Rule 424(b)(3)
File No. 333-119493
McKENZIE BAY INTERNATIONAL, LTD.
SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 15, 2004
Our shares have been authorized for quotation on the OTC Bulletin Board.
The mailing address of our principal office has been changed to 975 Spaulding
Avenue SE, Ada, Michigan 49301
In December 2004 we granted an option for the purchase of 150,000 shares to each
of Messrs. Bakeman and Westerholm under our 2001 Employee Incentive Stock Option
Plan exercisable at $1.22 and $1.35 per share, respectively. One-third of the
option amount of shares became immediately exercisable when the options were
granted. An additional one-third may be acquired on or after December 6, 2005
and the remaining shares may be acquired on and after December 6, 2006. Mr.
Bakeman's option expires on December 5, 2014 and Mr. Westerholm's option expires
on December 5, 2009.
The annual salaries of Messrs. Bakeman and Westerholm have been increased to
$200,000 and $225,000, respectively.
Donald C. Harms has become our general counsel pursuant to a three-year
contract under which he will receive an annual base salary of $175,000. The
other terms of the contract will be substantially the same as those of the
contracts with our three executive officers. Mr. Harms also received an option
for the purchase of 150,000 shares similar to the option granted to Mr. Bakeman
as described above. The per share exercise price of Mr. Harms' option is $1.00
per share, the market value of our shares on the day that Mr. Harms' employment
began.
Beginning in December 2004, each of the independent members of our Board of
Directors receives compensation at the annual rate of $10,000 to accrue and to
be paid when the Board of Directors determines that there are sufficient funds.
Michel Garon has become the Project Manger for Dermond Inc. Because Lac Dore
Mining Inc. has not begun development, Mr. Garon was not being fully utilized in
his role of General Manager. In January 2005, Mr. Garon became the President
of Lac Dore Mining Inc. Approximately 57% of Mr. Garon's salary, per his
contract with us, will be payable by Dermond Inc., with the remainder payable by
Lac Dore Mining Inc. If Lac Dore Mining Inc. begins development, Mr. Garon may
return to his former position. In January 2005, Jonathan Hintz became the Vice
President of Operations for WindStor Power Co.
In April 2005, Doris Galvin became the President of WindStor Power Co., pursuant
to a three-year contract under which she will receive an annual base salary of
$225,000. The other terms of the contract will be substantially the same as
those of the contracts with our other executive officers. Ms. Galvin also
received an option for the purchase of 150,000 shares similar to the option
granted to Mr. Bakeman and Mr. Harms as described above. The per share exercise
price of Ms. Galvan's option is $0.97 per share, the market value of our shares
on the day that Ms. Galvin's employment began.
On January 10, 2005, we borrowed $1,000,000 from Cornell Capital Partners and
issued our promissory note to Cornell Capital Partners in that amount. At the
same time, we placed 1,000,000 shares of common stock in escrow with an escrow
agent designated by Cornell Capital Partners and we deposited with the escrow
agent 19 requests for advances under the Standby Equity Distribution Agreement,
each in the amount of $50,000 and one such advance in the amount of $75,479.45.
The escrow agent has agreed to release the requests to Cornell Capital Partners
every seven days beginning January 17, 2005. Upon the release of each request,
the appropriate number of our shares held in escrow will be issued to Cornell
Capital Partners.
The promissory note issued to Cornell Capital Partners bears interest at the
annual rate of 12% and is payable on or before June 4, 2005. Proceeds from the
sale of the shares issued to Cornell Capital Partners will be utilized in
payment of outstanding amounts under the promissory note. In the event that
during the life of the promissory note, the proceeds from the sales of the
escrowed shares are insufficient to repay all amounts due, we will immediately
place in escrow such number of additional shares of our common stock of which
the proceeds of the sale of such shares shall be sufficient to repay all amounts
due under the promissory note. There is no limit on the number of shares we may
be required to issue to Cornell Capital Partners to satisfy our obligation under
the promissory note. Any decline in the market price of our shares will
increase the number of shares we would otherwise be required to issue to
Cornell.
On each of February 14, 2005 and March 14, 2005 we borrowed an additional
$1,000,000 from Cornell Capital Partners under the same terms and conditions,
except that the weekly advances will begin June 6, 2005 and the promissory notes
are payable on or before October 17, 2005 and October 21, 2005, respectively.
The share escrow with respect to the loans consists of 2,000,000 shares and
1,000,000 shares, respectively.
On January 10, 2005, we entered into a consulting agreement with Stone Street
Advisors, LLC. under which Stone Street will provide advisory services to us
with regard to various types of financial arrangements, including, equity line
of credit financing, debt financing, other forms of direct investment in us and
general corporate matters. The agreement with Stone Street provides that we
will pay an amount as agreed upon in the future. We have paid Stone Street an
aggregate of $75,000 from the proceeds we have received from Cornell Capital
Partners in connection with the three promissory notes. If we engage in any
more funding transactions with Cornell Capital Partners outside of the scope of
the Standby Equity Distribution Agreement, we anticipate that we will compensate
Stone Street at a similar rate. The initial term of the agreement is for a
period of one year. Thereafter, unless previously terminated, and neither party
has given notice of termination, the agreement will be automatically renewed for
successive one year periods. Either party may terminate the agreement without
cause by giving written notice of termination to the other party. Stone Street
is an affiliate of and is under common control with Cornell Capital Partners.
The percentage amounts in our prospectus relating to the effective discount in
connection with purchases of our shares by Cornell Capital Partners do not
reflect escrow fees of $500 per purchase, consulting fees payable to Stone
Street Advisors, LLC or interest under the promissory notes.
We have received a letter from a regulatory agency of the state of Michigan
requesting certain information concerning the offer and cash sale of our shares
and promissory notes. We have provided the requested information to the
agency. We believe that since December 31, 2002, we have sold an aggregate of
10,000 shares of our common stock to three Michigan investors for approximately
$8,300 in violation of the registration provisions of the Michigan Uniform
Securities Act. We have made an offer to those investors to refund their
purchase price with interest at 6% per year from the date of payment. Reference
is made to the disclosure under the caption "Risk Factors" in our prospectus
relating to offers and sales of our securities.
Subsequent to December 31, 2004, Lac Dore Mining Inc. did not remit scheduled
quarterly repayments of approximately $106,000 due under two separate interest
free loan agreements with the Government of Canada. These loans are unsecured
and are the obligations solely of Lac Dore Mining Inc. The quarterly payments
were made in March, 2005, and the regular quarterly payments that would have
been due in March, 2005 were deferred until June, 2005 by agreement of the
lender. As a result, there is currently no default under these obligations as
restructured, but if payment isn't made as agreed in June, 2005 a default could
occur that would give the lender the right to demand immediate repayment of all
amounts due. If the requisite payment is not then made, Lac Dore Mining Inc.
could lose its mining claims for the Lac Dore vanadium/titanium deposit.
As reported on our Quarterly Report on Form 10-QSB as filed with the SEC, during
the quarterly period ended December 31, 2004, we incurred a net loss of
$2,284,322 or ($.08) per share. Our net loss for the quarterly period ended
December 31, 2003 was $495,416 or ($.02) per share. The increase in net loss
was primarily due to significant increases in research and development,
management wages and benefits, professional fees and interest and finance
charges. The interest and finance charges were approximately $683,000. On
December 31, 2004, our working capital deficit was approximately $3,700,000. See
"Additional Information" in our prospectus.
Subsequent to December 31, 2004, the holders of convertible promissory notes
issued by us in the aggregate amount of $800,000 converted their notes into
1,066,667 shares of our common stock.
We have entered into agreements with 19 potential users of WindStor systems. The
agreements allow for us to conduct wind testing of installation sites for DWTs
to determine whether WindStor could be economically viable. We intend to utilize
a third party to assistance us in determining whether WindStor can be
economically viable at particular sites. Irrespective of the results and price
structure, none of the potential users is under any obligation to purchase or
lease any products from us.
At our Annual Meeting of Shareholders held on April 14, 2005, our shareholders
reelected our current Board of Directors and ratified the choice of BDO Seidman,
LLP as our independent auditor.
April 15, 2005