BioteQ
BioteQ Environmental Technologies Inc.
Annual Report
2000
Contents
Corporate Profile
President’s Message to Shareholders
The Technology
Project Descriptions
Management Discussion and Analysis
Management’s Responsibility for Financial Reporting
Auditors' Report and Consolidated Financial Statements
1
2
4
7
11
12
Corporate Information
inside back cover
BioteQ Environmental Technologies Inc
Corporate Profile
BioteQ is a Canadian industrial process company that has developed and patented
the BioSulphide ProcessTM for water treatment. The process allows the treatment of
acid contaminated water with concurrent recovery of saleable metals from the water.
Water discharged from the process contains very low concentrations of toxic heavy
metals.
BioteQ has projects in advanced stages of development in Canada and the United
States and is reviewing other projects in North America and elsewhere. BioteQ
proposes to operate on three commercial bases: design, build, own and operate;
contract; or third party license. Potential revenue streams are recovered metals and
treatment fees.
The management of BioteQ has extensive experience in environmental aspects of
the minerals and related industries, with internationally recognized expertise in many
aspects of acid contaminated water management.
1
BioteQ Environmental Technologies Inc
President’s Message to Shareholders
The acquisition of Biomet Mining Corporation allowed the company to complete its
qualifying transaction at the end of 2000 and is a significant milestone in our
objective of establishing commercial applications of the patented water treatment
technology, the BioSulphide ProcessTM. The acquisition not only included the
BioSulphide ProcessTM technology, but also Biomet’s laboratory assets, mobile pilot
plants, engineering studies, development projects and intellectual property. Most
importantly, the qualifying transaction brings a strong Board of Directors and
management team to the Company and provides an exceptional opportunity for the
Company to achieve commercial success and value for our shareholders.
Highlights in 2000
Biomet was very active during 2000 in the technical development of the
commercialization plan for the BioSulphide ProcessTM. Highlights from Biomet’s
operations during 2000 include:
• Successful completion of pilot operations at the Berkeley Pit
project in Butte, Montana, including operation of a prototype partial
oxidation burner for nutrient gas supply for the BioSulphide
ProcessTM.
• Completion of an independent Quality Assurance / Quality Control
report of the pilot results at Berkeley Pit contracted to the Montana
Bureau of Mines and Geology
• Completion of pilot operations, co-sponsored by Cominco Alaska,
at Cominco’s Red Dog Mine in Alaska and preliminary project
engineering for potential commercial operations at Red Dog
• Completion of preliminary engineering for potential commercial
operations by AGRA Simons (now AMEC Simons) which provided
the basis for project costing to assist in evaluation of commercial
opportunities for the Company
• Completion of laboratory and mini-pilot testing at Caribou Mine in
New Brunswick as well as a prefeasibility level engineering report
• Completion of a consultant's report of the burner operation in Butte
which confirmed the commercial potential of the burner
•
$1.2 million financing through the completion of the qualifying
transaction
• Addition of John York, C.A. as Chief Financial Officer and Dr.
Richard Lawrence, Ph.D., P.Eng., Executive Vice President, to the
management team.
2
BioteQ Environmental Technologies Inc
Expectations for 2001
The management team is now focusing on reaching a commercial agreement for
application of the BioSulphide ProcessTM and completing the engineering for project
feasibility. The commercialization plan includes the following critical steps:
1. Completion of an independent engineering study for a commercial
plant
2. Completion of an independent review on the burner operation and
its commercial potential
3. Development of key strategic alliances with complimentary
companies in plant engineering, equipment supply, finance and
operation,
4. Completion of a commercial transaction in North America,
5. Ongoing development of new commercial targets, and
6. Addition of key technical and financial personnel.
I would like to thank my fellow directors, employees, consultants, shareholders and
our underwriters for their contributions to our successes this year. 2001 should be
an exciting year for the Company as the commercial potential of its underlying
technology assets is realized. I look forward to working with the management team
and Board of Directors to both increase value and broaden our shareholder base.
P. Bradley Marchant
President and CEO
Vancouver, Canada
3
BioteQ Environmental Technologies Inc
The Technology
The BioSulphide ProcessTM was developed to neutralize acidic water with concurrent selective
recovery of metals from the contaminated solutions. Potential applications of the Process include
the treatment of:
•
•
•
•
•
•
acid mine drainage
heap/dump leach solutions
tailings re-treatment leachates
refinery/smelter waste streams
naturally occurring metal-laden streams
industrial and municipal water with high total dissolved solids (TDS) due to
sulphate
The resulting treated water can be discharged to the environment without further treatment or
recycled for process use.
Revenue sources from the BioSulphide ProcessTM are water treatment fees and recovered
metals such as copper, zinc, cobalt and nickel, and valuable sulphide-based co-products (eg.
NaHS, H2S). There is virtually no “reserve risk” as the acid and metals are contained in solution,
which is easily quantified, generally independently by environmental regulatory agencies.
Alternative processes available to treat these and related wastes include lime precipitation, lime
scrubbing, ion exchange and biosorption, conventional sulphate reduction, and wetlands. In
many applications, all of these alternatives encounter technical and/or economic limitations.
Process Description
The patented BioSulphide ProcessTM was developed with the following objectives:
• Minimize treatment costs
• Selectively recover metals in saleable grade concentrates to offset treatment
costs
• Reduce liabilities by reducing the volume of sludge for disposal and minimizing
heavy metal content
• Produce discharge quality water
• Easily engineered and operated using known chemical and biological process
unit operations
• Easily integrated into existing operations without specialized personnel or
infrastructure
4
BioteQ Environmental Technologies Inc
The BioSulphide ProcessTM integrates a biological phase and a chemical phase to treat
wastewater and other streams to discharge quality and maximize metals recovery. A general
process schematic is shown in Figure 1.
Nutrients
Excess H2S
Production of
By-products
Carbon and
Energy Sources
Bioreactor
(Sulphate Reduction)
Sulphate
H2S and
Alkalinity
Contaminated
Drainage
Metals, SO4
Selective
Metals Precipitation
Treated
Water
Metal Sulphide
Products
Figure 1. Generalized Schematic - BioSulphide ProcessTM
Essentially, the BioSulphide ProcessTM is a chemical treatment process that uses inexpensive
biologically-generated reagents. The entire wastewater stream passes through a chemical
treatment stage where the pH is adjusted, using biologically generated alkalinity, and biogenic
hydrogen sulphide gas (H2S) is introduced to selectively precipitate metals from solution as
sulphides. The sulphide concentrates are recovered by dewatering and shipped for sale.
A portion of the resultant metal-free sulphate solution is fed to an anaerobic biological reactor
where sulphate is biologically reduced to sulphide (H2S). The fraction of solution to be treated
biologically is normally controlled by the amount of H2S required for sufficient metal removal.
However, a larger portion might be treated if excess alkalinity and/or H2S are desired for
additional water treatment purposes and/or for the production of saleable sulphide-based co-
products, such as NaHS, depending on local markets. Alternatively, in selected applications,
sulphur can be reduced directly in a bioreactor to produce H2S for use in metals recovery.
The BioSulphide ProcessTM utilizes a mixed anaerobic biological culture to reduce sulphate
species already present in the wastewater to produce hydrogen sulphide with the simultaneous
production of alkalinity, in the form of carbonate, for pH adjustment. Biologically produced
sulphide is recycled as H2S gas or HS- in solution to the chemical treatment step for metal
sulphide precipitation and recovery. Biologically generated alkalinity is also utilized in the
chemical treatment step for pH control during selective precipitation. It is important to note that in
most cases, only a fraction of the total waste sulphate requires treatment to provide sulphide in
sufficient quantities for complete metal removal and pH control. It is not necessary, therefore, to
size bioreactors on the basis of the total flow of contaminated feed to the plant.
5
BioteQ Environmental Technologies Inc
Chemical Pretreatment:
M2+ + S2- ➙
MS [where M2+ represents a divalent cation]
Biological Reduction:
SO4
2- + Nutrients + H2O ➙
H2S + HCO3-
During the process biomass is continually created. Several nutrient sources for biomass growth
have been pilot tested (eg. coal, wood, natural gas or diesel combustion products, sewage
sludge, glycol and ethanol). For commercial applications, the nutrient source will likely be limited
to the combustion products of natural gas, propane or diesel fuel due to the simplicity of
operation, high efficiency of nutrient utilization, and because this method provides excess heat to
maintain the bioreactors at optimum biological activity.
Environmental Benefits
There are significant environmental benefits to the use of the BioSulphide ProcessTM. The
process offers a long-term mitigation alternative for acid rock drainage as well as more complete
metal recovery overall and improved resource utilization. The BioSulphide ProcessTM is a
responsible waste management alternative utilizing a simple, low risk biological process. The
final products from the process include:
•
treated water
• metals recovered for recycle
• minimum waste sludge for disposal
•
valuable co-products for industrial recycle
As a result of the positive environmental benefits of employing the BioSulphide ProcessTM,
preliminary indications are that permitting for commercial operation would not require any special
review and that the operation would receive favourable operating tax incentives.
6
BioteQ Environmental Technologies Inc
Project Descriptions
Red Dog Project
The objective of the Red Dog Project in Alaska is to treat tailings water that is currently stored at
site to recover 250 ppm dissolved zinc, remove copper, lead, cadmium and selenium to meet
discharge criteria, and recycle the water back to the mill. The project would be developed in two
stages. The first stage would be to treat a highly concentrated wastewater stream that
contributes to the metal load in the tailings pond and then, secondly, to treat tailings water for
recycle and/or discharge.
Biomet conducted the initial investigations at their laboratory in Vancouver, using water samples
from the site. A mini-pilot plant was then built and operated at site, initially by Biomet then by
Cominco personnel.
Based on the laboratory and mini-pilot plant results, both of which showed good rates of sulphate
reduction and metal removal to discharge limits, a mobile pilot plant was built in 1998 and
shipped to the Red Dog site. The pilot plant was tested in 1998, showing good sulphate
reduction using bottled nutrient gases. The pilot scale prototype burner was, however, not
successful. The results of the Phase 1 pilot operations at Red Dog demonstrated good biomass
development and zinc recovery along with complete removal of cadmium and lead from the
water. (Figure 1). The plant was operated again during 1999 for additional pilot scale burner
design data. These data, along with the design criteria from successful commercial scale burner
trials at our other pilot plant operations in Butte, Montana, during 2000, will be used to complete
an independent engineering study for commercial operations at Red Dog. Discussions with the
owners are in progress for commercial application of the BioSulphide ProcessTM at Red Dog.
7
BioteQ Environmental Technologies Inc
Feed
Discharge
1000
100
L
/
g
m
,
n
o
i
t
a
r
t
n
e
n
o
C
10
1
0.1
0.01
0.001
Cu
Zn
Pb
Cd
Se
Figure 1. Feed and product water analyses from Red Dog
pilot plant campaign, 1999 (note metal concentration on logarithmic scale)
Berkeley Pit Project
According to the US Environmental Protection Agency (US EPA), the Berkeley Pit in Butte,
Montana, is one of the largest acid drainage sites in the US. There is currently 32 billion gallons
of contaminated water stored in the abandoned Berkeley Pit containing 200 ppm copper and 600
ppm zinc.
Initial laboratory scoping work was completed in Vancouver using samples from the site, followed
by a mini-pilot plant operation in Butte. Based on the success of the laboratory and mini-pilot
8
BioteQ Environmental Technologies Inc
program, a second, larger scale mobile pilot plant was designed and built for operation at the
Berkeley Pit during 1999 to determine plant operational design criteria and changes required for
operation specific to the Berkeley Pit. This plant included a commercial-scale partial oxidation
burner that can utilize diesel, propane or natural gas as the fuel source. Results demonstrated
that the partial oxidation burner will produce nutrient gas according to design expectations.
A second phase of piloting at the Berkeley Pit was completed in 2000 to provide feasibility study
design criteria. The company has completed initial commercial scale engineering for the
Berkeley Pit project and is in discussions with the owners and the US EPA for construction of a
commercial plant.
A summary of results from the Berkeley Pit pilot testing, showing concentrations of metals in feed
water and plant discharge is shown below.
Feed
Discharge
1000
100
L
/
g
m
,
n
o
i
t
a
r
t
n
e
n
o
C
10
1
0.1
0.01
Cu
Zn
Pb
Cd
As
Figure 2. Feed and product water analyses from Berkeley Pit
pilot plant campaign, 2000 (note metal concentration on logarithmic scale)
Caribou Project
The Caribou Mine, located near Bathurst, New Brunswick, is currently shut down. The mine site
has acid drainage, containing copper and zinc for recovery. In addition, there is zinc-rich lime
sludge from the existing lime treatment plant that can be re-treated for zinc recovery. The
sludges overlay older high-grade tailings that can be re-leached using the acid drainage to
enhance metal recovery and allow disposal of the treated tailings within the existing tailings
impoundment area.
Biomet completed initial laboratory scoping work, jointly with RPC laboratories in Fredericton, and
mini-pilot plant testing at the Caribou site for copper and zinc recovery. A prefeasibility level
engineering study has been completed and discussions are in progress with the owners to
determine the potential for commercial operation at Caribou, first as a small commercial plant to
treat acid drainage followed by expansion to include tailings re-treatment.
9
BioteQ Environmental Technologies Inc
New Initiatives
The Company will also be exploring new potential commercial projects for water treatment.
These projects normally involve initial project scoping work and due diligence, followed by some
laboratory investigations to confirm the processing alternatives and then project piloting for
engineering purposes. The Company is currently evaluating projects in Canada, USA, Australia
and South America.
The Company has also been conducting due diligence on water treatment processes developed
in South Africa which are complimentary to the BioSulphide ProcessTM. Evaluation of these and
other complimentary processes will continue during 2001.
The partial oxidation burner technology that has been developed by the Company to provide low
cost nutrients for the bioreactors shows potential as an alternate source of hydrogen for the
growing fuel cell market. The Company will seek an independent assessment of the burner
potential to determine the best route to pursue for further development.
10
BioteQ Environmental Technologies Inc
Management Discussion and Analysis
The following discussion and analysis should be read in conjunction with the audited consolidated
financial statements of the Corporation for the year ended December 31, 2000.
Operating Results
On December 20, 2000, the Company completed its qualifying transaction under CDNX
regulations and changed its name to BioteQ Environmental Technologies Inc. The qualifying
transaction was structured as a reverse takeover by Biomet Mining Corporation. Consequently,
the Consolidated Financial Statements reflect the past and current activities of Biomet. BioteQ,
the legal parent and publicly traded entity, has been accounted for as being acquired on
December 20, 2000, and its activities are only included in these financial statements from that
date.
Biomet is developing a process for treatment of contaminated water. The majority of Biomet’s
costs associated with developing the process have been deferred. The costs shown in the
Consolidated Statement of Operations are the costs, which do not relate directly to the process
development and minimal costs of BioteQ from the date of acquisition on December 20, 2000.
During 2001, consolidated costs of operations will not be comparable with the year 2000. The
public company, BioteQ, is now operating as the parent of Biomet and will incur a full year of
costs of management, rental of office premises and other operating costs. Furthermore, in 2001
the Company is obliged to adopt the new accounting guidelines for “Enterprises in the
Development Stage”. As a result, the Company will have to review all deferred costs to assess
their recoverability in accordance with CICA Handbook Section 3450. To December 31, 2000 the
deferred costs have amounted to $1,852,474, of which $686,949 was incurred in 2000, compared
to $526,144 in 1999. Any write-down or write-off would impact the Consolidated Statement of
Operations.
Liquidity and Capital Resources
At December 31, 2000 the Company had cash of $618,384 and working capital of $412,518.
These resources were acquired with the BioteQ/Biomet transaction close to the year-end and
was the result of a concurrent financing to raise $900,000 ($699,000 net) through the issue of
shares. The Company is now focused on reaching a commercial agreement for application of its
BioSulphide ProcessTM. Additional financing is planned during 2001 to build a plant and provide
additional working capital.
Risks and Uncertainties
The Company is at an early stage in its development and has yet to put a commercial plant into
operation. Until that time, there will be some technical risk associated with the scale-up from pilot
size test plants, even though extensive testing has been carried out. The technical risk of a new
process plant should be reduced by being able to use many off-the-shelf components.
11
BioteQ Environmental Technologies Inc
Any new commercial application of the BioSulphide ProcessTM will run certain operational risks.
Revenue will be dependent to some extent on the price of the commodities being recovered and
operating costs will be largely dependent on the cost of consumables, which may fluctuate. The
Company will allow for the adverse effect of price changes in its budgeting process. The material
being processed should be very consistent and therefore does not carry the normal reserve risk
of a conventional mining operation.
Outlook
The Company’s development of its BioSulphide ProcessTM is nearly complete. In 2001 the
Company intends to finalize an independent engineering study for a commercial plant and pursue
a commercial transaction. The Company is confident that success will be achieved.
Management’s Responsibility for Financial Reporting
The management of BioteQ Environmental Technologies Inc. is responsible for the preparation of
the consolidated financial statements as well as the financial and other information contained in
the annual report. Management maintains an internal control system to provide reasonable
assurance as to the reliability of financial information and the safeguarding of assets.
The consolidated financial statements are prepared in accordance with generally accepted
accounting principals in Canada and necessarily include amounts determined in accordance with
auditors,
estimates
PriceWaterhouseCoopers, Chartered Accountants, express their opinion on the consolidated
financial statements in the annual report.
judgements made
by management.
external
The
and
The Board of Directors, through the Audit Committee, is responsible for ensuring that
management fulfils its responsibilities for financial reporting and internal control.
The financial statements of the Company have been approved by the Board of Directors.
“P B Marchant” “ J C York”
P. Bradley Marchant
President and CEO
John York
Chief Financial Officer
12
Bioteq Environmental Technologies
Inc.
(formerly Venturecorp Capital Inc.)
(A Development Stage Company)
Consolidated Financial Statements
December 31, 2000
PricewaterhouseCoopers LLP
Chartered Accountants
Suite 100
5611 Cooney Road
Richmond, British Columbia
Canada V6X 3J6
Telephone (604) 806 7000
Facsimile (604) 806 7217
February 26, 2001
Auditors’ Report
To the Shareholders of
Bioteq Environmental Technologies Inc.
We have audited the consolidated balance sheets of Bioteq Environmental Technologies Inc. as at
December 31, 2000 and 1999 and the consolidated statements of operations and deficit and cash flow
for each of the two 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 Canadian generally accepted auditing standards. Those
standards require that we plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the
financial position of the company as at December 31, 2000 and 1999 the results of its operations and
cash flows for each of the two years then ended in accordance with Canadian generally accepted
accounting principles. As required by the British Columbia Company Act, we report that, in our
opinion, these principles have been applied consistently except as disclosed in note 10.
“Price waterhouseCoopers LLP”
Chartered Accountants
PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP and other members of the worldwide
PricewaterhouseCoopers organization.
Bioteq Environmental Technologies Inc.
(formerly Venturecorp Capital Inc.)
(A Development Stage Company)
Consolidated Balance Sheets
As at December 31, 2000
Assets
Current assets
Cash
Funding receivable
Scientific research tax credits receivable
Other
Capital assets (note 5)
Deferred development costs (note 6)
Liabilities
Current liabilities
Accounts payable and accruals
Amounts due to shareholder (note 8)
Shareholders’ Equity
Share capital (note 7)
Deficit
Going concern (note 2)
Approved by the Board of Directors
2000
$
(Restated
note 10)
1999
$
618,384
–
–
28,535
646,919
191,522
26,545
65,110
82,957
13,672
188,284
166,801
1,852,474
1,165,525
2,690,915
1,520,610
234,401
–
65,027
88,520
234,401
153,547
2,655,770
1,443,849
(199,256)
(76,786)
2,456,514
1,367,063
2,690,915
1,520,610
“Brad Marchant” Director
“George Poling” Director
Bioteq Environmental Technologies Inc.
(formerly Venturecorp Capital Inc.)
(A Development Stage Company)
Consolidated Statements of Operations and Deficit
For the years ended December 31, 2000 and 1999
Expenses
Legal and accounting
Marketing
Administration
Net loss
Deficit – beginning of year, as previously stated
Prior period adjustment (note 10)
Deficit – beginning of year, restated
Deficit – end of year
Loss per share
2000
$
84,673
7,748
30,049
122,470
–
76,786
76,786
199,256
(0.01)
(Restated
note 10)
1999
$
20,000
17,279
6,010
43,289
–
33,497
33,497
76,786
(0.00)
Bioteq Environmental Technologies Inc.
(formerly Venturecorp Capital Inc.)
(A Development Stage Company)
Consolidated Statements of Cash Flow
For the years ended December 31, 2000 and 1999
Net loss
Change in working capital
Cash flows from financing activities
Issuance of common shares for cash
Amounts due to shareholder
Cash received through acquisition of Bioteq
Cash flows from investing activities
Capital assets
Deferred development costs
Cash receipts from third parties credited to deferred development costs
Net change in cash
Cash – Beginning of year
Cash – End of year
Supplemental information:
Share capital issued in exchange for shareholder loan
Interest paid
Income taxes paid
2000
$
(Restated
note 10)
1999
$
(122,470)
(43,289)
72,625
(49,845)
89,402
(27,922)
1,143,786
1,205,266
(98,627)
(611,953)
146,998
38,124
(5,165)
377,500
50,000
–
427,500
(54,473)
(761,836)
231,107
(563,582)
(585,202)
591,839
(162,867)
26,545
189,412
618,384
26,545
60,598
1,300
–
–
907
–
Bioteq Environmental Technologies Inc.
(formerly Venturecorp Capital Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2000
1 Company operations
On December 20, 2000, Biomet Mining Corporation (“Biomet”) completed a reverse take-over of Bioteq
Environmental Technologies Inc. (formerly Venturecorp Capital) (“Bioteq”). As a result of the reverse take-
over, the former shareholders of Biomet constituted the majority of the shareholders of Bioteq. Legally, Bioteq
is the parent entity; however, since the former shareholders of Biomet acquired control of Bioteq, Biomet is
identified as the acquiring entity. Biomet’s assets and liabilities, being those of the acquiring entity, are
included in the balance sheet at cost; the assets and liabilities of Bioteq are included at their fair market values;
and the historical financial statements presented are those of Biomet.
Biomet acquired a patent from related parties in 1997 for a process to treat metal-laden, sulphate-rich waste
water streams for acid neutralization and metal recovery. The result, the biosulphide process, has been
developed through the pilot demonstration stage and independent pre-feasibility study for commercial
application. The company is continuing to develop the process.
2 Going concern
The company requires capital to commercialize the biosulphide process.
These consolidated financial statements have been prepared on a going concern basis, which assumes that the
company will be able to meet its commitments, continue its operations and realize its assets and discharge its
liabilities in the normal course of business. These statements do not reflect adjustments to carrying values of
assets and liabilities that may be necessary should the company be unable to obtain financing and achieve
sufficient cash flows to continue as a going concern. The company has deferred $1,852,474 of development
costs to date. The recovery of these costs is contingent on successful commercial acceptance of the resulting
processes and products.
The company’s ability to carry on as a going concern is dependent upon its ability to arrange debt or equity
financing to meet its ongoing needs. Subsequent to the year end the company raised $161,500 from the exercise
of stock options (note 7).
3 Significant accounting policies
Generally accepted accounting principles
These financial statements are prepared in accordance with generally accepted accounting principles in Canada.
Principles of consolidation
The consolidated financial statements include the accounts of Bioteq Environmental Technologies Inc. and its
wholly owned operating subsidiary Biomet. All material intercompany transactions and balances have been
eliminated.
(1)
Bioteq Environmental Technologies Inc.
(formerly Venturecorp Capital Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2000
Capital assets
Expenditures on capital assets are stated at cost, net of grants and contractual amounts received under
feasibility studies. All assets are amortized on a straight-line basis over five years, with the amortization being
charged to deferred development costs.
Deferred development costs
The company continues to develop its biosulphide process. The majority of costs incurred by the company are
associated with the development of this process. As a result, all expenses incurred by the company, are deferred
with the exception of legal, audit and other administrative expenses that are not attributable to the development
of the process (note 10). The costs will be amortized upon commercial application of the process or will be
written-off if commercial feasibility is not achieved.
All amounts received from third parties in connection with testing during the development stage are netted
against development costs.
The company's current accounting policy is to capitalize development costs incurred during the pre-operating
stage. In March 2000, the Canadian Institute of Chartered Accountants ("CICA") issued Accounting Guideline
11, "Enterprises in the Development Stage" ("AcG-11"), which is effective for fiscal periods beginning after
April 1, 2000. AcG-11 removes certain exemptions for accounting for research and development costs and
disclosure of current assets and liabilities for enterprises in the development stage. Removal of these
exemptions results in enterprises in the development stage being subject to the same accounting standards of
recognition, measurement, presentation and disclosure as enterprises in the operating stage. The company is
required to adopt the recommendations effective January 1, 2001. As a result, upon adoption the deferred
development and pre-operating costs will be reviewed to assess their recoverability, in accordance with the
recommendations of CICA handbook section 3450, "Research and Development Costs". Any write-down or
write-off resulting will be treated as a change in accounting policy, applied retroactively without restatement of
the financial statements of prior periods.
Stock options
The company has a stock option plan, which is described in note 7. No compensation expense is recognized for
this plan when stock options are issued to employees. Consideration paid on exercise of stock options is
credited to share capital.
Financial instruments
The fair values of accounts receivable and payable approximate their carrying value.
(2)
Bioteq Environmental Technologies Inc.
(formerly Venturecorp Capital Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2000
4 Reverse take-over
As a result of the reverse take -over referred to in note 1, the former shareholders of Biomet acquired the
majority of shares in Bioteq. The cost of the purchase has been allocated to Bioteq’s assets and liabilities as at
December 20, 2000 as follows:
Fair value of consideration
Net assets acquired
Cash
Accounts payable
Due from Biomet (cash advances)
$
1,089,395
771,280
(81,885)
400,000
1,089,395
Prior to the reverse take-over on December 20, 2000, the legal parent, Bioteq, incurred administrative costs
from January 1, 2000 of $166,095, being largely legal costs of $87,875 and Underwriter costs of $37,000.
During 2000, Bioteq raised cash from the issue of shares of $699,000 (net of costs of $201,000) and also raised
cash from the issue of convertible notes of $300,000 which was loaned to Biomet.
5 Capital assets
Pilot plants, net
Accumulated amortization
Office equipment
Accumulated amortization
2000
$
1999
$
358,287
(170,816)
259,660
(99,159)
187,471
160,501
11,241
(7,190)
4,051
11,242
(4,942)
6,300
191,522
166,801
To date the company has received $258,537 from third parties and $15,670 in investment tax credits which are
offset against the cost of the pilot plants. Amortization amounted to $73,906 (1999 - $57,682).
(3)
Bioteq Environmental Technologies Inc.
(formerly Venturecorp Capital Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2000
6 Deferred development costs
Cumulative deferred development costs incurred to date are as follows:
Laboratory process development
Labour costs
Laboratory operations
Patents
Other
Investment tax credit
Amortization of capital assets
Pilot plants
Labour costs
Pilot plant operations
Other
Interest
2000
$
706,602
304,584
32,615
56,350
(67,287)
1,032,864
178,006
149,033
437,495
47,370
633,898
7,706
(Restated
note 10)
1999
$
430,174
218,988
24,573
23,573
(67,287)
630,021
104,101
133,033
252,264
34,847
420,144
11,259
1,852,474
1,165,525
(4)
Bioteq Environmental Technologies Inc.
(formerly Venturecorp Capital Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2000
During the normal course of operations, the company pays salaries, wages and management fees to
shareholders and directors. In addition, the company has had the following cumulative transactions since
inception with related parties:
Included in deferred development costs:
Intangible assets purchased from shareholders
Interest charged by a shareholder
Provision of engineering services by shareholders
Laboratory expenses incurred by shareholders
2000
$
20
4,284
257,323
68,356
1999
$
20
3,112
170,142
68,356
The amounts paid for the services are based on estimated fair market value, and/or contracted amounts.
7 Share capital
The company is authorized to issue 100,000,000 common shares without par value.
Issued and outstanding
Balance – December 31, 1998
Issued for cash
Expenses associated with issue of shares
Balance – December 31, 1999
Issued for cash
Settlement of amounts due to shareholders
Shares outstanding pre-December 20
Deemed number of shares to adjust for recapitalization
Shares issued in exchange for net assets of Bioteq (b)
Expenses associated with issue of shares
Total
Number of
shares (a)
381
20
–
401
178,804
121,196
300,401
10,699,599
11,000,000
4,905,884
Amount
$
1,066,349
382,500
(5,000)
1,443,849
89,402
60,598
1,593,849
–
1,593,849
1,089,395
–
(27,474)
15,905,884
2,655,770
(5)
Bioteq Environmental Technologies Inc.
(formerly Venturecorp Capital Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2000
(a) The number of shares prior to December 20, 2000 reflects the number of shares actually issued by Biomet.
The adjustment on December 20, 2000 reflects the deemed number of shares issued in connection with the
reverse take -over.
(b) The net assets of Bioteq on December 20, 2000 include the proceeds of a financing of $900,000, less
transaction costs of $201,000.
Stock options
The company has a stock option plan available to employees and consultants. 2,981,176 shares are available for
issue under the plan. Options vest at the minimum rate of 33% every six months from award.
Subsequent to the year-end, the company received $121,500 for the exercise of the over-subscription option
granted to the Underwriter under the December 2000 financing. This entitlement was exercised by the
Underwriter to acquire 270,000 shares at $0.50 per share, less commission of 10%. In addition, stock options
were exercised on 200,000 shares for $0.20 per share, for cash proceeds of $40,000. These were issued in 1999
and were the only incentive stock options outstanding at December 31, 2000.
At December 31, 2000 there were Underwriter options outstanding to purchase 100,000 common shares, which
were issued in relation to the company’s initial public offering in December 1999. Each option is exercisable
until June 8, 2001 at a price of $0.20 per share. In addition, the Underwriter also received in connection with
the December 2000 financing, 240,000 share purchase warrants entitling the agent to purchase 240,000
common shares at $0.50 per share until December 2002.
Subsequent to the year-end, a total of 450,000 options were issued to employees at prices between $0.54 and
$0.67 per share.
Escrow shares
The shares issued at December 31, 2000 includes the following held in escrow:
7,000,000 performance shares which will be released from escrow based upon the cash flow performance of
Biomet determined on an annual basis in accordance with the policies of the exchange. Biomet must generate a
cash flow of $0.30 for each performance share to be released from escrow. Any performance shares which have
not been released within 10 years from issuance will be cancelled and returned to the company’s treasury.
1,000,000 seed shares which are to be released prorata to the seed shareholders as to one third on each of the
first, second and third anniversaries of the completion of the company’s qualifying transactions, which
occurred on December 20, 2000.
Weighted average number of shares
The deemed shares issued on December 20, 2000 has been used for purposes of calculating the weighted
average number of shares.
(6)
Bioteq Environmental Technologies Inc.
(formerly Venturecorp Capital Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2000
8 Due to shareholder
During the year ended December 31, 1999, a shareholder loaned the company $88,520. The loan carried an
interest rate of 7-3/4% per annum and had no fixed terms of repayment. $1,300 of interest was paid on the loan.
During 2000 $60,598 of this loan was converted into common shares of the company. The remainder was
repaid.
9
Investment tax credits and tax loss carryforward
The company has accumulated losses of approximately $1,169,000 for income tax purposes which may be
deducted in the calculation of taxable income in future years. The losses expire as follows:
2004
2005
2006
2007
$
172,000
230,000
331,000
436,000
1,169,000
In addition to the accumulated losses for income tax purpose, the Company has incurred scientific research and
experimental development expenditure (“SR&ED”) of $433,000 to date for income tax purposes which may be
carried forward indefinitely and deducted in the calculation of taxable income in future years.
The Company has also accumulated non-refundable investment tax credits of $23,000 which may be applied
against taxes payable in future years, and which expire at various dates commencing 2006.
These amounts are subject to review and revision by Canada Customs and Revenue Agency and the potential
tax benefit which may result from application of the losses, non-refundable investment tax credits, SR&ED
expenditures and capital cost allowance is not reflected in these financial statements.
10 Prior period adjustment
The company changed its policy of capitalizing administrative costs to deferred development costs following
the acquisition of Bioteq. As a result, the company has restated its financial statements by reducing its deferred
development costs by $76,786 in both 1999 and in 2000; increasing its beginning deficit by $33,497 and
$76,786 in 1999 and 2000 respectively; and increasing the net loss for 1999 by $43,288.
(7)
Bioteq Environmental Technologies Inc.
(formerly Venturecorp Capital Inc.)
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 2000
11 Subsequent events
Subsequent to the year end the company entered into an office lease agreement with minimum annual payments
as follows:
2001
2002
2003
$
49,500
45,500
4,000
(8)
Corporate Information
Officers
President & CEO
Chief Financial Officer
and Secretary
Executive Vice President
Brad Marchant
John York
Richard Lawrence
directors
Dohwan Hwang
Anthony Kana
Brad Marchant
Clement Pelletier
George Poling
Gilbert Schneider
Vern Stromkins
Share structure (February 28, 2001)
Float
Escrowed shares
Performance shares
Issued shares
Broker warrants
Employee options
Fully diluted
8,375,884
1,000,000
7,000,000
16,375,884
340,000
450,000
17,165,884
transfer agent
Pacific Corporate Trust
625 Howe Street, 10th Floor
Vancouver, B.C., V6C 3B8
Auditors
PriceWaterhouseCoopers
Corporate Address
Annual General Meeting
The Annual General Meeting of the shareholders
will be held on April 10, 2001, at 2 pm at the
Conference Centre, Second Floor, 888 Dunsmuir
Street, Vancouver B.C.
Suite 1150 – 355 Burrard Street
Vancouver, B.C. Canada V6C 2G8
Telephone:
Facsimile:
Email:
Website:
604 685-1243
604 685-7778
bioteq@bioteq.ca
www.bioteq.ca
Stock Exchange
Canadian Venture Exchange
Symbol: “BQE”