10QSB 1 bsii-10qsb_03312004.txt QUARTERLY REPORT 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