SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[Mark One]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended: MARCH 31, 2004
--------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from _____to______
Commission file number: 0-30629
-------
TOTAL FIRST AID, INC.
(Name of small business issuer in its charter)
FLORIDA 65-0729332
------- ----------
(State of incorporation) (IRS employer Ident. No.)
21218 Saint Andrews Boulevard,#509
Boca Raton, FL 33433
561 912-9977
--------------
(Address and telephone number of principal executive offices)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
The number of shares outstanding of each of the issuer's classes of equity as of
March 31, 2004: 38,325,266 shares of Common Stock, $.001 par value.
Transitional Small Business Disclosure Format. Yes [ ] No [X]
TOTAL FIRST AID, INC.
TABLE OF CONTENTS
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2004
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheet (Unaudited)
as of March 31, 2004 Page 3
Condensed Consolidated Statements of Operations (Unaudited)
for the three months ended March 31, 2004 and 2003 Page 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the three months ended March 31, 2004 and 2003 Page 5
Notes to Condensed Consolidated Financial Statements Page 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Item 3. Controls and Procedures
PART II. OTHER INFORMATION
Item 2. Sale of Stock
Item 6. Exhibits and Reports on Form 8-K.
2
TOTAL FIRST AID, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2004
Current assets:
Cash $ 343,131
Accounts receivable - trade 1,797,729
Prepaid expenses 101,415
-----------
Total current assets 2,242,275
-----------
Property and equipment net 38,645
Goodwill 1,555,682
-----------
Total assets $ 3,836,602
===========
Current liabilities
Accounts payable and accrued expenses $ 1,675,500
Accounts payable - stockholders 376,587
Income taxes payable 844
-----------
Total current liabilities 2,052,931
-----------
Stockholders' equity
Capital stock, $.001 par value; 50,000,000 shares 38,618
authorized; 38,618,365 issued and outstanding
Additional Paid-in capital 1,888,045
Capital stock not issued 299,988
Retained deficit (432,538)
Accumulated other comprehensive loss (10,442)
-----------
Total stockholders' equity 1,783,671
-----------
Total liabilities and stockholders' equity $ 3,836,602
===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
TOTAL FIRST AID, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
2004 2003
------------ ------------
Consulting revenue $ 2,271,926 $ --
Direct expenses 2,075,906 --
------------ ------------
Gross profit 196,020 --
Selling, general and administrative expenses 385,385 80,000
------------ ------------
Loss from continuing operations (189,365) (80,000)
Loss from discontinued operations -- (23,288)
------------ ------------
Loss before provision for income taxes (189,365) (56,712)
Provision for Income taxes -- --
------------ ------------
Net loss $ (189,365) $ (56,712)
============ ============
Net loss per common share:
Continuing operations $ (.01) $ --
Discontinued operations -- --
------------ ------------
Net loss per common share $ (.01) $ --
============ ============
Weighted average number of common shares -
Basic and diluted, restated 37,275,799 30,677,285
============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
TOTAL FIRST AID, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
2004 2003
--------- ---------
Cash flow from operating activities:
Net loss $(189,365) $ (56,712)
--------- ---------
Adjustments to reconcile net loss to net cash used by operations
Depreciation and amortization 1,890 8,346
Foreign exchange gain 3,042 --
Changes, net of acquisition:
Increase in accounts receivable (260,195) (9,674)
Increase in inventories -- (224,783)
(Increase) decrease in prepaid expenses (22,102) 10,197
Increase (decrease) in accounts payable and accrued expenses (102,494) 106,225
--------- ---------
Total adjustments (379,859) (109,689)
--------- ---------
Net cash used by operations (569,224) (166,401)
--------- ---------
Cash flows from investing activities:
Purchase of equipment (12,787) (36,531)
--------- ---------
Cash flows from financing activities:
Borrowings (repayment) on line of credit (3,857) 200,000
Sale of common stock from private placements 591,508 --
--------- ---------
Net increase (decrease) in cash 5,640 (2,932)
Cash at beginning of period 337,491 6,071
--------- ---------
Cash at end of period $ 343,131 $ 3,139
========= =========
Cash paid for interest $ 555 $ 920
========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
TOTAL FIRST AID, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Total
First Aid, Inc. (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Regulation S-B. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three
month period ended March 31, 2004 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2004. For further
information, refer to the financial statements and footnotes for the year ended
December 31, 2003 found in the Company's Form 10-KSB.
The fiscal years ended December 31, 2004 and December 31,2003 are herein
referred to as "fiscal 2004" and "fiscal 2003", respectively.
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
On October 31, 2003, the stockholders of 3323455 Canada Inc. ("3323"), a
Canadian company, exchanged all of their issued and outstanding shares for
shares of Total First Aid, Inc. The exchange was accounted for as a
recapitalization of the Company, wherein the shareholders of 3323 retained the
majority of the outstanding stock of Total First Aid, Inc. after the merger.
(see Note 2) At the time of the acquisition, both companies were substantially
inactive. Collectively, 3323 and Total First Aid, Inc. are know as the
"Company". Additionally on October 31, 2003, the Company acquired Kischi
Konsulting Inc., 2906694 Canada Inc., and 3054276 Canada Inc, all Canadian
companies, which was accounted for as a purchase and were wholly-owned
subsidiaries of the Company. The consolidated Statements of Operations and Cash
Flows present the operations of the Company, and the acquired subsidiaries from
date of acquisition. The operations of Total First Aid, Inc. that were sold
during the year 2003 have been reflected in discontinued operations. Certain
expenses, totaling $749,090, incurred by 3323 as part of the acquisition and
reorganization have been included as recapitalization costs and reflected in the
Statement of Stockholders' Equity. During the year ended December 31, 2003,
First Aid Direct, Inc. changed its name to Total First Aid Inc. All amounts
included in the consolidated financial statements are reflected in US dollars,
except where it is indicated as Canadian dollars (CDN).
Effective March 31, 2004 3054276 Canada Inc. ("3054") and 2906694 Canada Inc.
("Centos") were "wound up" into 3323555 Canada Inc ("3332") pursuant to and in
compliance with Canadian Tax regulations. As a result of this action the
corporate existence of 3054276 Canada Inc, ("3054") and 2906694 Canada Inc.
("Centos") ceased.
(b) Business
As a result of the acquisition of our Canadian subsidiary (Kishi Konsulting
Inc.), the Company is now in the business of providing a range of information
technology consulting and outsourcing services designed to enhance
6
TOTAL FIRST AID INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
clients' business performance through the efficient and effective use of
information technology.
(c) Principles of Consolidation
The consolidated financial statements include the accounts of the Company (Total
First Aid Inc. and 3323455 Canada Inc.) and its subsidiary, Kischi Konsulting
Inc. All significant inter-company accounts and transactions have been
eliminated in consolidation.
(d) Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States (GAAP) requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying disclosures. Although these estimates are based on
management's knowledge of current events and actions it may undertake in the
future, they may ultimately differ from actual results.
(e) Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
(f) Goodwill
Goodwill represents the excess of cost over fair value of net assets acquired
through March 31, 2004. The Company had previously adopted SFAS 142 effective
January 1, 2002. With the adoption of SFAS 142, goodwill is not subject to
amortization. Rather, goodwill is subject to at least an annual assessment for
impairment by applying a fair-value based test. The Company performed an
additional fair-value based impairment test as of December 31, 2003, and no
impairment charge was deemed necessary.
(g) Revenue Recognition
The Company recognizes revenue at the time the services are rendered and
reasonable assurance exists as to the measurement of the consideration derived
from the rendering of the services.
(h) Stock-based Compensation
The Company has elected to follow Accounting Principles Board Opinion No. 25,
("Accounting For Stock Issued to Employees") ("APB No. 25"), and related
interpretations, in accounting for its employee stock based compensation rather
than the alternative fair value accounting allowed by SFAS No. 123, ("Accounting
for Stock-based Compensation"). APB No.
7
TOTAL FIRST AID INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
25 provides that the compensation expense relative to the Company's employee
stock options is measured based on the intrinsic value of the stock option. SFAS
No. 123 requires companies that continue to follow APB No. 25 to provide a
pro-forma disclosure of the impact of applying the fair value method of SFAS No.
123.
(i) Foreign Currency Translation
The accounts of the Company's foreign subsidiary are translated into U.S.
dollars. For a subsidiary where the functional currency is other than the U.S.
dollar, balance sheet accounts are translated at the exchange rate in effect at
the end of the year. Income and expense accounts are translated at the average
exchange rates in effect during the year. Resulting translation adjustments are
reflected as a separate component of stockholders' equity ("other comprehensive
income (loss)"). Realized foreign currency transaction gains and losses are
included in operations.
(j) Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure" ("SFAS 148"), amends SFAS 123,
"Accounting for Stock-Based Compensation." In response to a growing number of
companies announcing plans to record expenses for the fair value of stock
options, SFAS 148 provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS
123 to require more prominent and more frequent disclosures in financial
statements about the effects of stock-based compensation. The Statement also
improves the timeliness of those disclosures by requiring that this information
be included in interim as well as annual financial statements. In the past,
companies were required to make pro forma disclosures only in annual financial
statements. The transition guidance and annual disclosure provisions of SFAS 148
are effective for fiscal years ending after December 15, 2002, with earlier
application permitted in certain circumstances. The interim disclosure
provisions are effective for financial reports containing financial statements
for interim periods beginning after December 15, 2002.
(2) DISPOSITIONS AND ACQUISITIONS
Sale of Discontinued Operations
- -------------------------------
Effective as of the close of business on September 30, 2003, the Company f/k/a
First Aid Direct, Inc. completed the sale of substantially all of its assets to
VDC First Aid and Safety Supply, LLC, a related party. The assets disposed of
were those related to First Aid Direct's wholesale first
8
TOTAL FIRST AID INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) DISPOSITIONS AND ACQUISITIONS (Continued)
aid and safety supply business. VDC First Aid and Safety Supply is an affiliate
of Van Dyne-Crotty, Inc., who, along with its affiliates, were principal
shareholders of First Aid Direct. The sale of assets was made pursuant to the
terms and conditions of an Asset Purchase Agreement entered into on August 29,
2003. Following the closing, First Aid Direct continued to distribute its Total
First Aid and Roehampton Supply product lines. First Aid Direct changed its name
to Total First Aid, Inc. on September 30, 2003.
The purchase price for the assets disposed of is $1,215,000 and was paid at
closing. Approximately $215,000 of the purchase price was used to retire the
Company's indebtedness to Key Bank. The Company was also entitled to receive its
accounts receivable ($259,150) collected by VDC First Aid and Safety Supply
during the 120-day period following the closing. At closing, a $250,000 deposit
against those accounts receivable was paid to the Company. The Company has
recorded a gain on the sale of this product line of approximately $672,000. The
purchase price for the assets was supported by a valuation and fairness opinion
received from an unaffiliated financial consulting firm.
On October 26, 2003 the Company transferred approximately $103,000 of fixed
assets to VanDyne Crotty in exchange for VanDyne Crotty assuming the existing
facility lease, which would have obligated the Company in the amount of
$675,000, over the remaining lease term (four years and four months). The
transaction resulted in a loss of $103,000 to the Company.
On December 19, 2003, the Company disposed of the assets comprising the
Roehampton Supply Product line and the Total First Aid product line to
Roehampton Aid Corp. Roehampton Aid Corp. assumed all of the liabilities of
Total First Aid relating to the assets assigned, including all obligations
associated with the current employees of the operations transferred, and
outstanding purchase orders. The Company has recorded a loss on the disposition
of these assets of approximately $265,000.
The Company reported a net gain on these transactions of approximately $304,000,
before income taxes, in discontinued operations on their statement of operations
for the year ended December 31, 2003.
Acquisition of Subsidiaries
- ---------------------------
On October 31, 2003, the Company consummated the acquisition of 3323455 Canada
Inc. ("3323"). Simultaneous with the acquisition, 3323 acquired Kischi
Konsulting Inc. ("Kischi"), 3054276 Canada Inc. ("3054") and 2906694 Canada Inc.
("Centos"). The acquisition of 3323 was effected through a securities exchange
agreement in which the Company issued 26,692,285 shares of its common stock for
all of the issued and
9
TOTAL FIRST AID INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) DISPOSITIONS AND ACQUISITIONS (Continued)
outstanding shares of 3323. This acquisition has been accounted for as a
recapitalization of the Company. (see Note 1(a)) Kischi, 3054 and Centos were
acquired for 4,000,000 shares ($440,000) of the Company's common stock, and cash
in the amount of $1,115,682. The cash portion of the acquisition of Kischi and
the other companies was derived from a private placement of units of securities
of the Company, as well as cash on hand. The purchase price for the acquisitions
resulted from arms-length bargaining among the parties, and there was no prior
affiliation or relationship among management of the Company and the acquired
companies. The Company has accounted for this acquisition as a purchase.
The goodwill recognized at acquisition represents the actual stock issued and
cash paid in excess of the fair market value of all the net assets acquired in
the transaction.
(3) RELATED PARTY TRANSACTIONS
Consulting Agreements
- ---------------------
Effective November 1, 2003 the Company entered into a consulting agreement with
the C.E.O. for two years at a rate of $240,000 per annum, with a one year
renewal option. The Company also entered into consulting agreements with an
officer and director for two twelve month periods at a rate of $150,000 per
annum, with a twelve month renewal option, and a director for two twelve (12)
month periods providing for consulting services at a rate of $90,000 per annum,
with a twelve month renewal option.
In addition, the Company has entered into three individual consulting agreements
with shareholders of the Company who provide consulting services to Kishi
Konsulting Inc. The agreements provide for total compensation of $440,000 (CDN)
for a twelve month period, with an option of an additional twelve months.
During the three months ended March 31, 2003, 34% or $270,000 of revenue was
derived from sales to a stockholder.
Other
- -----
During the three months ended March 31, 2004, the Company's subsidiary incurred
management fees of $67,840 with companies owned by the prior directors. These
transactions are included in the normal
10
TOTAL FIRST AID INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) RELATED PARTY TRANSACTIONS (Continued)
course of operations and measured at the exchange amount, which is the amount
established and accepted by the parties.
In addition, the Company had the following transactions and balances with
related parties:
Expense reimbursement to its director for expenditures made on behalf of the
Company of $18,814. Amount included in accounts payable and accrued expenses
owed to its director and companies controlled by the director. This balance was
satisfied with common stock of the Company $195,578.
(4) STOCK OPTIONS
Had compensation cost for the Company's stock options been determined based on
the fair value at the grant dates for awards consistent with the method of SFAS
123, the Company's pro forma net loss and pro forma net loss per share would
have been as indicated below:
Three Months Ended Three Months Ended
March 31, 2004 March 31, 2003
----------------- -----------------
Net loss to common shareholders -
As reported $ (189,365) $ (56,712)
=========== ===========
Pro forma $ (895,879) $ (56,712)
=========== ===========
Basic and diluted loss per share -
As reported $ (.01) $ --
=========== ===========
Pro forma $ (.02) $ --
=========== ===========
For purposes of the preceding pro forma disclosures, the weighted average fair
value of each option has been estimated on the date of grant using the
Black-Scholes options-pricing model with the following weighted average
assumptions used for grants in 2004: no dividend yield; volatility of 126.7;
risk-free interest rate of 4% and an expected term of five years.
11
FORWARD-LOOKING STATEMENTS
Portions of this report, including disclosure under "Management's Discussion and
Analysis or Plan of Operation," contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), Section 21E of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), and the Private Securities Litigation Reform Act
of 1995, as amended. These forward-looking statements are subject to risks and
uncertainties and other factors that may cause our actual results, performance
or achievements to be materially different from the results, performance or
achievements expressed or implied by the forward-looking statements. You should
not unduly rely on these statements. Forward-looking statements involve
assumptions and describe our plans, strategies, and expectations. You can
generally identify a forward-looking statement by words such as may, will,
should, expect, anticipate, estimate, believe, intend, contemplate or project.
With respect to any forward-looking statement that includes a statement
of its underlying assumptions or bases, we caution that, while we believe such
assumptions or bases to be reasonable and have formed them in good faith,
assumed facts or bases almost always vary from actual results, and the
differences between assumed facts or bases and actual results can be material
depending on the circumstances. When, in any forward-looking statement, we or
our management express an expectation or belief as to future results, that
expectation or belief is expressed in good faith and is believed to have a
reasonable basis, but there can be no assurance that the stated expectation or
belief will result or be achieved or accomplished. All subsequent written and
oral forward-looking statements attributable to us, or anyone acting on our
behalf, are expressly qualified in their entirety by the cautionary statements.
We do not undertake any obligations to publicly release any revisions to any
forward-looking statements to reflect events or circumstances after the date of
this report or to reflect unanticipated events that may occur.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
Our primary ongoing sources of cash for operational purposes are net cash flows
from operating activities. We believe our current cash position coupled with
its cash flow forecast for the year and periods beyond, will be sufficient to
meet operational cash needs on both a short-term and long-term basis. Working
capital is $189,344 and increased from .91 to 1.00 at December 31, 2003 to 1.09
to 1.00 at March 31, 2004. Management is not aware of any known trends or
demands, commitments, events, or uncertainties, as they relate to liquidity
which could negatively affect our ability to operate and grow as planned.
With respect to our planned acquisition strategy, management believes that it
will be able to provide the necessary cash needed for subsequent acquisitions
from private placements, in addition to expected cash flows provided by ongoing
operations.
The following discussion should be read in conjunction with our Consolidated
Financial Statements and related Notes thereto, and other financial information
included elsewhere herein. Our financial statements are prepared in conformity
with U.S. GAAP.
12
Total First Aid's operations consisted of the wholesale distribution of first
aid and safety products to retail van distributors and the direct sale of those
products to end users through a direct ship operation. This changed on the close
of business September 30, 2003, when Total First Aid sold its main product line
"First Aid Direct" to VanDyne Crotty. We ceased first aid and safety operations
when we sold the residual product lines, "Roehampton Medical" and "Total First
Aid" to Roehampton Aid Corporation on December 19, 2003.
On October 31, 2003, we positioned ourselves in the Information Technology (IT)
sector with our acquisition of Kishi Konsulting Inc., a Canadian software
consulting company. The Sales and related Cost of Sales for current operations
of Kischi Konsulting are set forth in the Consolidated Financial Statements.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004.
We had consulting revenues of $2,271,926 for the three months ended March 31,
2004 from Kischi Konsulting.
Costs of Sales. The direct expenses consist primarily of the costs paid to the
consultants performing the services.
Gross Profit. Gross profit amounted to $196,020 or 9% of gross revenues.
Selling, General and Administrative Expense. The selling, general and
administrative expenses for the three months ended March 31, 2004 were $385,385
of which $304,000 reflected costs to officers and professional fees.
OTHER. No income tax expense or benefit is recorded in the three-month periods
ended March 31, 2004 and 2003.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
PLAN OF OPERATION
Kischi is a Canadian based company established in 1993 to offer professional
management IT consulting services. Kischi's mission is to provide world class,
quality and client focused management consulting services to assist its clients
improve business performance through the efficient and effective use of
Information Technology.
Kischi covers the full spectrum of Information technology professional
consulting services to the public and private sector. Kischi offers a variety of
services such as strategic IT business planning and architecture, marketing
support, systems development and maintenance, project management, project
administration, technology trend analysis, upgrading and integration services,
procurement facilitation, benchmarking and performance measurement systems,
13
outsourcing management, network planning and management, business intelligence
systems, training and human resource management. Kischi takes pride in providing
these services across any of today's technological platforms and in delivering
performance and value to its customers.
Kischi's Corporate Goals - To become a world class consulting company focusing
in the North American and European markets through a strategic acquisition
program within the next 36 months. Its products and services strategy is to
expand its core Information Technology resources with those of solid experience
Information Management and Management/Audit personnel. This strategy is in order
to meet the ever-increasing demand for quality professional informatics
services. Kischi will continue to seek out and employ highly skilled
professionals and expand its client base. Kischi's prime customer services
objective is to stay abreast of changing management policies and propose
management systems in line with outsourcing contract opportunities with leading
edge technologies. With the combination of highly skilled management and leading
edge technology and systems software, Kischi will offer very competitive cost
effective quality services to the changing market of the public sector.
Kischi's Marketing Strategy - On October 31, 2003, Kischi was acquired by Total
First Aid, Inc., (TFAI) OTCBB listed company. TFAI's aggressive business plan is
to build a world-class company through strategic acquisitions within the next 3
years. To this end Kischi and TFAI are in final negotiation stage for the
acquisition of two information Technology and Information Management companies.
It plans to acquire two more USA based companies before year-end.
Company Resources - Kischi has the benefit, as an independent professional
services firm, of focusing on matching the needs of our clients against the best
management consulting talent available. Through an alliance and partnership
capacity with hundreds of other high technology firms, Kischi can complement its
core of excellence in senior IT management advisors, IT architects and project
managers with the appropriate technical assistance to meet its clients
Information technology business requirements.
OVERVIEW
Through Kischi Konsulting, Inc., our Ottawa, Canada-based operating
subsidiary ("Kischi"), we offer a wide range of consulting and outsourcing
services designed to enhance clients' business performance through the efficient
and effective use of information technology ("IT"). Our revenues are contributed
by the operations of Kischi Konsulting, Inc. Kischi develops, implements,
supports and maintains, custom-designed systems that integrate its clients'
unique business applications with generic computer platforms and programs.
Kischi's client base, which resides predominantly in Canada, includes many
Canadian federal government departments and crown corporations, with a smaller
percentage of business being conducted with private entities working with the
Canadian federal government.
KISCHI KONSULTING, INC.
Consulting Services
-------------------
Kischi Konsulting, Inc., a Canadian corporation, has been providing IT
consulting services primarily to Canadian federal government departments and
agencies since 1994. Kischi generates revenues predominantly from fees for
consulting services relating to the design, development, implementation,
14
enhancement, support and maintenance of integrated systems that are
custom-designed for our clients. Depending upon a client's needs, Kischi's
service capabilities include:
o Strategic IT business planning and architecture.
o Custom-designed systems development, integration, enhancement, support and
maintenance.
o Custom Web applications development and maintenance.
o IT security, including information security, document management security,
security networks and user management.
o IT business continuity (contingency planning and disaster recovery).
o Utilizing XML and related technology to resolve business problems.
o Data warehousing and information management.
o Procurement facilitation.
o Training and human resource management.
o Project management, administration and team leadership.
o IT architecture and business analysis.
o Marketing support.
o Help desk support.
Consulting assignments vary as to complexity, staffing requirements and
duration. A particular project may be staffed by as few as one IT professional
to a team of from ten to twenty consultants. Project duration ranges from 30
days to two years. Kischi neither performs research and development not engages
in commercial software development or sales. All software and systems
development is performed on a contract basis, for and at the risk of our client,
and intellectual property rights to systems created during the course of
providing our services become the property of our client.
Among the recent projects Kischi has serviced or is servicing are the following:
o A CDN$2.2 million on-going assignment from Public Works and Government
Services Canada, commenced in June 2001, in which Kischi has supplied a team of
10 consultants to design and develop a Web-based case management application to
streamline the processing of requests for service.
o A CDN $2 million assignment from the Department of Finance/Financial
Analysis Tracking Center ("FINTRAC"), completed in August 2003, in which Kischi
was the lead provider of 12 highly skilled JAVA resources, who worked closely
with FINTRAC staff and other contracted resources to provide systems integration
relating to financial intelligence matters.
15
o A CDN$1.5 million on-going assignment at Revenue Canada to develop the
Paxis system. The system is comprised of a data acquisition solution (receiving
passenger information from airlines) and a passenger analysis function. Kischi
is providing Revenue Canada with team of 7 high level Java Developers to develop
this system.
o A CDN$3 million on-going assignment from the Department of Foreign Affairs
and International Trade, in which Kischi has supplied a team of 10 professionals
to support various areas of Signet (the Canadian Worldwide Embassy
Telecommunications Network), including network support, LAN support and desktop
support.
Consultants
-----------
Kischi maintains a database of over 1,500 consultants who are called
upon to provide services on an as needed basis, depending upon the requirements
of any particular consulting assignment. Kischi's database of consultants
provides it with access to a diverse set of backgrounds, skill sets, experience
and knowledge. For tax reasons, Kischi's consultants generally provide their
services through personal service corporations or similar entities. In order to
compete with larger consulting firms for significant government contracts,
Kischi often submits bid proposals as a participant in a joint venture formed
with one or more other consulting firms who, collectively, are able to service
all of the requirements of any particular project. In these instances, Kischi's
joint venture agreement is submitted along with its bidding proposal and, if
awarded, the project is that of the joint venture in which Kischi participates.
Often, but not in all instances, Kischi serves as the lead consultant in these
joint venture projects. Approximately 50% of the government projects awarded to
Kischi are serviced directly by Kischi and the other 50% are services by joint
ventures in which Kischi is a participant.
Clients
-------
Approximately 75 - 80% of our client base is comprised of Canadian
federal government departments and quasi-government agencies, with the balance
consisting of private sector organizations whose primary business operations
consist of work for federal government departments and quasi-government
agencies. Among the benefits of servicing federal government requirements is
that core government systems must be maintained irrespective of economic or
political conditions, thereby creating a steady need for systems development and
maintenance services.
Among our federal government clients are:
o Citizenship and Immigration Canada
o Revenue Canada
o Public Works and Government Services Canada
o Industry Canada (Canadian Intellectual Property Office)
o Department of Foreign Affairs and International Trade
o Department of National Defense
o Agriculture Canada
o Consulting and Audit Canada
o Department of National Defense
o Human Resources Development Canada
Our quasi-government clients include:
o Canada International Development Agency
o Immigration Refugee Board
o Treasury Board
o Bank of Canada
o Department of Finance/Financial Analyses Tracking Center
Approximately 40% of the revenues Kischi generated from government
contracts during the fiscal year ended December 31, 2003 were for services
rendered to Revenue Canada. Another approximately 40% of revenues were generated
from services rendered to other government departments, primarily the Public
Works and Government Services Canada, the Department of Foreign and
International Trade, the Department of Finance/Financial Analysis Tracking
Center and the Department of National Defense. No other client accounted for
more than 5% of our revenues
Sales And Marketing
-------------------
Kischi employs three full-time sales persons and a direct sales force of
four, and generates new business from:
o Government contracts awarded based through bid procurements.
o Referrals and word of mouth.
o Direct telephone solicitations by our in-house sales force.
o Targeted marketing.
o New assignments from existing clients.
o Government standing offers.
Competition
-----------
There is intense competition in the IT consulting market. Kischi
competes with a substantial number of consulting firms that are significantly
larger, far better capitalized and possessing greater fiscal and physical
resources than does Kischi. Among the larger competitors of Kischi are IBM,
Accenture, CGI, Fujitsu, EDS and Deloitte & Touche. Among the more mid-size
competitors of Kischi are Ajilon Consulting, Ajja Inc., Burnstand Inc.,
Systematix Inc. and Veritaaq Inc.. While there is no assurance that Kischi will
be successful in servicing its target market or that Kischi will operate
profitably, among the factors that we believe enable Kischi to effectively
compete in its industry are the following:
o Kischi management has extensive experience in the government bidding
process including the preparation of "requests for proposals" for
government projects.
o Kischi has been "pre-cleared" (site security clearance to the level of
"secret") to participate in certain government bidding processes and to
service government standing offers.
o Kischi has access to the resumes of over 1,500 consultants with a
diverse set of backgrounds, skill sets, experience and knowledge,
enabling Kischi it to effectively staff multiple consulting projects of
varying sizes and durations.
o Kischi has strong relationships with other IT consulting firms and
individuals, who are called upon from time-to-time to partner with
Kischi in joint ventures that enable Kischi to bid on larger projects
that it's size would otherwise preclude it from servicing.
o Kischi's incumbent services on current projects and its strong
reputation in the government IT consulting market well position it to be
awarded smaller government assignments not subject to the bidding
process.
17
Primary Risks
-------------
The primary risks faced by Kischi in its business are the following:
o The prospect that adverse economic conditions or political pressures
will cause constraints on government spending.
o Kischi's ability to staff multiple projects of varying complexity and
duration with qualified consultants.
o The possibility that the government will outsource its IT projects to
offshore consultants.
o The continued trend on the part of the Canadian government to contract
with larger consulting firms in an effort to reduce its risk.
o Kischi's success in recruiting new consultants away from private sector
positions.
o Growing competition to capture a portion of the lucrative federal
government IT consulting market.
EMPLOYEES
We currently employ 9 persons, on a full-time basis in clerical positions. Our
three executive officers and directors, and those of our subsidiaries provide
their services to us on a consulting basis. We also utilize the services of
approximately 90 full-time professional consultants who staff on-going
consulting assignments awarded from time to time.
ADDITIONAL RISK FACTORS FACED BY THE COMPANY
Factors, risks, and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements include, among others,
o our ability to raise capital,
o our ability obtain and retain clients,
o our ability to provide our products and services at competitive
rates,
o our ability to execute our business strategy in a very
competitive environment,
o our degree of financial leverage,
o risks associated with our acquiring and integrating companies
into our own,
o risks relating to rapidly developing technology and providing
services over the Internet;
o risks related to international economies,
o risks related to market acceptance and demand for our services,
o the impact of competitive services,
o risks associated with economic conditions and continued weakness
in the U. S. securities market,
o other risks referenced from time to time in our SEC filings.
18
ITEM 3. CONTROLS AND PROCEDURES.
Disclosure controls and procedures [as defined in Rule 13(a)-15(e) of the
Securities Exchange Act of 1934 (the "Exchange Act")] are designed to ensure
that information required to be disclosed in the reports filed or submitted
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in applicable laws, rules and regulations. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in the reports
filed under the Exchange Act is accumulated and communicated to management,
including the Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. Given the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. Further, the design of a control system must
reflect the fact that there are resource constraints, and that benefits of
controls must be considered relative to their costs. The design of any system of
controls is also based in part on certain assumptions regarding the likelihood
of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions.
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based upon and as of the date of that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures are effective to ensure
that information required to be disclosed in the reports the Company files and
submits under the Exchange Act is recorded, processed, summarized and reported
as and when required.
(b) Changes in Internal Controls
There were no changes in the Company's internal controls or in other factors
that could have significantly affected those controls subsequent to the date of
the Company's most recent evaluation.
19
PART II. OTHER INFORMATION
ITEM 1. CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
SECURITIES.
During the three months ended March 31, 2004:
(a) the Company sold 954,267 shares of common stock and warrants to
purchase 477,134 shares of common stock to six accredited investors for an
aggregate purchase price of $238,567; each warrant entitles the holder to
purchase one share of common stock for $.30 per share during the 3 year period
from the date of sale;
(b) The Company sold 352,941 shares of common stock and warrants to
purchase 352,941 shares of common stock to three accredited investors for an
aggregate purchase price of $300,000; each warrant entitles the holder to
purchase one share of common stock for $1.00 per share during the 3 year
period from the date of sale;
(c) the Company issued 6,000 shares of common stock to counsel to the Company
for legal services rendered; and
(d) the Company issued 10,000 shares of common stock to an unrelated third party
as consideration for fixed assets acquired.
In each of the foregoing transactions, each of the investors (a) had access to
business and financial information about us, (b) was an accredited invesor
within the meaning of Rule 501(a) of Regulation D and had such experience in
business and financial matters so that it was able to evaluate the risks and
merits of an investment in us, (c) acknowledged that the securities were not
registered under the Securities Act of 1933 and could not be transferred except
in compliance with applicable securities laws, and (d) received securities
bearing a legend describing the restrictions referred to in clause (c) above. No
placement agent or broker dealer participated in the transaction and no
commissions or similar compensation was paid. The transactions were exempt from
the registration requirements of the Securities Act of 1933 by reason of Section
4(2) thereof and the rules and regulations thereunder.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits
31.1 Certification Pursuant to Rule 13(a)-15(e) or 15d-15e of the
Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification Pursuant to Rule 13(a)-15(e) or 15d-15e of the
Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K/A
On February 17, 2004 the Company filed a FORM 8K/A to include the
Financials Statements and pro forma financial information from our acquisition
of 3323455 Canada Inc. and Kischi Konsulting Inc.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TOTAL FIRST AID INC
A FLORIDA CORPORATION
Date: May 17, 2004 By /s/ Michel L. Marengere
- -------------------- ------------------------------
Michel L. Marengere CEO
(Principal Executive Officer)
21