UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For the Quarter Ended: Commission File Number
- ---------------------- ----------------------
October 31, 2001 0-28973
0-28973
BioPulse International, Inc.
-----------------------------
(Name of small business issuer in its chapter)
Nevada 87-0634278
- ---------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
10421 South Jordan Gateway, Suite 500, South Jordan, Utah 84095
- --------------------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (801) 523-0101
----------------------
Securities registered pursuant to section 12(b) of the Exchange Act: None
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 report(s), and (2) has been
subject to such filing requirements for the past 90 days. (1) Yes [X ] No [ ]
State the number of shares outstanding of each of the registrants classes of
common equity, as of the latest practicable date:
As of October 31, 2001, issuer had approximately 10,926,746 shares of its $.001
par value common stock outstanding.
1
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
Pages F-3 through F-13 will directly follow.
Consolidated Balance Sheet as of October 31, 2001
and October 31, 1999 F-2
Consolidated Statement of Operations for the three
months ended October 31, 2001 and 2000 F-3
Consolidated Statement of Cash Flows for the three
months ended October 31, 2001 and 2000 F-4
Notes to Financial Statements F-5
F-1
Biopulse International, Inc.
Consolidated Balance Sheet
Assets
October 31, October 31,
2001 2000
----------- -----------
Current Assets
Cash $ 7,631 $ 104,189
Escrow Account 255,280
Accounts receivable (net of allowance for -- 112,940
doubtful accounts)
Inventory 64,327 83,502
Note Receivable - Employee -- 9,800
Note Receivable -- 19,032
Prepaid Rent , Current -- 135,080
----------- -----------
Total Current Assets 327,238 464,543
----------- -----------
Property & Equipment, Net (Note 2) 1,235,023 848,238
Intangable Assets 637,500 689,706
Other Assets
Deposits 8,731 8,731
Prepaid Rent - Net of Current Portion -- 151,594
----------- -----------
Total Other Assets 8,731 160,325
----------- -----------
Total Assets $ 2,208,492 $ 2,162,812
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 502,064 $ 92,739
Accrued Expenses 81,000 20,081
Notes Payable 500,000 911,600
Unearned Revenue -- 30,466
----------- -----------
Total Current Liabliities 1,083,064 1,054,886
----------- -----------
Total Liabilities 1,083,064 1,054,886
----------- -----------
Stockholders Equity
Preferred Stock 3,000,000 --
Common Stock 10,927 7,464
Additional Paid in Capital 4,925,386 1,226,934
Less Subscriptions Receivable (99,266) (119,586)
Treasury Stock (4,283) --
Accumulated Deficit (6,707,336) (6,886)
----------- -----------
Total Stockholders' Equity 1,125,428 1,107,926
----------- -----------
Total Liabilities and Stockholders' Equity $ 2,208,492 $ 2,162,812
=========== ===========
See Notes to the Consolidated Financial Statements
F-2
Biopulse International, Inc.
Consolidated Statement of Operations
For the Three For the Three
Months Ended Months Ended
October 31,2001 October 31, 2000
------------ ------------
Revenues $ 20,001 $ 1,159,680
Cost of Sales 4,773 398,359
------------ ------------
Gross Profit 15,228 761,321
------------ ------------
Operating Expenses
General and Administrative 628,600 679,803
Research & Development 20,000 --
------------ ------------
Total Expenses 648,600 679,803
------------ ------------
Net Profit (Loss) From Operations (633,372) 81,518
Net Income (Loss) before taxes (633,372) 81,518
Provision for Income taxes
------------ ------------
Net Income (Loss) $ (633,372) $ 81,518
============ ============
Net Income Per Share $ (0.06) $ 0.01
Weighted average Shares Outstanding 10,926,746 7,464,110
Fully diluted earnings per share $ (0.01) $ 0.01
Fully diluted weighted-average shares outstanding 72,026,364 8,626,443
See Notes to the Consolidated Financial Statements
F-3
Biopulse International, Inc.
Consolidated Statement of Cash Flows
For The Three For The Three
Months Ended Months Ended
October 31, 2001 October 31, 2000
--------- ---------
Cash flows from operating activities
Net Income $(633,372) $ 81,518
Adjustment to reconcile net income
to cash provided by operations
Depreciation and Amortization 58,616 42,144
(Increase) decrease in receivables -- (95,910)
(Increase) decrease in Inventory 4,773 (6,408)
(Increase) decrease in Prepaid rent -- 30,000
Increase (decrease) in payables 220,259 (12,048)
Increase (decrease) in credit card debt (51,737) --
Increase (decrease) in accrued expenses 60,513 (10,065)
Increase (decrease) in unearned fees (47,318)
--------- ---------
Net cash provided by operating activities (340,948) (18,087)
--------- ---------
Cash flows from investment activities
Purchase of Equipment -- (160,379)
Acquisition of Intangable assets -- (700,000)
--------- ---------
Net Cash (used) provided by investing activities -- (860,379)
--------- ---------
Cash flows from Financing Activities
Issued common stock for cash -- 75,000
Increase (decrease) in short-term debt -- 825,600
(Increase) decreace in subscription receivable -- 40,000
--------- ---------
Net cash (used) provided by financing activities -- 940,600
--------- ---------
Net increase (decrease) in cash (340,948) 62,134
Cash, beginning of period 603,859 42,055
--------- ---------
Cash, end of period $ 262,911 $ 104,189
========= =========
See Notes to the Consolidated Financial Statements
F-4
Biopulse International, Inc.
Notes to the Financial Statements
October 31, 2001 and October 31, 2000
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
Biopulse International, Inc. (BioPulse) was incorporated in the State
of Nevada on July 13,1984 originally under the name of Universal Financial
Capital Corp (UFC). UFC changed its name in September 1985 to International
Sensor Technologies, Inc.(IST). IST incurred heavy losses and no revenue from
operations and thereafter experienced five years of inactivity. On January 12,
1999, IST changed its name to BioPulse International, Inc. when it acquired
BioPulse, Inc. BioPulse is in the business of managing integrated medical
clinics, and medical research programs.
BioPulse issued 4,000,000 common shares in exchange for 100 percent of
the outstanding stock of Biopulse Inc., a Utah corporation organized June 4,
1998. The share exchange with Biopulse, Inc. was accounted for as a reverse
acquisition (recapitalization), therefore all historical financial information
is that of the accounting survivor Biopulse, Inc.
The Company also paid $100,000 to an officer/director of the Company
for accounting, legal and organization expenses to recapitalize the Company.
This was recorded as general and administrative expense during the year ended
July 31, 1999.
b. Recognition of Revenue
The Company recognizes income and expense on the accrual basis of
accounting. Patients are generally charged a flat fee for treatment for a
specified period of time and recorded as unearned revenue. Revenue from services
to patients is recognized as services are performed. Patients who do not
complete the entire treatment schedule are refunded fees prorated on a daily
basis.
Patient recruitment fees, consulting fees and provision of equipment
for other non-affiliated clinics are recognized as revenue when services have
been rendered, equipment installed and no right of return of fees exists.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding at the date of the financial
statements.
d. Cash and Cash Equivalents
BioPulse considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
F-5
Biopulse International, Inc.
Notes to the Financial Statements
October 31, 2001 and October 31, 2000
NOTE 1 - Summary of Significant Accounting Policies (continued)
e. Provision for Income Taxes
No provision for income taxes has been recorded due to net operating
loss carryforwards totaling approximately 6,000,000 that will be offset against
future taxable income pursuant to limitations of the Internal Revenue Code.
These NOL carryforwards begin to expire in the year 2000. No tax benefit has
been reported in the financial statements because BioPulse believes there is a
50% or greater chance the carryforward will expire unused, and are limited
pursuant to the Internal Revenue Code. The loss from the year ended July 31,
1999 can be used to offset income for the period ended October 31, 2000.
Accordingly, no tax provision has been recorded.
Deferred tax assets and the valuation account is as follows at October
31, 2001 and October 31, 2000:
October 31, 2001 October 31, 2000
- ----------------------------------------------------------- ------------------
Deferred tax asset:
NOL carrryforward $ 2,000,000 $ 700,000
Valuation allowance (2,000,000) (700,000)
------------------ ------------------
Total $ - $ -
================== ==================
f. Principles of Consolidation
These financial statements include the books of Biopulse International,
Inc and its wholly owned subsidiary Biopulse, Inc. All intercompany transactions
and balances have been eliminated in the consolidation.
h. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements and
expenses during the reporting period. In these financial statements, assets,
liabilities and expenses involve extensive reliance on management's estimates.
Actual results could differ from those estimates.
i. Accounts Receivable Allowance
BioPulse periodically reviews accounts receivable and the allowance for
doubtful accounts. At October 31, 2000 the allowance was $8,435 and at October
31, 2001 the allowance was $0, since there were no receivables at October 31,
2001.
F-6
Biopulse International, Inc.
Notes to the Financial Statements
October 31, 2001 and October 31, 2000
NOTE 1 - Summary of Significant Accounting Policies (continued)
j. Inventory
Inventory is recorded at the lower of cost or market on the first-in,
first-out basis, and consists primarily of medicine, medical supplies and
nutritional supplements.
Direct operating costs consist of direct costs incurred in the
providing of care to patients. These costs include the cost of medicine, medical
supplies, nutritional supplements, laboratory fees, patient hotel rooms, patient
meals and other direct costs. The salaries of in-house doctors and nurses are
included in general and administrative costs.
k. International Exchange
All fees are charged in U. S. dollars and most expenses are paid in U.
S. dollars. Expenses that are paid in a foreign currency are converted into U.
S. dollars at the exchange rate in effect on the date of the transaction.
l. Research and Development Costs
As an integral part of its patient treatment operations, BioPulse
conducts research designed to evaluate the effectiveness of patient treatment.
All costs associated with the patient's care are expensed in the period that
they are incurred. During the year ended July 31,2001, the company licensed TK-1
diagnostic technology from Brigham Young University. It paid a non refundable
fee of $100,000 for right to license this technology. This fee has been expensed
as research and development costs along with the cost the company has paid third
party laboratories to develop this technology into a marketable product.
NOTE 2 - Property and Equipment
BioPulse capitalizes purchases of equipment with a useful life of more
than one year. BioPulse also capitalizes improvements and costs that increases
the value of or extend the life of an asset.
Capitalized assets are depreciated over the estimated useful lives of
the assets (five to seven years for furniture and fixtures and leasehold
improvements, three to five years for autos, medical and computer equipment) on
the straight line basis.
F-7
Biopulse International, Inc.
Notes to the Financial Statements
October 31, 2001 and October 31, 2000
October 31, October 31,
2001 2000
----------- -----------
Property and Equipment consists of the following:
Furniture & Equipment $ 172,031 $ 171,301
Medical Equipment 676,497 683,104
Lab Equipment 209,061 --
Leasehold improvements 437,416 93,576
Auto 4,000 --
Accumulated Depreciation (263,982) (103,743)
----------- -----------
Total Property & Equipment $ 1,235,023 $ 848,238
=========== ===========
NOTE 2 - Property and Equipment (continued)
Depreciation expense was $ 46,116 and $31,850 for the three months
ended October 31, 2001 and 2000, respectively.
NOTE 3 - Intangible Assets
BioPulse capitalized as intangible assets the purchase cost of the
rights to certain technologies acquired from Aidan Inc. in August 2000. These
assets are amortized over their estimated useful life or the life of related
patents whichever is shorter. BioPulse does not expect the technology to become
obsolete during the 17 year useful life of the patents. The technology and
licenses acquired cover the world except for experimental use in the United
States.
Intangible assets consist of the following at October 31, 2001:
Intangible Assets $ 700,000
Accumulated Amortization (62,500)
---------
Total Intangible Assets $ 637,500
=========
Amortization expense was $12,500 for the quarter ended October 31,
2001.
NOTE 4 - Equity/Reverse stock split
In November 1998, the board of directors authorized a 1 for 400 reverse
stock split. These statements have been retroactively restated to reflect this
reverse split.
During the year ended July 31, 1999, BioPulse issued the following:
- 4,000,000 shares of common stock for 100 percent of the
outstanding stock of Biopulse, Inc. valued at $4,000.
- 2,000,000 shares of common stock for subscriptions receivable
of $970,000.
F-8
Biopulse International, Inc.
Notes to the Financial Statements
October 31, 2001 and October 31, 2000
- 25,000 shares of preferred stock, class "A" for cash of
$25,000.
- 25,374 shares of preferred stock, class "A" for services
valued at $25,374. Cost of these services was recorded as
general and administrative costs.
NOTE 4 - Equity/Reverse stock split (continued)
During the year ended July 31, 2000 BioPulse had issued the following:
- 600,000 shares to the underwriter for services rendered in the
offering.
- 600,000 shares at $.10 per share pursuant to a subscription
agreement.
- 5,000 shares for $3 per share.
During the year ended July 31, 2001 BioPulse issued the following:
- 35,000 shares of common stock for cash at $3 per share.
- 60,000 shares of common stock for equipment valued at $60,000
($1 per share.)
- 2,353,636 shares of common stock for cash at $0.41 per share.
In addition warrants were attached to these shares to purchase
189,000 shares of common stock. The exercise price shall be
fifty percent of the lesser of: 1) $6.375 or 2) the average
closing price for the five trading days immediately preceding
the effective date of a registration statement covering these
warrants.
- 1,050,000 shares of common stock pursuant to consulting with
Liviakis Financial Communications (LFC) for investor relations
services for one year valued at $2,961,000 ($2.82 per share,
the fair market value on the date the contract was signed).
The shares were non- assessable upon signing on November 2,
2000. In addition, the contract provides for cash commissions
to LFC of 2.5% of the value of debt or equity financing and 2%
of the value of the merger or acquisition for which LFC has
acted as a finder. This contract has been terminated.
- 80,000 shares were issued to three individuals for services
valued at $679,370. The cost of these services will be
recorded as general and administrative costs during the
quarter ended January 31, 2001.
F-9
Biopulse International, Inc.
Notes to the Financial Statements
October 31, 2001 and October 31, 2000
Options:
- At August 3, 2000 the company issued 1,500,000 options to
purchase common stock at $2.75 (market price) to Aiden, Inc.
in partial consideration for technology rights. The shares are
exercisable as follows:
- 700,000 immediately,
NOTE 4 - Equity/Reverse stock split (continued)
- 200,000 upon submission of patent application for production
of tissue vaccine,
- 200,000 upon submission of patent application for MPGC,
- 200,000 upon submission of patent application for Cytokines,
- 200,000 upon submission of patent application for Tissue
Vaccine.
The above options expire August 3, 2005.
The company has issued to Hunts Drive Ltd. in connection with the
issuance of preferred stock outstanding warrants to purchase up to 184,300
common shares with an exercise price of $8.40 per share. These warrants were
granted on January 24, 2001 and expire on January 24, 2006.
The company also issued to Hunts Drive, Ltd. in connection with the
issuance of preferred stock warrants to purchase up to 150,000 common shares
with an exercise price of $8.53 per share. These warrants were granted on
January 24, 2001 and expire on January 24,2006.
In January 2001, in connection with a private placement offering, the
company issued to Hunts Drive, LLC, 3,000 shares of Series B Convertible
Preferred at $1,000 per share. The Series B preferred shares may be converted at
any time. Under the terms of a securities purchase agreement, Hunts Drive may
convert each share of Series B preferred stock to shares of common stock having
a market value of $1,000. The conversion price of the common stock upon receipt
by us of a notice of conversion is equal to the lesser of $9.75 or 80% of the
average of the three lowest closing bid prices of the common stock during the
20-day trading period immediately prior to the conversion date as quoted on the
OTC Bulletin Board.
F-10
Biopulse International, Inc.
Notes to the Financial Statements
October 31, 2001 and October 31, 2000
For so long as the company has not received a notice of conversion for
the shares, we may redeem shares of our Series B preferred stock by serving a
notice of redemption. The redemption price equals 130% of the liquidation value,
plus all accrued but unpaid dividends on such shares. If the company delivers
notice of redemption pursuant to the foregoing sentence, the holders will retain
their conversion rights with respect to up to a maximum of 100% of the number of
shares subject to the redemption.
In connection with the sale of the Series B preferred stock, the
company also issued to Hunts Drive a warrant to purchase up to 100,000 shares of
our common stock. The warrants have an exercise price of $8.53 per share. Based
on the Black Shoals calculation, the value of the beneficial conversion feature
of the warrants is $7,000.
NOTE 5 - Commitments and Contingencies
The Company is committed to an operating lease for office space in
Sandy, Utah. The lease requires the Company to pay monthly rent of $8,731 and
expires December 2003. The landlord has agreed to terminate the lease December
1, 2001 for a payment of $70,000 due in July 2002.
The Company is responsible for an operating lease for clinic and office
space in Tijuana, Mexico. The lease requires the payment of $42,000 per month
and expires February 28, 2005. The lease states the rent obligation on the
clinic and office space in U.S. dollars.
Future minimum operating lease payments are as follows at July 31,
2001:
2001 $ 92,7314
2002 574,000
2003 504,000
2004 504,000
2005 84,000
-------------------
Total $ 1,758,731
===================
BioPulse entered into a contract with Aidan Incorporated on August 3,
2000, to license patented and patentable technology. The license term is the
life of the patents. The license covers world wide rights except rights for
experimental use in the United States. The Company paid $700,000 for the license
and granted 1,500,000 options described in Note 4.
F-11
Biopulse International, Inc.
Notes to the Financial Statements
October 31, 2001 and October 31, 2000
NOTE 5 - Commitments and Contingencies (continued)
Aidan is required to apply for patents and pay the expenses of issuance
of the patents.
BioPulse has paid the $700,000 to Aidan but is still obligated under
the options. BioPulse is required to file a registration statement to register
the stock that will be issued upon exercise of the options.
The Company entered into a contract with Brigham Young University
effective December 1, 2000 to license patented technology. The license term is
five years with an option to renew for an additional 5 years. The license covers
the world wide rights to this technology except for the following Aisian
countries : China, Japan, Taiwan, Malaysia, Indonesia, Philippines, Singapore
and Korea. The company paid $ 100,000 for the license in December 2000 and is
required to pay for further development of the technology. It will be required
to pay an additional $800,000 when the technology is developed into a marketable
product. It is estimated that this further development will require an
expenditure of $ 100,000. The License requires payment of a 7% royalty due
quarterly with the following minimum annual payments through 2005.
2000 $ 0
2001 0
2002 0
2003 100,000
2004 200,000
2005 400,000
-----------------
Total $ 700,000
=================
If the company does not make these future payments BYU's only recourse is to
terminate the license.
The company placed $300,000 in escrow to assure that there would be adequate
funds to pay for the research and development of the TK-1 technology. Brigham
Young University and the Company jointly control the escrow. There was $255,280
in the escrow account as of October 31, 2001.
The company has arranged with Covance Development to conduct the research
required by its contract with BYU. The agreement with Covance is that Biopolse
will pay Covance on a time and materials basis. The agreement may be terminated
at any time by either party without notice.
The clinic that the company manages in Tijuana, Mexico was visited on February
15, 2001 by Mexican health authorities (Instituto de Servicios de salud Publica
Del Estado De Baja California). The clinic held a license to operate as an
F-12
Biopulse International, Inc.
Notes to the Financial Statements
October 31, 2001 and October 31, 2000
alternative health clinic but did not have a specific license to offer each of
its therapies. The IHT (insulin hypoglycemic therapy) treatment room was closed
by the health authorities and reopened on May 19, 2001.
In November 2000 the company entered into an agreement with The Geneva Group,
Inc. to list the company's stock on the Frankfurt stock exchange. The company
paid $20,000 in cash and issued 25,000 shares of stock to The Geneva Group for
their services. There is no future obligation under this contract.
A lawsuit has been filed in U.S. District Court by Duchess Advisors in
connection with the raising of capital for the company in January 2001. Their
claim is that they are due a commission in relation to the raising of that
capital. The company paid commissions to Liviakis Financial and Roth Capital in
connection with this transaction and does not believe that Duchess Advisors is
entitled a commission. The potential liability is $30,000. Management does not
believe that they will have any liability.
Note 6 - Notes Payable
The Company borrowed $500,000 from Hunts Drive, LLC in July 2001. The note is
due with interest at 6.5% simple interest on October 1, 2001. 2,093,400 shares
of stock owned by Loran Swensen and Jonathan Neville (officers and directors of
the company) are security for the note. The note is in default.
Note 7 - Segment Reporting
During the year ended July 31, 2000, the company had a major customer (The
Wicker Clinic) that was responsible for more than 10% of the company's annual
revenue. The comnay trained some of Wicker Clinic staff in it protocols, sold
equipment, and sent patients to the clinic. Most of the training was done at the
clinic Biopulse managed in Tijuana, Mexico. The basis of segment reporting is
due to the single customer requirements rather than geographic areas because
revenue generated with the customers was generated in two geographic areas.
Therefore no segment reporting is required.
F-13
ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS
Management's Discussion and Analysis
The following discussion contains comments about the financial
condition of BioPulse International, Inc. for the Quarter Ended October 31,
2001.
Overview
Since inception in January 1999, we have been refining our operations
and developing our market. We have advertised in periodicals targeting potential
patients, rented booths at trade shows, and sought to develop a good reputation
through positive results and satisfied patients. We have introduced new
treatments for our patients and expanded our market.
From January 1999 we have managed Clinica BioPulso in Tijuana, Mexico,
through a management contract with a physician licensed in Mexico. We were
entitled to all revenues and are responsible for all expenses of the clinic.
More than 90% of our operating revenues and expenses and profits were generated
by the Mexican operations.
During 2001, the Mexican government revamped its oversight of medical
clinics subject to its jurisdiction. It sent new health department inspectors to
review the operations and permits of many clinics in Tijuana, Mexico. This led
to the closure of several clinics there. Clinica BioPulso also was inspected.
The inspectors determined that while the clinic personnel were properly
qualified, they had not submitted all of their protocols for government review.
On February 15, 2001, one treatment room was closed pending review of the
protocols. The clinic submitted applications for licenses for four protocols
(insulin hypoglycemic therapy, chelation, colonic treatments, and dendrytic cell
therapies) in May 2001. On May 9, 2001, the Instituto de Servicios de Salud
Publica Del Estado De Baja California (the Mexican health authorities) reopened
the treatment room. As a result of the new policy, the clinic decided not to
seek new patients until all the necessary protocols had been approved. Approval
of these permits are still pending.
Prior acquiring TK-1 technology in December, 2000, we have not incurred
material research and development expenses outside of the treatment of patients
at the clinic in Tijuana, Mexico. We conducted research and development using
data from records of the patients treated at the clinic in Mexico to determine
the effectiveness of the treatments. Additionally, we are working with the
doctors who are modifying the treatments based on the data received from the
treatment of patients. This limited research and development has been integrated
into the patient care given to paying patients, and we have not had any material
research and development costs to date that were distinguishable from patient
care. All costs of patient care have been expensed in the period in which they
were incurred. We paid $100,000 for the TK-1 technology that is not refundable
should we not be able to develop a marketable product. This $100,000 has been
expenses as research and development expenses plus the costs incurred to develop
TK-1 into a marketable product.
2
During 2000, we had an outpatient clinic at our office in Utah. The
revenues and expenses generated by this clinic were not material, and the clinic
no longer has any ongoing patient care operations.
Revenues
The clinic produced almost no revenue during the quarter ended October
31, 2001, down from 1,569,680 from clinic operations for same period last year.
This is due to our not accepting new cancer patients after being informed that
we need additional permits from the Mexican government to offer the treatments
that had bee previously offered as discussed above.
Costs and Expenses
Cost of sales was $4,773 for the quarter ended October 31, 2001 down
from $398,359 from the same period last year. This is due to the almost total
loss of patients at the clinic. General and Administrative expenses were
$628,600 for the quarter ended October 31, 2001 down from $679,803 for the same
period last year. Most of the general and administrative expenses are fixed
costs that are not controllable in the short run. One primary fixed cost is rent
of the clinic in Tijuana, Mexico. The clinic rent is $42,000 per month and
$329,000 is due as of October 31, 2001 and is included in accounts payable. The
landlord is working with us to resume operations and it is in his best interest
to not evict us. The lease was renegotiated in February 2001. Prior to the
renegotiation, rent was charged on patient rooms as they were used and were a
cost of sales. After the renegotiation, rent on the whole facility was charged
as a fixed amount regardless of occupancy; thus rent on patient rooms became a
fixed or general and administrative expense. The fixed rent increased $ 31,000
per month in February 2001. Staff salaries were reduced in the quarter ended
October 31, 2001 by approximately 50,000 over the same period in the prior year.
Significant Elements of Income or Loss That Do Not Arise From Continuing
Operations
There were no significant elements of income or loss that do not arise
from continuing operations.
Liquidity
As of October 31, 2001, the Company had current assets of $327,238 and
current liabilities of $1,083,064. Clinic operations had been generating near
breakeven cash flow through January 2001 but due to the change in the regulatory
3
climate in Mexico and resulting decrease in the number of patients that have
been treated at the clinic, the clinic has generated net negative cash flow
since January 2001. We have used most of our cash resources as of October 31,
2001 and have laid off most of our administrative personnel and the Mexican
clinic has laid off most of it personnel until operations resume. The officers
have continued to work and their salaries have accrued but have not been paid
during October and November. As of October 31, 2001, we have approximately
$250,000 in cash in escrow with Brigham Young University and expect to be able
to access $150,000 of that. That would leave more than enough to pay for the
expected costs to complete development of the TK-1 diagnostic test. As of
October 1, 2001 we are in default on our loan of $500,000 with Hunts Drive Ltd.
That loan was secured by the 2,093,400 shares of stock owned by Loran Swensen
and Johathan Neville, Officers and Directors of the company. We expect to be
able to reopen the clinic in Tijuana under a new agreement with the doctors
where they would use our equipment and facility and would pay us a flat fee for
that and consulting services
We believe that cash flow from the operations of the Clinica BioPulso
in Tijuana, Mexico, will be positive in the foreseeable future.
Seasonal Aspects
We have experienced lower patient occupancy during late fall and early
winter months than during other times of the year. Although there may be other
reasons for this, our treatments are elective treatments, and typically,
patients may choose to not seek these treatments during holiday seasons,
preferring instead to seek treatment at other times of the year.
Material Commitments for Capital Expenditures and Capital Resources
There are no material commitments for capital expenditures. BioPulse
has committed to develop the ELISA kit for the TK-1 diagnostic technology that
was acquired from Brigham Young University. This is expected to cost less than
$50,000.
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
A lawsuit has been filed in U.S. District Court by Duchess Advisors in
connection with the raising of capital for the company in January 2001. Their
claim is that they are due a commission in relation to the raising of that
capital. The company paid commissions to Liviakis Financial and Roth Capital in
connection with this transaction and does not believe that Duchess Advisors is
entitled a commission. The potential liability is $30,000. Management does not
believe that they will have any liability.
ITEM 2 CHANGES IN SECURITIES
None
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ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
BioPulse International, Inc.
Date: December 21, 2001 By: /s/ Reid Jilek
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Reid Jilek
CEO
Date: December 21, 2001 By: /s/ Michael Jones
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Michael Jones
Treasurer / CFO
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