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:
- ---------------------- -----------------------
January 31, 2001 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 January 31, 2001, issuer had approximately 9,458,2460 shares of
its $.001 par value common stock outstanding.
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
Pages F-3 through F-13 will directly follow.
Consolidated Balance Sheet as of January 31, 2001
and January 31, 2000 F-3
Consolidated Statement of Operations for the three
months and six months ended January 31, 2001 and 2000 F-4
Consolidated Statement of Cash Flows for the six
months ended January 31, 2001 and 2000 F-5
Notes to Financial Statements F-7
BioPulse International, Inc.
Consolidated Balance Sheet
January 31 July 31
2001 2000
------------ ------------
(unaudited)
Assets
Current Assets
Cash $1,274,597 $42,055
Accounts receivable (net of allowance for
doubtful accounts) 39,500 17,030
Inventory 73,856 77,094
Note Receivable - Employee 9,800 9,800
Note Receivable - Related Party (note 8) 13,032 19,032
Prepaid Rent, Current 135,080 133,925
------------ ------------
Total Current Assets 1,545,865 298,936
------------ ------------
Property & Equipment, Net (note 2) 1,031,584 659,729
Intangible Assets 1,479,412 -
Other Assets
Prepaid Rent - Net of Current Portion 118,593 182,749
Deposits 8,731 8,731
------------ ------------
Total Other Assets 127,324 191,480
------------ ------------
Total Assets $4,184,185 $1,150,145
============ ============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $19,922 $104,787
Accrued Expenses 19,953 30,146
Unearned Revenue 10,441 77,784
Notes Payable (note 7) - 86,000
------------ ------------
Total Current Liabilities 50,316 298,717
------------ ------------
Total Liabilities 50,316 298,717
Stockholders' Equity
Preferred Stock 3,000,000 25
Common Stock 9,458 7,329
Additional Paid In Capital 6,307,446 1,092,044
Less Subscriptions Receivable (99,266) (159,566)
Retained Earnings (5,083,769) (88,404)
------------ ------------
Total Stockholders' Equity 4,133,869 851,428
------------ ------------
Total Liabilities and Stockholders' Equity $4,184,185 $1,150,145
============ ============
See Accompanying Notes
F-3
BioPulse International, Inc.
Consolidated Statement of Operations
For the Three Months For the Six Months
Ended January 31, Ended January 31,
2001 2000 2001 2000
------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues $ 703,241 $ 908,450 $ 1,862,921 $ 1,136,658
Cost of Goods Sold 298,137 449,100 696,496 634,168
------------ ------------ ------------ ------------
Gross Profit 405,104 459,350 1,166,425 502,492
------------ ------------ ------------ ------------
Operating Expenses
General and
Administrative 5,481,987 499,224 6,161,790 777,270
------------ ------------ ------------ ------------
Total Expenses 5,481,987 499,224 6,161,790 777,270
Net (Loss) from
Operations (5,076,883) (39,874) (4,995,365) (274,778)
------------ ------------ ------------ ------------
Net (Loss) $(5,076,883) $(39,874) $(4,995,365) $(274,778)
============ ============ ============ ============
Net (Loss) Per Share $(0.54) $(0.01) $(0.59) $(0.05)
Weighted Average
Shares Outstanding 9,458,246 6,073,862 8,410,595 6,073,862
Fully diluted earnings
per share $(0.49) $(0.01) $(0.59) $(0.05)
Fully diluted weighted
average shares
outstanding 10,458,679 6,073,862 9,144,145 6,073,862
See Accompanying Notes
F-4
BioPulse International, Inc.
Consolidated Statement of Cash Flows
For the Six Months
Ended January 31,
2001 2000
------------ ------------
(unaudited) (unaudited)
Cash flows from operating activities
Net Income $(4,995,365) $ (274,778)
Adjustments to reconcile net income
to net cash provided by operations
Depreciation and amortization 88,113 15,704
(Increase) decrease in Receivables (22,470) (8,391)
(Increase) decrease in Inventory 3,238 (27,378)
(Increase) decrease in Prepaid Rent 63,001 (25,727)
Increase (decrease) in payables (84,865) (46,448)
Increase (decrease) in accrued expenses (10,193) 11,932
Increase (decrease) in unearned fees (67,343) 63,000
Stock issued for services 4,596,600 -
------------ ------------
Net cash provided by operating activities (429,284) (292,086)
------------ ------------
Cash flows from investing activities
Purchase of Equipment (379,380) (228,111)
Acquisition of Intangible assets (1,500,000) -
------------ ------------
Net cash (used) by investing activities (1,879,380) (228,111)
Cash flows from financing activities
Issued common stock for cash 1,065,000 -
Issued preferred stock for cash 2,495,906 -
Decrease in subscription receivable 60,300 780,434
Cash received from debt financing (80,000) (229,553)
------------ ------------
Net cash provided by financing activities 3,541,206 550,881
Net increase in cash 1,232,542 30,684
Cash, beginning of period 42,055 3,988
------------ ------------
Cash, end of period $ 1,274,597 $ 34,672
============ ============
See Accompanying Notes
F-5
BioPulse International, Inc.
Notes to the Financial Statements
January 31 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.
F-6
BioPulse International, Inc.
Notes to the Financial Statements
January 31, 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 2,370,000 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 July 31, 2000.
Accordingly, no tax provision has been recorded.
Deferred tax assets and the valuation account is as follows at July
31, 2000:
July 31,
Deferred tax asset: 2000
------------
NOL carrryforward $ 700,000
Valuation allowance (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 July 31, 2000 the allowance was $8,435 and
at January 31, 2001 the allowance was $3,000.
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.
F-7
BioPulse International, Inc.
Notes to the Financial Statements
January 31, 2001
NOTE 1 - Summary of Significant Accounting Policies (continued)
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. There have been no material
research and development costs incurred by the company that are not
associated with patient care. No research and development costs have
been capitalized.
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.
Property and Equipment consists of the following:
January July July
31, 2001 31, 2000 31, 1999
------------ ------------ ------------
Furniture & Equipment $ 178,247 $ 144,228 $ 20,935
Medical Equipment 720,627 543,087 110,606
Lab Equipment 142,885 - -
Leasehold improvements 125,243 44,306 4,971
Auto 4,000 - -
Accumulated Depreciation (139,418) (71,892) (11,385)
------------ ------------ ------------
Total Property & Equipment $ 1031,584 $ 659,729 $ 125,127
============ ============ ============
Depreciation expense was $60,508 and $11,385 for the years ended July
31, 2000 and 1999, respectively and $67,525 and $75,704for the six months
ended January 31, 2001 and 2000, respectively.
F-8
BioPulse International, Inc.
Notes to the Financial Statements
January 31, 2001
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 amortized over their estimated useful life or the
life of related patents whichever is shorter. The patents have a
remaining life of 17 years and 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.
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 review 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 $800,000 for the license in December 2000
Intangible assets consist of the following at January 31, 2001:
Intangible Assets $ 1,500,000
Accumulated Amortization (20,588)
------------
Total Intangible Assets $ 1,479,412
============
Amortization expense was $20,588 for the six months ended January 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.
- 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.
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.
F-9
BioPulse International, Inc.
Notes to the Financial Statements
January 31, 2001
NOTE 4 - Equity/Reverse Stock Split (continued)
During the six months ended January 31, 2001 BioPulse issued the
following:
- 25,000 shares for $3 per share.
- 60,000 shares for equipment at $1 per share.
- 353,636 shares of common stock at $2.82 per share with warrants
to purchase 189,000 shares of common stock at the lesser of
$6.375 per share and the average closing price for the five
trading days immediately prior to the effective date of this
registration statement, if this registration statement is
declared effective on or before February 19, 2001. If we do not
have an effective registration statement in place prior to
February 20, 2001, the exercise price shall be adjusted to fifty
percent of the lesser of $6.375 and the average closing price for
the five trading days immediately preceding the effective date of
this registration statement. If all of these warrants were
exercised, we would receive $1,206,902.
- 1,550,000 shares of common stock pursuant to consulting with
Livinkis Financial Communications (LFC) for investor relations
services for one year. The shares were non cancellate and 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.
- 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.
Options:
- At August 3, 2000 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,
- 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.
F-10
BioPulse International, Inc.
Notes to the Financial Statements
January 31, 2001
NOTE 4 - Equity/Reverse Stock Split (continued)
We have 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. If all of
these warrants were exercised, we would receive $1,548,120.
We also have outstanding warrants to purchase up to 150,00 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. If all of
these warrants were exercised, we would receive $1,279,500.
3,000 shares of Series B Convertible Preferred at $1,000 per share.
7% cumulative, convertible at 80% of average of the three lowest
closing bid prices during the 20 trading days immediately prior to the
conversion date.
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 Company is committed to an operating lease for clinic and office
space in Tijuana, Mexico. The lease requires the payment of $11,000
per month adjusted each March 1st by the U.S. consumer price index,
and expires February 28, 2005. For purposes of computing future
obligations a CPI increase of 3.5% is assumed. 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 January 31,
2001:
2001 $ 220,891
2002 245,392
2003 250,342
2004 150,650
2005 25,250
-----------
Total $ 951,718
===========
BioPulse entered into a contract with Aiden 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 $750,000 for the license between August 2000 and January 2000 and
as further consideration, granted 1,500,000 options described in Note 4.
Aidan is required to apply for patents and pay the expenses of
issuance of the patents.
BioPulse has paid the $750,000 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.
F-11
BioPulse International, Inc.
Notes to the Financial Statements
January 31, 2001
NOTE 5 - Commitments and Contingencies (continued)
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 review 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 $ 800,000 for the
license in December 2000 and is required to pay for further development of
the technology. It is estimated that this further development will require
an expenditure of $ 200,000. 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
==========
Under the BYU Contract, the following milestones are required to be
met:
- LICENSEE shall develop a serum ELISA diagnotic kit for the
detection of Thymidine Kinase-1 isoenzyme by December 31, 2001.
- LICENSEE shall complete clinical trials to validate the clinical
usefulness of the in vitro diagnostic ELISA test by June 30,
2002.
- LICENSEE shall submit applications for United States Food and
Drug Administration approval for the in vitro serum diagnostic
ELISA test by December 31, 2002, and shall vigorously pursue
approval of the application.
The BYU license can be terminated by BYU for non-performance of
milestones or insolvency of BioPulse.
On December 20, 2000 BioPulse entered into an engagement agreement
with Roth Capital Partners (RCP) for a private equity placement on a best
efforts basis for six months. Upon closing of the placement RCP will
receive a cash payment of 9% of the aggregate purchase price of the equity
placed plus warrants to purchase BioPulse common stock of 10% of the number
and at the price of the shares placed.
BioPulse has a contract with a Mexican MD whereby, in exchange for his
activity as the medical licensee for the clinic in Tijuana, Mexico receives
compensation of $1,500 per month. The contract also stipulates that
BioPulse receives all revenues generated by the clinic and is responsible
for all operating costs of the clinic. All of which are consolidated in
the financial statements.
F-12
BioPulse International, Inc.
Notes to the Financial Statements
January 31, 2001
NOTE 6 - Royalties
BioPulse has an agreement to pay to Mike Mower $450 in royalties per
patient who participates in a three week treatment program or $21 per day
for treatments of less than three weeks. These royalties were $24,300 and
$47,700 in the years ended July 31, 1999 and 2000 respectively and $17,800
and $15,700 in the quarters ended January 31, 2000 and 2001, respectively.
NOTE 7 - Note Payable
The Company borrowed $86,000 to be paid back on or before September 5,
2000 along with $8,600 in interest. The balance of $51,000 was repaid in
November 2000.
NOTE 8 - Note Receivable - Related Party
Notes receivable - related party are detailed as follows:
January 31, July 31,
2001 2000
----------- -----------
Note receivable from a corporation, under
common ownership, non-interest bearing,
due within one year $ 13,032 $ 19,032
----------- -----------
Total Notes receivable - Related Party $ 13,032 $ 19,032
=========== ===========
NOTE 9 - Preferred Stock
The Company has authorized five classes of Preferred Stock, each class
has 2,000,000 shares authorized at $1,000 par value. At January 31, 2001,
the Company had 3,000 shares of preferred stock outstanding.
NOTE 10 - Prepaid Rent
The lease on the clinic in Tijuana, BC, Mexico required that the funds
to build the clinic improvements be provided by the company and applied
against the rent obligation until the cost of the clinic improvements was
recovered.
F-13
ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS
Overview
BioPulse International, Inc., (the "Company" or "BioPulse") was
incorporated in the state of Nevada on July 13, 1984 originally under the
name Universal Financial Capital Corp. The Company changed its name in
September 1985 to International Sensor Technologies, Inc. As International
Sensor Technologies, Inc., the Company incurred heavy losses and no revenue
from operations. The Company also experienced five years of inactivity. On
January 12, 1999, the Company again changed its name to BioPulse
International, Inc. when it acquired BioPulse, Inc. The company is
considered to be in its early stages of market development. The company is
in the business of managing drug and rehabilitation centers, integrated
medicine clinics, and medical research programs.
BioPulse offers a variety of alternative medicinal products and
services, including dietary supplements, clinical procedures, and medical
equipment from around the world. The Company's efforts focus on treatments
for degenerative diseases such as cancer.
During 1998, BioPulse identified the initial protocols to be included
in the BioPulse treatment programs. The Company evaluated a variety of
techniques and products before determining which ones were most
appropriate. Some of the selected treatments have not yet been approved by
the United States Food and Drug Administration ("the FDA"), so they are
being studied at clinics outside the United States. The Company made
arrangements to have clinical studies done at clinics owned by licensed
physicians in Mexico and Germany that would utilize these protocols.
During 2000, the Company began expanding the scope of the treatments
it was studying to include biotech developments. The Company believes that
recent advances in biochemistry and microbiology have the potential to
explain the observable benefits of alternative medicine so that these
treatments can be optimized. At the same time, developments in biotech and
immunotherapy hold the promise of new treatments that are consistent with
the alternative medicine philosophy of improving overall health by working
with the body's natural systems to fight disease.
BioPulse believes that these technological developments can converge
with the public shift toward alternative medicine that has been recognized
by the U.S. Government and major medical associations and institutions. The
Company has focused on cancer, which is the second leading cause of death
in the United States (over 500,000 deaths annually) and costs the U.S.
economy more than $100 billion per year.
Results of Operations
The following discussion contains comments about the financial
condition of BioPulse International, Inc. for the Quarter ended January 31,
2001.
BioPulse International, Inc. restarted operations after a merger with
BioPulse Inc. during the fiscal year ended July 31, 1999. Operations began
in January 1999.
As is typical with most new businesses, there is a period of time
before the business is profitable. The market needs to be developed,
employees trained, policies and procedures fine-tuned and the Company needs
to become known and earn a reputation with its potential customers and
clients. During the first half of the fiscal year ending July 31, 2000,
BioPulse was still going through the startup process.
14
Since restarting operations, BioPulse has been refining its operations
and developing its market. BioPulse has advertised in periodicals
targeting its potential patients, rented booths at trade shows, developed a
good reputation by its results and by satisfied patients. Its fees started
low and have increased as its market developed and as demand for its
treatments has increased. BioPulse has also been developing new treatments
to offer its patients and expand its market.
During the last half of fiscal year ended July 31, 2000, the Company
became profitable. Revenues for the current quarter are $ 703,241 compared
to $908,450 for the same quarter last year and $1,862,921 for the six
months ended January 31, 2001 compared to $1,136,658 for the same period
last year. During the prior year, most patients coming to the clinic were
given IHT therapy and after analyzing the patients' response to this
therapy, it was determined which types of cancer IHT therapy showed promise
in treating and patients who did not have those types of cancer were not
offered IHT treatments. Beginning in August 2001 we began offering
dendritic cell treatments and that has replaced the revenue that was lost
from the IHT treatments being offered to fewer patients. In addition,
during the quarter ended January 31, 2000, the company recognized one-time
revenue of $350,000 from selling equipment to and training the staff at our
German affiliated clinic. After eliminating the one-time revenue, from last
year, the revenues for the quarter ended, January 31, 2001 increased over
the same period last year.
Gross profit improved during the current quarter and year to date. It
was 58% for the Quarter ended January 31, 2001 compared to 51% for the same
period last year. Gross profit was 63% for the six months ended January 31,
2001 compared to 44% for the same period last year.
Significant Elements of Income or Loss That Do Not Arise From
Continuing Operations
During the quarter ended January 31, 2001 $4,596,600 was recognized as
an expense for stock issued for services. No funds were used to pay these
expenses. The company has terminated the services early that most of this
stock was used to pay for and we are seeking a return of a significant
portion of this stock that was issued. It is not clear what if any amount
of stock will be canceled at this time.
The company also spend significant sums on travel expenses, legal
fees, consulting, printing and postage in raising capital that are included
in general and administrative expenses during the quarter ended January 31,
2001. These expenses were approximately $120,000 during the quarter.
The company wrote off as bad debts of approximately $80,000 during the
quarter. The company has been able to keep bad debts low during previous
periods of operations and has changed its policies to keep this from
happening in the future.
During the quarter ended January 31, 2001, the company acquired a
license to TK-1 diagnostic technology from Brigham Young University.
BioPulse expects to spend $200,000 in further development of the TK-1 test
during the next year and it is expected that revenues from selling the
diagnostic test kits will begin in the 1st quarter of Fiscal year ended
July 31, 2002.
Liquidity
The Company has no debt other than accounts payable, accrued expenses
and unearned revenue collected from patients. The company is very liquid.
Its current assets are $1,545,865 and its current liabilities are $50,316.
15
Known Trends
The regulatory climate is changing in Mexico after the new government
has been installed in Mexico City. More permits are required to operate
and BioPulse is in the process of acquiring these additional permits.
BioPulse has acquired some new permits and fully expects that its efforts
to acquire all permits will be successful.
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
$200,000 during the remainder of calendar year 2001.
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES
Recent Sales of Unregistered Securities.
On November 20, 2000, 1,193,500 restricted common shares were issued
to John Liviakis, 60,000 restricted common shares were issued to Liviakis
Financial Communications, Inc., Mr. Liviakis' company, 148,250 restricted
common shares were issued to Anthony Altavilla, and 148,250 restricted
common shares were issued to Jens Dalsgaard, each employees of Livakis
Financial, for consulting services on financial and public relations and
business and personnel related matters pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933. We received
no cash. These shares were not offered for sale to the public or as part
of a public distribution.
On November 20, 2000, 353,636 restricted common shares and warrants to
purchase up to an additional 189,318 restricted common shares were issued
to Kauser Partners, L.P., pursuant to an exemption from registration under
section 4(2) of the Securities Act of 1933. We received $1,000,000.
The strike price on the warrants is currently $6.375. The strike price can
be adjusted downward depending upon the date when this registration
statement becomes effective. These shares were not offered for sale to the
public or as part of a public distribution.
On November 29, 2000, 10,000 restricted common shares were issued to
Peter Kristensen, a sophisticated investor, for consulting services
pursuant to an exemption from registration under Section 4(2) of the
Securities Act of 1933. We received no cash. These shares were not
offered for sale to the public or as part of a public distribution.
16
On December 18, 2000, 40,000 restricted common shares were issued to
Edesio Biffoni, a sophisticated investor, for consulting services pursuant
to an exemption from registration under Section 4(2) of the Securities Act
of 1933. We received no cash. These shares were not offered for sale to
the public or as part of a public distribution.
On December 18, 2000, 30,000 restricted common shares were issued to
Tiger-Lewis, Inc., a sophisticated investor, for consulting services
pursuant pursuant to an exemption from registration under Section 4(2) of
the Securities Act of 1933. We received no cash. These shares were not
offered for sale to the public or as part of a public distribution.
On January 24, 2001, 3,000 restricted series B convertible preferred
shares and a warrant to purchase up to 100,000 shares of our common stock
were issued to Hunts Drive, LLC., an accredited investor in a private
placement pursuant to an exemption from registration provided by section
4(2) of the 1933 Securities and Exchange Act and provisions of Regulation
D, Rule 506 promulgated under the 1933 Act ("Regulation D"). The warrants
have an exercise price of $8.53 per share. After deducting offering costs,
we received approximately $2,660,000 in cash.
On January 24, 2001, a warrant to purchase up to 110,300 common shares
was issued to Hunts Drive, LLC., an accredited investor, pursuant to a
private equity credit agreement entered into between the parties, whereby
the Company may sell up to and additional $10,000,000 worth of its common
stock to Hunts Drive, in a private placement pursuant to an exemption from
registration provided by section 4(2) of the 1933 Securities and Exchange
Act and provisions of Regulation D, Rule 506 promulgated under the 1933 Act
("Regulation D"). The warrants have an exercise price of $8.40 per share.
On January 24, 2001, we granted warrants to Roth Capital Partners,
Inc., Anthony Soich, and Carbon Mesa Partners, to purchase up to 40,500;
4,500; and 5,000 common shares respectively. Each of these investors is
either accredited or sophisticated. These warrants were granted for
services in connection with the sale of series B convertible preferred
shares to Hunts Drive, LLC. The warrants have an exercise price of $8.53
per share. These warrants were issued pursuant to an exemption from
registration under Section 4(2) and/or 4(6) of the Securities Act of 1933.
We received no cash. These warrants were not offered for sale to the
public or as part of a public distribution.
On January 24, 2001, we granted warrants to Roth Capital Partners,
Inc., Anthony Soich, and Carbon Mesa Partners, to purchase up to 60,000;
6,600; and 7,400 common shares respectively. Each of these investors is
either accredited or sophisticated. These warrants were granted for
services in connection with the private equity credit agreement entered
into by us with Hunts Drive, LLC. These warrants were issued pursuant to
an exemption from registration under Section 4(2) and/or 4(6) of the
Securities Act of 1933. We received no cash. These warrants were not
offered for sale to the public or as part of a public distribution.
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 17
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: March 20, 2001 By: /s/ Reid Jilek
----------------------------
Reid Jilek
CEO
Date: March 20, 2001 By: /s/ Michael Jones
----------------------------
Michael Jones
Treasurer / CFO
18