Attached files
file | filename |
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EX-32.1 - Todays Alternative Energy Corp | v196071_ex32-1.htm |
EX-31.2 - Todays Alternative Energy Corp | v196071_ex31-2.htm |
EX-31.1 - Todays Alternative Energy Corp | v196071_ex31-1.htm |
EX-32.2 - Todays Alternative Energy Corp | v196071_ex32-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended July 31,
2010
o
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from _________________ to _________________
Commission
File No.: 000-33229
TODAYS
ALTERNATIVE ENERGY CORPORATION
(Exact
name of registrant as specified in its charter)
BIO
SOLUTIONS MANUFACTURING, INC.
(Former
Name)
Nevada
|
16-1576984
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
9720
Heatherstone River Court
Townhouse
1
Estero,
FL 33928
(Address
of principal executive offices)
Issuer’s
telephone number: (888) 880-0994
Check
whether the registrant filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ¨ No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filter ¨
|
Accelerated
filter ¨
|
|
Non-accelerated
filter ¨
|
(Do
not check if a smaller reporting company)
|
Smaller
reporting company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act. Yes ¨ No x
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE
PRECEDING FIVE YEARS
Indicate
by check mark whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes ¨ No ¨
APPLICABLE
ONLY TO CORPORATE ISSUERS
As of
September 7, 2010, there were 37,208,910 shares of our common stock issued
and outstanding.
Transitional
Small Business Disclosure Format: Yes
¨
No x
PART
1: FINANCIAL
INFORMATION
ITEM
1 – FINANCIAL STATEMENTS
Todays
Alternative Energy Corporation
(Formerly
Bio Solutions Manufacturing, Inc.)
Condensed
Consolidated Balance Sheets
July 31,
|
October 31,
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
Assets
|
||||||||
|
|
|
|
|
||||
Current
assets:
|
||||||||
Cash
|
$
|
3,014
|
$
|
3,423
|
||||
Prepaid
expense
|
1,950
|
-
|
||||||
Total
current assets
|
4,964
|
3,423
|
||||||
Total
assets
|
$
|
4,964
|
$
|
3,423
|
||||
Liabilities
and Stockholders' (Deficit)
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
$
|
1,201,524
|
$
|
1,112,481
|
||||
Convertible
notes payable
|
1,327,549
|
1,112,222
|
||||||
Total
current liabilities
|
2,529,073
|
2,224,703
|
||||||
Stockholders'
(deficit):
|
||||||||
Preferred
stock, $0.00001 par value, 10,000,000 authorized,10,000 shares of Series A
issued and outstanding as of July 31, 2010 and October 31, 2009 and 83,000
and 92,000 shares of Series B issued and outstanding as of July 31, 2010
and October 31, 2009, respectively
|
1
|
1
|
||||||
Common
stock, $0.00001 par value, 1,000,000,000 shares authorized, 37,097,922 and
26,617,197shares issued and outstanding as of July 31, 2010 and October
31, 2009, respectively
|
371
|
266
|
||||||
Additional
paid-in capital
|
7,124,312
|
6,806,420
|
||||||
Accumulated
deficit
|
(9,648,793
|
)
|
(9,027,967
|
)
|
||||
Total
stockholders' (deficit)
|
(2,524,109
|
)
|
(2,221,280
|
)
|
||||
Total
liabilities and stockholders' (deficit)
|
$
|
4,964
|
$
|
3,423
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
F-1
Todays Alternative Energy
Corporation
(Formerly
Bio Solutions Manufacturing, Inc.)
Condensed Consolidated
Statements of
Operations
(Unaudited)
Three Months Ending
|
Nine Months Ending
|
|||||||||||||||
July 31,
|
July 31,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Revenues
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||
Cost
of goods sold
|
-
|
-
|
-
|
-
|
||||||||||||
Gross
profit
|
-
|
-
|
-
|
-
|
||||||||||||
Expenses:
|
||||||||||||||||
General
and administrative expenses
|
136,305
|
61,380
|
316,853
|
291,263
|
||||||||||||
Total
expenses
|
136,305
|
61,380
|
316,853
|
291,263
|
||||||||||||
Net
loss from operations before other expenses and provision for income
taxes
|
(136,305
|
)
|
(61,380
|
)
|
(316,853
|
)
|
(291,263
|
)
|
||||||||
Other
expenses:
|
||||||||||||||||
Beneficial
conversion feature expense
|
(43,748
|
)
|
(92,650
|
)
|
(229,992
|
)
|
(215,202
|
)
|
||||||||
Interest
expense
|
(26,533
|
)
|
(16,999
|
)
|
(73,981
|
)
|
(52,634
|
)
|
||||||||
(70,281
|
)
|
(109,649
|
)
|
(303,973
|
)
|
(267,836
|
)
|
|||||||||
Net
loss before provision for income taxes
|
(206,586
|
)
|
(171,029
|
)
|
(620,826
|
)
|
(559,099
|
)
|
||||||||
Provision
for income taxes
|
-
|
-
|
-
|
-
|
||||||||||||
Net
loss
|
$
|
(206,586
|
)
|
$
|
(171,029
|
)
|
$
|
(620,826
|
)
|
$
|
(559,099
|
)
|
||||
Net
loss per weighted average share - basic and diluted
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
$
|
(0.06
|
)
|
||||
Weighted
average number of shares - basic and diluted
|
30,704,017
|
21,352,620
|
28,008,510
|
9,746,822
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
F-2
Todays
Alternative Energy Corporation
(Formerly
Bio Solutions Manufacturing, Inc.)
Unaudited
Condensed Consolidated Statements of Cash Flows
Nine Months Ended
|
||||||||
July 31,
|
||||||||
2010
|
2009
|
|||||||
Net
cash used by operating activities
|
$
|
(201,537
|
)
|
$
|
(194,156
|
)
|
||
Net
cash used by investing activities
|
-
|
-
|
||||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from notes payable
|
206,788
|
215,202
|
||||||
Payments
on notes payable
|
(5,660
|
)
|
(21,053
|
)
|
||||
Net
cash provided by financing activities
|
201,128
|
194,149
|
||||||
Net
decrease in cash
|
(409)
|
(7
|
)
|
|||||
Cash
and cash equivalents – beginning
|
3,423
|
873
|
||||||
Cash
and cash equivalents – ending
|
$
|
3,014
|
$
|
866
|
||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW:
|
||||||||
Interest
paid
|
$
|
-
|
$
|
-
|
||||
Income
taxes paid
|
$
|
-
|
$
|
-
|
||||
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
||||||||
Shares
issued for legal settlement
|
$
|
-
|
$
|
92,000
|
||||
Shares
issued for services provided
|
$
|
80,000
|
$
|
66,300
|
||||
Debt
converted to equity
|
$
|
8,005
|
$
|
25,600
|
||||
Expense
paid directly from proceeds of notes payable
|
$
|
-
|
$
|
12,500
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
F-3
TODAYS
ALTERNATIVE ENERGY CORPORATION
(FORMERLY
BIO SOLUTIONS MANUFACTURING, INC.)
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE
MONTHS ENDED JULY 31, 2010 AND 2009
NOTE
1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements of Todays
Alternative Energy Corporation (formerly Bio Solutions Manufacturing, Inc.) (the
“Company”) have been prepared in accordance with accounting principles generally
accepted in the United States of America and the rules of the Securities and
Exchange Commission (“SEC”), and should be read in conjunction with the audited
consolidated financial statements and notes thereto contained in the Company’s
Annual Report filed with the SEC on Form 10-K. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of financial position and the results of operations for the interim
periods presented have been reflected herein. The results of operations for the
interim periods are not necessarily indicative of the results to be expected for
the full year. Notes to the unaudited condensed consolidated financial
statements which would substantially duplicate the disclosure contained in the
audited consolidated financial statements for the fiscal year ended October 31,
2009 as reported in the 10-K have been omitted.
The
Company has presented this Form 10-Q in condensed manner, hence certain
reclassifications have been made to the prior comparable period to conform to
this period’s presentation.
The
unaudited condensed consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary, Bio-Extraction Services, Inc.
(“BESI”). Significant inter-company accounts and transactions have been
eliminated.
The
Company has adopted the fiscal year end of October 31.
Nature
of Business and History of Company
The
Company operates a biodiesel division that intends to use extraction technology
to convert waste cooking oil and grease into a biodiesel fuel ingredient sold to
biodiesel fuel producers. The Company's business is designed to eliminate
environmental issues associated with disposing of waste cooking oil and grease.
The Company operates a cleaning division that will manufacture and sell a new
line of industrial strength environmentally friendly biodegradable cleaning
products that contain natural non-toxic ingredients made more powerful by the
Company's own scientific formulations. The Company’s products are not
currently being sold. The Company anticipates resuming its sales and marketing
activities once it has obtained additional working capital.
Corporate
Changes
On
October 24, 2008, the Company stockholders approved the change of the Company’s
domicile from New York to Nevada by means of a merger of Bio Solutions
Manufacturing, Inc, a New York corporation with and into its wholly owned
subsidiary Todays Alternative Energy Corporation (Formerly Bio Solutions
Manufacturing, Inc.), a Nevada corporation, which change included, among other
things, a change in the Company’s authorized capital, a change in its articles
of incorporation, and a change in its bylaws. The reincorporation closed on
October 31, 2008.
All
current and prior share data has been changed to reflect the 1-for-1,000 reverse
stock split (“Reverse Stock Split”) effectuated by the Company on November 20,
2008.
On April
19, 2010, holders of the majority of the voting power of the outstanding stock
of Bio-Solutions Manufacturing, Inc. as of April 16, 2010, voted in favor of
changing the Company’s name to Todays Alternative Energy
Corporation. On June 9, 2010, the Company filed a certificate of
amendment with the Secretary of State of Nevada in order to effect the name
change.
Revenue
Recognition
The
Company recognizes revenue from product sales based on four basic criteria which
must be met before revenue can be recognized: (1) persuasive evidence that an
arrangement exists; (2) delivery has occurred; (3) the selling price is fixed
and determinable; and (4) collectibility is reasonably assured. Determination of
criteria (3) and (4) are based on management's judgment regarding the fixed
nature of the selling prices of the products delivered and the collectibility of
those amounts. Provisions for discounts and rebates to customers, estimated
returns and allowances, and other adjustments are provided for in the same
period the related sales are recorded. The Company defers any revenue for which
the product was not delivered or is subject to refund until such time that the
Company and the customer jointly determine that the product has been delivered
or no refund will be required.
F-4
Use of
Estimates
The
preparation of the financial statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Cash and Cash
Equivalents
For the
purpose of the accompanying unaudited condensed consolidated financial
statements, all highly liquid investments with a maturity of three months or
less are considered to be cash equivalents.
Inventories / Cost of Goods
Sold
The
Company has adopted a policy to record inventory at the lower of cost or market
determined by the first-in-first-out method. The elements of cost that comprise
inventory and cost of good sold are FOB shipping point costs, freight and
destination charges, customs and importation fees and taxes, customer broker
fees (if any) and other related costs. Warehousing costs are charged to cost of
goods in the period the costs are incurred. The Company provides inventory
allowances based on estimates of obsolete inventories.
Allowance for doubtful
accounts
The
Company maintains an allowance for doubtful accounts to reduce amounts to their
estimated realizable value, including reserves for customer and other receivable
allowances and incentives. In estimating the provision for doubtful accounts,
the company considers a number of factors including age of the accounts
receivable, trends and ratios involving the age of the accounts receivable and
the customer mix of each aging categories. As of July 31, 2010 and October 31,
2009 the allowance for doubtful accounts was $0 and $0,
respectively.
Property and
Equipment
Property
and equipment are stated at cost. When retired or otherwise disposed, the
related carrying value and accumulated depreciation are removed from the
respective accounts and the net difference less any amount realized from
disposition, is reflected in earnings. For financial statement purposes,
property and equipment would be recorded at cost and depreciated using the
straight-line method over their estimated useful lives.
Impairment of Long-Lived
Assets
Long-lived
assets and certain identifiable intangibles held and used by the Company are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Events relating to
recoverability may include significant unfavorable changes in business
conditions, recurring losses, or a forecasted inability to achieve break-even
operating results over an extended period. The Company evaluates the
recoverability of long-lived assets based upon forecasted discounted cash flows.
Should impairment in value be indicated, the carrying value of intangible assets
will be adjusted, based on estimates of future discounted cash flows resulting
from the use and ultimate disposition of the asset. Assets to be disposed of are
reported at the lower of the carrying amount or the fair value less disposal
costs.
Research and
Development
All
research and development costs must be charged to expense as incurred.
Accordingly, internal research and development costs are expensed as incurred.
Third-party research and development costs are expensed when the contracted work
has been performed or as milestone results have been achieved. Company-sponsored
research and development costs related to both present and future products are
expensed in the period incurred. The Company had no expenditures on research and
product development for the three and nine months ended July 31, 2010 and 2009,
respectively.
Loss per
Share
Basic and
diluted loss per share amounts are computed based on net loss divided by the
weighted average number of common shares outstanding. Potentially dilutive
shares of common stock realizable from the conversion of our convertible
debentures of 1,689,791,575 and 1,278,565,000, respectively at July 31, 2010 and
2009, are excluded from the computation of diluted net loss per share as their
inclusion would be anti-dilutive.
Concentration of Credit
Risk
Financial
instruments and related items, which potentially subject the Company to
concentrations of credit risk, consist primarily of cash, cash equivalents and
trade receivables. The Company places its cash and temporary cash investments
with high credit quality institutions. At times, such investments may be in
excess of the FDIC insurance limit.
F-5
Liquidity
As shown
in the accompanying unaudited condensed consolidated financial statements, the
Company’s current liabilities exceed its current assets by $2,524,109 as of July
31, 2010. The Company has incurred a net loss of $620,826 and used $201,537 in
cash flows for operations during the nine months ended July 31,
2010.
Reclassifications
Certain
reclassifications have been made in prior year's financial statements to conform
to classifications used in the current year.
Recent accounting
pronouncements
New Accounting Requirements
and Disclosures
In
January 2010, the FASB issued Accounting Standards Update No. 2010-06, “Fair
Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair
Value Measurements.” ASU 2010-06 amends Subtopic 820-10 to clarify existing
disclosures, require new disclosures, and includes conforming amendments to
guidance on employers’ disclosures about postretirement benefit plan assets. ASU
2010-06 is effective for interim and annual periods beginning after December 15,
2009, except for disclosures about purchases, sales, issuances, and settlements
in the roll forward of activity in Level 3 fair value measurements. Those
disclosures are effective for fiscal years beginning after December 15, 2010 and
for interim periods within those fiscal years. The adoption of the new guidance
did not have a material impact on the Company’s financial
statements.
In
January 2010, the FASB issued Update No. 2010-05 “Compensation—Stock
Compensation—Escrowed Share Arrangements and Presumption of Compensation”
(“2010-05”). 2010-05 re-asserts that the Staff of the SEC has stated
the presumption that for certain shareholders escrowed shares represent a
compensatory arrangement. 2010-05 further clarifies the criteria
required to be met to establish a position different from the SEC Staff’s
position. The Company does not believe this pronouncement will have
any material impact on its financial position, results of operations, or cash
flows.
In
January 2010, the FASB issued Update No. 2010-04 “Accounting for Various
Topics—Technical Corrections to SEC Paragraphs” (“2010-04”). 2010-04
represents technical corrections to SEC paragraphs within various sections of
the Codification. Management is currently evaluating whether these
changes will have any material impact on its financial position, results of
operations or cash flows.
In
January 2010, the FASB issued Update No. 2010-02 “Accounting and Reporting for
Decreases in Ownership of a Subsidiary—a Scope Clarification” (“2010-02”) an
update of ASC 810 “Consolidation.” 2010-02 clarifies the scope of ASC
810 with respect to decreases in ownership in a subsidiary to those of a
subsidiary or group of assets that are a business or nonprofit, a subsidiary
that is transferred to an equity method investee or joint venture, and an
exchange of a group of assets that constitutes a business or nonprofit activity
to a non-controlling interest including an equity method investee or a joint
venture. Management does not expect adoption of this standard to have
any material impact on its financial position, results of operations or
operating cash flows. Management does not intend to decrease its
ownership in its wholly-owned subsidiary.
In
January 2010, the FASB issued Update No. 2010-01 “Accounting for Distributions
to Shareholders with Components of Stock and Cash—a consensus of the FASB
Emerging Issues Task Force” (“2010-03”) an update of ASC 505
“Equity.” 2010-03 clarifies the treatment of stock distributions as
dividends to shareholders and their affect on the computation of earnings per
shares. Management does not expect adoption of this standard to have
any material impact on its financial position, results of operations or
operating cash flows.
In
February 2010, the FASB issued Accounting Standards Update No. 2010-09,
“Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure
Requirements.” ASU 2010-09 addresses both the interaction of the requirements of
Topic 855 with the SEC’s reporting requirements and the intended breadth of the
reissuance disclosures provisions related to subsequent events. An entity that
is an SEC filer is not required to disclose the date through which subsequent
events have been evaluated. ASU 2010-09 is effective immediately. The adoption
of the new guidance did not have a material impact on the Company’s financial
statements.
In April
2010, the FASB issued an accounting standard update, amending disclosure
requirements related to income taxes, as a result of the Patient Protection and
Affordable Care Act (“PPACA”), which became law on March 23, 2010, and was
subsequently amended on March 30, 2010. The adoption of this
accounting standard update did not have a material impact on our financial
position or results of operations.
Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not, or are not believed by
management to, have a material impact on the Company’s present or future
consolidated financial statements.
F-6
Going
Concern
The
accompanying unaudited condensed consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. Going
concern contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business over a reasonable length of time.
The Company has incurred losses since inception and has negative cash flows from
operations. For the years ended October 31, 2009 and 2008, the Company has
incurred net losses of $927,207 and $592,439, respectively, and has a
stockholders’ deficit of $2,221,280 as of October 31, 2009. For the nine months
ended July 31, 2010 and 2009, the Company has incurred net losses of
$620,826 and $559,099, respectively, and has a stockholders’ deficit of
$2,524,109 as of July 31, 2010. The future of the Company is dependent upon its
ability to obtain additional equity or debt financing and upon future successful
development and marketing of the Company’s products and services. Management is
pursuing various sources of equity and debt financing. Although the Company
plans to pursue additional financing, there can be no assurance that the Company
will be able to secure such financing or obtain financing on terms beneficial to
the Company. Failure to secure such financing may result in the Company’s
inability to continue as a going concern and the impairment of the recorded long
lived assets.
Currently,
the Company employees consist of its CEO and CFO. To conserve cash,
minimize borrowing and minimize overhead costs, the Company is outsourcing
certain administrative and operating activities under an arrangement that allows
it to pay for the services with shares of Company common stock. The
Company continues to need to borrow cash from time to time in order to pay its
operating costs while it seeks substantial financing needed to generate sales
from its Biodiesel Division and Cleaning Division. The Company
anticipates future losses from operations as a result of ongoing overhead
expenses incurred while it attempts to resume selling activities.
These
unaudited condensed consolidated financial statements do not include any
adjustments relating to the recoverability and classifications of recorded
assets, or the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue in existence.
NOTE
2 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accrued
expenses are comprised of the following:
July 31, 2010
|
October 31, 2009
|
|||||||
Accounts
payable
|
$
|
283,047
|
$
|
355,350
|
||||
Salaries
|
432,727
|
382,764
|
||||||
Interest
|
359,496
|
285,514
|
||||||
Payroll
taxes
|
80,977
|
73,576
|
||||||
Other
|
45,277
|
15,277
|
||||||
Total
accrued expenses
|
$
|
1,201,524
|
$
|
1,112,481
|
F-7
NOTE
3 – CONVERTIBLE NOTES PAYABLE
On
November 29, 2006, the Company entered into a loan agreement with certain
existing third-party lenders and a new lender, pursuant to which the Company
borrowed approximately $164,000 and certain outstanding debt obligations were
amended and restated. Under the loan agreement, the existing lenders received
amended and restated convertible promissory notes in the aggregate principal
amounts of $537,955 and $264,625, respectively, and the new lender received a
convertible promissory note in the aggregate principal amount of $164,000. Under
the loan agreement and the notes, each lender may, in its sole and absolute
discretion, make additional loans to the Company, up to an aggregate total of
$1,000,000 per lender. Each note was convertible into shares of the Company’s
common stock at a conversion rate equal to the lower of (a) $0.05 per
share, or (b) seventy percent (70%) of the three day average of the closing
bid price of the Company’s common stock immediately prior to conversion,
although such conversions could not be less than $0.01 per share, in any
circumstances. In May 2008, the conversion price was amended to provide a fixed
conversion price of $0.001 per share. In addition, the note holders cannot
convert any principal or interest under the notes to the extent that such
conversion would require the Company to issue shares of its common stock in
excess of its authorized and unissued shares of common stock.
Beneficial
conversion feature expenses of $43,748 and $92,650 were recorded in the three
months ended July 31, 2010 and 2009, respectively and beneficial conversion
feature expenses of $229,992 and $215,202 were recorded in the nine months ended
July 31, 2010 and 2009, respectively, all of which were attributed to this loan
agreement. The notes are secured by a first priority security interest in all of
the assets of the Company.
As of
July 31, 2010 and October 31, 2009, there were six and two note holders,
respectively, which held the Company’s notes payable with aggregate principal
outstanding balances of $1,327,549 and $1,112,222, respectively.
NOTE
4 - EQUITY TRANSACTIONS
In
connection with the October 31, 2008 closing of the transaction for the change
in domicile from New York to Nevada, the Articles of Incorporation and bylaws of
the surviving Nevada corporation are now the articles and bylaws of the Company.
The new Articles of Incorporation have increased the Company’s authorized
capitalization to 1,010,000,000 shares of which 1,000,000,000 shares are
authorized as common stock, par value $0.00001 per share and 10,000,000 shares
of preferred stock, par value $0.00001 per share.
Preferred
Stock
The
Company has authorized 10,000,000 shares of preferred stock. The Company’s board
of directors is expressly authorized to provide for the issue of all or any of
the shares of the preferred stock in one or more series, and to fix the number
of shares and to determine or alter for each such series, such voting powers,
full or limited, or no voting powers, and such designations, preferences, and
relative, participating, optional, or other rights and such qualifications,
limitations, or restrictions thereof, as shall be adopted by the board of
directors and as may be permitted by law.
On July
25, 2008, the Company created a series of preferred stock of the Company known
as Series A Preferred Stock, par value $0.001 per share. In connection with the
change in domicile, the par value was reduced to $0.00001 per share on October
31, 2008. The Series A Preferred Stock is not convertible. Holders of the Series
A Preferred Stock do not have any preferential dividend or liquidation rights.
The shares of Series A Preferred Stock are not redeemable. On all matters
submitted to a vote of the holders of the common stock, including, without
limitation, the election of directors, a holder of shares of the Series A
Preferred Stock shall be entitled to the number of votes on such matters equal
to the product of (a) the number of shares of the Series A Preferred Stock held
by such holder, (b) the number of issued and outstanding shares of Company
common stock, as of the record date for the vote, or, if no such record date is
established, as of the date such vote is taken or any written consent of
stockholders is solicited, and (c) 0.0002.
On August
1, 2008, the Company issued 10,000 shares of Series A Preferred Stock to the
Company’s Chief Financial Officer in consideration of accrued and unpaid salary
due her. The Company deemed the stated value of the Series A Preferred Stock to
be $1.00 per share.
On April
29, 2009, the Company created a series of preferred stock of the Company known
as Series B Preferred Stock, par value $0.00001 per share. The Series B
Preferred Stock has a stated value of $1.00 per share and is convertible into
shares of common stock at a conversion rate equal to the average of the Per
Shares Market Values (as defined) during the 10 trading days immediately prior
to conversion. No holder of Series B Preferred Stock may convert more than 1,000
shares of its Series B Preferred Stock in any given month and collectively the
holders of Series B Preferred Stock may not convert more than 4,000 shares in
any calendar month. In addition, holders of the Series B Preferred Stock may not
convert such shares into common stock if as a result of such conversion the
holder would hold in excess of 4.99% shares of Company issued and
outstanding common stock. The Series B Preferred Stock does not contain any
voting, liquidation, dividend or preemptive rights.
On April
30, 2009, the Company issued 92,000 shares of Series B Preferred Stock in
accordance with a Settlement Agreement and General Release dated April 30, 2009
in connection with the Becker litigation. During the nine months ended July 31,
2010, the Series B preferred stock holder converted 9,000 shares of Series B
Preferred Stock into 188,044 shares of common stock.
F-8
Common
Stock
Effective
with the October 31, 2008 change in the Company’s Articles of Incorporation, the
Company has 1,000,000,000 shares of authorized common stock. Par value was
changed to $0.00001 per share from $0.001 per share. The holders of the
Company’s common stock are entitled to one vote per share of common stock
held.
As of
July 31, 2010 and October 31, 2009, there were 37,097,922 and 26,617,197 shares
of Company common stock issued and outstanding, respectively.
Warrants
All
warrants issued have expired in the fiscal year ended October 31,
2009.
Stock
incentive plans
On April
19, 2002, the Company adopted the 2002 Omnibus Securities Plan (the “2002
Plan”). Under the plan, the Company may grant options or issue stock to selected
employees, directors, and consultants up to 30,000 shares. The exercise price of
each option is at the discretion of the Board of Directors but can not be less
than 85% of the fair market value of a share at the date of grant (100% of fair
market value for 10% stockholders). The vesting period of each option granted is
also at the discretion of the Board of Directors, but each option granted shall
vest at a rate of no less than 20% per year from date of grant.
In August
2005, the number of shares under the 2002 Plan was increased by 3,000,000 and
400 shares were issued under the 2002 Plan. In January 2006, the 3,000,000
increase was reaffirmed and ratified by the Board of Directors when technical
deficiencies in the registration statement registering the shares of stock
issuable under the 2002 Plan were corrected. As of July 31, 2010, there were
3,030,000 shares authorized under the 2002 Plan, 2,540 shares issued after
giving effect to the Reverse Stock Split and no options granted.
On
October 27, 2006, the Company adopted its 2006 Stock Incentive Plan (the “2006
Plan”). The Company is permitted to issue up to 6,000,000 shares of common stock
under the 2006 Plan in the form of stock options, restricted stock awards, and
stock awards to employees, non-employee directors, and outside consultants. As
of July 31, 2010, there were 6,000 shares issued under the 2006 Plan after
giving effect to the Reverse Stock Split and no options have been
granted.
In
December 2006, options to purchase an aggregate of 4,000 shares of common stock
at an exercise price of $300 per share were issued to consultants. The options
vested based on the number of gallons of bio-diesel alternative fuel that was
converted by the Company’s bio-converter from sites introduced directly or
indirectly by the consultant. As the vesting of these options did not occur
during the terms of the options, the Company did not value such options, which
has expired as of January 31, 2010. A summary of the non-plan option
activity for the nine months ended July 31, 2010 is as
follows:
Stock Options
|
Weighted Average
Exercise Price
|
|||||||||||||||
Outstanding
|
Exercisable
|
Outstanding
|
Exercisable
|
|||||||||||||
Balance
- October 31, 2009
|
4,000
|
-
|
$
|
300
|
$
|
-
|
||||||||||
Granted
Fiscal Year 2010
|
-
|
-
|
-
|
-
|
||||||||||||
Exercised
Fiscal Year 2010
|
-
|
-
|
-
|
-
|
||||||||||||
Expired
Fiscal Year 2010
|
(4,000
|
)
|
-
|
(300
|
)
|
-
|
||||||||||
Balance
– July 31, 2010
|
-
|
-
|
$
|
-
|
$
|
-
|
On
October 15, 2007, the Company adopted its 2007 Stock Incentive Plan (the “2007
Plan”). The Company is permitted to issue up to 10,000,000 shares of common
stock under the 2007 Plan in the form of stock options, restricted stock awards,
and stock awards to employees, non-employee directors, and outside consultants.
As of July 31, 2010, there were 9,960 shares issued under the 2007 Plan after
giving effect to the Reverse Stock Split and no options have been
granted.
On
April 22, 2008, the Company adopted its 2008 Stock Incentive Plan (the “2008
Plan”). The Company is permitted to issue up to 16,000,000 shares of common
stock under the 2008 Plan in the form of stock options, restricted stock awards,
and stock awards to employees, non-employee directors, and outside consultants.
As of July 31, 2010, there were 1,077,715 shares issued under the 2008 Plan
after giving effect to the Reverse Stock Split.
On April
22, 2008, the Company adopted its 2008 California Stock Incentive Plan (the
“California Plan”). The Company is permitted to issue up to 16,000,000 shares of
common stock under the California Plan in the form of stock options, restricted
stock awards, and stock awards to employees, non-employee directors, and outside
consultants. As of July 31, 2010, there were 1,357,241 shares issued under the
California Plan after giving effect to the Reverse Stock Split and no options
have been granted.
F-9
NOTE
5 - INCOME TAXES
The
Company recognizes deferred tax liabilities and assets for the expected future
tax consequences of events that have been included in the financial statement or
tax returns.
Under
this method, deferred tax liabilities and assets are determined based on the
difference between financial statements and tax basis of assets and liabilities
using enacted tax rates in effect for the year in which the differences are
expected to reverse. Temporary differences between taxable income reported for
financial reporting purposes and income tax purposes are insignificant.
Management estimates that at July 31, 2010, the Company has available for
federal income tax purposes a net operating loss carry forward of approximately
$5 million (which will begin expiring in 2019 through 2029) that may be used to
offset future taxable income. Due to significant changes in the Company's
ownership, the future use of its existing net operating losses may be
limited.
The
Company has provided a valuation reserve against the full amount of the net
operating loss benefit since, in the opinion of management based upon the
earnings history of the Company, it is more likely than not that the benefits
will not be realized. Components of deferred tax assets as of July 31, 2010 are
as follows:
Net
operating loss carry forward
|
$
|
1,700,000
|
||
Valuation
allowance
|
(1,700,000
|
)
|
||
Net
|
$
|
0
|
The
Company has not filed federal or state income tax returns for several
years.
NOTE
6 - RELATED PARTY TRANSACTIONS
During
2008, the Company issued 10,000 shares of Series A Preferred Stock to its Chief
Financial Officer in satisfaction of $10,000 in salary owed.
During
2009, there were 1,100 shares of common stock issued, respectively, to related
parties, management and employees of the Company for services rendered. The
expense for such shares issued was recorded using the then fair market value of
the shares issued.
NOTE
7 - COMMITMENTS AND CONTINGENCIES
Payroll
Taxes
At July
31, 2010 and October 31, 2009, the Company is delinquent with remitting payroll
taxes of $80,977 and $73,576, respectively, including estimated penalties and
interest. The Company has recorded the delinquent payroll taxes, which are
included in accrued expenses on the balance sheet. Although the Company has not
entered into any formal repayment agreements with the respective tax
authorities, management plans to make payment as funds become available.
Penalties and interest amounts are subject to increase based on a number of
factors that can cause the estimated liability to increase further.
Employment
agreements
On
October 30, 2007, the Company entered into employment agreements with the
Company’s President and Chief Financial Officer. Each agreement is for an
initial term of three years and provides for an annual base salary during the
term of the agreement of $75,000 and $54,000, respectively, provided, however,
that the base salary shall be increased to $150,000 and $100,000 per annum,
respectively, upon closing of a private placement of the Company’s debt or
equity securities resulting in gross proceeds of at least $4 million. Each
officer will receive performance based bonuses upon attainment of certain gross
revenue targets specified in each employment agreement. Each officer will also
receive stock grants of 200, 250, 300, and 350 shares of the Company’s common
stock in each of fiscal 2007, 2008, 2009 and 2010, respectively. The Company has
agreed to grant each officer options to purchase 4,000 shares of Company common
stock with exercise prices ranging from $170 to $2,000, which options would vest
upon the attainment of certain gross revenue targets, as more specifically set
forth in the employment agreements. The granting of the options is subject to
the Company’s adoption of a stock option plan for such purpose.
Each
employment agreement also contains the following material provisions: (i)
reimbursement for all reasonable travel and other out-of-pocket expenses
incurred in connection with employment; (ii) three (3) weeks paid vacation
leave; (iii) medical, dental and life insurance benefits; (iv) a severance
payment of twelve (12) month’s salary at the then-applicable base salary rate in
the event that the Company terminates the officer’s employment without cause or
if the officer’s employment is terminated due to death or disability; and (v) 24
month non-compete/non solicitation terms.
F-10
NOTE
8 – FAIR VALUE MEASUREMENTS
Fair Value Measurements under
GAAP clarifies the principle that fair value should be based on the assumptions
market participants would use when pricing an asset or liability and establishes
a fair value hierarchy that prioritizes the information used to develop those
assumptions. Under the standard, fair value measurements are separately
disclosed by level within the fair value hierarchy. It only applies to
accounting pronouncements that already require or permit fair value measures,
except for standards that relate to share-based payments.
Level 1 -
Quoted prices in active markets for identical assets or
liabilities.
Level 2 -
Observable inputs other than Level 1 prices such as quoted prices for similar
assets or liabilities; quoted prices in markets with insufficient volume or
infrequent transactions (less active markets); or model-derived valuations in
which all significant inputs are observable or can be derived principally from
or corroborated by observable market data for substantially the full term of the
assets or liabilities.
Level 3 -
Unobservable inputs to the valuation methodology that are significant to the
measurement of fair value of assets or liabilities.
To the
extent that valuation is based on models or inputs that are less observable or
unobservable in the market, the determination of fair value requires more
judgment. In certain cases, the inputs used to measure fair value may fall into
different levels of the fair value hierarchy. In such cases, for disclosure
purposes, the level in the fair value hierarchy within which the fair value
measurement is disclosed and is determined based on the lowest level input that
is significant to the fair value measurement.
The
carrying value of the Company’s cash, accounts payable, short-term borrowings
(including convertible notes payable), approximate fair value because of their
short-term maturity. All other significant financial assets, financial
liabilities and equity instruments of the Company are either recognized or
disclosed in the unaudited condensed consolidated financial statements together
with other information relevant for making a reasonable assessment of future
cash flows, interest rate risk and credit risk. Where practicable the fair
values of financial assets and financial liabilities have been determined and
disclosed; otherwise only available information pertinent to fair value has been
disclosed.
As of
July 31, 2010, there were no assets or liabilities that were measured at fair
value on a recurring basis.
NOTE
9 – SUBSEQUENT EVENTS
Since
July 31, 2010, the Company has issued 110,988 shares of Company common stock in
satisfaction of notices to convert 1,000 shares of Series B Preferred
Stock.
Since
July 31, 2010, the Company has issued 3,571,428 shares of Company common stock
to consultants for services rendered.
Since
July 31, 2010, the Company has borrowed an additional $11,200 under its November
29, 2006 loan agreement.
F-11
ITEM
2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The
following discussion and analysis should be read in conjunction with our audited
condensed consolidated financial statements and related notes included in this
report. This report contains “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995. The statements contained
in this report that are not historic in nature, particularly those that utilize
terminology such as “may,” “will,” “should,” “expects,” “anticipates,”
“estimates,” “believes,” or “plans” or comparable terminology are
forward-looking statements based on current expectations and
assumptions.
Various
risks and uncertainties could cause actual results to differ materially from
those expressed in forward-looking statements. Factors that could cause actual
results to differ from expectations include, but are not limited to, those set
forth under the section “Risk Factors” set forth in this report.
The
forward-looking events discussed in this report, the documents to which we refer
you and other statements made from time to time by us or our representatives,
may not occur, and actual events and results may differ materially and are
subject to risks, uncertainties and assumptions about us. For these statements,
we claim the protection of the “bespeaks caution” doctrine. All forward-looking
statements in this document are based on information currently available to us
as of the date of this report, and we assume no obligation to update any
forward-looking statements. Forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results to
differ materially from any future results, performance or achievements expressed
or implied by such forward-looking statements.
General
The
Company operates a biodiesel division that intends to use extraction technology
to convert waste cooking oil and grease into a biodiesel fuel ingredient sold to
biodiesel fuel producers. The Company's business is designed to eliminate
environmental issues associated with disposing of waste cooking oil and grease.
The Company operates a cleaning division that will manufacture and sell a new
line of industrial strength environmentally friendly biodegradable cleaning
products that contain natural non-toxic ingredients made more powerful by the
Company's own scientific formulations. The Company’s products are not
currently being sold. The Company anticipates resuming its sales and marketing
activities once it has obtained additional working capital.
On June
9, 2010, we changed our name to Todays Alternative Energy Corporation to better
reflect the direction of our business.
On July
1, 2010, we announced plans to brand the Company's new line of industrial
strength, environmentally friendly biodegradable cleaning products with the GEM
name, a Company-owned brand. The GEM brand name and the accompanying tagline,
"Guaranteed Enzyme Miracle," call attention to the natural enzymes and other
eco-friendly industrial strength ingredients in GEM cleansers that safely and
quickly remove oil, grease and other stubborn stains. GEM products contain no
ammonia, phosphates, dyes, artificial scents or toxins, and are
biodegradable. GEM products will enter a large expanding market for
green cleaners. U.S. retail sales of green household cleaning products totaled
$557 million in 2009 and have grown 229% since 2005, claiming 3% of the total
household cleaner retail market according to Packaged Facts' independent
proprietary online green cleaner survey and sales estimates. According to their
estimates, annual sales of green cleaner products in the U.S. will grow to $2
billion by 2014, an increase that is 4 times the size of 2009 sales. Sales
growth is coming from increased numbers of U.S. consumers who report using
natural, organic or ecologically friendly household cleaning products. According
to a Packaged Facts' February 2010 survey, 42% of adult consumers used green
cleaning products, which translates into 48 million U.S.
households.
We will
manufacture GEM products in San Antonio, Texas using our scientific
formulations. We plan to market GEM products to American consumers directly and
through retailers. We estimate that product sales will begin in the calendar
first quarter of 2011. Product prices are planned to be competitive with branded
household floor, carpet and drain cleaning products.
Critical
Accounting Policies
Our
discussion and analysis of our financial conditions and results of operations is
based upon our unaudited condensed consolidated financial statements, which have
been prepared in accordance with generally accepted accounting principles in the
United States. The preparation of financial statements requires managers to make
estimates and disclosures on the date of the financial statements. On an
on-going basis, we evaluate our estimates, including, but not limited to, those
related to revenue recognition. We use authoritative pronouncements, historical
experience, and other assumptions as the basis for making judgments. Actual
results could differ from those estimates. We believe the following critical
accounting policies affect our more significant judgments and estimates in the
preparation of our unaudited condensed consolidated financial
statements.
Going
Concern
The
unaudited condensed consolidated financial statements contained in this report
have been prepared assuming that we will continue as a going concern. Going
concern contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business over a reasonable length of time.
We have incurred losses since inception and have negative cash flows from
operations. For the years ended October 31, 2009 and 2008, we incurred net
losses of $927,207 and $592,439, respectively, and we have a stockholders’
deficit of $2,221,280 as of October 31, 2009. For the nine months ended July 31,
2010 and 2009, we incurred net losses of $620,826 and $559,099, respectively,
and we have a stockholders’ deficit of $2,524,109 as of July 31, 2010. Our
future is dependent upon our ability to obtain additional equity or debt
financing and upon future successful development and marketing of our products
and services. Management is pursuing various sources of equity and debt
financing. Although we plan to pursue additional financing, there can be no
assurance that we will be able to secure such financing or obtain financing on
terms beneficial to us. Failure to secure such financing may result in our
inability to continue as a going concern and the impairment of the recorded long
lived assets.
2
Currently,
our employees consist of our CEO and CFO. To conserve cash, minimize borrowing
and minimize overhead costs, we are outsourcing certain administrative and
operating activities under an arrangement that allows us to pay for the services
with shares of our common stock. We continue to need to borrow cash from time to
time in order to pay our operating costs while we seek substantial financing
needed to generate sales from our Biodiesel Division and Cleaning Division. We
anticipate future losses from operations as a result of ongoing overhead
expenses incurred while we attempt to resume selling activities.
The
financial statements contained in this report do not include any adjustments
relating to the recoverability and classifications of recorded assets, or the
amounts and classification of liabilities that might be necessary in the event
we cannot continue in existence.
Revenue
Recognition
Sales are
recorded at the time title passes to the customer, which, based on shipping
terms, generally occurs when the product is shipped to the customer. Based on
prior experience, we reasonably estimate our sales returns and warranty reserves
and both are recorded when such reserve estimates are required. Due to lack of
sales, there currently are no such reserves recorded for sales returns or
warranty reserves. Sales are presented net of discounts and
allowances.
Results
of Continuing Operations
Basis
of Presentation
The
results of operations set forth below for the three and nine months ended July
31, 2010 and 2009 are those of the continuing operations of Todays Alternative
Energy Corporation (formerly Bio Solutions Manufacturing, Inc.), which includes
BESI on a consolidated basis.
The
following table sets forth, for the periods indicated, certain selected
financial data from continuing operations:
Three Months Ended
|
Nine months Ended
|
|||||||||||||||
|
July 31,
|
July 31,
|
||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Net
sales
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||
Cost
of sales
|
-
|
-
|
-
|
-
|
||||||||||||
Gross
profit
|
-
|
-
|
-
|
-
|
||||||||||||
Selling,
general and administrative
|
136,305
|
61,380
|
316,853
|
291,263
|
||||||||||||
Operating
loss
|
$
|
(136,305
|
)
|
$
|
(61,380
|
)
|
$
|
(316,853
|
)
|
$
|
(291,263
|
)
|
Comparison
of the Three Months Ended July 31, 2010 and 2009
Net sales. Net sales from
operations were $0 for the three months ended July 31, 2010 and $0 for the three
months ended July 31, 2009.
Cost of Sales. Cost of
sales from continued operations were $0 for the three months ended July 31,
2010 and $0 for the three months ended July 31, 2009. We did not have any sales
in either three-month period.
Selling, general, and
administrative. Selling, general, and administrative expenses were
$136,305 for the three months ended July 31, 2010 and $61,380 for the three
months ended July 31, 2009. The increase of $74,925 or 122% was primarily due to
professional fees incurred for operational support for the Biodiesel and
Cleaning Divisions and back office accounting support.
3
Operating loss. Operating
losses incurred were $136,305 for the three months ended July 31, 2010 and
$61,380 for the three months ended July 31, 2009. The increase of $74,925 or
122% was primarily due to professional fees incurred for operational support for
the Biodiesel and Cleaning Divisions and back office accounting
support.
Loss from Beneficial Conversion
Feature. Loss from beneficial conversion features was $43,748 for the
three months ended July 31, 2010 and $92,650 for the three months ended July 31,
2009. The reduction of $48,902 or 53% was due to the reduction in new borrowings
during the current three- month period.
Interest expense. Interest
expense was $26,533 for the three months ended July 31, 2010 and $16,999 for the
three months ended July 31, 2009. The increase of $9,534 or 56% was primarily
due to our having a greater amount of outstanding borrowings during the current
three-month period.
Comparison
of the Nine months Ended July 31, 2010 and 2009
Net sales. Net sales from
operations were $0 for the nine months ended July 31, 2010 and $0 for the nine
months ended July 31, 2009.
Cost of Sales. Cost of sales
from continued operations were $0 for the nine months ended July 31, 2010 and $0
for the nine months ended July 31, 2009. We did not have any sales in either
nine-month period.
Selling, general, and
administrative. Selling, general, and administrative expenses were
$316,853 for the nine months ended July 31, 2010 and $291,263 for the nine
months ended July 31, 2009. The increase of $25,590 or 9% was primarily due to
due to professional fees incurred for operational support for the Biodiesel and
Cleaning Divisions and back office accounting support.
Operating loss. Operating
losses incurred were $316,853 for the nine months ended July 31, 2010 and
$291,263 for the nine months ended July 31, 2009. The increase of $25,590 or 9%
was primarily due to due to professional fees incurred for operational support
for the Biodiesel and Cleaning Divisions and back office accounting
support.
Loss from Beneficial Conversion
Feature. Loss from beneficial conversion features was $229,992 for the
nine months ended July 31, 2010 and $215,202 for the nine months ended July 31,
2009. The increase of $14,790 or 7% was due to the increased borrowings during
the current nine-month period.
Interest expense. Interest
expense was $73,981 for the nine months ended July 31, 2010 and $52,634 for the
nine months ended July 31, 2009. The increase of $21,347 or 41% was primarily
due to our having a greater amount of outstanding borrowings during the current
nine-month period.
Liquidity
and Capital Resources
We have
financed our operations, acquisitions, debt service, and capital requirements
through cash flows generated from debt financing, and issuance of equity
securities. Our working capital deficit at July 31, 2010 was $2,524,109 and
$2,221,280 at October 31, 2009. We had cash of $3,014 at July 31, 2010 and
$3,423 as of October 31, 2009.
We used
$47,828 and $201,537 of net cash from operating activities for the three and
nine months ended July 31, 2010, respectively, compared to using $76,413 and
$194,156 in the three and nine months ended July 31, 2009,
respectively.
Net cash
flows used in investing activities was $0 and $0 for the three and nine months
ended July 31, 2010, respectively and $0 and $0 for the three and nine months
ended July 31, 2009, respectively.
Net cash
flows provided by financing activities were $43,365 and $201,128 for the three
and nine months ended July 31, 2010, respectively, compared to net cash provided
by financing activities of $76,750 and $194,149 in the three and nine months
ended July 31, 2009, respectively. The net cash provided by financing activities
is from the proceeds from our lines of credit and notes payable, which are net
of repayments.
Loan
Agreement
Since
2003, we have borrowed money from a group of third-party lenders in order to
fund our operations. As of July 31, 2010, the outstanding principal balance on
these loans was approximately $1,300,000. On November 29, 2006, we entered into
a loan agreement with these certain lenders and a new lender, pursuant to which
we borrowed approximately $164,000 of new funds, and pursuant to which the
outstanding debt obligations were amended and restated. Under the loan
agreement, the existing lenders received amended and restated convertible
promissory notes in the aggregate principal amounts of $537,955 and $264,625,
respectively, and the new lender received a convertible promissory note in the
aggregate principal amount of $164,000. Under the loan agreement and the notes,
each lender may, in its sole and absolute discretion, make additional loans to
us, up to an aggregate total of $1,000,000 per lender. Each note bears interest
at the rate of eight percent (8%) per annum and is payable on demand. Each note
was also convertible into shares of our common stock at a conversion rate equal
to the lower of (a) $0.05 per share, or (b) seventy percent (70%) of the three
day average of the closing bid price of our common stock immediately prior to
conversion provided, however, that the conversion price could not be less than
$0.01 per share under any circumstances. In May 2008, the conversion price was
amended to provide for a fixed conversion price of $0.001 per share. In
addition, the note holders cannot convert any principal or interest under the
notes to the extent that such conversion would require us to issue shares of our
common stock in excess of our authorized and unissued shares of common stock.
The notes are secured by a first priority security interest in all of our
assets. By their terms, the holder of the notes may not convert the notes to the
extent such conversion would cause the holder, together with its affiliates, to
have acquired a number of shares of common stock that would exceed 4.99% of our
then outstanding common stock.
4
Capital
Requirements
The
report of our independent accountants for the fiscal year ended October 31, 2009
states that we have incurred operating losses since inception and requires
additional capital to continue operations, and that these conditions raise
substantial doubt about our ability to continue as a going concern.
As of
July 31, 2010, we had a working capital deficit of $2,524,109. Currently, we do
not generate any revenues. In the Biodiesel Division, we need to construct or
lease biodiesel plants and we will not generate any revenues in this division
until we have established plants which are operational. The expected cost to
build each biodiesel plant is $2.5 million and we do not have the capital to
build such plants. In the Cleaning Division, we need to lease space and buy
production equipment in order to begin producing cleaning products to sell and
we will not generate any revenues in this division until we have established a
production facility that is operational. The expected cost to open a production
facility is $400,000 and we are seeking the capital to begin leasing the space
and buying production equipment.
We
believe that, as of the date of this report, our existing working capital and
cash flows generated from operations will be insufficient to fund our plan of
operations over the next 12 months, and accordingly, we need to obtain
additional financing.
Off-Balance
Sheet Arrangements
None.
ITEM
3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a
“smaller reporting company” as defined by Item 10 of Regulation S-K, we are not
required to provide the information required by this item.
ITEM
4T – CONTROLS AND PROCEDURES
EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES
Our
management is responsible for establishing and maintaining a system of
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Exchange Act) that is designed to ensure that information required to be
disclosed by the Company in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
specified in the Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the issuer's management, including its principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required
disclosure.
Pursuant
to Rule 13a-15(b) under the Exchange Act, the Company's management, consisting
of David S. Bennett, the Company’s Chief Executive Officer and President (“CEO”)
and Patricia M. Spreitzer, the Company’s Chief Financial Officer, Secretary and
Treasurer (“CFO”), carried out an evaluation of the effectiveness of the
Company's disclosure controls and procedures (as defined under Rule 13a-15(e)
under the Exchange Act) as of the nine months ended July 31, 2010. Based
upon that evaluation, the Company's CEO and CFO concluded that the Company's
disclosure controls and procedures are not effective to ensure that information
requiring disclosure by the Company in the reports that the Company files or
submits under the Exchange Act, is recorded, processed, summarized and reported,
within the time periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to the Company’s CEO and CFO, as
appropriate, to allow timely decisions regarding required
disclosure.
CHANGES
IN INTERNAL CONTROLS
Our
management, consisting of our CEO and CFO, performed an evaluation to determine
whether any change in our internal controls over financial reporting occurred
during the nine month period ended July 31, 2010. Based on that evaluation, our
CEO and CFO concluded that no change occurred in the Company's internal controls
over financial reporting during the nine months ended July 31, 2010, that has
materially affected, or is reasonably likely to materially affect, the Company's
internal controls over financial reporting .
5
PART
II: OTHER INFORMATION
ITEM
1 – LEGAL PROCEEDINGS
Bio Solutions
Manufacturing, Inc. v. Michael Motola, Andy Vasara, Steva De Vasara and
Metropolitan Life Insurance Company . On November 3, 2009, the
Company commenced an action against the defendants in the United States District
Court of the Central District of California, Southern Division alleging certain
causes of action, including fraud, securities fraud, and negligent
misrepresentation. On May 13, 2010, the case was dismissed without
prejudice.
ITEM
1A – RISK FACTORS
As a
“small reporting company” as defined by Item 10 of Regulation S-K, we are not
required to provide information required by this item.
ITEM
2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM
3 – DEFAULT UPON SENIOR SECURITIES
None.
ITEM
4 – REMOVED AND RESERVED
ITEM
5 – OTHER INFORMATION
None.
ITEM
6 - EXHIBITS
a.
|
(a)
|
The
following exhibits are filed with this
report.
|
31.1
|
Certification
by Chief Executive Officer pursuant to Sarbanes Oxley Section
302.
|
31.2
|
Certification
by Chief Financial Officer pursuant to Sarbanes Oxley Section
302.
|
32.1
|
Certification
by Chief Executive Officer pursuant to 18 U.S. C. Section
1350.
|
32.2
|
Certification
by Chief Financial Officer pursuant to 18 U.S. C. Section
1350.
|
6
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated:
September 7, 2010
|
/s/ David S. Bennett
|
By:
David S. Bennett
|
|
Its:
Chief Executive Officer, President and Director (Principal
Executive
Officer)
|
|
Dated:
September 7, 2010
|
/s/ Patricia M.
Spreitzer
|
By:
Patricia M. Spreitzer
|
|
Its:
Chief Financial Officer, Secretary, Treasurer and Director
(Principal
Financial and Accounting
Officer)
|
7