As filed with the Securities and Exchange Commission on October 23, 2000
Registration No. 333-_____________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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BIOMASSE INTERNATIONAL INC.
(Name of issuer in its charter)
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<S> <C> <C>
Florida [??? ] 65-0909206
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code) Identification Number)
721 S.E. 17th Street, Suite 200 Irving Rothstein, Esq.
Fort Lauderdale, Florida Heller, Horowitz & Feit, P.C.
33316 292 Madison Avenue
(954) 524-0558 New York, New York 10017
(Address and telephone number (212) 685-7600
of registrant's principal executive (Name, address and telephone
offices and principal place of business) number of agent for service)
</TABLE>
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Copies to:
Irving Rothstein, Esq.
Heller, Horowitz & Feit, P.C.
292 Madison Avenue
New York, New York 10017
Telephone: (212) 685-7600
Approximate date of commencement of proposed sale to public: At the discretion
of the selling stockholders.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
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CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
----------------------------------- ------------------ ------------------------ -------------------------- -------------------
Title of Each Class of Securities Amount To Be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price Per Aggregate Offering Registration Fee
Security (2) Price (2)
----------------------------------- ------------------ ------------------------ -------------------------- -------------------
----------------------------------- ------------------ ------------------------ -------------------------- -------------------
Common Stock class B, par value 2,027,711 $1.00 (3) $2,027,711 $ 535.32
$0.001
----------------------------------- ------------------ ------------------------ -------------------------- -------------------
----------------------------------- ------------------ ------------------------ -------------------------- -------------------
Common Stock class B, par value 5,054,900 (1) $1.10 (4) $5,560,390 $1,467.94
$0.001
----------------------------------- ------------------ ------------------------ -------------------------- -------------------
----------------------------------- ------------------ ------------------------ -------------------------- -------------------
Total 7,082,611 (1) $7,588,101 $2,003.26
----------------------------------- ------------------ ------------------------ -------------------------- -------------------
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(1) Includes 5,054,900 shares of common stock issuable upon exercise of
currently exercisable warrants. Pursuant to Rule 416, this Registration
Statement also covers any additional shares of common stock which may be
issuable by virtue of the anti-dilution provisions in the warrants.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Based upon the price of a recent private offering.
(4) Exercise price.
The registrant hereby amends the 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 Commission, acting pursuant to said Section 8(a),
may determine.
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SUBJECT TO COMPLETION DATED, OCTOBER 23, 2000
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BIOMASSE INTERNATIONAL INC.
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7,082,611 Shares of Common Stock
This prospectus covers 7,082,611 shares of the common stock, of
Biomasse International, Inc. This figure includes 5,054,900 shares of common
stock that we may issue in the future if currently outstanding warrants are
exercised. The common stock will be sold solely by the selling stockholders.
The securities offered hereby involve a high degree of risk.
Please read the "Risk factors" beginning on page 2.
There is presently no public market for our securities.
--------------------------------
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
Our principal executive offices are located at 721 S.E. 17th
Street suite 200, Fort Lauderdale, FL 33316. Our telephone number is (954)
524-0558.
The date of the Prospectus is ________, 2000.
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Risk factors
You should carefully consider the following facts and other
information in this prospectus before deciding to invest in the shares. If any
of the following risks actually occur, our business, financial condition or
results of operations could be materially and adversely affected.
Since we have only a limited operating history, it is difficult for you to
evaluate if we are a good investment
We were incorporated in early 1999. We began to offer our first process
in 1999. Accordingly, we have only a very limited operating history, and we face
all of the risks and uncertainties encountered by early-stage companies. Thus,
our prospects must be considered in light of the risks, expenses and
difficulties associated with a new and rapidly evolving market of waste to
energy project. In sum, because of our limited history and the youth and
inherent risks of our industry, predictions of our future performance are very
difficult.
Our independent auditor has expressed concern over our ability to remain in
business
In his report on our audited financial statements, our auditor has
stated that there is a substantial doubt as to whether we will be able to remain
in business for even the next twelve months. His concern is based upon our
growing losses and no specific plan to have the funds necessary to implement our
business plan. If his concerns are proven accurate, any investment in our
securities will likely be lost.
We have incurred substantial losses and anticipate even more losses in the
future which may cause us to become insolvent
From our inception in April 1999 through March 31, 2000, we incurred an
accumulated deficit of $244,794. We anticipate continuing to incur significant
losses until, at the earliest, we generate sufficient revenues to offset the
substantial up-front expenditures and operating costs associated with developing
and commercializing recycling systems utilizing our process. There can be no
assurance that we will ever operate profitably.
We have no customers and generate no revenues and without them, we cannot long
survive.
We have not entered into any agreements to utilize our Process with any
pulp and paper mills as yet. We will not generate any meaningful revenues unless
we obtain contracts with a significant number of pulp and paper mills. There can
be no assurance that we will ever be able to obtain contracts with a significant
number of customers to generate meaningful revenues or achieve profitable
operations.
We need substantial additional financing or we may have to curtail operations
Our capital requirements relating to the commercialization of our
process have been, and will continue to be, significant. We are dependent on the
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proceeds of future financing in order to continue in business and to develop and
commercialize additional proposed products. Our business plan calls for the
installation of four plants over the next two years which would require at least
$20,000,000 in additional financing. There can be no assurance that we will be
able to raise the substantial additional capital resources necessary to permit
us to pursue this plan. Although, we have indications from investment bankers to
undertake providing us with funds for leasing, we have no current arrangements
with respect to, or sources of, additional financing and there can be no
assurance that any such financing will be available to us on commercially
reasonable terms, or at all. Any inability to obtain additional financing will
have a material adverse effect on us, such as requiring us to significantly
curtail or cease operations.
There still remains some question regarding the efficacy of our process and if
it does not work we will have no business.
Although considerable time and financial resources were expended in the
development of our Process, there can be absolutely no assurance that problems
will not develop which would have a material adverse effect on our business.
Although all the components that comprise our Process have been separately
proven efficient and reliable in large scale of industrial project, we have not
as yet realized our first completed industrial project that combine all the
required components, we are uncertain if it will perform all of the functions
for which it has been designed or prove to be sufficiently reliable in
widespread commercial use.
Currently, we are a one product company and if this sole product is
unsuccessful, we will have no business.
Our Process currently is for combusting sludge and other waste to rid pulp and
paper mills of their waste products, while generating steam for energy. However,
should others develop more efficient and less costly techniques, we could
potential have no future business.
We cannot patent our process so others may copy it and develop our business
While we may consider in the future patenting the core aspect of our
process, our innovative combustion chamber, overall, we cannot patent our
process and the protection of our proprietary methods is limited. We regard our
design as an integration of techniques that we have obtained under license as
proprietary and intend to attempt to protect it with trade secret laws,
proprietary rights agreements and internal nondisclosure agreements and
safeguards. However, such methods do not afford complete protection, can be
prohibitively expensive with frequent design changes to the system during the
development phase, and there can be no assurance that others will not
independently develop know-how or obtain access to our know-how or designs,
concepts, ideas and documentation.
Special note regarding forward-looking statements
Some of the statements under and elsewhere in this prospectus are
forward-looking statements that involve risks and uncertainties. These
forward-looking statements include statements about our plans, objectives,
expectations, intentions and assumptions and other statements contained in this
prospectus that are not statements of historical fact. You can identify these
statements by words such as and similar expressions. We cannot guarantee future
results, levels of activity, performance or achievements. Our actual results and
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the timing of certain events may differ significantly from the results discussed
in the forward-looking statements. Factors that might cause such a discrepancy
include those discussed herein and elsewhere in this prospectus. You are
cautioned not to place undue reliance on any forward-looking statements.
Summary historical financial information
The following selected financial data for the year ended September 30,
1999 and for the period since inception to June 30, 2000, is derived from our
audited financial statements included in this prospectus. The following data
should be read in conjunction with our financial statements.
Statement of operations data
For the Year From Inception
Ended 09/30/99 to 06/31/00
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Net Revenues $ -0- $ -0-
Operating Loss $ 74,786 $ 296,926
Income Taxes $ -0- $ 470
Net Loss $ 74,786 $ 296,456
Loss Per Share $ 0.0040 $ 0.0175
(Basic and Diluted)
Balance sheet data
June 30, 2000
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Working Capital $ (12,165)
Total Assets $ 235,217
Total Liabilities $ 41,522
Stockholders' Deficit $ 296,455
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Plan of operations
The following discussion should be read in conjunction with the
financial statements and related notes that are included elsewhere in this
prospectus. All dollar amounts in this prospectus are US dollars.
As further described below, our main business purpose is to provide the
pulp and paper industry with the most practical, economical and efficient way of
giving enhanced value to the waste sludge and other solid residues generated by
their wastewater treatment systems.
We were initially formed in March 1999, are currently still in the
development phase and preparing to begin commercial activity in the last quarter
of 2000.
In March, 1999, we rented 400 sq. ft. of space for our Quebec field
operation offices in Trois-Rivieres, Quebec, under a one year renewable
lease, costing us $500 per month.
Additionally, in September, 1999, we rented 400 sq.ft. of space for
our executive offices in Ft. Lauderdale, Florida. under a one year renewable
lease, costing us $650 per month.
Our total monthly expenditures are approximately $50,000, including
rent, employee salaries, management salaries, office overhead, car allowances,
consultant and professional fees, travel, business entertainment, equipment, and
insurance. W.A.F.A Investment Corp. of Ft. Lauderdale has signed a subscription
to purchase $400,000 of our common shares, and the funds have been promised to
be transferred to our bank account in staggered payments, with the first payment
due before the end of September, 2000. This should allow us at least eight
months of operating capital.
In April, 1999, we purchased the rights to the steam generating process
developed and owned by Marc Dufresne Inc., a Trois-Rivieres, Quebec based
company. The agreement transferred ownership of this process to us for a price
of $588,000 which was paid by the delivery of 588,000 shares of common stock.
Following this agreement, we began to develop our marketing approach to the pulp
and paper industry.
Marketing
We intend to concentrate initially on the North American pulp and paper
companies to have them transform their sludge and wood residue into steam. We
are scheduled to formally launch the marketing of our process at the
International Trade Show for the pulp and paper industry being held in Montreal,
Quebec in February 2001.
To be able to target the most profitable projects, we are negotiating a
service contract with the Ecole Polytechnique, an engineering school affiliated
with the University of Montreal, to do a survey that will allow us to perform
preliminary determinations of projects that would be the most profitable for us.
The university will be responsible for formulating and distributing a specially
designed questionnaire. Thereupon, we intend to follow up by establishing direct
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contact with management and the engineering department of those pulp and paper
mills that have been deemed most suitable for us. In collaboration with the
university, we plan to offer, our expertise and services to evaluate a
waste-to-energy project with regards to the feasibility and profitability of
such a project.
Once the feasibility and profitability study will have been
demonstrated for a particular mill, we will seek to conclude long term contracts
for energy generation and waste disposal with that company.
Our first installation
During the past year we identified our first potential customer, The
Great Northern Paper Company of Millinocket, Maine. We completed the
profitability and feasibility studies for this installation and based upon the
study's very positive conclusions, we believe we are close to finalizing a
ten-year contract for the sale of steam utilizing our process. The final selling
price will be determined based upon the final negotiated split of operating
costs between them and us, although we estimate that we will be selling the
steam at a price of $6.00 per 1000 lbs.
Our studies indicate that the cost of equipment and installation for a
plant suitable for Great Northern Paper is approximately $4,525,700. We plan to
finance this amount by approximately 60% debt and 40% equity. Two Canadian
finance companies, Rothschild Financial Corporation and Konex Financial services
have expressed interest in providing the approximately $2.7 million, over a
ten-year period, required for the debt portion. The equity portion, requiring
approximately $1,800,000, is expected to be derived from the exercise of at
least 1,700,000 warrants of the total currently outstanding. These warrants are
exercisable in to our common shares at $1.10 per share. Upon us signing a
contract for steam production with Great Northern Paper, three major warrant
holders, holding an aggregate of 3,000,000 have indicated their willingness to
exercise most if not all of their warrants.
The plant to be built for the Great Northern Paper project would be
able to produce at least 40,000 pounds of steam per hour and operate 8,200 hours
per year. At this level of production and our expected selling price, our annual
revenue should be $1,968,000. The estimated operating cost of this plant is
forecasted to be approximately $850,000 per year, yielding a gross profit of
approximately $1,118,000 from this plant. These revenues have been calculated
based on the minimum capacity to produce 40,000 pounds of steam/hour. Any
additional production will increase the revenue forecasted.
This past summer we engaged the engineering firm of Mesar Consultants
Inc. of Quebec City to assist us with Great Northern Paper project. They are to
provide us with engineering services commencing September, 2000 which are
expected to cost us approximately $18,000 per month. We are also in the process
of concluding agreements with subcontractors and have commenced the ordering of
all necessary equipment for the construction of the steam generating plant for
this project. We expect the installation to commence during January, 2001, and
plans are for completion of the plant in June 2001. Thus, we anticipate having
this first project in operation by the end of June, 2001 and to collect our
first revenues in July 2001.
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Research and development
The technical evaluation of our technology was done by the Ecole
Polytechnique (affiliated with University of Montreal) and they have indicated
their interest to continue research work on our process to maximize its
efficiency, and to adapt this technology for use with others type of waste,
specifically to generate energy from another problematic solid residue: the
organic portion of municipal solid waste.
Effect of recent accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." ("SFAS No. 133"), which requires companies
to recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. SFAS No. 133 is
effective for fiscal years beginning after June 15, 1999. We do not presently
enter into any transactions involving derivative financial instruments and,
accordingly, do not anticipate the new standard will have any effect on our
financial statements.
Use of proceeds
We will not receive any proceeds from the sale of the shares of common
stock by the selling stockholders. However, we will receive the exercise price
of the warrants if they are exercised.
The net proceeds to us from the exercise of all warrants for which the
underlying common stock is registered herewith, would be approximately
$5,560,390. There can be no assurance that we will receive any proceeds from the
exercise of the warrants as not all, or any, warrants may be exercised. This
could result in our receiving none or only minimal proceeds from this offering.
Any proceeds received from the exercise of the warrants will be added
to working capital. Aside from the amounts indicated in the Plan of operations
to be used for plant construction, we have no definite plans for the use of any
proceeds from this offering and we have made no specific allocation as to the
use of such proceeds. The proceeds could be used for current administrative,
marketing and other expenses, the acquisition of business or repayment of debt.
Any such application of the proceeds of this offering will be at the discretion
of our board of directors.
Business
We are a Florida corporation, established in early 1999. The main
business goal of Biomasse is to provide to the pulp and paper industry the most
practical, economical and efficient way of giving enhanced value to the waste
sludge (and other solid residues) generated by their wastewater treatment
systems.
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We have acquired and improved a waste-to-energy process originally
developed by Marc Dufresne (1978) Inc., of Trois-Rivieres, Quebec This process
is capable of processing pulp and paper mills waste sludge and wood residues in
an efficient and environmentally-friendly way into steam. This innovative
process integrates state-of-the-art technologies that combine fuel conditioning,
efficient combustion, steam generation and flue gas treatment. The steam
generated by this process can be used to generate electrical power or heat.
The North American pulp and paper industry is facing many challenges
caused by an increasingly competitive world market. Pulp and paper plants in
Canada are lagging behind their competitors in the U.S.A. and Europe in
productivity and in quality of their products. Globally, the industry is now in
a restructuring phase to reduce its costs of operations and diversify its
product line. Production of steam and power from waste sludge and other residues
and minimal use of landfill is one of the solutions for the reduction of
operating costs in the pulp and paper industry.
The pulp and paper industry produces, through its activities, enormous
amounts of waste sludge. Production of pulp and paper generates by-products that
exit the mill in waterborne, airborne or solid forms. As mills reduce their
emissions of airborne particles by installing stack scrubbers and their
waterborne particles and oxygen-consuming solutes by installing clarifiers and
secondary treatment systems, more and more of these by-products end up in the
solid residue stream. Thus, the rising use of secondary treatment facilities is
continuously increasing, considerably, the amount of sludge generated by this
industry.
The sludge is currently being buried, and this practice constitutes a
method of disposal that has a major impact on the environment. Landfill consumes
valuable space, may lead to long-term leaching problems, and wastes the
potential value of these residues. Due to the severe regulations covering the
burial of these wastes, their disposal has become increasingly costly. New
regulations in Quebec, in Canada and in the USA stipulate that landfill sites
must be impermeable and that the lixivium, or liquid effluent, must be collected
and treated to prevent water contamination and soil/ground water table
contamination.
Moreover, the organic substances found in the sludge tend to decompose
once buried, leading to the formation of gases containing a large fraction of
methane produced by anaerobic degradation of buried sludge and other organic
constituents that substantially contribute to the greenhouse effect. These gases
also contain strong smelling compounds that constitute a major source of odor
pollution for neighboring populations. This pollution, combined with the costs
related to the management and the development of landfill sites, as well as the
transport costs of sludge, that are bulky with a high water content, have led
the pulp and paper mills to consider alternatives to landfill.
Waste sludge contains an important fraction of organic matter that has an
attractive energy recovery potential. Energy production from organically rich
industrial wastes, such as paper mills sludge, is now considered by a majority
of industrialized countries as an intrinsic aspect of a responsible care policy.
This disposal approach involves several strategic advantages. This approach
reduces the volume of residues to be buried by at least 90%. The production of
energy using these wastes leads to significant economies in terms of traditional
non-renewable fossil fuels, also providing a net reduction of the emission rates
of gases believed responsible for the greenhouse effect.
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However, pulp and paper mills conventional combustion systems are either
not well suited or are simply inadequate for sludge combustion. For this reason
the combustion of sludge in conventional systems often led to:
o a decrease in the boiler's capability to produce steam with the
addition of wet wastes;
o an important consumption of auxiliary fuel such as natural gas or
oil to maintain boiler output and sufficiently high combustion
temperatures due to inconsistency of waste fuel moisture and the
high water content in the wastes;
o higher maintenance costs due to ash clogging in the boiler grate; and
o an increase in particle emissions and slag.
Our state-of-the-art process addresses the shortcomings observed in the
currently used methods of energy production from pulp and paper wastes.
Additionally, our solution is innovative in that it offers the customer a
financing program. Our process can be designed, installed, operated and entirely
financed. Our income is based on the sale of steam and electricity to the plant
and/or on a transport charge for removing the sludge from their premises. The
main economical and environmental advantages of our process can be summarized as
follows:
o no investment costs and minimal operation costs for the pulp and paper
mill customer;
o reduction of more than 90% of solid waste to be buried; extensive
reduction of management costs of landfill, sludge transportation
and handling costs;
o reduction of maintenance costs on inadequate conventional boilers
burning sludge;
o increase in total efficiency of the existing steam facilities
by using available flue gases of existing boilers;
o reduction of the total amount of traditional non-renewable fossil
fuels used in the plant;
o elimination of methane emission of landfill and reduction of the
global emission rates of gases responsible of the greenhouse effect;
o elimination of problems related to odorous emission of landfills.
Our team offers our Process to the pulp and paper mills in a
progressive strategic sequence. This sequence first begins with an evaluation of
the feasibility and profitability of a Waste-to-energy project for both parties.
Additionally, in the medium term, we plan to modify and adapt our
Process to new applications such as power generation from the organic fraction
of the municipal solid wastes.
The Industry
General background
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The North American pulp and paper industry is a cornerstone of the
American, Canadian and Quebec economies, employing several tens of thousands of
workers in regions across North America. Since the turn of the 20th century it
has been a major source of employment and export. There are around 325 mills in
the U.S. and more than 155 mills across Canada with 64 in Quebec alone.
While world demand for paper has been increasing, the geographical
distribution and the type of paper consumed has not been uniform. As published
by the Pulp and Paper Institute of Canada, April 1997, the North American market
share has declined from 39% in the mid seventies to 36% in the late eighties,
and the Asian market represented 24% in 1989 versus 17% in 1975. Similarly,
demand for newsprint paper decreased over the same period while demand for
writing and printing paper increased.
The industry in the U.S.
In 1992, the date of the most recent published material, the United
States pulp and paper industry had a direct employment of 146,500 and the total
value of shipments for the industry was estimated as $38.3 billion.
The US produced 86.5 million metric tons of paper and paperboard in
1997, almost 739 pounds for every man, woman, and child. This amount represents
29% of the total world production. The forest products industry is the
third-largest industrial consumer of energy, and generates more than 2 billion
tons of waste each year. The industry generates 55% of its own energy using its
woody waste products and other renewable sources for fuel (bark, wood, and
pulping liquor). The total cost of materials, services, and fuels and energy
used by US pulp and paper mills amounted to $21 billion in 1992.
Since 1972, the industry has reduced its use of fossil fuels and its
purchased energy by about 2 percent, yet increased its total production by
nearly 64 percent. Even so, the forest products industry spent more than $8.1
billion on purchased fuels and electricity in 1996, or over 3 percent of the
value of its shipments that year.
The Industry in Canada and in Quebec
The Canadian forest industry is Canada's largest industrial employer.
It added 10,000 jobs in 1997 (22,700 jobs have been added since 1993). The
increase resulted in a total of 261,700 full-time equivalent direct jobs in 1997
including 65,000 employees of pulp and paper companies. Of this total,
approximately 30,000 Quebecers work in the pulp and paper and related products
sector. This represents close to 6% of the manufacturing workforce in Quebec.
The 261,700 direct jobs in Canada support the equivalent of a further 755,000
full time equivalent jobs in other sectors of the Canadian economy. Total
capital spending by Canadian pulp and paper producers is approaching $3.4
billion annually.
Canada's, and particularly Quebec's, pulp and paper industry has always
been synonymous with massive exports. Due to market globalization and strong
international competition, this industry constantly has to reach new customers
and meet new demands. Exports outside North America may have been an exception
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20 years ago but they are common practice today. In 1998, total export value for
Quebec pulp and paper products reached $7.4 billion and approximately $12.1
billion for Canada in 1996.
Canada's pulp and paper industry has been a longtime, active supporter
of global free and fair trade. Access to export markets has been enhanced by the
North American Free Trade Agreement and the World Trade Organization. In 1995,
60% of all of Quebec's pulp and paper products were sold to the American market.
Canada's and Quebec's paper and paperboard production in 1997 were 18.9
and 8.2 million metric tons, respectively, which represents 6% and 3% of the
total world production. Although Quebec represents only one tenth of one percent
of the world population, it produces some 3% of the pulp and paper and lumber
manufactured each year worldwide. Quebec's paper and lumber manufacturers,
therefore, play a key role in domestic and foreign markets. In the newsprint
sector, Quebec alone accounts for 44.2% of Canadian production and roughly 12%
of world production.
To increase its productivity, diversify its production and improve its
environmental performance, the pulp and paper industry in Quebec has proceeded
with massive investments over the years. In the pulp and paper sector, capital
expenditures reached $6.4 billion between 1987 and 1997, representing 20 % of
all manufacturing investments made in Quebec.
Between 1989 and 1996, Canadian mills spent $3.7 billion on the biggest
environmental upgrade in the industry's history. During the same period, the
industry invested $1.0 billion in building up the capacity to recycle recovered
paper. Today, 23 mills across Canada are capable of recycling, and 62 mills use
recovered paper in whole or in part as a source of fiber.
Despite the overall size of the industry, Canadian and Quebec companies
are small on a global basis. Of the largest 50 companies in the world only five
are Canadian and those are likely to drop from this list as other foreign
companies grow faster.
The trends
During the 1980s worldwide consumption of paper increased 5% per year
and, as stated above, writing and printing paper consumption grew faster than
newsprint paper. Also, growth in Asia was the fastest of any other region in the
world.
As a result of the growth in consumption, capacity in the industry grew
even faster. During the 1980s, 30 new newsprint paper machines were put into use
in North America alone.
Mergers in this industry have been common around the world during the
past decade. The purpose of this trend is for companies to become more
competitive globally, increase their capital base, increase their presence in
the world, and acquire new technologies to better respond to the changing market
needs.
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We believe that all these trends are likely to continue as additional
Asian countries, (such as China, Indonesia and Malaysia, emerge as strong
economies and as people rely less on newspapers to get news and more on on-line
services such as the Internet, and as consumers become more demanding as to type
and price of paper products.
Technical challenges facing the North American industry are centered on
using recycled materials cost-effectively, meeting environmental regulations,
and reducing energy and operation costs. Other pressures include the diminishing
amount of land available for tree farms and landfill, and a lack of capital for
carrying out long-term research and development projects.
The threats facing the North American industry
As the dynamics of the industry have been changing, the North American
pulp and paper industry began facing several challenges. Below are the main
threats the North American industry faces today:
o Although global consumption of papers is on the increase, this increase
has been mainly in foreign markets, particularly in the Far East. This
forces North American companies to have to compete for the world market
against worldwide paper companies, putting downward pressure on prices
and upward pressure on quality and technology.
o To be able to be competitive globally, companies have to be present in
the potentially large and growing markets. To achieve that, many
foreign companies have merged, combining resources and increasing their
presence worldwide. This places additional pressure on companies to
increase their exposure in these markets and to become more efficient.
o As capacity in North America is increasing, prices are likely to drop
and companies would have to operate more efficiently to maintain the
same level of profitability.
The key success factors
Given the above stated challenges, to compete in today's environment,
pulp and paper companies have to satisfy the following four conditions:
1. Low production costs: The four main elements of production costs that
have to be optimized are:
o Lower cost of the fiber by increasingly finding close and abundant
sources of recycled paper;
o Improving the efficiency of the equipment by gradually
replacing old machinery with newer ones;
o Lower cost of labor by exerting pressure on unions to become more
in line with the realities of the international global market;
and
o Reducing energy and operating costs by increasing the fraction
of solid residues (wood and sludge) used for steam and electricity
generation and reducing operating costs related to the landfill
management.
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o Our process aims to considerably reduce the residues and landfill
management costs, and to recycle these residues in a practical
form: steam and power generation at low costs, contributing to
reduce the global production costs of the mills.
2. Market diversification: Since the fastest growth is being found in Asia
and to a lesser extent in Europe, it is important that US, Canadian and
Quebec companies penetrate these markets effectively. Competing in
these markets implies reducing their production costs as described
above to price their products in parity with the other global
companies;
3. Product diversification: New types of paper have to be developed to
meet the increasingly demanding needs of consumers. Companies also have
to shift their focus from the declining newsprint paper segment and
focus more on writing and printing paper and specialized paper which
commands higher profit margins;
4. Meeting Environmental Regulations: Pulp and paper plants are on the
constant lookout for alternatives and cheaper methods of disposal. Our
process produces several environmental advantages: reduction of the
total amount of traditional non-renewable fossil fuels used in the
plant, elimination of methane emission of landfill and reduction of the
global emission rates of gases believed responsible for the greenhouse
effect, and elimination of problems related to odorous emission of
landfills.
Sludge and solid residues generation and management
In the U.S.
The solid waste management and disposal practices in the U.S. Industry
was studied in 1992 and 1999 by the National Council of the Paper Industry for
Air and Stream Improvement, Inc.. The 1992 data are used in this document, since
the 1999 study is not yet available to us.
The total amount of solid wastes generated by the pulp and paper
industry in 1989 alone was estimated by the 1992 study to be 12.3 millions dry
metric tons. Total solid waste generation averaged approximately 162 kilograms
per metric tons of production. The total amount of sludge generated in the same
year was estimated to be 4.2 million dry metric tons. This corresponds to an
overall industry generation rate of approximately 50 dry kilograms of wastewater
treatment sludge per metric ton of production. In 1989, the amount of sludge
being use as landfill or lagooned accounted for 70% of the total, while burning
for energy accounted for 21%. In 1979, the amount of sludge being used as
landfill or lagooned accounted for 86% of the total, while burning for energy
accounted for 11%.
The overall average total disposal costs for mills using landfill sites
constructed since 1985 was $9.80 per cubic yard or $20.84 per wet metric ton,
for an average bulk density of 0.615 metric ton per cubic meter, compared to an
average for all sites, regardless of age, of $6.40 dollars per cubic yard or
$13.61 per wet metric ton. This data represents current total landfill disposal
costs consisting of capital plus operating costs. Estimated costs for disposal
of solid wastes in new as yet unconstructed landfill sites were reported in this
study to be approximately $15 per cubic yard or $31.90 per wet metric ton, for
an average bulk density of 0.615 metric ton per cubic meter.
Consequently, the 1989 annual total direct costs of sludge used as
landfill in the U.S. is estimated to have been more than $146 million for the
pulp and paper industry alone. This estimate is based on an average sludge
humidity of 72.6%, and an average cost of landfill of $13.61 per wet metric ton.
In early 1990, approximately one-half of the industry's landfill sites
had less than 6 years capacity remaining. Approximately 80 percent of the
landfill sites had less than 20 years capacity remaining. It was estimated back
in 1990 that by the end of 1999, the paper industry would require approximately
200 new landfill sites or major expansions on existing sites, with a total
additional area of approximately 10,000 acres. This assumed that the amounts of
solid waste would remain unchanged by 1999.
In Canada and in Quebec
In 1995, the amount of solid residues generated by the Canadian paper
industry was estimated at 7.3 millions of dry metric tons per year. Of this
total, 47% was wood and bark used for fuel, 13% was wood and bark not used as
fuel, 23% was sludge, 12% was inorganic, and 5% was in a miscellaneous category.
Generation of secondary sludge increased by 247% from 1994. Sludge generation
rates represents 44% of the total generation rates for solid residues other than
wood and bark used as fuel. In 1995, almost half of the total generated sludge
was deposited in landfill sites. The real generation of sludge is 5,705,000
metric tons per year, when their respective mean moistures are considered. The
following table summarizes the generation rates of solid residues by the
Canadian industry, in 1995:
<TABLE>
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------
Solid residues Generation rates %
(thousands metric tons/year)
====================================================================================================================
====================================================================================================================
Sludge Fraction of total sludge generation: 1704 23%
Primary sludge: 42%
Secondary sludge: 26%
Deinkink sludge: 12%
Combined sludge: 18%
Intake sludge: 2%
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Wood and bark 4354 60%
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Inorganics 873 12%
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Miscellaneous 375 5%
====================================================================================================================
====================================================================================================================
TOTAL: 7306 100%
--------------------------------------------------------------------------------------------------------------------
</TABLE>
Use of landfill is still a dominant option for solid residues
management. Of the waste used as landfill, 82% goes to private sites owned by
the paper mills instead of public landfill sites. Land-spreading, composting and
recycling account for only a small fraction of the residues. In 1995,
approximately one third of the sludge was burned. A small fraction of the
sludge, approximately 13%, were land spread or composted, but almost half of the
total sludge generated was deposited in landfill sites. Much of the increment in
secondary sludge is used as landfill, despite the problems that secondary sludge
produces in these sites.
14
<PAGE>
Sludge management is considered to be among the most frequent concerns
of the pulp and paper industry. Incineration of sludge is confirmed as a major
problem in recent study. A lot of mills have chosen the use of landfill as a
temporary measure, intending to find better ways to use sludge in the longer
term. The amount of sludge available for utilization in Canada is estimated by
the Pulp and Paper Research Institute of Canada, April 1997, to be 1,159,000 dry
metric tons per year. The amount of wood and bark is estimated to be 868,000 dry
metric tons per year in the same study.
The costs of sludge and residues land filling have been estimated with
the help of local Canadian pulp and paper associations. The estimated costs
include handling and transportation, and management of the landfill site. They
exclude any investment or social costs. These costs are estimated to range
between $3.41 and $23.86 per wet metric ton, with a mean of approximately $8.18
per wet metric ton. Consequently, the annual (1995) total direct costs of wood
residues and sludge land filling in Canada can be estimated to have been more
than $37 million for the pulp and paper industry alone.
The amount of solid residues generated by the Quebec industry was
estimated in 1998 by the Environmental Ministry of Quebec to have been 3.1
millions of wet metric tons. Of this total, the total amount of generated sludge
is 1,800,000 wet metric tons (58%) with 690,000 wet metric tons that were buried
(38%). In Quebec, the 1998 estimated total direct costs of wood residues and
sludge land filling is estimated to have been more than $8.2 million.
Much work has been done with land application of pulp and paper mill
sludge in the last 15 years. The sludge has been successfully used as a
replacement for manure in agricultural applications, as well as for land
reclamation projects. There seems to be no available data about the costs of
these applications. The lowest cost method of spreading the sludge appears to be
by using dry applications that eliminate the need to re-wet the sludge before
spreading. Recent studies published by Pulp & Paper Canada, 1995, show that the
projected costs for this approach could be reduced to $38.17 per wet metric ton
to apply approximately 36,000 wet tons onto 400 hectares. Finally, composting
has been examined but has not gained a lot of support as the process can require
a considerable capital investment for equipment and buildings. Odor can also be
a problem and production costs can be as high as $20.45 per ton, and the market
for compost is limited.
Our process
The basis of our process is the transformation of solid organic wastes
into steam. Steam is the most convenient source of energy that is used in pulp
and paper plants for heating, drying or for any other energy-intensive process.
15
<PAGE>
Our operation combines the service of transporting waste sludge and
wood residues transported from the plant to the process, solid fuel preparation,
minimizes solid fuels storage, efficient combustion, steam production and flue
gases treatment. The available flue gases from new and existing boilers are used
to thermally dry solid fuels and/or preheat combustion air.
Our process offers the possibility to operate in mixed combustion to
produce steam. The process is flexible and easily adapts itself to the
individual conditions of each pulp and paper mill. The main objective of the
flexibility and adaptability features of the process is to maximize the use of
components and utilities that are already available on site, and that can be
incorporated into our process. This approach aims to minimize the investment and
operational costs, benefiting both parties. For example, these components and
utilities can be
o stocking yards;
o exhaust chimney;
o main-power to operate our system;
o treatment and processing of the process outputs:
o filtered exhaust gases;
o wet scrubber liquid output in the mill's waste water
treatment basin;
o solid boiler outputs such as ash and clay for land
filling;
o electricity to operate our process;
o operating control room;
o condensation processing and pumping; and
o existing buildings to install our equipment.
Our process was externally evaluated by known experts of the chemical
engineering department of the Ecole Polytechnique de Montreal (Engineering
School of the Montreal University). This scientific evaluation of our process
validated the principles of its technology.
The product, the pricing and benefits
The product that we sell can be steam, only, or a combination of steam
and electricity, if the project integrates a cogeneration system. We do not
intend to sell the system that produces the end product. We plan merely to sell
the output: steam and electricity. Our plan is to bill our customers based on
the volume of steam generated. We will also charge a transport fee for the
sludge admitted to the process. We will not charge for the installation,
operation and maintenance of the system. The pricing is set on the basis of
1,000 lbs of steam produced and the amount of produced and delivered power
(kWh). And will be dependent on the each mill's guarantee to buy a minimum
amount of steam (and kWh) from us, and provide a minimum constant mass flow of
waste sludge and wood residues, if available. The price of the steam is also
based on the confirmed investment, installation, operating and maintenance
costs, financing costs of the project to us, as well as the number of components
and utilities provided to us by the pulp and paper mill.
We will remain the owner of the process and contractually sell the
steam over a period of time, selected by us to achieve a return on our
16
<PAGE>
investment with a reasonable built in profit. The pulp and paper mill can
capitalizes its gains at the end of the contract. Our responsibilities can be
summarized as follows:
o design of the process taking into account available components
o manufacturing and subcontracting of process components
o installation and start-up of the process
o operation and maintenance of the process which can be done in
collaboration with or by the customer's operator, supervised by
our representative
The customer's responsibilities can be summarized as follows:
o salary of the provided operator
o environment conformity permits for operation
o components and utilities that can be provided advantageously, by
the plant
The economic benefits
We present here the economic aspects for both parties of an
hypothetical project between us and a medium size North American pulp and paper
mill. In this example, we use typical data to illustrate that the proposed
process generates benefits for both parties, in a general context. We present a
simple context where only steam is sold to the mill. There is no power
production and no tipping fees for residues admission.
We assume that the following equipments, labors and utilities are
advantageously provided by the mill:
o Existing sludge warehouse
o Process monitoring and control room
o Treatment of our wet scrubber liquid effluent by the existing
primary and secondary treatment system o Electricity, water
supply and compressed air for the operation of our process
o Condense pumping and treatment
o Ash management and final disposal
The following basic data are used in our evaluation:
<TABLE>
<S> <C>
o Hours of operation per year: 8200 hrs
o Cost of natural gas 0.10 $/Nm3
o Cost of electricity sold to us by the mill: 0.04 $/kWh
o Total mass flow of wet sludge generated by the mill: 12.4 metric tons/hr
o Average moisture of mix sludge: 59.17%
o Landfill cost of sludge and ashes: 13.61 $/metric ton
o Current cost of steam production by the mill: 4.37 $/1000lbs
o Cost of the steam sold by us to the mill: 6.00 $/1000lbs
o Total mass flow of generated steam sold by our process: 40,000 lbs/hr
</TABLE>
17
<PAGE>
<TABLE>
<S> <C> <C>
o Capital cost for this project: $6.1 million
o Annual cost of operation and maintenance for this project: $800,000
--------------------------------------------------------------------------------------------------------------------
Summary of benefits for a typical pulp and paper mill $/year
====================================================================================================================
====================================================================================================================
Savings related to the project:
1. landfill cost of sludge $1,384,000
2. employee for sludge management 43,000
3. material for sludge management (loader, trucks, etc.) 34,000
Annual savings: $1,461,000
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Expenses related to the project:
1. extra cost of steam:
cost of the steam sold by Biomasse to the mill 40,000lbs/hr*8200
hrs/year*6.00 $/1000lbs= $1,968,000 $/year Current cost of steam production
by the mill 40,000lbs/hr*8200 hrs/year*4.37 $/1000lbs= $1,433,360 $/year
534,640 $/year
Annual expenses: (535,000)
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Annual benefits: 926,000
====================================================================================================================
====================================================================================================================
Summary of benefits for Biomasse $/year
====================================================================================================================
====================================================================================================================
Incomes related to the project:
1. minimal revenue from steam sales :
40,000lbs/hr*8200 hrs/year*6.00 $/1000lbs= 1,968,000 $/year
Annual incomes $1,968,000
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Expenses related to the project:
1. cost of operation and maintenance $800,000
(mainly electricity, natural gas and maintenance)
2. employee for process management 30,000
3. landfill cost of ashes and inert material (mainly sand and clay) 239,000
Annual expenses: (1,069,000)
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Annual benefits: 899,000
====================================================================================================================
====================================================================================================================
Estimated payback period: 6.78 years
====================================================================================================================
====================================================================================================================
Total annual benefits for both parties: 1,825,000
--------------------------------------------------------------------------------------------------------------------
</TABLE>
The market
The primary target market for our process is the North American pulp
and paper companies. Once established in this industry, we intend offer our
process to the wood processing industries (saw mills, furniture manufacturers,
etc.). In the longer term, we plan to adapt our process to generate power from
another problematic solid residue: the organic fraction of municipal solid
wastes. After realizing a few projects in North America, we expect to also
expand our market to other continents if opportunities are offered.
There are approximately 400 pulp and paper mills in North America.
Based on available studies, these mills generate more than 19.6 million of dry
metric tons of solid residues per year. The real generation of wastewater
treatment sludge can be estimated to be 21 million of wet metric tons per year.
The total direct costs of sludge sent to landfill sites in North America can be
estimated to more than $200 million annually. A large fraction of the North
18
<PAGE>
American pulp and paper mills do not currently attribute any enhanced value to
this residue that we have shown can be efficiently transformed into valuable
steam and electricity and contribute significantly to reductions in their
production costs.
We also intend to capitalize on the fact that pulp and paper companies
often operate several plants in the same state or geographic region. Once one of
our processes has been installed in one plant and its benefits become clear, the
installation of the process in other plants of the same paper company can
reasonably be expected.
Marketing strategy
We plan to install completely at least two projects per year for the
next two years and three annually for the years 2003 and 2004.
We have begun the process of approaching several major pulp and paper
company in Quebec and in the U.S. Our first objective is to identify the most
profitable "sludge & residues-to-energy" projects in North America. To do so, we
intend to collaborate with the Ecole Polytechnique of the University of Montreal
to develop and distribute to potential customers a questionnaire soliciting
information on their solid waste management and current disposal practices. This
survey will be oriented to allow us to perform a preliminary determination of
the potentially most profitable projects. Typical required information are: flow
rate generation of sludge and other wood residues, solid wastes disposal costs,
age of currently used landfill and availability of landfill sites, residues
combustion problems, landfill site management problems, dewatering problems,
utility costs, fuel costs, current costs of steam production by the mill, sludge
characteristics, etc.
We intend to establish a direct contact with the management and the
engineering of the most suitable pulp and paper mills. We will offer our
expertise and services to evaluate the feasibility and the profitability of a
waste-to-energy project, for both parties, in collaboration with the mill. This
collaboration will be dictated by involvement agreements. The proposed studies
could be partially or fully financed by the mills. Our analyses will be proposed
with an optimal sharing of responsibilities, as outlined previously under the
product, pricing and benefits sections.
We further intend to promote our process in industry trade shows,
public seminars and in industry publications. We will intensify this promotion
of our process and approach once we have completed our first major
Waste-to-Energy project.
Employees
We currently have three full time employees, all of whom are
executives. One is engaged in financial activities, one is in charge sales and
marketing activities and one is director of engineering and research and
development. In addition, we share two administration personnel with Marc
Dufresne (2000) Inc., at our main office in Trois-Rivieres Ouest. Additional
financing permitting, we intend to hire up to three additional employees. None
of our employees are represented by a labor union. We believe that relations
with our employees are good.
19
<PAGE>
Properties
Our facilities are located in approximately 2,000 square feet of
leased office space in Trois-Rivieres Ouest shared with Marc Dufresne (2000)
Inc., of which we currently occupy approximately 400 sq. ft. with an option to
expand. We also share some office space in Ft. Lauderdale. The lease in
Trois-Rivieres Ouest expires on December 31, 2001 and provides for an annual
rental of approximately $4,000 and in Fort Lauderdale the lease expires on
August 31, 2000 and provides for an annual rental of approximately $7,308. We
have only negligible costs relating to environmental compliance laws.
Legal proceedings
We are not involved in any material legal proceedings.
Management
Officers and directors
Our officers and directors are as follows:
Name Age Position
---- --- --------
Benoit Dufresne 37 President and Director
Jean Gagnon 55 Vice-President Finance and Secretary
and Director
Taghi Zaim 38 Director of Engineering, Research and
Development
Mr. Benoit Dufresne was educated in biotechnology and business law and
has specialized training in communications from the Canadian Army. He worked as
financial director for Marc Dufresne (1978) Inc. from 1986 to 1999. During this
tenure, he managed a budget of over $10,000,000 for Sibco Inc., an international
conglomerate consisting of over 12 corporations. Mr. Dufresne was vice-president
of Thermaltech Afrique S.A., a Moroccan corporation specializing in energy
technology from 1994 to 1998. Also, from 1987 and continuing until 1998, he was
president of, and active on a part-time basis for, Thermaltech Canada inc., a
corporation specializing in various technologies related to the energy industry.
Mr. Jean Gagnon has more than twenty years of experience in the
financial markets industry including, marketing analysis, business development,
planning and organizing, restructuring and reorganizing, problem solving and
contract negotiation. From 1981 to 1987, Mr. Gagnon was the director of sales
and marketing for the financing firm Borg Warner Acceptance Canada. In 1987, Mr.
Gagnon founded Societe Merivel Inc., a consulting firm specializing in
commercial leasing. The company was responsible for the implementation and
administration of many companies for which he created, presented and negotiated
successfully more than 3,000 contracts in commercial leasing activities with
20
<PAGE>
different financial institutions. He was president of Societe Merivel until
1995. In 1996, Mr. Gagnon joined Bombardier Capital as director of operations
and business development for this financing firm until 1998, during which year
he became VP finance for the predecessor project to Biomasse.
Mr. Taghi Zaim has a bachelors degree in engineering from the
University of Quebec and a masters degree in applied sciences from the
University of Montreal, as well as a masters degree in Industrial Security from
the University of Quebec. Mr. Zaim has more than fifteen years of experience in
the field of high technology, mostly as director of engineering and computer
science with the firm Omzar Technologies of Canada. Since 1995 and until joining
Biomasse in 1999, he worked as a consulting engineer for both YODA Corp. of
Canada and IBC Corporation.
Indemnification of directors and officers
Neither our certificate of incorporation nor our by-laws currently
provide indemnification to our officers or directors. In an effort to continue
to attract and retain qualified individuals to serve as our directors and
officers, we intend to adopt provisions providing for the maximum
indemnification permitted by Florida law.
Compensation of directors
Directors do not receive any compensation for their service as members
of the board of directors.
Consultants
Mr. Rene-Jean Lavallee is a professional engineer with a degree in
chemical engineering from the Ecole Polytechnique de Montreal (Engineering
School of the Montreal University). This degree is a specialty in environmental
and chemical processes. Mr. Lavallee also holds a master's degree in combustion
engineering. His master's degree was directed towards the development of a new
type of furnace to achieve the efficient combustion of various industrial solid
wastes, especially pulp and paper sludge. He is the co-inventor of this newly
patented technology. Mr. Lavallee was also involved in the development of
several specialized technologies in the field of energy production from
industrial waste, waste treatment and waste stabilization.
Abdel Jabbar Abouelouafa holds a degree in administration from
Universite du Quebec at Trois-Rivieres. He holds a master degree in second cycle
from University of Trois-Rivieres and also had studied for a Ph.D at Universite
de Montreal. Mr Abouelouafa was a teacher and research assistant in research
management during 1985-1986 at Universite du Quebec at Trois-Rivieres and
1986-1988 at Universite de Montreal. In 1988 and 1989 he was director of
planning and development for Laboratoires Zunik inc. in Montreal, a corporation
with principal activities in computers. In 1989, Mr. Abouelouafa founded, and
until 1995 was president, of Omzar Technologies inc. a research company in
computers and electronics, which has 60 employees and had $17 million in
revenues, annually. In 1994 and 1995 Mr. Abouelouafa became president and
chaiman of the board of Cap-Tech Communications inc. a public company listed on
the Alberta stock exchange and specializing in computer technology as applied to
21
<PAGE>
network and communications. From 1996 to 1998 Mr. Abouelouafa acted as strategic
counselor to Sofame Tech, a public corporation on the Alberta Stock Exchange
having activities in energy transformation. During 1999 and 2000 he has been
available to consult for Biomasse on strategic planning and financial affairs.
Security ownership of certain
beneficial owners and management
The following table sets forth, as of August 31, 2000, information
regarding the beneficial ownership of our common stock based upon the most
recent information available to us for
o each person known by us to own beneficially more than five (5%)
percent of our outstanding common stock,
o each of our officers and directors and
o all of our officers and directors as a group.
Each stockholder's address is c/o Biomasse International Inc., 5345
St.Joseph Street, Trois-Rivieres ouest (Quebec) G9A 5M4.
22
<PAGE>
<TABLE>
<S> <C> <C> <C>
Number of Number of
shares owned currently exercisable
Name beneficially warrants owned
beneficially % of total
---- ------------ -------------- ----------
Benoit Dufresne(1) 2,743,041 1,132,900 23.8
Jean Gagnon (2) 1,000,000 1,205,000 13.5
Simon Dufresne (1) 2,001,000 128,500 15.5
Societe Merivel Inc. (3) 1,000,000 -0- 6.6
W.A.F.A. Investment Corp (4) 7,400,000 400,000 50.1
Abdel Jabbar Abouelouafa (5) -0- 1,205,000 7.4
Sibco Inc. (6) 1,000,000 -0- 6.6
Marc Dufresne (1978) Inc. (7) 950,565 -0- 6.3
Taghi Zaim -0- 100,000 0.7
All officers and directors
as a group (3 persons) 3,743,041 2,437,900 35.1
</TABLE>
(1) Includes 50% of the shares owned by Sibco Inc. and 25% of the shares
owned by Marc Dufresne (1978) Inc.
(2) Includes the shares owned by Societe Merivel Inc.
(3) Controlled by Jean Gagnon, our Vice President Finance.
(4) Owned by W.A.F.A. TRUST which is controlled by the Abouelouafa family.
(5) Mr. Abouelouafa is our consultant. Does not include shares and warrants
held by W.A.F.A. Investment Corp.
(6) Owned by Benoit and Simon Dufresne.
(7) Owned 50 % by Sibco Inc.
Executive compensation
From inception through the fiscal year ended September 30, 1999 no
compensation was paid to any of our executive officers.
Employment agreements
On January 1st, 2000, Mr. Benoit Dufresne entered into a five (5) year
employment agreement commencing January 1st, 2000. The agreement provides for an
annual salary of $85,000. Mr. Dufresne may also receive bonuses as determined by
the board of directors.
On January 1st, 2000, Mr. Jean Gagnon entered into a five (5) year
employment agreement commencing January 1st, 2000. The agreement provides for an
annual salary of $70,000. Mr. Gagnon may also receive bonuses as determined by
the board of directors.
23
<PAGE>
On July 31, 2000, Mr. Taghi Zaim entered into a five (5) year
employment agreement commencing at the listing of our share on OTC : BB. The
agreement provides for an annual salary of $34,000 and warrants to purchase
100,000 shares at an exercise price of $1.10 per share.
On April 1st, 2000, Mr. Abouelouada entered into a five (5) year
consulting agreement. The agreement provides for an annual fee of $60,000 before
the listing and $100,000 after the listing. Mr. Abouelouafa also received some
other benefits.
Certain relationships and related transactions
During 1999 and the current year, the Company made advances to Abdel
Jabbar Abouelouafa, Jean Gagnon and Louise St-Pierre in the amounts of $4,475,
$3,688 and $4,769 respectively, for expenses they may incur. These advanced
amounts are required to be repaid in the following fiscal year if the advances
exceed the incurred expenses. On November 29, 1999, Louise St. Pierre resigned
as Director and Vice President of legal matters. A repayment schedule has been
established relating to her advances.
On April 26, 1999, the Company entered into a license rights agreement
with Marc Dufresne (1978) Inc., a shareholder of the company and an affiliate.
The amount of the license agreement was $588,000. On April 26, 1999, the Company
issued 588,000 shares of common stock, class B, to Marc DuFresne (1978) Inc., a
shareholder of the company, in settlement of the license rights agreement in the
amount of $588,000. The license was capitalized at predecessor cost for an
amount of $110,000 with the difference of $478,000 treated as a dividend to
affiliate. The $478,000 dividend to affiliate was applied against paid in
capital.
The company has a note payable dated September 30, 1999 in the amount
of $56,566 to Marc DuFresne (1978) Inc., a shareholder of the company. This note
is for reimbursements of expenditures paid by Marc DuFresne (1978) Inc. during
the fiscal year ended September 30, 1999 on behalf of Biomasse International,
Inc. The note is unsecured and bears interest of prime plus two percent and
matures on September 30, 2000. This note was converted into 56,565 shares in
November 1999.
On July 7, 1999, the Company issued 306,000 shares of common stock,
class B, to Marc DuFresne (1978) Inc., a shareholder of the company and an
affiliate, in settlement of an invoice for the purchase of equipment in the
amount of $306,000. The equipment was capitalized at predecessor cost for an
amount of $200,000 with the difference of $106,000 treated as a dividend to
affiliate. The $106,000 dividend to affiliate was applied against paid in
capital.
On November 29, 1999, the Company was advised by Marc Dufresne (1978)
Inc., a shareholder and affiliate, of a financial difficulty concerning Marc
Dufresne (1978) Inc. By way of a licensing agreement dated April 26, 1999, the
Company exercised it right to cancel the agreement and repurchase 4,500,000
shares held by Marc Dufresne (1978) Inc. These shares are being held by Biomasse
International, Inc. as treasury shares. The company also exercised its right to
acquire all intellectual property and rights related to the technology to
process and dispose of waste created by pulp and paper companies. The company
had a note payable dated September 30, 1999 in the amount of $56,566 to Marc
24
<PAGE>
DuFresne (1978) Inc., a shareholder of the company. This note is for
reimbursements of expenditures paid by Marc DuFresne (1978) Inc. during the
fiscal year ended September 30, 1999 on behalf of Biomasse International, Inc.
As part of the above transaction, it was agreed by all parties to issues 56,565
shares of stock is settlement of this note.
Our policy is to obtain all supplies and services on a normal
competitive basis, but that, all things being equal, to purchase from affiliated
or related entities. All related party transactions must be reviewed by the
board of directors to assure that we are not paying higher than fair market
arms-length prices.
Disclosure of commission position on
indemnification for securities act liabilities
Neither our by-laws nor our certificate of incorporation currently
provide indemnification to our officers or directors. In an effort to continue
to attract and retain qualified individuals to serve as our directors and
officers, we intend to adopt provisions providing for the maximum
indemnification permitted by Florida law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons,
pursuant to the foregoing provisions, or otherwise, we have 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.
Description of securities
Authorized and outstanding stock
Our authorized capital stock consists of 5,000,000 shares of Class A,
$1.00 par value and 60,000,000 shares of Class B common stock, $.001 par value.
As of July 31, 2000 there were 15,165,188 shares of Class B common stock
outstanding, which were held by approximately 55 stockholders of record.
Common stock
Subject to legal and contractual restrictions on payment of dividends,
the holders of common stock are entitled to receive such lawful dividends as may
be declared by the board of directors. In the event of our liquidation,
dissolution or winding up, the holders of shares of common stock are entitled to
receive all of our remaining assets available for distribution to stockholders
after satisfaction of all liabilities and preferences. Holders of our common
stock do not have any preemptive, conversion or redemption rights and there are
no sinking fund provisions applicable to our common stock. Record holders of our
common stock are entitled to vote at all meetings of stockholders and at those
meetings are entitled to cast one vote for each share of record that they own on
all matters on which stockholders may vote. Stockholders do not have cumulative
25
<PAGE>
voting rights in the election of our directors. As a result, the holders of a
plurality of the outstanding shares can elect all of our directors, and the
holders of the remaining shares are not able to elect any of our directors. All
outstanding shares of common stock are fully paid and non-assessable, and all
shares of common stock to be offered and sold in this offering will be fully
paid and non-assessable.
Warrants
We currently have 3,629,900 warrants outstanding, each of which
entitles the registered holder thereof to purchase, at any time until the close
of business on January 31, 2002, one share of Class B common stock at a price of
$1.10 and 1,425,000 warrants outstanding, each of which entitles the registered
holder thereof to purchase, at any time, one share of Class B Common stock at a
price of $.001. All of the warrants contain provisions which protect the holders
thereof against dilution by adjustment of the exercise price and number of
warrants, in certain events, such as stock dividends, stock splits, mergers,
sale of substantially all of our assets, and for other extraordinary events.
Transfer agent and registrar
The stock transfer agent and registrar for our common stock is
Intercontinental Registry and Stock Transfer, located at 900 Buchanan blvd # 1,
Boulder City, Nevada 89005-2100.
Dividend policy
Under applicable law, dividends may only be paid out of legally
available funds as proscribed by a statute, subject to the discretion of the
board of directors. In addition, it is currently our policy to retain internally
generated funds to support future expansion of our business. Accordingly, even
if we do generate earnings, and even if we are not prohibited from paying
dividends, we do not currently intend to declare or pay cash dividends on our
common stock for the foreseeable future.
Shares available for future sale
On the date of this prospectus, all 2,027,711 shares included in this
prospectus will generally be freely tradable without restriction imposed by, or
further registration under, the Securities Act for so long as this prospectus is
still current. An additional 13,137,477 shares of our common stock may be deemed
"restricted securities," as that term is defined under Rule 144 promulgated
under the Securities Act. Such shares may be sold to the public, subject to
volume restrictions, as described below. Commencing at various dates, these
shares may be sold to the public without any volume limitations. These figures
do not include the additional 5,054,900 shares underlying currently exercisable
warrants, all of which will be freely tradable upon exercise, provided this
prospectus is current.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including one of our
affiliates, or persons whose shares are aggregated with affiliates, who has
26
<PAGE>
owned restricted shares of common stock beneficially for at least one year is
entitled to sell, within any three-month period, a number of shares that does
not exceed 1% of the total number of outstanding shares of the same class. In
the event our shares are sold on an exchange or are reported on the automated
quotation system of a registered securities association, you could sell during
any three-month period the greater of such 1% amount or the average weekly
trading volume as reported for the four calendar weeks preceding the date on
which notice of your sale is filed with the SEC. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about us. A person who has not been
one of our affiliates for at least the three months immediately preceding the
sale and who has beneficially owned shares of common stock for at least two
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above.
You should note that we anticipate that our shares of common stock will
initially be included for quotation on the OTC Bulletin Board. Pursuant to SEC
regulations, the OTC Bulletin Board is not considered an "automated quotation
system of a registered securities association" and Rule 144 will only permit
sales of up to 1% of the outstanding shares during any three month period.
Plan of distribution
The sale of the shares of common stock by the selling stockholders may
be effected by them from time to time in the over the counter market or in such
other public forum where our shares are publicly traded or listed for quotation.
These sales may be made in negotiated transactions through the timing of options
on the shares, or through a combination of such methods of sale, at fixed
prices, which may be charged at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
selling stockholders may effect such transactions by selling the shares to or
through broker-dealers, and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the selling stockholders
and/or the purchasers of the shares for which such broker-dealer may act as
agent or to whom they sell as principal, or both. The compensation as to a
particular broker-dealer may be in excess of customary compensation.
The selling stockholders and any broker-dealers who act in connection
with the sale of the shares hereunder may be deemed to be underwriters within
the meaning of Section 2(11) of the Securities Act, and any commissions received
by them and any profit on any sale of the shares as principal might be deemed to
be underwriting discounts and commissions under the Securities Act.
Selling stockholders
We are registering
o Shares of common stock purchased by investors in our 1999-2000
private placement offerings,
o a portion of the shares of common stock owned by our founders,
and
27
<PAGE>
o 5,054,900 shares of common stock underlying currently
outstanding warrants.
Other than the costs of preparing this prospectus and a registration
fee to the SEC, we are not paying any costs relating to the sales by the selling
stockholders. Each of the selling stockholders, or their transferees, and
intermediaries to whom such securities may be sold may be deemed to be an
"underwriter" of the common stock offered in this prospectus, as that term is
defined under the Securities Act. Each of the selling stockholders, or their
transferees, may sell these shares from time to time for his own account in the
open market at the prevailing prices, or in individually negotiated transactions
at such prices as may be agreed upon. The net proceeds from the sale of these
shares by the selling stockholders will inure entirely to their benefit and not
to ours.
Except as indicated below, none of the selling stockholders has held
any position or office, or had any material relationship with us or any of our
predecessors or affiliates within the last three years, and after completion of
this offering will own the amount of our outstanding common stock listed
opposite their name. The shares reflected by each selling stockholder is based
upon information provided to us by our transfer agent and from other available
sources in August, 2000.
These shares may be offered for sale from time to time in regular
brokerage transactions in the over-the-counter market, or, either directly or
through brokers or to dealers, or in private sales or negotiated transactions,
or otherwise, at prices related to the then prevailing market prices. Thus, they
may be required to deliver a current prospectus in connection with the offer or
sale of their shares. In the absence of a current prospectus, if required, these
shares may not be sold publicly without restriction unless held by a
non-affiliate for two years, or after one year subject to volume limitations and
satisfaction of other conditions. The selling stockholders are hereby advised
that Regulation M of the General Rules and Regulations promulgated under the
Securities Exchange Act of 1934 will be applicable to their sales of these
shares. These rules contain various prohibitions against trading by persons
interested in a distribution and against so-called "stabilization" activities.
The selling stockholders, or their transferees, might be deemed to be
"underwriters" within the meaning of Section 2(11) of the Act and any profit on
the resale of these shares as principal might be deemed to be underwriting
discounts and commissions under the Act. Any sale of these shares by selling
shareholders, or their transferees, through broker-dealers may cause the
broker-dealers to be considered as participating in a distribution and subject
to Regulation M promulgated under the Securities Exchange Act of 1934, as
amended. If any such transaction were a "distribution" for purposes of
Regulation M, then such broker-dealers might be required to cease making a
market in our equity securities for either two or nine trading days prior to,
and until the completion of, such activity.
<TABLE>
<S> <C> <C> <C>
Shares Beneficially Owned
Name of Selling Security Holder Before Offering Offering After offering
</TABLE>
28
<PAGE>
<TABLE>
<S> <C> <C> <C>
Marc Dufresne (1978) Inc. 950,565 475,000 475,565
Benoit Dufresne 2,005,400 30,694 1,974,706
Simon Dufresne 1,501,000 23,020 1,477,980
Sibco inc. 1,000,000 15,346 984,654
W.A.F.A. Investment Corporation 7,400,000 666,000 6,734,000
Societe Merivel Inc. 1,000,000 15,346 984,654
9064-6167 Quebec Inc. 100,000 30,000 70,000
Power Group Investment Inc. 100,000 30,000 70,000
Paul Roy 50,000 15,000 35,000
O.S.F.A. Corp. 135,000 40,500 94,500
Carole Deslongchamps 5,000 1,500 3,500
Louise Gravel 10,000 3,000 7,000
Paulette Landry 2,000 600 1,400
Josee Landry 2,000 600 1,400
Yves Landry 2,000 600 1,400
Jean-Marie Landry 2,000 600 1,400
Michel Felx 2,000 600 1,400
Crecenzo Giannangelo 83,478 25,043 58,435
Francesca Piazza 14,348 4,304 10,044
Francesca Piazza 3,897 1,169 2,728
Maria Di Salvatore 10,000 3,000 7,000
Sylvie Boulerice 20,000 6,000 14,000
Jo-Ann Salerno 5,000 2,200 2,800
Paola Di Salvatore 10,000 3,000 7,000
Francesco Spadafora 13,000 3,900 9,100
Franca Spadafora 10,000 3,000 7,000
Esther Spadafora 20,000 6,000 14,000
Pelino Spadafora 40,000 12,000 28,000
BBT Consulting Group Ltd 500,000 150,000 350,000
Andre Desjardins 25,000 7,500 17,500
Maurice Robert 10,000 3,000 7,000
Francois Thibeault 2,000 600 1,400
Diane Girard 8,000 2,400 5,600
Claudette Girard 2,000 1,300 700
Gabriel Lussier 2,500 2,500 0
Yves Lussier 2,500 2,500 0
Jean-Benoit Gagnon 2,000 2,000 0
Lucille Gagnon 4,000 4,000 0
Mylene Gagnon 2,000 2,000 0
Danik Lavoie 1,500 1,500 0
Reynald Gagnon 5,000 5,000 0
Mohamed Bennis 10,000 10,000 0
Francois Thibeault 2,000 2,000 0
Ursule Germain 1,000 1,000 0
Andree Dubuc 1,000 1,000 0
Marc Dufresne 1,000 1,000 0
</TABLE>
29
<PAGE>
<TABLE>
<S> <C> <C> <C>
Polydex Inc. 10,000 10,000 0
Derek Lightfoot 3,000 3,000 0
Marcel Bruneau 5,000 5,000 0
Michel Caron 1,000 1,000 0
Ethel Brenner 1,000 1,000 0
Fran Altman 1,000 1,000 0
Roger Gauvin 1,000 1,000 0
Marcel Mongrain 35,000 35,000 0
Karine Hebert 2,000 2,000 0
Marilyn Bouchard 20,000 20,000 0
Warrants Beneficially Owned*
Name of Warrant Holder Before Offering Offering After Offering
Rene-Jean Lavallee 100,000 100,000 0
Benoit Dufresne 1,132,900 1,132,900 0
Simon Dufresne 128,500 128,500 0
Abdel Jabbar Abouelouafa 1,205,000 1,205,000 0
Jean Gagnon 1,205,000 1,205,000 0
Louise St-Pierre 60,000 60,000 0
BBT Consulting Group Ltd 500,000 500,000 0
Power Group Consultants LLC 100,000 100,000 0
Gabriel Lussier 2,500 2,500 0
Yves Lussier 2,500 2,500 0
Jean-Benoit Gagnon 2,000 2,000 0
Lucille Gagnon 4,000 4,000 0
Mylene Gagnon 2,000 2,000 0
Danik Lavoie 1,500 1,500 0
Reynald Gagnon 5,000 5,000 0
Mohamed Bennis 10,000 10,000 0
Francois Thibeault 2,000 2,000 0
Ursule Germain 1,000 1,000 0
Andree Dubuc 1,000 1,000 0
Marc Dufresne 1,000 1,000 0
Jo-Ann Salerno 1,000 1,000 0
Diane Girard 8,000 8,000 0
Polydex Inc. 10,000 10,000 0
Claudette Girard 1,000 1,000 0
Derek Lightfoot 3,000 3,000 0
Marcel Bruneau 5,000 5,000 0
Michel Caron 1,000 1,000 0
Ethel Brenner 1,000 1,000 0
Fran Altman 1,000 1,000 0
Roger Gauvin 1,000 1,000 0
</TABLE>
30
<PAGE>
<TABLE>
<S> <C> <C> <C>
Marcel Mongrain 35,000 35,000 0
Karine Hebert 2,000 2,000 0
Marilyn Bouchard 20,000 20,000 0
Taghi Zaim 100,000 100,000 0
Charles Abikhzer 100,000 100,000 0
W.A.F.A Investment Corp. 400,000 400,000 0
</TABLE>
----------
* We are registering the shares underlying the warrants. References in the chart
to before or after sale are all references to the underlying shares. The list
has been presented in two parts to distinguish between the actual shares and the
shares underlying the warrants. Each warrant is exercisable into one share of
Class B common stock at a price of $1.10 or $.001.
Legal matters
Certain legal matters in connection with this offering are being passed
upon by the law firm of Heller, Horowitz & Feit P.C., New York, New York.
Experts
Our audited financial statements as of September 30, 1999 and for the
fiscal year then ended are included in this prospectus in reliance upon the
report of Mark Cohen C.P.A., an independent certified public accountant, and
upon the authority of said person as an expert in accounting and auditing.
Available information
Commencing on the date of this prospectus, we will be subject to the
information requirements of the Securities Exchange Act of 1934, as amended.
This Act requires us to file reports, proxy statements and other information
with the Securities and Exchange Commission. Copies of the reports, proxy
statements and other information we file can be inspected at the Headquarters
Office of the Securities and Exchange Commission located at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 and at certain of its regional offices
at the following addresses:
o 7 World Trade Center, 13th Floor, New York, New York 10048; and
o 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of the material we file may be obtained from the Public Reference
Section of the Commission, at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. at prescribed rates. The Public Reference Room can be reached at (202)
942-8090. The Commission also maintains a web site that contains reports, proxy
and information statements and other information regarding us. This material can
be found at http://www.sec.gov.
31
<PAGE>
Mark Cohen C.P.A.
1772 East Trafalgar Circle
Hollywood, Fl 33020
(954) 922 - 6042
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
Board of Directors
Biomasse International, Inc.
We have audited the accompanying balance sheet of Biomasse International, Inc.
(a company in the development stage) as of September 30, 1999 and the related
statements of operations, shareholders' equity (deficiency) and cash flows for
the year ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Biomasse International, Inc. at
September 30, 1999, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company has experienced an operating loss and
management has determined that it will require additional capital to continue
funding operations and meet its obligations as they come due. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/Mark Cohen
Mark Cohen C.P.A.
A Sole Proprietor Firm
Hollywood, Florida
November 12, 1999
<PAGE>
INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEET
AT JUNE 30, 2000
Assets
------
<TABLE>
September 30, 1999 June 30, 2000
(Unaudited)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 56,615 $ 3,281
Other current assets 33,317 26,076
Total current assets 89,932 29,357
Property and equipment, net 200,000 203,342
Other assets 108,061 2,518
Total assets 397,992 235,217
Liabilities and Shareholder's Equity
------------------------------------
Current Liabilities
Accounts payable 31,528 25,000
Other current liabilities - 16,522
Note Payable 56,566 -
Total current liabilities 88,093 41,522
Shareholder's Equity
Common Stock, class A, $1.00 par value; authorized - -
5,000,000 shares; issued and outstanding 0 in 1999
and at June 30, 2000
Common Stock, class B, $.001 par value; authorized 55,000,000 19,135 19,135
shares; issued and outstanding 19,135,223 in 1999 and
19,135,223 issued, 14,745,188 outstanding at June 30, 2000
Paid in Capital 365,550 475,405
Treasury Stock - (4,390)
Deficit accumulated during the development stage (74,786) (296,455)
Total Shareholder's Equity 309,899 193,695
Total liabilities and shareholder's equity $ 397,992 $ 235,217
</TABLE>
Read the accompanying summary of significant accounting policies and notes to
financial statements, both of which are an integral part of this financial
statement.
<PAGE>
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF INCOME
FROM INCEPTION (MARCH 19, 1999) THROUGH JUNE 30, 2000
<TABLE>
Inception
Year Ended For the nine (March 19, 1999)
September 30, months ended through
1999 June 30, 2000 June 30, 2000
------------- ------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Operating Expenses:
Selling, general and administrative expenses $ 74,786 $ 115,297 $ 190,083
Loss on impairment of assets 106,843 106,843
----------- ----------- -----------
Operating Loss (74,786) (222,140) (296,926)
Other Income/(Expense)
Interest Income 470 470
----------- ----------- -----------
Total Other Income - 470 470
Net Loss (74,786) (221,670) (296,456)
Basic weighted average common shares outstanding 18,836,507 15,674,915 16,940,142
=========== =========== ===========
Basic Loss per common share $ (0.0040) $ (0.0142) $ (0.0175)
=========== =========== ===========
</TABLE>
Read the accompanying summary of significant accounting policies and notes to
financial statements, both of which are an integral part of this financial
statement.
<PAGE>
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF SHAREHOLDERS' EQUITY
FROM INCEPTION (MARCH 19, 1999) THROUGH JUNE 30, 2000
<TABLE>
Common Class A Common Class B Treasury Shares - Class B
-------------- ----------------------------- -------------------------------
Shares Amount Shares Par Value Amount Shares Par Value Amount
------ ------ --------- --------- -------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, beginning: - $ - - $ - - $ -
April 01, 1999
Proceeds from the
sale of Class B 17,684,723 0.001 17,685
April 01, 1999
Contract Settlement -
BBT Consulting Group, Inc. 500,000 0.001 500
April 26, 1999
Issuance of stock to
Marc Dufresne (1978) Inc.
for license rights 588,000 0.001 588
Dividend to affiliate -
Marc Dufresne (1978) Inc.
for license rights
July 07, 1999
Issuance of stock to
Marc Dufresne (1978) Inc.
for equipment 306,000 0.001 306
Dividend to affiliate -
Marc Dufresne (1978) Inc.
for equipment
September 30, 1999
Proceeds from the
sale of Class B through 56,500 0.001 57
circular offering
Net loss year ended
September 30, 1999
November 29, 1999
Repurchased treasury
shares from Marc Dufresne
(1978) Inc. - - - - - (4,500,000) 0.001 (4,500)
Proceeds from the sale of
Class B through circular
offering - - - - - 3,000 0.001 3
Issuance of stock to Marc
Dufresne (1978) Inc. for
settlement of note - - - - - 56,565 0.001 57
payable
March 01, 2000
Proceeds from the sale of
Class B through circular offering - - - - - 5,000 0.001 5
March 13, 2000
Proceeds from the sale of
Class B through circular offering - - - - - 5,400 0.001 5
April 05, 2000
Proceeds from the sale of
Class B through circular offering - - - - - 2,000 0.001 2
June 09, 2000
Proceeds from the sale of
Class B through circular offering - - - - - 35,000 0.001 35
June 16, 2000
Proceeds from the sale of
Class B through circular offering - - - - - 1,000 0.001 1
June 23, 2000
Proceeds from the sale of
Class B through circular offering - - - - - 2,000 0.001 2
Net loss for the nine month period
ended June 30, 2000
------ ------ ---------- --------- -------- --------- --------- --------
Balance, ending: - $ - 19,135,223 $ 0.001 $ 19,135 (4,390,035) $ 0.001 $ (4,390)
====== ====== ========== ========= ======== ========= ========= ========
</TABLE>
Read the accompanying summary of significant accounting policies and notes to
financial statement, both of which are an integral part of this financial
statement.
<PAGE>
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF SHAREHOLDERS' EQUITY
FROM INCEPTION (MARCH 19, 1999) THROUGH JUNE 30, 2000
(continued)
<TABLE>
Accumulated
Deficit during Total
Paid in Development Shareholder's
Capital Stage Equity
-------- -------------- -------------
<S> <C> <C> <C>
Balance, beginning: $ - $ - $ - $ -
April 01, 1999
Proceeds from the
sale of Class B 17,685
April 01, 1999
Contract Settlement -
BBT Consulting Group, Inc. 500
April 26, 1999
Issuance of stock to
Marc Dufresne (1978) Inc.
for license rights 587,412 588,000
Dividend to affiliate -
Marc Dufresne (1978) Inc. (478,000) (478,000)
for license rights
July 07, 1999
Issuance of stock to
Marc Dufresne (1978) Inc.
for equipment 305,694 306,000
Dividend to affiliate -
Marc Dufresne (1978) Inc. (106,000) (106,000)
for equipment
September 30, 1999
Proceeds from the
sale of Class B through 56,444 56,500
circular offering
Net loss year ended
September 30, 1999 (74,786) (74,786)
November 29, 1999
Repurchased treasury
shares from Marc Dufresne
(1978) Inc. (4,500)
Proceeds from the sale of
Class B through circular
offering 2,997 - 3,000
Issuance of stock to Marc
Dufresne (1978) Inc. for
settlement of note 56,509 - 56,566
payable
March 01, 2000
Proceeds from the sale of
Class B through circular offering 4,995 - 5,000
March 13, 2000
Proceeds from the sale of
Class B through circular offering 5,395 - 5,400
April 05, 2000
Proceeds from the sale of
Class B through circular offering 1,998 - 2,000
June 09, 2000
Proceeds from the sale of
Class B through circular offering 34,965 - 35,000
June 16, 2000
Proceeds from the sale of
Class B through circular offering 999 - 1,000
June 23, 2000
Proceeds from the sale of
Class B through circular offering 1,998 - 2,000
Net loss for the nine month period
ended June 30, 2000 - (221,669) (221,669)
-------- --------- -----------
Balance, ending: $ 475,405 $ (296,455) $ 193,695
======== ========= ===========
</TABLE>
Read the accompanying summary of significant accounting policies and notes to
financial statement, both of which are an integral part of this financial
statement.
<PAGE>
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FROM INCEPTION (MARCH 19, 1999) THROUGH JUNE 30, 2000
<TABLE>
Inception
(March 19, 1999)
For the year ended For the nine months ended through
September 30, 1999 June 30, 2000 June 30, 2000
------------------ ------------------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (74,786) $ (221,669) $ (296,455)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 3,157 370 3,527
Loss on Impairment of asset - 106,843 106,843
Issuance of stock for settlement of note 56,566
Changes in Operating assets and liabilities:
Accounts Receivable (17,385) 17,385 0
Other Current Assets (15,932) (10,144) (26,076)
Other Assets (1,218) (1,300) (2,518)
Accounts Payable and Accrued Liabilities 31,528 9,994 41,522
---------------- ------------------------- -----------------
Net cash provided by/(used in) operating activities (74,636) (98,523) (116,593)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - (3,711) (3,711)
---------------- ------------------------- -----------------
Net cash provided by/(used in) investing activities - (3,711) (3,711)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Notes payable, principally related parties 56,566 - -
Purchase of treasury stock - (4,500) (4,500)
Sales of common stock 74,685 53,400 128,085
---------------- ------------------------- -----------------
Net cash provided by/(used in) financing activities 131,251 48,900 123,585
---------------- ------------------------- -----------------
Net increase (decrease) in cash and cash equivalents 56,615 (53,334) 3,281
Cash and cash equivalents, beginning of period - 56,615 -
---------------- ------------------------- -----------------
Cash and cash equivalents, end of period $ 56,615 $ 3,281 $ 3,281
================ ========================= =================
</TABLE>
Read the accompanying summary of significant accounting policies and notes to
financial statement, both of which are an integral part of this financial
statement.
<PAGE>
BIOMASSE INTERNATIONAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FROM INCEPTION (MARCH 19, 1999) THROUGH JUNE 30, 2000
Basis of accounting:
Biomasse International, Inc. prepares its financial statements in accordance
with generally accepted accounting principles. This basis of accounting
involves the application of accrual accounting; consequently, revenues and
gains are recognized when earned, and expenses and losses are recognized
when incurred. Financial statement items are recorded at historical cost and
may not necessarily represent current values.
Management 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,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Certain amounts included in the financial statements are
estimated based on currently available information and management's judgment
as to the outcome of future conditions and circumstances. Changes in the
status of certain facts or circumstances could result in material changes to
the estimates used in the preparation of financial statements and actual
results could differ from the estimates and assumptions. Every effort is
made to ensure the integrity of such estimates.
Fair value of financial instruments:
The carrying amounts of cash and equivalents, accounts receivable, accounts
payable and accrued liabilities approximate their fair values because of the
short duration of these instruments.
Impairment of long-lived assets:
Long-lived assets and certain identifiable intangibles held and used by the
Company are reviewed for possible impairment whenever events or
circumstances indicate the carrying amount of an asset may not be
recoverable. Intangible assets have been written down to their net estimated
realizable value.
Cash and cash equivalents:
The Company considers all highly liquid investments with original maturities
of ninety days or less to be cash and cash equivalents. Such investments are
valued at quoted market prices.
Receivables:
The Company believes that the carrying amount of receivables at June 30,
2000 approximates the fair value at such date.
Property, equipment and depreciation:
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives as follows when the property and equipment is placed in
service:
Estimate Useful Life
(In Years)
Office Furniture and Equipment 10
Machinery and Equipment 20
Computer Equipment 3
<PAGE>
The cost of fixed assets retired or sold, together with the related
accumulated depreciation, are removed from the appropriate asset and
depreciation accounts, and the resulting gain or loss is included in net
earnings.
Repairs and maintenance are charged to operations as incurred, and
expenditures for significant improvements are capitalized. The cost of
property and equipment retired or sold, together with the related
accumulated depreciation, are removed from the appropriate asset and
depreciation accounts, and the resulting gain or loss is included in
operations.
Per share amounts:
Loss per share is computed by dividing net loss by the weighted average
number of shares outstanding throughout the year.
Recent Accounting Pronouncements:
The Statement of Financial Accounting Standards Board (SFAS) No. 130,
"Reporting Comprehensive Income," was issued by the Financial Accounting
Standards Board (FASB) in June 1997. This Statement establishes standards
for the reporting and display of comprehensive income and its components.
Comprehensive income including, among other things, foreign currency
translation adjustments and unrealized gains and losses on certain
investments in debt and equity securities. Also in June 1997, the FASB
issued SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information." This Statement establishes standards for reporting information
about operating segments in annual financial statements, and requires that
an enterprise report selected information about operating segments in
interim reports issued to shareholders. Both of these Statements are
effective for fiscal periods beginning after December 15, 1997. The Company
does not expect the adoption of these statements to have a material impact
on its financial condition or results of operations.
<PAGE>
BIOMASSE INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
FROM INCEPTION (MARCH 19, 1999) THROUGH JUNE 30, 2000
1. Organization and business
Biomasse International, Inc., was incorporated in the State of Florida
on March 19, 1999. The company has acquired a unique technology to
process and dispose of the waste created by pulp and paper companies in
an efficient and environmentally-friendly way. The pulp and paper
industry in Canada is facing many challenges caused by an increasingly
competitive world market. Pulp and paper plants in Canada are lagging
behind their competitors in the U.S.A. and Europe in productivity and
in quality of their products. The industry is now in a restructuring
phase to reduce its costs of operations and diversify its products
line. The industry is also increasingly scrutinized by environmental
agencies as this industry is a major producer of toxic waste.
Environmental regulations are becoming tighter and the public is
becoming more environmentally-conscious. Biomasse International, Inc.'s
technology addresses both problems: to eliminate the toxic waste by
incinerating it and then from the waste material to produce steam
energy which can be used for the operation of machinery in the plants.
The plant thus saves the cost of trucking the waste to distant
locations to bury it, and at the same time it eliminates the waste
completely, meeting the most stringent environmental concerns.
2. Concentrations of credit risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash, cash
equivalents and accounts receivable. The credit risk associated with
cash and cash equivalents is considered low due to the credit quality of
the financial institutions. The Company maintains, when appropriate, an
allowance for uncollectible accounts recievable. Therefore, no
additional credit risk beyond amounts provided for collection losses is
believed inherent in the Company's accounts receivable and to date have
been within management's expectations.
3. Details of financial statement components
<TABLE>
September 30, 1999 June 30, 2000
------------------ -------------
<S> <C> <C>
Other current assets:
Due from Federal Tax Authority $ $ 1,033
Due from Provincial Tax Authority 1,122
Advances due from A. Abouelouafa 1,174
Loan receivable - A. Abouelouafa 7,470
Other receivables 17,385
Employee advances 15,932 15,277
-------- --------
$ 33,317 $ 26,076
Property and equipment:
Furniture & Fixtures $ $ 1,638
Computer Equipment 2,074
Equipment 200,000 200,000
-------- --------
(Acquired from affiliate and recorded at 200,000 203,712
predecessor basis with the cost over such
basis recorded as a dividend to affiliate)
Accumulated depreciation 0 370
-------- --------
$200,000 $203,342
Other Assets:
License rights $110,000 $ --
(Acquired from affiliate and recorded at
predecessor basis with the cost over such
basis recorded as a dividend to affiliate)
Accumulated amortization 3,157
-------- --------
106,843 --
Security Deposit 1,218 2,518
-------- --------
108,061 2,518
</TABLE>
<PAGE>
On November 29, 1999, the Company was advised by Marc Dufresne (1978)
Inc., a majority shareholder and affiliate, of a financial difficulty
concerning Marc Dufresne (1978) Inc.. By way of a licensing agreement
dated April 26, 1999, the Company exercised it right to cancel the
agreement. The license right which was previously capitalized was
written down to zero. The total loss on impairment to asset equaled
$106,843 (refer to note 6 - repurchase of stock from shareholder and
note 7).
4. Commitments, contingencies and litigation
Employment Contracts:
On April 01, 1999, the Company executed a one year employment
agreement (which was to start on January 01, 2000 and has been
amended to start on the date the company's stock is listed on the OTC
bulletin board) with its President, Vice President Technical, Vice
President Strategic Matter, Vice President Finance and the Vice
President Legal Matters. On November 29, 1999, the Vice President
Legal Matters and Vice President Technical resigned and their
employment contracts were cancelled. On March 31, 2000, the Vice
President Strategic Matters resigned and the employment contract was
cancelled.
Year 2000 compliance:
The year 2000 issue is the result of computer programs being written
using two (2) digits rather than four (4) digits to define the year.
Any of the Company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than
2000. This problem could force computers to either shut down or
provide incorrect data or information. The Company utilizes generic
software programs developed, maintained and upgraded by independent
computer software providers. In response to the year 2000 issue,
management is of the opinion that the providers of these software
programs will resolve the date sensitive issue so that all critical
systems will be in compliance prior to the year 2000. The Company
does not anticipate any material adverse impact on the business.
Going Concern:
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The company reported a net
loss of $221,670 for the nine month period ended June 30, 2000 and
$74,786 for the year ended September 30, 1999. As reported on the
statement of cash flows, the Company incurred negative cash flows
from operating activities of $116,593 from inception. To date, this
has been financed principally through the sale of common stock
($128,085). Additional capital and/or borrowings will be necessary in
order for the Company to continue in existence until attaining and
sustaining profitable operations.
<PAGE>
5. Comprehensive income (loss)
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 130, "Reporting Comprehensive Income". SFAS 130 establishes
standards for the reporting and display of comprehensive income (loss)
and its components in the financial statements. The adoption of this
statement did not result in a change in the Company's disclosure.
6. Related Parties
Advance to Officers:
During 1999 and the current year, the Company made advances to Abdel
Jabbar Abouelouafa, Jean Gagnon and Louise St Pierre in the amounts
of $4,,315, $6,193 and $4,769 respectively for expenses they may
incur. These advanced amounts are required to be repaid in the
following fiscal year if the advances exceed the incurred expenses.
On November 29, 1999, Louise St. Pierre resigned as Director and Vice
President of Legal Matters. A repayment schedule has been established
relating to her advances. On March 31, 2000, Abdel Jabbar Abouelouafa
resigned as Director and Vice President of Strategic Matters. A
repayment schedule has been established relating to his advances.
License rights:
On April 26, 1999, the Company entered into a license rights
agreement with Marc DuFresne (1978) Inc., a shareholder of the
company and an affiliate. The amount of the license agreement was
$588,000. On April 26, 1999, the Company issued 588,,000 shares of
common stock, class B, to Marc DuFresne (1978) Inc., a shareholder of
the company, in settlement of the license rights agreement in the
amount of $588,000. The license was capitalized at predecessor cost
for an amount of $110,000 with the difference of $478,000 treated as
a dividend to affiliate. The $478,000 dividend to affiliate was
applied against paid in capital.
Note payable to stockholder:
The company has a note payable dated September 30, 1999 in the amount
of $56,566 to Marc DuFresne (1978) Inc., a majority shareholder of
the company. This note is for reimbursements of expenditures paid by
Marc DuFresne (1978) Inc. during the fiscal year ended September 30,
1999 on behalf of Biomasse International, Inc. The note is unsecured
and bears interest of prime plus two percent and matures on September
30, 2000.
Issuance of stock for equipment:
On July 07, 1999, the Company issued 306,000 shares of common stock,
class B, to Marc DuFresne (1978) Inc., a majority shareholder of the
company and an affiliate, in settlement of an invoice for the
purchase of equipment in the amount of $306,000. The equipment was
capitalized at predecessor cost for an amount of $200,000 with the
difference of $106,000 treated as a dividend to affiliate. The
$106,000 dividend to affiliate was applied against paid in capital.
Repurchase of shares from stockholder:
On November 29, 1999, the Company was advised by Marc Dufresne (1978)
Inc., a majority shareholder and affiliate, of a financial difficulty
concerning Marc Dufresne (1978) Inc.. By way of a licensing agreement
dated April 26, 1999, the Company exercised it right to cancel the
agreement and repurchase 4,500,000 shares held by Marc Dufrresne
(1978) Inc.. These shares are being held by Biomasse International,
Inc. as treasury shares. The company also exercised its right to
acquire all intellectual property and rights related to the
technology to process and dispose of waste created by pulp and paper
companies. The company had a note payable dated September 30, 1999 in
the amount of $56,566 to Marc DuFresne (1978) Inc., a majority
shareholder of the company. This note is for reimbursements of
expenditures paid by Marc DuFresne (1978) Inc. during the fiscal year
ended September 30, 1999 on behalf of Biomasse International, Inc. As
part of the above transaction, it was agreed by all parties to issues
56,565 shares of stock is settlement of this note.
7. Loss on impairment of asset:
On November 29, 1999, the Company was advised by Marc Dufresne (1978)
Inc., a majority shareholder and affiliate, of a financial difficulty
concerning Marc Dufresne (1978) Inc.. By way of a licensing agreement
dated April 26, 1999, the Company exercised it right to cancel the
agreement. The license right which was previously capitalized was
written down to zero. The total loss on impairment to asset equaled
$106,843.
8. Income Taxes
The Company did not provide any current or deferred United States
federal, state or foreign income tax provision or benefit for the
period presented because it has experienced operating losses since
inception. The Company has provided a full valuation allowance on the
deferred tax asset, consisting primarily of net operating loss
carryforwards, because of uncertainty regarding its realizability.
9. Shareholder's equity
Common stock
The Company has 5,000,000 shares of class A common stock which to
date have never been issued. Management has no intent of issuing any
of these shares and will be canceling these shares by filing an
amendment to the articles of incorporation with the State of
Delaware.
On April 01, 1999, the Company issued 17,684,723 shares of Class B
common stock to founding shareholder's at a price of $.001.
On April 01, 1999, the Company issued 500,000 shares of Class B
common stock to BBT Consulting Group, Inc. as part of its contractual
agreement to obtain a (NASD) OTC Bulletin Board listing of its common
shares. Each warrant entitles the registered holder thereof to
purchase at any time one share of common stock at a price of $.001.
On April 26, 1999, the Company issued 588,,000 shares of common stock
of Class B, at a price of $1.00 per share, to Marc DuFresne (1978)
Inc., a shareholder of the company, in settlement of the license
rights agreement in the amount of $588,000.
On July 07, 1999, the Company issued 306,000 shares of common stock
of Class B to Marc DuFresne (1978) Inc., a majority shareholder of
the company and an affiliate, in settlement of an invoice for the
purchase of equipment in the amount of $306,000.
On September 30, 1999, the Company, in accordance with it offering
circular to sell no less than 200,000 and up to 1,250,000 units (each
unit consisting of one (1) share of common stock and (1) warrant),
sold 56,500 shares of common stock at a price of $1.00 per share.
On November 29, 1999, the Company issues 56,565 shares of stock stock
of Class B, at a price of $1.00 per share, as settlement of a note
payable dated September 30, 1999 in the amount of $56,566 to Marc
DuFresne (1978) Inc., a majority shareholder of the company. This
note is for reimbursements of expenditures paid by Marc DuFresne
(1978) Inc. during the fiscal year ended September 30, 1999 on behalf
of Biomasse International, Inc.
From November 29, 1999 to June 23, 2000, the Company, in accordance
with it offering circular to sell no less than 200,000 and up to
1,250,000 units (each unit consisting of one (1) share of common
stock and (1) warrant), sold 53,400 shares of common stock at a price
of $1.00 per share.
<PAGE>
Shareholder's equity (continued):
Treasury stock
On November 29, 1999, the Company was advised by Marc Dufresne (1978)
Inc., a majority shareholder and affiliate, of a financial difficulty
concerning Marc Dufresne (1978) Inc.. By way of a licensing agreement
dated April 26, 1999, the Company exercised it right to cancel the
agreement and repurchase 4,500,000 shares held by Marc Dufrresne
(1978) Inc at $0.001 per share. These shares are being held by
Biomasse International, Inc. as treasury shares. The company uses the
cost method of accounting for treasury stock. The company plans to
make these shares available first for sale through its circular
offering and also before any other unissued common shares are sold.
The total number of treasury shares available at March 31, 2000 is
4,430,000.
10. Warrants and options
On April 01, 1999, the Company issued 500,000 warrants to BBT
Consulting Group, Inc. as part of its contractual agreement to obtain a
(NASD) OTC Bulletin Board listing of its common shares. Each warrant
entitles the registered holder thereof to purchase at any time one
share of common stock at a price of $.001.
On April 01, 1999, the Company issued 100,000 warrants to Mr. Rene-Jean
Lavallee for advisory services. Each warrant entitles the registered
holder thereof to purchase at any time one share of common stock at a
price of $.001. On this date Mr. Lavallee was considered an unrelated
third party.
On September 30, 1999, the Company, in accordance with it offering
circular to sell no less than 200,000 and up to 1,250,000 units (each
unit consisting of one (1) share of common stock and (1) warrant), sold
56,500 shares of common stock. Each warrant entitles the registered
holder thereof to purchase at any time from the date of the offering
until the close of business January 31, 2002, one share of common stock
at a price of $1.10.
From November 29, 1999 through June 23, 2000, the Company, in
accordance with it offering circular to sell no less than 200,000 and
up to 1,250,000 units (each unit consisting of one (1) share of common
stock and (1) warrant), sold 53,400 shares of common stock. Each
warrant entitles the registered holder thereof to purchase at any time
from the date of the offering until the close of business January 31,
2002, one share of common stock at a price of $1.10.
On April 01, 2000, the Company issued 1,000,000 warrants to A Abdel
Jabbar Abouelouafa as part of a contractual consulting agreement. The
warrants are exercisable at $1.10 per share and expire on January 31,
2002.
On April 01, 1999, the Company, pursuant to certain executive
employment contracts, issued 725,000 warrants to senior executives of
the Company at an exercise price of $.001 per share.
On March 02, 2000, the Company, pursuant an executive employment
contract, issued 500,000 warrants to Mr. Rene-Jean Lavallee. The
warrants are exercisable at $1.10 per share. 166,667 warrants expire on
April 30, 2001, 166,667 warrants expire on April 30, 2002 and 166,666
warrants expire on April 30, 2003.
On April 01, 2000, the Company, pursuant an executive employment
contract, issued 1,000,000 warrants to its President, Mr. Benoit
Dufresne. The warrants are exercisable at $1.10 per share and expire on
January 31, 2002.
<PAGE>
Warrants and options (continued):
On April 01, 2000, the Company, pursuant an executive employment
contract, issued 1,000,000 warrants to its Vice President Finance, Mr.
Jean Gagnon The warrants are exercisable at $1.10 per share and expire
on January 31, 2002.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation". The Company has determined
that it will continue to account for employee stock-based compensation
under Accounting Principles Board No. 25 and elect the disclosure-only
alternative under SFAS No. 123.
Nine months
FAS 123 "Accounting for stock Year ended ended
based compensation Sept 30, 1999 June 30, 2000
------------- -------------
Paragraph 47 (a)
1 Beginning of year - outstanding
i number of options 0 725,000
ii weighted average exercise price 0 .001
2 End of year - outstanding
i number of options 725,000 3,225,000
ii weighted average exercise price .001 1.00
3 End of year - exercisable
i number of options 725,000 725,000
ii weighted average exercise price .001 1.00
4 During the year - Granted
i number of options 725,000 2,500,000
ii weighted average exercise price .001 1.10
5 During the year - Exercised
i number of options 0 0
ii weighted average exercise price 0 0
6 During the year - Forfeited
i number of options 0 0
ii weighted average exercise price 0 0
7 During the year - Expired
i number of options 0 0
ii weighted average exercise price 0 0
Paragraph 47 (b) Weighted-average grant-date
fair value of options granted during the year:
1 Equals market price 0 0
2 Exceeds market price .53 0
3 Less than market price .99 .99
Paragraph 47(C)Equity instruments other than options none none
Paragraph 47(d) Description of the method and
significant assumptions used during the year to
estimate the fair value of options:
1 Weighted average risk-free interest rate 6.00% 6.00%
2 Weighted average expected life (in months) 33.16 34.00
3 Weighted average expected volatility 0.00% 0.00%
4 Weighted average expected dividends 0.00 0.00
<PAGE>
Warrants and Options (continued):
Paragraph 47(e) Total compensation cost recognized 0 0
in income for stock-based employee compensation awards.
Paragraph 47(f) The terms of significant none none
modifications of outstanding awards.
Paragraph 48 - Options outstanding at the date of
the latest statement of financial position presented:
1. (a) Range of exercise prices $0.001-$1.10 $0.001-$1.10
(b) Weighted-average exercise price .001 1.00
2. Weighted-average remaining contractual 21.44 28.00
life (in months)
Inception
Nine months Mar. 19, 1999
Year ended ended Through
Sept. 30, 1999 June 30, 2000 June 30, 2000
-------------- ------------- -------------
Net Income after
proforma effect (799,061) (221,670) (1,020,731)
Earnings per share
after proforma effect $ (0.0510) $ (0.0141) $ (0.0603)
11. Earnings (Loss) per common share
Basic earnings (loss) per share is computed using the weighted-average
number of common shares outstanding during the period. Options and
warrants are not considered since considering such items would have an
antidilutive effect.
<PAGE>
<TABLE>
<S> <C>
You should only rely on the information contained in
this document or other information that we refer you
to. We have not authorized anyone to provide you
with any other information that is different. You
should note that even though you received a copy of 7,082,611 Shares of Common Stock
this Prospectus, there may have been changes in our
affairs since the date of this Prospectus. This
Prospectus does not constitute an offer to sell
securities in any jurisdiction in which such offer
or solicitation is not authorized
BIOMASSE INTERNATIONAL INC.
TABLE OF CONTENTS PAGE
Risk Factors 2 PROSPECTUS
Special Note Regarding
Forward-Looking Statements 7
Summary Historical Financial
Information 8
Plan of Operations 9
Use of Proceeds 12
Business 13
Management 20
Security Ownership of Certain
Beneficial Owners and Management 22
Executive Compensation 22
Certain Relationships and
Related Transactions 23
Disclosure of Commission Position
on Indemnification for Securities
Act Liability 23
Description of Securities 23
Plan of Distribution 25
Selling Stockholders 26
Legal Matters 28
Experts 28
Available Information 29
Index to Financial Statements............. F- _____________ , 2000
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other expenses of issuance and distribution
The following statement sets forth the estimated expenses in connection
with the offering described in the Registration Statement, all of which will be
borne by the Registrant.
Securities and Exchange Commission Fee ................ $ 2,003
Accountants' Fees ..................................... $ 11,000
Legal Fees ............................................ $ 25,000
Company's Administrative Expenses ..................... $ 30,000
Printing and engraving .............................. $ 5,000
Miscellaneous ......................................... $ 3,997
Total $ 77,000
=======
Item 14. Indemnification of directors and officers.
Neither our By-Laws nor our Certificate of Incorporation currently
provide indemnification to our officers or directors. In an effort to continue
to attract and retain qualified individuals to serve as our directors and
officers, we intend to adopt provisions providing for the maximum
indemnification permitted by Florida law.
Item 15. Recent sales of unregistered securities
On April 1, 1999, the Company issued 500,000 warrants to BBT
Consulting Group, Inc. as part of its contractual agreement to assist in
obtaining an (NASD) OTC Bulletin Board listing of its common shares. Each
warrant entitles the registered holder thereof to purchase at any time one share
of common stock at a price of $.001.
Between September 30, 1999, and March 13, 2000, the Company, in
accordance with its offering circular to sell no less than 200,000 and up to
1,250,000 units at a price of $1.00 per unit (each unit consisting of one (1)
share of common stock and (1) warrant), sold an aggregate of 69,400 units. Each
warrant entitles the registered holder thereof to purchase at any time from the
date of the offering until the close of business January 31, 2002, one share of
common stock at a price of $1.10. All of the units were sold to non U.S.
residents pursuant to the exemption contained in Regulation S.
<PAGE>
Pursuant to certain executive employment contracts, options to purchase
825,000 shares of common stock were granted to senior executives of the Company
at an exercise price of $.001 per share. The total dollar value of the options
at the date of grant was $825. The fair market value of the company's stock on
the date of grant was determined to be $.001.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation". The Company has determined that it will continue to
account for employee stock-based compensation under Accounting Principles Board
No. 25 and elect the disclosure-only alternative under SFAS No. 123.
Item 16. Exhibits and financial statements schedules.
3.1 Certificate of Incorporation, as amended*
3.2 By-Laws
4.1 Specimen Common Stock Certificate
4.2 Specimen Warrant Certificate
5 Opinion of Heller, Horowitz & Feit P.C.*
10.1 Leases
10.2 Employment Agreement with Benoit Dufresne
10.3 Employment Agreement with Jean Gagnon
10.4 Employment Agreement with Taghi Zaim
10.5 Consulting Agreement with Abdel Jabbar Abouelouafa
10.6 License rights agreement with Marc DuFresne (1978) Inc.
10.7 Consulting Agreement with BBT Consulting Group, Inc.
23.1 Consent of Heller, Horowitz & Feit, P.C. (included in the Opinion
filed as Exhibit 5)
23.2 Consent of Mark Cohen, C.P.A.
27 Financial data schedule
___________________
* To be filed by amendment
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of
the Securities Act;
<PAGE>
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registraion statement; and notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement.
(iii) Include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(iv) Include any additional or changed material information on the plan
of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
II-IV
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form SB-2 and has authorized this registration
statement or amendment to be signed on its behalf by the undersigned, in the
City of Montreal on the ___ day of _________, 2000.
BIOMASSE INTERNATIONAL INC.
By:
---------------------------------------
In accordance with the requirements of the Securities Act, this
registration statement or amendment was signed by the following persons in the
capacities and on the dates stated:
Signature Title Date
---------- ----- ------
By:/s/Benoit Dufresne President and Director October 20, 2000
Benoit Dufresne
By:/s/Jean Gagno Vice President Finance October 20, 2000
Jean Gagnon and Director
II-V
