U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| [X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Fiscal Year Ended November 30, 2015
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________________ to __________________
Commission File Number 000-53274
BioPower Operations Corporation
(Exact name of registrant as specified in its charter)
| Nevada | 27-4460232 | |
| (State or other jurisdiction of | (IRS Employer | |
| incorporation or organization) | Identification No.) |
1000 Corporate Drive, Suite 200, Fort Lauderdale, Florida 33334
(Address of principal executive offices)
Issuer’s telephone number, including area code: +1 954 202 6660
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was Required to submit and post such files). [ ] Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (as defined in Rule 12b-2 of the Exchange Act). Check one:
| Large accelerated filer | [ ] | Non-accelerated filer | [ ] | |
| Accelerated Filer | [ ] | Smaller reporting company | [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
As of February 29, 2016, the last day of the Registrant’s most recently completed first fiscal quarter, the aggregate market value of the shares of the Registrant’s common stock held by non-affiliates (based upon the closing stock price of $.10 per share as per the close on, February 29 was approximately $1,880,998. Shares of the Registrant’s common stock held by each executive officer and director and by each person who owns 10 percent or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates of the Registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of March 11, 2016, there were 50,107,680 shares outstanding and 8,000,000 shares authorized to be issued of the registrant’s common stock, $.0001 par value.
Documents incorporated by reference: None.
BioPower Operations Corporation
Form 10-K
Table of Contents
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FORWARD LOOKING STATEMENTS AND ASSOCIATED RISK
Statements made in this 10-K that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the of the Securities Act of 1933 (the “Act”) and Section 21E of the Securities Exchange Act of 1934. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “intends”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue” or the negative of these terms or other comparable terminology. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
Introductory Comment - Use of Terminology
Throughout this Annual Report on Form 10-K, the terms “we,” “us” and “our” refers to BioPower Operations Corporation and, unless the context indicates otherwise, our subsidiaries in which we hold 100% of such entities’ outstanding equity securities, including BioPower Corporation (“BioPower Corporation”), Green3Power Holdings Company and its subsidiaries (“G3P”), Green Oil Plantations Americas Inc. (“Green Oil”), Green Energy Crops Corporation (“GECC”), Agribopo, Inc., FTZ Exchange LLC and FTZ Energy Corporation, on a consolidated basis. Unless otherwise indicated, all monetary amounts are reflected in United States Dollars.
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Overview
BioPower Operations Corporation (“we,” “our,” “BioPower”, “BIO” or the “Company”) was organized in Nevada on January 5, 2011. The Company and its subsidiaries intend to focus on developing waste to energy projects globally by designing, engineering, permitting, procuring equipment, managing construction and operating and maintaining facilities for the conversion of wastes into energy through licensed gasification technology including but not limited to producing electricity and ultra-low sulfur renewable synthetic fuels. The Company intends to also provide waste remediation services.
We have not yet generated or realized any significant revenues from business operations. Our auditors have issued a going concern opinion. This means there is substantial doubt that we can continue as an on-going business for the next twelve (12) months unless we obtain additional capital to pay our bills. This is because we have only generated minimal revenues from a testing agreement. In 2016, we intend to have revenues from waste remediation projects and consulting engineering. Further, we may have revenues from design, engineering, permitting and procurement of equipment for projects, if our projects that we have been developing receive project finance or payment by owners of the project/s. Accordingly, we must raise cash from sources other than revenues generated such as from the proceeds of loans, sale of common shares, and advances from related parties if none of the operating revenues discussed in this paragraph come to fruition.
About BioPower Operations Corporation
We are organized as a holding company. On October 24, 2014, the Company executed a Share Exchange Agreement with Green3Power Holdings Company (“G3P”) to acquire G3P and its wholly-owned subsidiaries Green3Power Operations Inc., a Delaware corporation (“G3P OPS”) and Green3Power International Company, a Nevis Corporation (“G3PI”), which are wholly-owned subsidiaries of the Company. This transaction was a stock for stock exchange, (See Share exchange Agreement below). We conduct all of our operations through Green3Power Holdings Company and their subsidiaries which are primarily engaged in the development of waste-to-energy projects and services including design, permitting, equipment procurement, construction management and operations and maintenance of the intended facilities. We intend to hold equity interests in the waste-to-energy facilities on a global basis and operate and maintain the facilities. A second business unit is focused on providing waste remediation services globally.
Strategy
Our mission is to provide waste and energy solutions on a global basis. We intend to do this through a variety of service offerings, including partially owning and operating and maintaining facilities for the conversion of waste to energy (known as “Waste-to-Energy” or “WtE”). Waste-to-Energy serves two key markets as both an on-going waste management solution that is environmentally superior to landfilling and as a source of clean energy that reduces overall greenhouse gas emissions.
We will also provide waste remediation services. Remediation waste is defined in 40 Code of Federal Regulations (CFR) 260.10 as “all solid and hazardous wastes, and all media (including groundwater, surface water, soils, and sediments) and debris, that are managed for implementing cleanup.”
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We intend to pursue our mission through the following key strategies:
| ● | Our exclusively licensed gasification technology can convert a variety of wastes into electricity or ultra-low sulfur, renewable synthetic fuel. The technology is modular and built to handle approximately 300 to 400 tons per day of waste per line of equipment. We can only use up to twelve (12) lines of equipment at a facility location because of the constraints of truck traffic per location. Because our licensed gasification is built in a series of lines, we are able to service and maintain the lines and systems while operating the facilities continuously. |
| ● | The Company intends to earn revenues from design, engineering, permitting, operations and maintenance fees and may also earn procurement fees from WtE projects. |
| ● | We have strategically aligned with Vanderweil Engineers to develop WtE facilities in the United States and internationally. Vanderweil has been in business since 1950 and its Power Engineering group is expert at developing, designing, engineering and permitting power generation facilities worldwide. |
| ● | The Company intends to maintain an equity interest of between twenty percent (20%) to one hundred percent (100%) in each of its developed projects. |
| ● | We have partnered and will partner with project development groups globally who have been in different stages of development of WtE projects. |
| ● | We intend to maximize the long-term value of WtE facilities by adding waste and off-take energy contracts, seeking incremental revenue opportunities and deploying new or improved technologies, systems and processes targeted at increasing revenue and reducing costs. |
| ● | We seek to grow primarily through the development of new facilities selected in markets where we believe that the tipping fees and off-take agreements will enable us to secure funding for the projects. We believe that our approach to these opportunities is highly-disciplined, both with regard to our required rates of return, necessary contract elements, regulatory issues and the manner in which potential new projects will be structured and financed. |
| ● | We believe that our efforts to develop our business will be enhanced by the development of additional technologies in such fields as gasification, recycling, alternative waste remediation and treatment processes and emission controls. We intend to use research and development efforts in some of these areas relevant to our WtE and waste remediation businesses. |
| ● | Our intention is to maintain a focus on sustainability- the on-going methodology for improving the environment. We seek to achieve continuous improvement in environmental performance, beyond compliance with legally required standards. |
| ● | We intend to provide waste remediation services on a global basis by working with local contractors. |
Our Waste-to-Energy Business
The WtE facilities we intend to build may earn revenue from the following potential revenue streams:
Prior to the start-up of the facility:
| ● | Design fees |
| ● | Engineering fees |
| ● | Permitting fees |
| ● | Procurement of equipment fees (usually 10% of the cost of equipment) |
| ● | Management of construction fees |
We will always have an Operations and Maintenance Agreement to operate and maintain the facility for a minimum of twenty years, for each facility using our technology, with or without ownership in the facility.
After the start-up of a facility if we are an equity owner in the facility, we will earn:
| ● | Tipping fees from the disposal and processing of each ton of waste – Waste Agreement usually twenty to thirty years; and |
| ● | Sale of electricity – Power Purchase Agreement (PPA) usually twenty to thirty years; or |
| ● | Sale of ultra-low sulfur renewable synthetic fuel (usually one year renewable to fifteen year); |
| ● | Recyclables recovered during the WtE process; |
| ● | Carbon credits, if available; |
| ● | RINS – Renewable Identification Number under the Renewable Fuel Standard Program, good until 2022 and in California to 2033. |
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In order to finance projects through traditional project finance, long-term contracts (off-take agreements) need to be executed for the sale of electricity or fuels in combination with a waste contract. There can be no assurance we will ever fund a facility, bring the development of a WtE facility into operation, partially own a WtE facility or operate and maintain a WtE facility.
Project Development of Waste-to-Energy Facilities
Early stage
Our Company is contacted by municipalities, government agencies and local developers for potential waste-to-energy projects on a global basis. We are either asked to respond to a request for proposal (RFP) or request for quotation (RFQ) from a municipality or the local developer has a potential waste-to-energy project.
We then collect as much of the following information that is available:
| ● | Tipping fees in the area; | |
| ● | Electricity rate (either federal mandate or local utility base load rates; | |
| ● | Renewable energy fuel rate with or without RINS or local government credits; | |
| ● | Waste Composition for the local area; | |
| ● | Total tonnage collected; | |
| ● | Total tonnage available; | |
| ● | Site location with available topo maps and boundary surveys; | |
| ● | Location of nearest substation; | |
| ● | Government will guarantee payments and | |
| ● | Map showing current locations collected from, dumping/landfill sites, and proposed location. |
Once the above information is gathered we prepare a preliminary design, financial models and determine the financial viability of the project. We also look at the credit worthiness of the Government, if outside the U.S., if there is a federal mandate for the purchase of electricity or the credit worthiness of the local utility, if not government owned. If a fuel project, we look at the local fuel rates and if there are credits associated with renewable fuels. We then determine whether or not we will submit a bid based on the financial viability of the project.
Intermediate Stage
Once we respond to an RFP/RFQ the municipality publishes the final bidders list, which generally can be as small a list as two bidders or as many as ten bidders. If we are on the final bidders list, we will meet with the municipality in accordance with our ranking. If we are awarded the bid, we then negotiate with the municipality the waste services agreement, land lease agreement and the Power Purchase Agreement (PPA) or Fuel Off-Take Agreement, if applicable. At times, the Government has mandated the PPA pricing.
We may also negotiate with waste haulers for long term contracts, wherein they will pay us a tipping fee per ton of waste brought to the facility.
Late Stage
During the late stage of project development, we negotiated Waste Agreement, Off-Take Agreement for PPA or the purchase of fuel, and Land Lease Agreement for the site. We make adjustments to our preliminary designs and financial models. We negotiate a Construction contract. We discuss with potential investors and fund managers that we have a project. If they are interested after the initial discussions, we then ask for a commitment letter subject to due diligence. We then provide the essential draft contracts for their review and all due diligence requested in order to finalize the financial commitment. At times, investors/lenders may be part of the final process of contract negotiation to make sure the contracts are compliant with their requirements for funding purposes.
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We have not financed any projects at this time and there can be no assurance we ever will finance a project.
BioPower and its subsidiary Green3Power have been working together to develop and finance projects. Based on this work we have the following projects in various stages of development:
Late Stage Project Under Development
St. Lucie County, Florida
Green3Power Operations, Inc. and Vanderweil Engineers are developing a 1,000 tpd Gasification Diesel Fuel Production Facility in St. Lucie County, Florida. Under the executed waste services agreement, the Gasification Facility would receive approximately 800 tpd of waste including 471.4 tpd of freshly collected municipal solid waste (MSW); approximately 105.0 tpd of construction and demolition debris (C&D Debris), approximately 123.3 tpd of Yard Waste, and approximately 100.3 tons/day of used tires. In addition, 200.0 tpd of C&D Debris from the existing C&D Landfill, or 200.0 tpd of baled MSW from the existing MSW Balefill would be excavated and would be transported to the Gasification Facility, where the waste would be converted into 64,000 gallons per day of ultra-low sulfur renewable synthetic fuels and electricity for the running of the facility. The Gasification Facility includes a Sorting Facility to remove heavy metals and reduce ash content, a Waste Dryer, Gasifier, a Cyclone to remove particulate matter from the synthesis gas, a Slagging Unit, a high efficiency, high temperature and pressure HRSG Boiler, and four-stage Steam Turbine/Generator, a Fischer Tropsch Reactor and Fuel Production System, and highly effective flue gas treatment system.
When in full operation, the projected $228 million budget for the St. Lucie plant including insurance costs will produce approximately 64,000 gal/day of ultra-low sulfur renewable synthetic fuel and 16,000 gal/day of Naptha with projected revenues of more than $83 million annually, varying with the price of fuel. The anticipated internal rate of return on the project investment is approximately twenty percent 20% with an EBIDTA of approximately $56.0 million in Year 1. The plant will create approximately 221 new jobs in the St. Lucie area. The power plant will feature an effective flue gas clean up train to ensure that regulated emissions are far below the concentrations allowed under Federal air quality standards. The upflow fluidized bed gasifiers to be used at the new facility have been in waste to energy service for more than 33 years. The project management team consists of the following team members:
● Green3Power Operations, who manages the project, and is responsible for the design, engineering, permitting, construction management, and operation and maintenance of the St. Lucie County Renewable Energy Facility; and
● Vanderweil Engineers, who is also responsible for the design, construction and permitting of the St. Lucie County Renewable Energy Facility.
Waste will be transported to the Sorting Facility, where the waste will be sorted to remove metals, glass, e-waste, and unacceptable waste, and then processed through a shredder to reduce the particle size. The waste will then be fed into the dryers, to reduce the water content, and then fed into the Gasifiers. The Gasifiers convert the waste into a synthesis gas and ash at a temperature of 1,000 to 1,400 deg. C. The diesel fuel production system utilizes an advanced Fischer Tropsch reactor to produce ultra-low sulfur renewable synthetic No. 2 diesel fuel. The flue gas is processed through a Cyclone to remove particulate matter, an Acid Gas Removal Unit and Ammonia Scrubber to remove HCl, H2S, and HNO3, an Electrostatic Precipitator to remove sub 2.5 micron particulate matter, a Bag House with carbon injection to remove particulate matter, heavy metals, and organics, and is then discharged out the stack at a temperature of 200 deg C, which prevents condensation.
The Green3Power Operations Renewable Energy Gasification System extracts water from the waste, and combines that water with leachate from the collection vehicles, Sorting Facility, and Inert MSW Landfill, and wastewater from the onsite sanitary facilities and cleaning water, and that water is treated in an onsite leachate/water treatment facility to boiler feed water standards. This treated water is then used as the makeup water in the system to provide the process and cooling water for the facility. Therefore, 100 percent of the water used by the facility is recycled.
On the Power Production Line the Synthesis gas is passed through an HRSG Boiler to produce high temperature and pressure steam. The steam is fed to a high efficiency steam turbine to generate clean, green, renewable electric energy. The flue gas is processed through a Cyclone to remove particulate matter, an Acid Gas Removal Unit to remove HCl, H2S, and HNO3, an Electrostatic Precipitator to remove sub 2.5 micron particulate matter, a Bag House with carbon injection to remove particulate matter, heavy metals, and organics, and is then discharged out the stack at a temperature of 140 to 200 deg C, which prevents condensation. The Power Production Line produces parasitic loading for the electricity needed for the facility of clean, green, electrical power 24 hours per day, 365 days per year.
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As a result, the Green3Power Operations Renewable Energy Gasification System does not take water from the city water supply, and does not discharge any wastewater to the sanitary system. All water is collected on site, treated onsite, and is recycled and used as process and cooling water. In addition, emissions from the facility are 100 times lower than EU and USEPA standards for Heavy Metals, Particulate Matter, NOx, SOx, and other key industrial pollutants, and the ash is processed through a slagging unit to remove the carbon, melted to form slag, and then crushed and sold as a sand replacement for concrete block production. The Gasification Facility recycles 100 percent of the water that it uses, has emission more than 100 times below air quality standards, and does not put by-product ash into a landfill. As a result, the Renewable Energy Gasification Facility is considered to be a “Green” technology for water, air, and solids.
The projected cost of the project is $228,000,000. The breakdown of the use of the investment funds may be summarized as follows:
| Description | Totals | |||
| Design of Facilities | $ | 6,100,000 | ||
| Project Management | $ | 2,642,890 | ||
| Permitting - Legal | $ | 500,000 | ||
| Corporate Expenses | $ | 1,787,391 | ||
| Working Capital | $ | 85,712 | ||
| Project Development | $ | 1,426,675 | ||
| License Fee | $ | 2,853,351 | ||
| Loan Fee | $ | 11,400,000 | ||
| Purchase of Equipment | $ | 111,087,867 | ||
| Installation of Equipment | $ | 12,069,657 | ||
| Construction of Facilities | $ | 31,526,195 | ||
| General Insurances | $ | 2,853,351 | ||
| Product Quantity/Quality Insurance | $ | 38,566,910 | ||
| Construction Management | $ | 5,100,000 | ||
| Lease Payments | $ | 1 | ||
| Total | $ | 228,000,000 | ||
There can be no assurance St. Lucie County, Florida will ever be financed and brought into operation. There can be no assurance we will ever bring the development of a WtE facility into operation, partially own a WtE facility, or operate and maintain a WtE facility.
Environmental Benefits of Waste-to-Energy
We believe that WtE offers solutions to public sector leaders around the world for addressing two key issues: (1) on-going management of waste, and (2) renewable energy generation. We believe that the environmental benefits of WtE, as an alternative to landfilling, are clear and compelling: by processing municipal solid waste in our intended WtE facilities, where we can reduce greenhouse gas (“GHG”) emissions (as the methane emitted by landfills is over 23 times more potent than carbon dioxide (“CO2”) over a 100 year period), lower the risk of ground-water contamination, and conserve land. At the same time, WtE generates clean, reliable energy from a renewable fuel source, thus reducing dependence on fossil fuels, the combustion of which is itself a major contributor of GHG emissions. The United States Environmental Protection Agency (“EPA”), using lifecycle tools such as its own Municipal Solid Waste Decision Support Tool, has found that, on average, approximately one ton of CO2-equivalent is reduced relative to landfilling for every ton of waste processed. Compared with fossil based generation, each ton of waste processed eliminates the need to consume approximately one barrel of oil or one-quarter ton of coal, in order to generate the equivalent amount of electricity. As public planners address their needs for more environmentally sustainable waste management and energy generation in the years ahead, we believe that WtE will be an increasingly attractive alternative.
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Waste Remediation
G3P management has significant experience in waste remediation projects. Remediation waste is defined as all solid and hazardous wastes, and all media (including groundwater, surface water, soils, and sediments) and debris, that are managed for implementing cleanup and regulatory compliance. Waste remediation includes the removal of toxins from landfills, superfund sites and water remediation. G3P intends to provide services for waste remediation on a global basis. There can be no assurance any waste remediation project will successfully be developed or financed.
Environmental and Humanitarian Benefits of Waste Remediation
The importance of waste remediation goes far beyond economic reasons include providing basic humanitarian services including clean drinking water and a healthy environment to hundreds of millions of people who suffer from cholera, cancers and other diseases created by unsound environmental conditions. The management team has the experience and knowledge to provide waste remediation services which can solve these environmental problems while earning significant service fees from providing these remediation services.
Present Operations
Waste-to-Energy Projects
We are currently in different stages of development of WtE projects in the United States with Vanderweil Engineers (primarily in Florida, New York, Arizona, California, and Hawaii); and in joint venture with local developers for the development of WtE projects outside the United States in Europe, the Middle East and UAE, the Philippines, Indonesia, Korea, South Viet Nam, Pakistan and various African countries. At present, we have in excess of five billion ($5,000,000,000) of total projected cost of projects in early stage development all over the world. There can be no assurance we will ever fund a WtE facility, bring a WtE facility into operation, partially own a WtE facility or operate and maintain a WtE facility.
We intend to generate revenues from our WtE projects in the following ways: prior to commencing facility operations we intend to earn fees from developing, designing and permitting the WtE facility, equipment procurement, and construction management of the facility. After the facility is in operation, if we own an interest in a facility, our revenues will be derived from the following main sources: (1) fees charged for waste received (tipping fees); (2) the sale of electricity and/or steam, and/or the sale of ultra-low sulfur renewable synthetic fuels, and (3) from the sale of ferrous and non-ferrous metals and other recyclables that are recovered from the waste stream as part of the WtE process. If a facility is in operation we will earn operations and maintenance fees for each facility through a long-term contract to operate and maintain the facility. Our intended facilities may sell energy primarily to utilities or government owned municipalities at negotiated contracted rates on a long term contract called a power purchase agreement (PPA).
WtE Project Contracts
Most of our WtE projects under development have been or will be developed and structured contractually as part of a competitive procurement process conducted by municipal and government entities. Although each contractual agreement has similarities, each contract is different, reflecting the specific needs and concerns of the community, applicable regulatory requirements and/or other factors including site and waste streams.
Our WtE project contracts may include waste agreements known as “Tipping Fee” contracts. Tipping Fee contracts are based on a per-ton fee we receive for receiving and processing each ton of waste. Each project intends to retain all of the revenue generated from the production of energy and recyclable sales in each special purpose vehicle (“SPV”) that is formed for each facility.
Our WtE project contracts will include off-take agreements either for the sale of electricity known as a (“PPA”) contract or the sale of the ultra-low sulfur renewable synthetic fuel. Power Purchase Agreements are usually with utility companies, municipalities, government agencies or end users and may contract for the purchase of electricity at a fairly constant rate for usually 15 – 30 years with extensions and usually subject to consumer price index changes. Our ultra-low sulfur renewable synthetic fuel is a commodity and can be sold into the wholesale and retail markets or to government agencies and is subject to fluctuations in the prices of the market which may vary significantly from country to country. Contracts are shorter in term and subject to market fluctuations.
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International Projects
The ownership and operation of facilities in foreign countries entails significant political and financial uncertainties, typically not encountered in the United States. Key international risks include currency exchange rates, currency repatriation restrictions, currency convertibility, government-sponsored efforts to renegotiate long-term contracts, non-payment of tipping fees, unexpected changes in electricity tariffs, changes in the markets for fuel, changes in laws and regulations and political, economic or military instability. Such risks have the potential to cause material impairment to the potential international projects.
Many of the countries in which the Company seeks projects are lesser developed countries than the United States or developing countries. The political, social and economic conditions in some of these countries are typically less stable than in the United States. The financial condition and creditworthiness of the potential purchasers of power may be a government or private utility or for the purchasers of fuel for projects in foreign countries may not be as strong as those of similar entities in the United States. At the time the Company develops a project, the investors/lenders undertake a credit analysis of the obligations of the purchasers under the off-take agreement for electricity or fuel and the waste agreement. The investors/lenders will look at the credit rating of the country and see if there are available government guarantees including letters of credit and other financial instruments to provide the necessary guarantees for the obligations under the waste and off-take agreements for the funding of the project.
The Company will typically seek to negotiate long-term contracts for the tipping fees from the delivery of a guaranteed waste stream and for the off-take agreement for the sale of electricity or fuels. The Company will also seek payment for the agreements that the Company enters into in U.S. Dollars. Often these agreements will be made in whole or part in the domestic currencies of the host countries. Conversion of such currencies into U.S. dollars generally is not assured by a government or other creditworthy country agency and may be subject to limitations in the currency markets, as well as restrictions of the host country. In addition, fluctuations in the value of such currencies against the value of the U.S. dollar may cause the Company’s participation in such projects to yield less return than expected. Transfer of earnings and profits in any form beyond the borders of the host country may be subject to special taxes or limitations imposed by host country laws. The Company has sought to participate in projects in jurisdictions where limitations on the convertibility and expatriation of currency have been lifted by the host country and where such local currency is freely exchangeable on the international markets. In most cases, components of project costs incurred or funded in the currency of the United States are recovered without risk of currency fluctuation through negotiated contractual adjustments to the price charged for electricity or fuels. This contractual structure may cause the cost in local currency to rise from time to time in excess of local inflation, and consequently there is risk in such situations.
The Company has sought to manage and mitigate these potential risks through all means that it deems appropriate, including: the use of investors/lender’s political and financial analysis of the host countries and the key participants in each project; guarantees of relevant agreements with creditworthy entities; political risk and other forms of insurance; participation by United States and/or international development finance institutions in the financing of projects in which the Company participates; and joint ventures with other companies to pursue the development, financing and construction of these projects. The Investors/Lenders determine which mitigation measures to apply based on its balancing of the risk presented, the availability of such measures and their cost.
Financing and Ownership of WtE Facilities
Financing
We have over the past year met with various investors and lenders who finance these types of waste to energy projects. In order to finance a waste to energy project there are many agreements that need to be contracted and in place before a final financial commitment. These include:
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| ● | Waste Agreement which provides the feedstock to convert into environmentally clean renewable energy- electricity or ultra-low Sulfur renewable synthetic fuel. | |
| ● | PPA – Power Purchase Agreement for the purchase of the electricity that we can produce at each facility; or | |
| ● | Fuel Off-take Agreement – for the purchase of the fuel we can produce at each facility | |
| ● | Construction Contract – Construction contractor who provides a performance bond and all other necessary guarantees to construct the facility on the specifications and time schedule provided | |
| ● | Insurance – for the quantity and quality of the production of electricity or fuel, political risk, and general liability | |
| ● | Land Lease – for the facility and the land necessary for a Project | |
| ● | Permitting – solid waste permits, air quality permits and normal construction, zoning and all local necessary permits. |
There can be no assurance that any project under development will ever successfully be financed.
Ownership
We intend to partially own each WtE facility. G3P intends to create a special purpose entity (“SPE”) company for each waste to energy project. Every SPE must have a sustainable project including facilities to process the waste into saleable products such as electricity or ultra-low sulfur renewable synthetic fuels. Each project will have joint venture partners that may provide various necessary elements for a project to obtain finance including: business development from a local partner, waste services, technology and/or the sale of end products produced. The Company intends to offer ownership in our initial SPEs to local co-development partners and investors. Each project must have a waste agreement coupled with an off-take agreement. These agreements may enable the SPE to obtain financing based upon the potential profitability of each project and risk mitigation. The role G3P intends to fulfill in each SPE is executive and general management, procurement of funding and development of markets for the sale of end products.
There can be no assurance any project will successfully be developed or financed.
Corporate History
On January 6, 2011, we acquired 100% of BioPower Corporation (“BC”), a Florida corporation incorporated on September 13, 2010, by our CEO and Director contributing 100% of the outstanding shares to the Company. As a result, BC became a wholly-owned subsidiary of the Company.
On April 5, 2012, the Company received notice from The Depository Trust Company “DTC” of the eligibility effective immediately of its common shares for electronic trading under the OTCQB trading symbol “BOPO.”
On May 12, 2012 the Company formed FTZ Energy Exchange Inc., a 100% wholly-owned subsidiary for the future development of an energy exchange.
On June 7, 2012, the Company’s Chief Executive Officer contributed 100% of his member interest in FTZ Exchange, LLC, (“FTZ”) a 100% wholly owned subsidiary, to the Company for no consideration. FTZ is a licensing company that licenses business know-how and technology to build transaction fee based exchanges for the sale of products and services in vertical markets.
On August 2, 2012, the Company formed Agribopo, Inc., a 100% wholly-owned subsidiary for the development of biomass related projects.
On November 27, 2012 the Company entered into a non-exclusive global license with Advanced Green Technologies, LLC. to convert biomass wastes from animals, humans and cellulosic biomass to Cellulosic ethanol, fertilizer and other derivative products. The Board of Directors agreed to sell this subsidiary pursuant to the October 24, 2014 transaction described below.
As of November 30, 2012, we considered the Green Oils license worthless as the Licensor cannot provide the due diligence necessary for funding projects through traditional project finance. The Company intends to put a stop on the transfer of any common stock paid for this license.
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On July 2, 2013, the Company entered into agreements for the first stage of a project to develop a castor plantation and milling operation in the Republic of Paraguay with offshore entities for the testing and development of the project subject to material adverse events - the TSA Project. As of April 1, 2014, we received notification of termination of the TSA project due to material and adverse events related to the necessity for building roads due to extreme flooding conditions and issues associated with clearing of the land.
On November 13, 2013 we entered into a joint venture agreement and formed MicrobeSynergy, LLC, a 50-50 joint venture for the exclusive distribution of a cellulosic advanced biofuels technology. We have to meet certain Milestones to maintain exclusivity; otherwise we would have a non-exclusive license. The Company believes that we met Milestone I but we have received notification from our joint venture partner that we did not meet Milestone 1. The Board of Directors agreed to sell this subsidiary pursuant to the October 24, 2014 transaction described below.
On October 24, 2014, BioPower Operations Corporation (the “Company” or “BOPO”) executed a Share Exchange Agreement (“SEA”) with Green3Power Holdings Company (“G3P”) to acquire G3P and its wholly-owned subsidiaries Green3Power Operations Inc., a Delaware corporation (“G3P OPS”) and Green3Power International Company, a Nevis Corporation (“G3PI”). Pursuant to the terms thereof, G3P shareholders exchanged their G3P stock for 20% of the outstanding common stock of BioPower after issuance and future consideration based on performance. Following the Closing, G3P, G3P OPS and G3PI became wholly-owned subsidiaries of the Company. G3P is a development stage company that develops waste-to-energy projects using exclusively licensed gasification technology, which can convert wastes to energy including electricity and synthetic fuels. G3P designs, procures equipment, manages the construction, intends to partially own and operate and maintain Gasification Waste-to-Energy power plants, using their unique thermal exclusively licensed gasification technology, an upgrade to present gasification technology in use around the world for the last 30 years. G3P has many projects under development but there can be no assurance that their first gasification facility will ever be built. G3P also provides waste remediation services.
BioPower and G3P Strategic Alliance
BioPower and G3P entered into a strategic alliance to split the ownership of each project when BioPower develops the project or provides financing for the project. This strategic alliance will end in two years from October 24, 2014 unless extended for one year under the terms of the SEA Agreement. The sole purpose of splitting the ownership is to define each company’s revenues under the SEA Agreement. (See SEA Agreement). BioPower’s management has pursued business development activities for both potential waste-to-energy projects as well as waste remediation projects. There can be no assurance such business development will ever lead to a successful project.
MARKETS, COMPETITION AND BUSINESS CONDITIONS
General Business Conditions
The Company’s business can be adversely affected by general economic conditions, inflation, competitive conditions, government restrictions and controls, changes in law, force majeure events including natural disasters, weather, the adverse financial condition of customers and suppliers, various technological changes and other factors over which the Company has no control including lack of investors or lenders to fund the projects.
The Company expects in the foreseeable future that competition for new projects will be intense in all domestic and International markets in which the Company intends to conduct its business, and its business will be subject to a variety of competitive and market influences.
Our waste-to-energy business. The Company competes both domestically and internationally for waste-to-energy projects, which are highly competitive. There are many companies which are financially capable of funding their own projects. We do not have the ability to fund a project and must seek funding for our potential projects from investors and lenders. These projects must have agreements with entities that are credit worthy or can provide credit worthy enhancements including letters of credit or sovereign guarantees. Sovereign guarantees may need to be credit enhanced to bring them up to credit worthy standards. We target projects that seek green renewable energy with waste solutions to protect their environment and that have tipping fees and an off-take agreement for electricity or fuels. These revenues and associated costs must produce a project with financial criteria to enable financing. Normally, these are projects that both domestic and foreign municipalities and governments request a bid.
Once a contract is awarded or a project is financed and constructed, the Company’s business can be impacted by a variety of risk factors which can affect profitability over the life of a project. Some of these risks are at least partially within the Company’s control, such as successful operation in compliance with law and the presence or absence of labor difficulties or disturbances. Other risk factors, described above, are largely out of the Company’s control and may have an adverse impact on a project over a long-term operation. (See Risk Factors)
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Technology, Research and Development
Globally, we have the Exclusive License right to market the proprietary W-t-E conversion technology using gasification. We believe that our know-how and management’s experience and reputation in the field of waste and WtE coupled with our know-how in designing, engineering and permitting enables us to compete for WtE projects.
We believe that our exclusively licensed technology offers an environmentally superior solution to post-recycled waste management and energy challenges faced by leaders around the world, and that our efforts to expand our business will be enhanced by the development of additional technologies in such fields as emission controls, residue disposal and alternative waste treatment processes. Our management team has developed new and cost-effective technologies that control NOx and SOx emissions. We intend to maintain a focus on research and development of technologies in these and other areas that we believe will enhance our competitive position, and offer new technical solutions to waste and energy problems that augment and complement our business.
A number of other companies are similarly engaged in new technology development focused on extracting energy from waste materials through a variety of technical approaches, including: gasification, pyrolysis or other combustion designs; converting waste to fuels; or processing waste to enable co-firing in larger power plants or industrial boilers. Firms engaged in these activities generally are more capitalized, and some engage in joint ventures with larger and well-capitalized companies. To date, we believe such efforts have not produced technologies that offer economically viable alternatives on a large scale.
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REGULATION OF BUSINESS
Regulations Affecting Our Business
Environmental Regulations — General
Our business activities in the United States are extensively regulated pursuant to federal, state and local environmental laws. Federal laws, such as the Resource Conservation and Recovery Act (RCRA), Clean Air Act, and Clean Water Act, and their state counterparts, govern discharges of pollutants to air and water. Other federal, state and local laws comprehensively govern the generation, transportation, storage, treatment and disposal of solid and hazardous waste and also regulate the storage and handling of chemicals and petroleum products (such laws and regulations are referred to collectively as the “Environmental Regulatory Laws”).
Other federal, state and local laws, such as the Comprehensive Environmental Response Compensation and Liability Act, commonly known as “CERCLA” and collectively referred to with such other laws as the “Environmental Remediation Laws,” make us potentially liable on a joint and several basis for any onsite or offsite environmental contamination which may be associated with our activities and the activities at our intended sites. These include landfills we may own, operated or lease, or at which there has been disposal of residue or other waste generated, handled or processed by our facilities in the future. Some state and local laws also impose liabilities for injury to persons or property caused by site contamination. Some service agreements provide us with indemnification from certain liabilities.
The Environmental Remediation Laws prohibit disposal of regulated hazardous waste at municipal solid waste facilities. The service agreements recognize the potential for inadvertent and improper deliveries of hazardous waste and specify procedures for dealing with hazardous waste that is delivered to a facility. Under some service agreements, we may be responsible for some costs related to hazardous waste deliveries. We have not incurred material hazardous waste disposal costs to date.
The Environmental Regulatory Laws require that many permits be obtained before the commencement of construction and operation of any waste or renewable energy project, and further require that permits be maintained throughout the operating life of the facility. We can provide no assurance that all required permits will be issued or re-issued, and the process of obtaining such permits can often cause lengthy delays, including delays caused by third-party appeals challenging permit issuance. Our failure to meet conditions of these permits or of the Environmental Regulatory Laws can subject us to regulatory enforcement actions by the appropriate governmental authority, which could include fines, penalties, damages or other sanctions, such as orders requiring certain remedial actions or limiting or prohibiting operation. See Item 1A. Risk Factors — Compliance with environmental laws, including changes to such laws, could adversely affect our results of operations. To date, we have not incurred any penalties, been required to incur capital costs or additional expenses, or been subjected to restrictions on our operations as a result of violations of Environmental Regulatory Laws or permit requirements.
Our intended operations may be subject to proceedings and orders pertaining to emissions into the environment and other environmental violations, which may result in fines, penalties, damages or other sanctions, we believe that we will be in compliance with existing Environmental Regulatory Laws. We may be identified, along with other entities, as being among parties potentially responsible for contribution to costs associated with the correction and remediation of environmental conditions at disposal sites subject to CERCLA and/or analogous state Environmental Remediation Laws. Our ultimate liability in connection with such environmental claims will depend on many factors, including our volumetric share of waste, the total cost of remediation, and the financial viability of other companies that have also sent waste to a given site and, in the case of divested operations, our contractual arrangement with the purchaser of such operations.
The Environmental Regulatory Laws may change. New technology may be required or stricter standards may be established for the control of discharges of air or water pollutants, for storage and handling of petroleum products or chemicals, or for solid or hazardous waste or ash handling and disposal. Thus, as new technology is developed and proven, we may be required to incorporate it into new facilities. This new technology may be more expensive than the technology we currently intend to use.
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Environmental Regulations — Recent Developments
Maximum Achievable Control Technology Rules (“MACT Rules”) — EPA is authorized under the Clean Air Act to issue rules periodically which tighten air emission requirements to achievable standards, as determined under a specified regulatory framework. EPA is required to establish these MACT rules for a variety of industries, including new and existing industrial boilers and municipal waste combustion (“MWC”) units. Our intended facilities intend to comply with all applicable MACT Rules currently in effect.
Energy Regulations
Our businesses are subject to the provisions of federal, state and local energy laws applicable to the development, ownership and operation of facilities located in the United States. The Federal Energy Regulatory Commission (“FERC”), among other things, regulates the transmission and the wholesale sale of electricity in interstate commerce under the authority of the Federal Power Act (“FPA”). In addition, under existing regulations, FERC determines whether an entity owning a generation facility is an Exempt Wholesale Generator (“EWG”), as defined in the Public Utility Holding Company Act of 2005 (“PUHCA 2005”). FERC also determines whether a generation facility meets the ownership and technical criteria of a Qualifying Facility (cogeneration facilities and other facilities making use of non-fossil fuel power sources such as waste, which meet certain size and other applicable requirements, referred to as “QF”), under the Public Utility Regulatory Policies Act of 1978 (“PURPA”). Our intended United States generating facilities intend to qualify as a QF or otherwise exempt, or the subsidiary owning the facility intends to be determined to be an EWG.
Federal Power Act — The FPA gives FERC exclusive rate-making jurisdiction over the wholesale sale of electricity and transmission of electricity in interstate commerce. Under the FPA, FERC, with certain exceptions, regulates the owners of facilities used for the wholesale sale of electricity or transmission of electricity in interstate commerce as public utilities. The FPA also gives FERC jurisdiction to review certain transactions and numerous other activities of public utilities. QFs intend to be exempt from FERC’s rate regulation under Sections 205 and 206 of the FPA because (i) the QF is 20 MW or smaller or (ii) its sales are made pursuant to a state regulatory authority’s implementation of PURPA. QFs that do not meet the exemptions would be required to obtain market-based rate authority from FERC or otherwise make sales pursuant to rates on file with FERC.
Under Section 205 of the FPA, public utilities are required to obtain FERC’s acceptance of their rate schedules for the wholesale sale of electricity. With respect to generating companies with market-based rate authorization, FERC has the right to suspend, revoke or revise that authority and require our sales of energy to be made on a cost-of-service basis if FERC subsequently determines that we can exercise market power, create barriers to entry, or engage in abusive affiliate transactions. In addition, amongst other requirements, market-based rate sellers are subject to certain market behavior and market manipulation rules and, if any of our subsidiaries were deemed to have violated any one of those rules, such subsidiary could be subject to potential disgorgement of profits associated with the violation and/or suspension or revocation of market-based rate authority, as well as criminal and civil penalties. If the market-based rate authority for one (or more) of our subsidiaries was revoked or it was not able to obtain market-based rate authority when necessary, and it was required to sell energy on a cost-of-service basis, it could become subject to the full accounting, record keeping and reporting requirements of FERC. Even where FERC has granted market-based rate authority, FERC may impose various market mitigation measures, including price caps, bidding rules and operating restrictions where it determines that potential market power might exist and that the public interest requires such potential market power to be mitigated. A loss of, or an inability to obtain, market-based rate authority could have a material adverse impact on our business. We can offer no assurance that FERC will not revisit its policies at some future time with the effect of limiting market-based rate authority, regulatory waivers, and blanket authorizations.
In compliance with Section 215 of the Energy Policy Act of 2005 (“EPAct 2005”), FERC has approved the North American Electric Reliability Corporation, or “NERC,” as the National Energy Reliability Organization, or “ERO”. As the ERO, NERC is responsible for the development and enforcement of mandatory reliability standards for the wholesale electric power system. Certain of our subsidiaries may become responsible for complying with the standards in the regions in which we may operate. NERC also has the ability to assess financial penalties for non-compliance. In addition to complying with NERC requirements, certain of our subsidiaries may have to comply with the requirements of the regional reliability council for the region in which that entity is located. Compliance with these reliability standards may require significant additional costs, and noncompliance could subject us to regulatory enforcement actions, fines, and increased compliance costs.
Public Utility Holding Company Act of 2005 — PUHCA 2005 provides FERC with certain authority over and access to books and records of public utility holding companies not otherwise exempt by virtue of their ownership of EWGs, QFs, and Foreign Utility Companies, as defined in PUHCA 2005. We may be deemed a public utility holding company, but if all or most of our generating facilities have QF status, are otherwise exempt, or are owned through EWGs, we are exempt from the accounting, record retention, and reporting requirements of PUHCA 2005.
EPAct 2005 eliminated the limitation on utility ownership of QFs. Over time, this may result in greater utility ownership of QFs and serve to increase competition with our businesses. EPAct 2005 also extended or established certain renewable energy incentives and tax credits which might be helpful to expand our businesses or for new development.
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Public Utility Regulatory Policies Act — PURPA was passed in 1978 in large part to promote increased energy efficiency and development of independent power producers. PURPA created QFs to further both goals, and FERC is primarily charged with administering PURPA as it applies to QFs. FERC has promulgated regulations that exempt QFs from compliance with certain provisions of the FPA, PUHCA 2005, and certain state laws regulating the rates charged by, or the financial and organizational activities of, electric utilities. The exemptions afforded by PURPA to QFs from regulation under the FPA and most aspects of state electric utility regulation are of great importance to us and our competitors in the WtE and independent power industries.
PURPA also initially included a requirement that utilities must buy and sell power to QFs. Among other things, EPAct 2005 eliminated the obligation imposed on utilities to purchase power from QFs at an avoided cost rate where the QF has non-discriminatory access to wholesale energy markets having certain characteristics, including nondiscriminatory transmission and interconnection services. In addition, FERC has established a regulatory presumption that QFs with a capacity greater than 20 MW have non-discriminatory access to wholesale energy markets in most geographic regions in which we operate. As a result, many of our development projects must rely on competitive energy markets rather than PURPA’s historic avoided cost rates in establishing and maintaining their viability. Existing contracts entered into under PURPA are not impacted, but as these contracts expire, a significant and increasing portion of our electricity output will be sold at rates determined through our participation in competitive energy markets.
Recent Policy Debate Regarding Climate Change and Renewable Energy
The public and political debate over GHG emissions (principally CO2 and methane) and their contribution to climate change continues both internationally and domestically. Any resulting regulations could in the future affect our business. WtE is internationally recognized as creating net reductions in GHG emissions and is otherwise environmentally beneficial, because it:
| ● | avoids CO2 emissions from fossil fuel power plants; |
| ● | avoids methane emissions from landfills; and |
| ● | avoids GHG emissions from mining and processing metal because it recovers and recycles scrap metals from waste. |
In addition, WtE facilities are a domestic source of energy, preserve land, and are typically located close to the source of the waste and thus typically reduce fossil fuel consumption and air emissions associated with long-haul transportation of waste to landfills.
For policy makers at the local level who make decisions on sustainable waste management alternatives, we believe that using WtE instead of landfilling will result in significantly lower net GHG emissions, while also introducing more control over the cost of waste management and supply of local electrical power. We are actively engaged in encouraging policy makers at state and federal levels to enact legislation that supports WtE as a superior choice for communities to avoid both the environmental harm caused by landfilling waste, and reduce local reliance on fossil fuels as a source of energy.
Many of these same policy considerations apply equally to other renewable technologies, especially with respect to our intended business. The extent to which such potential legislation and policy initiatives will affect our business will depend in part on whether WtE and our other renewable technologies are included within the range of clean technologies that could benefit from such legislation.
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In the absence of new legislative efforts, EPA is continuing to move forward with its regulation of GHGs under the Clean Air Act (“CAA”). In 2011, GHG emissions became subject to the Prevention of Significant Deterioration (“PSD”) and Title V programs of the CAA. While the inclusion of GHGs under the Title V program does not introduce new requirements for existing facilities other than additional reporting requirements, the inclusion of GHGs under PSD will impact new facilities. In 2013, EPA re-proposed GHG performance standards for new power plants. The newly proposed rule does not apply to biomass or MWC units and the rule has not been finalized. EPA is also on a timeline to propose rules for existing power plants in 2014. We cannot predict at this time the potential impact to our business of EPA’s regulatory initiatives under the CAA, or whether EPA’s regulation will be impacted or superseded by any future climate change legislation. We continue to closely follow developments in this area.
While the political discussion in Congress, as well as at the state and regional levels, has not been aimed specifically at waste or WtE businesses, regulatory initiatives developed to date have been broad in scope and designed generally to promote renewable energy, develop a certified GHG inventory, and ultimately reduce GHG emissions.
Other Regulations
Many countries have expansive systems for the regulation of its energy business. These generally include provisions relating to ownership, licensing, rate setting and financing of generation and transmission facilities.
We provide waste and energy services through environmentally-protective project designs, regardless of the location of a particular project. Compliance with environmental standards comparable to those of the United States are often conditions to credit agreements by multilateral banking agencies, as well as other lenders or credit providers. The laws of various countries include pervasive regulation of emissions into the environment and provide governmental entities with the authority to impose sanctions for violations, although these requirements are generally different from those applicable in the United States. See Item 1A. Risk Factors — Exposure to international economic and political factors may materially and adversely affect our international businesses and — Compliance with environmental laws, including changes to such laws, could adversely affect our results of operations.
International Climate Change Policies
Certain international markets in which we are proposing WtE projects have recently adopted regulatory or policy frameworks that encourage WtE projects as important components of GHG emission reduction strategies, as well as waste management planning and practice.
The European Union
The European Union has adopted regulations that require member states to reduce the utilization of and reliance upon landfill disposal. The legislation emanating from the European Union is primarily in the form of “Directives,” which are binding on the member states but must be transposed through national enabling legislation to implement their practical requirements, a process which can result in significant variance between the legislative schemes introduced by member states. Certain Directives notably affect the regulation of WtE facilities across the European Union. These include (1) Directive 96/61/EC concerning integrated pollution prevention and control (known as the “IPPC Directive”) which governs emissions to air, land and water from certain large industrial installations (amended several times and is now consolidated in Directive 2008/1/EC), (2) Directive 1999/31/EC concerning the landfill of waste (known as the “Landfill Directive”) which imposes operational and technical controls on landfills and restricts, on a reducing scale, the amount of biodegradable municipal waste which member states may dispose of to landfill, (3) Directive 2008/98/EC on waste (known as the revised “Waste Framework Directive”) which enshrines the waste hierarchy to divert waste from landfill and underpins a preference for efficient energy-from-waste for the recovery of value from residual wastes, and (4) Directive 2000/76/EC concerning the incineration of waste (known as the “Waste Incineration Directive” or “WID”), which imposes limits on emissions to air or water from the incineration and co-incineration of waste. Effective January 2014, the IPPC Directive and the WID will be merged, consolidated and replaced by Directive 2010/EU (the “Industrial Emissions Directive”).
Employee Health and Welfare
We are subject to numerous regulations enacted to protect and promote worker health and welfare through the implementation and enforcement of standards designed to prevent illness, injury and death in the workplace. The primary law relating to employee health and welfare applicable to our business in the United States is the Occupational Safety and Health Act of 1970 (“OSHA”), which establishes certain employer responsibilities including maintenance of a workplace free of recognized hazards likely to cause illness, death or serious injury, compliance with standards promulgated by OSHA, and assorted reporting and record keeping obligations, as well as disclosure and procedural requirements. Various OSHA standards apply to certain aspects of our intended operations.
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Employee health and welfare laws governing our business in foreign jurisdictions include the Workplace Health and Safety Directive and the Directive concerning ionizing radiation in the European Union, and various provisions of the Canada Labour Code and related regulations in Canada.
EMPLOYEES
As of November 30, 2015, we had seven employees; our Chairman and Chief Executive Officer, a Director of Business Development & Strategy, and an accountant are part of BioPower. G3P has four full-time employees consisting of engineers, waste management professionals and a strategic manager. We also use various consultants, strategic alliance partners, joint venture partners and advisors. We also have project development partners who have employees throughout the world. We intend to hire additional employees for project development and to manage and staff our operations as we raise capital and complete specific milestones that would require these employees. A special purpose entity is formed for each project and will hire their own employees and staff for facility operations. We presently rely on present management, partners, consultants and advisors to direct our business.
Patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts, including duration.
G3P has an exclusive global license agreement to deploy the licensed gasification technology. We have to pay up to $10,000,000 for these rights through the payment of a license fee earned from revenues in each project. We also pay our Licensor royalties on revenues produced from utilizing the technology in projects. This license fee reduces the $10,000,000 until paid. Once the full payment is made, G3P will own all rights to the technology with no further royalties due to the Licensor. The Company will continue to charge license fees and royalties for each project built, if the Company owns less than 100% of the project.
Estimate of the amount spent during each of the last two fiscal years on research and development activities, and if applicable, the extent to which the cost of such activities is borne directly by customers
We have not undertaken any substantive R&D activities, nor do we intend to have substantial R&D activities. Our intention is to have third parties who license the products provide R&D services necessary for use in their commercial application. We have licensed technologies which require testing procedures for the validation for commercialization of the products. During these testing procedures, we may discover improvements or breakthroughs that can lead to further advances of the existing technology. We will always strive to improve our licensed products as we utilize them for various commercial applications.
Costs and effects of compliance with environmental laws (foreign, federal, state and local)
While we anticipate costs for compliance with environmental laws, which will typically be for licensing or permitting operations, these are part of the normal and customary costs for every waste to energy operation. These costs generally vary by state, are not significant as relates to the total project cost, and are part of the business model costs for each facility.
FTZ Energy Exchange Corporation
FTZ Energy Exchange Corporation was incorporated on May 14, 2012 as a wholly-owned subsidiary of BioPower to launch an energy exchange. FTZ will require funding to launch an energy exchange. If waste to energy facilities are up and running, electricity and diesel fuels may be produced. At that time, the Board will revisit the proponents of having an energy exchange. There can be no assurance such funding will ever be achieved or that the energy exchange will ever be launched.
The Company and its subsidiaries, have never declared bankruptcy, have never been in receivership, and have never been involved in any legal action or proceedings.
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Neither the Company nor its subsidiaries, nor our officers, directors, promoters or affiliates, has had preliminary contact or discussions with, nor do we have any present plans, proposals, arrangements or understandings with any representatives of the owners of any business or company regarding the possibility of an acquisition or merger. Since incorporation, we have not made any material purchase or sale of assets outside the ordinary course of business.
We are not a blank check registrant as that term is defined in Rule 419(a) (2) of Regulation C of the Securities Act of 1933, since we have a specific business plan or purpose.
An investment in our securities should be considered highly speculative due to various factors, including the nature of our business and the present stage of our development. An investment in our securities should only be undertaken by persons who have sufficient financial resources to afford the total loss of their investment. In addition to the usual risks associated with investment in a business, you should carefully consider the following known material risk factors described below and all other information contained in this report before deciding to invest in our Common Stock.
The following risk factors could have a material adverse effect on our business, financial condition and results of operations.
Risks Relating to our Business
We are subject to a going concern opinion from our independent auditors.
Our independent auditors have added an explanatory paragraph to their audit issued in connection with the financial statements for the period ended November 30, 2015, relative to our ability to continue as a going concern. We had a working capital deficit of ($3,911,967) and we have an accumulated deficit accumulated of ($7,891,546), as at November 30, 2015. Because our auditors have issued a going concern opinion, it means there is substantial uncertainty we will continue operations in which case you could lose your investment. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue our business. As such we may have to cease operations and investors could lose their entire investment.
We have had no operations to date and have earned no operating revenues to date.
We have had no operations to date and no operating revenues. We expect to incur losses in the coming fiscal year, and possibly beyond, due to significant costs associated with our business and project development activities. There can be no assurance that we will be able to successfully implement our business plan, or that our business or project development activities will ever lead to us generating sufficient revenues to fund our continuing operations or that we will ever generate positive cash flow from our operations. Further, we can give no assurance that we will attain or thereafter sustain profitability in any future period. Since our resources are presently very limited, insufficient future revenues would result in termination of our operations, as we cannot sustain unprofitable operations unless additional equity or debt financing is obtained.
We have had no operations to date, and are competing with well-established companies in our business sector, and may never achieve profitability.
To date the Company has been focused on raising money and business and project development activities. We are faced with all of the risks associated with a company in the early stages of development. Our business is subject to numerous risks associated with a relatively new, undercapitalized company engaged in our business sector. Such risks include, but are not limited to, competition from well-established and well-capitalized companies and unanticipated difficulties regarding the marketing and sale of our products. There can be no assurance that we will ever generate significant commercial sales or achieve profitability. Should this be the case, our common stock could become worthless and investors in our common stock or other securities could lose their entire investment.
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We need to obtain a significant amount of debt and/or equity capital to commence waste to energy projects, build significant facilities and operate the facilities, which we may not be able to obtain on acceptable terms or at all.
We will require additional capital to fund our business and project development plan. We may also encounter unforeseen costs that could also require us to seek additional capital. As a result, we expect to seek to raise additional debt and/or equity funding. The full and timely development and implementation of our business plan and growth strategy will require significant additional resources, and we may not be able to obtain the funding necessary to implement our growth strategy on acceptable terms or at all. An inability to obtain such funding would prevent us from continuing business development. Furthermore, our business strategy may not produce revenues even if successfully funded. We have not yet identified the sources for the additional financing we require and we do not have commitments from any third parties to provide this financing. We might not succeed, therefore, in raising additional equity capital or in negotiating and obtaining additional and acceptable financing. Our ability to obtain additional capital will also depend on market conditions, national and global economies and other factors beyond our control. We might not be able to obtain required working capital, the need for which is substantial given our business and development plan. The terms of any future debt or equity funding that we may obtain may be unfavorable to us and to our stockholders.
We have limited financial and management resources to pursue our growth strategy.
Our growth strategy may place a significant strain on our management, operational and financial resources. We have negative cash flow from our development stage activities and continue to seek additional capital. We will have to obtain additional capital either through debt or equity financing to continue our business and development plan. There can be no assurance, however, that we will be able to obtain such financing on terms acceptable to our company.
If we raise additional funds through the issuance of equity or convertible securities, these new securities may contain certain rights, preferences or privileges that are senior to those of our common shares. Additionally, the percentage of ownership of our company held by existing shareholders will be reduced.
Weakness in the economy may have an adverse effect on our revenue, cash flow and our ability to grow our business.
Our business is directly affected by economic slowdowns and general reduction in demand for goods and services. A weak economy generally results in reduced overall demand for waste disposal, recyclables, electricity and fuel production. Under such conditions, the pricing we are able to charge for our waste management services, and for our energy and recycled materials, may decline and/or experience increased volatility. In addition, many of our potential customers are municipalities and government agencies which may be adversely affected in an economic downturn due to reduced tax and other revenues. Consequently some of these entities could be unable to pay adequate amounts or sign contracts for waste disposal.
Furthermore, lower prices for waste disposal and energy production, particularly in the absence of energy policies which encourage renewable technologies such as WtE, may also make it more difficult for us to sell waste and energy services at prices sufficient to allow us to develop new projects. These factors could have a material adverse effect on profitability and cash flow.
Exposure to energy, waste disposal, recyclables and commodity prices may affect our results of operations.
Some of the electricity and steam we intend to sell, synthetic fuels and recyclables, are subject to market price volatility. Changes in the market prices for electricity and steam in particular can be affected by changes in natural gas prices, weather conditions and other market variables, while recyclable prices are affected by general economic conditions and global demand for construction, goods and services. Volatility with respect to all of these revenues could adversely impact our business. We may not be successful in our efforts to mitigate our exposure to price swings relating to these potential revenue streams.
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We may experience volatility in the market prices and availability of equipment we purchase, such as gasifiers and Fischer Tropsch process equipment. Any price increase, delivery disruption or reduction in the availability of such supplies could affect our ability to compete for W-t-E projects. We may not be successful in our efforts to mitigate our exposure to supply and price swings for equipment.
We cannot predict the impact of these risks on our business or operations. One or more of these risks, if they were to occur, could have an adverse effect on our intended cash flows and results of operations.
Compliance with environmental laws, including changes to such laws, could adversely affect our results of operations.
Our business is subject to extensive environmental regulation by federal, state, local and foreign authorities, primarily relating to air, waste (including residual ash) and water. Costs of compliance with federal, state, local and foreign existing and future environmental regulations could adversely affect our intended cash flow and profitability. If our business fails to comply with these regulations, we could be subject to civil or criminal liability, damages and fines.
In addition, lawsuits or enforcement actions by federal, state, local and/or foreign regulatory agencies may materially increase our costs. Stricter environmental regulation of air emissions, solid waste handling and residual ash handling and disposal could materially affect our cash flow and profitability. Certain environmental laws make us potentially liable on a joint and several basis for the remediation of contamination at or emanating from properties or facilities we may own, operate or properties to which we arranged for the disposal of hazardous substances. Such liability is not limited to the cleanup of contamination we actually caused. We cannot provide any assurance that we will not incur liability relating to the remediation of contamination, including contamination we did not cause. For additional information on environmental regulation,
see Item 1. Business - Regulation of Business.
Existing environmental laws and regulations have been and could be revised or reinterpreted, and future changes in environmental laws and regulations are expected to occur. This may materially increase the amount we must invest to bring our intended facilities into compliance, impose additional expense on our operations, limit our ability to operate at capacity, or at all.
Changes in public policies and legislative initiatives could materially affect our business and prospects.
There has been substantial debate recently in the United States and abroad in the context of environmental and energy policies affecting climate change, the outcome of which could have a positive or negative influence on our project developments and our prospects for growing our business. Congress has considered proposed legislation which is designed to increase the proportion of the nation’s electricity that is generated from technologies considered “clean” or “renewable”, through mandatory generation levels, tax incentives, and other means. Congress has also considered enacting legislation which sets declining limits on greenhouse gas emissions, and requires generators to purchase rights to emit in excess of such limits, and allows such rights to be traded. For those sources of greenhouse gas emissions that are unable to meet the required limitations, such legislation could impose substantial financial burdens. Our business and future prospects could be adversely affected if renewable technologies we use were not included among those technologies identified in any final law as being clean or renewable or greenhouse gas reducing, and therefore not entitled to the benefits of such laws.
Dislocations in credit and capital markets and increased capital constraints on banks may make it difficult for us to borrow money or raise capital needed to finance the development and construction of new projects.
Our business is capital intensive and typically projects are funded through equity from investors coupled with borrowed money from project lenders to pay for the cost to construct facilities. Dislocations in the credit markets, including for project debt, and increased capital constraints on banks, have resulted in less credit being made available by banks and other lending institutions, and/or borrowing terms that are less favorable than has historically been the case. As a result, we may not be able to obtain financing for new facilities on terms, and/or for a cost, that we find acceptable, which may make it more difficult to finance new projects to be developed.
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Prolonged instability or worsening of the credit or capital markets may adversely affect our ability to obtain debt on favorable terms, or at all. Such circumstances could adversely affect our intended project development business, financial condition, and/or the share price of our common stock.
Our reputation could be adversely affected if we are unable to operate our intended projects in compliance with laws, or if our efforts to grow our project development results in adverse publicity.
If we encounter regulatory compliance issues in the course of operating our projects to be developed, we may experience adverse publicity, which may intensify if such non-compliance results in civil or criminal liability. This adverse publicity may harm our reputation, and result in difficulties in developing new projects.
With respect to our efforts to grow our project developments business globally, we sometimes experience opposition from advocacy groups or others intended to halt our development or on-going business. Such opposition is often intended to discourage third parties from doing business with us and may be based on misleading, inaccurate, incomplete or inflammatory assertions. Our reputation may be adversely affected as a result of adverse publicity resulting from such opposition. Such damage to our reputation could adversely affect our ability to grow our business.
Changes in technology may have a material adverse effect on our business.
Our company and others have recognized the value of the traditional waste stream as a potential resource. Research and development activities are ongoing to provide alternative and more efficient technologies to manage waste produce or extract by-products from waste, or to produce power or fuels. We and many other companies are pursuing these technologies, and capital is being invested to find new approaches to waste management, waste treatment, renewable power generation and the production of renewable fuels. It is possible that this deployment of capital may lead to advances in these or other technologies which will reduce the cost of waste management, power production or renewable fuel production to a level below our intended costs and/or provide new or alternative methods of waste management or energy generation that become more accepted than those we intend to utilize. Unless we are able to participate in these advances, any of these changes could have a material adverse effect on our intended revenues and profitability.
Development and construction of new projects and expansions may not commence as anticipated, or at all.
The development and construction of new WtE facilities involves many risks including:
| ● | the lack of financing for intended projects; |
| ● | the inaccuracy of our assumptions with respect to the cost of and schedule for completing construction; |
| ● | difficulty, delays or inability to obtain financing for a project on acceptable terms; |
| ● | delays in deliveries of, or increases in the prices of, equipment sourced from other countries; |
| ● | the unavailability of sufficient quantities of waste or other fuels for startup; |
| ● | permitting and other regulatory issues, license revocation and changes in legal requirements; |
| ● | labor disputes and work stoppages; |
| ● | unforeseen engineering and environmental problems; |
| ● | unanticipated cost overruns; and |
| ● | weather interferences and catastrophic events including fires, explosions, earthquakes, droughts, pandemics and acts of terrorism. |
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In addition, new facilities have no operating history. A new facility may be unable to fund principal and interest payments under its debt service obligations or may operate at a loss. In certain situations, if a facility fails to achieve commercial operation, at certain levels or at all, termination rights in the agreements governing the facilities financing may be triggered, rendering all of the facility’s debt immediately due and payable. As a result, the facility may be rendered insolvent and we may lose our interest in the facility.
Construction activities may cost more and take longer than we estimate.
The design and construction of new projects requires us to contract for services from engineering and construction firms, and make substantial purchases of equipment and other components that require large quantities of steel to fabricate. If worldwide demand for new infrastructure spending, including energy generating facilities and waste management facilities, increases, then prices for building materials such as steel, may also rise sharply. In addition, this increased demand would affect not only the cost of obtaining the services necessary to design and construct these facilities, but also the availability of quality firms to perform the services. These conditions may adversely affect our ability to successfully compete for new projects, or construct and complete such projects on time and within budget.
Exposure to foreign currency fluctuations may affect our results from operations or construction costs of facilities we develop in international markets.
We have sought to participate in projects where the host country has allowed the convertibility of its currency into U.S. dollars and repatriation of earnings, capital and profits subject to compliance with local regulatory requirements. As and if we grow our business in other countries and enter new international markets, we expect to invest substantial amounts in foreign currencies to pay for the construction costs of facilities we develop, or for the cost to acquire existing businesses or assets. Currency volatility in those markets, as well as the effectiveness of any currency hedging strategies we may implement, may impact the amount we are required to invest in new projects, as well as our reported results.
Our businesses generate their revenue primarily under long-term contracts and must avoid defaults under those contracts in order to service their debt and avoid material liability to contract counterparties.
We must satisfy performance and other obligations under contracts governing WtE facilities. These contracts typically require us to meet certain performance criteria relating to amounts of waste processed, energy generation rates per ton of waste processed, gallons of renewable fuel produced, residue quantity and environmental standards. Our failure to satisfy these criteria may subject us to termination of operating contracts. If such a termination were to occur, we would lose the cash flow related to the projects and incur material termination damage liability. In circumstances where the contract has been terminated due to our default, we may not have sufficient sources of cash to pay such damages. We cannot assure you that we will be able to continue to perform our respective obligations under such contracts in order to avoid such contract terminations, or damages related to any such contract termination, or that if we could not avoid such terminations that we would have the cash resources to pay amounts that may then become due.
Our businesses depend on performance by third parties under contractual arrangements.
Our waste and energy services businesses depend on a limited number of third parties to, among other things, purchase the electric and steam energy produced or renewable fuels produced by our future facilities, supply and deliver the waste and other goods and services necessary for the operation of our future facilities. The viability of our future facilities depends significantly upon the performance by third parties in accordance with long-term contracts, and such performance depends on factors which may be beyond our control. If those third parties do not perform their obligations, or are excused from performing their obligations because of nonperformance by our waste and energy services businesses or other parties to the contracts, or due to force majeure events or changes in laws or regulations, our businesses may not be able to secure alternate arrangements on substantially the same terms, if at all, for the services provided under the contracts. In addition, the bankruptcy or insolvency of a participant or third party in our facilities could result in nonpayment or nonperformance of that party’s obligations to us. Many of these third parties are municipalities and public authorities. The economic slowdown and disruptions in credit markets have strained resources of these entities generally, and could make it difficult for these entities to honor their obligations to us.
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With our initial contracts to receive tipping fees for waste brought to our facilities, sell electricity or renewable fuels for intended projects and the sale of recyclables, we expect to have exposure to market risk, and therefore revenue fluctuations, in energy markets in waste markets. Consequently, we may enter into futures, forward contracts, swaps or options with financial institutions to hedge our exposure to market risk in energy markets. We can provide no assurances as to the financial stability or viability of these financial and other institutions.
Concentration of suppliers and customers may expose us to heightened financial exposure.
Our waste and energy services businesses often rely on single suppliers and single customers at our facilities, exposing such facilities to financial risks if any supplier or customer should fail to perform its obligations.
For example, our businesses may often rely on a single supplier to provide the waste required to operate a facility and on a single customer or a few customers to purchase all or a significant portion of a facility’s output. The financial performance of these facilities depends on such customers and suppliers continuing to perform their obligations under their long-term agreements. A facility’s financial results could be materially and adversely affected if any one customer or supplier fails to fulfill its contractual obligations and we are unable to find other customers or suppliers to produce the same level of profitability. We cannot assure you that such performance failures by third parties will not occur or that if they do occur, such failures will not adversely affect the cash flows or profitability of our businesses.
In addition, we rely on municipal clients as a source of waste as our feedstock and for the revenue from the fees for waste services we provide. Because our contracts with municipal clients are generally long-term, we may be adversely affected if the credit quality of one or more of our municipal clients were to decline materially.
Exposure to international economic and political factors may materially and adversely affect our international businesses.
Our international project development operations expose us to political, legal, tax, currency, inflation, convertibility and repatriation risks, as well as potential constraints on the development and operation of potential business, any of which can limit the benefits to us of an international project.
The financing, development and operation of projects outside the United States can entail significant political and financial risks, which vary by country, including:
| ● | changes in law or regulations; |
| ● | changes in electricity pricing; |
| ● | changes in foreign tax laws and regulations; |
| ● | changes in United States federal, state and local laws, including tax laws, related to foreign operations; |
| ● | compliance with United States federal, state and local foreign corrupt practices laws; |
| ● | changes in government policies or personnel; |
| ● | changes in general economic conditions affecting each country, including conditions in financial markets; |
| ● | changes in labor relations in operations outside the United States; |
| ● | political, economic or military instability and civil unrest; |
| ● | expropriation and confiscation of assets and facilities; and |
| ● | credit quality of entities that purchase our power. |
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The legal and financial environment in foreign countries in which we currently are developing projects could also make it more difficult for us to enforce our rights under agreements relating to such projects.
Any or all of the risks identified above with respect to our potential international projects could adversely affect our profitability and cash generation. As a result, these risks may have a material adverse effect on our business, consolidated financial condition and results of operations.
Our reputation could be adversely affected if our businesses, or third parties with whom we have a relationship, were to fail to comply with United States or foreign anti-corruption laws or regulations.
Many of our project development activities may be conducted in countries where corruption has historically penetrated the economy to a greater extent than in the United States. It is our policy to comply, and to require our local partners and those with whom we do business to comply, with all applicable anti-bribery laws, such as the U.S. Foreign Corrupt Practices Act, and with applicable local laws of the foreign countries in which we operate. Our reputation may be adversely affected if we were reported to be associated with corrupt practices or if we or our local partners failed to comply with such laws. Such damage to our reputation could adversely affect our ability to grow our business.
Failure to obtain regulatory approvals could adversely affect our operations.
Our waste-to-energy projects will subject to obtaining federal, state, local and foreign approvals required to permit and operate our intended facilities. While we believe our projects will obtain all necessary permits and operating approvals, we may not always be able to obtain all required regulatory approvals. If there is a delay in obtaining any required regulatory approvals the projects may be delayed or may never be permitted.
The energy industry is becoming increasingly competitive, and we might not successfully respond to these changes.
We may not be able to respond in a timely or effective manner to the changes resulting in increased competition in the energy industry in global markets. These changes may include deregulation of the electric utility industry in some markets, privatization of the electric utility industry in other markets, reduction in the prices of renewable fuel and increasing competition in all markets. To the extent competitive pressures increase and the pricing and sale of electricity and renewable fuels assumes more characteristics of a commodity business, the economics of our business may be subject to greater volatility.
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Changes in climate conditions could materially affect our business and prospects.
Significant changes in weather patterns and volatility could have a positive or negative influence on our prospects for growing our business. Such changes may cause episodic events (such as floods or storms) that are difficult to predict or prepare for, or longer-term trends (such as droughts or sea-level rise). These or other meteorological changes could lead to increased operating costs, capital expenses, disruptions in facility operations or supply chains, changes in waste generation and interruptions in waste deliveries and changes in energy pricing, among other effects for our intended facilities.
We cannot assure you that our cash flow from operations from projects to be built will be sufficient to service our cash flow needs, which could have a material adverse effect on our financial condition.
Our ability for the project to meet our obligations under our indebtedness depends on our ability to receive revenues from the future projects. This, in turn, is subject to many factors, some of which are beyond our control, including the following:
| ● | the start-up of new facilities; |
| ● | market conditions affecting waste disposal and energy pricing, as well as competition from other companies for contracts; |
| ● | general economic, financial, competitive, legislative, regulatory and other factors. |
We cannot assure you that our business will generate cash flow from operations, or that future borrowings will be available to us, in an amount sufficient to enable us to meet our payment obligations and to fund other liquidity needs. If we are not able to generate sufficient cash flow, we may need to raise additional capital. If we are unable to implement one or more of these alternatives, we may not be able to meet our payment obligations under our outstanding indebtedness, which could have a material and adverse effect on our financial condition.
We do not have a traditional credit facility with a financial institution. This absence may adversely impact our operations.
We do not have a traditional credit facility with a financial institution, such as a working line of credit. The absence of a facility could adversely impact our operations, as it may constrain our ability to have the working capital for the operations of our businesses. If adequate funds are not otherwise available, we may be required to delay, scale back or eliminate portions of our project development efforts. Without credit facilities, the Company could be forced to cease operations and investors in our common stock or other securities could lose their entire investment.
Security breaches and other disruptions to our information technology infrastructure could interfere with our operations, compromise information belonging to us and our customers, suppliers or employees, and expose us to liability that could adversely impact our business and reputation.
In the ordinary course of business, we rely on information technology networks and systems to process, transmit and store electronic information, and to manage or support a variety of business processes and activities. Despite security measures and business continuity plans, interruptions and breaches of computer and communications systems, including computer viruses, “hacking” and “cyber-attacks,” power outages, telecommunication or utility facilities, system failures, natural disasters or other catastrophic events that could impair our ability to conduct business and communicate internally and with our customers, or result in the theft of trade secrets or other misappropriation of assets, or otherwise compromise privacy of sensitive information belonging to us, our customers or other business partners. Any such events could result in legal claims or proceedings, liability or penalties under privacy laws, disruption in operations, and damage to our reputation, which could adversely affect our business.
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Our insurance and contractual protections may not always cover lost revenues, increased expenses or contractual liabilities.
Although each of our projects will maintain insurance, obtain warranties from vendors, require contractors to meet certain performance levels and, in some cases, pass risks we cannot control to the service recipient or output purchaser, the proceeds of such insurance, warranties, performance guarantees or risk sharing arrangements may not be adequate to cover lost revenues, increased expenses or contractual liabilities.
We depend on our senior management and key personnel and we may have difficulty attracting and retaining qualified professionals.
Our future operating results depend to a large extent upon the continued contributions of key senior managers and personnel. In addition, we are dependent on our ability to attract, train, retain and motivate highly skilled employees. However, there is significant competition for employees with the requisite level of experience and qualifications. If we cannot attract, train, retain and motivate qualified personnel, we may be unable to compete effectively and our growth may be limited, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
Our controls and procedures may not prevent or detect all errors or acts of fraud.
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must consider the benefits of controls relative to their costs. Inherent limitations within a control system include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by an unauthorized override of the controls. While the design of any system of controls is to provide reasonable assurance of the effectiveness of disclosure controls, such design is also based in part upon certain assumptions about the likelihood of future events, and such assumptions, while reasonable, may not take into account all potential future conditions. Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and may not be prevented or detected.
Changes in generally accepted accounting principles could have an adverse effect on our business, financial condition, cash flows, revenue and results of operations.
We are subject to changes in and interpretations of financial accounting matters that govern the measurement of our performance. Based on our reading and interpretations of relevant guidance, principles or concepts issued by, among other authorities, the American Institute of Certified Public Accountants, the Financial Accounting Standards Board, and the United States Securities and Exchange Commission, our management believes that our current contract terms and business arrangements have been properly reported. However, there continue to be issued interpretations and guidance for applying the relevant standards to a wide range of contract terms and business arrangements that are prevalent in the industries in which we operate. Future interpretations or changes by the regulators of existing accounting standards or changes in our business practices could result in future changes in our revenue recognition and/or other accounting policies and practices that could have a material adverse effect on our business, financial condition, cash flows, revenue and results of operations.
Failure to maintain an effective system of internal control over financial reporting may have an adverse effect on our stock price.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated by the Securities and Exchange Commission to implement Section 404, we are required to furnish a report by our management to include in our annual report on Form 10-K regarding the effectiveness of our internal control over financial reporting. The report includes, among other things, an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by management.
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We have in the past discovered, and may potentially in the future discover, areas of internal control over financial reporting which may require improvement. If we are unable to assert that our internal control over financial reporting is effective now or in any future period, or if our independent auditors are unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price.
The Company is controlled by its officers and directors and new investors will not have any voice in our management, which could result in decisions adverse to them.
Our directors and officers collectively own or have the right to vote approximately 48.5% of our outstanding Common Shares. In addition, on January 28, 2011, the Company filed with the Secretary of State of the State of Nevada a Certificate of Designation of Series A Preferred Stock. The Certificate was approved by the Board and did not require shareholder vote. The Certificate created a new class of preferred stock known as Series A Preferred Stock. There is one share designated as Series A Preferred Stock. One share of Series A Preferred Stock is entitled to 50.1% of the outstanding votes on all shareholder voting matters. Series A Preferred Stock has no dividend rights and no rights upon a liquidation event. On January 31, 2011, the Company issued one share of Series A Preferred Stock to China Energy Partners, LLC, an entity controlled by Mr. Robert Kohn, our Chief Executive Officer and a Director and Ms. Bonnie Nelson, a Director, with each owning 50% of that entity. Through this entity, Mr. Kohn and Ms. Nelson are empowered with supermajority voting rights despite the amount of outstanding voting securities they each own.
As a result they will have the ability to control substantially all matters submitted to our stockholders for approval including:
| - | election of our board of directors; | ||
| - | removal of any of our directors; | ||
| - | amendment of our Articles of Incorporation or By-laws; and | ||
| - | adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us. |
In addition, sales of significant amounts of shares held by selling stockholders, or the prospect of these sales, could adversely affect the market price of our Common Shares. Preferred stock and common stock ownership of our principal stockholders and our officers and directors may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of BioPower, which, in turn, could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
Risks Relating to our Common Shares and the Trading Market
We may, in the future, issue additional Common Shares which would reduce investors’ percent of ownership and may dilute our share value.
Our Articles of Incorporation authorize the issuance of 100,000,000 Common Shares with par value of $0.0001 per share and 10,000 shares of Preferred Stock with par value of $1.00 per share. The future issuance of our authorized Common Shares and Preferred Stock, to the extent that it is convertible into shares of common stock, may result in substantial dilution in the percentage of our Common Shares held by our then existing stockholders. The issuance of Common Shares in the future for cash, future services or acquisitions or other corporate actions may have the effect of diluting the value of the Common Shares held by our investors, and might have an adverse effect on any trading market for our Common Shares.
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Because of the early stage of development and the nature of our business, our securities are considered highly speculative.
Our securities must be considered highly speculative, generally because of the nature of our business and the early stage of its development. We are seeking to commence a new business in the highly competitive renewable energy industry, and we have yet to establish or operate our first planned energy crop growing operation. Accordingly, we have not generated any revenues nor have we realized a profit from our operations to date, and there is little likelihood that we will generate any revenues or realize any profits in the short to medium term. Any profitability in the future from our business will be dependent upon our successfully implementing our business plan, which itself is subject to numerous risk factors as set forth herein. Since we have not generated any revenues, we will have to raise additional monies through the sale of our equity securities or debt in order to undertake our business operations.
There is no established trading market for our securities and purchasers of our securities may have difficulty selling their shares.
Our stock began to trade on the OTC QB market February 17, 2012. An active trading market in our securities may not develop or, if developed, may not be sustained and purchasers of the Common Shares may have difficulty selling their shares should they desire to do so.
Our Common Shares are subject to the “Penny Stock” Rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
The SEC has adopted regulations that generally define a “penny stock” to be any equity security other than a security excluded from such definition by Rule 3a51-1 under the Securities Exchange Act of 1934, as amended. For the purposes relevant to our Company, it is any equity security that has a market price of less than $5.00 per share, subject to certain exceptions.
Our Common Shares will be regarded as a “penny stock”, since our shares aren’t to be listed on a national stock exchange or quoted on the NASDAQ Market within the United States, to the extent the market price for our shares is less than $5.00 per share. The penny stock rules require a broker-dealer to deliver a standardized risk disclosure document prepared by the SEC, to provide the customer with additional information including current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, monthly account statements showing the market value of each penny stock held in the customer’s account, and to make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. To the extent these requirements may be applicable they will reduce the level of trading activity in the secondary market for the Common Shares and may severely and adversely affect the ability of broker-dealers to sell the Common Shares.
United States securities laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell the shares offered by this Offering.
Secondary trading in Common Shares sold in this Offering will not be possible in any state in the U.S.A. unless and until the Common Shares are qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in such state. There can be no assurance that we will be successful in registering or qualifying the Common Shares for secondary trading, or identifying an available exemption for secondary trading in our Common Shares in every state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of the Common Shares in any particular state, the Common Shares could not be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our Common Shares, the market for the Common Shares could be adversely affected.
We have not and do not intend to pay any cash dividends on our Common Shares, and consequently our stockholders will not be able to receive a return on their shares unless they sell them.
We intend to retain any future earnings to finance the development and expansion of our business. We have not, and do not, anticipate paying any cash dividends on our Common Shares in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them.
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The elimination of monetary liability against the Company’s directors, officers and employees under Nevada law and the existence of indemnification rights to the Company’s directors, officers and employees may result in substantial expenditures by the Company and may discourage lawsuits against the Company’s directors, officers and employees.
The Company’s certificate of incorporation contains a specific provision that eliminates the liability of directors for monetary damages to the Company and the Company’s stockholders; further, the Company is prepared to give such indemnification to its directors and officers to the extent provided by Nevada law. The Company may also have contractual indemnification obligations under its employment agreements with its executive officers. The foregoing indemnification obligations could result in the Company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which the Company may be unable to recoup. These provisions and resultant costs may also discourage the Company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by the Company’s stockholders against the Company’s directors and officers even though such actions, if successful, might otherwise benefit the Company and its stockholders.
If we do not comply with the state regulations in regard to the sale of these securities or find an exemption therefrom there may be potential limitations on the resale of your stock.
With few exceptions, every offer or sale of a security must, before it is offered or sold in a state, be registered or exempt from registration under the securities, or blue sky laws, of the state(s) in which the security is offered and sold. Similarly, every brokerage firm, every issuer selling its own securities and an individual broker or issuer representative (i.e., finder) engaged in selling securities in a state, must also be registered in the state, or otherwise exempt from such registration requirements. Most states securities laws are modeled after the Uniform Securities Act of 1956. To date, approximately 40 states use the Uniform Securities Act of 1956 as the basis for their state blue sky laws.
However, although most blue sky laws are modeled after the Uniform Securities Act of 1956 blue sky statutes, they vary widely and there is very little uniformity among state securities laws. Therefore, it is vital that each state’s statutes and regulations be reviewed before embarking upon any securities sales activities in a state to determine what is permitted, or not permitted, in a particular state. While we intend to review the blue sky laws before the distribution of any securities in a particular state, should we fail to properly register the securities as required by the respective states or find an exemption from registration, then you may not be able to resell your stock once purchased.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. DESCRIPTION OF PROPERTY
On June 3, 2013, the Company entered into a new lease agreement with its current landlord. The lease is for a 24 month period, expiring on May 31, 2015 , and requires monthly base rental payments of $ 4,000 for the period from June 1, 2013 through May 31, 2014 and $ 4,080 for the period from June 1, 2014 through May 31, 2015 plus adjustments for Common Area Expenses. On May 29, 2015, the Company amended and extended its current lease for an additional twelve month period, expiring on May 31, 2016, and requires monthly base rental payments of $4,583. The office space is approximately 2,000 square feet and includes five executive offices, a lunchroom and conference room.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results. We know of no pending proceedings to which any director, member of senior management, or affiliate is either a party adverse to us.
ITEM 4. MINE SAFETY PROCEDURES.
Not applicable.
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ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for Our Common Stock
Our common stock is presently listed on the OTC QB market. On August 1, 2011, the SEC declared our registration statement on form S-1 effective. We were notified by FINRA on Friday, February 10, 2012, that we were approved to commence trading under the stock symbol “BOPO”. We commenced trading on Friday, February 17, 2012. There can be no assurance that a market for our common stock will be sustained. Therefore, purchasers of our shares may be unable to sell their securities, because there may not be a sustainable public market for our securities. As a result, you may find it more difficult to dispose of, or obtain accurate quotes of our common stock. Any purchaser of our securities should be in a financial position to bear the risks of losing their entire investment.
On September 7, 2013 we affected a 1 for 5 reverse of our common stock and authorized shares outstanding. Our authorized capital consists of 100,000,000 common shares, par value $0.0001 per share (“Common Stock”), Holders of our Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. At March 11, 2016, 50,107,680 shares of our Common Stock are outstanding including 42,107,680 issued and 8,000,000 shares authorized to be issued. Our shares of Common Stock are held by approximately 224 stockholders of record. The number of record holders was determined from the records of our transfer agent and NOBO lists.
Notwithstanding, certain shareholders have each entered into a two year lockup agreement with the Company effectively restricting them from transferring some or all of their common stock for a period of two years without the prior written consent of the Company, which consent may be unreasonably withheld. Our officers and directors are subject to a two-year lockup on all of their shares. Subsequent to the lockup period, the stockholder may sell its common stock every calendar quarter in an amount equal to no more than one percent (1%) of the Company’s issued and outstanding shares of common stock; provided, however, that the stockholder shall not be permitted to make any transfer, or portion thereof, that would exceed twenty percent (20%) of the average weekly reported volume of trading of the Company’s common stock on all national securities exchanges and/or reported through the automated quotation system of a registered securities association during the calendar week preceding the transfer. Moreover, as per the lockup agreement, prior to any transfer, the stockholder must first offer its shares of common stock to be sold to the Company and allow the Company to purchase such shares at a price that is ninety percent (90%) of the average closing price for the Company’s Common Stock, as reported or quoted on its principal exchange or trading market, for the consecutive five (5) trading days prior to the transfer notice given to the Company.
Approximately, 31,297,696 shares of common stock are restricted securities as such term is defined under Rule 144 promulgated by the SEC, in that they were issued or to be issued in private transactions not involving a public offering.
For the period indicated, the following table sets forth the high and low closing prices per share of common stock. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.
| Fiscal Year 2015 | High ($) | Low ($) | ||||||
| Fourth Quarter | 0.35 | 0.15 | ||||||
| Third Quarter | 0.49 | 0.10 | ||||||
| Second Quarter | 0.35 | 0.05 | ||||||
| First Quarter | 0.35 | 0.17 | ||||||
| Fiscal Year 2014 | High ($) | Low ($) | ||||||
| Fourth Quarter | 0.21 | 0.07 | ||||||
| Third Quarter | 0.11 | 0.05 | ||||||
| Second Quarter | 0.20 | 0.08 | ||||||
| First Quarter | 0.20 | 0.11 | ||||||
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Dividends
We have not paid dividends on our common stock and do not anticipate paying such dividends in the foreseeable future.
Sale of Unregistered Securities
On April 7, 2014, the Company issued 500,000 shares of the Company’s stock as payment for investor relations service at $0.09 per share.
On October 24, 2014 the Company exchanged common stock shares and Series B Convertible Preferred Stock for 100% of the outstanding stock of G3P (“G3P Shares”) in a stock for stock tax free exchange transaction. The purchase price (the “Purchase Price”) paid by BOPO to the Existing Shareholders equals:
(i) 20% of the outstanding Common Stock (“CS”) of BOPO after issuance with a two year lock-up agreement.
(ii) Series B Convertible Preferred Stock (“PS”), which can be converted up to 50% of the outstanding CS at time of Closing, October 24, 2014, (approximately 30,000,000 common stock shares) prior to the issuance of the CS contemplated by this Transaction as determined in Paragraph 4 below.
On November 28, 2014, the Company issued 500,000 shares of its common stock at $0.20 per share, as payment for consulting services rendered to a non-management director, in full satisfaction of director’s fees, Chairman of audit committee fees and consulting fees.
On November 28, 2014, the Company issued 35,000 shares of its common stock at $0.20 per share, as a bonus for an accountant employee and a service provider.
In January 2015, the Company issued 500,000 shares of stock to unrelated third parties for cash totaling $60,000, at a price of $0.12 per share.
On May 1, 2015 the Company issued 50,000 shares of common stock to a Consultant for services to be provided over a twelve month period, commencing May 1, 2015. The shares are valued at $2,500. In addition, the Company shall pay to the Consultant a commission to be determined on a case by case basis for the opportunities accepted by the Company introduced by the Consultant. The shares were valued at $2,500.
On July 13, 2015, a third party investor exercised their right and converted 50% of their $30,000 loan into 100,000 common shares of stock at a price of $0.15.
In July , 2015, the Company accepted a common stock subscription for 100,000 shares of common stock at $0.15 per share or $15,000.
On August 10, 2015 the Company issued 150,000 shares of common stock to a Consultant for services to be provided over a twelve month period, commencing August 10, 2015. The shares were valued at $73,335. In addition, the Company shall pay to the Consultant a commission to be determined on a case by case basis for the opportunities accepted by the Company introduced by the Consultant.
On August 10, 2015, a third party investor exercised his right and converted 50% of a $30,000 loan into 100,000 common shares of stock at a price of $0.15.
Conversion Rights of Convertible Preferred Stock:
(i) Up to fifty percent (50%) maximum of the outstanding CS at October 24, 2014, (approximately 30,000,000 common stock shares).
At the end of two (2) years, G3P Existing Shareholders have the right to convert the PS into CS on the following basis:
If BOPO earns $ 0 net cash flow and G3P earns a minimum of $1,000,000 net cash flow then the PS can be converted into 50% of the CS outstanding on October 24, 2014, and prior to the issuance of the CS in this Transaction; or If BOPO and G3P earn a similar amount of net cash flow then G3P can convert the PS into 30% of the outstanding CS prior to the issuance of the CS in this Transaction or a total of 50% of the outstanding shares at Closing including the CS issued at Closing; or
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If G3P earns $-0- net cash flow, then G3P cannot convert the PS but will retain the original 20% of the CS issued at Closing.
G3P has an option, which can be exercised at the end of two (2) years to wait an additional one year to convert the PS. If G3P exercises the option to wait up to one more year before converting the PS, then G3P must provide evidence that one project is under construction or all contracts for the project are executed and funding is in place to commence construction.
On November 28, 2014, the Company issued 1,373,650 shares of its common stock at a contract conversion price $0.10 per share to an investor in full satisfaction of notes payable, amounting to $125,000, along with accrued interest of $12,365.
On November 28, 2014, the Company issued 722,550 shares of its common stock at a contract conversion price of $0.10 per share to an investor in exchange for the conversion of 50% of their note payable, amounting to $62,500, along with accrued interest of $9,755.
Securities authorized for issuance under equity compensation plans
As of the date of this Annual Report, we do not have any securities authorized for issuance under any equity compensation plans and we do not have any equity compensation plans.
ITEM 6. SELECTED FINANCIAL DATA
We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Statements made in this 10-K that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the of the Securities Act of 1933 (the “Act”) and Section 21E of the Securities Exchange Act of 1934. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “intends”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue” or the negative of these terms or other comparable terminology. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
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Unless the context otherwise requires, The “Company”, “we,” “us,” and “our,” refer to (i) BioPower Operations Corporation.; (ii) BioPower Corporation (“BC”), Green3Power Holdings Company and its subsidiaries (“G3P”), Green Oil Plantations Americas Inc. (“Green Oil”), Green Energy Crops Corporation (“GECC”), Agribopo, Inc., FTZ Exchange LLC and FTZ Energy Corporation,
Overview
From inception (September 13, 2010) to November 30, 2014, the Company focused on growing biomass crops coupled with the project development of processing and/or conversion facilities to produce oils, biofuels, electricity and other biomass products. We also intended to utilize licensed patented technology to convert biomass wastes into products and reduce the amount of waste going to landfills. On October 24, 2014 the Company acquired Green3Power Holdings Company and its wholly-owned subsidiaries (G3P), www.green3power.com, which intends to design, permit, procure equipment, manage construction, and partially own and operate and maintain Renewable Waste-to-Energy (WtE) Facilities using their unique turnkey exclusive global license to the gasification technology.
Today, BioPower and its subsidiaries intend to focus on developing renewable waste-to-energy projects globally by designing, engineering, permitting, procuring equipment, construction management and operating and maintaining facilities for the conversion of wastes into electricity and ultra-low sulfur renewable synthetic fuels through exclusively licensed gasification technology. The Company intends to also provide waste remediation services.
On August 4, 2015 the St. Lucie County Commissioners approved the contract and its revisions with G3P to build a Renewable Energy Facility on the St. Lucie County, Florida landfill using the G3P Gasification Technology. The contract provides for a 20 year waste stream of 1,000 tons per day of municipal solid waste, construction and demolition waste, green waste and tires. The facility will convert the waste into approximately 60,000 gallons per day of low sulfur renewable synthetic diesel fuel and 20,000 gallons of Naptha. Vanderweil Engineers and G3P have completed the Site Plan and have submitted the Solid Waste Permit. They are putting together the necessary documentation for other permit applications. There can be no assurance that G3P will successfully fund the $228 Million facility.
Our corporate headquarters are located at 1000 Corporate Drive, Suite 200, Fort Lauderdale, Florida 33334 and our phone number is (954) 202-6660. Our website can be found at www.biopowercorp.com. The information on our website is not incorporated in this report.
Our Business
G3Ps Gasification to Electricity or Renewable Synthetic Fuel Production Facilities
G3P designs, permits, procures equipment, manages construction, intends to partially own and intends to operate and maintain Gasification Waste-to-Energy facilities, using our exclusive global licensed thermal gasification technology, an upgrade to present gasification technology in use around the world for the last 30 years. Combined with our front-end processing system, these gasifiers enable the company to enhance the thermal output, which could provide an increase in revenues and bottom lines. We intend to produce energy through the gasification of non-hazardous municipal solid waste (“MSW”) or other wastes including used tires, tree cuttings, light construction and demolition (C&D) wastes and biomass in our specially designed refuse-derived fuel facilities which process waste prior to combustion and gasification. Waste is heated to create gases (syngas) which are then combusted into steam which can be turned into electricity through traditional steam turbines or create a Fischer-Tropsch ultra-low sulfur renewable synthetic fuel through a Fisher-Tropsch process that has been used for the last ninety years to create synthetic fuels. There can be no assurance we will ever build our first WtE facility.
To our knowledge this is the cleanest and most cost effective technology for the conversion of wastes to produce electricity or synthetic fuels. Utilizing a sorting Facility and an advanced dryer system on the front-end, enables solid wastes, light construction & demolition wastes, medical, biological, and pharmaceutical wastes, and used tires as feedstock to produce electricity and ultra-low sulfur renewable synthetic fuels. The front-end drying system is especially helpful in developing countries where there is high organic content and high moisture content waste. G3P also intends to provide waste remediation services.
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Background
On July 2, 2013, the Company entered into agreements for the first stage of a project to develop a castor plantation and milling operation in the Republic of Paraguay with offshore entities for the testing and development of a project with up to $10,000,000 in financing upon certification of the castor yield and subject to material adverse events- the TSA Project. As of April 1, 2014, we received notification of termination of the TSA project due to material and adverse events related to the necessity for building roads due to extreme flooding conditions and issues associated with clearing of the land.
On November 13, 2013 we entered into a joint venture agreement and formed MicrobeSynergy, LLC, a 50-50 joint venture for the exclusive distribution of a cellulosic advanced biofuels technology. We have to meet certain Milestones to maintain exclusivity otherwise we would have a non-exclusive license. The Company believes that we met Milestone I but we have received notification from our joint venture partner that we did not meet Milestone 1. As part of our October 24, 2014 transaction below, we sold our interest in this joint venture.
On October 24, 2014, BioPower Operations Corporation (the “Company” or “BOPO”) executed a Share Exchange Agreement (“SEA”) with Green3Power Holdings Company (“G3P”) to acquire G3P and its wholly-owned subsidiaries Green3Power Operations Inc., a Delaware corporation (“G3P OPS”) and Green3Power International Company, a Nevis Corporation (“G3PI”). Pursuant to the terms thereof, at Closing (as defined in the Share Exchange Agreement), and following the Closing, G3P, G3P OPS and G3PI will be wholly-owned subsidiaries of the Company. G3P is a development stage company that is an engineering firm developing waste-to-energy projects using licensed gasification technology, which can convert wastes to energy including electricity, and renewable synthetic fuel. G3P designs, procures, constructs, intends to partially own, operate and maintain Gasification Waste-to-Energy facilities, using their unique exclusively licensed gasification technology, an upgrade to present gasification technology in use around the world for the last 30 years. G3P also provides waste remediation services.
We have only generated minimal revenues from business operations. Our auditors have issued a going concern opinion. This means there is substantial doubt that we can continue as an on-going business for the next twelve (12) months unless we obtain additional capital to pay our bills. This is because we have not generated any revenues and no revenues are anticipated until we begin marketing our products to customers. Accordingly, we must raise cash from sources other than revenues generated such as from the proceeds of loans, sale of common shares and advances from related parties.
Licensed Technologies
Green3Power Holdings Company – Exclusive Licensed gasification technology for Waste-to-Energy Conversion
G3P has an exclusive global License for the use of the technologies and processes for building gasification facilities to convert wastes into electricity and ultra-low sulfur renewable synthetic fuels. Once the royalties paid for the use of these technologies equal $10,000,000, G3P will then own 100% of the technologies and processes without any further license fees. The initial license fees are paid based upon gross revenues of the facilities and their waste conversion operations. The Company will continue to charge license fees and royalties for each project where we do not own 100% of the project.
PLAN OF OPERATION
Since October 24, 2014 the Company has agreed to focus on the development, design, engineering, permitting, construction and operations and maintenance of its first waste-to-energy facility for the conversion of wastes into electricity and ultra-low sulfur renewable synthetic fuels utilizing its exclusively licensed gasification technology. The Company intends to also provide waste remediation services on a global basis.
We estimate our budgeted project development and operating expenses for the next twelve month period to be as follows:
| Project development costs | $ 500,000 | (1) | ||
| Operating Costs | 1,500,000 | |||
| Total | $ | 2,000,000 |
(1) To be reimbursed from project funding
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We anticipate that we will be required to raise additional funds through private sales of debt or equity securities of our company, to fund our operations and execute our business plan. There is no assurance that the financing will be completed on terms advantageous to us, or at all. If we are not successful in raising additional funding, we may be forced to curtail or cease some of all of our project development activities and operations.
We may also encounter unforeseen costs that could also require us to seek additional capital. As a result, we will need to raise additional debt and/or equity funding. However, no assurance can be given that we will be able to sell any of such securities. An inability to obtain such funding would prevent us from developing any waste to energy facilities. Our ability to obtain additional capital also will depend on market conditions, national and global economies and other factors beyond our control. The terms of any future debt or equity funding that we may obtain may be unfavorable to us and to our stockholders.
If we are able to raise the entire $2,000,000 we will have sufficient funds to meet operating costs, and project development costs for the current fiscal year, and we will be able to implement key aspects of our business plan, including project development costs for developing waste-to-energy facilities and to provide waste remediation services. We expect these amounts will be sufficient to initiate and sustain our project development activities for one year.
The amount and timing of additional funds that might be required cannot be definitively stated at the date of this report and will be dependent on a variety of factors, including the success of funding the St. Lucie County, Florida waste-to-energy project or any other first waste to energy project, waste remediation projects and the rate of future expansion that we might plan to undertake. If we were to determine that additional funds are required, we would be required to raise additional capital either by way of loans or equity, which, in the case of equity, would be potentially dilutive to existing stockholders. The Company cannot be certain that we will be able to raise the $2,000,000 for project development and operating costs or any additional capital to fund our operations or expansion past the current fiscal year.
OUR CHALLENGES
Our ability to successfully operate our business and achieve our goals and strategies is subject to numerous challenges and risks as discussed more fully in the section titled “Risk Factors,” including for example:
| ● | any failure to develop our projects and our inability to sufficiently meet our customers’ demands for our products; | |
| ● | any inability to effectively manage rapid growth; | |
| ● | risks associated with present and future joint ventures, strategic alliances or acquisitions; | |
| ● | economic, political, regulatory, legal and foreign risks associated with alternative energy; and, | |
| ● | any loss of key members of our management. |
You should read and consider the information set forth in “Risk Factors” and all other information set forth in this filing.
Regulation
The Company will comply with all U.S.A. and foreign regulations and laws where they apply to our waste-to-energy and waste remediation businesses including operations, safety and environmental standards.
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CONSOLIDATED RESULTS OF OPERATIONS
The following analysis reflects the consolidated results of operations of BioPower Operations Corporation and its subsidiaries.
Fiscal 2015 as Compared with Fiscal 2014
| 2015 | BioPower Operations Corp | BioPower Corporation | FTZ Exchange, LLC | Green3Power Holdings Company and Subsidiaries | Total | |||||||||||||||
| Revenue, net of costs | $ | - | $ | - | $ | - | $ | 13,420 | $ | 13,420 | ||||||||||
| Operating expenses | $ | (1,050,371 | ) | $ | (44,873 | ) | $ | - | $ | (864,352 | ) | $ | (1,959,596 | ) | ||||||
| Depreciation and amortization | $ | 8,946 | $ | - | $ | - | $ | 269 | $ | 9,215 | ||||||||||
| Other income (expense) | $ | (255,897 | ) | $ | (72 | ) | $ | - | $ | - | $ | (255,969 | ) | |||||||
| Net income (loss) | $ | (1,315,214 | ) | $ | (44,945 | ) | $ | $ | (851,201 | ) | $ | (2,211,360 | ) | |||||||
| 2014 | BioPower Operations Corp | BioPower Corporation | FTZ Exchange, LLC | Green3Power Holdings Company and Subsidiaries | Total | |||||||||||||||
| Operating expenses (1) | $ | (1,896,728 | ) | $ | (81,408 | ) | $ | - | $ | (30,526 | ) | $ | (2,008,662 | ) | ||||||
| Depreciation and amortization | $ | 12,341 | $ | - | $ | - | $ | 12,341 | ||||||||||||
| Other income (expense) | $ | (191,957 | ) | $ | 119,939 | $ | - | $ | (72,018 | ) | ||||||||||
| Net income (loss) (1) | $ | (2,101,026 | ) | $ | 38,531 | $ | $ | (30,526 | ) | $ | (2,093,021 | ) | ||||||||
(1) Includes acquisition costs of $923,436.
Revenue, net of costs. The Company reported $29,189 in revenues associated with remediation services, net of related costs of $15,769.
Operating Expenses and Depreciation. Operating expenses and depreciation for the year ended November 30, 2015, decreased $52,192 (3%) to $1,968,811 for 2015 as compared to $2,021,003 for the same period in 2014. The table below details the components of operating expense, as well as the dollar and percentage changes for the year ended November 30.
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| For Years Ended November 30, | ||||||||||||||||
| 2015 | 2014 | $ Change | % Change | |||||||||||||
| Stock based compensation | $ | 75,835 | $ | 343,251 | $ | (267,416 | ) | -78 | % | |||||||
| Wage and wage related costs | 1,583,574 | 463,769 | 1,119,805 | 241 | % | |||||||||||
| Acquisition cost | - | 923,436 | (923,436 | ) | -100 | % | ||||||||||
| Professional fees | 64,501 | 106,477 | (41,976 | ) | -40 | % | ||||||||||
| Insurance costs | 3,300 | 4,440 | (1,140 | ) | -26 | % | ||||||||||
| Rent - building and equipment | 54,548 | 47,158 | 7,390 | 16 | % | |||||||||||
| Travel and related | 96,167 | 64,563 | 31,604 | 49 | % | |||||||||||
| Miscellaneous expenses | 81,671 | 55,568 | 26,103 | 47 | % | |||||||||||
| Depreciation and amortization | 9,215 | 12,341 | (3,126 | ) | -25 | % | ||||||||||
| Total Operating Exp. & Depreciation | $ | 1,968,811 | $ | 2,021,003 | $ | (52,192 | ) | -3 | % | |||||||
Wage and wage related costs, which includes salaries, commissions, and taxes, increased $1,119,805 (241%) for the year ended November 30, 2015, as compared to the year ended November 30, 2014. This is primarily due to increases in salaries for the two BioPower officers and addition of the four G3P officers, all are also directors.
Acquisition cost was $-0- for the year ended November 30, 2015, compared to $923,436 for the year ended November 30, 2014. The cost was incurred as a result of the acquisition of G3P in 2014.
Professional fees include legal, accounting, stock transfer agent, SEC filing, banking consulting fees, and general consulting fees. Professional fees decreased for the year ended November 30, 2015 versus the same period in 2014 by $41,976 (-40%) primarily due to the decrease of legal fees incurred for a specific project and a decrease in accounting and SEC filing fees.
Insurance costs in the year ended November 30, 2015, were $3,300 compared to $4,440 for the same period in 2014, a decrease of $1,140 (-26%). The decrease is attributable to the not having a workers compensation insurance policy in place for 2015.
Rent expense increased for the year ended November 30, 2015 versus the same period in 2014 by $7,390 (16%) primarily due to the increased rental rate.
Travel expense for the year ended November 30, 2015 was $96,167 as compared to $64,563 for the same period for 2014 for an increase of $31,604 (49%) as a result of increased business development travel in 2015.
Miscellaneous expense increased by $26,103(47%) to $81,671 for the year ended November 30, 2015, as compared to $55,568 for the same period in 2014. The increase is attributable to a mix of increases and decreases in expenses that are not material in aggregate.
Depreciation expense for the year ended November 30, 2015 was $9,215 compared to the same period for 2014 of $12,341, (-25%). The decrease is a result of the sale of a portion of the equipment to a director in 2015.
Other Income (Expense). Other income (expense) includes interest income, interest expense, loss on settlement of debt, loss on derivatives, consulting income and expense and other non-operating income. Other expense for the year ended November 30, 2015 was $255,969 compared to other expense of $72,018 for the same period last year. In 2014, the Company reported net consulting income of $111,401 and a loss on settlement of debt and accrued expenses of $77,134. No equivalent transactions were reported in 2015. Interest expense increased by 135,145 in 2015 compared to 2014 due to increased borrowings on notes payable and convertible debt, including amortization of debt discounts associated with beneficial conversion features (“BCF”) and derivatives. The Company reported a $14,539 loss on derivatives in 2015.
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Net Loss and Net Loss per Share. Net loss for the year ended November 30, 2015 was $2,211,360, compared to $2,093,021 for the same period in 2014, for an increased net loss of $118,339. Net loss per share for the year ended November 30, 2015 was $0.05 compared to $0.07 in the same period for 2014, based on the weighted average shares outstanding of 41,723,041 and 31,289,083, respectively. The increased net loss for the year ended November 30, 2015 compared to the same period in 2014 arose primarily from the increase in interest expense noted above.
We incurred operating expenses of $1,968,811 and $2,021,003, for the years ended November 30, 2015 and 2014, respectively. Our operating expenses primarily consisted of acquisition, development, accounting, audit and legal, consulting, employee accrued salaries, stock based compensation and administrative expenses.
Liquidity and Capital Resources
The Company does not currently have sufficient resources to cover on-going expenses and expansion. As of November 30, 2015, the Company had cash of $1,281 and current liabilities of $3,905,990. Our current liabilities include accrued expenses and salaries of related parties of $3,043,282. We have historically financed our operations primarily through private placements of common stock, loans from third parties and loans from our Officer.
We plan on raising additional funds from investors to implement our business model. In the event we are unsuccessful, this will have a negative impact on our operations.
LIMITED OPERATING HISTORY: NEED FOR ADDITIONAL CAPITAL
There is no historical financial information about us upon which to base an evaluation of our performance. BioPower Corporation was incorporated September 13, 2010 in the State of Florida and re-domiciled as BioPower Operations Corporation which was incorporated in the State of Nevada on January 5, 2011. We have generated minimal revenues from our operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including the financial risks associated with the limited capital resources currently available to us for the implementation of our business strategies. (See “Risk Factors”). To become profitable and competitive, we must develop and execute the business plan. We must raise funds over the next twelve (12) month period partially through advances from related parties, sale of securities; and, we will seek alternative financing through means such as borrowings from institutions or private individuals. There are no assurances that third party borrowings or financings are available to the Company and, if so, under the terms and conditions acceptable.
Critical Accounting Policies
Share -Based Compensation
The Company recognizes all forms of share-based payments, including stock option grants, warrants, and restricted stock grants, at their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest, using a fair-value-based method and measurement date as required by FASB 718 and FASB 505.
Share based payments, excluding restricted stock, are valued using a Black-Scholes option pricing model. Share based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable.
The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations, and cash flows when implemented.
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Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discusses our exposure to market risk related to changes in interest rates.
We have debt with fixed interest rates. As a result, we have no exposure to market risk caused by fluctuations in interest rates.
The securities in our investment portfolio are not leveraged and are subject to minimal interest rate risk. [Due to their original maturities of twelve months or less, the securities are classified as cash and cash equivalents or short-term investments. Because of the short-term maturities of our investments, we do not believe that a change in market rates would have a significant negative impact on the value of our investment portfolio.
The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk. To achieve this objective in the current economic environment, we maintain our portfolio in cash equivalents or short-term investments, including obligations of U.S. government-sponsored enterprises and money market funds. These securities are classified as cash and cash equivalents or short-term investments and consequently are recorded on the balance sheet at fair value. We do not utilize derivative financial instruments to manage our interest rate risks.]
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company’s consolidated audited financial statements for the fiscal years ended November 30, 2015 and 2014, together with the report of the independent certified public accounting firm thereon and the notes thereto, are presented beginning at page F-1.
RECENT ACCOUNTING PRONOUNCEMENTS
See Item 8. Financial Statements And Supplementary Data — Note 1. Organization and Summary of Significant Accounting Policies and Note 2. Recent Accounting Pronouncements for a summary of additional accounting policies and new accounting pronouncements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.
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As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer/chief financial officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our chief executive officer/chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of November 30, 2015. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on our assessment, we determined that, as of November 30, 2015, our internal control over financial reporting was effective based on those criteria.
The Company’s management, including its Chief Executive Officer and Principal Financial Officer, does not expect that the Company’s disclosure controls and procedures and its internal control processes will prevent all errors. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of error if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that the breakdowns can occur because of simple error or mistake. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission, which permanently exempts smaller reporting companies.
Changes in Internal Controls over Financial Reporting
No change in our system of internal control over financial reporting occurred during the fourth quarter of the fiscal year ended November 30, 2015, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
None
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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following are the officers and directors of the Company as of the date of this report.
| Age | Position | |||
| Robert D. Kohn | 65 | Chairman of the Board, Chief Executive Officer and Chief Financial Officer | ||
| Bonnie Nelson | 64 | Director and Director of Business Strategy | ||
| Michael Dinkes Esq. C.P.A. | 73 | Director and Chairman of the Audit Committee (1) | ||
| Neil Williams, Ph.D. | 63 | Director |
(1) Passed away in February, 2016
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Robert Kohn, CEO and Chief Executive Officer, Director and Co-Founder
Mr. Kohn has been a director and Chief Executive Officer of BioPower Corporation of Florida since September 13, 2010, and has been integrally involved in the formation and development of this business. At present, this role requires 100% of his time. From July 2009 until September 2010, Mr. Kohn was the Interim Chief Financial Officer of Proteonomix, Inc., a public company involved in stem cell research. Mr. Kohn from November 2009 to September 2010 had also been a consultant to Clenergen Corporation, a reporting issuer and was also a board member until January 25, 2011. From 2006 to 2008, Mr. Kohn was the CEO and CFO of Global Realty Development Corp. and was hired to liquidate multiple Australian real estate development companies, which he accomplished. From 1999 – 2002, Mr. Kohn was the co-founder and CEO of AssetTrade which today is GoIndustry with approximately 1,300 employees in 20 countries. From 1996 to 1999 Mr. Kohn was President of Entrade (“energy trading”), a subsidiary of Exelon Corporation, one of the largest electric utilities in the United States. Mr. Kohn has a B.B.A. in accounting from Temple University and is a C.P.A. and formerly a tax consultant with Deloitte Touché.
Bonnie Nelson, Director and Director of Business Strategy, Co-founder
Ms. Nelson has been a director of BioPower Corporation of Florida since September 13, 2010, and has been integrally involved in the formation and development of this business. Ms. Nelson currently sits on the Board of Directors of Allied Artists and was a Board Advisor to Clenergen Corporation in 2010. From 1990 to present, with a career spanning over 20 years of investment and merchant banking, Ms. Nelson has extensive experience in consulting and corporate finance for public and private companies. Ms. Nelson has been responsible for developing and guiding many corporate turnarounds, joint ventures and strategic alliances. Bonnie Nelson was the prior owner and CEO of the Wall Street brokerage firm, Vanderbilt Securities, Inc. from 1983-1990. At Vanderbilt, she was specifically responsible for taking companies public, OTC trading, mergers and acquisitions, and the development of joint ventures and strategic alliances for her clients.
Michael Dinkes, Esq., C.P.A. Director
Mr. Dinkes had been a Director of the Company since April 26, 2012. He passed away in February 2016. He served as the Chairman of the Audit committee. Mr. Dinkes has been an independent C.P.A. in his own practice from 2008 to present. He has been a Senior Tax Partner of Lazar, Levine and Felix LLP from 1996 until 2008. He was the President and Chief Operating Officer of DHB Capital, an American Stock Exchange Company from 1992 to 1996. Mr. Dinkes has a J.D. from NYU School of Law and is admitted to practice in the State of New York. Mr. Dinkes is also a C.P.A. and admitted to practice in the States of New York and Connecticut. He earned a B.B.A. from Baruch School of Business. Mr. Dinkes is a practicing lawyer and CPA.
Neil D. Williams, Ph.D.
Dr. Williams has been a Director of the Company since October 24, 2014. Dr. Williams has been the President and CEO of Green3Power Holdings Company since August 2014. He is the President and CEO of EnviroPower Management since 2010. Dr. Williams was also the Chairman and President of EnviroPower Renewable from 2013 to 2014. He has been the President and CEO of Innviron Corporation since 1998. He is an internationally recognized scientist and environmental engineer. He is one of the original developers of the geosynthetic liners used at landfills and the designer of more than 250 waste management facilities with professional engineering credentials in more than 20 US States. Dr. Williams is one of the developers of the G3P Gasification Technology, and has more than 30 years of environmental management experience. Dr. Williams earned his Ph.D. from the University of California at Berkeley.
Board Committees
We currently have an audit committee but do not have nominating or compensation committees. Michael Dinkes, Esq. C.P.A. was the Chairman of the Audit Committee until February 2016, when he passed away. Our entire board of directors is responsible for the functions that would otherwise be handled by these committees. We intend, however, to establish, a nominating committee and a compensation committee of the board of directors as soon as practicable. We envision that the audit committee will be primarily responsible for reviewing the services performed by our independent auditors, evaluating our accounting policies and our system of internal controls. The nominating committee would be primarily responsible for nominating directors and setting policies and procedures for the nomination of directors. The nominating committee would also be responsible for overseeing the creation and implementation of our corporate governance policies and procedures. The compensation committee will be primarily responsible for reviewing and approving our salary and benefit policies (including stock options), including compensation of executive officers.
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Audit Committee Financial Expert
The Board of Directors had determined that Michael Dinkes, Esq., C.P.A. is our Audit Committee financial expert, as defined under Item 407(d)(5)(i) of Regulation S-K. Mr. Dinkes passed away in February, 2016.
Code of Ethics
We have adopted a code of ethics that applies to all of our employees and officers, and the members of our Board of Directors. A copy of the code of ethics has been previously filed as Exhibit 14.1.
Section 16(a) Beneficial Reporting Compliance
Because we are a 1933 Act Company, Directors, executive officers and holders of more than 10% of our outstanding common stock are not required to comply with Section 16(a) of the Securities Exchange Act of 1934, which requires generally that such persons file reports regarding ownership of transactions in securities of the Company on Forms 3, 4, and 5.
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ITEM 11. EXECUTIVE COMPENSATION
The following is a summary of the compensation we accrued for our executive officers, for the two fiscal years ended November, 2015 and 2014.
Summary Compensation Table
| Name and Position(s) | Year | Salary($) | Bonus($) | Total Compensation | ||||||||||||
| Robert D. Kohn (1) | 2015 | $ | 275,000 | $ | 275,000 | |||||||||||
| CEO and Director | 2014 | $ | 120,000 | $ | 120,000 | |||||||||||
| Bonnie Nelson (2) | 2015 | $ | 275,000 | $ | 275,000 | |||||||||||
| Director and Director of Business Strategy | 2014 | $ | 173,333 | $ | 200,000 | $ | 373,333 | |||||||||
| (1) | Mr. Kohn was appointed as our Chief Executive Officer, Chief Financial Officer, Secretary and Director on January 5, 2011. |
| (2) | Ms. Nelson was appointed as our Director and Director of Business Strategy on January 5, 2011. |
On January 5, 2011, each of Mr. Kohn, Mr. Shepherd and Ms. Nelson entered into employment agreements with the Company. Each contract stipulates that unpaid salary amounts shall accrue if unpaid; such salary amounts have been verbally agreed to be unpaid, but accrue. The general terms of the contracts are as follows:
Commencement: January 5, 2011, February 1, 2011, January 5, 2011
Term: Five years, Two years and Five years
Base Salary: $200,000 Mr. Kohn, $150,000 Mr. Shepherd, $125,000 Ms. Nelson
Ms. Nelson’s Base Salary was amended on April 1, 2013 to $200,000 per annum.
Mr. Kohn’s and Ms. Nelson’s Base Salaries were amended on April 1, 2014 to $120,000 per annum.
Mr. Kohn’s and Ms. Nelson’s Base Salaries were amended on October 24, 2014 to $275,000 per annum commencing December 1, 2014.
Incentive Compensation: Each shall be entitled to receive such bonus payments or incentive compensation as may be determined at any time or from time to time by the Board of Directors of the Company (or any authorized committee thereof) in its discretion. Such potential bonus payments and/or incentive compensation shall be considered at least annually by the Board or committee. Bonnie Nelson has received an accrued $200,000 bonus payment for the introduction of Green3Power. No other bonuses or incentive compensation has been determined to date.
Stock Options. Each shall be entitled to participate in all stock option plans of the Company in effect during the Term of employment. There are presently no stock option plans.
Incentive, Savings and Retirement Plans. During the Term of Employment, each shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable to other key executives of the Company and its subsidiaries, in each case comparable to those currently in effect or as subsequently amended. Such plans, practices, policies and programs, in the aggregate, shall provide the Executive with compensation, benefits and reward opportunities at least as favorable as the most favorable of such compensation, benefits and reward opportunities provided at any time hereafter with respect to other key executives. No such programs presently are in place.
Welfare Benefit Plans: During the Term, each person and/or his family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its subsidiaries (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs), at least as favorable as the most favorable of such plans, practices, policies and programs in effect at any time hereafter with respect to other key executives. In August 2012, the Board of Directors agreed to set a policy that would reimburse the executives up to $500 for home office expenses on a use or lose basis for each month. On March 31, 2014, the Board of Directors agreed to amend the medical reimbursement policy to up to $2,500 per quarter commencing April 1, 2014.
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Vacation. Each shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its subsidiaries as in effect at any time hereafter with respect to other key executives of the Company and its subsidiaries; provided, however, that in no event shall Executive be entitled to fewer than three weeks paid vacation per year, as well as pay for holidays observed by the Company.
Termination for Convenience: Upon termination without cause, each shall be entitled to receive compensation earned but unpaid through the date of such termination plus four weeks’ severance for each completed year and after one year pro-rata.
Termination for Cause: All future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate as of the date of termination.
The Company’s directors who are also employees do not receive remuneration from the Company unless approved by the Board. No compensation has been paid to the Company’s directors since inception. Mr. Dinkes, an outside Director received compensation of 30,000 shares of common stock as a Director and 20,000 shares of stock as Chairman of the audit committee.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table provides information concerning beneficial ownership of our capital stock as of February 28, 2015 by:
| ● | each stockholder, or group of affiliated stockholders, who owns more than 5% of our outstanding capital stock; | |
| ● | each of our named executive officers; | |
| ● | each of our directors; and | |
| ● | all of our directors and executive officers as a group. |
The following table lists the number of shares and percentage of shares beneficially owned based on 42,107,680 shares of Common Stock outstanding as of February 29, 2016.
Beneficial ownership is determined in accordance with the rules of the SEC, and generally includes voting power and/or investment power with respect to the securities held. Shares of Common Stock subject to options and warrants currently exercisable or exercisable within 60 days of January 12, 2015 or issuable upon conversion of convertible securities which are currently convertible or convertible within 60 days of January 12, 2015 are deemed outstanding and beneficially owned by the person holding those options, warrants or convertible securities for purposes of computing the number of shares and percentage of shares beneficially owned by that person, but are not deemed outstanding for purposes of computing the percentage beneficially owned by any other person. Except as indicated in the footnotes to this table, and subject to applicable community property laws, the persons or entities named have sole voting and investment power with respect to all shares of our Common Stock shown as beneficially owned by them.
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| Name | Office | Shares Beneficially Owned (1) | Percent of Class (2) | |||||||
| Officers and Directors | ||||||||||
| Robert D. Kohn | Director and CEO, CFO | 6,297,400 | 14.96 | % | ||||||
| Michael Dinkes, C.P.A. Esq. (1) | Director | 712,000 | 1.69 | % | ||||||
| Bonnie Nelson | Director and Director of Business Development & Strategy | 5,805,000 | 13.79 | % | ||||||
| Neil Williams, Ph. D. | Director | 4,863,428 | 11.55 | % | ||||||
| All officers and directors as a group (4 persons named above) | 17,677,828 | 41.98 | % | |||||||
(1) Passed away in February 2016
Security Ownership of Certain Beneficial Owners
The following table sets forth all of the beneficial owners known to us who own more than five (5) percent of any class of our voting securities as of February 29, 2016.
| Amount and Nature of Beneficial | ||||||||
| Title of Class | Name and Address of Beneficial Owner* | Ownership | Percent of Class | |||||
| Common | Robert Kohn | 6,297,400 Direct | 14.96 | % | ||||
| Series A Preferred Stock | China Energy Partners, LLC (2) | 1 Indirect | 100 | % | ||||
| Common | Riskless Partners, LLLP (3) | 5,805,000 Direct | 13.79 | % | ||||
| Series A Preferred Stock | China Energy Partners, LLC (2) | 1 Indirect | 100 | % | ||||
| Common | J2SB International, LLC (4) | 4,863,428 Direct | 11.55 | % | ||||
| Common | Richard Reiner | 3,820,617 Direct | 9.07 | % | ||||
| Common | Robert Reiner | 4,060,000 Direct | 10.12 | % | ||||
*The address of each shareholder is c/o BioPower Operations Corporation, 1000 Corporate Drive, Suite 200, Fort Lauderdale, Florida, 33334.
(1) The percent of class is based on the total number of shares outstanding of 42,107,680, as of February 29, 2016, and excludes shares owned by certain related parties.
(2) China Energy Partners, LLC is an entity owned 50% by Robert Kohn, our CEO and Chairman of the Board, and 50% owned by Ms. Bonnie Nelson, a Director of the Company. China Energy Partners, LLC owns one share of Series A Preferred Stock entitling China Energy Partners to vote 50.1% of the issued and outstanding shares of common stock of the Company on all matters presented to shareholders for approval.
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(3) The sole managing member of Riskless Partners, LLLP is Ms. Bonnie Nelson, a director and Director of business development. Ms. Nelson has sole voting and dispositive control of the shares of common stock owned by Riskless Partners, LLLP.
(4) The sole managing member of J2SB International, LLC is Mr. Neil Williams, a director and CEO of Green3Power Holdings Company. Mr. Williams has sole voting and dispositive control of the shares of common stock owned by J2SB International, LLC.
Securities Authorized for Issuance under Equity Compensation Plan
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with Related Persons
On June 21, 2013, the Company issued one of its directors 200,000 shares of its common stock in full satisfaction of director’s fees and consulting fees owed, amounting to $12,000.
On June 21, 2013, the Company issued its Chief Executive Officer 1,602,000 shares of its common stock in full satisfaction of amounts due to him for debt and accrued interest of $42,450 and reimbursable expenses, amounting to $53,694.
On June 21, 2013, the Company issued 1,000,000 shares of its common stock to its Director of Business Strategy in full satisfaction of amounts due to her for reimbursable expenses, amounting to $60,000.
On June 25, 2013, the Company granted 2,000,000 shares each to its Chief Executive Officer and Director of Business Strategy of its common stock at $.06 per share, in exchange for converting accrued expenses and note payable. Both parties agreed to continue to work with the Company accruing their salaries. The shares will vest after one year of service but became part of a two year lock-up agreement as of October 24, 2014.
On November 5, 2014 the Director of Business Strategy loaned the Company $50,000 on terms comparable to other loans from third parties. Accordingly and pursuant to the debt agreement, the $50,000 loan is now convertible debt.
On November 28, 2014 the Company granted Bonnie Nelson a $200,000 bonus payment for the introduction of Green3Power.
On November 28, 2014, the Company granted Michael Dinkes, a director, 500,000 shares of stock in payment for directors’ fees, audit committee service and other consulting services. The shares have a two year lock up
Aside from the transactions identified herein, there are no other transactions nor are there any proposed transactions in which any of our directors or nominees, executive officers, or any member of the immediate family of any of the foregoing had or is to have a direct or indirect material interest.
The Company’s Board conducts an appropriate review of and oversees all related party transactions on a continuing basis and reviews potential conflict of interest situations where appropriate. The Board has not adopted formal standards to apply when it reviews, approves or ratifies any related party transaction. However, the Board believes that the related party transactions are fair and reasonable to the Company and on terms comparable to those reasonably expected to be agreed to with independent third parties for the same goods and/or services at the time they are authorized by the Board.
Mr. Kohn, a director and officer of the Company holds a total of 6,297,400 common shares and Ms. Nelson a Director holds 5,805,000 common shares of the Company and together as partners in China Energy Partners LLC hold Series A Preferred stock which entitles them to vote 50.1% of the issued and outstanding shares of common stock of the Company.
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Director Independence
As of the date of this filing, we have no independent directors.
The Company has developed the following categorical standards for determining the materiality of relationships that the Directors may have with the Company. A Director shall not be deemed to have a material relationship with the Company that impairs the Director's independence as a result of any of the following relationships:
- the Director is an officer or other person holding a salaried position of an entity (other than a principal, equity partner or member of such entity) that provides professional services to the Company and the amount of all payments from the Company to such entity during the most recently completed fiscal year was less than two percent of such entity’s consolidated gross revenues;
- the Director is the beneficial owner of less than five percent of the outstanding equity interests of an entity that does business with the Company;
- the Director is an executive officer of a civic, charitable or cultural institution that received less than the greater of $1 million or two percent of its consolidated gross revenues, as such term is construed by the New York Stock Exchange for purposes of Section 303A.02 (b) (v) of the Corporate Governance Standards, from the Company or any of its subsidiaries for each of the last three fiscal years;
- the Director is an officer of an entity that is indebted to the Company, or to which the Company is indebted, and the total amount of either the Company's or the business entity's indebtedness is less than three percent of the total consolidated assets of such entity as of the end of the previous fiscal year; and
- the Director obtained products or services from the Company on terms generally available to customers of the Company for such products or services. The Board retains the sole right to interpret and apply the foregoing standards in determining the materiality of any relationship.
The Board shall undertake an annual review of the independence of all non-management Directors. To enable the Board to evaluate each non-management Director, in advance of the meeting at which the review occurs, each non-management Director shall provide the Board with full information regarding the Director’s business and other relationships with the Company, its affiliates and senior management.
Directors must inform the Board whenever there are any material changes in their circumstances or relationships that could affect their independence, including all business relationships between a Director and the Company, its affiliates, or members of senior management, whether or not such business relationships would be deemed not to be material under any of the categorical standards set forth above. Following the receipt of such information, the Board shall re-evaluate the Director's independence.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following lists fees billed by MaloneBailey LLP auditors for the Company from the quarter ended 2/28/2014 through the year ended 11/30/2015:
| 2015 | 2014 | |||||||
| Audit Fees | $ | 29,000 | $ | 19,000 | ||||
| Audit Related Fees | - | |||||||
| Tax Fees | - | - | ||||||
| All Other Fees | - | |||||||
In the event that we should require substantial non-audit services, the audit committee would pre-approve such services and fees.
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EXHIBITS
| Number | Description | |||
| 3.1 | Articles of Incorporation | Previously filed(1) | ||
| 3.1(a) | Amendment to Articles of Incorporation | Previously filed(1) | ||
| 3.1(b) | Certificate of Designation of the Rights, Preferences and Privileges Of Series A Preferred Stock of BioPower Operations Corporation | Previously filed(1) | ||
| 3.2 | Bylaws | Previously filed(1) | ||
| 4.1 | Specimen of Stock Certificate | Previously filed(1) | ||
| 5.1 | Legal Opinion & Consent of Attorney | Filed herewith | ||
| 10.1 | Employment Agreement between Robert Kohn and the Company dated January 5, 2011. | Previously filed(1) | ||
| 10.2 | Employment Agreement between Bonnie Nelson and the Company dated January 5, 2011. | Previously filed(1) | ||
| 10.3 | Employment Agreement between Dale Shepherd and the Company dated January 5, 2011. | Previously filed(1) |
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| 10.4 | Lock-Up Agreement between the Company and the Ford Irrevocable Trust, dated January 18, 2011 | Previously filed(2) | ||
| 10.5 | Lock-Up Agreement between the Company and the Fox Irrevocable Trust, dated January 18, 2011 | Previously filed(2) | ||
| 10.6 | Exclusive License Agreement between Clenergen Corporation and BioPower Corporation, dated November 30, 2010 | Previously filed(5) | ||
| 10.7 | Form of Subscription Agreement for Offering | Previously filed(2) | ||
| 10.8 | Exclusive Fully Paid Up License Agreement between Green Oil Plantations LTD. and BioPower Operations Corporation | Previously filed (4) | ||
| 10.9 | Warrant to Purchase 1,000,000 shares of Common Stock of BioPower Operations Corporation, dated January 11, 2011 | Previously filed(2) | ||
| 10.10 | Lock-Up Agreement between the Company and Robert Kohn, dated January 18, 2011 | Previously filed(2) | ||
| 10.11 | Lock-Up Agreement between the Company and Janet Kohn, dated January 18, 2011 | Previously filed(2) | ||
| 10.12 | Lock-Up Agreement between the Company and Noslen, LLC, dated January 31, 2011 | Previously filed(2) | ||
| 10.13 | Lock-Up Agreement between the Company and LB Persistence, LLC, dated January 31, 2011 | Previously filed(2) | ||
| 10.14 | Lock-Up Agreement between the Company and the David B. Cohen 2011 Irrevocable Trust, dated January 31, 2011 | Previously filed(2) |
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| 10.15 | Lock-Up Agreement between the Company and the Cohen Family 2011 Irrevocable Trust, dated January 31, 2011 | Previously filed(2) | ||
| 10.16 | Lock-Up Agreement between the Company and E10ST LLC, dated January 31, 2011 | Previously filed(2) | ||
| 10.17 | Lock-Up Agreement between the Company and the Jessica Leopold Irrevocable Trust, dated January 31, 2011 | Previously filed(2) | ||
| 10.18 | Lock-Up Agreement between the Company and Green Oil Plantations, Ltd, dated March 9, 2011 | Previously filed(2) | ||
| 10.19 | Lock-Up Agreement between the Company and Dale Shepherd, dated January 23, 2011 | Previously filed(2) | ||
| 10.20 | Lock-Up Agreement between the Company and Riskless Partners, LLLP, dated January 18, 2011 | Previously filed(2) | ||
| 10.21 | Lock-Up Agreement between the Company and TipTop Irrevocable Trust, dated January 19, 2011 | Previously filed(2) | ||
| 10.22 | Amended Exclusive License Agreement between Clenergen Corporation and BioPower Corporation, dated March 9, 2011 | Previously filed(2) | ||
| 10.23 | Demand Note, dated November 30, 2010, issued to Mr. Robert Kohn | Previously filed (4) | ||
| 10.24 | Demand Note, dated November 30, 2010, issued to Ms. Bonnie Nelson | Previously filed (4) | ||
| 10.25 | Sublease, dated March 18, 2011 between the Company and Carlson Wagonlit Travel, Inc. | Previously filed (5) |
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| 10.26 | Amended Exclusive License Agreement between Clenergen Corporation and BioPower Corporation, dated March 9, 2011 | Previously filed (4) | ||
| 10.27 | Letter Agreement by and between the Company and Halcyon Cabot Ltd. dated January 5, 2012 | |||
| 10.28 | Quture Advisory Agreement dated February 13, 2012 (7) | |||
| 10.29 | Dale Shepherd, President of BioPower, Loan Agreement dated February 22, 2012 | |||
| 21.1 | List of Subsidiaries | Previously filed(2) | ||
| 23.1 | Consent of Independent Registered Public Accounting Firm | Filed herewith | ||
| 23.2 | Consent of Gersten Savage LLP (included in Exhibit 5.1) | Previously Filed (6) | ||
| 31.1 | Certifications of Robert Kohn pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
| 32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||
| 101 | Interactive data files pursuant to Rule 405 of Regulation S-T |
Footnotes:
| (1) | Incorporated by reference to our Registration Statement on Form S-1 (Reg. No. 333-172139) filed with the SEC on February 09, 2011. |
| (2) | Filed as an Exhibit to the Company’s Registration Statement on Form S-1, dated March 16, 2011. |
| (3) | Filed as an Exhibit to the Company’s Registration Statement on Form S-1, dated April 8, 2011. |
| (4) | Filed as an Exhibit to the Company’s Registration Statement on Form S-1, dated April 29, 2011. |
| (5) | Filed as an Exhibit to the Company’s Registration Statement on Form S-1, dated May 18, 2011. |
| (6) | Filed as an Exhibit to the Company’s Registration Statement on Form S-1, dated July 21, 2011. |
| (7) | Incorporated by reference to our Current Report on Form 8-K filed with the SEC on February 17, 2012. |
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BIOPOWER OPERATIONS CORPORATION. | ||
| Date: March 15, 2016 | By: | /s/ Robert Kohn |
Robert D. Kohn, Chief Executive Officer, Chief Financial Officer, Principal Executive Officer, Principal Financial Officer and Director | ||
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BioPower Operations Corporation and Subsidiaries
Consolidated Financial Statements
November 30, 2015 and 2014
| F-1 |
CONTENTS
| F-2 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
BioPower Operations, Corp.
Fort Lauderdale, FL
We have audited the accompanying consolidated balance sheets of BioPower Operations, Corp. and its subsidiaries (collectively, the “Company”) as of November 30, 2015 and 2014, and the related consolidated statements of operations, shareholders’ deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and 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 BioPower Operations, Corp. and its subsidiaries as of November 30, 2015 and 2014, and the results its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has recurring net losses and has a working capital deficit. These conditions raise significant doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
March 15, 2016
| F-3 |
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
BioPower Operations Corporation and Subsidiaries
Consolidated Balance Sheets
| November 30, 2015 | November 30, 2014 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | 1,281 | $ | 15,118 | ||||
| Prepaid expenses | 12,708 | 818 | ||||||
| Total Current Assets | 13,989 | 15,936 | ||||||
| Equipment - net | 10,876 | 21,234 | ||||||
| Security deposit | 6,937 | 11,193 | ||||||
| 17,813 | 32,427 | |||||||
| Total Assets | $ | 31,802 | $ | 48,363 | ||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 435,567 | $ | 419,090 | ||||
| Accounts payable and accrued expenses - related parties | 3,043,282 | 1,455,540 | ||||||
| Derivative liability | 60,356 | - | ||||||
| Notes payable - related parties | 525 | 51,375 | ||||||
| Notes payable | 132,500 | 155,000 | ||||||
| Convertible debt, net of discount | 189,366 | 62,500 | ||||||
| Convertible debt - related parties, net of discount | 44,394 | - | ||||||
| Total Current Liabilities | 3,905,990 | 2,143,505 | ||||||
| Total Liabilities | 3,905,990 | 2,143,505 | ||||||
| Stockholders' Deficit | ||||||||
| Preferred stock, $1 par value; 10,000 shares authorized; 1 share issued and outstanding | 1 | 1 | ||||||
| Common stock, $0.0001 par value, 100,000,000 shares authorized; 42,107,676 shares and 41,107,676 shares, respectively, issued and outstanding | 4,212 | 4,112 | ||||||
| Additional paid-in capital | 4,013,145 | 3,580,931 | ||||||
| Accumulated deficit | (7,891,546 | ) | (5,680,186 | ) | ||||
| Total Stockholders’ Deficit | (3,874,188 | ) | (2,095,142 | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | 31,802 | $ | 48,363 | ||||
| F-4 |
BioPower Operations Corporation and Subsidiaries
Consolidated Statements of Operations
| Year Ended November 30, | ||||||||
| 2015 | 2014 | |||||||
| Revenue, net of costs | $ | 13,420 | - | |||||
| General and administrative expenses | $ | 1,968,811 | $ | 2,021,003 | ||||
| Other income (expense) | ||||||||
| Interest expense | (241,430 | ) | (106,285 | ) | ||||
| Loss on settlement of debt and accrued expenses | - | (77,134 | ) | |||||
| Loss on sale of equipment | (4,183 | ) | - | |||||
| Loss on derivatives | (10,356 | ) | - | |||||
| Consulting revenue, net of expense | - | 111,401 | ||||||
| Total other income (expense) - net | (255,969 | ) | (72,018 | ) | ||||
| Net loss | $ | (2,211,360 | ) | $ | (2,093,021 | ) | ||
| Net loss per common share - basic and diluted | $ | (0.05 | ) | $ | (0.07 | ) | ||
| Weighted average number of common shares outstanding during the period - basic and diluted | 41,723,041 | 31,289,083 | ||||||
| F-5 |
BioPower Operations Corporation and Subsidiaries
Consolidated Statement of Stockholders’ Deficit
| Deficit | ||||||||||||||||||||||||||||||||
| Accumulated | Accumulated | |||||||||||||||||||||||||||||||
| Preferred Stock, | Common Stock, | Additional | during | Other | Total | |||||||||||||||||||||||||||
| $1 Par Value | $0.0001 Par Value | Paid In | Development | Comprehensive | Stockholders' | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Stage | Loss | Deficit | |||||||||||||||||||||||||
| Balance - November 30, 2013 | 1 | 1 | 30,281,180 | 3,027 | 1,947,326 | (3,587,165 | ) | - | (1,636,811 | ) | ||||||||||||||||||||||
| Issuance of common stock for services | 535,000 | 55 | 33,196 | 33,251 | ||||||||||||||||||||||||||||
| Issuance of common stock for services - related party | 500,000 | 50 | 309,950 | 310,000 | ||||||||||||||||||||||||||||
| Issuance of common stock for conversion of debt and accrued expenses | 2,096,200 | 210 | 209,409 | 209,619 | ||||||||||||||||||||||||||||
| Issuance of common stock for acquisition | 7,695,296 | 770 | 922,666 | 923,436 | ||||||||||||||||||||||||||||
| Loss on settlement of debt and accrued expenses | 77,134 | 77,134 | ||||||||||||||||||||||||||||||
| Debt discount on convertible debt | 81,250 | 81,250 | ||||||||||||||||||||||||||||||
| Net loss | (2,093,021 | ) | (2,093,021 | ) | ||||||||||||||||||||||||||||
| Balance - November 30, 2014 | 1 | $ | 1 | 41,107,676 | $ | 4,112 | $ | 3,580,931 | $ | (5,680,186 | ) | $ | - | $ | (2,095,142 | ) | ||||||||||||||||
| Issuance of common stock for cash | 600,000 | 60 | 74,940 | 75,000 | ||||||||||||||||||||||||||||
| Issuance of common stock for services | 200,000 | 20 | 75,815 | 75,835 | ||||||||||||||||||||||||||||
| Issuance of common stock for conversion of debt and accrued expenses | 200,000 | 20 | 29,980 | 30,000 | ||||||||||||||||||||||||||||
| Debt discount on convertible debt | 251,479 | 251,479 | ||||||||||||||||||||||||||||||
| Net loss | (2,211,360 | ) | (2,211,360 | ) | ||||||||||||||||||||||||||||
| Balance - November 30, 2015 | 1 | $ | 1 | 42,107,676 | $ | 4,212 | $ | 4,013,145 | $ | (7,891,546 | ) | $ | - | $ | (3,874,188 | ) | ||||||||||||||||
| F-6 |
BioPower Operations Corporation and Subsidiaries
Consolidated Statements of Cash Flows
| Year Ended November 30, | ||||||||
| 2015 | 2014 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (2,211,360 | ) | $ | (2,093,021 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Loss on settlement of debt and accrued expenses | - | 77,134 | ||||||
| Depreciation | 9,215 | 12,341 | ||||||
| Stock issued for acquisition | - | 923,436 | ||||||
| Stock based compensation expense | 75,835 | 343,251 | ||||||
| Loss on sale of equipment | 4,183 | - | ||||||
| Amortization of debt discount | 217,760 | 81,250 | ||||||
| Loss on derivatives | 10,356 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | - | 27,840 | ||||||
| Prepaid expenses and other current assets | (7,634 | ) | 10,440 | |||||
| Accounts payable and accrued expenses | 21,456 | (71,924 | ) | |||||
| Accounts payable and accrued expenses - related parties | 1,593,742 | 356,753 | ||||||
| Net Cash Used In Operating Activities | (286,447 | ) | (332,500 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of equipment | (9,040 | ) | (4,754 | ) | ||||
| Net Cash Provided By Investing Activities | (9,040 | ) | (4,754 | ) | ||||
| CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: | ||||||||
| Proceeds from convertible debt | 192,500 | 125,000 | ||||||
| Proceeds from notes payable | 22,500 | 67,000 | ||||||
| Proceeds from notes payable - related parties | - | 51,200 | ||||||
| Repayment of notes payable | (7,500 | ) | - | |||||
| Repayment notes payable - related party | (850 | ) | - | |||||
| Proceeds from issuance of common stock | 75,000 | - | ||||||
| Net Cash Provided By Financing Activities | 281,650 | 243,200 | ||||||
| Net Increase (Decrease) in Cash | (13,837 | ) | (94,054 | ) | ||||
| Cash - Beginning of Period | 15,118 | 109,172 | ||||||
| Cash - End of Period | $ | 1,281 | $ | 15,118 | ||||
| SUPPLEMENTARY CASH FLOW INFORMATION: | ||||||||
| Cash Paid During the Period for: | ||||||||
| Income Taxes | $ | - | $ | - | ||||
| Interest | $ | - | $ | - | ||||
| SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Related party accounts payable settled by sale of asset to related party | $ | 6,000 | $ | - | ||||
| Accrued expenses converted to convertible debt | $ | 4,979 | $ | - | ||||
| Reclassification of note payable from convertible to non convertible | $ | 62,500 | $ | - | ||||
| Reclassification of note payable from non convertible to convertible | $ | 100,000 | $ | - | ||||
| Reclassification of related note payable from non convertible to convertible | $ | 50,000 | $ | - | ||||
| Debt discount recorded on convertible debt | $ | 216,979 | $ | 81,250 | ||||
| Debt discount recorded on convertible debt – related party | $ | 34,500 | $ | - | ||||
| Debt discount recorded on derivative on convertible debt | $ | 50,000 | $ | - | ||||
| Debt converted to common stock | $ | 30,000 | $ | 209,619 | ||||
| F-7 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
Note 1. Organization:
BioPower Corporation (“BioPower” or “the Company”) was incorporated in the State of Florida on September 13, 2010. On January 5, 2011, the Company re-domiciled to Nevada and formed BioPower Operations Corporation, a Nevada corporation. On January 6, 2011, the shareholders of BioPower Corporation contributed their shares of BioPower Corporation to BioPower Operations Corporation and BioPower Corporation became a wholly-owned subsidiary.
On October 24, 2014, the Company executed a Share Exchange Agreement (“SEA”) with Green3Power Holdings Company (“G3P”) to acquire G3P and its wholly-owned subsidiaries Green3Power Operations Inc., a Delaware corporation (“G3P OPS”) and Green3Power International Company, a Nevis Corporation (“G3PI”), which are wholly-owned subsidiaries of the Company. This transaction was a stock for stock exchange, which was accounted for as an acquisition and recorded as an expense based on the fair value of the Company’s common stock as of the date of the exchange. Also exchanged was one share of the Company’s Series B, preferred stock, which is convertible into common shares two years from the date of the SEA, if certain milestones are met as required by the SEA. No value was attributed to the preferred share. (See footnote 8. (B)). We conduct all of our operations through Green3Power Holdings Company and their subsidiaries which are primarily engaged in the development of waste-to-energy projects and services including design, permitting, equipment procurement, construction management and operations and maintenance of the intended facilities. We intend to hold equity interests in the waste-to-energy facilities on a global basis and operate and maintain the facilities. A second business unit is focused on providing waste remediation services globally.
The Company’s fiscal year end is November 30.
Note 2 Summary of Significant Accounting Policies
Principles of Consolidation
All inter-company accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.
Such estimates and assumptions for the periods ended November 30, 2015 and 2014, affect, among others, the following:
| ● | estimated fair value of share based payments, | |
| ● | estimated carrying value, useful lives and related impairment of equipment and intangible assets; and | |
| ● | estimated valuation allowance for deferred tax assets, due to continuing and expected future losses |
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.
| F-8 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
Cash
The Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents. The Company had no cash equivalents at November 30, 2015.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are stated at their estimated net realizable values. The Company evaluates whether it is necessary to record an allowance for doubtful accounts for estimated losses inherent in the accounts receivable portfolio. In evaluating the required allowance, management considers historical losses adjusted to take into account current market conditions and financial conditions, the amount of receivables in dispute, and the current receivable’s aging and current payment patterns. Based on its evaluation, no allowance for doubtful accounts was recorded as of November 30, 2015.
Equipment
Equipment is stated at cost, less accumulated depreciation computed on a straight-line basis over the estimated useful lives. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized when deemed material. When equipment is sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations.
Equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. There were no impairment charges taken during the periods ended November 30, 2015 and 2014.
Derivative Liabilities
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, accounts payable and accrued expenses and shareholder loans. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
Financial assets and liabilities recorded at fair value in our balance sheets are categorized based upon a fair value hierarchy established by GAAP, which prioritizes the inputs used to measure fair value into the following levels:
Fair Value of Financial Instruments
Level 1—Quoted market prices in active markets for identical assets or liabilities at the measurement date.
Level 2—Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable and can be corroborated by observable market data.
Level 3—Inputs reflecting management’s best estimates and assumptions of what market participants would use in pricing assets or liabilities at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.
| F-9 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Financial assets and liabilities measured at fair value on a recurring basis are summarized below for the year ended November 30, 2015
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets | ||||||||||||||||
| Securities-available for sale | $ | - | $ | - | $ | - | $ | - | ||||||||
| Liabilities | ||||||||||||||||
| Derivative Financial Instruments | $ | - | $ | - | $ | 60,356 | $ | 60,356 | ||||||||
Financial assets and liabilities measured at fair value on a recurring basis are summarized below for the year ended November 30, 2014:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets | ||||||||||||||||
| Securities-available for sale | $ | - | $ | - | $ | - | $ | - | ||||||||
| Liabilities | ||||||||||||||||
| Derivative Financial Instruments | $ | - | $ | - | $ | - | $ | - |
| F-10 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
The following table presents details of the Company’s level 3 derivative liabilities as of November 30, 2014:
| Amount | ||||
| Balance November 30, 2014 | $ | - | ||
| Debt discount originated from derivative liabilities | 50,000 | |||
| Initial loss recorded | 61,074 | |||
| Change in fair market value of derivative liabilities | (50,718 | ) | ||
| Balance November 30, 2015 | $ | 60,356 | ||
Investment in Joint Venture
GECC, a subsidiary of the Company signed an agreement to form a 50-50 Joint Venture with AGT Technologies, LLC. in November 2013 for the technology used for the conversion of cellulosic sugar to ethanol.
GECC owns fifty percent of MicrobeSynergy, LLC joint venture and will record its investment on the equity basis of accounting. The Company’s proportionate share of expenses incurred by the Joint Venture will be charged to the statement of operations and adjusted against the Investment in Joint Venture. Losses from the Joint Venture are only recognized until the investment in the Joint Venture is reduced to zero. Losses in excess of the investment must be restored from future profits before the Company can recognize its proportionate share of profits.
Elements of the joint venture related to exclusivity of the technology are in dispute.
The Company intends to sell GECC for a nominal value as its total focus is on the development of waste-to-energy facilities and waste remediation.
As of November 30, 2015, the Joint Ventures had no activity.
Convertible debt, Beneficial Conversion Feature and Debt Discount
For conventional convertible debt where the rate of conversion is below market value at the date of the agreement, the Company records a “beneficial conversion feature” (“BCF”) and related debt discount.
When the Company records a BCF, the relative fair value of the BCF would be recorded as a debt discount against the face amount of the respective debt instrument. The discount would be amortized to interest expense over the life of the debt. When a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
| F-11 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
Share-based payments
The Company recognizes all forms of share-based payments, including stock option grants, warrants, and restricted stock grants, which are based on the estimated number of awards that are ultimately expected to vest, using a fair-value-based method and measurement date as required by ASC 718 and ASC 505.
Share based payments, excluding restricted stock, are valued using a Black-Scholes option pricing model. Share based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable.
The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service.
When computing fair value, the Company may consider the following variables:
| ● | The risk-free interest rate assumption is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. |
| ● | The Company has not paid any dividends on common stock since inception and does not anticipate paying dividends on its common stock in the near future. |
| ● | The expected option term is computed using the “simplified” method as permitted under the provisions of Staff Accounting Bulletin (“SAB”) 110. |
| ● | The expected volatility is based on the historical volatility of the Company’s common stock, based on the daily quoted closing trading prices. |
| ● | The forfeiture rate is based on the historical forfeiture rate for unvested stock options. |
Earnings per share
Basic earnings (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. The Company does not include shares not yet issued that were included as a component of common stock payable in the earnings per share calculation.
Since the Company reflected a net loss in 2015 and 2014, considering any common stock equivalents, if exercisable, would have been anti-dilutive. A separate computation of diluted earnings (loss) per share is not presented.
The Company has the following potential common stock equivalents at November 30, 2015 and 2014:
| November 30, 2015 | November 30, 2014 | |||||||
| Convertible debt | 3,174,790 | - | ||||||
Revenue Recognition
The Company and its subsidiaries intend to focus on developing waste to energy projects globally by designing, engineering, permitting, procuring equipment, managing construction and operating and maintaining facilities for the conversion of wastes into energy through licensed gasification technology including but not limited to producing electricity and ultra-low sulfur renewable synthetic fuels.
The Company also provides waste remediation services. Our revenues from waste remediation services are primarily from consulting and actual remediation and are presented net of related project costs.
Revenues are recognized when realized or realizable and have been earned.
| F-12 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
Income Taxes
Provisions for income taxes are calculated based on reported pre-tax earnings and current tax law.
Significant judgment is required in determining income tax provisions and evaluating tax positions. The Company periodically assesses its liabilities and contingencies for all periods that are currently open to examination or have not been effectively settled based on the most current available information. When it is not more likely than not that a tax position will be sustained, the Company records its best estimate of the resulting tax liability and any applicable interest and penalties in the financial statements.
Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements using statutory rates in effect for the year in which the differences are expected to reverse. The Company presents the tax effects of these deferred tax assets and liabilities separately for each major tax jurisdiction.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that the changes are enacted. The Company records a valuation allowance to reduce deferred tax assets when it is more likely than not that some portion of the asset may not be realized. The Company evaluates its deferred tax assets and liabilities on a periodic basis.
Recent Accounting Pronouncements
There are no new accounting pronouncements that are expected to have any material impact on the Company’s consolidated financial statements.
Note 3. Going Concern
As reflected in the accompanying consolidated financial statements, the Company had a net loss of $2,211,360 and $2,093,021, for the years ended November 30, 2015 and 2014, respectively, and net cash used in operations of $286,447 and $332,500 for the years ended November 30, 2015 and 2014, respectively. Additionally, the Company had a working capital deficit of $3,892,001 and $2,127,569, for the years ended November 30, 2015 and 2014, respectively and a stockholders’ deficit of $3,874,188 and $2,095,142, at November 30, 2015 and 2014, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The ability of the Company to continue as a going concern is dependent on Management's plans, which include potential asset acquisitions, mergers or business combinations with other entities, further implementation of its business plan and continuing to raise funds through debt and/or equity financings. The Company will likely rely upon related party debt and/or equity financing in order to ensure the continuing existence of the business.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
| F-13 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
Note 4. Equipment
At November 30, 2015 and November 30, 2014, equipment consists of the following:
| November 30, | ||||||||||
| 2015 | 2014 | Estimated Useful Life | ||||||||
| Computer Equipment | $ | 36,800 | $ | 27,760 | 5 years | |||||
| Testing Equipment | - | 20,366 | 3 years | |||||||
| Less: Accumulated depreciation | (25,924 | ) | (26,892 | ) | ||||||
| Equipment, net | $ | 10,876 | $ | 21,234 | ||||||
Depreciation expense was $9,215 and $12,341 for the years ended November 30, 2015 and 2014, respectively.
Note 5. Income Taxes
The Company recognizes deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carryforwards. The Company has established a valuation allowance to reflect the likelihood of the realization of deferred tax assets.
The Company has a net operating loss carryforward for tax purposes totaling approximately $3,062,000 at November 30, 2015, expiring through 2034. U.S. Internal Revenue Code Section 382 places a limitation on the amount of taxable income that can be offset by carryforwards after a change in control (generally greater than a 50% change in ownership). Temporary differences, which give rise to a net deferred tax asset, are as follows:
Significant deferred tax assets at November 30, 2015 and 2014 are approximately as follows:
| 2015 | 2014 | |||||||
| Gross deferred tax assets: | ||||||||
| Net operating loss carryforwards | $ | 1,152,000 | $ | 568,000 | ||||
| Accrued and deferred expenses | 752,000 | 624,000 | ||||||
| Total deferred tax assets | 1,904,000 | 1,192,000 | ||||||
| Less: valuation allowance | (1,904,000 | ) | (1,192,000 | ) | ||||
| Net deferred tax asset recorded | - | $ | - | |||||
The valuation allowance at November 30, 2015, and 2014, was approximately $1,904,000 and $1,192,000, respectively.
| F-14 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
Note 6. Notes Payable and Convertible Debt
Notes payable consists of the following:
| Balance | Interest Rate | Maturity | ||||||||
| Balance – November 30, 2013 | $ | 88,000 | ||||||||
| Borrowings | 30,000 | 4 | % | August 4, 2014, in default | ||||||
| Borrowings | 25,000 | 8 | % | June 30, 2015, in default | ||||||
| Borrowings | 10,000 | 8 | % | April 1, 2015, in default | ||||||
| Borrowings | 2,000 | 8 | % | April 30, 2015, in default | ||||||
| Balance – November 30, 2014 | $ | 155,000 | 8 | % | Various | |||||
| Reclassification of convertible debt to notes payable | 62,500 | 8 | % | Due on demand | ||||||
| Borrowings | 7,500 | 8 | % | September 1, 2015 | ||||||
| Borrowings | 15,000 | 8 | % | July 14, 2015 | ||||||
| Repayment of note payable | (7,500 | ) | ||||||||
| Reclassification of debt to convertible debt | (43,000 | ) | ||||||||
| Reclassification of debt to convertible debt | (15,000 | ) | ||||||||
| Reclassification of debt to convertible debt | (42,000 | ) | ||||||||
| Balance – November 30, 2015 | $ | 132,500 | ||||||||
A third party investor advanced $30,000 in July, 2014, at 8% interest. The loan which was due August 4, 2014, has not been repaid. During September and October, 2014, a third party investor loaned the Company $25,000 at 8% interest, due on or before June 30, 2015.
In October, 2014, a third party investor made two advances totaling $12,000, at 8% interest. The loans are due in April, 2015.
In December, 2014 a third party investor combined two previous loans dated July 2, 2013 and September 11, 2014 for $18,000 and $5,000, respectively, into a new loan of $23,000, at 8% interest, due May 5, 2015. The $23,000 note payable and $20,000 note payable from the period ending November 30, 2014, was reclassified as convertible debt on July 24, 2015.
In May, 2015 a third party investor advanced $7,500, at 8% interest, which is due on September 1, 2015. The loan and accrued interest has been repaid.
On May 13, 2015 a third party investor advanced $30,000 of which $15,000 was not convertible. The loan was due on or before July 14, 2015, at 8% interest. The non-convertible portion of the debt was reclassified as convertible debt on July 24, 2015 (See Note 6- Convertible Debt).
| F-15 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
Only July 24, 2015 a third party investor combined three previous loans dated July 10, 2014, October 1, 2014, and October 30, 2014 for $30,000, $10,000, and $2,000, respectively, along with accrued interest of $2,448, into one convertible note in the amount of $44,448, due December 30, 2015. (See Note 6- Convertible Debt).
Accrued interest on notes payable at November 30, 2015 and November 30, 2014 amounted to $15,863 and $9,474, respectively, which is included as a component of accounts payable and accrued expenses.
Convertible debt consists of the following:
| Balance | Interest Rate |
Maturity | Conversion Price | |||||||||||
| Balance - November 30, 2013 | $ | 125,000 | ||||||||||||
| Borrowings | 125,000 | 8 | % | Due on demand | 0.10 | |||||||||
| Conversion of borrowings to equity | (125,000 | ) | ||||||||||||
| Conversion of borrowings to equity | (62,500 | ) | ||||||||||||
| Balance - November 30, 2014 | $ | 62,500 | 8 | % | 0.10 | |||||||||
| Reclassification to notes payable | (62,500 | ) | ||||||||||||
| Borrowings | 7,500 | 8 | % | December 30, 2015 | 0.12 | |||||||||
| Borrowings | 15,000 | 8 | % | July 15, 2015 | 0.15 | |||||||||
| Reclassification of notes payable to convertible debt | 15,000 | 8 | % | December 30, 2015 | 0.15 | |||||||||
| Reclassification of notes payable to convertible debt | 43,000 | 8 | % | December 30, 2015 | 0.15 | |||||||||
| Reclassification of notes payable to convertible debt | 42,000 | 8 | % | December 30, 2015 | 0.15 | |||||||||
| Borrowings | 120,000 | 8 | % | December 30, 2015 | 0.15 | |||||||||
| Borrowings | 50,000 | 8 | % | December 30, 2016 | 0.15 | |||||||||
| Accrued interest added to convertible debt | 4,979 | 8 | % | December 30, 2015 | 0.15 | |||||||||
| Conversion of borrowings to equity | (30,000 | ) | ||||||||||||
| Debt Discount | (78,113 | ) | ||||||||||||
| Balance - November 30, 2015 | $ | 189,366 | ||||||||||||
| F-16 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
On November 22, 2013 a third party investor advanced $125,000 due in 14 months from the date of the loan. Pursuant to the agreement the investor was allowed to convert up to 50% of the debt into commons stock at the conversion price of $0.10 per share. Pursuant to a November 28, 2014 agreement of the board of directors, the investor was allowed to convert 100% of the original amount of the debt and accrued interest into the Company’s common shares at a price of $0.10 per share in return for the investor extending the due date of remaining notes payable to June 30, 2015. The Company accounted for the conversion of loan in accordance with ASC 470, “Debt with Conversion and Other Options”. The portion of the loan which was originally convertible (50%) was deemed to have a beneficial conversion feature because the fair value of the stock exceeded the effective conversion price embedded in the loan on the commitment date. Accordingly, the Company recorded the value of the beneficial conversion feature for 50% of the debt, which was determined to be $18,750, as a discount to the loan and a corresponding increase to additional paid in capital. The debt discount was recognized as interest expense in the current period. The fair market value of the remaining shares as of the date of conversion, November 25, 2014, was $0.19 per share. At the date of conversion, the Company immediately recognized a loss on conversion of the debt and accrued interest of $67,379 with a corresponding increase to additional paid in capital.
On December 3, 2013 a third party investor advanced $125,000 due on or before February 3, 2015. Pursuant to the agreement, the investor was allowed to convert up to 50% of the debt at a share price of $0.10. The Company accounted for the conversion of loan in accordance with ASC 470, “Debt with Conversion and Other Options”. The loan was deemed to have a beneficial conversion feature because the fair value of the stock exceeded the effective conversion price embedded in the loan on the commitment date. Accordingly, the Company recorded the value of the beneficial conversion feature, which was determined to be $62,500 as a discount to the loan and a corresponding increase to additional paid in capital. The amount was recognized as interest expense. There was a loss on the conversion of accrued interest of $9,755, which was recorded as a loss on the settlement of debt and a corresponding amount was recorded as an increase to paid in capital.
On December 30, 2014 a third party investor advanced $7,500 due on or before December 30, 2015. Pursuant to the agreement, the investor is allowed to convert 100% of the debt at a share price of $0.12. The company accounted for the conversion of loan in accordance with ASC 470, “Debt with Conversion and Other Options”. The loan was deemed to have a beneficial conversion feature because the fair value of the stock exceeded the effective conversion price embedded in the loan on the commitment date. Accordingly, the Company recorded the value of the beneficial conversion feature, which was determined to be $5,000 as a discount to the loan and a corresponding increase to additional paid in capital.
On May 13, 2015 a third party investor advanced $30,000 due on or before July 15, 2015. Pursuant to the agreement, the investor was allowed to convert 50% of the debt at a share price of $0.15. The loan was later modified to allow for the conversion of the entire debt. In the third quarter, the $30,000 loan was converted into 200,000 shares at $0.15 per share. The company accounted for the conversion of loan in accordance with ASC 470, “Debt with Conversion and Other Options”. The loan was deemed to have a beneficial conversion feature because the fair value of the stock exceeded the effective conversion price embedded in the loan on the commitment date. Accordingly, the Company recorded the value of the beneficial conversion feature, which was determined to be $2,000 as a discount to the loan and a corresponding increase to additional paid in capital.
Only July 24, 2015 a third party investor combined a note in the amount of $23,000, dated December 1, 2014, along with a note in the amount of $20,000, dated October 14, 2014 and accrued interest of $2,531, into one note in the amount of $45,531, due December 30, 2015. The loan renewal and modification allows the debt to be converted into common shares at $0.15 per share. The company accounted for the conversion of loan in accordance with ASC 470, “Debt with Conversion and Other Options”. The loan was deemed to have a beneficial conversion feature because the fair value of the stock exceeded the effective conversion price embedded in the loan on the commitment date. Accordingly, the Company recorded the value of the beneficial conversion feature, which was determined to be $10,882 as a discount to the loan and a corresponding increase to additional paid in capital. (See Note 6-Note payable).
| F-17 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
Only July 24, 2015 a third party investor combined three previous loans dated July 10, 2014, October 1, 2014, and October 30, 2014 for $30,000, $10,000, and $2,000, respectively, along with accrued interest of $2,448, into one convertible note in the amount of $44,448, due December 30, 2015. The loan renewal and modification allows the debt to be converted into common shares at $0.15 per share. The company accounted for the conversion of loan in accordance with ASC 470, “Debt with Conversion and Other Options”. The loan was deemed to have a beneficial conversion feature because the fair value of the stock exceeded the effective conversion price embedded in the loan on the commitment date. Accordingly, the Company recorded the value of the beneficial conversion feature, which was determined to be $10,623 as a discount to the loan and a corresponding increase to additional paid in capital. (See Note 6- Note payable).
In July, 2015, the Company entered into various convertible debt agreements totaling $120,000 at 8% interest, due on December 30, 2015. The debt is convertible into common shares of stock at a conversion price of $0.15 per share. The company accounted for the conversion of loan in accordance with ASC 470, “Debt with Conversion and Other Options”. The loan was deemed to have a beneficial conversion feature because the fair value of the stock exceeded the effective conversion price embedded in the loan on the commitment date. Accordingly, the Company recorded the value of the beneficial conversion feature, which was determined to be $120,000 as a discount to the loan and a corresponding increase to additional paid in capital.
In July, 2015, the Company entered into convertible debt agreements totaling $50,000 at 8% interest, due on December 30, 2016. The debt is convertible into common shares of stock at a conversion price of $0.15 per share. On this date the Company recorded a debt discount of $50,000 from the initial valuation of the derivative liability of $111,074 and an initial loss on the derivative liability of $61,074 based on the Black Sholes pricing model. The fair value of the derivative liability at November 30, 2015 is $60,356, resulting in a loss on the change in fair value of the derivative of $50,718. The note is shown net of a derivative debt discount of $37,643 at November 30, 2015. (See Note 6).
Accrued interest on convertible debt at November 30, 2015 and November 30, 2014 amounted to $11,703 and $294, respectively, which is included as a component of accounts payable and accrued expenses.
Interest expense on convertible debt with third parties amounted to $8,025 and $4,973 at November 30, 2015 and 2014, respectively.
| F-18 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
Note 7. Notes Payable – Related Parties
For the year Ended November 30, 2014
During August, 2014, the directors of the Company made interest free loans of $1,200, which are due on demand.
On November 5, 2014, the Director of Business Strategy made a loan of $50,000, bearing interest at 8% with terms comparable to other loans from third parties. Accordingly, and pursuant to the debt agreement, the $50,000 loan is now convertible debt, which was due on May 5, 2015, and is now a demand loan.
For the year ended November 30, 2015
On November 5, 2014, the Director of Business Strategy made a loan of $50,000, bearing interest at 8% which was due on May 5, 2015, however, the note was extended to December 30, 2015 by agreement. The $50,000 non-convertible loan included a provision for matching, future conversion rights with any new loans made by the company with the exception of a Right of First Refusal. On December 30, 2014, a third party investor loaned the Company $7,500 with conversion rights at $0.12 per share. Therefore, effective December 30, 2014, $7,500 of the director’s $50,000 note payable was reclassified to convertible debt with conversion rights of $0.12 per share. The company accounted for the conversion of loan in accordance with ASC 470, “Debt with Conversion and Other Options”. The loan was deemed to have a beneficial conversion feature because the fair value of the stock exceeded the effective conversion price embedded in the loan on the commitment date. Accordingly, the Company recorded the value of the beneficial conversion feature, which was determined to be $5,000 at December 30, 2014, as a discount to the loan and a corresponding increase to additional paid in capital. On May 13, 2015, another third party investor loaned the Company $15,000 with conversion rights at $0.15 per share. Therefore, effective May 13, 2015, an additional $15,000 of the directors’ $50,000 note payable was reclassified to convertible debt with conversion rights of $0.15 per share. The company accounted for the conversion of loan in accordance with ASC 470, “Debt with Conversion and Other Options”. The loan was deemed to have a beneficial conversion feature because the fair value of the stock exceeded the effective conversion price embedded in the loan on the commitment date. Accordingly, the Company recorded the value of the beneficial conversion feature, which was determined to be $2,000 as a discount to the loan and a corresponding increase to additional paid in capital. On July 24, 2015, a third party investor loaned the Company $30,000 with conversion rights at $0.15 per share. Therefore, effective July 24, 2015, the remainder of the directors’ $50,000 note payable was reclassified to convertible debt with conversion rights of $0.15 per share. The company accounted for the conversion of loan in accordance with ASC 470, “Debt with Conversion and Other Options”. The loan was deemed to have a beneficial conversion feature because the fair value of the stock exceeded the effective conversion price embedded in the loan on the commitment date. Accordingly, the Company recorded the value of the beneficial conversion feature, which was determined to be $2,000 as a discount to the loan and a corresponding increase to additional paid in capital.
As of November 30, 2015 and 2014, respectively
the Company owes $4,250 and $294 in accrued interest, respectively, which has been recorded as a component of accounts payable
and accrued expenses – related party.
The Company has separated accounts payable and accrued expenses on the balance sheet to reflect amounts due to related parties primarily consisting of officer compensation, health insurance, interest on notes and reimbursable expenses to officers for travel, meals and entertainment, vehicle and other related business expenses.
| F-19 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
Note 8. Stockholders’ Deficit
(A) Preferred Stock
On January 28, 2011, the Company issued one share of Series A, preferred stock for $1. This series of preferred stock had a provision that the holder of the one share, a related party controlled by the Company’s Chief Executive Officer and a Director, can vote 50.1% of the total votes. There are no preferences, dividends, or conversion rights.
On October 24, 2014, as part of the transaction with G3P Holdings, the Company issued one share of its Series B convertible preferred stock which represents the number of shares of Series B preferred stock which are convertible into an aggregate number shares of the Company’s commons stock equal to 50% of the number of shares of the Company’s common outstanding immediately prior to the share exchange. Due to the requirements and timing for conversion, the share was not valued. (See footnote 1.)The Series B preferred share is exercisable only on the second anniversary of the closing date of the transaction, under the terms forth in the share exchange agreement set forth below:
Conversion Rights of Convertible Preferred Stock:
Up to fifty percent (50%) maximum of the outstanding CS at October 24, 2014, (approximately 30,000,000 common stock shares).
At the end of two (2) years, G3P Existing Shareholders have the right to convert the PS into CS on the following basis:
If BOPO earns $ 0 net cash flow and G3P earns a minimum of $1,000,000 net cash flow then the PS can be converted into 50% of the CS outstanding on October 24, 2014, and prior to the issuance of the CS in this Transaction; or If BOPO and G3P earn a similar amount of net cash flow then G3P can convert the PS into 30% of the outstanding CS prior to the issuance of the CS in this Transaction or a total of 50% of the outstanding shares at Closing including the CS issued at Closing; or
If G3P earns $-0- net cash flow, then G3P cannot convert the PS but will retain the original 20% of the CS issued at Closing.
G3P has an option, which can be exercised at the end of two (2) years to wait an additional one year to convert the PS. If G3P exercises the option to wait up to one more year before converting the PS, then G3P must provide evidence that one project is under construction or all contracts for the project are executed and funding is in place to commence construction.
(B) Common Stock
For the year ended November 30, 2014:
535,000 common shares were issued to unrelated third parties for services rendered for a value of $57,001.
500,000 common shares were issued to a director for services rendered for a value of $100,000
The Company expensed the shares issued for services as a component of general and administrative expenses.
| F-20 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
722,550 common shares were issued to an unrelated third party for conversion of $62,500 of debt and $9,755 of accrued interest, at a value of $0.10, per the convertible note agreement. The loss on settlement of debt was $9,755. (See footnote 6.)
1,373,650 common shares were issued to an unrelated third party for conversion of $125,000 of debt and $12,365 of accrued interest, at a value of $0.10, per the convertible note agreement. The loss on settlement of debt was $67,379. (See footnote 6).
7,695,296 common shares were issued in accordance with a share exchange agreement executed on October 24, 2014 with the shareholders of G3P Holdings. The fair value at the date of the exchange was $923,436. The cost of the acquisition was a component of general and administrative expenses. (See footnote 1.)
For the year ended November 30, 2015:
The Company issued 600,000 shares of stock for cash totaling $75,000, at values of $0.12 and $.15 per share to unrelated third parties.
200,000 common shares were issued to unrelated third parties for services rendered for a value of $75,835.
200,000 common shares were issued to an unrelated third party for conversion of $30,000 of debt, at a value of $0.15, per the convertible note agreement. (See footnote 6).
Note 9. Related Party Transactions
The Company has separated accounts payable and accrued expenses on the balance sheet to reflect amounts due to related parties primarily consisting of officer compensation, health insurance, interest on notes and reimbursable expenses to officers for travel, meals and entertainment, vehicle and other related business expenses.
Notes payable to related parties at November 30, 2015 and November 30, 2014 is $525 and $51,375 respectively. Convertible notes payable to related parties is $50,000 at November 30, 2015, with a corresponding debt discount of $5,606 for a net amount of $44,394.
Accrued interest at November 30, 2015 and November 30, 2014, amounted to $4,421 and $190, respectively and is a component of accounts payable and accrued expenses – related parties. Interest expense on notes payable to related parties amounted to $33,124 and $275 for the years ended November 30, 2015 and November 30, 2014, respectively.
For the year ended November 30, 2014
Effective November 30, 2014, the Company granted 500,000 shares of common stock with a fair value of $100,000, to one of its directors in exchange for all fees owed to the director for services rendered through November 30, 2014. (See footnote 8(B.))
| F-21 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
For the year ended November 30, 2015
On November 5, 2014, the Director of Business Strategy made a loan of $50,000, bearing interest at 8% which was due on May 5, 2015, however, the note was extended to December 30, 2015 by agreement. The $50,000 non-convertible loan included a provision for matching, future conversion rights with any new loans made by the company with the exception of a Right of First Refusal. On December 30, 2014, a third party investor loaned the Company $7,500 with conversion rights at $0.12 per share. Therefore, effective December 30, 2014, $7,500 of the director’s $50,000 note payable was reclassified to convertible debt with conversion rights of $0.12 per share. The company accounted for the conversion of loan in accordance with ASC 470, “Debt with Conversion and Other Options”. The loan was deemed to have a beneficial conversion feature because the fair value of the stock exceeded the effective conversion price embedded in the loan on the commitment date. Accordingly, the Company recorded the value of the beneficial conversion feature, which was determined to be $5,000 at December 30, 2014, as a discount to the loan and a corresponding increase to additional paid in capital. On May 13, 2015, another third party investor loaned the Company $15,000 with conversion rights at $0.15 per share. Therefore, effective May 13, 2015, an additional $15,000 of the directors’ $50,000 note payable was reclassified to convertible debt with conversion rights of $0.15 per share. The company accounted for the conversion of loan in accordance with ASC 470, “Debt with Conversion and Other Options”. The loan was deemed to have a beneficial conversion feature because the fair value of the stock exceeded the effective conversion price embedded in the loan on the commitment date. Accordingly, the Company recorded the value of the beneficial conversion feature, which was determined to be $2,000 as a discount to the loan and a corresponding increase to additional paid in capital. On July 24, 2015, a third party investor loaned the Company $30,000 with conversion rights at $0.15 per share. Therefore, effective July 24, 2015, the remainder of the directors’ $50,000 note payable was reclassified to convertible debt with conversion rights of $0.15 per share. The company accounted for the conversion of loan in accordance with ASC 470, “Debt with Conversion and Other Options”. The loan was deemed to have a beneficial conversion feature because the fair value of the stock exceeded the effective conversion price embedded in the loan on the commitment date. Accordingly, the Company recorded the value of the beneficial conversion feature, which was determined to be $2,000 as a discount to the loan and a corresponding increase to additional paid in capital.
In May, 2015, a director purchased the Company’s testing equipment for $6,000. The Company solicited bids for the sale of the equipment, which was no longer used in its business, and the director was the highest bidder. The company recognized a loss on the sale of $4,183 on the sale.
During the years ended November 30, 2015 and 2014, the Company recorded related party interest expense of $33,124 and $275, respectively.
Note 10. Derivative Liabilities
On July 23, 2015, the Company entered into a convertible loan agreement with an investor. The Company received a total of $50,000 which bears interest at 8% per annum and is due on December 30, 2016. Interest shall accrue from the advancement date and shall be payable on December 30, 2016. Any portion of the loan and unpaid interest are convertible at any time at the option of the lender into shares of common stock of the Company at a conversion price of $0.15 per share. If an equity transaction occurs at a price below $0.15, then the conversion price will adjust to such price.
On this date of issuance, the Company recorded a debt discount in the amount of $50,000 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further, the Company recognized a derivative liability of $111,074 and initial loss on derivative liability of $61,074 based on the Black Scholes pricing model. As of November 30, 2015, $12,357 of the debt discount has been amortized. The fair value of the derivative liability at November 30, 2015 is $60,356 resulting in a gain on the change in fair value of the derivative of $50,718 and the net loss on the derivative for the year ended November 30, 2015 is $10,356. The Note is shown net of a derivative debt discount of $37,643 at November 30, 2015.
| F-22 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
Since equity classification is not available for the conversion feature, we were required to bifurcate the embedded conversion feature and carry it as a derivative liability, at fair value. Derivative financial instrument is carried initially and subsequently at its fair values.
We estimated the fair value of the derivative on the inception date, and subsequently, using the Black-Scholes valuation technique, adjusted for the effect of dilution, because that technique embodies all of the assumptions (including, volatility, expected terms, and risk free rates) that are necessary to fair value complex derivate instruments.
As a result of the application of ASC No. 815 in year ended November 30, 2015 the fair value of the conversion feature is summarized as follows:
| Amount | ||||
| Balance November 30, 2014 | $ | - | ||
| Debt discount originated from derivative liabilities | 50,000 | |||
| Initial loss recorded | 61,074 | |||
| Change in fair market value of derivative liabilities | (50,718 | ) | ||
| Balance November 30, 2015 | $ | 60,356 | ||
The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of November 30, 2015 and commitment date:
| Commitment Date | November 30, 2015 | |||||||
| Expected dividends | - | - | ||||||
| Expected volatility | 296.84 | % | 310.04 | % | ||||
| Expect term | 1.44 | 1.08 | ||||||
| Risk free interest rate | 0.33 | % | 0.51 | % | ||||
| F-23 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
Note 11. Commitments and Contingencies
Commitments
Employment Agreements – Officers and Directors
As of November 30, 2015, the Company had employment agreements with certain officers and directors (two individuals) containing the following provisions:
| Term of contract | 4 years, expiring on November 30, 2018 | |
| Salary | $275,000 commencing December 1, 2014 | |
| Salary deferral | All salaries will be accrued but may be paid from the Company’s available cash flow funds. |
Annual Salaries:
| Name | Starting Dec. 1, 2014 | 2014-15 | 2015-2016 | 2016-2017 | ||||||||||||
| Robert Kohn | $ | 275,000 | $ | 325,000 | $ | 375,000 | ||||||||||
| Bonnie Nelson | $ | 275,000 | $ | 325,000 | $ | 375,000 | ||||||||||
The accrued officers and directors payroll at November 30, 2015 is $1,993,582.
Lease Agreement
On June 3, 2013, the Company entered into a new lease agreement with its current landlord. The lease is for a 24 month period, expiring on May 31, 2015 , and requires monthly base rental payments of $ 4,000 for the period from June 1, 2013 through May 31, 2014 and $ 4,080 for the period from June 1, 2014 through May 31, 2015 plus adjustments for Common Area Expenses. On May 29, 2015, the Company amended and extended its current lease for an additional twelve month period, expiring on May 31, 2016, and requires monthly base rental payments of $4,583. The office space is approximately 2,000 square feet and includes five executive offices, a lunchroom and conference room.
Rent expense was $54,548 and $47,158 for the years November 30, 2015 and 2014, respectively.
Contingencies
From time to time, the Company may be involved in legal matters arising in the ordinary course of business. While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations.
Note 12. Testing Services Agreement
On July 2, 2013, the Company entered into agreements for the first stage of a project to develop a castor plantation and milling operation in the Republic of Paraguay with offshore entities (aka “Ambrosia” and “Developer”) for the testing and development of a project with up to $ 10,000,000 in financing upon certification of the castor yield effective and subject to material and adverse events. We received notification of termination of the TSA project as of April 1, 2014 due to material and adverse events related to the necessity for building roads due to extreme flooding conditions and issues associated with clearing of the land.
We entered into a Settlement Agreement with our sub-contractor in June, 2014 for final payment for services related to the testing services agreement and all receivables and payables related to the testing services agreement were satisfied in June, 2014.
The Company recorded other consulting revenue, net of expense of $0 and $111,401 for the years ended November 30, 2015 and 2014, respectively, in connection with services provided under the TSA.
| F-24 |
BioPower Operations Corporation and Subsidiaries
Notes to Consolidated Financial Statements
November 30, 2015 and 2014
Note 13: Subsequent Events
On December 15, 2015 a shareholder loaned the Company $25,000 for a Convertible Note at $.15 per share due.
On February 18, 2016 a shareholder loaned the Company $16,500, for a Convertible Note at $.15 per share due.
On February 24, 2016, the Board of Directors approved the following stock compensation because of the Company not making any cash payments toward salary for the fye 2015. The stock compensation is to be paid by November 30, 2016 provided the Company had revenues from operations that could provide for the taxes due for the stock compensation, or the stock would be returned to the Company. The stock will be issued but held by the Transfer Agent until November 30, 2016 and the returned to the Company or distributed to the employee. The employee has the option to pay the Company for the employer tax due and their own taxes due for the stock compensation on or before November 30, 2016.
| Dr. Neil Williams, CEO G3P | 2,000,000 | common stock shares | ||||
| Robert Kohn, CEO BioPower | 1,250,000 | common stock shares | ||||
| Bonnie Nelson, Director of Strategy | 1,250,000 | common stock shares | ||||
| Benjamin Williams, Sr. Vice President | 500,000 | common stock shares | ||||
| Total | 5,000,000 | common stock shares |
On March 2, 2016, Mr. Baruch Halpern joined the Company as Chief Operating Officer. For more than 20 years, Mr. Halpern has been involved in equity research, advisory, capital raises, and has served as managing director of Halpern Capital, Inc., a boutique investment banking firm founded by Mr. Halpern in 2002. He has also held senior finance positions at major corporations. Since 2009, Mr. Halpern has been managing director of CrossCredit Capital, LLC, a firm focused on structured financial solutions, and since 2010 he has been managing director of Carbon Capital Advisors, LLC, a firm focused on green energy and carbon footprint amelioration. He is a founder of Sustain:Green, a firm founded in 2012 offering financial products such as prepaid debit and credit cards designed to fight climate change. Prior to founding Halpern Capital in 2002, Mr. Halpern held various sell-side analyst positions. Additionally, he gained substantial buy-side experience as vice president and portfolio manager at Fred Alger & Co., an investment advisory firm. At Fred Alger & Co., Mr. Halpern served as a research group leader, managing a $1 billion portfolio with more than 600 companies in a broad range of industries. Mr. Halpern has an extensive corporate and industry background, having also held positions with Celanese Corporation and Beech-Nut, Inc. He has served as a Director of RiceBran Technologies (NASDAQ: RIBT) since 2012. Mr. Halpern received his masters of business administration in finance from Baruch College. Mr. Halpern has been a CFA Charter holder since 1982 and holds numerous FINRA certifications.
As part of Mr. Halpern’s Employment Contract, the Company authorized the issuance of 3,000,000 shares of its common stock to remain in the possession of the Transfer Agent for one year. The 3,000,000 common shares will be released to Mr. Halpern after one year as long as he does not voluntarily resign. At that time a standard two-year lock-up agreement will also be executed. If Mr. Halpern voluntarily resigns before his first anniversary, there will be a claw-back of 2,250,000 common shares and Mr. Halpern will be issued the remaining 750,000 common shares with a two-year lock-up agreement.
Mr. Halpern also loaned the Company $100,000 and entered into a convertible debt agreement at 8% interest, due on March 2, 2018. The debt is convertible into common shares of stock at a conversion price of $0.15 per share. The loan includes a provision for matching future conversion rights with any new loans made by the Company with the exception of a Right of First Refusal. In addition, if an equity transaction is done at a price below $0.15 then the conversion price will adjust to such price.
| F-25 |