Attached files
file | filename |
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EX-32.1 - Todays Alternative Energy Corp | v177011_ex32-1.htm |
EX-31.2 - Todays Alternative Energy Corp | v177011_ex31-2.htm |
EX-31.1 - Todays Alternative Energy Corp | v177011_ex31-1.htm |
EX-32.2 - Todays Alternative Energy Corp | v177011_ex32-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended January 31,
2010
o
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from _________________ to _________________
Commission
File No.: 000-33229
BIO
SOLUTIONS MANUFACTURING, INC.
(Exact
name of registrant as specified in its charter)
Nevada
|
16-1576984
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
9720
Heatherstone River Court
Townhouse
1
Estero,
FL 33928
(Address
of principal executive offices)
Issuer’s
telephone number: (888) 880-0994
Check
whether the registrant filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filter o
|
Accelerated
filter o
|
|
Non-accelerated
filter o
|
(Do
not check if a smaller reporting company)
|
Smaller
reporting company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act. Yes o No
x
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE
PRECEDING FIVE YEARS
Indicate
by check mark whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes o No o
APPLICABLE
ONLY TO CORPORATE ISSUERS
As of
March 12, 2010, 26,682,819 shares of our common stock were issued and
outstanding.
Transitional
Small Business Disclosure
Format: Yes o No
x
PART
1:
|
FINANCIAL
INFORMATION
|
ITEM
1 – FINANCIAL STATEMENTS
Bio
Solutions Manufacturing Inc.
Condensed
Consolidated Balance Sheets
January
31,
|
October
31,
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
Assets
|
||||||||
|
|
|
|
|
||||
Current
assets:
|
||||||||
Cash
|
$
|
-
|
$
|
3,423
|
||||
Total
current assets
|
-
|
3,423
|
||||||
Total
assets
|
$
|
-
|
$
|
3,423
|
||||
Liabilities
and Stockholders' (Deficit)
|
||||||||
Current
liabilities:
|
||||||||
Bank
overdraft
|
$
|
4,123
|
$
|
-
|
||||
Accounts
payable and accrued expenses
|
1,170,725
|
1,112,481
|
||||||
Convertible
notes payable
|
1,183,437
|
1,112,222
|
||||||
Total
current liabilities
|
2,358,285
|
2,224,703
|
||||||
Stockholders'
(deficit):
|
||||||||
Preferred
stock, $0.00001 par value, 10,000,000 authorized,
|
||||||||
10,000
shares of Series A issued and outstanding as of January 31, 2010 and
October 31, 2009
|
||||||||
and
92,000 shares of Series B issued and outstanding as of January 31, 2010
and October 31, 2009
|
1
|
1
|
||||||
Common
stock, $0.00001 par value, 1,000,000,000 shares
|
||||||||
authorized,
26,617,197 shares issued and outstanding as of
|
||||||||
January
31, 2010 and October 31, 2009
|
266
|
266
|
||||||
Additional
paid-in capital
|
6,879,020
|
6,806,420
|
||||||
Accumulated
deficit
|
(9,237,572
|
)
|
(9,027,967
|
)
|
||||
Total
stockholders' (deficit)
|
(2,358,285
|
)
|
(2,221,280
|
)
|
||||
Total
liabilities and stockholders' (deficit)
|
$
|
-
|
$
|
3,423
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
F-1
Bio
Solutions Manufacturing Inc.
Unaudited
Condensed Consolidated Statements of Operations
Three
Months Ended
January
31,
|
||||||||
2010
|
2009
|
|||||||
|
||||||||
Revenues
|
$ | - | $ | - | ||||
Cost
of goods sold
|
- | - | ||||||
Gross
profit
|
- | - | ||||||
Expenses:
|
||||||||
General
and administrative expenses
|
113,914 | 133,930 | ||||||
Total
expenses
|
113,914 | 133,930 | ||||||
Net
loss from operations before other expenses and
|
||||||||
provision
for income taxes
|
(113,914 | ) | (133,930 | ) | ||||
Other
expenses:
|
||||||||
Beneficial
conversion feature expense
|
(72,600 | ) | - | |||||
Interest
expense
|
(23,091 | ) | (15,530 | ) | ||||
(95,691 | ) | (15,530 | ) | |||||
Net
loss before provision for income taxes
|
(209,605 | ) | (149,460 | ) | ||||
Provision
for income taxes
|
- | - | ||||||
Net
loss
|
$ | (209,605 | ) | $ | (149,460 | ) | ||
Net
loss per weighted average share
|
||||||||
-
basic and diluted
|
$ | (0.01 | ) | $ | (1.65 | ) | ||
Weighted
average number of shares
|
||||||||
-
basic and diluted
|
26,617,197 | 90,454 |
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
F-2
Bio
Solutions Manufacturing Inc.
Unaudited
Condensed Consolidated Statements of Cash Flows
Three
Months Ended
|
||||||||
January
31,
|
||||||||
2010
|
2009
|
|||||||
|
||||||||
Net
cash (used) by operating activities
|
$ | (70,548 | ) | $ | (47,059 | ) | ||
Net
cash (used) by investing activities
|
- | - | ||||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from notes payable
|
72,600 | 49,000 | ||||||
Payments
on notes payable
|
(5,475 | ) | (1,518 | ) | ||||
Net
cash provided by financing activities
|
67,125 | 47,482 | ||||||
Net
(decrease) increase in cash
|
(3,423 | ) | 423 | |||||
Cash
and cash equivalents – beginning
|
3,423 | 873 | ||||||
Cash
and cash equivalents- ending
|
$ | - | $ | 1,296 | ||||
Supplemental
disclosures:
|
||||||||
Interest
paid
|
$ | - | $ | - | ||||
Income
taxes paid
|
$ | - | $ | - |
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
F-3
BIO
SOLUTIONS MANUFACTURING, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three
Months Ended January 31, 2010 and 2009
NOTE
1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis
of Presentation
The
accompanying unaudited interim financial statements of Bio Solutions
Manufacturing, Inc. (the “Company”) have been prepared in accordance with
accounting principles generally accepted in the United States of America and the
rules of the Securities and Exchange Commission (“SEC”), and should be read in
conjunction with the audited consolidated financial statements and notes thereto
contained in the Company’s Annual Report filed with the SEC on Form 10-K. In the
opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the
results of operations for the interim periods presented have been reflected
herein. The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year. Notes to the
consolidated financial statements which would substantially duplicate the
disclosure contained in the audited consolidated financial statements for the
fiscal year ended October 31, 2009 as reported in the 10-K have been
omitted.
The
Company has presented this Form 10-Q in condensed manner, hence certain
reclassifications have been made to the prior comparable period to conform to
this period’s presentation.
The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries, BSP and BESI. Significant inter-company accounts and
transactions have been eliminated.
Nature
of Business and History of Company
Bio
Solutions Manufacturing, Inc. (the “Company”) is a provider of waste
bioremediation services. The Company operates through its wholly-owned
subsidiary, and Bio-Extraction Services, Inc. (“BESI”), a development stage
company acquired to focus on the production and sale of biodiesel fuel. The
Company’s products are not currently being sold. The Company anticipates
resuming is sales and marketing activities related to its biological waste
remediation products again once it has obtained additional working
capital.
Corporate
Changes
On
October 24, 2008, Company stockholders approved the change of the Company’s
domicile from New York to Nevada by means of a merger of Bio Solutions,
Manufacturing, Inc, a New York corporation with and into its wholly owned
subsidiary Bio Solutions Manufacturing, Inc., a Nevada corporation, which change
included, among other things, a change in the Company’s authorized capital, a
change in its articles of incorporation, and a change in its bylaws. The
reincorporation closed on October 31, 2008.
All
current and prior share data has been changed to reflect the 1-for-1,000 reverse
stock split effectuated by the Company on November 20, 2008.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. Going concern contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business over
a reasonable length of time. The Company has incurred losses since inception and
has negative cash flows from operations. For the years ended October 31, 2009
and 2008, the Company has incurred net losses of $927,207 and $592,439,
respectively, and has a stockholders’ deficit of $2,221,280 as of October 31,
2009. The future of the Company is dependent upon its ability to obtain
additional equity or debt financing and upon future successful development and
marketing of the Company’s products and services. Management is pursuing various
sources of equity and debt financing. Although the Company plans to pursue
additional financing, there can be no assurance that the Company will be able to
secure such financing or obtain financing on terms beneficial to the Company.
Failure to secure such financing may result in the Company’s inability to
continue as a going concern and the impairment of the recorded long lived
assets.
The
Company laid off its employees at its former facility in Mississippi in February
2007 and in connection with a legal settlement effectuated in October 2007, the
Company sold certain equipment, furniture, fixtures and inventory located at
that facility. The Company anticipates resuming is sales and marketing
activities related to its biological waste remediation products again once it
has obtained additional working capital. The Company anticipates future losses
from operations as a result ongoing overhead expenses incurred while management
attempts to resume selling activities.
These
financial statements do not include any adjustments relating to the
recoverability and classifications of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
F-4
BIO
SOLUTIONS MANUFACTURING, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three
Months Ended January 31, 2010 and 2009
NOTE
2 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accrued
expenses are comprised of the following as of January 31, 2010 and October 31,
2009:
January 31, 2010
|
October 31, 2009
|
|||||||
Accounts
payable
|
$ | 362,063 | $ | 355,350 | ||||
Salaries
|
398,735 | 382,764 | ||||||
Interest
|
308,605 | 285,514 | ||||||
Payroll
taxes
|
76,043 | 73,576 | ||||||
Other
|
25,279 | 15,277 | ||||||
Total
accrued expenses
|
$ | 1,170,725 | $ | 1,112,481 |
NOTE
3 – NOTES PAYABLE
On
November 29, 2006, the Company entered into a loan agreement with certain
existing related party lenders and a new lender, pursuant to which the Company
borrowed approximately $164,000 and certain outstanding debt obligations were
amended and restated. Under the loan agreement, the existing lenders received
amended and restated convertible promissory notes in the aggregate principal
amounts of $537,955 and $264,625, respectively, and the new lender received a
convertible promissory note in the aggregate principal amount of $164,000. Under
the loan agreement and the notes, each lender may, in its sole and absolute
discretion, make additional loans to the Company, up to an aggregate total of
$1,000,000 per lender. Each note was convertible into shares of the Company’s
common stock at a conversion rate equal to the lower of (a) $0.05 per share, and
(b) seventy percent (70%) of the three day average of the closing bid price of
the Company’s common stock immediately prior to conversion, although such
conversions could not be less than $0.01 per share, in any circumstances. In May
2008, the conversion price was amended to provide a fixed conversion price of
$0.001 per share. In addition, the note holders cannot convert any
principal or interest under the notes to the extent that such conversion would
require the Company to issue shares of its common stock in excess of its
authorized and unissued shares of common stock. The notes were
transferred to a single entity.
Expense of
$72,600 and $0 was recorded in the three months ended January 31, 2010 and 2009,
respectively, that is attributed the beneficial conversion feature with this
loan agreement. The notes are secured by a first priority security interest in
all of the assets of the Company.
As of
January 31, 2010 and October 31, 2009, two note holders held the Company’s notes
payable and the aggregate principal outstanding was $1,183,437 and
$1,112,222.
NOTE
4 - EQUITY TRANSACTIONS
In
connection with the October 31, 2008 closing of the transaction for the change
in domicile from New York to Nevada, the articles of incorporation and bylaws of
the surviving Nevada corporation are now the articles and bylaws of the Company.
The new articles of incorporation have increased the Company’s authorized
capitalization to 1,010,000,000 shares of which 1,000,000,000 shares are
authorized as common stock, par value $0.00001 per share and 10,000,000 shares
of preferred stock, par value $0.00001 per share.
Preferred
Stock
As of
October 31, 2008, the Company had authorized 10,000,000 shares of preferred
stock. The Company’s board of directors is expressly authorized to
provide for the issue of all or any of the shares of the preferred stock in one
or more series, and to fix the number of shares and to determine or alter for
each such series, such voting powers, full or limited, or no voting powers, and
such designations, preferences, and relative, participating, optional, or other
rights and such qualifications, limitations, or restrictions thereof, as shall
be adopted by the board of directors and as may be permitted by
law.
F-5
BIO
SOLUTIONS MANUFACTURING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Three
Months Ended January 31, 2010 and 2009
NOTE
4 - EQUITY TRANSACTIONS (continued)
On July
25, 2008, the Company created a series of preferred stock of the company known
as Series A Preferred Stock, par value $0.001 per share. In connection with the
change in domicile, the par value was reduced to $0.00001 per share on October
31, 2008. The Series A preferred stock is not convertible. Holders of
the Series A preferred stock do not have any preferential dividend or
liquidation rights. The shares of Series A preferred stock are not
redeemable. All matters submitted to a vote of the holders of the
common stock, including, without limitation, the election of directors, a holder
of shares of the Series A preferred stock shall be entitled to the number of
votes on such matters equal to the product of (a) the number of shares of the
Series A Preferred Stock held by such holder, (b) the number of issued and
outstanding shares of our common stock, as of the record date for the vote, or,
if no such record date is established, as of the date such vote is taken or any
written consent of stockholders is solicited, and (c) 0.0002.
On August
1, 2008, the Company issued 10,000 shares of Series A preferred stock to the
Company’s chief financial officer in consideration of accrued and unpaid salary
due her. The Company deemed the stated value of the Series A
preferred stock to be $1.00 per share.
On April
29, 2009, the Company created a series of preferred stock of the company known
as Series B Preferred Stock, par value $0.00001 per share. The Series
B Preferred Stock has a stated value of $1.00 per shares and is convertible into
shares of common stock at a conversion rate equal to the average of the Per
Shares Market Values (as defined) during the 10 trading days immediately prior
to conversion. No holder of series B preferred stock may convert more
than 1,000 shares of its series B preferred stock in any given month and
collectively the holders of series B preferred stock may not convert more than
4,000 shares in any calendar month. In addition, holders of the
series B preferred stock may not convert such shares into common stock if as a
result of such conversion the holder would hold in excess of 4.99% shares of our
issued and outstanding common stock. The series B preferred stock do
not contain any voting, liquidation, dividend or preemptive rights.
On April
30, 2009, the Company issued 92,000 shares of Series B preferred stock in
accordance with a Settlement Agreement and General Release dated April 30, 2009
in connection with the Becker litigation. For the three months ended
January 31, 2010, the Company received notices to convert 3,000 Series B
preferred shares into Company common stock (See Note 9 – Subsequent
Events).
Common
Stock
Effective
with the October 31, 2008 change in the Company’s articles of incorporation, the
Company has 1,000,000,000 shares of authorized common stock, of which 89,078
were issued and outstanding. Par value was changed to $0.00001 per
share from $0.001 per share. The holders of the Company’s common
stock are entitled to one vote per share of common stock held.
As of
January 31, 2010 and October 31, 2009, 26,617,197 shares of Company common stock
were issued and outstanding.
Warrants
Warrants
have been issued for equity raises only for the last years. Warrants issued
before October 31, 2005 were issued for services and are fully
vested. All warrants issued have expired in the fiscal year ended
October 31, 2009.
Stock
incentive plans
On April
19, 2002, the Company adopted the Bio Solutions Manufacturing Inc. (formerly
Single Source Financial Services Corporation) 2002 Omnibus Securities Plan (the
“2002 Plan”). Under the plan, the Company may grant options or issue stock to
selected employees, directors, and consultants for up to 30,000 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% stockholders). 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.
In August
2005, the number of shares under the 2002 Plan was increased by 3,000,000 and
400 shares were issued under the 2002 Plan. In January 2006, the 3,000,000
increase was reaffirmed and ratified by the Board of Directors when technical
deficiencies in the registration statement registering the shares of stock
issuable under the 2002 Plan were corrected. As of January 31, 2010, the total
authorization is 3,030,000 shares, 2,540 shares have been issued under the 2002
Plan and no options have been granted.
On
October 27, 2006, the Company adopted its 2006 Stock Incentive Plan (the “2006
Plan”). The Company is permitted to issue up to 6,000,000 shares of common stock
under the Plan in the form of stock options, restricted stock awards, and stock
awards to employees, non-employee directors, and outside consultants. As of
January 31, 2010, 6,000 shares have been issued under the 2006 Plan and no
options have been granted.
F-6
BIO
SOLUTIONS MANUFACTURING, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three
Months Ended January 31, 2010 and 2009
NOTE
4 - EQUITY TRANSACTIONS (continued)
On
October 15, 2007, the Company adopted its 2007 Stock Incentive Plan (the “2007
Plan”). The Company is permitted to issue up to 10,000,000 shares of common
stock under the Plan in the form of stock options, restricted stock awards, and
stock awards to employees, non-employee directors, and outside consultants. As
of January 31, 2010, 9,960 shares have been issued under the 2007 Plan and no
options have been granted.
On
April 22, 2008, the Company adopted its 2008 Stock Incentive Plan (the “2008
Plan”). The Company is permitted to issue up to 16,000,000 shares of common
stock under the 2008 Plan in the form of stock options, restricted stock awards,
and stock awards to employees, non-employee directors, and outside consultants.
As of January 31, 2010, 2,740 shares have been issued under the 2008
Plan.
On April
22, 2008, the Company adopted its 2008 California Stock Incentive Plan (the
“California Plan”). The Company is permitted to issue up to 16,000,000 shares of
common stock under the California Plan in the form of stock options, restricted
stock awards, and stock awards to employees, non-employee directors, and outside
consultants. As of January 31, 2010, 144,535 shares have been issued under the
California Plan and no options have been granted.
In
December 2006, options to purchase an aggregate of 4,000 shares of common stock
at an exercise price of $300 per share were issued to consultants. The options
vested based on the number of gallons of bio-diesel alternative fuel that is
converted by the Company’s bio-converter from sites introduced directly or
indirectly by the consultant. As the vesting of these options did not occur
during the terms of the options, the Company did not value such options, which
are expired as of January 31, 2010. A summary of the non-plan option activity of
for the three months ended January 31, 2010 is as follows:
Stock Options
|
Weighted Average
Exercise Price
|
|||||||||||||||
Outstanding
|
Exercisable
|
Outstanding
|
Exercisable
|
|||||||||||||
Balance
- October 31, 2009
|
4,000 | - | $ | 300 | - | |||||||||||
Granted
Fiscal Year 2010
|
- | - | - | - | ||||||||||||
Exercised
Fiscal Year 2010
|
- | - | - | - | ||||||||||||
Expired
Fiscal Year 2010
|
(4,000 | ) | - | (300 | ) | - | ||||||||||
Balance
– January 31, 2010
|
- | - | $ | - | $ | - |
NOTE
5 - INCOME TAXES
Due to
net operating losses and the uncertainty of realization, no tax benefit has been
recognized for operating losses. The Company’s ability to utilize its net
operating loss carry forwards is uncertain and thus a valuation reserve has been
provided against the Company’s net deferred tax assets. The Company
has not filed their federal or state income tax returns for several
years.
At
January 31, 2010, the Company has unused net operating losses of approximately
$5,000,000 (which will begin expiring in 2019 through 2029) that may be applied,
against future taxable income.
Due to
the changes in ownership over the years for the various acquisitions, debt
conversions and equity financings, the Company may have triggered a Section 382
limitation on the utilization of such net operating loss carryforwards. The
Company has not performed such an evaluation to determine whether the net
operating loss carryforwards have been limited.
NOTE
6 - RELATED PARTY TRANSACTIONS
During
2009, there were 1,100 shares of common stock issued, respectively, to related
parties, management and employees of the Company for services rendered. The
expense for such shares issued was recorded using the then fair market value of
the shares issued.
During
2008, the Company issued 10,000 shares of Series A preferred stock to its chief
financial officer in satisfaction of $10,000 in salary owed.
F-7
BIO
SOLUTIONS MANUFACTURING, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Three
Months Ended January 31, 2010 and 2009
NOTE
7 - COMMITMENTS AND CONTINGENCIES
Payroll
Taxes
At
January 31, 2010 and October 31, 2009, the Company is delinquent with remitting
payroll taxes of approximately $76,043 and $73,576, respectively, including
estimated penalties and interest. The Company has recorded the delinquent
payroll taxes, which are included in accrued expenses on the balance sheet.
Although the Company has not entered into any formal repayment agreements with
the respective tax authorities, management plans to make payment as funds become
available. Penalties and interest amounts are subject to increase based on a
number of factors that can cause the estimated liability to increase
further.
Employment
agreements
The
Company has employment agreements with the Company’s President and Chief
Financial Officer. Each agreement is for an initial term of three years and
provides for annual base salary during the term of the agreement of $75,000 and
$54,000, respectively, provided, however, that base salary shall be increased to
$150,000 and $100,000 per annum, respectively, upon closing of a private
placement of the Company’s debt or equity securities resulting in gross proceeds
of at least $4 million. Each officer will receive performance based bonuses upon
attainment of certain gross revenue targets specified in each employment
agreement. Each officer will also receive stock grants of 200, 250, 300, and 350
shares of the Company’s common stock in each of fiscal 2007, 2008, 2009 and
2010. The Company has agreed to grant each officer options to purchase 4,000
shares of our common stock with exercise prices ranging from $170 to $2,000,
which options would vest upon the attainment of certain gross revenue targets,
as more specifically set forth in the employment agreements. The granting of the
options is subject to the Company’s adoption of a stock option plan for such
purpose. In fiscal 2007, both officers were awarded a one-time bonus of $75,000
and $54,000, respectively, which bonuses are currently accrued but have not been
paid.
Each
employment agreement also contains the following material provisions: (i)
reimbursement for all reasonable travel and other out-of-pocket expenses
incurred in connection with employment; (ii) three (3) weeks paid vacation
leave; (iii) medical, dental and life insurance benefits; (iv) a severance
payment of twelve (12) month’s salary at the then-applicable base salary rate in
the event that the Company terminates the officer’s employment without cause or
if the officer’s employment is terminated due to death or disability; and (v) 24
month non-compete/non solicitation terms.
Legal
matters
On
November 27, 2007, Martin Becker (“Becker”) commenced an action against the
Company in the Superior Court of California, County of Los Angeles, for breach
of contract, common counts, and indemnity, seeking approximately $92,000 in
damages, as well as interest, fees, and costs. The complaint alleges that the
Company breached a certain Reorganization and Stock Purchase Agreement dated on
or about February 1, 2004 by failing to indemnify Becker as required under said
agreement. Pursuant to a Settlement Agreement and General Release dated
April 30, 2009, the Company issued 92,000 shares of Series B preferred stock
having a stated value of $1.00 and a market based conversion price and the
Company received a general release of all claims asserted by the parties in the
Becker litigation. During the three months ended January 31, 2010,
the Series B preferred stock holder submitted requests to convert 3,000 shares
of Series B preferred stock into common stock, which the Company issued on March
11, 2010. The Series B holder and the Company are discussing the
issuance of approximately 12,500 additional shares of Company common stock as
consideration for the delay in issuance.
NOTE
8 – FAIR VALUE MEASUREMENTS
Fair Value Measurements under
GAAP clarifies the principle that fair value should be based on the assumptions
market participants would use when pricing an asset or liability and establishes
a fair value hierarchy that prioritizes the information used to develop those
assumptions. Under the standard, fair value measurements are separately
disclosed by level within the fair value hierarchy. It only applies
to accounting pronouncements that already require or permit fair value measures,
except for standards that relate to share-based payments.
Level 1 -
Quoted prices in active markets for identical assets or
liabilities.
Level 2 -
Observable inputs other than Level 1 prices such as quoted prices for similar
assets or liabilities; quoted prices in markets with insufficient volume or
infrequent transactions (less active markets); or model-derived valuations in
which all significant inputs are observable or can be derived principally from
or corroborated by observable market data for substantially the full term of the
assets or liabilities.
Level 3 -
Unobservable inputs to the valuation methodology that are significant to the
measurement of fair value of assets or liabilities.
F-8
BIO
SOLUTIONS MANUFACTURING, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three
Months Ended January 31, 2010 and 2009
NOTE 8 – FAIR VALUE
MEASUREMENTS (continued)
To the
extent that valuation is based on models or inputs that are less observable or
unobservable in the market, the determination of fair value requires more
judgment. In certain cases, the inputs used to measure fair value may fall
into different levels of the fair value hierarchy. In such cases, for
disclosure purposes, the level in the fair value hierarchy within which the fair
value measurement is disclosed and is determined based on the lowest level input
that is significant to the fair value measurement.
The
carrying value of the Company’s cash and cash equivalents, accounts receivable,
prepayments, accounts payable, short-term borrowings (including convertible
notes payable), and other current assets and liabilities approximate fair value
because of their short-term maturity. All other significant financial
assets, financial liabilities and equity instruments of the Company are either
recognized or disclosed in the consolidated financial statements together with
other information relevant for making a reasonable assessment of future cash
flows, interest rate risk and credit risk. Where practicable the fair values of
financial assets and financial liabilities have been determined and disclosed;
otherwise only available information pertinent to fair value has been
disclosed.
The
following table sets forth the Company’s short investments as of January 31,
2010, which are measured at fair value on a recurring basis by level within the
fair value hierarchy. The table is classified based on the lowest
level of input that is significant to the fair value measurement:
At
January 31, 2010, the carrying amounts of the notes payable approximate fair
value because all of the notes have been classified to current
maturity.
Quoted
Prices in
Active
Markets for
Identical
Instruments
Level 1
|
Significant
Other
Observable
Inputs
Level 2
|
Significant
Unobservable
Inputs
Level 3
|
Assets at
Fair Value
|
|||||||||||||
Liabilities:
|
||||||||||||||||
Convertible
notes payable
|
$ | - | $ | - | $ | (1,183,437 | ) | $ | (1,183,437 | ) |
NOTE
9 – SUBSEQUENT EVENTS
The
Company has evaluated subsequent events through the date of this filing (March
12, 2010).
On March
11, 2010, the Company issued 65,622 shares of Company common stock in
satisfaction of notices to convert 5,000 shares of Series B preferred stock,
which includes notices to convert 3,000 Series B preferred shares during the
three months ended January 31, 2010.
Since
January 31, 2010, the Company has borrowed an additional $41,300 from a note
holder and has repaid $7 to a note holder.
F-9
ITEM
2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The
following discussion and analysis should be read in conjunction with our audited
consolidated financial statements and related notes included in this report.
This report contains “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. The statements contained in
this report that are not historic in nature, particularly those that utilize
terminology such as “may,” “will,” “should,” “expects,” “anticipates,”
“estimates,” “believes,” or “plans” or comparable terminology are
forward-looking statements based on current expectations and
assumptions.
Various
risks and uncertainties could cause actual results to differ materially from
those expressed in forward-looking statements. Factors that could
cause actual results to differ from expectations include, but are not limited
to, those set forth under the section “Risk Factors” set forth in this
report.
The
forward-looking events discussed in this annual report, the documents to which
we refer you and other statements made from time to time by us or our
representatives, may not occur, and actual events and results may differ
materially and are subject to risks, uncertainties and assumptions about
us. For these statements, we claim the protection of the “bespeaks
caution” doctrine. All forward-looking statements in this document
are based on information currently available to us as of the date of this
report, and we assume no obligation to update any forward-looking
statements. Forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results to
differ materially from any future results, performance or achievements expressed
or implied by such forward-looking statements.
General
We are a
provider of biodiesel fuel and waste bioremediation services. We have
historically focused on waste bioremediation solutions to municipal collection
systems and food service facilities through a distributor with a network of
franchisees, (the “Cleaning Division”). With our June 2006 acquisition of Bio
Extraction Services, Inc. (“BESI”) and its patent pending technology, we plan to
focus on the production and sale of biodiesel fuel (the “Biodiesel
Division”).
Our
business consists of a Biodiesel Division, through which we intend to produce,
develop, and sell biodiesel fuel. In the second quarter of our 2007
fiscal year, we ceased production of biological waste remediation products until
further notice and in the fourth quarter of our 2007 fiscal year, we terminated
our selling arrangement with BSFC. We plan to resume production of remediation
products in the future.
Critical
Accounting Policies
Our
discussion and analysis of our financial conditions and results of operations is
based upon our consolidated financial statements, which have been prepared in
accordance with generally accepted accounting principles in the United
States. The preparation of financial statements requires managers to
make estimates and disclosures on the date of the financial
statements. On an on-going basis, we evaluate our estimates,
including, but not limited to, those related to revenue
recognition. We use authoritative pronouncements, historical
experience, and other assumptions as the basis for making
judgments. Actual results could differ from those
estimates. We believe the following critical accounting policies
affect our more significant judgments and estimates in the preparation of our
consolidated financial statements.
Going
Concern
The
financial statements contained in this report have been prepared assuming that
we will continue as a going concern. Going concern contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business over a reasonable length of time. We have incurred losses
since inception and have negative cash flows from operations. For the
years ended October 31, 2009 and 2008, we incurred net losses of $927,207 and
$592,439, and we have a stockholders’ deficit of $2,221,280 as of October 31,
2009. Our future is dependent upon our ability to obtain additional
equity or debt financing and upon future successful development and marketing of
our products and services. Management is pursuing various sources of
equity and debt financing. Although we plan to pursue additional
financing, there can be no assurance that we will be able to secure such
financing or obtain financing on terms beneficial to us. Failure to
secure such financing may result in our inability to continue as a going concern
and the impairment of the recorded long lived assets.
2
We have
laid off our employees at our former facility in Mississippi in February 2007
and, in connection with a legal settlement effectuated in October 2007, we sold
certain equipment, furniture, fixtures an inventory located at that
facility. We anticipate resuming our sales and marketing activities
related to our biological waste remediation products again, once we have
obtained additional working capital. We anticipate future losses from
operations as a result ongoing overhead expenses incurred while management
attempts to resume selling activities.
The
financial statements contained in this report do not include any adjustments
relating to the recoverability and classifications of recorded assets, or the
amounts and classification of liabilities that might be necessary in the event
we cannot continue in existence.
Revenue
Recognition
Sales are
recorded at the time title passes to the customer, which, based on shipping
terms, generally occurs when the product is shipped to the
customer. Based on prior experience, we reasonably estimate our sales
returns and warranty reserves and are recorded when such reserve estimates are
required. Due to lack of sales, there currently are no such reserves
recorded for sales returns or warranty reserves. Sales are presented
net of discounts and allowances.
Results
of Continuing Operations
Basis
of Presentation
The
results of operations set forth below for the three months ended January 31,
2010 and 2009 are those of the continuing operations of Bio Solutions
Manufacturing, which includes BESI on a consolidated basis
The
following table sets forth, for the periods indicated, certain selected
financial data from continuing operations:
Three Months Ended
|
||||||||
January 31,
|
||||||||
2010
|
2009
|
|||||||
Net
sales
|
$ | - | $ | - | ||||
Cost
of sales
|
- | - | ||||||
Gross
income
|
- | - | ||||||
Selling,
general and administrative
|
113,914 | 133,930 | ||||||
Operating
(loss)
|
$ | (113,914 | ) | $ | (133,930 | ) |
Comparison
of the Three Months Ended January 31, 2010 and 2009
Net sales.
Net sales for operations were $0, for the three months ended January 31, 2010
and $0 for the three months ended January 31, 2009. The difference of
$0 or 0% was due to there having been no sales in either three-month
period.
Cost of Sales.
Cost of sales for continued operations were $0, for the three months
ended January 31, 2010 and $0 for the three months ended January 31,
2009. The difference of $0 or 0% was due to there having been no
sales in either three-month period.
Selling, general, and
administrative. Selling, general, and administrative expenses
were $113,914 for the three months ended January 31, 2010 and $133,930 for the
three months ended January 31, 2009. The difference of $20,016 or 15%
was primarily due to cost eliminations.
Operating loss.
Operating losses incurred were $113,914, for the three months ended
January 31, 2010 and $133,930 for the three months ended January 31,
2009. The difference of $20,016 or 15% was primarily due to cost
eliminations.
3
Loss from Beneficial Conversion
Feature. Loss from beneficial conversion features were
$72,600, for the three months ended January 31, 2010 and $0 for the three months
ended January 31, 2009. The difference of $72,600 was due to $72,600
in new borrowings under terms containing a beneficial conversion
feature.
Interest expense.
Interest expense were $23,091, for the three months ended January
31, 2010 and $15,530 for the three months ended January 31, 2009. The
difference of $7,561 or 49% was primarily due to our having a greater amount of
outstanding borrowings during the current three-month period.
Liquidity
and Capital Resources
We have
financed our operations, acquisitions, debt service, and capital requirements
through cash flows generated from operations, debt financing, capital leases,
and issuance of equity securities. Our working capital deficit at
January 31, 2010 was $2,358,285, at October 31, 2009 was
$2,221,280. We had cash of $0 at January 31, 2010, and $3,423 as of
October 31, 2009.
We used
$70,548 of net cash from operating activities for the three months ended January
31, 2010, compared to using $47,059 in the three months ended January 31,
2009.
Net cash
flows used in investing activities was $0 for the three months ended January 31,
2010 and $0 for the three months ended January 31, 2009.
Net cash
flows provided by financing activities were $67,125 for the three months ended
January 31, 2010, compared to net cash provided by financing activities of
$47,482 in the year three months ended January 31, 2009. The net cash
provided by financing activities is from the proceeds from our lines of credit
and notes payable, which are net of repayments.
Loan
Agreement
Since
2003, we have borrowed money from a group of third-party lenders in order to
fund our operations. As of October 31, 2007, the outstanding
principal balance on these loans was approximately $800,000. On
November 29, 2006, we entered into a loan agreement with certain these lenders
and a new lender, pursuant to which we borrowed approximately $164,000 of new
funds, and pursuant to which the outstanding debt obligations were amended and
restated. Under the loan agreement, the existing lenders received
amended and restated convertible promissory notes in the aggregate principal
amounts of $537,955 and $264,625, respectively, and the new lender received a
convertible promissory note in the aggregate principal amount of
$164,000. Under the loan agreement and the notes, each lender may, in
its sole and absolute discretion, make additional loans to us, up to an
aggregate total of $1,000,000 per lender. Each note bears interest at
the rate of eight percent (8%) per annum and is payable on
demand. Each note was also convertible into shares of our common
stock at a conversion rate equal to the lower of (a) $0.05 per share, and (b)
seventy percent (70%) of the three day average of the closing bid price of our
common stock immediately prior to conversion; provided, however, that the
conversion price could not be less that $0. 01 per share under any
circumstances. In May 2008, the conversion price was amended to
provide for a fixed conversion price of $0.001 per share. In
addition, the note holders cannot convert any principal or interest under the
notes to the extent that such conversion would require us to issue shares of our
common stock in excess of our authorized and unissued shares of common
stock. The notes are secured by a first priority security interest in all
of our assets. By their terms, the holder of the notes may not
convert the notes to the extent such conversion would cause the holder, together
with its affiliates, to have acquired a number of shares of common stock that
would exceed 4.99% of our then outstanding common stock.
Capital
Requirements
The
report of our independent accountants for the fiscal year ended October 31, 2009
states that we have incurred operating losses since inception and requires
additional capital to continue operations, and that these conditions raise
substantial doubt about our ability to continue as a going concern.
As of
January 31, 2010, we had a working capital deficit of
$2,358,285. Currently, we do not generate any revenues. In
the Biodiesel Division, we need to construct or lease biodiesel plants and we
will not generate any revenues in this division until we have established plants
which are operational. The expected cost to build each biodiesel
plant is $2.5 million and we do not have the capital to build such
plants. In addition, we closed the manufacturing facility for our
Cleaning Division products in the second fiscal quarter of 2007 and also ceased
marketing and selling such products at that time. We need capital to
open a new facility for the manufacture and subsequent sale of cleaning
products. If we cannot raise additional debt and/or equity capital,
we will be unable to generate any revenues.
We
believe that, as of the date of this report, our existing working capital and
cash flows generated from operations will be insufficient to fund our plan of
operations over the next 12 months, and accordingly, we will need to obtain
additional financing.
As set
forth above, we have entered into a loan agreement with various third party
lenders, under which these lenders, in their sole and absolute discretion, can
lend to us up to $2,000,000. However, such loans are completely
discretionary with the lenders, and as of the date hereof, we have received no
commitment from these lenders to advance us additional funds.
4
In the
event that our lenders do not advance us additional funds under the loan
agreement, we would need to seek additional debt or equity financing, in the
form of a private placement or a public offering, a strategic alliance, or a
joint venture. Such additional financing, alliances, or joint venture
opportunities might not be available to us, when and if needed, on acceptable
terms or at all. If we are unable to obtain additional financing in
sufficient amounts or on acceptable terms under such circumstances, our
operating results and prospects could be adversely affected. In
addition, any debt financings or significant capital expenditures require the
written consent of our existing lenders.
We intend
to retain any future earnings to retire debt, finance the expansion of our
business and any necessary capital expenditures, and for general corporate
purposes. The loan agreement with our lenders contains restrictions
as to the payment of dividends.
Off-Balance
Sheet Arrangements
None.
ITEM
3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a
“smaller reporting company” as defined by Item 10 of Regulation S-K, we are not
required to provide the information required by this item.
ITEM
4T – CONTROLS AND PROCEDURES
EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES
Our
management is responsible for establishing and maintaining a system of
disclosure controls and procedures (as defined in Rule 13a-15(e)) under the
Exchange Act) that is designed to ensure that information required to be
disclosed by the Company in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
specified in the Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the issuer's management, including its principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required
disclosure.
Pursuant
to Rule 13a-15(b) under the Exchange Act, the Company's management, consisting
of David Bennett, the Company’s Chief Executive Officer and President (“CEO”)
and Pat Spreitzer, the Company’s Chief Financial Officer, Secretary and
Treasurer (“CFO”), carried out an evaluation of the effectiveness of the
Company's disclosure controls and procedures (as defined under Rule 13a-15(e)
under the Exchange Act) as of the three months ended January 31, 2010. Based
upon that evaluation, the Company's CEO and CFO concluded that the Company's
disclosure controls and procedures are not effective to ensure that information
requiring disclosure by the Company in the reports that the Company files or
submits under the Exchange Act, is recorded, processed, summarized and reported,
within the time periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to the Company’s CEO and CFO, as
appropriate, to allow timely decisions regarding required
disclosure.
CHANGES
IN INTERNAL CONTROLS
Our management, consisting of our CEO
and CFO, performed an evaluation to determine whether any change in our internal
controls over financial reporting occurred during the three month period ended
January 31, 2010. Based on that evaluation, our CEO and CFO concluded that no
change occurred in the Company's internal controls over financial reporting
during the three months ended January 31, 2010, that has materially affected, or
is reasonably likely to materially affect, the Company's internal controls over
financial reporting.
PART
II: OTHER INFORMATION
ITEM
1 – LEGAL PROCEEDINGS
Bio Solutions
Manufacturing, Inc. v. Michael Motola, Andy Vasara, Steva De Vasara and
Metropolitan Life Insurance Company. On November 3, 2009, the
Company commenced an action against the defendants in the United States District
Court of the Central District of California, Southern Division alleging certain
causes of action, including fraud, securities fraud, and negligent
misrepresentation. On December 9, 2009 and December 23, 2009, Metropolitan Life
Insurance and Andy and Steva De Vasara, respectively, filed motions to dismiss
which are currently pending.
5
Becker
Litigation. On November 27, 2007, Martin Becker (“Becker”)
commenced an action against the Company in the Superior Court of California,
County of Los Angeles, for breach of contract, common counts, and indemnity,
seeking approximately $92,000 in damages, as well as interest, fees, and costs.
The complaint alleges that the Company breached a certain Reorganization and
Stock Purchase Agreement dated on or about February 1, 2004 by failing to
indemnify Becker as required under said agreement. Pursuant to a
Settlement Agreement and General Release dated April 30, 2009, the Company
issued 92,000 shares of Series B preferred stock having a stated value of $1.00
and a market based conversion price and the Company received a general release
of all claims asserted by the parties in the Becker litigation. Since
October 31, 2009, the Series B preferred stock holder submitted requests to
convert 5,000 shares of Series B preferred stock into 65,622 shares common
stock, which the Company issued on March 11, 2010.
ITEM
1A – RISK FACTORS
As a
“small reporting company” as defined by Item 10 of Regulation S-K, we are not
required to provide information required by this item.
ITEM
2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM
3 – DEFAULT UPON SENIOR SECURITIES
None.
ITEM
4 – RESERVED
ITEM
5 – OTHER INFORMATION
None.
ITEM
6 - EXHIBITS
|
a. (a)
|
The
following exhibits are filed with this
report.
|
31.1
|
Certification
by Chief Executive Officer pursuant to Sarbanes Oxley Section
302.
|
31.2
|
Certification
by Chief Financial Officer pursuant to Sarbanes Oxley Section
302.
|
32.1
|
Certification
by Chief Executive Officer pursuant to 18 U.S. C. Section
1350.
|
32.2
|
Certification
by Chief Financial Officer pursuant to 18 U.S. C. Section
1350.
|
6
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.
Dated:
|
March
12, 2010
|
/s/ David S. Bennett
|
By:
David S. Bennett
|
||
Its:
Chief Executive Officer, President and Director (Principal
Executive
Officer)
|
||
Dated:
|
March
12, 2010
|
/s/ Patricia M.
Spreitzer
|
By:
Patricia M. Spreitzer
|
||
Its:
Chief Financial Officer, Secretary, Treasurer and Director
(Principal
Financial and Accounting
Officer)
|
7