U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: March 31, 2004
Commission file no.: 33-25126-D
Bio-Solutions International, Inc.
--------------------------------------
(Name of Small Business Issuer in its Charter)
Nevada 85-0368333
- ------------------------------ ---------------------------
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
1161 James Street
Hattiesburg, MS 39402
- -------------------------------------- ---------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (601) 582-4000
Securities registered under Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
None None
- --------------------------------- --------------------------
Securities registered under Section 12(g) of the Act:
Common Stock, $0.0001 par value per share
----------------------
(Title of class)
Copies of Communications Sent to:
Wayne Hartke
The Hartke Building
7637 Leesburg Pike
Falls Church, VA 22043
Indicate by Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [_]
As of March 31, 2004, there were 57,809,083 of voting stock of the
registrant issued and outstanding.
SAFE HARBOR STATEMENT
This quarterly report on Form 10-QSB includes forward-looking statements.
All statements, other than statements of historical fact made in this Quarterly
Report on Form 10- QSB are forward-looking. In particular, the statements herein
regarding industry prospects and future results of operation or financial
position are forward-looking statements. Forward-looking statements reflect
management's current expectations based on assumptions believed to be reasonable
and are inherently uncertain as they are subject to various known and unknown
risks, uncertainties and contingencies, many of which are beyond the control of
Bio-Solutions International, Inc. The Company's actual results may differ
significantly from management's expectations.
In some cases, you can identify forward-looking statements by terminology
such as "may", "will", "should," "expects," "plans," "intends," "anticipates,"
"believes," "estimates," "predicts," "potential," or "continue" or the negative
of such terms or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, events, levels of
activity, performance, or achievements. We do not assume responsibility for the
accuracy and completeness of the forward- looking statements. We do not intend
to update any of the forward-looking statements after the date of this quarterly
report to conform them to actual results.
The following financial information and discussion and analysis should be
read in conjunction with the Company's Annual Report and Amended Annual Report
on Form 10-KSB for the year ended June 30, 2003.
The discussion of results, causes and trends should not be construed to
imply that such results, causes or trends will necessarily continue in the
future.
PART I
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Consolidated Balance Sheets..................................................F-2
Consolidated Statements of Operations........................................F-3
Consolidated Statements of Cash Flows........................................F-4
Notes to Consolidated Financial Statements...................................F-5
Bio Solutions International Inc.
Consolidated Balance Sheet
March 31, 2004
March 31,
2004
-----------------
ASSETS
CURRENT ASSETS
Cash $ 26,069
Accounts receivable -other 150,000
Accounts receivable- trade (net) 93,635
-----------------
Total current assets 269,704
OTHER NON-CURRENT ASSETS
Investments Held 100,000
Security Deposit 3,000
-----------------
Total non-current assets 103,000
-----------------
Total assets $ 372,704
=================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accruals $ 420,627
Note payable 409,067
-----------------
Total current liabilities 829,694
-----------------
Total liabilities 829,694
-----------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock $0.0001 par value, 100,000,000 authorized, 5,775
57,754,083 issued and outstanding
Additional paid in capital 1,694,508
Accumulated Deficit -2,207,273
Total stockholders' equity (deficit) -456,990
-----------------
Total liabilities and stockholders' equity (deficit) $ 362,704
=================
The accompanying notes are an integral part of the financial statements.
F-2
Bio Solutions International Inc.
Consolidated Statements of Operations
For the Nine and Three Months Ended March 31, 2004 and 2003
Nine Months Ending Three Months Ending
March 31, March 31, March 31, March 31,
2004 2003 2004 2003
--------------- ---------------- ---------------- ---------------
REVENUES
Sales of franchises $ 12,501 $ 154,339 $ - $ 54,428
Product and service sales 299,951 264,710 128,787 124,410
--------------- ---------------- ---------------- ---------------
Total revenues 312,452 419,049 128,787 178,838
COST OF GOODS SOLD 138,200 79,384 53,648 23,264
--------------- ---------------- ---------------- ---------------
Gross profit 174,252 339,665 75,139 155,574
OPERATING EXPENSES 340,594 318,558 206,496 99,153
--------------- ---------------- ---------------- ---------------
Total operating expenses 340,594 318,558 206,496 99,153
--------------- ---------------- ---------------- ---------------
Net income (loss) before other income (expenses) and
provision for income taxes-continuing operations -166,342 21,107 -131,357 56,421
--------------- ---------------- ---------------- ---------------
OTHER INCOME (EXPENSE)
Interest (expense) -32,174 -24,562 -10,298 -10,483
--------------- ---------------- ---------------- ---------------
Total other income (expense) -32,174 -24,562 -10,298 -10,483
--------------- ---------------- ---------------- ---------------
Net income (loss) before provision for income taxes
continuing operations -198,516 -3,455 -141,655 45,938
Provision for income taxes- continuing operations 0 0 0 0
--------------- ---------------- ---------------- ---------------
Net income (loss)-continuing operations -198,516 -3,455 -141,655 45,938
--------------- ---------------- ---------------- ---------------
DISPOSED OF OPERATIONS
Net Loss from disposed of operations -116,771 -181,525 -36,655 -56,501
Gain on sale of disposed of operations 380,375 0 380,375 0
--------------- ---------------- ---------------- ---------------
Income (loss)- from disposed of operations before 263,604 -181,525 343,720 -56,501
provision for income tax
Provision for income taxes- disposed of operations 0 0 0 0
Net income (loss)-on sale of disposed of operations 263,604 -181,525 343,720 -56,501
--------------- ---------------- ---------------- ---------------
Net income (loss)- $ 65,088 $ -184,980 $ 202,065 $ -105,63
=============== ================ ================ ===============
Net income (loss) per weighted average share
Continuing Operations ($0.00) ($0.00) ($0.00) $0.00
Disposed of Operations $0.00 ($0.00) $0.01 ($0.00)
=============== ================ ================ ===============
Weighted average number of shares 57,729,538 57,296,867 57,754,083 57,296,867
=============== ================ ================ ===============
The accompanying notes are an integral part of the financial statements.
F-3
Bio Solutions International Inc.
Consolidated Statements of Cash Flows
For the Nine Months Ended March 31, 2004 and 2003
March 31, March 31,
2004 2003
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 65,088 $ -184,980
Adjustments to reconcile net income (loss) to net cash provided (used) by
operations:
Stock Issued for services 0 90,000
Reduction of notes payable for purchases -2,835 0
Common stock issued for dispute 3,750 0
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable -74,340 -159,989
(Increase) decrease in accounts payable and other accruals 6,287 134,547
(Incr.)/decr. in assets of disposed of operations 389,040 36,124
Incr./(decr.) in liabilities of disposed of operations -26,494 -14,476
Prepaid franchise sales income -27,567 -3,040
--------------- ---------------
Net cash provided (used) by operating activities 332,929 -101,814
CASH FLOW FROM INVESTING ACTIVITIES:
Receivable from sale of disposed of operation -150,000 0
Reduction in deposits held for sale of business -50,000 0
Investments Held -100,000 0
--------------- ---------------
Net cash provided (used) by investing activities -300,000 0
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds of note and loan payable 0 82,500
Decrease in cash overdraft -6,860 0
--------------- ---------------
Net cash provided (used) by financing activities -6,860 82,500
--------------- ---------------
Net increase (decrease) in cash 26,069 -19,314
CASH - BEGINNING 0 20,334
--------------- ---------------
CASH - ENDING $ 26,069 $ 1,020
=============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest expense $ - $ -
=============== ===============
Cash paid for income taxes $ - $ -
=============== ===============
Common stock issued for debt conversion $ - $ 40,000
=============== ===============
Common stock issued to settle dispute $ 3,750 $ -
=============== ===============
The accompanying notes are an integral part of the financial statements.
F-4
Bio-Solutions International, Inc.
Notes to Consolidated Financial Statements
(Information with regard to March 31, 2004 and 2003 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.
The Company pursuant to an "Asset Purchase Agreement" dated March 18, 2004
has sold its manufacturing division , thus its activities are exclusively
the sale and marketing of franchises and related sale of its products.
F-5
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 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-6
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.
Investments held.
The Company received 2,000,000 shares of restricted common stock of
Bio-solutions Manufacturing, Inc.as part of the consideration received
pursuant to the "Asset purchase Agreement" dated March 18, 2004. The
valuation of these shares are based on an estimate of the value of assets
exchanged in this transaction and consideration of the limited
marketability of these shares and the restrictions on their future
disposition.
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.
F-7
Bio-Solutions International, Inc.
Notes to Consolidated Financial Statements
(1) SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventory
Inventory has historically been stated at the lower of cost or market. As a
result of the sale of its manufacturing division, the Company does not
inventory its products.
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 $7,932 for bad debts.
Interim financial information
The financial statements for the nine and three months ended March 31, 2004
and 2003 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 has been depreciated using the
straight-line method over the estimated useful lives of the various assets.
Effective March 1, 2004 pursuant to an " Asset Purchase Agreement" ( see
Note ) dated March 18, 2004 has sold all its fixed assets. The sale of
fixed assets consisted of equipment, machinery and leasehold improvements
totalling $ 416,972 net of accumulated depreciation of $ 91,660.
The depreciation expense for the nine months ended March 31, 2004 was $
31,745 was charged to net loss from discontinued operations.
(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 $2,200,000. 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. The tax affect
from the sale of its manufacturing division on March 12, 2004 would have
been approximately $ 125,000. Due to the significant net operating loss
forwards this has been fully offset.
(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
F-8
Bio-Solutions International, Inc.
Notes to Consolidated Financial Statements
(4) CAPITAL TRANSACTIONS (Continued)
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 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.
F-9
Bio-Solutions International, Inc.
Notes to Financial Statements
(4) CAPITAL TRANSACTIONS (Continued)
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.
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.
F-10
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 has been increased to $ 120,000 effective January 1,
2004.
The Company entered into an informal compensation agreement with two
shareholders for consulting and marketing services to the Company. Services
are being accrued at $10,000 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. 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 nine months ended March 31, 2004 and 2003 was
$27,000, respectively. As a result of the "Asset Purchase Agreement"
whereby the Company sold its manufacturing operations, the obligation of
the lease payments have been assumed by the Bio-Solutions Manufacturing,
Inc. The Company receive its office facilties at no charge. The rent
expense incurred per above has been charged to net loss from discontiued
operations.
(8) NOTES AND LOANS PAYABLE
03/31/04 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 $ 2,200
,000 accumulated through March 31, 2004. 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.
F-11
Bio-Solutions International, Inc.
Notes to Financial Statements
(10) SALE OF MANUFACTURING DIVISION
On March 12, 2004, the Company sold its manufacturing division to
Bio-Solutions Manufacturing, Inc. ( a Nevada Company ) effective March 1,
2004. The assets sold consisted of all the Company's fixed assets,
inventory products and its various product formulations. The gross sales
price was $ 809,711 which consisted of $ 250,000 cash at closing, $ 100,000
installment obligation ( payable in monthly installments of $ 25,000 )
assumption of $ 309,711 of accounts payable and $ 50,000 reduction of the
Company's note obligation. The gain recognized on this sale was $ 380,675.
The estimated tax affect of this gain is $ 125,000 which will be offset by
the company's net operating losses.
The purchaser of the manufacturing operations is considered a related party
due to some common ownership of the Company.
The agreement provides for an exclusive sale of the Bio-Solution products
to the Company at a pre-determined fixed pricing which allocates the
potential gross profit previously realized between both parties. In
addition, the Company will be allowed to use its existing office facilities
at no charge. Various non-manufacturing operating expenses incurred will be
allocated to the Company's accordingly.
(11) LITIGATION
The Company has settled a lawsuit with a former franchisee, BioSolutions of
Northern Virginia, Inc., which sought to file a complaint with the
Commonwealth of Virginia alleging breach of contract and misrepresentation
resulting in damages. The plainiffs in the litigation Joel H. Bernstein,
personally and Bio- Solutions of Northern Virginia LLC have a judgement by
default against the Company in the amount of $ 85, 380.63. The settlement
requires an initial payment of $ 35,000 monthly installments of $ 1,000
until paid in full.
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 outcome was that the Company comply with the
registration requirements, refund of franchise fees received in Virginia
and to withdraw from the state.
F-12
Item 2. Management's Discussion and Analysis
THE FOLLOWING ANALYSIS OF THE OPERATIONS AND FINANCIAL CONDITION OF THE COMPANY
SHOULD BE READ IN CONJUNCTION WITH THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, OF THE COMPANY CONTAINED ELSEWHERE IN
THIS FORM 10-QSB.
General
In March 2004, the Company sold certain of its assets associated with the
manufacturing portion of its business to Bio Solutions Manufacturing, Inc., a
Nevada corporation ("BSMI"). As a part of such agreement, BSMI agreed to assume
certain liabilities totaling $309,709.60 to be paid within six (6) months of
closing, with no less than $25,000 being paid each month until all the
liabilities are satisfied. BSMI issued 2,000,000 shares of the restricted common
stock of Single Source Financial Services, Inc., paid the Company $250,000.00
cash and agreed to make payments in the amount of $25,000.00 per month for a
period of four (4) months as payment for the assets.
Also in March 2004, BSMI entered into a marketing/manufacturing agreement
with Bio-Solutions Franchise Corp. ("BSFC"). As a part of the agreement, BSMI
will manufacture, test, research and develop environmental products for BSFC to
market and sell. The term of the agreement is for a period of ten (10) years.
The Company recorded a gain on disposed of operations in the amount of
$330,375, net of income tax effects.
Discussion and Analysis
The discussion contained herein reflects the Results of Operations of the
Company for the three months ended March 31, 2004 and 2003. The following
discussion and analysis should be read in conjunction with the financial
statements of the Company and the accompanying notes appearing in the previous
section. The following discussion and analysis contains forward-looking
statements, which involve risks and uncertainties in the forward-looking
statements. The Company's actual results may differ significantly from the
results, expectations and plans discussed in the forward-looking statements.
The Company's growth is expected to come primarily from the distribution
and sale of its bioremediation products and through the sale of franchises. This
pattern of growth will closely correlate to increased sales.
In February 2001, the Company acquired one hundred percent (100%) of the
issued and outstanding common stock of BSFC in exchange for 11,140,020 shares of
the Company's restricted common stock, such that BSFC became a wholly-owned
subsidiary of the Company.
In June 2001, the Company filed a Current Report on Form 8-K disclosing
that the Company had purchased all of the assets and liabilities of BSI in
exchange for 12,859,980 shares of the Company's restricted common stock in May
2001.
Since acquiring BSFC and the assets and liabilities of BSI, the Company has
begun to make preparations for a period of growth, which may require it to
significantly increase the scale of its operations. This increase will include
the hiring of additional personnel in all functional areas and will result in
significantly higher operating expenses. The increase in operating expenses is
expected to be matched by a concurrent increase in revenues. However, the
Company's net loss may continue even if revenues
15
increase. Expansion of the Company's operations may cause a significant strain
on the Company's management, financial and other resources. The Company's
ability to manage recent and any possible future growth, should it occur, will
depend upon a significant expansion of its accounting and other internal
management systems and the implementation and subsequent improvement of a
variety of systems, procedures and controls. There can be no assurance that
significant problems in these areas will not occur. Any failure to expand these
areas and implement and improve such systems, procedures and controls in an
efficient manner at a pace consistent with the Company's business could have a
material adverse effect on the Company's business, financial condition and
results of operations. As a result of such expected expansion and the
anticipated increase in its operating expenses, as well as the difficulty in
forecasting revenue levels, the Company expects to continue to experience
significant fluctuations in its revenues, costs and gross margins, and therefore
its results of operations.
The Company's principal place of business is 1161 James St., Hattiesburg,
MS 39402, and its telephone number at that address is (601) 582-4000. The
Company is quoted on the Over the Counter Bulletin Board ("OTCBB") under the
symbol "BSII".
Results of Operations - For the Three and Nine Months Ended March 31, 2004 and
2003
Financial Condition, Capital Resources and Liquidity
At March 31, 2004, the Company has $372,700 in total assets, of which
$269,700 are current assets and $100,000 is the common stock of BSMC held as a
result of the sale of that portion of the Company's business.
The Company has negative working capital of $560,000, and recorded a net
loss from continuing operations of $198,500 and $185,000 for the nine months and
$141,700 and $10,600 for the three months ended March 31, 2004 and 2003,
respectively.
The Company has no prospects at present to raise additional capital, in any
form. The Company expects to continue to record losses for the foreseeable
future.
Net Income / Loss
The Company recorded a net loss from continuing operations of $198,500 and
$185,000 for the nine months and $141,700 and $10,600 for the three months ended
March 31, 2004 and 2003, respectively.
The Company recorded net income, after gain on disposal of operations of
$65,100 and a loss of $185,000 for the nine months and $202,000 gain and $10,600
loss for the three months ended March 31, 2004 and 2003, respectively.
Employees
The Company has two employees at March 31, 2004.
Research and Development Plans
The Company believes that research and development is an important factor
in its future growth. The industry in which the Company operates is closely
linked to the technological advances of the products it services. Therefore, the
Company must continually invest in learning the new technology to provide the
best quality service to the public and to effectively compete with other
companies in the industry. No assurance can be made that the Company will have
sufficient funds to complete new training in the latest technological advances
as they become available. Additionally, due to the rapid advance rate at which
16
technology advances, the Company's equipment may be outdated quickly, preventing
or impeding the Company from realizing its full potential profits.
Forward-Looking Statements
This Form 10-QSB includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-QSB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), expansion
and growth of the Company's business and operations, and other such matters are
forward- looking statements. These statements are based on certain assumptions
and analyses made by the Company in light of its experience and its perception
of historical trends, current conditions and expected future developments as
well as other factors it believes are appropriate in the circumstances. However,
whether actual results or developments will conform with the Company's
expectations and predictions is subject to a number of risks and uncertainties,
general economic market and business conditions; the business opportunities (or
lack thereof) that may be presented to and pursued by the Company; changes in
laws or regulation; and other factors, most of which are beyond the control of
the Company.
Consequently, all of the forward-looking statements made in this Form
10-QSB are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even if substantially realized, that they will have the
expected consequence to or effects on the Company or its business or operations.
ITEM 3. CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Exchange Act, within the 90 days prior
to the filing date of this report, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's President
and Chief Executive Officer along with the Company's Chief Financial Officer.
Based upon that evaluation, the Company's President and Chief Executive Officer
along with the Company's Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective. There have been no significant
changes in the Company's internal controls or in other factors, which could
significantly affect internal controls subsequent to the date the Company
carried out its evaluation.
Disclosure controls and procedures are controls and other procedures that
are designed to ensure that information required to be disclosed in Company
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in Company reports filed under the Exchange
Act is accumulated and communicated to management, including the Company's Chief
Executive Officer and Chief Financial Officer as appropriate, to allow timely
decisions regarding required disclosure.
17
PART II
Item 1. Legal Proceedings.
In October 2003, Bio-Solutions of Northern Virginia, LLC and Joel H.
Bernstein filed a Motion for Judgment in the Circuit Court for the City of
Alexandria, Virginia alleging breach of contract, promissory estoppel,
fraudulent inducement to contract, fraud and misrepresentation and violation of
Virginia Retail Franchise Act. This lawsuit was settled for $60,000, to be paid
$35,000 initially with payments of $1,000 monthly until paid in full. In the
event any installments are not timely paid the additional sum of $2,389 is due
as interest. The initial payment of $35,000, and the first monthy installment of
$1,000 has been tendered by the Company pending execution of the settlement
documents.
Additionally, also in October 2003, The Commonwealth of Virginia State
Corporation Commission issued a Rule to Show Cause regarding the Company's
failure to register the sale of a Virginia franchise to one of its residents.
This issue was settled by the Company agreeing to comply with Virginia's
registration requirements, refund of franchise fees received in Virginia, to
withdraw from offering franchises in the State of Virginia and to pay the State
of Virginia the sum of $2,000 for legal fees.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults in Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the quarter ended March 31, 2004, covered by
this report to a vote of the Company's shareholders, through the solicitation of
proxies or otherwise.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed herewith by Item 601 of Regulation
S-B, as described in the following index of exhibits, are incorporated herein by
reference, as follows:
Exhibits
Number Description
- ------ -------------------------------
31.1 * Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.2 * Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
* Filed Herewith
(b) There were no Form 8K filings made during this quarter.
18
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Bio-Solutions International, Inc.
--------------------------------
(Registrant)
Date: June 22, 2004
/s/ Louis H. Elwell
- ---------------------------------------
Louis H. Elwell
Sole Officer and Director