addition, the Company maintains an informational web site.

CONTRACT MANUFACTURERS AND QUALITY ASSURANCE

Contract Manufacturers. The Company does not own or operate any
manufacturing facilities, and sources its products through third-party
contract manufacturers. Outsourcing is designed to allow the Company to
enhance production flexibility and capacity, leverage working capital,
transfer risk, and focus its energy and resources on marketing and sales,
while substantially reducing capital expenditures and avoiding the costs of
managing a production work force. Because the Company has two third-party
contract manufacturers, one on each coast of North America, the Company can
deliver its products quickly with lower freight costs.

Bariatrix supplies the Company with Balance bars and 40-30-30 Balance
powdered drink mixes from a facility in Quebec, Canada. Bariatrix produces the
Company's products under formulations that the Company owns. Bariatrix may not
produce products for any other customers using these formulas. In addition,
Bariatrix is contractually prohibited from producing products based on the 40-
30-30 concept for any other customer, with limited exceptions for two existing
customers and Canadian medical centers. The Company's contract with Bariatrix
expires December 31, 2002, subject to automatic annual extensions during each
year the contract remains in effect. Most Balance bars produced by Bariatrix
are shipped to locations east of the Mississippi River while drinks are
distributed nationwide.

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Nellson supplies the Company with Balance bars from a facility in Irwindale,
California. Nellson uses formulations owned by the Company, subject to
reversion to Nellson at any time before January 1, 2001, if the Company fails
to meet certain minimum volume purchase requirements that are significantly
below current purchase levels. If the Company fails to meet the purchase
requirements, it has an option to buy out any remaining requirements to
maintain ownership of the formulations. A reversion of ownership of the
formulations would not change Nellson's obligations to produce 40-30-30 bars
exclusively for the Company subject to an exception for one small customer.
Nellson is contractually prohibited from producing nutritional food products
based on the 40-30-30 concept for any other customer through December 31,
2002. The contract with Nellson expires December 31, 2002 subject to automatic
annual extensions during each year the contract remains in effect. Most of the
Balance bars produced by Nellson are shipped to locations west of the
Mississippi River. See "Risk Factors--Intellectual Property Protection."

The Company's manufacturers supply the Company's products at a fixed price
per unit. The prices are subject to increase upon 75 days notice by Nellson
and 90 days notice by Bariatrix if raw material prices, labor rates or
exchange rates rise. The Company provides no raw materials, but provides all
packaging materials. Under each contract, the Company is indemnified against
product liability relating to the manufacture and shipment of the products and
has indemnified the manufacturer against product liability arising from the
labeling and packaging of the products and from the use of the formulas. Both
manufacturers are required to comply with all legal requirements applicable to
the production of food products. See "Risk Factors--Government Regulation" and
"--Product Liability; Other Potential Liabilities and Insurance."

The Company believes that its contract manufacturers have the capacity to
fulfill the Company's planned production needs for at least the next nine
months. In addition, the Company believes that these manufacturers are willing
to increase capacity to meet the Company's additional production needs. If the
Company's growth exceeds the production capacity of its contract
manufacturers, or if either of them was unable or unwilling to continue
production, the Company believes it could locate and qualify other contract
manufacturers to meet its production needs. However, a limited number of
contract manufacturers have the ability to produce a high volume of the
Company's products, and it could take a significant period of time to locate
and qualify such alternative production sources. See "Risk Factors--Dependence
on Third Party Manufacturers."

Quality Assurance. The Company's contract manufacturers produce and package
the Company's products in accordance with the Standard Operating Procedures
for Good Manufacturing Practice by the FDA. All raw materials are purchased
from approved suppliers and inspected by the contract manufacturer as they are
received into the production facilities. Raw materials are then labeled to
indicate their source of supply, lot number, and date of receipt, and samples
of the raw materials are kept for two years from the date received. The
ingredients are mixed into batches under the supervision of two quality
assurance contract manufacturer employees to verify adherence to the Company's
formulations and ensure taste consistency. The finished products are passed
through metal detectors, weighed, wrapped, and date coded. After each
production run, samples are analyzed to test the product for micro-impurities
and to ensure accurate labeling.

COMPETITION

Although the Company competes across a number of markets with a variety of
competitors, it competes primarily with other makers of nutritional bars and
beverages. The Company's principal competitors in the nutrition bar category
are PowerBar, ClifBar, Inc., and Met-Rx, none of which currently produces
products formulated on a 40-30-30 basis, as well as PR Nutrition and Prozone,
each of which sell products produced on a 40-30-30 basis. The Company believes
that it is differentiated from its nutrition bar competitors by the broad
consumer appeal of its products and by its commitment to brand building
through strategic, consumer-focused marketing.

The Company's drink products also compete with a wide variety of other
powdered and ready-to-drink beverages. The Company's principal competitors in
the nutritional drink market are Met-Rx, Slim Fast

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Nutritional Foods International (Slim Fast), Abbot Laboratories Ross Products
Division (Ensure), and Nestle U.S.A., Inc. (Nestle Sweet Success), none of
which currently produce products formulated on a 40-30-30 basis. The success
of another nutrition bar or beverage based on the 40-30-30 concept could
create significant additional competition in the Company's existing and target
markets.

The Company's products also compete with many other snacks and meal
substitutes, including salty snacks, candy, fruits, and fast food. For
instance, candy and snack manufacturers are placing greater emphasis on
marketing low calorie and low fat products as healthy snacks.

Competition in the diverse consumer markets in which the Company competes is
based on a wide variety of factors, including taste, perceived nutritional
benefits, convenience, quality, brand recognition, and price. Many of the
Company's competitors are large, multinational companies with well
established, branded products, and significantly greater financial,
distribution, and marketing resources and greater market share than the
Company, including large advertising and promotion budgets. These competitors
may also have a significantly greater ability to influence or control product
placement in retail stores. In each retail outlet, many products compete for
limited shelf space. The Company's continued success will depend in part upon
its ability to provide competitive promotional discounts, slotting allowances,
and point-of-purchase displays, as well as the quality of its packaging. See
"Risk Factors--Competition."

PROPRIETARY RIGHTS

The Company's primary intellectual property rights are its trademarks, trade
names, and formulas for the Balance bar and 40-30-30 powdered drink mix.

Trademarks and TradeNames. The names of the Company's current products are
"Balance, The Complete Nutritional Food" bar, and "40-30-30 Balance" powdered
drink mix. As of March 31, 1998, the Company held one federally registered
trademark "Balance, The Complete Nutritional Food" and had 18 trademark
applications pending at the United States Patent and Trademark Office. In
addition, the Company has two trademark registrations as well as pending
applications in certain foreign countries. The Company intends to vigorously
protect its trademarks against infringement through cease and desist letters
and, if necessary, litigation. Such litigation, even if the Company is
successful, could be costly and could significantly divert the time and
efforts of the Company's management.

The Company does not have any proprietary rights in either the "balance"
name or "40-30-30" name alone, although the Company has filed for various
trademarks using each of these words in combination with other words. There
can be no assurance that the Company will be able to obtain trademark rights
using "balance" or "40-30-30" for any new products or product lines it may
introduce.

The Company and its largest distributor, Tree of Life, have agreed to limit
their use of the term "balance," "balanced" and variations thereof. Under the
contract, both the Company and Tree of Life may continue to use the current
names for their respective products. However, the Company may not use the
trademark or tradename "balanced" in connection with any goods or services or
the term "balance" at the beginning of any name of a nutritional drink product
or certain processed foods and meals produced by Tree of Life. Tree of Life
may not use the trademark or tradename "balance" in connection with any goods
or services or the term "balanced" in connection with nutritional bar
products. These restrictions could adversely affect the Company's ability to
successfully expand into new product categories or strengthen its brand name.

Formulas. The Company, working with its contract manufacturers, developed a
proprietary formula for Balance bars and a proprietary formula for the 40-30-
30 Balance powdered drink mix. The Company owns the Nellson formula subject to
reversion to Nellson at any time before January 1, 2001, if the Company fails
to meet certain minimum volume purchase requirements that are significantly
below current production levels. The Company considers its formulas as
proprietary trade secrets. In its efforts to maintain the

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confidentiality and ownership of trade secrets, the Company requires its
manufacturers, employees, brokers and consultants to execute confidentiality
agreements. However, there can be no assurance that these agreements will
provide meaningful protection for the Company's trade secrets in the event of
an unauthorized use or disclosure of such information or that a third party
will not independently develop a similarly tasting product using a similar
formula. See "Risk Factors--Intellectual Property Protection."

MIS SYSTEMS

The Company is committed to using technology to enhance its efficiency,
productivity, and competitive position. The Company implemented an electronic
data interchange ("EDI") system for key customers in the first quarter of
1998. The EDI system will enable distributors and certain high volume
retailers who purchase directly from the Company to place purchase orders
electronically through a value added network. Additionally, the Company has
recently installed a fully integrated sales and accounting system. The Company
also recently installed and is currently implementing an inventory control
system. The Company expects its inventory, sales and accounting systems to be
integrated with its EDI system in the second quarter of 1998. See "Risk
Factors--Managing and Maintaining Growth."

EMPLOYEES

As of March 31, 1998, the Company had a total of 62 employees, including 13
who are temporary-to- hire staff. None of the Company's employees is covered
by a collective bargaining agreement, and the Company believes that its
relationship with its employees is good.

FACILITIES

The Company is headquartered in Santa Barbara County, California, where it
leases an aggregate of approximately 30,000 square feet of space in two
buildings. These leases expire on January 31, 2000 and January 31, 2001,
respectively. However, the Company may extend each lease to January 31, 2002.
The Company believes that its current space adequately meets its needs in the
near term and it does not expect difficulties in obtaining additional space on
reasonable terms as the need arises. The Company uses independent contract
warehousing services for the storage of its products pending shipment to
retailers or distributors.

LEGAL PROCEEDINGS

On April 8, 1998, the day the Company filed the initial registration
statement relating to this offering, PowerBar filed a complaint against the
Company and its Senior Vice President of Sales in the U.S. District Court for
the Northern District of California. The complaint alleges in general that the
Company engaged in false advertising, unfair competition, and, with its Senior
Vice President of Sales who previously worked for PowerBar, misappropriated
trade secrets. PowerBar also alleges that the sales executive tortiously
interfered with PowerBar's business relationships by inducing distributors,
brokers, athletes, and sponsors to terminate their business relationships with
PowerBar. The factual allegations against the Company's advertising are
similar to those already reviewed by NAD at PowerBar's request. See "Risk
Factors--Risks Associated with Advertising."

PowerBar seeks, among other things, injunctive relief prohibiting the
allegedly false advertising, corrective advertising in various print media,
compensatory damages in an unspecified amount, disgorgement of the Company's
profits, treble damages as to certain claims, and restitution of revenues
obtained from the sales of Balance bars. The Company intends to vigorously
contest PowerBar's claims. On April 30, 1998, the Company and the sales
executive answered the allegations in PowerBar's complaint. In addition, the
Company moved the court to dismiss PowerBar's claim for relief under
California's common law of unfair competition, on the ground that PowerBar had
failed as a matter of law to make out such a claim. However, the Company
cannot predict the ultimate outcome of this litigation, and no assurance can
be given that this lawsuit will not

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be determined adversely to the Company. The Company has general, director and
officer, and excess liability insurance, but because the lawsuit was recently
filed, the Company has not yet received confirmation from either of its
insurers regarding their defense or acceptance of the Company's insurance
claims, and no provision in the Company's financial statements has been made
for any loss that may result from this action. An outcome adverse to the
Company, costs associated with defending the lawsuit, payment of damages and
costs associated with any indemnification of its sales executive, the
significant diversion of management's time and resources to defend the
lawsuit, a substantial settlement or award of damages, to the extent in excess
of any insurance coverage, or negative publicity resulting from the lawsuit
could have a material adverse effect on the Company's business, results of
operations, and financial condition. See "Risk Factors--Risk of Adverse
Publicity" and "--Litigation by Competitor."

In October 1997, the Company received a letter, prompted by two of the
Company's competitors, from NAD, a self-regulatory program by the advertising
industry, questioning certain claims made in the Company's advertisements. The
Company has addressed such challenges by either providing support for its
claims or changing its advertisements. There can be no assurance that future
inquiries or changes in advertising would not have a material adverse effect
on the Company's business, results of operations, and financial condition. See
"Risk Factors--Government Regulation," "--Risks Associated with Advertising,"
and "--Government Regulation."

The Company does not manufacture any products, and is contractually
indemnified by its contract manufacturers for product liability arising from
the manufacture of its products. However, the Company faces the risk that it
will be the subject of lawsuits based on the use of its products and formulas,
the labeling and packaging of its products (for which it has indemnified its
contract manufacturers), and the risk that its contract manufacturers will not
maintain sufficient insurance or have the financial ability to pay their
contractual indemnification obligations.

The Company has inspection rights and quality assurance programs with its
contract manufacturers. With respect to product liability claims in the United
States, the Company maintains $1.0 million per occurrence and $2.0 million in
aggregate product liability insurance as well as $8.0 million of excess
umbrella liability insurance. In addition, the Company requires its contact
manufacturers to include the Company as a named insured on their product
liability policies. Nellson maintains $12.0 million of product liability
coverage and Bariatrix maintains $C 10.0 million ($7.1 million U.S.) of
product liability coverage. However, there can be no assurance that such
insurance will continue to be available or will continue to be maintained by
either manufacturer, or if available and maintained, will be adequate to cover
potential liabilities.

GOVERNMENT REGULATION
The manufacturing, packaging, labeling, advertising, distribution, and sale
of the Company's products are subject to regulation by various government
agencies, principally the FDA. The FDA regulates the Company's products
pursuant to the Federal Food, Drug, and Cosmetic Act ("FDCA") and the Fair
Packaging and Labeling Act ("FPLA") and regulations thereunder. The FDCA is
intended, among other things, to ensure that foods are wholesome, safe to eat,
and produced under sanitary conditions, and that food labeling is truthful and
not deceptive. The FPLA provides requirements for the contents and placement
of information required on consumer packages to ensure that labeling is useful
and informative. The Company's products are generally classified and regulated
as food under the FDCA and are, therefore, not subject to premarket approval
by the FDA. However, the Company's products are subject to the comprehensive
labeling and safety regulations of the FDA, the violation of which could
result in product seizure and condemnation, injunction of business activities,
or criminal or civil penalties. Furthermore, if the FDA determines, on the
basis of labeling, promotional claims, or marketing by the Company, that the
intended use of any of the Company's products is for the diagnosis, cure,
mitigation, treatment, or prevention of disease, it could regulate those
products as drugs and require, among other things, premarket approval for
safety and efficacy. The Company believes that it presently complies in all
material respects with the foregoing laws and regulations. However, there can
be no assurance that non-compliance, or the cost of future compliance, with
such laws or regulations will not have a material adverse effect on the
Company's business, results of operations or financial condition.

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In September 1996, pursuant to a complaint related to a product safety issue
concerning Balance bars, and at the FDA's request, the Company voluntarily
temporarily withheld product shipments. Upon completion of government
inspection of facilities of the Company and one of its contract manufacturers,
and sampling and testing of products, the product shipments were resumed.
However, there can be no assurance that the FDA will not again request that
the Company cease any product shipment or require product recalls due to any
future regulatory matter. Any withholding or recall of products could have a
material adverse effect on the Company's business, results of operations, and
financial condition. See "--Legal Proceedings."

The Company's advertising is subject to regulation by the FTC, pursuant to
the Federal Trade Commission Act ("FTCA") which prohibits unfair or deceptive
acts or practices including the dissemination of false or misleading
advertising. Violations of the FTCA may result in a cease and desist order,
injunction, or civil or criminal penalties. The FTC monitors advertising and
entertains inquiries and complaints from competing companies and consumers. It
also reviews referrals from industry self-regulatory organizations, including
the NAD. The NAD of the Council of Better Business Bureaus, Inc. administers a
voluntary self-regulatory, alternative dispute resolution process that is
supported by the advertising industry and serves the business community and
the public by fostering truthful and accurate advertising. Certain advertising
claims made by the Company have been challenged through the NAD in the past.
The Company has addressed such challenges by either providing support for its
claims or changing its advertisements. Although the Company does not believe
that such changes have adversely affected its marketing success, any future
NAD inquiries or FTC actions that result in modifications to the Company's
advertising or the imposition of fines or penalties could have a material
adverse effect on the Company's business, results of operations and financial
condition. See "Risk Factors--Risks Associated With Advertising."

The Company's activities are also regulated by various agencies of the
states, localities, and foreign countries in which the Company's products are
sold. In addition, the Company has been and will be required to re-formulate
its products to comply with foreign regulatory standards. The Company believes
that it presently complies in all material respects with the foregoing laws
and regulations. There can be no assurance, however, that future compliance
with such laws or regulations will not have a material adverse effect on the
Company's business, results of operations and financial condition.

The Company may be subject to additional laws or regulations administered by
the FDA or other federal, state, or foreign regulatory authorities, the repeal
of laws or regulations, or more stringent interpretations of current laws or
regulations, from time to time in the future. The Company cannot predict the
nature of such future laws, regulations, interpretations, or applications, nor
can it predict what affect additional government regulations or administrative
orders, when and if promulgated, would have on its business in the future.
Such laws could, however, require the reformulation of products, the recall,
withholding or discontinuance of products, the imposition of additional
recordkeeping requirements, the revision of labeling, advertising, or other
promotional materials, and changes in the level of scientific substantiation
needed to support claims. Any or all such government actions could have a
material adverse effect on the Company's business, results of operation and
financial condition.

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MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS, AND KEY EMPLOYEES

Executive officers, directors, and key employees of the Company and their
ages as of March 31, 1998 are as follows:

[Download Table]

NAME AGE POSITION
---- --- --------

Thomas R. David-
son(2)(3).............. 58 Chairman of the Board of Directors
James A. Wolfe(3)....... 56 President, Chief Executive Officer and Director
Richard G. Lamb......... 51 Executive Vice President, Secretary and Director
Thomas J. Flahie........ 40 Senior Vice President of Finance and Administration
Patrick J. Lee.......... 31 Senior Vice President of Sales
Kristina M. Eriksen..... 39 Vice President of Finance
Lara Jackle............. 28 Vice President of Marketing
Eileen E. Fox........... 32 Vice President of Operations
Mark Fox................ 45 Vice President of Event Marketing
Michael Sanchez......... 38 Vice President of Western Sales
Adelle M. Demko(1)(3)... 51 Director
Barry D. Goss(2)........ 58 Director
John Hale(2)............ 48 Director
Dennis Ryan McCar-
thy(1)(2).............. 47 Director
George F. Raymond(1)(3). 61 Director

--------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Corporate Development Committee.

Thomas R. Davidson co-founded the Company in February 1992 and has served as
Chairman since that time. He served as Chief Executive Officer from February
1992 until January 1994 and as Secretary from February 1992 to July 1997. He
co-founded (1968) and serves as Chairman of Datatel, Inc.; co-founded (1979)
and served as a Director of National Information Systems until its sale in
1994; co-founded (1980) and served as a Director of V-Mark; and co-founded and
served as Chairman of Envision Medical Corporation from 1991 until its sale in
1996.

James A. Wolfe joined the Board of Directors in May 1993. He has served as
Chief Executive Officer since December 1995 and as President since November
1997. From December 1995 to December 1996, he was a consultant to the Company.
From January 1985 to December 1995, he was a self-employed business consultant
with clients such as Cadbury Schweppes, Welch's, Quaker Oats and Celestial
Seasonings. Prior to that time, he was an executive with 7-Up Foods, Coca-Cola
USA and Welch's.

Richard G. Lamb co-founded the Company in February 1992 and has served as a
Director since that time, as Executive Vice President since November 1997, and
as Secretary since July 1997. He served as Executive Vice President and Chief
Operating Officer from February 1992 until January 1994, and as President from
January 1994 to November 1997. Prior to joining the Company, Mr. Lamb was the
co-founder and President of Windsurfing Hawaii, Inc., a sporting goods
manufacturing company and prior to that served as Vice President,
International Operations, for Windsurfing International, Inc., a sporting
goods manufacturing company.

Thomas J. Flahie joined the Company in February 1998 and has served as
Senior Vice President of Finance and Administration since that time. From
December 1978 to February 1998, he held various positions with Andersen
Worldwide, an international accounting and consulting firm. He was a partner
with Andersen Worldwide for the last seven years.

Patrick J. Lee joined the Company in January 1997 and has served as Senior
Vice President of Sales since that time. From October 1995 to December 1996,
he was the Western Division Manager of PowerBar, Inc.

424B4 41st Page of 73 TOC 1st Previous Next ↓Bottom Just 41st
(formerly Power Food, Inc.) where he directed sales and marketing activities
for the Western United States. From 1988 to 1994, he worked for Dial
Corporation where he served as District Sales Manager in 1994, Trade Marketing
Manager from 1993 to 1994 and as Key Account Executive from 1990 to 1993.

Kristina M. Eriksen joined the Company in January 1997 and has served as
Vice President of Finance since that time. She also served as Chief Financial
Officer from January 1997 to February 1998. From November 1991 until January
1997 she was the Chief Financial Officer and Corporate Controller for Envision
Medical Corporation, a medical device company. From 1983 to 1990, she worked
for General Motors/Electronic Data Systems.

Lara Jackle joined the Company in September 1997 and has served as Vice
President of Marketing since that time. From August 1994 until September 1997,
Ms. Jackle was a project manager with Reckitt & Colman, an U.K. consumer
products marketing company. From 1992 to 1994 Ms. Jackle was a student at
Cornell University where she earned her M.B.A.

Eileen E. Fox joined the Company in February 1996 and has served as Vice
President of Operations since April 1998. From June 1993 to December 1995, she
held a product development position with Wheeler Springs Resorts, Inc., a spa
resort company. From December 1990 to January 1992, Ms. Fox worked for
Blackburn & Company, a radio and television station property broker and from
June 1988 to July 1989 with Metro Advertising, an advertising agency. Mark Fox
is Eileen Fox's husband.

Mark Fox joined the Company in January 1997 and has served as Vice President
of Event Marketing since December 1997. From 1994 until January 1997, Mr. Fox
was owner and founder of Mark Edward Promotional Design, a promotional and
event marketing firm. From 1990 to 1992 Mr. Fox was in the residential real
estate business. Eileen Fox is Mark Fox's wife.

Michael Sanchez joined the Company in June 1992 and has served as Vice
President of Western Sales since January 1997. He also served as Vice
President of Sales from January 1994 to January 1997 and held several sales
executive positions from June 1992 to January 1994. From February 1989 to June
1992, he served as a store manager for Circuit City, an electronics appliance
retailer.

Adelle M. Demko joined the Board of Directors in April 1997. From 1994 to
the present, Ms. Demko has been a management consultant and board advisor to
various companies. In July 1992 she joined Earthshell Container Corporation
and served as its President and Chief Operating Officer. In September 1989 she
founded Demko Baer & Associates, a financial consulting and database firm, and
served as principal from 1989 to 1992. From 1986 to 1989 she was an investment
banker at Wedbush Morgan Securities and a Limited Partner of Wedbush Capital
Partners, an equity buyout fund. Prior to that she was a financial and
strategy consultant at Xerox Corporation and a corporate and business attorney
in New York City. Ms. Demko serves as a director of Planet Earth Science and
as a member of the Advisory Board of Beam Technologies.

Barry D. Goss joined the Board of Directors in April 1993. He has been the
President and Chief Executive Officer of Intelligent Solutions Inc. since
1995. From 1989 to September 1994 Mr. Goss was the Vice President and Chief
Information Officer at Applied Magnetics Corporation, a manufacturer of
magnetic recording heads for the computer industry.

John Hale joined the Board of Directors in April 1997. Since November 1997,
Mr. Hale has been Executive Vice President and Chief Operating Officer for
Doctors' Choice, LLC a subsidiary of Age Wave, LLC, a health and nutrition
solutions business targeted to the mature adult population. From May 1992 to
November 1997, he was Senior Vice President of Operations at Celestial
Seasonings, Inc., the leading specialty tea company in the United States.
Prior to that, he has held various executive positions at Frito Lay, Inc. from
June 1987 through May 1992 and The Quaker Oats Company from November 1973
through June 1987.

Dennis Ryan McCarthy joined the Board of Directors in 1993. From February
1993 to May 1994 he served as Vice President of Finance of the Company. From
1982 to the present, Mr. McCarthy has served as

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a consultant on financial, investment banking and valuation issues for various
companies. Prior to that, he was the Secretary-Treasurer of the Newhall Land
and Farming Company, a publicly held company.

George F. Raymond, a Certified Public Accountant, joined the Board of
Directors in April 1997. Mr. Raymond founded Automatic Business Centers, a
payroll processing service in 1972 and served as its President and Chairman
from 1972 until 1989. Since 1987, Mr. Raymond served as a director of BMC
Software, a publicly held computer software company. Mr. Raymond also serves
as a director of DocuCorp International, a publicly held data imaging software
company.

All directors hold office until the third annual meeting of stockholders
after they were elected and until their successors have been elected and
qualified. However, directors first elected to Class I will hold office until
the 1999 annual meeting of stockholders; directors first elected to Class II
will hold office until the 2000 annual meeting of stockholders; and directors
first elected to Class III will hold office until the 2001 annual meeting of
stockholders. The officers of the Company are appointed annually and serve at
the discretion of the Board of Directors.

BOARD OF DIRECTORS COMMITTEES

The Audit Committee was established in July 1996 by the Board of Directors
to make recommendations concerning the engagement of independent public
accountants, review the plans and results of the audit engagement with the
independent public accountants, approve professional services provided by the
independent public accountants, review the independence of the independent
public accountants, consider the range of audit and non-audit fees, and review
the adequacy of the Company's internal accounting controls. The Audit
Committee is currently comprised of Adelle Demko (Chairperson), George
Raymond, and Dennis McCarthy.

The Compensation Committee was established in May 1993 by the Board of
Directors to review and approve the compensation and benefits for the
Company's executive officers and administer the Company's stock incentive
plans, and the Company's management incentive plans, described below. The
Compensation Committee is currently comprised of John Hale (Chairperson),
Thomas Davidson, Barry Goss, and Dennis McCarthy.

The Corporate Development Committee was established in July 1997 by the
Board of Directors to create a strategic plan for the Company's corporate
growth and development, review financing alternatives, consider potential
acquisitions of companies, and make recommendations concerning the corporate
structure of the Company. The Corporate Development Committee is currently
comprised of Thomas Davidson (Chairperson), Adelle Demko, George Raymond, and
James Wolfe.

DIRECTOR COMPENSATION

The Company does not pay and does not expect to pay its directors who are
employees of the Company for their services as directors. For services
rendered between January 1, 1994 and October 1997, non-employee directors of
the Company received fully vested options to purchase 1,200 shares of Common
Stock per meeting and, from October 1997 through the consummation of the
offering, cash compensation of $1,500 per meeting. In addition, each non-
employee director who joined the Board in 1997 received an option to purchase
6,000 shares of Common Stock that vests in April 1998. Upon consummation of
the offering, the Company expects to pay its non-employee directors cash
compensation of $1,500 per meeting for all meetings in excess of the four
regular Board of Director meetings. The Company will also reimburse reasonable
out-of-pocket expenses. The Company also expects to make automatic, annual
stock option grants under the 1998 Plan. See "Management--Stock Options and
Stock Plans."

424B4 43rd Page of 73 TOC 1st Previous Next ↓Bottom Just 43rd
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the Compensation Committee was an officer or employee of the
Company during 1997. No member of the Compensation Committee serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of the Company's Board
of Directors or Compensation Committee.

EXECUTIVE COMPENSATION

The following table sets forth certain compensation awarded to, earned by,
or paid to the Company's Chief Executive Officer and to the Company's other
executive officers whose total cash compensation exceeded $100,000 during the
year ended December 31, 1997 (collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

[Enlarge/Download Table]

LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------- ---------------------
OTHER
NAME AND PRINCIPAL ANNUAL SECURITIES UNDERLYING
POSITION SALARY $ BONUS $(1) COMPENSATION $(2) OPTIONS (#)(3)
------------------ -------- ---------- ----------------- ---------------------

James A. Wolfe, Chief
Executive Officer and
President.............. $124,333 $49,733 $11,077 --
Richard G. Lamb, Execu-
tive Vice President.... 107,500 37,625 10,274 --
Patrick Lee, Senior Vice
President of Sales..... 91,750 27,525 9,550 --

-----------------
(1) Bonuses for 1997 were determined in accordance with the 1997 Management
Incentive Plan.

(2) Consists of $6,250 of auto allowance and Company match of employee 401(k)
plan contributions.

(3) See "--1993 and 1997 Stock Incentive Plans."

BONUS PROGRAMS

In January 1998, the Compensation Committee adopted the Company's 1998
Employee Incentive Program for all employees. Under the program, cash bonuses
will be awarded based upon individual and Company target sales and profit
goals set for 1998 ("1998 Goals"). For all sales personnel other than the
Senior Vice President of Sales, 1998 Goals include both regional and overall
Company targets. For all other employees, 1998 Goals include only overall
Company targets. To be eligible, the employee must be employed by July 1, 1998
and must also be an employee on December 31, 1998. The Company has set target
bonuses for each level of employee at a specified percentage of an eligible
employee's salary (the "Target Bonus"). Target Bonuses range from 5% to 40% of
an employee's salary, depending upon level of seniority. If 108% of 1998 Goals
are achieved, 100% of Target Bonuses will be paid. To the extent the Company
exceeds 108% of its 1998 Goals, each eligible employee will receive an
increasing percentage of their Target Bonus up to 200% of such bonus.

The Company's 1997 Employee Incentive Program was identical to the 1998
Employee Incentive Program except that (i) management and outside sales
managers received bonuses based upon overall Company target sales and profit
goals set by the Compensation Committee for 1997, (ii) if 100% of 1997 goals
were achieved, 33% of 1997 target bonuses would be paid, and (iii) for every
percentage point above the 1997 goals, eligible employees would receive an
increasing percentage of their 1997 target bonus up to 100% of such bonus.

401(K) PLAN

The Company adopted a retirement savings plan (the "401(k) Plan") in 1997
that permits participation by all employees over age 21 with at least 3 months
of service. Employees can elect to contribute up to 15%

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of total eligible compensation into the 401(k) Plan. Contributions were
limited to $9,500 in 1997. The 401(k) Plan provides that the Company may make
matching contributions up to 100% of the first 5% of elective contributions.

STOCK OPTIONS AND STOCK PLANS

No stock options were granted to the Named Executive Officers during the
year ended December 31, 1997.

The following table sets forth information with respect to the ownership and
value of stock options as of December 31, 1997 held by the Named Executive
Officers.

AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED DECEMBER 31, 1997
AND OPTION VALUES AS OF DECEMBER 31, 1997

[Enlarge/Download Table]

SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT DECEMBER
DECEMBER 31, 1997 31, 1997(1)
--------------------------------- ---------------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($)(1) EXERCISABLE (#) UNEXERCISABLE (#) EXERCISABLE ($) UNEXERCISABLE ($)
---- --------------- --------------- --------------- ----------------- --------------- -----------------

James A. Wolfe......... -- -- 694,644 199,998 $3,707,320 $1,066,656
Richard G. Lamb........ -- -- 647,430 199,998 3,457,960 1,066,656
Patrick Lee............ 3,900 $19,825 56,100 60,000 285,175 305,000

-------
(1) There was no public trading market for the Company's Common Stock at
December 31, 1997. These values were calculated based on the difference
between the $5.50 fair market value of the Common Stock, as determined by
the Company's Board of Directors, and the stock option exercise price.

1998 PERFORMANCE AWARD PLAN

In April 1998, the Company adopted the 1998 Performance Award Plan (the
"1998 Plan") to provide a means to attract, reward and retain talented and
experienced officers, non-employee directors, other key employees and certain
other eligible persons (collectively, "Eligible Persons") who may be granted
awards from time to time by the Company's Board of Directors or, if
authorized, the Compensation Committee (such administrators, the "Committee"),
or, for non-employee directors, under a formula provided in the 1998 Plan. The
maximum number of shares reserved for issuance is 1,800,000 subject to
adjustment for certain changes in the Company's capital structure and other
extraordinary events. Shares subject to awards that are not paid for or
exercised before they expire or are terminated are available for other grants
under the 1998 Plan to the extent permitted by law.

Awards under the 1998 Plan may be in the form of nonqualified stock options,
incentive stock options, stock appreciation rights ("SAR's"), limited SAR's,
restricted stock, performance shares, stock bonuses, or cash bonuses based on
performance. Awards may be granted singly or in combination with other awards.
Any cash bonuses and other performance awards under the 1998 Plan will depend
upon the extent to which performance goals set by the Board of Directors or
the Committee are met during the performance period. Awards under the 1998
Plan generally will be nontransferable by the holder of the award (a "Holder")
(other than by will or the laws of descent and distribution). During the
Holder's lifetime, rights under the 1998 Plan generally will be exercisable
only by the Holder, subject to such exceptions as may be authorized by the
Committee in accordance with the 1998 Plan. No incentive stock option may be
granted at a price that is less than the fair market value of the Common Stock
(110% of fair market value of the Common Stock for certain participants) on
the date of grant. Nonqualified stock options and other awards may be granted
at prices below the fair market value of the Common Stock on the date of
grant. Restricted stock awards can be issued for nominal or the minimum lawful
consideration. Typically, the participant may vote restricted stock, but any
dividend on restricted shares will be held in escrow subject to forfeiture
until the shares have vested. No more than 450,000 shares will be available
for restricted stock awards, subject to exceptions for restricted stock awards
based on past service, deferred compensation and performance awards.

The maximum number of shares subject to awards (either performance or
otherwise) that may be granted to an individual in the aggregate in any one
calendar year is 150,000. No non-employee may receive awards in respect

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of more than 24,000 shares in the aggregate in any one calendar year. With
respect to cash-based performance awards, no more than $500,000 per year per
performance cycle may be awarded to any one individual. No more than one
performance cycle may begin in any one year with respect to cash-based
performance awards.

Section 162(m) Performance-Based Awards. In addition to options and SARs
granted under other provisions of the Plan, performance-based awards payable
in cash or shares within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended ("Performance-Based Awards"), which depend on the
achievement of pre-established financial performance goals, may be granted
under the Plan. The specific performance goals will be set by a qualified
committee of the Board created for these purposes and the specific targets
will be set by the Committee when their attainment is substantially uncertain.
The permitted performance goals under the Plan may include any one or more of
the following: revenue growth, net earnings (before or after taxes or before
or after taxes, interest, depreciation, and/or amortization), cash flow,
return on equity, return on assets or return on net investment, or cost
containment or reduction. The applicable performance cycle may not be less
than one nor more than 10 years (5 years in respect of such awards payable
only in cash).

Administration. The 1998 Plan will be administered by the Board of Directors
or the Committee. The Committee will have broad authority to (i) designate
recipients of discretionary awards, (ii) determine or modify (subject to any
required consent) the terms and provisions of awards, including the price,
vesting provisions, terms of exercise and expiration dates, (iii) approve the
form of award agreements, (iv) determine specific objectives and performance
criteria with respect to performance awards, and (v) construe and interpret
the 1998 Plan. The Committee will have the discretion to accelerate and extend
the exercisability or term and establish the events of termination or
reversion of outstanding awards.

Change in Control. Upon a Change in Control Event, each option and SAR will
become immediately exercisable; restricted stock will immediately vest free of
restrictions; and the number of shares, cash or other property covered by each
performance share award will be issued to the Holder, unless the Committee
determines to the contrary. A "Change in Control Event" is defined generally
to include (i) certain changes in a majority of the membership of the Board of
Directors over a period of two years or less, (ii) the acquisition of more
than 50% of the outstanding voting securities of the Company by any person
other than the Company, any Company benefit plan, Thomas Davidson, James
Wolfe, or Richard Lamb, or one of their affiliates, successors, heirs,
relatives or certain donees, or certain other affiliates, or (iii) stockholder
approval of a transfer of substantially all of the Company's assets, the
dissolution or liquidation of the Company, or a merger, consolidation or
reorganization (other than with an affiliate) whereby stockholders immediately
prior to such event own less than 50% of the outstanding voting securities of
the surviving entity after such event. In addition, if any participant's
employment is terminated by the Company for any reason other than for cause
either in anticipation of and within three months before (and in anticipation
of), or within one year after, the Change in Control Event, then all awards
held by that participant will vest in full immediately before his or her
termination date, unless the Committee otherwise determines before the Change
in Control Event.

The Committee may also provide for alternative settlements (including cash
payments), the assumption or substitution of awards or other adjustments in
the Change in Control context or in the context of any other reorganization of
the Company.

Plan Amendment; Termination and Term. The Company's Board of Directors has
the authority to amend, suspend or discontinue the 1998 Plan at any time, but
no such action will affect any outstanding award in any manner materially
adverse to a participant without the consent of the participant. The 1998 Plan
may be amended by the Board of Directors without stockholder approval unless
such approval is required by applicable law.

The 1998 Plan will remain in existence as to all outstanding awards until
such awards are exercised or terminated. The maximum term of options, SAR's
and other rights to acquire Common Stock under the 1998 Plan is ten years
after the initial date of award, subject to provisions for further deferred
payment in certain circumstances. No award can be made after April 6, 2007.
Awards may remain exercisable for a period of

424B4 46th Page of 73 TOC 1st Previous Next ↓Bottom Just 46th
time determined by the Committee after termination of employment for certain
reasons, after which, to the extent not exercised, such awards terminate.

Automatic Grants to Non-Employee Directors. Under the 1998 Plan, each
director who is not an officer or employee (each a "Non-Employee Director")
and who is or thereafter becomes a director of the Company after this offering
will be automatically granted a nonqualified stock option to purchase 6,000
shares of Common Stock when the person takes office, at an exercise price
equal to the market price of the Common Stock at the close of trading on that
date (or, with respect to the Company's current directors, on the tenth
trading day after completion of the offering). In addition, on the day of the
annual stockholders meeting in each calendar year beginning in 1999 and
continuing for each subsequent year during the term of the 1998 Plan, each
then-continuing Non-Employee Director will be granted a nonqualified stock
option to purchase 6,000 shares of Common Stock at an exercise price equal to
the market price of the Common Stock at the close of trading on that date.
Non-Employee Directors may also be granted discretionary awards. All
automatically granted Non-Employee Director stock options will have a 10-year
term and will be immediately exercisable. If a Non-Employee Director's
services are terminated for any reason, any automatically granted stock
options held by such Non-Employee Director that are exercisable will remain
exercisable for twelve months after such termination of service or until the
expiration of the option term, whichever occurs first. Automatically-granted
options are subject to the same adjustment, change in control, and
acceleration provisions that apply to awards generally, except that any
changes or Board or Committee actions (1) will be effected through a
stockholder approved reorganization agreement or will be consistent with the
effect on Options held by other than executive officers and (2) will be
consistent in respect of the underlying shares with the effect on stockholders
generally. Any outstanding automatic option grant that is not exercised prior
to a Change in Control Event in which the Company is not to survive will
terminate, unless such option is assumed or replaced by the surviving
corporation.

Payment for Shares. The exercise price of options and other awards may be
paid in cash, broker exercise, promissory note, or (subject to certain
restrictions) shares of Common Stock. The Company may finance the exercise or
purchase and (subject to any applicable legal limits) offset shares to cover
the exercise or purchase price and withholding taxes.

Federal Tax Consequences. The current federal income tax consequences of
awards authorized under the 1998 Plan follow certain basic patterns.
Generally, awards under the 1998 Plan that are includable in income of the
recipient at the time of award or exercise (such as nonqualified stock
options, SARs, restricted stock and performance awards) are deductible by the
Company, and awards that are not required to be included in income of the
recipient at such times (such as incentive stock options) are not deductible
by the Company.

Non-Exclusive Plan. The Plan is not exclusive. The Board, under Delaware
law, may grant stock and performance incentives or other compensation, in
stock or cash, under other plans or authority.

1993 AND 1997 STOCK INCENTIVE PLANS AND OTHER STOCK OPTION GRANTS

The Company established the 1993 Stock Incentive Plan (the "1993 Plan") and
1997 Stock Incentive Plan (the "1997 Plan") to provide incentive to, and
encourage stock ownership by, selected employees, officers, directors, and
consultants. Awards consisted of grants of options to purchase shares of the
Company's authorized but unissued Common Stock. The maximum number of shares
reserved for issuance under the 1993 Plan and the 1997 Plan is 2,400,000 and
489,000, respectively, subject to adjustments for extraordinary events. As of
March 31, 1998, a total of 2,578,326 options were granted pursuant to both
plans, of which 359,532 options were exercised and 2,218,794 options remain
outstanding. In April 1998, 309,000 additional options were granted under the
1997 Plan.

The Board or a committee designated by the Board has the power to administer
and interpret both plans. Option awards under both plans generally may not be
transferred by an optionee other than by will or the laws of descent and
distribution. No incentive stock option may be granted at a price that is less
than fair market value.

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Options under both plans may be accelerated by the Board upon a change in
control of the Company, which is defined under both plans to mean (i) an
acquisition of 50% or more of the issued and outstanding capital stock of the
Company by a single entity or group of affiliated entities or (ii) a merger or
sale of the Company's assets that does not result in the stockholders of the
Company owning equity securities in the surviving entity representing 50% or
more of the voting power of such entity. In addition, in an employee's option
agreement, the Board may provide, and has in the past provided, that an option
award accelerate upon a change in control, which the Board may define
differently than as set forth above.

The Company does not intend to grant options under either the 1993 Plan or
1997 Plan in the future.

In addition to the 1993 Plan and the 1997 Plan, as of March 31, 1998, a
total of 473,508 options were granted outside such plans, of which 76,800
options were exercised and 396,708 options remain outstanding.

1998 SEVERANCE PLAN

The Company intends to establish the 1998 Severance Plan (the "Severance
Plan") in June 1998 to encourage the continued service and dedication of
officers of the Company. The Company's Chief Executive Officer, President,
Executive Vice President, Senior Vice Presidents, and other Vice Presidents
("Eligible Officers") will be eligible to participate in the Severance Plan.
Under the Severance Plan, the Company will agree to pay each participant a
lump sum cash payment that varies according to the participant's title if he
or she terminates his or her employment with the Company due to (i) a
relocation of the participant 50 miles or more from such participant's current
employment location, (ii) a Change in Control Event, (iii) a material
diminution in the participant's duties, responsibilities, or title, or (iv)
the elimination of the participant's position. Upon any of such events, a
participant will be able to terminate his or her employment and receive the
following portion of his or her then current annual base salary: (i) 100% for
the Chief Executive Officer, (ii) 75% for the President (if not also the Chief
Executive Officer), Executive Vice President, and Senior Vice Presidents, and
(iii) 50% for other Vice Presidents. See "1998 Performance Award Plan" for a
definition of a Change in Control Event.

424B4 48th Page of 73 TOC 1st Previous Next ↓Bottom Just 48th
CERTAIN TRANSACTIONS

On January 15, 1997, Thomas R. Davidson, co-founder and Chairman of the
Board of the Company, was issued 100,000 shares of Common Stock for
consideration of $150,000. The shares were issued in connection with the
conversion of convertible bonds purchased by Mr. Davidson in July 1995. In
addition, Mr. Davidson and one of his affiliates entered into a registration
rights agreement with the Company. See "Description of Capital Stock--
Registration Rights Agreement."

On December 5, 1995, the Company entered into a consulting agreement with
James Wolfe to serve as the Company's acting Chief Executive Officer. Mr.
Wolfe also has been a director of the Company since May 10, 1993. Pursuant to
his consulting agreement, Mr. Wolfe received approximately $116,000 in
consideration of his services to the Company in 1996. The consulting agreement
was terminated on December 31, 1996 when Mr. Wolfe became the Chief Executive
Officer of the Company.

During 1997 and the three months ended March 31, 1998, the Company paid
$43,551 and $13,166 respectively, to Adelle Demko, a director of the Company,
in connection with special consulting services related to this offering.

424B4 49th Page of 73 TOC 1st Previous Next ↓Bottom Just 49th
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information about the beneficial
ownership of the Company's Common Stock as of March 31, 1998, and as adjusted
to reflect the sale of the Common Stock offered hereby, by (i) each director
and each Named Executive Officer of the Company, (ii) all directors and
executive officers of the Company as a group, (iii) each person (or group of
affiliated persons) known by the Company to own beneficially more than five
percent of the Company's outstanding voting securities not otherwise listed;
and (iv) each Selling Stockholder not otherwise listed. The address of each
director and Named Executive Officer listed is in care of the Company, 1015
Mark Avenue, Carpinteria, California 93013.

DIRECTORS AND NAMED EXECUTIVE OFFICERS:

[Download Table]

SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO THE OFFERING THE OFFERING
----------------------- SHARES -----------------------
NUMBER(1) PERCENT(1)(2) OFFERED NUMBER(1) PERCENT(1)(2)
--------- ------------- ------- --------- -------------

Thomas R. Davidson(3)... 4,807,602 49.6% -- 4,807,602 44.9%
James A. Wolfe(4)....... 697,902 6.9 -- 697,902 6.3
Richard G. Lamb(5)...... 1,408,518 13.6 171,308 1,237,210 10.9
Patrick Lee(6).......... 60,000 * -- 60,000 *
Thomas J. Flahie........ -- -- --
Adelle M. Demko(7)...... 9,600 * -- 9,600 *
Barry D. Goss(8)........ 219,840 2.2 70,759 149,081 1.4
John Hale(9)............ 9,600 * -- 9,600 *
Dennis Ryan McCar-
thy(10)................ 94,176 * -- 94,176 *
George F. Raymond(11)... 9,600 * -- 9,600 *
All directors and execu-
tive officers as a
group (10 persons)..... 7,316,838 66.7 242,067 7,074,771 59.1

OTHER SELLING STOCKHOLDERS:

Tucker Anthony, Inc..... 153,396 1.6 109,493 43,903 *
Jennifer Fisher Barner.. 15,600 * 10,063 5,537 *
Brian Bayly............. 78,264 * 43,016 35,248 *
Susan Bayly............. 20,004 * 9,995 10,009 *
Susan Block............. 24,000 * 15,845 8,155 *
Donald L. Breidenbach,
Sr. ................... 78,264 * 42,827 35,437 *
Donald E. Breidenbach,
Jr.(12)................ 177,396 1.8 83,796 93,600 *
Gene & Joyce Daoust..... 374,664 3.9 10,467 364,197 3.4
Lana R. Danta........... 15,000 * 5,139 9,861 *
John D. Deardourff...... 268,266 2.8 85,654 182,612 1.7
John T. Douglas......... 78,264 * 8,565 69,699 *
John T. Douglas Trust... 78,264 * 8,565 69,699 *
Giles B. Gunn........... 130,440 1.3 10,706 119,734 1.1
Charles B. Gunn......... 86,088 * 10,706 75,382 *
John W. Heron........... 195,000 2.0 139,189 55,811 *
PZL Limited(13)......... 171,522 1.8 34,261 137,261 1.3
Graham Major............ 600 * 427 173 *
Jackie Mauro............ 6,522 * 4,655 1,867 *
R. Bruce McFadden(14)... 62,964 * 37,233 25,731 *
John E. Montgomery...... 78,264 * 32,120 46,144 *
John S. Nadolski........ 156,522 1.6 55,864 100,658 *
Trustees for Bernard
Nash................... 39,000 * 10,706 28,294 *

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[Download Table]

Nicole J. Nash.......... 19,500 * 7,066 12,434 *
Paul M. Nash............ 19,500 * 4,496 15,004 *
1995 Education Trust.... 156,528 1.6 111,728 44,800 *
Danny Robertson......... 60,000 * 42,827 17,173 *
Roy Family Trust........ 75,150 * 47,109 28,041 *
Michael Sanchez(15)..... 482,484 4.8 42,827 439,657 4.0
Michael B. Shor......... 52,200 * 34,261 17,939 *
Joseph R.
Skenderian(16)......... 56,232 * 9,301 46,931 *
Robert E. Warfield...... 182,610 1.9 42,827 139,783 1.3
John & Brenda Yeaton.... 300,000 3.1 42,827 257,173 2.4

--------
*Less than 1% of outstanding shares.

(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
issuable on conversion of Preferred Stock or exercise of stock options
within 60 days of March 31, 1998, are deemed beneficially owned and
outstanding for computing only the percentage of the person or the entity
holding such securities. Except as indicated by footnote, and subject to
community property laws where applicable, the persons and entities named
in the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them.

(2) Percentage of ownership is based on 9,683,802 shares of Common Stock
outstanding before the offering and 10,687,174 shares of Common Stock
outstanding after the offering.

(3) Includes 15,600 shares of Common Stock that are issuable upon exercise of
stock options. Includes 2,520,000 shares of Common Stock held by the
Davidson Family Limited Partnership. Mr. Davidson disclaims beneficial
ownership of 1,890,000 of these shares, reflecting the limited partner
interests held by his children in the limited partnership.

(4) Includes 381,600 shares of Common Stock that are issuable upon exercise
of stock options.

(5) Includes 647,430 shares of Common Stock that are issuable upon exercise
of stock options.

(6) Includes 56,100 shares of Common Stock that are issuable upon exercise of
stock options.

(7) Includes 9,600 shares of Common Stock that are issuable upon exercise of
stock options.

(8) Includes 115,488 shares of Common Stock that are issuable upon exercise
of stock options. Includes 39,132 shares of Common Stock held by the Goss
Joint Venture. Mr. Goss disclaims beneficial ownership of 26,658 of these
shares, reflecting the joint venture interests held by Mr. Goss' father
and two sisters. Of the shares offered, 27,932 are owned by the Goss
Joint Venture and 42,827 are owned by Mr. Goss.

(9) Includes 9,600 shares of Common Stock that are issuable upon exercise of
stock options.

(10) Includes 42,000 shares of Common Stock that are issuable upon exercise of
stock options.

(11) Includes 9,600 shares of Common Stock that are issuable upon exercise of
stock options.

(12) Includes 60,000 shares of Common Stock that are issuable upon exercise of
stock options.

(13) PZL Limited is owned by David and Patricia Lamb. David Lamb is Richard
Lamb's brother.

(14) Mr. McFadden was a director of the Company from May 1993 to February
1997.

(15) Includes 279,000 shares of Common Stock that are issuable upon exercise
of stock options. Mr. Sanchez is Vice President of Western Sales for the
Company.

(16) Includes 43,200 shares of Common Stock that are issuable upon exercise of
stock options. Mr. Skenderian was a director of the Company from January
1994 to October 1997.

424B4 51st Page of 73 TOC 1st Previous Next ↓Bottom Just 51st
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company currently consists of 24,000,000
shares of Common Stock, par value $0.01 per share and 12,000,000 shares of
Preferred Stock, par value $.01 per share. Immediately following the
completion of the offering, the Company estimates that approximately
10,687,174 shares of Common Stock will be issued and outstanding (assuming no
exercise of the Underwriters' over-allotment option and no exercise of options
after March 31, 1998). No shares of Preferred Stock will be issued and
outstanding. The Company anticipates that immediately prior to the
consummation of this offering there will be 55 holders of Common Stock. In May
1998, the Company effected the Stock Split.

The following description of the Company's capital stock is a summary of the
material terms of such stock.

COMMON STOCK

Upon the completion of this offering, the Common Stock will be publicly
traded on the Nasdaq National Market under the symbol "BBAR." The holders of
Common Stock are entitled to one vote for each share held of record on all
matters submitted to a vote of the stockholders. There are no cumulative
voting rights, the absence of which will, in effect, allow the holders of a
majority of the outstanding shares of Common Stock to elect all the directors
then standing for election. The absence of cumulative voting rights could have
the effect of delaying, deterring or preventing a change of control of the
Company. Subject to preferential rights of any outstanding Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends as may
be declared by the Board of Directors out of funds legally available therefor.
See "Dividend Policy." If the Company liquidates, dissolves, or winds up, the
holders of Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities and satisfaction of preferential rights of any
outstanding shares of Preferred Stock. The Common Stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the Common Stock. The outstanding shares
of Common Stock are, and the shares of Common Stock to be issued upon
completion of this offering will be, fully paid and non-assessable.

PREFERRED STOCK

As of March 31, 1998, 3,806,910 shares of the Company's Series A Preferred
Stock were outstanding. All holders of the Company's Series A Preferred Stock
have agreed to convert each share of the Series A Preferred Stock into one
share of Common Stock immediately prior to the consummation of this offering
(the "Preferred Stock Conversion"), resulting in the issuance of an aggregate
of 3,806,910 shares of Common Stock after giving effect to the Stock Split.
Unless otherwise indicated, all information in this Prospectus gives effect to
the Preferred Stock Conversion. The holders of Series A Preferred Stock
presently outstanding are entitled to one vote for each share held of record
on all matters submitted to a vote of the stockholders. Holders of Series A
Preferred Stock presently outstanding are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." Each share of Series A Preferred
Stock presently outstanding is convertible into one share of Common Stock. If
the Company liquidates, dissolves, or winds up, the holders of Series A
Preferred Stock are entitled to receive payment in cash of $0.38 per share
before any amount can be paid to holders of Common Stock.

Pursuant to the Company's Certificate of Incorporation, the Board of
Directors is authorized to issue Preferred Stock in one or more series and to
fix by resolution the rights, preferences, privileges, and restrictions
thereof, including voting rights, dividend rights, dividend rates, conversion
rights, terms of redemption, redemption prices, liquidation preferences, and
the number of shares constituting any series or the designation of such
series, without further vote or action by the stockholders. The issuance of
Preferred Stock could have the effect of delaying, deterring or preventing a
change in control of the Company without further action of the stockholders.
The issuance of Preferred Stock with voting and conversion rights could

424B4 52nd Page of 73 TOC 1st Previous Next ↓Bottom Just 52nd
adversely affect the voting power of the holders of Common Stock, including
the loss of voting control to others. See "Risk Factors--Possible Anti-
Takeover Effect of Certain Charter Provisions."

REGISTRATION RIGHTS AGREEMENT

Thomas R. Davidson, the Company's co-founder and Chairman of the Board, and
the Davidson Family Limited Partnership, an affiliate of Mr. Davidson
(together with Mr. Davidson, "Davidson") have entered into a Registration
Rights Agreement with the Company. Under the terms of the Registration Rights
Agreement, Davidson has the right, commencing six months after the completion
of this offering, to cause the Company to file registration statements with
respect to shares of Common Stock held by Davidson on two separate occasions.
If the Company proposes to register any of its securities under the Securities
Act, either for its own account or for the account of others, Davidson is
entitled, subject to certain limitations and exceptions, to notice of such
registration and is entitled to include shares of Common Stock therein. In
addition, at any time the Company becomes eligible to file registration
statements on Form S-3 under the Securities Act, Davidson may request that the
Company file a registration statement on Form S-3 with respect to shares of
Common Stock held by Davidson, provided that such registration statement
contains only the information required by Form S-3. All fees, costs, and
expenses of any such registration, including underwriting fees and
commissions, will be borne by Davidson in proportion to the number of shares
of Common Stock sold by Davidson in the registered offering.

POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS

The Company's Bylaws require that stockholders give advance notice to the
Company's Secretary of any directorship nominations or other business to be
brought by stockholders at any stockholders' meeting. The Certificate of
Incorporation requires the approval of 75% of the Company's voting stock to
amend certain provisions of the Certificate of Incorporation. The existence of
authorized but unissued and unreserved Common Stock and Preferred Stock may
enable the Board of Directors to issue shares to persons friendly to current
management which could render more difficult or discourage an attempt to
obtain control of the Company by means of a proxy contest, tender offer,
merger, or otherwise, and thereby protect the continuity of the Company's
management. These provisions may have the effect of precluding some
stockholders from bringing matters before the stockholders and of deterring
hostile takeovers or delaying changes in control or management of the Company.
See "Risk Factors--Possible Anti-Takeover Effect of Certain Charter
Provisions."

The Company's Board of Directors is divided into three classes of directors
serving staggered three-year terms. At least two annual meetings of
stockholders, instead of one, generally will be required to change the
majority of the Company's Board of Directors, so it is more difficult for the
stockholders of the Company to change the management of the Company than if
the Board of Directors were not classified. In addition, the presence of a
classified Board of Directors could make it more difficult for a third party
to acquire, or could discourage a third party from attempting to acquire,
control of the Company and, therefore, may limit the price that certain
investors might be willing to pay in the future for shares of Common Stock.
See "Management."

Under the Delaware General Corporation's Law, as amended from time to time
(the "DGCL") in the case of a corporation having a classified board and not
having a provision in its Certificate to the contrary (as is the case with the
Company), stockholders may remove a director only for cause.

CERTAIN PROVISIONS OF DELAWARE LAW

The Company is a Delaware corporation and, upon consummation of this
offering, will be subject to Section 203 of the DGCL. In general, Section 203
prevents an "interested stockholder" (defined generally as a person owning 15%
or more of a corporation's outstanding voting stock) from engaging in a
"business combination" (as defined therein) with a Delaware corporation for
three years following the date such person

424B4 53rd Page of 73 TOC 1st Previous Next ↓Bottom Just 53rd
became an interested stockholder unless (i) before such person became an
interested stockholder, the board of directors of the corporation approved the
transaction in which the interested stockholder became an interested
stockholder or approved the business combination, (ii) upon consummation of
the transaction that resulted in the interested stockholder becoming an
interested stockholder, the interested stockholder owns at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding shares owned by persons who are both officers and
directors of the corporation and shares held by certain employee stock
ownership plans) or (iii) on or following the transaction in which such person
became an interested stockholder, the business combination is approved by the
board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of at least two-thirds of
the outstanding voting stock of the corporation not owned by the interested
stockholder.

LIMITATION OF LIABILITY AND INDEMNIFICATION AGREEMENTS

The Company's Certificate of Incorporation provides that to the fullest
extent permitted by the DGCL, a director of the Company will not be liable to
the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director. Under the DGCL, liability of a director cannot be limited
(i) for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, or
(iv) for any transaction from which the director derives an improper personal
benefit. The effect of the provisions of the Company's Certificate of
Incorporation is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of the fiduciary duty of care
as a director (including breaches resulting from negligent or grossly
negligent behavior), except in the situations described in clauses (i) through
(iv) above. This provision does not limit or eliminate the rights of the
Company or any stockholder to seek nonmonetary relief such as an injunction or
rescission if a director breaches his or her duty of care. In addition, the
Company's Certificate of Incorporation and Bylaws provide that the Company
will indemnify its directors, officers, employees, and agents against losses
incurred by any such person by reason of the fact that such person was acting
in such capacity.

The Company has entered into contracts with each of the directors and
executive officers of the Company under which the Company must indemnify them
from claims, liabilities, damages, expenses, losses, costs, penalties or
amounts paid in settlement incurred by them in or arising out of their work
for or on behalf of the Company, to the maximum extent provided by applicable
law. In addition, such parties are entitled to an advance of expenses in such
matters, to the maximum extent authorized or permitted by law.

CERTAIN ANTI-TAKEOVER EFFECTS

The provisions of the Certificate of Incorporation and the Bylaws of the
Company summarized above could be deemed to have anti-takeover effects and
could delay, defer, or prevent a tender offer or takeover attempt that a
stockholder might consider to be in such stockholder's best interest,
including attempts that might result in a premium over the market price for
the shares held by stockholders. See "Risk Factors--Possible Anti-Takeover
Effect of Certain Charter Provisions."

TRANSFER AGENT OR REGISTRAR

The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.

LISTING

Before this offering, there has not been a public trading market for the
Common Stock. The Common Stock has been approved for quotation on the NASDAQ
National Market under the symbol "BBAR."

424B4 54th Page of 73 TOC 1st Previous Next ↓Bottom Just 54th
SHARES ELIGIBLE FOR FUTURE SALE

SALES OF RESTRICTED SECURITIES

Upon the consummation of this offering, the Company will have outstanding
11,051,956 shares of Common Stock, assuming no exercise of options after
April 30, 1998. All of the 2,400,000 shares offered hereby may be resold
immediately in the public market. Beginning 180 days after the date of this
Prospectus, upon expiration of lock-up agreements between the representatives
of the Underwriters and officers, directors and certain stockholders of the
Company, approximately 2,248,464 additional shares will be eligible for sale
without restriction under Rule 144(k) under the Securities Act of 1933, as
amended (the "Securities Act") and 5,695,966 additional shares will be
eligible for sale subject to compliance with the restrictions of Rule 144. Any
early release of the lock-up agreement by the Underwriters, which, if granted,
could permit sales of a substantial number of shares and could adversely
affect the trading price of the Company's shares, may not be accompanied by an
advance public announcement by the Company. See "Risk Factors--Shares Eligible
for Future Sale."

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted shares for
at least one year, will be entitled to sell in any three-month period a number
of shares that does not exceed the greater of (i) one percent of the number of
shares of Common Stock then outstanding (approximately 110,520 shares
immediately after the offering) or (ii) the average weekly trading volume of
the Company's Common Stock as reported through the Nasdaq National Market
during the four calendar weeks immediately preceding the filing of a Form 144
for such sale with the Securities and Exchange Commission (the "Commission").
Sales under Rule 144 are also subject to certain requirements relating to
manner of sale, notice, and availability of current public information about
the Company. A person (or persons whose shares are aggregated) who is not
deemed to have been an affiliate of the Company at any time during the 90 days
immediately preceding the sale and who has beneficially owned restricted
shares for at least two years is entitled to sell such shares under Rule
144(k) without regard to the requirements described above.

OPTIONS

In general, Rule 701 permits resales of shares issued pursuant to certain
compensatory benefit plans and contracts commencing 90 days after the issuer
becomes subject to the reporting requirements of the Securities Exchange Act
of 1934, as amended, in reliance upon Rule 144(k). In addition, the Company
intends to file a registration statement on Form S-8 under the Securities Act
within 30 days after the date of this Prospectus to register 3,888,000 shares
of Common Stock reserved for issuance under the Company's 1993 Plan, 1997
Plan, and 1998 Plan. As of April 30, 1998, options to purchase 1,892,412
shares were outstanding under the 1993 Plan and 1997 Plan, and options to
purchase 358,308 shares were outstanding outside of both plans. No options
have been granted under the 1998 Plan. Of the shares issuable upon exercise of
these options, 53,676 are issuable to non-affiliates. Upon expiration of the
180-day lock-up period and subject to vesting and exercisability restrictions,
all shares issued upon exercise of these options may be resold in the public
market without restriction under either Rule 701 or the registration statement
on Form S-8, subject to certain restrictions for affiliates.

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UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Hambrecht & Quist LLC
and Adams, Harkness & Hill, Inc. have severally agreed to purchase from the
Company and the Selling Stockholders the following respective numbers of
shares of Common Stock:

[Download Table]

NUMBER OF
NAME SHARES
---- ---------

Hambrecht & Quist LLC............................................ 1,080,000
Adams, Harkness & Hill, Inc...................................... 720,000
BT Alex. Brown Incorporated...................................... 80,000
Donaldson, Lufkin & Jenrette Securities Corporation.............. 80,000
NationsBanc Montgomery Securities, Inc........................... 80,000
Charles Schwab & Co., Inc........................................ 80,000
First Southwest Company.......................................... 40,000
Hanifen, Imhoff Inc.............................................. 40,000
Piper Jaffray Inc................................................ 40,000
Raymond James & Associates Inc................................... 40,000
Sutro & Company Inc.............................................. 40,000
Wedbush Morgan Securities........................................ 40,000
WIT Capital Corporation.......................................... 40,000
---------
Total............................................................ 2,400,000
=========

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in the Company's business and the receipt of certain
certificates, opinions and letters from the Company, its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if
any of such shares are purchased.

The Underwriters propose to offer the shares of Common Stock directly to the
public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $0.40 per share. The Underwriters may allow, and such dealers may
re-allow, a concession not in excess of $0.10 per share to certain other
dealers. After the offering, the offering price and other selling terms can be
changed by the Representatives. The Representatives have informed the Company
that the Underwriters do not intend to confirm discretionary sales in excess
of five percent of the shares of Common Stock hereby.

The Selling Stockholders have granted to the Underwriters an option
exercisable no later than 30 days after the date of this Prospectus, to
purchase up to 360,000 additional shares of Common Stock at the offering
price, less the underwriting discount set forth on the cover page of this
Prospectus. To the extent the Underwriters exercise this option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage thereof which the number of shares of Common Stock to be purchased
by it shown in the above table bears to the total number of shares of Common
Stock offered hereby. The Company will be obligated, pursuant to the option,
to sell such shares to the Underwriters to the extent the option is exercised.
The Underwriters may exercise such option only to cover over-allotments made
in connection with the sale of shares of Common Stock offered hereby.

The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the
right to reject an order for the purchase of shares in whole or in part.

424B4 56th Page of 73 TOC 1st Previous Next ↓Bottom Just 56th
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the Underwriters may be required
to make in respect thereof.

The officers and directors and substantially all of the other stockholders
of the Company, who will beneficially own in the aggregate 8,242,498 shares of
Common Stock after the offering, have agreed, subject to certain exceptions,
that they will not, without the prior written consent of Hambrecht & Quist
LLC, offer, sell or otherwise dispose of any shares of Common Stock, options
or warrants to acquire shares of Common Stock or securities exchangeable for
or convertible into shares of Common Stock owned by them during the 180-day
period following the date of this Prospectus. The Company has agreed that it
will not, without the prior written consent of Hambrecht & Quist LLC, offer,
sell or otherwise dispose of any shares of Common Stock, options or warrants
to acquire shares of Common Stock or securities exchangeable for or
convertible into shares of Common Stock during the 180-day period following
the date of this Prospectus, except that the Company may issue shares upon the
exercise of options granted prior to the date hereof, and may grant additional
options under its stock incentive plans, provided that, without the prior
written consent of Hambrecht & Quist LLC, such additional options shall not be
exercisable during such period.

The Underwriters have reserved for sale, at the initial public offering
price, shares of Common Stock for certain employees, directors, vendors, and
affiliates of the Company who have expressed an interest in purchasing shares
of Common Stock. These employees, directors, and other persons are expected to
purchase, in the aggregate, not more than 5.9% of the Common Stock offered in
the offering. The number of shares available for sale to the general public in
the offering will be reduced to the extent these persons purchase the reserved
shares. Any reserved shares not so purchased will be offered to the general
public on the same basis as the other shares offered hereby.

Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock was determined
by negotiations between the Company, the Selling Stockholders, and the
Representatives. Among the factors considered in determining the initial
public offering price were prevailing market and economic conditions, revenues
and earnings of the Company, market valuations of other companies engaged in
activities similar to the Company, estimates of the business potential and
prospects of the Company, the present state of the Company's business
operations, the Company's management, and other factors deemed relevant.

Certain persons participating in this offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the
open market, including by entering stabilizing bids, effecting syndicate
covering transactions or imposing penalty bids. A stabilizing bid means the
placing of any bid or the effecting of any purchase, for the purpose of
pegging, fixing or maintaining the price of the Common Stock. A syndicate
covering transaction means the placing of any bid on behalf of the
underwriting syndicate or the effecting of any purchase to reduce a short
position created in connection with the offering. A penalty bid means an
arrangement that permits the Underwriters to reclaim a selling concession from
a syndicate member in connection with the offering when shares of Common Stock
sold by the syndicate member are purchased in syndicate covering transactions.
Such transactions may be effected on the Nasdaq National Market, in the over-
the-counter market, or otherwise. Such stabilizing, if commenced, may be
discontinued at any time.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by O'Melveny & Myers LLP, Los Angeles, California. Certain legal
matters in connection with the offering will be passed upon for the
Underwriters by Brobeck, Phleger & Harrison LLP, Palo Alto, California.

424B4 57th Page of 73 TOC 1st Previous Next ↓Bottom Just 57th
EXPERTS

The audited financial statements and schedule included in this Prospectus
and elsewhere in the Registration Statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports
with respect thereto, and are included herein in reliance upon the authority
of said firm as experts in giving said reports.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits to it. Certain items are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits filed as a
part of it. Statements contained in this Prospectus as to the contents of any
contract or any other document referred to are not necessarily complete and,
in each instance, if such contract or document is filed as an exhibit to the
Registration Statement, reference is made to the copy of such contract or
document filed as an exhibit, each such statement being qualified in all
respects by such reference to such exhibit. The Registration Statement,
including the exhibits, as well as the reports and other information filed by
the Company with the Commission, can be inspected without charge at the public
reference facilities maintained by the Commission in Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, 13th Floor, New York, NY 10048, and
copies of all or any part thereof can be obtained from such office after
payment of fees prescribed by the Commission. The Commission maintains a Web
site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. In addition, reports and other information
concerning the Company can be inspected at the offices of Nasdaq.

424B4 58th Page of 73 TOC 1st Previous Next ↓Bottom Just 58th
BALANCE BAR COMPANY

INDEX TO FINANCIAL STATEMENTS

[Download Table]

PAGE
----

Report of Independent Public Accountants.................................. F-2
Balance Sheets as of December 31, 1996 and 1997 and March 31, 1998........ F-3
Statements of Operations for the years ended December 31, 1995, 1996 and
1997 and the three months ended March 31, 1997 and 1998.................. F-4
Statements of Shareholders' Equity for the years ended December 31, 1995,
1996 and 1997 and the three months ended March 31, 1997 and 1998......... F-5
Statements of Cash Flows for the years ended December 31, 1995, 1996 and
1997 and the three months ended March 31, 1997 and 1998.................. F-6
Notes to Financial Statements............................................. F-7

F-1

424B4 59th Page of 73 TOC 1st Previous Next ↓Bottom Just 59th
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Balance Bar Company:

We have audited the accompanying balance sheets of Balance Bar Company (a
Delaware corporation) as of December 31, 1996 and 1997, and the related
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Balance Bar Company, as of
December 31, 1996 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Los Angeles, California
May 15, 1998

F-2

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BALANCE BAR COMPANY

BALANCE SHEETS
(AMOUNTS IN 000'S, EXCEPT PAR VALUE)

[Download Table]

DECEMBER 31,
---------------
MARCH 31,
1996 1997 1998
------ ------- -----------
ASSETS
------ (UNAUDITED)

CURRENT ASSETS:
Cash.................................................. $1,119 $ 89 $ 89
Accounts receivable, net of allowance for doubtful
accounts of $22 in 1996 and $46 in 1997 and 1998..... 1,435 3,444 5,777
Income taxes receivable............................... -- 374 --
Inventories........................................... 583 3,806 5,301
Prepaids and other.................................... 23 1,381 1,542
Deferred taxes........................................ 139 344 344
------ ------- -------
Total current assets.............................. 3,299 9,438 13,053
------ ------- -------
PROPERTY AND EQUIPMENT, net............................. 56 1,011 1,172
OTHER ASSETS............................................ 19 347 469
------ ------- -------
$3,374 $10,796 $14,694
====== ======= =======

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------

CURRENT LIABILITIES:
Current portion of long-term debt..................... $ -- $ 85 $ 88
Short-term borrowings................................. -- 1,100 3,400
Accounts payable...................................... 606 4,201 3,824
Accrued commissions................................... 97 121 417
Other accrued expenses................................ 146 957 736
Income taxes payable.................................. 363 -- 466
------ ------- -------
Total current liabilities......................... 1,212 6,464 8,931
------ ------- -------
LONG-TERM DEBT, net of current portion.................. -- 228 202
------ ------- -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value
Authorized--24,000 shares
Issued and outstanding--9,268 shares in 1996, 9,345
shares in 1997 and 9,684 in 1998................... 93 93 97
Additional paid-in capital............................ 2,142 2,424 2,593
Retained earnings (deficit)........................... (73) 1,587 2,871
------ ------- -------
2,162 4,104 5,561
------ ------- -------
$3,374 $10,796 $14,694
====== ======= =======

The accompanying notes are an integral part of these balance sheets.

F-3

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BALANCE BAR COMPANY

STATEMENTS OF OPERATIONS
(AMOUNTS IN 000'S, EXCEPT PER SHARE DATA)

[Download Table]

THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------- -----------------
1995 1996 1997 1997 1998
-------- -------- -------- ------- --------
(UNAUDITED)

SALES........................... $ 1,262 $ 10,544 $ 39,634 $ 6,136 $ 17,457
COST OF SALES................... 593 5,272 19,801 2,970 9,014
------- -------- -------- ------- --------
Gross profit................ 669 5,272 19,833 3,166 8,443
------- -------- -------- ------- --------
EXPENSES:
Advertising................... 157 1,083 7,481 849 1,630
Selling and marketing......... 355 1,536 7,204 1,130 3,522
General and administrative.... 237 797 2,299 417 1,057
Interest (income) expense..... 4 16 (27) (5) 58
------- -------- -------- ------- --------
Total expenses.............. 753 3,432 16,957 2,391 6,267
------- -------- -------- ------- --------
Income (loss) before income
taxes...................... (84) 1,840 2,876 775 2,176
INCOME TAXES.................... 1 225 1,216 328 892
------- -------- -------- ------- --------
Net income (loss)........... $ (85) $ 1,615 $ 1,660 $ 447 $ 1,284
======= ======== ======== ======= ========
EARNINGS (LOSS) PER SHARE:
Basic....................... $ (0.01) $ 0.19 $ 0.18 $ 0.05 $ 0.13
======= ======== ======== ======= ========
Diluted..................... $ (0.01) $ 0.17 $ 0.15 $ 0.04 $ 0.11
======= ======== ======== ======= ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
Basic....................... 7,800 8,410 9,302 9,268 9,599
======= ======== ======== ======= ========
Diluted..................... 7,800 9,343 11,043 11,434 11,683
======= ======== ======== ======= ========

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

F-4

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BALANCE BAR COMPANY

STATEMENTS OF SHAREHOLDERS' EQUITY
(AMOUNTS IN 000'S)

[Download Table]

COMMON STOCK ADDITIONAL RETAINED
------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
------ ------ ---------- --------- ------

BALANCE, December 31, 1994.......... 7,713 $77 $1,542 $(1,603) $ 16
Exercise of stock options......... 24 -- -- -- --
Issuance of common stock as
compensation for services........ 90 1 -- -- 1
Conversion of convertible bonds... 426 5 66 -- 71
Net loss.......................... -- -- -- (85) (85)
----- --- ------ ------- ------
BALANCE, December 31, 1995.......... 8,253 83 1,608 (1,688) 3
Exercise of stock options......... 15 -- -- -- --
Issuance of common stock as
compensation for services........ 196 2 65 -- 67
Conversion of convertible bonds... 804 8 193 -- 201
Compensation expense in connection
with issuance of stock options... -- -- 276 -- 276
Net income........................ -- -- -- 1,615 1,615
----- --- ------ ------- ------
BALANCE, December 31, 1996.......... 9,268 93 2,142 (73) 2,162
Exercise of stock options......... 58 -- 13 -- 13
Issuance of common stock as
compensation for services........ 19 -- 60 -- 60
Compensation expense in connection
with issuance of stock options... -- -- 209 -- 209
Net income........................ -- -- -- 1,660 1,660
----- --- ------ ------- ------
BALANCE, December 31, 1997.......... 9,345 93 2,424 1,587 4,104
----- --- ------ ------- ------
Exercise of stock options,
including tax benefit............ 339 4 101 -- 105
Compensation expense in connection
with issuance of stock options... -- -- 68 -- 68
Net income........................ -- -- -- 1,284 1,284
----- --- ------ ------- ------
BALANCE, March 31, 1998 (unaudited). 9,684 $97 $2,593 $ 2,871 $5,561
===== === ====== ======= ======

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

F-5

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BALANCE BAR COMPANY

STATEMENTS OF CASH FLOWS
(AMOUNTS IN 000'S)

[Download Table]

THREE MONTHS
YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
-------------------- ---------------
1995 1996 1997 1997 1998
---- ------ ------ ------ -------
(UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................... $(85) $1,615 $1,660 $ 447 $ 1,284
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization...... 12 17 175 9 149
Compensation expense in connection
with issuance of common stock and
stock options..................... 1 343 269 38 68
Other.............................. -- 11 -- -- --
Changes in operating assets and
liabilities:
Accounts receivable............... (24) (1,385) (2,009) (677) (2,333)
Income tax receivable............. -- -- (374) -- 374
Inventories....................... (24) (558) (3,223) (451) (1,495)
Prepaids and other................ 5 (17) (1,371) (149) (161)
Deferred taxes.................... -- (139) (205) -- --
Accounts payable.................. 42 505 3,595 679 (377)
Accrued expenses.................. 32 180 679 210 127
Income taxes payable.............. -- 363 (363) (2) 519
---- ------ ------ ------ -------
Net cash provided by (used in)
operating activities............ (41) 935 (1,167) 104 (1,845)
---- ------ ------ ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.... (3) (51) (1,114) (78) (310)
---- ------ ------ ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings...... -- -- 1,100 -- 2,300
Proceeds from long-term debt........... -- -- 300 -- --
Payments of long-term debt ............ (5) -- (3) -- (23)
Proceeds from issuance of convertible
bonds................................. 71 201 -- -- --
Proceeds from exercise of stock
options............................... -- -- 13 -- 52
Initial public offering costs.......... -- -- (159) -- (174)
---- ------ ------ ------ -------
Net cash provided by financing
activities...................... 66 201 1,251 -- 2,155
---- ------ ------ ------ -------
NET INCREASE (DECREASE) IN CASH......... 22 1,085 (1,030) 26 --
CASH, beginning of period............... 12 34 1,119 1,119 89
---- ------ ------ ------ -------
CASH, end of period..................... $ 34 $1,119 $ 89 $1,145 $ 89
==== ====== ====== ====== =======

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

F-6

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BALANCE BAR COMPANY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND MARCH 31, 1998
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)

1. THE COMPANY

Balance Bar Company, a Delaware corporation, (the Company) develops and
markets branded food products in convenient, good tasting, balanced
nutritional formulations. The Company's name was changed from Bio-Engineered
Foods, Inc. in 1997. The Company's current products, the "BALANCE--THE
COMPLETE NUTRITIONAL FOOD" bar and the "40-30-30 BALANCE" powdered drink mix,
are based on caloric proportions of 40% carbohydrates, 30% protein and 30%
dietary fat. During all periods presented, 90% or more of the Company's
revenue was derived from sales of its Balance bar (in multiple flavors and two
sizes).

2. CONCENTRATIONS OF RISK

Accounts receivable are unsecured and the Company is at risk to the extent
such amounts become uncollectable. As of December 31, 1996, two customers
comprised 31% and 19% of accounts receivable. As of December 31, 1997, two
customers comprised 18% and 17% of accounts receivable, respectively. As of
March 31, 1998, four customers comprised 17%, 13%, 12% and 10% of accounts
receivable, respectively.

During the year ended December 31, 1995, the Company did not have sales to
any customer that represented greater than 10% of sales. During the year ended
December 31, 1996, the Company had sales to two customers that represented
approximately 26% and 14%, respectively, of sales. During the year ended
December 31, 1997, the Company had sales to one customer that represented
approximately 25% of sales. In February 1998, the Company entered into a two
year exclusive sales agreement with this customer. For the three months ended
March 31, 1998, the Company had sales to three customers that represented
approximately 21%, 16% and 13%, respectively, of sales. The Company's
customers are comprised primarily of distributors and retailers and are
located primarily throughout the United States, and to a lesser extent Canada
and Japan. Sales to customers outside the United States were less than 10
percent of sales for all periods presented.

The Company has no internal capacity to produce its products and relies on
two contract manufacturers to produce its products. One manufacturer is
located in California and the other in Eastern Canada. The partial or total
loss of supply from either of these contract manufacturers would adversely
affect the Company's ability to fulfill orders and make timely delivery of
products. The Company has entered into long-term supply contracts with the two
contract manufacturers that require the Company to purchase minimum numbers of
bars per year and the contract manufacturers to supply specified numbers of
bars per year. If the production capacity of the two contract manufacturers is
insufficient to fill sales orders, the Company will attempt to use other
contract manufacturers. The Company may not be able to establish additional
production sources at acceptable prices that meet quality and capacity
requirements at other contract manufacturers, if necessary.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

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b. Unaudited Interim Financial Statements

The unaudited financial statements for the three months ended March 31,
1997 and 1998 omit certain footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles. All adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial condition at March
31, 1998, and the results of operations and cash flows for the three months
ended March 31, 1997 and 1998 have been included in the accompanying
unaudited financial statements.

c. Inventories

Inventories are valued at the lower of cost (first-in, first-out) or
market and consist of the following at December 31, 1996 and 1997 and March
31, 1998 (in 000's):

[Download Table]

DECEMBER
31,
----------- MARCH 31,
1996 1997 1998
---- ------ -----------
(UNAUDITED)

Balance bars......................................... $278 $2,074 $3,313
Powdered drink mix................................... -- 473 767
Packaging material and other......................... 305 1,259 1,221
---- ------ ------
$583 $3,806 $5,301
==== ====== ======

d. Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization
are computed using the straight-line method over each assets useful life
ranging from one to seven years.

The Company capitalizes expenditures that materially increase asset lives
and charges ordinary repairs and maintenance to operations as incurred.
When assets are sold or otherwise disposed of, the cost and related
accumulated depreciation or amortization are removed from the accounts and
any resulting gain or loss is included in operations.

e. Deferred Offering Costs

In connection with its proposed public offering of common stock, the
Company has capitalized $315,000 and $437,000 of related costs as of
December 31, 1997 and March 31, 1998, respectively. These costs are
included in long-term other assets in the accompanying balance sheets and
will be charged to common stock upon completion of the offering or
otherwise to operations.

f. Coupons

The Company provides for coupon redemption costs at the time of coupon
distribution. As of December 31, 1996 and 1997 and March 31, 1998, costs
related to the redemption of distributed but unredeemed coupons were not
material.

g. Revenue Recognition

The Company recognizes revenue at the time of shipment. The Company
provides for estimated returns and allowances at the time of shipment.

h. Advertising and Marketing

The costs of advertising and marketing are expensed as the advertising
takes place, as free samples and promotional materials are distributed and
as promotional events are held. At December 31, 1997 and March 31, 1998,
prepaids and other current assets in the accompanying balance sheets
includes $1,015,000 and $1,347,000, respectively, of prepaid advertising.

F-8

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i. Statements of Cash Flows

For purposes of the statements of cash flows, the Company considers all
highly liquid investments with an original maturity of three months or less
to be cash equivalents.

Cash payments for interest were $4,000, $23,000 and $24,000 for the years
ended December 31, 1995, 1996 and 1997, respectively and $62,000 for the
three months ended March 31, 1998. Cash payments for taxes were $1,000,
$1,000 and $2,159,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.

Non-cash transactions excluded from the statements of cash flows consist
of the conversion into common stock of $71,000 in 1995 and $201,000 in 1996
of convertible bonds.

j. Earnings (Loss) Per Share

Earnings (loss) per share is computed in accordance with Financial
Accounting Standards (SFAS) No. 128, "Earnings per share." Earnings (loss)
per share for the years ended December 31, 1996 and 1997 are based on the
weighted average number of shares outstanding plus the dilutive effects of
stock options. For the year ended December 31, 1995, stock options were not
included as their effect would be anti-dilutive.

The weighted average number of shares outstanding for the years ended
December 31, 1995, 1996 and 1997 was 7,800,000, 8,410,000 and 9,302,000,
respectively and for the three months ended March 31, 1997 and 1998 was
9,268,000 and 9,599,000, respectively. The dilutive effect of stock options
for the years ended December 31, 1996 and 1997 was 933,000 and 1,741,000,
respectively and for the three months ended March 31, 1997 and 1998 was
3,063,000 and 2,084,000, respectively.

k. Fair Value of Financial Instruments

Based on borrowing rates currently available for bank loans, the fair
value of short-term borrowings and long-term debt approximates carrying
values. The fair value of other financial instruments, consisting of cash,
and short-term trade receivables and payables also approximate carrying
values.

l. New Authoritative Pronouncements

In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income" (SFAS 130) and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (SFAS
131). SFAS 130 and SFAS 131 are effective in 1998. The Company does not
have any items or other comprehensive income and, accordingly, SFAS 130
does not have any effect on the Company's financial reporting. The adoption
of SFAS 131, in the first quarter of 1998, did not have a material impact
on the Company's financial reporting.

4. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 1996 and
1997 and March 31, 1998 (in 000's):

[Download Table]

DECEMBER
31,
------------ MARCH 31,
1996 1997 1998
---- ------ ---------

Furniture and fixtures................................ $16 $ 264 $ 385
Machinery and equipment............................... 95 835 971
Leasehold improvements................................ -- 142 195
--- ------ ------
111 1,241 1,551
Less: Accumulated depreciation and amortization....... (55) (230) (379)
--- ------ ------
$56 $1,011 $1,172
=== ====== ======

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5. SHORT-TERM BORROWINGS AND LONG-TERM DEBT

In 1997, the Company obtained a line-of-credit, that is due on demand, with
a bank that expires on June 1, 1998. The line-of-credit provides the Company
with maximum borrowings of $3,500,000. Advances are limited to 75 percent of
eligible accounts receivable and are secured by all of the company's assets.
Interest accrues at the bank's prime rate (8.5 percent at December 31, 1997)
plus one percent. As of December 31, 1997 and March 31, 1998, $1,100,000 and
$3,400,000, respectively, was outstanding under this agreement.

In March 1998, the Company increased the amount available under the line-of-
credit to $9.0 million and extended the maturity to April 2000. The interest
rate was reduced to the bank's prime rate (8.5 percent at March 31, 1998) plus
3/4%. Selected information regarding short-term borrowings for the year ended
December 31, 1997 and for the three months ended March 31, 1998 is as follows
(dollars in 000's):

[Download Table]

1997 1998
------ ------

Average amount outstanding................................ $ 208 $2,296
Maximum amount outstanding................................ $1,100 $3,400
Weighted average interest rate during period.............. 9.5% 9.5%

In December 1997, the Company obtained a $300,000 three year loan from a
bank. The loan is secured by all of the Company's assets. Interest accrues at
the bank's prime rate (8.5 percent at December 31, 1997 and March 31, 1998)
plus one percent. The principal balance is due $82,000 in 1998, $99,000 in
1999, $109,000 in 2000 and $10,000 in 2001.

6. INCOME TAXES

The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, deferred income tax assets
or liabilities are computed based on the temporary difference between the
financial statement and income tax bases of assets and liabilities using the
current marginal income tax rate. Deferred income tax expenses or credits are
based on the changes in deferred income tax assets or liabilities from period
to period.

The provisions for income taxes for the years ended December 31, 1995, 1996
and 1997 are as follows (in 000's):

[Download Table]

DECEMBER 31,
-----------------
1995 1996 1997
---- ---- ------

CURRENT:
Federal.............................................. $-- $227 $1,116
State................................................ 1 137 305
--- ---- ------
1 364 1,421
--- ---- ------
DEFERRED............................................... -- (139) (205)
--- ---- ------
Provision for income taxes........................... $ 1 $225 $1,216
=== ==== ======

Differences between the provision for income taxes and income taxes at the
statutory federal income tax rate for the years ended December 31, 1996 and
1997 are as follows (dollars in 000's):

[Download Table]

DECEMBER 31,
-------------------------
1996 1997
----------- ------------

Income tax at statutory federal rate............ $626 34.0% $ 978 34.0%
State income taxes, net of federal benefit...... 80 4.3 187 6.5
Effect of permanent differences................. 92 5.0 60 2.1
Net operating loss carryforwards................ (547) (29.7) -- --
Other items, net................................ (26) (1.4) (9) (0.3)
---- ----- ------ ----
$225 12.2% $1,216 42.3%
==== ===== ====== ====

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Under SFAS No. 109, deferred tax assets are recognized for temporary
differences that will result in deductible amounts in future periods. The
components of the deferred income tax assets (liabilities) at December 31,
1996 and 1997 are as follows (in 000's):

[Download Table]

DECEMBER 31,
--------------
1996 1997
------ ------

State taxes............................................... $ 45 $ 109
Allowance for doubtful accounts........................... 9 68
Inventory reserves........................................ -- 23
Depreciation.............................................. (3) (15)
Accrued liabilities....................................... 46 76
Other..................................................... 42 83
------ ------
$ 139 $ 344
====== ======

7. COMMITMENTS AND CONTINGENCIES

The Company leases its facilities and certain property and equipment under
long-term operating leases expiring at various dates through January 2001.
Total rental expense for 1995, 1996 and 1997 and the three months ended March
31, 1998 was $22,000, $29,000, $131,000 and $62,000, respectively.

Future minimum lease payments under operating leases are as follows (in
000's):

[Download Table]

Years ending December 31,
1998................................................................. $245
1999................................................................. 245
2000................................................................. 164
2001................................................................. 13
----
$667
====

Included in property and equipment is approximately $16,000 of equipment
that is leased under a lease accounted for as a capital lease that expires
December 31, 2001.

The Company has been named as a defendant in various lawsuits arising out of
the normal course of business. Management believes the final outcome of such
claims will not have a material impact on the Company's financial position or
results of operations.

Certain advertising claims made by the Company have been challenged by two
of the Company's competitors. The Company has agreed to not make certain
advertising claims in the future. In April 1998, one competitor sued the
Company seeking damages as a result of allegedly false and misleading
advertising. The competitor also alleged that the Company, with one of the
Company's sales executives who previously worked for the competitor,
misappropriated trade secrets. The Company has general (including advertising
injury), director and officer, and excess liability insurance. The Company was
notified by one of its insurers that the insurer accepted the Company's
director and officer liability claim, but because the lawsuit was recently
filed, the Company has not yet received confirmation from any of its other
insurers regarding their defense or acceptance of the Company's other
insurance claims. The Company intends to vigorously defend this lawsuit. No
provision has been made in the accompanying financial statements for any
litigation costs or loss that might result from this lawsuit, if any, because
the outcome is uncertain and no estimate can be made at this time.

8. SHAREHOLDERS' EQUITY

In April 1998, the Company's shareholders approved a six-for-one stock
split. The Company's financial statements have been retroactively adjusted,
for all periods presented, to reflect the effect of the stock split.

The Company had 3,806,910 shares of convertible preferred stock, $.01 par
value, outstanding at December 31, 1995, 1996 and 1997 and March 31, 1998. In
connection with the Company's initial public

F-11

424B4 69th Page of 73 TOC 1st Previous Next ↓Bottom Just 69th
offering, the Company has obtained commitments from all of the holders of the
convertible preferred stock to convert the preferred stock to Common Stock if
the proposed initial offering is completed. This commitment expires in June
1998. The Company's financial statements have been retroactively adjusted, for
all periods presented, to reflect the conversion of the preferred stock into
common stock. For all periods presented, 12,000,000 shares of convertible
preferred stock were authorized. No preferred stock will be authorized or
outstanding after the initial public offering is completed.

In 1997, the Company adopted SFAS No. 129 "Disclosure of Information About
Capital Structure." Holders of the Company's common stock and convertible
preferred stock are entitled to voting rights at the rate of one vote per
share. Preferred stockholders are entitled to a liquidation preference of
$0.38 per share. Preferred stock may be converted to common stock, at the rate
of one share for one share, at any time. No dividend has ever been declared on
the Company's common or convertible preferred stock.

In 1995 and 1996, the Company issued $71,000 and $201,000 of 12 percent
convertible bonds, respectively. These bonds were converted into common stock
at the rate of $0.17 per share and $0.25 per share, respectively in the years
the bonds were issued.

At December 31, 1997 and March 31, 1998, the Company had two stock option
plans, under which the Company is authorized to issue incentive and non-
qualified stock options to its directors, officers, key employees and
consultants totaling up to 2,580,000 shares of common stock. At December 31,
1997 and March 31, 1998, the Company had issued 467,508 and 473,508,
respectively, stock options outside of these two stock option plans. At
December 31, 1997 and March 31, 1998, 379,674 and 1,674 shares, respectively,
are available for future grant under these two plans. Options are generally
granted at exercise prices not less than the fair market value on the date of
grant and expire 10 years after the date of grant. Options granted under these
plans vest over various periods up to three years.

The Company adopted SFAS No. 123, "Accounting for Stock Based Compensation"
(SFAS 123) in 1996. As allowed by SFAS 123, the Company has elected to
continue to measure compensation cost under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and comply
with the pro forma disclosure requirements of the new standard.

A summary of the Company's outstanding options and activity follows for
1995, 1996 and 1997 and the three months ended March 31, 1998:

[Enlarge/Download Table]

1995 1996 1997 MARCH 1998
----------------- ------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
UNDER EXERCISE UNDER EXERCISE UNDER EXERCISE UNDER EXERCISE
OPTION PRICE OPTION PRICE OPTION PRICE OPTION PRICE
------- -------- --------- -------- --------- -------- --------- --------
(UNAUDITED)

OPTIONS OUTSTANDING,
beginning of period.... 234,408 $0.17 278,508 $0.09 2,609,322 $0.17 2,571,546 $0.18
Granted............... 135,600 0.08 2,345,814 0.18 46,800 0.38 384,000 3.98
Canceled.............. (67,500) 0.38 -- -- (26,088) 0.01 (1,200) 0.08
Exercised............. (24,000) 0.01 (15,000) 0.38 (58,488) 0.13 (338,844) 0.16
------- --------- --------- ---------
OPTIONS OUTSTANDING, end
of period.............. 278,508 $0.09 2,609,322 $0.17 2,571,546 $0.18 2,615,502 $0.74
======= ========= ========= =========
Options exercisable at
end of period.......... 278,508 $0.09 1,526,136 $0.15 2,002,656 $0.17 1,668,612 $0.17
======= ========= ========= =========
Weighted average fair
value of options
granted during the
period................. $0.08 $0.38 $3.29 $5.50
===== ===== ===== =====

F-12

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The following table summarizes information about stock options outstanding
at December 31, 1997:

[Download Table]

WEIGHTED AVERAGE
EXERCISE REMAINING
PRICES NUMBER OUTSTANDING CONTRACTUAL LIFE NUMBER EXERCISABLE
-------- ------------------ ---------------- ------------------

$0.01 39,132 .5 years 39,132
$0.08 192,900 7.3 years 192,900
$0.17 2,156,226 8.2 years 1,684,224
$0.42 183,288 9.0 years 86,400
--------- ---------
2,571,546 2,002,656
========= =========

The following table summarizes information about stock options outstanding
at March 31, 1998 (unaudited):

[Download Table]

WEIGHTED AVERAGE
EXERCISE REMAINING
PRICES NUMBER OUTSTANDING CONTRACTUAL LIFE NUMBER EXERCISABLE
-------- ------------------ ---------------- ------------------

$0.01 26,088 .2 years 26,088
$0.08 168,900 7.0 years 168,900
$0.17 1,853,226 8.0 years 1,381,224
$0.42 207,288 8.8 years 92,400
$1.67-$5.50 360,000 9.8 years --
--------- ---------
2,615,502 1,668,612
========= =========

As permitted by SFAS 123, the Company continues to apply the accounting
rules of APB 25 governing the recognition of compensation expense from its
stock option plans. Such accounting rules measure compensation expense on the
first date at which both the number of shares and the exercise price are
known. Under the Company's plans, this would typically be the grant date. To
the extent that the exercise price equals or exceeds the market value of the
stock on the grant date, no expense is recognized. Compensation expense is
recognized for options where the market value of the stock on the grant date
exceeds the exercise price. The compensation expense is recognized immediately
if vesting is at issuance or ratably over the vesting period if the options
vest over time.

Under the provisions of SFAS 123, equity instruments granted to non-
employees are excluded from the pro forma disclosure requirements and are
recorded as compensation expense at fair value in the accompanying statements
of operations.

During 1995, 1996 and 1997 and the three months ended March 31, 1998, the
Company recorded compensation expense of $1,000, $313,000, $209,000 and
$68,000, respectively, in connection with stock option and common stock grants
to employees at exercise prices less than fair market value on the date of
grant. During the years ended December 31, 1996 and 1997, the Company recorded
compensation expense of $30,000 and $60,000, respectively, in connection with
common stock grants to non-employees. To estimate the fair market values of
stock option and common stock grants, the Company used cash equity
transactions, estimated market multiples, developments in the Company's
business (such as the addition of significant customers, the hiring of key
personnel and the introduction of new products) and changes in levels of
profits to value the grants.

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424B4 71st Page of 73 TOC 1st Previous Next ↓Bottom Just 71st
Had the Company applied the fair value based method of accounting, which is
not required, to all grants of stock options, under SFAS 123, the Company
would have recorded additional compensation expense and computed pro forma net
income (loss) and earnings (loss) per share amounts as follows for 1995, 1996
and 1997 and the three months ended March 31, 1997 and 1998 (amounts in 000's
except for per share data):

[Download Table]

DECEMBER 31, MARCH 31,
--------------------- ------------
1995 1996 1997 1997 1998
------ ------ ------ ----- ------
(UNAUDITED)

Additional compensation expense.......... $ 3 $ 64 $ 37 $ 6 $ 47
Pro forma net income (loss).............. $ (88) $1,555 $1,635 $ 447 $1,253
Pro forma earnings (loss) per share:
Basic.................................. $(0.01) $ 0.19 $ 0.18 $0.05 $ 0.13
Diluted................................ $(0.01) $ 0.17 $ 0.15 $0.04 $ 0.11

These pro forma amounts were determined by estimating the fair value of each
option on its grant date using the Black-Scholes option-pricing model.
Assumptions of 6.30 percent for risk free interest rate, 6 years for expected
life, zero volatility and no expected dividends were applied to all grants in
1995 and 1996. Assumptions of 6.54 percent for risk free interest rate, 6
years for expected life, zero volatility and no expected dividends were
applied to all grants in 1997.

9. RELATED PARTY TRANSACTIONS

In December 1995, the Company entered into a management consulting agreement
with a member of the board of directors. In 1996, the Company recorded
$116,000 of expense in connection with this agreement.

During 1997 and the three months ended March 31, 1998, the Company paid
$44,000 and $13,000, respectively, to one member of the board of directors in
connection with special services related to the Company's initial public
offering.

10. 401(K) PLAN

In 1997, the Company adopted a 401(k) Plan (the Plan). All employees are
eligible to participate in the Plan after 3 months of service. The Company
matches up to a percent of employee contributions made during the year. The
total Company 401(k) matching contribution recognized for 1997 and the three
months ended March 31, 1998 was $42,000 and $22,000, respectively.

11. EVENTS SUBSEQUENT TO YEAR END

In April 1998, the Company filed a registration statement on Form S-1 to
sell Common Stock in an initial public offering.

In April 1998, the Company's shareholders ratified a six-for-one split of
the Company's Common and Preferred Stock. The Company's financial statements
have been retroactively adjusted, for all periods presented, to reflect the
effect of the stock split. The Company's shareholders also ratified an
increase of 309,000 in the number of stock options the Company is authorized
to issue under an existing stock option plan and ratified the adoption of a
new stock option plan, under which the Company is authorized to issue
1,800,000 shares of Common Stock upon the exercise of stock options.

In April and May 1998, 365,232 shares of Common Stock were issued in
connection with the exercise of stock options.

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[PICTURE SHOWING PEOPLE ENGAGING IN VARIOUS ACTIVITIES AND A LARGE BALANCE BAR]

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

NO DEALER, SALESPERSON OR
OTHER PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER
THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHO- RIZED BY THE COMPANY, ANY
SELLING STOCKHOLDER OR THE
UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF
AN OFFER TO BUY TO ANY PERSON IN
ANY JURIS- DICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE
UNLAWFUL OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR
ANY OFFER OR SALE MADE HERE-
UNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE
COMPANY OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.

-----------

TABLE OF CONTENTS

[Download Table]

PAGE
----

Prospectus Summary...................................................... 3
Risk Factors............................................................ 5
Use of Proceeds......................................................... 15
Dividend Policy......................................................... 15
Capitalization.......................................................... 16
Dilution................................................................ 17
Selected Financial Data................................................. 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 19
Business................................................................ 27
Management.............................................................. 40
Certain Transactions.................................................... 48
Principal and Selling Stockholders...................................... 49
Description of Capital Stock............................................ 51
Shares Eligible for Future Sale......................................... 54
Underwriting............................................................ 55
Legal Matters........................................................... 56
Experts................................................................. 57
Additional Information.................................................. 57
Index to Financial Statements........................................... F-1

-----------

UNTIL JUNE 26, 1998 (25 DAYS
AFTER THE DATE OF THIS PROSPEC-
TUS), ALL DEALERS EFFECTING
TRANSACTIONS IN THE COMMON
STOCK, WHETHER OR NOT PARTICI-
PATING IN THIS DISTRIBUTION, MAY
BE REQUIRED TO DELIVER A PRO-
SPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DE-
LIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2,400,000 SHARES

[LOGO OF BALANCE BAR COMPANY]

COMMON STOCK

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

PROSPECTUS

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

HAMBRECHT & QUIST
ADAMS, HARKNESS & HILL, INC.

JUNE 1, 1998
--------------------------------------------------------------------------------
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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘424B4’ Filing	Date	First	Last	Other Filings

	4/6/07	45
	12/31/02	34	35
	1/31/02	37
	12/31/01	68
	1/31/01	37
	1/1/01	35	36
	1/31/00	37		SC 13D
	12/31/98	43	68	10-K405
	7/1/98	43
	6/26/98	73
	6/5/98	1
Filed on:	6/2/98
	6/1/98	1	73
	5/15/98	59
	4/30/98	9	54	8-A12G/A
	4/8/98	9	37	8-A12G, S-1
	3/31/98	4	71
	12/31/97	5	70
	3/31/97	18	71
	1/15/97	48
	12/31/96	18	70
	12/31/95	18	68
	12/5/95	48
	12/31/94	18	62
	5/31/94	18
	1/1/94	42
	5/31/93	18
	5/10/93	48
				List all Filings

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Filing Submission 0000944209-98-001123 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Balance Bar Co – IPO: ‘424B4’ on 6/2/98

As of: Tuesday, 6/2/98 · Accession #: 944209-98-1123 · File #: 333-49651

Initial Public Offering (IPO): Prospectus — Rule 424(b)(4)Filing Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Initial Public Offering (IPO): Prospectus — Rule 424(b)(4)
Filing Table of Contents