As filed with the Securities and Exchange Commission on October 11, 2000
Registration No. 333-37078
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BIOMARINE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 091 75-2309471
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer Identification
incorporation or organization) Classification Code Number No.)
1198 Gulf Breeze Pkwy., Suite 8A
Gulf Breeze, Florida 32561
(850) 934-8888
(Address and telephone number of registrant's principal executive offices)
----------
John D. Ericsson,
President and Chief Executive Officer
1198 Gulf Breeze Pkwy., Suite 8A
Gulf Breeze, Florida 32561
(850) 934-8888
(Name, address and telephone number of agent for service)
----------
Copy of all communications to:
- ---------------------------------------- ---------------------------------------
Gerald A. Adler, Esq. David E. Fleming, Esq.
Bondy & Schloss LLP Cummings & Lockwood
6 East 43rd Street, 25th Floor 4 Stamford Plaza
New York, New York 10017 Stamford, CT 06904
Ph: (212) 661-3535 Ph: (203) 327-1700
Fax: (212) 972-1677 Fax: (203)708-3881
- ---------------------------------------- ---------------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462 (b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
Cover continued on next page
CALCULATION OF REGISTRATION FEE
==============================================================================================================================
Proposed
Maximum
Aggregate Amount of
Title of Each Class of Amount to be Proposed Maximum Offering Registration
Securities to be Registered Registered Offering Price (1) Price (1) Fee (2)
- ----------------------------------- ----------------------- ------------------------ --------------------- -------------------
Units consisting of 100 shares 12,500 Units $850 per Unit $10,625,000
of Common Stock and 100
Class B Warrants
- ----------------------------------- ----------------------- ------------------------ --------------------- -------------------
Common Stock, par value $.01 1,250,000 Shares
per share, included in the units -- --
- ----------------------------------- ----------------------- ------------------------ --------------------- -------------------
Class B Warrants included in 1,250,000 Warrants
the units -- --
- ----------------------------------- ----------------------- ------------------------ --------------------- -------------------
Common Stock issuable on 1,250,000 Shares $9.50 per share 11,875,000
exercise of Class B Warrants
included in the units
- ----------------------------------- ----------------------- ------------------------ --------------------- -------------------
Common Stock registered on 369,200 Shares $8.50 per Share
behalf of certain shareholders 3,138,200
- ----------------------------------- ----------------------- ------------------------ --------------------- -------------------
Units issuable as compensation 1,250 Units $9.35 per Unit 11,687.50
to the Underwriter
=================================== ======================= ======================== ===================== ===================
Common Stock underlying 125,000 Shares --
Underwriter's Units
=================================== ======================= ======================== ===================== ===================
Warrants underlying 125,000 Warrants --
Underwriter's Units
- ----------------------------------- ----------------------- ------------------------ --------------------- -------------------
Common Stock underlying 125,000 Shares $9.50 per share 1,187,500
Underwriter's Warrants
- ----------------------------------- ----------------------- ------------------------ --------------------- -------------------
Total
$26,837,387.50 $7,085.07
==============================================================================================================================
(1) Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457.
(2) The total amount of the Registration Fee has been paid in
connection with the filing of the Registration Statement.
The Registrant hereby amends this 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 Securities and Exchange Commission, acting
pursuant to said Section 8 (a), may determine.
Prospectus
Subject to completion, dated October 11, 2000
BIOMARINE TECHNOLOGIES, INC.
Up to 12,500 Units Offered by BioMarine
Each Unit = 100 Shares of + 100 Class B
Common Stock Warrants
Plus 229,200 shares to be sold separately by selling shareholders
Estimated Price of Units: ....................................................... $850 per Unit or $10,625,000
Underwriting/Dealer Commission and Other Expenses................................ $120 per Unit or $1,500,000
Net Proceeds to BioMarine........................................................ $730 per Unit or $9,125,000
Price of Shares Offered by Selling Shareholders.................................. Prevailing market price at time of sale.
This is our initial public offering of common stock and warrants, and no public
market currently exists for our stock or warrants. The offering commences on the
date of this prospectus and ends nine months later. We may, however, extend the
offering for an additional three months. After the offering, we expect the
shares and warrants to trade on the OTC Bulletin Board under the symbol "BMAR."
We plan to apply for trading on the Nasdaq SmallCap/TM/ Market upon selling
7,000 units in this offering. The warrants will be detachable from the shares
upon issuance.
Investing in the units involves risks which are described in "Risk
Factors" beginning on page 6 of this Prospectus.
BioMarine will receive all of the proceeds from the sale of the units
but will receive none of the proceeds of shares sold by selling shareholders. We
will use our best efforts to sell the units, but we will not be required to
raise any minimum amount of proceeds and will be able to use the proceeds of the
offering as soon as any units are sold.
We have retained Ridgewood Capital Funding, Inc., a registered
broker-dealer and member of the National Association of Securities Dealers, to
consult with and advise us in connection with the sale of units in this
offering. Ridgewood will assist , on a best efforts basis, in the solicitation
of orders to purchase units in this offering. However, Ridgewood is not
obligated to purchase any of the units offered. In addition to its underwriting
commission, we have granted Ridgewood a five year warrant to purchase up to
1,250 units at 110% of the offering price in this offering and has agreed to
reimburse Ridgewood for any reasonable and budgeted out-of-pocket expenses in
connection with the offering and to indemnify Ridgewood for certain matters. We
may use other dealers in the placement of the units and plan to pay them
commissions of up to 8% of the gross proceeds from any units sold by them.
The information in this prospectus is not complete and may be changed.
We may not sell these units until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these units and is not soliciting an offer to buy these units in any
state where the offer on sale is not permitted.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospects is accurate or complete. It is illegal for anyone to tell you
otherwise.
The date of this Prospectus is______________, 2000.
Ridgewood Group International, Ltd.
PROSPECTUS SUMMARY
The following summary highlights information that we present more fully
elsewhere in this prospectus. You should read this entire prospectus carefully.
BioMarine Technologies, Inc.
Through our founder, John D. Ericsson, we have designed and developed
two patented marine sea farming production systems: the Sea Trek Ocean Farming
System and the Sea Star Oyster Relay System. The Sea Trek Ocean Farming System
is designed for the production of cobia (ling fish, lemon fish), snapper,
grouper, redfish, mahi mahi and other marine finfish species, and the Sea Star
Oyster Relay System for the cleansing and production of oysters. Mr. Ericsson
has licensed both systems to BioMarine. We have received two site requisite
permits for commercial operations in the Gulf of Mexico creating two of the
largest sea farming sites in the United States. BioMarine believes these sites
will be the first commercial marine sea farming production projects permitted by
state and federal government for use in the open Gulf of Mexico.
We are a development stage company, have not yet had any significant
operations, and have only produced limited revenues from our vessel charter and
cleansed oyster product marketing. So far, we have concentrated our efforts on
research and development, and obtaining all necessary state and federal permits.
In addition, our activities have also been focused on raising capital and
positioning BioMarine for project eligibility loans with loan guarantees and
federal research grants.
Once our systems are in place and ready to operate, we intend to
produce a consistent size and quality of finfish on a year-round basis to take
advantage of seasonal fluctuations in the traditional finfish market. We also
plan to capitalize on the environmental awareness of today's consumer. Our
process is intended to be protective of the environment and to replenish the
seas rather than diminish their abundance. Since our fish will be grown in a
controlled natural environment in the interest of producing the highest quality
fish and oysters, we intend to have each harvest inspected by the U.S.
Department of Commerce in order that the fish can be packaged under new FDA
processing requirements.
BioMarine Technologies, Inc., formerly known as Sea Pride Industries,
Inc., was incorporated in Delaware in 1989.
The Offering
Units being offered by BioMarine 12,500 (each consisting of 100 shares
of common stock and 100 Class B Warrants)
Description of Shares Common stock par value $.01 per share.
Description of warrants Class B Warrants, each to purchase one share
of common stock for $9.50 during a period of
four years from the date of this prospectus.
The Class B Warrants are Detachable and
2
will trade separately from the shares in
each unit. The warrants are redeemable after
30 days written notice to the holder by
BioMarine at $.05 per warrant if the common
stock closing bid price exceeds $12.00 for
30 consecutive trading days. Shares being
offered by BioMarine
Shares being offered by
BioMarine Shareholders 229,200 Shares
Shares outstanding after
this offering 3,821,471 Shares (assuming all units
are sold)
Use of Proceeds We expect that the net proceeds from this
offering, assuming all of the units offered
by BioMarine are sold, will be approximately
$9,125,000. BioMarine will not receive any
of the proceeds from shares sold by the
selling shareholders. We intend to use the
proceeds for: feasibility studies, project
travel, equipment, materials and supplies,
technical advisors and subcontractors,
insurance, platform repairs, general and
administrative expenses, working capital and
debt repayment. $60,000 and $84,000 of the
proceeds will be used to pay accrued
salaries will be used to pay owed to John
Hemmer, our Chief Financial Officer, and
John D. Ericsson, our President and CEO,
respectively.
Proposed OTC Bulletin Board Symbols: Common Stock: "BMAR"; Warrants: "BMARW"
Executive Offices
Our executive offices are located at 1198 Gulf Breeze Parkway, Suite
8A, Gulf Breeze, Florida 32561. Our Telephone number is (850) 934-8888.
3
SUMMARY HISTORICAL FINANCIAL DATA
The following table presents summary historical consolidated financial
information for the six months ended June 30, 2000 and the fiscal years ended
December 31, 1999 and 1998 and certain balance sheet information which
information. The data was taken from our Consolidated Financial Statements, and
you should read the actual financial statements for a complete presentation of
this information.
Summary Historical Financial Data
========================================= =========================== ========================== ===============================
For the Six Months For the Year Ended For the Year Ended
Ended June 30, 2000 December 31, 1999 December 31, 1998
========================================= =========================== ========================== ===============================
Operating Data
- ----------------------------------------- --------------------------- -------------------------- -------------------------------
Revenue $ 50,000 $ 133,920 $205,613
- ----------------------------------------- --------------------------- -------------------------- -------------------------------
Salaries, wage and benefits 128,249 144,713 185,442
- ----------------------------------------- --------------------------- -------------------------- -------------------------------
General and administrative expenses 42,627 54,832 119,436
- ----------------------------------------- --------------------------- -------------------------- -------------------------------
Total costs and expenses 253,744 324,017 625,741
- ----------------------------------------- --------------------------- -------------------------- -------------------------------
Net (loss) (203,744) (190,097) (420,128)
- ----------------------------------------- --------------------------- -------------------------- -------------------------------
Net loss per common share
outstanding $(0.09) $(0.09) $(0.21)
- ----------------------------------------- --------------------------- -------------------------- -------------------------------
Weighted average number of shares
of common stock outstanding 2,398,271 2,028,461 1,976.59
- ----------------------------------------- --------------------------- -------------------------- -------------------------------
Balance Sheet Data
- ----------------------------------------- --------------------------- -------------------------- -------------------------------
Current assets 32,696 1,982 7,020
- ----------------------------------------- --------------------------- -------------------------- -------------------------------
Total assets 72,832 80,243 267,710
- ----------------------------------------- --------------------------- -------------------------- -------------------------------
Current liabilities 438,446 531,037 421,991
- ----------------------------------------- --------------------------- -------------------------- -------------------------------
Long term liabilities - - 111,416
- ----------------------------------------- --------------------------- -------------------------- -------------------------------
Shareholders' (deficit) (365,614) (450,794) (265,697)
- ----------------------------------------- --------------------------- -------------------------- -------------------------------
Working Capital (405,750) (529,055) (414,971)
========================================= =========================== ========================== ===============================
========================================= =========================== ========================== ===============================
4
RISK FACTORS
Please consider the following risk facts together with the other
information presented in this Prospectus including the financial statements and
the notes thereto before investing in the Units. The trading price of our common
stock and warrants could decline due to any of the following risks, and you
might lose all or part of your investment.
Our auditors have expressed doubt about our viability as a going
concern. Our independent accountants have included an explanatory paragraph in
their report on our financial statements for the years ended December 31, 1999
and 1998 which states that BioMarine has and can be expected in the future to
sustain substantial operating expenses without generating sufficient revenues to
cover operating costs. This matter, among others, raises substantial doubt as to
our ability to continue as a going concern. If we are unable to continue as a
going concern, our stock price will decline and you could lose your entire
investment. See "Financial Statements and Report of Independent Certified Public
Accountants" included elsewhere in this Prospectus.
Although we were incorporated over 11 years ago, we have had only
limited operations and are still in the development stage. We will incur
significant expenses in order to implement our business plan. While we were
incorporated in 1989,we have had only generated limited revenues. We have
conducted a limited amount of oyster cleansing and enhancing operations.
Furthermore, our Sea Star Oyster Relay System has only conducted pilot
production tests. We have never operated our Sea Trek Ocean Farming System. We
cannot assure our investors that either system is commercially viable. We are
still in our formative and development stage. As an investor, you should be
aware of the difficulties, delays and expenses normally encountered by an
enterprise in its development stage, many of which are beyond our control,
including unanticipated developmental expenses, inventory costs, employment
costs, and advertising and marketing expenses. We cannot assure our investors
that our proposed business plans as described in this prospectus will
materialize or prove successful, or that we will ever be able to operate
profitably. If we cannot operate profitably, you could lose your entire
investment. As a result of the start-up nature of our business we expect to
sustain substantial operating expenses without generating significant revenues.
We have a history of losses and a large accumulated deficit and we
expect future losses. Our revenues have been insignificant and the revenues we
have produced have been primarily from rental income and gains from the sale of
equipment. For the six months ended June 30, 2000 and the fiscal years ended
December 31, 1998 and 1999, BioMarine incurred net losses of
approximately$203,744, $420,128 and $190,079, respectively. We expect BioMarine
to lose more money as it spends additional capital to develop its systems,
market its products and establish its infrastructure and organization to support
anticipated operations. We cannot be certain whether BioMarine will ever produce
significant revenues or profits, or, if it does, that it will be able to
continue producing such revenues or profits. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
The ocean fish and seafood industry is highly competitive, and we may
not have adequate resources to compete effectively, acquire customers and attain
growth. While we believe that our Sea Trek Ocean Farming System and our Sea Star
Oyster Relay System are "state of the art," other companies in the business of
mariculture, with greater financial resources than ours, could develop competing
systems. Many of our current and potential competitors have substantially
greater financial, technical, marketing, distribution and other resources than
we do, as well as substantially larger research and development staffs and
facilities and many of them have substantially greater experience in the
production
5
and marketing of related products than we do and can be expected to be long-term
competitors. One or more of our competitors might succeed in developing
technologies and products that are more effective than any of those we develop
and may render our technology and products obsolete or noncompetitive.
We have no customers and may not be able to develop any customers once
our products are ready for market. Because we are still in the developmental
stage of our business, we have not yet attempted to market our products to food
distributors or consumers. As a result, even if we are successful in developing
our sea farming and oyster relay systems, we do not know whether we will be able
to successfully market our products and generate revenues. Even if we are able
to market our products, we may find our market share limited and hereby limiting
our ability to generate revenues which could cause our share price to decline.
We have never raised adequate funding to construct our Sea Trek Ocean
Farming System at the permitted site in Alabama. On November 2, 1993, the United
States Army Corps of Engineers issued a permit authorizing BioMarine to
construct and site the Sea Trek Ocean Farming project at a proposed location
within a 500 acre area designated for commercial fish farming. Since that time,
we have continued to utilize almost all of our working capital for research and
development and have not raised sufficient funds to construct our system and
commence operations at the Alabama project.
If we cannot protect our intellectual property and patented technology,
we may be unable to compete successfully. John D. Ericsson, our Chairman and
Chief Executive Officer, currently has U.S. Patents for the Sea Star Oyster
Relay System and the Sea Trek Ocean Farming System. Mr. Ericsson has licensed
the technology for these patents to BioMarine. Our products derived from the
licensed technology may infringe upon patents of third parties. Problems with
patents could potentially increase our costs or delay or preclude new product
development and sales of our products. If patent infringement claims are
asserted against Mr. Ericsson, that are deemed valid, we would be required to
seek licenses to enable us to continue our business. Such licenses may not be
available to us on acceptable terms or at all. Litigation could be costly and
time consuming and Mr. Ericsson and/or the BioMarine may not be able to afford
those costs. A successful challenge to one or more of Mr. Ericsson's patents or
our licenses could materially adversely affect our business. We also rely upon
trade secrets and other non-patented technology. Others may independently
develop or acquire substantially equivalent technology or we may not be able to
protect our non-patented technology and trade secrets from misappropriation.
Such development, acquisition or misappropriation by others of technology
similar to ours could increase competition in our industry, subject us to
pricing pressure and cause our revenues to decline significantly. This, in turn,
would cause the price of our common stock to decline.
We are subject to increasing regulation by federal and state government
which could increase our operating expenses and affect our business. Government
regulation, on both a federal and state level, in the mariculture sector has
been increasing and evolving. We have obtained two permits to construct and
operate our Sea Trek Ocean Farming System and Sea Star Oyster Relay System in
the Gulf of Mexico. Our affiliate, Gulf Marine Institute of Technology ("GMIT"),
nonprofit research institute, is currently litigating a dispute with the Texas
General Land Office over its platform site leases. Although state laws
regulating the mariculture industry vary, we believe that such state regulation
will have only an indirect and minimal effect on our operations in the near
term. We are unable to predict what government regulations, if any will directly
or indirectly affect our business. The mariculture industry is going through
changes, many of which result from cost-containment pressures, technological
advances, and regulatory efforts to respond to these developments. We cannot
accurately predict the extent to which
6
future changes in mariculture costs, treatment technology, and industry
regulations will affect our operations or profitability or whether we will ever
operate profitably.
The Texas General Land Office has notified our affiliate, GMIT, that it
intends to deny it the right to its four platform complex at its Texas site for
sea farming research and development purposes, which could preclude the
development of our systems at this site. GMIT acquired the lease to the Texas
platform site by an Assignment and Assumption Agreement, dated September 18,
1998, which was executed by the then-Commissioner of the Texas General Land
Office. However, on May 12, 1999, the new commissioner of the Texas General Land
Office changed its prior position and notified GMIT by letter from its General
Counsel that it intends to deny GMIT the right to use the platform area to
establish the mariculture operation on the platform complex despite the fact
that the project has received all state and federal agency approvals. GMIT has
filed suit to challenge the General Land Office's denial of its rights to the
platform lease site. We intend to assume GMIT's rights under this agreement in
order to develop our system at the Texas site. If GMIT is unsuccessful in its
suit, we will be unable to develop this system in Texas. We anticipate that in
such an event, we would proceed with our development plans for our alternative
Alabama site. In addition, if GMIT is unsuccessful in its litigation, we may
elect to have the platform at the Texas site dismantled and moved to the Alabama
site at a substantial cost. GMIT has posted a $2.6 million performance bond to
guarantee the platform removal costs.
We have not entered into any long term contracts for the development of
our systems or for the production or sale of our seafood products. Although we
have received a letter from Nireus Chios Aquaculture S.A., a Greek corporation
("Nireus") indicating its intent to assist us in the development of our systems,
we have not yet entered a written agreement with any such third party to develop
our systems. Similarly, we have not entered into any long term contracts with
third parties to assist us in the production or sale of our seafood products
although we have received a letter of intent from Fishery Products
International, a major U.S. seafood wholesaler, in which they have indicated an
intention to distribute a significant portion of our seafood products. No
assurance can be given that our systems will be developed or that once
developed, we will be successful in marketing our products.
Indications of Interest from Nireus. Nireus has advised BioMarine that
it has an interest and intent to provide it and its affiliates with certain
services, technology and information to help BioMarine expedite the development
of its United States based mariculture projects. Nireus's intention to go
forward with BioMarine is subject to the completion by Nireus of a feasibility
study that examines all of the technical points and economical aspects of
BioMarine's mariculture projects. BioMarine, out of the proceeds of the
offering, will pay Nireus $150,000, in addition to travel. At such time as
Nireus is retained to undertake its feasibility study, Nireus has indicated its
intent to sign a Memorandum of Understanding defining the framework of the
future working relationship of BioMarine and Nireus, consisting of Nireus's
transfer of its know-how. The details of the know-how transfer from Nireus to
BioMarine will be based on the technical results of the feasibility study. At
such time Nireus and BioMarine would negotiate the details and possibilities of
Nireus participating the BioMarine's mariculture projects. No assurance can be
given that the results of the feasibility study will be such that Nireus will
enter into a definitive agreement with BioMarine, in which event, BioMarine
would develop its mariculture projects on its own.
We have not yet built a full sized barrel cage system, and the Sea Trek
has not been commercially tested. While we believe the Sea Trek system to be
state-of-the art, a full sized barrel cage system has not been built yet.
However, a 1/20-scale model of the barrel cage was built and was then tested at
the Massachusetts Institute of Technology in 1995. While an oyster relay system
similar to our
7
Sea Star system has been operated we have not put either of our systems to
commercial use at their planned sites. We may be unable to commercialize our
technology in the manner in which we intend to do so, particularly with the Sea
Trek system, which has not been tested at all. If we cannot succeed in putting
our technology to commercial use and producing marketable seafood products, we
will be unable to generate revenues, and the price of our stock will decline.
We may be unable to sell oysters at prices sufficient to cover the
costs we incur in processing them. Although our preliminary test marketing of
our oysters in Mississippi indicated a strong demand for our oysters, we cannot
be certain whether we will be able to sell oysters at prices which will cover
both our fixed costs in developing the Sea Star Oyster Relay System and our
ongoing costs to operate the system and bring the oysters to market. Such
inability could result in operating losses and a significant decline in the
value of our stock.
The continued services and leadership of our senior management are
critical to our success and any loss of key personnel could adversely affect our
business. We are heavily dependent on the experience of our executive officers,
John D. Ericsson, Dr. Edwin W. Cake and John W. Hemmer, who have contributed and
continue to contribute to the development of BioMarine and its proposed
operations. If we were to lose the services of one or more of them, before a
qualified replacement could be obtained, our business, financial condition or
results of operations could be materially affected. BioMarine does not carry key
person life insurance on the lives of any of such individuals. In the event all
of the units offered by BioMarine are sold, we intend to apply for such
insurance upon completion of this offering. See "Management."
The absence of an active public market for our common stock may make it
difficult for you to resell your shares at or above the offering price, and our
stock price could be volatile and could decline following this offering. Prior
to this offering there has been no public market for our common stock, and even
after this offering, an active public market may not develop or be sustainable.
We have arbitrarily determined the initial public offering price and this may
not be the market price of the shares after the offering. The trading price of
the shares could be subject to wide fluctuations in response to factors included
in this prospectus, many of which are beyond our control. In addition, in recent
years, the stock market has experienced extreme price and volume fluctuations.
These fluctuations have had a substantial effect on the market prices for may
emerging growth companies, often unrelated to the operating performance of the
specific companies. Such market fluctuations could adversely affect the price of
our common stock. Furthermore, if selling stockholders in this offering sell
substantial amounts of common stock in the public market, the market price of
our common stock could fall.
We have never declared or paid dividends and do not plan to pay them.
We have never declared or paid any cash dividends on our common stock, and we do
not expect to pay dividends anytime soon. We expect to retain our earnings, if
any, and use them to finance the growth and development of our business.
The so called "Penny Stock Rule" could make it cumbersome for brokers
and dealers to trade in the common stock, making the market for the common stock
less liquid which could cause the price of our stock to decline. Trading in our
securities will initially be conducted on the OTC Bulletin Board and/or the
"pink sheets." As long as the common stock is not quoted on Nasdaq or at any
time that we have less than $2,000,000 in net tangible assets, trading in the
common stock is covered by Rule 15g-9 under the Securities Exchange Act of 1934
for non-Nasdaq and non-exchange listed securities. Under that rule,
broker-dealers who recommend covered securities to persons other than
established
8
customers and accredited investors must make a special written suitability
determination for the purchaser and receive the purchaser's written agreement to
a transaction prior to sale. Securities are exempt from this rule if the market
price is at least $5.00 per share.
The SEC has adopted regulations that generally define a penny stock to
be any equity security that has a market price of less than $5.00 per share,
subject to certain exemptions. Such exemptions include an equity security listed
on Nasdaq and an equity security issued by an issuer that has (i) net tangible
assets of at least $2,000,000, if such issuer has been in continuous operation
for three (3) years; (ii) net tangible assets of at least $5,000,000, if such
issuer has been in continuous operation for less than three (3) years; or (iii)
average revenue of at least $6,000,000 for the proceeding three (3) years.
Unless such an exemption is available, the regulations require the delivery of a
disclosure schedule explaining the penny stock market and the risks associated
therewith prior to any transaction involving a penny stock. If our common stock
becomes subject to the regulations on penny stocks, that factor could have a
severe adverse effect on the market liquidity for the common stock due to these
limitations on the ability of broker-dealers to sell the common stock in the
public market which could cause the price of our stock to decline.
Our directors have the authority to designate one or more classes of
preferred stock having rights greater than our common stock. Our Certificate of
Incorporation authorizes us to issue, without the approval of our stockholders,
one or more classes or series of preferred stock. Such preferred stock may have
such preferences, powers and relative, participating, optional and other rights,
including preferences over our common stock respecting dividends and
distributions, as our board of directors may determine. The terms of one or more
classes or series of preferred stock could adversely impact the voting power or
value of our common stock. For example, we might afford holders of preferred
stock the right to elect some number of our directors in all events or on the
happening of specified events or the right to veto specified transactions.
Similarly, the repurchase or redemption rights or liquidation preferences we
might assign to holders of preferred stock could affect the residual value of
the common stock. Our directors could use this authority, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of BioMarine. We presently have no Series A Preferred Shares
outstanding. Although the directors have no present intention of issuing any
shares of preferred stock in the future, they may nevertheless decide it is in
our best interests to do so. See "Description of Securities."
Certain charter and bylaw provisions and Delaware anti-takeover statue
can prevent a change in control of BioMarine. BioMarine is subject to Section
203 of the Delaware General Corporation Law regulating corporate takeovers. This
section prevents Delaware corporations from engaging under certain
circumstances, in a "business combination", which includes a merger or sale of
more than 10% of the corporation's assets, with any"interested stockholder", or
a stockholder who owns 15% or more of the corporation's outstanding voting
stock, as well as affiliates and associates of any such persons, for three years
following the date such stockholder became an "interested stockholder" unless:
* the transaction in which such stockholder became an
"interested stockholder" is approved by the board of directors
prior to the date the "interested stockholder" attained such
status;
* upon consummation of the transaction that resulted in the
stockholder's becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction
commenced, excluding those shares owned by persons who are
directors and also officers; or
9
* on or after the date the business combination is approved by
the board of directors and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least
two-thirds of the outstanding voting stock that is not owned
by the interested stockholders
Our certificate of incorporation, as amended, and our bylaws do not
provide for cumulative voting in the election of directors. The authorization of
undesignated preferred stock described above makes it possible for the board of
directors to issue preferred stock with voting or other rights or preferences
that could impede the success of any attempt to change control of BioMarine.
These and other provisions may have the effect of deferring hostile takeovers or
delaying changes in control or management of BioMarine.
As a new investor, you will experience immediate, substantial dilution
of the net tangible book value of the shares you purchase. Assuming the sale of
all of the units offered by BioMarine (excluding shares offered by selling
shareholders), purchasers of our common stock in this offering:
* will pay a price per share that substantially exceeds the value on a
per share basis of our assets after we subtract from those assets our
intangible assets and our liabilities;
* will incur immediate dilution in net tangible book value of $5.86 per
share;
* will contribute a majority of the funds we will need to commence
operations but will own only 32.4% of the outstanding shares of our
common stock;
* may experience further dilution in the net tangible value of their
common stock as a result of future issuances of common stock.
The underwriter in this offering has not agreed to serve as a market
maker for our stock. Although we have retained Ridgewood Capital Funding, Inc.
to assist us in placing the units offered by this prospectus, neither Ridgewood
nor any of its affiliates will act as a market maker for the common stock or
warrants. Therefore, we will have to locate at least one alternative market
maker in order for our common stock and/or warrants to be listed on the OTC
Bulletin Board. Moreover, in order to obtain listing on the Nasdaq National
Market or the Nasdaq SmallCap Market, we will require three market makers.
Failure to find at least one market maker would preclude our listing on the OTC
Bulletin Board, which would limit trading in our stock and/or warrants. This
could make your investment in BioMarine highly illiquid.
Forward Looking Statements. This Prospectus and the information
incorporated into it by reference contains various "forward-looking statements"
within the meaning of federal and state securities laws, including those
identified or predicated by the words "believes," "anticipates," "expects,"
"plan" or similar expressions. Such statements are subject to a number of
uncertainties that could cause the actual results to differ materially from
those projected. Such factors include, but are not limited to, those described
under "Risk Factors." Given these uncertainties, prospective purchasers are
cautioned not to place undue reliance upon such statements.
10
USE OF PROCEEDS
We estimate that the net proceeds we will receive from the offering,
after deducting the underwriter's commission and other estimated offering
expenses, will be approximately $9,125,000, assuming an initial public offering
price of $850 per unit and the sale of all of the units. We will not receive any
proceeds from the sale of any shares by selling shareholders. In addition, if we
sell only 1,250 (10%) of the units, we will receive only $645,625, and, if we
sell only 6,250 units (50%), we will receive only $4,428,125. The following
table sets forth our planned use of the proceeds of the offering assuming the
sale of all, 50% and 10% of the units.
- ----------------------------------------------------------------------------------------------------------------------------------
100% of Units 50% of Units 10% of Units
- ----------------------------------------------------------------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
-------- ------- ------- ------- ------- -------
- ----------------------------------------------------------------------------------------------------------------------------------
Equipment 2,818,358 31% 1,400,000 31.6 50,000 7.7
- ----------------------------------------------------------------------------------------------------------------------------------
Total Technical Wages/Salaries 295,000 3.2 % 295,000 6.7 42,000 6.5
- ----------------------------------------------------------------------------------------------------------------------------------
Platform De-commissioning Fund 260,000 2.8% 260,000 5.9 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance/ Platform Repairs 253,816 2.8 % 253,816 5.7 5,625 .9
- ----------------------------------------------------------------------------------------------------------------------------------
Debt Repayment to GMIT (1) 250,000 2.7 % 250,000 5.6 50,000 7.7
- ----------------------------------------------------------------------------------------------------------------------------------
Technical Advisors & Subcontractors 247,000 2.7 % 97,000 2.2 20,000 3.1
- ----------------------------------------------------------------------------------------------------------------------------------
Materials/Supplies 233,800 2.6 % 93,800 2.1 63,800 9.9
- ----------------------------------------------------------------------------------------------------------------------------------
Marketing/Telephone/ Environmental 190,800 2.1 % 190,800 4.3 95,400 15
- ----------------------------------------------------------------------------------------------------------------------------------
Monitoring
- ----------------------------------------------------------------------------------------------------------------------------------
Administrative Personnel Salaries/Wages 182,000 2.0 % 182,000 4.1 92,000 14.2
(2)
- ----------------------------------------------------------------------------------------------------------------------------------
Project Travel 115,000 1.2 % 65,000 1.5 20,000 3.1
- ----------------------------------------------------------------------------------------------------------------------------------
Repayment of Note to Shareholder 50,000 50,000 1.1 25,000 3.9
- ----------------------------------------------------------------------------------------------------------------------------------
Rent & Utilities 22,800 0.3 % 22,800 .5 22,800 3.5
- ----------------------------------------------------------------------------------------------------------------------------------
Working Capital 4,366,376 47.9 % 1,267,909 28.6 158,000 24.5
--------- ------
- ----------------------------------------------------------------------------------------------------------------------------------
Total $9,125,000 100% $4,428,125 100% $645,625 100%
- ----------------------------------------------------------------------------------------------------------------------------------
(1) We intend to use this portion of the proceeds to pay the remaining principal
balance of a demand note owed to our affiliate Gulf Marine Institute of
Technology the proceeds of which we used to pay our operating expenses and
professional and consulting fees during 1999. This note accrues interest at a
rate of 12% per annum. We have incurred substantial net losses over the past
several years.
11
(2) The amount of proceeds to be used for administrative salaries includes
$60,000 in accrued salaries to John Hemmer, our Chief Financial Officer and
$84,000 to John D. Ericsson, our President and CEO, through June 30, 2000.
The allocation set forth in the above table is subject to change based
upon actual rather than estimated expenses and changes in business conditions.
Pending use of the proceeds as described above, we plan to invest the net
proceeds in bank deposits and short-term, investment grade securities, including
government obligations and money market instruments.
DIVIDEND POLICY
We have never paid cash dividends and have no plans to do so in the
foreseeable future. Our future dividend policy will be determined by our board
of directors and will depend upon a number of factors, including, our financial
condition and performance, our cash needs and expansion plans, income tax
consequences, and the restrictions Delaware and other applicable laws and our
credit arrangements then impose.
CAPITALIZATION
The following table sets forth the capitalization of BioMarine on an
actual basis as of June 30, 2000 and on a pro forma basis as adjusted to give
effect to the offering and the application of the estimated use of proceeds
assuming the sale of 100%, 50% and 10% of the units offered:
Actual at
As Adjusted June 30, 2000
------------------------------------------ ---------------
100% 50% 10%
---- --- ---
$ 438,446 $ 438,446 $ 438,446 $ 438,446
Short-term debt
Long-term debt - - - -
Stockholders' equity
Preferred Stock, par value, $.01 per share:
5,000,000 shares authorized; no shares
issued or outstanding - - - -
Common Stock, par value, $.01 per share:
25,000,000 shares authorized; 2,613,261
shares issued and outstanding (actual), 3,863,261,
2,738,261 and 3,238,261 (pro forma) 38,632 27,383 32,382 26,133
Accumulated deficit (2,432,217) (2,432,217) (2,432,217) (2,432,217)
Additional paid-in capital 12,660,588 3,109,337 7,354,338 2,074,220
Total capitalization 10,705,449 1,142,949 5,392,949 106,582
12
DILUTION
The deficit in our net tangible book value as of June 30, 2000 was
approximately $365,614, or approximately $0.14 per share of common stock before
giving effect to the offering. The deficit in net tangible book value per share
represents the amount by which our total liabilities exceed our net tangible
assets as of June 30, 2000, divided by the number of shares of common stock then
outstanding. After giving effect to the sale of all of the 1,250,000 shares
offered by BioMarine hereby (taking no account of the warrants being offered)
and deducting the underwriter's commission and estimated offering expenses of
$1,500,000 payable by us, our pro forma net tangible book value as of June 30,
2000 would have been approximately $8,759,386 or approximately $2.26 per share.
This is based on an assumed IPO price of $850 per unit, allocating all of the
IPO price to the shares and not taking account of the warrants or the shares
underlying the warrants. This represents an immediate increase in pro forma net
tangible book value of approximately $2.40 per share to existing shareholders
and an immediate dilution of approximately $6.24 per share to new investors
purchasing units of this offering. The following table illustrates this per
share pro forma dilution:
Assumed initial public offering price per share $8.50
Net tangible book value (deficit) per share before this offering $(0.14)
Increase per share attributable to new investors 2.40
As adjusted pro forma net tangible book value per share after the offering 2.26
------
Dilution per share to new investors 6.24
------
Assuming that we only sell 10% of the units, dilution to new investors
would be $8.40. If we only sell 50% of the units, such dilution would be $7.25.
The following table summarizes as of June 30, 2000, the difference
between the existing stockholders who purchased their shares of common stock
within the five years ending June 30, 2000 and new investors in this offering
with respect to the number of shares of common stock purchased from us which are
currently outstanding, the total consideration paid and the average price per
share paid at an assumed initial public offering price of $8.50 per share
(before deducting commissions and estimated offering expenses payable by us):
Shares Purchased Total Consideration Average
------------------ --------------------- Price Per
Number Percent Amount Percent Share
------ ------- ------ ------- -----
Existing stockholders 1,321,896 51.4% $3,304,740 23.7% $2.50
purchasing within the past
five years
New investors 1,250,000 48.6% 10,625,000 76.3% 8.50
Total 2,571,896 100% 13,929,740 100%
* Certain of the shares indicated were issued in exchange for services
rendered. For purposes of this calculation, the value of these services has
been estimated at and presumed to be $2.50 per share issued.
The foregoing analysis includes only shares of common stock issued within the
past five years and does not include any shares which are issuable pursuant to
various warrants of BioMarine, including the warrants offered in this offering.
13
SELECTED FINANCIAL DATA
The following selected financial data has been derived from the
financial statements of BioMarine for the six months ended June 30, 2000 and the
years ended December 31, 1999 and 1998. The financial statements for each of
these fiscal years have been audited by Reznick, Fedder & Silverman, independent
certified public accountants. The following selected financial data should be
read in conjunction with and are qualified in their entirety by BioMarine's
Financial Statements and the notes thereto as well as Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this Registration Statement.
===============================================================================================================================
For the Six Months For the Year Ended For the Year Ended
Ended June 30, 2000 December 31, 1999 December 31, 1998
===============================================================================================================================
Operating Data
- -------------------------------------------------------------------------------------------------------------------------------
Revenue $ 50,000 $ 133,920 205,613
- -------------------------------------------------------------------------------------------------------------------------------
Salaries, wage and benefits 128,249 144,713 185,442
- -------------------------------------------------------------------------------------------------------------------------------
General and administrative expenses 42,627 54,832 119,436
- -------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 253,744 324,017 625,741
- -------------------------------------------------------------------------------------------------------------------------------
Net (loss) (203,744) (190,097) (420,128)
- -------------------------------------------------------------------------------------------------------------------------------
Net loss per common share outstanding $(0.09) $(0.09) $(0.21)
- -------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares of
common stock outstanding 2,028,461 1,976.593
- -------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data
- -------------------------------------------------------------------------------------------------------------------------------
Current assets 32,696 1,982 7,020
- -------------------------------------------------------------------------------------------------------------------------------
Total assets 72,832 80,243 267,710
- -------------------------------------------------------------------------------------------------------------------------------
Current liabilities 438,446 531,037 421,991
- -------------------------------------------------------------------------------------------------------------------------------
Long term liabilities - - 111,416
- -------------------------------------------------------------------------------------------------------------------------------
Shareholders' (deficit) (365,614) (450,794) (265,697)
- -------------------------------------------------------------------------------------------------------------------------------
Working Capital (405,750) (529,055) (414,971)
===============================================================================================================================
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PRO FORMA
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the audited consolidated financial statements appearing elsewhere in this
prospectus.
Overview
BioMarine was incorporated in the State of Delaware on October 3, 1989.
Prior to December 30, 1998, we operated under the name Sea Pride Industries,
Inc. The accompanying consolidated financial statements include the accounts of
BioMarine and its three subsidiaries, Sea Star Industries, Inc. ("Sea Star"),
and Sea Trek Industries, Inc. ("Sea Trek"), which are wholly owned subsidiaries;
and Sea Pride Capital Corporation ("SPCC"), a 75 percent owned subsidiary.
We have never produced significant revenues, and any revenues we have
produced have been primarily from rental income and gains from the sale of
equipment. For the fiscal years ended December 31, 1998 and 1999, BioMarine
incurred net losses of approximately $420,128, and $190,079, respectively. We
expect BioMarine to lose more money as it spends additional capital to develop
its systems, market its products and establish its infrastructure and
organization to support anticipated operations. We cannot be certain whether
BioMarine will ever earn a significant amount of revenues or profit.
Together with our president, Mr. John Ericsson, we have researched,
designed and developed our patented Sea Star Oyster Relay System to produce
cleansed oysters harvested from open nonpulluted as well as from conditionally
closed coastal areas of the Gulf of Mexico. Our president has also designed,
developed and patented the Sea Trek Ocean Farming System to produce redfish,
striped bass, mahi mahi and other marine finfish species in the Gulf of Mexico.
The president has licensed this system to us.
We have not yet commenced our commercial operations and have produced
only limited oyster products for sale using a pilot program with our Sea Star
Oyster Relay Project. We expect to commence commercial operations, if we are
able to raise adequate capital to permit construction of cages, equipment and
operating facilities necessary to conduct such operations. We have had only
limited revenues to date some of which have been from our anticipated
operations. Therefore, in addition to a comparative analysis of our results of
operations for the past two years, we have included below a Plan of Operation
for the next twelve months. The plan is only tentative and is subject to change
for any number of reasons.
Results of Operations
Six months ended June 30, 2000 compared with six months ended June 30, 1999
Revenues for the six months ended June 30, 2000 were $50,000, representing an
increase of $28,101, or 128.3%, over $21,899 for the six months ended June 30,
1999. None of these revenues were from mariculture operations. All of the
revenues generated in the six month period of 2000 were from the sale by
BioMarine of its subsidiary, Sea Pride Capital Corporation, to its President,
John Ericsson.
15
Salaries, wages and benefits for the six months ended June 30, 2000
were $128,249, representing an increase of $51,193, or 66.4%, over $77, 056 for
the six months ended June 30, 1999. The increase was mainly due to the expensing
of a previously waived portion of the salary of John Ericsson.
General and administrative expenses for the six months ended June 30,
2000 were $42,627, representing an increase of $5,270, or 14.1%, over $37,357
for the six months ended June 30, 1999. This increase was attributable to
additional costs incurred in connection with this offering.
Repair and maintenance, insurance and interest expense totaled $18,430
for the six months ended June 30, 2000, representing a decrease of $4,399, or
19.3% over $22,829 for the six months ended June 30, 1999. These expenses for
the 1999 period related to the boat, which we owned during 1998 and sold during
1999, as well as to interest payable on a loan from GMIT. During the 2000
period, the majority of these expenses constituted interest on the new GMIT
loan.
Legal and professional fees for the six months ended June 30, 2000 were
$40,183, representing an increase of $15,057, or 59.9%, over $25,126 during the
six months ended June 30, 2000. These fees were mainly for legal fees associated
with this offering, consultant fees, and accounting fees associated with the
audited financial statements.
For the six months ended June 30, 2000, we experienced a net loss of
$(203,744), which represented a decrease in net income of $45,042 over the net
loss of $(158,702) during the six months ended June 30, 1999.
Year ended December 31, 1999 compared with year ended December 31, 1998
Revenues for the year ended December 31, 1999 were $133,920,
representing a decrease of $71,693, or 37.5%, over $205,613 for the year ended
December 31, 1998. None of these revenues were from mariculture operations.
$111,667 in revenues for fiscal 1999 were attributable to a one-time gain on the
sale of a boat. During fiscal 1998, $190,943 in revenues were attributable to
the rental of this boat.
Salaries, wages and benefits for the year ended December 31, 1999 were
$144,713, representing a decrease of $40,729, or 21.9%, over $185,442 for the
year ended December 31, 1998. The decrease was mainly due to John Ericsson, our
President and Chief Executive Officer, waiving a portion of his salary.
General and administrative expenses for the year ended December 31,
1999 were $54,832, representing a decrease of $64,604, or 54.1%, over $119,436
for the year ended December 31, 1998. This decrease was attributable to a
decrease in our activities. During the 1999 period, Mr. Ericsson focused his
attention on obtaining permits for our planned sites in the Gulf of Mexico, all
of which activities (and related expenses) were conducted by our affiliate, Gulf
Marine Institute of Technology.
Repair and maintenance, insurance and interest expense totaled $32,944
for the year ended December 31, 1999, representing a decrease of $105,683, or
76.2%, over $138,627 for the year ended December 31, 1998. These expenses all
related to the boat which we owned during 1998 and sold during 1999.
Legal and professional fees for the year ended December 31, 1999 were
$56,508, representing a decrease of $90,858, or 61.7%, over $147,366 during the
year ended December 31, 1998. These fees were mainly for outside professional
consultants which we used to a lesser extent during 1999, and
16
included legal fees incurred in connection with the Company's settlement with
the Florida Department of Banking and Finance as well as patent maintenance
legal fees.
Primarily as a result of these cost decreases, total costs and expenses
decreased $301,724, or 48.2% from $625,741 during fiscal 1999 to $324,017 during
fiscal 1998.
For the year ended December 31, 1999, we experienced a net loss of
$(190,097), which represented an increase in net income of $230,031 over the net
loss of $(420,128) during the year ended December 31, 1998.
Plan of Operation
First Quarter
During the first fiscal quarter following the receipt of the proceeds
of this offering, BioMarine plans to contract with a team of consultants for its
mariculture project. We anticipate that this team will consist of our own
advisors as well as personnel provided by Nireus Chios Acquaculture S.A., a
Greek company ("Nireus"), that has expressed an interest in providing BioMarine
with services, technology and information to help expedite the development of
BioMarine mariculture products in the United States. It is intended that upon
receipt of the necessary design approvals, the equipment and design of our
third- party manufactured mariculture systems will be evaluated by Nireus for
approval for use at our mariculture sites. We then plan to acquire, lease or
hire vessels and helicopter services to be used to transport personnel,
equipment and fingerlings.
We intend to enter into contracts with construction companies to
convert the existing GMIT platform into a mariculture facility. We may also
acquire a salvaged platform for the Alabama site for conversion. Renovations
will then begin, and we expect to hire personnel to perform initial day to day
operations of the mariculture project.
We have not yet entered into a definitive agreement with Nireus and any
such agreement is subject to our retaining Nireus to undertake a feasibility
study, the results of which will determine the possibility of their working with
us to develop our mariculture projects. Out of the proceeds of the offering, we
will pay Nireus $150,000 plus expenses, including labor and travel costs of
Nireus personnel. We also have not yet selected or entered into contracts with
any of the personnel whom we intend to engage in the early stages of the
development and construction of our systems. Although we believe Nireus, subject
to their satisfaction with the results of the feasibility study, can supply much
of the development personnel and expertise, any delays or inability to retain
such personnel would extend the time frame for our plan of operation and could
impede our ability to complete construction and commence our sea farming
program.
[Diagram 20A GMIT Platform Complex]
The Texas General Land Office has notified our affiliate, Gulf Marine
Institute of Technology, a non-profit research institute("GMIT"), that it
intends to deny GMIT the right to use their platform complex at the Texas site
for aquaculture purposes, which could preclude the development of our systems at
this site. GMIT acquired the lease to the Texas platform site by an Assignment
and Assumption Agreement, dated September 18, 1998, which was executed by the
then-Commissioner of the Texas
17
General Land Office. However, on May 12, 1999, the new commissioner of the Texas
General Land Office changed its prior position and notified GMIT by letter from
its General Counsel that it intends to deny GMIT the right to use the platform
area to establish the mariculture operation on the platform. GMIT has filed suit
to challenge the General Land Office's denial of its lease rights to the
platform site. The lawsuit is scheduled for trial on November 20, 2000 in
Matagorda County, Texas. We have entered into a Commercial Development Agreement
with GMIT in order to develop our system at the Texas site. If GMIT is
unsuccessful in its suit, we will be unable to develop the project in Texas. We
anticipate that in such an event, we would proceed with our development plans
for our alternative 13-acre permitted site in Alabama. In addition, if GMIT is
unsuccessful in its litigation, GMIT may have to pay to have the platform at the
Texas site dismantled and moved to the Alabama site at a substantial cost. GMIT
has posted a $2.6 million performance bond to guarantee the platform removal
costs.
[Diagram 20B GMIT Platform Complex]
In the event that we proceed with development of our systems at the
Alabama site, we will need to acquire the Texas platform from GMIT and move it
or obtain another donated platform in the Alabama area of permitted use. Any
delay or inability to do so would delay our operations and could jeopardize our
entire business.
Once the platform is renovated, we expect to conduct continual normal
maintenance of the systems onboard the platform to ensure peak performance. We
plan to design, construct and test our finfish feed systems for the specific
need of the fingerling stocks during the first quarter and into the second to
third quarter. We also plan to design, construct and test the harvest and
transfer systems during this period.
During the first two quarters, we plan to design and construct an
onboard finfish hatchery for the platform complex and to expand the hatchery
until it reaches its maximum sustainable production level. Simultaneously with
the renovation and/or conversion of the platform to sea farming, with our
technical consultants' support, we will select fingerling species and the source
from which they will be provided. We expect to restock fingerlings at the time
of harvest during the third, sixth, ninth and twelfth month of the second year
of the project.
In the first month of the first quarter of the project, we plan to
purchase and test one to three SeaStations /TM/ for use as one of the cage
systems for fingerling growout. We expect to test and validate the anchoring
system for the SeaStation/TM/. In the third and fourth months, we plan to
evaluate and approve the final design of the systems to be utilized. During the
fourth month of the project additional SeaStation/TM/ systems may be delivered
to the site, installed by the manufacturer and made ready for operation. While
the SeaStation/TM/ is being installed in the first quarter of the project, we
plan to attach and further test a vacuum transfer system to the cage for fish
transfer at the site. We also plan to attach and test the automatic feeding
system to the cage system during this time.
Second Quarter
During the second quarter of the two-year start-up of the mariculture
project, the platform is expected to be ready for full operations. The
SeaStation/TM/ will be ready for operations after being installed and fully
tested. During this quarter, we also plan to have our personnel trained by the
manufacturer and industry partners to perform all aspects of operation of the
cage system, i.e., stocking, cleaning, maintenance, harvesting, etc.
18
Third Quarter
During the second and third quarters, we expect the project to be in
full operation. Placement of wild caught finfish obtained by sponsorship of live
fish rodeos through recreational fishing tournaments, will stock wild caught
fish into several SeaStation/TM/ cages until fingerlings from the platform
hatchery can be introduced into cage systems. By the end of the third quarter,
we expect to have completed the renovation and final testing and approval of all
systems.
Fourth Quarter
In the fourth quarter of the mariculture project, we plan to discuss
and evaluate the feasibility of expanding the project and determine how the
project should be commercially developed into a fully developed site. The exact
timing and the necessary equipment will be determined on the basis of the Nireus
feasibility study or their evaluation of our feasibility study.
Liquidity and Capital Resources
At December 31, 1999, we had cash in the amount of $1,982, current
liabilities of $531,037 and a deficit in working capital of $529,055. During
each of 1999 and 1998, we experienced negative cash flows of $(288,892) and
$(392,086) from operations. To date, we have primarily funded our operations
through the issuance of securities and borrowing. We estimate that the proceeds
of this offering will be sufficient to fund our planned mariculture operations
for the year following the offering. However, we may need additional financing
if such proceeds prove insufficient, and such financing may not be available on
terms favorable to BioMarine. We may need to issue additional securities in
order to obtain such financing.
Historically, we have funded our operations through the issuance of
debt and equity securities and through loans. We have not issued securities for
cash during fiscal 1998 or 1999 nor for the six months ended June 30, 2000.
During these periods, we have issued securities in exchange for services
rendered and on conversion of outstanding debt and obtained direct loans.
On May 30, 1997, we obtained a loan of $170,000 from First Union which
was secured by a first mortgage on a boat. The loan note accrued interest at
10.25% per annum, and quarterly payments of principal and interest totaled
$10,899. The note was paid in full in 1999 upon sale of the boat.
On December 5, 1998, we offered certain noteholders the option to
convert their notes into preferred stock in BioMarine. In December 1998,
$365,345 in principal and interest was converted into 146,140 shares of
preferred stock. These shares were subsequently converted into common stock on a
share for share basis. $50,000 in unconverted note principal remains
outstanding, and we have offered the holder of this note an option to convert
the note, together with accrued interest, into common stock at a rate of $2.50
per share upon a successful public offering of our common stock.
On June 8, 2000, we executed a note payable to a stockholder in the
amount of $50,000 which is payable from the proceeds of this offering. The note
is unsecured and accrues interest at 10% per annum.
At December 31, 1998, BioMarine had outstanding a note payable to our
affiliate, Gulf Marine Institute of Technology with a balance at that date of
$236, 500. This note was satisfied in full in 1999
19
and a new demand note executed to GMIT in the original amount of $400,810 which
accrues interest at 12% per annum. On December 31, 1999, BioMarine issued 8,520
shares of common stock to a holder of notes payable from GMIT, upon which GMIT
reduced the note by $21,300. As of June 30, 2000, the unpaid balance of this
note was $218,514.
The notes to our financial statements and out independent's auditors'
report thereon state that, as a result of the start-up nature of our business,
we have and can be expected to sustain substantial operating expenses without
generating sufficient revenues to cover such expenses. This raises substantial
doubt as to our ability to continue as a going concern. We believe we can
achieve significant revenues through the implementation of our plan of operation
which is outlined above. The implementation of this plan, however, depends on
the success of this offering. If we do not succeed in raising funds through this
offering, we will not have sufficient capital to implement the plan and will
need to modify the plan and seek other financing.
20
BUSINESS
General
BioMarine is a development stage company. Our purpose is to grow
fin-fish and process oysters in mariculture facilities and sell them in both
local and international markets, to obtain fish from foreign marine capture
fisheries and process them in U.S. based plant(s) for sale in local and foreign
markets, to develop a fully integrated seafood business involving the
distribution and sale of fish, oyster and other mollusks and to produce fish
feed, fingerlings and equipment for use in the U.S. Gulf of Mexico aquaculture
industry.
The term aquaculture covers all activities aimed at producing,
processing and marketing aquatic animals and plants from fresh, brackish and
salt waters. In narrow terms aquaculture embraces the use and manipulation of
natural and artificial bodies of water to produce species required by man and
thus concerns all activities associated with breeding and culture of aquatic
organisms.
Our president, John D. Ericsson, has researched, designed and developed
the patented marine aquaculture production systems (the "Sea Trek Ocean Farming
System" and the "Sea Star Oyster Relay System") to produce finfish and mollusks
initially in the Gulf of Mexico, off the coasts of Texas and Alabama. We have
obtained all required permits in order to conduct our proposed Sea Trek Ocean
Farming System operations and to establish project eligibility for loans,
federal research grants, and federal loan guarantees and matching funds. We
believe that our Sea Trek Ocean Farming project will be a "state-of-the-art"
marine aquaculture production system that will be one of the first and largest
(500 acres in Texas) offshore marine aquaculture production systems licensed and
permitted by the federal and state governments for use in the Gulf of Mexico.
We intend to introduce a modified version of our Sea Trek Ocean Farming
System for use in the offshore fish farming industry. Our affiliate, Gulf Marine
Institute of Technology, a nonprofit research institute, has acquired a platform
system located in Texas, valued at approximately $6 million, which we plan to
convert for commercial mariculture use. The platform complex currently has crew
quarters for 18, including a full service galley (kitchen), a heliport, a 30-ton
service crane, electric generator plants, fuel and water storage and can be
operated as a 24-hour a day operations center. It will be equipped with multiple
sea cages located around the platform perimeter, an automatic feeding system
that provides growing fish with food pellets many times per day as well as with
computerized monitoring and harvesting systems. It is intended that the
converted platform will contain a finfish hatchery, a research laboratory and
classrooms. The company intends to commence operations utilizing the
SeaStation/TM/ ballastable cage system initially, since the estimated
development cost of the Sea Trek barrel cage exceeds $600,000 each. The
SeaStation/TM/ is well established as a ballastable cage system for the open
water marine farming environment and costs approximately $100,000 per cage
installed (See SeaStation/TM/ Diagram 18A & B on Page ____).
We also plan to utilize the Sea Star Oyster Relay System for offshore
oyster cleansing and farming. The system is designed primarily to containerize
oysters for relaying to high-salinity, clean water areas to enhance the quality
of the oyster for half-shell marketing and raw consumption by increasing the
oyster's salt content and substantially reducing the potential illness risks
associated with raw oyster consumption. The Sea Star Oyster System takes
advantage of the oyster's natural ability to cleanse itself in high-salinity
waters that lack contaminants.
21
Although BioMarine originally intended to build the patented Sea Trek
Ocean Farming mariculture platform to support the fish farming systems, we have
learned that it is much more economical to acquire existing dormant oil and gas
platforms for conversion into mariculture operations. According to a study done
by the Minerals Management Service in 1996, "Mariculture Associated with Oil and
Gas Structures: A Compendium," there are nearly 4,000 oil and gas platforms in
the Gulf of Mexico. These structures range in age from brand new to roughly 30
years old; in size from single well caissons to large, multi-pile platforms with
crew quarters, cranes, heliports and all of the amenities necessary to sustain a
365-day a year sea farming operation. The platform sites' water depths range
from a few feet to over 1,000, and in distance from shoreline to more than 130
miles offshore.
Management believes there are opportunities for mariculture operations
from existing platforms. They would provide a permanent solid base from which to
conduct operations; provide a stable base for storage, feed delivery equipment
and utilities (power, environmental monitoring, etc.); the existing offshore oil
service infrastructure offers transportation and project support systems.
Platforms are well known as artificial reefs. This abundance of associate sea
life suggests a healthy environment suitable for cultivation of fish and
shellfish. The offshore location tends to moderate swings in temperature and
water currents which help make the cage system more self cleaning, providing
new, oxygenated water and removing waste from fish and feeding.
BioMarine's sea farming technologies, when fully developed, could
result in the ability to restock the natural marine environment with fast
growing, farmed, reared Gulf species and thus reduce some of the pressure on
wild stocks for human food production and with further research, cold water
species as well.
We were incorporated in the State of Delaware on October 3, 1989. Prior
to December 30, 1998, we operated under the name Sea Pride Industries, Inc. Our
principal executive offices are located at 1198 Gulf Breeze Parkway, Suite 8A,
Gulf Breeze, Florida 32561 and our telephone number is (850) 934-8888.
Industry Overview
In conjunction with increasing demand for fish and fish products the
output of the fisheries industry world-wide has continued to increase steadily
since the 1950s. In 1995 (the last year for which detailed statistics are
available from the United Nations Food and Agriculture Organization, ("FAO")),
the total production of fin-fish, shellfish and aquatic plants from capture
fisheries and aquaculture combined, reached 119.9 million metric tons (MMT)
valued at US $125.4 billion. Of the total production, 821 MMT were fin-fish and
shellfish destined for human consumption.
A recent analysis of the world capture fisheries resources by the FAO
(1997) shows that out of the 16 world statistical areas, 9 are over fished, 1
fully fished and only 6 are still increasing in production.
It is widely acknowledged in the fisheries industry that supplies from
traditional marine and inland capture fisheries are unlikely to increase
substantially and that the projected global shortfall in fish supply will
probably be met from expansion within the aquaculture sector. For example, the
supply of fish generated from capture fisheries in 1995 (91.3 MMT) was a little
less than in 1994 (91.6MMT), indicating zero growth for that year. (FAO Annual
Yearbook, Vol. 81, 1995, "Fisheries Statistics Commodities," Rome, (1997)) The
total supply of aquatic organisms produced from aquaculture in 1995, however,
reached a record 27.8 MMT in quantity, valued at US $42.3 billion. (FAO
Fisheries Circular
22
No. 815 Revision 9, "Aquaculture Production Statistics 1986-1995," Rome (1997))
This represents an increase of 9.6% in quantity and 5.2% in value, respectively,
over 1994.
Under current fishing regimes, (where some 60% - 70% of stocks require
urgent intervention as they are over-fished or fully fished), (FAO Press Release
98/31, Future of Fish for Food Depends on Better Management of Oceans,"
Rome/Lisbon, (May 19, 1998)) FAO estimated in 1996 that the world's potential
harvest through capture fisheries was between 85MMT to 90MMT annually. The FAO
also indicated that the harvest might be increased by the adoption of effective
management systems in all oceans and a reduction in the practice of discarding,
which averages 20 MMT each year. (FAO Press Release 98/31, FAO: Future of Fish
for Food depends on Better of Management of Oceans, Rome/ Lisbon - May 19, 1998;
Scientific American, Safina, C., "The World's Imperiled Fish," (November 1995))
By 2010, world-wide demand for fish food products is expected to range
between 110 to120 MMT allowing for an average compound annual growth of about
2.7%, producing a shortfall between demand and supply for human consumption that
could amount to between 10 to 40 MMT. (FAO, The State of World Fisheries and
Aquaculture, "Summary of World Fish and Aquaculture, " (Sophia 1996); FAO Press
Release 98/31, "Future of Fish for Food Depends on Better Management of Oceans,"
Rome/Lisbon, (May 19, 1998) This forecast was prepared by the FAO for the Kyoto
Conference of 1997 and is based on population growth, changes in per capita
income and the pace of urbanization. (FAO , The State of World Fisheries and
Aquaculture, "Summary of World Fish and Aquaculture," (Sophia 1996); FAO Press
Release 98/31, "Future of Fish for Food Depends on Better Management of Oceans,"
Rome/Lisbon, (May 19,1998)
The lower the output from the capture fisheries sector, the greater the
opportunity for growth in the aquaculture industry. Since the 1980s, aquaculture
has steadily increased its contribution to world fisheries production and
maintained its position as one of the fastest-growing food production activities
in the world. (World Aquaculture, New, Michael B., "Aquaculture and the
Fisheries - balancing the scales." (June 1997)) In 1996, aquaculture provided
almost 30% of the total world wide supply of fish food, about double what it
supplied a decade ago. (FAO, The state of world fisheries and aquaculture 1998
(Sophia))
The aquaculture industry could supply up to 35 MMT of fish food
products by the year 2010. (World Aquaculture, New, Michael B., "Aquaculture and
the Fisheries - balancing the scales." (June 1997)) There are, however, two
potential constraints which hinder the future growth of aquaculture, (i)
environmental degradation and (ii) the availability of land and water. The first
constraint typically arises from external sources, although environmental
degradation is sometimes the result of mismanagement. The second constraint
stems from competition with other land and water uses, particularly in
agriculture, and from urban encroachment into coastal zones. The unavailability
of suitable sites for aquaculture projects may eventually limit industry growth.
(FAO Circular No. 886, Revision 1, "Review of the State of World Aquaculture,"
(Rome 1997))
Industry Characteristics
Two major trends are changing the traditional fisheries industry. First
is the leveling off of the output of the capture fisheries and the inability to
raise sustainable catches to meet increasing demand. (FAO Press Release 98/31,
FAO: "Future of Fish for Food depends on Better Management of Oceans,"
(Rome/Lisbon May 19, 1998)) Secondly, the industry is consolidating to improve
efficiency and economic viability. (The State of Industrial Organization of the
World Fisheries Industry, An on-going
23
study sponsored by the U.S. Department of Labor, World Aquaculture Society,
presented by Henry Clifford Ph.D., University of Rhode Island, (attended by
representatives of the Offsets Group)) Large, vertically integrated companies
that procure, export and distribute large volumes of high-value products are
rapidly dominating the fisheries industry. Many smaller companies are either
being bought out or forced out.
With the capture fisheries being unable to supply demand, we believe
aquaculture is a viable alternative to make up the potential shortfall in supply
relative to demand. Aquaculture can succeed as well as it does because of the
following factors:
* the relatively lower harvest and labor cost per kilogram of
product that is achieved, compared with the cost of the equivalent
wild capture fishery product.
* the ability to plan the harvest timing and volume to meet
market demand which is possible in aquaculture, but not in wild capture
fisheries, and
* the ability to expand the supply to meet demand.
In contrast, wild fisheries are limited by many unpredictable factors such as
weather and a finite production capacity, which is currently at, or beyond,
sustainable yield in most of the world's oceans and coastal zones.
U.S. and Regional Industry Overview
The introduction of modern commercial fishing methods, new boats, more
efficient nets, powerful engines and sophisticated fish-finding equipment has
made fishing less problematic exercise but has also placed strains on existing
stocks, thereby limiting further growth.
The term aquaculture covers all activities aimed at producing,
processing and marketing aquatic animals and plants form fresh, brackish and
salt waters. In narrow terms aquaculture embraces the use and manipulation of
natural and artificial bodies of water to produce species required by man and
thus concerns all activities associated with breeding and culture of aquatic
organisms. Aquaculture is a growth sector in the fisheries industry.
Opportunities to grow are made possible by the leveling off in the supply of
fish from the capture fisheries. In 1996, aquaculture provided about 30% of the
world-wide supply of fish, or 27.8 MMT. (FAO Press Release 98/31, FAO: Future of
fish for Food depends on Better Management of Oceans," (Rome/Lisbon, May 19,
1998)) Over one-half of this production by volume is low-value fresh water
finfish origination in low-income, food deficit countries, such as China and
India, to feed indigenous people. (World Aquaculture, New Michael B.,
Aquaculture and the Fisheries - balancing the scales." (June 1997)) The FAO
forecasts an average annual increase in aquaculture of 4.8% which is well above
the 2.7% annual average increase in demand for food fish products.
An important sub-sector of aquaculture is the commercial production of
high-value, mainly marine species of fin-fish and shrimp. Referred to as
intensive marine aquaculture or mariculture, this sub-sector is a relatively new
sector of aquaculture, which has developed rapidly since breakthroughs in
hatchery technologies in the 1970's that allowed that artificial mass production
of marine fin-fish and shrimps juveniles. (Barnabe, G., Aquaculture, Vol. 1,
(1990)) It produced about 1.4 MMT of product in 1995 with a value of over US
$9.5 billion. (FAO Circular No. 815, Revision 9, "Aquaculture Production
Statistics 1986-1995," Rome (1997). At average value of US $6.79 per kilogram of
output
24
for the aquaculture sector as a whole, the mariculture sub-sector offers
significant business opportunities. FAO Circular No. 815, Revision 9,
"Aquaculture Production Statistics 1986-1995," Rome (1997).
Aquaculture in the United States and the Gulf Region
The prospect of dwindling local fish stocks and rising populations has
fueled interest in aquaculture and fish farming in the Gulf region as a means to
apply modern science to food production in a similar way to its application on
land. The practice of aquaculture within the Gulf region remains relatively
underdeveloped, particularly when compared to Europe, Asia, and other parts of
North America. At the present time, there is no large marine hatchery in the
Gulf that can produce juveniles on the commercial scale planned by BioMarine.
The lack of a large commercial marine hatchery in the region is stymieing the
growth of the industry.
Farming of Pacific and Atlantic salmon species is one of the
best examples of commercialized mariculture technology. Based on our research,
the salmon farming industry is currently achieving $4 billion in annual sales.
Thirty-five percent of the salmon consumed worldwide is produced through
mariculture (FAO). The dominant producer of farm-reared salmon is Norway with
548,950,410 pounds in 1997. (FAO Globefish Salmon Analysis 1999) Advances in
production technologies related to genetic improvements, feeds, aeration, sea
cage systems, and new strategies to control disease have led BioMarine to an
opportunity to farm fast growing Gulf marine finfish like Cobia (Lemonfish,
Ling) and Mahimahi. BioMarine intends to expand the success of the mariculture
industry into the U.S. Gulf of Mexico and worldwide.
Channel catfish is the dominant fresh water aquaculture species in the
United States with farm sales to processors totaling 597 million pounds. (USDA
"Aquaculture Outlook," March 13, 2000) Other important fish cultured in the U.S.
include salmon, trout and tilapia. Commercial culture of fast growing Gulf
species like Cobia (Lemonfish, Ling) and Mahimahi has yet to be developed in the
Gulf mariculture industry.
Fish farming, or aquaculture, which started in China approximately
4,000 years ago, is becoming as sophisticated as the beef and chicken industries
in the United States. Techniques that have been developed in university
laboratories and in private research in the last decade are now being put to
commercial use. These innovations, along with an expanding market for seafood
and increasing governmental support, have fostered significant growth in
aquaculture. Aquaculture has increased the variety of fish available to
consumers and has helped to restore supplies of some species, like sturgeon,
salmon, redfish, striped bass, snappers and groupers that became scarce as their
natural habitats disappeared or were over-fished.
The demand for seafood as the primary diet for people of all ages is
increasing worldwide. Several estimates suggest that harvest from the world's
oceans have approached the limits of wild fish stock productivity. The National
Marine Fisheries Service (NMFS) Strategic Plan has noted that this deficit
cannot be entirely mitigated by the rebuilding of wild stocks. Even a
significant rebound in wild stocks will not be able to meet the growing global
demand for seafood. The FAO reported that production of seafood products for
human consumption at the turn of the century will need to increase by
approximately 20 million metric tons over the 1983 level in order to maintain
present per capita fish consumption levels. This would require a 28% increase in
wild fishery harvests, which is not feasible.
25
U.S. demand for seafood is expected to increase by 1.4 million metric tons
annually due to population growth alone.
We believe the market for finfish is currently hampered by three major
concerns: (i) the inability of conventional fishing operations to deliver fresh
finfish to market on a perennial basis; (ii) increasing concern over
environmental damage caused by conventional commercial fishing operations; and
(iii) concerns among consumers regarding quality of seafood currently on the
market.
It is difficult to imagine the sea ever running out of fish. Yet, FAO's
1995 world fisheries report estimates that 70% of the world's marine fish stocks
are either fully exploited, overfished, depleted or recovering from overfishing.
(("Human Nature: Agricultural Biodiversity and Farm-based Food Security"
(December 1997)) As a result, many governments have had to close down some areas
of commercial fishing.
Current fisheries' practices in the Gulf have placed strains on
existing fish stocks, thereby limiting further growth. While the fish catches
per unit of effort have declined (cost per kilogram of product that is
achieved), the demand for fish has risen. Dwindling fish stocks and rising
demand have fueled interest in aquaculture fish farming as a means to apply
modern science to seafood production in a similar way to its application on
land. Mariculture, a relatively new sector of the aquaculture industry, allows
for the mass production of marine fin-fish and shrimp products.
Stagnation or decline has replaced the long-term growth trend. For the
past two decades, the fishing industry increasingly has had to face the results
of extracting fish faster than populations can reproduce. Pressure from
commercial fishing is so intense that 80-90 percent of the fish in some
populations are removed every year. Commercial trawlers chasing ever-decreasing
fish populations have cost taxpayers billions of dollars. A World Wide Fund for
Nature report estimates that to catch $70 billion worth of fish, the fishing
industry incurred costs totaling $124 billion annually. The governments of the
trawling nations have subsidized as much as $54 billion in deficits annually.
Although the world's commercial harvest has been stable for the past
several years, the economic value of the harvest has declined as fishermen are
forced to harvest less desirable species because of the decline of more
commercially valuable stocks.
We expect to have both the resources and management skills for
producing quality fish products to exploit regional and international market
opportunities driven by an increasing world wide demand. By maintaining high
standards and providing a competitively priced processed fish product, BioMarine
intends to become a regional market leader and to penetrate the US and
international markets.
Redfish, Striped Bass, Grouper, Cobia, Tuna, Mahi Mahi vis-a-vis Catfish
Industry
The Channel catfish is the most important aquaculture fish in the
United States. Annual production of catfish has grown from under five million
pounds in 1969 to an expected 585-595 million pounds by the end of 1999. Growers
indicated that they expected that 172,200 acres of ponds would be in use between
July 1 and December 31, 1999, up five percent from the second half of 1998.
(U.S. Dept. of Agriculture, "Aquaculture Outlook" (October 1999))
26
Over the first eight months of 1999, farm sales to processors totaled
397 million pounds, with an average price of 74.6 cents a pound. This implies
gross sales of $296 million for catfish growers, up two percent from a year ago.
(U.S. Dept. of Agriculture, "Aquaculture Outlook" (October 1999))
While fresh water Channel catfish are entirely different from marine
redfish, striped bass, cobia, flounder, grouper, tuna or mahi mahi, useful
comparisons can be correlated to make some reasonable assumptions. First, and
perhaps the most important, these fish do not suffer an image problem, as does
the catfish. In fact, redfish, cobia, tuna, grouper, flounder and mahi mahi have
good reputations among consumers. Marketing campaigns conducted by the catfish
industry have been quite successful and are representative of how fish
consumption habits can be influenced. Therefore, the impressive quantities of
catfish being sold today could serve as a minimum indicator of the market
potential for redfish, cobia, fluke, flounder, tuna, grouper and mahi mahi.
The BioMarine Solution
BioMarine plans for its commercial operations sites to be located four
miles south of Fort Morgan, Alabama in federal waters of the gulf of Mexico and
9.8 miles south of Port O'Connor, Texas in state waters. These locations have
high quality saltwater, providing warm saline water year-round to the grow-out
system. Since water quality and temperature are ideal at these locations,
BioMarine, when operational, expects to meet its projected growth rates.
BioMarine's initial aquaculture efforts will involve the use of
Norwegian-perfected salmon farming systems that have successfully reared
millions of salmon to over 12 pounds in 18 months. This saline technology
utilizing computer-controlled automated feeding and fish monitoring systems will
be adapted to rearing redfish, cobia and mahi mahi, as well as other marine
species in the warm water of the Gulf of Mexico. BioMarine believes that three
pound fish can be grown from two inch fingerlings with this technology in 12 to
18 months with mahi mahi and cobia taking only three to six months.
We intend to implement two very distinct types of mariculture projects
in the BioMarine hatchery and grow-out farms. The hatchery operations include
maintaining and managing the brood stock, managing the breeding cycle and
collecting and hatching the eggs. Once the eggs are hatched, the juveniles are
grown to a size where they can be successfully transferred to a grow-out
facility.
The grow-out facilities manage the growing process until the fish reach
market size and are harvested. A grow-out facility may sometimes include a
packaging station for fresh products and it may also include fish processing
operations such as gutting, filleting and freezing fish prior to sale.
The Finfish Hatcheries
We propose to build two hatcheries, which is a common practice in the
industry, to diversify risk. We intend to build the first hatchery in Texas on
GMIT's platform complex that will concentrate on producing finfish juveniles of
indigenous species, mainly cobia, snapper and redfish. Once the facilities have
been completed and are fully operational for production, the hatchery is
intended to be expandable to produce up to 6.5 million juveniles annually and
growing them to a size of 5-10 grams before they are transferred to grow-out
cages located around the platforms.
27
We also intend to build a second hatchery in Alabama that will produce
high-value gulf species of fish such as cobia, snapper, grouper, and others. It
is intended that the facility have a total production capacity of five million
finfish juveniles.
We expect to construct both hatcheries near or in the Gulf. As planned,
these hatcheries will comprise several facilities to provide fully controlled
optimum conditions of temperature, light and water quality. The main hatchery
buildings on the Texas platform complex and on shore will accommodate various
specialized sections for brood stock, egg incubation, larval rearing,
pre-growing (nursery), and production of live food organisms required for the
initial larval stages of fish. Water exchange quality will be affected by a
combination of open flow-through and re-circulated water systems.
Auxiliary platform and land based facilities include store rooms,
laboratories, offices, crew quarters workshop rooms, pump station, fuel tanks,
generators, water storage tanks, water treatment units prior to usage
(filtration, cooling, heating, oxygenation) and after usage (settling and
bio-filtration pond).
Hatchery Operations
We plan to obtain our initial stock of fish fingerlings from suppliers
located in the Gulf of Mexico region and appropriate foreign producers.
Thereafter, we then plan to produce fingerling stocks by a controlled spawning
system. Construction and/or acquisition of a hatchery will provide BioMarine
with the capability of supplying redfish, cobia and mahi mahi fingerlings for
grow-out. Because the broodfish are not handled or harmed during the spawning
process, they continue to spawn indefinitely. BioMarine's believes that the
controlled spawning process perfected by Nireus for Mediterranean sea bass and
sea bream can be adapted to cobia, mahi mahi and other fast growing Gulf marine
fish species.
Broodstock breeders, which are ideally between three to six years old,
are collected from the wild. After an initial acclimation period, they spawn
readily in captivity when provided with low stocking densities, high quality
water, and good nutrition. The broodstock is kept in rectangular and round
fiberglass tanks and by applying modified temperature and photo-period, they
will spawn naturally and off-season, providing eggs all year round, resulting in
optimal utilization of facilities and personnel. The eggs released by the
females are sprayed and externally fertilized by milt produced by the males. The
viable eggs are transparent and floating, collected by means of fine mesh
applied at the overflow of the broodstock tanks. They are then transferred into
small incubation tanks and provided with gentle water flow and aeration, where
they hatch after one to two days.
The newly hatched larvae are transferred and stocked into 10 cubic
meter fiberglass larvae rearing tanks, provided with gentle aeration and a
progressively increased water exchange. They feed on live prey organisms
enriched with unicellular algae and commercial enrichment diets until they reach
0.3 to 0.5 grams in weight. This takes between 45-70 days, after which they
metamorphose (take on the characteristic of the adult). Proper aeration,
lighting, nutrition, and clean tanks (bottom and surface) must be provided
during this period as vital organ development occurs during this phase. At the
end of this period the larvae are weaned progressively on to commercial inert
diets.
After the completion of the metamorphosis the fish are transferred into
the pre-growing (nursery) in 20 to 100 cubic meter concrete raceways. During
this stage the juveniles are completely weaned to dry feeds, prepared for
fattening and subjected to several gradings, countings, and vaccination. Once
28
they reach a weight of 1.5 to 2 grams, they are robust enough to be able to
withstand transportation to the on-growing facilities. Larger nursery facilities
have been planned into the Texas platform hatchery design to be able to produce
larger size juveniles of up to 10 grams, shortening the on-growing cycle for
some of the indigenous species.
Finfish Grow-out Operations
BioMarine intends to operate two grow-out fish farms, one in Texas and
one in Alabama.
We intend to build and operate a cage-farming center in the Gulf waters
of Texas that will be designed to produce an annual capacity of 3,000 tons of
high-value Gulf of Mexico finfish. As planned, the facility will operate a nine
month growing cycle. The farms will employ open-sea, submersible cage technology
that is designed to withstand hurricane generated six to nine meter waves.
We are also planning to build and operate a cage farm in Alabama. The
facility design will depend on the site chosen. Based on the use of conventional
plastic cage technology, combined with new open sea submersible cages, it is
intended to produce an annual capacity of 750 tons of indigenous marine finfish
within 5 years. Production depends on the number of cages utilized. Over time,
more cages will be added to increase production to capacity.
We plan to grow juveniles to market size in cage farms that comprise
both onshore and offshore facilities. Each farm will have on-land facilities
comprising office space, storage for feed, nets and equipment, a packaging
station equipped with packaging lines, ice production, cold storage facilities,
and an area for the necessary vehicles or boats required for transporting
personnel, products, and raw material. The Texas offshore facility will be based
on the existing four platform complex with space for a small office, feed and
equipment storage, central feeding system, and safety equipment. Operations
around the cages will be carried out by means of a specialized boat equipped
with a crane and winch, fish pumping and grading equipment, and several small
boats.
The cages containing the fish will be arranged in flotillas that are
securely moored in and around the platforms. The cages are constructed of nylon
and spectron type mesh nets that are hung from a metal ballastable structure to
form a cage. (See the SeaStation/TM/ design Diagram 18 A.) A farm will have a
variety of cages with mesh sizes ranging from 5 millimeters up to 18 to 20
millimeters to accommodate different size fish as they grow. The size of mesh
used depends on the type of fish and the average weight of the population. In
addition, larger nets may be employed outside the perimeter of the cages to
restrict entry of predators.
Finfish from the hatcheries are stocked at densities starting at less
then 2 kilograms per cubic meter. Over a growing period of nine to twelve
months, depending on species, densities reach 10 to 15 kilograms per cubic
meter. The biological performance of the fish is determined by several factors
including the species, quality of juveniles and feed, feeding techniques and
bio-rhythms (level of feeding activity achieved at different times of the day),
and quality of husbandry. In addition, environmental variables, such as
sea-water temperature, water quality and, in particular, oxygen concentration,
which can have a major effect of biological performance.
The objective of the grow-out period is to grow high-quality fish to
commercial size, weighing approximately 2.2 to 5 lbs. (1 to 2 kilograms), with
the lowest possible production cost during the growing period. The key to
meeting this objective is the quality of daily husbandry procedures that
29
include feeding, monitoring of the integrity of the nets and the degree of
fouling, net mending by divers, net changing with the fish in position, moving
live fish from cage to cage or splitting and grading them by size.
A major cost factor in grow-out operations is feed. Juveniles up to the
weight of 30 grams are fed a daily diet of high-quality crumble. After reaching
30 grams, the fish are fed a high-energy extruded pellet between two and four
times per day depending on the species grown. The daily quantity of the feed
supplied in each individual cage depends on the number and size of the fish in
the cage and the environmental conditions, both of which are monitored
continuously. Feed distribution can be done either manually or mechanically with
the use of automatic feeders. BioMarine's management intends to reach the lowest
food conversion ratios (feed intake to weight gain) by limiting waste and
feeding the fish at the optimal level, based on the above variables.
Fish growth is monitored monthly. Sampling and grading by size takes
place one to three times during the production cycle in order to prevent the
development of large size variations in the fish populations that could promote
cannibalism and competition for feed. Grading is done manually or by means of
mechanical automatic graders. Fish are normally sedated or anesthetized during
the grading process and handling. Fish counting is carried out by hand or by
means of special devices equipped with photocells.
Harvesting is carried out by crowding the fish then collecting the fish
with dip nets or with fish vacuum pumps that transport the fish, placing them
directly into iced water in insulated containers.
Production Capacity
Based upon our best estimates to date, we estimate that our targeted
annual aquaculture product levels of 5,750 tons of full grown marine finfish,
and 20 million oysters can be achieved when the facilities are complete and
production is fully operational. Indigenous finfish account for 5,000 tons of
production and high-value Gulf species represent the other 750 tons.
The seed required for the above production, approximately 16 million
finfish juveniles will be produced by two marine hatcheries. These quantities,
however, represent only a fraction of the production capacity of the hatcheries.
We intend to achieve a total hatchery production of approximately 50 million
finfish juveniles. The additional juvenile production are intended to be sold to
other grow-out facilities in the region.
Indigenous Finfish Species Annual Production (Tons)
- -------------------------- ------------------------
Cobia 1100
Red Porgy 1000
Redfish 2050
Grouper 1000
Mahi Mahi 300
Snappers & misc. 300
Total Finfish 5750
30
The redfish, also called channel bass or spot-tailed bass on the East
Coast, has been over-fished so rapidly that its stocks have been substantially
depleted, especially since the blackened redfish popularity was started by Chef
Prudhomme. The well-known New Orleans chef created the recipe for "blackened
redfish" in 1980. The national Cajun food craze was on and has not abated to
date. This created such a demand for redfish that historic catches from state
waters became inadequate to meet the demand. Consequently, less desirable bull
reds (mature redfish) became attractive to purse seining operations in Federal
waters in the Gulf of Mexico. As a result, Federal waters were quickly
threatened by over-fishing and were closed by emergency Federal regulations in
July 1986. This action has left an unfilled gap in the redfish supply. Unlike
other popular seafood products such as marine shrimp, salmon, oysters and tuna,
redfish is currently unavailable from international sources, except Mexican
substitutes, such as Covina. Therefore, the demand and price of redfish have
risen dramatically. Juvenile redfish, known as "rat reds" in the south and as
"puppy drum" on the Atlantic coast, have always been prized by local fisherman
for their firm, flaky white meat when cooked. Redfish can be prepared in many
ways because of the firm texture and ability to accept seasonings.
Mahi mahi or dolphin fish, has two species in a family of their own.
The better known of the two is up to five feet long with a maximum weight of 67
pounds and should not be confused with the dolphin, a mammal. Mahi mahi live in
tropical seas, alone or in schools. Mahi mahi kept in the Marine Studios in
Florida had to be fed three times a day, indicating that they were living at a
fast rate, rapidly using up energy and requiring a large quantity of food to
replace it. Part of this energy is taken up in rapid growth. The 52 captive mahi
mahi were at most 16 inches long and 1.5 pounds in weight when put into the
aquarium. One was measured and weighed 4 lbs. 2 months later. It was 45 inches
long and weighed 25 pounds. Three months later, two more were found to be 50
inches long and up to 37 pounds in weight. More recent studies at the Oceanic
Institute of Hawaii indicate that one inch fingerlings grew to a 4.4 pound fish
in under 150 days. Demand for mahi mahi easily outstrips the market. For
example, Hawaii alone imports approximately 2,000 tons of mahi mahi each year.
Redfish and cobia are found throughout the Gulf of Mexico and up the
Atlantic Coast, northward to the Carolinas, with mahi also found off the Pacific
coast of Latin America. Redfish congregate in large schools to spawn during the
fall. This characteristic allowed them to be captured en mass through the use of
purse seines, huge nets and spotter plane before State and Federal regulations
protecting the fish were imposed. The commercial fishery has historically
targeted two to ten pound redfish that inhabit near-shore, state-regulated
waters. State jurisdiction extends three nautical miles off-shore, except for
Texas and Florida, which extend nine miles. The total annual commercial catch of
redfish from state waters off the Gulf of Mexico averaged about three million
pounds (ranging from two to five million pounds) before redfish bans were placed
on commercial fishing. By comparison, BioMarine's first commercial fish-farming
project has been designed to grow over 1.2 million pounds of redfish, mahi mahi
and cobia per vessel.
Redfish are now being reared in aquaculture projects in the southern
United States. It has been forecast that it will take over 10 years for the
aquaculture production of redfish to catch up to the demand for the fish in the
markets. Redfish grow to market size in approximately 18 months in nature with
mahi mahi reaching market size in only six months. The desired market size is
between two to five pounds. Fish that are grown in warm water with abundant
natural food have reached weights of over five pounds in one year.
Cobia, also known as ling or lemonfish, is a widely distributed
migratory species of significant commercial and recreational value as a fishery.
Commercial landings of Cobia in the Gulf and Atlantic
31
region from 1991-1996, totaled 1,046 metric tons (1151 tons) with an average
ex-vessel value of $7.80 per kg. ($3.54 per lb.) (NMFS 1998). Commercial scale
culture of Cobia has never been attempted n the United States; however,
operations in Korea have successfully produced fingerlings and sold Cobia to
Japanese markets at $4.88 per pound whole.
Cobia, given their salinity and temperature requirements appear to be
best suited to coastal cage culture. Cobia grow rapidly according to Dr. Joan
Holt of the University of Texas Marine Research Center in Port Aransas, Texas,
who stated that 1/4 lb. (125 gm) cobia fingerlings were grown to 21-22 lbs. in
just 18 months and can reach a maximum size of 132 lbs. (60 kg.) (Vaught-Shaffer
and Nakamura 1989). Because of their rapid growth rates, excellent palatability
and prolific spawning capacity, they offer excellent potential for commercial
culture. These characteristics of cobia have been recognized in Taiwan as well,
where they are unmder development as a mariculture species (Liao et al 1995).
Redfish are grown in both salt and freshwater and tolerate a wide range
of temperatures and salinity. Redfish can survive near-freezing water
temperatures (for a limited period of time), provided that they have developed
an adequate layer of body fat and water salinity levels are approximately 20
parts per thousand. The natural Gulf of Mexico water temperature never drops
below 50(d)F at the proposed project site. Therefore, fish cold-stress mortality
should never occur. Growth rates of wild redfish vary widely, depending upon
food availability and environment. Maximum growth occurs during warm months,
when temperatures reach 79 to 86 degrees Fahrenheit. This temperature range
generally occurs in the Gulf of Mexico during March through November.
Packaging and Processing
After harvesting the fish from the grow-out facilities, fish are to be
selected, graded, and packaged. This activity is to be carried out in
specialized packaging and processing stations on land that are equipped with
cold-stores, ice production and storage equipment, fully or semi-automatic
grading systems, and packaging lines. Packaging and processing will be done in
air-conditioned buildings in accordance with the quality control and hygiene
requirements of the international markets that adhere to the International
Standards Organization (ISO) 9002, Hazard Analysis Critical Control Points
(HACCP) rules and European Union (EU) directive 91/493. Use of HACCP based
quality control systems are mandatory in European states and for countries and
companies exporting to Europe. BioMarine intends to implement the standards of
HACCP in order to export is products to its target European market. Although ISO
9002 is not mandatory in any country at the present time, it is highly regarded
in the industry and BioMarine intends to examine the requirements for obtaining
ISO certification.
Finfish are sold as fresh or chilled and are packed in ice in
polystyrene boxes for transportation to selected markets either by road or air.
Fish farming gives the fish a shelf life of up to two weeks, compared to fish
from the capture fisheries that undergo a harsh bio-chemical process during
capture that results in a shorter shelf life.
In addition to fresh and frozen fish and oyster production, aquaculture
also offers the possibility of selling live products, a market which is rapidly
growing in the United States. Production and distribution of live fish products
offer a significant price premium over the price of fresh or frozen fish. This
business opportunity has already been introduced in other countries and
BioMarine's management
32
intends to examine opportunities for marketing a portion of its overall
production in live fish to the U. S. restaurant and grocery markets, which like
lobster, is marketed in live tanks.
The Sea Trek Ocean Farming System
BioMarine intends to introduce a modified version of the Sea Trek Ocean
Farming System, a patented system for the offshore fish farming industry
developed by BioMarine's president, John D. Ericsson. (See "Certain
Transactions"). The initial system is planned to comprise: a four (4) platform
complex owned by Gulf Marine Institute of Technology (GMIT) off Port O'Connor,
Texas with the SeaStation/TM/ ballastable Sea Cage System. (See Cage System in
diagram A). The platform that the system will be used from will have an
automatic feeding system that provides the fish with pelletized food. The
platform will also contain a research laboratory, hatchery, and fingerling
production laboratory, office, crew quarters, classroom and heliport.
[Diagram 33A (Sketch of SeaStation/TM/ Sea Cage)]
[Diagram 33B (Sketch of SeaStation/TM/ Submerged View)]
In rougher conditions, these types of cages can be lowered until the
top is level with the surface of the water, thus reducing the impact of the
waves. During stormy conditions the systems can be completely submerged to the
desired depth in order to avoid high waves and heavy swells. In the event of
hurricane force winds, the system cages can be lowered from the platform control
station and anchored along the sea floor until the weather conditions return to
normal. During specific operations such as harvesting, grading, defouling, close
inspection, etc., the system can be deballasted or lifted out of the water to
leave them over halfway out of the water.
The Sea Star Oyster Relay System
We intend to introduce the Sea Star Oyster Relay System, a patented
system for the offshore oyster farming industry. The patented Sea Star system,
is designed primarily to containerize oysters for relaying to high-salinity,
clean water areas to enhance the quality of the oyster for half-shell marketing
and raw oyster consumption by increasing the oyster's salt content and reducing
the potential illness risks associated with raw consumption. It takes advantage
of the oyster's natural ability to cleanse itself in offshore, clean waters that
lack contaminants such as chemicals, pathogens, bacteria associated with the
oyster's natural coast habitat, etc.
[Diagram 19B of SeaStar Oyster Relay System.]
Oyster Feasibility Studies
BioMarine's subsidiary, Sea Star Industries, Inc., evaluated the
commercial viability and cleaning efficacy of the relaying process in 1995, in
which the results demonstrated that the process: (1) allows for the natural
biological cleaning from the oysters of bacteria such as E.coli; (2) reduces the
level of Vibrio vulnificus bacteria in oysters, a potentially deadly pathogen
that thrives during warm
33
water months in the Gulf of Mexico; and (3) increases the salt content of the
oysters, thereby enhancing the flavor.
Hundreds of thousands of acres of natural oyster reefs, beds and farms
throughout the Gulf of Mexico region are lost annually from production because
of polluted land runoff, domestic wastewater effluents and invasion of coastal
waters by the marine bacterium Vibrio vulnificus. This bacteria has resulted in
sickness and/or deaths of numerous at-risk persons who have immuno-compromised
health conditions. As a result of the expanding pollution, millions of dollars
worth of oysters cannot be utilized and/or must undergo an approved cleansing
method (e.g., controlled purification, depuration or relaying).
The tests were conducted in federal, offshore, high-salinity waters of
the Gulf of Mexico off the Mississippi coast near Horn Island. This area meets
the National Shellfish Sanitation Program guidelines for approved area
classification. The USFDA conducted its own study in March 1996, which verified
the Sea Star cleaning process for E.coli and Vibrio vulnificus bacteria.
In addition, a feasibility study undertaken by NMFS indicated that the
Gulf of Mexico has suitable climatic and geographic characteristics conducive to
the development of a mariculture industry. The Gulf waters are characterized by
suitable warm temperature, resulting in an extended growing season. The US Gulf
of Mexico is a large relatively under-developed region which can provide
comparable low-cost access to sites for fish farming. These characteristics have
been fundamental to the success of mariculture projects in other parts of the
world. In conjunction with the application of state-of-the-art technology, the
climatic and geographic characteristics make fish-farming a likely success in
the US Gulf of Mexico.
Potential Oyster Production
As an example of potential oyster production, management believes that
an estimated 200,000 sacks of commercial oysters could be harvested annually
from "restricted" areas if depuration and/or relaying were permitted. At an
estimated average value of $15 per sack, those 200,000 sacks represent a
potential $3 million resource. We believe that cleansed, high-salinity oysters
could bring a premium of up to $35 per sack over conventional wild-harvested
oysters. This would raise the commercial value of 200,000 sacks of cleansed
oysters to approximately $10 million. We believe that multiplying these numbers
by the thousands of oyster bed acres located in "restricted or closed-area"
waters in other Gulf and Atlantic states and the economic impact potential of
the oyster cleansing process becomes readily apparent.
Nireus/Chios Aquaculture S.A.
We have selected Nireus as a potential strategic partner because of its
demonstrated intention to enter into a relationship with BioMarine, its breadth
of experience in the fisheries and aquaculture industry, its respect for the
environment and fisheries industry practices, and its overall commitment to
excellence. Nireus was established in 1988 and located its operations on the
island of Chios, in the Aegean Archipelago, Greece. It is now the largest and
fastest growing marine-aquaculture company in Greece and has assets exceeding
U.S. $100,000,000. It operates three marine hatcheries and eleven grow-out cage
farms in Greece and has approximately 520 employees, including four Ph.Ds. Its
seafood products are widely known for their consistently high quality. No
assurance can be given however that a formal relationship with Nireus will be
achieved.
34
On August 4, 2000, BioMarine received a letter from Nireus indicating
that it could undertake a full feasibility study of the BioMarine sites in Texas
and Alabama. Nireus and BioMarine have agreed to commence the site review during
the week of October 8, 2000. Subject to Nireus's continued interest, BioMarine
expects that Nireus and BioMarine will work together to accomplish the
following:
1. Feasibility Study
The confirmation by Nireus of our research efforts and NOAA's favorable
1999 feasibility study which is intended to examine all the technical points of
the project with Nireus, pointing out the crucial factors which will influence
construction and operation. The feasibility study will also examine economic
aspects of the project (cost, economic viability etc).
Nireus's compensation for the initial feasibility study is expected to
be $150,000 plus.
2. Memorandum of Understanding
On commencement of the feasibility study BioMarine and Nireus intend to
proceed to the signing of a Memorandum of Understanding, which shall define the
framework of the two companies' future cooperation, consisting in Nireus's
know-how transfer. The details of the management and technical know-how transfer
arrangements from Nireus to BioMarine shall be negotiated based on the technical
results of the feasibility study at which time Nireus would determine whether it
will participate in BioMarine's mariculture project and, if so, in what
capacity, i.e. partnership joint venture, or in a management capacity.
3. Management and Technical Know-how Transfer
Upon completion of the above under steps 1 and 2, and subject to the
successful results of the feasibility study, Nireus is expected to transfer its
management and technical know-how to BioMarine and provide services as follows:
(i) prepare a biological selection and description of the species
for cultivation in the Gulf of Mexico;
(ii) conduct an implementation study;
(iii) supervise construction;
(iv) supervise hatchery and grow-out operations;
(v) prepare manuals of procedures for operating units.
BioMarine Activities to Date
BioMarine's activities to date have been mainly limited to
assisting in the development of the Sea Trek Ocean Farming System and
researching the potential of the Sea Star Oyster Relay System, securing licenses
and permitted sites for mariculture operation and raising capital from
investors.
35
BioMarine has conducted testing of the Sea Star System off the coast of
Mississippi and test-marketed the oyster products.
First Site - Texas
BioMarine has received permits to co-operate with GMIT in a
500-acre permitted project site located in Texas State waters in Matagorda
County, Texas. On June 4, 1999, the U.S. ACOE issued Permit No. 11830(09), an
amendment modifying the project purpose of the permit to change the use of an
existing oil platform complex owned by GMIT from extraction of petroleum
products to commercial mariculture production at a site in the SW/4 of State
Tract 526-L, Matagorda Anchorage Area. If BioMarine is able to raise the
necessary capital, a minimum of $9.0 million, (of which there is no assurance),
the Texas Sea Trek Ocean Farming project is planned to be BioMarine's first
offshore mariculture project.
Although BioMarine is named on the ACOE permit to use the Texas
platform for development of the project, the lease for the platform site is only
in the name of GMIT as the lessee.
We have entered into a Commercial Development Agreement with GMIT
which permits us to develop the platform and surrounding area for mariculture
purposes. The agreement requires us to pay $260,000 per year for ten years into
an escrow fund to cover costs associated with the eventual decommissioning of
the platform. We have also agreed to indemnify GMIT and obtain insurance in
connection with the use of the platform. The agreement provides for a royalty
payment to GMIT of 10% of the net profits derived from our commercial use of the
platform.
The Texas General Land Office has notified GMIT that it intends to
deny GMIT the right to use their platform complex at the Texas site for
acquaculture purposes, which could preclude the development of our systems at
this site. GMIT acquired a 50 year lease to the Texas platform site by an
Assignment and Assumption Agreement, dated September 18, 1998, which was
executed by the then-Commissioner of the Texas General Land Office. However, on
May 12, 1999, the new commissioner of the Texas General Land Office changed its
prior position and notified GMIT by letter from its General Counsel that it
intends to deny GMIT the right to use the platform area to establish the
mariculture operation on the platform. GMIT has filed suit to challenge the
General Land Office's denial of its rights to the platform. We intend to assume
GMIT's rights under this agreement in order to develop our system at the Texas
site. If GMIT is unsuccessful in its suit, we will be unable to develop this
system. We anticipate that in such an event, we would proceed with our
development plans for our alternative site in Alabama. In addition, if GMIT is
unsuccessful in its litigation, we may contract to pay to have the platform at
the Texas site dismantled and moved to the Alabama site at a substantial cost.
Second Site -- Alabama
The second proposed Sea Trek Ocean Farming project may involve the
acquisition or lease of a salvaged oil and gas production type platform for the
Alabama permitted site if the Texas platform complex is too expensive to move to
Alabama. We have not yet contracted for such acquisition or lease. The platform
may be donated, refurbished or acquired prior to abandonment or be purchased as
a refurbished platform, from a firm such as J. Ray McDermott International that
salvage oil and gas industry platform complexes worldwide. The acquisition and
renovation of such a platform is expected to require about six months. In
addition, if we are unable to locate a platform for donation or just prior
36
to abandonment, BioMarine could incur additional costs to pay for the platform.
This is not part of our budgeted use of proceeds of this offering and so would
require additional equipment financing.
On November 2, 1993, the United States Army Corps of Engineers
issued a Department of the Army Final Permit Number AL93-01004-M authorizing
BioMarine to construct and site the Sea Trek Ocean Farming project at the
proposed 13-acre location within a 500 acre area designated for commercial fish
farming. The permit was renewed on April 27, 1999 and extended until September
30, 2002. The project location is in the Gulf of Mexico approximately four miles
southeast of Fort Morgan, Alabama. BioMarine has received all permits required
for its finfish ocean platform mariculture operations at this 13-acre site.
The United States Environmental Protection Agency Region IV in
Atlanta, Georgia issued BioMarine a National Pollutant Discharge Elimination
System (NPDES) Permit Number AL0067237 on September 20, 1994 and is in the
renewal process and expected to be issued prior to year end 2000. On August 10,
1993, the Alabama Department of Environmental Management certified the proposed
project to meet coastal management certification requirements. On September 22,
1993, the Exxon Company, U.S.A. granted BioMarine permission to install and
operate a mariculture platform in Exxon's mineral lease in Block 827 in the
Mobile area of the Gulf of Mexico.
Insurance
BioMarine intends to obtain the normal and necessary insurance
coverage for its property and operations. In this connection, BioMarine intends
to apply for crop mortality catastrophic insurance coverage, which is currently
offered in the USA by a leading AA+ Rated Casualty Insurance Company, on its
fish and oyster operations when these systems are installed and operational.
BioMarine hopes to be able to purchase 20% deductible coverage against loss
from disease, flood and tidal wave, storm damage, subsidence, land slip,
structural or mechanical problems, environmental problems and malicious acts or
theft.
Although BioMarine has determined that seafood crop insurance is
available, there can be no assurance that BioMarine will be able to obtain crop
mortality insurance coverage of any kind or type until it obtains successful
production of seafood products.
Sea Farming Products
We intend to have a broad product mix, focused on the following
three major categories: fish products, juveniles, and other products. Fish
products will be the dominant product line of BioMarine and will comprise
finfish from grow-out farms, oysters and mollusks.
1. Fish Products
Finfish products include indigenous species developed primarily
for local and export markets. These fish will be sold live or chilled, whole or
gutted. Modern harvesting techniques allow for a shelf-life of up to two weeks
versus three to seven days for the same fish derived from capture fisheries.
BioMarine intends to produce significant quantities of chilled finfish as it
commands a higher price than frozen finfish, although it limits the market reach
due to shorter shipping distance.
Internationally, BioMarine's finfish production will compete in
the high-value marine finfish market segment which had an estimated consumption
of 18.1 MMT in 1995 supplied by both
37
capture fisheries and aquaculture production. (FAO Stat. Database Results
(1998); FAO Annual Yearbook, Vol. 81, 1995, "Fisheries Statistics Commodities,"
Rome, (1997); FAO Circular No. 815, Revision 9, "Aquaculutre Production
Statistics 1986-1995." Rome (1997) Many of the species from the capture
fisheries, however, are being over fished and exploited beyond sustainable
development, thus opening market opportunities for aquaculture production. FAO
Press Release 98/31, "FAO: Future of Fish for Food depends on Better Management
of Oceans," Rome/Lisbon, (May 19, 1998); Scientific American, Safina, C., The
World's Imperiled Fish," (November 1995))
2. Juveniles
Juveniles will be produced for BioMarine's own grow-out facilities
as well as for other facilities in the region. Potential demand for marine
finfish juveniles in the Gulf of Mexico beyond 10 years could be more than 100
million juveniles per year. Although marine aquaculture is a newly developed
industry in the U.S. Gulf region, there are only a few U.S. States, such as
Maine, Washington State, and Texas that have created marine aquaculture farms.
At the present time, no state in the Gulf region, however, has developed the
advanced, large-scale hatcheries that BioMarine intends to implement.
BioMarine also envisions an additional market for juvenile
products that consists of state and federal governments who buy juveniles to
restock wild fisheries. Most of the commercially important stocks destined for
human consumption are fully exploited and natural stocks are decreasing. Stock
enhancement programs, which include the enrichment of natural stocks by
juveniles artificially reproduced in hatcheries, are commonly practiced
worldwide and have already been implemented in Texas for redfish. We believe
that BioMarine will be able to offer a good product for stock enhancement
programs and will actively pursue this market opportunity.
3. Other Programs
BioMarine may also provide complimentary products and services,
such as consulting services, equipment and fish-feed, to both its own and other
grow-out facilities in the region.
Research and Development
Developing and managing aquaculture requires capital investment,
management expertise and supporting technology. Keeping abreast of advances in
technology is critical to maintaining a competitive edge in the aquaculture
industry.
BioMarine is committed to implementing cost-effective, advance
aquaculture technology. In doing so, we intend to actively pursue research and
development activities that add value to BioMarine's business. BioMarine will
work in conjunction with both government and university research centers in the
region to develop methods for increasing production of indigenous species to a
viable commercial level for both farming and wild stock enhancement. The
majority of research and development will be carried out at the Texas hatchery
with, if a definitive agreement is entered into, support from Nireus's research
facilities in Greece.
38
Material Contracts
Non-Exclusive Patent License Agreements
We have entered into a Non-Exclusive Patent License Agreement,
dated as of February 4, 2000, with John D. Ericsson, our president. Pursuant to
this agreement, Mr. Ericsson has granted BioMarine and its subsidiary, Sea Star
Industries, Inc., a non-exclusive license to manufacture, use, sell and
otherwise practice the patented "Oyster Cleansing/Purification Array." This is
the technology which underlies the Sea Star Oyster Relay System. Pursuant to the
license agreement, we are to pay Mr. Ericsson five percent of the gross sales
from the processing of shellfish and from any receipts from the sale of the
equipment. We are also to pay Mr. Ericsson 10 percent of lease receipts due us
on the equipment, less manufacturing, labor and material costs. These fees
pertain to all devices made or used under the patent held by Mr. Ericsson.
We have entered into a similar Non-Exclusive Patent License
Agreement, dated as of February 4, 2000, with Mr. Ericsson, pursuant to which
Mr. Ericsson has granted BioMarine and its subsidiary, Sea Trek Industries,
Inc., a non-exclusive license to manufacture, use, sell and otherwise practice
the patented "Open Water Mariculture System." This is the technology which
underlies the Sea Trek Ocean Farming System. The royalty payments under this
agreement are on the same terms as the license agreement involving Sea Star
Industries, Inc. described above. Similarly, these fees pertain to all devices
made or used under the patent held by Mr. Ericsson.
Target Markets
We plan to target three markets for our products:
1. The United States: the major market for local species from
mariculture projects, a small quantity of imported non-indigenous
species and selected products from the processing plant.
2. Europe: for processed products and indigenous species from
BioMarine's finfish grow-out facility and oyster operations,
subject to obtaining approval from the European Commission to
export fish products from the U. S. to the countries of the
European Union.
3. Japan: for indigenous species from BioMarine's grow-out facility
and oyster operations.
The fish industry serves a global market and international trade
of fish products has risen from US $17 billion in 1985 to US $52 billion in
1995. (FAO, The State of World Fisheries, etc.) With the exception if 1994, when
trade in lower-value products increased substantially due to an increase in fish
meal and fish oil production, the value of shipments has grown faster then the
volume, indicating rising prices. The industry's products comprise a mix of
low-value commodities, such as fishmeal, as well as high-value species, such as
crustaceans (shrimp, lobster), fin-fish (cod, groupers, salmon, sea breams, and
sea bass) and cephalopods (octopus, squid and cuttlefish) . (FAO Annual
Yearbook, etc.)
The major importers of fish and oyster products are the developed
countries. The European Union countries (EU), Japan and the United States
accounting for about US $43.4 billion or 77% of world fish imports by value in
1995. The EU was the largest importer at US $18.5 billion, followed closely by
Japan with US $17.8 billion and the United States with imports valued at US $7.1
billion.
(FAO Annual Yearbook)
Gulf Seafood Markets
39
Texas, the largest and most populated Gulf state, had a population
of 18.7 million people in 1995 and is ranked as the second most populated state
in the United States. By 2000, the population is expected to be 20.1 million and
is projected to grow by 7.1 million to 27.2 million by 2025. As a result, the
market for seafood within a 250 mile proximity of our Port O'Connor, Texas
operations site is tremendous with Houston, San Antonio, Austin and Dallas/Ft.
Worth, Texas being some of the largest cities in the United States. Texans are
currently creating a huge demand for quality seafood based upon average seafood
consumption, currently at approximately 15 pounds per person per year, which
equals approximately 315,000,000 (three hundred fifteen million) pounds per year
of seafood consumed in Texas alone.
As the Baby Boom generation (those born between 1946 and 1964)
reaches retirement age, the need to eat less animal fat and maintain healthy
diets with seafood will become more important, thus an expected increase in
seafood consumption should occur in Texas, Louisiana, Mississippi, Alabama and
Florida as well as throughout the United States in general. BioMarine intends to
be the largest, lowest cost producer of farmed seafood products in the Gulf of
Mexico region.
BioMarine plans to market its seafood products initially to
regional processors. These HACCP approved processing plants represent a major
market outlet for our new, farm reared products. In addition, these plants may
be employed to process our company's products on a contract basis until we
establish our own processing plants.
There is one HACCP approved processing plant located in Port
O'Connor, Texas, which is within 12 nautical miles from the Texas mariculture
platform complex.
The Alabama permitted site has several approved processing plants
including three located in Bayou LaBatre, Alabama, which is within 30 miles of
the operations site.
Eventually, BioMarine intends to transport its processed seafood
in refrigerated containers within 24 hours of harvest directly into the regional
and international wholesale and retail markets via shipment by ground and
airfreight similar to the way our strategic partner, Nireus Chios Aquaculture
S.A. of Greece, ships Mediterranean products to European and Asian consumers.
Competition
The maritime aquaculture industry is highly competitive and
consists of substantial competing companies and organizations worldwide. Our
competitors will include other aquaculture producers that supply fish and frozen
fish products in our target markets. We will also compete, to lesser extent,
against other fish processing in the region whose product is derived from the
capture fisheries. More than half of the industry's revenues are generated by
the largest ten maritime aquaculture companies and organizations, and the
remainder are attributable to other substantial companies and organizations.
More than ten companies worldwide have annual revenues in excess of $100
million. Thus, there is a substantial number of companies and organizations
worldwide that could compete with BioMarine, either directly or indirectly, in
its markets, all of which have been established longer and have substantially
greater financial resources than BioMarine.
However, we know of no other mariculture ventures other than
BioMarine currently permitted or planning to operate in the Gulf of Mexico, nor
are there any other mariculture ventures that
40
are permitted by the State of Alabama, Texas or the Federal government to
operate in the Gulf of Mexico. Commercial finfish bans and size limits on most
species are in place throughout the Gulf of Mexico. A few hatcheries are
producing insignificant quantities of fingerlings. Mariculture competition in
the Gulf is expected to be minimal for the next several years. BioMarine
believes that it has the potential to develop into the largest and most advanced
finfish/oyster production facility in the Alabama and Texas areas of the Gulf of
Mexico and within the United States.
Business Strategy
Our business strategy is to gain a competitive advantage over
other aquaculture producers by producing fast-growing, high-value fish products
at low-cost from species that are indigenous to the Gulf of Mexico with "state
of the art" technology provided by Nireus should we be successful in entering
into a definitive agreement with Nireus.
Lower costs are made possible by the Gulf's warmer water that
extends the growing season and utilizes the most cost effective proven
management systems for operating projects. BioMarine intends to arrange to
harvest its fish products when the natural fisheries supply industries
(commercial trawling and oystermen are dormant. This will present an opportunity
to obtain higher prices for its fish and oyster products when demand is high and
supply is low.
At present, the weakest link in the finfish market chain is the
inability to provide a stable and timely supply of particular fish species with
a guaranteed level of quality and freshness that can meet consumer and
restaurant demand. If any company could satisfy that demand, it would virtually
sell its fish before they are caught. BioMarine's finfish grow-out operations
intend to take advantage of this situation by producing a consistent size an
quality of finfish on a year round basis. The traditional market calls for a two
to three pound fish that yields two, eight to ten ounce filets. Therefore,
BioMarine proposes to rear a two to three pound fish in five months for mahi
mahi and cobia and 12 to 14 months for redfish, snapper and grouper. We intend
to build the name BioMarine into a nationally known brand name seafood product
that will be trademarked, as "Sea Pride," advertised by name and asked for by
name because of its proposed guaranteed high quality and freshness.
Recent articles in the Wall Street Journal and Consumer Reports
highlight the very legitimate concerns f consumers who have discovered that
seafood products available to them in restaurants, supermarkets or other outlets
are not only not fresh and not U.S. Government inspected, but these foods may be
actually hazardous to their health. Since BioMarine's fish will be grown in a
controlled natural environment in the interest of producing the highest quality
fish and oysters, BioMarine intends to have each harvest inspected by the U.S.
Department of Commerce in order that the fish can be packaged under new FDA
processing requirements. The demand for quality and consistency of seafood
supply is so great that BioMarine has received letters of interest from a major
U.S. seafood distribution company regarding exclusive rights to market all the
seafood that BioMarine may produce.
Initially, BioMarine intends to produce whole-unprocessed finfish
and oysters for sale to existing third-party processors. However, once minimum
production levels are reached, BioMarine plans to focus its marketing efforts on
filet products that are vacuum sealed for extended shelf life, prepackaged with
and without nationally recognized seasonings, including smoked or blackened
recipes, and in various sizes of microwaveable containers for restaurants,
gourmet specialty retailers, catering companies, supermarkets and other
institutional markets. BioMarine believes that a substantial market
41
is available worldwide for these packaged filet products at $10 to $12 per
pound. Marketing studies will be conducted by BioMarine and Nireus to determine
alternatives for all products reared during the first 18 months of commercial
operations.
In the longer term, BioMarine anticipates that the successful
operation of its facilities will encourage growth of the industry in the region
and create commercial opportunities for others to develop grow-out facilities.
BioMarine's management believes that its establishment of local commercial
hatcheries and grow-out facilities is likely to create a base industry that can
supply other grow-out facilities. Other companies that operate grow-out
facilities will complement BioMarine's business by providing additional
customers for juvenile sales and its integrated businesses such as fish- feed
and equipment, as well as providing additional production for the marketing and
distribution.
BioMarine will also enhance its competitive position, through both
vertical and horizontal integration activities. In the short-term, BioMarine
will integrate operations vertically from hatcheries operations to grow-out
facilities to production of mariculture products. From production, it will
integrate forward into the marketing and distribution of its products. It will
also integrate backward from hatchery and grow-out operations into the
manufacturing of feed and equipment used in the facilities. BioMarine will later
integrate operations horizontally by investing in aquaculture companies
operating in other parts of the world. This activity will benefit the forward
integration into marketing, distribution and sales by providing additional
products to sell.
BioMarine will pursue the objective of integration under the
careful guidance and approval of the Board of Directors and will staff a
separate division to explore, develop and negotiate acquisitions and strategic
alliances necessary to achieve the objective. The following diagram provides an
overview of the proposed integration. Details of the strategy are discussed
below.
Integration
Key forward integration will be into the distribution, marketing
and selling of BioMarine's products in the target markets. Potential activities
include establishing an alliance with Nireus, or creating a subsidiary
distribution company. BioMarine also plans to assess the benefits and
profitability of establishing retail outlets with Nireus to ensure market access
for its products and to provide immediate sales and cash flow and vital market
information.
Trademark, Copyright, Patent and Intellectual Property Rights
BioMarine intends to file trademark and copyright applications relating to
BioMarine's "Sea Pride Seafood" products and the state-of-the-art marine farming
production systems including the Sea Trek Ocean Farming and Sea Star Mollusk
Cleansing systems developed by John D. Ericsson. If trademarks or copyrights
were to issue, there can be no assurance as to the extent of the protection that
will be granted to BioMarine as a result of having such trademarks or copyrights
of that BioMarine will be able to afford the expenses of any complex litigation
which may be necessary to enforce their intellectual property rights. Failure of
BioMarine's proposed trademark and copyright applications may have a material
adverse impact on BioMarine's business. Except as may be required by the filing
of trademark and copyright applications, BioMarine will attempt to keep all
other proprietary information secret and to take such actions as may be
necessary to ensure the results of its development activities are not
42
disclosed and are protected under the common law concerning trade secrets. Such
steps will include the execution of non-disclosure agreements by key Company
personnel and may also include the imposition of restrictive agreements on
purchasers of BioMarine's products and services. There is no assurance that the
execution of such agreements will be effective to protect BioMarine, that
BioMarine will be able to enforce the provisions of such non-disclosure
agreements, or that technology and other information acquired by BioMarine
pursuant to its development activities will be deemed to constitute trade
secrets by any court of competent jurisdiction.
Government Regulation
Regulation of the maritime aquaculture field has been increasing and
evolving. Although state laws regulating the maritime aquaculture field vary
from state to state, BioMarine's belief is that such state regulation will have
only indirect and minimal effect on its operations in the near term. BioMarine
is unable to predict what government regulations, if any, will directly or
indirectly affect its business. The maritime aquaculture industry is undergoing
substantial changes, many of which result from cost containment pressures
technological advances and regulatory efforts to respond to these developments.
BioMarine cannot accurately predict the extent to which future changes in
maritime aquaculture costs, treatment technology and industry regulations will
affect its operations or profitability.
A stock-assessment study conducted by scientists from the National
Marine Fisheries Service (NMFS) concluded that the high rate of inshore fishing
of juvenile fish will reduce the spawning of stock below a level at which
recruitment over fishing will occur. When recruitment over fishing occurs, the
number of spawning fish is not adequate to maintain the population. If this
happens, the entire fishery will collapse and may require decades of no fishing
in order to possibly recover. State, Federal and university scientists have
concluded that the inshore exploitation rates have been and continue to be
higher than the level that is required to maintain the spawning stock. The NMFS
study indicated that in order to ensure an adequate stock of spawning fish, the
spawning stock should not be reduced below 20 to 40 percent of the stock size
that existed before any fishing occurred. Therefore, the condition of the
fishery is not good, and significant regulatory actions are being taken in order
to assure that the spawning stock is restored and maintained. These regulatory
actions have resulted in restricted harvest levels for fishermen in the near
term, and will continue for some time in order to increase long-term
productivity from the fishery.
BioMarine's sea farming technologies, when fully developed, could
result in the ability to restock the natural marine environment with fast
growing farm reared gulf species and thus reduce some of the pressure on wild
stocks for human food production and with further research, cold water species
as well.
The Gulf states are taking actions to regulate the inshore fishery to
allow a minimum escapement level of 20 percent of the fish that would have
escaped had there been no fishery. This means that 20 percent of each year-class
of fish should be allowed to survive in the inshore fishery so they might
migrate to the offshore spawning stock. Considering that annual escapement
levels in Florida have been as low as one percent of each year-class as early as
1965, and much below 20 percent for other states in recent years, even attaining
a 20 percent escapement level will require several years of strict regulation.
According to the Recreational and Commercial Fishing Regulations for
the Gulf of Mexico Federal Waters, January 2000, which is prepared by the Gulf
of Mexico Fishery Management Council, it is illegal to possess or harvest
redfish from federal waters of the Gulf of Mexico.
43
Actions by the states to increase escapement of juvenile fish to the
spawning stock will similarly reduce harvest for inshore waters. Texas Parks and
Wildlife Department, which recognized over-fishing was occurring in their
fishery in the mid 1970s, implemented more restrictive rules to reduce fishing
harvest levels. Based on a legislative mandate, Texas implemented a prohibition
on the sale of redfish in 1981. Presently, these regulations provide for a limit
of three fish ranging in size from 20 to 28 inches in length for recreational
fishing only. (Texas Parks and Wildlife Department - Bag and Size Limits for
Saltwater Fish 2000-2001)
Florida has declared redfish a protected species. The bag limit for
redfish in Florida is one per day. (Florida Fish and Wildlife Conservation
Commission). Florida is also considering passing legislation to halt or place a
moratorium on commercial net fishing because the offshore waters are being
stripped of commercial fish and other sea life. Alabama prohibits the sale of
redfish from its waters and is presently considering reduced bag and size limits
for their fishery. Mississippi limits the commercial catch to a 200,000-pound
annual quota and the recreational catch by size and bag limits of 10 fish.
Louisiana's legislature closed redfish harvest until 2001 and reviews this issue
annually.
Employees
As of the date of this prospectus, BioMarine employs two full time
employees, Mr. John D. Ericsson and Ms. Sharon Bennett. Of these full-time
employees, Mr. Ericsson, BioMarine's President, is engaged in administration and
finance, and Ms. Bennett, BioMarine's Secretary, is engaged in the management of
the office, administrative duties and bookkeeping.
Within the 12 months following the closing of this initial public
offering, BioMarine intends to hire approximately five additional full-time
employees. Of these additional full-time employees, one employee is planned to
be engaged in administration and finance, one is to be engaged in development,
marketing, sales and strategic planning and three are to be engaged in the
engineering, development, construction, operation, and maintenance of the Sea
Trek Ocean Farming System and the Sea Star Mollusk Cleansing System. Other
consultants and specialists will be hired as independent contractors for
specific projects required by BioMarine. (See "Technical Consultants.")
BioMarine believes that is future success will depend in large part
upon its ability to recruit and retain qualified professional personnel.
Competition for qualified professional personnel is intense, particularly in the
geographical area in which BioMarine is located.
Facilities
BioMarine's principal executive office currently occupy approximately
1000 square feet of leased space located at 1198 Gulf Breeze Pkwy., Suite. 8A,
Gulf Breeze, Florida 32561. BioMarine's telephone number is (850) 934-8888 and
its facsimile number is (850) 934-8889.
BioMarine believes that its current facilities will meet BioMarine's
office needs until the closing of this offering, and that suitable facilities
will be available when, and if needed, to accommodate BioMarine's future
operations.
44
Legal Proceedings
We are aware of no legal proceedings pending either against BioMarine
or any of its subsidiaries.
45
MANAGEMENT
The officers and directors of BioMarine are as follows:
Name Title
John D. Ericsson President, Chief Executive Officer, Director
Edwin W. Cake, Jr., Ph.D. Director, Chief Science Officer
Sharon K. Bennett Secretary/Treasurer
John W. Hemmer Director, Chief Financial Officer
Dr. S. Randall Hobgood Director
All directors of BioMarine hold office until the next annual meeting of
shareholders or until their successors are elected and qualified. At present,
BioMarine's Bylaws provide for not less than one director nor more than nine.
Currently, there are four directors of BioMarine. The Bylaws permit the Board of
Directors to fill any vacancy and such director may serve until the next annual
meting of shareholders or until his successor is elected and qualified. Officers
serve at the discretion of the Board of Directors. There are no family
relationships among any officers or directors of BioMarine. See "Certain
Transactions."
John D. Ericsson, 53, has been Chief Executive Officer and President of
BioMarine Technologies, Inc. since its inception in 1989. Since 1995, he has
served as Managing Director and President of Gulf Marine Institute of
Technology, a 501-(c)(3) publicly supported, non-profit research institute,
where he has supervised marine research and acquired $7.0 million in equipment
and grants for mariculture development. From 1982 to 1989, Mr. Ericsson was an
independent consultant in the fields of energy, cogeneration and marine
aquaculture to various companies and institutions in the United States. From
1977 to 1982, Mr. Ericsson was an officer and director of an independent oil and
gas company that developed over $10.0 million in oil and gas reserves. Mr.
Ericsson holds a B.S. degree in business management and marketing from the
University of Tulsa and is listed in Who's Who of American Inventors 1996-1998,
holding U.S. Patents numbers 5,438,958, DES 362,508 for the Sea Trek Ocean
Farming System and 5,628,280 for the Sea Star Oyster Relay System. He is a
member of the World Aquaculture Society, the Aquacultural Engineering Society
and has been honored by the Massachusetts House of Representatives for "his
outstanding contributions to the fishing industry." Mr. Ericsson and BioMarine's
mariculture systems were featured in the October 23, 1995 issue of Forbes
Magazine in the Science and Technology section. In October 1996, the Florida
Department of Banking and Finance filed an Administrative Complaint against Mr.
Ericsson and BioMarine, alleging violations of certain provisions of the Florida
Securities and Investor Protection Act in connection with the unregistered offer
and sale of securities, including omitting to disclose material information to
investors in the offering. The matter was settled pursuant to a Stipulation and
Consent Agreement with Final Order pursuant to which BioMarine paid a fine of
$35,000. Mr. Ericsson divides his time evenly between BioMarine and Gulf Marine
Institute of Technology, devoting extra time to one or the other as required to
address particular issues.
Edwin W. Cake, Jr., Ph.D., 59, has been a director and Chief Science Officer of
BioMarine since 1993. From 1994 to 1998, he served as President and a Director
of Sea Star Industries, Inc., a subsidiary of BioMarine and a director of Gulf
Marine Institute of Technology since 1995. Dr. Cake served as Aquaculturist and
Secretary/Treasurer of Nauticulture Systems, Inc., from 1988 to 1991. From 1973
to 1986, Dr. Cake was a Senior Research Scientist and Section Head of the Oyster
Biology Section of the
46
Gulf Coast Research Laboratory, a marine research institute in Ocean Springs,
Mississippi. From 1975 to January 2000, Dr. Cake was an Adjunct Professor of
marine science and environmental science at the University of Southern
Mississippi. Dr. Cake is a Senior Environmental Consultant to various private
and public institutions. A former member of the Executive Committee of the U.S.
EPA's Gulf of Mexico Program, he has also served as president of the National
Shellfisheries Association. Dr. Cake holds B.S., M.S., and Ph.D. degrees in
Marine Biology and Biological Oceanography from Florida State University.
Sharon Bennett, 42, is Secretary/Treasurer of BioMarine and has been with
BioMarine Technologies, Inc. since August 1995, initially employed as
Administrative Assistant and since March 1996, has held the position of Office
Manager and Secretary/Treasurer. From September 1994 through February 1995, Ms.
Bennett was Office Manager for Nelson Architectural Woodworking and Design in
Pensacola, Florida. From February 1991 through August 1994, she held the
position of Production Manager for Thrifty Nickel Want Ads in Pensacola,
Florida. From March 1984 through January 1991, Ms. Bennett was Composing
Supervisor for six weekly newspaper publications of Gulf Coast Newspapers in
Robertsdale, Alabama.
John W. Hemmer, 72, has served as a consultant and a director of BioMarine since
1989 and was named Chief Financial Officer in February 2000. He also has been a
director of the Gulf Marine Institute of Technology since 1998. Mr. Hemmer has
worked as an independent business and financial consultant since June 1999. From
October 1995 to June 1999, Mr. Hemmer served as Vice President of Finance,
Treasurer, Chief Financial Officer and a director of Paradigm Medical
Industries, Inc., a manufacturer and marketer of surgical and diagnostic
equipment for the eyecare industry, which is currently seeking clearance from
the FDA to market the first laser cataract surgery system. He continues to
serves a Paradigm's Chief Financial Officer. From August 1991 to December 1994,
Mr. Hemmer served as Secretary, Treasurer and a director of Belize
Agro/Industrial Development, Ltd., which established the first Free Trade Zone
in Belize built around a core business of seafood products for the export
market. He was President and Chief Executive Officer of John W. Hemmer, Inc., a
registered broker/dealer from May 1987 to May 1989, which subsequently changed
its name to Westfalia Investments, Inc., but retained his registered
representative status until March 1995. Prior thereto, he was Vice President of
Bankers Trust Company in charge of venture capital, Vice President of Corporate
Finance at Dempsey, Tegler and Company, Inc., a senior security analyst at
Lazard Freres & Company and an Investment Officer of The Chase Manhattan Bank.
Mr. Hemmer received his M.S. degree from Columbia University Graduate School of
Business and a B.A. degree from Queens College.
Dr. S. Randall Hobgood, 57, has been a director of BioMarine since December
1998. Dr. Hobgood has been a Vice President of Pensacola Radiology Consultants,
P.A. since January 1975, where he has concentrated on diagnostic studies. Dr.
Hobgood holds a B.E.E. in electrical engineering, an M.S. in Radiation
Biophysics and an M.D., each from the University of Florida.
Committees
Our Bylaws allow the board of directors to designate one or more
committees, including an audit committee, an executive committee and a
compensation committee. The board of directors currently has not exercised this
authority. However, in keeping with the listing requirements of the Nasdaq
SmallCap Market, we plan to establish an audit committee of the board of
directors, consisting of a minimum of two independent directors, prior to
submission of our listing application.
47
Employment Agreements
BioMarine has entered into employment agreements with its Chief
Executive Officer and President, John D. Ericsson, and its Secretary/Treasurer,
Sharon Bennett. Each of these agreements provides for a term of three years from
the date of this prospectus and is terminable on 60 days' notice by either
BioMarine or the employee. Mr. Ericsson's agreement provides for a salary of
$120,000 for the first year of his term, and Ms. Bennett's provides for a salary
of $36,000. Salaries for the remainder of the term under both agreements are to
be determined by the board of directors. Each agreement provides for a bonus,
discretionary with BioMarine, based on our profitability and the performance of
the employee. Each agreement also provides for the right to participate in our
ordinary employee benefit plans and death and disability compensation. Both
agreements contain non-disclosure and non- competition provisions.
Conflicts of Interest
Management of BioMarine has other financial and business interests to
which a significant amount of time is devoted that may pose certain inherent
conflicts of interest. BioMarine may, in the foreseeable future, enter into
employment agreements with certain officers of BioMarine. There can be no
assurance that management will resolve all conflicts of interest in favor of
BioMarine. Failure of management to conduct BioMarine's business in its best
interest may result in liability of the management to BioMarine. Mr. Ericsson
divides his time evenly between BioMarine and Gulf Marine Institute of
Technology, devoting extra time to one or the other as required to address
particular issues.
Limitation on Liability of Directors
As permitted by Delaware law, BioMarine's Certificate of Incorporation includes
a provision which provides that a director of BioMarine shall not be personally
liable to BioMarine or its stockholders for monetary damages for a breach of
fiduciary duty as a director, except (i) for any breach of the director's duty
of loyalty to BioMarine or its stockholders, (ii) under Section 174 of the
General Corporation Law of the State of Delaware, which prohibits the unlawful
payment of dividends or the unlawful repurchase or redemption of stock, or (iv)
for any transaction from which the director derives an improper personal
benefit. His provision is intended to afford directors protection against and to
limit their potential liability for monetary damages resulting from suits
alleging a breach of the duty of care by a director. As a consequence of this
provision, stockholders of BioMarine will be unable to recover monetary damages
resulting from suits alleging a breach of the duty of care by a director. As a
consequence of this provision, stockholders of BioMarine will be unable to
recover monetary damages against directors for action taken by them that may
constitute negligence or gross negligence in performance of their duties unless
such conduct falls within one of the foregoing exceptions. The provision,
however, does not alter the applicable standards governing a director's
fiduciary duty and does not eliminate or limit the right of BioMarine or any
stockholder to obtain an injunction or any other type of non-monetary relief in
the event of a breach of fiduciary duty. BioMarine believes this provision will
assist in securing and retaining qualified persons to serve as directors.
48
EXECUTIVE COMPENSATION
BioMarine has not paid any compensation exceeding $100,000 to its
executive officers from its inception through the date of this Prospectus. The
following table sets forth the annual compensation for Mr. Ericsson, BioMarine's
President and Chief Executive Officer, who receives a salary of $96,000 per
year:
Long Term Compensation
- ---------------------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
- ---------------------------------------------------------------------------------------------------------------------
Securities
Name and Principal Other Annual Underlying All Other
Position Year Salary Bonus Compensation Options Compensation
- ---------------------------------------------------------------------------------------------------------------------
John D. Ericsson, 1997 $96,000
President and Chief 1998 $96,000 --
Executive Officer 1999 $96,000
- ---------------------------------------------------------------------------------------------------------------------
If funds are available, BioMarine plans to pay John D. Ericsson an
annual salary of $120,000. BioMarine does not anticipate paying any other
officer or director an annual salary in excess of $60,000 during fiscal year
2000. The officers and employees of BioMarine will receive an overall group
insurance plan providing health, life and disability insurance benefits. The
amount allocable to each individual officer and employee cannot be specifically
or precisely ascertained, but in any event, will not exceed $5,000 per annum as
to each individual. In lieu of salary for past uncompensated services, BioMarine
granted and conveyed title and the proprietary rights to the Sea Trek Ocean
Farming System and Sea Star Oyster Relay System to John D. Ericsson. See
"Certain Transactions."
49
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table lists the number of securities underlying
unexercised options at the date of this prospectus:
==============================================================================================================================
Number of Value of Unexercised In-the-Money
Securities Options at FY-End
Underlying
Unexercised Exercisable/
Options at FY-End Unexercisable
Shares Acquired on Value Realized Exercisable/
Name Exercise Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------
John D. Ericsson -- -- -- /1,000,000
==============================================================================================================================
PRINCIPAL AND SELLING SECURITY HOLDERS
The shares of common stock may be offered and sold from time to time by
the shareholders or by their transferees, pledgees, donees or their successors
pursuant to this prospectus. The following table sets forth certain information
about the selling shareholders. Except as otherwise provided, none of the
selling shareholders has, or within the past three years has had, any position,
office or other material relationship with BioMarine or any of its predecessors
or affiliates. Because some of the selling shareholders may offer all or some
portion of the shares pursuant to this Prospectus, no estimate can be given as
to the number of shares of common stock that will be held by the selling
shareholders upon termination of any such sales.
In addition, the table sets forth certain information concerning the
beneficial ownership of our common stock as of the date of this prospectus, by
(i) each person known by us to be the beneficial owner of more than 5% of our
common stock, (ii) each of our named executive officers, (iii) each of our
directors, and (iv) all directors and executive officers as a group. Unless
otherwise indicated, each of the stockholders has sole voting and investment
power with respect to the shares beneficially owned.
- --------------------------------------------------------------------------------------------------------------------------------
Name and Address Shares Beneficially Number of shares Shares Beneficially
Owned Prior to Offering offered Owned After Offering
- --------------------------------------------------------------------------------------------------------------------------------
Number Percent Number Percent
- --------------------------------------------------------------------------------------------------------------------------------
John D. Ericsson(1) 2,940,000(2) 64.6% 0 2940000 64.6%
President, Chief Executive Officer,
Director
- --------------------------------------------------------------------------------------------------------------------------------
Edwin W. Cake, Jr. Ph.D.(1) 150,000(3) 5.7 0 150000 5.7
Director, Chief Science Officer
- --------------------------------------------------------------------------------------------------------------------------------
Sharon K. Bennett(1) 20,000(4) * 0 13000 *
Secretary/Treasurer
- --------------------------------------------------------------------------------------------------------------------------------
John W. Hemmer(1) 110,000(5) 4.2 0 110000 4.2
Director, Chief Financial Officer
- --------------------------------------------------------------------------------------------------------------------------------
Dr. S. Randall Hobgood, Director 187,977(6) 7.2 0 187977 7.2
- --------------------------------------------------------------------------------------------------------------------------------
All officers and directors as a group 3407977 72.4 0 3240977 72.4
- --------------------------------------------------------------------------------------------------------------------------------
50
Kathleen S. Bell Living Trust 8000 * 8000 - -
- --------------------------------------------------------------------------------------------------------------------------------
John L. Black 10000 * 10000 - -
- --------------------------------------------------------------------------------------------------------------------------------
Bruce Brumby 4000 * 4000 - -
- --------------------------------------------------------------------------------------------------------------------------------
Georgine Burt 20,000(7) * 20,000(7) - -
- --------------------------------------------------------------------------------------------------------------------------------
Donald L. Casey 6000 * 6000 - -
- --------------------------------------------------------------------------------------------------------------------------------
Edward J. Crenshaw 8000 * 8000 - -
- --------------------------------------------------------------------------------------------------------------------------------
Katherine Douglass and Stuart 2200 * 2200 - -
Douglass
- --------------------------------------------------------------------------------------------------------------------------------
James I. Dunne 4000 * 2000 2000 *
- --------------------------------------------------------------------------------------------------------------------------------
Justin D. Ericsson 20,000(8) * 10000 10000 *
- --------------------------------------------------------------------------------------------------------------------------------
Barbara A. Leon 8,000(9) * 4000 4,000(9) *
- --------------------------------------------------------------------------------------------------------------------------------
Paul G. Romine Charitable Trust 8000 * 8000 - -
- --------------------------------------------------------------------------------------------------------------------------------
Dennis H. Peters 5000 * 5000 - -
- --------------------------------------------------------------------------------------------------------------------------------
Dr. Grady Price, Jr.(10) 48000 1.9 48000 - -
- --------------------------------------------------------------------------------------------------------------------------------
Judy B. Price(10) 48000 1.9 48000 - -
- --------------------------------------------------------------------------------------------------------------------------------
William H. Robinson 8000 * 8000 - -
- --------------------------------------------------------------------------------------------------------------------------------
Dr. Charles R. and Margaret W. 14000 * 14000 - -
Salisbury (JTWROS)
- --------------------------------------------------------------------------------------------------------------------------------
Angela D. Shields 1000 * 1000 - -
- --------------------------------------------------------------------------------------------------------------------------------
Christina A. Shields 1000 * 1000 - -
- --------------------------------------------------------------------------------------------------------------------------------
Vivian Shields 2000 * 2000 - -
- --------------------------------------------------------------------------------------------------------------------------------
Norvelle Smith 8000 * 8000 - -
- --------------------------------------------------------------------------------------------------------------------------------
The Jade Trust 50,000(11)(2) 50,000(11)(2) - -
- --------------------------------------------------------------------------------------------------------------------------------
The Revocable Trust of William B. 8,000(12 ) * 8,000(12 ) - -
Bulla
- --------------------------------------------------------------------------------------------------------------------------------
Ellen S. Vollmer 6000 * 2000 4000 *
- ------------------------------------------------------------ ---------------------------------------------
* Indicates less than 1%.
(1) The address for each of the directors and officers of BioMarine is 1198
Gulf Breeze Parkway, Suite 8A, Gulf Breeze, FL 32561.
(2) Mr. Ericsson holds 1,027,000 shares of common stock and warrants to
purchase 1,027,000 shares of common stock at a price of $2.50 per
share. He also holds an option to purchase 1,000,000 shares at $.10 per
share. Mr. Ericsson has also retained voting rights to the shares held
by The Jade Trust.
(3) Dr. Cake holds 75,000 shares of common stock and warrants to purchase
an additional 75,000 shares of common stock at $2.50 per share.
(4) Ms. Bennett holds 10,000 shares of common stock and warrants to
purchase 10,000 shares of common stock at $2.50 per share.
(5) Mr. Hemmer holds in his own name 75,000 shares of common stock and
warrants to purchase 25,000 shares of common stock at $2.50 per share.
He additionally holds 5,000 shares of common stock jointly with each of
his daughters, Dana Hemmer and Allyson Hemmer, respectively (10,000
shares in the aggregate). Mr. Hemmer's wife, Barbara Bean Hemmer, holds
60,000 shares of which he disclaims beneficial ownership.
51
(6) Dr. Hobgood holds in his own name 150,977 shares of common stock,
warrants to purchase 37,000 shares of common stock at $2.50 per share.
(7) Includes 10,000 shares underlying warrants held by Ms. Burt which are
exercisable at $2.50 per share.
(8) Includes 10,000 shares underlying warrants held by Mr. Ericsson which
are exercisable at $2.50 per share.
(9) Includes 4,000 shares underlying warrants held by Ms. Leon which are
exercisable at $2.50 per share.
(10) Dr. and Ms. Price are husband and wife. Dr. Price holds 36,000 in his
name, and Ms. Price holds 12,000 in her name. Each disclaims beneficial
ownership of the other's shares.
(11) Mr. John D. Ericsson, our president and Chief Executive Officer,
retains voting rights to these shares.
(12) Includes 2,000 shares underlying warrants held by the trust which are
exercisable at $2.50 per share commencing 90 days after the
commencement of this offering and extending for a period of 48 months
thereafter.
CERTAIN TRANSACTIONS
Since the BioMarine's inception, its officers and directors have acted
as its business developers and promoters for which they have received some
salary compensation from time to time. Our President, John D. Ericsson, however,
did not receive any salary compensation from 1989 to 1992 for his services to
BioMarine. In order to compensate him for this, the board of directors voted to
grant him, as the inventor of the Sea Trek Ocean Farming System and Sea Star
Oyster Relay System, title and ownership of the proprietary rights to the two
systems.
At approximately the same time, Mr. Ericsson and BioMarine entered into
a non-exclusive patent license agreement to manufacture and operate a Sea Trek
Ocean Farming System and Sea Star Oyster Relay System for a 5% gross profits
royalty payable to Mr. Ericsson. If a Sea Trek Ocean Farming System and Sea Star
Oyster System are developed and become operational, BioMarine will pay Mr.
Ericsson under this non-exclusive patent license agreement a royalty per
operating system, in addition to his then annual salary.
John W. Hemmer, one of BioMarine's directors, has agreed to provide
consulting and other services to BioMarine in connection with corporate
structuring and financing. In addition to shares, which he held previously,
BioMarine issued 25,000 shares of its Common Stock to Mr. Hemmer in 1998 and
issued an additional 50,000 shares in January, 2000 for serving as CFO for
BioMarine. BioMarine also has agreed to pay Mr. Hemmer a fee of $5,000 per
month, in accrued salary, up to $60,000, which is payable from the proceeds of
this offering.
On January 23 and 31, 1998, Dr. S. Randall Hobgood loaned GMIT $8,000
and $10,000 respectively. On December 2, 1999, BioMarine issued 8,520 shares to
Dr. Hobgood as consideration for the forgiveness of the loan then valued at
$21,300. GMIT forgave certain amounts owed to it by BioMarine in exchange for
this issuance.
BioMarine intends to enter into an agreement to sub-lease from GMIT the
platform at the Texas site. In exchange for the sub-lease, BioMarine would
assume GMIT's obligation to pay $260,000 per month into a platform abandonment
escrow to cover costs to dismantle the platform after its use.
52
BioMarine will also indemnify GMIT against damages from accidents, loss of life
or other casualties resulting from the use of the platform and pay to GMIT a
royalty of 10% of BioMarine's profits in excess of one million pounds of fish
per year.
BioMarine currently owes GMIT approximately $220,000 on a demand note
which bears interest at 12%.
PLAN OF DISTRIBUTION
BioMarine has entered into an agreement, dated as of ______________,
2000 (the "Agreement"), with Ridgewood Group International, Inc., pursuant to
which Ridgewood is to provide investment banking services to BioMarine.
Ridgewood has retained its affiliate, Ridgewood Capital Funding Inc. to assist
BioMarine in the distribution of units in this offering. For its distribution
services, Ridgewood Capital Funding Inc. is to receive a fee of 8% of the gross
proceeds raised from the sale of units in this offering, as well as 4% of the
proceeds received from exercise of warrants underlying the units in this
offering. In addition, BioMarine has agreed to sell to Ridgewood Capital Funding
Inc. for $100 a five year warrant to purchase up to ten (10%) of the units being
sold to the public in this offering, which shall be exercisable at a price equal
to 110% of the initial public offering price of the units. BioMarine has also
agreed to reimburse Ridgewood for any reasonable and budgeted out-of- pocket
expenses incurred by it pursuant to the Agreement and to indemnify Ridgewood for
acts committed pursuant to specific written direction or arising form specific
material misinformation supplied by BioMarine to Ridgewood (except in cases of
misconduct or negligence by Ridgewood).
BioMarine also plans to offer shares directly to investors and may
engage other broker/dealers than Ridgewood or its affiliates to assist in such
efforts. BioMarine plans to pay commissions of up to 8% to such broker/dealers.
Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and Ridgewood. The principal factors to be considered in determining
the public offering price include:
- the information in this prospectus and otherwise available to the
underwriters;
- the history and the prospects for the industry in which we compete;
- the ability of our management;
- the prospects for our future earnings;
- the present state of our development and our current financial
condition; and
- the general condition of the securities markets at the time of this
offering.
53
DESCRIPTION OF SECURITIES
General
BioMarine's authorized capital consists of 25,000,000 shares of Common
Stock, par value $.01 and 5,000,000 shares of Preferred Stock, par value $.01.
Common Stock
As of December 31, 1999, BioMarine had outstanding 2,029,961 shares of
Common Stock. Each share of Common Stock is entitled to one vote at all meetings
of shareholders. Shareholders are not permitted to cumulate votes in the
election of directors. All shares of Common Stock are equal to each other with
respect to liquidation rights and dividend rights. There are no preemptive
rights to purchase any additional shares of Common Stock. In the event of
liquidation, dissolution or winding up BioMarine, holders of the Common Stock
will be entitled to receive, on a pro rata basis, all assets of BioMarine
remaining after satisfaction of all liabilities and preferences of outstanding
Preferred Stock, if any. The outstanding shares of Common Stock are duly and
validly issued, fully paid and nonassessable. Our common stock is not currently
traded on any exchange or public market. Upon the sale of 7000 units in this
offering, we intend to apply for listing of our common stock on the Nasdaq
SmallCapSM Market. Our common stock is currently held by approximately 165
shareholders.
Class B Warrants
Each Class B Warrant entitles the holder to purchase one share of
common stock at an exercise price of $9.50 per share. Unless previously
redeemed, the Class B Warrants are exercisable at any time commencing on the
date of this prospectus through the fourth anniversary hereof. The Class B
Warrants included in the units offered hereby are transferable separately from
the common stock. The Class B Warrants are subject to redemption by BioMarine at
$.05 per warrant if the common stock closing bid price exceeds $12.00 for 30
consecutive trading days ending within 15 days of the date as of which the
notice of redemption is given. Holders of the Class B Warrants will
automatically forfeit their rights to purchase the shares of common stock
issuable under such warrants unless the warrants are exercised before the close
of business on the business day immediately prior to the date set for
redemption. All of the outstanding warrants of a class, except for warrants
underlying the Underwriter's warrants, must be redeemed if any of that class are
redeemed. The Class B Warrants underlying the Underwriter's warrants are subject
to redemption by BioMarine at any time after the Underwriter's warrants have
been exercised and the underlying warrants are outstanding. A notice of
redemption shall be mailed to each registered holder of Class B Warrants by
first class mail, postage prepaid, upon 30 days' notice before the date fixed
for redemption. The notice of redemption shall specify the redemption price, the
date fixed for redemption, the place where the Warrant certificates shall be
delivered and the redemption price to be paid, and that the right to exercise
the Class B Warrants shall terminate at 5:00 p.m. (New York City time) on the
business day immediately preceding the date fixed for redemption.
The Class B Warrants may be exercised upon surrender of the
certificate(s) therefor on or prior to the expiration or the redemption date (as
explained above) at the offices of BioMarine's warrant agent with the
subscription form on the reverse side of the certificate(s) completed and
executed as indicated, accomplished by payment (in the form of a certified check
payable to the order of BioMarine Technologies, Inc.) of the full exercise price
for the number of Warrants being exercised.
54
The Class B Warrants contain provisions that protect the holders
thereof against dilution by adjustment of the exercise price per share and the
number of shares upon exercise thereof upon the occurrence of certain events,
including issuances of common stock (or securities convertible, exchangeable or
exercisable into common stock) at less than market value, stock dividends, stock
splits, mergers, sale of substantially all of BioMarine's assets, and for other
extraordinary events; provided, however, that no such adjustment shall be made
upon, among other things (i) the issuance or exercise of options or other
securities under any stock option or other benefit plan offered to employee,
officers or directors of BioMarine, (ii) the sale or exercise of outstanding
options or warrants or the class B Warrants offered hereby, or (iii) the
conversion of shares of BioMarine's preferred stock to common stock.
BioMarine is not required to issue fractional shares of common stock,
and in lieu thereof will make a cash payment based upon the current market value
of such fractional shares. The holders of the Class B Warrants will not possess
any rights as shareholders of BioMarine unless and until such warrants have been
exercised for shares of common stock.
"Blank Check" Preferred Stock
BioMarine is authorized to issue 5,000,000 shares of Preferred Stock,
$.01 par value. BioMarine has filed a Certificate of Designations with the
Secretary of State of the State of Delaware, designating 700,000 shares as
Series A Convertible Preferred Stock. No shares of Series A Convertible
Preferred Stock remain outstanding as of the date hereof.
Transfer Agent
BioMarine's transfer agent for the common stock and the warrant agent
for the Class B Warrants is Halter Capital Corporation.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, assuming all of the shares are
purchased, BioMarine will have outstanding 3,821,471 shares of Common Stock,
assuming no exercise or conversion of any convertible debt, warrants or options
outstanding or offered in the units. Of these shares, only the 1,250,000 shares
offered in this offering will be freely tradable without restriction (except for
restrictions imposed by certain state regulatory authorities) or registration
under the Securities Act, except that any shares purchased by an "affiliate" of
BioMarine (as defined in the rules and regulations promulgated under the
Securities Act) will be subject to the resale limitations under Rule 144 under
the Securities Act. The remaining 2,590,771 shares of outstanding Common Stock
were issued and sold by BioMarine in private transactions in reliance upon
exemptions from registration under the Act. Such shares may be sold only
pursuant to an effective registration statement filed by BioMarine or an
applicable exemption, including the exemption contained in Rule 144 promulgated
under the Act.
In general, under Rule 144 as currently in effect, a shareholder,
including an affiliate of BioMarine may sell shares of Common Stock after at
least one year has elapsed since such shares were acquired from BioMarine or an
affiliate of BioMarine. The number of shares of Common Stock which may be sold
within any three-month period is limited to the greater of: (i) one percent of
the then
55
outstanding Common Stock or (ii) the average weekly trading volume in the Common
Stock during the four calendar weeks preceding the date on which notice of such
sale was filed under Rule 144.
Certain other requirements of Rule 144 concerning availability of
public information, manner of sale and notice of sale must also be satisfied. In
addition, a shareholder who is not an affiliate of BioMarine (and who has not
been an affiliate of BioMarine for 90 days prior to the sale) and who has
beneficially owned shares acquired from BioMarine or an affiliate of BioMarine
for over two years may resell the shares of Common Stock without compliance with
the foregoing requirements under Rule 144.
No predictions can be made as to the effect, if any, that future sales
of shares, or the availability of shares for future sale, will have on the
market price of the Common Stock prevailing from time to time. Nevertheless,
sales of substantial amounts of Common Stock, or the perception that such sales
may occur, could have a material adverse effect on prevailing market prices.
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.
Representations of Purchasers
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under the securities laws, (ii) where required
by law, such purchaser is purchasing as principal and not as agent, and (iii)
such purchaser has reviewed the text above under "Resale Restrictions."
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
56
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or these persons. All or a substantial portion of the assets of the
issuer and these persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the issuer or such persons in
Canada or to enforce a judgment obtained in Canadian courts against the issuer
or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser in this offering. This report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one report must be filed
in respect of common stock acquired on the same date and under the same
prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult with their own legal
and tax advisors with respect to the tax consequences of an investment in the
common stock in their particular circumstances and with respect to the
eligibility of the common stock for investment by the purchaser under relevant
Canadian legislation.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
BioMarine by Bondy & Schloss LLP, New York, New York. Gerald A. Adler, Esq., a
partner in Bondy & Schloss LLP, owns 2,000 shares of BioMarine's common stock.
Certain legal matters with this offering will be passed upon for the
underwriters by Cummings & Lockwood, Stamford, Connecticut.
EXPERTS
The financial statements of BioMarine at and for the years ended
December 31, 1998 and 1999, appearing in this prospectus have been audited by
Reznick Fedder & Silverman, Certified Public Accountants, as set forth in their
report hereon appearing elsewhere herein, and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
BioMarine has filed with the Commission a Registration Statement on
Form SB-2 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act, with respect to the shares being offered
in this offering. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain items of which are omitted in
accordance with the rules and regulations of the Commission. The omitted
information may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at
Seven World
57
Trade Center, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661. Such material can also be obtained at the
Commission's Website at http://www.sec.gov. Copies of such material can be
obtained from the public reference section of the Commission at prescribed
rates. With respect to statements contained in this Prospectus as to the
contents of any contract or other document field as an exhibit to the
Registration Statement, reference is made to the copy of the document filed as
an exhibit to the Registration Statement, each statement made in this Prospectus
relating to such documents being qualified in all respect by such reference. For
further information with respect to BioMarine and the securities being offered
hereby, reference is hereby made to such Registration Statement, including the
exhibits thereto and the financial statements, notes, and schedules filed as a
part thereof.
58
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
BIOMARINE TECHNOLOGIES, INC.
(formerly Sea Pride Industries, Inc.)
AND SUBSIDIARIES
(A Development Stage Enterprise)
DECEMBER 31, 1999 and 1998
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS REPORT F-3
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS F-5
CONSOLIDATED STATEMENTS OF OPERATIONS F-6
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIT F-7
CONSOLIDATED STATEMENTS OF CASH FLOWS F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-9
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
BioMarine Technologies, Inc. and Subsidiaries
We have audited the consolidated balance sheets of BioMarine
Technologies, Inc. (formerly Sea Price Industries, Inc.) and Subsidiaries, as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, stockholders' deficit and cash flows for the years then ended. These
consolidated 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 audits 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 consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of BioMarine
Technologies, Inc. and Subsidiaries, as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for the years 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 B of the
financial statements, the Company is in the development stage, and at December
31, 1999 and 1998 had stockholders' deficits of $429,494 and $265,697,
respectively. This condition raises substantial doubt about its ability to
continue as a going concern. Management's plans regarding those matters also are
described in Note B. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
F-3
As discussed in Notes K and L to the financial statements, the
Company's 1999 and 1998 preferred stock reported as $3,741 should have been
$2,941. Common stock reported at $20,300 should have been $21,834 and the net
loss in 1999 reported at $190,097 should have been $178,882. The discoveries
were made subsequent to the issuance of the financial statements. The financial
statements have been restated to reflect this correction.
/s/ Reznick Fedder & Silverman
Atlanta, Georgia
January 7, 2000,
except for Notes K and L, as to which the date is
May 31, 2000
F-4
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
December 31,
-------------------------------
1999 1998
------------- -------------
ASSETS
Current assets
Cash $ 1,982 $ 7,020
------------- -------------
Total current assets 1,982 7,020
------------- -------------
Property and equipment less accumulated depreciation of
$100,593 and $115,664 62,077 230,668
------------- -------------
Other assets
Advances to affiliates 14,922 28,760
Investments 1,262 1,262
------------- -------------
16,184 30,022
------------- -------------
$ 80,243 $ 267,710
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 17,252 $ 45,648
Accrued expenses and other current liabilities 62,975 58,303
Current portion of notes payable 429,510 318,040
------------- -------------
Total current liabilities 509,737 421,991
------------- -------------
Long-term liabilities
Notes payable -- 111,416
------------- -------------
Stockholders' deficit
Preferred stock - $ .01 par value
Authorized - 5,000,000 shares
Issued - 294,140 shares
Common stock - $.01 par value 2,941 2,941
Authorized - 25,000,000 shares
Issued - 2,183,201 and 2,168,761 shares in 1999
and 1998, respectively 21,834 21,689
Additional paid-in capital 1,807,954 1,793,014
Accumulated deficit during development stage (2,228,473) (2,049,591)
------------- -------------
(395,744) (231,947)
Treasury stock (33,750) (33,750)
------------- -------------
Total stockholders' deficit (429,494) (265,697)
------------- -------------
$ 80,243 $ 267,710
============= =============
See notes to consolidated financial statements
F-5
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Cumulative
from
For the years ended December 31, October 3, 1989
-------------------------------- (Inception) to
1999 1998 December 31, 1999
------------- ------------- -------------
Revenue
Rental $ 2,254 $ 190,943 $ 337,181
Gain on sale of equipment 111,667 -- 111,667
Other 19,999 14,670 123,276
------------- ------------- -------------
133,920 205,613 572,124
------------- ------------- -------------
Costs and expenses
Salaries, wages and benefits 144,713 185,442 664,774
General and administrative expenses 54,832 119,436 1,456,794
Repairs and maintenance 3,265 53,618 77,871
Insurance 3,944 16,636 49,670
Taxes 159 656 10,912
Legal and professional fees 66,508 147,366 321,493
Interest 29,000 68,373 130,698
Depreciation 31,596 34,214 109,600
------------- ------------- -------------
Total costs and expenses 334,017 625,741 2,821,812
Net loss before income tax provision (200,097) (420,128) (2,249,688)
------------- ------------- -------------
Income tax provision -- -- --
Net loss before extraordinary gain (200,097) (420,128) (2,249,688)
Extraordinary item:
Income from extinguishment of debt 21,215 -- 21,215
------------- ------------- -------------
Net loss $ (178,882) $ (420,128) $ (2,228,473)
============= ============= =============
Net loss per common share outstanding $ (.08) $ (.19)
============= =============
Weighted number of shares outstanding 2,172,371 2,016,778
============= =============
See notes to consolidated financial statements
F-6
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the years ended December 31, 1999 and 1998
Accumulated
Preferred Common Additional Deficit During
Shares Shares Preferred Common Paid-In Development
Outstanding Outstanding Stock Stock Capital Stage
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1997 -- 2,002,961 $ -- $ 20,030 $ 1,339,859 $(1,629,463)
as originally stated
Reclassification -- 140,800 -- 1,409 (1,409) --
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1997
as restated -- 2,143,761 -- 21,439 1,338,450 (1,629,463)
Stock issued:
Acquisition of minority interest 148,000 -- 1,480 -- 90,680 --
Debt converted to stock 146,140 -- 1,461 -- 363,884 --
For services rendered -- 25,000 -- 250 -- --
Net loss -- -- -- -- -- (420,128)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 294,140 2,168,761 2,941 21,689 1,793,014 (2,049,591)
Stock issued:
For services rendered -- 6,000 -- 60 14,940 --
Debt retirement -- 8,520 -- 85 -- --
Net loss -- -- -- -- -- (178,882)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 294,140 2,183,281 $ 2,941 $ 21,834 $ 1,807,954 $(2,228,473)
=========== =========== =========== =========== =========== ===========
Treasury
Stock Total
----------- -----------
Balance at December 31, 1997 $ (33,750) $ (303,324)
as originally stated
Reclassification -- --
----------- -----------
Balance at December 31, 1997
as restated (33,750) (303,324)
Stock issued:
Acquisition of minority interest -- 92,160
Debt converted to stock -- 365,345
For services rendered -- 250
Net loss -- (420,128)
----------- -----------
Balance at December 31, 1998 (33,750) (265,697)
Stock issued:
For services rendered -- 15,000
Debt retirement -- 85
Net loss -- (178,882)
----------- -----------
Balance at December 31, 1999 $ (33,750) $ (429,494)
=========== ===========
See notes to consolidated financial statements
F-7
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Cumulative
from
For the years ended December 31, October 3, 1989
------------- ------------- (Inception) to
1999 1998 December 31, 1999
------------- ------------- -------------
Cash flows from operating activities
Net loss $ (178,882) $ (420,128) $ (2,228,473)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 31,596 34,214 147,260
Gain on sale of equipment (111,667) -- (111,667)
Stock issuance for services rendered 15,000 250 52,733
Extinguishment of debt (21,215) -- (21,215)
(Increase) decrease in:
Other assets -- 935 --
Increase (decrease) in:
Accounts payable (28,396) (9,664) 17,252
Accrued expenses and other current liabilities 4,672 2,307 62,975
------------- ------------- -------------
Net cash used in operating activities (288,892) (392,086) (2,081,135)
------------- ------------- -------------
Cash flows from investing activities
Purchases of equipment (16,338) (28,707) (362,670)
Proceeds from disposal of equipment 265,000 -- 265,000
Advances to affiliates -- -- (162,370)
Repayment of advances 13,838 132,348 146,186
Purchase of minority interest -- (37,919) --
------------- ------------- -------------
Net cash provided by (used in) investing activities 262,500 65,722 (113,854)
------------- ------------- -------------
Cash flows from financing activities
Principal repayments of debt (379,456) (21,516) (715,000)
Proceeds from borrowings 400,810 256,500 1,165,810
Issuance of stock -- 92,160 1,779,911
Purchase of treasury stock -- -- (33,750)
Net cash provided by financing activities 21,354 327,144 2,196,971
------------- ------------- -------------
NET INCREASE(DECREASE) IN CASH (5,038) 780 1,982
Cash, beginning 7,020 6,240 --
------------- ------------- -------------
Cash, ending $ 1,982 $ 7,020 $ 1,982
============= ============= =============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 23,798 $ 12,157 $ 52,470
============= ============= =============
Supplemental disclosure of non-cash activities:
Issuance of common stock for services rendered $ 36,300 $ 250 $ 61,240
============= ============= =============
See notes to consolidated financial statements
F-8
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Bio Marine Technologies, Inc. (the "Company") was incorporated in the
State of Delaware on October 3, 1989. Prior to December 30, 1998, the
Company operated under the name Sea Pride Industries, Inc. The
accompanying consolidated financial statements include the accounts of
the Company and its three subsidiaries: Sea Star Industries, Inc. ("Sea
Star"), and Sea Trek Industries, Inc. ("Sea Trek"), which are wholly
owned subsidiaries; and Sea Pride Capital Corporation ("SPCC"), a 75
percent owned subsidiary. Sea Star and Sea Trek were incorporated in
the State of Delaware on December 16, 1994 and SPCC was purchased on
September 10, 1993. Sea Trek and SPCC have been inactive since
inception.
The Company and its President, John D. Ericsson, have researched,
designed, and developed a proprietary, state-of-the-art patented,
mariculture production system ("Sea Star Oyster Relay System"), to
produce cleansed oysters harvested from open nonpolluted as well as
from conditionally closed coastal areas of the Gulf of Mexico.
In addition to the Sea Star Oyster Relay System, the Company's
president has designed, developed, and patented a marine aquaculture
production system, the "Star Trek Ocean Farming System," to produce
redfish, striped bass, mahi mahi and other marine finfish species in
the Gulf of Mexico. The president has licensed the systems to the
Company. The Sea Trek Ocean Farming System and Sea Star Oyster Relay
System will be the Company's initial operating systems.
The Mobile, Alabama, District of the Army Corps of Engineers has
granted the Company permission to locate and develop its Sea Trek Ocean
Farming System and Sea Star Oyster Relaying System in Outer Continental
Shelf Waters, in the Alabama area of the Gulf of Mexico. The Company
had previously transferred its oyster permits permission to Sea Star.
All permits to conduct its proposed oyster cleansing operations and
finfish farming on this site, have been obtained.
The Company has obtained a second permitted site for establishing sea
farming in the Gulf of Mexico located in Matagorda County, at a
platform site nine miles south of Port O'Connor, Texas. The Company
expects to be granted the development rights to commercially expand the
site up to 500 acres by a nonprofit research and development
institution affiliated through common directors which owns the four
platform complex.
F-9
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999 and 1998
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
SPCC, formerly known as Brian Capital, Inc., is registered with the
Securities and Exchange Commission. SPCC is a shell corporation with no
operations during 1999 or 1998.
Commencement of commercial operations has not yet occurred. The Company
and its operating subsidiaries have produced limited oyster products
for sale using the one pilot program with its Sea Star Oyster Relay
Project. Operations are expected to commence once adequate capital has
been raised to permit construction of cages, equipment, and operating
facilities necessary to conduct such operations.
Since inception, the Company has generated limited operating revenues
and therefore is considered promotional and in its formative and
development stage. Its only activity has been to raise capital, develop
its proprietary systems and obtain requisite permits to conduct its
proposed offshore oyster and aquaculture fish farming. All costs, were
expensed as incurred during the development stage.
A summary of significant accounting policies is as follows:
Principles of Consolidation
The financial statements include the accounts of the Company and its
three subsidiaries. All significant intercompany transactions and
accounts have been eliminated in the consolidation.
Depreciation
Depreciation is computed using both straight-line and accelerated
methods over the estimated useful lives of the assets which range from
five to ten years.
Income Taxes
Income tax provisions are made at appropriate rates for all taxable
items included in the statement of operations, regardless of the period
in which such items are reported for tax purposes.
F-10
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999 and 1998
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Use of 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 and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Accordingly, actual results
could differ from those estimates.
Per Share Data
Net loss per common share for the years ended December 31, 1999 and
1998 has been computed based upon the weighted average number of common
shares outstanding. The assumed exercise of warrants were not
considered in the computation in either year due to their anti-dilutive
effect. Fully dilutive per share data is not included because the
assumed exercise of the common stock equivalents is anti-dilutive.
Minority Interests
The interests of the minority stockholders in the capital and retained
earnings of the consolidated subsidiary are recorded as a liability in
the consolidated accounts of the Company. Such liability may be reduced
to zero as the minority interests in the losses of the subsidiary
exceed the carrying value of the minority interest.
Revenue Recognition
The Company leases certain vessels under operating leases with terms
less than one year. Rental revenue is recognized when it becomes due
under the lease agreement. Other revenue for various miscellaneous
items is recognized when received.
F-11
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999 and 1998
NOTE B - GOING CONCERN
As a result of the start-up nature of its business, the Company has and
can be expected in the future to sustain substantial operating expenses
without generating sufficient revenues to cover such operating costs.
That matter, among others, raises substantial doubt as to the Company's
ability to continue as a going concern. Management believes that
sufficient revenues can be achieved through the implementation of a
plan which includes, among other things, the manufacture, installation
and operation of finfish farming from the Sea Trek Ocean Farming
System, the harvesting and cleansing of oyster stock from its Sea Star
Oyster Relaying System, and the development of a marketing and
distribution network.
The implementation of this plan is, according to management, dependent
on among other things, a successful public offering of the Company's
common stock. If the Company does not succeed in raising funds though
an offering, it will not have sufficient capital to implement its plan
as discussed above and will need to modify its plans and seek other
financing. The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment is carried at cost and consists of the following
at December 31:
1999 1998
------------- -------------
Machinery and equipment $ 84,826 $ 268,488
Office furniture and fixtures 51,344 51,344
Vehicles 26,500 26,500
------------- -------------
162,670 346,332
Less: accumulated depreciation (100,593) (115,664)
------------- -------------
$ 62,077 $ 230,668
============= =============
F-12
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999 and 1998
NOTE D - NOTES PAYABLE
On May 30, 1997, the Company executed a note payable to First Union in
the amount of $170,000. The note accrued interest at 10.25 percent per
annum and was secured by a first mortgage on a vessel. Quarterly
payments of principal and interest of $10,899 were required through
maturity on June 5, 2002. As of December 31, 1998, the outstanding
balance totaled $142,956. During 1999, the vessel was sold and the note
was satisfied in full.
On December 5, 1998, the Company granted the holders of certain notes
payable issued by the Company and Sea Star, the option of converting
outstanding principal and accrued interest into Series "A"
Noncumulative 12 percent Convertible Preferred Stock, $.01 par value
("Preferred Stock") at a stated value of $2.50 per share. Prior to
December 31, 1998, certain notes and accrued interest were converted in
the aggregate amounts of $305,000 and $60,345, respectively, into
146,140 shares of Preferred Stock. As of December 31, 1999 and 1998, an
unconverted note payable in the amount of $50,000, which accrues
interest at a rate of 15 percent per annum on the unpaid principal
balance remained outstanding. The owner has been granted the option to
convert the note and accrued interest into common stock ($.01 par
value) at a stated value of $2.50 per share, upon a successful public
offering of the Company's common stock.
The Company held a note payable to Gulf Marine Institute of Technology
("GMIT") in the amount of $240,000. The note accrued interest at a rate
of 12 percent per annum and was due on demand. The note was secured by
a second mortgage of property owned by Sea Star, a wholly owned
subsidiary. As of December 31, 1998, the outstanding balance totaled
$236,500. During 1999, the note was satisfied in full.
In 1999, the Company executed a new note payable to GMIT in the
original amount of $400,810. On December 31, 1999, the Company issued
8,520 shares of common stock to a holder of certain notes payable from
GMIT (see Note K). As a result of this transaction, the balance of this
note at December 31, 1999 is $379,510. The note accrues interest at 12
percent and is due on demand.
F-13
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999 and 1998
NOTE E - INCOME TAXES
From its inception through February 8, 1993, the Company operated as an
S Corporation. Under this election, income or loss is passed through
directly to the stockholders. Aggregate losses during the period the
Company was an S Corporation totaled $138,477.
Deferred income taxes are provided for temporary differences in the
basis of assets and liabilities for income tax and financial reporting
purposes. These differences relate principally to net operating losses.
The sources of temporary differences and the deferred tax liability
(asset) for each are as follows:
December 31,
--------------------------------
1999 1998
------------- -------------
Net benefit of net operating loss carryforward $ (653,458) $ (605,250)
Valuation allowance 653,458 605,250
------------- -------------
Deferred tax asset (liability) per balance sheet $ -- --
============= =============
Income tax expense (benefit) is comprised of the following components:
Current $ -- $ --
Deferred (benefit) (48,208) (123,881)
Change in valuation allowance 48,208 123,881
------------- -------------
$ -- --
============= =============
A reconciliation of income taxes in the accompanying statement of
operations to the statutory rate is summarized as follows:
Expected tax expense (benefit) at statutory rate $ (60,820) $ (142,843)
Other 12,612 18,962
Valuation allowance 48,208 123,881
------------- -------------
$ -- --
============= =============
F-14
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999 and 1998
NOTE E - INCOME TAXES (Continued)
The Company and its subsidiaries file separate income tax returns.
Net operating losses expire through 2014. As of December 31, 1999 and
1998, the entire benefit has been offset by a valuation allowance and
no net tax benefit has been recorded. Actual benefits are dependent
upon the income tax rate in effect at the time the benefit is used.
Both of the other subsidiaries, Sea Trek and SPCC, had no activity for
the years ended December 31, 1999 and 1998. Net operating loss
carryforwards are summarized as follows at December 31, 1999.
Year of Expiration Net Operating
------------------ Loss
--------------
2008 $ 67,389
2009 245,203
2010 457,267
2011 259,199
2012 386,733
2013 364,360
2014 141,788
--------------
$ 1,921,939
==============
NOTE F - RELATED PARTY TRANSACTIONS
Officers Salaries
In 1999 and 1998, officers salaries of $96,000 per year were expensed.
At December 31, 1999, $36,000 was payable. In addition, the Company's
president, John D. Ericsson, received stock options and warrants in
1999 and 1998 (see Note G).
F-15
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999 and 1998
NOTE F - RELATED PARTY TRANSACTIONS (Continued)
Proprietary Right and Licenses
The Company's President, John D. Ericsson, received no salary
compensation from 1989 through 1992. In order to compensate him for his
unpaid services on behalf of the Company, the members of the Company's
board of directors caused the Company to grant and convey to Mr.
Ericsson, the inventor of the Sea Trek Ocean Farming System, title to
and ownership of the Sea Trek Ocean Farming System proprietary rights.
Coincidentally therewith, Mr. Ericsson and the Company entered into a
nonexclusive patent license agreement to manufacture and operate a Sea
Trek Ocean Farming System for a 5 percent gross sales royalty payable
to Mr. Ericsson. If a Sea Trek Ocean Farming System is developed and
becomes operational, the Company will pay Mr. Ericsson under this
nonexclusive patent license agreement a royalty per operating system,
in addition to his annual salary. As of December 31, 1999 and 1998, the
Sea Trek Ocean Farming System had not generated any sales and no
royalty was payable to Mr. Ericsson.
Mr. Ericsson is the inventor of the Sea Star Oyster Relay System and
the Company has conveyed to Mr. Ericsson the official title to the
ownership of the Sea Star System proprietary rights and patent.
Simultaneously therewith, Mr. Ericsson and the Company entered into a
nonexclusive patent license agreement to manufacture and operate the
Sea Star Oyster Relay System, on a worldwide basis, for a 2.5 percent
gross sales royalty payable to Mr. Ericsson. Mr. Ericsson has agreed
to waive these royalties for the first 12 months following commercial
operations start-up. As of December 31, 1999 and 1998, the Sea Star
Oyster Relay System had not generated any sales and no royalty was
payable to Mr. Ericsson.
NOTE G - CAPITAL STOCK
Stock Issued for Consideration Other Than Cash
During 1999 and 1998, the Company issued 6,000 shares and 25,000 shares
in consideration of consulting services rendered in the aggregate
amounts of $15,000 and $250, respectively. The value attributable to
the shares issued for services represents, in management's opinion, the
fair value of the services rendered. In addition, 8,520 shares were
issued to retire debt of $21,300 due to GMIT (see Note K).
F-16
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999 and 1998
NOTE G - CAPITAL STOCK (Continued)
Acquisition of Remaining Minority Interest of Sea Star
Effective December 5, 1998, the minority stockholders of Sea Star
exchanged their common shares on a two for one basis for the Company's
preferred stock in the aggregate amount of 68,000 shares. The Directors
of Sea Star exchanged their common shares on a one-for-one basis for
the Company's preferred stock in the aggregate amount of 80,000 shares
(see Note L). As a result, Sea Star became a wholly owned subsidiary of
the Company.
Stock Option Plans
Sea Star, a wholly owned subsidiary, has adopted a 1996 Stock Option
Plan for officers, employees, directors and consultants of the Company
which became effective in July 1996. This plan authorized the granting
of stock options to purchase an aggregate of not more than 10 percent
of the issued and outstanding shares. No plan options have been granted
to date.
In addition, the Company has adopted a 1998 Incentive Stock Option Plan
for officers, employees, directors, and consultants of the Company.
This plan authorized the granting of stock options under the 1998 Plan
to purchase up to 400,000 shares of common stock at no less than fair
market value and for no longer than five years. No plan options have
been granted to date.
On December 5, 1998, the board of directors of the Company resolved to
grant the Company's President, John D. Ericsson an option to purchase
1,000,000 shares of the Company's common stock at $.10 per share. As of
the grant date, the exercise price of the options has been valued at
zero.
Warrants
Common Stock Class A Warrants - At December 31, 1999 and December 31,
1998, the Company has an aggregate of 1,585,950 common stock Class "A"
Warrants outstanding. Each warrant entitles the holder to purchase one
additional share of common stock at $2.50 per share, exercisable
beginning 90 days from the effective date of a proposed initial public
offering of the Company's unissued common stock for a period of 48
months thereafter. The warrants are redeemable at $.10 per warrant upon
30 days written notice to the holders thereof, beginning 12 months from
the effective date of a proposed
F-17
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999 and 1998
initial public offering until their expiration.
F-18
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999 and 1998
NOTE G - CAPITAL STOCK (Continued)
During 1999, the Company issued 40,000 warrants to Mr. Ericsson,
exercisable at $1.00 per share, and for a period up to five years after
a successful public offering.
NOTE H - SUBSEQUENT EVENTS
In October 1996, the Florida Department of Banking and Finance filed an
Administrative Complaint against the Company and Mr. Ericsson, alleging
violations of certain provisions of the Florida Securities and Investor
Protection Act in connection with the offer and sale of securities. The
Company settled the complaint in 1999. Fines assessed in 1997 totaled
$35,000 of which $5,000 was payable at December 31, 1999. This balance
was paid on January 1, 2000.
On April 28, 2000, the Board of Directors amended a resolution
originally effective December 5, 1998, (See Note L). The original
resolution called for the shareholders of Sea Star to receive 2 shares
of the Company's Series "A" preferred stock in exchange for 1 share of
Sea Star's common stock. The resolution was amended to give the
Directors of Sea Star 1 share of the Company's Series "A" preferred
stock in exchange for 1 share of Sea Star common stock. The amended
resolution was retroactive to December 5, 1998. All share data is
stated to reflect the exchange.
On May 31, 2000, the Company entered into an agreement with its
president, John D. Ericsson whereby, the Company's subsidiary SPCC was
sold to Mr. Ericsson in exchange for the forgiveness of $36,000 of
accrued salaries due to Mr. Ericsson and an executed note in the amount
of $14,000 for a portion of the sale price.
NOTE I - EQUITY OFFERINGS
Private Offering Memorandum of Sea Star Common Stock
Sea Star, a wholly owned subsidiary, offered to qualified investors on
a best efforts basis, 200,000 units (the "Units"). Each unit consists
of one (1) share of common stock, $0.01 par value and one (1)
redeemable common stock purchase warrant ("warrant"). Each warrant
entitles the holder to purchase one share of common stock at $5 per
share for a period of five (5) years commencing twelve months from the
date of the last sale of units in the offering.
F-19
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999 and 1998
NOTE I - EQUITY OFFERINGS (Continued)
Each warrant is redeemable by the Company for $0.10 per warrant upon
thirty days prior written notice, provided that the average closing bid
price of common stock is $6 or more per share for a period of twenty
(20) consecutive trading days. Any shares issued would create a
minority ownership interest in Sea Star. During 1998, no shares were
issued and the offering was closed.
Proposed Initial Public Offering
The Company intends to file an SB-2 Registration Statement with the
Securities and Exchange Commission, for a proposed initial public
offering of the Company's common stock at approximately $8 to $10 per
share, aggregating up to approximately $10,000,000. Should the Company
not obtain an underwriter for its proposed initial public offering, the
Company intends to make the offering to the public through selected
broker-dealer firms. The Company intends to utilize the proceeds of its
proposed initial public offering for capital expenditures, marketing
and working capital.
NOTE J - MINORITY INTERESTS IN SUBSIDIARY
The interests of the minority stockholders of SPCC are zero. Neither
the Company nor the minority stockholders have made an investment in
SPCC as of December 31, 1999 and 1998.
NOTE K - EXTRAORDINARY ITEM
In 1999, $21,300 due under the note payable to GMIT was extinguished
with the issuance of 8,520 shares of the Company's common stock. The
gain on the transaction was $21,215, with a tax effect of $7,213.
NOTE L - ADJUSTMENTS
On April 28, 2000, the Board of Directors amended a resolution
originally effective December 5, 1998, (See Note G). The original
resolution called for the shareholders of Sea Star to receive 2 shares
of the Company's Series "A" preferred stock in exchange for 1 share of
Sea Star's common stock. The resolution was amended to give the
Directors of Sea Star 1 share of the Company's Series "A" preferred
stock in exchange for 1 share of Sea Star common stock. The amended
resolution was retroactive to December 5,
F-20
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999 and 1998
1998. All share data is stated to reflect the exchange.
F-21
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999 and 1998
NOTE L - ADJUSTMENTS (Continued)
During 2000, management discovered the following errors in the stock
register.
1. In 1997, 140,800 issued shares of common stock were not
reflected.
2. In 1999, 4,840 shares issued for services and 8,520
shares issued to extinguish debt were not reflected.
The summary of effect of these transactions is as follows:
As Originally
Reported Restated
(January 7, 2000) (May 31, 2000)
----------------- -----------------
Exchange of Sea Star's Director stock
Preferred stock $ 2,280 $ 1,480
Additional paid in capital 89,880 90,680
Issuance of stock in 1997 -- 1,409
Common stock -- (1,409)
Additional paid in capital
Issuance of stock in 1999 for services
Common stock 20 60
Additional paid in capital 4,980 14,940
Legal and professional fees 56,508 66,508
Issuance of stock in 1999 to extinguish debt
Common stock -- 85
Extraordinary gain -- 21,215
F-22
FINANCIAL STATEMENTS AND
ACCOUNTANTS' REVIEW REPORT
BIOMARINE TECHNOLOGIES, INC.
(formerly Sea Pride Industries, Inc.)
AND SUBSIDIARIES
(A Development Stage Enterprise)
JUNE 30, 2000 AND 1999
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
TABLE OF CONTENTS
PAGE
INDEPENDENT ACCOUNTANTS' REVIEW REPORT F-3
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS F-4
CONSOLIDATED STATEMENTS OF OPERATIONS F-5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIT F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors and Stockholders
BioMarine Technologies, Inc. and Subsidiaries
We have reviewed the accompanying balance sheets of BioMarine
Technologies, Inc. (formerly Sea Price Industries, Inc.) and Subsidiaries as of
June 30, 2000 and 1999, and the related statements of operations, stockholders
deficit and cash flows for the six month periods then ended, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All of the information
included in these financial statements is the representation of the management
of BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.) and
Subsidiaries.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements for the six month
periods ended June 30, 2000 and 1999, in order for them to be 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 B of the
financial statements, the Company is in the development stage, and has incurred
significant operating losses. This condition raises substantial doubt about its
ability to continue as a going concern. Management's plans regarding those
matters also are described in Note B. The financil statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Reznick Fedder & Silverman
Atlanta, Georgia
August 18, 2000
F-3
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
June 30, 2000 and 1999
(See independent accountants' review report)
June 30,
----------------------------
2000 1999
----------- -----------
ASSETS
Current assets
Cash $ 32,696 $ 26,303
----------- -----------
Total current assets 32,696 26,303
----------- -----------
Property and equipment less accumulated depreciation
of $124,821 and $133,897, respectively 37,849 228,773
----------- -----------
Other assets
Advances to affiliates 1,025 --
Investments 1,262 1,262
----------- -----------
2,287 1,262
----------- -----------
$ 72,832 $ 256,338
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable 2,005 $ 35,698
Accrued expenses and other current liabilities 117,927 51,746
Notes payable - current 318,514 586,455
Due to affiliate -- 1,838
----------- -----------
Total current liabilities 438,446 675,737
----------- -----------
Long-term liabilities
Notes payable -- --
----------- -----------
-- --
----------- -----------
Stockholders' deficit
Preferred stock - $ .01 par value
Authorized - 5,000,000 shares
Issued - 0 shares in 2000 and 294,140 shares
in 1999
Common stock - $.01 par value -- 2,941
Authorized - 25,000,000 shares
Issued - 2,613,261 shares in 2000 and
2,170,761 in 1999 26,133 21,709
Additional paid-in capital 2,074,220 1,797,994
Accumulated deficit during development stage (2,432,217) (2,208,293)
----------- -----------
(331,864) (385,649)
Treasury stock (33,750) (33,750)
----------- -----------
Total stockholders' deficit (365,614) (419,399)
----------- -----------
$ 72,832 $ 256,338
=========== ===========
See notes to consolidated financial statements
F-4
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the six month periods ended June 30, 2000 and 1999 (See
independent accountants' review report)
(Unaudited)
Cumulative
from
For the six months ended June 30, October 3, 1989
----------- ----------- (Inception) to
2000 1999 June 30, 2000
----------- ----------- -----------
Revenue
Rental $ -- $ 2,254 $ 337,181
Gain on sale of equipment -- -- 111,667
Gain on sale of SPCC 50,000 -- 50,000
Other -- 19,645 123,276
----------- ----------- -----------
50,000 21,899 622,124
----------- ----------- -----------
Costs and expenses
Salaries, wages and benefits 128,249 77,056 793,023
General and administrative
expenses 42,627 37,357 1,499,421
Repairs and maintenance 893 3,265 78,764
Insurance 230 3,181 49,900
Taxes 27 -- 10,939
Legal and professional fees 40,183 25,126 361,676
Interest 17,307 16,383 148,005
Depreciation 24,228 18,233 133,828
----------- ----------- -----------
Total costs and expenses 253,744 180,601 3,075,556
Net loss before income
tax provision (203,744) (158,702) (2,453,432)
----------- ----------- -----------
Income tax provision -- -- --
Net loss before extraordinary
gain (203,744) (158,702) (2,453,432)
Extraordinary item:
Income from extinquishment
of debt -- -- --
----------- ----------- -----------
Net loss $ (203,744) $ (158,702) $(2,453,432)
=========== =========== ===========
Net loss per common shares
oustanding $ (0.09) $ (0.07)
=========== ===========
Weighted number of shares
outstanding 2,398,271 2,168,761
=========== ===========
See notes to consolidated financial statements
F-5
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the six month periods ended June 30, 2000 and 1999 (See
independent accountants' review report)
Preferred Common Additional
Shares Shares Preferred Common Paid-In Accumulated
Outstanding Outstanding Stock Stock Capital Deficit
----------- ----------- ----------- ----------- ----------- -----------
Balance at January 1, 1999 294,140 2,168,761 2,941 21,689 1,793,014 (2,049,591)
Stock issued:
For services rendered -- 2,000 -- 20 4,980 --
Net loss -- -- -- -- -- (158,702)
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1999 294,140 2,170,761 2,941 21,709 1,797,994 (2,208,293)
Stock issued:
For services rendered -- 4,000 -- 40 9,960 --
Debt retirement -- 8,520 -- 85 -- --
Net loss -- -- -- -- -- (20,180)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 294,140 2,183,281 2,941 21,834 1,807,954 (2,228,473)
Stock issued -- 135,840 -- 1,358 266,266 --
Stock converted (294,140) 294,140 (2,941) 2,941 -- --
Net loss -- -- -- -- -- (203,744)
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 2000 $ -- $ 2,613,261 $ -- $ 26,133 $ 2,074,220 $(2,432,217)
=========== =========== =========== =========== =========== ===========
Treasury
Stock Total
----------- -----------
Balance at January 1, 1999 (33,750) (265,697)
Stock issued:
For services rendered -- 5,000
Net loss -- (158,702)
----------- -----------
Balance at June 30, 1999 (33,750) (419,399)
Stock issued:
For services rendered -- 10,000
Debt retirement -- 85
Net loss -- (20,180)
----------- -----------
Balance at December 31, 1999 (33,750) (429,494)
Stock issued -- 267,624
Stock converted -- --
Net loss -- (203,744)
----------- -----------
Balance at June 30, 2000 $ (33,750) $ (365,614)
=========== ===========
See notes to consolidated financial statements
F-6
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six month periods ended June 30, 2000 and 1999 (See
independent accountants' review report)
(Unaudited)
Cumulative
from
For the six months ended June 30, October 3, 1989
--------------------------------- (Inception) to
2000 1999 June 30, 2000
----------- ----------- -----------
Cash flows from operating activities
Net loss $ (203,744) $ (158,702) $(2,432,217)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 24,228 18,233 171,488
Gain on sale of equipment -- -- (111,667)
Stock issuance for services rendered -- 5,000 52,733
Extinguishment of debt -- -- --
(Increase) decrease in:
Other assets -- --
Increase (decrease) in:
Accounts payable (15,248) (9,950) 2,005
Accrued expenses and other current liabilities 54,952 (16,148) 117,927
----------- ----------- -----------
Net cash used in operating activities (139,812) (161,567) (2,199,731)
----------- ----------- -----------
Cash flows from investing activities
Purchases of equipment -- (16,338) (362,670)
Proceeds from disposal of equipment -- -- 265,000
Advances to affiliates -- -- (162,370)
Repayment of advances (147,100) 28,760 (914)
Purchase of minority interest -- -- (37,919)
Net cash provided by (used in)
investing activities (147,100) 12,422 (298,873)
----------- ----------- -----------
Cash flows from financing activities
Principal repayments of debt -- (7,311) (715,000)
Proceeds from borrowings 50,000 175,739 1,215,810
Issuance of stock 267,624 -- 2,047,536
Purchase of treasury stock -- -- (33,750)
----------- ----------- -----------
Net cash provided by financing activities 317,624 168,428 2,514,596
----------- ----------- -----------
NET INCREASE(DECREASE) IN CASH 30,714 19,283 32,696
Cash, beginning 1,982 7,020 --
----------- ----------- -----------
Cash, ending $ 32,696 $ 26,303 $ 32,696
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ -- $ 23,798 $ 52,470
=========== =========== ===========
Supplemental disclosure of non-cash activities:
Issuance of common stock for services rendered $ -- $ 5,000 $ 61,240
=========== =========== ===========
See notes to consolidated financial statements
F-7
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
(See independent accountants' review report)
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Bio Marine Technologies, Inc. (the "Company") was incorporated in the
State of Delaware on October 3, 1989. Prior to December 30, 1998, the
Company operated under the name Sea Pride Industries, Inc. The
accompanying consolidated financial statements include the accounts of
the Company and its two subsidiaries: Sea Star Industries, Inc. ("Sea
Star"), and Sea Trek Industries, Inc. ("Sea Trek"), which are wholly
owned subsidiaries. Sea Pride Capital Corporation ("SPCC"), a
previously 75 percent owned subsidiary was sold to the Company's
president, John D. Ericsson in 2000. Sea Star and Sea Trek were
incorporated in the State of Delaware on December 16, 1994 and SPCC was
purchased on September 10, 1993. Sea Trek and SPCC have been inactive
since inception.
The Company and its President, John D. Ericsson, have researched,
designed, and developed a proprietary, state-of-the-art patented,
mariculture production system ("Sea Star Oyster Relay System"), to
produce cleansed oysters harvested from open nonpolluted as well as
from conditionally closed coastal areas of the Gulf of Mexico.
In addition to the Sea Star Oyster Relay System, the Company's
president has designed, developed, and patented a marine aquaculture
production system, the "Star Trek Ocean Farming System," to produce
redfish, striped bass, mahi mahi and other marine finfish species in
the Gulf of Mexico. The president has licensed the systems to the
Company. The Sea Trek Ocean Farming System and Sea Star Oyster Relay
System will be the Company's initial operating systems.
The Mobile, Alabama, District of the Army Corps of Engineers has
granted the Company permission to locate and develop its Sea Trek Ocean
Farming System and Sea Star Oyster Relaying System in Outer Continental
Shelf Waters, in the Alabama area of the Gulf of Mexico. The Company
had previously transferred its oyster permits permission to Sea Star.
All permits to conduct its proposed oyster cleansing operations and
finfish farming on this site, have been obtained.
F-8
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 2000 and 1999
(See independent accountants' review report)
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
The Company has obtained a second permitted site for establishing sea
farming in the Gulf of Mexico located in Matagorda County, at a
platform site nine miles south of Port O'Connor, Texas. The Company
expects to be granted the development rights to commercially expand the
site up to 500 acres by a nonprofit research and development
institution affiliated through common directors which owns the four
platform complex.
SPCC, formerly known as Brian Capital, Inc., is registered with the
Securities and Exchange Commission. SPCC is a shell corporation with no
operations during the period from January 1, 1998 through June 30, 2000
(See Note D).
Commencement of commercial operations has not yet occurred. The Company
and its operating subsidiaries have produced limited oyster products
for sale using the one pilot program with its Sea Star Oyster Relay
Project. Operations are expected to commence once adequate capital has
been raised to permit construction of cages, equipment, and operating
facilities necessary to conduct such operations.
Since inception, the Company has generated limited operating revenues
and therefore is considered promotional and in its formative and
development stage. Its only activity has been to raise capital, develop
its proprietary systems and obtain requisite permits to conduct its
proposed offshore oyster and aquaculture fish farming. All costs were
expensed as incurred during the development stage.
A summary of significant accounting policies is as follows:
Principles of Consolidation
The financial statements include the accounts of the Company and its
two subsidiaries. All significant intercompany transactions and
accounts have been eliminated in the consolidation.
Depreciation
Depreciation is computed using both straight-line and accelerated
methods over the
F-9
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 2000 and 1999
(See independent accountants' review report)
estimated useful lives of the assets which range from five to ten
years.
F-10
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 2000 and 1999
(See independent accountants' review report)
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Income Taxes
Income tax provisions are made at appropriate rates for all taxable
items included in the statement of operations, regardless of the period
in which such items are reported for tax purposes.
Use of 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 and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Accordingly, actual results
could differ from those estimates.
Per Share Data
Net loss per common share for the six month periods ended June 30, 2000
and 1999 has been computed based upon the weighted average number of
common shares outstanding. The assumed exercise of warrants were not
considered in the computation in either year due to their anti-dilutive
effect. Fully dilutive per share data is not included because the
assumed exercise of the common stock equivalents is anti-dilutive.
Minority Interests
The interests of the minority stockholders in the capital and retained
earnings of the consolidated subsidiary are recorded as a liability in
the consolidated accounts of the Company. Such liability may be reduced
to zero as the minority interests in the losses of the subsidiary
exceed the carrying value of the minority interest.
Revenue Recognition
The Company leases certain vessels under operating leases with terms
less than one year. Rental revenue is recognized when it becomes due
under the lease agreement. Other revenue for various miscellaneous
items is recognized when received.
F-11
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 2000 and 1999
(See independent accountants' review report)
NOTE B - GOING CONCERN
As a result of the start-up nature of its business, the Company has and
can be expected in the future to sustain substantial operating expenses
without generating sufficient revenues to cover such operating costs.
That matter, among others, raises substantial doubt as to the Company's
ability to continue as a going concern. Management believes that
sufficient revenues can be achieved through the implementation of a
plan which includes, among other things, the manufacture, installation
and operation of finfish farming from the Sea Trek Ocean Farming
System, and its Sea Star Oyster Relaying System, harvesting and
cleansing oyster stock, and the development of a marketing and
distribution network.
The implementation of this plan is, according to management, dependent
on among other things, a successful public offering of the Company's
common stock. If the Company does not succeed in raising funds through
the public offering, it will not have sufficient capital to implement
its plans as discussed above and will need to modify its plans and seek
other financing. The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment is carried at cost and consists of the following
at:
June 30,
------------------------------
2000 1999
------------- -------------
Machinery and equipment $ 84,826 $ 284,826
Office furniture and fixtures 51,344 51,344
Vehicles 26,500 26,500
------------- -------------
162,670 362,670
Less: accumulated depreciation (124,821) (133,897)
------------- -------------
$ 37,849 $ 228,773
============= =============
F-12
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 2000 and 1999
(See independent accountants' review report)
NOTE D - SALE OF SPCC
On May 31, 2000, the Company entered into an agreement with its
president, John D. Ericsson whereby, the Company's subsidiary SPCC was
sold to Mr. Ericsson in exchange for the forgiveness of $36,000 of
accrued salaries due to Mr. Ericsson and an executed note in the amount
of $14,000 for a portion of the sale price.
NOTE E - NOTES PAYABLE
On May 30, 1997, the Company executed a note payable to First Union in
the amount of $170,000. The note accrued interest at 10.25 percent per
annum and was secured by a first mortgage on a vessel. Quarterly
payments of principal and interest of $10,899 were required through
maturity on June 5, 2002. As of June 30, 1999, the outstanding balance
totaled $135,645. During October 1999, the vessel was sold and the note
was satisfied in full.
On December 5, 1998, the Company granted the holders of certain notes
payable issued by the Company and Sea Star, the option of converting
outstanding principal and accrued interest into Series "A"
Noncumulative 12 percent Convertible Preferred Stock, $.01 par value
("Preferred Stock") at a stated value of $2.50 per share. Prior to
January 1, 1999, certain notes and accrued interest were converted in
the aggregate amounts of $305,000 and $60,345, respectively, into
146,140 shares of Preferred Stock. As of June 30, 2000 and 1999, an
unconverted note payable in the amount of $50,000, which accrues
interest at a rate of 15 percent per annum on the unpaid principal
balance remained outstanding. The owner has been granted the option to
convert the note and accrued interest into common stock ($.01 par
value) at a stated value of $2.50 per share, upon a successful public
offering of the Company's common stock.
On June 8, 2000, the Company executed a note payable to a stockholder
in the amount of $50,000 which is due from proceeds of the proposed
initial public offering (Note I). The note is unsecured and accrues
interest at 10.00 percent per annum.
The Company held a note payable to Gulf Marine Institute of Technology
("GMIT") in the amount of $240,000. The note accrued interest at a rate
of 12 percent per annum and
F-13
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 2000 and 1999
(See independent accountants' review report)
was due on demand. The note was secured by a second mortgage of
property owned by Sea Star, a wholly owned subsidiary. As of June 30,
1999, the outstanding balance totaled $400,810. During December 1999,
the note was satisfied in full.
F-14
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 2000 and 1999
(See independent accountants' review report)
NOTE E - NOTES PAYABLE (Continued)
In December 1999, the Company executed a new note payable to GMIT in
the original amount of $400,810. On December 31, 1999, the Company
issued 8,520 shares of common stock to a holder of certain notes
payable from GMIT (see Note K). As a result the note was reduced by
$21,300. The note accrues interest at 12 percent and is due on demand.
As of June 30, 2000, the unpaid balance of the note totaled $218,514.
NOTE F - INCOME TAXES
From its inception through February 8, 1993, the Company operated as an
S Corporation. Under this election, income or loss is passed through
directly to the stockholders. Aggregate losses during the period the
Company was an S Corporation totaled $138,477.
Deferred income taxes are provided for temporary differences in the
basis of assets and liabilities for income tax and financial reporting
purposes. These differences relate principally to net operating losses.
The sources of temporary differences and the deferred tax liability
(asset) for each are as follows:
June 30,
------------------------------------
2000 1999
---------------- ----------------
Net operating loss carryforward $ (722,731) $ (668,772)
Valuation allowance 722,731 668,772
---------------- ----------------
Deferred tax asset (liability) per balance sheet $ -- $ --
================ ================
Income tax expense (benefit) is comprised of the following components:
June 30,
------------------------------------
2000 1999
---------------- ----------------
Current $ -- $ --
Deferred (benefit) (69,273) (53,959)
Change in valuation allowance 69,273 53,959
---------------- ----------------
$ -- $ --
================ ================
F-15
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 2000 and 1999
(See independent accountants' review report)
NOTE F - INCOME TAXES (Continued)
A reconciliation of income taxes in the accompanying statement of
operations to the statutory rate is summarized as follows:
June 30,
------------------------------------
2000 2000
---------------- ----------------
Expected tax expense (benefit) at statutory rate $ (69,273) $ (53,959)
Valuation allowance 69,273 53,959
---------------- ----------------
$ -- $ --
================ ================
The Company and its subsidiaries file separate income tax returns.
NOL's expire through 2015. As of June 30, 2000 and 1999, the entire
benefit has been offset by a valuation allowance and no net tax benefit
has been recorded. Actual benefits are dependent upon the income tax
rate in effect at the time the benefit is used. Both of the other
subsidiaries, Sea Trek and SPCC, had no activity for the six month
periods ended June 30, 2000 and 1999. NOL carryforwards are summarized
as follows at June 30, 2000.
Year of Expiration NOL
------------------ --------------
2008 $ 67,389
2009 245,203
2010 457,267
2011 259,199
2012 386,733
2013 364,360
2014 141,788
2015 203,744
--------------
$ 2,125,683
==============
F-16
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 2000 and 1999
(See independent accountants' review report)
NOTE G - RELATED PARTY TRANSACTIONS
Officers Salaries
At June 30, 2000, $84,000 was payable and $108,676 was expensed,
respectively. At June 30, 1999, $4,000 was payable and $48,000 was
expensed.
Proprietary Right and Licenses
The Company's President, John D. Ericsson, received no salary
compensation from 1989 through 1992. In order to compensate him for his
unpaid services on behalf of the Company, the members of the Company's
board of directors caused the Company to grant and convey to Mr.
Ericsson, the inventor of the Sea Trek Ocean Farming System, title to
and ownership of the Sea Trek Ocean Farming System proprietary rights.
Coincidentally therewith, Mr. Ericsson and the Company entered into a
nonexclusive patent license agreement to manufacture and operate a Sea
Trek Ocean Farming System for a 5 percent gross sales royalty payable
to Mr. Ericsson. If a Sea Trek Ocean Farming System is developed and
becomes operational, the Company will pay Mr. Ericsson under this
nonexclusive patent license agreement a royalty per operating system,
in addition to his annual salary. As of June 30, 2000, December 31,
1999 and 1998, the Sea Trek Ocean Farming System had not generated any
sales and no royalty was payable to Mr. Ericsson.
Mr. Ericsson is the inventor of the Sea Star Oyster Relay System and
the Company has conveyed to Mr. Ericsson the official title to the
ownership of the Sea Star System proprietary rights and patent.
Simultaneously therewith, Mr. Ericsson and the Company entered into a
nonexclusive patent license agreement to manufacture and operate the
Sea Star Oyster Relay System, as it relates to oysters, on a worldwide
basis, for a 2.5 percent gross sales royalty payable to Mr. Ericsson.
Mr. Ericsson has agreed to waive these royalties for the first 12
months following commercial operations start-up. As of June 30, 2000,
December 31, 1999 and 1998, the Sea Star Oyster Relay System had not
generated any sales and no royalty was payable to Mr. Ericsson.
F-17
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 2000 and 1999
(See independent accountants' review report)
NOTE H - CAPITAL STOCK
Preferred Stock Exchange
During 2000, the preferred stockholders exchanged on a one for one
basis their shares of the Company preferred stock for common shares of
the Company.
Stock Issued for Consideration Other Than Cash
For the six months ended June 30, 1999, the Company issued 2,000 shares
in consideration of consulting services rendered in the aggregate
amount of $5,000. The value attributable to the shares issued for
services represents, in management's opinion, the fair value of the
services rendered. In addition, 8,520 shares were issued to retire debt
of $21,300 due to GMIT in 1999 and 4,000 shares were issued in
consideration of services rendered in the second half of 1999.
Acquisition of Remaining Minority Interest of Sea Star
Effective December 5, 1998, the minority stockholders of Sea Star
exchanged their common shares on a two for one basis for the Company's
preferred stock in the aggregate amount of 68,000 shares. The Directors
of Sea Star exchanged their common shares on a one-for-one basis for
the Company's preferred stock in the aggregate amount of 80,000 shares.
As a result, Sea Star became a wholly owned subsidiary of the Company.
Stock Option Plans
Sea Star, a wholly owned subsidiary, has adopted a 1996 Stock Option
Plan for officers, employees, directors and consultants of the Company
which became effective in July 1996. This plan authorized the granting
of stock options to purchase an aggregate of not more than 10 percent
of the issued and outstanding shares. No plan options have been granted
to date.
In addition, the Company has adopted a 1998 Incentive Stock Option Plan
for officers, employees, directors, and consultants of the Company.
This plan authorized the granting of stock options under the 1998 Plan
to purchase up to 400,000 shares of common stock at no less than fair
market value and for no longer than five years. No plan options have
been granted to date.
F-18
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 2000 and 1999
(See independent accountants' review report)
NOTE H - CAPITAL STOCK (Continued)
On December 5, 1998, the board of directors of the Company resolved to
grant the Company's President, John D. Ericsson an option to purchase
1,000,000 shares of the Company's common stock at $.10 per share. As of
the grant date, the exercise price of the options was equal to the
market value.
Warrants
Common Stock Class A Warrants - Common stock Class "A" Warrants
outstanding as of June 30, 2000, totaled 1,585,950. Each warrant
entitles the holder to purchase one additional share of common stock at
$2.50 per share, exercisable beginning 90 days from the effective date
of a proposed initial public offering of the Company's unissued common
stock for a period of 48 months thereafter. The warrants are redeemable
at $.10 per warrant upon 30 days written notice to the holders thereof,
beginning 12 months from the effective date of a proposed initial
public offering until their expiration.
During 1999, the Company issued 40,000 warrants to Mr. Ericsson,
exercisable at $1.00 per share, and for a period up to five years after
a successful public offering.
NOTE I - EQUITY OFFERINGS
Private Offering Memorandum of Sea Star Common Stock
Sea Star, a wholly owned subsidiary, offered to qualified investors on
a best efforts basis, 200,000 units (the "Units"). Each unit consists
of one (1) share of common stock, $0.01 par value and one (1)
redeemable common stock purchase warrant ("warrant"). Each warrant
entitles the holder to purchase one share of common stock at $5 per
share for a period of five (5) years commencing twelve months from the
date of the last sale of units in the offering.
Each warrant is redeemable by the Company for $0.10 per warrant upon
thirty days prior written notice, provided that the average closing bid
price of common stock is $6 or more per share for a period of twenty
(20) consecutive trading days. Any shares issued would create a
minority ownership interest in Sea Star. During 1998, no shares were
issued and the offering was closed.
F-19
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Subsidiaries
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 2000 and 1999
(See independent accountants' review report)
NOTE I - EQUITY OFFERINGS (Continued)
Proposed Initial Public Offering
The Company has filed an SB-2 Registration Statement with the
Securities and Exchange Commission, for a proposed initial public
offering of the Company's common stock at approximately $8 to $10 per
share, aggregating up to approximately $10,000,000. The Company intends
to utilize the proceeds of its proposed initial public offering for
capital expenditures, marketing and working capital.
NOTE J - MINORITY INTERESTS IN SUBSIDIARY
The interests of the minority stockholders of SPCC are zero. Neither
the Company nor the minority stockholders have made an investment in
SPCC as of June 30, 2000 and 1999
F-20
- -------------------------------------------------------- ----------------------------------------------------
We have not authorized any underwriter, dealer,
salesperson or other person to give any
information or represent anything not contained
in this prospectus. You must not rely on any
unauthorized information. This prospectus does
not offer to sell or buy any Units in any
jurisdiction where it is unlawful to do so.
--------------- BIOMARINE TECHNOLOGIES, INC.
TABLE OF CONTENTS
Page
----
Prospectus Summary.............................
Summary Historical Financial Information....... 12,500 Units
Risk Factors................................... Each Unit consisting of
Use of Proceeds................................ 100 Shares of Common Stock, $.01 par value,
Dividend Policy................................ and
Capitalization................................. 100 Class B Warrants
Dilution....................................... plus
Selected Financial Data........................ 229,200 Shares of Common Stock
Management's Discussion and Analysis of on behalf of Selling Shareholders
Financial Condition
and Results of Operations...................
Business.......................................
Management.....................................
Principal Shareholders.........................
Principal Stockholders.........................
Plan of Distribution...........................
Description of Securities......................
Shares Eligible for Future Sale................
Legal Matters.................................. -------
Experts........................................ PROSPECTUS
Additional Information......................... -------
Index to Financial Statements..................
Ridgewood Capital Funding, Inc.
________
Until ________, 2000 (25 days after
the date of this prospectus) all dealers that buy _____________________, 2000
sell or trade the shares and warrants included
in these Units, whether or not participating in
this offering, may be required to deliver a
prospectus. This is in addition to the dealers'
obligations to deliver a prospectus when acting
as underwriters and with respect to their unsold
allotments or subscriptions.
================================ ================================
- -------------------------------------------------------- ----------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a corporation may indemnify directors and officers as well
as other employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation, a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defence or settlement of such actions, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
bylaws, disinterested director vote, stockholder vote, agreement or otherwise.
The Certificate of Incorporation of BioMarine, as amended, (the
"Certificate") provides that each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person, or a person of whom such person is the legal
representative, is or was a director or officer of the Company or is or was
serving at the request of the Company as a director or officer of the Company or
is or was serving at the request of the Company as a director, officer, employee
or agent of another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an official capacity
as a director, officer, employee or agent or in any other capacity while serving
as a director, officer, employee or agent, will be indemnified and held harmless
by the Company to the fullest extent authorized by the DGCL, as the same exists
or may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment), against all expense, liability and loss reasonably incurred or
suffered by such person in connection therewith. Such right to indemnification
includes the right to have the Company pay the expenses incurred in defending
any such proceeding in advance of its final disposition, subject to the
provisions of the DGCL. Such rights are not exclusive of any other right which
any person may have or acquire.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses incurred in connection
with the issuance and distribution of the securities being registered hereby,
other than the underwriting discount and non- accountable expense allowance,
expected to be incurred by the Company:
SEC registration fee $ 7,085.07
NASD fee $ **
State securities law fees and expenses $ **
Printing and engraving expenses $ 50,000.00
Legal fees and expenses $ 150,000.00
Accounting fees and expenses $ 50,000.00
Transfer agent fee $ 5,000.00
-------------
TOTAL $ **
=============
** To be completed by amendment.
All amounts in the above table are estimated except the SEC registration
fee and the NASD fee.
Item 26. Recent Sales of Unregistered Securities.
On December 31, 1999, the Company agreed to issue to Mr. William C. Fitzhugh
28,790 shares of its common stock, all in exchange for the forgiveness of debt
in the total amount of $71,975.13. These shares were issued pursuant to Section
4(2) of the Securities Act as they were not issued in connection with a public
offering, and the Company believes Mr. Fitzhugh to be a sophisticated person.
On December 2, 1999, the Company issued 8,520 shares to Dr. S. Randall Hobgood
as consideration for the forgiveness by GMIT of a loan valued at $21,300. These
shares were issued pursuant to Section 4(2) of the Securities Act as they were
not issued in connection with a public offering, and the Company believes Dr.
Hobgood to be sophisticated. Dr. Hobgood is currently a director of the Company.
On December 5, 1998, the Company issued 25,000 shares of common stock to Mr.
John W. and Barbara Bean Hemmer (JTWROS) in exchange for Mr. Hemmer's service as
a director of the Company. The Company has agreed to issue an additional 50,000
shares to Mr. Hemmer upon commencement of this offering. These shares are all
issued pursuant to Rule 701 under the Securities Act. The shares were valued at
$2.50 per share.
Effective December 5, 1998, the Company issued 148,000 shares of its preferred
stock to the minority holders of the common stock of its subsidiary, Sea Star
Industries, Inc., in exchange for all of their interests in Sea Star. These
shares were issued in such exchange pursuant to Section 3(a)(9) of the
Securities Act.
On December 5, 1998, the Company granted the holders of certain notes payable
issued by the Company the option to convert such notes into Series "A"
Non-cumulative 12 Percent Convertible Preferred Stock. During December 1998, the
Company issued 146,140 shares of such preferred stock to these holders in
exchange for principal and interest in the respective amounts of $305,000 and
$60,345.These shares were issued pursuant to Section 4(2) of the Securities Act
as they were not issued in connection with a public offering, and the Company
believes these holders to be sophisticated.
In January 2000, the Company exchanged all of its outstanding shares of
preferred stock for an equal number of shares of its common stock.
During the first three months of 2000, the Company issued 103,050 shares of its
common stock, in the aggregate, at a price of $2.50 per share upon the exercise
of outstanding warrants covering such shares.
iii
Item 27. Exhibits and Financial Schedules.
(a) Exhibits
1.1 Form of Placement Agreement, dated as of __________, 2000 by and
between the Company and Ridgewood Capital Funding, Inc.
3.1 Certificate of Incorporation, as amended**
3.2 Bylaws of BioMarine Technologies, Inc.**
4.1 Specimen Certificate for Shares of Common Stock**
4.2 Form of Common Stock Purchase Warrant*
4.3 1998 Incentive Stock Option Plan**
5.1 Opinion and Consent of Bondy & Schloss LLP
10.1 Commercial Lease and Deposit Receipt, dated October 1998, by and
between Sea Star Industries, Inc., the Company's wholly-owned
subsidiary, and Three P, Inc.**
10.2 Employment Agreement between the Company and John Ericsson, dated April
15, 2000.**
10.3 Employment Agreement between the Company and Sharon Bennett, dated
April 15, 2000.**
10.4 Non-Exclusive Patent License Agreement, by and between the Company and
Mr. John D. Ericsson, covering the Sea Trek Ocean Farming System
10.5 Non-Exclusive Patent License Agreement, by and between the Company and
Mr. John D. Ericsson, covering the Sea Star Oyster Relay System
10.6 Commercial Development Agreement by and between the Company and Gulf
Marine Institute of Technology
23.1 Consents of Reznick Fedder & Silverman, Certified Public Accountants
23.2 Consent of Bondy & Schloss LLP (included in item 5.1 above)
24 Powers of Attorney (included on the signature page)
27 Financial Data Schedule
- ---------------------
* To be filed by amendment
** Previously filed.
(b) Financial Statement Schedules.
All supplemental schedules are omitted because they are not required or
because the information is shown in the financial statements or notes thereto.
Item 28. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has 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. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purpose of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
iv
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the underwriters to permit prompt delivery to each
purchaser.
The undersigned Registrant hereby further undertakes that it will:
(1) 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 registration statement. 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 end of the estimated maximum
offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.
(iii) 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 of any of the
securities that remain unsold at the end of the offering.
v
SIGNATURES
In accordance with to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing of Form SB-2 and has authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Gulf Breeze, State of Florida on October 11, 2000.
BIOMARINE TECHNOLOGIES, INC.
By: /s/ John D. Ericsson
----------------------------
John D. Ericsson,
President and Chief Executive Officer
vi
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below constitutes and appoints John D. Ericsson and John
W. Hemmer or either of them, as such person's true and lawful
attorneys-in-fact and agents, will full powers of substitution and re-
substitution, for such person in name, place and stead, to sign in any and
all amendments (including post-effective amendments) to this Registration
Statement on Form SB-2, in any and all capacities, and to file the same,
with all exhibits thereto and all other documents in connection therewith,
with the Securities and Exchange Commission, granting unto such
attorneys-in-fact and agents, and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 11, 2000.
Signature Title
--------- -----
/s/ John D. Ericsson
- ----------------------------------- President, Chief Executive Officer,
John D. Ericsson Director
/s/ Edwin W. Cake, Jr., Ph.D. Director, Chief Science Officer
- -----------------------------------
Edwin W. Cake, Jr., Ph.D.
/s/ John W. Hemmer Director
- -----------------------------------
John W. Hemmer
/s/ Sharon K. Bennett Secretary/Treasurer
- -----------------------------------
Sharon K. Bennett
/s/ S. Randall Hobgood Director
- -----------------------------------
S. Randall Hobgood, M.D.
vii
EXHIBIT INDEX
1.1 Form of Placement Agreement, dated as of __________, 2000 by
and between the Company and Ridgewood Capital Funding, Inc.
3.1 Certificate of Incorporation, as amended**
3.2 Bylaws of BioMarine Technologies, Inc.**
4.1 Specimen Certificate for Shares of Common Stock**
4.2 Form of Common Stock Purchase Warrant*
4.3 1998 Incentive Stock Option Plan**
5.1 Opinion and Consent of Bondy & Schloss LLP
10.1 Commercial Lease and Deposit Receipt, dated October 1998, by
and between Sea Star Industries, Inc., the Company's
wholly-owned subsidiary, and Three P, Inc.**
10.2 Employment Agreement between the Company and John Ericsson,
dated April 15, 2000.**
10.3 Employment Agreement between the Company and Sharon Bennett,
dated April 15, 2000.**
10.4 Non-Exclusive Patent License Agreement, by and between the
Company and Mr. John D. Ericsson, covering the Sea Trek Ocean
Farming System*
10.5 Non-Exclusive Patent License Agreement, by and between the
Company and Mr. John D. Ericsson, covering the Sea Star Oyster
Relay System*
10.6 Commercial Development Agreement
23.1 Consents of Reznick Fedder & Silverman, Certified Public
Accountants
23.2 Consent of Bondy & Schloss LLP (included in item 5.1 above)
24 Powers of Attorney (included on the signature page)
27 Financial Data Schedule
- ---------------------
* To be filed by amendment
** Previously filed.
viii