<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 November 30, 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 0-21384
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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 November 30, 2000
--------------------- ----------------------
$.001 par value 40,268,851
Transitional Small Business Disclosure Format Yes _ No X
-
FORM 10-QSB
Securities and Exchange Commission
-1-
<PAGE>
Washington, D.C. 20549
Aquatic Cellulose International Corp.
Index
PART I - FINANCIAL INFORMATION
Item 1. Interim Consolidated Financial Statements
Consolidated Balance Sheets at
May 31, 2000 and November 30, 2000 (unaudited)
Consolidated Statements of Operations
for the three and six months ended November 30, 1999
(unaudited) and 2000 (unaudited)
Consolidated Statements of Stockholders' Deficiency and
Comprehensive Income for the six months ended November 30,
1999 (unaudited) and 2000 (unaudited)
Consolidated Statements of Cash Flows for the six months ended
November 30, 1999 (unaudited) and 2000 (unaudited)
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis and Plan of Operations
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
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 Sheets
$ United States
<TABLE>
<CAPTION>
November 30, 2000 and May 31, 2000
-------------------------------------------------------------------------------------------------------------------
November 30, 2000 May 31, 2000
(Unaudited - Prepared
by Management)
-------------------------------------------------------------------------------------------------------------------
Assets
Current assets
<S> <C> <C>
Cash and cash equivalents $ 105,579 $ 271,864
Accounts receivable, net of allowance for
doubtful accounts of $nil (May 31, 2000 - $nil) 232,907 268,813
Advance on equipment purchase 100,000 -
Inventory 341,775 -
-------------------------------------------------------------------------------------------------------------------
780,261 540,677
Fixed assets (note 2) 14,340 4,228
-------------------------------------------------------------------------------------------------------------------
$ 794,601 $ 544,905
-------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Deficiency
Current liabilities
Accounts payable and accrued liabilities $ 281,501 $ 167,685
Convertible debentures payable (note 3) 627,800 500,000
-------------------------------------------------------------------------------------------------------------------
909,301 667,685
Stockholders' deficiency
Capital stock (note 4)
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
Issued:
40,268,851 common shares 2,719,261 2,074,734
Deficit (2,869,017) (2,240,541)
Accumulated other comprehensive income
Foreign currency translation adjustment 35,056 43,027
-------------------------------------------------------------------------------------------------------------------
(114,700) (122,780)
Commitments (note 6)
Subsequent events (note 8)
-------------------------------------------------------------------------------------------------------------------
$ 794,601 $ 544,905
-------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
On behalf of the Board:
_______________________ Director _________________________ Director
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<PAGE>
AQUATIC CELLULOSE INTERNATIONAL CORP.
Consolidated Statements of Loss
$ United States
Three and six months ended November 30, 2000 and 1999
(Unaudited - prepared by management)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Three month periods Six month periods
ended November 30, ended November 30,
------------------------- --------------------------
2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 105,463 $ - $ 139,712 $ -
Cost of sales 147,218 - 231,681 -
-------------------------------------------------------------------------------------------------------------------
(41,755) - (91,969) -
Expenses
Depreciation 778 339 1,426 417
Financing fees 90,000 - 90,000 -
Engineering design - - - -
Selling, general and
administrative 313,672 182,782 445,081 296,841
-------------------------------------------------------------------------------------------------------------------
404,450 183,121 536,507 297,258
-------------------------------------------------------------------------------------------------------------------
Loss $ (446,205) $ (183,121) $ (628,476) $ (297,258)
-------------------------------------------------------------------------------------------------------------------
Weighted average number
of shares 38,136,852 36,603,985 38,136,852 36,603,985
Loss per share - basic
and diluted $ (0.01) $ (0.01) $ (0.02) $ (0.01)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
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
Six months ended November 30, 2000
(Unaudited - prepared by management)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Accumulated Total
Capital Stock 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)
Issued for services 612,000 267,120 - - 267,120
Issued upon conversion
of convertible debentures
payable 1,953,722 372,200 - - 372,200
Issued for no additional
consideration 100,000 - - - -
Issued in lieu of cash
payment of interest on
convertible debentures
payable 177,144 29,760 - - 29,760
Share issue costs - (24,553) - - (24,553)
------------------------------------------------------------------------------------------------------------------
40,268,851 2,719,261 - - 521,747
Comprehensive income
(loss):
Loss - - (628,476) - (628,476)
Foreign currency translation
adjustment - - - (7,971) (7,971)
------------------------------------------------------------------------------------------------------------------
Comprehensive income
(loss) (636,447)
------------------------------------------------------------------------------------------------------------------
Balance, November 30,
2000 40,268,851 $ 2,719,261 $ (2,869,017) $ 35,056 $ (114,700)
------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
AQUATIC CELLULOSE INTERNATIONAL CORP.
Consolidated Statements of Cash Flows
$ United States
Six months ended November 30, 2000 and 1999
(Unaudited - prepared by management)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities
Cash received from customers $ 175,618 $ 2,490
Cash paid to suppliers, service providers and employees (797,841) (311,414)
-------------------------------------------------------------------------------------------------------------------
(622,223) (308,924)
Financing
Issuance of capital stock (24,553) 250,000
Issuance of convertible debentures payable 500,000 -
-------------------------------------------------------------------------------------------------------------------
475,447 250,000
Investing
Purchase of fixed assets (11,143) -
Effect of exchange rate changes on cash (8,366) (8,063)
-------------------------------------------------------------------------------------------------------------------
Decrease in cash (166,285) 66,987
Cash, beginning of period 271,864 100,906
-------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 105,579 $ 33,919
-------------------------------------------------------------------------------------------------------------------
</TABLE>
Additional information disclosed in note 7.
See accompanying notes to consolidated financial statements
-6-
<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
and processing operations, and, as such, is no longer a development stage
enterprise, as disclosed at November 30, 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 and commitments 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
These interim consolidated financial statements have been prepared in
accordance with United States generally accepted accounting principles
and include the accounts of the Company and its wholly-owned
subsidiary, Aquatic Cellulose Ltd. All significant inter company
accounts and balances have been eliminated. These interim consolidated
financial statements include all adjustments, consisting solely of
normal recurring adjustments, which in managements' opinion are
necessary for a fair presentation of the financial results for the
interim periods. The financial statements have been prepared
consistent with the accounting policies described in the Company's
Annual Report on Form 10-KSB filed with the Securities and Exchange
Commission for the year ended May 31, 2000, and should be read in
connection therewith.
c) Inventory
Inventory is recorded at the lower of cost and net realizable value.
-7-
<PAGE>
AQUATIC CELLULOSE INTERNATIONAL CORP.
Notes to Consolidated Financial Statements, page 2
$ United States
--------------------------------------------------------------------------------
1. Significant accounting policies (continued):
d) 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 and the net realizable value
of inventory is based on management estimates. Management reviews its
estimates on a quarterly basis and, where necessary, makes adjustments
prospectively.
e) Loss per share
Basic loss per share is calculated based on the weighted average
number of shares outstanding during the period. As the Company has a
net loss in each of the period presented, basic and diluted loss per
share is the same.
f) 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."
g) 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.
-8-
<PAGE>
AQUATIC CELLULOSE INTERNATIONAL CORP.
Notes to Consolidated Financial Statements, page 3
$ United States
<TABLE>
-------------------------------------------------------------------------------------------------------------------
2. Fixed assets:
--------------------------------------------------------------------------------------------------------------
November 30, May 31,
2000 2000
--------------------------------------------------------------------------------------------------------------
Accumulated Net book Net book
Cost depreciation value value
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computer equipment $ 16,077 $ 2,760 $ 13,317 $ 667
Furniture and equipment 2,228 1,676 552 2,592
Leasehold improvements 4,728 4,257 471 969
--------------------------------------------------------------------------------------------------------------
$ 23,033 $ 8,693 $ 14,340 $ 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:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
Outstanding Outstanding
Price per May 31, November 30,
Expiry Date share 2000 Issued Exercised 2000
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
May 4, 2003 $ 0.69 250,000 - - 250,000
----------------------------------------------------------------------------------------------------------
</TABLE>
c) Stock options:
The Company's stock options vested on the date of issue.
<TABLE>
-------------------------------------------------------------------------------------------------------------
Outstanding Outstanding
Price per May 31, November 30,
Expiry Date share 2000 Issued Exercised 2000
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
February 22, 2005 $ 0.52 1,425,250 - - 1,425,250
-------------------------------------------------------------------------------------------------------------
</TABLE>
-9-
<PAGE>
AQUATIC CELLULOSE INTERNATIONAL CORP.
Notes to Consolidated Financial Statements, page 4
$ 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 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 an agreement with a service provider, the Company is
committed to issuing an aggregate of 90,000 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 $52,930 based upon
the market value of the shares earned on the applicable dates of
entitlement. This obligation is included in accounts payable and
accrued liabilities at November 30, 2000 and May 31, 2000 (see note
8(ii)).
c) Pursuant to a manufacturing agreement with a corporation which is
wholly owned by the CEO of the Company, a related party, the Company is
committed to purchasing an Aquatic Timber Harvesting machine at a cost
of $750,000. To date the Company has made an advance of $100,000
towards this purchase. This amount is included in advance on equipment
purchase at November 30, 2000.
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 six months ended November 30 $ (628,476) $ (297,258)
Non-cash items
Depreciation 1,426 417
Interest paid by issuance of shares 29,760 -
Services paid by issuance of shares 267,120 -
Decrease in accounts receivable 35,906 2,490
Increase in prepaid expenditures (100,000) -
Increase in inventory (341,775) -
Increase (decrease) in accounts payable and accrued liabilities 113,816 (14,573)
--------------------------------------------------------------------------------------------------------------
Cash used in operating activities $ (622,223) $ (308,924)
--------------------------------------------------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
AQUATIC CELLULOSE INTERNATIONAL CORP.
Notes to Consolidated Financial Statements, page 5
$ United States
--------------------------------------------------------------------------------
7. Statement of cash flows (continued):
During the six months ended November 30, 2000, the Company issued 1,953,722
common shares on conversion of convertible debentures payable in the amount
of $372,200. As this was a non-cash transaction it is not reflected in the
statement of cash flows.
8. Subsequent events:
Shares issued subsequent to November 30, 2000:
i) 12,000 shares valued at $1,380 for services.
ii) 90,000 shares to a service provider at a value of $52,930. This
obligation was included in accounts payable and accrued liabilities at
November 30, 2000 as described in note 6(b).
iii) 1,000,000 shares on conversion of $58,000 of convertible debentures.
-11-
<PAGE>
Item 2. Management's Discussion and Analysis and Plan of Operation
Plan of Operations
Plan of Operation
-----------------
The short-term objectives of the Company are the following:
1. Continue expanding the Brazil harvesting and processing
operations. This expansion will require additional equipment,
labor, as well as 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 and processing equipment to be
placed into its current operations.
The Company's long-term objectives are as follows:
1. To increase harvest and mill production 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. There can however, 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.
There is no expected or planned sale of significant equipment by the
Company. The Company's work force is now expected to triple from the current
level over the next twelve months.
Results of Operations
Three and Six Months Ended November 30, 2000 Compared to November 30, 1999
---------------------------------------------------------------------------
The company realized revenue of $105,463 for the three months ended
November 30, 2000 and $139,712 for the six months ended November 30, 2000,
compared with zero for the three and six months ended November 30, 1999. The
November 30, 2000 revenue represents the selling of raw and processed wood in
the domestic market.
Cost of sales for the three month and six month periods ended November
30, 2000, were $147,218 and $231,681 respectively, compared with zero for the
three month and six month periods ended November 30, 1999. Cost of sales is
higher than anticipated by management due to the processing of some special
dimensional wood in Belem as well as processing difficulties with the mill in
Brazil.
-12-
<PAGE>
Operating costs and expenses for the three months ended November 30,
2000 and November 30, 1999, were $404,450 and $183,121 respectively for an
increase of $221,329 or 120%. The company's operation in Brazil accounted for
$130,890 of the increase.
Operating costs and expenses for the six months ended November 30, 2000
and November 30, 1999, were $536,507 and $297,258 respectively for an increase
of $239,249 or 80%. Financing fees accounted for $90,000 of the increase with
the remainder mainly attributable to increases in public relations and investor
relations activities as well as an increase in activity in Brazil.
Liquidity and Capital Resources
-------------------------------
Net cash used in Operating Activities for the six month period ended
November 30, 2000 and 1999 was ($622,223) and ($308,924) respectively, for a
decrease in cash from operating activities in the amount of $313,299. This
decrease was mainly due to increased payments to suppliers, service providers
and employees as the operations in Brazil increased.
Net cash from financing activities was $475,447 and $250,000 for the
six months period ended November 30, 2000 and 1999 respectively, reflecting a
change of $225,447. The increase was a result of the issuing of convertible
debt.
Net cash used in investing activities was ($11,143) and ($0) for the
six months period ended November 30, 2000 and 1999 respectively. The $11,143 was
a payment for the purchase of fixed assets.
The effects of exchange rate changes on cash had an adjustment of
$8,366 for the six month period ended November 30, 2000 versus an adjustment of
$8,063 for the same six month period prior year, reflecting a change of $303.
-13-
<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 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."
-14-
<PAGE>
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."
On May 4, 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
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.
Shares issue form May 31, 2000 to November 30, 2000:
-15-
<PAGE>
a) 612,000 shares of the Company's common stock were issued for
services valued at $267,120.
b) 1,953,722 shares of the Company's common stock were issued on
conversion of $372,200 of convertible debentures. These common shares were
registered on Form SB-2 filed on August 21, 2000, File NO: 333-44184.
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) 177,144 shares of the Company's common stock were issued in lieu of
cash payment of interest on convertible debentures payable.
Subsequent Events
-----------------
Shares issued subsequent to November 30, 2000:
i) 12,000 shares valued at $1,380 for services.
ii) 90,000 shares to a service provider at a value of $52,930. This
obligation was included in accounts payable and accrued liabilities at
November 30, 2000 as described in note 6(b) to the financial
statements.
iii) 1,000,000 shares on conversion of $58,000 of convertible debentures.
Item 3. Defaults Upon Senior Securities:
None.
Item 4. Submission of Matters of a Vote to Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K:
None
-16-
<PAGE>
SIGNATURES
----------
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, January 16, 2001
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Gary Ackles Director - Chairman
By: /s/ Claus Wagner-Bartak Director January 16, 2001
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Claus Wagner-Bartak
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