SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of The Securities Exchange Act of 1934
Date of report (Date of earliest event reported): June 2, 2004
(March 22, 2004)
Bio Solutions Manufacturing, Inc.
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(Exact Name of Registrant as Specified in its Charter)
New York
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(State or Other Jurisdiction of Incorporation)
000-33229 16-1576984
- ------------------------------------ ------------------------------
(Commission File Number) (I.R.S. Employer
Identification No.)
1161 James Street, Hattiesburg, MS 39401
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(Address of Principal Executive Offices) (Zip Code)
(601) 582-4000
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(Registrant's Telephone Number, Including Area Code)
Single Source Financial Services Corporation
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(Former Name or Former Address, if Changed Since Last Report)
This Form 8-K/A amends From 8-K filed on March 22, 2004, by the Registrant under
its former name, Single Source Financial Services Corporation. The purpose of
this amendment to Form 8-K is to provide financial statements and the pro forma
financial information for Bio Solutions Manufacturing, Inc., a Nevada
corporation, as required by Item 7 of form 8-K.
ITEM #1- CHANGE IN CONTROL OF REGISTRANT
Not Applicable
ITEM #2- ACQUISITION OR DISPOSITION OF ASSETS
Not Applicable
ITEM #3 - BANKRUPTCY OR RECEIVERSHIP
Not Applicable
ITEM #4 - CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not Applicable
ITEM #5 - OTHER EVENTS
Not Applicable
ITEM #6 - RESIGNATION OF DIRECTORS AND EXECUTIVE OFFICERS
Not Applicable
ITEM #7 - FINANCIAL STATEMENTS AND EXHIBITS
(a.) Financial statements of business acquired.
Pursuant to the requirements of Regulation S-X 210.3.05(b) the following
are the audited financial statements of Bio-Solutions International, Inc., a
Nevada corporation, ( the predecessor entity ) for the years June 30, 2003 and
2002 and unaudited financial statements for the six months ended December 31,
2003 and 2002. The Registrant acquired all of the outstanding capital stock of
Bio Solutions Manufacturing, Inc., a Nevada corporation. On March 1, 2004, Bio
Solutions Manufacturing, Inc., acquired the operating assets and assumed certain
liabilities of Bio Solutions International, Inc. pursuant to the terms of an
Asset Purchase Agreement. Prior to that date, Bio- Solutions Manufacturing was
operated as the manufacturing division of Bio-Solutions International, Inc. and
its assets, liabilities and operations were accounted for as a integral part of
Bio- Solutions International, Inc. financial statements. In addition, the
audited financials statements of the Registrant for its latest year end October
31, 2003 have been included in this filing. Due to difficulties in compiling the
necessary data, unaudited proforma financial statements combining the statements
of operations for the Registrant for the year ended October 31, 2003 and the
manufacturing operations of the "predecessor entity" and the balance sheet of
the Registrant and its newly acquired subsidiary Bio-Solutions Manufacturing,
Inc have been delayed and will be included as an amendment to the Form 8K-A on
or before June 8, 2004.
INDEX TO AUDITED FINANCIAL STATEMENTS
OF BIO-SOLUTIONS INTERNATIONAL, INC.
Independent Auditors' Report.................................................F-2
Consolidated Balance Sheets..................................................F-3
Consolidated Statements of Operations........................................F-4
Consolidated Statements of Stockholders' Deficiency..........................F-5
Consolidated Statements of Cash Flows........................................F-6
Notes to Consolidated Financial Statements...................................F-7
F-1
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Bio-Solutions International, Inc.
Hattiesburg, Mississippi
We have audited the accompanying consolidated balance sheets of Bio-Solutions
International, Inc. as of June 30, 2003 and 2002 and the related consolidated
statements of operations, stockholders' deficiency and cash flows for the years
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
June 30, 2003 and 2002 and the results of their operations and their cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 4 to the
consolidated financial statements, the Company has experienced net losses since
inception. The Company's financial position and operating results raise
substantial doubt about its ability to continue as a going concern. Management's
plans with regard to these matters are also described in Note 9. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/Baum & Company, P.A.
Baum & Company, P.A.
Coral Springs, Florida
October 31, 2003
F-2
Bio-Solutions International, Inc.
Consolidated Balance Sheets
June 30, 2003 and 2002
2003 2002
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ASSETS
CURRENT ASSETS
Cash $ 18,140 $ 20,334
Accounts receivable - trade 19,295 34,073
Inventory 31,963 94,348
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Total current assets 69,398 148,755
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PROPERTY AND EQUIPMENT
(Net of accumulated depreciation of $59,895 and
$12,134 in 2003 and 2002, respectively) 357,077 264,996
------------------- -------------------
Total property and equipment 357,077 264,996
------------------- -------------------
OTHER ASSETS
Security deposits 3,000 2,500
Investments 0 0
Product formulation 50,000 50,000
Goodwill 0 0
------------------- -------------------
Total other assets 53,000 52,500
------------------- -------------------
Total Assets $ 479,475 $ 466,251
=================== ===================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 462,410 $ 382,761
Disposition deposit 50,000 0
Prepaid franchise sale income 27,567 35,000
Capitalized lease payable 5,284 0
Notes and loan payable 375,902 336,812
------------------- -------------------
Total current liabilities 921,163 754,573
------------------- -------------------
Total Liabilities 921,163 754,573
------------------- -------------------
STOCKHOLDERS' DEFICIENCY
Preferred stock, $0.001 par value, authorized
1,000,000 shares; none issued and outstanding 0 0
Common stock, $0.0001 par value, authorized
100,000,000 shares; 57,379,083 and 50,168,557
issued and outstanding shares; respectively 5,738 5,017
Additional paid-in capital 1,690,795 1,576,516
Accumulated deficit (2,138,221) (1,869,855)
------------------- -------------------
Total stockholders' deficit (441,688) (288,322)
------------------- -------------------
Total Liabilities and Stockholders' Deficit $ 479,475 $ 466,251
=================== ===================
The accompanying notes are an integral part of the financial statements
F-3
Bio-Solutions International, Inc.
Consolidated Statements of Operations
Years Ended June 30, 2003 and 2002
2003 2002
--------------------- ----------------------
REVENUES
Sales of franchises $ 162,146 $ 82,600
Product and service sales 322,939 88,423
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Total revenues 485,085 171,023
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EXPENSES
Cost of products 114,013 62,919
Operating expenses 674,986 1,013,469
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Total expenses 788,999 1,076,388
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Net income (loss) before other income (expense)
and provision for income taxes (303,914) (905,365)
--------------------- ----------------------
OTHER INCOME (EXPENSE):
Writeoff of other assets 0 (1,846)
Writeoff of business acquisition 0 (104,036)
Interest expense 35,548 (42,103)
--------------------- ----------------------
Total other income (expense) 35,548 (147,985)
--------------------- ----------------------
Net income (loss) before provision for income taxes (268,366) (1,053,350)
--------------------- ----------------------
Provision for income taxes 0 0
--------------------- ----------------------
Net income (loss) $ (268,366) $ (1,053,350)
===================== ======================
Net income (loss) per weighted average share, basic $ (0.01) $ (0.02)
===================== ======================
Weighted average number of shares 57,317,364 44,698,131
===================== ======================
The accompanying notes are an integral part of the financial statements
F-4
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 939 1 93,879 0 0 93,880
payable
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 3,467,865 347 103,689 0 0 104,036
Net loss 0 0 0 0 (1,053,350) (1,053,350)
----------- ---------- ------------- ------------ -------------- ---------------
BALANCE, June 30, 2002 50,168,557 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 (268,366) (268,366)
----------- ---------- ------------- ------------ -------------- ---------------
ENDING BALANCE, June 30, 2003 57,379,083 $ 5,738 $ 1,690,795 $ 0 $ (2,138,221)$ (441,688)
=========== ========== ============= ============ ============== ===============
The accompanying notes are an integral part of the financial statements
F-5
Bio-Solutions International, Inc.
Consolidated Statements of Cash Flows
Years Ended June 30, 2003 and 2002
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (268,366) $ (1,053,350)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 47,761 8,259
Stock issued for services 25,000 462,759
Stock issued for interest expense 0 27,754
Stock issued for business acquisition 0 104,036
Changes in operating assets and liabilities:
(Increase) in accounts receivable 14,778 (9,133)
(Increase) decrease in inventory 62,385 44,724
(Increase) in security deposits (500) 0
Increase in accounts payable 251,899 171,874
Increase in accrued compensation - related parties (172,250) 91,050
Prepaid franchise sale income 42,567 35,000
------------------ -----------------
Net cash used for operating activities 3,274 (117,027)
------------------ -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Writeoff of goodwill 0 1,286
Investments 0 560
Acquisition of fixed assets (44,558) (235,686)
------------------ -----------------
Net cash used by investing activities (44,558) (233,840)
------------------ -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash acquired in acquisition 0 0
Proceeds of note and loan payable 39,090 346,399
Proceeds of common stock 0 20,000
------------------ -----------------
Net cash provided by financing activities 39,090 366,399
------------------ -----------------
Net increase in cash (2,194) 15,532
CASH, beginning of period 20,334 4,802
------------------ -----------------
CASH, end of period $ 18,140 $ 20,334
================== =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Non-Cash Financing Activities:
Fixed assets acquired under capital lease $ 6,000 $ 0
================== =================
Stock issued to acquire equipment $ 0 $ 8,000
================== =================
Stock issued to retire debt $ 40,000 $ 327,637
================== =================
The accompanying notes are an integral part of the financial statements
F-6
Bio-Solutions International, Inc.
Notes to Consolidated Financial Statements
(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 100,000,000 total equity shares consisting of no shares
of preferred stock and 100,000,000 shares of common stock, with a par value
of $0.0001 per share.
F-7
Bio-Solutions International, Inc.
Notes to Consolidated Financial Statements
(1) SIGNIFICANT ACCOUNTING POLICIES (Continued)
Principles of consolidation
The consolidated financial statements include the accounts of Bio-Solutions
International, Inc. and its wholly- owned subsidiary, Biosolutions
Franchise Corporation. All intercompany transactions have been eliminated.
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, 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
"Biosolutions" 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 upon collection, which occurs when product is
purchased by franchisor.
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
F-8
Bio-Solutions International, Inc.
Notes to Consolidated Financial Statements
(1) SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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.
F-9
Bio-Solutions International, Inc.
Notes to Consolidated Financial Statements
(1) SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
Accounts receivable
Represents amounts due from franchisers of its products. Substantially all
amounts are expected to be collected within one year. The Company has
established an allowance of $2,932 for bad debts.
(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.
2003 2002
-------------- -------------
Machinery and equipment $ 121,518 $ 110,919
Office furniture and equipment 35,579 35,312
Leasehold improvements 253,875 130,899
-------------- -------------
410,972 277,130
Less: Accumulated depreciation (59,895) 12,134
-------------- -------------
$ 470,867 $ 264,996
============== =============
The depreciation expense for the years ended 2003 and 2002 was $47,761and
$8,259, respectively.
F-10
Bio-Solutions International, Inc.
Notes to Consolidated Financial Statements
(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 June 30, 2003,
the Company has incurred cumulative net operating losses of approximately
$2,000,000. 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 fifteen 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.
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 June 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.
F-11
Bio-Solutions International, Inc.
Notes to Financial Statements
(4) CAPITAL TRANSACTIONS (Continued)
On May 1, 2001, the Company exchanged 12,859,980 restricted shares of
common stock for the assets and liabilities of Biosolutions, 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.
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.
F-12
Bio-Solutions International, Inc.
Notes to Financial Statements
(4) CAPITAL TRANSACTIONS (Continued)
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.
(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 0
years, as of June 30, 2003. A reconciliation of the Company's stock option
activity, and related information for the year ended June 30, 2003 is as
follows:
Year ended
June 30, 2003
------------------------------------
Number Weighted
of average
options exercise price
--------------- ------------------
Outstanding at beginning of year 70,000 $ 0.88
Granted 0 -
Exercised 0 -
Expired/Forfeited (70,000) -
--------------- ------------------
Outstanding at end of period 0 $ 0.88
=============== ==================
F-13
Bio-Solutions International, Inc.
Notes to Financial Statements
(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.
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.
(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.
Future minimum rentals are as follows:
2004 $ 36,000
2005 36,000
2006 36,000
The rent expense for 2003 and 2002 was $36,000 and $30,320, respectively.
(8) NOTES AND LOANS PAYABLE
Unsecured promissory note, bearing interest at 10% per
annum, convertible into restricted shares of common stock at
$.10 per share. $ 375,902
Unsecured loan, non-interest bearing and convertible into
2,000,000 restricted shares of common stock. 0
-------------------
$ 375,902
===================
(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 $2,138,000
accumulated through June 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
Capital Transactions
In July 2003 the Company issued 375,000 shares of restricted common stock in
exchange for settlement of a contract dispute.
F-14
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
Contents
Page
Independent Auditors' Report F-16
Consolidated Balance Sheet F-17
Consolidated Statements of Operations F-18
Consolidated Statement of Stockholders' (Deficit) F-19
Consolidated Statements of Cash Flows F-20
Notes to Consolidated Financial Statements F-21
Independent Auditors' Report
Board of Directors
Single Source Financial Services Corporation
Culver City, California
We have audited the accompanying consolidated balance sheet of Single Source
Financial Services Corporation (the "Company") as of October 31, 2003 and the
related consolidated statements of operations, cash flows, and stockholders'
(deficit), for the two years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the accompanying consolidated financial statements present
fairly, in all material respects, the financial position of Single Source
Financial Services Corporation as of October 31, 2003, and the results of its
operations and its cash flows for the two years then ended, in conformity with
accounting principles generally accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 14 to
the financial statements, the Company has suffered recurring losses from
operations and has a net capital deficiency, which raises substantial doubt
about its ability to continue as a going concern. Management's plans regarding
those matters also are described in Note 14. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Jonathon P. Reuben, C.P.A.
An Accountancy Corporation
Torrance, California
January 7, 2004
F-16
SINGLE SOURCE FINANCIAL SERVICES CORP.
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
OCTOBER 31,
2003
------------
ASSETS
CURRENT ASSETS
Cash $ 1,736
Loans receivable - related party 277,500
------------
TOTAL CURRENT ASSETS 279,236
------------
PROPERTY AND EQUIPMENT
Furniture 992
Office equipment 12,656
------------
13,648
Accumulated depreciation (7,699)
------------
5,949
------------
TOTAL ASSETS $ 285,185
============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Income taxes payable $ 4,427
Accounts payable 25,499
Loan payable - other 547,973
Current portion of long-term debt due to related parties 102,492
Net liabilities of discontinued operations 92,934
------------
TOTAL CURRENT LIABILITIES 773,325
Long-term debt due to related parties 784,398
------------
TOTAL LIABILITIES 1,557,723
------------
STOCKHOLDERS' (DEFICIT)
Preferred stock, no par value, authorized 10,000,000
shares, none issued and outstanding --
Common stock, par value $.001, authorized 100,000,000
shares, issued and outstanding 986,243 986
Paid-in capital 1,166,178
Retained (Deficit) (2,439,702)
------------
TOTAL STOCKHOLDERS' (DEFICIT) (1,272,538)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 285,185
============
F-17
SINGLE SOURCE FINANCIAL SERVICES CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED
OCTOBER 31,
-----------------------
2003 2002
Revenues $ -- $ --
Cost of revenues -- --
---------- ----------
Gross profit -- --
Selling, general, and administrative expenses (141,935) (74,743)
---------- ----------
Net loss from operations (141,935) (74,743)
Other income (expenses)
Gain on extinguishment of debt -- 21,993
Interest income 1,387 1,834
---------- ----------
Loss before income taxes (140,548) (50,916)
Provision for income tax (1,800) --
---------- ----------
Net loss from continuing operations (142,348) (50,916)
---------- ----------
Discontinued operations
Loss from operations of Single Source
Electronic Transactions, Inc. (127,365) (619,808)
Loss from disposal of Single Source
Electronic Transactions, Inc. assets -- (5,338)
---------- ----------
(127,365) (625,146)
---------- ----------
Net loss $(269,713) $(676,062)
========== ==========
Basic Loss Per Share
Continued operations $ (0.20) $ (0.09)
Discontinued operations (0.18) (1.06)
---------- ----------
Net loss $ (0.38) $ (1.15)
========== ==========
Weighted average shares outstanding 724,403 587,350
========== ==========
F-18
SINGLE SOURCE FINANCIAL SERVICES CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)
- ---------------------------------------------------------------------------------------------------------------
COMMON STOCK ADDITIONAL
--------------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL DEFICIT
------------ ------------ ------------ ------------
BALANCE - OCTOBER 31, 2001 574,805 $ 575 $ 173,055 $(1,466,754)
Prior-period adjustment - recognition of interest
expense per the terms of a convertible debenture
relating to loan payable - other -- -- -- (27,173)
Shares issued for services 22,635 23 279,502 --
Contributed office rent -- -- 7,500 --
Net loss for the year ended October 31, 2002 -- -- -- (676,062)
------------ ------------ ------------ ------------
BALANCE - OCTOBER 31, 2002 597,440 597 460,057 (2,169,989)
Shares issued in cancellation of indebtedness 395,380 395 675,241 --
Shares rescinded (32,000) (32) 32 --
Contributed office rent -- -- 8,000 --
Shares issued for services 22,873 23 22,850 --
Other 2,550 2 (2) --
Net loss for the year ended October 31, 2003 -- -- -- (269,713)
------------ ------------ ------------ ------------
BALANCE - OCTOBER 31, 2003 986,243 $ 986 $ 1,166,178 $(2,439,702)
============ ============ ============ ============
F-19
SINGLE SOURCE FINANCIAL SERVICES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ----------------------------------------------------------------------------------------
FOR THE YEAR
ENDED
OCTOBER 31,
2003 2002
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) from continuing operations $(142,348) $ (50,916)
Adjustments to reconcile net (loss) to net cash
(used) in operating activities of continuing operations:
(Loss) from discontinued operations (127,365) (625,146)
Depreciation 2,730 2,632
Amortization -- 111
Contributed rent 8,000 7,500
Interest income (1,387) (1,834)
Interest expense 103,512 107,530
Bad debt 31,621 --
Common stock issued for services 22,873 279,525
Loss on abandonment of leasehold improvements -- 5,338
(Increase) Decrease in Assets
Decrease in trade receivable 185 115
Decrease in inventories -- 23,212
Increase (Decrease) in Liabilities
(Decrease) in bank overdraft -- (14,066)
Increase in income tax payable 2,827 --
Increase (decrease) in accounts payable (51,080) 66,138
Increase in accrued interest 31,800 --
---------- ----------
NET CASH (USED) IN OPERATING ACTIVITIES (118,632) (199,861)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Advances to Card Ready International, Inc. (11,500) (259,000)
Repayments from Card Ready International, Inc. 63,000 --
Equipment acquisition -- (3,062)
---------- ----------
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES 51,500 (262,062)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from related parties 9,500 133,000
Advances from others 65,000 344,000
Repayments on related party loans (8,000) (15,100)
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 66,500 461,900
---------- ----------
NET (DECREASE) IN CASH AND CASH
EQUIVALENTS (632) (23)
BEGINNING BALANCE - CASH AND CASH EQUIVALENTS 2,368 2,391
---------- ----------
ENDING BALANCE - CASH AND CASH EQUIVALENTS $ 1,736 $ 2,368
========== ==========
F-20
SINGLE SOURCE FINANCIAL SERVICES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION:
FOR THE YEAR
ENDED
OCTOBER 31,
2003 2002
---------- ----------
Interest Expense $ 138 $ 560
Income Taxes $ -- $ --
NON-CASH INVESTING AND FINANCING ACTIVITIES:
For the year ended October 31, 2003, the Company issued 6,500 shares
of its common stock to a creditor of certain third parties in
consideration for the cancellation of $70,000 due by the Company to
the related parties.
For the year ended October 31, 2003, the Company issued 31,880 shares
of its restricted common stock to a shareholder of the Company and a
creditor of B.A.A.M.S., Inc. in exchange for the cancellation of
$70,136 of indebtedness due B.A.A.M.S., Inc. by the Company
For the year ended October 31, 2003, the Company issued 357,000 shares
of its common stock to a related party in exchange for the
cancellation of $535,500 of indebtedness.
For the year ended October 31, 2002, a prior-period adjustment, for
interest expense recognition per the terms of a convertible debenture,
of $27,173 recorded to retained earnings.
F-21
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
Single Source Financial Services Corporation (the "Company") was
incorporated in New York on September 19, 1994. In November 2000, the
Company acquired Single Source Electronic Transactions, Inc. ("SSET").
In August 2001, a dispute arose between the Company and the seller of
SSET. Under the terms of the settlement, the seller received the
historical residual stream generated on all sales made prior to July
31, 2001. For financial reporting purposes, the Company treated this
transaction as a disposal of a business segment. See Note 9.
On October 2, 2003, the Company effected a 1-for-100 reverse stock
split of Company's $.001 par value common stock. As a result of the
reverse stock split, issued and outstanding shares were reduced by
98,974,239 shares. All equity accounts and related transactions
included in the accompanying financial statements have been restated
to reflect the reverse stock split as if it occurred at the beginning
of each period presented.
The Company's financial statements are prepared using the accrual
method of accounting in accordance with generally accepted accounting
principles accepted in the United States and have been prepared on a
going concern basis which contemplates the realization of assets and
the settlement of liabilities in the normal course of business.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major renewals and
improvements are charged to the asset accounts while replacements,
maintenance and repairs, which do not improve or extend the lives of
the respective assets, are expensed. At the time property and
equipment are retired or otherwise disposed of, the asset and related
accumulated depreciation accounts are relieved of the applicable
amounts. Gains or losses from retirements or sales are credited or
charged to income.
The Company depreciates its property and equipment as follows:
Financial statement reporting - straight-line method as follows:
Furniture and fixtures 5 years
Computer equipment 5 years
Telephone equipment 5 years
F-22
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
LONG-LIVED ASSETS
In August 2001, SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," was issued establishing new rules and
clarifying implementation issues with SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of, "by allowing a probability-weighted cash flow estimation
approach to measure the impairment loss of a long-lived asset. The
statement also established new standards for accounting for
discontinued operations. Transactions that qualify for reporting in
discontinued operations include the disposal of a component of an
entity's operations that comprises operations and cash flow that can
be clearly distinguished, operationally and for financial reporting
purposes, from the rest of the entity. The Company has adopted this
standard and its adoption had no significant effect on the Company's
financial statements.
NET LOSS PER SHARE
The Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share" ("EPS")
that established standards for the computation, presentation and
disclosure of earnings per share, replacing the presentation of
Primary EPS with a presentation of Basic EPS.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers
cash and cash equivalents to include all stable, highly liquid
investments with maturities of three months or less.
ACCOUNTING ESTIMATES
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities, and the reported revenues and expenses. Actual
results could vary from the estimates that were used.
INCOME TAXES
The Company accounts for its income taxes under the provisions of
Statement of Financial Accounting Standards 109 ("SFAS 109"). The
method of accounting for income taxes under SFAS 109 is an asset and
liability method. The asset and liability method requires the
recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between tax bases and
financial reporting bases of other assets and liabilities.
F-23
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS
Pursuant to SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments", the Company is required to estimate the fair value of
all financial instruments included on its balance sheet as of October
31, 2003. The Company considers the carrying value of such amounts in
the financial statements to approximate their face value.
REVENUE AND COMMISSION EXPENSE RECOGNITION - DISCONTINUED OPERATIONS
Income from equipment sales was recognized after the buyer received
its merchant and terminal identification numbers and was approved for
any applicable financing.
Income from residuals was recognized when the residual payment is
actually received.
The Company recognized commissions owed upon the actual receipt of
payment on the related sale.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Single
Source Financial Services Corporation and its wholly owned subsidiary
Single Source Electronic Transactions, Inc. SSET has been treated as a
discontinued operation and net assets and liabilities are reported as
a separate line item on the balance sheet as net liabilities of
discontinued operations. All material inter-company accounts and
transactions have been eliminated.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of loans receivable
from related party as the only major asset of the Company. As of
October 31, 2003, loans receivable from related party represent a
major asset of the Company and if not collected could represent a
credit risk to the Company.
RECLASSIFICATION
Certain amounts in October 31, 2002 have been reclassified to conform
to the October 31, 2003 presentation. Such reclassification had no
effect on net income as previously reported.
F-24
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
ADVERTISING
The Company and SSET expense all advertising as incurred. For the
years ended October 31, 2003 and 2002, the Company charged to
discontinued operations $90 and $32,381, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
The FASB recently issued the following statements:
FASB 148 - Accounting for Stock-Based Compensation - Transition and
Disclosure and amendment of FASB Statement No. 123
FASB 150 - Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity
These FASB statements did not have, or are not expected to have, a
material impact on the Company's financial position and results of
operations.
NOTE 3 - LOANS RECEIVABLE - RELATED PARTY
For the year ended October 31, 2003, the Company made advances of
$11,500 and collected $63,000 from Card Ready International, Inc.
("Card Ready") pursuant to a binding letter of intent under which the
Company has agreed to advance up to $500,000 to Card Ready in
incremental installments. Under the letter of intent, the Company has
the option to purchase a majority of the shares of Card Ready from
MBBRAMAR, Inc., a corporation wholly owned by shareholders of the
Company. That option was exercised on April 29, 2002; however, the
purchase has not yet been consummated. See Note 13.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment with a book value of $5,949 are pledged as
collateral for long-term debt due to related parties. Depreciation
charged to discontinued operations for the years ended October 31,
2003 and 2002 amounted to $819 and $1,600, respectively. Depreciation
charged to continuing operations for the years ended October 31, 2003
and 2002, were $1,911 and $1,142, respectively.
F-25
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5 - PAYABLE ON CUSTOMER LEASE CHARGEBACKS
Pursuant to agreements with two leasing companies, the Company was
obligated to assume the cost of leases entered into by its customers
who subsequently defaulted under the terms of their respective leases.
The remaining balance at October 31, 2003 totaled $40,363 and is
payable in monthly installments without interest through December 2006
as follows:
October 31, 2004 $19,290
October 31, 2005 18,215
October 31, 2006 2,858
--------
$40,363
========
This obligation is included in the accompanying balance sheet and
classified as debt relating to discontinued operations.
NOTE 6 - RELATED PARTY TRANSACTIONS
a) For the years ended October 31, 2003 and 2002, the Company's
operations were partially funded through advances made by B.A.A.M.S.,
Inc., a corporation wholly owned by two shareholders. The amounts
advanced are evidenced by various promissory notes and are assessed
interest at an annual rate of 8%. Each note matures in thirty-six
months from the date of advance. The advances are secured by a lien
covering property and equipment with a book value of $5,949. The
balance of the loan as of October 31, 2003, amounted to $656,791.
The two shareholders of B.A.A.M.S. and their immediate family own
approximately 70% of the Company's outstanding common stock.
Interest charged to discontinued operations for the years ended
October 31, 2003 and 2002 amounted to $79,465, and $89,952,
respectively. Interest charged to continuing operations for the years
ended October 31, 2003 and 2002 amounted to $3,647, and $0,
respectively.
b) For the years ended October 31, 2003 and 2002, the Company received
advances from its President. The amounts advanced are evidenced by
various promissory notes and are assessed interest at an annual rate
of 8%. Each note matures in thirty-six months from the date of
advance. The balance at October 31, 2003, amounted to $54,929.
Accrued interest of $2,508 and $3,098 were charged to discontinued
operations for the years ended October 31, 2003 and 2002. Interest
charged to continuing operations for the years
F-26
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
ended October 31, 2003 and 2002, amounted to $ 1,681 and $57,
respectively.
c) For the years ended October 31, 2003 and 2002, the Company received
advances from four entities controlled by the Directors of the
Company. The amounts advanced are evidenced by various promissory
notes and are assessed interest at an annual rate of 8%. Each note
matures in thirty-six months from the date of advance. The balance of
these notes including accrued interest as of October 31, 2003 amounted
to $175,170.
Accrued interest of $11,468 and $10,882 were charged to discontinued
operations for the years ended October 31, 2003 and 2002 respectively.
Interest charged to continuing operations for the years ended October
31, 2003 and 2002 was $3,944 and $3,538, respectively.
A schedule of maturities of long term indebtedness due related parties
is as follows:
October 31, 2004 $ 102,492
October 31, 2005 345,488
October 31, 2006 438,910
----------
$ 886,890
==========
d) The Company operates from the offices of Card Ready without charge.
For financial reporting purposes $8,000 and $7,500, which represented
the estimated fair market value of office rent, was charged to
operations for the years ended October 31, 2003 and 2002,
respectively.
NOTE 7 - INCOME TAXES
INCOME TAX EXPENSE
The provision for income tax expense for the years ended October 31, 2003
and 2002 are as follows:
2003 2002
--------- --------
Current
Federal $ -- $ --
State 1,800 --
--------- --------
Total Income Tax Expense $ 1,800 $ --
========= ========
DEFERRED TAXES
Deferred income taxes arise from temporary differences resulting from
income and expense items reported for financial accounting and tax purposes
in different periods. Deferred taxes are classified as current or
non-current, depending on the classification of the assets and
F-27
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
liabilities to which they relate. At October 31, 2003 the components of
deferred tax assets are as follows:
Net operating loss carryforward $ 646,727
Less valuation allowance (646,727)
-----------
Net deferred tax assets $ --
===========
VALUATION ALLOWANCE
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which temporary differences become deductible. Management
considers the scheduled reversal of deferred taxes, projected future
taxable income and tax planning strategies in making this assessment.
A reconciliation of the valuation allowance is as follows:
Balance, at November 1, 2002 $ 604,791
Addition for the period 41,936
-----------
Balance, at October 31, 2003 $ 646,727
===========
NET OPERATING LOSS CARRYFORWARD
The Company has available at October 31, 2003 $2,724,448 of unused
operating loss carryforwards that may be applied against future taxable
income which expire in various years throughout 2022.
NOTE 8 - LOAN PAYABLE - OTHER
The Company has received total advances from an unrelated third party
through October 31, 2003 totaling $489,000. Of the amounts received,
$424,000 is subject to the terms of a convertible debenture. The terms of
the debenture were finalized in January 2004. Under the terms of the
debenture, the amounts received are assessed interest, retroactively, at a
rate of 7.5% per annum and the total outstanding balance, including accrued
interest, is convertible into 1,931,890 shares of common stock at a
conversion price of $.25 per share. As of October 31, 2003, the total
balance due under the debenture is $482,973. Interest of $31,800 has been
charged to continuing operations for the year ended October 31, 2003. See
Note 13. Interest expense of $27,173 for the year ended October 31, 2002
has been recorded as a prior-period adjustment. See Note 12.
F-28
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
As indicated, of the $489,000 received, $65,000 is not subject to the terms
of the debenture and is non-interest bearing, unsecured, and due on demand.
NOTE 9 - DISCONTINUED OPERATIONS
As indicated above, the Company transferred the residual stream of merchant
accounts to the former owner of SSET. In addition to this transaction, for
the year ended October 31, 2002, the Company abandoned certain office
equipment and other assets. The Company accounted for this transaction as a
disposal of a segment of its operations. Discontinued operations for the
two years ended October 31, 2003 and 2002, consist of the following:
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002
-------------- --------------
Revenues $ 7,680 $ 33,049
Cost of revenues -- (19,547)
-------------- --------------
Gross profit 7,680 13,502
Selling, general, and administrative
expenses (47,599) (525,220)
-------------- --------------
Net Loss from operations (39,919) (511,718)
Other income (expense)
Interest income -- --
Interest expense (87,446) (108,090)
-------------- --------------
Net Loss before income taxes (127,365) (619,808)
Provision for income tax -- --
-------------- --------------
Net Loss $ (127,365) $ (619,808)
============== ==============
NOTE 10 - STOCKHOLDERS' EQUITY
Common Stock
The holders of the Company's common stock are entitled to one vote per
share of common stock held.
F-29
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Preferred Stock
The holders of preferred stock have certain preferential rights over the
holders of the Company's common shares. Dividend features or voting rights
are at the discretion of the Board of Directors without the requirement of
shareholder approval. As of October 31, 2003 there were no preferred shares
outstanding.
Issuances Involving Non-Cash Consideration
All issuances of the Company's stock for non-cash consideration have been
assigned a dollar amount equaling the market value of the shares issued on
the respective stock issuance or the value of consideration received,
whichever is more readily determinable.
On December 18, 2002, the Company issued 1,000,000 (pre-split) (10,000
shares post-split) shares of its common stock in consideration for
consulting services. The shares were valued at $10,000.
On December 18, 2002 the Company issued 650,000 (pre-split) (6,500 shares
post-split) shares of its common stock to a creditor who had lent two
related parties funds that were part of the advances made to the Company
during 2002. The 650,000 (pre-split) (6,500 shares post-split) shares were
issued in consideration for the cancellation of $70,000 of indebtedness due
the related parties, and in turn had their respective indebtedness canceled
by the creditor.
On December 20, 2002, the Company issued 1,000,000 (pre-split) (10,000
shares post-split) shares of its common stock in consideration for
consulting services. The shares were valued at $10,000.
On January 10, 2003 the Company issued a total of 287,300 (pre-split)
(2,873 shares post-split) shares of its common stock to two consultants for
services rendered. The shares were valued at $2,873.
NOTE 11 - EMPLOYEE STOCK PLAN
On April 19, 2002, the Company formed the Single Source Financial Services
Corporation 2002 Omnibus Securities Plan. Under the plan, the Company may
grant options or issue stock to selected employees, directors, and
consultants for up to 3,000,000 (pre-split) (30,000 shares post-split)
shares. The exercise price of each option is at the discretion of the Board
of Directors but can not be less than 85% of the fair market value of a
share at the date of grant (100% of fair market value for 10%
shareholders). The vesting period of each option granted is also at the
discretion of the Board of Directors, but each option granted shall vest at
a rate of no less than 20% per year from date of grant. As of October 31,
2003, no options have been granted.
F-30
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
However, the Company issued 1,925,000 (pre-split) (19,250 shares
post-split) shares of common stock to various consultants through the plan
as discussed in Note 10 above.
NOTE 12 - PRIOR-PERIOD ADJUSTMENT
Retained deficit at the beginning of October 31, 2002 has been adjusted to
correct an error relating to the retroactive recognition of interest
expense per the terms of a convertible debenture. The error increased the
net loss for the year ended October 31, 2002 by $27,173.
NOTE 13 - SUBSEQUENT EVENTS
LOAN PAYABLE - OTHER
In January 2004, the Company finalized its debt conversion agreement
whereby 1,931,890 (post-split) shares of common stock will be issued to the
lender in exchange for the cancellation of $482,973 of indebtedness. See
Note 8.
CONTINGENCIES
On November 5, 2003, the Company settled lawsuits filed against it for
breach of contract and fraud in connection with services allegedly
provided. The Company issued 1,400,000 (pre-split) (14,000 shares post
split) shares of common stock valued at $14,000.
REORGANIZATION
The Company is currently negotiating the final stages of a Reorganization
and Stock Purchase Agreement with Bio-Solutions Manufacturing, Inc.
("BSM"). Under the terms of the agreement, the shareholders of BSM will
receive 11,865,000 shares of common stock of the Company in exchange for
the transfer of all of the shares of BSM to the Company. Under the
agreement, shares of SSET will be distributed to the shareholders of the
Company, who will receive shares of SSET's common stock on a pro-rata basis
determined on the number of shares that each shareholder holds of the
Company's common stock on the record date of the distribution. In addition,
under the terms of the agreement, the prior exercise of the option
currently held by the Company regarding its ability to acquire shares of
Card Ready will be canceled and the option will be transferred to SSET. The
terms of the option will then be re-negotiated.
F-16
SINGLE SOURCE FINANCIAL SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 14 - MANAGEMENT'S DISCUSSION ON FUTURE OPERATIONS
Since its inception, the Company has had recurring losses totaling
$2,439,702. Substantially all of the losses have been funded by shareholder
and officer loans. During 2002, the Company discontinued its business
relating to the sales and leasing of electronic processing equipment to
merchants, from which the majority of the Company's losses relate, thereby
significantly reducing the Company's overhead. As discussed in Note 13, the
Company's prior exercise of the option to acquire shares of CardReady is
being canceled and the option transferred to SSET, which will renegotiate
the option with the owner of the CardReady shares. Management also
anticipates advancing funds to the Company on an as needed basis and also
plans on seek new capital through stock and debt offerings.
F-31
INDEX TO UNAUDITED FINANCIAL STATEMENTS
OF BIO-SOLUTIONS INTERNATIONAL, INC.
Consolidated Balance Sheets.................................................F-33
Consolidated Statements of Operations.......................................F-34
Consolidated Statements of Stockholders' Deficiency.........................F-35
Consolidated Statements of Cash Flows.......................................F-36
Notes to Consolidated Financial Statements..................................F-37
F-32
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-33
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-34
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-35
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-36
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-37
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-38
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-39
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-40
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-41
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-42
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-43
(b) Pro forma financial information.
(1) Pro forma financial information regarding the newly acquired
subsidiary Bio-Solutions Manufacturing, Inc have been delayed and
will be included as an amendment to the Form 8K-A on or before
June 8, 2004.
(c) Exhibits
Exhibit No. Description
- ----------------------------------------------------------------------
31.1 * Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 * Certification pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
32.1 * Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
32.2 * Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
- ---------------------
* Filed Herewith.
Item 7A. 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, Chief Executive and Chief Financial Officer. Based upon that
evaluation, the Company's President, Chief Executive and 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 and Chief Financial Officer as appropriate, to allow timely decisions
regarding required disclosure.
ITEM #8 - CHANGE IN FISCAL YEAR
Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Bio Solutions Manufacturing, Inc.
(Registrant)
Date: June 2, 2004 By: /s/ Krish V. Reddy
--------------------------------
Krish V. Reddy, Ph.D.,
President