FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 000-29329
BIOFILTRATION SYSTEMS, INC.
---------------------------
(Exact Name of Registrant as Specified in its Charter)
Florida 65-0382549
------- ----------
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
2341 Porter Lake Drive, Suite 109, Sarasota, Florida 34240
----------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
(941) 343-9300
--------------
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 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
--- ---
The number of shares of registrant's Common Stock, $.001 par value, outstanding
as of March 31, 2000 was 492,010,000 shares.
<PAGE>
BIOFILTRATION SYSTEMS, INC.
INDEX
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Certified Public Accountant's Review Report 3
Balance Sheet - March 31, 2000 5
Statement of Operations - Cumulative from Inception and for
the Three Months Ended March 31, 2000 and 1999 7
Statement of Changes in Stockholders' Equity from Inception
(December 17, 1992) to March 31, 2000 8
Statement of Cash Flows - Cumulative from Inception and for
the Three Months Ended March 31, 2000 and 1999 14
Notes to Financial Statements 16
Item 2. Management's Discussion and Analysis 23
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submissions of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
FORWARD LOOKING STATEMENTS
When used in this report, the words "may, will, expect, anticipate,
continue, estimate, project or intend" and similar expressions identify
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E Securities Exchange Act of 1934 regarding events,
conditions and financial trends that may effect our future plan of operation,
business strategy, operating results and financial position. Current
stockholders and prospective investors are cautioned that any forward-looking
statements are not guarantees of future performance and are subject to risks and
uncertainties and that actual results may differ materially from those included
within the forward-looking statements as a result of various factors. Such
factors are described under the headings "Business-Certain Considerations,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the financial statements and their associates notes.
Important factors that may cause actual results to differ from projections
include, for example:
- the success or failure of management's efforts to implement their
business strategy;
- our ability to protect our intellectual property rights;
- our ability to compete with major established companies;
- our ability to attract and retain qualified employees; and
- other risks which may be described in future filings with the SEC.
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
FINANCIAL STATEMENTS
MARCH 31, 2000
CONTENTS
--------
Page
----
CERTIFIED PUBLIC ACCOUNTANTS' REVIEW REPORT 1 - 2
FINANCIAL STATEMENTS
BALANCE SHEET 3 - 4
STATEMENTS OF OPERATIONS 5
STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY 6 - 11
STATEMENTS OF CASH FLOWS 12 - 13
NOTES TO FINANCIAL STATEMENTS 14 - 20
[GRAPHIC OMITED]
<PAGE>
To the Stockholders
Biofiltration Systems, Inc.
(a development stage company)
Sarasota, Florida
We have reviewed the accompanying balance sheets of Biofiltration Systems, Inc.
(a development stage company) as of March 31, 2000, and the related statements
of operations and cash flows for the three month periods ended March 31, 2000
and 1999, and the statements of changes in stockholders' equity for the period
from inception (December 17, 1992) to March 31, 2000. Our reviews were
conducted in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of the
management of Biofiltration Systems, Inc.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The accompanying cumulative statement of operations and cash flows for the
period from inception (December 17, 1992) to March 31, 2000, was not audited or
reviewed by us and, accordingly, we do not express an opinion on them.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As explained in Note A, the Company
is in a development stage. Continued operations are dependent upon its ability
to generate sufficient cash flows to commence and sustain operations. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The accompanying financial statements do not include any
adjustments that might result from this uncertainty.
CERTIFIED PUBLIC ACCOUNTANTS
Tampa, Florida
May 12, 2000
<PAGE>
SEMAGO & COMPANY, P.A.
-------------------------------------
102 W. WHITING STREET, SUITE 600, TAMPA, FL 33602
813-221-2331 FAX 813-225-1021
<TABLE>
<CAPTION>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
BALANCE SHEET
-------------
MARCH 31, 2000
--------------
ASSETS
------
<S> <C>
CURRENT ASSETS - CASH (NOTE A) $ 222,826
----------
OFFICE EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION
OF $945 2,432
----------
OTHER ASSETS
Patent (Notes A and D) 470,000
Prepaid sales commissions
to related company
(Note B) 505,910
Advance to related company 86
Deposit on purchase of subsidiary
company 20
Other 2,728
----------
978,744
----------
$1,204,002
==========
</TABLE>
Read certified public accountants' review report.
The accompanying notes to financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
BALANCE SHEET
-------------
MARCH 31, 2000
--------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
<S> <C>
Accounts payable $ 7,965
Accrued expenses 24,556
Current portion of related
party notes payable 57,960
------------
TOTAL CURRENT LIABILITIES 90,481
------------
LONG-TERM LIABILITIES
Stockholder notes payable
(Note C) 348,900
Related party notes payable,
less current portion
(Note D) 470,000
------------
818,900
------------
COMMITMENTS AND CONTINGENCIES
(NOTES B AND F) -
------------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value,
700,000,000 shares authorized,
496,010,000 shares issued and
outstanding (Notes C, F, H, I
and K) 496,010
Additional paid-in capital
(Notes F and H) 1,577,644
(Deficit) accumulated during
development stage (1,644,033)
------------
429,621
Less treasury stock, at cost
(Note G) ( 135,000)
------------
294,621
------------
$ 1,204,002
============
</TABLE>
Read certified public accountants' review report.
The accompanying notes to financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
STATEMENTS OF OPERATIONS
------------------------
CUMULATIVE FROM INCEPTION AND FOR THE
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
------------------------------------------
Cumulative
during
development
stage 2000 1999
------------- ------------ ----------
<S> <C> <C> <C>
REVENUES $ 2,000 $ - $ -
------------- ------------ ----------
EXPENSES
Interest
(Notes C and D) 181,813 10,386 10,191
Professional fees 174,009 29,784 140
Telephone and utilities 21,889 2,829 960
Depreciation 945 270 -
Rent 29,123 3,400 3,210
Office expenses 37,646 6,548 5,724
Stock promotion expenses
(Notes A and F) 1,127,500 - -
Miscellaneous 73,108 4,800 2,919
------------- ------------ ----------
1,646,033 58,017 23,144
------------- ------------ ----------
NET LOSS BEFORE PROVISION
FOR INCOME TAXES (1,644,033) ( 58,017) ( 23,144)
PROVISION FOR INCOME
TAXES (NOTE E) - - -
------------- ------------ ----------
NET LOSS $ (1,644,033) $( 58,017) $( 23,144)
============= ============ ==========
NET LOSS PER COMMON
SHARE (NOTE A) $ ( .0046) $( .0005) $( .0002)
============= ============ ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING (in
hundred's), AS
RESTATED FOR 100:1
STOCK SPLIT (NOTE H) 3,571,844 1,175,781 955,805
============= ============ ==========
</TABLE>
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The accompanying notes to financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
---------------------------------------------
FROM INCEPTION (DECEMBER 17, 1992) TO MARCH 31, 2000
----------------------------------------------------
(Shares in hundred's)
Common stock (Deficit)
------------------ Common Treasury stock Additional Stock during
Par stock ---------------- paid-in subscription development
Shares value subscribed Shares Cost capital receivable stage
--------- ------- ---------- ------ ------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCEPTION,
DECEMBER 17, 1992 - $ - $ - - $ - $ - $ - $ -
STOCK ISSUED FOR CASH
($.001 PER SHARE),
DECEMBER 31, 1992 155,000 155 - - - - - -
STOCK SUBSCRIPTION FOR
320,000 SHARES,
($.001 PER SHARE),
DECEMBER 1992 - - 320 - - - ( 320) -
--------- ------- ---------- ------ ------ ---------- ------------ -----------
BALANCE, DECEMBER 31, 1992 155,000 155 320 - - - ( 320) -
STOCK ISSUED FOR CASH
($.001 PER SHARE),
JANUARY 1993 2,350,000 2,350 - - - 49,755 - -
STOCK ISSUED IN LIEU OF
INTEREST ($.001 PER
SHARE), JANUARY 1993 250,000 250 - - - - - -
CONTRIBUTION OF ADDITIONAL
PAID-IN CAPITAL - - - - - 25,000 - -
COLLECTION OF STOCK
SUBSCRIPTION RECEIVABLE 320,000 320 ( 320) - - - 320 -
NET LOSS - - - - - - - ( 2,765)
--------- ------- ---------- ------ ------ ---------- ------------ -----------
BALANCE, DECEMBER 31, 1993 3,075,000 $3,075 $ - - $ - $ 74,755 $ - $ ( 2,765)
</TABLE>
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The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
<TABLE>
<CAPTION>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
---------------------------------------------
FROM INCEPTION (DECEMBER 17, 1992) TO MARCH 31, 2000
----------------------------------------------------
(Shares in hundred's)
Common stock (Deficit)
------------------ Common Treasury stock Additional Stock during
Par stock ---------------- paid-in subscription development
Shares value subscribed Shares Cost capital receivable stage
--------- ------- ---------- ------ ------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STOCK ISSUED IN LIEU OF
INTEREST ($.001 PER
SHARE):
MARCH 1994 16,000 $ 16 - - $ - $ - $ - $ -
JUNE 1994 50,000 50 - - - - - -
AUGUST 1994 50,000 50 - - - - - -
OCTOBER 1994 100,000 100 - - - - - -
CONTRIBUTION OF ADDITIONAL
PAID-IN CAPITAL - - - - - 16,600 - -
NET LOSS - - - - - - - ( 5,486)
--------- ------- ---------- ------ ------ ---------- ------------ -----------
BALANCE, DECEMBER 31, 1994 3,291,000 3,291 - - - 91,355 - ( 8,251)
STOCK ISSUED IN LIEU OF
INTEREST ($.001 PER
SHARE):
MARCH 1995 75,000 75 - - - - - -
JUNE 1995 75,000 75 - - - - - -
OCTOBER 1995 50,000 50 - - - - - -
CONTRIBUTION OF ADDITIONAL
PAID-IN CAPITAL - - - - - 20,000 - -
NET LOSS - - - - - - - (17,998)
--------- ------- ---------- ------ ------ ---------- ------------ -----------
BALANCE, DECEMBER 31, 1995 3,491,000 $3,491 $ - - $ - $ 11,355 $ - $ (26,249)
</TABLE>
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The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
<TABLE>
<CAPTION>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
---------------------------------------------
FROM INCEPTION (DECEMBER 17, 1992) TO MARCH 31, 2000
----------------------------------------------------
(Shares in hundred's)
Common stock (Deficit)
------------------ Common Treasury stock Additional Stock during
Par stock ---------------- paid-in subscription development
Shares value subscribed Shares Cost capital receivable stage
--------- ------- ---------- ------ ------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STOCK ISSUED IN LIEU OF
INTEREST ($.001 PER
SHARE):
MARCH 1996 $ 50,000 50 $ - - $ - $ - $ - $ -
JULY 1996 25,000 25 - - - - - -
CONTRIBUTION OF ADDITIONAL
PAID-IN CAPITAL - - - - - 10,000 - -
NET LOSS - - - - - - - ( 29,769)
--------- ------- ---------- ------ ------ ---------- ------------ -----------
BALANCE, DECEMBER 31, 1996 3,566,000 3,566 - - - 121,355 - ( 56,018)
STOCK ISSUED FOR CASH
($.02 PER SHARE),
DECEMBER 1997 750 1 - - - 1,499 - -
STOCK ISSUED IN LIEU OF
INTEREST ($.001 PER
SHARE):
MARCH 1997 12,500 12 - - - - - -
MAY 1997 25,000 25 - - - - - -
JULY 1997 50,000 50 - - - - - -
DECEMBER 1997 37,500 38 - - - - - -
CONTRIBUTION OF ADDITIONAL
PAID-IN CAPITAL - - - - - 15,450 - -
NET LOSS - - - - - - - ( 36,705)
--------- ------- ---------- ------ ------ ---------- ------------ -----------
BALANCE, DECEMBER 31, 1997 3,691,750 $ 3,692 $ - - $ - $ 138,304 $ - $ ( 92,723)
</TABLE>
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The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
<TABLE>
<CAPTION>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
---------------------------------------------
FROM INCEPTION (DECEMBER 17, 1992) TO MARCH 31, 2000
----------------------------------------------------
(Shares in hundred's)
Common stock (Deficit)
------------------ Common Treasury stock Additional Stock during
Par stock ---------------- paid-in subscription development
Shares value subscribed Shares Cost capital receivable stage
--------- ------- ---------- ------ ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STOCK ISSUED FOR CASH
($.02 PER SHARE):
MARCH 1998 6,850 7 - - $ - $ 13,693 $ - $ -
DECEMBER 1998 10,500 $ 10 - - - 20,990 - -
STOCK ISSUED FOR SERVICES
($.02 PER SHARE),
JUNE 1998 250,000 250 - - - 499,750 - -
CONTRIBUTION OF ADDITIONAL
PAID-IN CAPITAL - - - - - 127,769 - -
STOCK REDEEMED UPON
CANCELLATION OF SERVICES - - - 92,500 (185,000) - - -
NET LOSS - - - - - - - (457,942)
--------- ------- ---------- ------ ---------- ---------- ------------ -----------
BALANCE, DECEMBER 31, 1998 3,959,100 $3,959 $ - 92,500 $(185,000) $ 00,506 $ - $ (550,665)
</TABLE>
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financial statements are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
---------------------------------------------
FROM INCEPTION (DECEMBER 17, 1992) TO MARCH 31, 2000
----------------------------------------------------
(Shares in hundred's)
Common stock (Deficit)
------------------ Common Treasury stock Additional Stock during
Par stock ------------------ paid-in subscription development
Shares value subscribed Shares Cost capital receivable stage
--------- ------- ---------- -------- ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STOCK SUBSCRIPTION FOR
875,000 SHARES (VARYING
PRICE PER SHARE),
MARCH 1999 - $ - $1,000,000 - $ - $ - $(1,000,000) $ -
STOCK ISSUED FOR SERVICES
($.35 PER SHARE),
APRIL 1999 - - - (25,000) 50,000 37,500 - -
CONTRIBUTION OF ADDITIONAL
PAID-IN CAPITAL - - - - - 35,250 - -
COLLECTIONS OF STOCK
SUBSCRIPTION RECEIVABLE
AND ISSUE OF STOCK FOR
SERVICES 250,000 250 ( 62,500) - - 874,750 62,500 -
ADJUSTMENT TO STOCK
SUBSCRIPTION PRICE
PER SHARE - - ( 625,000) - - - 625,000 -
NET LOSS - - - - - - - (1,035,351)
--------- ------- ---------- -------- ---------- ---------- ------------ ------------
BALANCE, DECEMBER 31, 1999 4,209,100 $4,209 312,500 67,500 $(135,000) $1,748,006 $( 312,500) $(1,586,016)
</TABLE>
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financial statements are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
---------------------------------------------
FROM INCEPTION (DECEMBER 17, 1992) TO MARCH 31, 2000
----------------------------------------------------
(Shares in hundred's)
Common stock (Deficit)
------------------ Common Treasury stock Additional Stock during
Par stock ------------------ paid-in subscription development
Shares value subscribed Shares Cost capital receivable stage
--------- --------- ---------- -------- ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STOCK ISSUED FOR CASH
($.005 PER SHARE),
MARCH 2000 625,000 $ 625 $ - - $ - $ 311,875 $ - $ -
STOCK ISSUED FOR SERVICES
($.001 PER SHARE)
MARCH 2000 20,000 20 - - - - - -
STOCK ISSUED FOR PURCHASE
OF SUBSIDIARY COMPANY
($.001 PER SHARE)
MARCH 2000 20,000 20 - - - - - -
STOCK ADVANCED TO RELATED
COMPANY
($.001 PER SHARE)
MARCH 2000 86,000 86 - - - - - -
CONTRIBUTION OF ADDITIONAL
PAID-IN CAPITAL - - - - - 8,813 - -
COLLECTION OF STOCK
SUBSCRIPTION RECEIVABLE - - (312,500) - - - 312,500 -
ADJUSTMENT FOR 100:1
STOCK SPLIT - 491,050 - - - (491,050) - -
NET LOSS - - - - - - - ( 58,017)
--------- -------- ---------- ------ ------------ ----------- ----------- ------------
BALANCE, March 31, 2000 4,960,100 $496,010 $ - 67,500 $ (135,000) $ 1,577,644 $ - $(1,644,033)
========= ======== ========== ====== ============ =========== =========== ============
</TABLE>
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these statements.
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<TABLE>
<CAPTION>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
--------------------------------
STATEMENTS OF CASH FLOWS
---------------------------
CUMULATIVE FROM INCEPTION AND FOR THE
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
-----------------------------------------------
Cumulative
during
development
stage 2000 1999
------------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 2,000 $ - $ -
Cash paid for expenses (243,018) ( 55,983) ( 9,775)
Cash paid for interest ( 7,059) ( 443) ( 2,381)
------------- ---------- ---------
Net cash used by
operations (248,077) ( 56,426) (12,156)
------------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Advances to related company (493,410) ( 40,000) -
Purchase of office equipment ( 3,377) - -
------------- ---------- ---------
Net cash used by investing
activities (496,787) ( 40,000) -
------------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common
stock 150,960 - -
Contributions of additional
paid-in capital 67,050 - -
Collections on due from
stockholders 37,500 - -
Collections on stock subscription
receivable 312,820 312,500 -
Proceeds from related party
notes payable 51,214 - -
Proceeds from stockholder
notes payable 325,646 6,746 4,949
Other 22,500 - -
------------- ---------- ---------
Net cash provided by
financing activities 967,690 319,246 4,949
------------- ---------- ---------
NET INCREASE (DECREASE) IN CASH 222,826 222,820 ( 7,207)
CASH, BEGINNING OF PERIOD - 6 9,120
------------- ---------- ---------
CASH, END OF PERIOD $ 222,826 $ 222,826 $ 1,913
============= ========== =========
</TABLE>
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The accompanying notes to financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
--------------------------------
STATEMENTS OF CASH FLOWS
---------------------------
CUMULATIVE FROM INCEPTION AND FOR THE
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
-------------------------------------------------
Cumulative
during
development
stage 2000 1999
------------ ----------- ---------
RECONCILIATION OF NET LOSS TO
CASH FLOWS FROM OPERATING ACTIVITIES
------------------------------------
<S> <C> <C> <C>
NET LOSS $(1,644,033) (58,017) $(23,144)
RECONCILING ADJUSTMENTS
Increase in other assets ( 2,728) - ( 202)
Depreciation 945 270 -
(Decrease) increase in accounts
payable 7,965 ( 8,642) 3,380
Increase (decrease) in accrued
expenses 2,056 1,130 ( 1,043)
Stock issued in lieu of interest 866 - -
Stock issued for expenses 1,400,020 20 -
Treasury stock acquired by way
of reduction of expenses ( 185,000) - -
Contribution of accrued interest
to paid-in capital 171,832 8,813 8,853
------------ ----------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES $( 248,077) $ (56,426) $(12,156)
============ =========== =========
NONCASH INVESTING AND FINANCING ACTIVITIES
------------------------------------------
INCREASE IN PAID-IN CAPITAL AND
STOCKHOLDER NOTES PAYABLE THROUGH
ADVANCES TO RELATED COMPANY $ 12,500 $ - $ -
============ =========== =========
INCREASE IN PAID-IN CAPITAL AND
STOCKHOLDER NOTES PAYABLE THROUGH
INCREASE IN DUE FROM STOCKHOLDER $ 37,500 $ - $ -
============ =========== =========
PURCHASE OF PATENT FOR RELATED
PARTY DEBT $ 470,000 $ - $ -
============ =========== =========
DECREASE IN ACCRUED INTEREST
PAYABLE THROUGH CONTRIBUTION
TO PAID-IN CAPITAL $ 171,832 $ 8,813 $ -
============ =========== =========
ISSUE OF STOCK FOR ADVANCE TO
RELATED COMPANY $ 86 $ 86 $ -
============ =========== =========
ISSUE OF STOCK FOR DEPOSIT ON
PURCHASE OF SUBSIDIARY COMPANY $ 20 $ 20 $ -
============ =========== =========
</TABLE>
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<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 2000 AND 1999
-----------------------
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company activities
- -------------------
Biofiltration Systems, Inc. (the Company) was incorporated in the state of
Florida in December 1992. The Company will operate as a manufacturer of modular
biofiltration systems for the treatment of a variety of waste waters. It is
management's intention to sell or lease these systems to customers worldwide.
Further, the Company will pursue other business opportunities as they arise.
Company offices are located in Sarasota, Florida.
For the period from inception (December 17, 1992) to March 31, 2000, the Company
has been in a development stage. During this time management has been engaged
in business planning activities and obtaining capital. Operations are expected
to commence in 2000.
Successful completion of the Company's development plan and its transition to
attaining profitable operations is dependent upon obtaining adequate working
capital and achieving a level of sales necessary to support its cost structure.
The recovery of the Company's assets is dependent upon the above future events.
The outcome of these events is uncertain.
Patent
- ------
The patent was purchased from a related company (see Note D) that originally
developed and recorded the patent. The patent is recorded at its purchase cost.
Amortization of the patent over its useful life will begin when the Company
commences operations.
Use of estimates
- ------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent asset 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 these estimates.
Start-up costs
- ---------------
Costs associated with the start-up costs of Company operations have been
expensed as incurred.
Advertising costs
- ------------------
Advertising costs are expensed as incurred.
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 2000 AND 1999
-----------------------
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock issue and promotion expenses
- --------------------------------------
It is the Company's policy to capitalize costs associated with the offering of
its common stock to outside investors. However, due to the uncertainty of
recovery these costs have been expensed as stock promotion expenses in the
accompanying financial statements (see Note F)
Deferred income taxes
- -----------------------
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the period the
change is enacted.
Loss per common share
- ------------------------
Loss per common share is computed using the weighted average number of shares
outstanding during the periods presented in accordance with Statement of
Financial Accounting Standards No. 128 Earnings Per Share.
Cash
- ----
For the purpose of the statements of cash flows, cash includes time deposits
with original maturities of three months or less.
NOTE B - NATIONAL SALES AGREEMENT
The Company's majority stockholders own another company that provides services
as a national sales agent (see Note D).
In 1992, the Company entered into an agreement whereby the related company
provides exclusive national sales services. The term of the agreement is for a
one year period, automatically renewable for an additional one year period.
This agreement can be terminated with a one year notice by either party.
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 2000 AND 1999
-----------------------
NOTE B - NATIONAL SALES AGREEMENT (continued)
Terms of the national sales agreement provide for the related company to be paid
30% of the Company's retail sales and/or collected lease revenue, as defined.
Further, in accordance with the agreement and at its option, the Company may
advance funds against future commissions to the related company. At March 31,
2000, this related company had been prepaid $505,910 against future sales
commissions.
Realization of prepaid sales commission is dependent upon the Company generating
adequate cash flows to commence and sustain operations. Additionally, the
national sales agent must generate sufficient sales to earn these prepaid sales
commissions. Management anticipates both of these conditions will be achieved.
NOTE C - STOCKHOLDER NOTES PAYABLE
Stockholder notes payable consist of non-interest bearing notes payable to
certain stockholders. Principal is payable from operating profits. However,
based on written representation from the Company's majority stockholder, these
notes payable will be repaid prior to payment of sales commissions due sales
agent (see Note B). Repayments will be limited to not more than 50% of all
earned sales commissions due sales agent.
In lieu of interest on the above notes, the stockholders received additional
stock certificates. An amount equal to the par value of the stock certificates
was recorded as interest expense in the year the stock was issued. Stockholder
notes and shares of stock issued in lieu of interest (as restated for 100:1
stock split) amounted to the following:
<TABLE>
<CAPTION>
Common stock
---------------------
Shares
Stockholder Par (in
Period of issue notes value hundreds)
- ---------------------------- ------------ ------- ---------
<S> <C> <C> <C>
Year ended December 31, 1993 $ 102,500 $25,000 25,000
Year ended December 31, 1994 66,400 21,600 21,600
Year ended December 31, 1995 80,000 20,000 20,000
Year ended December 31, 1996 40,000 7,500 7,500
Year ended December 31, 1997 60,000 12,500 12,500
------------ ------- ---------
$ 348,900 $86,600 86,600
============ ======= =========
</TABLE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 2000 AND 1999
-----------------------
NOTE D - RELATED PARTY NOTES PAYABLE
The Company's majority stockholders own another company that developed and sold
a patent to the Company for $470,000 (see Note A). The Company issued a
$470,000 note payable to this related company in conjunction with the purchase.
Terms of the note provide for interest at 7.5% per annum. Principal and unpaid
interest payments on this note shall be paid from no more than 50% of any
Company net profits, as defined.
Through March 31, 2000, the Company's majority stockholders have agreed to
assume the liability for the interest accrued on the above note through March
31, 2000. This assumption of the liability has been recorded as a contribution
to additional paid-in capital in the accompanying financial statements.
Additionally, the related corporation described above has advanced funds to the
Company under an unsecured, revolving promissory note. Terms of this note
provide for interest at 8.5%, payable quarterly, with principal due on December
31, 2000. At March 31, 2000, the amount outstanding on this note payable is
$57,960.
NOTE E - INCOME TAXES
The Company has a deferred tax asset of approximately $520,000 at March 31,
2000, due to net operating losses incurred since inception. Temporary
differences giving rise to deferred tax assets consist primarily of the deferral
of substantially all start-up expenses for income tax purposes. Management has
provided a valuation allowance equal to the amount of deferred tax assets at
March 31, 2000. This is due to the uncertainty of realization of the future
benefit of these deductions. Therefore, for the periods presented there is no
benefit for income taxes recorded in the accompanying statement of operations.
NOTE F - SPECIAL SERVICES AGREEMENTS
In June 1998, pursuant to a stock purchase agreement, the Company issued
25,000,000 shares of common stock for public relations and marketing services.
Subsequently, the purchaser defaulted on the terms of the agreement and
9,250,000 shares were returned to the Company. These shares of stock are
reflected as treasury stock in the accompanying financial statements.
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 2000 AND 1999
-----------------------
NOTE F - SPECIAL SERVICES AGREEMENTS (continued)
On March 31, 1999, the Company entered into a cancelable special services
agreement with an unrelated active participation investor. Pursuant to this
agreement, the investor will provide various public relations and marketing
services to the Company in exchange for the right to purchase 87,500,000 shares
of the Company's stock for $1,000,000. The purchase of these shares will occur
in stages, at varying per share prices ranging from $.0025 to $.20 per share. At
March 31, 1999, the shares associated with this agreement were recorded as
subscribed common shares.
In accordance with the above agreement, upon collection of the subscription
price for the first stage, 25,000,000 shares of common stock were issued. For
these shares, the $812,500 difference between the fair value of the stock at
March 31, 1999, and its selling price, has been recorded as stock promotion
expense.
On or about September 1, 1999, the Company was de-listed from the OTCBB.
Subsequently, the company reduced the subscription price on the remaining
62,500,000 shares to $.005 per share. In the accompanying financial statements
the stock subscription receivable was adjusted to reflect the revised
subscription price.
NOTE G - TREASURY STOCK
In December 1998, the Company canceled a stock purchase agreement with a
purchaser (see Note F). As a result, 9,250,000 shares of common stock were
returned to the Company. The treasury stock is recorded at the original cost
per share of the stock transaction. However, these shares are currently held in
an escrow account on behalf of the Company. It is the intention and practice of
the Company that these shares be held for future issuance to new investors or
for future services to be provided.
NOTE H - CAPITAL STOCK
During the period ended March 31, 2000, the Company's Board of Directors
approved an increase in the Company's authorized common stock to 700,000,000
shares. Par value of the Company's stock remained at $.001.
On March 9, 2000, the Company's Board of Directors approved a 100:1 stock split
effective March 31, 2000. Shareholders of record received revised share
certificates on April 15, 2000.
In the accompanying financial statements common stock shares have been
retroactively restated to reflect the 100:1 stock split for all periods
presented.
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 2000 AND 1999
-----------------------
NOTE H - CAPITAL STOCK (continued)
In March 2000, the Company issued 2,000,000 shares of restricted common stock
for professional services to be rendered for the year ended December 31, 2000.
These shares have been recorded at par value due to the restricted nature of the
shares and the inability to determine the value of professional services to be
rendered.
NOTE I - ADVANCE TO RELATED COMPANY
On March 31, 2000, the Company advanced 8,600,000 shares of restricted common
stock to Beachaccess.Net, Inc. (see Note K). These shares of stock were used by
Beachaccess.Net, Inc. to acquire customer accounts, operating and fixed assets
of three internet service providers and a computer hardware distribution
operation. The purchase documents between Beachaccess.Net, Inc. and the
operators provided for a stock only purchase. These operations are located in
North and South Carolina.
At March 31, 2000, the advance of Company stock has been recorded in the
accompanying financial statements at the par value of common shares advance to
Beachaccess.Net, Inc.
NOTE J - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 Disclosure about Fair Values
of Financial Instruments requires disclosure of fair value to the extent
possible for financial instruments which are recognized in the balance sheet.
The fair value disclosed herein is not necessarily representative of the amount
that could be realized or settled, nor does the fair value amount consider tax
consequences of realization or settlement. The following summarizes financial
instruments by individual balance sheet account at March 31, 2000:
<TABLE>
<CAPTION>
Carrying Fair
amount value
------------------ -------------
<S> <C> <C>
Financial assets:
Cash $ 222,826 $ 222,826
================== =============
Advance to related Company $ 86 $ (C)
================== =============
Deposit on purchase of subsidiary
company $ 20 $ (C)
================== =============
Financial liabilities:
Accounts payable and
accrued expenses $ 32,521 $ 32,521
================== =============
Stockholder notes
payable $ 348,900 $ (B)
================== =============
Related party notes
payable $ 527,960 $ (A)
================== =============
</TABLE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 2000 AND 1999
-----------------------
NOTE J - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
The carrying values of cash and accounts payable approximate their fair values.
(A) Due to involvement of related parties and the lack of either a stated
interest rate or specific repayment date, the fair value of related party notes
payable is not readily determinable.
(B) Because the stockholder notes payable are non-interest bearing and have
no specified repayment dates, the fair value is not readily determinable.
(C) The carrying value of these assets has been recorded at the par value of
the restricted common shares issued or advanced. These shares are presently
restricted as to sales and are non-marketable. As such the fair value cannot be
determined.
NOTE K - SUBSEQUENT EVENTS
On April 1, 2000, the Company signed a binding letter of intent to purchase all
of the outstanding stock of Beachaccess.Net, Inc. (see Note I). Terms of the
purchase provide for issuance of 21,250,000 of restricted and 3,750,000 of
unrestricted shares of the Company's common stock to owners of Beachaccess.Net,
Inc. As of March 31, 2000, the Company has issued 2,000,000 shares of
restricted common stock as a deposit on this transaction. This deposit has been
recorded in the accompanying financial statements at the par value of common
stock.
Subsequent to March 31, 2000, the Company issued 3,200,000 shares of restricted
common stock to Beachaccess.Net, Inc. to acquire additional internet customer
accounts from various internet providers.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of its operations for the three month periods ended March 31, 2000
and 1999, should be read in conjunction with the Company's financial statements
included elsewhere herein. When used in the following discussions, the words
"believes," "anticipates," "intends," "expects," and similar expressions are
intended to identify forward-looking statements. Such statements are subject to
certain risks and uncertainties, which could cause results to differ materially
from those projected.
Results of Operations
As of March 31, 2000, the Company has no sales from operations. The Company
intends to commence operations in fiscal 2000 as a manufacturer of modular
biofiltration systems for treatment of a variety of waste waters. The Company
intends to sell these systems worldwide and also intends to pursue other
business opportunities which compliment its existing business plan.
Since its inception in December 1992 through March 31, 2000, the Company
has been in the development stage. During this period, the Company has
continuously engaged in the planning and development of its business plan and
raising capital. The Company's future success is wholly dependent upon proper
capitalization to enable the Company to achieve sales levels which would support
its cost structure. Although the Company has raised certain investment capital,
there can be no assurance that future investment capital will be available to
fully implement the Company's business plan.
Since 1992, the Company has been party to an agreement whereby a related
company owned by the Company's majority stockholder provides exclusive national
sales services. Under the terms of the agreement, the related company is
entitled to receive 30% of the Company's retail sales.
Further, in accordance with the agreement, the related company may be paid
commissions in advance of the Company. To date, the Company has a credit of
$505,910 against future commissions.
On Mach 31, 1999, the Company entered into a cancelable special services
agreement with an unrelated active participation investor. Pursuant to this
agreement, the investor will provide various public relations and marketing
services to the Company in exchange for the right to purchase 87,500,000 shares
of the Company's stock for $1,000,000. The purchase of these shares will occur
in stages, at varying per share prices ranging from $.0025 to $.20 per share. At
March 31, 1999, the shares associated with this agreement were recorded as
subscribed common shares.
In accordance with the above agreement, upon collection of the subscription
price for the first stage, 25,000,000 shares of common stock were issued. For
these shares, the $812,500 difference between the fair value of the stock at
March 31, 1999 and its selling price has been recorded as stock promotion
expense.
On or about September 1, 1999, the Company was de-listed from the OTC-BB.
Subsequently, the Company reduced the subscription price of the remaining
62,500,000 shares to $.005 per share. In the accompanying financial statements
the stock subscription receivable was adjusted to reflect the revised
subscription price.
On March 31, 2000, the Company advanced 8,600,000 shares of restricted
common stock to purchase Beachaccess.net, Inc. These shares of stock were used
by Beachaccess.Net, Inc. to acquire customer accounts, operating and fixed
assets of three Internet service providers and a computer hardware distribution
operation. The purchase documents Beachaccess.Net, Inc. and the operators
provided for a stock only purchase. These operations are located in North and
South Carolina.
Liquidity and Capital Resources
The Company, at March 31, 2000, had $1,204,002 in assets. Liabilities
consisting of certain accrued expenses totaled $818,900.
In December 1998, the Company canceled a stock purchase agreement with a
purchaser. As a result, 9,250,000 shares of common stock were returned to the
Company. The treasury stock is recorded at the original cost per share of the
stock transaction. However, these shares are currently held in an escrow account
on behalf of the Company. It is the intention and practice of the Company that
these shares be held for future issuance to new investors or for future services
to be provided.
Since inception, the Company has financed its operations primarily through
cash provided through various short- and long-term credit facilities and through
the private sale of its common stock. The Company intends to complete its first
public offering of shares during 2000. The Company's management believes that
sufficient funds will be raised from future operations so as to minimize the
need for future equity capitalization.
In addition, management of the Company believes the need for additional
capital going forward will be derived from internal revenues and earnings
generated from the sale of its products and services. If the Company is unable
to begin to generate revenues from its anticipated products, management believes
the Company will need to raise additional funds to meet its cash requirements.
Inflation
Inflation has not been a major factor in the Company's business since
inception. There can be no assurances that this will continue if and when the
Company completes an acquisition or merger.
PART II - Other Information
Item 1. Legal Proceedings
The Company is not involved in any legal proceedings or litigation, and the
officers and directors are aware of no other pending litigation.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Events
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) There were no reports on Form 8-K filed by the registrant for the
quarter ending March 31, 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BIOFILTRATION SYSTEMS, INC.
Date: May 17, 2000 By: /s/ Alpha J. Keyser
----------------------------------
Alpha J. Keyser, President and CEO
(Principal Executive Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 222826
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 222826
<PP&E> 3337
<DEPRECIATION> 945
<TOTAL-ASSETS> 1204002
<CURRENT-LIABILITIES> 90481
<BONDS> 0
0
0
<COMMON> 496010
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1204002
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 58017
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10386
<INCOME-PRETAX> (58017)
<INCOME-TAX> 0
<INCOME-CONTINUING> (58017)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58017)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
