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ENVIRONMENTAL BIOSCIENCE, INC. - SB-2 - 20040816 - MANAGEMENTS_DISCUSSION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the financial
condition and results of operations of the Company for the year ended March 31,
2004 and from the inception (October 2002) through March 31, 2003. This
discussion should be read in conjunction with the financial statements of the
Company, and the related notes thereto appearing elsewhere in this registration
statement. In addition, this discussion contains forward-looking statements.
Such statements reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions,
including, but not limited to, the risk factors described in this Prospectus.
Should one or more of these risks or uncertainties materialize, or should the
underlying assumptions prove to be incorrect, actual results may vary materially
from those described herein.
Overview
The Company
has been granted an exclusive license to commercially exploit a U.S. Patented
Steam Injection System to be used to reclaim landfill airspace. When certain
terms are fulfilled the Companies' license will become exclusive
.
The Company has not installed its Steam Injection System at any landfill, has
not earned revenues, and has incurred losses since inception. Prior to the
company obtaining contracts for installation of its Steam Injection System and
operation of the landfills at which they are installed, it will need to be
adequately capitalized in order to establish its technology at a pre-qualifying
landfill site. In addition, the company will need to obtain regulatory clearance
from the EPA and other regulatory agencies and a minimal level of market
acceptance for its Steam Injection System. Finally, EBSI will need to achieve
certain financing milestones to maintain its license. EBSI may not be able to
satisfy any of these requirements on a timely basis, or at all
.
EBSI is a development stage company that
intends to increase capacity and gas production for municipal waste landfills
through the use of a new, exclusively licensed, patented Steam Injection System.
The company's Steam Injection System is designed to rapidly
transform and degrade a landfill's organic waste to increase
the total space available at a landfill and to increase the landfill's
production of landfill gas, or LFG, that, when captured, can be used for energy
use. The Steam Injection System allows for decomposition and biological
stabilization of landfill waste in a much shorter time than a traditional "dry
tomb" landfill. EBSI believes that this technology will produce a paradigm shift
in landfill management and operations by allowing a landfill to increase its
revenues while providing greater environmental benefits to the community.
Year Ended March 31, 2003
Organization of the
Company.
During the period from inception (October 2002) to March 31,
2003, the Company was in the process of organization, setting up its Board of
Directors and performing general governance procedures. During this time
the company incurred an operating deficit of $1,500 which is primarily
attributed to the costs of incorporation.
Year Ended March 31, 2004
During the first full year of operation the Company spent about $18,000 on
marketing expenses to a small business company to prepare a business plan and
summary, $13,000 for a marketing plan, $56,000 for Professional and Legal fees
and $8,400 for office and miscellaneous expenses.
Liquidity and Capital Resources
The company has financed its operations primarily through
private sales of equity securities. As of March 31, 2004, EBSI has raised
approximately $114,300 from the sale of common stock and certain services for
stock, and $250,000 in loans
convertible to stock.
Management expects to incur substantial
expense in commencing the establishment of its Steam Injection System at a
preliminary site. The pace of this establishment will depend, in large part, on
the ongoing cash position. Management believes that the net proceeds of the
Offering, together with the company's available cash, will be sufficient to meet
its operating expenses and capital requirements for at least six (6) months
following completion of the SB-2 filing. However, these expectations are based
on certain assumptions concerning the costs involved in purchase of equipment
and hiring of personnel for the establishment of the preliminary test site and
the collection of data from that site. These assumptions concern future events
and circumstances that management believes to be significant to the company's
operations and upon which its working capital requirements will depend. Some
assumptions will invariably not materialize and some unanticipated events and
circumstances occurring subsequent to the date of this SB-2 filing.
In addition, the company requires additional
funding in order to achieve its operating objectives. Such funding will be
necessary for the company to maintain its rights to use its Steam Injection
System under the license agreement and to establish the Steam Injection System
at new sites. The amount and timing of future capital requirements will depend
upon many factors, including the level of funding received from this Offering,
the extent and timing of any Unit Warrant exercises, and the extent and timing
of acceptance of the Steam Injection System, both by the market and the EPA.
The company intends to pursue, as part of its
business strategy, future strategic acquisitions which may involve the
expenditure of significant funds. Depending upon the nature, size and timing of
future acquisitions, it may be required to obtain additional debt or equity
financing in connection with such future acquisitions. The company currently has
no agreements or commitments concerning any such additional acquisitions, and
management may not be able to identify any companies that satisfy its
acquisition criteria. Furthermore, additional financing for acquisitions may not
be available, when and if needed, on acceptable terms or at all.
Plan of Operation
Upon the closing of this SB-2 offering, the company intends to
commence solicitation of a municipal waste landfill to establish its Steam
Injection System onsite as its preliminary test site. If the company is
successful in this solicitation, it will then purchase equipment and hire
personnel for this site, and then install the system at the site. Management
anticipates it will take two (2) months from the closing of this Offering to
establish the preliminary test site. The company plans to operate the test site
for a period of three (3) to six (6) months in order to obtain the data
necessary for presentation to other landfill operators and the EPA. The company
estimates that after six (6) months of operation, it can achieve a reduction in
landfill material of between 25 to 60 percent in a typical landfill, according
to industry sources. To date, the company has not purchased or installed any
equipment or hired any personnel.
Upon completion of the preliminary test site,
the company intends to market its Steam Injection System through direct
marketing initiatives, public relation campaigns, alliances with trade and
industry associations, and lobbying efforts. Commencement and expansion of sales
and marketing activities will require funds to commence direct marketing
initiatives, advertising and public relations efforts and development of
association alliances, as well as to increase sales staff headcount and
tradeshow attendance. In all likelihood, additional financing will be required
to conduct sales and marketing activities.
In addition, the company also intends to
acquire companies that offer complementary services to those markets which it
currently serves as well as new markets. For each acquisition, the company will
be required to assimilate the operations, services and personnel of the acquired
business and train, retain, and motivate its key personnel. The company may have
to incur debt or issue equity securities to pay for any future acquisitions.
The company's plan assumes the completion of this Offering in
the second quarter of 2004 and includes the following activities over the next
12 months.
The establishment of its first Steam Injection
System at a preliminary landfill site, including the purchasing and installing
of equipment and hiring of personnel;
The preparation of data from the operation of its
Steam Injection System at this preliminary site and submission of this data to
other landfill operators and the EPA;
The commencement of approval efforts with the EPA
and other regulators to affirmatively establish steam injection as the
preferred form of landfill bioreactor; and
The acquisition of targeted engineering companies.
If the company begins to accrue meaningful
amounts of fees from the installation of its Steam Injection Systems, it may
need additional capital to finance its accounts receivable. The amount of funds
required to finance revenue growth will depend upon the rate of sales growth,
the timeliness of payments from customers, the availability of receivables and
inventory financing from third parties, and the extent to which the company
permits (and our customers select) financing arrangements other than payment
upon delivery. The terms of the arrangements (including payment timing) with any
third-party finance company, and the frequency with which the company allows,
and its customers select, such arrangements, will have a direct impact upon its
working capital needs.
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