Item 1. Description of Business.
Our Background. We were incorporated under the laws of the State of Nevada on March 27, 2007. We are an emerging growth company.
Certificate of Amendment - Increase in Authorized Capital. On October 17, 2012, our Board of Directors and shareholders holding a majority of the total issued and outstanding shares of common stock pursuant to written consents in lieu of a meeting approved an amendment to our Articles of Incorporation to increase the authorized capital (the “Amendment”). The Amendment was filed with the Nevada Secretary of State on October 17, 2012 increasing our authorized capital from 90,000,000 shares of common stock to 200,000,000 shares of common stock, par value $0.001.
Our Business. The Company was a manufacturer of a pre-mix for chicken integrators called Nutra-Animal, a pre-mix anti-oxidant containing wheat middlings, vitamin E, calcium carbonate, silicone dioxyde, shrimp flour, sodium selenite and fish oil. The Company was also a distributor of GreenEx ™ in Africa. GreenEx ™ is a biological larvicide produced from a strain of Bacillus thuringiensis subspecies israelensis (Bti), a naturally occurring bacterium that produces a crystalline protein toxin (cystal) toxic for mosquitoes, vectors of Malaria. GreenEx ™ formulations are produced in the United States to strict manufacturing specifications, ensuring that the products are of high quality and without any harmful contaminants. We were not successful in this business endeavor.
On September 26, 2011, the Company acquired all the assets and intellectual property rights of Type 2 Defense, a natural dietary supplement formulated to support healthy glucose levels for type 2 diabetics and pre-diabetics. With the acquisition of Type 2 Defense we abandoned our former operations and now focus exclusively on the Type 2 Defense product. Since we abandoned our former operations, we wrote off any inventories attributable to our former operations.
THE BUSINESS:
Type2 Defense
Type2 Defense™ (the “Product” or the “Supplement”) is a glucose control dietary supplement powder formulated to support healthy glucose levels in addition to maintaining healthy blood pressure. Packaged with 30 packets to a box, the product powder drink mix delivery system has been developed to support healthy glucose levels for type 2 diabetics and pre-diabetics. The product is also effective in controlling hypertension and has strong antioxidant powers.
We intend to sell and market the Product on the Internet. The target market is type 2 and pre-diabetics. The Product is delivered in 10 gram plastic packets (i.e. Emergent- C) conveniently packaged in a box of 30 servings. The targeted market is heath conscious individuals that have been diagnosed as Type II diabetics or individuals who are concerned with pre-diabetic symptoms.
We believe that there is a growing market place that lacks adequate healthy tools to maintain healthy blood glucose levels. Type2 Defense is a powder blend of natural ingredients that has been developed to maintain healthy blood glucose levels. The Type2 Defense powder blend is a flavorful supplement when mixed with water becomes an effective vehicle that encourages its target market with a convenient and all natural pure health beverage containing green tea blended with cinnamon and blueberry flavoring along with Type2 Defense proprietary blend. The Product’s goal is to provide a safe and natural supplement that will assist in the stabilization of healthy glucose levels along with providing strong antioxidants.
TYPE II and PRE-DIABETIES Market:
Expanding waistlines, poor diet and an overall lack of exercise are all contributing factors to diabetes. Medical reports speak in alarming tones about the increased frequency of overweight children being diagnosed with juvenile diabetes along with the increased diagnosis of elderly and adult onset diabetes. The American culture of little exercise and unhealthy eating choices have led the medical industry down the path of the American Diabetes epidemic. Studies show that the diabetes epidemic will only get worse. A projected 1.6 million Americans will be diagnosed with diabetes every year. While diabetes awareness is catching on, diabetes is a real danger to the general health populace and fiscal economics of this country.
The reality is that many people are pre-diabetic before they acquire Type I or Type II diabetes. Most doctors are not trained to prevent diabetes but only treat it once the symptoms of diabetes have taken effect. Treatment involves lifestyle changes, such as daily exercise and healthful eating, oral medications and sometimes insulin. Also, multiple daily blood testing with meters and test strips to monitor sugar levels are required, along with doctor-supervised tests to measure blood-sugar control.
The costs associated with diabetes are overwhelming. Diabetes can seriously devastate the average Americans budget, especially for those individuals who do not have medical insurance. Doctors’ visits, insulin, oral medication, test strips, syringes, all add up to thousands of dollars per year. The long term health costs are even more devastating. Over time diabetes will create nerve damage that will accelerate many common deadly health conditions leading to higher medical cost and a lower quality of life. Such changes include but are not limited to heart attack, stroke, and decreased circulation. Untreated diabetes will lead to a litany of deadly medical conditions.
The Centers for Disease Control and Prevention predicts that one of every three babies who were born in 2000 will develop diabetes. The CDC also claims 41 million people have blood-sugar levels that are higher than normal but not quite high enough to be called diabetes. This condition is called pre-diabetes, and it also raises the risk of diabetes, stroke and heart disease.
Marketing Strategies and Web Site
The Company’s business plan calls for hiring a nutritional spokesperson and or diabetic celebrity to be prominently featured on its website. Marketing Type2 Defense will be a web based with a strong social marketing focus.
Educational material regarding diabetes and links to popular sites will provide a content rich site. Health and fitness will be the main model of the website.
Internet ad click-throughs will lead prospective customers directly to our home page. The home page and other pages will be available for shoppers to peruse and satisfy curiosity. We anticipate that our web page will be fully operational within the next three months at which time we intend to sell Market Type2 Defense.
Leads driven to the Type2 Defense order page will see an offer for a one month free trial with paid shipping. Acceptance of the free offer will enroll the customer for monthly auto-ship program of one box per month with a 12 month minimum order which will be charged monthly to the customer’s credit card. Repeat customers on automatic monthly shipping schedules charged to credit cards will be the key to a steady flow of cash receipts.
Customers will have the opportunity to cancel memberships at any time after the first month’s free sample and purchase of one case.
We anticipate that most of our sales will be one box of 30 packets on auto-ship programs. We anticipate that the product will be shipped from a distribution facility and fulfillment service. Subject to changes in the market and our production costs we anticipate selling the Product for $42.00 per box.
We anticipate that our project will be produced by Nutricap Labs. If Nutricap Labs cannot fulfill our orders, we believe that there are several other manufacturers who can meet our exacting production standards. We intend to utilize third party providers to handle order fulfillment.
Government Regulation
The manufacturing, processing, formulating, packaging, labeling, distributing, selling and advertising of our Type2 Defense will be subject to regulation by one or more federal agencies. The most active regulation has been administered by The Food and Drug Administration (hereinafter the "FDA") which will regulate our Product. In particular, the FDA regulates the safety, manufacturing, labeling and distribution of dietary supplements, including vitamins, minerals and herbs, food additives, food supplements, over-the-counter drugs and prescription drugs, medical devices and cosmetics. In addition, the Federal Trade Commission (hereinafter the "FTC") has overlapping jurisdiction with the FDA to regulate the labeling, promotion and advertising of dietary supplements, over the counter drugs, cosmetics and foods.
Dietary supplement companies are authorized to make substantiated statements of nutritional support and, subject to several possible limitations, to market manufacture-substantiated-as-safe dietary supplement products without FDA pre-clearance. Failure to comply with applicable FDA requirements can result in sanctions being imposed on the Company or the manufacturers of our products, including but not limited to fines, injunctions, product recalls, seizures and criminal prosecution.
As for labeling, DSHEA permits "statements of nutritional support" for dietary supplements without FDA pre-approval. Such statements may describe how particular dietary ingredients affect the structure, function or general well-being of the body, or the mechanism of action by which a dietary ingredient may affect body structure, function or well-being (but may not state that a dietary supplement will diagnose, mitigate, treat, cure or prevent a disease). A company making a statement of nutritional support must possess substantiating evidence for the statement, and, for such statements that are not about the effects on the body as a result of a dietary supplement used as a tool for its nutritive value and are not otherwise "health claims," disclose on the label that the FDA has not reviewed that statement and that the product is not intended for use for a disease, and notify the FDA of the statement within thirty (30) days after its initial use.
The FTC is authorized to use a variety of processes and remedies for enforcement, both administratively and judicially including compulsory process, cease and desist orders, and injunctions. FTC enforcement can result in orders requiring, among other things, limits on advertising, corrective advertising, consumer redress, divestiture of assets, rescission of contracts and such other relief as may be deemed necessary. State and local authorities can also regulate advertising and labeling for dietary supplements and conventional foods. There can be no assurance that state and local authorities will not commence regulatory action that could restrict the permissible scope of our product claims.
Intellectual Property. Our intellectual property consists solely of the Type2 Defense formula acquired on September 26, 2011. We have filed an application with the United States Patent and Trademark Office for Type2 Defense.
Employees. We have two full-time employees. We will need to hire additional employees as we expand our business operations. We may also outsource services to third party providers and hire consultants to support our expansion and business development.
Facilities. Our executive, administrative and operating offices are located at 1250 NE Loop 410, Suite 200, San Antonio, TX 78209. This office space has been sufficient for our current operations. We do not believe that there will be any difficulty in obtaining additional office at competitive prices when necessary.
Item 1A.
Item 1A. Risk Factors.
RISK FACTORS ASSOCIATED WITH OUR NEW BUSINESS MODEL
An investment in our common stock involves a high degree of risk. You should carefully consider the risk factors described below together with all of the other information contained herein. Each of these risks could have a material adverse effect on our business, operating results, financial condition and/or growth prospects. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our operations. If any of these risks actually occur, our business, financial condition or results of operations may be materially adversely affected. In such case, the trading price of our common stock could decline and shareholders could lose all or part of their investment.
Risks Related to our Business:
We have never marketed a glucose control dietary supplement.
We intend to rely on a number of marketing and sales methods. Our primary focus will be Internet advertising. There can be no assurance that we will be able to launch a successful marketing campaign or that consumers will purchase our product. Our new management team has never sold products similar to the Type2 Defense.
We may not be successful with our product launch.
There is no assurance that we will be able to generate sufficient revenues to achieve profitability. We anticipate that we will continue to generate operating losses and negative cash flow from operations at least through the end of 2012 or longer. We cannot be certain that we will ever achieve, or if achieved, maintain profitability. If our revenue grows at a slower rate than we anticipate or if our marketing and operating expenses exceed our expectations or cannot be adjusted accordingly, our business, results of operation and financial condition will be materially adversely affected and we may be unable to satisfy the terms and conditions of outstanding debentures or continue operations.
We have not implemented our marketing program.
We have not yet implemented our Type2 Defense marketing program. Our website is in the final developmental stages. Our officer has limited experience in the sales and marketing of this type of product. There can be no assurance that once our website becomes fully operational, revenues will be sufficient to support our ongoing operations or hire and retain qualified consultants to support our marketing program.
Our success will depend on external factors in the diabetic and nutritional supplement industries.
Type2 Defense will compete against more traditional medical treatments involve a substantial degree of risk. Consumer receptiveness to Type2 Defense is unpredictable. The commercial success of a Type2 Defense also depends upon:
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the quality and acceptance of other competing brands and products;
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creating brand awareness;
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critical reviews;
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the availability of alternatives;
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general economic conditions; and
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other tangible and intangible factors.
Each of these factors is subject to change and cannot be predicted with certainty.
We may be exposed to product liability and recall claims.
We, like any other retailer, distributor and manufacturer of products that are designed to be ingested, face an inherent risk of exposure to product liability or product recall claims in the event that the use of our products results in injury. Such claims may include, among others, that our products contain contaminants or include inadequate instructions as to use or inadequate warnings concerning side effects and interactions with other substances. We currently do not carry product liability insurance. If there are product liability claims, it is unlikely that we will be able satisfy these claims and as a result, we may be forced to terminate operations.
The scientific support for our products is subject to uncertainty.
Our research, scientific knowledge and clinical testing supporting the medicinal benefits of Type2 Defense is an essential element of our ability to legally market our products. We believe that are clinical trials are sound and that we have a reasonable basis to rely on them in marketing the product. There is, however, the risk that new or undiscovered information may become available that may undermine or refute our scientific support. A reduction in the credibility of our scientific support for the medicinal benefits of our products could have a material adverse effect on our operations and financial conditions.
We will be in competition with companies that are larger, more established and better capitalized than we are.
The medical supplement industry, as well as dietary supplements in general, are highly competitive, rapidly evolving and subject to constant change. We expect that if our products establish a market niche, competition will arise from a variety of sources, from large Fortune 500 companies and to the myriad of other smaller national and regional nutraceutical companies. Many of our potential competitors have:
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greater financial, technical, personnel, promotional and marketing resources;
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longer operating histories;
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greater name recognition; and
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larger consumer bases than us.
We believe that existing industry competitors are likely to continue to expand their product offerings. Moreover, because there are few, if any, substantial barriers to entry, we expect that new competitors are likely to offer similar products designed to treat diabetes. We cannot be certain that we will be able to compete successfully in this extremely competitive market.
Uncertain and Costly Compliance with Government Regulation.
The manufacturing, processing, formulating, packaging, labeling, distributing, selling and advertising of Type2 Defense will be subject to regulation by one or more federal agencies. The most active regulation has been administered by The Food and Drug Administration (hereinafter the "FDA") which regulates our products pursuant to the Federal Food, Drug and Cosmetic Act (hereinafter the "FDCA") and regulations promulgated thereunder. In particular, the FDA regulates the safety, manufacturing, labeling and distribution of nutritional and medical supplements. In addition, the Federal Trade Commission (hereinafter the "FTC") has overlapping jurisdiction with the FDA to regulate the labeling, promotion and advertising of dietary supplements, over the counter drugs, cosmetics and foods.
Compliance with applicable FDA and any state or local statute is critical. Although we believe that we will be in compliance with applicable statutes, there can be no assurance that, should the FDA amend its guidelines or impose more stringent interpretations of current laws or regulations, we would be able to comply with these new guidelines. We are unable to predict the nature of such future laws, regulations, interpretations or applications, nor can we predict what effect additional governmental regulations or administrative orders, when and if promulgated, would have on our business in the future. These regulations could, however, require the reformation of Type2 Defense or market withdrawal.
Unauthorized use of our intellectual property may affect our market share and profitability.
We do not have a registered trademark. We intend to apply for a trademark with the U.S. Patent and Trademark Office to protect our rights to use the name Type2 Defense as a nutritional supplement and to protect certain of our proprietary product formulations. We believe that our trademark application will be meritorious, but we can make no assurance that our applications may be not be materially limited or modified or denied in whole or in part in the course of their prosecution before the Patent and Trademark Office.
We will continue to try to protect intellectual property rights to our products through available copyright and trademark laws. Despite these precautions, existing copyright and trademark laws afford only limited practical protection in certain jurisdictions. We may distribute our products in some jurisdictions in which there is no copyright or trademark protection. As a result, it may be possible for unauthorized third parties to distribute products that infringe on our proprietary rights. We will rely on our trademarks, trade secrets, know-how and continuing technological advancement to establish a competitive position in the marketplace. Despite our precautions, there can be no assurance that we will be able to adequately protect our intellectual property from competitors in the future. In addition, litigation may be necessary in the future to:
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enforce intellectual property rights;
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protect our trade secrets;
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determine the validity and scope of the rights of others; or
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defend against claims of infringement or invalidity.
Any such litigation could result in substantial costs and the diversion of resources and could have a material adverse effect on our business, operating results or financial condition. Further we may not have the financial resources available to protect our intellectual property.
Protecting and defending against intellectual property claims may have a material adverse effect on our business.
From time to time, we may receive notice that others have infringed on our proprietary rights or that we have infringed on the intellectual property rights of others. There can be no assurance that infringement or invalidity claims will not materially adversely affect our business, financial condition or results of operations. Regardless of the validity or the success of the assertion of claims, we could incur significant costs and diversion of resources in protecting or defending against claims, which could have a material adverse effect on our business, financial condition or results of operations.
We will need to raise additional capital to market our products and expand our operations. Our failure to raise additional capital will significantly affect our ability to fund our proposed activities.
Launching our Product will require additional capital. There is no commitment in place to secure this additional financing. Any equity financing may be dilutive to shareholders, and debt financing, if available, would increase expenses and may involve restrictive covenants. The Company will be required to raise additional capital, at times and in amounts, which are uncertain, especially under the current capital market conditions. Under these circumstances, if the Company is unable to acquire additional capital or is required to raise it on terms that are less satisfactory than desired, it may have a material adverse effect on its financial condition and you will lose your investment.
We have a limited operating history upon which an evaluation of our prospects can be made.
We have no experience in selling the Type 2 Defense diabetic treatment program. Our lack of operating history in this field makes an evaluation of our business and prospects very difficult. Our prospects must be considered speculative, considering the risks, expenses, and difficulties frequently encountered in the establishment of a new business. We cannot be certain that our business will be successful or that we will generate significant revenues and become profitable.
Because we are a development stage, we have limited revenues to sustain our operations.
We are a development stage company that is currently developing our business. To date, we have not generated any revenues from operations. . The success of our business operations will depend on our ability to obtain clients and provide quality products to those clients. We are not able to predict if we will be able to develop our business and generate significant revenues. If we are not able to complete the successful development of our business plan, generate significant revenues and attain sustainable operations, then our business will fail.
We have incurred a net loss for the year ended December 31, 2012, and expect to incur net losses for the foreseeable future.
As of December 31, 2012, our net loss for the year ended December 31, 2012 was $399,078. We expect to incur operating and capital expenditures for the next year and, as a result, we expect significant net losses in the future. We will need to generate significant revenues to achieve and maintain profitability. We may not be able to generate sufficient revenues to achieve profitable operations in which case operations may terminate.
Our products and processes can expose us to product liability claims.
Product liability claims or product recalls can adversely affect our business reputation and expose us to increased scrutiny by governmental regulators. The packaging, marketing and distribution of Type2 Defense involve an inherent risk of product liability and product recall and the resultant adverse publicity. We may be subject to significant liability if the consumption of our Product causes injury, illness or death. We could be required to recall our Product in the event of contamination or damage to the products. In addition to the risks of product liability or product recall due to deficiencies caused by our production or processing operations, we may encounter the same risks if any third party tampers with our Product. We cannot assure you that we will not be required to perform product recalls, or that product liability claims will not be asserted against us, in the future. Any claims that may be made may create adverse publicity that would negatively affect our ability to market our products successfully.
Our officer and directors are engaged in other activities that could conflict with our interests. Therefore our officers and directors may not devote sufficient time to our affairs, which may affect our ability to conduct marketing activities and generate revenues.
The individuals serving as officer and directors have existing responsibilities and may have additional responsibilities to provide management and services to other entities. As a result, conflicts of interest between us and the other activities may occur from time to time, in that our officers and directors shall have conflicts of interest in allocating time, services and functions between the other business ventures in which they may or become involved and our affairs. Outside demands on our management’s time may prevent them from devoting sufficient time to our operations.
Our executive officer, board of directors and key employees are crucial to our business, and we may not be able to recruit, integrate and retain the personnel we need to succeed.
Our success will depend upon a number of key management, sales, technical and other critical personnel. The loss of the services of any key personnel, or our inability to attract, integrate and retain highly skilled technical, management, sales and marketing personnel could result in significant disruption to our operations, including our inability or limited success in locating new sites, effectiveness of sales efforts, quality of customer service, and completion of our initiatives, including growth plans and the results of our operations. Any failure by us to find suitable replacements for our key senior management may be disruptive to our operations.
We depend on the efforts and abilities of our management to continue operations.
We are reliant on management to implement our business strategy. The demand on their time will increase because of our status as a public company. The interruption of the services of our management could significantly hinder our operations, profits and future development, if suitable replacements are not promptly obtained. We cannot guarantee that our management will remain with us.
The costs to meet our reporting requirements as a public company subject to the Exchange Act of 1934 will be substantial and may result in us having insufficient funds to operate our business. Complying with federal securities laws as a public company is expensive and we will incur significant time and expense enhancing, documenting, testing and certifying our internal control over financial reporting.
We will incur ongoing expenses associated with professional fees for accounting and legal expenses associated with being a public company. We estimate that these costs will range up to $50,000 per year for the next few years. Those fees will be higher if our business volume and activity increases. Those obligations will reduce and possibly eliminate our ability and resources to fund our operations and may prevent us from meeting our normal business obligations. Furthermore, SEC rules require that our chief executive officer/chief financial officer periodically certify the existence and effectiveness of our internal control over financial reporting.
Our auditors have questioned our ability to continue operations as a “going concern.” Investors may lose all of their investment if we are unable to continue operations and generate revenues.
In the absence of significant sales and profits, we may seek to raise additional funds to meet our working capital needs principally through the additional sales of our securities. However, we cannot guarantee that we will be able to obtain sufficient additional funds when needed, or that such funds, if available, will be obtainable on terms satisfactory to us. As a result, our auditors believe that substantial doubt exists about our ability to continue operations.
Risks Related to Owning Our Common Stock
Shares of our common stock may continue to be subject to price volatility and illiquidity because our shares may continue to be thinly traded and may never become eligible for trading on a national securities exchange.
While we may at some point be able to meet the requirements necessary for our common stock to be listed on a national securities exchange, we cannot assure you that we will ever achieve a listing of our common stock on a national securities exchange. Our shares are currently only eligible for quotation on the Over-The-Counter Pink Sheets, which is not an exchange. Initial listing on a national securities exchange is subject to a variety of requirements, including minimum trading price and minimum public “float” requirements, and could also be affected by the general skepticism of such markets concerning companies that are the result of mergers with inactive publicly-held companies. There are also continuing eligibility requirements for companies listed on public trading markets. If we are unable to satisfy the initial or continuing eligibility requirements of any such market, then our stock may not be listed or could be delisted. This could result in a lower trading price for our common stock and may limit your ability to sell your shares, any of which could result in you losing some or all of your investments.
The market valuation of our business may fluctuate due to factors beyond our control and the value of your investment may fluctuate correspondingly.
The market valuation of emerging growth companies, such as us, frequently fluctuate due to factors unrelated to the past or present operating performance of such companies. Our market valuation may fluctuate significantly in response to a number of factors, many of which are beyond our control, including:
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changes in securities analysts’ estimates of our financial performance, although there are currently no analysts covering our stock;
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fluctuations in stock market prices and volumes, particularly among securities of emerging growth companies;
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changes in market valuations of similar companies;
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announcements by us or our competitors of significant contracts, new technologies, acquisitions, commercial relationships, joint ventures or capital commitments;
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variations in our quarterly operating results;
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fluctuations in related commodities prices; and
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additions or departures of key personnel.
As a result, the value of your investment in us may fluctuate.
Investors should not look to dividends as a source of income.
We do not intend to pay cash dividends in the foreseeable future. Consequently, any economic return will initially be derived, if at all, from appreciation in the fair market value of our stock, and not as a result of dividend payments.
Our common stock is subject to penny stock regulations which may make it difficult for investors to sell their stock.
The Securities and Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in “penny stocks”. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules; deliver a standardized risk disclosure document prepared by the Commission, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. The broker-dealer also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer and salesperson in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for a stock that becomes subject to the penny stock rules. If our common stock becomes subject to the penny stock rules, holders of our shares may have difficulty selling those shares.
Additional Issuance of Equity Securities in Accordance with Provisions of Certain Convertible Notes May Result in Dilution to Our Existing Stockholders.
Our Articles of Incorporation, as amended, authorize the issuance of 200,000,000 shares of common stock. The Board of Directors has the authority to issue additional shares of our capital stock to provide additional financing in the future and the issuance of any such shares may result in a reduction of the book value or market price of the then outstanding shares of our common stock. We have entered into numerous convertible notes as a source of funding and, upon conversion, will result in the issuance of a substantial number of shares of common stock. If we do issue any such additional shares, such issuances will cause a reduction in the proportionate ownership and voting power of all other stockholders. As a result of such dilution, your proportionate ownership interest and voting power will be decreased accordingly. Further, any such issuance could result in a change of control.
Nevada Law and Our Articles of Incorporation May Protect our Directors From Certain Types of Lawsuits.
Nevada law provides that our officers and directors will not be liable to us or our stockholders for monetary damages for all but certain types of conduct as officers and directors. Our Bylaws permit us broad indemnification powers to all persons against all damages incurred in connection with our business to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing stockholders from recovering damages against our officers and directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require us to use our limited assets to defend our officers and directors against claims, including claims arising out of their negligence, poor judgment, or other circumstances.
Item 1B.
Item 1B. Unresolved Staff Comments.
None.
Item 2.
Item 2. Description of Property.
As of December 31, 2012, we held no real property. We do not presently own any interests in real estate.
Facilities
Our executive, administrative and operating offices are located at 1250 NE Loop 410, Suite 200, San Antonio, TX 78209.
Item 3.
Item 3. Legal Proceedings.
None.
Item 4.
Item 4. Mine Safety Disclosure.
Not applicable
PART II
Item 5.
Item 5. Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities
A. Market Information
The Company’s Common Stock is currently quoted for sale on Pink Sheets of the National Quotation Service under the symbol BISU. The high and low closing prices of the Company’s common stock since January 1, 2011 are set forth below. These closing prices do not reflect retail mark-up, markdown or commissions.
Reports to Security Holders.
We are a reporting company with the Securities and Exchange Commission, or SEC. The public may read and copy any materials filed with the Securities and Exchange Commission at the Security and Exchange Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may also obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Securities and Exchange Commission. The address of that site is http://www.sec.gov.
Holders.
As of March 22, 2013 there were approximately 260 record holders of our common stock.
Dividend Policy.
We have never declared or paid a cash dividend on our capital stock. We do not expect to pay cash dividends on our common stock in the foreseeable future. We currently intend to retain our earnings, if any, for use in our business. Any dividends declared in the future will be at the discretion of our board of directors and subject to any restrictions that may be imposed by our lenders.
Equity Compensation Plan.
We have two equity compensation plans - our 2011 Incentive and Equity Compensation Plan and our 2013 Stock Incentive Plan. The table set forth below presents information as of the date of this Annual Report:
We are authorized to issue 20 million shares of our common stock pursuant to our 2011 Incentive and Equity Compensation Plan (the “Plan”). To date, we have granted 19,711,000 shares under this plan.
We are authorized to issue 30,000,000 shares of our common stock pursuant to our 2013 Stock Incentive Plan. (the "2013 Plan"). To date, we have granted 8,625,000 shares under this plan.
2011 Plan
The purpose of the 2011 Plan is to enhance the profitability and value of the Company for the benefit of its stockholders by enabling the Company to attract, retain and reward directors, employees and consultants (collectively, “Participants”) and strengthen the mutuality of interests between such persons and the Company’s stockholders.
Awards
Pursuant to the 2011 Plan, the Company may issue non-qualified stock options (“Non-Qualified Stock Options”), incentive stock options (“Incentive Stock Options”, together with Non-Qualified Stock Options referred to herein as “Stock Options”), stock appreciation rights (“Stock Appreciation Rights”), restricted stock (“Restricted Stock”) and registered stock (“Registered Stock”), (collectively, the “Awards”) to eligible Participants.
All employees of and consultants to the Company and its affiliates are eligible to be granted Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock and Registered Stock. All employees and directors of the Company and its affiliates are eligible to be granted Incentive Stock Options.
The aggregate number of shares of Common Stock which may be issued under the 2011 Plan with respect to which Awards may be granted shall not exceed 20,000,000 shares of common stock.
If any Stock Option or Stock Appreciation Right granted under the 2011 Plan expires, terminates or is cancelled for any reason without having been exercised in full or, with respect to Stock Options, the Company repurchases any Stock Option, the number of shares of Common Stock underlying the repurchased Stock Option, and/or the number of shares of Common Stock underlying any unexercised Stock Appreciation Right or Stock Option shall again be available for the purposes of Awards under the 2011 Plan.
Administration
The 2011 Plan is administered and interpreted by a Committee (“Committee”) appointed by the Board of Directors, or if no Committee, by the Board of Directors. The Committee has full authority, among other things, to: (a) select the eligible employees and consultants to whom Stock Options, Stock Appreciation Rights, Restricted Stock or Registered Stock may from time to time be granted; (b) determine, in accordance with the terms of the 2011 Plan, the number of shares of Common Stock to be covered by each Award to an eligible employee or consultant granted; and (c) determine the terms and conditions of any Award granted hereunder, including, but not limited to, the exercise or purchase price (if any), any restriction or limitation, any vesting schedule or acceleration thereof, or any forfeiture restrictions or waiver thereof, regarding any Stock Option or other Award, and the Common Stock relating thereto, based on such factors, if any, as the Committee shall determine, in its sole discretion.
Stock Options
The option price per Common Stock purchasable under an Incentive Stock Option shall not be less than 100% of the fair market value of the Common Stock at the time of grant. For the purposes of the 2011 Plan, the “fair market value” means: (i) if the Common Stock is listed on a national securities exchange or quoted on the Nasdaq National Market or Nasdaq SmallCap Market, the last sale price of the Common Stock in the principal trading market for the Common Stock on such date; (ii) if the Common Stock is not listed on a national securities exchange or quoted on the Nasdaq National Market or Nasdaq SmallCap Market, but is traded in the over-the-counter market, the closing bid price for the Common Stock on such date, as reported by the OTC Bulletin Board or the National Quotation Bureau, Incorporated or similar publisher of such quotations; and (iii) if the fair market value of the Common Stock cannot be otherwise determined, such price as the Committee shall determine, in good faith, based on reasonable methods set forth under Section 422 of the Code.
·
The purchase price of shares of Common Stock subject to a Non-Qualified Stock Option shall be determined by the Committee.
·
The term of each Stock Option shall be fixed by the Committee, but no Stock Option shall be exercisable more than ten (10) years after the date the Stock Option is granted.
Stock Awards
Shares of Restricted Stock or Registered Stock may be issued to eligible employees or consultants either alone or in addition to other Awards granted under the 2011 Plan. The Committee shall determine the eligible persons to whom, and the time or times at which, grants of Restricted Stock or Registered Stock will be made, the number of shares to be awarded, the price (if any) to be paid by the recipient, the time or times within which such Awards may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the Awards. The purchase price of Restricted Stock shall be fixed by the Committee. The purchase price for shares of Restricted Stock may be zero to the extent permitted by applicable law. The Participant shall not be permitted to transfer shares of Restricted Stock awarded under the 2011 Plan during a period set by the Committee.
Tandem Stock Appreciation Rights
Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option (a “Reference Stock Option”) granted under the 2011 Plan (“Tandem Stock Appreciation Rights”). In the case of a Non-Qualified Stock Option, such rights may be granted either at or after the time of the grant of such Reference Stock Option. In the case of an Incentive Stock Option, such rights may be granted only at the time of the grant of such Reference Stock Option.
A Tandem Stock Appreciation Right or applicable portion thereof granted with respect to a Reference Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the Reference Stock Option, except that, unless otherwise determined by the Committee, in its sole discretion, at the time of grant, a Tandem Stock Appreciation Right granted with respect to less than the full number of shares covered by the Reference Stock Option shall not be reduced until and then only to the extent the exercise or termination of the Reference Stock Option causes the number of shares covered by the Tandem Stock Appreciation Right to exceed the number of shares remaining available and unexercised under the Reference Stock Option.
Upon the exercise of a Tandem Stock Appreciation Right, a Participant shall be entitled to receive up to, but no more than, an amount in cash and/or Common Stock equal in value to the excess of the fair market value of one share of Common Stock over the option price per share specified in the Reference Stock Option multiplied by the number of shares in respect of which the Tandem Stock Appreciation Right shall have been exercised, with the Committee having the right to determine the form of payment.
Non-Tandem Stock Appreciation Rights
Stock Appreciation Rights may also be granted without reference to any Stock Options granted under the 2011 Plan (“Non-Tandem Stock Appreciation Rights”). The term of each Non-Tandem Stock Appreciation Right shall be fixed by the Committee, but shall not be greater than ten (10) years after the date the right is granted.
Non-Tandem Stock Appreciation Rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at grant. Subject to such terms and conditions, Non-Tandem Stock Appreciation Rights may be exercised in whole or in part at any time during the option term, by giving written notice of exercise to the Company specifying the number of Non-Tandem Stock Appreciation Rights to be exercised.
Upon the exercise of a Non-Tandem Stock Appreciation Right, a Participant shall be entitled to receive, for each right exercised, up to, but no more than, an amount in cash and/or Common Stock equal in value to the excess of the fair market value of one share of Common Stock on the date the right is exercised over the fair market value of one (1) share of Common Stock on the date the right was awarded to the Participant.
Transfer of Awards
No Stock Option or Stock Appreciation Right granted shall be transferable by the Participant otherwise than by will or by the laws of descent and distribution. All Stock Options and all Stock Appreciation Rights granted to Participants shall be exercisable, during the Participant’s lifetime, only by the Participant. Tandem Stock Appreciation Rights shall be transferable, to the extent permitted, only with the underlying Stock Option. Shares of Restricted Stock may not be transferred prior to the date on which shares are issued, or, if later, the date on which any applicable restriction period lapses.
Termination of Employment
Generally, unless otherwise determined by the Committee at grant, if a Participant is terminated for cause, any Stock Option held by such Participant shall thereupon terminate and expire as of the date of termination. Unless otherwise determined by the Committee at grant, any Stock Option held by a Participant:
i.
on death or termination of employment or consultancy by reason of disability or retirement may be exercised, to the extent exercisable at the Participant’s death or termination, by the legal representative of the estate or Participant as the case may be, at any time within a period of one (1) year from the date of such death or termination;
ii.
on termination of employment or consultancy by involuntary termination without cause or for good reason may be exercised, by the Participant at any time within a period of ninety (90) days from the date of such termination; or
iii.
on termination of employment or consultancy by voluntary termination but without good reason and occurs prior to, or more than ninety (90) days after, the occurrence of an event which would be grounds for termination by the Company for cause, any Stock Option held by such Participant may be exercised, to the extent exercisable at termination, by the Participant at any time within a period of thirty (30) days from the date of such termination,
iv.
but in no event beyond the expiration of the stated term of such Stock Option.
Amendments to the 2011 Plan
The Board may at any time amend, in whole or in part, any or all of the provisions of the 2011 Plan, or suspend or terminate the 2011 Plan entirely. Provided, however, that, unless otherwise required by law or specifically provided in the 2011 Plan, the rights of a Participant with respect to Awards granted prior to such amendment, suspension or termination, may not be impaired without the consent of such Participant and, provided further, without the approval of the stockholders of the Company, if and to the extent required by the applicable provisions of Rule 16b-3 of the 1934 Act or, if and to the extent required, under the applicable provisions of the Code, no amendment may be made which would, among other things: increase the aggregate number of shares of Common Stock that may be issued under the 2011 Plan; change the classification of Participants eligible to receive Awards under the 2011 Plan; decrease the minimum option price of any Stock Option; extend the maximum option period; change any rights under the 2011 Plan with regard to non-employee directors; or require stockholder approval in order for the 2011 Plan to continue to comply with the applicable provisions.
2013 Plan
The purpose of the 2013 Stock Incentive Plan of Bio-Solutions Corp. is to further align the interests of employees, directors and non-employee Consultants with those of the stockholders by providing incentive compensation opportunities tied to the performance of the Common Stock and by promoting increased ownership of the Common Stock by such individuals. The 2013 Plan is also intended to advance the interests of the Company and its stockholders by attracting, retaining and motivating key personnel upon whose judgment, initiative and effort the successful conduct of the Company’s business is largely dependent.
Administration.
The 2013 Plan shall be administered by a Committee comprised of one or more members of the Board, or if no such committee exists, the Board. The Committee shall have such powers and authority as may be necessary or appropriate for the Committee to carry out its functions as described in the 2013 Plan. Subject to the express limitations of the 2013 Plan, the Committee shall have authority in its discretion to determine the Eligible Persons to whom, and the time or times at which, Awards may be granted, the number of shares, units or other rights subject to each Award, the exercise, base or purchase price of an Award (if any), the time or times at which an Award will become vested, exercisable or payable, the performance goals and other conditions of an Award, the duration of the Award, and all other terms of the Award. Subject to the terms of the 2013 Plan, the Committee shall have the authority to amend the terms of an Award in any manner that is not inconsistent with the 2013 Plan, provided that no such action shall adversely affect the rights of a Participant with respect to an outstanding Award without the Participant’s consent. The Committee shall also have discretionary authority to interpret the 2013 Plan, to make factual determinations under the 2013 Plan, and to make all other determinations necessary or advisable for 2013 Plan administration, including, without limitation, to correct any defect, to supply any omission or to reconcile any inconsistency in the 2013 Plan or any Award Agreement hereunder. The Committee may prescribe, amend, and rescind rules and regulations relating to the 2013 Plan. The Committee’s determinations under the 2013 Plan need not be uniform and may be made by the Committee selectively among Participants and Eligible Persons, whether or not such persons are similarly situated. The Committee shall, in its discretion, consider such factors as it deems relevant in making its interpretations, determinations and actions under the 2013 Plan including, without limitation, the recommendations or advice of any officer or employee of the Company or such attorneys, consultants, accountants or other advisors as it may select. All interpretations, determinations and actions by the Committee shall be final, conclusive, and binding upon all parties.
Shares Subject to the 2013 Plan.
The maximum aggregate number of shares of Common Stock that may be issued and sold under all Awards granted under the 2013 Plan shall be thirty-million (30,000,000) shares. Shares of Common Stock issued and sold under the 2013 Plan may be either authorized but unissued shares or shares held in the Company’s treasury. To the extent that any Award involving the issuance of shares of Common Stock is forfeited, cancelled, returned to the Company for failure to satisfy vesting requirements or other conditions of the Award, or otherwise terminates without an issuance of shares of Common Stock being made thereunder, the shares of Common Stock covered thereby will no longer be counted against the foregoing maximum share limitations and may again be made subject to Awards under the 2013 Plan pursuant to such limitations. Any Awards or portions thereof that are settled in cash and not in shares of Common Stock shall not be counted against the foregoing maximum share limitations.
If there shall occur any change with respect to the outstanding shares of Common Stock by reason of any recapitalization, reclassification, stock dividend, extraordinary dividend, stock split, reverse stock split or other distribution with respect to the shares of Common Stock, or any merger, reorganization, consolidation, combination, spin-off or other similar corporate change, or any other change affecting the Common Stock, the Committee may, in the manner and to the extent that it deems appropriate and equitable to the Participants and consistent with the terms of the 2013 Plan, cause an adjustment to be made in (i) the maximum number and kind of shares provided hereof, (ii) the number and kind of shares of Common Stock, or other rights subject to then outstanding Awards, (iii) the exercise or base price for each share or other right subject to then outstanding Awards, and (iv) any other terms of an Award that are affected by the event. Notwithstanding the foregoing, in the case of Incentive Stock Options, any such adjustments shall, to the extent practicable, be made in a manner consistent with the requirements of Section 424(a) of the Code.
Notwithstanding anything contained in the 2013 Plan to cover the contrary, including any adjustments, the maximum aggregate number of shares of Common Stock that may be issued and sold under all Awards granted under the 2013 Plan shall be anti-dilutive in the event of a reverse stock split by the Company and shall not result in any reduction in the number of shares available and authorized under the 2013 Plan at the effective time of such reverse stock split(s).
Participation and Awards.
All Eligible Persons are eligible to be designated by the Committee to receive Awards and become Participants under the 2013 Plan. The Committee has the authority, in its discretion, to determine and designate from time to time those Eligible Persons who are to be granted Awards, the types of Awards to be granted and the number of shares of Common Stock or units subject to Awards granted under the 2013 Plan. In selecting Eligible Persons to be Participants and in determining the type and amount of Awards to be granted under the 2013 Plan, the Committee shall consider any and all factors that it deems relevant or appropriate.
Stock Options.
A Stock Option may be granted to any Eligible Person selected by the Committee. Subject to Section 422 of the Code, each Stock Option shall be designated, in the discretion of the Committee, as an Incentive Stock Option or as a Nonqualified Stock Option. The exercise price per share of a Stock Option shall not be less than 85 percent of the Fair Market Value of the shares of Common Stock on the Date of Grant, provided that the Committee may in its discretion specify for any Stock Option an exercise price per share that is higher than the Fair Market Value on the Date of Grant, except that the price shall not be less than 110 percent of the Fair Market Value in the case of any person who owns securities possessing more than 10 percent of the total combined voting power of all classes of securities of the Company. The Committee shall in its discretion prescribe the time or times at which, or the conditions upon which, a Stock Option or portion thereof shall become vested and/or exercisable, and may accelerate the vesting or exercisability of any Stock Option at any time, provided, however, that any Stock Option shall vest at the rate of at least twenty percent (20%) per year over five (5) years from the date the Stock Option is granted, subject to reasonable conditions as may be provided for in the Award Agreement. However, in the case of a Stock Option granted to officers, Non-employee Directors, managers or Consultants of the Company, the Stock Option may become fully exercisable, subject to reasonable conditions, at any time or during any period established by the Company. The requirements for vesting and exercisability of a Stock Option may be based on the continued Service of the Participant with the Company or its Affiliates for a specified time period (or periods) or on the attainment of specified performance goals established by the Committee in its discretion.
Stock Awards.
A Stock Award may be granted to any Eligible Person selected by the Committee. A Stock Award may be granted for past services, in lieu of bonus or other cash compensation, as directors’ compensation or for any other valid purpose as determined by the Committee. A Stock Award granted to an Eligible Person represents shares of Common Stock that are issued without restrictions on transfer and other incidents of ownership and free of forfeiture conditions, except as otherwise provided in the 2013 Plan and the Award Agreement. The deemed issuance price of shares of Common Stock subject to each Stock Award shall not be less than 85 percent of the Fair Market Value of the Common Stock on the date of the grant. In the case of any person who owns securities possessing more than ten percent of the combined voting power of all classes of securities of the issuer or its parent or subsidiaries possessing voting power, the deemed issuance price of shares of Common Stock subject to each Stock Award shall be at least 100 percent of the Fair Market Value of the Common Stock on the date of the grant. The Committee may, in connection with any Stock Award, require the payment of a specified purchase price.
Restricted Stock Awards.
Restricted Stock Award may be granted to any Eligible Person selected by the Committee. The deemed issuance price of shares of Common Stock subject to each Restricted Stock Award shall not be less than 85 percent of the Fair Market Value of the Common Stock on the date of the grant. In the case of any person who owns securities possessing more than ten percent of the combined voting power of all classes of securities of the issuer or its parent or subsidiaries possessing voting power, the deemed issuance price of shares of Common Stock subject to each Restricted Stock Award shall be at least 100 percent of the Fair Market Value of the Common Stock on the date of the grant. The Committee may require the payment by the Participant of a specified purchase price in connection with any Restricted Stock Award. The restrictions imposed on shares granted under a Restricted Stock Award shall lapse in accordance with the vesting requirements specified by the Committee in the Award Agreement, provided that the Committee may accelerate the vesting of a Restricted Stock Award at any time. Such vesting requirements may be based on the continued Service of the Participant with the Company or its Affiliates for a specified time period (or periods) or on the attainment of specified performance goals established by the Committee in its discretion. If the vesting requirements of a Restricted Stock Award shall not be satisfied, the Award shall be forfeited and the shares of Common Stock subject to the Award shall be returned to the Company.
Change in Control.
Except to the extent an Award Agreement provides for a different result, notwithstanding anything elsewhere in the 2013 Plan or any rules adopted by the Committee pursuant to the 2013 Plan to the contrary, if a Triggering Event shall occur within the 12-month period beginning with a Change in Control of the Company, then, effective immediately prior to such Triggering Event, each outstanding Stock Option, to the extent that it shall not otherwise have become vested and exercisable, shall automatically become fully and immediately vested and exercisable, without regard to any otherwise applicable vesting requirement.
Forfeiture Events.
The Committee may specify in an Award Agreement at the time of the Award that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events shall include, but shall not be limited to, termination of Service for cause, violation of material Company policies, breach of noncompetition, confidentiality or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company.
Effective Date; Amendment and Termination.
The 2013 Plan shall become effective following its adoption by the Board. The term of the 2013 Plan shall be ten (10) years from the date of adoption by the Board.
The Board may at any time and from time to time and in any respect, amend or modify the 2013 Plan. The Board may seek the approval of any amendment or modification by the Company’s stockholders to the extent it deems necessary or advisable in its discretion for purposes of compliance with Section 162(m) or Section 422 of the Code, or exchange or securities market or for any other purpose. No amendment or modification of the 2013 Plan shall adversely affect any Award theretofore granted without the consent of the Participant or the permitted transferee of the Award.
The 2013 Plan shall terminate on the tenth anniversary of the date of its adoption by the Board. The Board may, in its discretion and at any earlier date, terminate the 2013 Plan. Notwithstanding the foregoing, no termination of the 2013 Plan shall adversely affect any Award theretofore granted without the consent of the Participant or the permitted transferee of the Award.
S-8 Registration Statements
On March 27, 2011, we filed an S-8 registration statement registering an aggregate of 20,000,000 shares of common stock under our 2011 Plan. As of the date of this Annual Report, an aggregate 19,711,000 shares of the Company’s common stock have been granted under the 2011 Plan.
On March 4, 2013, we filed an S-8 registration statement with the Securities and Exchange Commission registering up to 30,000,000 shares of common stock under our 2013 Plan. As of the date of this Annual Report, an aggregate 8,625,000 shares of the Company’s common stock have been granted under the 2013 Plan.
As of the date of this Annual Report, no Stock Options have been awarded.
Recent Sales of Unregistered Securities.
During the fiscal year ended December 31, 2012 and through the current date we issued a total of 31,575,465 shares during the year ended December 31, 2012 and a further 6,426,174 shares to the current date of our common stock.
a)
On February 22, 2012, three consultants were issued 1,650,000 unregistered shares of the Company’s common stock for services to the Company. These shares were valued between $0.01 and $0.06 per share or $41,500.
b)
On April 18, 2012, the holder of a November 10, 2009 promissory note for $10,000 (CAD) converted the note plus accrued interest of $833 (CAD) into 100,000 shares of the Company’s unregistered common stock at a per share price of $0.109 to fully settle the debt.
c)
On July 31, 2012, a director was issued 2,000,000 unregistered shares of the Company’s common stock for director compensation. These shares were valued at $0.024 per share or $48,000.
d)
On July 31, 2012, three consultants were issued 3,250,000 unregistered shares of the Company’s common stock for sales, financing and investor/public relations compensation. These shares were valued at $0.024 per share or $78,000.
e)
On July 31, 2012, the holder of a December 16, 2011 promissory note for $4,100 partially converted $2,500 of the note into 1,000,000 shares of the Company’s unregistered common stock at a per share price of $0.0025.
f)
On September 6, 2012, a former director was issued 250,000 unregistered shares of the Company’s common stock for director compensation. These shares were valued at $0.022 per share or $5,500.
g)
On September 11, 2012, the holder of a December 16, 2011 promissory note for $4,100 partially converted $1,600 of the note into 640,000 shares of the Company’s unregistered common stock at a per share price of $0.0025. This conversion fully satisfied the terms of the promissory note. On October 3, 2012, our chief executive officer was issued 15,000,000 unregistered shares of the Company’s common stock as part of his employment contract dated July 1, 2012. These shares were valued at $0.015 per share or $225,000.
h)
On October 30, 2012, the Company issued 1,708,334 unregistered shares of the Company’s common stock to settle a convertible note payable plus accrued interest. These shares were valued at $0.009 per share or $15,375.
i)
On November 30, 2012 and December 18, 2012, the Company issued 3,000,000 and 2,000,000, respectively, unregistered shares of the Company’s common stock to settle two convertible notes payable. These shares were valued at $0.0025 per share or $12,608.
j)
On December 17, 2012, the Company issued 399,011 unregistered shares of the Company’s common stock to settle a convertible note payable plus accrued interest. These shares were valued at $0.009 per share or $3,566.
k)
On December 17, 2012, the Company issued 578,120 unregistered shares of the Company’s common stock to settle a convertible note payable plus accrued interest. These shares were valued at $0.009 per share or $5,228.
l)
On January 18, 2013, a consultant was issued 2,000,000 unregistered shares of the Company’s common stock for marketing services to the Company. These shares were valued at $0.014 per share or $28,000.
m)
On January 23, 2013, the Company issued 1,464,286 unregistered shares of the Company’s common stock to settle a convertible note payable plus accrued interest. These shares were valued at $0.007 per share or $10,250.
n)
On January 25, 2013, the Company issued 732,436 unregistered shares of the Company’s common stock to settle a convertible note payable plus accrued interest. These shares were valued at $0.007 per share or $5,127.
o)
On February 7, 2013, the Company issued 1,485,519 unregistered shares of the Company’s common stock to settle a convertible note payable plus accrued interest. These shares were valued at $0.007 per share or $10,399.
p)
On March 4, 2013, the Company issued 743,933 unregistered shares of the Company’s common stock to settle a convertible note payable plus accrued interest. These shares were valued at $0.007 per share or $5,208.
With respect to the sales of all securities
·
the aggregate shares of common stock were issued to eight United States residents and a Canadian resident in reliance on Section 4(2) and Rule 506 promulgated under the Securities Act of 1933, as amended. The shares of common stock have not been registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. The investors acknowledged that the securities to be issued have not been registered under the Securities Act, that they understood the economic risk of an investment in the securities, and that they had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities;
·
the sale was made to a sophisticated or accredited investor, as defined in Rule 502;
·
we gave the purchaser the opportunity to ask questions and receive answers concerning the terms and conditions of the offering and to obtain any additional information which we possessed or could acquire without unreasonable effort or expense that is necessary to verify the accuracy of information furnished;
·
at a reasonable time prior to the sale of securities, we advised the purchaser of the limitations on resale in the manner contained in Rule 502(d)2; and
·
neither we nor any person acting on our behalf sold the securities by any form of general solicitation or general advertising.
Use of Proceeds of Registered Securities.
There were no proceeds from the sales the Company’s unregistered common stock during the year ended December 31, 2012.
Penny Stock Regulation.
Shares of our common stock are and will probably be subject to rules adopted the Securities and Exchange Commission that regulate broker-dealer practices in connection with transactions in “penny stocks”. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in those securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules; deliver a standardized risk disclosure document prepared by the Securities and Exchange Commission, which contains the following:
·
a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
·
a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to violation to such duties or other requirements of securities’ laws
·
a brief, clear, narrative description of a dealer market, including "bid" and "ask” prices for penny stocks and the significance of the spread between the "bid" and "ask" price;
·
a toll-free telephone number for inquiries on disciplinary actions;
·
definitions of significant terms in the disclosure document or in the conduct of trading in penny stocks; and
·
such other information and is in such form (including language, type, size and format), as the Securities and Exchange Commission shall require by rule or regulation.
Prior to effecting any transaction in penny stock, the broker-dealer also must provide the customer the following:
·
the bid and offer quotations for the penny stock;
·
the compensation of the broker-dealer and its salesperson in the transaction:
·
the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and
·
monthly account statements showing the market value of each penny stock held in the customer’s account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for a stock that becomes subject to the penny stock rules. Holders of shares of our common stock may have difficulty selling those shares because our common stock will probably be subject to the penny stock rules.
Purchases of Equity Securities. None during the period covered by this report.
Item 6.
Item 6. Selected Financial Data.
Not applicable.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This following information specifies certain forward-looking statements of management of the company. Forward-looking statements are statements that estimate the happening of future events and are not based on historical fact. Forward-looking statements may be identified by the use of forward-looking terminology, such as “may”, “shall”, “could”, “expect”, “estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”, “continue”, or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guarantee, or warranty is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. We cannot guarantee that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.
Critical Accounting Policies and Estimates.
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.
These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012.
Background
Our Business
On March 27, 2007, Bio-Solutions Corp. (the “Company”) was incorporated in the State of Nevada.
The Company was a manufacturer of a pre-mix for chicken integrators called Nutra-Animal, a pre-mix anti-oxidant containing wheat middlings, vitamin E, calcium carbonate, silicone dioxyde, shrimp flour, sodium selenite and fish oil. The Company is also the distributor of GreenEx ™ in Africa. GreenEx ™ is a biological larvicide produced from a strain of Bacillus thuringiensis subspecies israelensis (Bti), a naturally occurring bacterium that produces a crystalline protein toxin (cystal) toxic for mosquitoes, vectors of Malaria. GreenEx ™ formulations are produced in the United States to strict manufacturing specifications, ensuring that the products are of high quality and without any harmful contaminants.
On September 26, 2011, the Company acquired all the assets and intellectual property rights of Type2 Defense, a natural dietary supplement formulated to support healthy glucose levels for type 2 diabetics and pre-diabetics.
During October 2011, the Company decided to abandon the former operations to focus solely on the Type2 Defense product. All inventories from the former products were written off as of October 1, 2011. The Type 2 Defense product is currently under development with the initial shipment expected during the quarter ending June 30, 2013.
The Company elected to enter the development stage on October 1, 2011 and expects to emerge from the development stage during the quarter ending June 30, 2013.
Results of Operations.
Results of operations for the year ended December 31, 2012 compared to year ended December 31, 2011
Revenues.
We had no revenues or cost of revenues for the years ended December 31, 2012 and 2011. The Company’s focus for 2013 will be the launch of the Type 2 Defense dietary supplement.
Operating Expenses.
For the year ended December 31, 2012, we had total operating expenses of $361,423. This included professional fees of $355,656, and general and administrative expenses of $5,767. For the year ended December 31, 2011, we had total operating expenses of $888,812. This included professional fees of $788,855, general and administrative expenses of $14,669 and amortization expense and impairment totaling $85,288. The 59% decrease from the year ended December 31, 2011 is primarily attributable to lower stock based compensation for professional fees as the Company moves towards generating cash from operations.
Other Expenses.
We had $37,655 interest expense for the year ended December 31, 2012 compare to $10,374 interest expense for the year ended December 31, 2011. The 263% increase is attribution to new convertible loans used for working capital.
Net Loss.
For the year ended December 31, 2012, we had a net loss of $399,078 and a net loss per share of $0.005. In comparison, for the year ended December 31, 2011 we had a net loss of $899,186, and a net loss per share of $0.02 per share. We expect to continue to incur net losses for the foreseeable future and until we generate significant revenues.
Liquidity and Capital Resources.
At December 31, 2012, our current assets consisted of $1,076 in cash. At December 31, 2012, we had no accounts receivables and our other assets totaling $206,600 applicable to the Type 2 Defense intellectual property. Our total assets were $207,676. At December 31, 2011, our current assets totaled $27,082 consisting of $82 in cash and $27,000 in prepaid expenses. At December 31, 2011, we had no accounts receivables and our other assets totaling $206,600 applicable to the Type 2 Defense intellectual property. Our total assets were $233,682.
Our current liabilities at December 31, 2012 totaled $185,476 consisting of $123,199 in accounts payable and accrued expenses, $1,597 for short term loans from related parties and $60,680 in convertible short-term loans. Our current liabilities at December 31, 2011 totaled $419,704 consisting of $296,429 in accounts payable and accrued expenses, $41,500 for stock to be issued, $19,666 in short term loans, $49,158 for short term loans from related parties and $8,200 in convertible short-term loans. An officer was due $4,751. The decrease of $224,228 is primarily related to the resignation Gilles Chaumillon as President, Chief Executive Officer and Director of the Company. Mr. Chaumillon agreed to settle his outstanding debt, interest and account payable balances of $227,811 for $10,000.
We had a working capital deficit in both 2012 and 2011 for $184,400 and $392,622, respectively. Unless we secure additional funding, of which there can be no assurance, we will not be able to satisfy our ongoing expenses.
At December 31, 2012 and 2011, we had no other liabilities and no long term commitments or contingencies.
On August 18, 2011, a related party advanced $1,500 to the Company. The advance is evidenced by a demand promissory note bearing interest at 5% per annum.
On August 27, 2011, the Company’s former President advanced $1,950 to the Company. The advance is evidenced by a demand promissory note bearing interest at 5% per annum. This note was canceled as part of the former President’s resignation agreement in June 2012.
On December 16, 2011, the Company was advanced $4,100 each from two unrelated parties. The advances are evidenced by two equal convertible promissory notes bearing interest at 5% per annum with a due date on December 31, 2012. In addition, at any time, the holders may convert the notes into shares of the Company’s common stock at an exercise price of $.0025 per share.
On January 27, 2012, the Company issued a $1,000 (CAD) convertible note to the Company’s former president. The loan bears interest at 5% and has a maturity date of December 31, 2012. In addition, at any time, the Company’s President may convert the note into shares of the Company’s common stock at an exercise price of $.0025 per share. This note was canceled as part of the former President’s resignation agreement in June 2012.
On September 30, 2012, the Company issued a $15,000 convertible note to an individual. The loan bears interest at 5% and has a maturity date of September 30, 2012. In addition, at any time, the holder may convert the note into shares of the Company’s common stock at an exercise price of $.009 per share.
On April 20, 2012, the Company issued a $2,500 convertible note to an individual. The loan bears interest at 5% and has a maturity date of October 20, 2012. In addition, at any time, the holder may convert the note into shares of the Company’s common stock at an exercise price of $.009 per share.
On April 20, 2012, the Company issued a $5,000 convertible note to an individual. The loan bears interest at 5% and has a maturity date of October 20, 2012. In addition, at any time, the holder may convert the note into shares of the Company’s common stock at an exercise price of $.009 per share.
On April 30, 2012, the Company issued a $1,000 (CAD) convertible note to the Company’s former President. The loan bears interest at 5% and has a maturity date of October 26, 2012. In addition, at any time, the Company’s President may convert the note into shares of the Company’s common stock at an exercise price of $.009 per share. This note was canceled as part of the former President’s resignation agreement in June 2012.
On May 10, 2012, the Company issued a $2,600 convertible note to the Company’s chief executive officer. The loan bears interest at 5% and has a maturity date of November 15, 2012. In addition, at any time, the Company’s CFO may convert the note into shares of the Company’s common stock at an exercise price of $.009 per share.
On May 15, 2012, the Company issued a $3,500 convertible note to an individual. The loan bears interest at 5% and has a maturity date of November 15, 2012. In addition, at any time, the individual may convert the note into shares of the Company’s common stock at an exercise price of $.009 per share.
On June 15, 2012, Gilles Chaumillon resigned as President, Chief Executive Officer and Director of the Company. In addition, Mr. Chaumillon agreed to settle his outstanding debt, interest and account payable balances of $227,811 for $10,000 payable in ten equal monthly installments of $1,000 beginning July 2012. At June 30, 2012, the Company wrote-of the net amount of $217,811 as a conversion of accounts payable and notes payable to equity.
On July 18, 2012, the Company issued a $30,000 convertible note to an individual. The loan bears interest at 5% and has a maturity date of December 18, 2012. In addition, at any time, the individual may convert the note into shares of the Company’s common stock at an exercise price of $.007 per share.
On August 22, 2012, the Company issued a $20,000 convertible note to an individual. The loan bears interest at 5% and has a maturity date of January 22, 2012. The Individual advanced $3,000 in August 2012, $10,000 in October 2012 and $7,000 in November 2012. In addition, at any time, the individual may convert the note into shares of the Company’s common stock at an exercise price of $.007 per share.
On January 25, 2013, the Company issued a $12,000 promissory note to an individual. The loan bears interest at 5% and is payable on demand.
On January 28, 2013, the Company issued a $12,500 convertible note to an individual. The loan bears interest at 5% and is payable on demand and may be converted at any time prior to December 31, 2013 into shares of the Company’s common stock. The conversion price shall be 80% of the average closing price of the stock for the ten (10) business days preceding the conversion notice. The conversion price shall not be lower than $0.01 per share.
On January 30, 2013, the Company issued a $7,500 convertible note to an individual. The loan bears interest at 5% and has a maturity date of July 30, 2013. In addition, at any time, the holder may convert the note into shares of the Company’s common stock at an exercise price of $.005 per share.
On February 20, 2013, the Company issued a $7,500 convertible note to an individual. The loan bears interest at 5% and has a maturity date of August 20, 2013. In addition, at any time, the holder may convert the note into shares of the Company’s common stock at an exercise price of $.005 per share.
On February 26, 2013, the Company issued a $12,500 convertible note to an individual. The loan bears interest at 5% and is payable on demand and may be converted at any time prior to January 31, 2014 into shares of the Company’s common stock. The conversion price shall be 80% of the average closing price of the stock for the ten (10) business days preceding the conversion notice. The conversion price shall not be lower than $0.01 per share.
Plan of Operation
During 2013, we expect to expand our business with Type2 Defense product. The legal and accounting costs of being a public company will continue to impact our liquidity and we will need to obtain funds to pay those expenses. Other than the anticipated increases in legal and accounting costs due to the reporting requirements of being a reporting company, we are not aware of any other known trends, events or uncertainties, which may affect our future liquidity.
Our auditors have questioned our ability to continue operations as a “going concern”. We hope to obtain significant revenues from future product sales. In the absence of significant sales and profits, we will seek to raise additional funds to meet our working capital needs principally through the additional sales of our securities. However, we cannot guarantee that we will be able to obtain sufficient additional funds when needed, or that such funds, if available, will be obtainable on terms satisfactory to us. As a result, our auditors believe that substantial doubt exists about our ability to continue operations.
Our Plan of Operation for the Next Twelve Months.
We have finalized our formulations; production of our Type 2 production has commenced and we are in the final stages of launching our website. With the completion of our first production run in April 2013 and launch of our website, we expect to generate sales by the fiscal quarter ended June 30, 2013. Fulfillment will be handled by a third party fulfillment house. We will most likely require additional working capital to fully implement our business plan for 2013. We have no commitment for additional funding.
Our business strategy for the next twelve months will be to implement on-line sales of our Type2 Defense product.
At December 31, 2012 we had nominal cash which will not be sufficient to satisfy our working capital requirements for the next twelve months. We cannot forecast with any degree of certainty anticipated revenues or cash flow. Our forecasts and operations will involve risks and uncertainties which we are unable to predict and actual results could fail. We will require additional capital to continue operations. If we cannot secure additional capital or generate significant revenues we may cease operations in which case you will lose your investment.
We intend to pursue capital through public or private financing as well as borrowings and other sources, such as our officer, directors and principal shareholders. We cannot guarantee that additional funding will be available on favorable terms, if at all. If adequate funds are not available, then our ability to continue or expand our operations may be significantly hindered. If adequate funds are not available, our officer, directors and principal shareholders may contribute capital to the Company in the form of debt financing or equity contributions. However, our officer, directors and principal shareholders are not committed to contribute funds to pay for our expenses.
There can be no assurance that we will be able to secure additional debt or equity financing and if available, will be offered on terms acceptable to the Company.
Even assuming that we secure adequate financing, there can be no assurance that we will be profitable at any time in the future.
Off-Balance Sheet Arrangements.
We have no off-balance sheet arrangements.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
Item 8.
Item 8. Financial Statements
The financial statements required by Item 8 are presented in the following order:
BIO-SOLUTIONS CORP.
(A Development Stage Company)
Financial Statements:
Report of Independent Registered Public Accounting Firm
To the Directors of
Bio-Solutions Corp.
We have audited the accompanying balance sheets of Bio-Solutions Corp. (the "Company") as of December 31, 2012 and 2011, and the related statements of operations and accumulated other comprehensive loss, changes in stockholders' equity (deficit) and cash flows for the years ended December 31, 2012 and 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bio-Solutions Corp. as of December 31, 2012 and 2011, and the results of its statements of operations and accumulated other comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for the year ended December 31, 2012 and 2011 in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is in process of executing its business plan and expansion. The Company has not generated significant revenue to this point, however, has been successful in raising funds in their private placement. The lack of profitable operations and the need to continue to raise funds raise significant doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ KBL, LLP
New York, NY
March 22, 2013
BIO-SOLUTIONS CORP.
(A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS DECEMBER 31, 2012 and 2011 IN US$
The accompanying notes are an integral part of these financial statements.
BIO-SOLUTIONS CORP.
(A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS AND ACCUMULATED OTHER COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 AND DEVELOPMENT STAGE OCTOBER 1, 2011 THROUGH DECEMBER 31, 2012 IN US$
The accompanying notes are an integral part of these financial statements.
BIO-SOLUTIONS CORP. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 IN US$
The accompanying notes are an integral part of these financial statements.
BIO-SOLUTIONS CORP.
(A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOW FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 AND DEVELOPMENT STAGE OCTOBER 1, 2011 THROUGH DECEMBER 31, 2012 IN US$
The accompanying notes are an integral part of these financial statements.
BIO-SOLUTIONS CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2012 AND 2011
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
On March 27, 2007, Bio-Solutions Corp. (the “Company”) was incorporated in the State of Nevada.
The Company was a manufacturer of a pre-mix for chicken integrators called Nutra-Animal, a pre-mix anti-oxidant containing wheat middlings, vitamin E, calcium carbonate, silicone dioxyde, shrimp flour, sodium selenite and fish oil. The Company is also the distributor of GreenEx ™ in Africa. GreenEx ™ is a biological larvicide produced from a strain of Bacillus thuringiensis subspecies israelensis (Bti), a naturally occurring bacterium that produces a crystalline protein toxin (cystal) toxic for mosquitoes, vectors of Malaria. GreenEx ™ formulations are produced in the United States to strict manufacturing specifications, ensuring that the products are of high quality and without any harmful contaminants.
On June 30, 2010, the board of directors approved the increase of the authorized shares of common stock from 75,000,000 to 90,000,000. In addition the board approved a 1.20 to 1 stock split. All shares have been reflected retroactively in accordance with SAB Topic 14C.
On September 26, 2011, the Company acquired all the assets and intellectual property rights of Type2 Defense, a natural dietary supplement formulated to support healthy glucose levels for type 2 diabetics and pre-diabetics.
During October 2011, the Company decided to abandon the former operations to focus solely on the Type2 Defense product. All inventories from the former products were written off as of October 1, 2011. The Type 2 Defense product is currently under development with the initial shipment expected at the end of March 2013.
The Company has elected to enter the development stage on October 1, 2011 and expects to emerge from the development stage at the end of June 2013.
During October 2012, the board of directors increased the number of common shares authorized from 90,000,000 to 200,000,000 shares.
During February 2013, the Company began the first production run of the Type 2 Defense product. The product will be completed in May 2013 with sales expected in June 2013.
Going Concern
These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues since inception and has generated losses totaling $3,442,575 since inception, of which $568,650 are deficits accumulated during the development stage, and needs to raise additional funds to carry out their business plan. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, and the ability of the Company to obtain necessary equity financing to continue operations. The Company has had very little operating history to date. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. These factors raise substantial doubt regarding the ability of the Company to continue as a going concern.
The Company estimates that they will need a $650,000 capital infusion will be required to continue operations through the end of 2013. Besides generating revenues from current operations, the Company may need to raise additional capital to expand operations to the point at which the Company can achieve profitability. The terms of equity that may be raised may not be on terms acceptable by the Company. If adequate funds cannot be raised outside of the Company, the Company’s officer and directors may need to contribute funds to sustain operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development Stage
The Company is considered to be in the development stage as defined in ASC 915, “Accounting and Reporting by Development Stage Enterprises”.
On September 26, 2011, the Company acquired all the assets and intellectual property rights of Type 2 Defense. During October 2011, the Company abandoned its former operations to focus solely on the Type 2 Defense product. All inventories from the former products were written off as of October 1, 2011.
The Company’s primary activities since October 1, 2011 have been performing business, strategic and financial planning, enhancing the Type2 Defense formula and securing capital for ongoing operations.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Currency Translation
The Company operates in Canada and the United States, and certain accounts of the Company are reflected in currencies other than the U.S. dollar. The Company translates income and expense amounts at average exchange rates for the year, translates assets and liabilities at year-end exchange rates and equity at historical rates for currencies in the Canadian dollar. The Company’s functional currency is the Canadian dollar, while the Company reports its currency in the US dollar. The Company records these translation adjustments as accumulated other comprehensive income (loss). Gains and losses from foreign currency transactions are included in other income (expense) in the results of operations. For the years ended December 31, 2012 and 2011, the Company recorded $6,060 and $1,199 in translation losses, respectively.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Comprehensive Income (Loss)
The Company adopted ASC 220-10, “Reporting Comprehensive Income.” ASC 220-10 requires the reporting of comprehensive income in addition to net income from operations.
Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of information that historically has not been recognized in the calculation of net income.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments and other short-term investments with maturity of three months or less, when purchased, to be cash equivalents.
The Company maintains cash and cash equivalent balances at two financial institutions that are insured by the Federal Deposit Insurance Corporation.
Fixed Assets
Although the Company does not have any fixed assets at this point. Any fixed assets acquired in the future will be stated at cost, less accumulated depreciation. Depreciation will be provided using the straight-line method over the estimated useful lives of the related assets. Costs of maintenance and repairs will be charged to expense as incurred.
Recoverability of Current and Long-Lived Assets
The Company reviews their current and long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment will be based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. Fixed assets to be disposed of by sale will be carried at the lower of the then current carrying value or fair value less estimated costs to sell. During the years ended December 31, 2012 and 2011, respectively, the Company wrote off their inventory for $83,508 and a pre-paid production cost for $15,700.
Fair Value of Financial Instruments
The carrying amount reported in the balance sheets for cash and cash equivalents, accounts payable, accrued expenses, and accounts receivable approximate fair value because of the immediate or short-term maturity of these financial instruments. The Company does not utilize derivative instruments.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Beneficial Conversion Features
ASC 470-20 applies to convertible securities with beneficial conversion features that must be settled in stock and to those that give the issuer a choice in settling the obligation in either stock or cash. ASC 470-20 requires that the beneficial conversion feature should be valued at the commitment date as the difference between the conversion price and the fair market value of the common stock into which the security is convertible, multiplied by the number of shares into which the security is convertible. ASC 470-20 further limits this amount to the proceeds allocated to the convertible instrument.
Income Taxes
The Company accounts for income taxes utilizing the liability method of accounting. Under the liability method, deferred taxes are determined based on differences between financial statement and tax bases of assets and liabilities at enacted tax rates in effect in years in which differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts that are expected to be realized.
The Company follows ASC 740-10, “Accounting for Uncertainty in Income Taxes” (“ASC 740-10”). This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. ASC 740-10 is effective for fiscal years beginning after December 15, 2006. Management has adopted ASC 740-10 for 2007, and they evaluate their tax positions on an annual basis, and have determined that as of December 31, 2012, no additional accrual for income taxes is necessary. The Company’s policy is to recognize both interest and penalties related to unrecognized tax benefits expected to result in payment of cash within one year are classified as accrued liabilities, while those expected beyond one year are classified as other liabilities. The Company has not recorded any interest or penalties since its inception.
The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The tax years for 2009 to 2011 remain open for examination by federal and/or state tax jurisdictions. The Company is currently not under examination by any other tax jurisdictions for any tax year.
Revenue Recognition
The Company currently has no revenue. Once the Company emerges from the development state and generates revenue from the sales of our products, the following criteria for recognition will be utilized:
1) Persuasive evidence of an arrangement exists;
2) delivery has occurred or services have been rendered;
3) the seller’s price to the buyer is fixed or determinable, and
4) collectable is reasonably assured.
(Loss) Per Share of Common Stock
Basic net loss per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (EPS) include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options warrants and convertible notes. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for periods presented. The Company has not issued any options or warrants to date. At December 31, 2012, the total shares issuable upon conversion of convertible notes payable would be 9,349,524 shares of the Company’s common stock.
Inventory
Inventory is stated at the lower of cost (FIFO: first-in, first-out) or market, and includes raw materials and finished goods. The cost of finished goods includes the cost of packaging supplies, direct and indirect labor and other indirect manufacturing costs. As of December 31, 2012, the Company had no inventory.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Issued Accounting Standards
In May 2011, FASB issued Accounting Standards Update (ASU) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. FASB ASU 2011-04 amends and clarifies the measurement and disclosure requirements of FASB ASC 820 resulting in common requirements for measuring fair value and for disclosing information about fair value measurements, clarification of how to apply existing fair value measurement and disclosure requirements, and changes to certain principles and requirements for measuring fair value and disclosing information about fair value measurements. The new requirements are effective for fiscal years beginning after December 15, 2011. The Company plans to adopt this amended guidance on October 1, 2012 and at this time does not anticipate that it will have a material impact on the Company’s results of operations, cash flows or financial position.
In September 2011, FASB issued ASU No. 2011-05, Presentation of Comprehensive Income, which amends the disclosure and presentation requirements of Comprehensive Income. Specifically, FASB ASU No. 2011-05 requires that all non-owner changes in stockholders’ equity be presented either in 1) a single continuous statement of comprehensive income or 2) two separate but consecutive statements, in which the first statement presents total net income and its components, and the second statement presents total other comprehensive income and its components. These new presentation requirements, as currently set forth, are effective for the Company beginning October 1, 2012, with early adoption permitted. The Company plans to adopt this amended guidance on October 1, 2012 and at this time does not anticipate that it will have a material impact on the Company’s results of operations, cash flows or financial position.
In September 2011, FASB issued ASU 2011-08, Testing Goodwill for Impairment, which amended goodwill impairment guidance to provide an option for entities to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. After assessing the totality of events and circumstances, if an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount; performance of the two-step impairment test is no longer required. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. Adoption of this guidance is not expected to have any impact on the Company’s results of operations, cash flows or financial position.
In July 2012, the FASB issued ASU 2012-02, Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, on testing for indefinite-lived intangible assets for impairment. The new guidance provides an entity to simplify the testing for a drop in value of intangible assets such as trademarks, patents, and distribution rights. The amended standard reduces the cost of accounting for indefinite-lived intangible assets, especially in cases where the likelihood of impairment is low. The changes permit businesses and other organizations to first use subjective criteria to determine if an intangible asset has lost value. The amendments to U.S. GAAP will be effective for fiscal years starting after September 15, 2012. The Company’s adoption of this accounting guidance does not have a material impact on the consolidated financial statements and related disclosures.
There were other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
NOTE 3 - STOCKHOLDERS’ EQUITY (DEFICIT)
The Company was established with one class of stock, common stock - 75,000,000 shares authorized at a par value of $0.001. On June 30, 2010, the authorized shares were increased to 90,000,000. In October 2012, the Company increased the authorized common shares to 200,000,000.
The Company issued 870,000 unregistered shares of the Company’s stock for the three months ended March 31, 2010 to various consultants (including 450,000 shares to the CEO under the employment agreement) at a value ranging between $0.17 and $0.23 per share or $186,250.
The Company issued 672,000 unregistered shares of the Company’s stock for the three months ended June 30, 2010 to various consultants at a value ranging between $0.125 and $0.275 per share or $64,800 and 240,000 shares of stock in satisfaction of accounts payable valued at $30,000 ($0.125 per share).
On June 30, 2010, the Company approved a 1.20 to 1 stock split that increased the common shares. The shares have been reflected retroactively herein under SAB Topic 14C.
The Company issued 750,000 unregistered shares of the Company’s stock for the three months ended September 30, 2010 to various consultants at a value ranging between $0.06 and $0.10 per share or $51,000.
The Company issued 850,000 unregistered shares of the Company’s stock for the three months ended December 31, 2010 to a consultant at a value of $0.04 per share or $34,000.
On March 27, 2011, the Company filed Form S-8 for our 2011 Stock Incentive and Equity Compensation Plan for 20,000,000 registered shares of the Company’s common stock. We issued 15,470,000 under this plan.
During April 2011, the Company issued 1,400,000 registered shares of the Company’s common stock to two consultants for investor relations and other services compensation. These shares were valued from $0.05 to $.055 per share or $74,617.
During April 2011, officers, directors and related parties were issued 3,000,000 registered shares of the Company’s common stock for director, officer and administrative services compensation. These shares were valued at $0.08 per share or $240,000.
During April 2011, the Company issued 571,428 unregistered shares of the Company’s common stock to two consultants for services to the Company. The Shares were valued from $0.07 to $0.08 per share or $42,500.
During April 2011, a related party was issued 500,000 unregistered shares of the Company’s common stock for administrative services compensation. These shares were valued at $0.08 per share or $40,000.
During April 2011, the Company issued 320,000 registered shares of the Company’s common stock to settle a note payable. These shares were valued at $0.021 per share or $6,806.
During April 2011, the Company issued 350,000 registered shares of the Company’s common stock to settle an account payable. These shares were valued at $0.021 per share or $7,444.
During May 2011, the Company issued 839,951 unregistered shares of the Company’s common stock to settle two accounts payable. These shares were valued at $0.03 per share or $25,669.
During May 2011, the Company sold 383,160 unregistered shares of the Company’s common stock for working capital. These shares were valued at $0.03 per share or $11,480.
During May 2011, the Company issued 900,000 registered shares of the Company’s common stock to a consultant for investor relations compensation. These shares were valued at $0.04 per share or $36,000.
During June 2011, the Company issued 900,000 registered shares of the Company’s common stock to a consultant for services to the Company. These shares were valued at $0.03 per share or $27,000.
During July 2011, a director was issued 250,000 unregistered shares of the Company’s common stock for director compensation. These shares were valued at $0.04 per share or $10,000.
During August 2011, the Company issued 900,000 registered shares of the Company’s common stock to a consultant for investor relations compensation. These shares were valued at $0.025 per share or $22,500.
During September 2011, the Company issued 1,000,000 unregistered shares of the Company’s common stock to an officer as partial settlement of salary. These shares were valued at $0.103 per share or $102,510.
During September 2011, the Company issued 2,324,600 unregistered shares of the Company’s common stock to settle three notes payable and related accrued interest. These shares were valued from $0.094 to $0.118 per share or $247,002.
During September 2011, officers, directors and related parties were issued 7,500,000 registered shares of the Company’s common stock for director, officer and administrative services compensation. These shares were valued at $0.015 per share or $112,500.
During September 2011, the Company issued 200,000 registered shares of the Company’s common stock to a consultant for services compensation. These shares were valued at $0.014 per share or $2,700.
During October 2011, the Company issued 20,000,000 unregistered shares of the Company’s common stock for the acquisition of the Type 2 Defense product. These shares were valued at $0.01 per share or $200,000.
During October 2011, the Company issued 770,000 unregistered shares of the Company’s common stock to settle accounts payable. These shares were valued at $0.013 per share or $10,000.
During November 2011, the Company issued 600,000 unregistered shares of the Company’s common stock for the acquisition of the Type 2 Defense product. These shares were valued at $0.011 per share or $6,600.
During December 2011, the Company issued 3,000,000 unregistered shares of the Company’s common stock to settle a note payable. These shares were valued at $0.003 per share or $9,861.
During September and December 2011, three consultants earned 1,650,000 unregistered shares of the Company’s common stock for services to the Company. These shares were valued from $0.01 to $0.06 per share or $41,500 and were issued on February 22, 2012.
During April 2012, the Company issued 100,000 unregistered shares of the Company’s common stock to settle a notes payable and related accrued interest. These shares were valued at $0.109 per share or $53,500.
During July 2012, a director was issued 2,000,000 unregistered shares of the Company’s common stock for director compensation. These shares were valued at $0.024 per share or $48,000.
During July 2012, three consultants were issued 3,250,000 unregistered shares of the Company’s common stock for sales, financing and investor/public relations compensation. These shares were valued at $0.024 per share or $78,000.
During July and September 2012, the Company issued 1,640,000 unregistered shares of the Company’s common stock, respectively, to settle a convertible note payable. These shares were valued at $0.0025 per share or $4,100.
During September 2012, a former director was issued 250,000 unregistered shares of the Company’s common stock for director compensation. These shares were valued at $0.024 per share or $5,500.
During October 2012, our chief executive officer was issued 15,000,000 unregistered shares of the Company’s common stock as part of his employment contract dated July 1, 2012. These shares were valued at $0.015 per share or $225,000.
During October and November 2012, the Company issued 1,550,000 registered shares of the Company’s common stock to a consultant for legal compensation. These shares were valued at $0.0179 per share or $27,675.
During October 2012, the Company issued 1,708,334 unregistered shares of the Company’s common stock to settle a convertible note payable plus accrued interest. These shares were valued at $0.009 per share or $15,375.
During November 2012, the Company issued 2,000,000 registered shares of the Company’s common stock to an employee for service to the Company. These shares were valued at $0.0125 per share or $25,000.
During November 2012, the Company issued 520,000 registered shares of the Company’s common stock to settle an accounts payable. These shares were valued at $0.012 per share or $6,300.
During November and December 2012, the Company issued 5,000,000 unregistered shares of the Company’s common stock to settle two convertible notes payable. These shares were valued at $0.0025 per share or $12,608.
During December 2012, the Company issued 399,011 unregistered shares of the Company’s common stock to settle a convertible note payable plus accrued interest. These shares were valued at $0.009 per share or $3,566.
During December 2012, the Company issued 578,120 unregistered shares of the Company’s common stock to settle a convertible note payable plus accrued interest. These shares were valued at $0.009 per share or $5,228.
As of December 31, 2012, the Company has 101,085,862 shares of common stock issued and outstanding.
The Company has not issued any options or warrants to date.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company conducts business with another company owned by a former officer of the Company. The Company uses office space in the other company’s offices. For the years ended December 31, 2012 and 2011 the Company incurred $0 and $4,104, respectively, for rent expense to this company.
NOTE 5 - SHORT-TERM LOANS - RELATED PARTY
On August 18, 2011, a related party advanced $1,500 to the Company. The advance is evidenced by a demand promissory note bearing interest at 5% per annum. The unpaid balance including accrued interest was $1,597 and $1,522 at December 31, 2012 and 2011, respectively. This noted is included as short-term loans - related party on the balance sheet.
NOTE 6 - CONVERTIBLE NOTES PAYABLE
On March 27, 2009, the Company entered into a promissory note payable on demand for $10,000 (CD$). The note accrued interest at 5% per annum. On November 30, 2012, the Company amended the note to add a conversion feature that permits the holder, at any time, to convert the note into shares of the Company’s common stock at an exercise price of $.0025 per share. As part of the new agreement, the holder of the note waived all interest including interest previously accrued. During December 2011, $7,500 CAD was converted into 3,000,000 shares of the Company’s common stock at $0.0025 per share. During December 2012 the remaining $2,500 CAD was converted into 1,000,000 registered shares of the Company’s common stock at $0.0025 per share to fully satisfy the promissory note.
On April 9, 2009, the Company entered into a promissory note payable on demand for $10,000 (CD$). The note accrued interest at 5% per annum. On April 30, 2012, the Company amended the note to add a conversion feature that permits the holder, at any time, to convert the note into shares of the Company’s common stock at an exercise price of $.0025 per share. As part of the new agreement, the holder of the note waived all interest including interest previously accrued. During November and December 2012, $10,000 CAD was converted into 4,000,000 registered shares of the Company’s common stock at $0.0025 per share to fully satisfy the promissory note.
On December 16, 2011, the Company was advanced $4,100 each from two unrelated parties. The advances are evidenced by two equal convertible promissory notes bearing interest at 5% per annum with a due date on December 31, 2012. In addition, at any time, the holders may convert the notes into shares of the Company’s common stock at an exercise price of $.0025 per share. During July and September 2012, one of the convertible notes was converted into 1,000,000 unregistered shares and 640,000 registered shares of the Company’s common stock, respectively, at $0.0025 per share. The unpaid balance including accrued interest was $4,314 and $8,218 at December 31, 2012 and December 31, 2011, respectively.
On March 31, 2012, the Company issued a $15,000 convertible note to an individual. The loan bears interest at 5% and has a maturity date of December 31, 2012. In addition, at any time, the holder may convert the note into shares of the Company’s common stock at an exercise price of $.009 per share. During October 2012, $15,000 plus $375 for accrued interest was converted into 1,708,334 registered shares of the Company’s common stock at $0.009 per share to fully satisfy the promissory note.
On April 20, 2012, the Company issued a $2,500 convertible note to an individual. The loan bears interest at 5% and has a maturity date of October 20, 2012. In addition, at any time, the holder may convert the note into shares of the Company’s common stock at an exercise price of $.009 per share. The unpaid balance including accrued interest was $2,641 at December 31, 2012.
On April 20, 2012, the Company issued a $5,000 convertible note to an individual. The loan bears interest at 5% and has a maturity date of October 20, 2012. In addition, at any time, the holder may convert the note into shares of the Company’s common stock at an exercise price of $.009 per share. During December 2012, $5,000 plus $228 for accrued interest was converted into 578,120 registered shares of the Company’s common stock at $0.009 per share to fully satisfy the promissory note.
On May 10, 2012, the Company issued a $2,600 convertible note to the Company’s CFO. The loan bears interest at 5% and has a maturity date of November 15, 2012. In addition, at any time, the Company’s CFO may convert the note into shares of the Company’s common stock at an exercise price of $.009 per share. The unpaid balance including accrued interest was $2,714 at December 31, 2012.
On May 15, 2012, the Company issued a $3,500 convertible note to an individual. The loan bears interest at 5% and has a maturity date of November 15, 2012. In addition, at any time, the individual may convert the note into shares of the Company’s common stock at an exercise price of $.009 per share. During December 2012, $3,500 plus $166 for accrued interest was converted into 399,011 registered shares of the Company’s common stock at $0.009 per share to fully satisfy the promissory note.
On July 18, 2012, the Company issued a $30,000 convertible note to an individual. The loan bears interest at 5% and has a maturity date of December 18, 2012. In addition, at any time, the individual may convert the note into shares of the Company’s common stock at an exercise price of $.007 per share. The unpaid balance including accrued interest was $30,813 at December 31, 2012.
On August 22, 2012, the Company issued a $20,000 convertible note to an individual. The loan bears interest at 5% and has a maturity date of January 22, 2013. In addition, at any time, the individual may convert the note into shares of the Company’s common stock at an exercise price of $.007 per share. The unpaid balance including accrued interest was $20,198 at December 31, 2012.
As of December 31, 2012, the total short-term loans - convertible amounted to $60,680 including $1,480 of accrued interest. The conversion price of the notes were fixed and determinable on the date of issuance and as such in accordance with ASC Topic 815 “Derivatives and Hedging” (“ASC 815”), the embedded conversion options of the note were not considered derivative liabilities. The beneficial conversion features of the convertible notes are at a price below fair market value. The Company recorded interest expense of $34,296 year ended December 31, 2012, in the accompanying statement of operations for the beneficial conversion feature based on the fair market value of $0.01 per share of the Company’s common stock at December 31, 2012.
NOTE 7 - MAJOR CUSTOMERS
The Company generated no sales during the year ended December 31, 2012 and 2011.
NOTE 8 - PROVISION FOR INCOME TAXES
Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.
As of December 31, 2012, there is no provision for income taxes, current or deferred.
At December 31, 2012, the Company had a net operating loss carry forward in the amount of $3,442,575, available to offset future taxable income. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.
A reconciliation of the Company’s effective tax rate as a percentage of income before taxes and federal statutory rate for the periods ended December 31, 2012 and 2011 is summarized below.
NOTE 9 - CONVERSION OF ACCOUNTS PAYABLE AND NOTES PAYABLE TO EQUITY
On September 11, 2008, the Company entered into a License Agreement with Oceanutrasciences Inc., a Canadian company (“ONS”) (the “Agreement”)/ The Agreement is for a term of three years from September 11, 2008 to September 11, 2011. Under the terms of the Agreement, the Company has acquired the license and trademark rights to produce the “Nutra-Pro 80-20” product from ONS in the North America animal feed territory. The Company has acquired these rights for $150,000 (CD$) ($141,525 US$ at September 11, 2008). The Company paid the initial payment of $50,000 (CD$), with the remaining payments due $50,000 (CD$) on October 31, 2008 and $50,000 (CD$) on December 31, 2008. The Company has made a $25,000 (CD$) payment in December 2008, and as of December 31, 2009 and through November 26, 2010 owed $75,000 (CD$), which was reflected in accounts payable and accrued expenses on the balance sheet as of December 31, 2010. On November 26, 2010, ONS has filed bankruptcy in Canada. ONS has sold their assets to another company. The Company was amortizing the license fee over the 36 month term of the Agreement. Amortization expense for the year ended December 31, 2010 was $48,541. The remaining $34,967 of unamortized license fees has been deemed impaired by Management as of December 31, 2010. On May 15, 2012, the Company obtained a legal opinion that the $75,000 (CD$) balance due to ONS should not be recognized as an amount owed by Bio-Solutions and may be written off at December 31, 2011. The legal opinion contains a four part justification, first, the contract was never fulfilled by ONS, second, the September 20, 2009 ONS bankruptcy documents did not recognize the $75,000 (CD$) as an asset of ONS, third, subsection 10.1 of the Agreement provides for the right of one party to request the Agreement be resiliated in the event one party files for bankruptcy and finally, the contractual prescription in the province of Quebec, Canada, for similar contracts is three (3) years. At December 31, 2011, the Company wrote-off the $73,748 (US$) as a conversion of accounts payable to equity.
On June 15, 2012, Gilles Chaumillon resigned as President, Chief Executive Officer and Director of the Company. In addition, Mr. Chaumillon agreed to settle his outstanding debt, interest and account payable balances of $227,811 for $10,000 payable in ten equal monthly installments of $1,000 beginning July 2012. At June 30, 2012, the Company wrote-of the net amount of $217,811 as a conversion of accounts payable and notes payable to equity. At December 31, 2012, Mr. Chaumillon is owed $9,000.
NOTE 10 - INTELLECTUAL PROPERTY
On September 26, 2011, the Company acquired all the assets and intellectual property rights of Type2 Defense, a natural dietary supplement formulated to support healthy glucose levels for type 2 diabetics and pre-diabetics. The acquisition from Type2 Defense, a Texas based sole proprietorship was for the issuance of 20,000,000 shares of the Company’s common stock. The shares are valued at $200,000 or $0.01 per share based on the closing price of the Company’s common stock on September 26, 2011. The agreement also includes the issuance of 10,000,000 shares of the Company’s common stock upon achieving certain operational milestones and an additional 10,000,000 shares of Company’s common stock upon reaching 1,500 customers. On November 4, 2011, an advance of 600,000 shares of the Company’s common stock related to the reaching of 1,500 customers’ milestone in the original agreement was approved by the board of directors. The shares were valued at $0.013 per share or $6,600 and included as intellectual property on the accompanying condensed balance sheet. The issuance of 10,000,000 shares of the Company’s common stock upon reaching 1,500 customers was reduced by the advance to 9,400,000 shares. As of March 22, 2013, the agreement provisions for achieving operational milestones for 10,000,000 shares of the Company’s common stock and reaching 1,500 customers for 9,400,000 shares of the Company’s common stock have not been achieved.
All assets other than the intellectual property had a fair value of $0, with the intellectual property being valued at $206,600. The Company has not amortized this value as they deem the value to have an infinite useful life. The Company performed an impairment test as of December 31, 2012 and concluded that based on discounted cash flows for the Type 2 product, the related intellectual property asset for $206,600 was not impaired.
NOTE 11 - FAIR VALUE MEASUREMENTS
The Company adopted certain provisions of ASC Topic 820. ASC 820 defines fair value, provides a consistent framework for measuring fair value under generally accepted accounting principles and expands fair value financial statement disclosure requirements. ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:
·
Level 1 inputs: Quoted prices for identical instruments in active markets.
·
Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
·
Level 3 inputs: Instruments with primarily unobservable value drivers.
NOTE 12 - SUBSEQUENT EVENTS
During January 2013, the Company signed an agreement with a consultant for website services. The terms of the agreement include a fee of $15,000 or 1,500,000 registered shares of the Company’s common stock in their S-8 registration filed March 2013. The shares were valued at $0.01 per share. The shares were issued on March 8, 2013.
During January 2013, a consultant was granted 2,000,000 registered shares of the Company’s common stock in their S-8 registration filed March 2013 for legal services to the Company. The shares were valued at $0.013 per share or $26,000. The shares were issued on March 8, 2013.
During January 2013 a consultant was issued 2,000,000 unregistered shares of the Company’s common stock for marketing services to the Company. These shares were valued at $0.014 per share or $28,000.
During January 2013, a consultant was granted 625,000 registered shares of the Company’s common stock in their S-8 registration filed March 2013 for marketing services to the Company. The shares were valued at $0.011 per share or $6,875. The shares were issued on March 8, 2013.
During January, 2013, the Company issued a $12,000 promissory note to an individual. The loan bears interest at 5% and is payable on demand.
During January 2013, a consultant was granted 4,500,000 registered shares of the Company’s common stock in their S-8 registration filed March 2013 for marketing services to the Company. The shares were valued at $0.011 per share or $50,000. The shares were issued on March 15, 2013.
During January 2013, the Company issued a $12,500 convertible note to an individual. The loan bears interest at 5% and is payable on demand and may be converted at any time prior to December 31, 2013 into shares of the Company’s common stock. The conversion price shall be 80% of the average closing price of the stock for the ten (10) business days preceding the conversion notice. The conversion price shall not be lower than $0.01 per share. This transaction will result in the recording a derivative liability in the Company’s financial statements during the Quarter ended March 31, 2013.
During January 2013, the Company issued a $7,500 convertible note to an individual. The loan bears interest at 5% and has a maturity date of July 30, 2013. In addition, at any time, the holder may convert the note into shares of the Company’s common stock at an exercise price of $.005 per share.
During February, 2013, the Company issued a $7,500 convertible note to an individual. The loan bears interest at 5% and has a maturity date of August 20, 2013. In addition, at any time, the holder may convert the note into shares of the Company’s common stock at an exercise price of $.005 per share.
During January and February 2013, convertible promissory notes totaling $30,983 including interest was fully converted into 4,426,174 unregistered shares of the Company’s common stock at $0.007 per share.
During February 2013, the Company issued a $12,500 convertible note to an individual. The loan bears interest at 5% and is payable on demand and may be converted at any time prior to January 31, 2014 into shares of the Company’s common stock. The conversion price shall be 80% of the average closing price of the stock for the ten (10) business days preceding the conversion notice. The conversion price shall not be lower than $0.01 per share. This transaction will result in the recording a derivative liability in the Company’s financial statements during the Quarter ended March 31, 2013.
During February 2013, the Company began the first production run of the Type 2 Defense product. The product will completed in in May 2013 with sales expected in May and June 2013.
During March 2013, the Company filed a Form S-8 with the Security and Exchange Commission. The 2013 Stock Incentive Plan may issue up to 30,000,000 registered shares of the Company’s common stock for services to the Company.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A.
Item 9A. Controls and Procedures.
Evaluation of disclosure controls and procedures.
We maintain controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and (ii) accumulated and communicated to our principal executive and principal financial officers to allow timely decisions regarding required disclosure. Based upon their evaluation of those controls and procedures performed as of December 31, 2012, the date of this report, our chief executive officer/chief financial officer concluded that our disclosure controls and procedures were not effective.
Management's annual report on internal control over financial reporting.
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a set of processes designed by, or under the supervision of, a company’s principal executive and principal financial officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
·
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the Company’s transactions and dispositions of the Company’s assets;
·
provide reasonable assurance that The Company’s transactions are recorded as necessary to permit preparation of the Company’s financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and
·
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statement.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of internal control, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer/Chief Financial Officer, the Company conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), as of December 31, 2012.
A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment described above, management identified the following control deficiency that represents material weaknesses at December 31, 2012:
·
Due to the limited number of Company personnel, a lack of segregation of duties and responsibilities with respect to our cash and control over the disbursements related thereto. An essential part of internal control is for certain procedures to be properly segregated and the results of their performance are adequately reviewed. This is normally accomplished by assigning duties so that no one person handles a transaction from beginning to end and incompatible duties between functions are not handled by the same person.
As a result of this material weakness described above, management has concluded that, as of December 31, 2012, the Company’s internal control over financial reporting was not effective based on the criteria in “Internal Control-Integrated Framework” issued by COSO. The Company intends to augment the Company’s internal controls procedures and expand the Company’s accounting staff. The Company intends to initiate measures to remediate and refine the Company’s internal controls to address this identified material weakness as the Company grows and obtains a stronger cash position that would justify additional expenditures.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during our most recently completed quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Item 9B. Other Information.
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth information regarding our executive officers and directors:
William Gallagher. Mr. Gallagher has over 40 years of investment banking experience having participated in private placements, syndications, corporate restructuring and initial public offerings. In 1992 he founded and is the president of JagCapital, Inc. a merchant bank headquartered in San Antonio, Texas and specializing in the hospitality industry, consumer products and energy transactions. From 1994-1998 he served as chairman and chief executive officer of Harvest Restaurant Group, a rotisserie chicken restaurant chain. In 1989 he founded Billy Blues BBQ sauce; and served as its chief executive officer until 1995. Billy Blues owned the nationally known Chris & Pitts Barbecue Sauce. From 2004 through 2006 he served as chairman and chief executive officer of Sweet Success Corporation. JagCapital, Inc. continued to consult with various companies including Organic Alliance Inc., an organic fruits and vegetables company in Salinas, California and Nest Ventures, a venture capital company in Scottsdale Arizona. Mr. Gallagher is a graduate of the University of Texas. Mr. Gallagher joined the board on October 10, 2011 and was appointed Chief Financial Officer. He was appointed Chief Executive Officer in June 2012.
Thomas E. Metzger. Mr. Metzger is a skilled business executive having served as a chief executive officer, president, chief operating officer of multiple hotel and restaurant companies. He has special understanding and expertise in all aspects of the food service and hospitality industry including strategic planning, concept development, construction, financial development and management, human resources and marketing. In 2006 he formed the South Seas Restaurant Management Company which operated Little Caesars Pizza and Buffalo Wild Wings in the Hawaiian Islands. From 2004-2006 he serves as president and chief operating officer of Heart of America Restaurants and Inn’s (“HOARI”). HOARI operated eight different full service restaurant brands and seven different hotel franchise brands together with the Wild Wood Lodges brand.
From 2001 through 2004 he served as president and chief financial officer of W P Pacific, Inc. W P Pacific owned and operated Wolfgang Puck Café’s, Wolfgang Puck Express, Cucina Presto, Cucina-Cucina restaurants and the Coffee and Tea Leaf coffee shops. From 1999 through 2001 her served as chief executive officer and president of Sizzler USA, Inc. which is engaged in the operation, development and franchising of Sizzler Family Steakhouse. Prior to this, Mr. Metzger had executive level positions with Wrapsters, Inc., Kenny Rogers Roasters International, Inc. and Mid Atlantic Restaurant Systems. He earned an undergraduate and masters of Science degree from LaSalle University in hotel and restaurant management. Mr. Metzger joined the board on October 10, 2011.
Mark Solomon. Mr. Solomon was appointed to the board during July 2011. On February 15, 2012, Mr. Solomon tendered his resignation as a director of Bio-Solutions, Corp.
Dr. Gilles Chaumillon. On June 15, 2012, Dr. Chaumillon tendered his resignation as an officer and director of Bio-Solutions, Corp.
Gilbert Pomerleau. On October 10, 2011, Mr. Pomerleau tendered his resignation as an officer and director of Bio-Solutions, Corp.
Ghislaine St-Hilaire. In July 2011, Ms. St-Hilaire tendered her resignation as vice president and secretary and director of Bio-Solutions, Corp.
All directors hold office until the completion of their term of office, which is not longer than one year, or until their successors have been elected. All officers are appointed annually by the board of directors and, subject to employment agreements (which do not currently exist) serve at the discretion of the board. Currently, directors receive no compensation.
There are no family relationships between any of our officers or directors. There are no orders, judgments, or decrees of any governmental agency or administrator, or of any court of competent jurisdiction, revoking or suspending for cause any license, permit or other authority to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining any of our officers or directors from engaging in or continuing any conduct, practice or employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security, or any aspect of the securities business or of theft or of any felony. Nor are any of the officers or directors of any corporation or entity affiliated with us so enjoined.
Code of Ethics. We do not currently have a Code of Ethics that applies to all employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We plan to adopt a Code of Ethics.
Nominating Committee. Our entire Board participates in consideration of director nominees. The Board will consider candidates who have experience as a board member or senior officer of a company or who are generally recognized in a relevant field as a well-regarded practitioner, faculty member or senior government officer. The Board will also evaluate whether the candidates' skills and experience are complementary to the existing Board's skills and experience as well as the Board's need for operational, management, financial, international, technological or other expertise. The Board will interview candidates that meet the criteria and then select nominees that Board believes best suit our needs.
The Board will consider qualified candidates suggested by stockholders for director nominations. Stockholders can suggest qualified candidates for director nominations by writing to our board of directors at 1250 NE Loop 410, San Antonio, TX 78209. Submissions that are received that meet the criteria described above will be forwarded to the Board for further review and consideration. The Board will not evaluate candidates proposed by stockholders any differently than other candidates
Audit Committee Financial Expert. Our board of directors does not have an “audit committee financial expert,” within the meaning of such phrase under applicable regulations of the Securities and Exchange Commission, serving on its audit committee. The board of directors believes that all members of its audit committee are financially literate and experienced in business matters, and that one or more members of the audit committee are capable of (I) understanding generally accepted accounting principles (“GAAP”) and financial statements, (ii) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves, (iii) analyzing and evaluating our financial statements, (iv) understanding our internal controls and procedures for financial reporting; and (v) understanding audit committee functions, all of which are attributes of an audit committee financial expert. However, the board of directors believes that there is not any audit committee members who have obtained these attributes through the experience specified in the SEC’s definition of “audit committee financial expert.” Further, like many small companies, it is difficult for the Company to attract and retain board members who qualify as “audit committee financial experts,” as competition for these individuals is significant. The board believes that its current audit committee is able to fulfill its role under SEC regulations despite not having a designated “audit committee financial expert.” We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our start-up operations, we believe the services of a financial expert are not warranted.
Audit Committee. Presently, the board of directors acts as the audit committee. The board of directors does not have an audit committee financial expert. The board of directors has not yet recruited an audit committee financial expert to join the board of directors because we have only recently commenced a significant level of financial operations.
Item 11.
Item 11. Executive Compensation
Summary Compensation Table.
The table set forth below summarizes the annual and long-term compensation for services in all capacities to us payable to our chief executive officer and our other executive officers for years ended December 31, 2012 and 2011. On March 29, 2011, the Company filed Form S-8 for our 2011 Stock Incentive and Equity Compensation Plan for 20,000,000 registered shares of the Company’s common stock. We issued 19,711,000 under this plan to officers, directors and others. The registered shares noted below were issued under this plan.
_________
(1)
Value of 1,000,000 registered shares issued in April 2011 at $0.08 per share; plus value of 500,000 unregistered shares issued in April 2011 at $0.08 per share; plus, value of 3,500,000 registered shares issued in September 2011 at $0.015 per share.
(2)
Value of 500,000 registered shares issued in April 2011 at $0.08 per share; plus, value of 1,000,000 registered shares issued in September 2011 at $0.015 per share.
(3)
Value of 500,000 registered shares issued in April 2011 at $0.08 per share.
(4)
Value of 1,000,000 registered shares issued in April 2011 at $0.08 per share; plus, value of 3,000,000 registered shares issued in September 2011 at $0.015 per share.
(5)
Value of 15,000,000 unregistered shares issued in October 2012 at $0.015 per share in accordance with Mr. Gallaher’s employment agreement dated July 1, 2012.
(6)
Value of 2,000,000 unregistered shares issued in July 2012 at $0.013 per share.
(7)
Value of 250,000 unregistered shares issued in July 2012 at $0.022 per share.
(8)
Value of 250,000 unregistered shares issued in July 2011 at $0.04 per share.
Employment Contracts and Termination of Employment.
Mr. Gallagher signed an 18 month employment contract on July 1, 2012. The contract expires on December 31, 2013. According to the contract, Mr. Gallagher is compensated with 15,000,000 unregistered shares of the Company’s common stock valued at $225,000 or $0.015 per share. The shares were issued in October 2012. Only Mr. Gallaher has an employment contract.
We have no other plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment as a result of resignation or retirement.
On August 17, 2009, we entered into an employment agreement with Gilles Chaumillon, our CEO. The agreement has a one-year term, however can be extended for additional one-year terms unless terminated by either party. The CEO’s compensation under the agreement is for a $100,000 (CD$) salary as well as the issuance of 750,000 shares of stock. 375,000 of those shares were issued in August 2009 and the remaining 375,000 shares were issued in January 2010. Mr. Chaumillon’s contract was not renewed at August 17, 2011.
Outstanding Equity Awards.
As of December 31, 2012, the following named executive officers had the following unexercised options, stock that has not vested, and equity incentive plan awards:
Equity Compensation Plan.
On March 29, 2011, the Company filed Form S-8 for our 2011 Stock Incentive and Equity Compensation Plan for 20,000,000 registered shares of the Company’s common stock. We issued 19,711,000 under this plan to officers, directors and others.
Stock Options/SAR Grants.
No grants of stock options or stock appreciation rights were made since our date of incorporation on March 27, 2007.
Long-Term Incentive Plans.
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers.
Director Compensation.
Since March 27, 2007 through December 31, 2012, none of our directors received salary compensation solely by virtue of their serving on the Company’s Board of Directors.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain information regarding the beneficial ownership of our common stock as of December 31, 2012, by each person or entity known by us to be the beneficial owner of more than 5% of the outstanding shares of common stock, each of our directors and named executive officer, and all of our directors and executive officer as a group.
_______
* Figures may vary due to rounding.
(1) Includes 7,142,857 shares of common stock issuable upon conversion of Notes Payable at $0.007 per share.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. In accordance with Securities and Exchange Commission rules, shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the table are deemed beneficially owned by the optionees. Subject to community property laws, where applicable, the persons or entities named in the table above have sole voting and investment power with respect to all shares of our common stock indicated as beneficially owned by them.
Changes in Control.
Our management is not aware of any arrangements which may result in “changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-K.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Related Party Transactions.
The Company conducts business with another company owned by a former officer of the Company. The Company uses office space in the other company’s offices. For the years ended December 31, 2012 and 2011 the Company incurred $0 and $4,104, respectively, for rent expense to this company.
Mr. Gallagher signed an 18 month employment contract on July 1, 2012. The contract expires on December 31, 2013. According to the contract, Mr. Gallagher is compensated with 15,000,000 unregistered shares of the Company’s common stock valued at $225,000 or $0.015 per share. The shares were issued in October 2012.
With regard to any future related party transaction, we plan to fully disclose any and all related party transactions, including, but not limited to, the following:
·
disclose such transactions in prospectuses where required;
·
disclose in any and all filings with the Securities and Exchange Commission, where required;
·
obtain disinterested directors consent; and
·
obtain shareholder consent where required.
Director Independence.
Members of our Board of Directors are not independent as that term is defined by defined in Rule 4200(a) (15) of the Nasdaq Marketplace Rules.
Item 14.
Item 14. Principal Accountant Fees and Services.
Audit Fees.
The aggregate fees billed in the fiscal year ended December 31, 2012 and 2011, respectively, for professional services rendered by the principal accountant for the audit of our annual financial statements and quarterly review of the financial statements included in our Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for each fiscal year was $20,000.
Audit-Related Fees.
For the fiscal year ended December 31, 2012 and 2011, there were no fees billed for services reasonably related to the performance of the audit or review of the financial statements outside of those fees disclosed above under “Audit Fees.”
Tax Fees.
For the fiscal year ended December 31, 2012 and 2011 respectively, our accountants rendered services for tax compliance, tax advice, and tax planning work for which we paid $0 and $0, respectively.
All Other Fees.
None.
Pre-Approval Policies and Procedures.
Prior to engaging our accountants to perform a particular service, our board of directors obtains an estimate for the service to be performed. All of the services described above were approved by the board of directors in accordance with its procedures.
Item 15.
Item 15. Exhibits, Financial Statement Schedules.
(a) Financial Statements.
Included in Item 7
(b) Exhibits.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements 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.
March 22, 2013
By:
/s/ William Gallagher
William Gallagher
Its:
Chief Executive Officer, Chief Financial Officer and a Director
(Principal Executive, Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
March 22, 2013
By:
/s/ William Gallagher
William Gallagher
Its:
Chief Executive Officer, Chief Financial Officer and a Director
(Principal Executive, Financial and Accounting Officer)
March 22, 2013
By:
/s/ Thomas E. Metzger
Thomas E. Metzger
Director