BOPO BioPower Operations Corporation (CE)

 

 

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, 2014

 

[  ] 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 incorporation or organization)		(IRS Employer 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). [X] Yes [  ] 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 28, 2015, 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 $.20 per the close on, February 28, was approximately $2,509,905. 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, 2015, there were 41,607,676 outstanding shares of the registrant’s common stock, $.0001 par value.

 

Documents incorporated by reference: None.

 

 

 

BioPower Operations Corporation

 

Form 10-K

 

Table of Contents

 

			Page
PART I
Item 1.	Business		4
Item 1A.	Risk Factors		16
Item 1B.	Unresolved Staff Comments		28
Item 2.	Description of Property		28
Item 3.	Legal Proceedings		28
Item 4.	Mine Safety Disclosure		28
PART II
Item 5.	Market for Common Equity and Related Stockholder Matters		29
Item 6.	Selected Financial Data		33
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		40
Item 8.	Financial Statements and Supplementary Data		40
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		40
Item 9A.	Controls and Procedures		41
Item 9B.	Other Information		42
PART III
Item 10.	Directors and Executive Officers		42
Item 11.	Executive Compensation		45
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		46
Item 13.	Certain Relationships and Related Transactions, and Director Independence		48
Item 14.	Principal Accountant Fees and Services		49
PART IV
Item 15.	Exhibits		50
Signatures			52
Financial Statements			F-1

 

 

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.

 

 

PART I

 

ITEM 1. BUSINESS

 

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 synthetic fuels. The Company intends to also provide waste remediation services.

 

We have not yet generated or realized any 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. Accordingly, we must raise cash from sources other than revenues generated such as from the proceeds of loans, sale of common shares, advances from related parties and consulting agreements.

 

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, a Delaware corporation,”) 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.

 

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.”

 

We intend to pursue our mission through the following key strategies:

 

●	Our licensed gasification technology can convert a variety of wastes through modular units into electricity or high quality, low sulfur, synthetic green fuel. As we add new contracts for waste we can add additional modular units to handle the conversion. Because our licensed gasification is modular and built in series, we are able to service and maintain the lines and systems while operating the facilities continuously.
●	The Company intends to earn design, engineering, permitting, operations and maintenance fees and under certain circumstances EPC (Engineering, Equipment Procurement and Construction Management) fees from WtE projects.

 

 

●	We have strategically aligned with Vanderweil Engineers to develop WtE facilities in the United States. Vanderweil has been in business since 1950 and its Power Engineering group is expert at developing WtE projects, designing, engineering and permitting power generation facilities.
●	The Company intends to maintain a minimum of a twenty percent (20%) equity interest in each of its developed projects.
●	We have partnered with project development groups globally who have been in different stages of development of WtE projects in Europe, Africa and Asia. These groups can also provide partial or total financing for some of these projects.
●	We intend to maximize the long-term value of WtE facilities by adding waste, service or 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 or acquisitions of existing permitted facilities that we can retrofit or upgrade. These developments and acquisitions must be in selected attractive markets where we believe that market and regulatory conditions will enable us to utilize our skills and best practices at attractive rates of return. We are currently focusing on opportunities in the United States, Middle East, Africa, Europe and Asia. We believe that our approach to these opportunities is highly-disciplined, both with regard to our required rates of return 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.

 

Our Waste-to-Energy Business

 

The WtE facilities we intend to build may earn revenue from both the disposal and processing of waste and the generation of electricity, as well as from the sale of synthetic low sulfur fuels and recyclables recovered during the WtE process. 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 equity and debt investments. 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.

 

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. Waste-to-energy is considered renewable under the laws of many states and under U.S. federal law.

 

Typical Gasification Electricity or Synthetic Fuel Production Facility

 

G³P designs, permits, procures equipment, manages construction, intends to partially own and intends to operate and maintain Gasification Waste-to-Energy power plants, using our unique licensed gasification technology, an upgrade to present gasification technology in use around the world for the last 30 years. These innovative gasifier designs 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, construction and demolition (C&D) wastes and biomass in our specially designed refuse-derived fuel facilities which process waste prior to combustion and gasification, in which 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 fuel through a Fisher-Tropsch process that has been used for almost the last one hundred years to create 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 diesel fuels. Utilizing a Sorting Facility and an advanced dryer system on the front-end, enables solid wastes, construction & demolition wastes, medical, biological, and pharmaceutical wastes, and used tires as feedstock to produce electricity and 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 provides waste remediation services and can provide licensed technologies for wastewater treatment facilities.

 

Sorting Facility
1.	The MSW received is pre-processed including shredding and sorting. In a typical gasification facility, waste collection trucks deliver waste to the facility where it is dumped onto a sorting floor. The waste is then sorted to separate out glass, metal, e-waste, soil, rock, and concrete for recycling. We intend to remove unacceptable waste such as batteries, household hazardous waste, and inert industrial hazardous waste. The used tires are debeaded, shredded, and fed to the gasifiers with the MSW.
Gasifiers
2.	With limited and regulated flow of air, the used tires and MSW are converted to Synthesis Gas (Syngas), which is converted to steam and electricity or synthetic fuel.
Synthetic Fuel Production Facility
3.	Synthetic fuel production facility from the synthesis gas produced by the gasification facility using a Fischer-Tropsch Reactor and condensation column.
Leachate/Water Treatment Plant
4.	The leachate water from waste and condensate from the boiler and steam turbine are used as boiler feed water. The high pressure steam generated drives a turbine that generates power, which is output to the grid. A patented drying system is used to extract water from the waste, making the system extremely efficient for wet, organic waste, and resulting in extraction of 100 percent of the water needs for the facility from the waste, and from precipitation at the facility. The facility does not use city drinking water, and does not discharge wastewater to the sanitary sewer.
Slagging Unit
5.	The residue is inert ash that can be used in a variety of ways. This constitutes less than 5 percent of the tonnage of used tires or MSW sent to the facility per day. This ash is free of toxic pollutants and can be safely used as aggregate, or may be used to make concrete block.
Flue Gas Treatment System
6.	Construction of State of the Art Flue Gas Treatment System. All international pollution control standards can be met, since the plant design inherently generates less than 2 to 3 orders of magnitude of effluent gas, particulates, and heavy metals as compared to U.S. EPA Air Quality Standards, which are amongst the most stringent in the world.
Emissions and Odorless System
7.	The unique design of the Green3Power Licensed gasification technology ensures negligible quantities of dioxins, furans, NOx, SOx, CO2, volatile hydrocarbons, and particulate matter into the atmosphere. The efficiency of Synthetic fuel production depends on the characteristics of the feedstock.
	The Gasification Synthetic Fuel Production Facilities can be designed to be enclosed in buildings. The air management systems for the Gasification Facilities have the intakes located inside the buildings. As a result, all odors generated by the MSW are captured by the air management system and are treated in the Gasifiers at temperatures of 1,000 ºC and higher. Therefore, all odor causing chemicals are destroyed. The buildings are maintained at very high negative pressures, resulting in high velocities into the buildings when the doors are opened. Therefore, it is not possible for any odors to leave the buildings, and wastes are not tipped outside the buildings, so no odors are generated by the facilities.
8.	Green3Power is the only company authorized to implement projects using this design.

 

 

Environmental Benefits of Waste-to-Energy

 

We believe that WtE offers solutions to public sector leaders around the world for addressing two key issues: on-going management of waste and 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 34 times more potent than carbon dioxide (“CO₂”) over a 100 year period), lower the risk of groundwater 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.

 

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 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 Arizona, California and Hawaii); and in joint venture with Active Plus with offices in Sweden and Hong Kong for the development of WtE projects outside the United States in Eastern Europe (primarily in Kosovo); the Middle East and the UAE.; the Philippines, Indonesia, Korea and South Vietnam; and various African countries including Kenya, Nigeria, Congo, and others.

 

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 and EPC contractor fees (for engineering, equipment procurement and construction management of the facility). After the facility is in operation our revenues will be derived from four main sources: (1) fees charged for waste received (tipping fees); (2) the sale of electricity and/or steam, and (3) the sale of synthetic fuels. (4) We will also receive operations and maintenance fees for each facility and we also have ancillary waste streams 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. Our intended facilities may sell energy primarily to utilities or government owned municipalities at contracted rates or, where a long term contract is not in place, at prevailing market rates in regional markets.

 

WtE Project Contracts

 

Most of our WtE projects 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.

 

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 may include off-take agreements for the sale of electricity known as a Power Purchase Agreement (“PPA”). 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 5 – 30 years with extensions subject to consumer price index changes. Fuel is a commodity and can be sold into the wholesale markets 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.

 

Financing and Ownership of WtE Facilities

 

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 synthetic fuels. Each project will have joint venture partners that may provide various necessary elements for a project to obtain finance including: business development, waste services, technology and/or the sale of end products produced. The Company intends to offer ownership in our initial SPEs to co-development partners and investors. Each project may have a waste agreement possibly coupled with an end use agreement. These agreements may enable the SPE to obtain traditional project finance based upon the potential profitability of each project. The role G³P intends to fulfill in each SPE is executive and general management, engineering and permitting, EPC role (engineering, procurement of equipment and construction management), procurement of funding and development of markets for the sale of end products and operations and maintenance of each plant. 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.

 

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 is an engineering firm developing 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

 

Waste Services

 

Post recycled solid waste generation in the United States is over 275 million tons per year, of which the WtE industry processes approximately 11%. WtE is an important part of the waste management infrastructure of the United States, particularly in regions with high population density but limited availability of land for landfilling, with 82 facilities currently in operation that collectively process over 25 million tons of post-recycled solid waste and serve the needs of over 25 million people and produce enough electricity for the equivalent of 1.3 million homes. The use of WtE is even more prevalent in Western Europe and many countries in Asia, such as Japan. Over 1,000 WtE facilities are in use today around the world, processing approximately 200 million tons of waste per year. In the waste management hierarchies of the United States EPA and the European Union, WtE is designated as a superior solution to landfilling.

 

Renewable Energy

 

Public policy in the United States, at both the state and national levels, has developed over the past several years in support of increased generation of renewable energy as a means of combating the potential effects of climate change, as well as increasing domestic energy security. Today in the United States, approximately 12% of electricity is generated from renewable sources, slightly over half of which is hydroelectric power.

 

WtE contributes approximately 7% of the nation’s non-hydroelectric renewable power. WtE is designated as renewable energy in 31 states, the District of Columbia, and Puerto Rico, as well as in several federal statutes and policies. Unlike most other renewable resources, WtE generation can serve base-load demand and is more often located near population centers where demand is greatest, minimizing the need for expensive incremental transmission infrastructure.

 

 

General Business Conditions

 

Waste and Energy Markets - We compete in waste markets which are highly competitive. In the United States, the market for waste management is almost entirely price-driven and is greatly influenced by economic factors within regional waste markets. These factors include:

 

●	regional population and overall waste production rates;
●	the number of waste disposal sites (including principally landfills, other WtE facilities and transfer stations) in existence or in the planning or permitting process;
●	the available disposal capacity (in terms of tons of waste per day) that can be offered by other regional disposal sites;
●	the extent to which local governments seek to control transportation and/or disposal of waste within their jurisdictions;
●	the extent to which local governments and businesses continue to value sustainable approaches to handling of wastes; and
●	the availability and cost of transportation options (e.g., rail, inter-modal, trucking) to provide access to more distant disposal sites, thereby affecting the size of the waste market itself.

 

Waste service providers seek to obtain waste supplies for their facilities by competing on price (usually on a per-ton basis) with other service providers. We actively must compete in these markets to enter into spot, medium- and long-term contracts for our project development WtE facilities. These WtE projects are generally in densely-populated areas, with high waste generation rates and numerous large and small participants.

 

Technology, Research and Development

 

Globally, we have the Exclusive License right to market the proprietary gasification technology. We believe that our know-how and management’s reputation in the field of WtE and our know-how in designing, engineering and permitting WtE facilities are important to our competitive position in the WtE industry.

 

Through project development, joint venture and strategic alliance partners and acquisitions, we intend to partially own in joint venture and operate and maintain WtE facilities which utilize our licensed gasification technology. As we continue our efforts to develop and/or acquire additional WtE projects internationally, we will consider using the licensed gasification technology for the production of electricity or synthetic fuels, which best fit the needs of the local environment of a particular project.

 

We believe that our licensed gasification 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 represented major advances in controlling NOx and SOx emissions. These technologies have been tested at existing gasification facilities, not owned by G³P, and are now operating. 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.

 

 

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 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.

 

 

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.

 

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 biomass 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.

 

 

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. Many of these more developed initiatives have been at the state or regional levels, and some initiatives exist in regions where we intend to have projects. For example:

 

●	The Regional Greenhouse Gas Initiative (“RGGI”) is an operating regional “cap-and-trade” program focused on fossil fuel-fired electric generators which does not directly affect WtE facilities.
●	In 2006, the California legislature enacted Assembly Bill 32 (“AB 32”), the Global Warming Solutions Act of 2006, which seeks to reduce GHG emissions in California to 1990 levels by 2020. AB 32 includes an economy-wide “cap-and-trade” program, which could impact future California WtE facilities. In 2013, regulatory amendments were finalized to exclude WtE facilities from the cap-and-trade program in the first compliance period (2013-2014). However, the treatment of WtE facilities beyond 2014 is uncertain at this time.

 

Other Regulations

 

Most countries have expansive systems for the regulation of the 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 compete 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 which 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.

 

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, 2014, 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 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. Each specific special purpose entity that is created for each project will hire their own employees and staff for waste to energy and facility operations. We presently rely on present management, 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 against revenues. We also pay our Licensor royalties on revenues produced from utilizing the technology. This license fee reduces the $10,000,000. Once the full payment is made, G³P will own all rights to the technology with no further royalties due.

 

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.

 

 

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.

 

ITEM 1A. RISK FACTORS

 

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, 2014, relative to our ability to continue as a going concern. We had a working capital deficit of ($2,127,569) and we have an accumulated deficit accumulated of ($5,680,186), as at November 30, 2014. 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 development activities. There can be no assurance that we will be able to successfully implement our business plan, or that our business 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 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.

 

 

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 our 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. Similarly, the portion of waste processing capacity which is not under contract may be subject to volatility, principally as a result of general economic activity and waste generation rates, as well as the availability of alternative disposal sites and the cost to transport waste to alternative disposal. Volatility with respect to all of these revenues could adversely impact our businesses’ profitability and financial performance. We may not be successful in our efforts to mitigate our exposure to price swings relating to these revenue streams.

 

 

We may experience volatility in the market prices and availability of commodities we purchase, such as reagents, chemicals and fuel. Any price increase, delivery disruption or reduction in the availability of such supplies could affect our ability to operate the facilities and impair our cash flow and profitability. We may not be successful in our efforts to mitigate our exposure to supply and price swings for these commodities.

 

Operation of our businesses involves significant risks, which could have an adverse effect on our intended cash flows and results of operations.

 

The operation of our businesses involves many risks, including:

 

●	supply or transportation interruptions;
●	the breakdown, failure or unplanned maintenance or repair of equipment or processes;
●	difficulty or inability to find suitable replacement parts for equipment;
●	the unavailability of sufficient quantities of waste or fuel;
●	fluctuations in the heating value of the waste we use for fuel at our WtE facilities;
●	failure or inadequate performance by subcontractors;
●	disruption in the transmission of electricity generated;
●	labor disputes and work stoppages;
●	unforeseen engineering and environmental problems;
●	unanticipated cost overruns;
●	weather interferences and catastrophic events including fires, explosions, earthquakes, droughts, pandemics and acts of terrorism; and
●	the exercise of the power of eminent domain.

 

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.

 

Contracts to provide new waste services or services for waste-to-energy facilities involves significant risks, which could have an adverse effect on our intended cash flows and results of operations.

 

If we enter into contracts to provide new waste services or services for waste-to-energy facilities, we may face additional operating risks. These may include:

 

●	performance by multiple contractors critical to our ability to perform under new customer agreements;
●	logistics associated with transportation of waste with which we have limited experience; and
●	reliance on joint venture parties or technology providers with whom we have limited experience.

 

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 or combustion, residual ash handling and disposal, and waste water discharge 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 a portion of 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 grow our business through new projects to be developed.

 

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 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 businesses in compliance with laws, or if our efforts to grow our business results in adverse publicity.

 

If we encounter regulatory compliance issues in the course of operating our business, 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 attracting new customers and developing projects.

 

With respect to our efforts to grow and maintain our 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. We and many other companies are pursuing these technologies, and capital is being invested to find new approaches to waste management, waste treatment, and renewable power generation. 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 or power production to a level below our costs and/or provide new or alternative methods of waste management or energy generation that become more accepted than those we currently 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.

 

 

Our ability to optimize our operations depends in part on our ability to compete for and obtain fuel for our facilities, and our failure to do so may adversely affect our financial results.

 

Our WtE facilities depend on solid waste for fuel, which provides a source of revenue. For some of our WtE facilities, the availability of solid waste to us, as well as the tipping fee that we charge to attract solid waste to our facilities, depends upon competition from a number of sources such as other WtE facilities, landfills and transfer stations competing for waste in the market area. There has been consolidation, and there may be further consolidation, in the solid waste industry that would reduce the number of solid waste collectors or haulers that are competing for disposal facilities or enable such collectors or haulers to use wholesale purchasing to negotiate favorable below-market rates. The consolidation in the solid waste industry has resulted in companies with vertically integrated collection activities and disposal facilities. Such consolidation may result in economies of scale for those companies, as well as the use of disposal capacity at facilities owned by such companies or by affiliated companies. Such activities can affect both the availability of waste to us for processing at our intended WtE facilities and market pricing, which could materially and adversely affect our results of operations.

 

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:

 

●	difficulties in identifying, obtaining and permitting suitable sites for new 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.

 

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 such as boilers, turbine generators 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, 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 by our future facilities, and supply and deliver the waste and other goods and services necessary for the operation of our future energy 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.

 

With our initial contracts to sell electricity for intended projects, we expect to have exposure to market risk, and therefore revenue fluctuations, in energy markets than 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 often rely on a single supplier to provide waste, fuel, water and other services 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 the municipal clients as a source not only of waste for fuel, but also of 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 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.

 

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 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.

 

Some of our project developments 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.

 

 

Energy regulation could adversely affect our revenues and costs of operations.

 

Our waste and energy services businesses are subject to extensive energy regulations by federal, state and foreign authorities. We cannot predict whether the federal, state or foreign governments will modify or adopt new legislation or regulations relating to the solid waste or energy industries. The economics, including the costs, of operating our facilities may be adversely affected by any changes in these regulations or in their interpretation or implementation or any future inability to comply with existing or future regulations or requirements.

 

For more information on energy regulations applicable to us, see Item 1. Business - Regulation of Business.

 

Failure to obtain regulatory approvals could adversely affect our operations.

 

Our waste and energy services businesses will be continually in the process of obtaining federal, state, local and foreign approvals required to permit and operate our intended facilities. While we believe our businesses will obtain all necessary permit and operating approvals, we may not always be able to obtain all required regulatory approvals, and we may not be able to obtain any necessary modifications to existing regulatory approvals or maintain all required regulatory approvals. If there is a delay in obtaining any required regulatory approvals or if we fail to obtain and comply with any required regulatory approvals, the operation of our intended facilities or the sale of electricity to third parties could be prevented, made subject to additional regulation or subject our businesses to additional costs.

 

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 and increasing competition in all markets. To the extent competitive pressures increase and the pricing and sale of electricity assumes more characteristics of a commodity business, the economics of our business may be subject to greater volatility.

 

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 existing business and 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, altered availability of waste for plant cooling operations, and changes in energy pricing, among other effects.

 

We cannot assure you that our cash flow from operations will be sufficient to service our indebtedness, which could have a material adverse effect on our financial condition.

 

Our ability to meet our obligations under our indebtedness depends on our ability to receive dividends and distributions from our subsidiaries in the future. 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 under our outstanding indebtedness and to fund other liquidity needs. If we are not able to generate sufficient cash flow to service our debt obligations, we may need to refinance or restructure our debt or seek 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 inventory purchases or other operational requirements. If adequate funds are not otherwise available, we may be required to delay, scale back or eliminate portions of our business 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.

 

Future impairment charges could have a material adverse impact on our financial condition and results of operations.

 

In accordance with accounting guidance, we evaluate long-lived assets for impairment whenever events or changes in circumstances, such as significant adverse changes in regulation, business climate or market conditions, could potentially indicate the carrying amount may not be recoverable. Significant reductions in our expected revenues or cash flows for an extended period of time resulting from such events could result in future asset impairment charges, which could have a material adverse impact on our financial condition and results of operations.

 

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.

 

Our insurance and contractual protections may not always cover lost revenues, increased expenses or contractual liabilities.

 

Although our businesses 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.

 

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 42.5% 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.

 

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.

 

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. The office space is approximately 2,000 square feet and includes five executive offices, a lunchroom and conference room.

 

ITEM 3. LEGAL PROCEEDINGS

 

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.

 

 

PART II

 

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, 2015, 41,607,676 shares of our Common Stock are outstanding. Our shares of Common Stock are held by approximately 214 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, 25,928,896 shares of common stock are restricted securities as such term is defined under Rule 144 promulgated by the SEC, in that they were 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 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

 

Fiscal Year 2013		High ($)				Low ($)
Fourth Quarter (1)			0.23				0.03
Third Quarter			0.30				0.05
Second Quarter			0.65				0.05
First Quarter			1.25				0.35

 

(1) BOPO commenced trading an effective 1 for 5 reverse on September 7, 2013.

 

 

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 February 22, 2012, the Company sold 40,000 shares of our common stock for $1.25 per share. The foregoing issuance of the shares was effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act.

 

On March 26, 2012, the Company issued 30,000 shares of our common stock for $3.25 per share to an investment banker for services to be rendered primarily for project finance funding of Castor operations. The foregoing issuance of the shares was effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act.

 

On June 7, 2012 the Company issued 6,000 shares of our common stock as payment for services rendered to a non-management director and an additional 4,000 shares for his position as Chairman of the audit committee. The foregoing issuance of the shares was effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act.

 

On October 18, 2012 a note holder exchanged $50,000 in debt for 40,000 shares at $1.25 per share. The foregoing issuance of the shares was effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act. The Company also recorded 40,000 shares which were issued for cash of $50,000 in the prior year as a common stock payable which was reversed in the current year. The shares were recognized in the year ended November 30, 2013.

 

On February 5, 2013, the Company issued 42,813 shares of the Company’s stock as payment for investor relations services at $0.80 per share. The foregoing issuance of the shares was effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act.

 

On May 4, 2013, the Company issued 40,000 shares of the Company’s stock as payment for investor relations services at $0.80 per share. The foregoing issuance of the shares was effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act.

 

The Company accepted subscription agreements on May 18, 2013, for sales of 215,000 shares of our common stock at a price of $0.06 per share with no commissions paid, for total proceeds of $12,900. The foregoing issuance of the shares was effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act.

 

On June 10, 2013, the Company issued 416,667 shares of its common stock at $0.06 per share to a third party to settle debt of $25,000. The Company recorded a loss on the settlement of debt of $19,165.

 

On June 21, 2013, the Company issued 200,000 shares of its common stock at $0.06 per share, 30,000 shares as payment for services rendered to a non-management director, in full satisfaction of director’s fees, Chairman of audit committee fees and consulting fees owed. The foregoing issuance of the shares was effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act.

 

On June 21, 2013, the Company issued 894,900 shares of its common stock at $.06 per share to its Chief Executive Officer in full satisfaction of amounts due to him for reimbursable expenses, amounting to $53,694. The foregoing issuance of the shares was effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act.

 

On June 21, 2013, the Company issued its Chief Executive Officer 707,500 shares of its common stock at $.06 per share in full satisfaction of his notes payable, amounting to $40,500, along with accrued interest of $1,950. The foregoing issuance of the shares was effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act.

 

 

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. The foregoing issuance of the shares was effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act.

 

On June 21, 2013, the Company issued 3,122,800 shares of its common stock at $.06 per share to two investors in full satisfaction of notes payable, amounting to $183,306, along with accrued interest of $4,062. The foregoing issuance of the shares was effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act.

 

On June 25, 2013, the Company granted 1,500,000 shares of common stock at $.09 per share to a consultant for business services to be provided over a twelve month period. The shares will vest after one year of service. The foregoing issuance of the shares was effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act.

 

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 $.09 per share, in exchange for converting accrued expenses and note payable and continuing to work without full pay. The shares will vest after one year of service. The foregoing issuance of the shares was effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act.

 

On June 25, 2013, a note holder exchanged $50,000 in debt for 40,000 shares at $1.25 per share. The foregoing issuance of the shares was effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act.

 

On June 25, 2013, the Company accepted subscription agreements for sales of 215,000 shares of our common stock at a price of $0.06 per share with no commissions paid, for total proceeds of $12,900. The foregoing issuance of the shares was effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act.

 

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.

 

 

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

 

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.

 

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.

 

Today, BioPower and its subsidiaries intend to focus on developing 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 synthetic fuels through licensed gasification technology. The Company intends to also provide waste remediation services.

 

Typical Gasification Electricity or Synthetic Fuel Production Facility

 

G³P designs, permits, procures equipment, manages construction, intends to partially own and intends to operate and maintain Gasification Waste-to-Energy power plants, using our unique licensed thermal licensed gasification technology, an upgrade to present licensed gasification technology in use around the world for the last 30 years. These innovative gasifier designs 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, construction and demolition (C&D) wastes and biomass in our specially designed refuse-derived fuel facilities which process waste prior to combustion and gasification, in which 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 fuel through a Fisher-Tropsch process that has been used for almost the last one hundred years to create 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, construction & demolition wastes, medical, biological, and pharmaceutical wastes, and used tires as feedstock to produce electricity and 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.

 

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 have agreed to sell 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, diesel fuels and advanced biofuels. G³P designs, procures, constructs, intends to partially own, operate and maintain Gasification Waste-to-Energy power plants, using their unique thermal licensed gasification technology, an upgrade to present licensed gasification technology in use around the world for the last 30 years. G³P also provides waste remediation services.

 

We have not yet generated or realized any 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 – 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 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 using the gasification technologies and processes.

 

Enzyme Technology

 

We have a non-exclusive global License for a patented one-step enzyme technology which converts wastes from poultry, hogs, humans and sugar to products such as fertilizer, cellulosic ethanol and other products. The patent expires in June 2029. Under the terms of the agreement, we pay our Licensor 50% of any sub-license fees that we receive. We also pay our Licensor 12% of all royalties on all revenues we earn from utilizing the technology. This 12% is calculated on the basis of net gross revenues which equal gross revenues less all direct costs associated with the production of the revenues.

 

BioPower focused initially on Municipalities who have a need to reduce their costs of the handling of sewage by utilizing the Company’s licensed technology to reduce operating and landfill costs by reducing sewage with its licensed enzymes and converting a portion of the sewage into products that do not have to go to the landfill but can be used for energy and fertilizer. The utilization of biomass residues is of paramount importance to achieve environmental sustainability by harnessing the potential of renewable resources in the production of clean energy and value added products.

 

 

Simultaneously, we hired a microbiologist Ph.D. with vast experience in commercializing technologies associated with enzymes and biofuels conversions. After almost one year of working with the Licensor and testing, our microbiologist and the Licensor could not provide sufficient test results for the commercialization of the technology. We stopped our testing until the Licensor could provide a commercial product. As part of our October 24, 2014 transaction, we have agreed to sell our interest in this license.

 

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 energy through licensed gasification technology including but not limited to electricity and synthetic fuels. The Company intends to also provide waste remediation services on a global basis.

 

We estimate our minimum operating expenses and working capital requirements for the next twelve month period to be as follows:

 

Business development costs		$	350,000
General and Administrative			1,400,000
Working Capital			250,000
Total		$	2,000,000

 

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 operations and/or curtail or elect not to proceed with certain aspects of our business plan.

 

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 biomass feedstock plantations. 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 business development costs and management and consulting fees for the current fiscal year, and we will be able to implement key aspects of our business plan, including business development costs for developing waste-to-energy facilities and provide waste remediation services. We would have a total of $250,000 remaining for working capital. We expect these amounts will be sufficient to initiate and sustain our business development activities for one year.

 

The amount and timing of additional funds that might be required cannot be definitively stated as at the date of this report and will be dependent on a variety of factors, including the success of our initial operations 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 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 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.

 

 

CONSOLIDATED RESULTS OF OPERATIONS

 

The following analysis reflects the consolidated results of operations of BioPower Operations Corporation and its subsidiaries.

 

Fiscal 2014 as Compared with Fiscal 2013

 

2014		BioPower Operations Corp				BioPower Corporation				FTZ Exchange, LLC				Green3Power Holdings Company and Subsidiaries				Total
Operating expenses (2)		$	(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) (2)		$	(2,101,026	)		$	38,531			$				$	(30,526	)		$	(2,093,021	)

 

2013		BioPower Operations Corp				BioPower Corporation				FTZ Exchange, LLC				Green3Power Holdings Company and Subsidiaries				Total
Operating expenses (1)		$	(1,158,743	)		$	(137,303	)		$	-			$	-			$	(1,296,046	)
Depreciation and amortization		$	5,552			$	-			$	-			$	-			$	5,552
Other income (expense) (2)		$	(262,087	)		$	220,957			$	-			$	-			$	(41,130	)
Net income (loss) (1)		$	(1,426,382	)		$	83,654											$	(1,342,728	)

 

	(1)	Includes $400.00 for Global Energy Crops Corporation and Green Oils Plantations of America filing fees of $150.00 each and FTZ Energy Corporation $100.00 in filing fees.
	(2)	Includes acquisition costs of $923,436.

 

Cost of Sales. There is no cost of sales as operations have not commenced.

 

Operating Expenses and Depreciation. Operating expenses and depreciation for the year ended November 30, 2014, increased $719,405 (55%) to $2,021,003 for 2014 as compared to $1,301,598 for the same period in 2013. The table below details the components of operating expense, as well as the dollar and percentage changes for the year ended November 30.

 

		For Years Ended November 30,
		2014				2013				$ Change				% Change
Stock based compensation		$	343,251				436,220			$	(92,969	)			-21	%
Wage and wage related costs			463,769				490,827				(106,626	)			-22	%
Acquisition cost			923,436				-				923,436
Professional fees			106,477				170,348				(63,871	)			-38	%
Insurance costs			4,440				3,772				668				18	%
Rent - building and equipment			47,158				46,589				569				1	%
Travel and related			64,563				81,582				-17,019				-21	%
Miscellaneous expenses			55,568				66,708				(11,140	)			-17	%
Depreciation and amortization			12,341				5,552				6,689				120	%
Total Operating Exp. & Depreciation		$	2,021,003				1,301,598			$	719,405				55	%

 

 

Wage and wage related costs, which includes salaries, commissions, taxes and benefits, decreased $92,969 (-21%) for the year ended November 30, 2014, as compared to the year ended November 30, 2013. This is due to the decrease in salaries of two officers, who are also directors.

 

Acquisition cost was $936,436 for the year ended November 30, 2014, compared to $-0- for the year ended November 30, 2013. The cost was incurred as a result of the acquisition of G³P.

 

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, 2014 versus the same period in 2013 by $63,871 (-38%) primarily due to the decrease of legal fees incurred for a specific project.

 

Insurance costs in the year ended November 30, 2014, were $4,440 compared to $3,772 for the same period in 2013, an increase of $668 (1%). The increase is attributable to the increase of general insurance costs.

 

There was an insignificant increase in rent of expense of 1%.

 

Travel expense for the year ended November 30, 2014 was $64,563 as compared to $81,582 for the same period for 2013 for a decrease of $17,019 (-21%) as a result of decreased business development travel and travel associated with a consulting services agreement which was terminated in 2014.

 

Miscellaneous expense decreased by $11,140 (-17%) to $55,568 for the year ended November 30, 2014, as compared to $66,708 for the same period in 2013. 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, 2014 was $12,341 compared to the same period for 2013 of $5,552, (120%). The increase is a result of newly acquired assets which were placed in service in 2014.

 

Other Income (Expense). Other income (expense) includes interest income, interest expense, loss on settlement of debt, consulting income and expense and other non-operating income. Other expense for the year ended November 30, 2014 was $72,018 compared to other expense of $41,130 for the same period last year. The increase in other expense from 2013 of $30,888 was primarily the result of the decrease in net consulting income of $147,333 and a decrease in the loss on impaired assets of $76,050 and an increase in interest expense and loss on settlement of debit, which approximates the difference.

 

Net Loss and Net Loss per Share. Net loss for the year ended November 30, 2014 was $2,093,021, compared to $1,342,728 for the same period in 2013, for an increased net loss of $750,293. Net loss per share for the year ended November 30, 2014 was $0.07 compared to $0.06 in the same period for 2013, based on the weighted average shares outstanding of 30,505,153 and 23,531,311, respectively. The increased net loss for the year ended November 30, 2014 compared to the same period in 2013 arose from the non-operating loss on settlement of debt and accrued expenses of $77,134, and acquisition expenses of $923,436 incurred in the G³P transaction. This increase was partially offset partially by net consulting revenues of $111,401.

 

We did not have any operating revenues during the years ended November 30, 2014 and 2013.

 

We incurred operating expenses of $2,021,003 and $1,301,598, for the years ended November 30, 2014 and 2013, 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, 2014, the Company had cash of $15,118 and current liabilities of $2,143,505. Our current liabilities include accrued expenses and salaries of related parties of $1,455,540. 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 are a development stage company. We have not generated any 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

 

Development Stage

 

Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the Company to remove the inception to date information and all references to development stage.

 

Today, BioPower and its subsidiaries intend to focus on developing 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 synthetic fuels through licensed gasification technology. The Company intends to also provide waste remediation services. The Company, while seeking to implement its business plan, will look to obtain additional debt and/or equity related funding opportunities.

 

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.

 

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, 2014 and 2013, 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.

 

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, 2013. 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, 2014, 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, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

ITEM 9B. OTHER INFORMATION

 

None.

 

PART III

 

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		64		Chairman of the Board, Chief Executive Officer and Chief Financial Officer
Bonnie Nelson		63		Director and Director of Business Strategy
Michael Dinkes Esq. C.P.A.		72		Director and Chairman of the Audit Committee
Neil Williams, Ph.D.		62		Director

 

 

Robert Kohn, CEO and Chief Executive Officer, Director and Co-Founder

 

Mr. Kohn has been a director and 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 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 has been a Director of the Company since April 26, 2012. He serves 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. Currently, Michael Dinkes, Esq. C.P.A. is the Chairman of the Audit Committee. 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.

 

 

Audit Committee Financial Expert

 

The Board of Directors has 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.

 

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

 

Directors, executive officers and holders of more than 10% of our outstanding common stock are 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. Based solely on its review of such forms received by it, the Company believes that all Section 16(a) filing requirements applicable to its officers and directors were complied with during the fiscal year ended November 30, 2014.

 

 

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, 2014 and 2013.

 

Summary Compensation Table

 

Name and Position(s)		Year		Salary($)				Bonus($)				Total Compensation
Robert D. Kohn (1)		2014		$	120,000							$	120,000
CEO and Director		2013		$	200,000							$	200,000
Bonnie Nelson (2)		2014		$	173,333			$	200,000			$	373,333
Director and Director of Business Strategy		2013		$	125,000							$	125,000
Dale S. Shepherd (3)		2014		$	0				0				0
President and COO		2013			0				0				0

 

(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.
(3)	Mr. Shepherd was appointed as our President and Chief Operating Officer effective February 1, 2011 and resigned August 9, 2012.

 

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 a $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.

 

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 41,607,676 shares of Common Stock outstanding as of February 28, 2015.

 

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.

 

 

Name		Office		Shares Beneficially Owned (1)				Percent of Class (2)
Officers and Directors
Robert D. Kohn		Director and CEO, CFO			6,297,400				15.14	%
Michael Dinkes, C.P.A. Esq.		Director			712,000				1.71	%
Bonnie Nelson		Director and Director of Business Development & Strategy			5,805,000				13.95	%
Neil Williams, Ph. D.		Director			4,863,428				11.69	%
All officers and directors as a group (4 persons named above)					17,677,828				42.49	%

 

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 28, 2015.

 

				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			15.14	%
Series A Preferred Stock		China Energy Partners, LLC (2)		1 Indirect			100	%
Common		Riskless Partners, LLLP (3)		5,805,000 Direct			13.95	%
Series A Preferred Stock		China Energy Partners, LLC (2)		1 Indirect			100	%
Common		J2SB International, LLC (4)		4,863,428 Direct			11.69	%
Common		Thomas Roberts		2,100,816 Direct			5.05	%
Common		Richard Reiner		3,820,617 Direct			9.18	%
Common		Robert Reiner		4,060,000 Direct			9.76	%

 

* 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 41,607,676, as of February 28, 2015, 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.

 

(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.

 

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.

 

 

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 8/31/2013 and year ended 11/30/2014 and for Berman & Co., auditors for the Company, through the quarter ended 5/31/2013:

 

		2014				2013
Audit Fees		$	19,000			$	24,564
Audit Related Fees							1,500
Tax Fees			-				-
All Other Fees							16,936

 

In the event that we should require substantial non-audit services, the audit committee would pre-approve such services and fees.

 

 

PART IV

 

ITEM 15. EXHIBITS

 

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)
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)

  

  

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)
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.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	BIOPOWER OPERATIONS CORPORATION.
Date: March  13, 2015	By:	/s/ Robert Kohn
		Robert D. Kohn, Chief Executive Officer, Chief Financial Officer, Principal Executive Officer, Principal Financial Officer and Director

 

 

BioPower Operations Corporation and Subsidiaries

 

Consolidated Financial Statements

 

November 30, 2014 and 2013

 

 

CONTENTS

 

	Page(s)
Report of Independent Registered Public Accounting Firm	F-3
Balance Sheets – As of November 30, 2014 and November 30, 2013 (Consolidated)	F-4
Statements of Operations and Other Comprehensive Loss – Year Ended November 30, 2014 and November 30, 2013, (Consolidated)	F-5
Statement of Stockholders’ Deficit – Year Ended November 30, 2014 and November 30, 2013, (Consolidated)	F-6
Statements of Cash Flows – Year Ended November 30, 2014 and November 30, 2013. (Consolidated)	F-7
Notes to Consolidated Financial Statements	F-8

 

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors

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, 2014 and 2013 and the related consolidated statements of operations and other comprehensive loss, stockholders’ deficit and cash flows for each of the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with 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 audits 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of BioPower Operations, Corp. and its subsidiaries as of November 30, 2014 and 2013, and the results of their operations and their 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 incurred recurring losses, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to this matter are also 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 12, 2015

 

  

BioPower Operations Corporation and Subsidiaries

Consolidated Balance Sheets

 

		November 30, 2014				November 30, 2013
Assets
Current Assets
Cash		$	15,118			$	109,172
Consulting receivables			-				27,840
Prepaid expenses			818				11,258
Total Current Assets			15,936				148,270
Equipment - net			21,234				28,821
Security deposit			11,193				11,193
			32,427				40,014
Total Assets		$	48,363			$	188,284
Liabilities and Stockholders’ Deficit
Current Liabilities
Accounts payable and accrued expenses		$	419,090			$	513,134
Accounts payable and accrued expenses - related parties			1,455,540				1,098,786
Notes payable - related parties			51,375				175
Notes payable			155,000				88,000
Convertible debt			62,500				125,000
Total Current Liabilities			2,143,505				1,825,095
Total Liabilities			2,143,505				1,825,095
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; 41,107,676 shares and 30,281,180 shares, respectively, issued and outstanding			4,112				3,028
Additional paid-in capital			3,580,931				1,947,325
Accumulated deficit			(5,680,186	)			(3,587,165	)
Total Stockholders’ Deficit			(2,095,142	)			(1,636,811	)
Total Liabilities and Stockholders’ Deficit		$	48,363			$	188,284

 

 

BioPower Operations Corporation and Subsidiaries

Consolidated Statements of Operations and Other Comprehensive Loss

 

		Year Ended November 30,
		2014				2013
General and administrative expenses		$	2,021,003			$	1,301,598
Other income (expense)
Interest expense			(106,285	)			(32,893	)
Loss on settlement of debt and accrued expenses			(77,134	)			(190,921	)
Loss on impairment of available-for-sale securities			-				(76,050	)
Consulting revenue, net of expense			111,401				258,734
Total other income (expense) - net			(72,018	)			(41,130	)
Net loss		$	(2,093,021	)		$	(1,342,728	)
Net loss per common share - basic and diluted		$	(0.07	)		$	(0.06	)
Weighted average number of common shares outstanding during the period - basic and diluted			31,289,083				23,531,311
Comprehensive loss
Net loss		$	(2,093,021	)		$	(1,342,728	)
Reclassification adjustment due to impairment on available-for-sale securities			-				37,800
Comprehensive loss		$	(2,093,021	)		$	(1,304,928	)

 

  

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, 2012			1			$	1				18,056,000			$	1,806			$	802,384			$	(2,244,437	)		$	(37,800	)		$	(1,478,046	)
Debt discount			-				-				-				-				25,000				-				-				25,000
Reclassification adjustment due to impairment on available-for-sale securities			-				-				-				-				-				-				37,800				37,800
Issuance of common stock for cash											215,000				21				12,879												12,900
Issuance of commons stock to directors											4,000,000				400				149,600												150,000
Issuance of common stock to consultant											1,500,000				150				143,600												143,750
Issuance of common stock for debt											3,624,967				362				425,185												425,547
Issuance of common stock for conversion of related party debt and accrued expenses											2,802,400				280				246,216												246,496
Issuance of common stock for services rendered ($0.80/share)											82,813				8				142,462												142,470
Net loss																							(1,342,728	)							(1,342,728	)
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				367,793												368,003
Issuance of common stock for acquisition											7,695,296				770				922,666												923,436
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	)

 

 

BioPower Operations Corporation and Subsidiaries

Consolidated Statements of Cash Flows

 

		Year Ended November 30,
		2014				2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(2,093,021	)		$	(1,342,728	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on impairment of marketable securities			-				76,050
Loss on settlement of debt and accrued expenses			77,134				190,921
Depreciation			12,341				5,552
Stock issued for acquisition			923,436
Stock based compensation expense			343,251				436,220
Amortization of debt discount			81,250				25,000
Changes in operating assets and liabilities:
Accounts receivable			27,840				(27,840	)
Prepaid expenses			10,440				(10,576	)
Security deposit			-				467
Accounts payable and accrued expenses			(71,924	)			35,326
Accounts payable and accrued expenses - related parties			356,753				431,459
Deferred revenue			-				(56,429	)
Net Cash Used In Operating Activities			(332,500	)			(236,578	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment			(4,754	)			(15,612	)
Net Cash Provided By Investing Activities			(4,754	)			(15,612	)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds from convertible debt			125,000				150,000
Proceeds from notes payable			67,000				181,506
Proceeds from notes payable - related parties			51,200				-
Proceeds from issuance of common stock							12,900
Net Cash Provided By Financing Activities			243,200				344,406
Net Increase (Decrease) in Cash			(94,054	)			92,216
Cash - Beginning of Period			109,172				16,956
Cash - End of Period		$	15,118			$	109,172
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash Paid During the Period for:
Income Taxes		$	-			$	-
Interest		$	-			$	-
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Reversal of common stock payable		$	-			$	208,500
Common stock issued for conversion of debt and accrued expenses		$	209,620			$	246,496
Common stock issued for conversion of notes payable		$	-			$	217,047
Debt discount recorded on convertible debt		$	81,250			$	25,000

 

  

BioPower Operations Corporation and Subsidiaries

Notes to Consolidated Financial Statements

November 30, 2014 and 2013

 

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.

 

Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The early adoption of this ASU allows the Company to remove the inception to date information and all references to development stage.

 

The Company’s fiscal year end is November 30.

 

Reverse Stock Split

 

On August 6, 2013, the Company effected a 1-for-5 reverse stock split of its commons stock (“Reverse Split”). As a result of the Reverse Split, every five shares of the common stock of the Company were combined into one share of common stock. Immediately after the September 4, 2013 effective date, the Company had 18,056,007 shares of common stock issued and outstanding. All share and per share amounts have been retroactively restated to reflect the Reverse Split. Effective at the same time as the Reverse Split, the authorized number of shares of our common stock was proportionately decreased from 500,000,000 shares to 100,000,000 shares. The par value remained the same.

 

Note 2. Summary of Significant Accounting Policies

 

Principles of Consolidation

 

All inter-company accounts and transactions have been eliminated in consolidation.

 

 

BioPower Operations Corporation and Subsidiaries

Notes to Consolidated Financial Statements

November 30, 2014 and 2013

 

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, 2014 and 2013, 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.

 

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, 2014 .

 

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, 2013. The Company had no receivables at November 30, 2014.

 

Marketable Securities

 

Classification of Securities

 

At the time of acquisition, a security is designated as held-to-maturity (“HTM”), available-for-sale (“AFS”), or trading, which depends on ability and intent to hold such security to maturity. Securities classified as trading and AFS are reported at fair value, while securities classified as HTM are reported at amortized cost.

 

Any unrealized gains and losses are reported as other comprehensive income (loss). Realized gains (losses) are computed on a specific identification basis and are recorded in net capital gains (losses) on investments in the combined consolidated statements of operations.

 

The Company’s cost basis in AFS was as follows:

 

		Amount				Shares
Balance – November 30, 2013		$	-				4,500,000
Balance – November 30, 2014		$	-				0

 

 

BioPower Operations Corporation and Subsidiaries

Notes to Consolidated Financial Statements

November 30, 2014 and 2013

 

The composition of the Company’s investments at November 30, as follows:

 

		2014				2013
Common stock – public company, cost		$	-0-			$	76,050
Unrealized loss on available for sale marketable securities			-0-				(37,800	)
Reclassification adjustment due to impairment			-0-				37,800
Impairment			-0-				(76,050	)
Fair value		$	-0-			$	-0-

 

The Company had no investment loss for the year ended November 30, 2014 and 2013.

 

Impairment

 

The Company reviews its equity investment portfolio for any unrealized losses that would be deemed other-than-temporary and require the recognition of an impairment loss in income. If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and the Company’s intent and ability to hold the investments. Management also considers the type of security, related-industry and sector performance, as well as published investment ratings and analyst reports, to evaluate its portfolio. Once a decline in fair value is determined to be other than temporary, an impairment charge is recorded and a new cost basis in the investment is established. If market, industry, and/or investee conditions deteriorate, the Company may incur future impairments. The company recognized $-0- and $76,050 loss on impairment for the years ended November 30, 2014 and 2013, respectively.

 

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, 2014 and 2013.

 

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.

 

 

BioPower Operations Corporation and Subsidiaries

Notes to Consolidated Financial Statements

November 30, 2014 and 2013

 

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, 2014, 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.

 

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 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.

 

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.

 

 

BioPower Operations Corporation and Subsidiaries

Notes to Consolidated Financial Statements

November 30, 2014 and 2013

 

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 2014 and 2013, 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, 2014 and 2013:

 

		November 30, 2014				November 30, 2013
Convertible debt			-				625,000

 

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 $2,093,021 and $1,342,728, for the years ended November 30, 2014 and 2013, respectively, and net cash used in operations of $332,500 and $236,578 for the years ended November 30, 2014 and 2013, respectively. Additionally, the Company had a working capital deficit of $2,127,569 and $1,676,825, for the years ended November 30, 2014 and 2013, respectively and a stockholders’ deficit of $2,095,142 and $1,636,811, at November 30, 2014 and 2013, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

 

BioPower Operations Corporation and Subsidiaries

Notes to Consolidated Financial Statements

November 30, 2014 and 2013

 

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.

 

Note 4. Equipment

 

At November 30, 2014 and November 30, 2013, equipment consists of the following:

 

		November 30,
		2014				2013				Estimated Useful Life
Computer Equipment		$	27,760			$	27,760			5 years
Testing Equipment			20,366				15,612			3 years
Less: Accumulated depreciation			(26,892	)			(14,551	)
Equipment, net		$	21,234			$	28,821

 

Depreciation expense was $12,341 and $5,552 for the years ended November 30, 2014 and 2013, 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 $1,510,000 at November 30, 2014, 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, 2014 and 2013 are approximately as follows:

 

		2014				2013
Gross deferred tax assets:
Net operating loss carryforwards		$	568,000			$	431,000
Accrued and deferred expenses			624,000				490,000
Total deferred tax assets			1,192,000				921,000
Less: valuation allowance			(1,192,000	)			(921,000	)
Net deferred tax asset recorded			-			$	-

 

 

BioPower Operations Corporation and Subsidiaries

Notes to Consolidated Financial Statements

November 30, 2014 and 2013

 

The valuation allowance at November 30, 2014, and 2013, was approximately $1,192,000 and $921,000, respectively. The net change in valuation allowance during the period ended November 30, 2014 was an increase of approximately $271,000.

 

Note 6. Notes Payable and Convertible Debt

 

Notes payable consists of the following:

 

		Balance				Interest Rate				Maturity
Balance - November 30, 2012		$	89,800
Borrowings			181,506				8	%		Due on demand
Conversion of borrowings to equity			(183,306	)
Balance - November 30, 2013		$	88,000
Borrowings			30,000				4	%		August 4, 2014
Borrowings			25,000				8	%		June 30, 2015
Borrowings			10,000				8	%		April 1, 2015
Borrowings			2,000				8	%		April 30, 2015
Balance - November 30, 2014		$	155,000

 

On June 21, 2013, the Company issued two of its investors a total of 3,122,800 shares of its common stock in full satisfaction of notes payable, amounting to $183,306, along with accrued interest of $4,062. On the date of conversion, the notes payable and accrued interest was valued at $281,052, or $0.09 per share, based on the closing price of the common stock. The Company recorded a loss on the settlement of debt and accrued expenses of $93,684 during the year ended November 30, 2013 as a result of the conversion.

 

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 November, 2014, an officer of the Company made a $50,000 loan, at 8% interest, which is due on May 5, 2015.

 

 

BioPower Operations Corporation and Subsidiaries

Notes to Consolidated Financial Statements

November 30, 2014 and 2013

 

Accrued interest at November 30, 2014 and November 30, 2013 amounted to $9,474 and $6,368, 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, 2012		$	-
Borrowings			25,000				4	%		Due on demand		$	0.25
Conversion of borrowings to equity			(25,000	)
Borrowings			125,000				8	%		January 22, 2015			0.10
Balance - November 30, 2013		$	125,000
Borrowings			125,000				8	%		Due on demand			0.10
Conversion of borrowings to equity			(187,500	)
Balance - November 30, 2014		$	62,500

 

In January 2013, a third party investor advanced $25,000. The lender could convert the loan into 100,000 restricted shares of the Company at $0.25 per share. The Company determined that the loan met the definition of a conventional convertible debt since the holder of the note could only realize the benefit of the conversion option by exercising it and receiving the entire amount of proceeds in a fixed number of shares or cash. 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 $25,000, as a discount to the loan and a corresponding increase to additional paid in capital. The amount was immediately recognized as interest expense since the loan is due on demand.

 

In order to induce the investor to convert his loan promptly, the Company reduced the conversion price to $0.06 per share, thereby increasing the number of shares issuable upon conversion to 416,667 shares. The carrying value of the loan on June 10, 2013, the date of conversion, was $25,000 and the closing price of the Company’s common stock on that date was $0.06 per share. The Company accounted for the conversion of loan in accordance with ASC 470, “Debt with Conversion and Other Options.” The Company determined the fair value of the securities issued in connection with the conversion to be $25,000 and the fair value of the securities issuable pursuant to the original terms of the loan agreement to be $6,000, thereby resulting in $19,000 of incremental consideration paid by the Company upon conversion of the note. In addition, the Company issued the lender 5,500 shares of its common stock in full satisfaction of accrued interest of $330 related to this note. The Company recorded a loss on the settlement of debt and accrued expenses of $19,165 for the year ended November 30, 2013 as a result of the conversion.

 

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.

 

 

BioPower Operations Corporation and Subsidiaries

Notes to Consolidated Financial Statements

November 30, 2014 and 2013

 

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.

 

Interest expense on convertible debt with third parties amounted to $4,973 and $6,368 at November 30, 2014 and 2013, respectively.

 

Note 7. Notes Payable – Related Parties

 

For the year ended November 30, 2013

 

On June 21, 2013, the Company issued its Chief Executive Officer 707,500 shares of its common stock in full satisfaction of his note payable, amounting to $40,500 and accrued interest of $1,950. On the date of conversion, the note payable and accrued interest were valued at $63,675, or $0.09 per share, based on the closing price of the common stock. The Company recorded a loss on the settlement of debt and accrued expenses of $21,225 for the year ended November 30, 2013 as a result of the conversion.

 

For the year Ended November 30, 2014

 

During June and 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% which is due on May 5, 2015. 

 

As of November 30, 2014 and 2013, respectively the Company owes $294 and $190 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.

 

 

BioPower Operations Corporation and Subsidiaries

Notes to Consolidated Financial Statements

November 30, 2014 and 2013

 

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, 2013:

 

The Company issued 215,000 shares of stock for cash totaling $12,900, at a value of $0.06 per share to unrelated third parties.

 

The Company authorized 80,000 shares of stock for the conversion of debt, which were valued $100,000 at November 30, 2012. The shares were a component of Common Stock Payable and not included in equity, nor used in calculating earnings per share until the year ending November 30, 2013.

 

 

BioPower Operations Corporation and Subsidiaries

Notes to Consolidated Financial Statements

November 30, 2014 and 2013

 

3,544,967 common shares for unrelated party debt at a price of approximately $0.09 per share, for a total value of $325,547.

 

The Company authorized 40,000 shares of stock to an unrelated consultant for services, which were valued at $108,500 at November 30, 2012. The shares were a component of Common Stock Payable and were not include in equity, nor used in calculating earnings per share until the year ending November, 30, 2013.

 

42,813 shares were issued to unrelated consultants for services, at prices ranging from $0.18 to $0.80, for a total value of $34,250.

 

1,500,000 shares were issued to an unrelated third party for services to be rendered over a one year period. At November 30, 2013 the unvested shares had a value of $143,750. As of November 30, 2014, the 1,500,000 shares were fully vested and the fair value of the shares was $120,000. The $23,750 decrease, from November 30, 2013 to November 30, 2014 was a result of the fair value measurement at November 30, 2014 based on the current market price per share of the common stock.

 

On June 25, 2013, the Company’s Chief Executive Officer and Director of Business Strategy were each granted 2,000,000 shares of common stock in exchange for continuing to work without cash payment of their full salary and to convert accrued expenses and a note payable. The shares were issued for the year ending November 30, 2103, but will vest after one year of service. The fair value of the common stock at the date of grant was $0.09 per share based upon the closing market price on the date of grant. The aggregate grant date fair value of the awards amounted to $360,000, which will be recognized as compensation expense over the vesting period. The Company recorded $150,000 of compensation expense during the year ended November 30, 2013 with respect to this award.

 

The Company expensed the shares issued for services as a component of general and administrative expenses.

 

2,802,400 common shares for debt and accrued expenses of related parties at prices ranging from $0.06 to $0.09 per share, for a total value of $246,496.

 

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. A fair value measurement adjustment was made in the amount of ($23,750), relating to shares issued from November 30, 2013 to November 30, 2014, bringing the total value for common shares issued to third parties for services to $33,251.

 

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.

 

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. (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. (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.)

 

 

BioPower Operations Corporation and Subsidiaries

Notes to Consolidated Financial Statements

November 30, 2014 and 2013

 

(C) Restricted Stock

 

For the year ended November 30, 2013

 

On June 21, 2013, the Company granted 1,500,000 shares of common stock to a consultant for services to be provided over a twelve month period, commencing June 1, 2013. The shares will vest after one year of service; however the Company issued the shares in September 2013. All of the shares vested as of November 30, 2014, with a true value of $120,000. These shares are restricted for two years as of October 24, 2014 as part of the SEA Agreement which has a two-year lock-up agreement. (See footnote 8(B)).

 

On June 25, 2013, the Company’s Chief Executive Officer and Director of Business Strategy were each granted 2,000,000 shares of common stock in exchange for converting accrued expenses and a note payable. The shares vested after one year of service but will not replace the Company’s obligation to pay the required salary over the next year. The fair value of the common stock at the date of grant was $ 0.09 per share based upon the closing market price on the date of grant. The aggregate grant date fair value of the awards amounted to $ 360,000, which is recognized as compensation expense over the vesting period. Total unrecognized compensation expense related to unvested stock awards at November 30, 2014 and November 30, 2013, amounts to $0 and $210,000. These shares are restricted for two years as of October 24, 2014 as part of the SEA Agreement which has a two-year lock-up agreement. (See footnote 8(B)).

 

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.

 

For the year ended November 30, 2013

 

On June 12, 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 the date of conversion, the fair value of the Company’s common stock was $0.06 per share, based on the closing price of the common stock.

 

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 the date of conversion, the fair value of the Company’s common stock was $0.09 per share, based on the closing price of the common stock. The Company recorded a loss on the settlement of debt and accrued expenses of $48,072 during the year ended November 30, 2013 as a result of the conversion.

 

On June 21, 2013, the Company issued its Director of Business Strategy 1,000,000 shares of its common stock in full satisfaction of amounts due to her for reimbursable expenses, amounting to $60,000. On the date of conversion, the fair value of the Company’s common stock was $0.09 per share, based on the closing price of the common stock. The Company recorded a loss on the settlement of debt and accrued expenses of $30,000 during the year ended November 30, 2013 as a result of the conversion.

 

On June 25, 2013, the Company’s Chief Executive Officer and Director of Business Strategy were each granted 2,000,000 shares of common stock in exchange for converting accrued expenses and a note payable (see Note 8. (B.)) and continuing to work and accruing their salary. The shares were issued during the year ended November 30, 2013, but will vest after one year of service and will not replace the Company’s obligation to pay the required salary over the next year. The fair value of the common stock at the date of grant was $0.09 per share based upon the closing market price on the date of grant. The aggregate grant date fair value of the awards amounted to $360,000, which will be recognized as compensation expense over the vesting period. The Company recorded $210,000 and $150,000 of compensation expense during the years ended November 30, 2014 and November 30, 2013, respectively.

 

 

BioPower Operations Corporation and Subsidiaries

Notes to Consolidated Financial Statements

November 30, 2014 and 2013

 

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.))

 

During the years ended November 30, 2014 and 2013, the Company recorded related party interest expense of $275 and $807, respectively.

 

Note 10. Commitments and Contingencies

 

Commitments

 

Employment Agreements – Officers and Directors

 

As of November 30, 2013, the Company had employment agreements with certain officers and directors (two individuals) containing the following provisions:

 

Term of contract		5 years, expiring on December 31, 2015
Salary		$200,000
Salary deferral		All salaries will be accrued but may be paid from the Company’s available cash flow funds.

 

As of November 30, 2014, 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

 

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.

 

Rent expense was $47,158 and $46,589 for the years November 30, 2014 and 2013, respectively.

 

 

BioPower Operations Corporation and Subsidiaries

Notes to Consolidated Financial Statements

November 30, 2014 and 2013

 

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 11. 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 $111,401 and $258,734 for the years ended November 30, 2014 and 2013, respectively, in connection with services provided under the TSA.

 

Note 12. Subsequent Events

 

None

 

 

 

EXHIBIT 31.1

 

CERTIFICATION OF

PRINCIPAL EXECUTIVE OFFICER/PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

 

I, Robert D. Kohn, certify that:

 

1. I have reviewed this Annual Report on Form 10-K of the Registrant;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. As the Registrant’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. As the Registrant’s certifying officer, I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

	BIOPOWER OPERATIONS CORPORATION
Date: March 13, 2015	By:	/s/ Robert Kohn
		Robert D. Kohn, Chief Executive Officer, Chief Financial Officer, Principal Executive Officer, Principal Financial Officer and Director

 

 

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the annual report of BioPower Operations Corporation (the “Company”) on Form 10-K for the year ending November 30, 2013, as filed with the Securities and Exchange Commission on the date hereof, I, Robert Kohn, Principal Executive Officer, Principal Accounting and Financial Officer, Chief Executive Officer, Chief Financial Officer, Secretary and Director of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

1. The annual report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

 

2. The information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

 

	BIOPOWER OPERATIONS CORPORATION
Dated: March 13, 2015	By:	/s/ Robert Kohn
		Robert D. Kohn, Chief Executive Officer, Chief Financial Officer, Principle Executive Officer, Principal Accounting and Financial Officer and Director