<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended August 31, 2000
---------------
OR
[_] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _______________ to _______________
Commission file number 0- 27063
--------
AQUATIC CELLULOSE INTERNATIONAL CORP.
------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 82-0381904
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
3704 32nd Street, Suite 301 Vernon, B.C. VIT 5N6
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code: (800) 565-6544
(former, name, address and former fiscal year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---
State the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock August 31, 2000
--------------------- ---------------
$.001 par value 37,425,985
Transitional Small Business Disclosure Format Yes ___ No X
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<PAGE>
FORM 10-QSB
Securities and Exchange Commission
Washington, D.C. 20549
Aquatic Cellulose International Corp.
Index
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Condensed Consolidated Balance Sheets at
May 31, 2000 and August 31, 2000 (unaudited)
Condensed Consolidated Statements of Operations
for the three months ended August 31, 2000 (unaudited)
and 1999 (unaudited)
Condensed Consolidated Statements of Cash Flows
for the three months ended August 31, 2000 (unaudited)
and 1999 (unaudited)
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters of a Vote to Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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<PAGE>
PART I. FINANCIAL INFORMATION
-----------------------------
ITEM I. FINANCIAL STATEMENTS
AQUATIC CELLULOSE INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEET
$ United States
August 31, 2000 and May 31, 2000
===============================================================================
August 31, May 31,
2000 2000
(Unaudited)
-------------------------------------------------------------------------------
Assets
Current assets
Cash $ 43,513 $ 271,864
Accounts receivable 272,154 268,813
Inventory 150,596 -
--------------------------------------------------------------------------------
466,263 540,677
Fixed assets (note 2) 12,492 4,228
-------------------------------------------------------------------------------
$ 478,755 $ 544,905
-------------------------------------------------------------------------------
Liabilities and Stockholders' Deficiency
Current liabilities
Accounts payable and accrued liabilities $ 283,640 $ 167,685
Convertible debentures payable (note 3) 500,000 500,000
--------------------------------------------------------------------------------
783,640 667,685
Stockholders' deficiency
Capital stock (note 4) 2,074,734 2,074,734
Deficit (2,422,812) (2,240,541)
Accumulated other comprehensive income
Foreign currency translation adjustment 43,193 43,027
--------------------------------------------------------------------------------
(304,885) (122,780)
Commitments (note 6)
Subsequent events (note 9)
-------------------------------------------------------------------------------
$ 478,755 $ 544,905
--------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
On behalf of the Board:
________________ Director
________________ Director
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AQUATIC CELLULOSE INTERNATIONAL CORP.
Consolidated Statements of Loss
$ United States
Three months ended August 31, 2000 and 1999
(Unaudited - prepared by management)
================================================================================
2000 1999
-------------------------------------------------------------------------------
Sales $ 34,249 $ -
Cost of sales 84,463 -
--------------------------------------------------------------------------------
(50,214)
Expenses
Depreciation 648 78
Engineering design - 25,487
Selling, general and administrative 131,409 88,572
--------------------------------------------------------------------------------
132,057 114,137
--------------------------------------------------------------------------------
Loss $ (182,271) $(114,137)
-------------------------------------------------------------------------------
Weighted average number of shares 37,425,985 36,603,985
Loss per share - basic and diluted $ (0.00) $ (0.00)
--------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
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<PAGE>
AQUATIC CELLULOSE INTERNATIONAL CORP.
Consolidated Statement of Stockholders' Deficiency and Comprehensive Income
$ United States
Three months ended August 31, 2000
(Unaudited - prepared by management)
<TABLE>
<CAPTION>
===================================================================================================================================
Capital Stock Accumulated Total
--------------------- Other Stockholders'
Number Comprehensive Equity
of Shares Amount Deficit Income (Deficiency)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, May 31, 2000 37,425,985 $2,074,734 $(2,240,541) $ 43,027 $ (122,780)
Comprehensive income
(loss):
Loss - - (182,271) - (182,271)
Foreign currency translation
adjustment - - - 166 166
-------------------------------------------------------------------------------------------------------------
Comprehensive income
(loss) (182,271) 166 (182,105)
-------------------------------------------------------------------------------------------------------------
Balance, August 31, 2000 37,425,985 $2,074,734 $(2,422,812) $ 43,193 $(304,885)
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
AQUATIC CELLULOSE INTERNATIONAL CORP.
Consolidated Statements of Cash Flows
$ United States
Three months ended August 31, 2000 and 1999
(Unaudited - prepared by management)
--------------------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------------------
Operating activities
Cash received from customers $ 30,908 $
Cash paid to suppliers, service providers and employees (250,513) (117,431)
------------------------------------------------------------------------------
(219,605) (117,431)
Financing
Issuance of capital stock - 250,000
Investing
Purchase of fixed assets (8,842) -
Effect of exchange rate changes on cash 96 (35,611)
--------------------------------------------------------------------------------
Increase (decrease) in cash (228,351) 96,958
Cash, beginning of period 271,864 100,906
--------------------------------------------------------------------------------
Cash, end of period $ 43,513 $ 197,864
================================================================================
Additional information disclosed in note 7.
See accompanying notes to consolidated financial statements
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<PAGE>
AQUATIC CELLULOSE INTERNATIONAL CORP.
Notes to Consolidated Financial Statements
$ United States
--------------------------------------------------------------------------------
Aquatic Cellulose International Corp. (the "Company") was incorporated under the
laws of the State of Nevada. The Company's principal activity is the manufacture
under authority, of equipment for underwater harvesting and/or salvaging of
submerged timber and the procurement of contracts for the harvest and salvage of
submerged timber. In January 2000, the Company commenced significant harvesting
operations, and, as such, is no longer a development stage enterprise, as
disclosed at August 31, 1999.
1. Significant accounting policies:
a) Going concern
These financial statements have been prepared on the going concern
basis, which assumes the realization of assets and liquidation of
liabilities in the normal course of business. The application of the
going concern concept is dependent on the Company's ability to
generate future profitable operations and receive continued financial
support from its shareholders and other investors. These consolidated
financial statements do not give effect to any adjustments should the
Company be unable to continue as a going concern and, therefore, be
required to realize its assets and discharge its liabilities in other
than the normal course of business and at amounts differing from those
reflected in the consolidated financial statements. Management plans
to obtain sufficient working capital from operations and external
financing to meet the Company's liabilities and commitments as they
become payable. There can be no assurance that management plans will
be successful. Failure to obtain sufficient working capital from
operations and external financing will cause the Company to curtail
operations.
b) Basis of presentation and consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Aquatic Cellulose Ltd. All
significant inter company accounts and balances have been eliminated.
c) Translation of Financial Statements
The Company's functional currency is the United States dollar. The
Company's subsidiary, Aquatic Cellulose Ltd., operates in Canada and
its operations are conducted in Canadian currency. Its financial
statements are translated from Canadian into United States dollars as
follows:
i) Assets and liabilities are translated at the rate of exchange in
effect at the balance sheet date, being US $1.00 per Cdn $1.4715
(May 31 - $1.4965).
ii) Revenues and expenses are translated at the exchange rate in
effect at the transaction date.
iii) The net adjustment arising from the translation is included in
accumulated other comprehensive income.
Other foreign exchange gains and losses are recognized in income as
realized.
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<PAGE>
AQUATIC CELLULOSE INTERNATIONAL CORP.
Notes to Consolidated Financial Statements, page 2
$ United States
--------------------------------------------------------------------------------
1. Significant accounting policies (continued):
d) Inventory
Inventory is recorded at the lower of cost and net realizable value.
e) Fixed assets
Fixed assets are recorded at cost. Depreciation is provided using the
following methods and annual rates which are intended to amortize the
cost of assets over their estimated useful life:
------------------------------------------------------------------------
Asset Method Rate
------------------------------------------------------------------------
Computer equipment Declining balance 30%
Furniture and equipment Declining balance 20%
Leasehold improvements Straight-line 20%
------------------------------------------------------------------------
Costs incurred in the development of the Company's harvesting equipment
have been expensed in prior years.
f) Revenue recognition
The Company recognizes sales when goods are shipped and the title and
the risks and rewards of ownership have been transferred from the
Company to the buyer.
g) Management estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amount of revenues and expenses during the period. Actual results could
differ from those estimates.
The collectibility of accounts receivable is based on management
estimates. Management reviews its estimate on a quarterly basis and,
where necessary, makes adjustments prospectively.
h) Financial instruments
The fair values of the Company's cash, accounts receivable and accounts
payable and accrued liabilities approximate their carrying values due to
the relatively short periods to maturity of the instruments. The fair
value of the convertible debentures payable approximates their carrying
amount as a market rate of interest is attached to their repayment.
Accounts receivable as at August 31, 2000 of $272,154 are from one
customer resulting from the Company's harvesting project in Brazil.
Accordingly, there is a concentration of credit risk. The maximum credit
risk exposure for all financial assets is the carrying amount of those
assets.
i) Loss per share
Loss per share is calculated based on the loss for the three month
period and the weighted average number of shares outstanding during the
period. For both periods, the effect of potential common stock
equivalents, was anti dilutive.
-8-
<PAGE>
Aquatic Cellulose International corp.
Notes to Consolidated Financial Statements, page 3
$ United States
--------------------------------------------------------------------------------
1. Significant accounting policies (continued):
j) Stock option plan
The Company applies the intrinsic value-based method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations,
in accounting for its stock options. As such, compensation expense would
be recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price.
Statement of Financial Accounting Standard ("SFAS") No. 123, "Accounting
for Stock-Based compensation," established accounting and disclosure
requirements using a fair value-based method of accounting for stock-
based employee compensation plans. As allowed by SFAS No. 123, the
Company has elected to continue to apply the intrinsic value-based method
of accounting described above, and has adopted the disclosure
requirements of SFAS No. 123.
k) Income taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. When
it is not considered to be more likely than not that a deferred tax asset
will be realized, a valuation allowance is provided for the excess.
l) Commitments and contingencies
Liabilities for loss contingencies, including environmental remediation
costs, arising from claims, assessments, litigation, fines and penalties
and other sources are recorded when it is probable that a liability has
been incurred and the amount of the assessment and/or remediation can be
reasonably estimated. Recoveries from third parties which are probable of
realization are separately recorded, and are not offset against the
related environmental liability, in accordance with Financial Accounting
Standards Board Interpretation No. 39, "Offsetting of Amounts Related to
Certain Contracts."
m) New accounting pronouncement
In June, 1998, the Financial Accounting Standards board issued SFAS no.
133, "Accounting for Derivative Instruments and Hedging Activities."
Adoption of this standard is not expected to have a significant impact on
the Company's results of operations or financial position.
n) Quarterly financial reporting
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<PAGE>
In the opinion of management, all adjustments (consisting of normal
recurring items) necessary for the fair presentation of these unaudited
financial statements in conformity with generally accepted accounting
principles have been made.
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<PAGE>
AQUATIC CELLULOSE INTERNATIONAL CORP.
Notes to Consolidated Financial Statements, page 4
$ United States
--------------------------------------------------------------------------------
2. Fixed assets:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
August 31, 2000 May 31, 2000
--------------------------------------------------------------------------------------------------------
Accumulated Net book Net book
Cost depreciation value value
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computer equipment $ 2,325 $1,698 $ 627 $ 667
Furniture and equipment 13,489 2,364 11,125 2,592
Leasehold improvements 4,936 4,196 740 969
--------------------------------------------------------------------------------------------------------
$20,750 $8,258 $12,492 $4,228
========================================================================================================
</TABLE>
3. Convertible debentures payable:
Convertible debentures payable bear interest at 12%, due on a quarterly basis
from June 30, 2000 and are secured by a first priority interest in the
Company's accounts receivable, inventory, fixed assets and general
intangibles. The debentures are due on May 4, 2001 and are convertible into
the Company's common shares at the lesser of $0.60 per share and 70% of the
average of the lowest three inter-day prices during the twenty trading days
immediately preceding the conversion date. If unpaid as at May 4, 2001, the
debentures will automatically convert to common shares.
4. Capital stock:
a) Authorized:
50,000,000 common shares with a par value of $0.001 per share
10,000,000 preferred shares with a par value of $0.001 per share,
issuable in series
b) Stock purchase warrants:
-------------------------------------------------------------------------
Outstanding Outstanding
Price per May 31, August 31,
Expiry Date share 2000 Issued Exercised 2000
------------------------------------------------------------------------
May 4, 2003 $0.69 250,000 - - 250,000
-------------------------------------------------------------------------
c) Stock options:
The Company's stock options vested on the date of issue.
-------------------------------------------------------------------------
Outstanding Outstanding
Price per May 31, August 31,
Expiry Date share 2000 Issued Exercised 2000
-------------------------------------------------------------------------
February 22,
2005 $0.52 1,425,250 - - 1,425,250
-------------------------------------------------------------------------
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<PAGE>
AQUATIC CELLULOSE INTERNATIONAL CORP.
Notes to Consolidated Financial Statements, page 5
$ United States
--------------------------------------------------------------------------------
5. Notes receivable:
During the year ended May 31, 1999, the Company loaned $105,450 to three
Directors for the exercise of Company stock options. These notes are
unsecured, do not bear interest and are due on July 24, 2001. For financial
statement presentation purposes, these notes have been offset against
capital stock.
6. Commitments:
a) Pursuant to a consulting agreement, the Company has committed to issuing
25,000 common shares and a minimum of 25,000 stock purchase warrants in
exchange for services to be provided during the remainder of the 2001
fiscal year. Under the agreement an additional 75,000 stock purchase
warrants may be issued if the Company's stock price reaches certain
thresholds. Each stock purchase warrant would enable the holder to
purchase one of the Company's common shares at an exercise price of $0.75
per share until May 24, 2005.
b) Pursuant to agreements with two service providers, the Company is
committed to issuing an aggregate of 227,000 common shares in payment for
services rendered to the Company during the 2000 fiscal year. The value
of the services provided was determined to be $133,500 based upon the
market value of the shares earned on the applicable dates of entitlement.
These obligations are included in accounts payable and accrued
liabilities at August 31, 2000 and May 31, 2000.
c) The Company is committed to issuing an additional 100,000 shares, without
further consideration, to an investor who purchased 100,000 shares for
$50,000 cash during the 2000 fiscal year.
7. Statement of cash flows:
Cash flows from operating activities under the indirect method are as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
2000 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Loss for the three months ended August 31 $ (182,271) $ (114,137)
Non-cash items
Depreciation 648 78
Increase in accounts receivable (3,341) (1,028)
Increase in inventory (150,596) -
Increase (decrease) in accounts payable and accrued liabilities 115,955 (2,344)
------------------------------------------------------------------------------------------------------------------------------------
Cash used in operating activities $ (219,605) $ (117,431)
====================================================================================================================================
</TABLE>
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<PAGE>
AQUATIC CELLULOSE INTERNATIONAL CORP.
Notes to Consolidated Financial Statements, page 6
$ United States
--------------------------------------------------------------------------------
8. Income taxes:
The Company has non-capital losses available to reduce future years' income
for income tax purposes. Management is unable to assert that it is more
likely than not that the Company will realize the benefit of these losses
carried forward and, as such, a valuation allowance equal to the value of
the tax asset has been provided. These losses expire as follows:
----------------------------------------------------------------------------
2003 $ 253,000
2005 473,000
2006 484,000
2007 777,000
2008 187,000
----------------------------------------------------------------------------
$2,174,000
============================================================================
9. Subsequent events:
a) Convertible debentures
Subsequent to August 31, 2000, the Company issued an additional $500,000
of convertible debentures subject to the terms and conditions described
in note 3. Costs incurred in relation to the debenture issue amounted to
$90,000.
b) Shares issued subsequent to August 31, 2000:
i) 450,000 shares valued at $182,800 for services.
ii) 137,000 shares to a service provider at a value of approximately
$80,600. This obligation was included in accounts payable and
accrued liabilities at August 31, 2000 as described in note 6(b).
iii) 100,000 shares, without further consideration, as described in note
6(c).
iv) 918,938 shares on conversion of $225,000 of convertible debentures.
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<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Plan of Operation
-----------------
The short-term objectives of the Company are the following:
1. Continue expansion of the Brazilian harvesting project. This expansion
will require additional equipment and labor plus training and support.
Implementation of these items have already started.
2. Seek out and develop key alliances, acquisitions and joint ventures.
3. Establish new lumber markets, especially with respect to rare and
exotic species.
4. Expand international operations to a third continent.
5. Purchase additional harvesting equipment to be placed into its current
operations.
The Company's long-term objectives are as follows:
1. To increase lumber reserves to a level that will provide for future
revenues and long-term growth.
2. To continue upgrades of the robotic technology.
Over the next twelve months, Management is of the opinion that sufficient
working capital will be obtained from operations and external financing (Secured
Convertible Debenture Agreement) to meet the Company's liabilities and
commitments as they become payable. The Company has in the past successfully
relied on private placements of common stock securities, bank debt, loans from
private investors and the exercise of common stock warrants in order to sustain
operations.
There is no expected or planned sale of significant equipment by the
Company.
The Company's work force consists of approximately forty full employees
(including Brazil). This figure is expected to double from the current level
over the next twelve months.
Results of Operations
Three Months Year to Date
-------------------------
The company realized revenue of $34,249 for the three months ended August
31, 2000, compared with zero for the three months ended August 31, 1999. The
August 31, 2000 revenue represents wood sales in Brazil. .
The Cost of sales reflects certain inefficiencies typical to start-up
operations. The $84,463 cost of sales figure for the three months ended August
31, 2000 is comprised of the costs of harvesting and
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<PAGE>
transporting timber, consisting primarily of wages, fuel and supplies related to
the Brazilian Project. For the same period prior year, there was no revenue and
zero costs of sales were generated.
Engineering design expense typically consists of costs incurred to maintain
and improve the Company's harvesting equipment. For the three months ended
August 31, 2000 there were no engineering expenses due to the current projects
having been completed. The engineering expense of $25,487 for the period ended
August 31, 1999 was incurred to maintain and improve the Company's harvesting
equipment.
Selling, general and administration expenses increased to $131,409 from
$88,572 for the three month period ended August 31, 2000. The increase was due
to the Company's operations in Brazil.
The Company incurred a loss in three months ended August 31, 2000 of
$182,271 compared with a loss of $114,137 in fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net cash used in operating activities in three months period ended August
31, 2000 amounted to $(219,605) compared to $(117,431) in the same period prior
year. The increased use of cash is mainly attributable to the costs incurred in
setting up operations in Brazil and increases in selling, general and
administrative expenses.
Financing activities generated a net cash decrease to zero from $250,000 in
the three month period ended August 31, 2000, as there were no shares issued for
funds during the three months ended August 31, 2000.
For the three month period ended August 31, 2000, the Company had cash of
$43,513 and accounts receivable of $272,154 for total liquid assets of $315,667.
Accounts payable and accrued liabilities at August 31, 2000 amounted to
$283,640.
It is anticipated that the $500,000 convertible debentures payable will be
converted into shares in accordance with the terms of these debentures.
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<PAGE>
PART II. OTHER INFORMATION
---------------------------
ITEM 1. Legal Proceedings
The Company is not a party to any material pending legal proceedings and, to the
best of its knowledge, no such action by or against the Company has been
threatened.
ITEM 2. Changes in Securities and Use of Proceeds
A total of 27,148,336 shares of common stock, par value $.001 (the
"Shares"), have been issued by the Company since July 31, 1998 for cash or
services rendered to the Company, absent registration under the Securities Act
of 1933, as amended (the "Securities Act"). Part of these shares were offered
pursuant to the exemption provided by Rule 504 of Regulation D (10,523,336
Shares) where such offering price in the aggregate did not exceed $1,000,000 and
all purchasers were accredited investors as defined in Rule 501(a) of Regulation
D, with the remaining shares offered pursuant to the exemption provided by
Section 4(2) of the Securities Act for transactions by an issuer not involving a
public offering for payment of services provided by vendors and/or consultants.
The Shares issued are as follows.
In August, 1998, the Company issued 1,000,000 restricted Shares to Big Rock
Marketing Group for cash at $.027 per share or $27,000. Additionally, 420,000
restricted Shares were issued to Chelsey Technology Corp. for services valued at
$.027 per share (a 55% discount to market) which amounted to $11,340 as payment
for public relations services rendered to the Company and represented fair value
for services rendered. The above shares were issued pursuant to the exemption
provided for under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering."
In October, 1998, the Company issued 1,000,000 restricted Shares to Big
Rock Marketing Group for cash at $.027 per share. 500,000 restricted Shares were
issued to P. Daoust valued at $.027 per Share (approximately 50% of market
value) as compensation for public relations services rendered to the Company and
represented fair value for services rendered. The above shares were issued
pursuant to the exemption provided for under Section 4(2) of the Securities Act
of 1933, as amended, as a "transaction not involving a public offering."
In November, 1998, the Company issued 500,000 restricted Shares to NIKA
Resources Ltd. for cash at $.10 per share (a negotiated settlement amount). The
Company issued 500,000 restricted Shares to Big Rock Marketing Inc. for cash at
$.027 per share and 28,000 restricted shares to Phoenix Media Group, Ltd. at
$.027 per share for services rendered to the Company ($.027 was approximately
market value and these shares represented fair value for services rendered). The
shares were issued pursuant to the exemption provided for under Section 4(2) of
the Securities Act of 1933, as amended, as a "transaction not involving a public
offering."
In December, 1998, the Company issued 3,000,000 restricted shares to
various consultants for public relations services rendered valued at $.027 share
per share, 240,000 restricted Shares to Sean Ackles for cash
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<PAGE>
at $.10 per share and 250,000 restricted shares to Big Rock Marketing Inc. for
cash at $.053 per share. The issuance price represented approximately market
value of the shares at the time of issuance. These shares were issued pursuant
to the exemption provided for under Section 4(2) of the Securities Act of 1933,
as amended, as a "transaction not involving a public offering."
In January, 1999, the Company issued 1,350,000 restricted shares to various
consultants and vendors for services and product rendered. These shares were
valued at $.027 per share (approximately market value and represented fair value
for services rendered). These shares were issued pursuant to the exemption
-
provided for under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering."
In February, 1999, the Company issued 10,523,336 shares to various
investors pursuant to the exemption to registration provided under Rule 504 of
Regulation D of the Securities Act of 1933, as amended. These shares were sold
for cash at $.024 per share (sale price was set at approximately a 30% discount
to market at the time of filing).
In April 1999, the Company issued 6,515,000 shares of restricted stock
pursuant to the exemption provided for under Section 4(2) of the Securities Act
of 1933, as amended, as a "transaction not involving a public offering." as
follows: 1) the Company issued 3,515,000 restricted shares to various Officers
of the Company who exercised options granted in February, 1999 for services
rendered in their positions. These shares were valued at $.03 per share, which
was market value on the date the options were granted; 2) the Company issued
1,000,000 restricted shares valued at $.03 per share to Consultants for public
relations services rendered to the Company; 3) 1,500,000 and 500,000 restricted
shares were issued to Big Rock Marketing Group for cash at $.10 and $.20 per
share.
In May, 1999, the Company issued 500,000 restricted shares to Big Rock
Marketing Group valued at $.03 per share (price reflected market price) for
public relations services rendered to the Company and these shares represented
fair value for services rendered. These shares were issued pursuant to the
exemption provided for under Section 4(2) of the Securities Act of 1933, as
amended, as a "transaction not involving a public offering."
In May, 2000, the Company issued 100,000 restricted Shares valued at $.50
per share (price reflected market value) for cash to Matt Lothian pursuant to
the exemption provided for under Section 4(2) of the Securities Act of 1933 as
amended, as a "transaction not involving a public offering."
In December through May, 2000, the Company issued 722,000 restricted shares
valued at an average of $.642 per share (price reflected market price) for
services, pursuant to the exemption provided for under Section 4(2) of the
Securities Act of 1933 as amended, as a "transaction not involving a public
offering."
Subsequent Events
-----------------
1) Convertible debentures
Subsequent to August 31, 2000, the Company issued an additional $500,000 of
convertible debentures payable, bearing interest at 12%, due on a quarterly
basis from June 30, 2000 which are secured by a first priority interest in the
Company's accounts receivable, inventory, fixed assets and general intangibles.
The
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<PAGE>
debentures are due on May 4, 2001 and are convertible into the Company's common
shares at the lesser of $0.60 per share and 70% of the average of the lowest
three inter-day prices during the twenty trading days immediately preceding the
conversion date. The underlying common shares were registered on Form SB-2 filed
on August 21, 2000, File NO: 333-44184. If unpaid as at May 4, 2001, the
debentures will automatically convert to common shares. Costs incurred in
relation to the debenture issue amounted to $90,000.
2) Shares issued subsequent to August 31, 2000:
a) 450,000 shares of the Company's common stock were issued for services
valued at $182,800.
b) 137,000 shares of the Company's common stock were issued to a service
provider at a value of approximately $80,600. This obligation was included in
accounts payable and accrued liabilities at August 31, 2000. The value of the
services provided was determined to be $133,500 based upon the market value of
the shares earned on the applicable dates of entitlement
c) 100,000 shares of the Company's common stock, without further
consideration, were issued to an investor who purchased 100,000 shares for
$50,000 cash during the 2000 fiscal year.
d) 918,938 shares of the Company's common stock were issued on conversion
of $225,000 of convertible debentures. These common shares were registered on
Form SB-2 filed on August 21, 2000, File NO: 333-44184.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
27 Financial Data Schedule
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<PAGE>
SIGNATURES
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Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Registrant: AQUATIC CELLULOSE INTERNATIONAL CORP.
Signature Title Date
----------- ------- ----
By: /s/ Gary Ackles Chief Executive Officer, October 20, 2000
---------------
Gary Ackles Director - Chairman
By: /s/ Claus Wagner-Bartak Director October 20, 2000
-----------------------
Claus Wagner-Bartak
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