U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: September 30, 2003
Commission file no.: 33-25126-D
Bio-Solutions International, Inc.
--------------------------------------
(Name of Small Business Issuer in its Charter)
Nevada 85-0368333
- ------------------------------------ -----------------------
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
1161 James Street
Hattiesburg, MS 39402
- ---------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (601) 582-4000
Securities registered under Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
None None
- ----------------------------------- ----------------------------
Securities registered under Section 12(g) of the Act:
Common Stock, $0.0001 par value per share
----------------------
(Title of class)
Copies of Communications Sent to:
Wayne Hartke
The Hartke Building
7637 Leesburg Pike
Falls Church, VA 22043
Indicate by Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [_]
As of September 30, 2003, there were 57,754,083 shares of voting stock of the
registrant issued and outstanding.
SAFE HARBOR STATEMENT
This quarterly report on Form 10-QSB includes forward-looking statements. All
statements, other than statements of historical fact made in this Quarterly
Report on Form 10- QSB are forward-looking. In particular, the statements herein
regarding industry prospects and future results of operation or financial
position are forward-looking statements. Forward-looking statements reflect
management's current expectations based on assumptions believed to be reasonable
and are inherently uncertain as they are subject to various known and unknown
risks, uncertainties and contingencies, many of which are beyond the control of
Bio-Solutions International, Inc. The Company's actual results may differ
significantly from management's expectations.
In some cases, you can identify forward-looking statements by terminology such
as "may", "will", "should," "expects," "plans," "intends," "anticipates,"
"believes," "estimates," "predicts," "potential," or "continue" or the negative
of such terms or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, events, levels of
activity, performance, or achievements. We do not assume responsibility for the
accuracy and completeness of the forward- looking statements. We do not intend
to update any of the forward-looking statements after the date of this quarterly
report to conform them to actual results.
The following financial information and discussion and analysis should be read
in conjunction with the Company's Annual Report and Amended Annual Report on
Form 10-KSB for the year ended June 30, 2003.
The discussion of results, causes and trends should not be construed to imply
that such results, causes or trends will necessarily continue in the future.
PART I
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Consolidated Balance Sheets..................................................F-2
Consolidated Statements of Operations........................................F-3
Consolidated Statements of Stockholders' Deficiency..........................F-4
Consolidated Statements of Cash Flows........................................F-5
Notes to Consolidated Financial Statements...................................F-6
F-1
Bio-Solutions International, Inc.
Consolidated Balance Sheets
Three Months Ended Year Ended
September 30, June 30,
2003 2003
--------------------- -------------------
(unaudited) (restated)
ASSETS
CURRENT ASSETS
Cash $ 6,979 $ 0
Accounts receivable - trade 40,835 19,295
Inventory 41,499 31,963
--------------------- -------------------
Total current assets 89,313 51,258
--------------------- -------------------
PROPERTY AND EQUIPMENT
(Net of accumulated depreciation of $69,661and
$59,895 at 9/30/03 and 6/30/03, respectively) 347,311 357,077
--------------------- -------------------
Total property and equipment 347,311 357,077
--------------------- -------------------
OTHER ASSETS
Security deposits 3,000 3,000
Product formulation 50,000 50,000
--------------------- -------------------
Total other assets 53,000 53,000
--------------------- -------------------
Total Assets $ 489,624 $ 461,335
===================== ===================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Bank Overdraft $ 0 $ 6,860
Accounts payable 512,312 492,410
Deposits held 115,000 50,000
Prepaid franchise sale income 26,807 27,567
Capitalized lease payable 5,051 5,284
Notes and loan payable 410,102 411,902
--------------------- -------------------
Total current liabilities 1,069,272 987,163
--------------------- -------------------
Total Liabilities 1,069,272 987,163
--------------------- -------------------
STOCKHOLDERS' DEFICIENCY
Common stock, $0.0001 par value, authorized
100,000,000; 57,379,083 and 57,754,083
shares issued and outstanding, respectively 5,775 5,738
Additional paid-in capital 1,694,508 1,690,795
Accumulated deficit (2,279,931) (2,222,361)
--------------------- -------------------
Total stockholders' deficit (579,648) (525,828)
--------------------- -------------------
Total Liabilities and Stockholders' Deficit $ 489,624 $ 461,335
===================== ===================
The accompanying notes are an integral part of the financial statements
F-2
Bio-Solutions International, Inc.
Consolidated Statements of Operations
Three Months Ended September 30, 2003 and 2002
(Unaudited)
2003 2002
--------------------- ----------------------
REVENUES
Sales of franchises $ 6,423 $ 46,600
Product and service sales 68,560 83,654
--------------------- ----------------------
Total revenues 74,983 130,254
--------------------- ----------------------
EXPENSES
Cost of products 30,274 82,351
Operating expenses 90,701 253,262
--------------------- ----------------------
Total expenses 120,975 335,613
--------------------- ----------------------
Net income (loss) before other income (expense)
and provision for income taxes (45,992) (205,359)
--------------------- ----------------------
OTHER INCOME (EXPENSE):
Interest expense (11,578) (3,593)
--------------------- ----------------------
Total other income (expense) (11,578) (3,593)
--------------------- ----------------------
Net income (loss) before provision for income taxes (57,570) (208,952)
--------------------- ----------------------
Provision for income taxes 0 0
--------------------- ----------------------
Net income (loss) $ (57,570) $ (208,952)
===================== ======================
Net income (loss) per weighted average share, basic $ (0.01) $ (0.01)
===================== ======================
Weighted average number of shares 57,680,713 50,168,554
===================== ======================
The accompanying notes are an integral part of the financial statements
F-3
Bio-Solutions International, Inc.
Consolidated Statements of Stockholders' Deficit
Additional Total
Number of Common Paid-in Deferred Stockholders'
Shares Stock Capital Compensation Deficit Deficiency
-------------- ---------- ------------- ------------- -------------- -------------
BEGINNING BALANCE, June 30, 2000 90,021 9 $ 1,754,727 $ (9,407)$ (1,870,329) $ (125,000)
10/00-shares issued to settle
accounts payable 939 1 93,879 0 0 93,880
11/00-shares issued in exchange for
options 1,947 2 194,656 0 0 194,658
02/01-shares issued for services 18,300,000 1,830 181,970 0 0 183,800
02/01-acquisition of PSM 11,140,020 1,114 (1,943,376) 9,407 1,508,346 (424,509)
S-8 stock for services 9,370,000 937 92,763 0 0 93,700
144 stock for services 105,000 10 1,040 0 0 1,050
Shares issued for cash 1,214,285 121 250,379 0 0 250,500
05/01-asset acquisition 12,859,980 1,285 0 0 0 1,285
06/01-cancellation of shares (15,692,910) (1,570) 1,570 0 0 0
Net loss 0 0 0 0 (454,522) (454,522)
-------------- ---------- ------------- ------------- -------------- -------------
BALANCE, June 30, 2001 37,389,282 3,739 627,608 0 (816,505) (185,158)
Shares issued for cash 300,000 30 19,970 0 0 20,000
Shares issued for services 4,657,500 466 462,293 0 0 462,759
Shares issued for equipment 800,000 80 7,920 0 0 8,000
Shares issued for debt 3,553,910 355 355,036 0 0 355,391
Shares issued for business acquisition 3,467,862 347 103,689 0 0 104,036
Net loss 0 0 0 0 (1,053,350) (1,053,350)
-------------- ---------- ------------- ------------- -------------- -------------
BALANCE, June 30, 2002 50,168,554 5,017 1,576,516 0 (1,869,855) (288,322)
Shares issued for debt 210,526 21 39,979 0 0 40,000
Shares issued for services 7,000,000 700 74,300 0 0 75,000
Net loss 0 0 0 0 (377,506) (377,506)
-------------- ---------- ------------- ------------- -------------- -------------
BALANCE, June 30, 2003 57,379,080 5,738 1,690,795 0 (2,222,361) (550,828)
Shares issued to settle business dispute 375,000 37 3,713 0 0 3,750
Net loss 0 0 0 0 (57,570) (57,570)
-------------- ---------- ------------- ------------- -------------- -------------
ENDING BALANCE, September 30, 2003,
(unaudited) 57,754,080 $ 5,775 $ 1,694,508 $ 0 $ (2,279,931)$ (604,648)
============== ========== ============= ============= ============== =============
The accompanying notes are an integral part of the financial statements
F-4
Bio-Solutions International, Inc.
Consolidated Statements of Cash Flows
Three Months Ended September 30, 2003 and 2002
(Unaudited)
2003 2002
----------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (57,570) $ (208,952)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 9,766 9,008
Stock issued for dispute 3,750 0
Reduction of note payable for purchases 0 0
Changes in operating assets and liabilities:
(Increase) in accounts receivable (17,240) (65,126)
(Increase) decrease in inventory (9,536) 58,328
(Increase) in security deposits 0 (500)
Increase in deposits held 65,000 0
Increase in accounts payable 19,902 254
Increase in accrued compensation - related parties 0 74,400
Prepaid franchise sale income 0 10,000
----------------- ---------------
Net cash used for operating activities 14,072 (122,588)
----------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets 0 (13,331)
----------------- ---------------
Net cash used by investing activities 0 (13,331)
----------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capitalized lease (233) 0
Proceeds of note payable 0 122,500
Bank Overdraft (6,860) 6,860
----------------- ---------------
Net cash provided by financing activities (7,093) 129,360
----------------- ---------------
Net increase (decrease) in cash 6,979 (6,559)
CASH, beginning of period 0 20,334
----------------- ---------------
CASH, end of period $ 6,979 $ 13,775
================= ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-Cash Financing Activities:
Stock issued to settle dispute $ 3,750 $ 0
================= ===============
Taxes paid in cash $ 0 $ 0
================= ===============
Interest expense paid in cash $ 0 $ 0
================= ===============
The accompanying notes are an integral part of the financial statements
F-5
Bio-Solutions International, Inc.
Notes to Consolidated Financial Statements
(Information with regard to September 30, 2003
and 2002 is unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES
Organization and operations
Septima Enterprises, Inc. (Company) was incorporated on September 12, 1988
under the laws of the State of Colorado for the purpose of acquiring
interests in other business entities and commercial technologies.
Operations to date have consisted of acquiring capital, evaluating
investment opportunities, acquiring interests in other businesses and
technologies, establishing a business concept, conducting research and
development activities, and manufacturing.
The Company, due to the unsuccessful nature of its initial operations,
ceased all operations in February 1998. In September 1998, creditors of the
Company were successful in obtaining a judgment against the Company for
unpaid debts. In October 1998, the Company was subject to a Judicial Sale
whereby all assets of the Company were sold in satisfaction of the
September 1998 judgment. Accordingly, the aggregate adjusted balance of
open trade payables, as of December 31, 2000, of approximately $134,000 was
the only remaining identifiable liability of the Company.
During the first quarter of Fiscal 2001, the Company's legal counsel began
to negotiate the settlement of the outstanding trade accounts payable. As a
result of these efforts, the Company was able to negotiate settlements
during the second quarter of Fiscal 2001, using cash, the Company's
restricted and unregistered common stock and combinations thereof, to
satisfy approximately $122,700 of open trade payables Additionally,
unaffiliated third parties have agreed to assume the remaining
approximately $11,000 of trade payables owed to unlocated vendors.
The Company held a Special Meeting of the Shareholders on January 22, 2001.
The shareholders approved the following items: 1) Authorized the Company to
effect a 1 for 100 reverse split of the Company's issued and outstanding
common stock as of February 5, 2001; 2) authorized the Company to
reincorporate in the State of Nevada thereby changing the corporate
domicile from Colorado to Nevada; and 3) approved changing the par value of
the common shares from no par value to $0.0001 per share. The effects of
these actions are reflected in the accompanying financial statements as of
the first day of the first period presented.
The Company changed its state of incorporation from Colorado to Nevada by
means of a merger with and into a Nevada corporation formed on January 26,
2001 solely for the purpose of effecting the reincorporation. The
Certificate of Incorporation and Bylaws of the Nevada corporation are the
Certificate of Incorporation and Bylaws of the surviving corporation. Such
Certificate of Incorporation changed the Company's name to Bio- Solutions
International, Inc. and modified the Company's capital structure to allow
for the issuance of 101,000,000 total equity shares consisting of 1,000,000
shares of $0.001 par value preferred stock and 100,000,000 shares of common
stock, with a par value of $0.0001 per share.
Principles of consolidation
The consolidated financial statements include the accounts of
Bio-Solutions International, Inc. and its wholly- owned subsidiaries,
Biosolutions Franchise Corporation. All intercompany transactions have
been eliminated.
F-6
Bio-Solutions International, Inc.
Notes to Consolidated Financial Statements
(1) SIGNIFICANT ACCOUNTING POLICIES (Continued)
Acquisitions
On February 14, 2001, the Company and Paradigm Sales & Marketing
Corporation (a privately-owned Florida corporation), and the
individual holders of all of the outstanding capital stock of Paradigm
Sales & Marketing Corporation (Holders) entered into a reverse
acquisition transaction (Reorganization) pursuant to a certain Share
Exchange Agreement (Agreement) of such date. Pursuant to the
Agreement, the Holders tendered to the Company all issued and
outstanding shares of common stock of Paradigm Sales & Marketing
Corporation in exchange for 11,140,020 shares of post-reverse split
restricted, unregistered common stock of the Company. The
reorganization was accounted for as a reverse acquisition.
In May 2001, the Company and Biosolutions International, Inc. (A New
Jersey corporation) entered into an Asset Acquisition Agreement
whereby all the assets were acquired. Upon allocation of the value
ascertained to the 12,859,980 shares issued, $1,260 of goodwill
resulted from the transaction.
On January 21, 2002, the Company and H3O Holding Corp., (a Delaware
corporation), entered into an asset purchase agreement. Pursuant to
this agreement, the Company issued 3,467,862 shares of restricted
stock, in February 2002, for the assets of "H3O", a water beverage
business. The assets acquired consists of the following: inventory of
finished goods, registered and unregistered trademarks, trade names,
customer list and the formulations and recipes to produce the water
products. The common stock of the Company was held in escrow until
June 2002, at which time all provisions of the agreement were
satisfied.
Revenue Recognition
The Company's revenue is derived primarily from the sale of its
products to its franchised distributors upon shipment of product.
Additionally, the Company receives income from the sale of its
franchises for exclusive rights for specific geographical territories.
This income is recognized upon receipt for the initial down-payment.
The balance of the unpaid franchise fee is realized by adding a
premium to product purchases of the franchisee.
Stock-based compensation
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, which establishes a fair value based method
for financial accounting and reporting for stock-based employee
compensation plans and for transactions in which an entity issues its
equity instruments to acquire goods and services from non-employees.
However, the new standard allows compensation to employees to continue
to be measured by using the intrinsic value based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, but requires expanded disclosures. The
Company has elected to continue to apply to the intrinsic value based
method of accounting for stock options issued to employees.
Accordingly, compensation cost for stock options is measured as the
excess, if any, of the estimated market price of the Company's stock
at the date of grant over the amount an employee must pay to acquire
the stock. No compensation expense has been recorded in the
accompanying statements of operations related to stock options issued
to employees. All transactions in which goods or services are the
consideration received for the issuance of equity instruments are
accounted for based on the fair value of the consideration received or
the fair value of the equity instruments issued, whichever is more
reliably measurable.
F-7
Bio-Solutions International, Inc.
Notes to Consolidated Financial Statements
(1) SIGNIFICANT ACCOUNTING POLICIES (Continued)
Net loss per share
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and
common stock equivalents (primarily outstanding options and warrants).
Common stock equivalents represent the dilutive effect of the assumed
exercise of the outstanding stock options and warrants, using the
treasury stock method. The calculation of fully diluted earnings
(loss) per share assumes the dilutive effect of the exercise of
outstanding options and warrants at either the beginning of the
respective period presented or the date of issuance, whichever is
later.
Income taxes
Deferred income taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carry-forwards and
deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.
Fair value of financial instruments
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments: Cash, accounts
receivable and accounts payable. The carrying amounts approximated
fair value because of the demand nature of these instruments.
Organization and start-up costs
In accordance with Statement of Position 98-5, the organization and
start-up costs have been expensed in the period incurred.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Inventory
Inventory is stated at the lower of cost or market.
F-8
Bio-Solutions International, Inc.
Notes to Consolidated Financial Statements
(1) SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts receivable
Represents amounts due from franchisees for its products.
Substantially all amounts are expected to be collected within one
year. The Company has set up an allowance of $1,500 for bad debts.
Interim financial information
The financial statements for the three months ended September 30, 2003
and 2002 are unaudited and include all adjustments which in the
opinion of management are necessary for fair presentation, and such
adjustments are of a normal and recurring nature. The results for the
three months are not indicative of a full year results.
(2) PROPERTY AND EQUIPMENT
The cost of property and equipment is depreciated using the
straight-line method over the estimated useful lives of the various
assets.
September 30, June 30,
2003 2003
---------------- ------------------
Machinery and equipment $ 127,518 $ 121,518
Office furniture and equipment 35,579 35,579
Leasehold improvements 253,875 253,875
---------------- ------------------
416,972 410,972
Less: Accumulated depreciation (69,661) (59,895)
---------------- ------------------
$ 347,311 $ 351,077
================ ==================
The depreciation expense for the three months ended September 2003 and
2002 was $ 9,766 and $9,008, respectively.
(3) INCOME TAXES
In accordance with FASB 109, deferred income taxes and benefits are
provided for the results of operations of the Company. As of September
30, 2002, the Company has incurred cumulative net operating losses of
approximately $2,174,000. At this time, due to the uncertainty of
future profitable operations, a valuation allowance of 100% will be
reflected as an offset against the tax benefit attributed to this
loss. This potential tax benefit may be carried forward for up to
twenty years.
(4) CAPITAL TRANSACTIONS
On October 10, 2000, the Company issued an aggregate 939 post-reverse
split shares (93,880 pre-reverse split shares) of the Company's
restricted, unregistered common stock in settlement of outstanding
trade accounts payable in the amount of approximately $93,880.
In February 2001, the Company changed its state of incorporation from
Colorado to Nevada by means of a merger with and into a Nevada
corporation formed on January 26, 2001 solely for the purpose of
effecting the reincorporation. The Certificate of Incorporation and
Bylaws of the Nevada corporation are the Certificate of Incorporation
and Bylaws of the surviving corporation. Such Certificate of
Incorporation changed the Company's name to Bio-Solutions
International, Inc. and modified the Company's capital structure to
allow for the issuance of 100,000,000 total equity shares consisting
of no shares of preferred stock and 100,000,000 shares of common
stock. Both classes of stock have a par value of $0.0001 per share.
F-9
Bio-Solutions International, Inc.
Notes to Consolidated Financial Statements
(4) CAPITAL TRANSACTIONS (Continued)
On February 13, 2001, the Company issued an aggregate 6,300,000
post-reverse split shares of restricted, unregistered common stock for
professional consulting services related to the reinitialization of
the Company, preparation of all delinquent SEC filings and search
activities related to the potential acquisition of a privately- owned
operating entity. This transaction was valued at an estimated "fair
value" of $0.01 per share, or $63,000.
On February 16, 2001, the Company filed with the Securities and
Exchange Commission a Form S-8 Registration Statement. The
Registration Statement registered 12,000,000 post-reverse split shares
of the Company's common stock, reserved for the Company's Year 2001
Employee/Consultant Stock Compensation Plan for the Company's current
employees, directors, consultants and advisors. Through September 30,
2002, a total of 12,000,000 shares under this Registration Statement
have been issued.
In February 2001, the Company issued 11,140,000 shares of restricted
common stock in the reverse acquisition with Paradigm Sales and
Marketing, Inc.
On March 14, 2001, the Company issued 100,000 shares of restricted
common stock as a sign-on bonus in conjunction with an employment
agreement.
On May 1, 2001, the Company exchanged 12,859,980 restricted shares of
common stock for the assets and liabilities of Biosolutions
International, Inc. (a New Jersey Co.).
On May 10, 2001, the Company issued 5,000 post-reverse split shares of
restricted, unregistered common stock for consulting services valued
at $50.
On June 7, 2001, two (2) stockholders agreed to return to treasury
15,692,910 restricted shares of common stock. No consideration was
given for these shares.
For the period July through September 2001, the Company issued 650,000
shares of S-8 common stock for services.
In September 2001, the Company received $40,000 for 210,526 restricted
shares of common stock.
In September 2001, the Company issued 800,000 restricted shares of
common stock for a mobile laboratory.
In October 2001, the Company issued 450,000 shares of S-8 common stock
for services.
In December 2001, the Company issued 300,000 shares of restricted
common stock for $20,000 in cash.
In December 2001, the Company issued 1,200,000 shares of S-8 common
stock for services.
In December 2001, the Company issued 1,270,000 shares of restricted
common stock for services.
In December 2001, the Company issued 3,554,560 shares of restricted
common stock to convert $355,391 of Notes Payable and accrued interest
from related parties.
In January 2002, the Company issued 100,000 shares of S-8 common stock
for services.
In February 2002, the Company issued 252,500 shares of restricted
common stock for services.
F-10
Bio-Solutions International, Inc.
Notes to Financial Statements
(4) CAPITAL TRANSACTIONS (Continued)
In April 2002, the Company issued 400,000 shares of restricted common
stock for services.
In May 2002, the Company issued 7,500 shares of restricted common
stock for services.
In June 2002, the Company issued 300,000 shares of S-8 common stock
for services.
In June 2002, the Company released from escrow 3,467,862 shares of
previously issued common stock for the acquisition of assets.
In October 2002, the Company issued 210,526 shares of restricted
common stock to satisfy $40,000 of advances made by a stockholder.
In October 2002, the Company issued 2,000,000 shares of restricted
common stock to a stockholder for his services.
In April 2003, the Company issued 5,000,000 shares of restricted
common stock to 5 stockholders for their services.
In July 2003, the Company issued 375,000 shares of restricted common
stock valued at $3,750 to settle a business dispute.
(5) STOCK OPTIONS
During the second quarter of Fiscal 2001, the Company negotiated the
surrender and cancellation of approximately 12,270 issued and
outstanding options to purchase shares of the Company's common stock
at prices ranging between $2.00 and $100.00 per share, expiring
through January 2004, in exchange for the issuance of an aggregate
1,946 shares of restricted, unregistered common stock. The common
stock was issued at an exchange rate of approximately 12.42% of the
issued and outstanding options cancelled.
The fair value of each option grant is estimated on the date of grant
using the present value of the exercise price with the following
weighted-average assumptions used for grants in 1997: risk-free
interest rates of 7.5 percent; expected lives of 5 to 10 years, no
dividends and price volatility of 30%. The weighted average remaining
life of the options outstanding is 3 years, as of June 30, 2002.
At June 30, 2003, the Company had no stock options outstanding, as the
last of the previously issued options expired worthless during fiscal
2003.
6) RELATED PARTIES
On May 16, 2001, the Company entered into an employment agreement with
a shareholder commencing May 1, 2001 for a term of five (5) years. In
addition, there is a sign-on bonus of 100,000 shares of restricted
common stock and an additional 100,000 shares upon completion of the
manufacturing of a specific quality of product. The annual
compensation is fixed at $60,000 per annum.
On January 3, 2000, the Company's wholly-owned subsidiary entered into
an employment agreement with a shareholder for a term of five (5)
years. The Company pays or accrues compensation of $5,500 per month.
F-11
Bio-Solutions International, Inc.
Notes to Financial Statements
(6) RELATED PARTIES, continued
The Company entered into an informal compensation agreement with a
shareholder for consulting and marketing services to the Company.
Services are being accrued at $5,500 per month.
The Company entered into informal compensation agreements with other
shareholders for consulting and marketing services to the Company.
(7) LEASE COMMITMENTS
On April 29, 2002, the Company executed a lease agreement for an
office and warehouse facility commencing May 1, 2002 for a term of
five (5) years. An officer and director owns one-third of the entity
which owns the leased facility.
Future minimum rentals are as follows:
2004 $ 36,000
2005 36,000
2006 36,000
2007 12,000
The rent expense for the three months ended September 30, 2003 and
2002 was $9,000, respectively.
(8) NOTES AND LOANS PAYABLE
9/30/03 6/30/03
------------ -------------
Unsecured promissory note, bearing interest
at 10% per annum, convertible into restricted
shares of common stock at $.10 per share. $ 410,102 $ 411,902
(9) GOING CONCERN
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company's financial
position and operating results raise substantial doubt about the
Company's ability to continue as a going concern, as reflected by the
net loss of $2,174,000 accumulated through September 30, 2003. The
ability of the Company to continue as a going concern is dependent
upon commencing operations, developing sales and obtaining additional
capital and financing. The financial statements do not include any
adjustments that might be necessary if the Company is unable to
continue as a going concern.
(10) SUBSEQUENT EVENTS
The Company is currently negotiating an agreement to sell the
manufacturing portion of its business and the associated assets. The
purchase price is expected to include cash, notes, assumption of
certain liabilities and common stock of a public company. The Company
received $50,000 toward the purchase price at June 30, 2003.
(11) CONTINGENCY
The Company has been notified that a franchisee, BioSolutions of
Northern Virginia, Inc., has sought to file a complaint with the
Commonwealth of Virginia alleging breach of contract and
misrepresentation resulting in damages. Legal Counsel has estimated
that the claim can be settled for approximately $30,000.
On October 8, 2003, the Commonwealth of Virginia filed a "show cause"
order due to non-registration of the franchising activities in
Virginia. The state allegations include various violations of the
"Virginia Retail Franchising Act." The probable outcome will be that
the Company comply with the registration requirements, refund of
franchise fees received in Virginia and to withdraw from the state.
F-12
Item 2. Management's Discussion and Analysis
THE FOLLOWING ANALYSIS OF THE OPERATIONS AND FINANCIAL CONDITION OF THE COMPANY
SHOULD BE READ IN CONJUNCTION WITH THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, OF THE COMPANY CONTAINED ELSEWHERE IN
THIS FORM 10-QSB.
General
The Company relied upon Section 4(2) of the Securities Act of 1933, as amended
(the "Act") and Rule 506 of Regulation D promulgated thereunder ("Rule 506") for
several transactions regarding the issuance of its unregistered securities. In
each instance, such reliance was based upon the fact that (i) the issuance of
the shares did not involve a public offering, (ii) there were no more than
thirty-five (35) investors (excluding "accredited investors"), (iii) each
investor who was not an accredited investor either alone or with his purchaser
representative(s) has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the prospective
investment, or the issuer reasonably believes immediately prior to making any
sale that such purchaser comes within this description, (iv) the offers and
sales were made in compliance with Rules 501 and 502, (v) the securities were
subject to Rule 144 limitation on resale and (vi) each of the parties is a
sophisticated purchaser and had full access to the information on the Company
necessary to make an informed investment decision by virtue of the due diligence
conducted by the purchaser or available to the purchaser prior to the
transaction (the "506 Exemption").
In July 2003, the Company issued 375,000 shares of its restricted common stock
to Michael Motola in exchange for settlement of a contract dispute valued at
$3,750. For such offering, the Company relied upon the 506 Exemption.
Discussion and Analysis
The discussion contained herein reflects the Results of Operations of the
Company for the three months ended September 30, 2003 and 2002. The following
discussion and analysis should be read in conjunction with the financial
statements of the Company and the accompanying notes appearing in the previous
section. The following discussion and analysis contains forward-looking
statements, which involve risks and uncertainties in the forward-looking
statements. The Company's actual results may differ significantly from the
results, expectations and plans discussed in the forward-looking statements.
The Company's growth is expected to come primarily from the distribution and
sale of its bioremediation products and through the sale of franchises. This
pattern of growth will closely correlate to increased sales.
In February 2001, the Company acquired one hundred percent (100%) of the issued
and outstanding common stock of BSFC in exchange for 11,140,020 shares of the
Company's restricted common stock, such that BSFC became a wholly-owned
subsidiary of the Company. Prior thereto, the Company's Board of Directors was
expanded by consent of the existing Directors and Louis H. Elwell, III, June
Nichols Sweeney, Senator R. Vance Hartke, Dr. Krish Reddy and Joe Ashley were
appointed to fill the vacancies until the next meeting of the shareholders.
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In June 2001, the Company filed a Current Report on Form 8-K disclosing that the
Company had purchased all of the assets and liabilities of BSI in exchange for
12,859,980 shares of the Company's restricted common stock in May 2001.
Since acquiring BSFC and the assets and liabilities of BSI, the Company has
begun to make preparations for a period of growth, which may require it to
significantly increase the scale of its operations. This increase will include
the hiring of additional personnel in all functional areas and will result in
significantly higher operating expenses. The increase in operating expenses is
expected to be matched by a concurrent increase in revenues. However, the
Company's net loss may continue even if revenues increase. Expansion of the
Company's operations may cause a significant strain on the Company's management,
financial and other resources. The Company's ability to manage recent and any
possible future growth, should it occur, will depend upon a significant
expansion of its accounting and other internal management systems and the
implementation and subsequent improvement of a variety of systems, procedures
and controls. There can be no assurance that significant problems in these areas
will not occur. Any failure to expand these areas and implement and improve such
systems, procedures and controls in an efficient manner at a pace consistent
with the Company's business could have a material adverse effect on the
Company's business, financial condition and results of operations. As a result
of such expected expansion and the anticipated increase in its operating
expenses, as well as the difficulty in forecasting revenue levels, the Company
expects to continue to experience significant fluctuations in its revenues,
costs and gross margins, and therefore its results of operations.
The Company's principal place of business is 1161 James St., Hattiesburg, MS
39402, and its telephone number at that address is (601) 582-4000. The Company
is quoted on the Over the Counter Bulletin Board ("OTCBB") under the symbol
"BSII".
Results of Operations -For the Three Months Ended September 30, 2003 and 2002
Financial Condition, Capital Resources and Liquidity
For the three months ended September 30, 2003 and 2002, the Company recorded
total revenues in the amount of $75,000 and $130,300 respectively. The reason
for the decrease was the sale of several franchises in 2002.
For the three months ended September 30, 2003 and 2002, the Company had cost of
product of $30,300 and $82,400 respectively. This decrease of product costs was
directly related to decreased product sales.
For the three months ended September 30, 2003 and 2002, the Company had
operating expenses of $90,700 and $253,300. The Company has been actively
reducing its operating costs.
For the three months ended September 30, 2003 and 2002, the Company had total
expenses of $121,000 and $335,600.
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Net Losses
For the three months ended September 30, 2003 and 2002, the Company reported a
net loss of $57,600 and $209,000 respectively.
The ability of the Company to continue as a going concern is dependent upon
increasing sales and obtaining additional capital and financing. The Company is
currently seeking financing to allow it to continue its planned operations.
To implement such plan, also during this initial phase, the Company intends to
initiate a self-directed private placement under Rule 506 in order to raise the
funds required by its development among which the financial means related to new
staff, equipment and offices. No underwriters have been contacted and no known
investors have been contacted with respect to such fund raising. In the event
such placement is successful, the Company believes that it will have sufficient
operating capital to meet the initial expansion goals and operating costs for a
period of one year.
Employees
At September 30, 2003, the Company had a total of 7 employees, of which 6 were
employed full time and 1 was employed part time. None of these employees are
represented by a labor union for purposes of collective bargaining. The Company
considers its relations with its employees to be excellent. The Company plans to
employ additional personnel as needed.
Research and Development Plans
The Company believes that research and development is an important factor in its
future growth. The industry in which the Company operates is closely linked to
the technological advances of the products it services. Therefore, the Company
must continually invest in learning the new technology to provide the best
quality service to the public and to effectively compete with other companies in
the industry. No assurance can be made that the Company will have sufficient
funds to complete new training in the latest technological advances as they
become available. Additionally, due to the rapid advance rate at which
technology advances, the Company's equipment may be outdated quickly, preventing
or impeding the Company from realizing its full potential profits.
Forward-Looking Statements
This Form 10-QSB includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-QSB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), expansion
and growth of the Company's business and operations, and other such matters are
17
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Company in light of its experience and its perception
of historical trends, current conditions and expected future developments as
well as other factors it believes are appropriate in the circumstances. However,
whether actual results or developments will conform with the Company's
expectations and predictions is subject to a number of risks and uncertainties,
general economic market and business conditions; the business opportunities (or
lack thereof) that may be presented to and pursued by the Company; changes in
laws or regulation; and other factors, most of which are beyond the control of
the Company.
Consequently, all of the forward-looking statements made in this Form 10-QSB are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequence to
or effects on the Company or its business or operations.
ITEM 3. CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Exchange Act, within the 90 days prior to
the filing date of this report, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's President
and Chief Executive Officer along with the Company's Chief Financial Officer.
Based upon that evaluation, the Company's President and Chief Executive Officer
along with the Company's Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective. There have been no significant
changes in the Company's internal controls or in other factors, which could
significantly affect internal controls subsequent to the date the Company
carried out its evaluation.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in Company reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in Company reports filed under the Exchange Act is
accumulated and communicated to management, including the Company's Chief
Executive Officer and Chief Financial Officer as appropriate, to allow timely
decisions regarding required disclosure.
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PART II
Item 1. Legal Proceedings.
In October 2003, Bio-Solutions of Northern Virginia, LLC and Joel H. Bernstein
filed a Motion for Judgment in the Circuit Court for the City of Alexandria,
Virginia alleging breach of contract, promissory estoppel, fraudulent inducement
to contract, fraud and misrepresentation and violation of Virginia Retail
Franchise Act. Additionally, also in October 2003, The Commonwealth of Virginia
State Corporation Commission issued a Rule to Show Cause regarding the Company's
failure to register the sale of a Virginia franchise to one of its residents.
The hearing on the Rule to Show Cause is set for January 2004.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults in Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the quarter ended September 30, 2003, covered by
this report to a vote of the Company's shareholders, through the solicitation of
proxies or otherwise.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed herewith by Item 601 of Regulation
S-B, as described in the following index of exhibits, are incorporated herein by
reference, as follows:
Exhibits
Number Description
- ------ -------------------------------
31.1 * Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1 * Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
* Filed Herewith
(b)There were no Form 8K filings made during this quarter.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Bio-Solutions International, Inc.
--------------------------------
(Registrant)
Date: December 12, 2003 By: /s/ Louis H. Elwell, III
------------------------------
Louis H. Elwell, III
President, CEO and Director
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