As filed with the Securities and Exchange Commission on May 10, 2002
Registration No. 333-_________
-----------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
---------------------------------------
BIOMASSE INTERNATIONAL INC.
(Name of issuer in its charter)
Florida 562000 65-0909206
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code) Identification Number)
4720 Boulevard Royal, Suite 103 Irving Rothstein, Esq.
Trois-Rivieres-Ouest Heller, Horowitz & Feit, P.C.
Quebec, Canada G9A 4N1 292 Madison Avenue
(819) 374-3131 New York, New York 10017
(Address and telephone number (212) 685-7600
of registrant's principal executive (Name, address and telephone
offices and principal place of business) number of agent for service)
------------------------------------
Copies to:
Irving Rothstein, Esq.
Heller, Horowitz & Feit, P.C.
292 Madison Avenue
New York, New York 10017
Telephone: (212) 685-7600
Approximate date of commencement of proposed sale to public: At the discretion
of the selling stockholders.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
CALCULATION OF REGISTRATION FEE
- ----------------------------------- ------------------ ------------------------ -------------------------- -------------------
Title of Each Class of Securities Amount To Be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered (1) Offering Price Per Aggregate Offering Registration Fee
Security (2) Price (2)
- ----------------------------------- ------------------ ------------------------ -------------------------- -------------------
Common Stock class B, par value
$0.001 14,111,111 $ 0.16 $2,257,778 $207.71
- ----------------------------------- ------------------ ------------------------ -------------------------- -------------------
Total 14,111,111 $2,257,778 $207.71
- ----------------------------------- ------------------ ------------------------ -------------------------- -------------------
(1) Shares of common stock which may be offered pursuant to this registration
statement, which shares are issuable upon conversion of secured convertible
debentures and upon exercise of related warrants. The number of shares of common
stock registered hereunder represents a good faith estimate by the Company of
the number of shares of common stock issuable upon conversion of the debentures
and upon exercise of the warrants. In addition to the shares set forth in the
table, the amount to be registered includes an indeterminate number of shares
issuable upon conversion of or in respect of the debentures and the warrants, as
such number may be adjusted as a result of stock splits, stock dividends and
similar transactions in accordance with Rule 416.
(2) Estimated solely for the purpose of calculating the registration fee. Based
upon the last sale price on May 8, 2002.
The registrant hereby amends the registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
SUBJECT TO COMPLETION DATED, MAY 10, 2002
-----------------
BIOMASSE INTERNATIONAL, INC.
----------------------
14,111,111 Shares of Common Stock
This prospectus covers 14,111,111 shares of the class B common stock,
$.001 par valued, of Biomasse International, Inc. All of these shares are being
offered by certain of our security holders which they will receive upon the
exercise of warrants and/or the conversion of debentures. None of the warrants
or debentures themselves are being registered. Our class B common stock is
quoted on the Over-the-Counter Bulletin Board under the symbol "BIMS."
The securities offered hereby involve a high degree of risk. Please
read the "Risk factors" beginning on page 3.
--------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Our principal executive offices are located at 721 S.E. 17th Street
suite 200, Fort Lauderdale, FL 33316. Our telephone number is (954) 524-0558.
The date of the Prospectus is ________, 2002.
Summary
Biomasse is a Florida corporation established in March 1999. We own a
process to convert, in an environmentally safe manner, the waste residue
produced by pulp and paper mills into steam. We intend to profit by charging
mills less for waste disposal than they currently pay for shipping and storage.
Our process can also provide additional benefits to mills, and profits for us,
by converting the steam into energy thereby creating a low cost, clean energy
source. Our principal executive offices are located at 721 S.E. 17th Street,
Suite 200, Fort Lauderdale, Florida 33316. Our telephone number is (954)
524-0558.
Number of shares currently 17,114,711 shares
outstanding
Common stock offered for sale Up to 14,111,111 shares.
By equity and by warrant/debenture
holders
Price At the market
Number of shares outstanding after 31,225,822
the offering*
Use of proceeds Biomasse will not receive any proceeds
from the sale of the shares of
common stock by the selling
stockholders.
Plan of distribution The sale of the shares of common stock
by the selling stockholders may be
effected by them from time to time
privately or in the over the counter
market or in such other market where
our common stock is publicly traded or
listed for quotation.
OTC Bulletin Board Symbol BIMS
* Assumes all of the warrants and debentures are converted and that the
exercise/conversion formulas require all of the registered shares to be issued.
Risk factors
You should carefully consider the following facts and other information
in this prospectus before deciding to invest in the shares. If any of the
following risks actually occur, our business, financial condition or results of
operations could be materially and adversely affected.
Since we have only a limited operating history, it is difficult for you to
evaluate if we are a good investment
We were incorporated in early 1999. We began to offer our first process
in 1999. Accordingly, we have only a very limited operating history, and we face
all of the risks and uncertainties encountered by early-stage companies. Thus,
our prospects must be considered in light of the risks, expenses and
difficulties associated with a new and rapidly evolving market of waste to
energy project. In sum, because of our limited history and the youth and
inherent risks of our industry, predictions of our future performance are very
difficult.
Our independent auditor has expressed concern over our ability to remain in
business
In his report on our audited financial statements, our auditor has
stated that there is a substantial doubt as to whether we will be able to remain
in business for even the next twelve months. His concern is based upon our
growing losses and no specific plan to have the funds necessary to implement our
business plan. If his concerns are proven accurate, any investment in our
securities will likely be lost.
We have incurred substantial losses and anticipate even more losses in the
future which may cause us to become insolvent
From our inception in March 1999 through December 31, 2001, we incurred
an accumulated deficit of $1,025,379. We anticipate continuing to incur
significant losses until, at the earliest, we generate sufficient revenues to
offset the substantial up-front expenditures and operating costs associated with
developing and commercializing recycling systems utilizing our process. There
can be no assurance that we will ever operate profitably.
We have only one customer and generate no revenues and without them, we cannot
long survive
We have only entered into one agreement with a pulp and paper mill to
utilize our process which converts pulp and paper mill waste residue into steam.
We will not generate any meaningful revenues unless we obtain contracts with a
significant number of pulp and paper mills. There can be no assurance that we
will ever be able to obtain contracts with a significant number of customers to
generate meaningful revenues or achieve profitable operations.
2
We need substantial additional financing or we may have to curtail operations
Our capital requirements relating to the commercialization of our
process have been, and will continue to be, significant. We are dependent on the
proceeds of future financing in order to continue in business and to develop and
commercialize additional proposed products. Our business plan calls for the
installation of four plants over the next two years which would require at least
$20,000,000 in additional financing. There can be no assurance that we will be
able to raise the substantial additional capital resources necessary to permit
us to pursue this plan. Although, we have indications from investment bankers to
undertake providing us with funds for leasing, we have no current arrangements
with respect to, or sources of, additional financing and there can be no
assurance that any such financing will be available to us on commercially
reasonable terms, or at all. Any inability to obtain additional financing will
have a material adverse effect on us, such as requiring us to significantly
curtail or cease operations.
There still remains some question regarding the efficacy of our process and if
it does not work we will have no business.
Although considerable time and financial resources were expended in the
development of our process, there can be absolutely no assurance that problems
will not develop which would have a material adverse effect on our business.
Although all the components that comprise our process have been separately
proven efficient and reliable in large scale of industrial project size, we have
not as yet realized our first completed industrial project that combine all the
required components, we are uncertain if it will perform all of the functions
for which it has been designed or prove to be sufficiently reliable in
widespread commercial use.
Currently, we are a one product company and if this sole product is
unsuccessful, we will have no business.
Our process currently is for combusting sludge and other waste to rid
pulp and paper mills of their waste products, while generating steam for energy.
However, should others develop more efficient and less costly techniques, we
could potentially have no future business.
We cannot patent our process so others may copy it and develop our business
While we may consider in the future patenting the core aspect of our
process, our innovative combustion chamber, overall, we cannot patent our
process and the protection of our proprietary methods is limited. We regard our
design as an integration of techniques that we have obtained under license as
proprietary and intend to attempt to protect it with trade secret laws,
proprietary rights agreements and internal nondisclosure agreements and
safeguards. However, such methods do not afford complete protection, can be
prohibitively expensive with frequent design changes to the system during the
development phase, and there can be no assurance that others will not
independently develop know-how or obtain access to our know-how or designs,
concepts, ideas and documentation.
The sale of shares eligible for future sale by our current stockholders may
decrease the price of our common stock
3
If our stockholders, including the selling security holders listed in
this prospectus, sell substantial amounts of our common stock in the public
market, including shares issued upon the conversion of outstanding convertible
securities or upon the exercise of warrants, then the market price of our common
stock could fall.
As of April 30, 2002, we had issued $250,000 of secured convertible
debentures to the selling security holders. Under the terms of the agreement we
entered into with the selling security holders, upon the effectiveness of the
registration statement of which this prospectus is a part and subject to certain
closing conditions, the selling security holders are obligated to purchase and
we are obligated to issue to the selling security holders an additional $250,000
of debentures. The debentures are convertible into the number of shares of
common stock as is determined by dividing the sum of the outstanding principal
amount and the amount of accrued and unpaid interest thereon by the then current
conversion price. The conversion price is equal to the lesser of $0.225, subject
to adjustment under certain antidilution provisions, and fifty percent of the
average of the lowest three inter-day trading prices for our common stock during
the twenty trading day period ending one day prior to the date of conversion.
Assuming $500,000 of debentures were outstanding on April 30, 2002, such
debentures would have been convertible into approximately 4,545,455 shares of
common stock, but his number of shares could prove to be significantly greater
in the event of a decrease in the trading price of common stock. You could
therefore experience substantial dilution of your investment upon conversion of
the debentures. The shares of common stock into which the debentures may be
converted are being registered pursuant to the registration statement of which
this prospectus is a part.
As of April 30, 2002, we had issued warrants to purchase 750,000 shares
of common stock to the selling security holders. Under the terms of the
agreement we entered into with the selling security holders, we are obligated to
issue to the selling security holders warrants to purchase an additional 750,000
shares of common stock upon the effectiveness of the registration statement of
which this prospectus is a part. These warrants are exercisable over the next
three years at a price per share equal to the lesser of $0.107, subject to
adjustment under certain antidilution provisions, and the average of the lowest
three inter-day trading prices for our common stock during the twenty trading
day period ending one trading day prior to the date of exercise. The shares of
common stock issuable upon exercise of these warrants are being registered
pursuant to the registration statement of which this prospectus is a part.
Our shares may be classified as a "penny stock" which could limit their
marketability or otherwise depress their market value.
Broker-dealer practices in connection with transactions in "penny
stocks" are regulated by certain penny stock rules adopted by the Securities and
Exchange Commission. Penny stocks generally are equity securities with a price
of less than $5.00. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document that provides information about penny
stocks and the nature of level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and, if the broker dealer is the sole
market-maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
broker-dealers who sell such securities to persons other than established
4
customers and accredited investors 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. Consequently, these
requirements may have the effect of reducing the level of trading activity, if
any, in the secondary market for a security that becomes subject to the penny
stock rules. It is likely that when public trading of our shares begins, if
ever, the shares will be subject to the penny stock rules and purchasers in the
shares being offered may find it more difficult to sell their shares.
We may not receive any proceeds from the securities being offered and any
proceeds that we do receive will be used solely in the discretion of management
without any input from investors or shareholders
We will only receive proceeds from this offering in the event warrants
are exercised. No assurance can be given that any warrants will be exercised. In
the event any warrants are exercised and we receive the proceeds from such
exercise, these proceeds will be added to our general working capital. This
means that management will have the sole discretion on the disbursements of
these funds. As it is possible that if many of the warrants are exercised a
significant amount of proceeds will be realized, this will give management
unfettered discretion over one of our most significant assets. With this
available pool of cash, our management may determine to spend it in ways that
you may not agree with and under general corporate law principles, management
would generally not be required to obtain your approval before any expenditures.
Special note regarding forward-looking statements
Some of the statements under and elsewhere in this prospectus are
forward-looking statements that involve risks and uncertainties. These
forward-looking statements include statements about our plans, objectives,
expectations, intentions and assumptions and other statements contained in this
prospectus that are not statements of historical fact. You can identify these
statements by words such as and similar expressions. We cannot guarantee future
results, levels of activity, performance or achievements. Our actual results and
the timing of certain events may differ significantly from the results discussed
in the forward-looking statements. Factors that might cause such a discrepancy
include those discussed herein and elsewhere in this prospectus. You are
cautioned not to place undue reliance on any forward-looking statements.
Summary historical financial information
The following selected financial data for the years ended September 30,
2000 and 2001, for the quarter ended December 31, 2001 and for the period since
inception to December 31, 2001, is derived from our financial statements
included in this prospectus. The following data should be read in conjunction
with our financial statements.
Statement of operations data
For the Year For the Quarter
Ended 09/30/01 Ended 12/31/01
-------------- ----------------
5
Net Revenues $54,667 $ 9,417
Operating Loss $347,731 $184,106
Income Taxes $ -0- $ -0-
Net Loss $546,821 $184,297
Loss Per Share $ 0.0217 $ 0.0113
(Basic and Diluted)
For the Year From Inception
Ended 09/30/00 to 12/31/01
-------------- ---------------
Net Revenues $ -0- $ 5,360
Operating Loss $203,808 $ 826,745
Income Taxes $ -0- $ -0-
Net Loss $203,161 $1,025,379
Loss Per Share $ 0.0132 $ ?
(Basic and Diluted)
Balance sheet data
December 31, 2001
----------------
Working Capital $ (238,600)
Total Assets $ 306,009
Total Liabilities $ 464,880
Stockholders' Equity $ (158,871)
6
Plan of operations
The following discussion should be read in conjunction with the
financial statements and related notes that are included elsewhere in this
prospectus. All dollar amounts in this prospectus are US dollars.
As further described below, our main business purpose is to provide the
pulp and paper industry with the most practical, economical and efficient way of
giving enhanced value to the waste sludge and other solid residues generated by
their wastewater treatment systems.
We were initially formed in March 1999, are currently still in the
development phase and preparing to begin commercial activity in the second
quarter of 2002.
On April 26, 1999, we entered into a license rights agreement with Marc
Dufresne (1978) Inc., a shareholder and an affiliate. The amount of the license
agreement was $588,000. On April 26, 1999, we issued 588,000 shares of common
stock, class B, to Marc DuFresne (1978) Inc., in payment of a license fee for
the process of a waste sludge conversion system. These shares were valued at
$1.00 per share. Pursuant to the terms of the license agreement, on November 29,
1999 we exercised our right to cancel the agreement and to acquire outright
ownership of all intellectual property and rights related to the process. Due to
its financial difficulties, Marc Dufresne (1978) Inc. was unable to perform its
contractual obligations such as purchasing the components and assembling the
facility for the process. Accordingly, pursuant to the terms of the license
agreement we were allowed to convert our licensor/licensee relationship to
outright ownership of the technology, at no cost.
In January, 2001, we rented 800 sq. ft. of space for an offices in
Pompano Beach, Florida. under a one year renewable lease, costing us $750 per
month.
Additionally, in July, 2001, we rented 1200 sq. ft. of space for an
executive office in Trois-Rivieres, Quebec, Canada under a three years renewable
lease, costing us approximately $740 per month.
Our total monthly expenditures are approximately $55,000, including
rent, employee salaries, management salaries, office overhead, car allowances,
consultant and professional fees, travel, business entertainment, equipment, and
insurance. However, senior management has waived a major portion of their salary
incurred to date, representing approximately $19,000 per month and intends to do
so as long the company is not earning any revenues from its core business.
During the year ending September 30, 2001, we incurred an operating
loss of $347,731 and a net loss of $546,821 for an accumulated deficit since
inception of $841,082. During the quarter ending December 31, 2001 we had a net
loss of $184,297 for an accumulated deficit since inception of $1,025,379.
During the fiscal year ended September 30, 2001, we received
approximately $230,000 of cash of which $119,000 came from private equity
investment, $40,000 as loans from major shareholders and $60,000 in revenues
from a client.
7
The major part of the expenditures, representing approximately 54%,
were used to pay for consulting fees. The balance were used to finalize the
listing of our common shares on the OTC Bulletin Board, to make 2 technical and
feasibility studies with 2 paper mills and start 3 other preliminary studies.
Marketing
Initially, we intend to concentrate on North American pulp and paper
companies, to induce them to transform their sludge and wood residue into steam.
To begin the process of making ourselves known to the industry, we
attended the International Trade Show for the pulp and paper industry held in
Montreal, Quebec in February 2001. We initiated contacts with numerous people in
the industry, introducing them to the company and our process. At the Trade Show
in January 2002, we had our own booth displaying our product, thus providing
substantially more exposure to the industry.
To enable us to target the projects with the most profit potential, we
have contracted with the engineering firm, McBurney of Norcross, Georgia, to
assist us in analyzing the needs of potential clients. Using publicly available
data, we are able to survey information on likely candidates and perform
preliminary determinations of projects that would be the most profitable for us.
Thereupon, we intend to follow up by establishing direct contact with management
and the engineering department of those pulp and paper mills that have been
deemed most suitable for us.
Additionally, we plan to offer, in collaboration with McBurney, our
expertise and services as consultants to evaluate waste-to-energy projects with
regards to their feasibility and profitability.
We completed one such study for Paperboard Industries Inc., a
subsidiary of Cascades Inc., in Jonquiere, Quebec, earning $60,000 for the
Company, with approximately $20,000 additional fees anticipated in the first
quarter of this fiscal year.
Further, the profitability studies for a particular mill, can then be
utilised as a sales tool to conclude long term contracts for energy generation
and waste disposal with that company.
Our first installation
On April 18,2002, we signed a contract with J. Ford Inc., a
Quebec-based specialized pulp and paper producer, to sell them $5million of
steam over the next five years. We are currently looking for financing to build
the facility and we currently expect to begin construction in June 2002 and to
have revenues from this project beginning in January 2003. We estimate that it
will cost approximately $3.1 million to build the facility. We are currently
concluding discussions with a bank for financing and expect to have the
necessary financing in place by June 2002.
8
Our next potential installation
During the past year we identified our first potential customer, The
Great Northern Paper Company of Millinocket, Maine ("GNP"). We completed the
profitability and feasibility studies for this 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. The final selling
price will be determined based upon the final negotiated split of operating
costs, although based on the feasibility study and additional discussions with
GNP so far and the minimum recycling potential of the amount sludge generated by
GNP's mills, we estimate if we sign an agreement, that the ten year contract
should be at least $47,000,000 of steam sold to GNP.
The study indicated that the cost of equipment and installation for a
plant suitable for Great Northern Paper would be approximately $10,000,000. We
obtained a letter of intent to finance up to 80% of the cost of the project from
two Canadian finance companies, Rothschild Financial Corporation and Konex
Financial Services. However we are in discussion with other major finance
companies in order to obtain 100% debt financing, eliminating the need for
additional equity financing.
Although it cannot be guaranteed, we anticipate signing a contract with
Great Northern Paper contract by the end of June 2002, and start the
construction in July 2002. The construction will take from 6 to 9 months. We
expect revenues from this contract to commence in April 2003.
Research and development
The technical evaluation of our technology was done by the Ecole
Polytechnique (affiliated with University of Montreal) and they have indicated
their interest to continue research work on our process to maximize its
efficiency, and to adapt this technology for use with others type of waste,
specifically to generate energy from another problematic solid residue: the
organic portion of municipal solid waste.
Until revenues from contracts are realized, we currently have no plans
to conduct any research and development nor to expend any additional funds on
plant and equipment in the near term, except as indicated above. As well, the
Company does not anticipate realizing any income from the sale of any plant or
significant equipment.
Liquidity
As reflected in our December 31, 2001 balance sheet, we have minimal cash on
hand. Monthly operating expenses including rent, communications, travel, and
professional fees and other general and administrative expenses are
approximately $36,000. Executive and management salaries are approximately an
additional $19,000 per month. However, due to a lack of funds, these salaries
are not being paid and are being accrued.
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 month's revenue. In the case of The
Great Northern Paper Company, that equates to approximately $350,000. These
deposits will then contribute to the satisfying our overall monthly
expenditures. Another option which could be available to us is the exercise of
warrants held by warrant holders. We have approximately 3.9 million warrants
outstanding. The exercise price of each warrant is $1.10 per share and they
9
expire on January 31, 2004. Upon signing a contract for production with The
Great Northern Paper Company, three major warrant holders, holding an aggregate
of 3 million warrants have each indicated their willingness to exercise most if
not all of their warrants. However, they are not obligated to exercise their
warrants or provide us with any funds. Until any of these options eventualize,
we are being funded by loans from shareholders, including management and
affiliates. None of these shareholders have any obligation to continue providing
loans and if these loans cease and other sources of funding are not located, we
may have to severely cut back on our operations which may negatively impact our
ability to sign any installation contracts. The proceeds from the warrants whose
underlying shares are being registered now will only generate $272,255 if all
are exercised for cash.
Effect of recent accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." ("SFAS No. 133"), which requires companies
to recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. SFAS No. 133 is
effective for fiscal years beginning after June 15, 1999. We do not presently
enter into any transactions involving derivative financial instruments and,
accordingly, do not anticipate the new standard will have any effect on our
financial statements.
Use of proceeds
We will not receive any proceeds from the sale of the shares of common
stock by the selling stockholders. However, we will receive the exercise price
of the warrants if they are exercised (unless exercised through the cashless
exercise feature).
Business
We are a Florida corporation, established in early 1999. Our main
business goal is to provide to the pulp and paper industry the most practical,
economical and efficient way of giving enhanced value to the waste sludge (and
other solid residues) generated by their wastewater treatment systems.
10
We have acquired and improved a waste-to-energy process originally
developed by Marc Dufresne (1978) Inc., of Trois-Rivieres, Quebec This process
is capable of processing pulp and paper mills waste sludge and wood residues, in
an efficient and environmentally-friendly way, into steam. This innovative
process integrates state-of-the-art technologies that combine fuel conditioning,
efficient combustion, steam generation and flue gas treatment. The steam
generated by this process can be used to generate electrical power or heat.
We believe that the North American pulp and paper industry is facing
many challenges caused by an increasingly competitive world market. Pulp and
paper plants in Canada are lagging behind their competitors in the U.S.A. and
Europe in productivity and in quality of their products. We believe that it is
generally accepted in the industry that globally, the industry is now in a
restructuring phase to reduce its costs of operations and diversify its product
line. Production of steam and power from waste sludge and other residues and
minimal use of landfill is one of the solutions for the reduction of operating
costs in the pulp and paper industry.
As is generally known, the pulp and paper industry produces, through
its activities, enormous amounts of waste sludge. Production of pulp and paper
generates by-products that exit the mill in waterborne, airborne or solid forms.
As mills reduce their emissions of airborne particles by installing stack
scrubbers and their waterborne particles and oxygen-consuming solutes by
installing clarifiers and secondary treatment systems, more and more of these
by-products end up in the solid residue stream. Thus, our research shows that
the rising use of secondary treatment facilities is continuously increasing,
considerably, the amount of sludge generated by this industry.
We are aware that the sludge is currently being buried, and this
practice constitutes a method of disposal that has a major impact on the
environment. As is generally known, landfill consumes valuable space, may lead
to long-term leaching problems, and wastes the potential value of these
residues. Due to the severe regulations covering the burial of these wastes,
their disposal has become increasingly costly. New regulations in Quebec, in
Canada and in the USA stipulate that landfill sites must be impermeable and that
the lixivium, or liquid effluent, must be collected and treated to prevent water
contamination and soil/ground water table contamination.
As is generally known, the organic substances found in the sludge tend
to decompose once buried, leading to the formation of gases containing a large
fraction of methane produced by anaerobic degradation of buried sludge and other
organic constituents that substantially contribute to the greenhouse effect.
These gases also contain strong smelling compounds that constitute a major
source of odor pollution for neighboring populations. We are aware that this
pollution, combined with the costs related to the management and the development
of landfill sites, as well as the transport costs of sludge, that are bulky with
a high water content, have led the pulp and paper mills to consider alternatives
to landfill.
Waste sludge contains an important fraction of organic matter that has
an attractive energy recovery potential. Our research shows that energy
production from organically rich industrial wastes, such as paper mills sludge,
is now considered by a majority of industrialized countries as an intrinsic
aspect of a responsible care policy. This disposal approach involves several
strategic advantages. This approach reduces the volume of residues to be buried
by at least 90%. The production of energy using these wastes leads to
significant economies in terms of traditional non-renewable fossil fuels, also
11
providing a net reduction of the emission rates of gases believed by some
scientists to be responsible for the greenhouse effect.
However, pulp and paper mills' conventional combustion systems are
either not well- suited or are simply inadequate for sludge combustion. For this
reason the combustion of sludge in conventional systems often lead to:
o a decrease in the boiler's capability to produce steam with the
addition of wet wastes;
o an important consumption of auxiliary fuel such as natural gas or
oil to maintain boiler output and sufficiently high combustion
temperatures due to inconsistency of waste fuel moisture and the high
water content in the wastes;
o higher maintenance costs due to ash clogging in the boiler grate;
and
o an increase in particle emissions and slag.
Our state-of-the-art process addresses the shortcomings observed in the
currently used methods of energy production from pulp and paper wastes.
Additionally, our solution is innovative in that it offers the customer a
financing program. Our process can be designed, installed, operated and entirely
financed by third parties. Our income is based on the sale of steam and
electricity to the plant and/or on a transport charge for removing the sludge
from their premises. The main economical and environmental advantages of our
process can be summarized as follows:
o no investment costs and minimal operation costs for the pulp and
paper mill customer;
o reduction of more than 90% of solid waste to be buried; extensive
reduction of management costs of landfill, sludge transportation and
handling costs;
o reduction of maintenance costs on inadequate conventional boilers
burning sludge;
o increase in total efficiency of the existing steam facilities by
using available flue gases of existing boilers;
o reduction of the total amount of traditional non-renewable fossil
fuels used in the plant;
o elimination of methane emission of landfill and reduction of the
global emission rates of gases responsible of the greenhouse effect;
o elimination of problems related to odorous emission of landfills.
Our team offers our process to the pulp and paper mills in a
progressive strategic sequence. This sequence first begins with an evaluation of
the feasibility and profitability of a Waste-to-energy project for both parties.
As a marketing tool, we will provide this evaluation at no cost to mills where
we believe the possibility exists for us to introduce our process.
Additionally, in the medium term, we plan to modify and adapt our
process to new applications such as power generation from the organic fraction
of the municipal solid wastes.
The Industry
The North American pulp and paper industry is a cornerstone of the
American, Canadian and Quebec economies, employing several tens of thousands of
workers in regions across North America. There are around 379 mills in the U.S.
12
and 121 mills across Canada with 64 in Quebec alone.
The Industry in Canada and in Quebec
Canada's, and particularly Quebec's, pulp and paper industry has always
been synonymous with massive exports. Due to market globalization and strong
international competition, this industry constantly has to reach new customers
and meet new demands. In 1998, total export value for Quebec pulp and paper
products reached $7.4 billion and approximately $12.1 billion for Canada in
1996.
To increase its productivity, diversify its production and improve its
environmental performance, the pulp and paper industry in Quebec has proceeded
with massive investments over the years. In the pulp and paper sector, capital
expenditures reached $6.4 billion between 1987 and 1997, representing 20 % of
all manufacturing investments made in Quebec.
Between 1989 and 1996, Canadian mills spent $3.7 billion on the biggest
environmental upgrade in the industry's history. During the same period, the
industry invested $1.0 billion in building up the capacity to recycle recovered
paper. Today, 23 mills across Canada are capable of recycling, and 62 mills use
recovered paper in whole or in part as a source of fiber.
Technical challenges facing the North American industry are centered on
using recycled materials cost-effectively, meeting environmental regulations,
and reducing energy and operation costs. Other pressures include the diminishing
amount of land available for tree farms and landfill, and a lack of capital for
carrying out long-term research and development projects.
The threats facing the North American industry
As the dynamics of the industry have been changing, the North American
pulp and paper industry began facing several challenges. Below are the main
threats the North American industry faces today:
o Although global consumption of papers is on the increase, this increase
has been mainly in foreign markets, particularly in the Far East. This
forces North American companies to have to compete for the world market
against worldwide paper companies, putting downward pressure on prices
and upward pressure on quality and technology.
o To be able to be competitive globally, companies have to be present in
the potentially large and growing markets. To achieve that, many
foreign companies have merged, combining resources and increasing their
presence worldwide. This places additional pressure on companies to
increase their exposure in these markets and to become more efficient.
o As capacity in North America is increasing, prices are likely to drop
and companies would have to operate more efficiently to maintain the
same level of profitability.
The key success factors
13
Given the above stated challenges, we believe that in order to compete
in today's environment, pulp and paper companies have to satisfy the following
four conditions:
1. Low production costs: The four main elements of production costs that have
to be optimized are:
o Lower cost of the fiber by increasingly finding close and abundant
sources of recycled paper;
o Improving the efficiency of the equipment by gradually replacing old
machinery with newer ones;
o Lower cost of labor by exerting pressure on unions to become more in
line with the realities of the international global market; and
o Reducing energy and operating costs by increasing the fraction of
solid residues (wood and sludge) used for steam and electricity
generation and reducing operating costs related to the landfill
management.
o Our process aims to considerably reduce the residues and landfill
management costs, and to recycle these residues in a practical form:
steam and power generation at low costs, contributing to reduce the
global production costs of the mills.
2. Market diversification: Since the fastest growth is being found in Asia and
to a lesser extent in Europe, it is important that US, Canadian and Quebec
companies penetrate these markets effectively. Competing in these markets
implies reducing their production costs as described above to price their
products in parity with the other global companies;
3. Product diversification: New types of paper have to be developed to meet
the increasingly demanding needs of consumers. Companies also have to shift
their focus from the declining newsprint paper segment and focus more on
writing and printing paper and specialized paper which commands higher
profit margins;
4. Meeting Environmental Regulations: Pulp and paper plants are on the
constant lookout for alternatives and cheaper methods of disposal. Our
process produces several environmental advantages: reduction of the total
amount of traditional non-renewable fossil fuels used in the plant,
elimination of methane emission of landfill and reduction of the global
emission rates of gases believed responsible for the greenhouse effect, and
elimination of problems related to odorous emission of landfills.
Sludge and solid residues generation and management
The solid waste management and disposal practices by the U.S. Industry
was studied in 1992 by the National Council of the Paper Industry for Air and
Stream Improvement, Inc., as reported in their Technical Bulletin 641.
The total amount of solid wastes generated by the American pulp and
paper industry in 1989 alone was estimated in this study to be 12.3 millions dry
metric tons. The total amount of sludge generated in the same year was estimated
to be 4.2 million dry metric tons. Sludge consists of fibers, organic matter,
ash, inert matter and moisture. When the amount of sludge generated is expressed
on a dry basis, the moisture content is excluded. For example, a mill that
14
produces 50,000 dry metric tons per year of sludge having 70% moisture content
generates 166,667 metric tons per year of humid or wet sludge. In 1989, the
amount of sludge being use as landfill or lagooned accounted for approximately
70% of the total, while burning for energy accounted for approximately 21%. This
shows a growing trend to energy conversion that almost doubled during the
previous ten years. In 1979, the amount of sludge being used as landfill or
lagooned accounted for 86% of the total, while burning for energy accounted for
11%. The considerable amount of sludge being carted to landfills every day
represents an important amount of fuel for our process.
The overall average total disposal costs for mills using landfill sites
constructed since 1985 was $9.80 per cubic yard or $20.84 per wet metric ton,
compared to an average for all sites, regardless of age, of $6.40 dollars per
cubic yard or $13.61 per wet metric ton. This data represents current total
landfill disposal costs consisting of capital plus operating costs. Estimated
costs for disposal of solid wastes in new as yet un-constructed landfill sites
were reported in this study to be approximately $15 per cubic yard or $31.90 per
wet metric ton.
Consequently, the 1989 annual total direct costs of sludge used as
landfill in the U.S. is estimated to have been more than $146 million for the
pulp and paper industry alone. This estimate is based on an average sludge
humidity of 72.6%, and an average cost of landfill of $13.61 per wet metric ton.
The process offered by Biomasse enables the pulp and paper mills to avoid most
of these sludge disposal costs.
In early 1990, approximately one-half of the industry's landfill sites
had less than 6 years capacity remaining. Approximately 80 percent of the
landfill sites had less than 20 years capacity remaining. It was estimated back
in 1990 that by the end of 1999, the paper industry would require approximately
200 new landfill sites or major expansions on existing sites, with a total
additional area of approximately 10,000 acres. This assumed that the amounts of
solid waste would remain unchanged by 1999.
In Canada and in Quebec
The generation and management of solid waste residues by the Canadian
pulp and paper mills were studied in 1995 by the Pulp and Paper Research
Institute of Canada. Statistics and information presented in this section
originate from this study. In 1995, the amount of solid residues generated by
the Canadian paper industry was estimated at 7.3 millions of dry metric tons per
year. Of this total, 47% was wood and bark used for fuel, 13% was wood and bark
not used as fuel, 23% was sludge, 12% was inorganic, and 5% was in a
miscellaneous category. Generation of secondary sludge increased by 247% from
1994. Sludge generation rates represents 44% of the total generation rates for
solid residues other than wood and bark used as fuel. In 1995, almost half of
the total generated sludge was deposited in landfill sites. The real generation
of sludge is 5,705,000 metric tons per year, when their respective mean
moistures are considered. The following table summarizes the generation rates of
solid residues by the Canadian industry, in 1995:
- --------------------------------------------------------------------------------------------------------------------
Solid residues Generation rates %
(thousands metric tons/year)
====================================================================================================================
====================================================================================================================
Sludge Fraction of total sludge generation: 1704 23%
15
Primary sludge: 42%
Secondary sludge: 26%
Deinkink sludge: 12%
Combined sludge: 18%
Intake sludge: 2%
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Wood and bark 4354 60%
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Inorganics 873 12%
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Miscellaneous 375 5%
====================================================================================================================
====================================================================================================================
TOTAL: 7306 100%
- --------------------------------------------------------------------------------------------------------------------
Use of landfill is still a dominant option for solid residues
management. Of the waste used as landfill, 82% goes to private sites owned by
the paper mills instead of public landfill sites. Land-spreading, composting and
recycling account for only a small fraction of the residues. In 1995,
approximately one third of the sludge was burned. A small fraction of the
sludge, approximately 13%, were land spread or composted, but almost half of the
total sludge generated was deposited in landfill sites. Much of the increment in
secondary sludge is used as landfill, despite the problems that secondary sludge
produces in these sites.
Sludge management is considered to be among the most frequent concerns
of the pulp and paper industry. Incineration of sludge is confirmed as a major
problem in recent study. A lot of mills have chosen the use of landfill as a
temporary measure, intending to find better ways to use sludge in the longer
term. The amount of sludge available for utilization in Canada was reported by
the Pulp and Paper Research Institute of Canada, in its April 1997 report, to be
approximately 1,159,000 dry metric tons per year. The amount of wood and bark
was approximately 868,000 dry metric tons per year in the same study.
The costs of sludge and residues land filling outlined herein was
estimated with the help of local Canadian pulp and paper associations. The
estimated costs include handling and transportation, and management of the
landfill site. They exclude any investment or social costs. These costs are
estimated to range between $3.41 and $23.86 per wet metric ton, with a mean of
approximately $8.18 per wet metric ton. Consequently, the annual (1995) total
direct costs of wood residues and sludge land filling in Canada can be estimated
to have been more than $37 million for the pulp and paper industry alone.
The amount of solid residues generated by the Quebec industry was
estimated in 1998 by the Environmental Ministry of Quebec to have been 3.1
millions of wet metric tons. Of this total, the total amount of generated sludge
is 1,800,000 wet metric tons (58%) with 690,000 wet metric tons that were buried
(38%). In Quebec, the 1998 estimated total direct costs of wood residues and
sludge land filling is estimated to have been more than $8.2 million.
Much work has been done with land application of pulp and paper mill
sludge in the last 15 years. In volume 96 of Pulp and Paper Canada, Pickell and
Wunderlich studied the practices and future options of sludge disposals. As
mentioned in this study, the sludge has been successfully used as a replacement
for manure in agricultural applications, as well as for land reclamation
projects. There seems to be no available data about the costs of these
applications. The lowest cost method of spreading the sludge appears to be by
using dry applications that eliminate the need to re-wet the sludge before
spreading. Recent studies published by Pulp & Paper Canada, 1995, show that the
16
projected costs for this approach could be reduced to $38.17 per wet metric ton
to apply approximately 36,000 wet tons onto 400 hectares. Finally, composting
has been examined but has not gained a lot of support as the process can require
a considerable capital investment for equipment and buildings. Odor can also be
a problem and production costs can be as high as $20.45 per ton, and the market
for compost is limited.
Our process
The basis of our process is the transformation of solid organic wastes
into steam. Steam is the most convenient source of energy that is used in pulp
and paper plants for heating, drying or for any other energy-intensive process.
Our operation combines the service of transporting waste sludge and
wood residues brought from the plant to the process, solid fuel preparation,
minimizes solid fuels storage, efficient combustion, steam production and flue
gases treatment. The available flue gases from new and existing boilers are used
to thermally dry solid fuels and/or preheat combustion air.
Our process offers the possibility to operate in mixed combustion to
produce steam. The process is flexible and easily adapts itself to the
individual conditions of each pulp and paper mill. The main objective of the
flexibility and adaptability features of the process is to maximize the use of
components and utilities that are already available on site, and that can be
incorporated into our process. This approach aims to minimize the investment and
operational costs, benefiting both parties. For example, these components and
utilities can be
o stocking yards;
o exhaust chimney;
o main-power to operate our system;
o treatment and processing of the process outputs:
o filtered exhaust gases;
o wet scrubber liquid output in the mill's waste water treatment basin;
o solid boiler outputs such as ash and clay for land filling;
o electricity to operate our process;
o operating control room;
o condensation processing and pumping; and
o existing buildings to install our equipment.
Our process was externally evaluated by known experts of the chemical
engineering department of the Ecole Polytechnique de Montreal (Engineering
School of the Montreal University) and their findings were published by Guy and
Legros in June 1997 in the University Journal. This scientific evaluation of our
process validated the principles of its technology.
The product, the pricing and benefits
The product that we sell is steam and/or a combination of steam and
electricity, if the project integrates a cogeneration system. We do not intend
to sell the production system that generates the end product. We plan merely to
sell the output: steam and electricity. Our plan is to bill our customers based
on the volume of steam generated. We will also charge a transport fee for the
17
sludge admitted to the process. We will not charge for the installation,
operation and maintenance of the system. The pricing is set on the basis of
1,000 lbs of steam produced and the amount of produced and delivered power
(kWh). And will be dependent on the each mill's guarantee to buy a minimum
amount of steam (and kWh) from us, and provide a minimum constant mass flow of
waste sludge and wood residues, if available. The price of the steam is also
based on the confirmed investment, installation, operating and maintenance
costs, financing costs of the project to us, as well as the number of components
and utilities provided to us by the pulp and paper mill. Due to union
regulations, we will be unable to have our employees operate the system. As a
result, the mill will provide the personnel to operate the system. We will train
the operator(s) as part of our service, but the mill will be completely
responsible for paying the salary and benefits of the operator(s). However,
these expenses will be charged back to us and are calculated and incorporated
into our pricing model.
We will remain the owner of the process and contractually sell the
steam over a period of time, selected by us to achieve a return on our
investment with a reasonable built in profit. The pulp and paper mill can
capitalize its gains at the end of the contract. Our responsibilities can be
summarized as follows:
o design of the process taking into account available components
o manufacturing and subcontracting of process components
o installation and start-up of the process
o operation and maintenance of the process which can be done in
collaboration with or by the customer's operator, supervised by our
representative
The customer's responsibilities can be summarized as follows:
o salary of the provided operator
o environment conformity permits for operation
o components and utilities that can be provided advantageously, by the
plant
The economic benefits
We present here the economic aspects for both parties of a hypothetical
project using our process for a representative medium size North American pulp
and paper mill. In this example, we use typical data to illustrate that the
proposed process generates benefits for both parties, in a general context. We
present a simple context where only steam is sold to the mill and there is no
power production and no garbage removal fees. In other words, while our process
will get rid of the waste by converting it into steam, if the mill is
interested, we can then use the steam to generate energy, or we can simply
deliver the steam to the mill for them to use or not as they choose.
We assume that the following equipment, labor and utilities are
advantageously provided by the mill:
o Existing sludge warehouse
o Process monitoring and control room
18
o Treatment of our wet scrubber liquid effluent by the existing primary
and secondary treatment system
o Electricity, water supply and compressed air for the operation of our
process
o Condense pumping and treatment
o Ash management and final disposal
The following basic data are used in our evaluation:
o Hours of operation per year: 8200 hrs
o Cost of natural gas 0.10 $/Nm3
o Cost of electricity sold to us by the mill: 0.04 $/kWh
o Total mass flow of wet sludge generated by the mill: 12.4 metric
tons/hr
o Average moisture of mix sludge: 59.17%
o Landfill cost of sludge and ashes: 13.61 $/metric ton
o Current cost of steam production by the mill: 4.37 $/1000lbs
o Cost of the steam sold by us to the mill: 6.00 $/1000lbs
o Total mass flow of generated steam sold by our process: 40,000 lbs/hr
o Capital cost for this project: $6.1 million
o Annual cost of operation and maintenance for this project: $800,000
- --------------------------------------------------------------------------------------------------------------------
Summary of benefits for a typical pulp and paper mill $/year
====================================================================================================================
====================================================================================================================
Savings related to the project:
1. landfill cost of sludge $1,384,000
2. employee for sludge management 43,000
3. material for sludge management (loader, trucks, etc.) 34,000
Annual savings: $1,461,000
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Expenses related to the project:
1. extra cost of steam:
cost of the steam sold by Biomasse to the mill 40,000lbs/hr*8200
hrs/year*6.00 $/1000lbs= $1,968,000 $/year Current cost of steam production
by the mill 40,000lbs/hr*8200 hrs/year*4.37 $/1000lbs= $1,433,360 $/year
534,640 $/year
Annual expenses: (535,000)
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Annual benefits: 926,000
====================================================================================================================
====================================================================================================================
Summary of benefits for Biomasse $/year
====================================================================================================================
====================================================================================================================
Incomes related to the project:
1. minimal revenue from steam sales :
40,000lbs/hr*8200 hrs/year*6.00 $/1000lbs= 1,968,000 $/year
Annual incomes $1,968,000
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Expenses related to the project:
1. cost of operation and maintenance $800,000
(mainly electricity, natural gas and maintenance)
2. employee for process management 30,000
3. landfill cost of ashes and inert material (mainly sand and clay) 239,000
Annual expenses: (1,069,000)
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
19
Annual benefits: 899,000
====================================================================================================================
====================================================================================================================
Estimated payback period: 6.78 years
====================================================================================================================
====================================================================================================================
Total annual benefits for both parties: 1,825,000
- --------------------------------------------------------------------------------------------------------------------
The market
The primary target market for our process is the North American pulp
and paper industry. Once established in this industry, we intend to offer our
process to the wood processing industries (saw mills, furniture manufacturers,
etc.). In the longer term, we plan to adapt our process to generate power from
another problematic solid residue: the organic fraction of municipal solid
wastes. After realizing a few projects in North America, we expect to also
expand our market to other continents if opportunities are offered.
There are approximately 500 pulp and paper mills in North America.
Based on available studies, these mills generate more than 19.6 million of dry
metric tons of solid residues per year. The real generation of wastewater
treatment sludge can be estimated to be 21 million of wet metric tons per year.
As discussed earlier, wet residue is sludge with a high moisture content making
it heavier and more difficult to dispose of in an environmentally safe fashion.
The total direct costs of sludge sent to landfill sites in North America can be
estimated to more than $200 million annually. A large fraction of the North
American pulp and paper mills do not currently attribute any enhanced value to
this residue that we have shown can be efficiently transformed into valuable
steam and electricity and contribute significantly to reductions in their
production costs.
We also intend to capitalize on the fact that pulp and paper companies
often operate several plants in the same state or geographic region. Once our
processes has been installed in one plant and its benefits become clear, the
installation of the process in other plants of the same paper company can
reasonably be expected.
Marketing strategy
We hope to install two projects this year. We believe that after the
industry sees the success of these initial installations that we will be able to
obtain more contracts.
Our first objective is to identify the most profitable "sludge &
residues-to-energy" projects in North America.
To enable us to target the projects with the most profit potential, we
have contracted with the engineering firm, McBurney of Norcross, Georgia to
assist us in analyzing the needs of potential clients. Using publicly available
data, we are able to survey information on likely candidates and perform
preliminary determinations of projects that would be the most profitable for us.
To do so, we have developed a questionnaire soliciting information from most
likely potential customers on their solid waste management and current disposal
practices. Typical required information are: flow rate generation of sludge and
other wood residues, solid wastes disposal costs, age of currently used landfill
and availability of landfill sites, residues combustion problems, landfill site
management problems, de-watering problems, utility costs, fuel costs, current
costs of steam production by the mill, sludge characteristics, etc.
20
Thereupon, we intend to follow up by establishing direct contact with
management and the engineering department of those pulp and paper mills that
have been deemed most suitable for us.
We have begun the process of approaching several major pulp and paper
company in Quebec and in the U.S.
We intend to establish a direct contact with the management and the
engineering of the most suitable pulp and paper mills. We will offer our
expertise and services to evaluate the feasibility and the profitability of a
waste-to-energy project, for both parties, in collaboration with the mill. This
collaboration will be dictated by involvement agreements. The proposed studies
could be partially or fully financed by the mills. Our analyses will be proposed
with an optimal sharing of responsibilities, as outlined previously under the
product, pricing and benefits sections.
We further intend to promote our process in industry trade shows,
public seminars and in industry publications. We will intensify this promotion
of our process and approach once we have completed our first major
Waste-to-Energy project.
Competition
The Company believes that the combination of our improved steam
generating process, and the "turnkey" business model offered to the industry has
no direct competition. In addition, the specialized boilers used in our process,
that are uniquely designed and built by McBurney are available to us exclusively
when sold to any Canadian clients initially contacted by us.
Environmental costs
We currently have only negligible expenses relating to environmental
compliance laws. Our process was specifically designed to be
environmentally-friendly and to comply with generally popular environmental
laws. Based upon our research, we do not expect to incur any significant
expenses in adapting our process to comply with local environmental laws in the
jurisdictions we are marketing our process. Approximately 20% of our equipment
expenses for installing our system is for environmental compliance. This cost is
built into our pricing.
Employees
We currently have five full time employees, three of whom are senior
management. One is engaged in financial activities, two of whom are in sales and
marketing and one is director of engineering and research and development.
Additional financing permitting, we intend to hire up to three additional
employees. None of our employees are represented by a labor union. We believe
that relations with our employees are good.
Properties
Our facilities are located in approximately 1,200 square feet of leased
office space in Trois-Rivieres Ouest shared with Marc Dufresne (2000) Inc., of
which we currently occupy approximately 400 sq. ft. with an option to expand.
21
The lease in Trois-Rivieres Ouest expires in June 2004 and provides for an
annual rental of approximately $9,000. We are currently looking for a location
in Florida.ngs
We are not involved in any material legal proceedings.
Management
Officers and directors
Our officers and directors are as follows:
Name Age Position
Benoit Dufresne 38 President and Director
Jean Gagnon 56 Vice-President and Secretary and
Director
Pierre H Vincent 46 Vice-President, Legal & Governmental
Affairs and Director
Maurice Robert 51 Director
Marcel Mongrain 68 Director
Denis Durand 46 Director
Officers and directors
Benoit Dufresne, President
Mr. Benoit Dufresne was educated in biotechnology and business law and
has specialized training in communications from the Canadian Army. He worked as
financial director for Marc Dufresne (1978) Inc. from 1986 to 1999. During this
tenure, he managed a budget of over $10,000,000 for Sibco Inc., an international
conglomerate consisting of over 12 corporations. Mr. Dufresne was vice-president
of Thermaltech Afrique S.A., a Moroccan corporation specializing in energy
technology from 1994 to 1998. Also, from 1987 and continuing until 1998, he was
president of, and active on a part-time basis for, Thermaltech Canada inc., a
corporation specializing in various technologies related to the energy industry.
Mr. Jean Gagnon, Chief Financial Officer
Mr. Jean Gagnon has more than twenty years of experience in the
financial markets industry including, marketing analysis, business development,
planning and organizing, restructuring and reorganizing, problem solving and
contract negotiation. From 1981 to 1987, Mr. Gagnon was the director of sales
and marketing for the financing firm Borg Warner Acceptance Canada. In 1987, Mr.
Gagnon founded Societe Merivel Inc., a consulting firm specializing in
22
commercial leasing. The company was responsible for the implementation and
administration of many companies for which he created, presented and negotiated
successfully more than 3,000 contracts in commercial leasing activities with
different financial institutions. He was president of Societe Merivel until
1995. In 1996, Mr. Gagnon joined Bombardier Capital as director of operations
and business development for this financing firm until 1998, during which year
he became VP finance for the predecessor project to Biomasse.
Mr. Pierre H. Vincent, Vice President Legal and Governmental Affairs
Mr. Pierre H. Vincent is a practicing lawyer since his admission to the
Quebec Bar in 1976 and he also holds a Masters degree in Commerce from
University of Sherbrooke. Aside from his law practice, from 1995 to 1998, Mr.
Vincent was VP Legal Matters for Uniforet Inc., a Quebec based public company in
the forestry industry. During this period he was responsible for legal matters,
strategies and activities related to the environment. He was also corporate
secretary responsible to define and implement a strategic plan concerning the
environmental policy for Uniforet. For nine years, during 1984 to 1993, he sat
as a Member of Parliament for the Canadian Government. During this period he
was, at various times, Minister of Environment, Minister of Consumer and
Business Affairs, Parliamentary Secretary to the Minister of Finance, to the
Vice Prime Minister and to the Minister of Revenue.
Mr. Maurice Robert, Director
Mr. Maurice Robert is a professional mechanical engineer specializing
in project management. Mr. Robert has a degree in Mechanical Engineering and a
Masters Degree in Arts. Since 1998 he has been president and chief executive
officer of Polydex Inc., a company which specializes in international
development and consulting engineering in the construction industry. From 1981
to 1998 he was an associate at VFP Consultants Inc., during which time he
managed a team of 30 professional engineers and technicians and was director and
technical director of the mechanical engineering department.
Mr. Marcel Mongrain, Director
Mr. Mongrain, President of Marlu inc., businessman, is best known for
owning and operating, over the past 25 years, 10 McDonald's franchises, creating
over 400 jobs and generating over 23 million dollars of business yearly. By
establishing the very first franchise in the area, followed by 8 other locations
and the very first bistro type McDonalds in Quebec, he has become a well known
and respected businessman in the Trois-Rivieres and surrounding areas.
Mr. Denis Durand, Director
Mr. Denis Durand holds a Masters degree in Economics from Universite
Laval. Since 1993, he has been a senior partner at Jarislowsky Fraser limited, a
firm of investment consultants located in Montreal. He has also occupied
different positions at some well-known companies since the beginning of his
career in 1973. He also sits on a few other boards of directors.
Directors serve for one year terms and until replaced at an annual
meeting of shareholders.
23
Indemnification of Directors and Officers
Section 145 of the Florida General Corporation Law, as amended,
authorizes the Company to Indemnify any director or officer under certain
prescribed circumstances and subject to certain limitations against certain
costs and expenses, including attorney's fees actually and reasonably incurred
in connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which a person is a party by reason of being
a director or officer of the Company if it is determined that such person acted
in accordance with the applicable standard of conduct set forth in such
statutory provisions. The Company's Certificate of Incorporation contains
provisions relating to the indemnification of director and officers and the
Company's By-Laws extends such indemnities to the full extent permitted by
Florida law.
The Company may also purchase and maintain insurance for the benefit of
any director or officer which may cover claims for which the Company could not
indemnify such persons.
Compensation of Directors
Directors are to receive, each, a $500 honorarium for each attendance
at a Board of Directors meeting, plus an annual stipend of $2,000 to cover
expenses, plus 20,000 warrants per year to a maximum of 100,000 warrants. These
warrants have an exercise price of $1.10 and an expiry date of approximately
three years post issuance. As at September 30, 2001, no warrants have as yet
been issued.
Security ownership of certain
beneficial owners and management
The following table sets forth, as of March 31, 2002, information
regarding the beneficial ownership of our common stock based upon the most
recent information available to us for
o each person known by us to own beneficially more than five (5%)
percent of our outstanding common stock,
o each of our officers and directors and
o all of our officers and directors as a group.
Each stockholder's address is c/o Biomasse International Inc., 4720
Boulevard Royal, Suite 103, Trois-Rivieres Ouest, Quebec G9A 4N1.
Number of
Number of currently exercisable
Name shares owned warrants owned
beneficially beneficially* % of total
- ------------- ------------------- ----------- ------------
Benoit Dufresne 2,877,873 1,005,400 21.4
Jean Gagnon 205,000 1,000,000 6.6
Simon Dufresne 1,373,777 1,000 8
Societe Merivel Inc. (1) 938,956 -0- 5.5
24
W.A.F.A. Investment Corp (2) 5,714,855 -0- 33.4
Abdel Jabbar Abouelouafa (3) 0 1,000,000 5.5
Sibco Inc. (4) 911,568 -0- 5.3
Marc Dufresne (1978) Inc. (5) 950,565 -0- 5.6
All officers and directors
as a group (3 persons)(6) 4,715,524 2,005,400 35.2
* Pursuant to the applicable regulations covering this disclosure, currently
exercisable warrants - even if out of the money-are added to the
shareholdings to determine the percentage of shares owned.
(1) Controlled by Jean Gagnon, our Vice President Finance.
(2) Owned by W.A.F.A. TRUST which is controlled by the Abouelouafa family.
(3) Mr. Abouelouafa is our consultant. Does not include shares and warrants
held by W.A.F.A. Investment Corp.
(4) Owned by Benoit and Simon Dufresne.
(5) Owned 50 % by Sibco Inc.
(6) Includes the portion of the securities held by entities partially owned by
an officer/director.
Executive compensation
From inception through December 31, 2000 no compensation was paid to
any of our executive officers.
Summary Compensation Table
Name and Other Long-term
Principal Position Year(1) Salary Bonus Compensation
Compensation:Options ------ ------ ----- ------------
- ------------------
Benoit Dufresne 2001 $85,000 0 $10,200 0
Chairman & President
(1) Covers the period from October 1, 2000 to the fiscal year end on September,
2001.
Employment agreements
On January 1st, 2000, Mr. Benoit Dufresne entered into a five (5) year
employment agreement commencing January 1st, 2000. The agreement provides for an
annual salary of $85,000. Mr. Dufresne may also receive bonuses as determined by
the board of directors.
On January 1st, 2000, Mr. Jean Gagnon entered into a five (5) year
employment agreement commencing January 1st, 2000. The agreement provides for an
annual salary of $70,000. Mr. Gagnon may also receive bonuses as determined by
the board of directors.
On April 1, 2000, pursuant to these agreements, we issued 1,000,000
warrants to each of Messrs. Dufresne and Gagnon. The warrant are exercisable at
$1.10 per share and expire on January 31, 2002.
25
In July 2002, Mr. Pierre Vincent entered into a five (5) year
employment agreement. The agreement provides for an annual salary of $50,000.
Mr. Vincent may also receive bonuses as determined by the board of directors.
Certain relationships and related transactions
On April 1st, 2000, Mr. Abouelouafa entered into a five (5) year
consulting agreement. The agreement provides for an annual fee of $60,000 before
our listing on the OTC:BB and $100,000 after the listing. Mr. Abouelouafa also
received some other benefits consisting of a life insurance policy costing
approximately $1,000 per year and a car allowance costing approximately $500 per
month.
Since inception, we made advances to Abdel Jabbar Abouelouafa and Jean
Gagnon in the amounts of $4,475 and $9,802, respectively, for expenses they may
incur. These advanced amounts are required to be repaid in the following fiscal
year if the advances exceed the incurred expenses. As of December 31, 2000, Mr.
Abouelouafa had repaid his advances.
On April 26, 1999, we entered into a license rights agreement with Marc
Dufresne (1978) Inc., a shareholder and an affiliate. The amount of the license
agreement was $588,000. On April 26, 1999, we issued 588,000 shares of common
stock, class B, to Marc DuFresne (1978) Inc., in payment of the license fee.
These shares were valued at $1.00 per share. Pursuant to the terms of the
license agreement, on November 29, 1999 we exercised our right to cancel the
agreement and to acquire outright ownership of all intellectual property and
rights related to the process. Due to its financial difficulties, Marc Dufresne
(1978) Inc. was unable to perform its contractual obligations such as purchasing
the components and assembling the facility for the process. Accordingly,
pursuant to the terms of the license agreement we were allowed to convert our
licensor/licensee relationship to outright ownership of the technology, at no
cost.
On July 7, 1999, we issued 306,000 shares of common stock, class B, to
Marc DuFresne (1978) Inc., a shareholder and an affiliate, in settlement of an
invoice for the purchase of equipment in the amount of $306,000
We have a note payable dated September 30, 1999 in the amount of
$56,566 to Marc DuFresne (1978) Inc., a shareholder of the company. This note is
for reimbursements of expenditures paid by Marc DuFresne (1978) Inc. during the
fiscal year ended September 30, 1999 on behalf of Biomasse International, Inc.
The note is unsecured and bears interest of prime plus two percent and matures
on September 30, 2000. This note was converted into 56,565 shares in November
1999.
Our policy is to obtain all supplies and services on a normal
competitive basis, but that, all things being equal, to purchase from affiliated
or related entities. All related party transactions must be reviewed by the
board of directors to assure that we are not paying higher than fair market
arms-length prices. We currently have three independent directors on our board
and a majority of them must approve all related party transactions.
26
Disclosure of commission position on
indemnification for securities act liabilities
Neither our by-laws nor our certificate of incorporation currently
provide indemnification to our officers or directors. In an effort to continue
to attract and retain qualified individuals to serve as our directors and
officers, we intend to adopt provisions providing for the maximum
indemnification permitted by Florida law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons,
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore
unenforceable.
Description of securities
Authorized and outstanding stock
Our authorized capital stock consists of 5,000,000 shares of Class A,
$1.00 par value and 55,000,000 shares of Class B common stock, $.001 par value.
As of April 30, 2002 there were 17,114,711 shares of Class B common stock
outstanding, which were held by approximately 113 stockholders of record. We
have no intention of issuing any of the Class A shares and intend to file an
amendment to our certificate of incorporation to cancel the Class.
Common stock
Subject to legal and contractual restrictions on payment of dividends,
the holders of common stock are entitled to receive such lawful dividends as may
be declared by the board of directors. In the event of our liquidation,
dissolution or winding up, the holders of shares of common stock are entitled to
receive all of our remaining assets available for distribution to stockholders
after satisfaction of all liabilities and preferences. Holders of our common
stock do not have any preemptive, conversion or redemption rights and there are
no sinking fund provisions applicable to our common stock. Record holders of our
common stock are entitled to vote at all meetings of stockholders and at those
meetings are entitled to cast one vote for each share of record that they own on
all matters on which stockholders may vote. Stockholders do not have cumulative
voting rights in the election of our directors. As a result, the holders of a
plurality of the outstanding shares can elect all of our directors, and the
holders of the remaining shares are not able to elect any of our directors. All
outstanding shares of common stock are fully paid and non-assessable, and all
shares of common stock to be offered and sold in this offering will be fully
paid and non-assessable.
Warrants
In addition to the warrants and debentures issued in our spring 2002
private placement which will be discussed below, we currently have 3,929,900
warrants outstanding, each of which entitles the registered holder thereof to
purchase, at any time until the close of business on January 31, 2004, one share
of Class B common stock at a price of $1.10. All of the warrants contain
provisions which protect the holders thereof against dilution by adjustment of
27
the exercise price and number of warrants, in certain events, such as stock
dividends, stock splits, mergers, sale of substantially all of our assets, and
for other extraordinary events.
Transfer agent and registrar
The stock transfer agent and registrar for our common stock is
Intercontinental Registry and Stock Transfer, located at 900 Buchanan blvd # 1,
Boulder City, Nevada 89005-2100.
Dividend policy
Under applicable law, dividends may only be paid out of legally
available funds as proscribed by a statute, subject to the discretion of the
board of directors. In addition, it is currently our policy to retain internally
generated funds to support future expansion of our business. Accordingly, even
if we do generate earnings, and even if we are not prohibited from paying
dividends, we do not currently intend to declare or pay cash dividends on our
common stock for the foreseeable future.
Shares available for future sale
On the date of this prospectus, all 12,314,420 shares included in this
prospectus, if issued, will generally be freely tradable without restriction
imposed by, or further registration under, the Securities Act for so long as
this prospectus is still current. An additional 13,085,390 shares of our common
stock may be deemed "restricted securities," as that term is defined under Rule
144 promulgated under the Securities Act. Such shares may be sold to the public,
subject to volume restrictions, as described below. Commencing at various dates,
these shares may be sold to the public without any volume limitations. These
figures do not include the additional 3,929,900 shares underlying previously
outstanding exercisable warrants. The shares underlying these warrants will only
be freely tradable upon exercise, if they are then covered by an effective
prospectus.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including one of our
affiliates, or persons whose shares are aggregated with affiliates, who has
owned restricted shares of common stock beneficially for at least one year is
entitled to sell, within any three-month period, a number of shares that does
not exceed 1% of the total number of outstanding shares of the same class. In
the event our shares are sold on an exchange or are reported on the automated
quotation system of a registered securities association, you could sell during
any three-month period the greater of such 1% amount or the average weekly
trading volume as reported for the four calendar weeks preceding the date on
which notice of your sale is filed with the SEC. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about us. A person who has not been
one of our affiliates for at least the three months immediately preceding the
sale and who has beneficially owned shares of common stock for at least two
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above.
Our shares of common stock are currently included for quotation on the
OTC Bulletin Board. Pursuant to SEC regulations, the OTC Bulletin Board is not
considered an "automated quotation system of a registered securities
28
association" and Rule 144 will only permit sales of up to 1% of the outstanding
shares during any three month period.
Securities purchase agreement
Pursuant to a Securities Purchase Agreement dated March 28, 2002 (the
"Securities Purchase Agreement"), on such date we received a $250,000 investment
from the selling security holders through the issuance of $250,000 aggregate
principal amount of 12% Secured Convertible Debentures due March 28, 2003 (the
"Debentures"), which are convertible into shares of our common stock at a
conversion price of the lesser of $.225, subject to adjustment under certain
antidilution provisions, and fifty percent of the average of the lowest three
inter-day trading prices for our common stock during the twenty trading day
period ending one trading day prior to the date of conversion. In connection
with the sale of the Debentures we also issued to the selling security holders
three-year warrants (the "Warrants") to purchase an aggregate of 750,000 shares
of common stock at an exercise price equal to the lesser of $.107, subject to
adjustment under certain antidilution provisions, and the average of the lowest
three inter-day trading prices for our common stock during the twenty trading
day period ending one trading day prior to the date of exercise.
In connection with the sale of the Debentures we also entered into a
Registration Rights Agreement with the selling security holders (the
"Registration Rights Agreement") pursuant to which we agreed to file with the
Securities and Exchange Commission the registration statement of which this
prospectus is a part for the resale of the shares of common stock issuable upon
conversion of the Debentures and exercise of the Warrants and the additional
terms of the Securities Purchase Agreement, upon the declration of effectiveness
of the registration statement and provided certain other customary closing
conditions are satisfied, none of which such closing conditions is within the
control of the selling security holders, the selling security holders will be
obligated to purchase, and the Company will be obligated to sell and issue to
the selling security holders, additional Debentures in the aggregate principal
amount of $250,000 and additional Warrants to purchase an aggregate of 750,000
shares of common stock, with the closing of such purchase to occur within ten
business days of the effective date of the registration statement. The closing
conditions that must be satisfied prior to the sale and issuance of the
additional Debentures and Warrants are as follows:
- The representations and warrants made by us in the
Securities Purchase Agreement must be true and correct in
all material respects.
- We shall have performed, satisfied and complied in all
material respects with the covenants, agreements and
conditions required by the Securities Purchase Agreement to
be performed, satisfied or complied with by us.
- No litigation shall have been commenced or governmental
action taken which prohibits the consummation of any of the
transactions contemplated by the Securities Purchase
Agreement.
- No material adverse event shall have occurred to us.
29
- The shares of common stock issuable upon conversion of the
Debentures and exercise of the Warrants shall have been
authorized for quotation on the Nasdaq OTC Bulletin Board
and trading in the common stock on the Nasdaq OTC Bulletin
Board shall not have been suspended by the SEC or the Nasdaq
OTC Bulletin Board.
The registration statement of which this prospectus is a part covers
the resale of the shares of our common stock issuable upon conversion of the
Debentures and exercise of the Warrants. As described in the following
paragraph, the number of shares issuable upon the conversion of the Debentures
and exercise of the Warrants fluctuates depending on the market price of our
common stock. The 14,111,111 shares of our common stock being registered
represents an estimate of two times the maximum number of shares issuable upon
conversion of the Debentures and exercise of the Warrants as of April 30, 2002.
The number of shares we are required to issue upon the conversion of
the Debentures fluctuate with our common stock market price and therefor cannot
be determined until the day of conversion. The number of shares issuable upon
conversion is obtained by dividing the amount of principal and interest being
converted by the conversion price. The conversion price is determined at the
time of conversion and is equal to the lower of $.225, subject to adjustment
under certain antidilution provisions, and fifty percent of the average of the
lowest three inter-day trading prices for our common stock during the twenty
trading day period ending one trading day prior to the date of conversion. You
should be aware that the selling security holders may engage in short sales of
our common stock at any time, including prior to converting in short sales of
our common stock at any time, including prior to converting the Debentures,
which would put downward pressure on the market price our common stock and could
therefor result in more shares being issued to the selling security holders on
conversion than might otherwise be the case.
Assuming all $500,000 of the Debentures were fully converted on May 6,
2002 the conversion price would have been $.09 and upon conversion of the
selling security holders would have received 5,555,555 (500,000/0.09) shares of
common stock. Assuming that all 1,500,000 Warrants were fully exercised
concurrently with such conversion the selling security holders would have
received 7,545,455 shares of common, which following such conversion and
exercise would represent approximately 30% of our total outstanding shares. You
could therefore experience substantial dilution of your investment upon
conversion of the Debentures and exercise of the Warrants. Additionally, you
should be aware that there is no limit on the number of shares into which the
Debentures are convertible that is not waivable by the selling security holders
in their sole discretion and if the trading price of our common stock should
fall significantly we may be required to issue substantially more shares of our
common stock upon conversion of the Debentures, which could result in even later
dilution to existing shareholders.
Description of secured convertible debentures and warrants
The securities being offered by the selling security holders consist of
shares of common stock that are issuable upon the conversion of $250,000 of
secured convertible debentures and upon the exercise of warrants that we issued
in a private placement on March 28, 2002 and upon the conversion of an
30
additional $250,000 of secured convertible debentures and the exercise of
additional warrants that we will issue to the selling security holders within 10
business days following the effectiveness of the registration statement of which
this prospectus is a part. The debentures (including the additional debentures)
have an aggregate original principal amount of $500,000 bear interest at a rate
of 12% per annum. The debentures are convertible into common stock at a
conversion price equal to the lesser of $.225, subject to adjustment under
certain antidilution provisions, and fifty percent of the average of the lowest
three inter-day trading prices for our common stock during the twenty trading
day period ending one trading day prior to the date of conversion. The warrants
(including the additional warrants) are exercisable for a three year period for
an aggregate of 1,500,000 shares of our common stock at an initial exercise
price equal to the lesser of $0.107, subject to adjustment under certain
antidilution provisions, and the average of the lowest three inter-day trading
prices for our common stock during the ten trading day period ending one trading
day prior to the date of exercise.
In connection with the sale of the debentures we entered into a
security agreement with the selling security holders to secure the payment
obligations under the debentures. This agreement grants the selling security
holders a first prior security interest in all of our tangible and intangible
property which includes all of our goods, inventory, contract, rights,
receivables, patents, trademarks and copyrights. As a result, if we default upon
the repayment terms of the debentures, our assets would become subject to
foreclosure and it could be very difficult to remain a going concern.
The debentures provide that they may not be converted into common
stock, nor may the holder receive shares in payment of interest, if the
debenture holder and any affiliate would, as a result, beneficially own more
than 4.9% of our company's issued and outstanding shares of common stock.
However, this limitation can be waived by the holder as to itself, in its sole
discretion, by giving 61 days' prior notice to us. The conversion limitations do
not preclude a holder from converting and selling all or a portion of the
outstanding principal amount of the debentures that would result in the
beneficial ownership by such holder of less than 4.9% of the shares of common
stock than outstanding, and thereafter converting and selling an additional
similar portion of its holdings. In this manner such holder could over time
receive and sell a number of shares of common stock in excess of 4.9% of the
shares of common stock outstanding while never beneficially owning more than
4.9% at any one time and without ever having waived the 4.9% restriction
described above.
The number of shares being offered by the selling security holders
represents 200% of the shares of common stock issuable to the selling security
holders upon (i) full conversion of the debentures assuming all $500,000 of the
debentures were converted on April 30, 2002 and (ii) exercise of the warrants
assuming all 1,500,000 warrants were exercised on April 30, 2002. Because the
number of shares of common stock issuable upon conversion of the debentures and
as payment of interest thereon is dependent in part upon the market price of the
common stock prior to a conversion, the actual number of shares of common stock
that will then be issued in respect of such conversions or interest payments
and, consequently, offered for sale under the registration statement of which
this prospectus is a part, cannot be determined at this time. We have
contractually agreed to include herein all shares of common stock issuable upon
conversion of the debentures, payment of interest thereunder and exercise of the
warrants issued to the selling security holders.
31
The registration statement of which this prospectus is a part does not
cover the sale or other transfer of the debentures of warrants. If a selling
security holder transfers its debentures or warrants, the transferee of the
debentures or warrants may not sell the shares of common stock issuable upon
conversion or exercise of the debentures or warrants under the terms of this
prospectus unless this prospectus is appropriately amended or supplemented by
us. For the period a holder holds our debentures or warrants, the holder has the
opportunity to profit from a rise in the market price of our common stock
without assuming the risk of ownership of the shares of common stock issuable
upon conversion of the debentures or exercise of the warrants. The holders of
the debentures and warrants may be expected to convert their debentures or
market price for our common stock. Further, the terms on which we could obtain
additional capital during the period in which the debentures or warrants remain
outstanding may be adversely affected.
Plan of distribution
The shares being offered by the selling stockholders or their
respective pledgees, donees, transferees or other successors in interest, will
be sold from time to time in one or more transactions, which may involve block
transactions:
o on the Over-the-Counter Bulletin Board or on such other market
on which the common stock may from time to time be trading;
o in privately-negotiated transactions;
o through the writing of options on the shares;
o short sales; or
o any combination thereof.
The sale price to the public may be:
o the market price prevailing at the time of sale;
o a price related to such prevailing market price;
o at negotiated prices; or
o such other price as the selling stockholders determine from
time to time.
The shares may also be sold pursuant to Rule 144. The selling
stockholders shall have the sole and absolute discretion not to accept any
purchase offer or make any sale of shares if they deem the purchase price to be
unsatisfactory at any particular time.
The selling stockholders or their respective pledgees, donees,
transferees or other successors in interest, may also sell the shares directly
to market makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling stockholders
and/or the purchasers of shares for whom such broker-dealers may act as agents
or to whom they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that a selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling stockholders cannot assure that all or any of the shares offered in this
prospectus will be issued to, or sold by, the selling stockholders. The selling
stockholders and any brokers, dealers or agents, upon effecting the sale of any
of the shares offered in this prospectus, may be deemed "underwriters" as that
term is defined under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, or the rules and regulations under such acts.
The selling stockholders, alternatively, may sell all or any part of
the shares offered in this prospectus through an underwriter. No selling
stockholder has entered into any agreement with a prospective underwriter and
there is no assurance that any such agreement will be entered into. If a selling
stockholder enters into such an agreement or agreements, the relevant details
will be set forth in a supplement or revisions to this prospectus.
The selling stockholders and any other persons participating in the
sale or distribution of the shares will be subject to applicable provisions of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
under such act, including, without limitation, Regulation M. These provisions
may restrict certain activities of, and limit the timing of purchases and sales
of any of the shares by, the selling stockholders or any other such person.
Furthermore, under Regulation M, persons engaged in a distribution of securities
are prohibited form simultaneously engaging in market making and certain other
activities with respect to such securities for a specified period of time prior
to the commencement of such distributions, subject to specified exceptions or
exemptions. All of these limitations may affect the marketability of the shares.
We have agreed to indemnify the selling stockholders, or their
transferees or assignees, against certain liabilities, including liabilities
under the Securities Act of 1933, as amended, or to contribute to payments the
selling stockholders or their respective pledgees, donees, transferees or other
successors in interest, may be required to make in respect of such liabilities.
Selling stockholders
We are registering shares of common stock underlying convertible
debentures and warrants purchased by investors in our 2002 private placement.
32
Other than the costs of preparing this prospectus and a registration
fee to the SEC, we are not paying any costs relating to the sales by the selling
stockholders. Each of the selling stockholders, or their transferees, and
intermediaries to whom such securities may be sold may be deemed to be an
"underwriter" of the common stock offered in this prospectus, as that term is
defined under the Securities Act. Each of the selling stockholders, or their
transferees, may sell these shares from time to time for his own account in the
open market at the prevailing prices, or in individually negotiated transactions
at such prices as may be agreed upon. The net proceeds from the sale of these
shares by the selling stockholders will inure entirely to their benefit and not
to ours.
Except as indicated below, none of the selling stockholders has held
any position or office, or had any material relationship with us or any of our
predecessors or affiliates within the last three years, and after completion of
this offering will own the amount of our outstanding common stock listed
opposite their name. The shares reflected by each selling stockholder is based
upon information provided to us by them and/or by our transfer agent and from
other available sources in April, 2002.
Shares Beneficially Owned
Name of Selling Security Holder Before Offering Offering After offering Percentage
AJW Partners, LLC 3,143,636 3,143,636 0 0
New Millennium Capital Partners II, LLC 3,143,636 3,143,636 0 0
AJW New Millennium Offshore, Ltd. 4,352,727 4,352,727 0 0
Pegasus Capital Partners, LLC 1,450,911 1,450,911 0 0
33
The number of shares set forth in the table for the selling
stockholders represents an estimate of the number of shares of common stock to
be offered by the selling stockholders. The actual number of shares of common
stock issuable upon conversion of the debentures and exercise of the related
warrants is indeterminate, is subject to adjustment and could be materially less
or more than such estimated number depending on factors which cannot be
predicted by us at this time including, among other factors, the future market
price of the common stock. The actual number of shares of common stock offered
in this prospectus, and included in the registration statement of which this
prospectus is a part, includes such additional number of shares of common stock
as may be issued or issuable upon conversion of the debentures and exercise of
the related warrants by reason of any stock split, stock dividend or similar
transaction involving the common stock, in accordance with Rule 416 under the
Securities Act of 1933.
Under the terms of the debentures and the related warrants, the
debentures are convertible and the warrants are exercisable by any holder only
to the extent that the number of shares of common stock issuable pursuant to
such securities, together with the number of shares of common stock owned by
such holder and its affiliates (but not including shares of common stock
underlying unconverted shares of debentures or unexercised portions of the
warrants) would not exceed 4.9% of the then outstanding common stock as
determined in accordance with Section 13(d) of the Exchange Act. Accordingly,
the number of shares of common stock set forth in the table for the selling
stockholder exceeds the number of shares of common stock that the selling
stockholder could own beneficially at any given time through their ownership of
the debentures and the warrants. In that regard, the beneficial ownership of the
common stock by the selling stockholder set forth in the table is not determined
in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended.
Legal matters
Legal matters in connection with this offering are being passed upon by
the law firm of Heller, Horowitz & Feit P.C., New York, New York.
Experts
Our audited financial statements as of September 30, 2000 and 2001 and
for the fiscal years then ended are included in this prospectus in reliance upon
the report of Mark Cohen C.P.A., an independent certified public accountant, and
upon the authority of said person as an expert in accounting and auditing.
Available information
We are subject to the information requirements of the Securities
Exchange Act of 1934, as amended. This Act requires us to file reports, proxy
statements and other information with the Securities and Exchange Commission.
Copies of the reports, proxy statements and other information we file can be
34
inspected at the Headquarters Office of the Securities and Exchange Commission
located at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549:
Copies of the material we file may be obtained from the Public
Reference Section of the Commission, at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. at prescribed rates. The Public Reference Room can be reached
at (202) 942-8090. The Commission also maintains a web site that contains
reports, proxy and information statements and other information regarding us.
This material can be found at http://www.sec.gov.
35
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEET
AT DECEMBER 31, 2001
(UNAUDITED)
Assets
Current Assets
Cash and cash equivalents $ 14,066
Receivables, net 10,312
Prepaid Consulting fees 185,753
Other current assets (principally related party) 16,150
Total current assets 226,280
Property and equipment, net 20,468
Intangibles, net 51,028
Other assets 8,234
Total assets 306,009
===========
Liabilities and Shareholder's Equity
Current Liabilities
Accounts payable and accrued expenses 235,385
Accrued salaries and payroll related benefits 100,040
Other current liabilities (principally related party) 129,455
Total current liabilities 464,880
Shareholder's Equity
Common Stock, class A, $1.00 par value; authorized -
5,000,000 shares; issued and outstanding 0 in 2001
Common Stock, class B, $.001 par value; authorized 19,135
55,000,000 shares; issued and outstanding 16,544,945
Paid in Capital 845,884
Treasury Stock (2,590)
Deficit accumulated during the development stage (1,025,379)
Accumulated other comprehensive income 4,080
Total Shareholder's Equity (158,871)
Total liabilities and shareholder's equity $306,009
============
Read the accompanying summary of significant accounting notes to
financial statements, which are an integral part of this financial statement.
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000
FROM INCEPTION (MARCH 19, 1999) THROUGH DECEMBER 31, 2001
Inception
Three months ended December 31, (March 19, 1999)
---------------------------------------- through
2001 2000 December 31, 2001
-------------- -------------- --------------------
(Unaudited) (Unaudited) (Unaudited)
Revenues: $ 9,417 $ - $ 64,084
Cost of Revenues: - - 58,724
-------------- -------------- --------------------
Gross Profit 9,417 - 5,360
Operating Expenses:
Marketing 74,594 - 74,594
Travel 6,896 2,967 66,499
Professional fees 2,021 - 121,967
Consulting fees 19,071 30,400 209,205
Directors fees 5,000 - 5,000
Salaries and payroll related benefits 58,093 - 134,621
Rent 4,000 3,082 32,624
Depreciation 1,324 214 3,248
Amortization 5,500 1,833 58,972
Selling, general and administrative expenses 17,023 13,893 125,374
-------------- -------------- --------------------
193,523 52,389 832,105
Operating Loss (184,106) (52,389) (826,745)
Other Income/(Expense)
Interest Income - related party - 177 824
Interest Income - other 5 - 5
Interest Expense (197) - (523)
Foreign exchange - - 1,059
Loss on impairment of asset - - (200,000)
-------------- -------------- --------------------
Total Other Income (192) 177 (198,634)
Net Loss (184,297) (52,212) (1,025,379)
Basic weighted average common shares outstanding 16,274,457 15,265,188
============== ==============
Basic Loss per common share $ (0.0113) $ (0.0034)
============== ==============
Read the accompanying summary of significant accounting notes to
financial statements, which are an integral part of this financial statement.
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000
FROM INCEPTION (MARCH 19, 1999) THROUGH DECEMBER 31, 2001
Inception
(March 19, 1999)
For the years ended December 31, through
----------------------------------------------------
2001 2000 December 31, 2001
------------- -------------- ------------------
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (184,297) $ (52,212) $ (1,025,380)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 6,824 2,047 62,221
Rent expense offset to paid in capital 1,500 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 consulting services 14,247 14,247
Accumulated other comprehensive income 4,080 4,080
Changes in Operating assets and liabilities:
Receivables (9,627) 6,853 (10,312)
Other Current Assets (5,369) 1,742 (16,150)
Other Assets - 8,296 (8,234)
Accounts Payable and Accrued Liabilities 187,119 23,496 464,880
------------- -------------- ------------------
Net cash provided by/(used in) operating activities 12,976 (8,276) (293,648)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment 2,877 - (23,717)
------------- -------------- ------------------
Net cash provided by/(used in) investing activities 2,877 - (23,717)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Notes payable, principally related parties - - 56,566
Purchase of treasury stock (3,136) - (7,636)
Exercise of warrants - - 1,325
Sales of common stock - 3,500 281,177
------------- -------------- ------------------
Net cash provided by/(used in) financing activities (3,136) 3,500 331,432
------------- -------------- ------------------
Net increase (decrease) in cash and cash equivalents 12,716 (4,776) 14,066
Cash and cash equivalents, beginning of period 1,350 4,891 -
------------- -------------- ------------------
Cash and cash equivalents, end of period $ 14,066 $ 115 $ 14,066
============= ============== ==================
Supplemental Schedule of noncash investing and financing activities:
April 26, 1999 issued 588,000 shares of common stock 110,000
for license rights from affiliate (recorded at predecessor
basis)
July 07, 1999 issued 306,000 shares of common stock 200,000
for equipment from affiliate (recorded at predecessor
basis)
November 29, 1999 issuance of 56,565 shares of 56,566 113,132
common stock in settlement of note payable (related
party)
Read the accompanying summary of significant accounting notes to
financial statements, which are an integral part of this financial statement.
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
$184,297 for the three months ended December 31, 2001 (unaudited) as well as
reporting net losses of $1,025,379 from inception (March 19, 1999) to December
31, 2001 (unaudited). As reported on the statement of cash flows, the Company
has incurred negative cash flows from operating activities of $293,648 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.
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).
On December 17, 2001, the Company issued 325,000 shares in settlement
of a consulting agreement.
Mark Cohen C.P.A.
1772 East Trafalgar Circle
Hollywood, Fl 33020
(954) 922 - 6042
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Biomasse International, Inc.
We have audited the accompanying balance sheet of Biomasse International, Inc.
(a company in the development stage) as of September 30, 2001 and 2000 and the
related statements of operations, shareholders' equity (deficiency) and cash
flows for the year ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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 Biomasse International, Inc. at
September 30, 2001 and 2000, and the results of its operations and its cash
flows for the year then ended, in conformity with 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 5 to the
financial statements, the Company has experienced an operating loss and
management has determined that it will require additional capital to continue
funding operations and meet its obligations as they come due. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/Mark Cohen
Mark Cohen C.P.A.
A Sole Proprietor Firm
Hollywood, Florida
December 20, 2001
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEET
Assets
- -------------------------------------------------------------------------------------------------------------
September 30,
- -------------------------------------------------------------------------------------------------------------
2001 2000
- -------------------------------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents $ 1,350 $ 4,891
Receivables, net 685 11,402
Other current assets 10,781 11,544
- -------------------------------------------------------------------------------------------------------------
Total current assets 12,815 27,837
Property and equipment, net 24,670 203,128
Intangibles, net 56,528 78,528
Other assets 8,234 12,180
- -------------------------------------------------------------------------------------------------------------
Total assets 102,246 321,673
============ =========
Liabilities and Shareholder's Equity
Current Liabilities
Accounts payable and accrued expenses 170,369 53,694
Accrued salaries and payroll related benefits 48,977 -
Other current liabilities 58,415 31,591
Note Payable - -
- -------------------------------------------------------------------------------------------------------------
Total current liabilities 277,761 85,285
- -------------------------------------------------------------------------------------------------------------
Shareholder's Equity
Common Stock, class A, $1.00 par value; authorized - -
5,000,000 shares; issued and outstanding 0 in 2001
and 2000
Common Stock, class B, $.001 par value; authorized 19,135 19,135
55,000,000 shares; issued and outstanding 16,223,280
and 15,165,188 respectively
Paid in Capital 649,344 905,485
Treasury Stock (2,912) (3,970)
Share subscription receivable - (390,000)
Deficit accumulated during the development stage (841,082) (294,262)
- -------------------------------------------------------------------------------------------------------------
Total Shareholder's Equity (175,514) 236,388
- -------------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $102,246 $321,673
============ =========
Read the accompanying summary of significant accounting notes to
financial statements, which are an integral part of this financial statement.
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
FROM INCEPTION (MARCH 19, 1999) THROUGH SEPTEMBER 30, 2001
Inception
(March 19, 1999)
Year Ended September 30, through
2001 2000 September 31, 2001
------------ ------------ ------------------
(Unaudited)
Revenues: $ 54,667 $ - $ 54,667
Cost of Revenues: 58,724 - 58,724
------------ ------------ ------------------
Gross Profit (4,057) - (4,057)
Operating Expenses:
Travel 20,458 32,938 59,603
Professional fees 29,859 27,915 119,946
Consulting fees 122,313 57,821 190,134
Salaries and payroll related benefits 76,528 - 76,528
Rent 15,090 12,925 28,624
Depreciation 1,341 584 1,924
Amortization 22,000 22,000 53,472
Selling, general and administrative expenses 56,086 49,625 108,351
------------ ------------ ------------------
343,674 203,808 638,582
Operating Loss (347,731) (203,808) (642,639)
Other Income/(Expense)
Interest Income - related party 178 646 824
Interest Expense (326) - (326)
Foreign exchange 1,059 - 1,059
Loss on impairment of asset (200,000) - (200,000)
------------ ------------ ------------------
Total Other Income (199,089) 646 (198,443)
Net Loss (546,821) (203,161) (841,082)
Basic weighted average common shares outstanding 16,052,108 15,449,199
============ ============
Basic Loss per common share $ (0.0217) $ (0.0132)
============ ============
Read the accompanying summary of significant accounting notes to
financial statements, which are an integral part of this financial statement.
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
FROM INCEPTION (MARCH 19, 1999) THROUGH SEPTEMBER 30, 2001
Inception
(March 19, 1999)
For the years ended September 30, through
2001 2000 September 30, 2001
-------------- -------------- -------------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (546,821) $ (203,161) $ (841,083)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 23,341 22,584 55,397
Rent expense offset to paid in capital 4,500 500 5,000
Issuance of warrants for advisory services 10,000
Issuance of options for professional services 6,000 6,000
Loss on impairment of asset 200,000 200,000
Changes in Operating assets and liabilities:
Receivables 10,717 5,983 (685)
Other Current Assets 763 4,388 (10,781)
Other Assets 3,946 (10,962) (8,234)
Accounts Payable and Accrued Liabilities 192,476 53,757 277,761
-------------- -------------- -------------------
Net cash provided by/(used in) operating activities (105,075) (126,913) (306,624)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (22,883) (3,711) (26,594)
-------------- -------------- -------------------
Net cash provided by/(used in) investing activities (22,883) (3,711) (26,594)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Notes payable, principally related parties - - 56,566
Purchase of treasury stock - (4,500) (4,500)
Exercise of warrants 1,325 1,325
Sales of common stock 123,092 83,400 281,177
-------------- -------------- -------------------
Net cash provided by/(used in) financing activities 124,417 78,900 334,568
-------------- -------------- -------------------
Net increase (decrease) in cash and cash equivalents (3,541) (51,724) 1,350
Cash and cash equivalents, beginning of period 4,891 56,615 -
-------------- -------------- -------------------
Cash and cash equivalents, end of period $ 1,350 $ 4,891 $ 1,350
============== ============== ===================
Supplemental Schedule of noncash investing and financing activities:
April 26, 1999 issued 588,000 shares of common stock 110,000
for license rights from affiliate (recorded at predecessor
basis)
July 07, 1999 issued 306,000 shares of common stock 200,000
for equipment from affiliate (recorded at predecessor
basis)
November 29, 1999 issuance of 56,565 shares of 56,566 56,566
common stock in settlement of note payable (related
party)
Read the accompanying summary of significant accounting notes to
financial statements, which are an integral part of this financial statement.
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF SHAREHOLDERS' EQUITY
FROM INCEPTION (MARCH 19, 1999) THROUGH SEPTEMBER 30, 2001
Common Class A Common Class B Treasury Shares - Class B
-------------------------------------------------- ------------------------------
Shares Amount Shares Par Value Amount Shares Par Value Amount
------------------------- ----------------------- ------------------------------
Balance, beginning: March 19, 1999 - $ - - $ - - $ -
April 01, 1999 sale of Class B common stock 17,684,723 0.001 17,685
April 01, 1999 contract settlement -
BBT Consulting Group, Inc. 500,000 0.001 500
April 01, 1999 non cash advisory services
April 26, 1999
Issuance of stock to
Marc Dufresne (1978) Inc. for license rights 588,000 0.001 588
Dividend to affiliate - Marc Dufresne (1978) Inc.
for license rights
July 07, 1999
Issuance of stock to Marc Dufresne (1978) Inc.
for equipment 306,000 0.001 306
Dividend to affiliate - Marc Dufresne (1978) Inc.
for equipment
September 30, 1999 sale of Class B common stock through 56,500 0.001 57
circular offering
Net loss year ended September 30, 1999
------------------------- ----------------------- ------------------------------
Balance: September 30, 1999 - - 19,135,223 0.001 19,135 - -
November 29, 1999
Repurchased treasury shares from
Marc Dufresne (1978) Inc. (4,500,000) 0.001 (4,500)
Proceeds from the sale of Class B
through circular offering 3,000 0.001 3
Issuance of stock to Marc Dufresne
(1978) Inc. for settlement 56,565 0.001 57
of note payable
Sale of Class B common through circular
offering 70,400 0.001 70
September 30, 2000 subscription of Class B
common through circular offering 400,000 0.001 400
September 30, 2000 office rent applied to
paid in capital
Net loss for the twelve month period
ended September 30, 2000
------------------------- ----------------------- ------------------------------
Balance, ending: September 30, 2000 - - 19,135,223 0.001 19,135 (3,970,035) 0.001 (3,970)
Office rent applied to paid in capital
Receipts for share subscription receivable
Cancellation of share subscription (386,500) 0.001 (387)
Exercise of warrants 1,325,000 0.001 1,325
Issuance of options for professional services
Sale of Class B common through circular offering 119,592 0.001 120
Net loss for the twelve month period ended September 30, 2001
------------------------- ----------------------- ------------------------------
Balance, ending: September 30, 2001 - - 19,135,223 0.001 19,135 (2,911,943) 0.001 (2,912)
========================= ======================= ==============================
Read the accompanying summary of significant accounting notes to
financial statements, which are an integral part of this financial statement
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF SHAREHOLDERS' EQUITY
FROM INCEPTION (MARCH 19, 1999) THROUGH SEPTEMBER 30, 2001
(CONT.)
Paid in Subscription Development Shareholder's
Capital Receivable Stage Equity
--------- ------------- ----------- -------------
Balance, beginning: March 19, 1999 $ - $ - $ - $ -
April 01, 1999 sale of Class B common stock - - 17,685
April 01, 1999 contract settlement - BBT Consulting Group, Inc. - - 500
April 01, 1999 non cash advisory services 10,000 (10,000) -
April 26, 1999
Issuance of stock to Marc Dufresne (1978) Inc.
for license rights 587,412 - 588,000
Dividend to affiliate - Marc Dufresne (1978) Inc. (478,000) (478,000)
for license rights
July 07, 1999
Issuance of stock to Marc Dufresne (1978) Inc.
for equipment 305,694 - 306,000
Dividend to affiliate - Marc Dufresne (1978) Inc. (106,000) (106,000)
for equipment
September 30, 1999 sale of Class B common stock through 56,444 - 56,500
circular offering
Net loss year ended September 30, 1999 (81,101) (81,101)
---------- ---------- --------- -----------
Balance: September 30, 1999 375,550 - (91,101) 303,584
November 29, 1999
Repurchased treasury shares from Marc Dufresne (1978) Inc. (4,500)
Proceeds from the sale of Class B through circular offering 2,997 3,000
Issuance of stock to Marc Dufresne (1978) Inc. for settlement 56,509 56,566
of note payable
Sale of Class B common through circular offering 70,330 70,400
September 30, 2000 subscription of Class B common through 399,600 (390,000) 10,000
circular offering
September 30, 2000 office rent applied to paid in capital 500 500
Net loss for the twelve month period ended September 30, 2000 (203,161) (203,161)
---------- ----------- --------- -----------
Balance, ending: September 30, 2000 905,485 (390,000) (294,262) 236,388
Office rent applied to paid in capital 4,500 4,500
Receipts for share subscription receivable 3,500 3,500
Cancellation of share subscription (386,114) 386,500 -
Exercise of warrants - - 1,325
Issuance of options for professional services 6,000 6,000
Sale of Class B common through circular offering 119,472 119,592
Net loss for the twelve month period ended September 30, 2001 (546,821) (546,821)
---------- ----------- --------- -----------
Balance, ending: September 30, 2001 649,344 - (841,082) (175,514)
========== =========== ========= ===========
Read the accompanying summary of significant accounting notes to
financial statements, which are an integral part of this financial statement
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
FROM INCEPTION (MARCH 19, 1999) THROUGH SEPTEMBER 30, 2001
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Biomasse International, Inc., was incorporated in the State of Florida
on March 19, 1999. The company has acquired a unique technology to process and
dispose of the waste created by pulp and paper companies in an efficient and
environmentally-friendly way. The pulp and paper industry in Canada is facing
many challenges caused by an increasingly competitive world market. Pulp and
paper plants in Canada are lagging behind their competitors in the U.S.A. and
Europe in productivity and in quality of their products. The industry is now in
a restructuring phase to reduce its costs of operations and diversify its
products line. The industry is also increasingly scrutinized by environmental
agencies as this industry is a major producer of toxic waste. Environmental
regulations are becoming tighter and the public is becoming more
environmentally-conscious. Biomasse International, Inc.'s technology addresses
both problems: to eliminate the toxic waste by incinerating it and then from the
waste material to produce steam energy which can be used for the operation of
machinery in the plants. The plant thus saves the cost of trucking the waste to
distant locations to bury it, and at the same time it eliminates the waste
completely, meeting the most stringent environmental concerns.
Biomasse International, Inc. prepares its financial statements in
accordance with generally accepted accounting principles. This basis of
accounting involves the application of accrual accounting; consequently,
revenues and gains are recognized when earned, and expenses and losses are
recognized when incurred. Financial statement items are recorded at historical
cost and may not necessarily represent current values.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management estimates:
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,
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Certain amounts included in the financial
statements are estimated based on currently available information and
management's judgment as to the outcome of future conditions and
circumstances. Changes in the status of certain facts or circumstances
could result in material changes to the estimates used in the preparation
of financial statements and actual results could differ from the estimates
and assumptions. Every effort is made to ensure the integrity of such
estimates.
Fair value of financial instruments:
The carrying amounts of cash and equivalents, accounts receivable, accounts
payable and accrued liabilities approximate their fair values because of
the short duration of these instruments.
Intangible assets
Intangible assets consist principally of intellectual property and rights
related to the technology to process and dispose of waste created by pulp
and paper companies. Intangible assets are amortized on a straight line
basis over 5 years.
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
FROM INCEPTION (MARCH 19, 1999) THROUGH SEPTEMBER 30, 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Impairment of long-lived assets:
Long-lived assets held and used by the Company are reviewed for possible
impairment whenever events or changes in circumstances indicate the
carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying
amount of the assets to the future net cash flows expected to be generated
by the asset. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying amount of
the assets exceeds the fair value of the assets. The fair value of an asset
is the amount at which the asset could be bought or sold in a current
transaction between willing parties, that is, other than in a forced or
liquidation sale. Quoted market prices in active markets are the best
evidence of fair value and shall be used as the basis for the measurement,
if available. If quoted market prices are not available, the estimate of
fair value shall be based on the best information available in the
circumstances. The estimate of fair value shall consider prices for similar
assets and the results of valuation techniques to the extent available in
the circumstances. Valuation techniques include the present value of
estimated expected future cash flows using a discount rate commensurate
with the risk involved, option-pricing models, matrix pricing and
fundamental analysis.
Cash and cash equivalents:
The Company considers all highly liquid investments with original maturities
of ninety days or less to be cash and cash equivalents. Such investments are
valued at quoted market prices.
Receivables:
The Company believes that the carrying amount of receivables at September
30, 2001 approximates the fair value at such date.
Property, equipment and depreciation:
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives as follows when the property and equipment is placed in
service:
Estimate Useful Life
(In Years)
Office Furniture and Equipment 10
Computer Equipment 3
Machinery and Equipment 10
Repairs and maintenance are charged to operations as incurred, and expenditures
for significant improvements are capitalized. The cost of property and equipment
retired or sold, together with the related accumulated depreciation, are removed
from the appropriate asset and depreciation accounts, and the resulting gain or
loss is included in operations.
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
FROM INCEPTION (MARCH 19, 1999) THROUGH SEPTEMBER 30, 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Revenue Recognition
The Company's revenues recognized to date are consultation services. In
December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition," which
provides guidance on the recognition, presentation and disclosure of
revenue in financial statements filed with the SEC. SAB 101 outlines the
basic criteria that must be met to recognize revenue and provide guidance
for disclosures related to revenue recognition policies. Management
believes that Biomasse International, Inc.'s revenue recognition practices
are in conformity with the guidelines of SAB 101.
Earnings (Loss) per share calculation:
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 - DETAILS OF FINANCIAL STATEMENT COMPONENTS
September 30,
2001 2000
---- ----
Receivables:
Due from Federal Tax Authority $ 685 $ 2,830
Due from Provincial Tax Authority - 2,985
Advances due from A. Abouelouafa - 5,587
-------------- -------
$ 685 $11,402
Other current assets:
Prepaid rent - 282
Employee advances 10,781 11,262
-------------- -------
$ 10,781 $ 11,544
Property and equipment:
Furniture & Fixtures $ 3,971 $ 1,638
Computer Equipment 8,415 2,073
Equipment 14,208 200,000
------- -------
(Acquired from affiliate and recorded at 26,594 203,711
predecessor basis with the cost over
such basis recorded as a dividend to
affiliate).
Accumulated depreciation 1,924 583
-------------- ----------
$24,670 $ 203,128
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
FROM INCEPTION (MARCH 19, 1999) THROUGH SEPTEMBER 30, 2001
NOTE 3 - DETAILS OF FINANCIAL STATEMENT COMPONENTS (CONTINUED):
Intangibles:
Intellectual property $ 110,000 $ 110,000
(Acquired from affiliate and recorded at
predecessor basis with the cost over
such basis recorded as a dividend to
affiliate).
Accumulated amortization 53,472 10,490
-------- -------------
$ 56,528 $ 99,510
On November 29, 1999, the Company was advised by Marc Dufresne (1978) Inc., a
majority shareholder and affiliate, of a financial difficulty concerning Marc
Dufresne (1978) Inc.. By way of a licensing agreement dated April 26, 1999, the
Company exercised it right to cancel the agreement and acquire the intellectual
property at no cost as a penalty to Marc Dufresne (1978) Inc., for its inability
to perform its contractual obligation.
NOTE 4 - COMMITMENTS AND CONTIGENCIES
Office Leases
On September 01, 2000, the Company entered into an agreement with
Gestion Sibco Inc. for office space Quebec, Canada. Benoit DuFresne is a major
shareholder of Gestion Sibco Inc.. The term of the agreement is one (1) year
expiring on August 31, 2001. The annual lease amount is $6,000 USD. Gestion
Sibco Inc has agreed to waive the lease payments due since the Company is in the
development stage and has incurred losses since inception. The lease was
cancelled on July 01, 2001 without penalty. $500.00 for September 2000 and
$4,500 for the period from October 01, 2000 through June 30, 2001 has been
reflected in the financial statements of the Company at September 30, 2000 and
2001 as rent expense with an offset to paid in capital.
On May 6th 2001, the Company entered into an agreement to lease office
space for a period of three years starting on July 1, 2001 and ending on June
30, 2004. The annual lease payment is $11,150.00 CAD.
The following is a schedule by years of future minimum rental payments
required under operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of September 30, 2001:
Year ending September 30:
2002 - $ 19,970
2003 - 15,641
2004 - 6,139
2005 - -
2006 - -
------------
$ 41,750
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
FROM INCEPTION (MARCH 19, 1999) THROUGH SEPTEMBER 30, 2001
NOTE 5 - GOING CONCERN
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company reported net losses of
$546,821 and $203,161 for the twelve months ended September 30, 2001 and 2000
respectively as well as reporting net losses of $841,082 from inception (March
19, 1999) to September 30, 2001. As reported on the statement of cash flows, the
Company incurred negative cash flows from operating activities of $105,075 and
$126,913 for twelve months ended September 30, 2001 and 2000 respectively and
has reported deficient cash flows from operating activities of $306,624 from
inception (March 19, 1999). To date, these losses and cash flow deficiencies
have been financed principally through the sale of common stock ($281,177).
Management has continued to develop a strategic plan to develop a management
team, maintain reporting compliance and seek new expansive areas in waste
disposal. Management anticipates that additional investments will be needed to
develop an effective sales and marketing program before the organization will
generate sufficient cash flow from operations to meet current operating expenses
and overhead.
NOTE 6 - RELATED PARTY TRANSACTIONS
Repurchase of shares from stockholder:
On November 29, 1999, the Company was advised by Marc Dufresne (1978) Inc.,
a majority shareholder and affiliate, of a financial difficulty concerning
Marc Dufresne (1978) Inc.. By way of a licensing agreement dated April 26,
1999, the Company exercised it right to cancel the agreement and repurchase
4,500,000 shares held by Marc Dufrresne (1978) Inc. These shares are being
held by Biomasse International, Inc. as treasury shares. The company also
exercised its right to acquire all intellectual property and rights related
to the technology to process and dispose of waste created by pulp and paper
companies at no cost as a penalty to Marc Dufresne (1978) Inc., for its
inability to perform its contractual obligation. The company had a note
payable dated September 30, 1999 in the amount of $56,566 to Marc DuFresne
(1978) Inc., a majority shareholder of the company. This note is for
reimbursements of expenditures paid by Marc DuFresne (1978) Inc. during the
fiscal year ended September 30, 1999 on behalf of Biomasse International,
Inc. As part of the above transaction, it was agreed by all parties to
issues 56,565 shares of stock is settlement of this note.
NOTE 7 - CONVERSION OF LICENSE RIGHTS TO INTELLECTUAL PROPERTY
On November 29, 1999, the Company was advised by Marc Dufresne (1978) Inc.,
a majority shareholder and affiliate, of a financial difficulty concerning
Marc Dufresne (1978) Inc.. By way of a licensing agreement dated April 26,
1999, the Company exercised it right to cancel the agreement. The company
also exercised its right to acquire all intellectual property and rights
related to the technology to process and dispose of waste created by pulp
and paper companies at no cost as a penalty to Marc Dufresne (1978) Inc.,
for its inability to perform its contractual obligation.
NOTE 8 - INCOME TAXES
The Company did not provide any current or deferred United States federal,
state or foreign income tax provision or benefit for the period presented
because it has experienced operating losses since inception. The Company
has provided a full valuation allowance on the deferred tax asset,
consisting primarily of net operating loss carryforwards, because of
uncertainty regarding its realizability.
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
FROM INCEPTION (MARCH 19, 1999) THROUGH SEPTEMBER 30, 2001
NOTE 9 - SHAREHOLDERS' EQUITY
Common stock
The Company has 5,000,000 shares of class A common stock which to date
have never been issued. Management has no intent of issuing any of
these shares and will be canceling these shares by filing an amendment
to the articles of incorporation with the State of Delaware.
On November 29, 1999, the Company issues 56,565 shares of stock stock
of Class B, at a price of $1.00 per share, as settlement of a note
payable dated September 30, 1999 in the amount of $56,566 to Marc
DuFresne (1978) Inc., a majority shareholder of the company. This note
is for reimbursements of expenditures paid by Marc DuFresne (1978)
Inc. during the fiscal year ended September 30, 1999 on behalf of
Biomasse International, Inc.
From October 01, 1999 to September 30, 2000, the Company, in
accordance with it offering circular to sell no less than 200,000 and
up to 1,250,000 units on an ongoing basis (each unit consisting of one
(1) share of common stock and one (1) warrant), sold 73,400 units at
price of $1.00 per unit. From this transaction, the Company issued
73,400 shares of Class B common stock and 73,400 warrants. Each
warrant entitles the registered holder thereof to purchase at any time
from the date of the offering until the close of business January 31,
2004, one share of common stock at a price of $1.10.
On September 30, 2000 the Company, in accordance with it offering
circular to sell no less than 200,000 and up to 1,250,000 units on an
ongoing basis (each unit consisting of one (1) share of common stock
and one (1) warrant), sold 400,000 units at price of $1.00 per unit
through a share subscription receivable. From this transaction, the
Company issued 400,000 shares of Class B common stock and 400,000
warrants. Each warrant entitles the registered holder thereof to
purchase at any time from the date of the offering until the close of
business January 31, 2004, one share of common stock at a price of
$1.10. On April 30, 2001 386,500 shares of Class B common stock and
386,500 warrants were cancelled due to the share subscription
receivable deemed uncollectible.
From October 01, 2000 to September 30, 2001, the Company, in
accordance with it offering circular to sell no less than 200,000 and
up to 1,250,000 units on an ongoing basis (each unit consisting of one
(1) share of common stock and one (1) warrant), sold 119,592 units at
price of $1.00 per unit. From this transaction, the Company issued
119,592 shares of Class B common stock and 119,592 warrants. Each
warrant entitles the registered holder thereof to purchase at any time
from the date of the offering until the close of business January 31,
2004, one share of common stock at a price of $1.10.
From October 01, 2000 to September 30, 2001, 1,325,000 options were
exercised at a purchase price of $0.001.
Treasury stock
On November 29, 1999, the Company was advised by Marc Dufresne (1978)
Inc., a majority shareholder and affiliate, of a financial difficulty
concerning Marc Dufresne (1978) Inc.. By way of a licensing agreement
dated April 26, 1999, the Company exercised it right to cancel the
agreement and repurchase 4,500,000 shares held by Marc Dufrresne
(1978) Inc at $0.001 per share. These shares are being held by
Biomasse International, Inc. as treasury shares. The company uses the
cost method of accounting for treasury stock. The company has made
these shares available first for sale through its circular offering
and also before any other unissued common shares are sold. The total
number of treasury shares available at September 30, 2001 is
2,911,943.
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
FROM INCEPTION (MARCH 19, 1999) THROUGH SEPTEMBER 30, 2001
NOTE 9 - SHAREHOLDERS' EQUITY (CONTINUED):
Warrants and options
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation". The Company has determined
that it will continue to account for employee stock-based compensation
under Accounting Principles Board No. 25 and elect the disclosure-only
alternative under SFAS No. 123.
From October 01, 1999 through September 30, 2000, the Company, in
accordance with it offering circular to sell no less than 200,000 and
up to 1,250,000 units on an ongoing basis (each unit consisting of one
(1) share of common stock and one (1) warrant), sold 73,400 units at
price of $1.00 per unit. From this transaction, the Company issued
73,400 shares of Class B common stock and 73,400 warrants. Each
warrant entitles the registered holder thereof to purchase at any time
from the date of the offering until the close of business January 31,
2004, one share of common stock at a price of $1.10.
On April 01, 2000, the Company issued 1,000,000 warrants to A Abdel
Jabbar Abouelouafa as part of a contractual consulting agreement. As
per the agreement, consulting fees of $5,000 per month since April 01,
2000 have been reflected in the financial statements, which is the
entire consulting fee agreed to. The warrants are exercisable at $1.10
per share and expire on January 31, 2004. The Company did not reflect
any expense in the financial statements for these warrants issued
since the grant price of the warrant exceeded the fair value of the
stock on April 01, 2000.
On April 01, 2000, the Company, pursuant to an executive employment
contract, issued 1,000,000 warrants to its President, Mr. Benoit
Dufresne. The warrants are exercisable at $1.10 per share and expire
on January 31, 2004. The Company did not reflect any compensation
expense in the financial statements for these warrants issued since
the grant price of the warrant exceeded the fair value of the stock on
April 01, 2000.
On April 01, 2000, the Company, pursuant to an executive employment
contract, issued 1,000,000 warrants to its Vice President Finance, Mr.
Jean Gagnon The warrants are exercisable at $1.10 per share and expire
on January 31, 2004. The Company did not reflect any compensation
expense in the financial statements for these warrants issued since
the grant price of the warrant exceeded the fair value of the stock on
April 01, 2000.
On Augurst 22, 2000, the Company issued 300,000 warrants to 3 parties
as part of a contractual consulting agreement. As per the agreement,
consulting fees of $1,000 per month since April 01, 2000 have been
reflected in the financial statements, which is the entire consulting
fee agreed to. The warrants are exercisable at $1.10 per share and
expire on January 31, 2004. The Company did not reflect any expense in
the financial statements for these warrants issued since the grant
price of the warrant exceeded the fair value of the stock on August
22, 2000.
On August 22, 2000, the Company, pursuant to an employment contract,
issued 100,000 warrants to its Director of Engineering R&D. The
warrants are exercisable at $0.001 per share and expire on January 31,
2004. The Company did not reflect any compensation expense in the
financial statements for these warrants issued since the grant price
of the warrant exceeded the fair value of the stock on August 22,
2000.
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
FROM INCEPTION (MARCH 19, 1999) THROUGH SEPTEMBER 30, 2001
NOTE 9 - SHAREHOLDERS' EQUITY (CONTINUED):
On September 30, 2000 the Company, in accordance with it offering
circular to sell no less than 200,000 and up to 1,250,000 units on an
ongoing basis (each unit consisting of one (1) share of common stock
and one (1) warrant), sold 400,000 units at price of $1.00 per unit.
From this transaction, the Company issued 400,000 shares of Class B
common stock and 400,000 warrants. Each warrant entitles the
registered holder thereof to purchase at any time from the date of the
offering until the close of business January 31, 2002, one share of
common stock at a price of $1.10. On April 30, 2001 386,500 shares of
Class B common stock and 386,500 warrants were cancelled due to the
share subscription receivable deemed uncollectible.
FAS 123 "Accounting for stock based compensation"
Year ended September 30,
Paragraph 47 (a) 2001 2000
----- ----
1. Beginning of year - outstanding
i. number of options 2,825,000 725,000
ii. weighted average exercise price .001 .001
2. End of year - outstanding
i. number of options 2,000,000 2,825,000
ii. weighted average exercise price 1.10 .779
3. End of year - exercisable
i. number of options 2,000,000 2,825,000
ii. weighted average exercise price 1.10 .779
4. During the year - Granted
i. number of options 0 2,100,000
ii. weighted average exercise price 0 1.048
5. During the year - Exercised
i. number of options 825,000 0
ii. weighted average exercise price .001 0
6. During the year - Forfeited
i. number of options 0 0
ii. weighted average exercise price 0 0
7. During the year - Expired
i. number of options 0 0
ii. weighted average exercise price 0 0
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
FROM INCEPTION (MARCH 19, 1999) THROUGH SEPTEMBER 30, 2001
NOTE 9 - SHAREHOLDERS' EQUITY (CONTINUED):
Year ended September 30,
2001 2000
---- ----
Paragraph 47 (b) Weighted-average grant-date
fair value of options granted during the year:
1. Equals market price 0.00 0.00
2. Exceeds market price 0.00 0.00
3. Less than market price 0.00 0.00
Paragraph 47(C)Equity instruments other than options none none
Paragraph 47(d) Description of the method and significant assumptions used
during the year to estimate the fair value of options:
The Black Scholes option pricing model is the method used to calculate The fair
value of options.
1. Weighted average risk-free interest rate 6.00% 6.00%
2. Weighted average expected life (in months) 4.00 16.00
3. Weighted average expected volatility 0.00% 0.00%
4. Weighted average expected dividends 0.00 0.00
Paragraph 47(e) Total compensation cost recognized in 0 0
income for stock-based employee compensation awards.
Paragraph 47(f) The terms of significant none none modifications of outstanding
awards.
Paragraph 48 - Options outstanding at the date of the latest statement of
financial position presented:
1. (a) Range of exercise prices $1.10 $ 0.001-$1.10
(b) Weighted-average exercise price 1.10 0.82
2. Weighted-average remaining contractual 4.00 16.00
life (in months)
Inception
Mar. 19, 1999
Year ended Year ended Through
After proforma effect Sept. 30, 2001 Sept 30, 2000 September 30, 2001
-------------- ------------- -------------------
Net Income (546,821) (203,161) (841,082)
Earnings per share $ (0.0217) $ (0.0132)
- ----------------------------------------------------------------------------------------------------------------
You should only rely on the information contained in this
document or other information that we refer you to. We have
not authorized anyone to provide you with any other
information that is different. You should note that even 14,111,111 Shares of Common Stock
though you received a copy of this prospectus, there may
have been changes in our affairs since the date of this
prospectus. This prospectus does not constitute an offer to
sell securities in any jurisdiction in which such offer or
solicitation is not authorized BIOMASSE INTERNATIONAL INC.
TABLE OF CONTENTS
PAGE
Risk factors 2
Special note regarding
Forward-looking statements 7
Summary historical financial
Information 8 PROSPECTUS
Plan of operations 9
Use of proceeds 12
Business 13
Management 20
Security ownership of certain
Beneficial owners and
Management 22
Executive compensation 22
Certain relationships and
Related transactions 23
Disclosure of commission position
on indemnification for securities _____________ , 2002
act liability 23
Description of securities 23
Plan of distribution 25
Selling stockholders 26
Legal matters 28
Experts 28
Available information 29
Index to Financial Statements....... F-
- ----------------------------------------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other expenses of issuance and distribution
The following statement sets forth the estimated expenses in connection
with the offering described in the Registration Statement, all of which will be
borne by the Registrant.
Securities and Exchange Commission Fee ....................... $ 250
Accountants' Fees .......................................................$ 2,000
Legal Fees ..............................................................$15,000
Printing and engraving ............................................... $ 5,000
Miscellaneous ...........................................................$ 750
Total $ 23,000
=======
Item 14. Indemnification of directors and officers.
------------------------------------------
Neither our By-Laws nor our Certificate of Incorporation currently
provide indemnification to our officers or directors. In an effort to continue
to attract and retain qualified individuals to serve as our directors and
officers, we intend to adopt provisions providing for the maximum
indemnification permitted by Florida law.
Item 15. Recent sales of unregistered securities
---------------------------------------
On April 01, 1999, the Company issued an aggregate of 17,684,723 shares
of Class B common stock to 30 persons as founding shareholder's at a price of
$.001. These shares were issued to non-U.S. persons pursuant to the exemption
contained in Regulation S except for one shareholder which is a U.S. entity but
is controlled by a non-U.S. person and was exempt pursuant to Section 4(2).
On April 01, 1999, the Company issued 500,000 shares of Class B common
stock at par value and 500,000 warrants to BBT Consulting Group, Inc. as part of
its contractual agreement to obtain a (NASD) OTC Bulletin Board listing of its
common shares. Each warrant entitles the registered holder thereof to purchase
at any time one share of common stock at a price of $.001. The fair value of the
shares and warrants were determined to be $.001 on April 01, 1999.
The issuance was an exempt transaction pursuant to Section 4(2) inasmuch as it
was not issued as part of an offering to raise funds.
On April 01, 1999, the Company issued 100,000 warrants to Mr. Rene-Jean
Lavallee for advisory services valued at $10,000. Each warrant entitles the
registered holder thereof to purchase at any time one share of common stock at a
price of $.001. These warrants were issued for advisory services relating to the
engineering aspects of a project. The issuance was an exempt transaction
pursuant to Section 4(2) inasmuch as it was not issued as part of an offering to
raise funds.
On April 01, 1999, the Company, pursuant to certain executive
employment contracts, issued 725,000 warrants to the senior executives of the
Company at an exercise price of $.001 per share. The issuance was an exempt
transaction pursuant to Section 4(2) inasmuch as it was not issued as part of an
offering to raise funds.
On April 01, 2000, the Company issued an aggregate of 3,000,000
warrants to as part of contractual agreements. The warrants are exercisable at
$1.10 per share and expire on January 31, 2004.
On April 26, 1999, the Company issued 588,000 shares of Class B common
stock, at a price of $1.00 per share, to Marc DuFresne (1978) Inc., a
shareholder of the company, in payment of a licensing fee in the amount of
$588,000. The issuance was an exempt transaction pursuant to Section 4(2)
inasmuch as it was not issued as part of an offering to raise funds.
On July 07, 1999, the Company issued 306,000 shares of Class B common
stock, at a price of $1.00 per share to Marc DuFresne (1978) Inc., a majority
shareholder of the company and an affiliate, in settlement of an outstanding
invoice for the purchase of equipment in the amount of $306,000. The issuance
was an exempt transaction pursuant to Section 4(2) inasmuch as it was not issued
as part of an offering to raise funds.
In an offering commencing on September 30, 1999, the Company sold an
aggregate of 529,000 units at a price of $1.00 per unit. Each unit consisted of
one share and one warrant. Each warrant entitles the registered holder thereof
to purchase at any time from the date of the offering until the close of
business January 31, 2004, one share of common stock at a price of $1.10. These
units were issued exclusively to non-U.S. persons pursuant to the exemption
contained in Regulation S.
On November 29, 1999, the Company issued 56,565 shares of Class B
common stock at a price of $1.00 per share, as settlement of a note payable
dated September 30, 1999 in the amount of $56,566 to Marc DuFresne (1978) Inc.,
a majority shareholder of the company. This note was for reimbursements of
expenditures paid by Marc DuFresne (1978) Inc. during the fiscal year ended
September 30, 1999 on behalf of Biomasse International, Inc. The issuance was an
exempt transaction pursuant to Section 4(2) inasmuch as it was not issued as
part of an offering to raise funds.
On August 22, 2000, the Company issued 300,000 warrants to 3 parties as
part of a contractual consulting agreement. The warrants are exercisable at
$1.10 per share and expire on January 31, 2004. The issuance was an exempt
transaction pursuant to Section 4(2) inasmuch as it was not issued as part of an
offering to raise funds.
On August 22, 2000, the Company, pursuant to the terms of an employment
contract, issued 100,000 warrants to its Director of Engineering R&D. The
warrants are exercisable at $1.10 per share and expire on January 31, 2004. The
issuance was an exempt transaction pursuant to Section 4(2) inasmuch as it was
not issued as part of an offering to raise funds.
In January 2002, the Company issued 250,000shares of Class B common
stock to The NIR Group for advisory services performed during the first quarter
of 2002. The issuance was an exempt transaction pursuant to Section 4(2)
inasmuch as it was not issued as part of an offering to raise funds.
On March 28, 2002, we issued 12% secured convertible debentures due
March 28, 2003 in the aggregate principal amount of $250,000 to the selling
security holders, which are convertible into shares of our common stock. In
connection with the sale of the debentures we also issued to the selling
security holders three-year warrants to purchase an aggregate of 750,000 shares
of common stock. In connection with the sale of the debentures we also entered
into a Registration Rights Agreement with the selling security holders pursuant
to which we agreed to file this registration statement for resale of the shares
of common stock issuable upon conversion of the debentures and exercise of the
warrants. Within ten business days after the effective date of this registration
statement, the selling security holders will purchase additional debentures in
the aggregate principal amount of $250,000 and additional warrants to purchase
an aggregate of 750,000 shares of common stock. These securities were issued in
reliance upon the exemption from the registration provisions of the Securities
Act provided for by Section 4(2) thereof and Rule 506 promulgated thereunder
since all the purchaser were accredited investors and it did not involve a
public offering.
Item 16. Exhibits and financial statements schedules.
3.1 Certificate of Incorporation, as amended*
3.2 By-Laws*
4.1 Specimen Common Stock Certificate*
4.2 Specimen Warrant Certificate*
4.3 Form of Warrant Agreement*
4.4 Form of 12% Secured Convertible Debenture**
4.5 Form of Stock Purchase Warrant**
5 Opinion of Heller, Horowitz & Feit P.C.**
10.1 Leases*
10.2 Employment Agreement with Benoit Dufresne*
10.3 Employment Agreement with Jean Gagnon*
10.4 Consulting Agreement with Abdel Jabbar Abouelouafa*
10.5 License rights agreement with Marc DuFresne (1978) Inc.*
10.6 Consulting Agreement with BBT Consulting Group, Inc.*
10.8 Securities Purchase Agreement dated March 28, 2002.**
10.9 Registration Rights Agreement dated March 28, 2002.**
10.10 Security Agreement dated March 28, 2002.**
23.1 Consent of Heller, Horowitz & Feit, P.C.
(included in the Opinion filed as Exhibit 5)
23.2 Consent of Mark Cohen, C.P.A.**
* Incorporated by reference from Registration Statement on Form SB-2, file no.
333-48480
** Filed herewith
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in
the registraion statement; and notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high and
of the estimated maximum offering range may be reflected in the
form of prospectus filed with Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii)Include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement provided, however, that paragraphs
(a)(1)(i) and (a)(1)(ii) do not apply if the registration
statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in post-effective amendment
by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
(iv) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered and the offering of the securities at that time to
be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
SIGNATURES
In accordance with the requirements of the Securities Act, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and has authorized this registration
statement or amendment to be signed on its behalf by the undersigned, in the
City of Montreal on the 30th day of April, 2002.
BIOMASSE INTERNATIONAL INC.
By: /s/Benoit Dufresne
Benoit Defresne
In accordance with the requirements of the Securities Act, this
registration statement or amendment was signed by the following persons in the
capacities and on the dates stated:
Signature Title Date
- ---------- ------ ------
By: /s/Benoit Dufresne President and Director April 30, 2002
Benoit Dufresne
By: /s/Jean Gagnon Vice President Finance, April 30, 2002
Jean Gagnon Secretary and Director
By: /s/Pierre H. Vincent Vice President Legal and April 30, 2002
Pierre H. Vincent Governmental Affairs and
Director
By: __________________ Director April __, 2002
Maurice Robert
By: /s/Marcel Mongrain Director April 30, 2002
Marcel Mongrain
By:___________________ Director April __, 2002
Denis Durand