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: December 31, 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 December 31, 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
December 31, June 30,
2003 2003
---------------------- -------------------
(unaudited) ( restated )
ASSETS
CURRENT ASSETS
Cash $ 16,487 $ 0
Accounts receivable - trade 64,247 19,295
Inventory 41,968 31,963
---------------------- -------------------
Total current assets 122,702 51,258
---------------------- -------------------
PROPERTY AND EQUIPMENT
(Net of accumulated depreciation of $79,427 and $59,895 at 12/31/03
and 6/30/03, respectively) 337,545 357,077
---------------------- -------------------
Total property and equipment 337,545 357,077
---------------------- -------------------
OTHER ASSETS
Security deposits 3,000 3,000
Product formulation 50,000 50,000
---------------------- -------------------
Total other assets 53,000 53,000
---------------------- -------------------
Total Assets $ 512,247 $ 461,335
====================== ===================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Bank Overdraft $ -0- $ 6,860
Accounts payable 507,816 492,410
Deposits held 249,600 50,000
Prepaid franchise sale income - 0 - 27,567
Capitalized lease payable 4,818 5,284
Notes and loan payable 409,067 411,902
---------------------- -------------------
Total current liabilities 1,171,301 987,163
---------------------- -------------------
Total Liabilities 1,171,301 987,163
---------------------- -------------------
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 (2,359,337) (2,222,361)
---------------------- -------------------
Total stockholders' deficit (659,054) (525,828)
---------------------- -------------------
Total Liabilities and Stockholders' Deficit $ 512,247 $ 461,335
====================== ===================
The accompanying notes are an integral part of the financial statements
F-2
Bio-Solutions International, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------------------------- -----------------------------
2003 2002 2003 2002
--------------- -------------- ------------- --------------
REVENUES
Sales of franchises $ 6,078 $ 56,311 $ 12,501 $ 99,911
Product and service sales 102,604 56,646 171,164 140,300
--------------- -------------- ------------- --------------
Total revenues 108,682 112,957 183,665 240,211
--------------- -------------- ------------- --------------
EXPENSES
Cost of products 54,278 18,799 84,552 56,120
Operating expenses 123,512 118,785 214,213 285,258
--------------- -------------- ------------- --------------
Total expenses 177,790 137,584 298,765 341,378
--------------- -------------- ------------- --------------
Net income (loss) before other income (expense)
and provision for income taxes (69,108) (24,627) (115,100) (101,167)
--------------- -------------- ------------- --------------
OTHER INCOME (EXPENSE):
Writedown of business inventory -0- -0- -0- (45,030)
Interest expense (10,298) (10,483) (21,876) (28,220)
--------------- -------------- ------------- --------------
Total other income (expense) (10,298) (10,483) (21,876) (73,250)
--------------- -------------- ------------- --------------
Net income (loss) before provision for income taxes (79,406) (35,110) (136,976) (174,417)
--------------- -------------- -------------- --------------
Provision for income taxes 0 0 0 0
--------------- -------------- ------------- --------------
Net income (loss) $ (79,406) $ (35,110) $ (136,976) $ (174,417)
=============== ============== ============= ==============
Net income (loss) per weighted average share, basic $ (0.01) $ (0.01)
============= ==============
Weighted average number of shares 57,680,713 50,918,698
============= ==============
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 (352,506) (352,506)
------------ ---------- -------------- --------------- ------------ --------------
BALANCE, June 30, 2003 57,379,080 5,738 1,690,795 0 (2,222,361) (525,828)
Shares issued to settle business dispute 375,000 37 3,713 0 0 3,750
Net loss 0 0 0 0 (136,976) (136,976)
------------ ---------- -------------- --------------- ------------ --------------
ENDING BALANCE, December 31, 2003,
(unaudited) 57,754,080 $ 5,775 $ 1,694,508 $ 0 $ (2,359,337)$ (659,054)
============ ========== ============== =============== ============ ==============
The accompanying notes are an integral part of the financial statements
F-4
Bio-Solutions International, Inc.
Consolidated Statements of Cash Flows
Six Months Ended December 31, 2003 and 2002
(Unaudited)
2003 2002
---------------------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (136,976) $ (174,417)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 19,532 18,755
Stock issued for services - 0 - 50,000
Stock issued to satisfy debt - 0 - 40,000
Stock issued for dispute 3,750 0
Reduction of note payable for purchases (2,835) 0
Changes in operating assets and liabilities:
(Increase) in accounts receivable (44,952) (94,919)
(Increase) decrease in inventory (9,005) 53,048
(Increase) in security deposits 0 (500)
Increase in deposits held 199,600 0
Increase in accounts payable 22,266 (2,928)
Increase in accrued compensation - related parties - 0 - 129,500
Prepaid franchise sale income (27,567) (35,000)
---------------------- ---------------------
Net cash used for operating activities 23,813 (16,461)
---------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets - 0 - (43,288)
---------------------- ---------------------
Net cash (used) by investing activities 0 (43,288)
---------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capitalized lease (466) 0
Proceeds of note payable - 0 - 40,500
Bank Overdraft repayment (6,860) 0
---------------------- ---------------------
Net cash provided (used) by financing activities (7,326) 40,500
---------------------- ---------------------
Net increase (decrease) in cash 16,487 (19,249)
CASH, beginning of period - 0 - 20,334
---------------------- ---------------------
CASH, end of period $ 16,487 $ 1,085
====================== =====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-Cash Financing Activities:
Taxes paid in cash $ 0 $ 0
====================== =====================
Interest expense paid in cash $ 0 $ 0
====================== =====================
Stock issued to settle dispute $ 3,750 $ 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 December 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 $2,932 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.
December 30, June 30,
2003 2003
--------------------- -------------------
Machinery and equipment $121,518 $ 121,518
Office furniture and equipment 35,579 35,579
Leasehold improvements 259,875 259,875
--------------------- -------------------
416,972 416,972
Less: Accumulated depreciation (79,427) (59,895)
--------------------- -------------------
$ 337,545 $ 357,077
===================== ===================
The depreciation expense for the six months ended December 2003 was $ 9760.
(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 December 31, 2003, the Company
has incurred cumulative net operating losses of approximately $2,359,000. 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.
F-10
Bio-Solutions International, Inc.
Notes to Financial Statements
(4) CAPITAL TRANSACTIONS (Continued)
In February 2002, the Company issued 252,500 shares of restricted common stock
for services.
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%.
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.
F-11
Bio-Solutions International, Inc.
Notes to Financial Statements
(6) RELATED PARTIES, continued
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.
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
12/31/03 6/30/03
------------- ------------
Unsecured promissory note, bearing interest
at 10% per annum, convertible into restricted
shares of common stock at $.10 per share. $ 409,067 $ 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 $ 2,359 ,000
accumulated through December 31, 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 sold the manufacturing portion of its business and the associated
assets in March 2004. The Company received a $250,000 deposit toward the
purchase price as of December 31, 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
In March 2004, the Company sold certain of its assets associated with the
manufacturing portion of its business to Bio Solutions Manufacturing, Inc., a
Nevada corporation ("BSMI"). As a part of such agreement, BSMI agreed to assume
certain liabilities totaling $309,709.60 to be paid within six (6) months of
closing, with no less than $25,000 being paid each month until all the
liabilities are satisfied. BSMI issued 2,000,000 shares of the restricted common
stock of Single Source Financial Services, Inc., paid the Company $250,000.00
cash and agreed to make payments in the amount of $25,000.00 per month for a
period of four (4) months as payment for the assets.
Also in March 2004, BSMI entered into a marketing/manufacturing agreement with
Bio-Solutions Franchise Corp. ("BSFC"). As a part of the agreement, BSMI will
manufacture, test, research and develop environmental products for BSFC to
market and sell. The term of the agreement is for a period of ten (10) years.
Discussion and Analysis
The discussion contained herein reflects the Results of Operations of the
Company for the three months ended December 31, 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.
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
16
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 and Six Months Ended December 31, 2003 and
2002
Financial Condition, Capital Resources and Liquidity
For the three months ended December 31, 2003 and 2002, the Company recorded
total revenues in the amount of $108,682 and $112,957 respectively. For the six
months ended December 31, 2003 and 2002, the Company recorded total revenues in
the amount of $183,665 and $240,211 respectively.
For the three months ended December 31, 2003 and 2002, the Company had cost of
product of $54,278 and $18,799 respectively. For the six months ended December
31, 2003 and 2002, the Company had cost of product of $84,552 and $56,120
respectively.
For the three months ended December 31, 2003 and 2002, the Company had operating
expenses of $123,512 and $118,785. For the six months ended December 31, 2003
and 2002, the Company had operating expenses of $214,213 and $285,258.
For the three months ended December 31, 2003 and 2002, the Company had total
expenses of $177,790 and $137,584. For the six months ended December 31, 2003
and 2002, the Company had total expenses of $298,765 and $341,378.
Net Losses
For the three months ended December 31, 2003 and 2002, the Company reported a
net loss of $79,406 and $35,110 respectively. For the six months ended December
31, 2003 and 2002, the Company reported a net loss of $136,976 and $174,417
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 December 31, 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.
17
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
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.
18
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 was set for January 2004 but has been
continued pending settlement negotiations.
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 December 31, 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
- ------ -------------------------------
10.1 * Asset Purchase Agreement between the Company and Bio Solutions
Manufacturing, Inc. dated March 12, 2004.
10.2 * Marketing/Manufacturing Agreement between Bio Solutions
Manufacturing Inc. and Bio-Solutions Franchise Corp. dated March
12, 2004.
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: March 23, 2004
By: /s/ Louis H. Elwell, III
------------------------------
Louis H. Elwell, III
Sole officer and Director
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