UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A-2
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
BIFS TECHNOLOGIES CORPORATION
(formerly known as BIOFILTRATION SYSTEMS, INC.)
(Name of Small Business Issuer in its charter)
Florida 65-0382549
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
2341 Porter Lake Drive, Suite 101, Sarasota, Florida 34240
(Address of principal executive offices) (zip code)
Issuer's telephone number: (941) 343-9300
Securities to be registered under Section 12(g) of the Act:
Title of each class to be so registered Name of each exchange on which each
class is to be registered
Common Stock, $.00001 par value OTC Bulletin Board
INTRODUCTORY STATEMENT
BIFS Technologies Corporation (f/k/a BioFiltration Systems, Inc.) has elected to
file this Form 10-SB registration statement on a voluntary basis in order to
become a reporting company under the Securities Act of 1934. The primary purpose
for this is that the Company intends to be listed for trading on the OTC
Electronic Bulletin Board. Under the current NASD rules, in order to become
listed on the OTC Electronic Bulletin Board, a company now must be a reporting
company under the Securities Act of 1934.
This registration statement, including the information that may be incorporated
by reference, contains forward-looking statements including, among other items,
statements regarding the Company's business and growth strategies and
anticipated trends in the Company's business and demographics. These
forward-looking statements are subject to a number of risks and uncertainties,
some of which are beyond the Company's control. Actual results could differ
materially from these forward- looking statements as a result of factors
described in the section "Risk Factors" including, among others, regulatory or
economic influences.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. Business Development and Summary
BIFS Technologies Corporation (f/k/a BioFiltration Systems, Inc.), hereinafter
referred to as the "Company", was incorporated on December 17, 1992, as a "C"
corporation under the laws of the state of Florida. The Company is authorized to
issue 800,000,000 shares of its common stock, $.00001 par value per share. As of
June 30, 2000, the Company has 512,890,716 shares issued and 506,140,716
outstanding. The Company is currently traded on the National Daily Quotation
Bureau Pink Sheets and intends to become listed on the OTC Bulletin Board as
soon as all listing requirements are met.
For the period from inception (December 17, 1992) to March 2000, the Company has
been in a development stage. During this time, management has been engaged in
business planning activities and obtaining capital.
One of the business objectives was to find or develop cost effective methods of
remote performance tracking of operational facilities. In early 2000, the
Company learned of a new technology being developed by a company, Beach
Access.Net, Inc. in Myrtle Beach, SC that met many of the criteria. The Company
began acquisition negotiations with Beach Access.Net in March, finalizing the
agreement in April. The effective date for the purchase was April 1, 2000.
The Company currently operates two reporting segments. The first is the
Pollution Control Systems Group and the second is the Internet Technology Group.
The Company began with only the Pollution Control Systems Group in 1992.
Pollution Control Systems Group
The Company has acquired and marketed a patented pollution control technology
under Patent number 5,205,935. The technology provides a method and apparatus
for the continuous degradation of hazardous paint and organic solvent wastes, as
well as other organic wastes. The apparatus includes a high performance fixed
film bioreactor system which remediates and purifies contaminated waters.
<PAGE> 2
"The costs of replacing and upgrading drinking water and wastewater treatment
plants and distribution infrastructure are tremendous. A 1997 drinking water
needs survey conducted by the USEPA estimated that US$138 billion is needed over
the next 20 years to continue to provide safe drinking water - more than the
current assets of the entire drinking water industry. A similar 1996 survey
estimated that US$139.5 billion is needed over the next 10 years for wastewater
infrastructure nationwide. These needs will persist as the population continues
to grow, existing infrastructure ages, and new contamination threats emerge."
"EPA Regulations", J. Charles Fox, Assistant Administrator for the USEPA, World
of Water 2000.
The Company recognized this trend in the early 1990's and positioned itself
accordingly. The Company has and is pursuing this market opportunity
aggressively.
Technology Group
For many years, the Company had been searching for the best method of monitoring
remote production facilities. The Company was looking for a method that would
utilize current communications technology, would be scalable and would be
inexpensive. In April of this year, the Company completed a major goal of
expanding its technology capability through the acquisition of Beach Access.Net,
Inc. (Beach Access), an Internet Service Provider (ISP) and developer of an
exciting new wireless Internet access capability. Beach Access subsequently
acquired additional companies and assets, expanding its ISP capacity, wireless
systems technology, network and computer installation and repair and software
and database development capability.
Beach Access is marketing this technology under the trade name of "SWOMITM",
Seamless Wireless Omni-directional Mobile Internet. SWOMITM offers the user true
roaming capability within the SWOMITM system with access speeds of 2Mbps, the
same as a direct connection to a T-1. The SWOMITM system incorporates Beach
Access ISP assets and allows customers to link their computers, at T-1 access
speeds, for video, audio or data transmission on the Internet using a patented
roaming technology.
Beach Access is installing a prototype system covering over six contiguous miles
of the Myrtle Beach, South Carolina area. Using the SWOMITM equipment, a user
will be able to move within the SWOMITM network area with no loss of service or
degradation of speed.
Beach Access is exploring the best alternative(s) to market this product
nationally.
Uncertainties
<PAGE> 3
While the trend toward stricter enforcement of the Clean Water Act and other
environmental and governmental regulations appears to be firmly in place, a
change in policy or commitment could happen at any time. This change may occur
because of an election, changing administrations, change in agency directors or
a court ruling. In the rapidly changing environment of the high-tech sector, a
new invention or application may be developed which could make the Company's
bioremediation and SWOMI technologies obsolete. Accordingly, the Company cannot
guarantee that forecast revenues will occur or that competition or factors
outside its control will not create adverse operating conditions for the
Company.
Since inception, the Company has financed its operations primarily through cash
provided through various short- and long-term credit facilities and through the
sale of its common stock. The Company's management believes the need for
additional capital going forward will be met from revenues and earnings
generated from the sale of its products and services. If the Company is unable
to generate sufficient revenues from its products and services, management
believes the Company will need to raise additional funds to meet its cash
requirements.
B. Principal Products
Pollution Control Systems Group
The Company offers its product under its Patent number 5,205,935, which was
issued on April 27, 1993. The Patent covers part of the bioremediation
technology the Company intends to utilize in its operations. The Company
proposes to have modular biofiltration systems manufactured by outside sources
and to market these systems to various industries.
Patent Acquisition Details
The Patent was acquired from AAA Environmental, Inc. on May 15, 1995 for the sum
of $470,000. The Patent has a useful life of seventeen years from the April 27,
1993 Date of Patent. Payment was in the form of a Note Payable to AAA
Environmental for $470,000. AAA Environmental stock is 100% owned by the
majority shareholders of the Company.
The Company had previously recorded the cost of the Patent at $470,000. This
cost was reduced to $61,073, which reflects the related company's amortized
cost, and is being amortized over its useful life. The difference in recorded
value and its cost has been charged to additional paid-in capital. The Patent
value adjustment was made to comply with regulatory requirements.
The $470,00O note payable associated with the purchase of the Patent has been
reduced to the Patent's amortized cost. The difference between the original
recorded value and revised value has been credited to paid-in capital. Interest
expense previously recorded has been adjusted.
<PAGE> 4
Patent Detail - Abstract from Patent
High Performance Fixed Film Bioreactor - A method and apparatus for the
continuous degradation of hazardous paint and organic solvent wastes. The
apparatus includes a high performance fixed film bioreactor system into which is
fed waters contaminated with paints or solvents from industrial operations and
which utilizes the characteristic of either anaerobic or aerobic microorganisms
growing on a fixed film for the degradation of these solvents and purification
of contaminated waters. The bioreactor incorporates novel internal flow
features, which result in highly effective destruction of organic wastes in
aqueous streams.
Background of the Invention
The present invention relates to an apparatus and method for treating waters
contaminated with paint or organic solvent wastes, as well as other organic
wastes. More particularly, the invention relates to an apparatus for
microbiological destruction of paint and solvent in contaminated waters wherein
these contaminants are considered hazardous.
Worldwide, the use of solvent organic substances and petroleum distillation
substances for the formulation of latex-based paints, degreasing, de-inking, and
other industrial applications has resulted in the widespread use of these
organic substances and very often in the contamination of waters used for
cleaning equipment and surfaces, and ground waters as the result of spills and
leaking storage tanks and piping.
Disposal of wastewaters contaminated with paint or solvents presents a costly
problem to many industrial facilities as they are classified as hazardous
substances due to toxicity, flammability, corrosivity, or irritability. On-site
disposal of hazardous compounds is often desirable, however, presently accepted
means of destruction is often cost prohibitive for the generator.
Biological degradation of these hazardous substances presents a cost-effective
alternative to incineration of chemical/physical oxidation techniques.
Accordingly, it is an object of the invention to present an apparatus capable of
biological destruction of the hazardous substances.
It is a further object of the invention to present an apparatus capable of
simple, low cost operation for application on site for the biodegradation of
these substances.
It is yet another object of the invention to present an apparatus that is
capable of high rates of destruction of the substance.
<PAGE> 5
It is yet a further object of the invention to present an apparatus that is
modular and portable so that it may be simply relocated from site to site.
It is yet another object of the invention to present an apparatus capable of
utilizing either anaerobic or aerobic microorganism cultures for the rapid
destruction of these substances.
Summary of the Invention
Disclosed is an apparatus for the biological degradation of aqueous wastes
including solvents, paint components, and other organic pollutants.
The bioreactor utilizes fixed film technology, wherein microorganisms, either
aerobic or anaerobic, will attach to the film or packing material and effect
biodegradation of organic pollutants in wastewaters or ground waters so
contaminated.
The invention features rapidly moving liquid across the surface of a fixed film
in order to increase biodegradation rates and to eliminate plugging of the
bioreactor packing. Rapid internal flow inside the reactor space is beneath the
bioreactor packing.
In aerobic applications, the jets are eductors, which by venturi action, educt
ambient air into the pumped liquid stream thus accomplishing high efficiency
aeration or oxygen transfer to the bioreactor liquid. Oxygen so transferred to
liquid is used as the terminal electron acceptor by aerobic micro-organisms,
which are attached to the surface of the bioreactor packing, while these
micro-organisms utilize organic pollutants, solvents, or paint components as
electron donors, resulting in the degradation of these organic pollutants to
carbon dioxide and water.
In anaerobic applications, the jets do not educt ambient air in the reactor
liquid but are used only for the rapid flow of liquid across the surface of the
anaerobic microbial fixed film. In this case, anaerobic microorganisms serve as
inocula for the bioreactor and will colonize or attach to the surface of packing
material wherein these microorganisms biodegrade organic pollutants such as
certain solvents and paint components to carbon dioxide and methane gas. The
rapid movement of bioreactor liquid across the surface of the microbial fixed
film increases the rate of biodegradation of organic pollutants.
Bioremediation following the above procedure is effective for the treatment of a
wide variety of hazardous substances. Typical hazardous substances, which may be
bioremedial using the process of the invention, include:
o Alcohols, e.g., isopropanol, ethanol, butanol, ethylene glycol;
o Aromatics, e.g., benzene, toluene, ethyl benzene, xylene;
o Carbohydrates, e.g., glucose, fructose;
<PAGE> 6
o Ketenes, e.g., methylethylketone;
o Petroleum hydrocarbons, e.g., gasoline, diesel, fuel oils, motor oils,
crude oil;
o Phthalates, e.g., o-phthalate;
o Solvents, e.g., methylene chloride, acetone, stoddard solvent,
tetrabydrofuran;
o Chlorinated compounds, e.g., monochlorobenzene, 1,2-dichloroethane;
o Detergents;
o And mixtures thereof.
It is recognized, however, that virtually any material, which may be
biodegraded, may be treated with the apparatus and method of the present
invention, depending only on advantages of either anaerobic or aerobic
micro-organisms for the biodegradation of specific wastes.
Bioremediation has been available for several years.
The biofiltration systems, which will be specifically tailored to each
customer's needs, may be utilized for treatment of a variety of waste waters
including, but not limited to:
o Aircraft deicing fluids
o Landfill leachates
o Contaminated groundwater
o Industrial effluents
o Aluminum can plant solvent wastes
o Food processing wastewater and other organic wastes.
Technology Group
The primary product offered by this group is Internet access. Beach Access is an
Internet Service Provider (ISP) and has acquired additional ISP assets in the
Myrtle Beach area. The group has developed an innovative and unique method of
Internet access called "SWOMITM", Seamless Wireless Omni-directional Mobile
Internet. SWOMITM offers the user true roaming capability within the SWOMITM
system with access speeds of 2Mbps. The system incorporates Beach Access ISP
assets and allows customers to link their computers, at T-1 access speeds, for
video, audio or data transmission on the Internet using a patented roaming
technology.
More simply stated, the SWOMITM technology:
o Uses patented firmware to provide 2Mbps Internet access speeds.
o Uses hardware, which costs less than $250 per unit.
o Uses towers, which cost less than $30,000 to erect.
o Allows total user mobility within the network using laptop PC's or
other portable devices.
<PAGE>
o Has an automatic seek and switch feature (similar to cell phone
technology) that maintains the connection while users move from one
cell to another.
o Has automatic switching - does not require any user resetting of the
equipment.
Applications for the product are numerous, but a few are listed here: Hotels and
motels, convention centers, RV parks, housing developments, business districts,
high-rise office buildings, etc. Within the Myrtle Beach market area, the
Chamber of Commerce estimates that there are over 13 million visitors per year.
Generally, visits are for a one-week period, which would be 250,000 visitors per
week. Beach Access's research and resort manager comments indicate that at least
10,000 of these 250,000 weekly visitors would be interested in a high-speed
wireless Internet access capability during their stay.
C. Manufacturing
The Company does not intend to manufacture any of the products it sells.
However, the Company will recommend the best configuration of its products for
its customers. All manufacturing is subcontracted, but to the Company's rigid
specifications. This gives the Company the flexibility to keep manufacturing
costs under control.
Under the direct supervision of the Company's Pollution Control Systems Group
Technical Director, specialized erection companies will assemble the larger
bioreactors on-site. The Company's control panels will be purchased from
original equipment manufacturers and will be installed by Company personnel.
Packing media will be shipped directly to the site and installed on-site.
Although the Company will not manufacture its own products, it will perform
supervision of assembly, redesigning, testing and servicing. Some of the
benefits of this strategy are:
o Decrease in working capital required to conduct business
o Ability to increase capacity quickly with reduced capital costs
o Increased overall flexibility
The Technology Group likewise will use contracted services for the manufacture
of the SWOMITM hardware and for construction of towers. The Group's VP of R & D
will monitor product quality, working closely with the manufacturer. The VP of
Operations will manage and monitor system implementation and on-going
operations.
D. The Market and Product Distribution
<PAGE> 7
The sales agent is responsible to market all biofilters on behalf of the
Company. They may choose to employ additional agents, as necessary to explore
and take advantage of all market opportunities. These additional agents will be
under their control. The sales agent will operate on a set fee commission basis,
which will allow the Company to maintain a projected profit margin on each sale.
The sales agent has been and is representing the Company's products to the
nation's airports. They are also seeking additional agents to contact
municipalities, the beverage industry, canning and can manufacturing industries.
Other potential markets include landfill operations, food processing facilities,
commercial laundries, and chicken, cattle and swine farms.
For the Technology Group, the distribution is two fold. The first is to develop
markets within its own geographic area. These sites will be used to continue
product improvement and testing while offering SWOMITM benefits to customers in
the local area. The second approach is to develop strategic alliances with
national companies that have the capability to distribute the product
nationally. The Company is in negotiations at this time and expects to complete
the arrangement by the end of the year.
E. Sales and Marketing Strategy
The Company's anaerobic biofiltration system will be marketed through an
affiliate company, AAA Environmental Services Corporation, now known as Vikki M.
Hunter Keyser, P.A., which is wholly owned by the majority shareholders of the
Company. The Company has negotiated a National Sales Agreement with the
affiliate 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. Either party can terminate this
agreement with a one-year notice.
The agent shall be paid (30%) of the retail sale, and/or lease collected
revenue, provided, the sale and /or lease shall be accomplished at full list
price or higher. List price is considered to be three times the manufactured
installed cost. If the sale is not for a minimum of three times cost, the
commission will be adjusted accordingly. The agent shall in no way be paid more
money than is retained by the company, before taxes. If a lease is agreed upon
by the company for less than three times cost the agent shall not be entitled to
any payment until the company receives all cost back including interest and
operating expenses. After the company has been reimbursed, any additional lease
income will be paid to the agent in accordance with the terms shown above.
In accordance with the agreement and at its option, the Company may advance
funds against future commissions to the related company. At June 30, 2000, the
related company had been prepaid $575,910 against future sales commissions. As
of the date hereof, all prepaid sales commissions have been repaid and the
financial statements now reflect no prepaid commissions.
<PAGE> 8
The Company's sales and technical representatives will attend trade shows held
by environmental and agricultural associations to increase the overall awareness
of the product. The marketing department of the agent will follow up requests
with contacts made and developed through these sources.
Promotional materials such as brochures, CD-ROM, documentation videos and an
Internet web page are currently being designed and prepared and will be
available for distribution by all sales staff. As well, there is a telephone
marketing program being contemplated that will generate leads for the sales
staff.
A professional exhibit will be designed and built for use at various conferences
and trade shows. This information exhibit will focus on the mechanics of the
biofiltration system, the problems the system resolves, and the benefits and
savings that result from the use of the system. Current industry articles,
published research papers and other information discussing the industry,
bioremediation solutions and the Company will be made available.
F. Government Regulation
In addition to the Resource Conservation and Recovery Act, the Clean Water Act
and The Environmental Protection Agency regulations discussed in MD&A, Section C
of the filing, the Company now also comes under the jurisdiction of the Federal
Communications Commission (FCC). Since the Technology Group uses radio
frequencies to carry information among the users, towers and the ISP, the Group
must comply with FCC rules and regulations. A major factor is that the FCC
regulates which frequencies may be used and the power transmitted on each
frequency.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND PLAN OF OPERATION
The following discussion and analysis of the Company's financial condition and
results of its operations for the six months ended June 30, 2000 and the years
ended December 31, 1999 and 1998, 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.
<PAGE> 9
A. General Discussion of the Company
BIFS Technologies Corporation (formerly known as BioFiltration Systems, Inc.)
was incorporated in December 1992 as a Florida "C" corporation, for the purpose
of purchasing, further developing and patenting a proven anaerobic/aerobic
remediation process for treating and disposing of organic effluent. This
technology is documented in Patent number 5,205,935, which was recorded April
27, 1993, and is more fully described below. The Patent was filed by an
affiliate of the Company and the Company subsequently purchased the Patent from
the affiliate.
The bio-remediation technology allowed the Company to enter into the business of
marketing modular biofiltration systems for the treatment of a variety of waste
waters, including aircraft deicing and anti-icing fluids, landfill leachates,
contaminated groundwater, industrial effluents, aluminum can plant solvent
wastes, food processing wastewater and other organic wastes. The biofilter or
biofiltration process provides a dynamic means of filtering and simultaneously
destroying waste components in a liquid or air stream by entrapped micro
organisms on the filter media. The micro organisms are responsible for the
destruction of waste chemicals and cleaning of the fluid.
As the full impact of earth's very serious environmental problems becomes more
apparent with each passing decade, the environmental remediation industry is
expected to grow for the near future. The Company's patented anaerobic/aerobic
treatment of liquid wastes renders it suitable for discharge into publicly owned
treatment plants and, if required, recycled for irrigation or for disposal
directly into the waterways (with appropriate permits).
As stated by J. Charles Fox, Assistant Administrator for USEPA, "The costs of
replacing and upgrading drinking water and wastewater treatment plants and
distribution infrastructure are tremendous. A 1997 drinking water needs survey
conducted by the USEPA estimated that US$138 billion is needed over the next 20
years to continue to provide safe drinking water - more than the current assets
of the entire drinking water industry. A similar 1996 survey estimated that
US$139.5 billion is needed over the next 10 years for wastewater infrastructure
nationwide. These needs will persist as the population continues to grow,
existing infrastructure ages, and new contamination threats emerge."
<PAGE> 10
The Company intends to market its bioremediation products through the sales
agent to customers initially in the U.S. and Canada. It intends to contract with
specialized fiberglass and steel fabrication shops in the areas it makes sales
to manufacture bioreactor vessels to its strict specifications. This eliminates
the need for the Company to carry large amounts of inventory and it keeps the
shipping costs to a minimum. The electrical control panels are purchased locally
and installed by Company personnel. By utilizing the fabrication shops in the
area of the sale, the talents of the most experienced professional technical
consultants and commission compensated sales representatives, the Company keeps
its fixed costs to a minimum thereby allowing it the flexibility to tackle
projects it determines feasible.
The Patent and Its Advantage
High Performance Fixed Film Bioreactor
A method and apparatus for the continuous degradation of hazardous paint and
organic solvent wastes. The apparatus includes a high performance fixed film
bioreactor system into which is fed waters contaminated with paints or solvents
from industrial operations and which utilizes the characteristic of either
anaerobic or aerobic microorganisms growing on a fixed film for the degradation
of these solvents and purification of contaminated waters. The bioreactor
incorporates novel internal flow features, which result in highly effective
destruction of organic wastes in aqueous streams.
Background of the Patent
The Patent relates to an apparatus and method for treating waters contaminated
with paint or organic solvent wastes, as well as other organic wastes. More
particularly, the Patent relates to an apparatus for microbiological destruction
of paint and solvent in contaminated waters wherein these contaminants are
considered hazardous.
Worldwide, the use of solvent organic substances and petroleum distillation
substances for the formulation of latex-based paints, degreasing, de-inking, and
other industrial applications has resulted in the contamination of waters used
for cleaning equipment and surfaces, and ground waters as the result of spills
and leaking storage tanks and piping.
Disposal of wastewaters contaminated with paint or solvents presents a costly
problem to many industrial facilities as they are classified as hazardous
substances due to toxicity, flammability, corrosivity, or irritability. On site
disposal of hazardous compounds is often desirable, however, presently accepted
means of destruction are often cost prohibitive for the generator. Biological
degradation of these hazardous substances presents a cost-effective alternative
to incineration of chemical/physical oxidation techniques.
The Patent is an apparatus capable of:
o Biological destruction of the hazardous substances.
o Simple, low cost operation for application on site for the biodegradation
of these substances.
<PAGE> 11
o High rates of destruction of the substance.
o Being modular and portable so that it may be simply relocated from site
to site
o Utilizing either anaerobic or aerobic microorganism cultures for the
rapid destruction of these substances.
Summary of Operation
The bioreactor utilizes fixed film technology, wherein microorganisms, either
aerobic or anaerobic, will attach to the film or packing material and effect
biodegradation of organic pollutants in wastewaters or ground waters so
contaminated.
The bioreactor features rapidly moving liquid across the surface of a fixed film
in order to increase biodegradation rates and to eliminate plugging of the
bioreactor packing. Rapid internal flow inside the reactor space is beneath the
bioreactor packing.
In aerobic applications, the jets are eductors, which by venturi action, educt
ambient air into the pumped liquid stream thus accomplishing high efficiency
aeration or oxygen transfer to the bioreactor liquid. Oxygen so transferred to
liquid is used as the terminal electron acceptor by aerobic micro-organisms,
which are attached to the surface of the bioreactor packing, while these
micro-organisms utilize organic pollutants, solvents, or paint components as
electron donors, resulting in the degradation of these organic pollutants to
carbon dioxide and water.
In anaerobic applications, the jets do not educt ambient air in the reactor
liquid but are used only for the rapid flow of liquid across the surface of the
anaerobic microbial fixed film. In this case, anaerobic microorganisms serve as
inocula for the bioreactor and will colonize or attach to the surface of packing
material wherein these microorganisms biodegrade organic pollutants such as
certain solvents and paint components to carbon dioxide and methane gas. The
rapid movement of bioreactor liquid across the surface of the microbial fixed
film increases the rate of biodegradation of organic pollutants.
Bioremediation following the above procedure is effective for the treatment of a
wide variety of hazardous substances. Typical hazardous substances which may be
bioremedial using the process of the invention include:
o Alcohols, e.g., isopropanol, ethanol, butanol, ethylene glycol;
o Aromatics, e.g., benzene, toluene, ethylbenzene, xylenes;
o Carbohydrates, e.g., glucose, fructose;
o Ketenes, e.g., methylethylketone;
o Petroleum hydrocarbons, e.g., gasoline, diesel, fuel oils, motor oils,
crude oil;
o Phthalates, e.g., o-phthalate;
o Solvents, e.g., methylene chloride, acetone, stoddard solvent,
tetrabydrofuran;
o Chlorinated compounds, e.g., monochlorobenzene, 1,2-dichloroethane;
<PAGE> 12
o Detergents;
o And mixtures thereof.
It is recognized, however, that virtually any material, which may be
biodegraded, may be treated with the apparatus and method of the present
invention, depending only on advantages of either anaerobic or aerobic
microorganisms for the biodegradation of specific wastes.
Airport Deicing
Adherence to the Code of Federal Regulations (CFR) Title 14, Part 121 has
increased the quantities of deicing fluids used by U.S. airlines and airports.
U.S. glycol usage in 1990 was estimated at 11,500,000 gallons. Airport operators
have reported that the volume of aircraft deicing fluid has increased threefold
since 1992.
Before a commercial airliner starts the take-off roll in winter weather, deicing
solutions (glycols) are sprayed over the plane to prevent ice from forming and
destroying the plane's ability to fly. The amount of glycol used per mid-sized
plane requires as much treatment plant capacity as required to treat normal
sewage from a city of approximately 50,000 people. Deicing operations are active
every day, somewhere in the world. The environmental problem with glycols is
that they grab any available oxygen molecules in water, resulting in death for
plants and animals that depend on water for survival. Grasses, fish, shellfish,
and just about all other life forms are effected. Year after year, thousands of
tons of glycols soak into the ground and aquifers untreated due to airport
deicing operations. Glycol runoff could contain as much as 300,000 mg/I COD
(Chemical Oxygen Demand). Residential sewage only contains 250 mg/I COD. These
heavy COD loads can completely shut down a municipal owned treatment plant
without pre-treatment to a level of 250 mg/COD, or less. Many municipal plants
are refusing to accept glycols. Most do not have the capacity to handle it.
To address this problem, the Company has further developed and demonstrated the
ability to convert these glycol wastewater streams into liquid that can be
discharged without further treatment. Many airports are seriously considering
this optional solution, allowing them to bypass the municipal treatment plants
entirely. Because the Environmental Protection Agency has recently informed all
national airports that they cannot deice aircraft without collecting and
treating deicing fluids, these airports are faced with the near term
construction of systems to collect and treat deicing fluids. Because of this
regulatory driver, and the fact that management has built operating systems to
treat other glycols, this is the first market sector that the Company has
focused upon.
<PAGE> 13
The acclaimed NASA/AMES Research Laboratories declared at a recent meeting of
the American Association of Airport Executives, anaerobic bio-remediation is the
most cost effective method of treating spent deicing fluids. Another study done
by ARCO Chemical Company also concluded the most cost-effective method of
deicing fluid disposal was anaerobic bio-remediation. Investigation by
environmental personnel at one of the Nation's largest airports recently
concluded that the Company's bio-remediation system had the potential to save
the airport nearly $1,000,000 per year if the patented full-scale glycol
treatment system was installed on airport property near the glycol detention
basins. In addition, they concluded the Company's process would create recycled
usable water which can be used for airport irrigation purposes. The Company's
patented anaerobic bio-filter process will safely and effectively eliminate the
deicing and anti-icing spent fluid disposal problem at any airport.
Agriculture opportunities
Resistance to change will be especially challenging for the agricultural
community in the coming years as it faces greater scrutiny for being the leading
source of pollution in 70 percent of impaired river miles in the U.S. Only 2,000
of the nation's 450,000 livestock operations currently have permits. Hog farms
with 100,000 animals, the equivalent to cities of a quarter-million people,
often have no wastewater treatment systems. Companies offering technologies to
compost or palletize manure, or anaerobic digesters for more wet waste streams,
will be in increasing demand as the regulatory climate heats up in this market
sector.
Liquidity and Capital Resources
During the past three fiscal years, 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, until
acquisition of the Technology Group including Beach Access.Net, was in a
development stage and did not have any revenues. In the second quarter 2000, the
Company recorded sales of $166,432, which were generated by the Technology
Group. Since the beginning of the year, the Company received about $1,125,000
from the sale of stock. The Company's management believes that sufficient funds
will be raised from future operations to minimize the need for future equity
capitalization.
During April 2000, the Company finalized the acquisition of Beach Access.Net,
Inc. (Beach Access). The acquisition was funded with 1,750,000 free-trading
shares of Company stock. This acquisition completed the Company's goal of
providing a means for remote monitoring of pollution treatment sites and
expanding its internal technology capability. Beach Access is operated and
managed as a wholly owned subsidiary and is charged with the mission to be the
technology group of the Company and a leader in the wireless Internet access
market.
<PAGE> 14
In connection with the initial acquisition of Beach Access.Net, Inc., the
Company invested 8,600,000 shares of restricted common stock in Beach
Access.Net, Inc. to acquire other related business assets and operations. In
connection with these acquisitions, Beach Access.Net, Inc recorded goodwill of
$279,896. For the six months ended June 30, 2000, $13,995 was recorded as
goodwill amortization.
In connection with the Beach Access acquisition, the Company issued to the
former owner and certain employees of Beach Access.Net, Inc. 8,000,000 shares of
unrestricted and restricted common stock as a signing bonus and additional
compensation.
As part of the operating plan for expansion, Beach Access made the following
acquisitions. In May, Beach Access acquired the Internet servicing rights to
approximately 1,300 resort customers, acquired Revcon Technologies, Inc., a
company in the wireless systems industry and acquired Alliance Computers, LLC, a
company in the computer networking, programming and wireless connectivity
industry. These assets were purchased with 12,800,000 shares of Company stock.
In the accompanying financial statements, the purchase of these customers has
been recorded at the fair market value of stock issued, less a 50% discount
because of the restricted nature of the stock. The cost of the purchase of
Revcon, Inc. and Alliance Computers LLC is being amortized over twelve months.
For the six months ended June 30, 2000, amortization of the purchase price
amounted to $15,600.
On August 1, 2000, certain of the above agreements were modified. The
modification provided for an additional 180,000 shares of restricted stock to be
issued for the right to provide Internet services to the same customers.
In connection with the Beach Access purchase, the Company recorded $226,010 of
goodwill, which is being amortized over five years. For the six months ended
June 30, 2000, $11,300 was recorded as goodwill amortization.
Special Services Agreements
o 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.
<PAGE> 15
o 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 was to 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 was to 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. The shares were offered under a 504-D
offering.
o 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,
was 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 0.005 per share. In the accompanying financial statements,
the stock subscription receivable was adjusted to reflect the revised
subscription price.
In March 2000, the remaining 62,500,000 shares were issued for $312,500,
completing the Company's obligation for this special services agreement.
The Company, at June 30, 2000, had $2,337,436 in assets compared to $513,551 and
$524,167 as of December 31, 1999 and 1998 respectively. The increase in assets
from the prior period is due primarily to the issue of stock for cash and
acquisition, for stock, of Beach Access.Net, Inc. and related entities.
Liabilities consisting of certain accrued expenses totaled $746,083 as of June
30, 2000 compared to $501,025 and $469,956 for 1999 and 1998 respectively.
The Company has reduced the value of its Patent from $470,000 to $61,073, less
accrued amortization. The Company has made this change to reflect the actual
costs related to the Patent, in accordance with regulatory requirements. The
company has also reduced the offsetting Note Payable to related entities, with
the entity's approval. The resulting adjustment to interest expense is reflected
in Additional Paid-In Capital.
The Company has also recorded revised accrued interest on Shareholder Notes of
$348,900. The Notes had previously been recorded as zero interest notes. In lieu
of interest, shareholders received additional stock certificates. Interest equal
to the par value of the shares had been recorded. In accordance with regulatory
requirements, interest, at the rate of average annual Prime + 1% during the term
of the notes, has been accrued, with the adjustment reflected in Paid-In
Capital.
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.
<PAGE> 16
B. Segment Data
The Company operates in two business segments, pollution treatment systems and
Internet technology. Currently, the only operating segment is the Internet
technology group. For the six months ended June 30, 2000, information on
reportable segments is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Pollution Technology Total
Six months ended June 30, 2000
External revenue - $166,432 $166,432
Intersegment revenue $0 $0 $0
Loss from continuing Operations $(80,762) $(751,477) $(832,239)
Loss from discontinued Operation 0 (379,760) (379,760)
$(80,762) $(1,131,237) $(1,211,999)
</TABLE>
For the six months ended June 30, 1999, the Company only operated as a pollution
treatment company.
Since December 31, 1999, the Company has added the operations and assets of the
Internet technology segment. This segment was added on April 1, 2000. As of June
30, 2000, total assets of the Internet technology segment were $654,654.
DISCONTINUED OPERATIONS
In early July 2000, Company management decided to discontinue and dispose of
certain measurable portions of its Internet technology segment. Management
estimates that by August 15, 2000, all of these operations will be discontinued
and assets will be disposed of. The results of operations for the periods
presented are reported as a component of discontinued operation in the
statements of operation. Additionally, management's estimate of the loss on
disposal is presented as a separate component of discontinued operations. The
estimated loss on the disposal of discontinued operations represents the
estimated loss on disposal of the segment's assets and operation through August
15, 2000.
Summarized results of the disposed segment portions for the six months ended
June 30, 2000, are as follows:
Net sales $ 296,043
Operating loss $ (230,720)
Loss from discontinued Operations $ (149,040)
<PAGE> 17
For the period before April 1, 2000, the Company did not operate in the above
segment.
Forecast Results of Operations
The Company expects the balance of 2000 to continue as a time for finalization
of product development and testing. Beach Access.Net revenues will be primarily
from ISP dial-up services, currently at $40,000 per month. The Company forecasts
that the first SWOMI(TM) revenues will be December 2000 billings of $60,000 for
the month. The Company forecasts to have 1,000 rooms on-line with SWOMI(TM) at
that time. The Company also forecasts that biofiltration revenues will begin in
December 2000 and will be $18,000 for the month. The Company forecasts total
revenues for the second half of 2000 to be $318,000. Total expenses are forecast
to be $505,000.
The initial construction program for the SWOMI(TM) Phase 1 network is in
progress in Myrtle Beach, SC and is expected to be completed in November 2000.
Once Phase 1 is complete, the Company will finalize a construction and
deployment model for use in other locations.
For 2001, the Company forecasts total sales of $6,950,000, with SWOMI(TM) sales
of $6,000,000, ISP sales of $500,000, and biofiltration sales of $450,000. The
Company expects expenses related to these revenues to be $3,500,000.
The Company is considering several expanded or new programs for 2001, which may
change the revenue and expenses referenced above. Such programs include the
Hotel and Resort Industry Program, the ISP Franchise Program, and the College
and University Program. The Company is also in negotiations for National Rollout
campaign for its SWOMI(TM) technology.
C. Governmental Approval, Regulation and Environmental Compliance
The operations of the Company are subject to regulations by the Environmental
Protection Agency ("EPA") as well as regulations normally incident to business
operations such as occupational safety and health acts, workmen's compensation
statutes, unemployment insurance legislation and income tax and social security
related regulations. Although the Company will make every effort to comply with
applicable regulations, it can provide no assurance of its ability to do so, nor
can it predict the effect of these regulations on its proposed activities.
Wastewater effluent and gaseous emissions from industrial, commercial and
governmental sources are subject to regulation by the EPA in the United States.
Of importance are:
<PAGE> 18
o A final determination in 1991 of 20 mineral processing wastes formerly
exempt from the Resource Conservation and Recovery Act, the Toxic
Substances Control Act being established for only two - phosphyogypsum
and phosphoric acid process wastewater - and the remaining 18 being
regulated as RCRA Subtitle D wastes;
o Under the Clean Water Act, regulations require national pollution
discharge elimination permits for storm water runoff from chemical
operations, dumps, organic and/or hazardous wastes, lumbering, mining,
recycling, transportation and publicly owned wastewater treatment
plants;
o Under Section 404 of the Clear Water Act, the EPA signed an agreement
with the Army Corps of Engineers setting a goal of "no net loss" of
wetlands;
o Effective March 1992, benzene content in wastewater regulations became
effective under the National Emission Standard for Hazardous Air
Pollutants;
o 1985 standards by the EPA require control of sulfides, chromium and
acidity by the tanning industry -- a $2.9 billion industry. Control
standards for the tanning industry under the Clean Air Act expected to
be published in 1994 requiring a 90% reduction in all volatile organic
compounds from the industry baseline recorded in 1987 Toxic Release
Inventory;
o The 1990 Clean Air Act requires utilities to invest an estimated $15 to
$20 billion in order to comply.
The Company now also comes under the jurisdiction of the Federal Communications
Commission (FCC). Since the Technology Group uses radio frequencies to carry
information among the users, towers and the ISP, the Group must comply with FCC
rules and regulations. A major factor is that the FCC regulates which
frequencies may be used and the power transmitted on each frequency.
The user and the tower must be operating on the same frequency in order for a
connection to be made. The hardware for the Company's SWOMITM product can be
modified to work on any frequency. A nation-wide frequency, one that could be
used by the Company anywhere in the nation, can be acquired from the FCC for a
fee, which may be substantial. The Company is exploring several alternatives for
frequency utilization at this time.
D. Risks Associated with Operations
The Company's long-term success is partially predicated on the strength of
developing a comprehensive sales and marketing program and its ability to design
each product to the specifications of its customer's effluent or emissions
requirements.
<PAGE> 19
Since the Company does not intend to manufacture its products, it will rely on
the use of outside manufacturers to manufacture its product to rigid
specifications. As such, there can be no assurance that the product will be
manufactured and delivered in a timely manner which would adversely affect the
Company's proposed operations.
While the Company's plan of operations is being developed thoroughly, there is
no assurance the plan will be accepted in or by the marketplace, nor, that if it
is accepted, that demand will be sufficient to make the Company profitable. The
Company cannot project with certainty the outcome of its operations, and there
are no assurances that the Company will operate profitably in either the near or
long term.
E. Competition
Pollution Control Systems Group
There are a number of companies involved in this industry. The current and
prospective competitors include many large companies that have substantially
greater market presence and financial, technical, marketing and other resources
than the Company. The Company competes or expects to compete directly or
indirectly with the following companies:
o Biothane of Camden, New Jersey, involved only in the larger "built in
place" anaerobic aspect of wastewater treatment;
o Baccardi Corporation of Puerto Rico;
o Pacques Lavatin of Canada;
o ORS of Massachusetts, a subsidiary of GTI; o Biotrol of Minnesota.
Technology Group
The Group has developed a technology, which, to our knowledge, no one else has
developed. Several companies have perfected a "Point-to-Point" wireless Internet
connectivity. This means that as long as the user is with the fixed-point
wireless range, e.g. an office, that they could be connected. SWOMITM offers the
user true roaming capability within the SWOMITM system with access speeds of
2Mbps. The system incorporates Beach Access ISP assets and allows customers to
link their computers, at T-1 access speeds, for video, audio or data
transmission on the Internet using a patented roaming technology.
<PAGE> 20
The Group knows that every major telecommunications company and unknown emerging
companies are working to develop the solution, which we now have. Therefore, we
expect competition in the future. As of now, we are expanding our Myrtle Beach
operations and exploring alternatives to expand nationally. We expect to
aggressively utilize our market advantage to capture market share.
There can be no assurance that the Company will have the financial resources,
technical expertise, or marketing and support capabilities to continue to
complete successfully.
F. Developing and Changing Market
The market conditions for the Company's product are evolving and changing with
respect to current and expected future legislative changes. The Company believes
the current conditions will continue favorably for this type of venture. There
can be no assurance that the Company's assessment of the situation is correct,
nor that the products it selects will be accepted by the consumer.
G. Employees
As of the current date, the Company has approximately 25 full time employees
including the President/CEO. As the Company increases its operations, additional
employees will be required. The Company's future success depends on its ability
to attract and retain other qualified personnel, for which competition is
intense. The loss of Mr. Keyser or Mr. Cannon or the Company's inability to
attract and retain other qualified employees could have a material adverse
effect on the Company.
H. Year 2000 Issue
The Company has not experienced any Year 2000 problems. Critical software
programs used by the Company, including accounting programs, have been upgraded
to Year 2000 compliant versions.
I. Additional Information
The Company intends to provide an annual report to its security holders and to
make quarterly reports available for inspection by its security holders. The
annual report will include audited financial statements.
<PAGE> 21
The Company will, as a result of this filing, become subject to the
informational requirements of the Securities Exchange Act of 1934 (the "Act")
and, in accordance with the Securities and Exchange Commission (the
"Commission"), such reports, proxy statements and other information may be
inspected at public reference facilities of the Commission at Judiciary Plaza,
450 Fifth Street N.W., Washington D.C. 20549; Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; 7 World Trade Center, New
York, New York, 10048; and 5670 Wilshire Boulevard, Los Angeles, California
90036. Copies of such material can be obtained from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C.
20549, at prescribed rates. For further information, the Commission maintains a
website that contains reports, proxy and information statements, and other
information regarding reporting companies at http://www.sec.gov/.
ITEM 3. DESCRIPTION OF PROPERTY
The Company maintains its principal business operations at 2341 Porter Lake
Drive, Suite 101, Sarasota, Florida 34240. The Company's telephone number is
(941) 343-9300. The Company does not own any property. The Company maintains
three offices, one is the corporate address listed above, and the other two are
in South Carolina for the Technology Group. The primary address for the
Technology Group (Beach Access.Net) is 9618 North Kings Highway, Myrtle Beach,
South Carolina 29572. The phone number is (843) 692-7434. All facilities are
leased.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of June 30, 2000, with
respect to the beneficial ownership of common stock by each person who, to the
knowledge of the Company, beneficially owned or had the right to acquire more
than 5% of the outstanding common stock; each director of the Company; and all
executive officers and directors of the Company as a group:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Title of Name and Address of Number of Percent of
Class Beneficial Owner (1) Shares Class (2)
Common Alpha J. and Victoria Keyser 282,500,00 55%
525 Sutton Place
Longboat Key, FL 34228
Common Thomas Cannon 0 0%
Common James E. Feiler 0 0%
Common All Directors and Executive 282,500,00 55%
Officers as a Group
</TABLE>
<PAGE> 22
(1) As used in this table, "beneficial ownership" means the sole or shared
power to vote or to direct the voting of a security or the sole or
shared investment power with respect to a security (i.e., the power to
dispose of or to direct the disposition of a security)
(2) Figures are rounded to the nearest percentage.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The following table sets forth the names and positions with the Company and ages
of the executive officers and directors of the Company. Directors will be
elected at the Company's annual meeting of shareholders and serve for one year
or until their successors are elected and qualify. Officers are elected by the
Board and their terms of office are at the discretion of the Board, except to
the extent governed by employment contract.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
--------------------------- ------- ---------------------------------------------- ------------------- ----------------------------
Name Age Title Director Since Term
Expires
--------------------------- ------- ---------------------------------------------- ------------------- ----------------------------
--------------------------- ------- ---------------------------------------------- ------------------- ----------------------------
Alpha J. Keyser 63 Director, President and Chief Executive 1992 2001
Officer
--------------------------- ------- ---------------------------------------------- ------------------- ----------------------------
--------------------------- ------- ---------------------------------------------- ------------------- ----------------------------
Thomas Cannon 56 Director, Marketing Director 1993 2001
--------------------------- ------- ---------------------------------------------- ------------------- ----------------------------
--------------------------- ------- ---------------------------------------------- ------------------- ----------------------------
James A. Feiler 41 Director, Technical Director 2000 2001
--------------------------- ------- ---------------------------------------------- ------------------- ----------------------------
</TABLE>
Duties, Responsibilities and Experience
Alpha J. Keyser, Director, President and Chief Executive Officer
<PAGE> 23
Al Keyser currently serves as the Company's President and Chief Executive
Officer and Director. Mr. Keyser has more than 30 years experience in
construction, heavy equipment manufacture development operation and sales, oil
and gas drilling operations, and explorative hydrogeology. Mr. Keyser has
started and served as CEO of a number of successful small businesses in these
areas. In 1989, he started AAA Environmental Services Corp., an environmental
services company formed for the development and marketing of equipment,
technology and services in wastewater environmental clean up, solid and
hazardous waste treatment and air emission control. From 1985 to 1988, he was
President and owner of Algasco, Inc., a natural gas exploration and development
company which drilled 19 gas wells in the vicinity of Victoria, Texas. From 1978
to 1986, he was President and owner of Alpha Gas Development, Inc., which was
formed to do well exploration and development in Kentucky. The company leased in
excess of 35,000 acres in Whitley County, Kentucky, resulting in the discovery
of one of, if not the, largest gas field in the state. In 1985, the company
obtained a $500,000 grant from Department of Energy to provide the extension of
Devonian shale into southeast Kentucky. Mr. Keyser sold the company in 1984 but
remained as President and CEO until late 1986. From 1973 to 1977, he was the
owner and President of Al J. Keyser, Inc., which marketed and installed more
than 60 sewage pumping stations in southwest Florida. From 1963 to 1972, he was
Eastern Regional Sales Manager for Hein-Wenner Corp. He assisted in the original
controls design and pioneered the concept and sale of the larger 1/2 yard and up
hydraulic excavators through the eastern U.S. and Canada. He became the number
one producer in the company. From 1960 to 1963, he was employed in the sales
department of Bay City Shovels and was responsible for installation,
demonstration and troubleshooting for a worldwide producer of heavy construction
equipment, cranes, backhoes and shovels.
Thomas Cannon, Director
Tom Cannon currently serves as a Director and as the Marketing Director of the
Company. He has extensive marketing expertise, especially to the nation's
airports and to the military. He is responsible for all marketing efforts and
directs all sales agents. From 1991 to 1993, he was employed by Flow
International, Inc., and was responsible for sales and market development at
their services division. From 1987 to 1991, Mr. Cannon founded Rampart Water
Blast, Inc., which developed technology to remove rubber and paint from runways
at commercial and military airports throughout the U.S. He took the company from
start-up to $3.5 million gross sales in four years. He sold the company to Flow
International. From 1980 to 1987, he formed Coastal Striping, Inc., to paint
roads and runways at military bases throughout the U.S., reaching $4 million in
gross sales. He closed the company when the military changed its bidding
procedures and funding. From 1976 to 1980 he managed Safe Line, Inc., a company
that painted highways in Ohio. From 1968 to 1976, he was employed by Standard
Oil Co. Ohio (now known as BP). He started there after graduating from college
and progressed through marketing and real estate departments to become project
manager.
James A. Feiler, P.G., R.E.M.
<PAGE> 24
Jim joined the Company in April 2000 and currently serves as a Director of the
Company and as its Technical Director. His primary responsibilities include
assisting with the marketing of the patented biofiltration system and directing
the design, installation and field operations of BIFS equipment. From 1996 until
joining the company, he was employed by Professional Service Industries as a
Department Manager and Consultant for Environmental Services. Primary duties
included managing the Atlanta Environmental Department that conducted Phase I
Environmental Site Assessments, Phase II Environmental Site Assessments, site
investigations, and remediation and asbestos/LBP/IAQ/IH services. He was also
responsible for planning, growth and coordinating sales, marketing, and
operations to achieve revenue generation, profits and quality control. From 1995
to 1996, Jim was and independent consulting geologist specializing in landfill
compliance monitoring of groundwater, surface water, and leachate, petroleum and
hazardous waste site investigation and corrective action implementation and oil
and natural gas exploration, development, and production. Before this, Mr.
Feiler worked with environmental companies engaged in managing, designing,
installing and operating soil and groundwater remediation systems for RCRA and
UST projects. Mr. Feiler has a degree in Geology from Miami University and is a
licensed Geologist and a Registered Environmental Manager.
ITEM 6. EXECUTIVE COMPENSATION
Al Keyser has received no compensation for serving in the capacity of President
and Chief Executive Officer. Mr. Keyser, as "Tenants in the Entireties"
ownership with Victoria Keyser, his wife, is the beneficial owner of 282,500,000
shares of the Company's common stock.
Should the Company become profitable and produce commensurate cash flows from
operations, compensation for Mr. Keyser will be reviewed, modified as
appropriate and approved by the Company's Board of Directors.
It is the responsibility of the Company's officers and its Board of Directors to
determine appropriate compensation programs for key personnel. Such
determination and timing thereof will be based upon such factors as equity
sales, operating cash flows, capital requirements, and other similar factors
incorporated into the Company's business plan.
There are no annuity, pension, or retirement benefits proposed to be paid to
officers, directors, or employees of the Company in the event of retirement at a
normal date pursuant to any presently existing plan provided or contributed to
by the Company, or any of its subsidiaries, if any.
Key Officer and Employee Employment Agreements
As part of the acquisition of Beach Access.Net and related entities, the Company
negotiated employment contracts with the key managers
A five-year employment agreement was signed with Jay Knabb, CEO of Beach
Access.Net, Inc. and the former owner, providing for the following:
o Annual salary of $60,000;
o Options to purchase additional shares of restricted common stock for
$.001 per share as follows (contingent upon certain performance
criteria being met)
o 3,250,000 shares at any time
o 4,000,000 shares beginning January 1, 2001
<PAGE> 25
o 4,000,000 shares beginning January 1, 2002 o 4,000,000 shares
beginning January 1, 2003
o A covenant not to compete for a two-year period in certain, as defined,
businesses.
In connection with the Revcon Technologies, Inc. and Alliance Computer Systems,
LLC acquisitions, Kenneth Borge and Paul Aubin, the former owners respectively,
signed five year employment agreements with Beach Access.Net, Inc. These
agreements provide for the following:
o Annual salaries aggregating $110, 000;
o Options to purchase additional shares of restricted shares of common
stock for $.001 per share as follows: o 1,000,000 restricted shares
contingent upon certain performance criteria associated with mobile
wireless Internet
operation being met;
o 1,000,000 restricted shares contingent upon certain further
performance criteria associated with mobile wireless Internet
operation being met;
o A covenant not to compete for a two-year period in certain, as defined,
businesses.
Through June 30, 2000, the performance criteria associated with the above stock
options had not been met.
Compensation of Directors
All directors will be reimbursed for expenses incurred in attending Board or
committee meetings. Directors do not receive any other compensation from the
Company.
Stock Option Plan and Non-Employee Directors' Plan
No stock option plan, other than stock purchase options negotiated as a
condition of employment for certain key employees, has been set forth, and no
non-employee directors' plan has been instituted. The Company may decide, at a
later date, and reserves the right to, initiate these plans as deemed necessary
by the Board.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain family members of the Company's President own shares of the Company's
common stock as set forth below:
<PAGE> 26
Alpha J. Keyser, President and CEO, is related to the following shareholders:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name # of Shares Relationship Date Acquired
Victoria Keyser 282,500,000 Wife 1992 - 93
</TABLE>
These shares are owned as "Tenants in the Entireties".
ITEM 8. DESCRIPTION OF SECURITIES
The Company's Articles of Incorporation authorizes the issuance of 800,000,000
shares of common stock, $.00001 par value per share, of which 512,890,716 shares
are outstanding as of June 30, 2000 . In March 2000, effective April 15, 2000,
the Company's Board of Directors approved a 100:1 stock split. In conjunction
with this stock split, the par value of the Company's stock was changed to
$.00001.
The Company is not authorized to issue shares of preferred stock. Holders of
shares of common stock are entitled to one vote for each share on all matters to
be voted on by the stockholders. Holders of common stock have no cumulative
voting rights. Holders of shares of common stock are entitled to share ratably
in dividends, if any, as may be declared, from time to time by the Board of
Directors in its discretion, from funds legally available therefor. In the event
of liquidation, dissolution or winding up of the Company, the holders of shares
of common stock are entitled to share, pro rata, all assets remaining after
payment in full of all liabilities.
Holders of common stock have no preemptive rights to purchase the Company's
common stock. There are no conversion rights or redemption or sinking fund
provisions with respect to the common stock. All of the outstanding shares of
common stock are validly issued, fully paid and non-assessable. The Company has
not authorized any Preferred stock, Convertible stock, or Warrants as of the
date of this filing.
Transfer Agent
The transfer agent for the common stock is Florida Atlantic Stock Transfer,
Inc., 7130 Nob Hill Road, Tampa, Florida 33321.
<PAGE> 27
GLOSSARY OF TERMS
The following terms have been defined to provide clarity to the technical
language contained herein.
Acetogenisis
The production of organic acids by acetogenic microorganisms in the
Anaerobic Biofilter (ANBF). The acetogens are a necessary part of the
methanogenic consortium, and produce the organic acids (acetic acid)
and reducing equivalents (H +/- NADH) required by the methanogens for
the production of methyne gas (CH4).
Aerobic Biofilter (ABF)
The aerobic biofilter can be used to treat wastewater streams that
carry waste components (that is, the cause of COD or BOD5) that are
either too complex for anaerobic micro-organisms to metabolize, or are
of too low a concentration to provide effective use of the anaerobic
biofilter (ANBF). The aerobic biofilter (ABF) will produce over ten
times the amount of biosolids (waste activated sludge) that the
anaerobic biofilter (ANBF) produces.
Anaerobic Biofilter (ANBF)
The apparatus used to entrap methanogenic consortia for the process of
treatment or reduction of COD (or BOD5) in wastewaters. For many
industrial wastewaters, the ANBF is the most cost effective system
available to reduce effluent wastewater COD and city surcharges usually
associated with organic-laden wastewater discharge. The ANBF is a form
of wastewater pretreatment, usually reducing waste strength by over
90%.
Biofilter (BF)
The biofilter or biofiltration process provides a dynamic means of
filtering and simultaneously destroying waste components in a liquid
(aqueous) or air stream by entrapped microorganisms on the filter
media. The microorganisms are responsible for the destruction of waste
chemicals and cleaning of the fluid.
Biogas
<PAGE> 28
The mixture of methane (CH4) and carbon dioxide (CO2) produced by
methanogenic consortia, while growing on organic waste components.
Generally, the percentage of CH4 in the mixture is 55-60% in sludge
digesters and 70-90% in ANBF's processing liquid wastes, such as
condensate and still bottoms from waste beer processing.
BOD (Biological Oxygen Demand)
Also called "biochemical oxygen demand", this is a standard way of
describing how much oxygen dissolved in water is consumed by biological
oxidation of the chemical during the stated period of time. The unit
lb/lb indicates the pounds of oxygen consumed by each pound of chemical
during the time stated. When given in percent, the values indicate the
pounds of oxygen consumed by each 100 pounds of chemical during the
time stated. If the percentage is followed by "(theor.)", it indicates
the pounds of oxygen theoretically required to completely oxidize 100
pounds of the chemical.
BOD5 (Biological Oxygen Demand - 5 Day Test)
Commonly used by municipalities to attempt to describe the amount of
oxygen demanding components in a wastewater sample that would be
BIOLOGICALLY OXIDIZABLE. The test is performed using a microbial
inoculum and measuring oxygen uptake over a 5-day incubation period.
BOD5 does not necessarily estimate the COD of a wastewater, but tells
only the demand readily required by microorganisms under the conditions
of the test. It is designed to estimate the "potential" for
eutrophication of a public waterway, should the wastewater be added to
it untreated. BOD5 should not be used directly for treatment process
control. It is generally expressed as mg BOD5 per liter of wastewater.
In many industrial wastewaters, there exists a rough correlation
between BOD5 and COD of about 0.7 in untreated waters. The ratio tends
to drop significantly after treatment.
COD (Chemical Oxygen Demand)
The oxygen equivalent required to completely oxidize chemically all
organic and other oxidizable components of a wastewater sample.
Generally expressed as mg COD per liter of wastewater.
COD Load-rate
<PAGE> 29
The COD load-rate of the ABF is defined as the mass of COD introduced
per unit of biofilter volume per day. It is usually expressed as grams
of COD per liter reactor volume per day. Thus, if 1,000 pounds of COD
were fed to 18,000 gallons of reactor space each day, the load-rate
would be 1,000 lbs./18,000 gallons (454,000 grams/68,130 liters/day) or
0.0555 lbs/gal/day (6.6 grams/liter/day).
Eutrophication ("Good Food")
The addition of wastewaters high in organic and other oxygen demanding
components, e.g. - NH3-N, to natural waterways results in rapid oxygen
depletion of those waters with concomitant fish kill and further
imbalance of the natural ecosystem.
Gram (g)
The mass of one cubic centimeter (cc) of water at Standard Temperature
and Pressure (STP). There are 454 grams in one pound.
Hydraulic Load-rate
The amount of liquid presented to the BF per unit volume per unit time,
e.g. 40,000 gallons / 18,000 gallons reactor volume/day (151,400 liters
/ 68,130 liters/day) would be a hydraulic load-rate of 2.22
gallons/gallon/day (2.22 liters/liter/day). Note: this does not reflect
the organic or COD load-rate, only the liquid in the system. However,
it does determine the retention time of the liquid in the BF.
Hydraulic Retention (HRT)
The HRT is determined by the flow of liquid to the fixed volume of the
BF. If the Hydraulic load-rate is 40,000 gallons/18,000 gallons reactor
volume/day or 2.22 gallons/gallon/day, then 24 hours/2.22 = 10.8 hours
HRT. HRT can also be calculated by inverting the equation: 18,000
gallon reactor volume/40,000 gallons/day x 24 =10.8 hours HRT.
Liter (l)
Metric measure of liquid volume (approximately one (1) quart). There
are 3.785 liters in each U.S. gallon at Standard Temperature and
Pressure (STP).
Methane
Methane gas (CH4) is highly volatile, is the major component of natural
gas and biogas, and contains useful energy.
<PAGE> 30
Methanogenic Consortium
Anaerobic mixtures of a number of species of bacteria that together can
convert complex organic molecules to methane (CH4) and C02. All the
necessary bacterial species are present in active anaerobic sludge from
an anaerobic digester. Proper start-up of an ANBF selects and
strengthens those subcultures necessary to the conversion of components
in a specific wastewater. In this case, ethanol, acetic acid, other
organic acids, sugars, many solvents, small amounts of protein and a
variety of carbohydrates, such as found in beer, soft drinks and
solvents, will be converted.
Milliliter (ml)
1/1,000 of 1.0 liter. Also known and defined as one cubic centimeter
(1 cc). There are 1,000 ml or cc in one liter at Standard Temperature
and Pressure (STP).
Milligram (mg)
1/1,000 of a gram. There are 1,000 grams in one (1) kilogram of mass at
Standard Temperature and Pressure (STP).
pH (Power of the Hydrogenation)
A measure of acidity (pH 0-7) or alkalinity (pH 7-14) of a wastewater
sample. pH is a logarithmic function. Therefore, every decrease of 1.0
unit of pH increases the acidic nature of the solution (H +) by an
order of magnitude (factor of 10).
TOC (Total Organic Carbon)
The direct measure of organic carbon in a wastewater sample. In
industrial wastewaters, there is a correlation of COD to TOC of about
2: 1.
VOC (Volatile Organic Compounds)
Organic (carbon-containing) compounds contributing to air pollution.
<PAGE> 31
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The common stock is currently quoted on the National Daily Quotation Bureau Pink
Sheets operated by The NASDAQ Stock Market, Inc. under the symbol "BIFS." The
following table sets forth the high and low last sale prices for the common
stock for each fiscal quarter, or interim period, in which the common stock has
been publicly traded. These prices do not reflect retail mark-ups, markdowns or
commissions and may not represent actual transactions.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
---------------------------------------------- ----------------- ---------------
Quarter Ended Low High
---------------------------------------------- ----------------- ---------------
---------------------------------------------- ----------------- ---------------
September 30, 1998 $0.050 $0.050
---------------------------------------------- ----------------- ---------------
---------------------------------------------- ----------------- ---------------
December 31, 1998 $0.015 $0.050
---------------------------------------------- ----------------- ---------------
---------------------------------------------- ----------------- ---------------
March 31, 1999 $0.007 $0.040
---------------------------------------------- ----------------- ---------------
---------------------------------------------- ----------------- ---------------
June 30, 1999 $0.005 $0.025
---------------------------------------------- ----------------- ---------------
---------------------------------------------- ----------------- ---------------
September 30, 1999 $0.001 $0.006
---------------------------------------------- ----------------- ---------------
---------------------------------------------- ----------------- ---------------
December 31, 1999 $0.001 $0.005
---------------------------------------------- ----------------- ---------------
---------------------------------------------- ----------------- ---------------
March 31, 2000 $0.007 $0.200
---------------------------------------------- ----------------- ---------------
---------------------------------------------- ----------------- ---------------
June 30, 2000 $0.047 $0.469
---------------------------------------------- ----------------- ---------------
</TABLE>
The quarterly prices have been adjusted to reflect a split of the Company's
stock. In March 2000, effective April 15, 2000, the Company's Board of Directors
approved a 100:1 forward stock split. In conjunction with this stock split, the
par value of the Company's stock was changed from $0.001 to $0.00001.
The Company's shares of common stock are not registered with the U.S. Securities
and Exchange Commission under the Securities Act of 1933, as amended
(hereinafter referred to as the "Act") and are restricted securities with the
exception of 87,500,000 shares issued pursuant to Rule 504, Regulation D.
Since its inception, the Company has not paid cash dividends on its common
stock. It is the present policy of the Company not to pay cash dividends and to
retain future earnings to support the Company's growth. Any payments of cash
dividends in the future will be dependent upon, among other things, the amount
of funds available therefor, the Company's earnings, financial condition,
capital requirements, and other factors which the Board of Directors deems
relevant.
As of June 30, 2000, there were approximately 93 shareholders of common stock of
record.
<PAGE> 32
ITEM 2. LEGAL PROCEEDINGS
The Company is not presently a party to any litigation nor to the knowledge of
management is any litigation threatened against the Company which would
materially affect the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There are no changes in or disagreements with accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Private Placements
On March 31, 1999, the Company entered into a cancelable special services
agreement with The Baldridge Company, an unrelated active participation
investor. Pursuant to this agreement, Baldridge was to 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. This was the only stage exercised by Baldridge.
On or about September 1, 1999, the Company was delisted from the OTCBB.
Baldridge decided at that time not to continue purchasing the stock as agreed
and defaulted on the contract. The Company notified Baldridge of the default and
gave the required ten-day notice as specified in the contract.
Subsequently, the Company reduced the subscription price on the remaining
62,500,000 shares to $0.005 per share. In the accompanying financial statements
the stock subscription receivable was adjusted to reflect the revised
subscription price.
On March 4, 2000, the Company entered into an agreement with Harding Asset
Funds, Inc. to purchase the remaining 62,500,000 shares for $0.005 or a total of
$312,500. Harding was one of the original partners with Baldridge.
<PAGE> 33
The active participation investor is not a "beneficial owner" under this
definition as the purpose is to resell the stock. The active participation
investor is defined for the Company under the following terms:
"WHEREAS, the Company desires to be assured of the association and services
of the Active Participation Investor in order to avail itself of the Active
Participation Investor's consulting experience, skills, abilities, background
and knowledge to facilitate long range planning and to execute the Company's
stock marketing needs in an orderly and efficient manner; the Company is
therefore willing to engage the Active Participation Investor upon the terms
and conditions herein contained:
WHEREAS, the Active Participation Investor agrees to be engaged and retained
by the Company in accordance with the following terms and conditions.
NOW, THEREFORE, in consideration of the recitals, promises and conditions
contained herein, the Active Participation Investor and the Company agrees as
follows:
THE ACTIVE PARTICIPATION INVESTOR OFFERS THE FOLLOWING CONSULTING SERVICES:
o Will arrange a Public Relations Program
o Will write and design a color PR Research Report.
o Will introduce the company to the Active Participation Investor's
network of brokers. These brokers have been identified as ones that
will recommend emerging growth companies in the Bulletin Board Market.
o Will distribute leads to brokers.
o Will qualify and track all leads.
o Will add sufficient Market Makers
o Will make our toll-free number available."
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Chapter 607 of the Florida Statutes provides for the indemnification of officers
and directors under certain circumstances against expenses incurred in
successfully defending against a claim and authorizes Florida corporations to
indemnify their officers and directors under certain circumstances against
expenses and liabilities incurred in legal proceedings involving such persons
because of their being or having been an officer or director.
<PAGE> 34
Section 607.0850 of the Florida Statutes permits a corporation, by so providing
in its certificate of incorporation, to eliminate or to limit a director's
liability to the corporation and its stockholders for monetary damages arising
out of certain alleged breaches of their fiduciary duty. Section 607.0850
provides that no such limitation of liability may affect a director's liability
with respect to any of the following: (I) breaches of the director's duty of
loyalty to the corporation or its stockholders; (ii) acts or omissions not made
in good faith or which involve intentional misconduct of knowing violations of
law; (iii) liability for dividends paid or stock repurchased or redeemed in
violation of the Florida General Corporation Law; or (iv) any transaction from
which the director derived an improper personal benefit. Section 607 does not
authorize any limitation on the ability of the corporation or its stockholders
to obtain injunctive relief, specific performance or other equitable relief
against directors.
Article IX of the Company's Articles of Incorporation and the Company's By-laws
provide that all persons who the Company is empowered to indemnify pursuant to
the provisions of Section 607 of the Corporation laws of the State of Florida
(or any similar provision or provisions of applicable law at the time in
effect), shall be indemnified by the Company to the fullest extent permitted
thereby. The foregoing right of indemnification is not deemed to be exclusive of
any other rights to which those seeking indemnification may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors, or
otherwise.
Article IX of the Company's Articles of Incorporation provides that no director
of the Company will be personally liable to the Company or its stockholders; (i)
for any monetary damages for breaches of fiduciary duty of loyalty to the
Company or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) under
Section 607 of the Florida Statutes, or (iv) for any transaction from which the
director derived an improper personal benefit.
PART F/S
FINANCIAL STATEMENTS
The audited financial statements of the Company, prepared by Semago & Company,
P.A., Certified Public Accountants, 102 W. Whiting Street, Suite 600, Tampa,
Florida 33602, required by Regulation S-X commence on page F/S 1 hereof in
response to this Item of this Registration Statement on Form 10-SB and are
incorporated herein by this reference. As of August 14, 2000, Semago & Company,
P.A. will change their name and address as follows: B2d Semago, 601 N. Ashley
Drive, Suite 700, Tampa, Florida 33602.
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
<PAGE> 35
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1 - 2
FINANCIAL STATEMENTS
BALANCE SHEETS 3 - 4
STATEMENTS OF OPERATIONS 5
STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY 6 - 10
STATEMENTS OF CASH FLOWS 11 - 12
NOTES TO FINANCIAL STATEMENTS 13 - 22
<PAGE> 36
To the Stockholders
Biofiltration Systems, Inc.
(a development stage company)
Sarasota, Florida
Independent Auditors' Report
We have audited the accompanying balance sheets of Biofiltration Systems, Inc.
(a development stage company) as of December 31, 1999 and 1998, and the related
statements of operations and cash flows cumulative since inception (December 17,
1992) and for the years then ended and the statements of changes in
stockholders' equity for the period from inception (December 17, 1992) to
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Biofiltration Systems, Inc. (a
development stage company) as of December 31, 1999 and 1998, and the results of
its operations and cash flows cumulative since inception (December 17, 1992) and
for the years then ended and the statements of changes in stockholders' equity
for the period from inception (December 17, 1992) to December 31, 1999, in
conformity with generally accepted accounting principles.
<PAGE> 37
As described in Note I, the accompanying financial statements have been restated
to reflect a change in the recorded cost of a patent acquired from a related
company and the related amortization and in accounting for imputed interest
related to shareholder notes payable. Also, described in Note I, these financial
statements have been retroactively restated to reflect a 100:1 stock split
approved in March 2000, effective April 15, 2000.
CERTIFIED PUBLIC ACCOUNTANTS Tampa, Florida March 1, 2000, except for Note I
which is dated
May 25, 2000
<PAGE> 38
<TABLE>
<CAPTION>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
<S> <C> <C>
1999 1998
--------- ---------
CURRENT ASSET - CASH $ 6 $ 9,120
--------- ---------
OFFICE EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION
OF $675 2,702 -
--------- ---------
OTHER ASSETS
Patent, net of accumulated
amortization of $18,868
and $14,784 in 1999 and
1998, respectively 42,205 46,289
Prepaid sales commissions
to related company 465,910 465,910
Other 2,728 2,848
-------- ---------
510,843 515,047
--------- ---------
$ 513,551 $ 524,167
========= =========
</TABLE>
The accompanying notes to financial
statements are an integral part of these
statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
----------- ---------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 16,607 $ 12,192
Accrued expenses 23,231 1,891
Current portion of related
party notes payable 51,214 -
----------- ---------
TOTAL CURRENT LIABILITIES 91,052 14,083
----------- ---------
LONG-TERM LIABILITIES
Stockholder notes payable 348,900 348,900
Related party notes payable,
less current portion 61,073 106,973
----------- ---------
409,973 455,873
----------- ---------
COMMITMENTS AND CONTINGENCIES - -
----------- ---------
STOCKHOLDERS' EQUITY
Common stock, $.00001 par value, 700,000,000 shares authorized, 420,910,000
and 395,910,000 shares issued and 414,160,000 and 386,660,000 shares
out- standing at December 31, 1999 and December 31, 1998,
respectively 4,209 3,959
Common stock, 62,500,000 shares
subscribed 312,500 -
Stock subscription receivable ( 312,500) -
Additional paid-in capital 1,769,118 812,091
(Deficit) accumulated during
development stage (1,625,801) (576,839)
----------- ---------
147,526 239,211
Less treasury stock, at cost ( 135,000) (185,000)
----------- ---------
12,526 54,211
----------- ---------
$ 513,551 $ 524,167
=========== =========
</TABLE>
The accompanying notes to financial
statements are an integral part of these
statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
STATEMENTS OF OPERATIONS
------------------------
CUMULATIVE AND FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
---- ---------------------------
Cumulative
during
development
stage 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $ 2,000 $ - $ 2,000
----------- ----------- -----------
EXPENSES
Interest 192,344 49,870 39,738
Professional fees 144,225 105,051 29,748
Telephone and utilities 19,060 9,663 8,477
Depreciation and amortization 19,543 4,759 4,084
Rent 25,723 13,616 8,897
Office expenses 31,098 16,365 11,239
Stock promotion expenses 1,127,500 812,500 315,000
Miscellaneous 68,308 37,138 27,132
----------- ----------- -----------
1,627,801 1,048,962 444,315
----------- ----------- -----------
NET LOSS BEFORE PROVISION
FOR INCOME TAXES (1,625,801) (1,048,962) ( 442,315)
PROVISION FOR INCOME
TAXES - - ( 21,750)
----------- ----------- -----------
NET LOSS $(1,625,801) $(1,048,962) $(464,065)
=========== =========== ===========
NET LOSS PER COMMON
SHARE $(.0046) $(.0023) $(.0012)
=========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING (shares
in 100's) 3,530,856 4,495,796 3,843,193
=========== =========== ===========
</TABLE>
The accompanying notes to financial
statements are an integral part of these
statements.
-5-
<PAGE>
<TABLE>
<CAPTION>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
STATEMENTS OF CASH FLOWS
------------------------
CUMULATIVE AND FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
---- ---------------------------
Cumulative
during
development
stage 1999 1998
----------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 2,000 $ - $ 2,000
Cash paid for expenses (187,035) (89,798) ( 74,371)
Cash paid for interest ( 6,616) ( 6,253) ( 363)
--------- -------- ---------
Net cash used by
operations (191,651) (96,051) ( 72,734)
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Advances to related company (453,410) - ( 23,750)
Purchase of office equipment ( 3,377) ( 3,377) -
--------- -------- ---------
Net cash used by investing
activities (456,787) ( 3,377) ( 23,750)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common
stock 150,960 - 34,700
Contributions of additional
paid-in capital 67,050 - -
Collections on due from
stockholders 37,500 - 25,000
Collections on stock subscription
receivable 320 62,500 -
Proceeds from related party
notes payable 51,214 5,314 45,900
Proceeds from stockholder
notes payable 318,900 - -
Other 22,500 22,500 -
--------- -------- ---------
Net cash provided by
financing activities 648,444 90,314 105,600
--------- -------- ---------
NET INCREASE (DECREASE) IN CASH 6 ( 9,114) 9,116
CASH, BEGINNING OF PERIOD - 9,120 4
--------- -------- ---------
CASH, END OF PERIOD $ 6 $ 6 $ 9,120
========= ======== =========
</TABLE>
The accompanying notes to financial
statements are an integral part of these
statements.
-11-
<PAGE>
<TABLE>
<CAPTION>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
STATEMENTS OF CASH FLOWS
------------------------
CUMULATIVE AND FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
---- ---------------------------
Cumulative
during
development
stage 1999 1998
----------- ----------- ---------
<S> <C> <C> <C>
RECONCILIATION OF NET LOSS TO
CASH FLOWS FROM OPERATING ACTIVITIES
NET LOSS $(1,625,801) $(1,048,962) $(464,065)
RECONCILING ADJUSTMENTS
Provision for income taxes - - 21,750
(Increase) decrease in other
assets ( 2,728) 120 ( 1,070)
Depreciation and amortization 19,543 4,759 4,084
Increase in accounts payable 16,607 4,415 12,192
Increase in accrued expenses 731 ( 1,160) -
Stock issued in lieu of interest 866 - -
Stock issued for expenses 1,400,000 900,000 500,000
Treasury stock acquired by way
of reduction of expenses ( 185,000) - (185,000)
Contribution of accrued interest
to paid-in capital 184,131 44,777 39,375
----------- ---------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES $( 191,651) $( 96,051) $( 72,734)
=========== =========== =========
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 $ 61,073 $ - $ -
=========== =========== =========
DECREASE IN ACCRUED INTEREST
PAYABLE THROUGH CONTRIBUTION
TO PAID-IN CAPITAL $ 184,131 $ 44,777 $ 49,337
=========== =========== ========
</TABLE>
The accompanying notes to financial
statements are an integral part of these
statements.
-12-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1999 AND 1998
--------------------------
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 wastewater. It is
management's intention to sell or lease these systems to customers worldwide.
Company offices are located in Sarasota, Florida.
For the period from inception (December 17, 1992) to December 31, 1999, 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. As such, the accompanying financial statements
have been prepared in accordance with Financial Accounting Standards Board
Statement No. 7, Accounting and Reporting by Development Stage Enterprises.
Revenue recognition
Revenues will be recognized on the accrual basis of accounting or in accordance
with provisions of Financial Accounting Standards Board Statement No. 13,
Accounting for Leases.
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
which represents the predecessor related company's development cost less
predecessor amortization. The patent is being amortized over its useful life,
currently estimated at 14 years.
For each of the years ended December 31, 1999 and 1998, patent amortization
amounted to $4,084.
Impairment of long-lived assets
Long-lived assets, including intangibles, are periodically reviewed for
impairment when events or changes in circumstances indicate the carrying amount
of an asset may not be recoverable.
The amount of an impairment loss is measured as the excess of the carrying
amount of the asset over the fair value of the asset.
-13-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1999 AND 1998
--------------------------
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
Stock issue and promotion expenses
Costs associated with the offering of the Company's common stock to outside
investors will be capitalized. Such costs will be offset against the future
proceeds on sale of the stock. Offering costs incurred that have not resulted in
sales of stock have been expensed to stock promotion expense in the accompanying
financial statements (see Note F).
Sales commissions pursuant to a national sales agreement
Pursuant to a national sales agreement, the Company will pay sales commissions
to a related company (see note B). As sales and lease revenues are generated,
commission expense will be recognized at a rate of 30% in accordance with the
terms of the agreement on the accrual basis of accounting.
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
bases. 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.
-14-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1999 AND 1998
--------------------------
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Loss per common share
Loss per common share is computed using the weighted average 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 statement 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.
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 December 31,
1999 and 1998, this related company has received $465,910 against future sales
commissions.
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.
As noted above, these notes are non-interest bearing. However, from time-to-time
the Company has issued common stock as consideration for the non-interest
bearing notes. The stock and associated interest has been valued at the stock's
par value.
-15-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1999 AND 1998
--------------------------
NOTE C - STOCKHOLDER NOTES PAYABLE (continued)
Stockholder notes and shares of stock issued for interest amounted to the
following:
<TABLE>
<CAPTION>
Common stock
Stockholder Par
Period of issue notes value Shares
---------------------------- ----------- ------ -------
(In 100's)
<S> <C> <C> <C>
Year ended December 31, 1993 $ 102,500 $ 250 250,000
Year ended December 31, 1994 66,400 216 216,000
Year ended December 31, 1995 80,000 200 200,000
Year ended December 31, 1996 40,000 75 75,000
Year ended December 31, 1997 60,000 125 125,000
--------- ----- -------
$ 348,900 $ 866 866,000
========= ===== =======
</TABLE>
Subsequent to December 31, 1999, the Company has imputed additional interest on
these notes (see Note I).
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 December 31, 1999, the Company's majority stockholders have agreed to
assume the liability for the interest accrued on the above note through December
31, 1999. This assumption of the liability has been recorded as a contribution
to additional paid-in capital in the accompanying financial statements.
Subsequent to December 31, 1999, the Company restated the value of the patent
and adjusted the related party note payable (see Note I).
Additionally, the related corporation described above has advanced money 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 December 31, 1999 and 1998, amounts outstanding on this note
payable are $51,214 and $45,900, respectively.
-16-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1999 AND 1998
--------------------------
NOTE E - INCOME TAXES
At December 31, 1999 and 1998, the provision for income taxes consist of the
following:
1999 1998
----------- ---------
Deferred tax benefit $ 390,000 $ 170,000
Less valuation allowance (390,000) (191,750)
----------- ---------
$ - $( 21,750)
=========== =========
The valuation allowance has been provided by the management of the Company. This
is due to the uncertainty of the realization of the future benefit of the
deferred tax assets.
For the years ended December 31, 1999 and 1998, the following temporary
differences give rise to the above deferred tax benefits:
<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
Net operating costs expensed
for financial accounting purposes
but capitalized for tax purposes $ 1,048,962 $ 442,315
=========== =========
For the years ended December 31, 1999 and 1998, a reconciliation of the income
tax benefit at statutory rates to the Company's effective rate is as follows:
1999 1998
----------- ---------
Benefit computed at statutory rates 39.5% 39.5%
Less surtax exemption - ( .9%)
Less valuation allowance on deferred
tax assets (39.5%) ( 43.5%)
----------- ---------
Benefit computed at effective rate $ - $( 4.9%)
=========== =========
</TABLE>
-17-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1999 AND 1998
--------------------------
NOTE E - INCOME TAXES (continued)
At December 31, 1999 and 1998, deferred tax assets consist of the following:
1999 1998
----------- ---------
Deferred tax assets $ 610,000 $ 210,000
Less valuation allowance (610,000) (210,000)
----------- ---------
$ - $ -
=========== =========
At December 31, 1999, the Company has no tax net operating losses available for
carryforward.
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 (see Note G). The fair value of
the shares issued, less the treasury stock, of $315,000 has been recorded as
stock promotion expenses for the year ended December 31, 1998.
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 $.25 to $2.00 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 $.50 per share. In the accompanying financial statements
the stock subscription receivable was adjusted to reflect the revised
subscription price.
-18-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1999 AND 1998
--------------------------
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 of the Company that
these shares be held for future issuance to new investors or for future services
to be provided.
During 1999, the Company issued 2,500,000 shares of treasury stock, at cost, for
services rendered.
NOTE H - 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
practicable 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 December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
Carrying Fair Carrying Fair
amount value amount value
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Financial assets
Cash $ 6 $ 6 $ 9,120 $ 9,120
========= ======== ========= ========
Prepaid sales
commissions to
related company $ 465,910 $ (C) $ 465,910 $ (C)
========= ======== ========= ========
Financial liabilities
Accounts payable and
accrued expenses $ 39,838 $ 39,838 $ 14,083 $ 14,083
========= ======== ======== ========
Stockholder notes
payable $ 348,900 $ (B) $ 348,900 $ (B)
========= ======== ========= ========
Related party notes
payable $ 112,287 $ (A) $ 106,473 $ (A)
========= ======== ========= ========
</TABLE>
The carrying values of cash and accounts payable approximate their fair values.
-19-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1999 AND 1998
--------------------------
NOTE H - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
(A) The fair value of related party notes payable are not determinable.
Due to the involvement of the related party, no stated interest rate
and no specific repayment date, it is impracticable to estimate the
fair value of these financial instruments.
(B) The fair value of the stockholder notes are not determinable because
they are non-interest bearing and have no specified repayment date.
Therefore, it is impracticable to estimate the fair market value of
stockholder notes payable.
(C) The fair value of prepaid sales commissions to related company are not
determinable because they have no specified repayment date. Therefore,
it is impracticable to estimate the fair value of prepaid sales
commissions.
NOTE I - RESTATEMENT
In April 1993, the Company purchased for $470,000, a patent from a related
company. This amount was considered to approximate fair market value. The patent
was acquired by way of a $470,000 note payable to this related company.
Amortization of the patent cost was intended to commence when Company operations
commenced. In accordance with rules promulgated by the Securities and Exchange
Commission, this patent should be recorded at the predecessor related company's
development cost. Company management has agreed to reduce the patent's cost to
$61,073, the related company's development cost, less predecessor amortization.
The related company has also agreed to reduce the purchase note payable a
corresponding amount. In addition, the Company has revised its accounting policy
to begin amortizing this patent over its useful life beginning in the month of
acquisition.
Subsequent to December 31, 1999, in order to more correctly reflect interest
expense, Company management decided to impute interest on stockholder notes
payable at an average annual prime rate plus 1.0%. These notes are non-interest
bearing. The Company had issued common stock from time-to-time as consideration
for these non-interest bearing notes. The par value of the stock issued was
originally recorded as interest expense. The difference between the interest
expense imputed and the par value of the common stock issued has been recorded
as additional paid-in capital.
In a separate and unrelated matter, the Company entered into a 100:1 common
stock split, approved in March 2000, effective April 15, 2000, and increased the
Company's authorized common stock to 800,000,000 shares. The accompanying
financial statements have been restated to reflect the stock split.
-20-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1999 AND 1998
--------------------------
NOTE I - RESTATEMENT (continued)
Summarized financial information illustrating the restatement on the Company's
financial statements is as follows:
<TABLE>
<CAPTION>
From Inception
--------------------------
As originally
reported As restated
<S> <C> <C>
Results of operations -
Operating expenses -
Interest $ 171,427 $ 192,344
=========== ===========
Patent amortization $ - $ 18,868
=========== ===========
Net loss $(1,586,016) $(1,625,801)
=========== ===========
Net loss per common share $ (.0045) $ (.0046)
=========== ===========
1999
As originally
reported As restated
Financial position -
Total assets $ 941,346 $ 513,551
=========== ===========
Total liabilities $ 910,147 $ 501,025
=========== ===========
Stockholders' equity $ 31,199 $ 12,526
=========== ===========
Results of operations -
Operating expenses -
Interest $ 40,343 $ 49,870
=========== ===========
Patent amortization $ - $ 4,084
=========== ===========
Net loss $(1,035,351) $(1,048,962)
=========== ===========
Net loss per common share $ (.0023) $ (.0023)
=========== ===========
</TABLE>
-21-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1999 AND 1998
--------------------------
NOTE I - RESTATEMENT (continued)
<TABLE>
<CAPTION>
1998
As originally
reported As restated
<S> <C> <C>
Financial position -
Total assets $ 947,878 $ 524,167
=========== ===========
Total liabilities $ 879,078 $ 469,956
=========== ===========
Stockholders' equity $ 68,800 $ 54,211
=========== ===========
Results of operations -
Operating expenses -
Interest $ 37,699 $ 39,738
=========== ===========
Patent amortization $ - $ 4,084
=========== ===========
Net loss $( 457,942) $( 464,065)
=========== ===========
Net loss per common share $ (.0012) $ (.0012)
=========== ===========
</TABLE>
The auditors' report on previously issued December 31, 1999, financial
statements raised substantial doubt as to the Company's ability to continue as a
going concern. Subsequently, the Company has been able to raise sufficient
capital to maintain and continue operations. As such, the auditors report on the
restated financial statements as of December 31, 1999, has been modified such
that it no longer raises substantial doubt as to the Company's ability to
continue as a going concern.
-22-
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
MARCH 31, 2000
<PAGE>
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 - 17
<PAGE>
To the Board of Directors
Biofiltration Systems, Inc.
Sarasota, Florida
Independent Accountants' Report
We have reviewed the accompanying consolidated balance sheet of Biofiltration
Systems, Inc. as of March 31, 2000, and the related consolidated statements of
operations and cash flows for the three months ended March 31, 2000. These
financial statements are the representation of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. 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 information furnished to us by management, we believe certain
disclosures required under generally accepted accounting principles have been
omitted as permitted under Rule 10-01(a) of Regulation S-X of the Securities and
Exchange Commission for financial statements filed with form 10-QSB. These
regulations presume the users of interim financial statements have read the
latest form 10-KSB which include all disclosures required by generally accepted
accounting principles. The accompanying interim financial statements disclose
only material transactions, uncertainties, commitments, contingencies or
subsequent events.
As described in Note F, the accompanying financial statements have been restated
to reflect a change in the recorded cost of a patent acquired from a related
company and the related amortization and in accounting for imputed interest
related to shareholder notes payable that were issued for stock in lieu of
interest.
Based on our review, with the exceptions of the matters described in the
preceding paragraph, 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.
<PAGE>
The accompanying statement of operations and cash flows of Biofiltration
Systems, Inc. for the three months ended March 31, 1999, were not audited or
reviewed by us and, accordingly, we do not express an opinion on them.
CERTIFIED PUBLIC ACCOUNTANTS
Tampa, Florida
August 10, 2000
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 2000
ASSETS
CURRENT ASSET - CASH $ 222,826
-----------
OFFICE EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION
OF $945 2,432
-----------
OTHER ASSETS
Patent, net of accumulated
amortization of $19,889 41,184
Prepaid sales commissions
to related company 505,910
Stock advances to related company 580,500
Stock advances on related company
employment agreement 270,000
Other 2,728
-----------
1,400,322
$1,625,580
The accompanying notes to financial statements
are an integral part of these statements.
-3-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 7,965
Accrued expenses 24,361
Current portion of related
party notes payable 57,960
-----------
TOTAL CURRENT LIABILITIES 90,286
-----------
LONG-TERM LIABILITIES
Stockholder notes payable 348,900
Related party notes payable,
less current portion 61,073
-----------
409,973
COMMITMENTS AND CONTINGENCIES -
-----------
STOCKHOLDERS' EQUITY
Common stock, $.00001 par value,
700,000,000 shares authorized,
496,010,000 shares issued and
489,260,000 shares outstanding 4,960
Additional paid-in capital 2,940,954
(Deficit) accumulated during
development stage (1,685,593)
-----------
1,260,321
Less treasury stock, at cost (135,000)
-----------
1,125,321
$1,625,580
The accompanying notes to financial statements
are an integral part of these statements.
-4-
<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
----------- ----------- -----------
REVENUES $ 2,000 $ - $ -
----------- ----------- -----------
<S> <C> <C> <C>
EXPENSES
Interest 203,484 11,140 10,157
Professional fees 174,009 29,784 140
Telephone and utilities 21,889 2,829 960
Depreciation and amortization 20,834 1,291 1,021
Rent 29,123 3,400 3,210
Office expenses 37,646 6,548 5,724
Stock promotion expenses 1,127,500 - -
Miscellaneous 73,108 4,800 2,919
----------- ----------- -----------
1,687,593 59,792 24,131
----------- ----------- ---------
NET LOSS BEFORE PROVISION
FOR INCOME TAXES (1,685,593) (59,792) (24,131)
PROVISION FOR INCOME
TAXES - - -
----------- ----------- -----------
NET LOSS $(1,685,593) $ (59,792) $ (24,131)
=========== =========== ===========
NET LOSS PER COMMON
SHARE $(.0047) $(.0001) $(.0001)
=========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING (in
hundred's) 3,571,844 4,210,500 3,968,822
=========== =========== =========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
-5-
<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
----------- --------- --------
<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>
The accompanying notes to financial statements
are an integral part of these statements.
-12-
<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
----------- --------- --------
<S> <C> <C> <C>
RECONCILIATION OF NET LOSS TO
CASH FLOWS FROM OPERATING ACTIVITIES
NET LOSS $(1,685,593) $( 59,792) $(24,131)
RECONCILING ADJUSTMENTS
Increase in other assets ( 2,728) - ( 202)
Depreciation and amortization 20,834 1,291 1,021
(Decrease) increase in accounts
payable 7,965 ( 8,642) 3,380
Increase (decrease) in accrued
expenses 1,861 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 193,698 9,567 8,819
----------- --------- --------
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 $ 61,073 $ - $ -
=========== ========= ========
DECREASE IN ACCRUED INTEREST
PAYABLE THROUGH CONTRIBUTION
TO PAID-IN CAPITAL $ 193,523 $ 9,587 $ 8,819
=========== ========= ========
ISSUE OF STOCK FOR ADVANCE TO
RELATED COMPANY $ 580,500 $ 580,500 $ -
=========== ========= ========
ISSUE OF STOCK FOR ADVANCE ON
EMPLOYMENT AGREEMENT $ 270,000 $ 270,000 $ -
=========== ========= ========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
-13-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
The information presented herein as of March 31, 2000, and for the three months
ended March 31, 2000 and 1999, is unaudited.
NOTE A - BASIS OF PRESENTATION
The accompanying consolidated financial statements of Biofiltration Systems,
Inc. (the Company) have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to the Securities and Exchange Commission's Form 10-QSB and item
310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal required adjustments) considered necessary for a fair
presentation have been included.
Operating results for the three month period ended March 31, 2000, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000. For further information, refer to the December 31, 1999
financial statements and footnotes included in the Company's initial
registration statement with the Securities and Exchange Commission.
NOTE B - NET LOSS PER COMMON SHARE
Net loss per common share is computed in accordance with the requirements of
Statement of Financial Accounting Standards No. 128 Earnings Per Share.
NOTE C - STOCK SPLIT
In March 2000, effective April 15, 2000, the Company's Board of Directors
approved a 100:1 stock split. In conjunction with this stock split, the par
value of the Company's stock was changed to $.00001.
All shares disclosed in the accompanying financial statements reflect the effect
of the 100:1 stock split.
NOTE D - STOCK ADVANCES
As noted below, the Company acquired all of the common stock of Beach
Access.Net, Inc. on April 1, 2000. On March 31, 2000, the Company advanced Beach
Access.Net, Inc. 8,600,000 of restricted common stock for purchase of business
assets and customer bases. At March 31, 2000, the value of this advance has been
computed at the stock's fair market value, less a 50% discount because of its
restricted nature.
Further, as noted below, subsequent to March 31, 2000, Beach Access.Net, Inc.
issued 8,000,000 shares of restricted and unrestricted shares of Company common
stock as a signing bonus and additional compensation. At March 31, 2000, the
Company advanced 2,000,000 shares of this arrangement to the former owner of
Beach Access.Net, Inc. The value of this advance has been computed at the
stock's fair market value.
Subsequent to March 31, 2000, the stock advances described above were converted
to investment in Beach Access.Net, Inc.
NOTE E - SUBSEQUENT EVENTS
Effective April 1, 2000, the Company purchased all of the outstanding stock of
Beach Access.Net, Inc., an internet service provider located in South Carolina.
The purchase price was 1,750,000 unrestricted shares of the Company's common
stock. This business combination was accounted for as a purchase.
-14-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE E - SUBSEQUENT EVENTS (continued)
In connection with this purchase, the Company recorded $226,010 of goodwill
which is being amortized over five years.
In connection with the initial acquisition of Beach Access.Net, Inc. the Company
invested 8,600,000 shares of restricted common stock in Beach Access.Net, Inc.
to acquire other related business assets and operations. These business
combinations were accounted for as purchases. In connection with these
acquisitions, goodwill of $279,896, was recorded by Beach Access.Net, Inc.
Included in the above acquisitions was an investment the Company was unable to
realize. A loss on disposal of $121,500 was recorded during the quarter ended
June 30, 2000.
Additionally, another of the acquired entities was operated for a short period
of time before management decided to discontinue its operation. From its
acquisition date through June 30, 2000, this entity had operating losses of
$109,200. At June 30, 2000, the Company accrued an additional $149,040 for
estimated additional costs associated with this disposal.
In connection with the acquisition of Beach Access.Net, Inc., the Company issued
to the former owner and certain employees of Beach Access.Net, Inc. 8,000,000
shares of unrestricted and restricted common stock as a signing bonus and
additional compensation.
Further, a five year employment agreement was signed with the former owner
providing for the following:
<PAGE>
- annual salary of $60,000;
- options to purchase shares of common stock for $.001 per share as follows
(contingent upon certain performance criteria being met):
<PAGE>
- 3,250,000 shares at any time
- 4,000,000 shares beginning January 1, 2001
- 4,000,000 shares beginning January 1, 2002
- 4,000,000 shares beginning January 1, 2003
- a covenant not to compete for a two year period in certain, as defined,
businesses.
The stock issued as a signing bonus and additional employee compensation have
been recorded at the stock's fair market value as of April 1, 2000, less a 50%
discount on certain shares because of their restricted nature. For the three
months ended June 30, 2000, employee compensation of $675,000 has been recorded
to reflect the issuance of these shares.
In May 2000, Beach Access.Net, Inc. acquired all of the common stock of
Revcon Technologies, Inc. and Alliance Computer Systems, LLC. These business
combinations were accounted for as a purchase. Both of these companies provide
networking, programming and wireless connectivity services. The purchase price
for both was 1,000,000 shares of restricted common stock. In connection with
these purchases, Beach Access.Net, Inc. recorded assets in excess of the
purchase price of $102,479, which is being amortized over five years.
-15-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE E - SUBSEQUENT EVENTS (continued)
In connection with the Revcon Technologies, Inc. and Alliance Computer Systems,
LLC acquisitions, the former owners signed five year employment agreements with
Beach Access.Net, Inc. These agreements provide for the following:
<PAGE>
- annual salaries aggregating $110,000;
- options to purchase shares of common stock for $.001 per share as follows:
- 1,000,000 restricted shares contingent upon certain performance criteria
associated with mobile wireless internet operation being met;
- 1,000,000 restricted shares contingent upon certain further performance
criteria associated with mobile wireless internet operation being met;
- a covenant not to compete for a two year period in certain, as defined,
businesses.
In April 2000, Beach Access.Net, Inc. acquired the rights to provide internet
access for twelve months to approximately 1,300 customers. The cost for these
rights was 3,200,000 shares of restricted common stock. Terms of the agreements
provide for monthly service fees of $20,000.
The purchase of these customers has been recorded at the fair market value of
stock issued, less a 50% discount because of the restricted nature of the stock.
The cost of the purchase is being amortized over twelve months.
On August 1, 2000, certain of the above agreements were modified. The
modification provided for an additional 180,000 shares of restricted stock to be
issued for the right to provide internet services to the same customers.
NOTE F - RESTATEMENT
In April 1993, the Company purchased for $470,000, a patent from a related
company. This amount was considered to approximate fair market value. The patent
was acquired by way of a $470,000 note payable to this related company.
Amortization of the patent cost was intended to commence when Company operations
commenced. In accordance with rules promulgated by the Securities and Exchange
Commission, this patent should be recorded at the predecessor related company's
development cost. Company management has agreed to reduce the patent's cost to
$61,073, the related company's development cost, less predecessor amortization.
The related company has also agreed to reduce the purchase note payable a
corresponding amount. In addition, the Company has revised its accounting policy
to begin amortizing this patent over its useful life beginning in the month of
acquisition.
Subsequent to December 31, 1999, in order to more correctly reflect interest
expense, Company management decided to impute interest on stockholder notes
payable at an average annual prime rate plus 1.0%. These notes are non-interest
bearing. The Company had issued common stock from time-to-time as consideration
for these non-interest bearing notes. The par value of the stock issued was
originally recorded as interest expense. The difference between the interest
expense imputed and the par value of the common stock issued has been recorded
as additional paid-in capital.
At March 31, 2000, the Company had advanced 8,600,000 and 2,000,000 shares to
Beach Access.Net, Inc. and the former owner of Beach Access.Net, Inc.,
respectively (see Note D). The value originally assigned to these advances was
the stock's par value. Subsequently, Company management decided to revalue these
advances to an amount more reflective of the stocks fair market value.
-16-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE F - RESTATEMENT (continued)
Summarized financial information illustrating the restatement on the Company's
financial statements is as follows:
From inception
----------------------------
As originally
reported As restated
---------- --------------
Results of operations -
Interest $ 181,813 $ 203,484
=========== ===========
Patent amortization $ - $ 19,889
=========== ===========
Net loss $(1,644,033) $(1,685,593)
=========== ===========
Net loss per common share $ (.0046) $ (.0047)
=========== ===========
Three months ended
March 31, 2000
----------------------------
As originally
reported As restated
---------- ----------
Financial position -
Assets $ 1,204,002 $ 1,625,580
=========== ===========
Liabilities $ 909,381 $ 500,259
=========== ===========
Stockholders' equity $ 294,621 $ 1,125,321
=========== ===========
Results of operations -
Interest $ 10,386 $ 11,140
=========== ===========
Patent amortization $ - $ 1,021
=========== ===========
Net loss $( 58,017) $( 59,792)
=========== ===========
Net loss per common share $ (.0001) $( .0001)
=========== ===========
Three months ended
March 31, 1999
----------------------------
As originally As restated
reported
------------ ------------
Results of operations -
Interest $ 10,191 $ 10,157
=========== ===========
Patent amortization $ - $ 1,021
=========== ===========
Net loss $( 23,144) $( 24,131)
=========== ===========
Net loss per common share $( .0001) $( .0001)
=========== ===========
-17-
BIOFILTRATION SYSTEMS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
<PAGE>
BIOFILTRATION SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
JUNE 30, 2000
CONTENTS
Page
CERTIFIED PUBLIC ACCOUNTANTS' REVIEW REPORT 1 - 2
FINANCIAL STATEMENTS
BALANCE SHEET 3 - 4
STATEMENTS OF OPERATIONS 5
STATEMENTS OF CASH FLOWS 6 - 7
NOTES TO FINANCIAL STATEMENTS 8 - 10
<PAGE>
To the Board of Directors
Biofiltration Systems, Inc.
Sarasota, Florida
Independent Accountants' Report
We have reviewed the accompanying consolidated balance sheet of Biofiltration
Systems, Inc. as of June 30, 2000, and the related consolidated statements of
operations and cash flows for the three and six months ended June 30,2000. These
financial statements are the representation of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. 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 information furnished to us by management, we believe certain
disclosures required under generally accepted accounting principles have been
omitted as permitted under Rule 10-01(a) of Regulation S-X of the Securities and
Exchange Commission for financial statements filed with form 10-QSB. These
regulations presume the users of interim financial statements have read the
latest form 10-KSB which include all disclosures required by generally accepted
accounting principles. The accompanying interim financial statements disclose
only material transactions, uncertainties, commitments, contingencies or
subsequent events.
The Company has omitted the statement of stockholders' equity, which is a
required statement under generally accepted accounting principles. This
statement is not required under Rule 10-01(a) of Regulation S-X of the
Securities and Exchange Commission.
Based on our review, with the exceptions of the matters described in the
preceding paragraphs, 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 statement of operations and cash flows of Biofiltration
Systems, Inc. for the three months and six months ended June 30, 1999, were not
audited or reviewed by us and, accordingly, we do not express an opinion on
them.
CERTIFIED PUBLIC ACCOUNTANTS
Tampa, Florida
August 10, 2000
<PAGE>
BIOFILTRATION SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
ASSETS
CURRENT ASSETS
Cash $ 860,099
Accounts receivable 107,022
Inventory 59,704
Purchased customer accounts, net 112,400
-----------
TOTAL CURRENT ASSETS 1,139,225
-----------
FIXED ASSETS
Computer equipment 183,821
Other 28,440
-----------
212,261
Accumulated depreciation (12,958)
-----------
199,303
OTHER ASSETS
Patent, net 40,163
Prepaid sales commissions 575,910
Goodwill, net 378,957
Other 3,878
-----------
998,908
$ 2,337,436
The accompanying notes to consolidated financial
statements are an integral part of this financial statement.
-2-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of related party
notes payable $ 34,973
Accounts payable and accrued expenses 152,097
Provision for loss on disposal of
business segments 149,040
-----------
TOTAL CURRENT LIABILITIES 336,110
-----------
OTHER LIABILITIES
Stockholder notes payable 348,900
Related party notes payable, less
current portion 61,073
-----------
409,973
COMMITMENTS AND CONTINGENCIES -
-----------
STOCKHOLDERS' EQUITY
Common stock $.00001 par value,
800,000,000 shares authorized,
512,890,716 shares issued and
506,140,716 shares outstanding 5,129
Additional paid-in capital 4,559,021
Accumulated deficit (2,837,797)
-----------
1,726,353
Less treasury stock (135,000)
-----------
1,591,353
$ 2,337,436
The accompanying notes to consolidated financial
statements are an integral part of this financial statement.
-3-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS AND THREE MONTHS ENDED
JUNE 30, 2000 AND 1999
---------- -----------------------
Six-months ended
2000 1999
----------- ------------
(Unaudited) (Unaudited)
REVENUES $ 166,432 $ -
COST OF REVENUES 52,640 -
----------- -----------
GROSS PROFIT 113,792 -
----------- -----------
OTHER EXPENSES
General and administrative 879,441 125,418
Depreciation and amortization 44,589 2,042
Stock promotion expenses - 812,500
Interest 22,001 20,443
----------- -----------
946,031 960,403
----------- -----------
LOSS FROM CONTINUING OPERATIONS (832,239) (960,403)
----------- -----------
DISCONTINUED OPERATIONS
Loss from discontinued operations (230,720) -
Loss on disposal of discontinued
operations (149,040) -
----------- -----------
(379,760) -
----------- -----------
NET LOSS $(1,211,999) $( 960,403)
=========== ===========
LOSS PER COMMON SHARE
Loss from continuing operations $( .0018) $( .0024)
=========== ===========
Loss from discontinued operations $( .0005) $ -
=========== ===========
Loss from disposal of discontinued
operations $( .0003) $ -
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (shares in 100's) 4,654,152 3,959,100
=========== ===========
The accompanying notes to consolidated financial
statements are an integral part of these financial statements.
-4-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS AND THREE MONTHS ENDED
JUNE 30, 2000 AND 1999
---------- -----------------------
(Continued)
Three-months ended
2000 1999
----------- -----------
(Unaudited) (Unaudited)
REVENUES $ 166,432 $ -
COST OF REVENUES 52,640 -
----------- -----------
GROSS PROFIT 113,792 -
------------ -----------
OTHER EXPENSES
General and administrative 832,080 112,465
Depreciation and amortization 43,298 1,021
Stock promotion expenses - 812,500
Interest 10,861 10,286
----------- -----------
886,239 936,272
----------- -----------
LOSS FROM CONTINUING OPERATIONS (772,447) (936,272)
----------- -----------
DISCONTINUED OPERATIONS
Loss from discontinued operations (230,720) -
Loss on disposal of discontinued
operations (149,040) -
----------- -----------
(379,760) -
----------- -----------
NET LOSS $(1,152,207) $(936,272)
=========== ===========
LOSS PER COMMON SHARE
Loss from continuing operations $(.0015) $(.0024)
=========== ===========
Loss from discontinued operations $(.0005) $( - )
=========== ===========
Loss from disposal of discontinued
operations $(.0003) $( - )
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (shares in 100's) 5,098,012 3,959,100
=========== ===========
The accompanying notes to consolidated financial
statements are an integral part of these financial statements.
-5-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
- -----------------------
Six months ended
-------------------------
2000 1999
----------- ---------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 59,410 $ -
Cash paid for continuing operating
expenses (195,869) (126,351)
Cash paid for discontinued operations - -
Interest (2,570) (4,198)
----------- ---------
Net cash used by operating activities (139,029) (130,549)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Advances (to) from related company (110,000) 3,184
Purchase of fixed assets - -
------------ ---------
Net cash used by investing activities (110,000) 3,184
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of stock 1,125,362 -
Collections on stock subscriptions
receivable - 122,000
Repayment of related party notes
payable (16,241) -
----------- ---------
Net cash provided by financing activities 1,109,121 122,000
----------- ---------
INCREASE (DECREASE) IN CASH 860,092 (5,365)
CASH, BEGINNING OF PERIOD 6 9,120
----------- ---------
CASH, END OF PERIOD $860,098 $3,755
=========== =========
The accompanying notes to consolidated financial
statements are an integral part of these financial statements.
-6-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
- -----------------------
<TABLE>
<CAPTION>
Six-months ended
--------------------------
2000 1999
------------ ---------
(Unaudited) (Unaudited)
RECONCILIATION OF NET LOSS TO
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
NET LOSS $(1,211,999) $(960,403)
RECONCILING ADJUSTMENTS
Depreciation and amortization 44,589 2,042
Loss on disposal of discontinued
operations 379,760 -
Increase in accounts receivable (107,022) -
Increase in inventory (59,704) -
Increase in accounts payable and
accrued expenses 112,259 (2,824)
Decrease in other assets 8,657 -
Stock issued in lieu of compensation 675,000 -
Treasury stock acquired by way of
reduction of expenses - 812,500
Contribution of accrued interest
to paid-in capital 19,431 18,136
----------- ---------
CASH FLOWS FROM OPERATING $(139,029) $(130,549)
=========== =========
NONCASH INVESTING AND FINANCING ACTIVITIES
DECREASE IN ACCRUED INTEREST
PAYABLE THROUGH CONTRIBUTION
TO PAID-IN CAPITAL $19,431 $18,136
=========== ========
ACQUISITION OF AND INVESTMENT IN
SUBSIDIARY COMPANY BY ISSUANCE
OF COMMON STOCK $1,657,257 $ -
=========== =========
The accompanying notes to consolidated financial
statements are an integral part of these financial statements.
</TABLE>
-7-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
The information presented herein as of June 30, 2000, and for the six and
three-months ended June 30, 2000 and 1999, is unaudited.
NOTE A - BASIS OF PRESENTATION
The accompanying consolidated financial statements of Biofiltration Systems,
Inc. (the Company) have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to the Securities and Exchange Commission's Form 10-QSB and item
310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal required adjustments) considered necessary for a fair
presentation have been included.
Operating results for the six and three-month periods ended June 30, 2000, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. For further information, refer to the December 31,
1999 financial statements and footnotes included in the Company's initial
registration statement with the Securities and Exchange Commission.
As of April 1, 2000, the Company commenced operations and is no longer a
development stage company.
NOTE B - BUSINESS ACQUISITIONS
Effective April 1, 2000, the Company purchased all of the outstanding stock of
Beach Access.Net, Inc., an internet service provider located in South Carolina.
The purchase price was 1,750,000 unrestricted shares of the Company's common
stock. This business combination was accounted for as a purchase.
In connection with this purchase, the Company recorded $226,010 of goodwill
which is being amortized over five years. For the six months ended June 30,
2000, $11,300 was recorded as goodwill amortization.
In connection with the initial acquisition of Beach Access.Net, Inc. the Company
invested 8,600,000 shares of restricted common stock in Beach Access.Net, Inc.
to acquire other related business assets and operations. In connection with
these acquisitions, goodwill of $279,896, was recorded by Beach Access.Net, Inc.
For the six months ended June 30, 2000, $13,995 was recorded as goodwill
amortization.
In connection with this acquisition, the Company issued to the former owner and
certain employees of Beach Access.Net, Inc. 8,000,000 shares of unrestricted and
restricted common stock as a signing bonus and additional compensation.
Further, a five year employment agreement was signed with the former owner
providing for the following:
<PAGE>
- annual salary of $60,000;
- options to purchase additional shares of restricted common stock for $.001
per share as follows (contingent upon certain performance criteria being
met):
<PAGE>
- 3,250,000 shares at any time
- 4,000,000 shares beginning January 1, 2001
- 4,000,000 shares beginning January 1, 2002
- 4,000,000 shares beginning January 1, 2003
- a covenant not to compete for a two year period in certain, as defined,
businesses.
-8-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE B - BUSINESS ACQUISITIONS (continued)
The stock issued as a signing bonus and additional employee compensation have
been recorded at the stock's fair market value as of April 1, 2000, less a 50%
discount on certain shares because of their restricted nature. In the
accompanying statement of operations for the six months ended June 30, 2000,
employee compensation of $675,000 has been recorded to reflect the issuance of
these shares.
In May 2000, Beach Access.Net, Inc. acquired all of the common stock of Revcon
Technologies, Inc. and Alliance Computer Systems, LLC. These business
combinations were accounted for as a purchase. Both of these companies provide
networking, programming and wireless connectivity services. The purchase price
for both was 1,000,000 shares of restricted common stock. In connection with
these purchases, Beach Access.Net, Inc. recorded assets in excess of the
purchase price of $102,479, which is being amortized over five years.
Amortization will commence July 1, 2000. Neither of these operations had
significant operations during the six months ended June 30, 2000.
In connection with the Revcon Technologies, Inc. and Alliance Computer Systems,
LLC acquisitions, the former owners signed five year employment agreements with
Beach Access.Net, Inc. These agreements provide for the following:
<PAGE>
- annual salaries aggregating $110,000;
- options to purchase additional shares of restricted shares of common stock
for $.001 per share as follows:
- 1,000,000 restricted shares contingent upon certain performance criteria
associated with mobile wireless internet operation being met;
- 1,000,000 restricted shares contingent upon certain further performance
criteria associated with mobile wireless internet operation being met;
- a covenant not to compete for a two year period in certain, as defined,
businesses.
Through June 30, 2000, the performance criteria associated with the above stock
options had not been met.
In April 2000, Beach Access.Net, Inc. acquired the rights to provide internet
access for twelve months to approximately 1,300 customers. The cost for these
rights was 3,200,000 shares of restricted common stock. Terms of the agreements
provide for monthly service fees of $20,000.
In the accompanying financial statements, the purchase of these customers has
been recorded at the fair market value of stock issued, less a 50% discount
because of the restricted nature of the stock. The cost of the purchase is being
amortized over twelve months. For the six months ended June 30,2000,
amortization of the purchase price amounted to $15,600.
On August 1, 2000, certain of the above agreements were modified. The
modification provided for an additional 180,000 shares of restricted stock to be
issued for the right to provide internet services to the same customers.
NOTE C - STOCK SPLIT
In March 2000, effective April 15, 2000, the Company's Board of Directors
approved a 100:1 stock split. In conjunction with this stock split, the par
value of the Company's stock was changed to $.00001.
All shares disclosed in the accompanying financial statements reflect the effect
of the 100:1 stock split.
-9-
BIOFILTRATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE D - NET LOSS PER COMMON SHARE
Net loss per common share is computed in accordance with the requirements of
Statement of Financial Accounting Standards No. 128.
NOTE E - SEGMENTS
The Company operates in two business segments, pollution treatment systems and
internet technology. Currently, the only operating segment is the internet
technology group. For the six months ended June 30, 2000 and 1999, information
on reportable segments is as follows:
<TABLE>
<CAPTION>
Pollution Internet
treatment technology Total
----------- ----------- -----------
<S> <C> <C> <C> >
Six months ended June 30, 2000
External revenue $ - $ 166,432 $ 166,432
======== =========== ============
Intersegment revenue $ - $ - $ -
======== =========== ============
Loss from continuing
operations $(80,762) $( 751,477) $(832,239)
Loss from discontinued
operation - ( 379,760) (379,760)
-------- ----------- ------------
$(80,762) $(1,131,237) $(1,211,999)
======== =========== ===========
</TABLE>
For the six months ended June 30, 1999, the Company only operated as a pollution
treatment company.
Since December 31, 1999, the Company has added the operations and assets of the
internet technology segment. This segment was added on April 1, 2000. As of June
30, 2000, total assets of the internet technology segment were $654,654.
NOTE F - DISCONTINUED OPERATIONS
In early July 2000, Company management decided to discontinue and dispose of
certain measurable portions of its internet technology segment. Management
estimates that by August 15, 2000, all of these operations will be discontinued
and assets will be disposed of. The results of operations for the periods
presented are reported as a component of discontinued operation in the
statements of operation. Additionally, management's estimate of the loss on
disposal is presented as a separate component of discontinued operations. The
estimated loss on the disposal of discontinued operations represents the
estimated loss on disposal of the segment's assets and operation through August
15, 2000.
Summarized results of the disposed segment portions for the six months ended
June 30, 2000, are as follows:
Net sales $ 296,043
=========
Operating loss $(230,720)
=========
Loss from discontinued
operations $(149,040)
=========
For the six months ended June 30, 1999, the Company did not operate in the above
segment.
-10-
BEACH ACCESS.NET, INC.
FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999
<PAGE>
BEACH ACCESS.NET, INC.
FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999
CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
BALANCE SHEETS 2 - 3
STATEMENTS OF OPERATIONS 4
STATEMENTS OF CHANGES IN STOCKHOLDER'S
EQUITY (DEFICIT) 5
STATEMENTS OF CASH FLOWS 6 - 7
NOTES TO FINANCIAL STATEMENTS 8 - 12
<PAGE>
B2d
semago
CPAs & Business Advisors
To the Board of Directors
Beach Access.Net, Inc.
Myrtle Beach, South Carolina
Independent Auditors' Report
We have audited the accompanying balance sheet of Beach Access.Net, Inc. as of
December 31, 1999, and the related statement of operations, changes in
stockholder's equity (deficit) and cash flows for the period from inception
(July 29, 1999) to December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Beach Access.Net, Inc. as of
December 31, 1999, and the results of its operations, changes in stockholder's
equity (deficit) and cash flows for the period from inception ( July 29, 1999)
to December 31, 1999, in conformity with generally accepted accounting
principles.
CERTIFIED PUBLIC ACCOUNTANTS
(a/k/a Semago & Company, P.A.)
Tampa, Florida
September 18, 2000
<PAGE>
BEACH ACCESS.NET, INC.
BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
2000 1999
<S> <C> <C>
--------- --------
(Unaudited)
CURRENT ASSETS
Cash $ 17,491 $ 11,092
Accounts receivable 73,167 1,691
Inventory 64,635 -
--------- --------
TOTAL CURRENT ASSETS 155,293 12,783
--------- --------
PROPERTY AND EQUIPMENT
Operating equipment 149,992 21,899
Furniture and fixtures 923 7,973
--------- --------
150,915 29,872
Less accumulated depreciation ( 4,008) ( 2,327)
-------- --------
146,907 27,545
--------- --------
OTHER ASSETS
Investment in business entity,
at cost 121,500 -
Goodwill 279,896 -
Other 1,190 1,190
--------- --------
402,586 1,190
--------- --------
$ 704,786 $ 41,518
========= ========
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
-2-
<PAGE>
BEACH ACCESS.NET, INC.
BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Bank line-of-credit $ 124,500 $ 124,500
Trade accounts payable and accrued
expenses 113,882 20,340
--------- ---------
TOTAL CURRENT LIABILITIES 238,382 144,840
--------- ---------
OTHER LONG-TERM LIABILITY - ADVANCE
FROM RELATED COMPANY 580,500 -
--------- ---------
CONTINGENCIES - -
--------- ---------
STOCKHOLDER'S EQUITY (DEFICIT)
Common stock, no par value,
10,000 shares authorized,
issued and outstanding - -
Retained earnings (deficit) (114,096) (103,322)
--------- ---------
(114,096) (103,322)
--------- ---------
$ 704,786 $ 41,518
========= ========
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
-3-
<PAGE>
BEACH ACCESS.NET, INC.
STATEMENTS OF OPERATIONS AND
CHANGES IN RETAINED EARNINGS (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND THE
PERIOD FROM INCEPTION (JULY 29, 1999) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
(Unaudited)
REVENUES $ 70,105 $ 76,336
--------- --------
COST OF REVENUES
Salaries and benefits 27,058 37,452
Resale supplies 19,508 62,244
Communications 17,534 23,602
--------- ---------
64,100 123,298
--------- ---------
GROSS PROFIT (LOSS) 6,005 ( 46,962)
--------- ---------
OTHER OPERATING EXPENSES
Advertising 4,591 11,370
Consulting fees - 15,000
Depreciation 1,681 2,327
Rent 4,358 13,427
Other office 2,887 9,741
--------- ---------
13,517 51,865
--------- ---------
OPERATING LOSS ( 7,512) ( 98,827)
--------- ---------
OTHER EXPENSE - INTEREST 3,262 4,495
--------- ---------
NET LOSS $( 10,774) $(103,322)
========= =========
NET LOSS PER COMMON SHARE $( 1.08) $( 10.33)
========= =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 10,000 10,000
========= =========
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
-4-
<PAGE>
BEACH ACCESS.NET, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND THE
PERIOD FROM INCEPTION (JULY 29, 1999) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Common stock Additional Retained
Par paid-in earnings
Shares value capital (deficit)
<S> <C> <C> <C> <C>
BALANCE AT INCEPTION,
JULY 29, 1999 - $ - $ - $ -
Stock issued at no
par value 10,000 - - -
Contribution to
additional paid-in
capital - - 5,000 -
Repayment of capital
contribution - - (5,000) -
NET LOSS - - - (103,322)
------ ---- ------- -------
BALANCE,
DECEMBER 31, 1999 10,000 -
- (103,322)
NET LOSS - - - (10,774)
------ ---- ------- ---------
BALANCE,
MARCH 31, 2000 10,000 $ - $ - $(114,096)
====== ==== ======= =======
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
-5-
BEACH ACCESS.NET, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND THE
PERIOD FROM INCEPTION (JULY 29, 1999) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 70,954 $ 75,593
Cash paid for cost of revenues (66,948) (106,141)
Cash paid for other operating
expense (11,836) ( 49,515)
Cash paid for interest ( 3,262) ( 3,473)
-------- ---------
Net cash used by
operating activities (11,092) ( 83,536)
-------- ---------
CASH FLOWS PROVIDED BY INVESTING
ACTIVITIES
Purchase of property and equipment - ( 29,872)
Purchase of business cash assets 17,491 -
-------- ---------
Net cash provided (used) by
investing activities 17,491 ( 29,872)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank line-of-credit - 124,500
Stockholder capital contribution - 5,000
Stockholder capital distribution - ( 5,000)
-------- --------
Net cash provided by financing
activities - 124,500
-------- ---------
NET CHANGE IN CASH BALANCE 6,399 11,092
CASH, BEGINNING OF PERIOD 11,092 -
-------- ---------
CASH, END OF PERIOD $ 17,491 $ 11,092
======== =========
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
-6-
<PAGE>
BEACH ACCESS.NET, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND THE
PERIOD FROM INCEPTION (JULY 29, 1999) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
(Unaudited)
RECONCILIATION OF NET LOSS TO
CASH FLOWS FROM OPERATING ACTIVITIES
NET LOSS $( 10,774) $(103,322)
RECONCILING ADJUSTMENTS
Depreciation 1,681 2,327
Decrease (increase) in accounts
receivable 849 ( 1,691)
Increase in other assets - ( 1,190)
(Decrease) increase in trade
accounts payable and accrued
expenses ( 2,848) 20,340
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES $( 11,092) $( 83,536)
========= =========
NONCASH INVESTING AND FINANCING ACTIVITIES
PURCHASE OF BUSINESS ASSETS BY WAY
OF STOCK ADVANCES FROM RELATED
COMPANY
Cash $ 17,491 $ -
Accounts receivable 72,325 -
Inventory 64,635 -
Property and equipment 121,043 -
Goodwill and other intangibles 401,396 -
Accounts payable ( 96,390) -
--------- ---------
$ 580,500 $ -
========= =========
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
-7-
<PAGE>
BEACH ACCESS.NET, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited financial information
The information presented herein as of March 31, 2000, and for the three months
then ended is unaudited.
Company activities and operating cycle
Beach Access.Net, Inc. (the Company) was incorporated in the state of South
Carolina in July 1999. The Company operates as a provider of internet access to
individual and business customers.
The Company's operations and corporate office are located in Myrtle Beach, South
Carolina.
Revenue and cost recognition
Revenues are recognized when services are rendered, generally monthly, on the
accrual basis of accounting.
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 assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
Start-up costs
Costs associated with the start-up of Company operations have been expensed as
incurred.
Advertising costs
Advertising costs are expensed as incurred.
Property and equipment
Property and equipment is recorded at cost and include expenditures which
substantially increase the existing assets useful lives. Maintenance, repairs
and minor renewals are expensed as incurred. When assets are retired or
otherwise disposed of the related cost and accumulated depreciation are removed
from the respective accounts and any profit or loss on disposition is credited
or charged to earnings.
-8-
<PAGE>
BEACH ACCESS.NET, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Depreciation is provided on the straight-line method at rates designed to
amortize cost over the asset's estimated useful life, usually five years. For
income tax purposes the Company uses accelerated depreciation methods.
Income taxes
For income tax purposes, the stockholder has elected to be taxed under
provisions of Subchapter S of the Internal Revenue Code. Under these provisions,
the Company does not pay Federal or State income taxes. Rather, the Company's
taxable income or loss is recorded on the stockholder's individual income tax
return.
Loss per common share
Loss per common share is computed using the weighted average 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 statement of cash flows, cash includes time deposits with
original maturities of three months or less.
NOTE B - BANK LINE-OF-CREDIT
The Company has a $125,000 line-of-credit with a bank. Terms of the loan provide
for interest at prime plus 1.0%, payable monthly. Substantially all Company
assets are pledged as collateral on this loan.
In July 2000, the present owner of the Company personally paid off the
outstanding balance of this loan. A $124,500 contribution to additional paid-in
capital was subsequently recorded in connection with this transaction.
NOTE C - LEASE ACTIVITY
The Company leases its office and operating facility under a short-term
operating lease. In April 2000, terms of this lease were revised. The new lease,
provides for additional space and a three year term at a base rate of $2,830 per
month.
In addition, the Company leased facilities on a short-term, as needed, basis.
-9-
<PAGE>
BEACH ACCESS.NET, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999
NOTE C - LEASE ACTIVITY (continued)
For the periods ended March 31, 2000 and December 31, 1999, rent expense on the
above activity amounted to $4,358 and $13,427, respectively.
NOTE D - SUBSEQUENT EVENTS (UNAUDITED)
On April 1, 2000, the Company's sole stockholder sold all outstanding shares of
Company stock to Biofiltration Systems, Inc. (BFS), a Florida corporation.
In connection with the acquisition, BFS provided 6,800,000 shares of its
restricted common stock to the Company. The Company used this stock to acquire
related business assets and customer bases as follows:
Value of BFS stock $ 459,000
Value of business assets
acquired 179,104
---------
Goodwill recorded $ 279,896
=========
The value of the BFS stock was determined by utilizing its traded market value
as of the acquisition date less a 50% discount because of its restricted nature.
Concurrent with the above transactions the Company acquired business assets and
customer base from another entity for 1,800,00 shares of BFS restricted stock.
The value assigned to this transaction, $121,500, was determined as noted above.
Subsequently the Company was unable to realize its investment and a loss on
disposal of $121,500 was recorded.
Additionally, another of the above acquired entities was operated for a short
period of time before management decided to discontinue its operation. From its
acquisition date through June 30, 2000, this entity had operating losses of
$109,220. At June 30, 2000, the Company accrued an additional $149,040 for
estimated additional costs associated with disposal.
In connection with the acquisition of the Company by BFS and a companion
employment agreement, the Company issued to the former owner and certain
employees of the Company, 8,000,000 shares of unrestricted and restricted BFS
common stock as a signing bonus and additional compensation.
-10-
BEACH ACCESS.NET, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999
NOTE D - SUBSEQUENT EVENTS (UNAUDITED) (continued)
The stock issued as a signing bonus and additional compensation was recorded at
BFS stock's fair market value as of April 1, 2000, less a 50% discount on
certain shares because of their restricted nature. Employee compensation of
$675,000 was recorded in connection with this transaction.
Further, the employment agreement provides the following to the former owner:
<PAGE>
- For five years an annual salary of $60,000;
- As additional compensation, options to purchase additional shares of BFS
common stock at below market prices;
- A covenant not to compete for a two year period in certain, as defined,
businesses.
In April 2000, the Company acquired the rights to provide internet access for
twelve months to approximately 1,300 customers. The purchase price for this
acquisition was 3,200,000 shares (later increased by 180,000 shares) of BFS
restricted common stock. Terms of agreements provided for the Company to receive
$20,000 per month for twelve months.
At June 30, 2000, the Company had recorded the value of these transactions at
$128,000. This amount represents the fair market value of the BFS stock less a
50% discount because of its restricted nature.
In May 2000, the Company purchased all of the common stock of Revcon
Technologies, Inc. and Alliance Computer Systems, L.L.C. Both of these companies
provide networking, programming and wireless connectivity services. The purchase
price for both was 1,000,000 shares of BFS restricted common stock. These
acquisitions have been recorded as follows:
Value of BFS stock $ 29,000
Value of business assets 131,479
Goodwill recorded $(102,479)
=========
The value of BFS stock was determined by utilizing its market value as of the
acquisition date, less a 50% discount because of its restricted nature.
-11-
<PAGE>
BEACH ACCESS.NET, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999
NOTE D - SUBSEQUENT EVENTS (UNAUDITED) (continued)
In connection with the Revcon and Alliance acquisitions, the Company signed
employment agreements with the former owners providing the following:
<PAGE>
- For five years, annual salaries aggregating $110,000;
- As additional compensation, options to purchase additional shares of BFS
common stock at below market prices;
- a covenant not to compete for a two year period in certain, as defined,
businesses.
In July 2000, BFS advanced the Company $150,000 to aid in the development of a
seamless, wireless, omni-directional, mobile internet system.
-12-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
PART III
ITEM 1. INDEX TO EXHIBITS
2 Reorganization Agreement (not applicable)
3 3.1 Articles of Incorporation and Amendments **
3.1.1 Articles of Amendment
3.2 By-Laws **
4 Instruments defining the rights of holders (refer to exhibit 3)
9 Voting Trust agreement (not applicable)
10 Material contracts
10.1 Beach Access.Net, Inc., Stock Purchase Agreement
10.2 Alliance Computer Systems, LLC, Agreement for Sale of Business Assets
10.3 Revcon Technologies Corp., Stock Purchase Agreement
11 Statement re: Computation of per share earnings (not applicable)
21 Subsidiary of the Registrant
24 Power of Attorney (not applicable)
27 Financial Data Schedule December 31, 1999 and March 31, 2000
99 Additional Exhibits
--------------------
* To be provided by Amendment
** Previously provided
</TABLE>
<PAGE> 39
SIGNATURE PAGE
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: October 12, 2000 BIFS Technologies Corporation
By: /s/ Alpha J. Keyser
-------------------------------------
Alpha J. Keyser, President and CEO
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange act of 1934, this
registration statement has been signed below by the followings persons on behalf
of the registrant and in the capacities and on the dates indicated.
Date: October 12, 2000 By: /s/ Alpha J. Keyser
--------------------------------------
Alpha J. Keyser, Chairman
Date: October 12, 2000 By: /s/ Thomas Cannon
---------------------------------------
Thomas Cannon, Director
Date: October 12, 2000 By: /s/ James A. Fieler
---------------------------------------
James A. Fieler, Director
<PAGE> 40
EXHIBIT 3.1.1
FLORIDA DEPARTMENT OF STATE
Katherine Harris
Secretary of State
October 3, 2000
BIFS TECHNOLOGIES CORPORATION
2341 PORTER LAKE DR.
SUITE 101
SARASOTA, FL 34240
Re: Document Number P92000012596
The Articles of Amendment to the Articles of Incorporation of BIOFILTRATION
SYSTEMS, INC. which changed its name to BIFS TECHNOLOGIES CORPORATION, a Florida
corporation, were filed on October 3, 2000.
This document was electronically received and filed under FAX audit number
H00000052226.
Should you have any questions regarding this matter, please telephone (850)
487-6050, the Amendment Filing Section.
Darlene Connell
Corporate Specialist
Division of Corporations Letter Number: 900A00052426
Division of Corporations - P.O. BOX 6827 - Tallahassee, Florida 32814
<PAGE> 41
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
BIOFILTRATION SYSTEMS, INC.
The Articles of Incorporation of the above-named corporation (the
"Corporation"), filed with the Department of State on the 17th day of December
1992, and assigned Document Number P92000012596, are hereby amended pursuant to
a written consent in lieu of meeting executed and approved by the holders of all
of the Corporation's common stock and all of the Corporation's Directors on the
2nd day of October, 2000, as follows:
ITEM 1
1. ARTICLE I is hereby amended to read as follows:
ARTICLE I
The name of the corporation is: BIFS Technologies Corporation
This Articles of Amendment to the Articles of Incorporation was adopted
by the shareholders and Directors on the 2nd day of October, 2000.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Amendment to the Articles of Incorporation this 2nd day of October, 2000.
By: /s/ Alpha Joseph Keyser
----------------------------
Alpha Joseph Keyser, President
<PAGE> 42
EXHIBIT 10.1
STATE OF SOUTH CAROLINA STOCK PURCHASE AGREEMENT
COUNTY OF HORRY
This Stock Purchase Agreement is made this 5th day of August 2000 by
and between JAY KNABB hereinafter referred to as "Seller" and BIOFILTRATION
SYSTEMS, INC. a Florida Corporation herein referred to as "Purchaser."
WHEREAS, JAY KNABB owns all of the issued and outstanding shares of
BEACH ACCESS.NET, INC., a South Carolina Corporation (hereinafter referred to
as "the Corporation"), and
WHEREAS, Seller wishes to sell to Purchaser all of his stock, rights,
title and interests in the Corporation on the terms and conditions contained
herein, and
WHEREAS, the parties previously entered into a "binding Letter of
Intent" dated April 1, 2000 for the sale of the shares of stock of Beach
Access.Net, Inc. from Seller to Purchaser, and
WHEREAS, the parties wish for this agreement to supercede and replace
the "binding Letter of Intent" while still making the effective day of this
agreement April 1, 2000,
NOW THEREFORE, for and in consideration of the mutual promises and
covenants contained herein, the parties agree as follows:
1. Seller agrees to sell to Purchaser all of his shares of stock,
rights, title and interest in the Corporation which was incorporated under the
laws of the State of South Carolina.
2. The purchase price for the shares of the Corporation shall
be paid by issuing One Million Seven-Hundred Fifty Thousand (1,750,000) free
trading shares of common stock of BIOFILTRATION SYSTEMS, INC. to the Seller.
3. Purchaser and Seller each represent to the other that they have had
the opportunity to inspect the books and records of the Corporation and that
each knows of his own knowledge the full and complete financial condition of the
corporation.
<PAGE> 43
4. Seller warrants to Purchaser that he owns all of the issued and
outstanding shares of stock in the Corporation and that the shares of stock have
not been pledged as collateral for any loan and that, to the best of his
knowledge the shares of stock are free and clear of any restrictions or
encumbrances of a financial nature and that there are no suits at law, in equity
or any bankruptcy proceedings, divorce proceedings or other proceedings pending
or threatened against Seller which could become a lien upon the shares of stock
referenced herein or effect the ownership of the shares of stock.
5. Purchaser agrees that it is buying the shares of stock referenced
herein for an investment and not with the intent to resell the shares. Purchaser
understands and agrees that the shares of stock being purchased are not
registered with the Securities and Exchange Commission or any state Securities
Commission and that as such there is no market to readily sell the shares of
stock.
6. Seller warrants and represents Beach Access.Net Corporation is in
good standing in the State of South Carolina and that there are no suits at law
or in equity pending or threatened against the Corporation and that the
Corporation does not have any tax liability of any kind to any Federal or State
government.
7. It is understood and agreed by the parties herein that the
Corporation owns the assets listed on the attached Exhibit "A" (which is
incorporated herein by reference) and that the Corporation owns said assets free
and clear of any debt.
8. This agreement is contingent upon the Seller executing the
"Employment Agreement" that is attached hereto as Exhibit "B" and incorporated
herein by reference.
9. This agreement supercedes and replaces the "binding Letter of
Intent" entered into between the parties on April 1, 2000, however, the
effective day of this agreement is still April 1, 2000.
WHEREIN, the parties have executed this agreement on the date first
referenced above.
WITNESS PURCHASER
Biofiltration Systems, Inc.
By: /s/ Alpha J. Keyser
------------------------------------
Alpha J. Keyser
Its: President
SELLER
/s/ Jay Knabb
-------------------------------------
Jay Knabb
<PAGE> 44
STATE OF SOUTH CAROLINA
EMPLOYMENT AGREEMENT
COUNTY OF HORRY
This Employment Agreement is entered into this 1st day of April 2000,
by and between BEACH ACCESS.NET, INC. a South Carolina Corporation,
BIOFILTRATION SYSTEMS, INC., a Florida Corporation, and its wholly owned
subsidiary BEACH ACCESS.NET, INC. a South Carolina Corporation hereinafter
collectively referred to as "Employer" and JAY KNABB, hereinafter referred to as
"Employee."
WHEREAS, BIOFILTRATION SYSTEMS, INC. a Florida Corporation wishes to
purchase all of the issued and outstanding shares of stock of BEACH ACCESS.NET,
INC., and
WHEREAS, Employee is the sole shareholders, director, officer and
principal of BEACH ACCESS.NET, INC., and
WHEREAS, the agreement to purchase the shares of stock of Beach
Access.Net, Inc. is contingent upon Employer engaging the services of Employee
under this agreement, and
WHEREAS, Employee wishes to provide services for Employer on the terms
and conditions contained herein,
NOW THEREFORE, for and in consideration of the mutual promises and
covenants contained herein and the monies to be paid the parties agree as
follows:
1. TERM. This contract shall be for a term of FIVE (5) years beginning
on April 1, 2000 and ending on March 31, 2005.
2. SALARY. Employer shall pay to Employee for his services under
this agreement a base salary per month of Three Thousand and no/100's
($3,000.00) Dollars. This salary shall increase to Five Thousand and no/100's
($5,000.00) Dollars per month beginning Aug. 1, 2000.
3. SIGNING BONUS. As a signing bonus Employer hereby agrees to give
Employee a total of four million shares of common stock of BIOFILTRATION
SYSTEMS, INC. Of these four million shares, two million shall be free trading
shares and two million shall be restricted shares. Employer agrees that the
restricted shares shall be converted to free trading shares at the earliest
possible opportunity.
<PAGE> 45
4. COMPENSATION FOR THIRD PARTIES. As a further inducement to
Employee, Employer agrees to give shares of common stock of BIOFILTRATION
SYSTEMS, INC. to the following third parties that have been instrumental
in the company and/or in closing the transaction
(A). John Weible.............................................1,000,000
(B). Heather Bohrer......................................... 500,000
(C). Pavil Corporation........................................1,000,000
(D). David O'Brien.......................................... 500,000
(E). Steve Sawyer.............................................1,000,000
Employer and Employee each understand and agree that the shares of
stock of BIOFILTRATION SYSTEMS, INC. which are given to the third parties
referenced above shall be restricted shares and shall be subject to Rule 144 of
the SEC and as such contain restrictions on resale.
5. ADDITIONAL COMPENSATION-INCOME BONUS. In addition to his salary,
Employee shall receive the following stock bonus plans based upon his
performance as follows:
(a). FIRST OPTION. Employee shall have the option to purchase 3,250,000
additional shares of common stock of BIOFILTRATION SYSTEMS, INC. at the price of
$.001 cents per share. This option may be exercised anytime after the execution
of this agreement.
(b). SECOND OPTION. Employee shall have the option to purchase 4,000,000
additional shares of common stock of BIOFILTRATION SYSTEMS, INC. at the price of
$.001 cents per share beginning on Jan. 1, 2001.
(c). THIRD OPTION. Employee shall have the option to purchase 4,000,000
additional shares of common stock of BIOFILTRATION SYSTEMS, INC. at the price of
$.001 cents per share beginning on Jan. 1, 2002.
(d). FOURTH OPTION. Employee shall have the option to purchase 4,000,000
additional shares of common stock of BIOFILTRATION SYSTEMS, INC. at the price of
$.001 cents per share beginning on Jan. 1, 2003.
The Second, Third and Fourth options contained in this
paragraph are subject to the following:
(1). Employee may not voluntarily leave the employment of the
corporation. Should Employee voluntarily leave the employment of the
corporation, all unexercised stock options and options which have not matured
shall cease and become null and void.
<PAGE> 46
(2). The corporation must accomplish the goal of successful
completion and testing of two cells communicating with each other and with a
remote device within range of the antenna arrays. A cell consists of one or more
antenna's positioned to transmit/receive radio waves from 0 to 360 degrees to
attain band concentration of desired effect.
(3) The shares of stock of BIOFILTRATION SYSTEMS, INC. which
are given to Employee by his exercise of THE FIRST, SECOND, THIRD AND FOURTH
OPTIONS referenced above, shall be restricted shares and as such shall be
subject to Rule 144 of the SEC and as such contain restrictions on resale.
6. DUTIES OF EMPLOYEE. Employee shall perform the same duties that he
has already been performing for Beach Access.Net, Inc. and any other reasonable
duties that the board of directors may require. Employee shall provide to
Employer any and all information requested by Employer concerning the business.
7. REMEDIES. Should either party feel that the other has breached this
agreement, the offended party shall give notice to the other in writing stating
in what way this agreement has been breached. Should the accused party fail to
respond within ten (10) days to the notice, it shall be deemed to be an
admission of the allegations contained in the notice. Should the accused party
respond to the offended party's notice and deny that any breach has occurred,
the offended party may bring a legal action to determine whether this agreement
has been breached or not. The party who does not prevail in the legal action
shall pay the costs of the prevailing party, including a reasonable attorney's
fee.
8. TERMINATION. Should Employee be terminated by Employer for any
reason, Employee shall retain his stock options without any contingency for
performance, however, Employee must exercise his stock options within one (1)
year of his termination.
9. COVENANT NOT TO COMPETE. Employee agrees that for the term of this
agreement and for two years thereafter, he will not work for any business
engaged in the origination or implementation of "SWAMI" (seamless wireless area
mobile Internet) service. This covenant not to compete shall be limited to the
continental United States. Should Employee be terminated by Employer, this
provision shall be null and void.
10. Should any term or terms of this agreement be found to be
unenforceable by a court of competent jurisdiction, then that provision shall be
stricken from this agreement, and the remainder of this agreement shall remain
in full force and effect.
11. This agreement shall be construed under the laws of the State of
South Carolina.
Wherein, the parties have executed this agreement on the date first
written above.
<PAGE> 47
WITNESS EMPLOYER
BEACH ACCESS.NET, INC.
/s/ Alpha Keyser
---------------------------------
BY: Alpha Keyser
ITS: Chairman of the Board
of Directors
BIOFILTRATION SYSTEMS, INC.
/s/ Alpha Keyser
---------------------------------
BY: Alpha Keyser
ITS: President
EMPLOYEE
Jay Knabb
-------------------------------
JAY KNABB
<PAGE> 48
EXHIBIT 10.2
STATE OF SOUTH CAROLINA AGREEMENT FOR SALE OF BUSINESS ASSETSCOUNTY OF HORRY
THIS AGREEMENT is entered into this 5th day August of 2000, by and
between ALLIANCE COMPUTER SYSTEMS, LLC, a South Carolina Limited Liability
Company, hereinafter referred to as "Seller" and BEACH ACCESS.NET, INC.
hereinafter referred to as "Purchaser."
WHEREAS, the Seller owns a busines s known as "ALLIANCE COMPUTER
SYSTEMS," and
WHEREAS, Purchaser wishes to purchase "ALLIANCE COMPUTER SYSTEMS" from
Seller by purchasing all of the assets associated with "ALLIANCE COMPUTER
SYSTEMS,"
WHEREAS, the parties have entered into an oral agreement on May 31,
2000 for the sale of the assets and wish to have the terms of this agreement set
forth in writing,
NOW THEREFORE, for and in consideration of the monies to be paid and
the mutual promises and covenants contained herein, the parties agree as
follows:
1. SALE OF BUSINESS. On the date first written above Seller hereby
sells to Purchaser all assets and inventory owned by the Seller and used in the
business known as, "ALLIANCE COMPUTER SYSTEMS". The assets transferred by Seller
to Purchaser shall include all of the inventory, good will, trade name and any
other items owned by the Seller used in the operation of "ALLIANCE COMPUTER
SYSTEMS". The assets and inventory specifically includes all of those items
listed on the attached "Exhibit A" which is incorporated herein by reference. It
is understood and agreed between the parties that the Seller will cease any
business operations with the consummation of this sale agreement.
2. TRADE NAME. The sale of the business shall include the right to
use the name "ALLIANCE COMPUTERS AND ALLIANCE COMPUTER SYSTEMS" in any
advertizing or other uses.
3. PURCHASE PRICE. The purchase price shall be paid by Purchaser having
issued to Seller, Seven Hundred Six Thousand Six Hundred and Sixty Seven shares
of common stock in BIOFILTRATION SYSTEMS, INC. a publicly traded Florida
Corporation. Purchaser further agrees to repay Seller the sum of Seventeen
Thousand and no/l00"s ($17,000.00) Dollars that were loaned to the Purchaser by
the Seller.
4. LEASE AGREEMENT OF SELLER. Seller and Purchaser agree that the
lease agreement of the Seller is not being transferred or assumed by the
Purchaser and shall remain with the Seller.
<PAGE> 49
5. INDEMNITY AGAINST CREDITORS' CLAIMS. The Seller has requested the
Purchaser to waive the requirements of the bulk transfer provisions of the
Uniform Commercial Code, and the Purchaser has acceded to this request. The
Seller shall indemnify the Purchaser and hold it harmless against all claims
made by creditors of the Seller. The Seller represents that there are no other
liens, encumbrances, or security interests on any of the property to be sold to
the Purchaser, and warrants that the title herein conveyed to the Purchaser is
free and clear of all liens. All of the provisions, warranties and
representations in this paragraph shall survive closing.
6. REPRESENTATIONS. Purchaser arid Seller each represent to the other
that they have had the opportunity to inspect the books and records of the
Business and the Limited Liability Company and that each knows of his own
knowledge the full and complete financial condition of the business.
7. WARRANTY. Seller warrants to Purchaser that ALLIANCE COMPUTER
SYSTEMS, LLC owns the assets sold herein free and clear of any encumbrances and
that the corporation has not pledged the assets as collateral for any loan and
that, to the best of the knowledge of the LLC'S Managing Partner, Paul Aubin,
there are no suits at law, in equity or any bankruptcy proceedings, divorce
proceedings or other proceedings pending or threatened against Seller which
Could become a lien upon the assets referenced herein or effect the ownership of
the assets.
8. COVENANT NOT TO COMPETE. Seller agrees that as long as Purchaser is
not in default under the terms of this agreement, and for three years from the
date of this agreement, Seller shall not open or become partners or a
shareholder in any other business that owns or operates a similar business to
the one being sold under this agreement, within one hundred miles from the
business being sold hereunder known as "ALLIANCE COMPUTERS SYSTEMS".
9. EMPLOYMENT AGREEMENT. This agreement is contingent upon the Seller,
Purchaser and BIOFILTRATION SYSTEMS, INC. executing the employment agreement
attached hereto as "Exhibit B".
10. This agreement shall be interpreted and construed in accordance
with the laws of the State of South Carolina.
Wherein, the parties have executed this agreement on the date first
written above.
<PAGE> 50
WITNESS ALLIANCE COMPUTER SYSTEMS, LLC
/s/ Paul Aubin
---------------------------------
By: PAUL AUBIN
ITS: MANAGING PARTNER
BEACH ACCESS.NET, INC.
/s/ Jay Knabb
---------------------------------
By: JAY KNABB
ITS: PRESIDENT
BIOFILTRATION SYSTEMS, INC.
/s/ Alpha Keyser
---------------------------------
BY: ALPHA J. KEYSER
ITS: PRESIDENT
<PAGE> 51
STATE OF SOUTH CAROLINA EMPLOYMENT AGREEMENT COUNTY OF HORRY
This Employment Agreement is entered into this 31st day May of 2000, by
and between BEACH ACCESS.NET, INC. a South Carolina Corporation, BIOFILTRATI0N
SYSTEMS, INC., a Florida Corporation, hereinafter collectively referred to as
"Employer" and PAUL AUBIN, hereinafter referred to as "Employee".
WHEREAS, BEACH ACCESS.NET, INC. is a wholly owned subsidiary of
BIOFILTRATION SYSTEMS, INC. a Florida Corporation, arid
WHEREAS, BEACH ACCESS.NET, INC. wishes to purchase all of the assets
of ALLIANCE COMPUTER SYSTEMS, LLC, pursuant to the "AGREEMENT FOR SALE OF
BUSINESS ASSETS", and
WHEREAS, Employee is the managing partner of ALLIANCE COMPUTER SYSTEMS,
LLC, and
WHEREAS, the agreement to purchase the assets of ALLIANCE COMPUTER
SYSTEMS, LLC is contingent upon Employer engaging the services of Employee under
this agreement, and
WHEREAS, Employee wishes to provide services for Employer on the terms
and conditions contained herein,
NOW THEREFORE, for and in consideration of the mutual promises and
covenants contained herein and the monies to be paid the parties agree as
follows:
1. TERM. This contract shall be for a term of FIVE (5) years beginning
on June 1, 2000 and ending on May 31, 2005.
2. SALARY. Employer shall pay to Employee for his services under
this agreement a base salary per year of Fifty Five Thousand and no/100's
($55,000.00) Dollars.
3. ADDITIONAL COMPENSATION-INCOME BONUS. In addition to his salary,
Employee shall receive the following stock bonus plans based upon his
performance as follows:
(a). FIRST OPTION. Employee shall have the option of purchasing Seven
Hundred Six Thousand Six Hundred and Sixty Seven shares of common stock in
BIOFILTRATION SYSTEMS, INC. a publicly traded Florida Corporation for the
purchase price of $.000l cents per share once Beach Access.Net, Inc. has
accomplished the goal of a successful completion and testing of two cells
communicating with each other and with a remote device within range of the
antenna arrays,. A cell consists of one or more antenna's positioned to
transmit/receive radio waves from 0 to 360 degrees to attain band concentration
of desired effect.
<PAGE> 52
(b). SECOND OPTION. Employee shall have the option of purchasing Seven
Hundred Six Thousand Six Hundred and Sixty Seven shares of common stock in
BIOFILTRATION SYSTEMS, INC. a publicly traded Florida Corporation for the
purchase price of $.0001 cents per share once Beach Access.Net, Inc. has
accomplished the goal of having six total cells (as described in 3(a) above)
tested and in operation.
(c). The shares of stock of BIOFILTRATION SYSTEMS, INC. which are given to
Employee by his exercise of THE FIRST and SECOND OPTIONS referenced above, shall
be restricted shares and as such shall be subject to Rule 144 of the SEC and as
such contain restrictions on resale.
4. DUTIES OF EMPLOYEE. Employee shall perform the same duties that he
has already been performing for Alliance Computer Systems, LLC in addition shall
perform those duties referenced in the option provisions contained herein and
any other reasonable duties that the board of directors may require. Employee
shall also provide to Employer any and all information requested by Employer
concerning Alliance Computer Systems, LLC.
5. LIMITATIONS ON EMPLOYEE. Any decisions regarding raises for
employees, hiring additional employees (but not replacements of existing
employees), and expenditures for equipment or other capital expenditures, must
be agreed to by the President of Beach Access.Net, Inc.
6. REMEDIES. Should either party feel that the other has breached this
agreement, the offended party shall give notice to the other in writing stating
in what way this agreement has been breached. Should the accused party fail to
respond within ten (10) days to the notice, it shall be deemed to be an
admission of the allegations contained in the notice. Should the accused party
respond to the offended party's notice and deny that any breach has occurred,
the offended party may bring a legal action to determine whether this agreement
has been breached or not. The party who does not prevail in the legal action
shall pay the costs of the prevailing party, including a reasonable attorney's
fee.
7. TERMINATION. Should Employee terminate his employment with Employer,
the stock options referenced above shall become null and void if the stock
options have not been exercised at the time of termination by Employee. Should
Employee be terminated by Employer for any reason, Employee shall retain his
stock options without any contingency for performance, however, the stock
options must be exercised by Employee within one (1) year from the date of
termination.
<PAGE> 53
8. COVENANT NOT TO COMPETE. Employee agrees that for the term of this
agreement and for two years thereafter, he will not work for any business
engaged in the origination or implementation of "SWAMI" (seamless wireless area
mobile internet) service. This covenant not to compete shall be limited to the
continental United States. Should Employee be terminated by Employer, this
provision shall be null and void. Employee further agrees not to disclose to any
third party, without the prior written permission of Employer, any information
related to his employment with Employer, including, but not limited to, any
information regarding customers of Employer, any information regarding the
products, research, inventions, methods or services of Employer or its related
companies.
9. Should any term or terms of this agreement be found to be
unenforceable by a court of competent jurisdiction, then that provision shall be
stricken from this agreement, and the remainder of this agreement shall remain
in full force and effect.
10. EFFECTIVE DATE. This written agreement memorializes that certain
oral agreement that was made by the parties on May 31, 2000.
11. This agreement shall State be construed under the laws of the of
South Carolina.
Wherein, the parties have executed this agreement on the date first
written above.
WITNESS EMPLOYER
BEACH ACCESS.NET, INC.
/s/ Jay Knabb
---------------------------------
By: Jay Knabb
ITS: President
EMPLOYEE
/s/ Paul Aubin
----------------------------------
By: PAUL AUBIN
BIOFILTRATION SYSTEMS, INC.
/s/ Alpha Keyser
---------------------------------
BY: Alpha J. Keyser
ITS: President
<PAGE> 54
EXHIBIT 10.3
STATE OF SOUTH CAROLINA STOCK PURCHASE AGREEMENT
COUNTY OF HORRY
This Stock Purchase Agreement is made this 31st day of May 2000 by and
between KENNETH BOURG, LINDA WHITLEY AND JASON BOURG in referred to as "Seller"
and BEACH ACCESS.NET, INC. a South Carolina Corporation and wholly owned
subsidiary of BIOFILTRATION SYSTEMS, INC. herein referred to as "Purchaser."
WHEREAS, KENNETH BOURG, LINDA WHITLEY AND JASON BOURG collectively
own all of the issued and outstanding shares of REVCON TECHNOLOGIES CORP. a
Delaware Corporation (hereinafter referred to as "the Corporation," ) and
WHEREAS, Sellers wishes to sell to Purchaser all of their stock,
rights, title and interests in the Corporation on the terms and conditions
contained herein,
NOW THEREFORE, for and in consideration of the mutual promises and
covenants contained herein, the parties agree as follows:
1. Sellers agree to sell to Purchaser all of their shares of stock,
rights, title and interest in the Corporation which was incorporated under the
laws of the State of Delaware.
2. The purchase price for the shares of the Corporation shall be paid
by issuing Two Hundred Ninety Three Thousand Three Hundred and thirty-three
shares of common stock of BIOFILTRATION SYSTEMS, INC. a Florida Corporation to
the Sellers. The individual Sellers shall receive the following number of shares
of BIOFILTRATION SYSTEMS, INC.:
(A). Kenneth Bourg 272,800
(B). Linda Whitley 5,867
(C). Jason Bourg 14,666
3. Purchaser and Sellers each represent to the other that they have
had the opportunity to inspect the books and records of the Corporation and that
each knows of his own knowledge the full and complete financial condition of the
corporation.
4. Sellers warrant to Purchaser that they own all of the issued and
outstanding shares of stock in the Corporation and that the shares of stock have
not been pledged as collateral for any loan and that, to the best of their
knowledge the shares of stock are free and clear of any restrictions or
encumbrances of a financial nature and that there are no suits at law, in equity
or any bankruptcy proceedings, divorce proceedings or other proceedings pending
or threatened against Sellers which could become a lien upon the shares of stock
referenced herein or effect the ownership of the shares of stock.
<PAGE> 55
5. Purchaser agrees that it is buying the shares of stock referenced
herein for an investment and not with the intent to resell the shares. Purchaser
understands and agrees that the shares of stock being purchased are not
registered with the Securities and Exchange Commission or any state Securities
Commission and that as such there is no market to readily sell the shares of
stock.
6. Sellers warrant and represent to Purchaser that the Corporation is
in good standing in the State of Delaware and that there are no suits at law or
in equity pending or threatened against the Corporation and that the Corporation
does not have any tax liability of any kind to any Federal or State government.
7. It is understood and agreed by the parties herein that the
Corporation owns the assets listed on the attached Exhibit "A" (which is
incorporated herein by reference) and that the Corporation owns said assets free
and clear of any debt.
8. Sellers, with the execution of this agreement, hereby resign any
and all offices, directorships and/or employment positions which they hold in
the corporation at the time of closing.
9. Sellers understand and agree that the shares of stock of
BIOFILTRATION SYSTEMS, INC. which they are receiving as consideration for their
shares of stock in the Corporation are subject to Rule 144 of the SEC and as
such contain restrictions on resale.
10. This agreement is contingent upon Kenneth Bourg executing the
"Employment Agreement" that is attached hereto as Exhibit "B" and incorporated
herein by reference.
WHEREIN, the parties have executed this agreement on the date first
referenced above.
WITNESS PURCHASER
Beach Access.Net, Inc.
/s/ Jay Knabb
------------------------------
By: Jay Knabb
Its: President
SELLERS
/s/ Kenneth Bourg
------------------------------
Kenneth Bourg
/s/ Linda Whitley
-----------------------------
Linda Whitley
/s/ Jason Bourg
-----------------------------
Jason Bourg, by Pamela R. Aubin
As attorney-in-fact
Exhibit A
Assets for Revcon Technologies Corp.
<PAGE> 56
Assorted Hand Tool $200.00
1/2in. Power Drill with assorted bits 189.00
600 ft.1/2in. rope 125.00
1-10 ft. Balloon (reusable) 750.00
Assorted 2' balloons 125.00
2- Omni Antennas 8dBi 325.00
2- 18dBi Directional Antenna horns 300.00
1 -24dBi Directional Antenna Horns 200.00
1-24dBi Directional Antenna with grid (short range) 249.00
1- Wave Access /Access Point Bridge 1000.00
2- Wave Access PCMCIA Cards 800.00
1- HP 600 series Printer 129.00
1-AST Computer System w/ Keyboard & 15" Monitor 1000.00
1 -Panasonic Fax Machine 199.00
1-2 drawer file cabinet 25.00
2-Gateway Computer Systems with Keyboards (Network Nodes) 700.00
2-13" Field Test Monitors 90.00
1-set Remote radios (Walkie Talkies) 90.00
1 -GPS handheld system 400.00
2- extension cords 22.00
1-AC adapter 120.00
1-Crimping tool for LMR 400 and LMR 600 cable 420.00
1-Crimping tool for RJ1 1 25.00
1-volt meter 45.00
1-Assorted Office supplies including letterhead, envelops, paper 180.00
Assorted Software
Microsoft Office Suite 250.00
Quickbooks Pro Accounting 220.00
Adobe Acrobat 180.00
Microsoft Windows 98 79.00
Micropath Line of Site Software 2400.00
Assorted cable connectors LMR cable (very expensive) 250.00
Assorted bolts, nuts, screws, connectors 15.00
Assorted Clamps and Antenna kits 150.00
3-Lighting arresters 250.00
Assorted Wall Brackets for antennas 80.00
1 -Amplifier defective awaiting RMA 895.00
2-50' sections of LMR 400 cable/with connectors (solectek) 250.00
2-100' sections of LMR 400 cable 40.00
2-50' sections of LMR 600 cable/with connectors 125.00
2-100' sections of LMR600 cable 100.00
2-literature racks 50.00
3-section of Rohn 250 tower 360.00
50' ground cable 5.00
Assorted ground clamps 22.00
Mfg. Technical Manuals (assorted) 0.00
1-compass 15.00
2-PCS phones with one car adapter (Sprint) 200.00
Solectek jumper cables 50.00
Sub Total of Fixed Assets, supplies, inventory $13694.00
Financial Assets and Liabilities as of 6-14-00
Fixed Assets, supplies, inventory $13694.00
Account Receivables 18501.80
Checking Account 1713.92
-------
Sub Total Assets $33918.72
Minus (-) Remaining Liabilities
Account Payables (4862.71)
Payroll taxes for May (1372.00)
Cash Float by Owner (5000.00)
Relocation to Myrtle Beach (600.00)
-------
Subtotal Liabilities $(11834.71)
<PAGE> 57
EXHIBIT "B"
STATE OF SOUTH CAROLINA
EMPLOYMENT AGREEMENT
COUNTY OF HORRY
This Employment Agreement is entered into this 31st Day of May 2000, by
and between BEACH ACCESS.NET, INC. a South Carolina Corporation, REVCON
TECHNOLOGIES CORP., a Delaware Corporation, hereinafter collectively referred to
as "Employer" and KENNETH BOURG, hereinafter referred to as Employee.
WHEREAS, BEACH ACCESS.NET, INC. is a wholly owned subsidiary of
BIOFILTRATION SYSTEMS, INC. a Florida Corporation and wishes to purchase all of
the issued and outstanding shares of stock of REVCON TECHNOLOGIES CORP., and
WHEREAS, Employee is one of the shareholders, officers and principals
of REVCON TECHNOLOGIES CORP., and
WHEREAS, the agreement to purchase the shares of stock of Revcon
Technologies, Corp. is contingent upon Employer engaging the services of
Employee under this agreement, and
WHEREAS, Employee wishes to provide services for Employer on the terms
and conditions contained herein,
NOW THEREFORE, for and in consideration of the mutual promises and
covenants contained herein and the monies to be paid the parties agree as
follows:
1. TERM. This contract shall be for a term of FIVE (5) years beginning
on June 14, 2000 and ending on June 13, 2005.
2. SALARY. Employer shall pay to Employee for his services under this
agreement a base salary per year of fifty-five Thousand and no/100's
($55,000.00) Dollars.
3. ADDITIONAL COMPENSATION-INCOME BONUS. In addition to his salary,
Employee shall receive two stock options based upon his performance as follows:
(a). OPTION ONE. Employee shall have the option of purchasing 293,333
additional shares of common stock of BIOFILTRATION SYSTEMS, INC. at the price of
$.001 cents per share for a period of one year from the date of this agreement
once successful completion and testing of two cells communicating with each
other and with a remote device within range of the antenna arrays has occurred.
A cell consists of one or more antennas positioned to transmit/receive radio
waves from zero to 360 degrees to attain band concentration of desired effect.
<PAGE> 58
(b). OPTION TWO. Employee shall have the option of purchasing 293,333
additional shares of common stock of BIOFILTRATION SYSTEMS, INC. at the price of
$.001 cents per share for a period of two years from the date of this agreement
once six total cells (as described in (a) above) are tested and in operation.
4. DUTIES OF EMPLOYEE. Employee shall perform the same duties that
he has already been performing for Revcon Technologies, Corp. and in
addition shall perform those duties referenced in the option provisions
contained herein. Employee shall provide to Employer any and all information
requested by Employer concerning the business.
5. LIMITATIONS ON EMPLOYEE. Any decisions regarding raises for
employees, hiring additional employees (but not replacements of existing
employees), and expenditures for equipment or other capital expenditures,
must be agreed to by the President of Beach Access.Net, Inc.
6. REMEDIES. Should either party feel that the other has breached this
agreement, the offended party shall give notice to the other in writing stating
in what way this agreement has been breached. Should the accused party fail to
respond within ten (10) days to the notice, it shall be deemed to be an
admission of the allegations contained in the notice. Should the accused party
respond to the offended party's notice and deny that any breach has occurred,
the offended party may bring a legal action to determine whether this agreement
has been breached or not. The party who does not prevail in the legal action
shall pay the costs of the prevailing party, including a reasonable attorney's
fee.
7. TERMINATION. Should Employee terminate his employment with
Employer, the stock options referenced above shall become null if the stock
options have not been exercised at the time of termination by Employee. Should
Employee be terminated by Employer for any reason, Employee shall retain his
stock options without any contingency for performance.
8. COVENANT NOT TO COMPETE. Employee agrees that for the term of this
agreement and for two years thereafter, he will not work for any business
engaged in the origination or implementation of "SWAMI" (seamless wireless area
mobile Internet) service. This covenant not to compete shall be limited to the
continental United States. Should Employee be terminated by Employer, this
provision shall be null and void.
9. Should any term or terms of this agreement be found to be
unenforceable by a court of competent jurisdiction, then that provision shall be
stricken from this agreement, and the remainder of this agreement shall remain
in full force and effect.
10. This agreement shall be construed under the laws of the State of
South Carolina.
<PAGE> 59
11. Biofiltration Systems, Inc., the parent company of Beach
Access.Net, Inc. joins in the execution of this agreement for the sole purpose
of agreeing to provide the shares of stock contracted for under the option
provisions above.
Wherein, the parties have executed this agreement on the date first
written above.
WITNESS EMPLOYER
BEACH ACCESS.NET, INC.
/s/ Jay Knabb
------------------------------------
BY: Jay Knabb
ITS: President
REVCON TECHNOLOGIES CORP.
/s/ Jay Knabb
------------------------------------
BY: Jay Knabb
ITS: President
EMPLOYEE
/s/ Kenneth Bourg
-----------------------------------
KENNETH BOURG
BIOFILTRATION SYSTEMS, INC.
/s/ Alpha Keyser
-----------------------------------
BY: Alpha J. Keyser
ITS: President
