SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE EXCHANGE ACT
Commission file number 0-32663
BIOMASSE INTERNATIONAL, INC.
(exact name of small business issuer as specified in its charter)
FLORIDA
(State or other jurisdiction of
incorporation or organization)
65-0909206
(IRS Employer Identification No.)
4720, BOULEVARD ROYAL, SUITE 103, TROIS-RIVIERES-OUEST, QUEBEC, CANADA G9A 4N1
(Address of principal executive offices)
(819) 374-3131
(Registrant's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 of 15(d) of the Exchange Act during the past 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
YES [X ] NO [ ]
As of August 13, 2002 the Registrant had 39,424,945 shares of its Common Stock
outstanding
Transitional Small Business Disclosure Format: YES [ ] NO [X]
Index to Form 10-QSB
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For the Quarter ended June 30, 2002
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Page
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of June 30, 2002 (unaudited) 3
Statement of Operations for the three and nine months ended 4
June 30, 2002 and 2001 and from inception (March 19, 1999)
through June 30, 2002 (unaudited)
Statement of Cash Flows for the nine months ended 5
June 30, 2002 and 2001 and from inception (March 19, 1999)
through June 30, 2002 (unaudited)
Notes to the Financial Statements for the nine months 6
ended June 30, 2002 (unaudited)
Item 2. Plan of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEET
JUNE 30, 2002
(UNAUDITED)
ASSETS
------
Current Assets
Cash and cash equivalents $ 457
Receivables 41,851
Prepaid consulting fees 94,575
Prepaid equipment costs 241,646
Other current assets (principally related party) 31,998
----------
Total current assets 410,527
Property and equipment, net 19,159
Intangibles, net 40,028
Other assets 8,434
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TOTAL ASSETS 478,147
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LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Current Liabilities
Bank overdrafts 562
Accounts payable and accrued expenses 471,381
Accrued salaries and payroll related benefits 252,927
Other current liabilities (principally related party) 171,143
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Total current liabilities 896,013
Convertible debenture 250,000
Shareholder's Equity
Common Stock, class A, $1.00 par value; authorized -
5,000,000 shares; issued and outstanding 0
Common Stock, class B, $.001 par value; authorized 19,135
55,000,000 shares; issued 19,135,223,
outstanding 17,924,945
Paid in Capital 964,564
Treasury Stock - 1,210,278 Shares (1,210)
Deficit accumulated during the development stage (1,644,089)
Accumulated other comprehensive income (6,266)
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Total Shareholder's Equity (667,866)
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $478,147
==========
Read the accompanying summary of significant accounting notes to
financial statements, which are an integral part of this financial statement.
3
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2002 AND 2001
FROM INCEPTION (MARCH 19, 1999) THROUGH JUNE 30, 2002
Inception
Three months ended June 30, Nine months ended June 30, (March 19, 1999)
--------------------------- ---------------------------- through
2002 2001 2002 2001 June 30, 2002
----------- ------------- ----------- ----------- ----------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues: $ 4,765 $ - $ 14,174 $ - $ 68,840
Cost of Revenues: 1,811 - 1,811 - 60,535
----------- ---------- ----------- ---------- --------------
Gross Profit 2,954 - 12,363 - 8,305
Operating Expenses:
Marketing 173 - 74,545 - 74,545
Travel 5,307 7,903 16,593 13,836 76,196
Professional fees 31,364 1,833 38,705 4,456 158,651
Consulting fees 227,960 43,391 351,889 92,247 542,023
Directors fees - - 9,000 - 9,000
Salaries and payroll related benefits 104,430 - 222,216 - 298,743
Rent 2,726 4,150 9,223 10,982 37,847
Depreciation 1,464 214 4,167 641 6,091
Amortization 5,500 5,500 16,500 16,500 69,972
Selling, general and administrative expenses 23,090 8,287 71,975 31,270 180,326
----------- ---------- ----------- ---------- --------------
402,013 71,278 814,813 169,933 1,453,395
Operating Loss (399,060) (71,278) (802,450) (169,933) (1,445,089)
Other Income/(Expense)
Interest Income - related party - - - 177 824
Interest Income - other 42 - 48 - 48
Interest Expense (189) - (605) - (931)
Foreign exchange - - - - 1,059
Loss on impairment of asset - - - - (200,000)
----------- ---------- ----------- ---------- --------------
Total Other Income (146) - (557) 177 (199,000)
Net Loss (399,206) (71,278) (803,007) (169,755) (1,644,089)
Basic weighted average common shares outstanding 16,560,263 15,091,566 16,457,987 15,148,152
=========== =========== =========== ===========
Basic and diluted loss per common share $ (0.02) $ (0.00) $ (0.05) $ (0.01)
=========== =========== =========== ===========
Read the accompanying summary of significant accounting notes to
financial statements, which are an integral part of this financial statement.
4
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2002 AND 2001
FROM INCEPTION (MARCH 19, 1999) THROUGH JUNE 30, 2002
Inception
For the nine ended June 30, (March 19, 1999)
------------------------------------ through
2002 2001 June 30, 2002
---------------- ---------------- -------------------
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (803,007) $ (169,755) $ (1,644,089)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 2,167 17,141 57,564
Rent expense offset to paid in capital - 4,500 5,000
Issuance of warrants for advisory services 10,000
Issuance of options for professional services 6,000
Loss on impairment of asset 200,000
Issuance of shares for professional services 239,257 239,257
Accumulated other comprehensive income -
Changes in Operating assets and liabilities:
Receivables (41,166) (1,568) (41,851)
Other Current Assets (21,217) (9,446) (31,998)
Other Assets (200) 8,946 (8,434)
Accounts Payable and Accrued Liabilities 618,252 58,739 896,013
---------------- ---------------- -------------------
Net cash provided by/(used in) operating activities (5,914) (91,443) (312,538)
CASH FLOWS FROM INVESTING ACTIVITIES:
Prepaid equipment costs (241,646) (241,646)
Purchase of property and equipment - - (26,594)
---------------- ---------------- -------------------
Net cash provided by/(used in) investing activities (241,646) - (268,240)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Notes payable, principally related parties - - 56,566
Purchase of treasury stock (3,333) - (7,833)
Exercise of warrants - - 1,325
Convertible debenture 250,000 250,000
Sales of common stock - 86,729 281,177
---------------- ---------------- -------------------
Net cash provided by/(used in) financing activities 246,667 86,729 581,235
---------------- ---------------- -------------------
Net increase (decrease) in cash and cash equivalents (893) (4,714) 457
Cash and cash equivalents, beginning of period 1,350 4,891 -
---------------- ---------------- -------------------
Cash and cash equivalents, end of period $ 457 $ 177 $ 457
================ ================ ===================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of 588,000 shares of common stock 110,000
for license rights from affiliate (recorded at predecessor
basis)
Issuance of 306,000 shares of common stock 200,000
for equipment from affiliate (recorded at predecessor
basis)
Issuance of 56,565 shares of common stock 56,566 56,566
in settlement of note payable (related party)
5
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO THE FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -BASIS OF PRESENTATION
The accompanying unaudited financial statements of Biomasse International,
Inc. have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB and Article 10 of Regulation S-X. The financial statements reflect all
adjustments consisting of normal recurring adjustments which, in the opinion of
management, are necessary for a fair presentation of the results for the periods
shown. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.
These financial statements should be read in conjunction with the audited
financial statements and footnotes thereto included in Biomasse International,
Inc.'s form 10-KSB as filed with the Securities and Exchange Commission.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and that effect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
NOTE 2 - EARNINGS (LOSS) PER SHARE
Earnings (Loss) per common share are calculated under the provisions of
SFAS No. 128, "Earnings per Share," which establishes standards for computing
and presenting earnings per share. SFAS No. 128 requires the Company to report
both basic earnings (loss) per share, which is based on the weighted-average
number of common shares outstanding during the period, and diluted earnings
(loss) per share, which is based on the weighted-average number of common shares
outstanding plus all potential dilutive common shares outstanding. Options and
warrants are not considered in calculating diluted earnings (loss) per share
since considering such items would have an anti-dilutive effect.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The company reported a net loss of
$803,007 for the six months ended June 30, 2002 (unaudited) as well as reporting
net losses of $1,644,089 from inception (March 19, 1999) to June 30, 2002
(unaudited). As reported on the statement of cash flows, the Company has
incurred negative cash flows from operating activities of $312,538 from
inception (March 19, 1999) (unaudited). To date, these losses and cash flow
deficiencies have been financed principally through the sale of common stock
($281,177) (unaudited). Additional capital and/or borrowings will be necessary
in order for the Company to continue in existence until attaining and sustaining
profitable operations. Management has continued to develop a strategic plan to
develop a management team, maintain reporting compliance and establish long term
relationships with other major organizations to implement its unique technology
to process and dispose of the waste created by pulp and paper companies in an
efficient and environmentally-friendly way.
6
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO THE FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - STOCKHOLDER'S EQUITY
On October 19, 2001, the Company repurchased from a shareholder 3,335 units
(each unit consisting of one (1) share of common stock and one (1) warrant) at a
price of $1.00 per unit.
On December 17, 2001, the Company issued 325,000 shares in settlement of a
consulting agreement.
On June 30, 2002, the Company issued 1,705,000 shares in settlement of
consulting and professional fees.
NOTE 5 - SUBSEQUENT EVENT
In July 2002, the Company issued 20 million shares of common stock in
accordance with contractual obligations set forth in consulting agreements
entered into by the Company.
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ITEM 2. PLAN OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and related notes that are included under Item 1. Statements made
below which are not historical facts are forward-looking statements.
Forward-looking statements involve a number of risks and uncertainties
including, but not limited to, general economic conditions, our ability to
complete development and then market our services, competitive factors and other
risk factors as stated in other of our public filings with the Securities and
Exchange Commission.
Our main business purpose is to provide the pulp and paper industry with the
most practical, economical and efficient way of disposing of the sludge they
produce as a by-product of their operations. Our proprietary technology also
allows us to give enhanced value to the waste sludge and other residues
generated by their wastewater treatment systems. We own a process to convert, by
combustion, in an environmentally safe manner, the waste residue produced by
pulp and paper mills into steam. We intend to profit by charging mills for the
disposal of their sludge by converting it to steam, which will be less than they
are currently paying for shipping and storage of waste sludge. As an added
benefit to the mill, it can, in turn, use the steam as energy thereby creating a
low cost, clean energy source.
We signed our first agreement on April 12, 2002 with J. Ford Ltee., a pulp and
paper manufacturer in Quebec, Canada. This agreement is for five years with a
revenue stream of approximately $1 million US per year to Biomasse. The
equipment is in the building process and the project should begin generating
revenue by December 2002.
We intend to concentrate initially on the North American pulp and paper
companies. During the past year we identified several potential customers, The
Great Northern Paper Company of Millinocket, Maine and Kruger in Bromptonville,
Quebec. We completed the profitability and feasibility studies for these
installation and based upon the study's very positive conclusions, we believe we
are close to finalizing a ten-year contract for the sale of steam utilizing our
process with both of these organizations in the near future. Once these
contracts are finalized, a nine to twelve month installation process will ensue.
We do not expect to generate any substantial revenue until the installation is
completed and the system has been tested and is operational.
Our studies indicate that the cost of equipment and installation for a plant
suitable for Great Northern Paper Company and Kruger Bromptonville is estimated
at approximately $7,000,000 and $9,200,000 respectively.
Liquidity
As reflected in our June 30, 2002 balance sheet, we have minimal cash on hand.
Monthly operating expenses including rent, communications, travel, consulting,
and professional fees and other general and administrative are approximately
$30,000. Our President and Vice President - Finance agreed not to accept any
salaries until the company listed its stock publicly on the OTC Bulletin Board.
When we listed, the number of our employees increased to four with the
8
addition of a Vice President of Legal Affairs as well as an administrative
person. Once this happened, executive and management salaries are estimated to
be approximately $20,000 per month. We have several options to fund the above
monthly expenditures: In our contract with the pulp and paper manufacturers, we
are requiring a deposit with the signing of the contract of approximately one
months revenue. In the case of the J Ford Ltee project, that equates to
approximately $83,000 US. These deposits will then contribute to the satisfying
our overall monthly expenditures. We have entered into an agreement to secure a
$500,000 financing whereby the Company received $250,000 US at the signing of a
12% secured convertible debenture. The Company does not intend to access the
additional $250,000 US in the future. The $250,000 US debenture is convertible
into common stock at a conversion price of the lesser of $.225 or the average of
the lowest 3 inter-day trading prices during the 20 trading days immediately
prior to the conversion date discounted by 50%. The debenture holder will also
receive for each $1.00 of debenture investment, warrants to purchase 3 shares of
the Company's common stock. The warrant term shall be for three years.
9
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
On October 19, 2001, the Company repurchased from a shareholder 3,335
units (each unit consisting of one (1) share of common stock and one (1)
warrant).
On December 17, 2001, the Company issued 325,000 shares in settlement
of a consulting agreement.
On June 30, 2002, the Company issued 1,705,000 shares in settlement of
consulting and professional fees.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
99.1 Certification of Periodic Report, dated August 14, 2002,
of the Principal Executive Officer and Principal Financial
Officer of the Company pursuant to Section 906 of the
Sarbanes--Oxley Act of 2002.
(b) Reports on Form 8-K:
None
10
SIGNATURES
In accordance with Section 13 or 15(d) of the 1934 Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereto duly
authorized.
BIOMASSE INTERNATIONAL, INC.
By: /s/ Jean Gagnon
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Jean Gagnon, Vice - President
August 14, 2002
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