##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549
 Form 10-QSB þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the quarterly period ended June 30, 2004 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 Commission File Number 0-50520 Biomass Processing Technology, Inc.   Delaware
    
    65-0638890(State or Other Jurisdiction of
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)3222 Commerce Place, Suite A, West Palm Beach, Florida
    
    33407(Address of Principal Executive Offices)
    
    (Zip Code)
 (561) 684-6611   Securities registered under Section 12 (b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Common Stock,
$.02 par value per share Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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   
o As of August 9, 2004, there were 69,876,738 shares of Common Stock issued and
outstanding. Transitional Small Business Disclosure Format:  Yes   x   No   
o




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BPTechnology Logo BIOMASS PROCESSING TECHNOLOGY, INC. and SUBSIDIARIES __________ TABLE OF CONTENTS PART I FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    4Item 2. Plan of Operation
    
    
    14Item 3. Controls and Procedures
    
    
    17PART II OTHER INFORMATIONItem 2. Changes in Securities and Use of Proceeds
    
    
    18Item 6. Exhibits and Reports on Form 8-K
    
    
    19SIGNATURES
    
    
    20EXHIBITS
    
    
    21
 2




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##### 



Caution Regarding Forward-Looking Information This quarterly report contains both historical and forward-looking
statements. All statements, other than statements of historical facts, that
address future activities, events or developments are forward-looking
statements, including, but not limited to, statements containing the words
believe, anticipate, expect and words of similar import. These statements
are based on certain assumptions and analyses made by us in light of our
experience and our assessment of historical trends, current conditions and
expected future developments as well as other factors we believe are
appropriate under the circumstances. Whether actual results will conform to
the expectations and predictions of management, however, is subject to a number
of risks and uncertainties that may cause actual results to differ materially.
Such risks include, among others, the risks described under Description of
Business  Risk Factors in the Companys Annual Report on Form 10-KSB for the
year ended December 31, 2003. Consequently, all of the forward-looking statements made in this Form
10-QSB are qualified by these cautionary statements and there can be no
assurance that the actual results anticipated by management will be realized
or, even if substantially realized, that they will have the expected
consequences to or effects on the Companys business operations. 3




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##### 



PART I. FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS BIOMASS PROCESSING TECHNOLOGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003 (Unaudited)June 30,
    
    December 31,2004
    
    2003ASSETSCurrent assetsCash and cash equivalents
    
    $
    219,770
    
    
    $
    394,816Accounts receivable
    
    
    94,985
    
    
    
    101,503Prepaid expenses and other current assets
    
    
    254,789
    
    
    
    273,224Equipment in process, held for sale
    
    
    1,945,410
    
    
    
    1,647,321Total Current Assets
    
    
    2,514,954
    
    
    
    2,416,864Property and equipment, net
    
    
    24,430,838
    
    
    
    22,803,456Other assetsPatent application costs
    
    
    232,181
    
    
    
    98,160Deposits and other assets
    
    
    101,775
    
    
    
    101,275Total Other Assets
    
    
    333,956
    
    
    
    199,435Total Assets
    
    $
    27,279,748
    
    
    $
    25,419,755LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    1,764,979
    
    
    $
    622,571Accrued expenses
    
    
    814,502
    
    
    
    138,467Current portion- long term debt and capital
leases
    
    
    239,984
    
    
    
    297,488Total Current Liabilities
    
    
    2,819,465
    
    
    
    1,058,526Long-term LiabilitiesLong-term capital leases, less current portion
    
    
    163,442
    
    
    
    101,185Convertible Promissory Note
    
    
    10,000
    
    
    
    Note Payable  Officer
    
    
    169,700
    
    
    
    Total Long-term Liabilities
    
    
    343,142
    
    
    
    101,185Commitments and ContingenciesStockholders equityCommon stock, $.02 par value; 100,000,000 shares
authorized; issued and outstanding, 69,550,688 at
June 30, 2004 and 69,431,788 at December 31, 2003
    
    
    1,391,014
    
    
    
    1,388,636Additional paid in capital
    
    
    38,578,363
    
    
    
    37,106,241Deficit accumulated during the development stage
    
    
    (15,852,236
    )
    
    
    (14,234,833
    )Total Stockholders Equity
    
    
    24,117,141
    
    
    
    24,260,044Total Liabilities and Stockholders Equity
    
    $
    27,279,748
    
    
    $
    25,419,755
 See accompanying notes to the consolidated financial statements 4




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##### 



BIOMASS PROCESSING TECHNOLOGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Cumulative
    
    For the Three
    
    For the SixDuring
    
    Months Ended June 30,
    
    Months Ended June 30,DevelopmentStage
    
    2004
    
    2003
    
    2004
    
    2003REVENUES
    
    $
    7,499,216
    
    
    $
    313,024
    
    
    $
    606,874
    
    
    $
    672,353
    
    
    $
    1,187,813COST OF
SALES
Cost of Services Provided
    
    
    7,413,107
    
    
    
    330,506
    
    
    
    580,121
    
    
    
    665,323
    
    
    
    1,138,222GROSS PROFIT (LOSS)
    
    
    86,109
    
    
    
    (17,482
    )
    
    
    26,753
    
    
    
    7,030
    
    
    
    49,591OPERATING EXPENSESResearch and development
    
    
    15,503,320
    
    
    
    1,114,074
    
    
    
    672,891
    
    
    
    1,630,280
    
    
    
    1,157,134(Gain) loss on disposal of assets
    
    
    76,757
    
    
    
    (21,989
    )
    
    
    
    
    
    
    (22,192
    )
    
    
    (1,011
    )Total Operating Expenses
    
    
    15,580,077
    
    
    
    1,092,085
    
    
    
    672,891
    
    
    
    1,608,088
    
    
    
    1,156,123INTEREST EXPENSE
    
    
    (358,268
    )
    
    
    (10,313
    )
    
    
    (3,033
    )
    
    
    (16,345
    )
    
    
    (9,680
    )LOSS BEFORE INCOME TAX BENEFIT
    
    
    (15,852,236
    )
    
    
    (1,119,880
    )
    
    
    (649,171
    )
    
    
    (1,617,403
    )
    
    
    (1,116,212
    )PROVISION FOR INCOME TAXES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (15,852,236
    )
    
    $
    (1,119,880
    )
    
    $
    (649,171
    )
    
    $
    (1,617,403
    )
    
    $
    (1,116,212
    )LOSS PER SHARE:Basic and diluted loss per share
    
    
    
    
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.02
    )
    
    $
    (0.02
    )Weighted average common shares outstanding,
basic and diluted
    
    
    
    
    
    
    69,600,112
    
    
    
    68,635,124
    
    
    
    69,547,729
    
    
    
    68,604,629
 See accompanying notes to the consolidated financial statements 5




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##### 



BIOMASS PROCESSING TECHNOLOGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(UNAUDITED) DeficitAccumulatedNumber of
    
    Common
    
    
    
    
    
    During theCommon
    
    Stock,
    
    Paid in
    
    DevelopmentShares
    
    at Par Value
    
    Capital
    
    Stage
    
    TotalBalances as of December 31, 2003
    
    
    69,431,788
    
    
    $
    1,388,636
    
    
    $
    37,106,241
    
    
    $
    (14,234,833
    )
    
    $
    24,260,044Contribution of common shares
    
    
    (225,000
    )
    
    
    (4,500
    )
    
    
    4,500
    
    
    
    
    
    
    
    Issuance of common shares
    
    
    343,900
    
    
    
    6,878
    
    
    
    1,467,622
    
    
    
    
    
    
    
    1,474,500Net loss for the six month
period ended June 30, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,617,403
    )
    
    
    (1,617,403
    )Balances as of June 30, 2004
    
    
    69,550,688
    
    
    $
    1,391,014
    
    
    $
    38,578,363
    
    
    $
    (15,852,236
    )
    
    $
    24,117,141
 See accompanying notes to the consolidated financial statements 6




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##### 



BIOMASS PROCESSING TECHNOLOGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Six Months EndedCumulative During
    
    June 30,DevelopmentStage (see Note 1)
    
    2004
    
    2003Operating ActivitiesNet Loss
    
    $
    (15,852,236
    )
    
    $
    (1,617,403
    )
    
    $
    (1,116,212
    )Adjustments to reconcile net loss to net
cash provided by (used in) operations:Depreciation
    
    
    1,132,050
    
    
    
    106,290
    
    
    
    120,974Loss (gain) on disposal of assets
    
    
    76,757
    
    
    
    (22,192
    )
    
    
    (1,011
    )Stock-based compensation
    
    
    163,700
    
    
    
    
    
    
    
    Changes in certain assets and liabilities:Equipment in process, held for sale
    
    
    (1,945,410
    )
    
    
    (298,089
    )
    
    
    (705,711
    )Accounts receivable
    
    
    (94,985
    )
    
    
    6,518
    
    
    
    (8,264
    )Prepaid expenses & other current assets
    
    
    (254,789
    )
    
    
    18,435
    
    
    
    (18,525
    )Deposits and other assets
    
    
    (101,775
    )
    
    
    (500
    )
    
    
    14,937Accounts payable and accrued expenses
    
    
    2,579,481
    
    
    
    1,818,443
    
    
    
    49,173Net Cash Provided by (used in) Operations
    
    
    (14,297,207
    )
    
    
    11,502
    
    
    
    (1,664,639
    )Investing ActivitiesProceeds from sale of assets
    
    
    135,230
    
    
    
    39,300
    
    
    
    25,930Patent application costs
    
    
    (232,181
    )
    
    
    (134,021
    )
    
    
    Purchases of property and equipment
    
    
    (24,444,598
    )
    
    
    (1,594,805
    )
    
    
    (464,390
    )Net Cash Used in Investing Activities
    
    
    (24,541,549
    )
    
    
    (1,689,526
    )
    
    
    (438,460
    )Financing ActivitiesProceeds from long-term debt issuances
    
    
    219,596
    
    
    
    10,000
    
    
    
    Repayment of debt and capital leases
    
    
    (1,136,447
    )
    
    
    (151,222
    )
    
    
    (157,996
    )Proceeds from note payable  officer
    
    
    169,700
    
    
    
    169,700
    
    
    
    Proceeds from common stock issuances
    
    
    39,805,677
    
    
    
    1,474,500
    
    
    
    2,177,100Net Cash Provided by Financing Activities
    
    
    39,058,526
    
    
    
    1,502,978
    
    
    
    2,019,104Net increase (decrease) in cash and cash
equivalents
    
    
    219,770
    
    
    
    (175,046
    )
    
    
    (83,995
    )Cash and cash equivalents at beginning of
the period
    
    
    
    
    
    
    394,816
    
    
    
    188,434Cash and cash equivalents at the end of
the period
    
    $
    219,770
    
    
    $
    219,770
    
    
    $
    104,439
 (continued) See accompanying notes to the consolidated financial statements 7




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BIOMASS PROCESSING TECHNOLOGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Six Months EndedCumulative During
    
    June 30,DevelopmentStage (see Note 1)
    
    2004
    
    2003Supplemental Disclosure of Cash Flow InformationCASH PAID DURING THE PERIOD FOR:Interest (net of amounts capitalized)
    
    $
    356,034
    
    
    $
    14,111
    
    
    $
    9,680Income taxes
    
    $
    
    
    
    $
    
    
    
    $
    
 Supplemental Disclosure of Noncash Investing and Financing Activities: Equipment Financing.During the six months ended June 30, 2004, the Company
acquired equipment and vehicles by entering into capital leases and debt
agreements totaling $155,975. Since inception, the Company acquired equipment
and vehicles by entering into capital leases and debt agreements totaling
$1,330,277. See accompanying notes to the consolidated financial statements 8




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BIOMASS PROCESSING TECHNOLOGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1  BASIS OF PRESENTATION Organization and Basis of Consolidation: Biomass Processing Technology, Inc.
began its activities on January 30, 1996. Its principal offices and laboratory
are located in West Palm Beach, Florida with construction in progress on a
facility in Okeechobee, Florida. The Company is constructing a combined animal
and vegetative (CAV) biomass conversion and fermentation facility and
equipment which the Company intends to use to process biomass residue to basic
feed stocks for the chemical and energy markets. The Company is also engaged
in research and development activities, which include the development of
products produced from biomass materials and production equipment that performs
the Companys processes. On May 18, 2004, the Company filed seven provisional
patent applications with the United States Patent and Trademark Office with
respect to its proprietary technology for the processing of biomass materials. The accompanying consolidated financial statements include the accounts of
Biomass Processing Technology, Inc. and its wholly-owned subsidiaries, Omni
Environmental Corporation (formerly known as Omni Technologie International,
Ltd.), BPT CAV1 Corporation (CAV1), and BPT Intellectual Property Corporation
(IP) (collectively, the Company). All significant inter-company
transactions have been eliminated. CAV1 was incorporated in the State of
Florida on October 24, 2003, to operate the CAV1 facility when operational. IP
was incorporated in the State of Delaware on October 24, 2003, to manage
certain intellectual property assets. These two companies were inactive in
2003. Certain assets were transferred to CAV1 and IP by the parent as of
January 1, 2004, and the accounts of these subsidiaries are included in the
consolidated group as of January 1, 2004. The transfer of assets to the
subsidiaries was effected to address future organizational needs and does not
represent any change in current operations. Development Stage and Going Concern Considerations: The Company is a
development stage enterprise as planned principal operations have not
commenced, and the Company has not generated significant revenues since its
inception. Historically, the Company has relied upon outside investor funds to
maintain its operations and develop its business. Should the Company continue
to experience operating losses during the remainder of 2004, it will be
necessary to raise additional funds from outside investors and/or lenders in
order to continue as a going concern. The Company cannot provide assurances
that if additional investor funding were needed, the necessary funds would be
available on terms acceptable to the Company. The accompanying financial
statements have been prepared on a going concern basis, which contemplates the
realization of assets and the settlement of liabilities in the normal course of
business. 9




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BIOMASS PROCESSING TECHNOLOGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1  BASIS OF PRESENTATION (Continued) During July and August, 2004, the Company began final testing with respect to
its CAV biomass processing facility. To cause the facility to become
operational, the Company must complete testing activities with respect to the
operation of the facility, and must then begin processing operations.
Following the commencement of processing operations, the Company expects to
commence marketing and selling the products of the CAV facilitys processing
operation. The Company does not expect any significant purchases of plant or
equipment . in the initial stages of becoming operational. When the CAV facility becomes operational, the Company will end its start-up
period as a development stage company. The Company presently anticipates
becoming operational near the end of the third quarter of 2004. The facility
is designed to process biomass through six fermentor lines, of which four have
been constructed. During the early stages of operations, the plant will begin
with operation of two lines. When the engineering department has completed
testing of the production process of the initial two lines and made any
necessary modifications, the other two (third and fourth) existing lines will
be added to the production process. In the three quarters following
commencement of operations, management will concentrate on increasing
production by bringing up the fifth and sixth processing lines currently under
construction at the facility. The Company believes that its current capital resources and revenues from
operations will be insufficient to fund the Companys intended operations
beyond the year 2004. The Company commenced efforts to raise additional
capital through the offering of equity securities during the second quarter of
2004. There is no assurance that the Company will be able to raise additional
funds which may be necessary to enable it to continue its planned business
operations. Should any of managements planned events not occur, the
accompanying financial statements may be materially affected. Interim Reporting: The accompanying unaudited financial statements of the
Company have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Item
310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. The
consolidated balance sheets, statements of operations, statements of
stockholders equity, and statements of cash flows include, in the opinion of
management, all the adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of the periods
presented and the financial condition as of the end of those periods. There
are no additional material subsequent events or material contingencies that
require disclosure. The information included in these unaudited financial
statements should be read in conjunction with the text presented under
Plan of Operation contained in this report and with the financial statements
and accompanying notes included in the Companys Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2003. Historical interim results are
not necessarily indicative of results that may be expected for any future
period. 10




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BIOMASS PROCESSING TECHNOLOGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2  CONVERTIBLE PROMISSORY NOTE On February 24, 2004, the Company issued a convertible promissory note in the
principal amount of $10,000 bearing interest at a rate of 10% and maturing
February 24, 2006. Interest on the note is payable quarterly. The holder of
the note was entitled to convert the note into 2,500 shares of common stock
during the 30 days prior to the maturity date or during the 30 days prior to an
accelerated maturity date which could be selected by the Company any time six
months after issuance. Subsequent to the quarter ended June 30, 2004, the
Company selected August 24, 2004 as the accelerated maturity date and the
holder of the note elected to convert the note into 2,500 shares of common
stock. The Company paid $72 of accrued interest accrued from July 1, 2004
through the date of conversion. NOTE 3  RELATED PARTY TRANSACTIONS During the first three months of 2004, the Companys principal stockholder, who
is also an officer and director, loaned the Company $110,000 for working
capital under a note in a principal amount not to exceed $200,000 and bearing
simple interest at 4%. During the three month period ended June 30, 2004,
additional advances of $59,700 were made. The note, as amended, is payable on
or before July 1, 2005 and may be prepaid without penalty. During the six months ended June 30, 2004, two of the Companys principal
stockholders, who are also directors, directly transferred an aggregate of
225,000 shares of their personal common stock holdings to the Company for no
consideration, in connection with the sale of those shares by the Company in a
private placement of the Companys common stock. Of these shares, 200,000 were
transferred to the Company during the three month period ended June 30, 2004 in
conjunction with a private placement of 400,000 shares sold to existing
stockholders. These 200,000 shares were accounted for as a capital
contribution to the Company. Some of these shares were sold in the three months
ended June 30, 2004, and the remainder of these shares were sold subsequent to
that date. NOTE 4  NET LOSS PER COMMON SHARE SFAS No. 128, Earnings Per Share, requires companies with complex capital
structures or common stock equivalents to present both basic and diluted
earnings per share (EPS). The Companys only authorized capital stock is
100,000,000 shares of common stock, $0.02 par value per share. In February
2004, the Company issued a convertible promissory note, which constituted a
common stock equivalent. Basic EPS is calculated by dividing net income (loss)
by the weighted average number of common shares outstanding during the
period. Diluted EPS is calculated by dividing net income (loss) 11




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##### 



BIOMASS PROCESSING TECHNOLOGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4  NET LOSS PER COMMON SHARE (Continued) available to common stockholders by the weighted average number of common
shares and common stock equivalents. Common equivalent shares are excluded from
the computation in periods in which they have an anti-dilutive effect. At June 30, 2004, the Companys common equivalent shares only included the
above mentioned convertible promissory note, which was convertible into 2,500
shares of the Companys common stock at June 30, 2004 (see Note 2). The note
was converted into shares of the Companys common stock in July 2004. The
weighted average number of shares used to compute basic and diluted loss per
share in the June 30, 2004 financial statements are the same since the effect
of the convertible promissory note is anti-dilutive. There were no common
share equivalents in the June 30, 2003 comparative period. A reconciliation of the number of common shares shown as outstanding in the
consolidated financial statements with the number of shares used in the
computation of weighted average common shares outstanding for the six month and
three month periods ended June 30, 2004 and 2003 is shown below: SIX MONTH PERIOD ENDING JUNE 30,
    
    2004
    
    2003Common shares outstanding
    
    
    69,550,688
    
    
    
    68,663,638Effect of weighting
    
    
    (2,959
    )
    
    
    (59,009
    )Weighted average common shares outstanding
    
    
    69,547,729
    
    
    
    68,604,629
 THREE MONTH PERIOD ENDING JUNE 30,
    
    2004
    
    2003Common shares outstanding
    
    
    69,550,688
    
    
    
    68,663,638Effect of weighting
    
    
    49,424
    
    
    
    (28,514
    )Weighted average common shares outstanding
    
    
    69,600,112
    
    
    
    68,635,124
 In accordance with SFAS No. 128, the effect of weighting includes shares issued
and shares reacquired during the respective periods. NOTE 5  INCOME TAXES All deferred tax assets created by the Companys net operating losses are
offset in their entirety by a deferred tax asset valuation allowance, therefore
there is no provision or benefit recorded in the statements of operations for
the periods presented. 12




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##### 



BIOMASS PROCESSING TECHNOLOGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6  CASUALTY LOSS In May, 2004, a fire caused extensive damage to a piece of the Companys
equipment at the St. Lucie County landfill site and minor damage to several
other pieces of ancillary machinery. The Companys insurance carrier has
taken the position that the Companys insurance coverage on the damaged
equipment limited the insurers liability to $15,000. The Company contends
that the equipment was fully insured, and alternatively that if the Companys
coverage was in fact so limited, this was attributable to the negligence and
misrepresentation of the insurance agent who placed the insurance policy, who
should be held liable for the difference. The Company has referred the matter
to legal counsel. The damaged equipment was pledged as security for the
Companys obligations under an equipment lease, for which the Company remains
liable to the equipment lessor. Pending resolution of the insurance coverage
dispute, the Company has accrued a $485,000 loss provision, net of $15,000
received from insurance proceeds, as an estimate of the loss incurred. NOTE 7  SUBSEQUENT EVENTS During the period from July 1, 2004, to August 9, 2004, the Company sold
326,050 shares of common stock for total proceeds of $1,699,250 in a private
offering of shares of its common stock. 13




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##### 



ITEM 2. PLAN OF OPERATION As of June 30, 2004, the Company was a development stage company, as its
planned principal operations had not commenced, and it had not conducted
significant operations or generated significant operating revenues since its
inception through the end of the second quarter of 2004. The principal
business of the Company is intended to be the development and commercialization
of its proprietary biomass processing technology, through the application of
which biomass material may be converted into its constituent components using
hydrolysis and fermentation-based processing. The plan of the Company is to
produce basic feed protein and other products for the animal feed, food,
chemical, and energy markets. Patents During the quarter ended June 30, 2004, the Company filed seven provisional
patent applications with the United States Patent and Trademark Office with
respect to its proprietary technology for the processing of biomass materials.
(See discussion of EcoGold below.) A provisional application is a limited
filing allowing the Company one year to complete the final application. The
Company is in the process of completing the final applications, and filing
additional provisional applications, which process is expected to be completed
during 2005. Based on the claims made in the provisional applications, the
Company expects the final applications to seek issuance of 50 or more US and
foreign patents. The CAV Facility During the three months ended June 30, 2004, the Company continued construction
and testing of its combined animal and vegetative (CAV) biomass conversion
and fermentation facility. The primary product to be produced by the CAV
facility is yeast marketed to animal feed manufacturers for use as a protein
and pro-biotic supplement to animal feed. The secondary product presently
planned for the CAV facility is lignin, a natural polymer. During July 2004,
the Company began planned final testing with respect to the operational
effectiveness of the CAV facility. The original design of the CAV facility anticipated four production lines,
although the site was permitted for operation of up to six lines. The Company
anticipates commencing production with two lines and beginning operations at
one third of total design capacity near the end of the third quarter of 2004.
The Company plans to add two additional production lines by the end of 2004,
and to add two additional production lines by the second quarter of 2005. 14




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The present planned expansion of CAV production is summarized below. OriginalLines
    
    Schedule
    
    Capacity*
    
    Comment1 & 2
    
    End of Qtr. 3
    
    
    33
    %
    
    To commence production September 7, 20043 & 4
    
    End of 2004
    
    
    100
    %
    
    Complete except piping & control installationHydrolysis
    
    End of 2004
    
    
    
    
    
    Gives added byproduct: lignin5 & 6
    
    Qtr. 2 of 2005
    
    
    167
    %
    
    Permitted, but not built
 * Original Capacity is based on the design of four fermentor lines, shown as 100% capacity. As production commences, the Company expects to simultaneously begin marketing
and selling the products of the CAV facilitys processing operation. The
Company does not expect to generate significant revenue from the CAV facilitys
processing operations during the third quarter of 2004, because necessary
inventory accumulation, which will not have occurred before the end of the
third quarter of 2004, must be accomplished before sales may be made. Investment by the Company in the CAV facility is $23.2 million as of June 30,
2004. This amount includes construction and installation of all reactors and
major equipment for four lines of fermentation, as well as piping and control
for two lines. This amount also includes infrastructure costs, such as boilers
with redundant steam capacity and hydrolysis and compressed air with back-up,
process, control and support buildings, and cooling freon and cooling water
supply, all to support six lines. Major process equipment is already in place
for four lines. In addition, most major components required for hydrolysis are
already in place. The completion of the third and fourth lines will require
process piping and control installation. Hydrolysis will require these
components and material handling equipment. The fifth and sixth lines will
require construction and installation of foundations and all major process
equipment, as well as piping and control. To assist in evaluation of the contribution of installed infrastructure
elements and in assessment of the construction of the CAV under current plans,
the following table compares the remaining items to be added to the completed
process equipment and infrastructure costs. Plant and Equipment
    
    Costs
    
    %
    
    Comments:Cost of CAV as of June 30, 2004
    
    $
    23,200,000
    
    
    
    94.9
    %
    
    Infrastructure, major equipmentADD: Lines 3 & 4
    
    
    750,000
    
    
    
    3.1
    %
    
    Requires only piping and control installationADD: Hydrolysis
    
    
    500,000
    
    
    
    2.0
    %
    
    Requires piping and material handlingSubtotal  Original Design
    
    
    24,450,000
    
    
    
    100.0
    %ADD: Lines 5 & 6
    
    
    4,000,000
    
    
    
    16.4
    %
    

All process equipment, control, pipingTOTAL  REVISED DESIGN
    
    $
    28,450,000
    
    
    
    116.4
    %
 15




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The construction of two additional lines of production at an estimated cost of
$4,000,000 will provide an estimated increase in production capacity of two
thirds (167%) of the original estimated production capability. When the CAV facility becomes operational, the Company will end its start-up
period as a development stage company. Following the commencement of
operations, the Company plans to refine its technology and processing methods
to concentrate on production of higher value yeast. EcoGold  The Dilute Waste Stream Recovery Technology The seven provisional patent applications filed on May 18, 2004 discussed above
are related to a unique biomass processing technology that the Company calls
EcoGold. EcoGold is the name of our ecologically beneficial process and
equipment as well as the name of the product produced through the process,
which is a golden colored, high value nutrient. The EcoGold process is
designed to eliminate phosphorus and nitrogen pollution from waste streams, by
creating a valuable product (protein) at farms and industrial sites. Most industrial processing develops a watery waste stream, no different than in
agricultural waste. In agriculture, as in many other industries, cleaning this
stream to EPA standards is a very expensive process and a significant cost of
the design, construction, and operation of a farming facility. The EcoGold
equipment and integrated technology are designed to produce a valuable product
from the waste stream. The waste recovery value can be much higher than
compliance costs of meeting EPA standards and can even be a significant
percentage of normal costs of operations. The Company plans to complete installation of the first equipment developed
using the EcoGold process at a large dairy testing site in August 2004. The
Company expects to complete testing and any necessary modifications to this
unit and then to offer the unit for sale in the final quarter of 2004. This
test site unit is shown on the Companys balance sheet as of June 30, 2004, as
Equipment in Process, held for sale reflected at a cost of $1,945,410,
although the cost of future smaller units may be considerably less if the
Company is able to successfully produce these units through mass production.
The Company has had initial discussions with several vendors but has not yet
entered into any agreements with respect to the sale or mass production of
these units. Should the Companys plans for the test site EcoGold system during the final
half of 2004 materialize as expected, the Company plans to market the EcoGold
technology in 2005 to approximately 12,000 Concentrated Animal Feeding
Operators (CAFOs) in the United States. The CAFOs consist of dairy farms, beef
cattle operations, swine operations, and poultry farms. These CAFOs are
currently subject to EPA mandates to reduce pollution of land and watersheds.
Penalties for non-compliance with maintaining EPA standards range from severe
fines to reduction of production to closing of operations. No assurance can be
provided, however, that the Company will be successful in producing or selling
units implementing the EcoGold technology. 16




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##### 



Other Products in Development The Company is concentrating its initial operating efforts on its CAV and
EcoGold business segments as discussed above. The Company is continuing its
research and development on other products. Capital Resources The Company believes that its current capital resources and revenues from
operations will be insufficient to fund the Companys intended operations
beyond the year 2004. The Company has commenced efforts to raise additional
capital through the private offering of equity securities during the second
quarter of 2004. There is no assurance that the Company will be able to raise
additional funds that may be necessary to enable it to continue its planned
business operations. Should any of managements planned events not occur, the
Companys financial condition and results of operations may be materially
affected. 
 ITEM 3. CONTROLS AND PROCEDURES As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of
June 30, 2004, the Companys management carried out an evaluation of the
effectiveness of the design and operation of the Companys disclosure controls
and procedures. This evaluation was carried out by Larry W. Denney, the
Companys Chief Executive Officer, and Robert F. Kendall, CPA, Chief Financial
Officer. Based upon that evaluation, the Companys Chief Executive Officer and
Chief Financial Officer concluded that as of June 30, 2004, except as set forth
below in this paragraph the Companys disclosure controls and procedures were
effective in timely alerting them to material information required to be
included in the Companys periodic SEC reports. The Companys independent
auditors, in conjunction with their audit of the Companys financial statements
for the year ended December 31, 2003, advised the Company that in the auditors
view, the Companys disclosure controls and procedures were subject to material
weaknesses resulting from the resignation in February 2004 of the Companys
former chief financial officer and from an inadequate segregation of duties
related to accounting controls. In April 2004, the Company hired a certified
public accountant with experience with United States generally accepted
accounting principles and the preparation of reports required to be filed with
the Securities and Exchange Commission. Company management believes that the
addition of this certified public accountant, who was elected Chief Financial
Officer by the Board of Directors during the three month period ended June 30,
2004, has significantly improved the effectiveness of the Companys disclosure
controls and procedures. It should be noted that the design of any system of controls 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, regardless of how remote. Disclosure controls
and procedures are controls and other 17




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##### 



procedures that are designed to ensure that information required to be
disclosed in the Companys reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the SECs rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in the Companys reports filed under the Exchange Act
is accumulated and communicated to management, including the Companys Chief
Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure. Except for the Companys hiring of a certified public accountant in April 2004
as described above, there were no changes in the Companys internal control
over financial reporting identified in connection with the evaluation required
by paragraph (d) of Rule 13a-15 under the Exchange Act with respect to the
fiscal quarter ended June 30, 2004, that have materially affected, or are
reasonably likely to materially affect, the Companys internal control over
financial reporting. 
 PART II. OTHER INFORMATION 
 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. On various dates between May 17, 2004 and June 14, 2004, the Company issued and
sold an aggregate of 13,250 shares of Common Stock at a price of $10 per share
to six investors, all of whom the Company believes to be accredited investors,
for aggregate proceeds of $132,500. The shares were issued without
registration in reliance on Section 4(2) of the Securities Act and Rule 506 of
Regulation D thereunder. On various dates between June 18, 2004 and June 30, 2004, the Company issued
and sold an aggregate of 119,400 shares of Common Stock at a price of $5 per
share to 23 investors, all of whom where existing stockholders of the Company
and all of whom the Company believes to be accredited investors, for aggregate
proceeds of $597,000. The shares were issued without registration in reliance
on Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder.
In connection with these sales, on June 18, 2004, each of Larry W. Denney, the
Companys principal stockholder and Chairman of the Board, President, and Chief
Executive Officer, and Jack B. Simpson, a director of the Company, directly
transferred 100,000 shares of Common Stock owned by them (a total of 200,000
shares) to the Company for no consideration. The Company sold these shares as
part of a private offering limited to existing stockholders. This private
offering, in which the Company received $2,143,250 in proceeds from the sale of
an aggregate of 428,650 shares, commenced on June 18, 2004 and closed on July
27, 2004. Also in conjunction with this private offering, in July 2004, Mr.
Denney and Mr. Simpson each transferred half of an additional 14,325 shares
owned by them to the Company for no additional consideration to them, which
shares were sold in the private offering to existing stockholders as described
above. 18




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##### 



ITEM 6. EXHIBITS AND REPORTS ON FORM 8  K (a) List of Exhibits: Document
    
    Exhibit No.Certificate of Incorporation filed with the Delaware Secretary
of State on January 30, 1996 (incorporated herein by reference
to Exhibit 2.1.1 of the registrants Form 10-SB, filed with
the Commission on December 19, 2003)
    
    
    3.1.1Certificate of Amendment to Certificate of Incorporation filed
with the Delaware Secretary of State on September 12, 1997
(incorporated herein by reference to Exhibit 2.1.2 of the
registrants Form 10-SB, filed with the Commission on December
19, 2003)
    
    
    3.1.2Certificate of Amendment to Certificate of Incorporation filed
with the Delaware Secretary of State on May 23, 2001
(incorporated herein by reference to Exhibit 2.1.3 of the
registrants Form 10-SB, filed with the Commission on December
19, 2003)
    
    
    3.1.3By-Laws (incorporated herein by reference to Exhibit 2.2 of
the registrants Form 10-SB, filed with the Commission on
December 19, 2003)
    
    
    3.2Certification by the Chief Executive Officer of the Company
pursuant to Rule 13a-14 under the Securities Exchange Act of
1934, as amended
    
    
    31.1Certification by the Chief Financial Officer of the Company
pursuant to Rule 13a-14 under the Securities Exchange Act of
1934, as amended
    
    
    31.2Certification by the Chief Executive Officer of the Company
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
    
    
    32.1Certification by the Chief Financial Officer of the Company
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
    
    
    32.2
 (b) Reports onForm 8-K. On June 17, 2004, the Company filed a Form 8K with the Securities and Exchange
Commission disclosing that it had commenced a $5,000,000 private offering of
500,000 shares of common stock at an offering price of $10.00 per share. 19




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##### 



SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. Biomass Processing Technology, Inc.Dated: August 14, 2004
    By:
    /s/ Larry W. DenneyLarry W. Denney, Chairman of the Board,President and Chief Executive Officer(principal executive
officer and duly authorized officer) Biomass Processing Technology, Inc.Dated: August 14, 2004
    By:
    /s/ Robert F. KendallRobert F. Kendall, CPA, Chief Financial Officer(principal financial officer) 20