UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED AUGUST 31, 2003
Commission File No. 000-26189
BP INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware | 95-3937129 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification number) |
510 West Arizona Ave, DeLand, FL 32720
(Address of principal executive offices, including zip code)
386.943.6222
(Registrant's telephone number, including area code)
Copies to: Michael D. Spadaccini, Esq.
12531 El Camino Real, Unit A
San Diego CA 92130
Tel: (858) 350-5183; Fax: (619) 374-2027
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES( ) NO (X)
Number of shares of the issuer's common stock, par value $.001, outstanding as of August 31, 2003: 38,112,639 shares.
Item 1. Business
Our Principal Products and Markets
BP International, Inc. is a manufacturer of tennis court equipment, industrial fabrics, athletic field and gymnasium equipment, privacy and construction fence screening, fabric architecture shade structures and cabanas, sports lighting, and custom netting.
We manufacture products in five categories:
- Tennis and Tennis Court Equipment, such as windscreens and accessories, tennis nets, net posts, benches, court cabanas, court accessories, divider netting, backdrop curtains, protective padding, customized logos, volleyball equipment, basketball equipment and tennis court lighting.
- Athletics Equipment, such as turf protectors, field covers, windscreens artificial turf mats, safety rails, and batting cages and frames
- Fencing Fabrics, such as privacy screens, decorative screens, kennel covers, horticultural fabrics, silt fencing, safety fencing, and temporary fencing.
- Netting, made with knotted and knotless nylon, knotted and knotless polyethylene, for sports activities such as baseball, soccer, golf, volleyball, tennis, hockey, lacrosse, and football, and for bird and scaffold netting.
- Shade Structures, Canopies and Cabanas, under the trade name 'ShadeZone(TM)'.
Our ShadeZone(TM) shade structures are available as standard installations in common shapes, or as fully customized products tailored to a customer's individual needs. ShadeZone(TM) products are manufactured of knitted high-density polyethylene fabric and are UV stabilized and designed to provide maximum sun protection. Knitted with a lock stitch construction and composed of monofilament and tape yarns, the fabric is designed for strength and durability. With a weight of 14 oz. per square yard the ShadeZone(TM) fabric is extremely durable.
We sell our products to sports facilities, support facilities, municipalities, parks, playgrounds, schools, and recreation centers. We distribute our products through authorized dealers, contractors, or direct delivery. BP International has 53 employees and all are full-time employees.
Our Competition
We face significant competition in several markets in which we operate. Specifically, we face significant competition in the tennis equipment, which is a more mature market and moderate competition in the fencing fabrics market, which is a market that is relatively untapped. We do enjoy the advantage of being one of the largest manufacturers in both of those markets. In the shade structure market, which is a quickly developing market, we are a recent entrant, and we are gaining market share, but we are not the largest manufacturer.
Our Sources of Raw Materials
For the years ended May 31, 2003 and 2002, we purchased approximately 20% of total raw materials from a single supplier. In the event that certain raw material supplies were delayed or curtailed, the Company's ability to ship the related product in desired quantities and in a timely manner could be adversely affected. The Company has attempted to mitigate this risk by maintaining a long-term relationship with this supplier while developing new relationships with additional raw material sources.
Our Dependence on Individual Customers
We do not depend on any single customer, or on any small number of customers. The loss of any individual customer would not have a materially adverse impact on our performance.
Trademarks
We have secured US federal trademarks for the following trade names:
- ShadeZone(TM)
- DuraScreen
- DuraShade
- PrivaScreen
We have no patents, labor agreements, license arrangements, franchise arrangements, royalty agreements, or concession arrangements.
Hazardous Materials, Government Regulation, and Environmental Compliance
Our research and development necessarily involves the controlled use of hazardous materials and chemicals. Although we believe that safety procedures for handling and disposing of such materials comply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages that result and such liability could exceed our resources. We may incur substantial costs to comply with environmental regulations.
The Historical Development of Our Business
Our wholly owned subsidiary, Ball Products, Inc. conducts our manufacturing operations. Ball Products, Inc. is a Florida corporation, founded in 1987 by Larry Ball and Emmett Ball, who are our current directors and officers. Ball Products, Inc. became part of BP International in April of 2003 when BP International (then we were called Allergy Immuno Technologies, Inc.) acquired Ball Products, Inc.
BP International, Inc. historically provided clinical testing services to physicians, laboratories and pharmaceutical firms in specialized areas of allergy and immunology under the name Allergy Immuno Technologies, Inc.
April of 2003, we acquired 100% of the voting common stock of Ball Products, Inc. In July of 2003, our shareholders voted to change our name from Allergy Immuno Technologies, Inc. to BP International, Inc.
Termination of Our Former Operations and the Sale of Our Assets to Biomerica; Potential Consequences of Our Failure to Conduct a Formal Shareholder Vote in Connection With the Sale of Our Assets
By the end of February 2002, BP International (we were called Allergy Immuno Technologies then) had liabilities of $357,972 and assets of only $18,974. Allergy had always experienced operating losses, and it had historically relied on borrowings from its parent, Biomerica, Inc., to maintain operations. Allergy had made attempts to sell its clinical testing business beginning in September 2000. From September 2000 through June 2001 Allergy contacted third party laboratories that might be interested in buying Allergy's clinical testing business. These efforts yielded one interested party who ultimately decided that Allergy's operations were too small for their needs.
In late February 2002, Biomerica's management decided that it could no longer afford to lend money to Allergy to fund Allergy's operations. Biomerica's decision to cease lending money to Allergy significantly impacted Allergy's ability to continue to operate. Allergy's board met on March 7, 2002 to discuss the impact of Biomerica's decision to cease lending funds to Allergy.
Allergy's board reasoned that Allergy's losses were likely to continue, and without borrowings from Biomerica, Allergy would no longer have enough capital to operate. The board concluded that Allergy's clinical testing services be terminated as of March 14, 2002.
Allergy's board met again on March 25. At the March 25, 2002 meeting two alternatives for the future of Allergy were discussed. One alternative was to seek investors or purchasers for Allergy. The other alternative was to transfer some of the liabilities and all of the assets of Allergy to its parent, Biomerica.
Ultimately, Allergy's management concluded that Allergy's liabilities and assets should be transferred to its parent Biomerica. Allergy's management, based upon its attempt to sell Allergy's clinical testing business in early 2001, determined that a sale of Allergy's assets to a third party would not yield a buyer without unreasonable effort. On April 30, 2002, Allergy transferred its assets and liabilities to its former parent company, Biomerica. The asset and liability transfer transaction between Allergy and Biomerica was memorialized in a General Assignment Agreement.
Allergy's financial condition immediately before the asset and liability transfer to Biomerica was as follows: Allergy owed Biomerica loans totaling $333,382; these loans had accrued over several years. Allergy also owed accounts payable to third parties totaling $27,307.61. Allergy also had the following assets: $803 in cash, prepaid expenses totaling $582.31, aged accounts receivable totaling $5,104.71, inventory valued at $2,600.48, fixed assets such as computers and testing equipment, four patents, and options to purchase 10,000 units of Hollister-Stier, LLC at an exercise price of $10 per unit.
In furtherance of Allergy's plan to transfer its assets and liabilities to Biomerica, Biomerica and Allergy agreed to the following General Assignment Agreement: First, Allergy agreed to transfer to Biomerica its cash, prepaid expenses, accounts receivable, inventory, fixed assets, and patents, and also issued 808,467 shares of Allergy common stock to Biomerica and in return Biomerica agreed to assume Allergy's accounts payable. Second, Biomerica reduced the amount of the loan owed by Allergy from $333,382 to $225,282 (a reduction of $108,100), and in return Allergy transferred to Biomerica the Hollister-Stier options.
At the time of the asset and liability transfer from Allergy to Biomerica, Biomerica controlled 74.53% of Allergy's outstanding shares. Biomerica thus exercised control over Allergy's board and its management because of its shareholder majority. Furthermore, at the time of the asset transfer, Allergy and Biomerica shared common management. Biomerica's seven directors were Allen Barbieri, David Barrows, Carlos Beharie, Francis R. Cano, Zackary S. Irani, Janet Moore, and Dr. Robert A. Orlando. Three of the seven directors (Mr. Irani, Ms. Moore, and Dr. Orlando) were also directors of Allergy. Allergy's fourth director at such time was Susan Irani, Mr. Irani's cousin, whom Allergy deemed to be an affiliate of Biomerica. All of Allergy's directors were elected by Biomerica through its majority voting control of Allergy.
Further, at such time, Mr. Irani served as the Chief Executive Officer and Ms. Moore served as the Chief Financial Officer and Secretary of both Biomerica and Allergy. The asset and liability transfer was negotiated and executed by management common to Allergy and Biomerica and was approved by all of the directors of both companies. Thus, the asset and liability transfer was a transaction with a related party.
Allergy did not conduct a formal shareholder vote in connection with our decision to sell our assets to Biomerica, and thus, we did not mail proxy or information materials to shareholders. Allergy's board was advised by counsel that since Biomerica controlled 74.53% of Allergy's outstanding shares, Allergy did not have to conduct a formal shareholder vote in connection with the decision to sell the Allergy assets to Biomerica since they were not vital to the operation of the corporation. The majority shareholder, Biomerica, had approved the transfer of the assets. Allergy's assets at the time were not significant, and in fact Allergy's liabilities greatly exceeded its assets-the remaining assets only totaled $9,090. Allergy's only significant asset (which was actually valued on the books at $0) was an option to buy some shares in Hollister-Stier, a privately held company. Biomerica agreed to take that option as partial payment for the note payable that AIT owed to Biomerica and reduced th e note accordingly. The value of $108,100 was assigned to the option after consulting with Hollister-Stier.
Following the asset and liability transfer from Allergy to Biomerica, we learned that our failure to call a shareholder vote in connection with the asset transfer may have violated a provision of Delaware's corporate law. Delaware's General Corporation Law (GCL) requires that the disposition or sale of 'all or substantially all' of a corporation's assets can only be made following a formal shareholder vote called upon 20 days' notice. However, Delaware's GCL also contains an apparently conflicting provision: a statute that allows a corporation's majority shareholder to act by a written resolution in lieu of a shareholder vote. This conflict between the two statutes has never been resolved or interpreted by any specific case law.
Thus, our failure to call a formal shareholder vote in connection with the sale of our assets could have potential consequences. Potentially, a minority shareholder could bring a legal action under Delaware state law against Allergy to either rescind the liability and asset transfer agreement, or to seek damages against Allergy. As of the date of this filing, no shareholder has filed such an action against us, and no shareholder has contacted us announcing an intention to bring an action.
Our present attorney has advised us that the likelihood of such an action is remote for the following reasons:
- No shareholder has yet announced dissatisfaction with the transaction although it was announced publicly in June of 2002.
- The amount of assets that were the subject of the transfer were small (and were transferred along with substantial liabilities), and thus the compensation due to shareholders upon a successful claim would be correspondingly small.
- The inconsistency in Delaware law would open up a potential defense to such a claim.
Our attorney has also advised that were such a claim to be brought, that the potential liability would be small for the following reasons:
- The amount of assets that were the subject of the transfer were small (and were transferred along with substantial liabilities), and thus the compensation due to shareholders upon a successful claim would be correspondingly small.
- The assets that were the subject of the transfer yielded only unprofitable operations since Allergy's inception, and thus the compensation due to shareholders upon a successful claim would be correspondingly small.
Our attorney has also advised that our potential liability under such a claim would be incapable of precise determination because the measure of damages under such a claim would depend upon a subjective determination of the value of the assets and liabilities, if any, that Allergy transferred to Biomerica.
We have discussed with our independent accountant for the period ended May 31, 2003 the potential liability we face from our failure to follow the formalities outlined in Delaware law. Our auditors have concluded that we are unlikely to face any liability from our failure, and in the event we do face liability, that such a liability would be small, but incapable of precise determination. Thus, our auditors have concluded that an amendment to our financial statements is not warranted.
Biomerica's Sale of its Interest in Allergy
Following the execution of the General Assignment Agreement, Allergy was left without business operations and became a blank check company. Biomerica thereafter sought to sell substantially all of its ownership in Allergy to a group that would commence new operations for Allergy or would merge Allergy with a company with operations.
Biomerica's attorney learned of Allergy's plans in March, 2002 through his representation of Biomerica. The Attorney was contacted in April by representatives of Omnics International Corporation inquiring if the Attorney knew of a blank check company either available for sale or available for merger with an operating company.
At the time of Omnics International's inquiry to Biomerica, through its attorney, Omnics International manufactured an omni-directional wheel that has application to wheelchairs, robotics, forklifts, and any other device requiring or benefiting from increased mobility. Omnics International was seeking to purchase a publicly trading blank check company for the purpose of merging Omnics International's operations with the publicly trading blank check company. The company resulting from this planned consolidation would ideally be publicly traded, would contain Omnics' business operations, and would eventually bear the name 'Omnics'.
Biomerica's attorney then made the introduction between Omnics and Biomerica/Allergy in a conference call in April of 2002. Direct negotiations between Allergy and Omnics followed. LDM Holdings was formed by Omnics International's principals during negotiations with Allergy for the specific purpose of purchasing the controlling interest in Allergy. Omnics International's attorney advised the formation of a separate company, LDM Holdings, to purchase the Allergy shares for two reasons: one, Omnics International had debt that could not be determined immediately but was likely substantial, and two, Omnics International's board could not determine promptly whether Omnics International was in good standing in its state of incorporation. Thus, Omnics International's counsel advised that a new corporation affiliated with Omnics International be formed to purchase the Allergy shares; this component of Omnics International's and LDM Holding's plan called for Omnics International to transfer its om ni-directional wheel technology and related assets to LDM Holdings once Omnics International's debt and corporate status were resolved. Thereafter, LDM Holdings would either merge with Allergy, or would transfer the omni-directional wheel technology and related assets to Allergy.
Biomerica's and LDM Holdings' negotiations continued. Biomerica and LDM Holdings reached final terms as follows: On May 30, 2002, Biomerica, Inc., sold the following property to LDM Holdings:
- 13,350,000 shares its stock. The shares represented 74.25% of the outstanding voting shares of Allergy on the day of the sale.
- The promissory note for $225,282. The effect of the sale of the note is that Allergy no longer owes $225,282 to Biomerica, but now owes it to LDM Holdings.
In return, LDM Holdings paid Biomerica $212,500 in cash. At the conclusion of this transaction LDM Holdings became the majority shareholder of Allergy.
Recent Change in Control
On May 30, 2002, the Company underwent a change in control. Immediately before Biomerica sold its interest in Allergy to LDM Holdings, it was a 75.67% shareholder in Allergy. Biomerica sold 74.25% of Allergy's outstanding shares to LDM Holdings on May 30, leaving Biomerica with 1.42% of Allergy's outstanding shares. Thus, following May 30 Biomerica no longer had a business relationship with Allergy, and was no longer a majority shareholder in Allergy.
At the time of Biomerica's sale of its controlling interest in Allergy to LDM Holdings, Allergy had the following four directors: Zackary Irani, Susan Irani, Dr. Robert Orlando, and Janet Moore. All four of these directors were affiliated with Biomerica. Dr. Robert Orlando issued a written letter of resignation on May 21, 2002, indicating that such resignation was to be effective immediately upon the sale of Biomerica's controlling interest in Allergy. On June 6, 2002, Allergy's board of directors took the following corporate actions by unanimous written resolution:
- Dr. Robert Orlando's resignation was accepted by the remaining directors.
- Louis Marrero, Dean Martin, and John Peca were appointed to Allergy's board.
- Zackary Irani resigned from the board.
- Susan Irani resigned from the board.
- Janet Moore resigned from the board.
Louis Marrero and Dean Martin were affiliated with Omincs International, and John Peca was an attorney representing Omnics International.
Soon thereafter, on June 12, 2002, Allergy's board of directors took the following corporate actions by unanimous written resolution:
- The current officers, Zackary Irani, CEO, and Janet Moore, CFO and secretary were removed from office.
- Louis Marrero was appointed as president.
- Dean Martin was appointed as treasurer.
- John Peca was appointed as secretary.
Soon thereafter, on June 18, 2002, Allergy's board of directors took the following corporate actions by unanimous written resolution:
- The membership of the board of directors was increased from 3 persons to 5 persons.
- C. Edward Poteat was appointed to the board.
- Phillip S. Hoffman was appointed to the board.
Why Allergy's Consolidation with Omnics International Failed
As discussed above, the Company had originally planned, following the change in control, to either (i) ultimately acquire the omni-directional wheel technology then owned by Omnics International Corporation, or (ii) ultimately acquire the Omnics International Corporation outright. The purpose of either plan was to bring the exploitation and development of the omni- directional wheel technology and its operations under Allergy.
Following LDM Holdings' purchase of the Allergy shares, two of Allergy's new directors, Mr. Dean Martin and Mr. Lou Marrero, Allergy's attorney, Omnics' Attorneys, and Allergy's accountants set down to begin the work of preparing the merger between Omnics/LDM and Allergy. Upon close examination of Omnics International, the attorneys and accountants discovered the following problems with Omnics International:
- Omnics International did not conduct proper periodic annual shareholder and director meetings, and would require substantial expense and effort to correct.
- Omnics International did not maintain an appropriate minute book, and would require substantial expense and effort to correct.
- Omnics International's financial records were not adequately maintained, and would require substantial expense and effort to correct.
- Omnics International had substantial debt.
Thus, Allergy's accountant, Allergy's attorney, and Omnics' attorneys advised that a consolidation between Allergy and Omnics International could occur only after tremendous expense and delay. Allergy's management, in August of 2002, abandoned plans to pursue the consolidation with Omnics International.
Thus, Allergy remained without business operations. Management thereafter determined that the company's business plan would be to locate and merge with a suitable operating company.
This search eventually led to the acquisition of Ball Products, Inc. which is described more fully above.
Item 2a. FINANCIAL STATEMENTS
BP INTERNATIONAL, INC. |
(Formerly Allergy Immuno Technologies, Inc.) |
| | | | | | | | | |
Consolidated Balance Sheets |
| | | | | | | | | |
Assets |
| | | | | | | | | August 31, 2003 |
| | | | | | | May 31, 2003 | | (Unaudited) |
Current assets: | | | | | | | |
| Cash and cash equivalents | | | | $ 51,754 | | 5,247 |
| Accounts receivable - trade, less allowance for doubtful | | | | |
| accounts of $335,000 | | | | 679,908 | | 626,617 |
| Inventories | | | | | | 701,190 | | 793,368 |
| Prepaid expenses | | | | | 61,068 | | 64,551 |
| Due from related parties | | | | 256,519 | | 265,864 |
| Due from affiliate | | | | | 912,289 | | 1,141,214 |
| | | | | | | | | |
| | Total current assets | | | | 2,662,728 | | 2,896,861 |
| | | | | | | | | |
| Property and equipment, at cost, net of accumulated | | | | |
| depreciation and amortization | | | | 627,326 | | 610,775 |
| | | | | | | | | |
| Deposits | | | | | | 2,071 | | 2,071 |
| | | | | | | | | |
| | Total assets | | | | | $ 3,292,125 | | 3,509,707 |
| | | | | | | | | |
Liabilities and Shareholders' Equity (deficit) | | | | | |
| | | | | | | | | |
Current liabilities: | | | | | | | |
| Accounts payable | | | | | $ 823,082 | | 958,339 |
| Accrued expenses | | | | | 24,150 | | 91,156 |
| Current maturities of long-term debt | | | | 771,366 | | 755,939 |
| | | | | | | | | |
| | Total current liabilities | | | | 1,618,598 | | 1,805,434 |
| | | | | | | | | |
Long-term debt, less current maturities | | | | 1,594,374 | | 2,050,485 |
| | | | | | | | | |
Shareholders' equity (deficit): | | | | | | |
| Common stock - $.001 par value, authorized 50,100,000 | | | | |
| shares; issued 38,112,664 and 38,242,664 shares | | 38,113 | | 38,243 |
| Additional paid-in capital | | | | 1,195,711 | | 1,217,581 |
| Accumulated deficit | | | | | (1,154,671) | | (1,602,036) |
| | | | | | | | | |
| | Total shareholders' equity (deficit) | | | 79,153 | | (346,212) |
| | | | | | | | | |
| | | | | | | $ 3,292,125 | | 3,509,707 |
See accompanying notes to financial statements. | | | | | |
BP INTERNATIONAL, INC. |
(Formerly Allergy Immuno Technologies, Inc.) |
| | | | | | | | | | |
Consolidated Statements of Operations |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | Three Months Ended |
| | | | | | | | August 31, |
| | | | | | | | 2003 | | 2002 |
| | | | | | | | (Unaudited) | | (Unaudited) |
| | | | | | | | | | |
Revenues: | | | | | | | | | | |
Net sales | | | | | | | $ 1,283,634 | | 1,974,989 |
| | | | | | | | | | |
Cost and expenses: | | | | | | | | | |
Cost of goods sold | | | | | | | 1,111,289 | | 1,233,481 |
Selling, general and administrative | | | | | 557,359 | | 750,563 |
| | | | | | | | | | |
| | | | | | | | 1,668,648 | | 1,984,044 |
| | | | | | | | | | |
| Operating loss | | | | | | (385,014) | | (9,055) |
| | | | | | | | | | |
Other expense: | | | | | | | | | |
Interest | | | | | | | | 58,146 | | 26,423 |
Other | | | | | | | | 4,205 | | 6,446 |
| | | | | | | | | | |
| Loss before income taxes | | | | | (447,365) | | (41,924) |
| | | | | | | | | | |
Provision for income taxes | | | | | | - | | - |
| | | | | | | | | | |
| Net loss | | | | | | | $ (447,365) | | (41,924) |
| | | | | | | | | | |
Basic loss per share | | | | | | | $ 0.01 | | - |
| | | | | | | | | | |
Diluted loss per share | | | | | | | $ 0.01 | | - |
| | | | | | | | | | |
Weighted average number of shares outstanding - basic | | | | 38,128,914 | | 35,326,747 |
| | | | | | | | | | |
Weighted average number of shares outstanding - diluted | | | | 38,128,914 | | 35,326,747 |
| | | | | | | | | | |
| | | | | | | | | | |
See accompanying notes to financial statements | | | | | | | |
BP INTERNATIONAL, INC. |
(Formerly Allergy Immuno Technologies, Inc.) |
| | | | | | | | | | |
Consolidated Statements of Cash Flows |
| | | | | | | | | | |
| | | | | | | | Three months ended |
| | | | | | | | August 31, |
| | | | | | | | 2003 | | 2002 |
| | | | | | | | (Unaudited) | | (Unaudited) |
Cash flows from operating activities: | | | | | | |
Net loss | | | | | | | $ (447,365) | | (41,924) |
Adjustments to reconcile net income to net cash | | | | | |
provided by operating activities: | | | | | | |
| Depreciation and amortization | | | | 17,201 | | 13,388 |
| Issues of stock for services | | | | 22,000 | | - |
| Changes in operating assets and liabilities: | | | | | |
| | Accounts receivable | | | | | 53,291 | | 77,153 |
| | Inventories | | | | | (92,178) | | (179,617) |
| | Prepaid expenses | | | | | (3,483) | | (410) |
| | Due from related parties and affiliate | | | (238,270) | | (87,523) |
| | Accounts payable and accrued expenses | | | 202,263 | | 98,599 |
| | | | | | | | | | |
| | | Net cash used in operating activities | | | (486,541) | | (120,334) |
| | | | | | | | | | |
Cash flows from investing activities: | | | | | | |
Purchase of property and equipment | | | | (650) | | (23,114) |
| | | | | | | | | | |
| | | Net cash used in investing activities | | | (650) | | (23,114) |
| | | | | | | | | | |
Cash flows from financing activities: | | | | | | |
Proceeds from long-term debt | | | | 550,000 | | 160,736 |
Payments on long-term debt | | | | (109,316) | | (13,104) |
| | | | | | | | | | |
| | | Net cash provided by financing activities | | 440,684 | | 147,632 |
| | | | | | | | | | |
| | | Increase (decrease) in cash and cash equivalents | (46,507) | | 4,184 |
| | | | | | | | | | |
Cash and cash equivalents - beginning of period | | | 51,754 | | 4,767 |
| | | | | | | | | | |
Cash and cash equivalents - end of period | | | | $ 5,247 | | 8,951 |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
See accompanying notes to financial statements | | | | | |
BP INTERNATIONAL, INC.
(Formerly Allergy Immuno Technologies, Inc.)
Notes to Consolidated Financial Statements
August 31, 2003 and May 31, 2003
(1) Basis of Presentation of Financial Statements
On April 21, 2003, pursuant to a certain stock exchange agreement (Agreement), Allergy Immuno Technologies, Inc. exchanged 6,351,841 shares of its common stock for 100% of the outstanding common stock of Ball Products, Inc. (Ball) in a business combination accounted for as a reverse acquisition. For accounting purposes the reverse acquisition is reflected as if Ball issued its stock (10,120,317 shares) for the net assets of ALIM. The net assets of ALIM were not adjusted in connection with the reverse acquisition since they were monetary in nature. Accordingly, no goodwill or intangibles were recorded because the Agreement resulted in a merger of the companies which has been reflected as a recapitalization transaction. The accompanying consolidated financial statements for the quarter ended August 31, 2002 have been presented as if the transaction occurred May 31, 2002.
(2) Presentation of Unaudited Financial Statements
The unaudited financial statements have been prepared in accordance with rules of the Securities and Exchange Commission and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows, in conformity with generally accepted accounting principles. The information furnished, in the opinion of management, reflects all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of August 31, 2003, and results of operations and cash flows for the three month period ended August 31, 2003 and 2002. The results of operations are not necessarily indicative of results which may be expected for any other interim period, or for the year as a whole.
(3) Long-Term Debt
During the three months ended August 31, 2003, the Company issued $550,000 of convertible notes with interest at 10% for the first year of the notes and 5% thereafter. The notes are convertible at a rate ranging from $.15 to $.20 per share. The notes are convertible through February, 2005. Additionally, 130,000 shares of the Company's common stock was issued as a partial consulting fee associated with issuance of these notes.
(4) Inventories
At August 31, 2003 and May 31, 2003, inventories consist of the following:
| | August 31, | | May 31, |
| | 2003 | | 2003 |
| | | | |
Raw materials | $ 670,658 | | 621,511 |
Finished goods | 152,710 | | 109,679 |
Reserve for obsolescence | (30,000) | | (30,000) |
| | | | |
| | $ 793,368 | | 701,190 |
ITEM 2B. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of the financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto. The following discussion contains certain forward-looking statements that involve risk and uncertainties. Our actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, risks and uncertainties related to the need for additional funds, the rapid growth of the operations and our ability to operate profitably after the initial growth period is completed. We undertake no obligation to publicly release the results of any revisions to those forward-looking statements that may be made to reflect any future events or circumstances.
Results of Operations
For the Three Months Ended August 31, 2003, and August 31, 2002.
Sales. We had total sales of $1,283,634 in the three months ended August 31, 2003 compared to $1,974,989 in the comparable period in 2002, a decrease of 35%. The decrease in sales is attributable to the continuing weakness in the economy.
Cost of Goods Sold. We had cost of goods sold of $1,111,289 in the three months ended August 31, 2003, representing approximately 86.6% of sales, compared to cost of goods sold of $1,233,481 in the comparable period in 2002, which represented 62.4% of sales. The increase in the proportion of cost of goods sold to sales in the present fiscal period is due to rectifying the deficiencies in the Collier County project.
Operating Costs/Selling, General and Administrative. We had operating costs of $557,359 in the three months ended August 31, 2003, approximately 43.4% of revenues, compared to $750,563 in the comparable period in fiscal 2002, 38% of revenues. This decrease of $193,204 in operating costs is due to impementation of a revised budget allowing for the increase in Cost of Goods Sold.
Operating (Loss)/Profit. Operating loss for the three months ended August 31, 2003 was ($385,014) compared to operating loss of ($9,055) in the comparable period in 2002. The increase in operating loss is attributable to the decrease in sales and increase in Cost of Goods Sold as outlined above.
Other Income (Expense). Other income and (expense) for the three months ended August 31, 2003 was ($62,351) compared to $32,869 in the comparable period in 2002, an increase of 89.7%. The increase is due to increased interest expense.
Net (Loss)/Earnings. We reported a net loss of ($447,365) for the three months ended August 31, 2003 compared to a net loss of ($41,924) for the comparable period in 2002. The increase in loss is attributable primarily to the factors outlined above that contributed to our decreased sales, increased operating costs, and increased interest expenses.
Liquidity and Capital Resources
Our principal source of working capital is income from operations, borrowings under our revolving credit facilities, and capital investment.
We have experienced losses in the last two years and have relied upon borrowings under our revolving credit facilities and capital investment to maintain liquidity and continue operations. Our auditors have raised substantial doubt about our ability to continue as a going concern.
We have a revolving credit line which is secured by certain eligible receivables and certain eligible inventory. We can borrow up to 50% of our eligible inventory and up to 80% of our eligible receivables. The eligible inventory and eligible receivables is recalculated monthly, and audited quarterly. Presently, we have borrowed the maximum available under the credit line. In addition, at May 31, 2003, we are not in compliance with certain covenants associated with its revolving line of credit agreement.
During 2002 and early 2003, we began to more fully develop our industrial fabric operations. As a result, we incurred additional advertising, personnel and research and development costs associated with this effort. In addition, management has employed additional administrative, production and sales staff in anticipation of significantly increased sales volume (particularly with respect to industrial fabrics) in fiscal 2004 in accordance with our business plan. In connection with this effort, we have restructured its long-term debt obligations and has identified sources of additional equity capital.
Accordingly, we feel that the activities described in the preceding paragraph have positioned us to experience increased sales volume of more profitable industrial fabrics. Further, we contemplate that increased sales combined with anticipated additional capital contributions, will significantly improve operations and cash flow in 2003 and beyond. However, there can be no assurance that management will be successful in obtaining additional funding or in attaining profitable operations.
We are aware of an uncertainty that could have a negative material impact upon our income and short-term liquidity. We were contracted to construct outdoor shade structures for the Collier County school playgrounds in South Florida. We provided the manufacturing for the project, and one of our large clients contracted to perform the general contracting and installation. An engineer we hired for the project developed an inadequate design for several parts of the structure. Also, the bid documents upon which we based our design contained directives with respect to wind load for the project that were vaguely defined; as a result, the project did not meet adequate wind load requirements.
We are presently working with Collier County to resolve the deficiencies in the project. All parties involved, the County, ourselves, the engineer, and the general contractor, are presently expressing their willingness and flexibility to participate in a workout. Our present estimates indicate that corrective actions costing between $400,000 and $700,000 would resolve the deficiencies in the project. We remain confident that some of these expenditures would be shared by the other participants in the project, but the specific contributions have yet to be decided. We have hired an attorney to offer his opinion with respect to our ultimate liability. We expect this opinion shortly. Our potential costs in connection with the project could be substantial, and such costs could materially effect our operations.
So far no cause of action has been filed with respect to the project, and no party has threatened to bring a suit immediately. However, it is possible that if we are not able to come to some resolution with the County, that the matter could ripen into a cause of action in which we would be a defendant. In such a suit, we could face substantial losses that would materially effect our operations.
We are, however, aware of a trend that we feel could potentially have a positive impact on our sales, revenue, and income. In the past several years, increasing attention has been paid to the potentially harmful effects of sun exposure, especially to our nation's youth. Our ShadeZone(TM) line of outdoor shade structures is designed to address this concern.
We have relied upon capital investment and loans from a principal shareholder, DM Ventures, LLC, and its affiliate LDM Holdings. We cannot guarantee, however, that either DM Ventures or LDM Holdings will continue to provide capital and loans to maintain our liquidity. If we cannot secure additional capital investment or loans in the upcoming year, our operations will be materially affected.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements to report.
Item 3. Evaluation of Disclosure Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. Regulations under the Securities Exchange Act of 1934 require public companies to maintain 'disclosure controls and procedures,' which are defined to mean a company's controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Within 90 days prior to the filing date of this Report (the 'Evaluation Date'), the Company's principal executive officer ('CEO') and principal financial officer ('CFO') carried out an evaluation of the effectiveness of the Company's disclosure controls and procedures. Based on those evaluations, as of the Evaluation Date, the Company's CEO and CFO believe:
(i) that the Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to the Company's management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure; and
(ii) that the Company's disclosure controls and procedures are effective.
(b) Changes in Internal Controls. There were no significant changes in our internal controls or, to our knowledge, in other factors that could significantly affect our internal controls subsequent to the evaluation date referred to above.
Item 4. LEGAL PROCEEDINGS
We are not a party to any legal proceedings.
Item 5. CHANGES IN SECURITIES AND USE OF PROCEEDS
The rights of security holders have not been materially modified during the reporting period.
Item 6. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We submitted several matters to a vote of our security holders during the reporting period. We held our annual meeting of shareholders on July 18, 2003 at the Holiday Inn, at 350 East International Speedway, DeLand, FL at 1:00p.m.
Based upon the stockholders list prepared by the Company's transfer agent, Interwest Transfer Company, there were 31,760,823 shares of the Company's common stock issued and outstanding and entitled to one vote per share at the Meeting. Of the shares available for voting, 28,807,136 share of common stock were present in person or represented by proxy at the beginning of the Meeting. At the Meeting we received, counted and ascertained ballots cast by the shareholders of the Company entitled to vote thereat.
At our annual meeting our shareholders voted the following items:
a. The election of Larry Ball to the board of directors, to serve for a term of one year or until a successor is qualified and elected. The vote on this matter yielded the following number of votes cast for, against, and abstaining: FOR: 28,806,948, Against: 188, Abstentions:0. Based on the foregoing, this item PASSED.
b. The election of Emmett Ball to the board of directors, to serve for a term of one year or until a successor is qualified and elected. The vote on this matter yielded the following number of votes cast for, against, and abstaining: FOR: 28,806,948, Against: 188, Abstentions:0. Based on the foregoing, this item PASSED.
c. The change of the name of the corporation from Allergy Immuno Technologies to BP International, Inc. The vote on this matter yielded the following number of votes cast for, against, and abstaining: FOR: 28,807,136, Against: 0, Abstentions:0. Based on the foregoing, this item PASSED.
d. Ratification of the selection of Parks, Tschopp & Whitcomb, P.A. as the independent public accountants to the Company. The vote on this matter yielded the following number of votes cast for, against, and abstaining: FOR: 28,807,136, Against: 0, Abstentions:0. Based on the foregoing, this item PASSED.
Item 7. EXHIBITS AND REPORTS ON FORM 8-K
a. Reports on Form 8-K.
i. We filed a report on Form 8-K on June 13, 2003 to report a change in our certifying accountant that took place on June 10, 2003.
ii. We filed a report on Form 8-K/A on June 17, which reported an event of April 21, 2003. The report included financial statements incident to our acquisition of Ball Products, Inc.
iii. We filed a report on Form 8-K/A on July 2, 2003 to further report on the change in our certifying accountant that took place on June 10, 2003.
iv. We filed a report on Form 8-K on July 23, 2003 to report the following event that took place on July 18, 2003: the vote of our shareholders to change our name from Allergy Immuno Technologies, Inc. to BP International, Inc.
b. Exhibits:
Exhibit 99.1. Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.2. Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: October 20, 2003
ALLERGY IMMUNO TECHNOLOGIES, INC.
Registrant
By /s/ Larry Ball
____________________________
Larry Ball
President & CEO
CERTIFICATION
I, Larry Ball, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Allergy Immuno Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: October 20, 2003
By /s/ Larry Ball
____________________________
Larry Ball
President & CEO
CERTIFICATION
I, Emmett Ball, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Allergy Immuno Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: October 20, 2003
By: /s/Emmett Ball
____________________________
Emmett Ball
Chief Financial Officer
=========================================================================
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Allergy Immuno Technologies, Inc.(the "Company") on Form 10-Q for the period ended February 28, 2002, as filed with the Securities Exchange Commission on date hereof (the "Report"), I, Larry Ball, the Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: October 20, 2003
By /s/ Larry Ball
____________________________
Larry Ball
President & CEO
=========================================================================
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Allergy Immuno Technologies, Inc.(the "Company") on Form 10-Q for the period ended February 28, 2002, as filed with the Securities Exchange Commission on date hereof (the "Report"), I, Emmett Ball, the Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: October 20, 2003
By: /s/Emmett Ball
____________________________
Emmett Ball
Chief Financial Officer
