FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 000-29329
BIFS TECHNOLOGIES CORPORATION
(formerly known as BIOFILTRATION SYSTEMS, INC.)
(Exact Name of Registrant as Specified in its Charter)
Florida 65-0382549
-------- ----------
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
2341 Porter Lake Drive, Suite 109, Sarasota, Florida 34240
----------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
(941) 343-9300
--------------
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
-----
The number of shares of registrant's Common Stock, $.00001 par value,
outstanding as of September 30, 2000 was 519,320,716 shares.
<PAGE>
BIFS TECHNOLOGIES CORP.
INDEX
Page
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Certified Public Accountant's Review Report 1
Consolidated Balance Sheet - September 30, 2000 2
Consolidated Statements of Operations For the
Nine Months and Three Months Ended
September 30, 2000 and 1999 4
Consolidated Statements of Cash Flows For the
Nine Months Ended September 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submissions of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
FORWARD LOOKING STATEMENTS
When used in this report, the words "may, will, expect, anticipate,
continue, estimate, project or intend" and similar expressions identify
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E Securities Exchange Act of 1934 regarding events,
conditions and financial trends that may effect our future plan of operation,
business strategy, operating results and financial position. Current
stockholders and prospective investors are cautioned that any forward-looking
statements are not guarantees of future performance and are subject to risks and
uncertainties and that actual results may differ materially from those included
within the forward-looking statements as a result of various factors. Such
factors are described under the headings "Business-Certain Considerations,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the financial statements and their associates notes.
Important factors that may cause actual results to differ from projections
include, for example:
o the success or failure of management's efforts to implement their
business strategy;
o our ability to protect our intellectual property rights;
o our ability to compete with major established companies;
o our ability to attract and retain qualified employees; and
o other risks which may be described in future filings with the SEC.
BIOFILTRATION SYSTEMS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
<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 September 30, 2000, and the related consolidated statements
of operations and cash flows for the three and nine months ended September
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 includes 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 consolidated statements of operations and cash flows of
Biofiltration Systems, Inc. for the three months and nine months ended September
30, 1999, were not audited or reviewed by us and, accordingly, we do not express
an opinion on them.
CERTIFIED PUBLIC ACCOUNTANTS
(a.k.a. Semago & Company, P.A.)
Tampa, Florida
November 7, 2000
<PAGE>
BIOFILTRATION SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
ASSETS
CURRENT ASSETS
Cash $ 875,373
Accounts receivable 26,894
Inventory 31,192
Purchased customer accounts, net 104,641
-----------
TOTAL CURRENT ASSETS 1,038,100
-----------
FIXED ASSETS
Wireless internet access system,
under construction 131,770
Computer equipment 189,410
Other 26,059
-----------
347,239
Accumulated depreciation ( 22,484)
-----------
324,755
OTHER ASSETS
Patent, net 39,142
Prepaid sales commissions 18,000
Goodwill, net 270,090
Other 3,878
-----------
331,110
$ 1,693,965
The accompanying notes to consolidated
financial statements are an integral part of this
financial statement.
-2-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of related party
notes payable $ 34,848
Accounts payable and accrued expenses 86,590
-----------
TOTAL CURRENT LIABILITIES 121,438
-----------
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,
519,320,716 shares issued and
505,820,716 shares outstanding 5,193
Additional paid-in capital 5,190,391
Accumulated deficit (3,898,030)
-----------
1,297,554
Less treasury stock ( 135,000)
-----------
1,162,554
$ 1,693,965
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 NINE MONTHS AND THREE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
-------- ----------------------------
<TABLE>
<CAPTION>
Nine-months ended
2000 1999
----------- -----------
<S> <C> <C>
(Unaudited) (Unaudited)
REVENUES $ 288,623 $ 6,021
COST OF REVENUES 113,641 -
----------- -----------
GROSS PROFIT 174,982 6,021
----------- -----------
OTHER EXPENSES
General and administrative 1,953,516 194,311
Depreciation and amortization 107,869 3,244
Stock marketing expenses - 812,500
Research and development 17,775 -
Interest 31,892 30,577
----------- -----------
2,111,052 1,040,632
----------- -----------
LOSS FROM CONTINUING OPERATIONS (1,936,070) (1,034,611)
----------- -----------
DISCONTINUED OPERATIONS
Loss from discontinued operations ( 163,220) -
Loss on disposal of discontinued
operations ( 172,939) -
----------- -----------
( 336,159) -
----------- -----------
NET LOSS $(2,272,229) $(1,034,611)
=========== ===========
LOSS PER COMMON SHARE
Loss from continuing operations $( .004) $( .003)
=========== ===========
Loss from discontinued operations $ - $ -
=========== ===========
Loss from disposal of discontinued
operations $ - $ -
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (shares in 100's) 4,820,818 4,127,582
=========== ===========
</TABLE>
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 NINE MONTHS AND THREE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
------- ----------------------------
(Continued)
<TABLE>
<CAPTION>
Three-months ended
2000 1999
----------- -----------
<S> <C> <C>
(Unaudited) (Unaudited)
REVENUES $ 122,191 $ 6,021
COST OF REVENUES 61,001 -
----------- -----------
GROSS PROFIT 61,190 6,021
----------- -----------
OTHER EXPENSES
General and administrative 1,074,768 68,893
Depreciation and amortization 63,280 1,202
Stock marketing expenses - -
Research and development 17,775 -
Interest 9,891 10,134
----------- -----------
1,165,714 80,229
----------- -----------
LOSS FROM CONTINUING OPERATIONS (1,104,524) ( 74,208)
----------- -----------
DISCONTINUED OPERATIONS
Income from discontinued operations 71,542 -
Loss on disposal of discontinued
operations ( 27,941) -
----------- -----------
43,601 -
----------- -----------
NET LOSS $(1,060,923) $( 74,208)
=========== ===========
LOSS PER COMMON SHARE
Loss from continuing operations $( .002) $ -
=========== ===========
Income from discontinued operations $ - $ -
=========== ===========
Loss from disposal of discontinued
operations $ - $ -
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (shares in 100's) 5,171,405 4,209,100
=========== ===========
</TABLE>
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 NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
Nine months ended
--------------------------
2000 1999
----------- ------------
<S> <C> <C>
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 261,729 $ 6,021
Cash paid for continuing operating
expenses ( 740,865) (191,478)
Cash paid for discontinued operations ( 65,592) -
Interest ( 1,832) ( 14,332)
----------- ---------
Net cash used by operating activities ( 546,560) (199,789)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Advances to related company ( 128,000) ( 5,166)
Repayment of advances to related company 575,910 -
Purchase of fixed assets ( 134,979) ( 32,199)
----------- ---------
Net cash provided (used) by investing
activities 312,931 ( 37,365)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit payable - 79,871
Proceeds from sale of stock 1,125,362 58,991
Collections on stock subscriptions
receivable - 122,000
Repayment of related party notes
payable ( 16,366) -
----------- ---------
Net cash provided by financing activities 1,108,996 260,862
----------- ---------
NET INCREASE IN CASH 875,367 23,708
CASH, BEGINNING OF PERIOD 6 9,120
----------- ---------
CASH, END OF PERIOD $ 875,373 $ 32,828
=========== =========
</TABLE>
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 NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
Nine-months ended
-------------------------
2000 1999
----------- ----------
<S> <C> <C>
(Unaudited) (Unaudited)
RECONCILIATION OF NET LOSS TO
CASH FLOWS FROM OPERATING ACTIVITIES
NET LOSS $(2,272,229) $(1,034,611)
RECONCILING ADJUSTMENTS
Depreciation and amortization 107,869 3,244
Loss on disposal of discontinued
operations 336,159 -
Increase in accounts receivable ( 26,894) -
Increase in inventory ( 31,192) -
Increase in accounts payable and
accrued expenses 46,752 942
Increase in other assets ( 1,150) -
Stock issued for services 1,334,375 -
Treasury stock acquired by way of
reduction of expenses - 812,500
Contribution of accrued interest
to paid-in capital 27,250 18,136
Recovery of stock investment in
subsidiary company ( 67,500) -
----------- -----------
CASH FLOWS FROM OPERATING $( 546,560) $( 199,789)
=========== ===========
NONCASH INVESTING AND FINANCING ACTIVITIES
DECREASE IN ACCRUED INTEREST
PAYABLE THROUGH CONTRIBUTION
TO PAID-IN CAPITAL $ 27,250 $ 18,136
=========== ===========
ACQUISITION OF AND INVESTMENT IN
SUBSIDIARY COMPANY BY ISSUANCE
OF COMMON STOCK $ 1,589,757 $ -
=========== ===========
</TABLE>
The accompanying notes to consolidated
financial statements are an integral part of these
financial statements.
-7-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
The information presented herein as of September 30, 2000, and for the nine and
three-months ended September 30, 2000 and 1999, is unaudited.
Effective October 3, 2000, the Company has changed its name to BIFS Technologies
Corporation.
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 nine and three-month periods ended September 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.
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 nine months ended September
30, 2000, $22,600 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.
As discussed in Note G, one of these operations was subsequently discontinued.
Goodwill associated with this operation amounting to $115,962 was written off
during the nine months ended September 30, 2000. For the nine months ended
September 30, 2000, $21,367 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
SEPTEMBER 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 nine months ended September 30,
2000, employee compensation of $675,000 has been recorded to reflect the
issuance of these shares.
In April 2000, the former owner exercised the option under the above employment
agreement to purchase 3,250,000 shares of the Company's restricted common stock.
The stock issued under this option was recorded at its fair market value as of
the exercise date less a 50% discount because of the shares restricted nature.
For the nine months ended September 30, 2000, compensation of $219,375 was
recorded under this option.
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. For the
nine months ended September 30, 2000, $4,299 was recorded as goodwill
amortization. Neither of these operations had significant operations during the
nine months ended September 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;
<PAGE>
- a covenant not to compete for a two year period in certain, as defined,
businesses.
In July 2000, the former owners exercised their option under the above
employment agreements to purchase 1,000,000 shares of the Company's restricted
common stock. The stock issued under this option was recorded at its fair market
value as of the exercise date less a 50% discount because of the shares
restricted nature. For the nine months ended September 30, 2000, compensation of
$110,000 was recorded under this option.
In April 2000, Beach Access.Net, Inc. acquired the rights to provide internet
access through May 2001 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.
On August 1, 2000, certain of the above agreements were modified whereby an
additional 180,000 shares of the Company's restricted common stock was issued
for the above customer rights. An additional $30,600 was capitalized as
purchased customer accounts during the period ended September 30, 2000.
-9-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE B - BUSINESS ACQUISITIONS (continued)
In the accompanying financial statements, the purchase of these customers has
been recorded at the fair market value of stock on the date issued, less a 50%
discount because of the restricted nature of the stock. The cost of the purchase
is being amortized on a straight-line basis over twelve months through May 2001.
For the nine months ended September 30,2000, amortization of the purchase price
amounted to $53,959.
NOTE C - CONSULTING AGREEMENT
In July 2000, the Company retained a business advisor to provide various
business consulting and planning services. Terms of the agreement provided for
the following:
- five year term;
- stock option at $.001 per share on 3,000,000 shares of restricted stock
upon signing of the agreement;
- stock option at $.001 per share on an additional 1,000,000 shares of
restricted stock effective January 1, 2001;
- stock option at $.001 per share on an additional 1,000,000 shares of
restricted stock effective January 1, 2002.
During the nine months ended September 30, 2000, the business advisor exercised
the option to acquire 3,000,000 shares of restricted common stock. The stock
issued under this option was recorded at its fair market value as of the
exercise date less a 50% discount because of the shares restricted nature. For
the nine months ended September 30, 2000, professional fees of $330,000 were
recorded under this agreement.
NOTE D - 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 E - 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.
-10-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE F - 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 nine months ended September 30, 2000 and 1999,
information on reportable segments is as follows:
<TABLE>
<CAPTION>
Pollution Internet
treatment technology Total
<S> <C> <C> <C>
Nine months ended September 30, 2000
External revenue $ - $ 288,623 $ 288,623
========= ========= =========
Intersegment revenue $ - $ - $ -
========= =========== ===========
Loss from continuing
operations $ 574,192 $ 1,361,878 $ 1,936,070
Loss from discontinued
operations - 336,159 336,159
--------- --------- -----------
$ 574,192 $ 1,698,037 $ 2,272,229
</TABLE>
For the nine months ended September 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
September 30, 2000, total assets of the internet technology segment were
$552,742.
NOTE G - DISCONTINUED OPERATIONS
In August 2000, the Company discontinued certain measurable portions of its
internet technology segment. The results of operations for the periods presented
are reported as a component of discontinued operation in the statements of
operation.
Summarized results of the disposed segment for the three months:
Three months ended Nine months ended
September 30, 2000 September 30, 2000
Net sales $ 42,669 $ 338,712
======== ========
Operating income (loss) $ 71,542 $(163,220)
======== ========
Income (loss) from
discontinued operations $ 27,941 $(172,939)
For the nine months ended September 30, 1999, the Company did not operate in the
above segment.
NOTE H - OTHER COMMITMENTS AND CONTINGENCIES
In connection with development and construction of the wireless internet access
system, the Company has committed to purchase approximately $1,200,000 in
component parts used in the system. Through November 7, 2000, the Company has
paid approximately $219,000 toward this purchase.
In September 2000, the Company was approved for contract award for deicer
disposal services at MidAmerica St. Louis Airport.
-11-
<PAGE>
BIOFILTRATION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE I - PREPAID SALES COMMISSIONS
In September 2000, advances against sales commissions to a related company,
amounting to $575,910, were repaid in cash by the related company.
NOTE J - SUBSEQUENT EVENT
Subsequent to September 30, 2000, the Company's majority shareholder loaned
$500,000 to the Company's subsidiary, Beach Access.Net, Inc. Proposed terms of
the loan provide for interest at 11.0%, payable monthly, with the entire
principal balance due in October 2002.
-12-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of its operations for the nine month periods ended September 30,
2000 and 1999 should be read in conjunction with the Company's financial
statements included elsewhere herein. When used in the following discussions,
the words "believes", "anticipates", "intends, " "expects", and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, which could cause results to
differ materially from those projected.
PLAN OF OPERATION
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.
As of September 30, 2000 the Company had 800,000,000 shares authorized,
519,320,716 shares issued and 505, 820,716 shares outstanding.
On October 4, the Company announced a name change and reorganization. The
Company changed its name to BIFS Technologies Corporation to better reflect the
nature of its business operations. The pollution control systems or
biofiltration business has been consolidated under the Environment Systems
Division. Beach Access.Net in South Carolina has been consolidated under the
Information Systems Division as Myrtle Beach operations. In the accompanying
narrative, the new designations will be used.
Liquidity and Capital Resources
The current cash balance is $875,373. During the third quarter, the Company
was able to support operations without selling any shares of stock or raising
any capital from debt. Cash for operations was provided primarily from repayment
of prepaid sales commissions of $575,910 by an affiliated company.
Subsequent to quarter end, the Company's majority shareholder loaned the
Information Systems Division $500,000 for purchasing equipment for and
construction of the SWOMITM infrastructure. Terms of the agreement call for
interest at 11%, payable monthly, with the principal balance to be repaid in
October 2002. The Company believes that this cash will be adequate to fund
operations and capital programs for the remainder of the year.
<PAGE>
The Company, at September 30, 2000, had $1,693,965 in assets. The reduction
in assets of $643,471 from the prior period is due primarily to repayment of
prepaid sales commissions of $575,910 by an affiliated entity. Liabilities
consisting of certain accounts payable, accrued expenses, related party and
shareholder notes payable totaling totaled $531,408. The Company continues to
maintain a strong current assets to current liabilities ratio of 8.5:1,
increasing from 3.39 in the prior quarter.
Since inception, the Company has financed its operations primarily through
cash provided through various short- and long-term credit facilities and through
the private sale of its common stock. The Company's management believes the need
for additional capital going forward will be derived from internal revenues and
earnings generated from the sale of its products and services. If the Company is
unable to generate sufficient revenues from its products and services,
management believes the Company will need to raise additional funds to meet its
cash requirements.
Inflation
Inflation has not been a major factor in the Company's business since
inception. There can be no assurances that this will continue if or when the
Company completes an acquisition or merger.
The Environment Systems Division
In September, the Division received a contract award for installation
of "Aircraft Deicer Fluid Disposal Services" at MidAmerica St. Louis Airport.
This contract is the first award for the Division and is a direct result of its
long-term marketing program. The system is expected to be installed and
operational for the 2000/2001 deicing season.
The Division has received renewed interest in its deicing solution because
of this award. The Division continues to aggressively market its deicing and
pollution treatment technology to the airports. The budgetary and approval
process of municipal airports continues to be a significant factor affecting the
length of the sales cycle. The Division is also expanding the use of sales
agents to broaden their market coverage.
The Division expects to market one additional airport system during the
remainder of this year, in accordance with its marketing plan. The expected
annual revenues for the two systems are $550,000 for these contracts.
The cost of treatment is competitive with the Publicly Owned Treatment
Works (POTW), making the Division's solution viable for the user. The size of
system depends on the amount of wastewater volume and the COD/BOD concentrations
to be treated. The Division's system would be located on the airport grounds and
would involve pre-treatment of wastewater before discharge.
<PAGE>
The Division is also exploring other markets where its products offer a
cost effective means of treating wastewater. Agriculture, food processing, and
other applications are being considered. The Division expects to market one
other system this year with annualized contract revenues of $220,000. The
contract would be similar to those mentioned above.
The total expected revenue from the Environment Systems Division for
systems sold this year is expected to be $765,000 on an annualized basis. Due to
the nature of the contracts, there will be a system construction and
implementation delay from the time a contract is awarded to when revenues are
generated. This delay will depend on the specific site and time necessary to
obtain required construction permits, etc.
Information Systems Division
The Myrtle Beach operation is continuing the development of "SWOMITM",
Seamless Wireless Omni-directional Mobile Internet infrastructure in the Myrtle
Beach area. SWOMITM offers the user true roaming capability within the SWOMITM
system with access speeds of 2Mbps. 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.
The Company has committed significant resources to the SWOMITM project. The
Division, subsequent to quarter end, placed an order for approximately $1.2
Million of SWOMITM equipment. This new equipment, combined with existing SWOMI
infrastructure, will allow the Division to begin commercial SWOMITM operations,
on schedule, in December. The system is expected to cover sixteen contiguous
miles of the Myrtle Beach, South Carolina area and focuses on the hospitality
industry. Several hotels will be using the SWOMITM in December to provide their
guests with high-speed Internet access.
The Division expects to market the SWOMITM system in other areas of the
country after completion of the Myrtle Beach project.
Results of Operations
General
The Company generated revenue of $122,191 during the quarter, which was
primarily from Myrtle Beach ISP operations. The Company has shown a current
quarter loss of ($1,060,230), of which $659,375 resulted from compensation
expense related to exercise of options granted as part of employment and
consulting agreements.
Segment Data
The Company currently operates in two business segments, Environment
Systems and Information Systems. The only operating segment generating revenue
in 2000 is the Information Systems segment. For the nine months ended September
30, 2000 segment results follow:
<PAGE>
<TABLE>
<CAPTION>
Environment Information
Systems Systems Total
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nine months ended September 30, 2000
External revenue $0 $288,623 $288,623
== ======== ========
Intersegment revenue $0 $0 $0
== == ==
Loss from continuing Operations $(574,192) $(1,361,878) $(1,936,070)
Loss from discontinued Operation 0 (336,159) (336,159)
- --------------- --------------
Net Loss $(574,192) $(1,698,037) $(2,272,229)
========== ============ ============
</TABLE>
Since December 31, 1999, the Company has added the operations and assets of
the Information Systems segment. This segment was added on April 1, 2000 with
the purchase of Beach Access.Net and other entities. As of September 30, 2000,
total assets of the Information Systems segment were $552,742.
DISCONTINUED OPERATIONS
In August 2000, Company discontinued certain measurable portions of its
Information Systems segment. The results of operations for the periods presented
are reported as a component of discontinued operations in the statements of
operations.
Summarized results of the disposed segment for the nine month period ended
September 30, 2000 is as follows:
Net sales $ 338,712
=========
Operating loss $(163,220)
=========
Net Loss from discontinued operations $(172,939)
==========
For the period before April 1, 2000, the Company did not operate in the
above segment.
ENVIRONMENT SYSTEMS
The Company Environment Systems Division and corporate activities has
generated a loss of ($574,192) of which $330,000 related to compensation expense
from a consulting contract with Dr. Harold Campbell.
<PAGE>
The company has retained Dr. Campbell as a Senior Consultant with specific
assignments in the areas of new product development, public relations and
technology assessment. Dr. Campbell has extensive experience in public and
investor relations strategies, general business strategy formulation and other
forms of executive consulting including computing science and
telecommunications.
The contract with Dr. Campbell is for a period of five years and provided
for options on five million shares of Company stock. Three million options were
exercisable immediately and one million shares each are exercisable on January
1, 2001 and January 1, 2002. All options carry an exercise price of $0.001.
The Environment Systems Division did not have any revenues during the
quarter. Expenses were primarily related to accounting and professional fees,
interest expense and travel.
Information Systems
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 nine months ended
September 30, 2000, $22,600 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, Beach Access.Net, Inc recorded goodwill of
$279,896. One of these operations was subsequently discontinued. Goodwill
associated with this operation amounting to $115,962 was written off during the
nine months ended September 30, 2000. For the nine months ended September 30,
2000, $21,367 was recorded as goodwill amortization.
In connection with the Beach Access.Net acquisition, the Company issued to
the former owner and certain employees 8,000,000 shares of unrestricted and
restricted common stock as a signing bonus and additional compensation.
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 nine months ended September 30,
2000, employee compensation of $675,000 has been recorded to reflect the
issuance of these shares.
In April 2000, the former owner exercised the option under the employment
agreement to purchase 3,250,000 shares of the Company's restricted common stock.
The stock issued under this option was recorded at its fair market value as of
the exercise date less a 50% discount because of the shares restricted nature.
For the nine months ended September 30, 2000, compensation of $219,375 has been
recorded under this option.
<PAGE>
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. For the
nine months ended September 30, 2000, $4,299 was recorded as goodwill
amortization. Neither of these entities had significant operations during the
nine months ended September 30, 2000.
In July 2000, the former owners exercised their option under their
employment agreements to purchase 1,000,000 shares of the Company's restricted
common stock. The stock issued under this option was recorded at its fair market
value as of the exercise date less a 50% discount because of the shares
restricted nature. For the nine months ended September 30, 2000, compensation of
$110,000 was recorded under this option.
In April 2000, Beach Access.Net, Inc. acquired the rights to provide
Internet access through May 2001 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.
On August 1, 2000, certain of the above agreements were modified whereby an
additional 180,000 shares of the Company's restricted common stock was issued
for the above customer rights. An additional $30,600 was capitalized as
purchased customer accounts during the period ended September 30, 2000.
In the accompanying financial statements, the purchase of these customers
has been recorded at the fair market value of stock on the date issued, less a
50% discount because of the restricted nature of the stock. The cost of the
purchase is being amortized on a straight-line basis over twelve months through
May 2001. For the nine months ended September 30,2000, amortization of the
purchase price amounted to $53,959.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings or litigation, and the
officers and directors are aware of no other pending litigation.
Item 2. CHANGES IN SECURITIES.
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
Item 5. OTHER EVENTS
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) There were no reports on Form 8-K filed by the registrant for
the quarter ending September 30, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BIFS TECHNOLOGIES CORP.
Date: November 13, 2000 By: /s/ Alpha J. Keyser
---------------------------------
Alpha J. Keyser, President and CEO
(Principal Executive Officer)
