As filed with the Securities and Exchange Commission on May 15, 2000.
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 (Primary Standard Industrial (IRS Employer
of incorporation or Classification Identification
organization) Code Number Number)
1198 Gulf Breeze Pkwy., Suite 8
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 8
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.
Mary P. O'Hara, Esq.
Bondy & Schloss LLP
6 East 43rd Street, 25th Floor
New York, New York 10017
Ph. (212) 661-3535
Fax: (212) 972-1677
David E. Fleming, Esq.
Cummings & Lockwood
4 Stamford Plaza
Stamford, CT 06904
Ph: (203) 708-3881
Fax: (212) 972-1677
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
Title of Each Class Amount to be Proposed Maximum Proposed
Amount of
of Securities Registered Offering Price (1) Maximum
Registration
to be Registered Aggregate
Fee
Offering Price
(1)
Units consisting of one 12,500 Units $850 per Unit $10,625,000
share of Common Stock
and one Class B Warrant
Common Stock, par value 1,250,000 Shares -- --
$.01 per share, included
in the units
Class B Warrants 1,250,000 Warrants -- --
included in the units
Common Stock issuable 1,250,000 Shares $9.50 per share 11,875,000
on exercise of Class B
Warrants included in
the units
Common Stock registered 369,200 Shares $8.50 per Share 3,138,200
on behalf of certain
shareholders
Units issuable as 1,250 Units $9.35 per Unit 11,687.50
compensation 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.
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.
BIOMARINE TECHNOLOGIES, INC.
Up to 12,500 Units offered by BioMarine
Each Unit = 100 Shares of + 100 Class B
Common Stock Warrants
Plus 396,200 shares to be sold separately by selling shareholders
Estimated Price of Units: $850 per Unit or $10,625,000
Underwriting Commission and Other Expenses $120 per Unit or $1,500,000
Net Proceeds to BioMarine $730 per Unit or $9,125,000
Price of share 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. 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
SmallCapTM 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 it 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.
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.
BIOMARINE TECHNOLOGIES, INC.
12,500 Units
Each Unit consisting of
100 Shares of Common Stock, $.01 par value,
and
100 Class B Warrants
PROSPECTUS
Ridgewood Capital Funding, Inc.
_____________________, 2000
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 shares in any jurisdiction
where it is unlawful to do so.
TABLE OF CONTENTS
PART I Page
Prospectus Summary
Summary Historical Financial Information
Risk Factors
Use of Proceeds
Dividend Policy
Capitalization.
Selected Historical and Financial Data
Management's Discussion and Analysis
of 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
Additional Information
Index to Financial Statements F-1
PART II
Until ________, 2000 (25 days after the date of this Prospectus) all dealers
that buy sell or trade these shares, 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.
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
proprietary state-of-the-art 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 used 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 the largest sea farming sites in the world. BioMarine
believes these sites will be the first commercial marine sea farming
production projects permitted by the state and federal governments for
use in the open Gulf of Mexico. We are a development stage company
and have not yet had any significant operations.
We intend to introduce our Sea Trek Ocean Farming System for use in the
offshore fish farming industry. Gulf Marine Institute of Technology has
acquired a platform system located in Texas which we plan to convert for
commercial mariculture use. The platform complex will be equipped with an
automatic feeding system that provides fish with food pellets many times per
day as well as with computerized monitoring and harvesting systems. The
converted platform is planned to contain a finfish hatchery, research
laboratory, crew quarters, classroom and heliport. While we believe the
system will be state-of-the art, a full sized Sea Trek barrel cage system
has not yet been built. However, a 1/20- scale model of the barrel cage
was built and was then tested at the Massachusetts Institute of Technology
in 1995 with favorable test results for fully exposed ocean farming
conditions.
We plan to utilize the Sea Star Oyster 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
oysters' natural ability to cleanse itself in high-salinity waters that
lack contaminants.
So far, we have concentrated our efforts on research and development, and
obtaining all necessary state and federal permits for two sites. 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. We have had limited operations and have
produced limited revenues from our vessel charter and cleansed oyster
product marketing. BioMarine Technologies, Inc., formerly known as
Sea Pride Industries, Inc., was incorporated in Delaware in 1989.
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.
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.
Detachable and separately traded from the
shares in each unit.
Redeemable 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 2,571,471 Shares
shareholders
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:
technical wages/salaries, administrative personnel salaries/wages, project
travel, equipment, materials/supplies, technical advisors & subcontractors,
insurance/ platform repairs, rent & utilities, marketing/telephone/
environmental monitoring, working capital and debt repayment. $ ____________
of the proceeds will be used to pay an accrued salary owed to Mr. John Hemmer,
our Chief Financial Officer.
Proposed OTC Bulletin Board Symbols: Common Stock: "BMAR"; Warrants:
"BMARW"
Risk Factors An investment in these units involves a
high degree of risk to the public investors and, therefore, anyone who cannot
afford a loss of his or her entire investment should not purchase them. You
should carefully review and consider the factors set forth under
Risk Factors as well as other information in this prospectus before
purchasing any of the Units. See "Risk Factors."
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.
SUMMARY OF HISTORICAL FINANCIAL DATA
The following table presents summary historical consolidated financial
information for 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 Year Ended For the Year
Ended
December 31, 1999 December 31,
1998
Operating Data
Revenue $ 133,920 205,613
Salaries, wage and benefits 144,713 185,442
General and administrative expenses 54,832 119,436
Total costs and expenses 324,017 625,741
Net (loss) (190.097) (420,128)
Net loss per common share outstanding $(0.09) $(0.21)
Weighted average number of shares
of common stock outstanding 2,028,461 1,976.593
Balance Sheet Data
Current assets 1,982 7,020
Total assets 80,243 267,710
Current liabilities 531,037 421,991
Long term liabilities - 111,416
Shareholders' (deficit) (450,794) (265,697)
Working Capital (529,055) (414,971)
$(414,971)
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 might lose your entire
investment. See Financial Statements and Report of Independent Certified
Public Accountants included elsewhere in this Prospectus.
Our limited operating history makes it difficult to evaluate our prospects.
While we were incorporated in 1989,we have only generated limited revenues.
We have conducted a limited amount of oyster cleansing and enhancing
operations. Furthermore, our Sea Star Oyster Relaying System has only
conducted pilot production tests. We cannot assure our investors that such
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. We have never earned significant revenues, and any revenues we
have earned 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, or, if it
does, that it will be able to continue earning such revenues or profit. 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 Star Oyster Relay System and our Sea
Trek Ocean Farming 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 us as well as substantially larger research and development
staffs and facilities and many of them have substantially greater experience
in the production and marketing of related products than us 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 market our products successfully and generate revenues from
them. We may not be able to market our products. Even if we can market our
products, we may find our market share limited. This would limit our ability
to generate such revenues which would cause our share price to decline.
Our ability to compete successfully may depend on our ability to protect
our intellectual property and proprietary technology. John D. Ericsson, our
Chairman and Chief Executive Officer, currently has U.S. Patents for the Sea
Star Oyster Relaying 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
proprietary technology. Others may independently develop or acquire
substantially equivalent proprietary 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 regulation by federal and state government. 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. Although state laws regulating the mariculture industry
vary, we believe that such state regulation will have only 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 future changes in mariculture costs, treatment technology, and
industry regulations will affect our operations or profitability or whether we
will ever operate profitably.
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
are negotiating with a third party 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 entered into a letter of intent with
Fishery Products International in which they have indicated an intention to
distribute a significant portion of our seafood products.
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 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.
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 don't plan to pay dividends. We have never declared or paid any cash
dividends on our common stock, and we don't 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 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
(ii) 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;
o 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
o 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
andour 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 48.6% 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 has agreed to act as a market maker for the common stock or
warrants. If Ridgewood declines to make a market in the common stock and
warrants, 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 need to find two 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.
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.
Amount Percent
Total Technical Wages/Salaries 295,000 3.2 %
Administrative Personnel Salaries/Wages (1) 182,000 2.0 %
Project Travel 115,000 1.2 %
Equipment 2,818,358 31 %
Materials/Supplies 233,800 2.6 %
Technical Advisors & Subcontractors 247,000 2.7 %
Insurance/ Platform Repairs 253,816 2.8 %
Rent & Utilities 22,800 0.3 %
Marketing/Telephone/
Environmental Monitoring 190,800 2.1 %
Working Capital 3,969,114 43.4 %
Contingency @ 10% 397,312 4.3 %
Debt Restructure 400,000 4.4 %
Total $9,125,000 100%
(1) The amount of proceeds to be used for administrative salaries includes
$__________ which we plan to pay to Mr. John Hemmer, our Chief Financial
Officer for his accrued salary for the period from _____________ to
_______________.
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 cash, short-term debt and current
maturities of long-term debt and capitalization as of December 31, 1999 on a
pro forma basis as adjusted to give effect to the offering and the application
of the estimated use of proceeds:
December 31, 1999
Short-term debt $ 531,037
Long-term debt -
Stockholders' equity
Preferred Stock, par value, $.01 per share: 3,741
5,000,000 shares authorized; 294,140 shares
issued or outstanding
Common Stock, par value, $.01 per share: 20,300
25,000,000 shares authorized, 2,029,961
shares issued and outstanding
Additional paid-in capital 1,798,603
Total capitalization 80,243
DILUTION
The deficit in our net tangible book value as of December 31, 1999 was
approximately $450,794, or approximately $0.22 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 December 31, 1999, 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 December 31, 1999 would have been approximately
$8,674,206, or approximately $2.64 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 $2.86 per share to existing shareholders and an immediate
dilution of approximately $5.86 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 $(0.22)
Increase per share attributable to new investors 2.86
As adjusted pro forma net tangible book value per share after
the offering 2.64
Dilution per share to new investors 5.86
The following table summarizes as of December 31, 1999, the difference between
the existing stockholders who purchased their shares of common stock within
the five years ending December 31, 1999 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
purchasing within the past
five years 1,321,896 51.4% $3,304,740 23.7% $2.50
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.
SELECTED FINANCIAL DATA
The following selected financial data has been derived from the financial
statements of BioMarine for 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 Year Ended For the Year Ended
December 31, 1999 December 31, 1998
Operating Data
Revenue $ 133,920 205,613
Salaries, wage and benefits 144,713 185,442
General and administrative expenses 54,832 119,436
Total costs and expenses 324,017 625,741
Net (loss) (190.097) (420,128)
Net loss per common share outstanding $(0.09) $(0.21)
Weighted average number of shares
of common stock outstanding 2,028,461 1,976.593
Balance Sheet Data
Current assets 1,982 7,020
Total assets 80,243 267,710
Current liabilities 531,037 421,991
Long term liabilities - 111,416
Shareholders' (deficit) (450,794) (265,697)
Working Capital (529,055) (414,971)
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.
Together with our president, Mr. John Ericsson, we have researched, designed
and developed our proprietary, state-of-the-art 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 none of which have been from our anticipated
commercial 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
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 our anticipated
mariculture operations. $111,667 in revenues for fiscal 1999 were attributable
to a one-time gain on the sale of certain equipment. During fiscal 1998,
$190,943 in revenues were attributable to the rental of equipment?.
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 because Mr. John
Ericsson, our President and Chief Executive Officer, waived a portion of his
salary during 1999 .
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 the transfer
of certain expenses to Gulf Marine Institute of Technology.
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.
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 date of this prospectus,
BioMarine plans to contract with a team of consultants for the project. Upon
receipt of all necessary design approvals, the equipment and design of our
third-party manufactured mariculture systems will be evaluated for approval by
BioMarine and GMIT for use at its mariculture sites. We then plan to acquire,
lease or hire vessels to be used as transport for personnel, equipment and
fingerlings. We intend to enter into contracts with construction companies
either to convert the existing GMIT platform into a mariculture facility or to
acquire a salvaged platform for the Alabama site for conversion. Renovations
will then begin, and personnel will be hired to perform initial day to day
operations of the mariculture project. Once the platform is renovated,
normal maintenance of the systems onboard the platform will be continually
conducted to ensure peak performance. The finfish feed systems to be used
will be designed and constructed for the specific need of the fingerling
stocks during the first quarter and will continue through the second to third
quarter. The harvest and transfer systems will also be designed and
constructed during this period. We plan to design and construct an onboard
finfish hatchery for the platform complex during the first two quarters, 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.
Fingerlings will be restocked 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 one to three
SeaStations TM for use as one of the cage systems for fingerling growout. The
anchoring system for the SeaStationTM is expected to be validated. In the
third and fourth months, we expect to evaluate and approve the final design of
the systems to be utilized. During the fourth month of the project additional
SeaStationTM systems are to be delivered to the site, installed by the
manufacturer and made ready for operation. While the SeaStationTM is being
installed in the first quarter of the project, the vacuum transfer system will
be attached to the cage for fish transfer at the site. The automatic feeding
system is also expected to be attached 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 will be ready for full operations. The SeaStationTM will be
ready for operations after being installed and fully tested. Personnel will
be trained by the manufacturer and industry partners to perform all aspects of
operation of the cage system, i.e., stocking, cleaning, maintenance,
harvesting, etc.
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 to expand the project and to determine how the
project should be commercially developed into a fully developed site.
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
near term. 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.
BUSINESS
General
BioMarine is a development stage company. Our president, John D. Ericsson, has
researched, designed and developed proprietary, state-of-the-art 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.
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 economically viable to acquire existing
oil and gas platforms that are no longer in production 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.
There are some obvious 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 wastes 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. Unless the context otherwise indicates, the terms BioMarine and
Company as used in this Memorandum refer to BioMarine Technologies, Inc.
Industry Overview
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 1995. Advances in production technologies related to genetic
improvements, feeds, aeration, sea cage systems, and new strategies to control
disease have lead the Company to an opportunity to farm fast growing Gulf
marine finfish like Cobia (Lemonfish, Ling) and Mahimahi. BioMarine will
expand the success of the mariculture industry into the United States Gulf of
Mexico and worldwide.
Channel catfish is the dominant fresh water aquaculture species in the United
States with 202.8 metric tons (447 million pounds) produced in 1995. 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 has 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 Food and Agriculture Organization of the United
Nations reports 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. U.S. demand for seafood is expected to
increase by 1.4 million metric tons annually due to population growth alone.
Global commercial harvest of wild caught fish peaked at 89 million metric tons
in 1989. Since then, stagnation or decline has replaced the long-term growth
trend. For the past two decades, the fishing industry has had to increasingly
face the result 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. To catch
$70 billion worth of fish, the fishing industry recently 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.
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 595-605 million pounds by the end of 1999. According to
a March 5, 1999, report by the Economic Research Service, U.S. Department of
Agriculture, growers reported that as of January 1, 1999, they anticipated
that 175,220 acres of ponds were used during the first half of 1999, up two
percent from the revised estimate of the acreage used in 1998. Most of the
increase is attributed to a five-percent increase in the acreage in
Mississippi.
Catfish farmers reported that total sales in 1998 reached $469 million, 10
percent higher than the revised figure of $427 million for 1997. Food-size
fish sales totaled just under 600 million pounds, up five percent from 1997,
and averaged 74 cents per pound, up four percent. Fingerling sales increased
31 percent to $20 million, as the volume rose 29 percent and prices increased
slightly. Most of the increase is attributed to higher sales by Mississippi
growers.
While fresh water Channel catfish are entirely different from marine redfish,
striped bass, cobia, fluke, 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, fluke 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
The Sea Trek Ocean Farming System
BioMarine intends to introduce a modified version of the patented Sea Trek
Ocean Farming System, a proprietary, (developed by BioMarine's president, John
D. Ericsson, see Certain Transactions), state-of-the-art system, for the
offshore fish farming industry. The initial system is planned to be comprised
of: a four (4) platform complex owned by Gulf Marine Institute of Technology
(GMIT) off Port O'Connor, Texas with the SeaStationTM ballastable Sea Cage
System (see Cage System in diagram 18-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, crew quarters, classroom and
heliport. While BioMarine believes 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. The barrel cage system shown in the diagram
18-A below and on page 19 may be built and tested later in the project
development.
[Diagram 18-A (Sketch of barrel cage system).]
The Sea Trek system has a patented barrel cage invented by John D. Ericsson
and designed to operate in most deep offshore marine conditions. Under normal
conditions, the Sea Trek and SeaStationTM system would be semi-submerged.
Each cage system is lifted by an automatic ballast system controlled from the
platform.
[Diagram 19-A (sketch of individual barrel cage).]
In rougher conditions, these two types of cages can be lowered until the top
is level with the surface, thus reducing the impact of the waves. During
stormy conditions (i.e., wind force 12+), 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.
[Diagram 19-B ("Evolution of the SeaStation TM Sea Cage).]
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 Trek barrel cage of the two
system types has sufficient buoyancy to revolve 180 degrees to any desired
position so that one-eighth of the cage is exposed to the sun. This exposure
will dry off the seaweed and reduce fouling organisms and allow pressure
washing of each cage.
The Sea Star Oyster Relay System
We intend to introduce the Sea Star Oyster Relay System, a proprietary, state-
of-the-art 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 (chemicals, pathogens,
bacteria associated in the oyster's natural coast habitat, etc.).
[Diagram 20-A of SeaStar Oyster Relay System.]
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).
Feasibility Study
BioMarine's subsidiary, Sea Star Industries, Inc., evaluated the commercial
viability and cleansing efficacy of the relaying process in 1995, in which the
results demonstrated that the process: (1) allows for the natural biological
cleansing of the oysters (i.e. E.coli); (2) reduces the level of Vibrio
vulnificus bacteria in oysters, a potentially deadly pathogen that thrives
during warm water months in the Gulf of Mexico, and; (3) increases the salt
content of the oysters, thereby enhancing the flavor.
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.
Potential Oyster Production
As an example of potential oyster production, an estimated 200,000 sacks of
commercial oysters could be harvested annually from restricted areas if
depuration and/or relaying were permitted. At the average value of $15 per
sack, those 200,000 sacks represent a $3 million resource. The cleansed, high-
salinity oysters could bring up to $35 per sack premium over conventional
wild-harvested oysters. This would raise the commercial value of 200,000 sacks
of cleansed oysters to approximately $10 million (one economic snapshot of how
off-bottom relaying could affect the oyster industry in just one of the five
Gulf states, i.e. Texas). Multiply these numbers by the vast thousands of
oyster bed acres located in restricted or closed-area waters in other Gulf
and Atlantic states and the economical impact potential of the oyster
cleansing process becomes readily apparent.
Activities to Date
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. 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 cooperate 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. If BioMarine raises less
capital than required to initiate the Sea Trek project but at least $500,000,
BioMarine plans first to start the Sea Star Oyster Relay System operation
described on page 18.
Although BioMarine is permitted to use the Texas platform for development of
the project, the permit is in the name of GMIT as the owner of the platform.
As a condition to the issuance of the permit, GMIT was required to grant to
the Government Land Office a lien against the platform and the right to tear
it down or decommission it at any time at the option of the GLO. GMIT was
also required to post a bond for the payment of demolition expenses should the
GLO exercise its rights to have the platform torn down. In addition, the
platform cannot be used as collateral or otherwise encumbered or hypothecated
without the permission or a waiver from the GLO. In the event that GMIT is
required to tear down the Texas platform, BioMarine expects that it would
continue with its plans for the Alabama project which is described below.
Second Site -- Alabama
The second proposed Sea Trek Ocean Farming project involves the acquisition of
a salvaged oil and gas production type platform for the Alabama permitted
site. 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.
On November 2, 1993, the United 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 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 site.
On October 21, 1993, the United States Environmental Protection Agency region
IV in Atlanta, Georgia issued an acknowledgment letter of receipt of
BioMarine's completed application for a National Pollutant Discharge
Elimination System (NPDES) permit and assigned it for issuance in the near
future.
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:
1) Disease as defined
2) Flood & Tidal Wave
3) Storm Damage, Subsidence, Landslip,
Structural Failure, Breakage, or Blockage
Of any part of the Water Supply System
4) Drought, Freezing, Lightning, Explosion &Aircraft
5) Mechanical Breakdown or Accidental damage to Machinery and other
installations
6) Electrical Breakdown, Failure or Interruption of the
Electrical Supply and Electrocution
7) Deoxygenation due to Plankton Bloom or High Water Temperature
8) Pollution as defined
9) Malicious Acts, Theft & Predation
Although the Company 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
Sea Farming Products
Redfish, Cobia and Mahi Mahi
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 feed 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 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, making it the potential sea cow of mariculture in
the Gulf of Mexico. 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 from state waters off the Gulf of Mexico averaged about three
million pounds (range: 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 region from 1991-1996,
totaled1,046 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.
Some preliminary studies on growth rates and spawning suggest cobia has
excellent potential for mariculture (Hassler and Rainville 1975; Calor et al
1994).
Grow-out Requirements and Techniques
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_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.
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 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 under development as a mariculture species
(Liao et al 1995).
The decreasing supply and increasing demand for fish and shellfish represents
an excellent opportunity for aquaculture along the Gulf of Mexico. However, no
species can be farmed on a commercial level until spawning techniques have
been developed that provide growers with a steady and adequate number of
fingerlings (juvenile redfish approximately on to three inches in size). In
1989, The Redfish Hatchery, Inc. in Pass Christian, Mississippi, started
producing redfish fingerlings on a commercial level.
BioMarine's commercial operations sites are to be located four miles south of
Fort Morgan, Alabama in federal waters of the Gulf of Mexico and 8.9 miles
south of Port O'Connor, Texas in state waters. These locations have high
quality saltwater, which provides warm saline water year-round to the grow-out
system. As a result, since water quality and temperature are ideal at this
location, BioMarine expects to meet or exceed 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 that utilizes
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's aquaculture
experts believe that three pound fish can be grown from 2 pound fingerlings
with this technology in 12 to 18 months with mahi mahi and cobia taking only
six months.
Controlled Spawning of Redfish
The initial stock of fish fingerlings will be obtained from suppliers located
in the Gulf of Mexico region and appropriate foreign producers. BioMarine
plans to produce future fingerling stocks by a controlled spawning system.
Construction and/or acquisition of a hatchery is would 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 mariculture experts
believe that the controlled spawning process perfected for Mediterranean sea
bass and sea bream can be adapted to cobia, mahi mahi and other fast growing
Gulf marine fish species. A research and development grant will be applied for
by BioMarine through the National Institute of Standards & Technology. If
successful, BioMarine could receive matching funds to help develop this
important breakthrough in Gulf commercial mariculture technology.
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 either
the gross sales from the processing of shellfish any receipts from the sale of
the equipment. We are also to pay Mr. Ericsson ten 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.
The Market
The Market
Seafood Consumption in the United States
The United States is the world's largest importer of seafood. At least 50
percent of the seafood that Americans consume is imported. The United States'
second largest importer, now ranks sixth in total volume of product landed,
behind Russia, mainland China, Japan, Peru and Chile. In 1991, the U.S. landed
4.4 million metric tons of fish commercially and 128 thousand metric tons
recreationally. World landings indicate that fish landings of conventional
commercial wild species have remained virtually flat for the last few years
(GCRL, 1992). The world is currently harvesting at or near the maximum
available poundage from the earth's supply of wild stocks of fish.
It has only been in the last 20 years that various forms of aquaculture have
developed as a commercial industry. In the United States, trout, catfish and
salmon rearing have developed rapidly. Aquaculture provides the seafood
industry with increased control over its product. Producers can better meet
the demand of the market by adjusting size, quality and appearance of
products. In addition, the survival rate from fertilized eggs to adult size
can reach in excess of 50 percent in aquaculture environments versus roughly
one percent in nature.
From a grow-out perspective, it is important to know what form and sizes the
market demands. Most processing firms and restaurants prefer a three to four
pound fish that will yield two, eight to 11.5 ounce filets. Presently, 61
percent of all U.S. seafood consumption is in restaurants. While the specialty
shops and supermarkets are selling 48 and 40 percent of their fish as filets,
respectively, the wholesaler distributors are selling 75 percent of their fish
as filets. Therefore, the wholesalers are primarily interested in purchasing a
gilled and gutted product, and to a lesser degree, a skin-off filet. They are
also requesting fish in the round that can be supplied off the farm.
Currently, prices for large volumes of bled whole round redfish, cobia and
mahi mahi are as high as $4.00 per pound.
Retail supermarkets are aggressively seeking a greater share of the consumers'
seafood dollar. Up to now, they have not pursued redfish aggressively because
there is no steady dependable supply. A year round assured source of redfish,
cobia and mahi mahi produced by BioMarine would be of great value since
supermarkets could then advertise aggressively, knowing that they could supply
the generated demand. This would be especially effective in the Gulf Coast
area where regional favorites tend to make up the bulk of the sales.
Consumer Awareness
The number one cause of death in America today is heart disease. For years,
researchers have known that the building of fatty plaque that narrows arteries
and causes heart attacks is related to the cholesterol and saturated fat
content of the diet. This knowledge has created consumer awareness and
translates into less animal protein, such as red meat, eggs and dairy
products, and a demand for more poultry and seafood.
America's new health awareness and growing rate for fish have raised seafood
to a $16 billion annual business-compared with $12 billion revenue for
chicken, which is cheaper, and $44 billion for beef. As a result of this
industry grown, an increasing number of national restaurant chains have added
fish to their menus. Major corporations, such as Hormel, Continental Grain and
International Protein have started fish-farming operations. The demand for
fresh fish keeps climbing despite prices for some species, ranging $7 to $10
per pound. However, unlike beef and chicken, fish offers a wide range of
variety and prices. Throughout the United States, supermarkets have taken
advantage of the seafood craze by stocking a greater variety of fish and
enlarging and renovating their seafood departments. Although sales of frozen
seafood have been stagnant, many supermarkets still sell more frozen than
fresh seafood because of the seasonal supply issue from wild caught species
and will pay a premium for year round supply of fresh seafood.
Analysis of the Redfish, Cobia and Mahi Mahi Markets
Traditionally, the redfish has been a staple in the Gulf coast and the
Atlantic coast areas as far north as South Carolina. Only recently, however,
the fame of the redfish's firm white meat and mild flavor has spread to the
northeast and the far west. Because of this rise in demand, there is a change
in perception of the market. A survey on this topic conducted by the Texas
A&M Extension Service found that the firms closest to production, the
processors and dealers, were less likely to deal in redfish. On the other
hand, those closest to the consumer were more likely to have redfish as part
of their product line. As an example, 75 percent of the supermarkets indicated
that redfish was part of their product line. It should be noted that those
firms that do not sell redfish stated that their primary reason for omitting
redfish was that there was too much regulation of redfish. Farm-reared redfish
and cobia are less regulated as a result of state permitting of aquaculture
products, thus creating the possibility of an entirely new market. With items
such as redfish and cobia traditionally sold on the fresh market, it is of the
utmost importance to be close to the processor. A majority of the redfish in
the United States is purchased from processors in Louisiana. Therefore,
BioMarine plans to produce its redfish, striped bass and mahi mahi in close
proximity to these processors in order to facilitate the marketing of the
fish. This will give BioMarine an ready market for its products, that will
grow rapidly at a continuous and predictable rate to reach the processors.
Mississippi and Alabama have had as many as twelve major seafood processing
companies within the State that were approved by the U.S. Department of
Commerce (USDC). These USDC-approved processing plants represent a major
market outlet for new, farm-reared products, or they may be employed to
process Company finfish on a contract basis. There are only 127 USDC-approved
processing plants in the entire United States, including Alaska and Hawaii.
There is one HACEP approved seafood processing plant located in Port O'Connor,
Texas. Port O'Connor is the shore side base of the operations for the Texas
project. The base and processing plant are just 12 nautical miles from the
platform complex.
Initially, BioMarine intends to transport its finfish in refrigerated vessels
and trucks to be processed within 24 hours of harvesting, into the retail
market via ground and airfreight. This procedure will guarantee a fresher
product that is not normally found in conventional fishing operations.
Market Strategy
Present Inability to Deliver Fresh Finfish to Market on a Perennial Basis
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 redfish, cobia and
mahi mahi grow-out operations intend to take advantage of this situation by
producing a consistent size and 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.
Increasing Concern Over Environmental Damage Caused by Conventional Commercial
Fishing Operations
We also plan to capitalize on the environmental awareness of today's consumer.
Events such as the environmental conference in Rio de Janeiro have served to
underscore to the consumer the dangers faced by the earth's wildlife.
Considerable damage is being levied upon sea life through the course of normal
commercial fishing operations. To produce one pound of marketable seafood in
a given catch, another 12 pounds of sea life is sacrificed because the huge
nets used commercially do not permit an escape for unwanted sea life. Today's
consumer is more inclined to purchase a product from a company that is
considerate and protective of the environment. The BioMarine process is
protective of the environment and will serve to replenish the seas rather than
diminish their abundance.
Concerns Among Consumers Regarding Quality of Seafood Currently on the Market
Recent articles in The Wall Street Journal and Consumer Reports highlight the
very legitimate concerns of 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 is
available worldwide for these packaged filet products at $10 to $12 per
pound. Marketing studies will be conducted by BioMarine to determine
alternatives for all products reared during the first 18 months of
commercial operations.
Competition
The maritime aquaculture industry is highly competitive and consists of
substantial competing companies and organizations worldwide. More than half of
the industry's revenues are generated by the largest ten maritime aquaculture
companies and organizations, and the remainder is attributed 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, there are no other mariculture ventures other than the Company
currently operating in the Gulf of Mexico, nor are there any mariculture
ventures that are permitted by the State of Alabama, Texas or the Federal
government to operate in the Gulf of Mexico. Commercial redfish bans and size
limits on most species are in place throughout the Gulf of Mexico. A few
hatcheries 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 the world.
Trademark, Copyright and Proprietary Rights
BioMarine intends to file trademark and copyright applications relating to
BioMarine's proprietary 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 proprietary
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 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.
The NMFS, through implementation of a Fishery Management Plan (FMP), has taken
actions to prohibit the harvest of redfish from the offshore spawning stock
it allows only small allocations for incidental fishing by recreational and
commercial users. An amendment to the FMP will prohibit any retention of
redfish from Federal waters off Texas and Florida, where historical levels of
escapement to the spawning stock were lowest. Therefore, for the immediate
future, total landings of recreational and commercial users from Federal
waters will not exceed 625,000 pounds annually.
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 five fish ranging in size from 18 to 30 inches in
length for recreational fishing only.
Florida has recently closed it redfish (red drum) fishery to all harvest by
emergency order, which will be extended by permanent order while they develop
conservation measures to increase the escapement level. 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 ten fish. Louisiana's
legislature closed redfish harvest until 1993 pending review.
Employees
As of the date of this prospectus, BioMarine employs two full time employees,
Mr. John D. Ericsson and Ms. Sharon Bennet. Of these full-time employees, Mr.
Ericsson, the Company's President, is engaged in administration and finance,
and Ms. Bennet, the Company'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.
Legal Proceedings
We are aware of no legal proceedings pending either against BioMarine or any
of its subsidiaries.
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 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 offer and sale of securities. The
matter was settled pursuant to a Stipulation and Consent Agreement with Final
Order pursuant to which BioMarine paid a fine of $35,000.
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 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.
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. He serves as a member of the board of directors of Purchase Point
Medical Corp.
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.
Conflicts of Interest
Management of BioMarine has other financial and business interest 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
agreement 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.
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.
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
Name and Principal
Position Year Salary Bonus Other Annual Securities
Compensation Underlying All Other
Options Compensation
- -----------------------------------------------------------------------------
John D. Ericsson, 1997 $96,000 - - - -
President and 1998 $96,000 - - - -
Chief 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.
We have not entered into any written employment agreements with any of our
officers, but we are currently negotiating the terms of such agreements to be
entered into with Mr. John D. Ericsson, our President, and Mr. John Hemmer,
our Chief Financial Officer.
AGGREGATED 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
Securities Unexercised
In-the-
Underlying Money Options
at
Unexercised FY-End
Options at FY-End
Exercisable/
Shares Acquired Value Exercisable/ Unexercisable
Name on Exercise Realized Unexercisable
- ----------------------------------------------------------------------------
John D. Ericsson -- -- -- --
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 Beneficially
Owned Prior to Offering shares offered Owned After
Offering
Number Percent Number Percent
- -----------------------------------------------------------------------------
John D. Ericsson(1)
President, Chief
Executive Officer,
Director 2,940,000(2) 64.6% 100,000 2,840,000 62.4%
Edwin W. Cake, Jr.
Ph.D.(1) Director,
Chief Science Officer 150,000(3) 5.7 25,000 125,000 4.7
Sharon K. Bennett(1)
Secretary/Treasurer 20,000(4) * 7,000 13,000 *
John W. Hemmer(1)
Director, Chief
Financial Officer 110,000(5) 4.2 25,000 85,000 3.2
Dr. S. Randall Hobgood,
Director 187,977(6) 7.2 10,000 177,977 6.8
All officers and
directors as a group 3,407,977 72.4 167,000 3,240,977 68.8
Kathleen S. Bell
Living Trust 8,000 * 8,000 - -
John L. Black 10,000 * 10,000 - -
Bruce Brumby 4,000 * 4,000 - -
Georgine Burt 20,000(7) * 20,000(7) - -
Donald L. Casey 6,000 * 6,000 - -
Edward J. Crenshaw 8,000 * 8,000 - -
Katherine Douglass and
Stuart Douglass 2,200 * 2,200 - -
James I. Dunne 4,000 * 2,000 2,000 *
Justin D. Ericsson 20,000(8) * 10,000 10,000 *
Barbara A. Leon 8,000(9 * 4,000 4,000(9) *
Paul G. Romine Charitable
Trust 8,000 * 8,000 - -
Dennis H. Peters 5,000 * 5,000 - -
Dr. Grady Price, Jr.(10) 48,000 1.9 48,000 - -
Judy B. Price(10) 48,000 1.9 48,000 - -
William H. Robinson 8,000 * 8,000 - -
Dr. Charles R. and Margaret W.
Salisbury (JTWROS) 14,000 * 14,000 - -
Angela D. Shields 1,000 * 1,000 - -
Christina A. Shields 1,000 * 1,000 - -
Vivian Shields 2,000 * 2,000 - -
Norvelle Smith 8,000 * 8,000 - -
The Jade Trust 50,000(11)(2) * 50,000(11)(2) - -
The Revocable Trust of
William B. Bulla 8,000(12 ) * 8,000(12 ) - -
Ellen S. Vollmer 6,000 * 2,000 4,000 *
* 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.
(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.
Mr. 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
agreed to issue an additional 50,000 shares upon consummation of this
offering. BioMarine also has agreed to pay Mr. Hemmer a fee of $5,000 per
month, which accrues for the three years beginning November 15, 1998 and is
payable upon consummation of this offering.
On January 23 and 31, 1999, Dr. Randall S. Hobgood loaned GMIT $8,000.00 and
$10,000.00 respectively.
On December 2, 1999, the Company 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.
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 over the Internet
or otherwise but will not engage any other broker/dealer than Ridgewood or its
affiliates to assist in such efforts.
DESCRIPTION OF SECURITIES
The following description of the Common Stock of BioMarine and BioMarine's
Certificate of Incorporation and Bylaws is a summary and is qualified in its
entirety by the provisions of the Certificate of Incorporation and Bylaws
which are included as exhibits to the Registration Statement of which this
Prospectus is a part, and by the provisions of the Florida Business
Corporation Act.
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.
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.
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 Continental Stock Transfer & Trust Company.
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
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.
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 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. Statements contained in this Prospectus as to the
contents of any contract or other document field as an exhibit to the
Registration Statement are not necessarily complete and in each instance
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.
Following this offering, we will become subject to the reporting requirements
of the Securities Exchange Act of 1934. Under this act, we will file with the
Commission quarterly reports on Form 10-QSB and annual reports on Form 10-KSB.
Copies of these filings will be available from the Commission, either through
its principal office and its Public Reference Section, or at its Website.
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
BIOMARINE TECHNOLOGIES, INC.
(formerly Sea Pride Industries, Inc.)
AND SUBSIDIARIES
DECEMBER 31, 1999 and 1998
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS REPORT 3
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 5
CONSOLIDATED STATEMENTS OF OPERATIONS 6
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIT 7
CONSOLIDATED STATEMENTS OF CASH FLOWS 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Sublidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
1999 1999
------------------------------
ASSETS
Current assets
Cash $ 1,982 $ 7,020
------------- -------------
Property and equipment less accumulated
depreciation of $100,593 and $115,664 62,077 230,668
------------- -------------
Other assets
Advance 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 50,000 318,040
Note payable, current 400,810 -
------------ -------------
531,037 421,991
------------ -------------
Long-term liabilities
Notes payable - 111,416
------------ -------------
Stockholders' deficit
Preferred stock - $.01 par vlaue
Authorized - 5,000,000 shares
Issued - 294,140 shares
Common stock - $.01 par value 2,941 2,941
Authorized 20,000,000 shares
Issued - 2,029,961 and 2,027,961 shares in
1999 and 1998, respectively 20,300 20,280
Additional paid-in capital 1,799,403 1,794,423
Accumulated deficit (2,239,688) (2,049,591)
------------ -------------
(417,044) (231,947)
Treasury stock (33,750) (33,750)
------------ -------------
Total stockholders' deficit (450,794) (265,697)
------------ -------------
$ 80,243 $ 267,710
------------ -------------
See notes to consolidated financial statements
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Sublidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31,
1999 1998
------------ -------------
Revenue
Rental $ 2,254 $ 190,943
Gain on sale of equipment 111,667 -
Other 19,999 14,670
------------ -------------
133,920 205,613
------------ -------------
Costs and expenses
Salaries, wages and benefits 144,713 185,442
General and administrative expenses 54,832 119,436
Repairs and maintenance 3,265 53,618
Insurance 3,944 16,636
Taxes 159 656
Legal and professional fees 56,508 147,366
Interest 29,000 68,373
Depreciation 31,596 34,214
------------ -------------
Total costs and expenses 324,017 625,741
------------ -------------
Net loss before income tax provision (190,097) (420,128)
------------ -------------
Income tax provision -- --
------------ -------------
Net loss $ (190,097) $ (420,128)
============ ==============
Net loss per common share outstanding $ (.09) $ (.21)
============ ==============
Weighted number of shares outstanding 2,028,461 2,005,044
============ ==============
See notes to consolidated financial statements
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Sublidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the years ended December 31, 1999 and 1998
Preferred Common
Shares Shares Preferred Common
Outstanding Outstanding Stock Stock
--------------------------------------------
Balance at December 31, 1997 - 2,002,961 $ - $20,030
Stock issued:
Acquisition of minority interest 148,000 - 1,480 -
Debt converted to stock 146,140 - 1,461 -
For services rendered - 25,000 - 250
Net loss - - - -
--------- ----------- ---------- -------
Balance at December 31, 1998 294,140 2,027,961 2,941 20,280
Stock Issued:
For services rendered - 2,000 - 20
Net loss - - - -
--------- ----------- --------- -------
Balance at December 31, 1999 294,140 2,029,961 $ 2,941 $20,300
========= =========== ========= =======
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the years ended December 31, 1999 and 1998
(Continued)
Additional
Paid-In Accumulated Treasury
Capital Deficit Stock Total
--------------------------------------------------
Balance at December 31, 1997 $ 1,339,859 $(1,629,463) $ (33,750) $(303,324)
Stock issued:
Acquisition of minority
interest 90,680 - - 92,160
Debt converted to stock 363,884 - - 365,345
For services rendered - - - 250
Net loss - (420,128) - (420,128)
----------- ------------- ---------- ----------
Balance at December 31, 1998 1,794,423 (2,049,591) (33,750) (265,697)
Stock Issued:
For services rendered 4,980 - - 5,000
Net loss - (190,097) - (190,097)
----------- ------------- ----------- ---------
Balance at December 31, 1999 $ 1,799,403 $(2,239,688) $ (33,750) $(450,794)
See notes to consolidated financial statements
BioMarine Technologies, Inc. (formerly Sea Pride Industries, Inc.)
and Sublidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
1999 1998
----------- ------------
Cash flows from operating activities
Net loss $ (190,097) $ (420,128)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 31,596 34,214
Gain on sale of equipment (111,667) -
Stock issuance for services rendered 5,000 250
(Increase decrease in:
Other assets - 935
Increase (decrease in:
Accounts payable (28,396) (9,664)
Accrued expenses and other current liabilities 4,672 2,307
----------- -----------
Net cash used in operating activities (288,892) (392,086)
----------- -----------
Cash flows from investing activities
Purchases of equipment (16,338) (28,707)
Proceeds from disposal of equipment 265,000 -
Repayment of advances 13,838 132,348
Purchase of minority interest - (37,919)
----------- ------------
Net cash provided by investing activities 262,500 65,722
----------- ------------
Cash flows from financing activities
Principal repayments of debt (379,456) (21,516)
Proceeds from borrowing 400,810 256,500
Issuance of stock - 92,160
------------ ------------
Net cash provided by financing activities 21,354 327,144
----------- ------------
NET INCREASE (DECREASE) IN CASH (5,038) 780
Cash, beginning 7,020 6,240
----------- -----------
Cash, ending $ 1,982 $ 7,020
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 23,798 $ 12,157
========== ==========
Supplemental disclosure of non-cash activities:
Issuance of common stock for services rendered $ 5,000 $ 250
========== ===========
See notes to consolidated financial statements
NOTE A - ORGANIZATION
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 system 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
nonaffiliated non-profit research and development institution which owns the
four platform complex.
NOTE A - ORGANIZATION (Continued)
SPCC, formerly known as Brian Capital, Inc., is registered with the
Securities and Exchange Commission. Currently, SPCC is a shell corporation
with no operations.
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, except those associated with the
Company's organization were expensed as incurred during the development stage.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
Property and Equipment
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.
NOTE B - 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.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
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 $135,645. 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. The note accrues interest
at 12 percent and is due on demand.
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 tax expense and benefits result from temporary differences in
the recognition of revenues and expenses for income tax and financial
reporting purposes. Such temporary differences of the Company are
insignificant.
NOTE E - INCOME TAXES (Continued)
The Company and its subsidiaries file separate income tax returns. The
Company and Sea Star, a wholly owned subsidiary, have the following
approximate gross deferred tax assets and net operating loss (NOL)
carryforwards:
December 31, 1999 December 31, 1998
---------------------- -----------------------
Company Sea Star Company Sea Star
---------- ---------- ----------- ----------
Deferred Tax Asset $ 435,000 $ 188,000 $ 420,000 $ 145,000
NOL Carryforward $1,396,000 $ 589,000 $1,310,000 $ 485,000
Such NOL's 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.
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.
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.
NOTE F - RELATED PARTY TRANSACTIONS (Continued)
Mr. Ericsson is also the inventor of the Sea Star Oyster Relay System and the
Company has conveyed to Mr. Ericsson official title to an 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.
NOTE G - CAPITAL STOCK
Stock Issued for Consideration Other Than Cash
During 1999 and 1998, the Company issued 2,000 shares and 25,000 shares in
consideration of services rendered in the aggregate amounts of $5,000 and
$250, respectively. The value attributable to the shares issued for services
represents, in management's opinion, the fair value of the services rendered.
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.
NOTE G - CAPITAL STOCK (Continued)
The Company's President, John D. Ericsson holds an option to purchase
1,000,000 shares of the Company's common stock at $.10 per share.
Warrants
Common Stock Class A Warrants - At December 31, 1999 and December 31, 1998,
the Company has an aggregate of 1,468,000 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 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 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
issued November 17, 1998, (See Notes D and 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 effective November 17, 1998. All
share data is stated to reflect the exchange.
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.
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 - 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.
NOTE J - GOING CONCERN (Continued)
The implementation of this plan is, according to management, dependent on
among other things, a successful public offering of the Company's common
stock. The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern.
NOTE K - 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 L FINANCIAL GUARANTY
Sentinel Insurance Company of America, LLC has agreed to provide up to $10
million of financial guaranties to enhance potential financing by either
conventional sources, a private placement, or underwriting by a registered
security firm for future research and development. Fees for the guarantee
will be 7 percent of the proceeds for the first two years and 1.5 percent of
the remaining principal obligation for each additional year up to fifteen
years. In addition, a royalty is to be paid of 2 percent of gross sales.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. 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 14. 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 the Company, 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 15. 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 as well as a warrant to purchase an
additional 40,000 shares of 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. Randall S.Hobgood
as consideration for the forgiveness 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.
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.
Item 16. Exhibits and Financial Schedules.
(a) Exhibits
1.1 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
23.1 Consent of Reznick Fedder & Silverman, Certified Public
Accountants
23.5 Consent of Bondy & Schloss LLP (included in item 5.1 above)*
24 Powers of Attorney (included on the signature page)
_____________________
* To be filed by amendment
(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 17. 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
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.
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 May __, 2000.
BIOMARINE TECHNOLOGIES, INC.
By: /s/John D. Ericsson
John D. Ericsson,
President and Chief Executive Officer
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 May 15, 2000.
Signature Title
- ---------- --------
/S/ John D. Ericsson
- -------------------------------
John D. Ericsson President, Chief Executive Officer, Director
/S/ Edwin W. Cake, Jr., Ph.D.
- -------------------------------
Edwin W. Cake, Jr., Ph.D. Director, Chief Science Officer
/S/ John W. Hemmer
- -------------------------------
John W. Hemmer Director
/S/ Sharon K. Bennett
- -------------------------------
Sharon K. Bennett Secretary/Treasurer
EXHIBIT INDEX
1.1 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
23.1 Consent of Reznick Fedder & Silverman, Certified Public Accountants
23.5 Consent of Bondy & Schloss LLP (included in item 5.1 above)*
24 Powers of Attorney (included on the signature page)
_____________________
* To be filed by amendment