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
- ---------------------- ----------------------
April 30, 2002 0-28973
BioPulse International, Inc.
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(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)
7063 South 700 West, Midvale, Utah 84047
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (801) 301-0484
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. Yes [X ] No [ ]
State the number of shares outstanding of each of the registrant's classes of
common equity, as of the latest practicable date:
As of January 31, 2002, issuer had approximately 15,452,046 shares of its $.001
par value common stock outstanding.
PART I FINANCIAL INFORMATION
----------------------------
ITEM 1 FINANCIAL STATEMENTS
Page
----
Consolidated Balance Sheet
as of April 30, 2002 and April 30, 2001 2
Consolidated Statement of Operations
for the three and nine months ended
April 30, 2002 and April 30, 2001 3
Consolidated Statement of Cash Flows
for the three and nine months ended
April 30, 2002 and April 30, 2001 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis 14
Signatures 17
1
Consolidated Balance Sheet
Biopulse International, Inc.
Assets
------
April 30 July 31,
2002 2001
------------ -----------
(unaudited)
Current Assets
Cash $ 389 331,584
Escrow Account 56,543 272,275
Inventory 0 69,100
----------- -----------
Total Current Assets 56,932 672,959
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Property & Equipment, Net (Note 2) 398,804 1,281,139
Intangible Assets 0 650,000
Other Assets
Deposits 0 8,731
----------- -----------
Total Other Assets 0 8,731
----------- -----------
Total Assets $ 455,736 2,612,829
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 725,123 $ 281,805
Accrued Expenses 204,340 20,487
Notes Payable (Note 7) 500,000 500,000
Credit Card 51,737 -$51,737
----------- -----------
Total Current Liabilities 1,429,463 854,029
----------- -----------
Total Liabilities 1,429,463 854,029
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Stockholders Equity
Preferred Stock 2,999,000 3,000,000
Common Stock 15,483 10,927
Additional Paid in Capital 4,921,830 4,925,386
Less Subscriptions Receivable (99,266) (99,266)
Treasury Stock (4,283) (4,283)
Accumulated Deficit (8,806,491) (6,073,964)
------------ -----------
Total Stockholders' Equity (973,727) 1,758,800
------------ -----------
Total Liabilities and Stockholders' Equity $ 455,736 $ 2,612,829
=========== ===========
See accompanying Notes to the Consolidated Financial Statements.
2
Biopulse International, Inc.
Consolidated Statement of Operations
For the For the For the Nine For the Nine
Quarter Ended Quarter Ended Months Ended Months Ended
April 30, 2002 April 30, 2001 April 30, 2002 April 30, 2001
-------------- -------------- -------------- --------------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues $ 1,250 $ 265,360 $ 21,251 $ 2,128,281
Cost of Goods Sold 0 $ 117,682 4,773 814,178
------------ ------------ ------------ ------------
Gross Profit $ 1,250 $ 147,678 16,478 1,314,103
------------ ------------ ------------ ------------
Operating Expenses:
Research and Development 0 0 27,000 0
General and Administrative 86,301 1,453,792 1,153,958 7,615,582
------------ ------------ ------------ ------------
Total Expenses $ 86,301 $ 1,453,792 1,180,958 7,615,582
------------ ------------ ------------ ------------
Net Profit (Loss) From Operations (85,051) (1,306,114) (1,164,480) (6,301,479)
(Loss) Recognized from Discontinued Operations 0 0 (1,568,047) 0
------------
Net Income (Loss) before taxes (85,051) (1,306,114) (2,732,527) (6,301,479)
Provision for Income taxes 0 0 0 0
------------ ------------ ------------ ------------
Net Income (Loss) ($ 85,051) ($ 1,306,114) ($ 2,732,527) ($ 6,301,479)
============ ============ ============ ============
Net Income Per Share ($ 0.01) ($ 0.14) ($ 0.19) ($ 0.72)
Weighted average Shares Outstanding 15,452,046 9,458,246 14,145,511 8,759,812
Fully diluted earnings per share ($ 0.00) ($ 0.07) ($ 0.04) ($ 0.51)
Fully diluted weighted-average
shares outstanding 76,551,664 18,910,038 75,245,129 12,452,500
See accompanying Notes to the Consolidated Financial Statements.
3
Consolidated Statement of Cash Flows for the three and nine
Biopulse International, Inc.
Consolidated Statement of Cash Flows
For nine months For nine months
ended April 30, 2002 ended April 30, 2001
-------------------- --------------------
(unaudited) (unaudited)
Cash flows from operating activities
Net Income $(1,164,480) $(6,301,479)
Adjustment to reconcile net income
to cash provided by operations
Depreciation and Amortization 58,615 143,236
(Increase) decrease in receivables -- 11,180
(Increase) decrease in Inventory 4,773 11,942
(Increase) decrease in prepaid rent 63,001
(Increase) decrease in deposits 8,731
Increase (decrease) in payables 413,318 (62,051)
Increase (decrease) in credit card debt (51,737)
Increase (decrease) in accrued expenses 183,853 (10,193)
Increase (decrease) in unearned fees -- (67,338)
Stock issued for services -- 4,596,600
----------- -----------
Net cash provided by operating activities (546,927) (1,615,102)
----------- -----------
Cash flows from investment activities
Purchase of Equipment -- (565,607)
Cash loan to related party -- 19,032
Cash for prepaid rent -- --
Acquisition of Intangible assets -- (1,100,000)
----------- -----------
Net Cash (used) provided by investing activities 0 (1,646,575)
----------- -----------
Cash flows from Financing Activities
Issued common stock for cash -- 1,065,000
Issued preferred stock for cash -- 2,495,906
Principal payment on short term debt -- (86,000)
(Increase) decrease in subscription receivable -- 60,300
Purchase of treasury stock -- --
----------- -----------
Net cash (used) provided by financing activities 0 3,535,206
----------- -----------
Net increase (decrease) in cash (546,927) 273,529
Cash, beginning of period 603,859 42,055
----------- -----------
Cash, end of period $ 56,932 $ 315,584
=========== ===========
See accompanying Notes to the Consolidated Financial Statements.
4
Biopulse International, Inc.
Notes to the Financial Statements
April 30, 2002 and April 30, 2001
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.
5
Biopulse International, Inc.
Notes to the Financial Statements
April 30, 2002 and April 30, 2001
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. Accordingly, no tax provision has been
recorded.
Deferred tax assets and the valuation account is as follows at July 31,
2001 and July 31, 2000:
July July
31, 2001 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 April 30, 2001 and at April 30, 2001 there were no
accounts receivable and the allowance was zero.
6
Biopulse International, Inc.
Notes to the Financial Statements
April 30, 2002 and April 30, 2001
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. The inventory on hand as of January 31, 2002 was
written off because there is not a strong market to liquidate the inventory.
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.
April April
30, 2002 30, 2001
----------- -----------
Property and Equipment consists of the following:
Furniture & Equipment $ 172,031 $ 186,397
Medical Equipment 676,497 776,533
Lab Equipment 209,061 148,115
Leasehold improvements -- 471,468
Auto 4,000 4,000
Accumulated Depreciation (263,982) (154,042)
Total Property & Equipment 797,607 1,432,471
Reduction to Liquidation Value (398,803)
Net Property and Equipment $ 398,804 $ 1,432,471
7
Biopulse International, Inc.
Notes to the Financial Statements
April 30, 2002 and April 30, 2001
NOTE 2 - Property and Equipment (continued)
Depreciation expense was $ 58,615 and $143,236 for the nine months
ended April 30, 2002 and 2001, 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. The
unamortized cost of these rights has been written off as a cost of discontinued
operations associated with the closure of the clinic in Tijuana, Mexico in
January 2002 (See note 8).
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.
- 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.
8
Biopulse International, Inc.
Notes to the Financial Statements
April 30, 2002 and April 30, 2001
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.
During the year ended July 31, 2002 Biopulse issued the following:
- 4,186,800 shares were issued to two officers and shareholders to
replace their shares that taken as security for a note that the
company defaulted on. Two restricted replacement shares were issued
for each free-trading share as security.
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,
9
Biopulse International, Inc.
Notes to the Financial Statements
April 30, 2002 and April 30, 2001
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.
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.
10
Biopulse International, Inc.
Notes to the Financial Statements
April 30, 2002 and April 30, 2001
NOTE 5 - Commitments and Contingencies
The Company was 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.
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.
11
Biopulse International, Inc.
Notes to the Financial Statements
April 30, 2002 and April 30, 2001
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.
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 $56,543
in the escrow account as of April 30, 2002.
The company has arranged with Covance Development to conduct the research
required by its contract with BYU. The agreement with Covance is that Biopulse
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
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.
12
Biopulse International, Inc.
Notes to the Financial Statements
April 30, 2002 and April 30, 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.
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 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 and the 2,093400
shares of stock have been transferred to the note holder.
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 company 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.
Note 8 - Loss From Discontinued Operations
In January 2002 the clinic in Tijuana, Mexico was closed. This clinic was the
first business operation of the company and has since its inception been its
primary source of operating revenue. Clinic operations were curtailed after an
inspection in February 2001. The Mexican regulators informed that clinic that it
needed additional permits to perform its major Cancer treatments. The clinic had
been inspected on three prior occasions and their operating permits reviewed
without a problem. After experiencing delay after delay in obtaining the permits
and draining the company's working capital management decided to close the
clinic. The following costs are associated with closing the clinic:
$ 64,327
Write Off Leasehold Improvements 437,416
Write Off Intangible Assets 637,500
Write Down Equipment to Liquidation Value 398,804
Employee Severance Costs 30,000
-----------------
Total Loss From Discontinued Operations $ 1,568,047
=================
13
ITEM 2 MANAGEMENT'S 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 April 30, 2002.
Overview
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 cancer patients until all the necessary protocols had been approved. In
January 2002 management closed the clinic because the timing of the approval of
the permits was uncertain and it was there were no longer funds available to
keep the clinic open.
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
expensed as research and development expenses plus the costs incurred to develop
TK-1 into a marketable product.
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.
14
Revenues
- --------
The clinic produced almost no revenue during the quarter ended and six
months ended April 30, 2002, down from $ 285,360 and $ 2,128,281 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 and nine months ended April 30, 2002
down from $ 117,682 and $ 814,178 from the same period last year. This is due to
the almost total loss of patients at the clinic. General and Administrative
expenses were $ 86,301 and $ 1,453,792 for the quarter and nine months ended
April 30, 2002 down from $ 1,153,958 and $ 7,615,582 for the same period last
year. Most of the general and administrative expenses for the prior year were
for the value of stock issued for services. Most general and administrative
expenses have been eliminated as of January 2002 due to the closing of the
clinic in Tijuana Mexico.
Liquidity
- ---------
As of April 30, 2002, the Company has very little cash and is looking
to sell its clinic equipment and sublicense some of its intellectual property.
The clinic has a potential buyer for the clinic and to sublicense TK-1
technology in Europe. Most of the employees of Biopulse have been laid off and
the remaining two employees are working for deferred salaries. These salaries
are accrued as a liability on the financial statements. There are talks with a
potential buyer of the equipment and licensee of the TK-1 technology that if the
sale is completed would be sufficient to pay the accounts payable and accrued
expenses. 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 Jonathan Neville, Officers and Directors of the company.
Seasonal Aspects
- ----------------
None
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.
15
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. Issuing 200,000 shares of stock to the plaintiff has
settled this lawsuit.
ITEM 2 CHANGES IN SECURITIES
None
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
16
SIGNATURES
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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: March 17, 2002 By: /s/ Reid Jilek
---------------------------
Reid Jilek
Chief Executive Officer
Date: June 14, 2002 By: /s/ Michael Jones
---------------------------
Michael Jones
Treasurer
Chief Financial Officer
17