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EX-31.1 - CERTIFICATION - Biomass Secure Power Incexhibit31-1.htm
EX-32.1 - CERTIFICATION - Biomass Secure Power Incexhibit32-1.htm
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter period ending March 31, 2010

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 333-70836

BIOMASS SECURE POWER INC.
(Exact name of registrant as specified in its charter)

British Columbia Canada N/A
Jurisdiction of Incorporation I.R.S. Employer Identification No.

40218 Wellsline Road Abbotsford BC Canada V3G 2K7
(Address of principal executive offices)(Zip Code)

604 807 4957
Registrant’s telephone number, including area code

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
                                                                                                                                                                                       [X] Yes [  ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). (Not Currently Applicable)[  ] Yes [   ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer []   Accelerated filer []
Non-accelerated filer [] (Do not check if a smaller reporting company) Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
                                                                                                                                                                                       [X] Yes [  ] No


APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
                                                                                                                                                                                        [  ] Yes [  ] No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 235,099,866 shares of common stock as at December 13, 2010.


TABLE OF CONTENTS

PART I FINANCIAL INFORMATION. 1
   
Item 1. Financial Statements. 1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 2
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 7
Item 4. Controls and Procedures. 7
   
PART II OTHER INFORMATION. 7
  7
Item 1. Legal Proceedings. 9
Item 1A. Risk Factors. 13
Item 2 Unregistered Sale of Equity Securities and Use of Proceeds. 13
Item 3. Defaults Upon Senior Securities. 13
Item 4. [REMOVED AND RESERVED] 13
Item 5. Other Information. 13
Item 6. Exhibits. 13
   
SIGNATURES. 14


PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIOMASS SECURE POWER INC.
(A Development Stage Company)

INTERIM FINANCIAL STATEMENTS

MARCH 31, 2010 AND 2009

(Unaudited)

1


BIOMASS SECURE POWER INC.
 (A development stage company)
INTERIM BALANCE SHEETS
(Unaudited)

     March 31, 2010     June 30, 2009  
               
ASSETS              
               
Current              
Cash  $  -   $ 124  
Prepaid expenses and deposit (Note 8)     63,000     63,000  
      63,000     63,124  
Property and equipment (Note 6)     724     -  
   $  63,724   $ 63,124  
               
LIABILITIES              
               
Current              
Bank indebtedness  $  4,168   $ -  
Accounts payable and accrued liabilities     83,356     85,695  
Due to related parties (Notes 7 and 9)     197,757     65,235  
      285,281     150,930  
               
STOCKHOLDERS’ EQUITY              
               
Common stock (Note 8)     5,680,217     5,680,217  
Contributed surplus     53,221     53,221  
Accumulated deficit from prior operations     (5,253,808 )   (5,253,808 )
Accumulated deficit during development stage     (701,187 )   (567,436 )
      (221,557 )   (87,806 )
   $  63,724   $ 63,124  

Commitments (Notes 9 and 11)

Approved by the Board of Directors:

   
"Slawomir Kownacki"   "James Carroll"
, Director   , Director

The accompanying notes are an integral part of these financial statements

F-1


BIOMASS SECURE POWER INC.
 (A development stage company)
INTERIM  STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended March 31
(Unaudited)

          From July 1, 2007, the date of entering into the development stage, to March 31, 2010  
           
    Three Months Ended   Nine Months Ended      
  March 31, March 31,      
     2010     2009      2010 2009      
                             
Expenses                            
   Amortization $              70     $ -   $       170 $ -   $ 170  
   Management, director and consulting fees (Notes 8 and 10)             60,000     30,000              120,000 140,000     556,338  
   Office and general administrative                 915     3,288                 4,617 10,187     38,751  
   Professional fees                   32     39                      32 39     29,780  
   Shareholder communication                     -     -                        - -     27,000  
   Transfer agent and filing fees              1,400     -                 7,418 1,309     33,352  
   Travel                     -     1,327                 1,514 6,400     15,796  
Net loss for the period $       (62,417)   $ (34,654 ) $      (133,751) $(158,325 ) $ (701,187 )
                             
Basic and diluted loss per share $        (0.000)   $ (0.000 ) $        (0.001) $(0.001 )      
                             
Weighted average shares outstanding     235,099,866     197,351,587        235,099,866 189,123,850        

The accompanying notes are an integral part of these financial statements

F-2


BIOMASS SECURE POWER INC.
 (A development stage company)
 STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
For the period from July 1, 2007 (date entering the development stage) to March 31, 2010
(Unaudited)

  Share capital   Contributed surplus   Deficit from prior operations   Deficit during develop stage   Total
  Number   Amount        
Balance, June 30, 2007  96,502,717 $  5,090,086 $  53,221 $  (5,253,808) $ - $  (110,501)
Capital stock issued for debt on August 29, 2007 at $0.0075 per share 1,487,881   11,159   -   -   -   11,159
Capital stock issued for expenses incurred on behalf of the Company on August 29, 2007 at $0.0075 per share 1,356,444   10,173   -   -   -   10,173
Capital stock returned to treasury on October 23, 2007 (3,000,000)   -   -   -   -   -
Capital stock issued for expenses incurred on behalf of the Company on February 5, 2008 at $0.0031 per share 5,780,463   17,919   -   -   -   17,919
Capital stock issued for debt on February 5, 2008 at $0.0031 per share 20,000,000   62,000   -   -   -   62,000
Capital stock issued for management fees on February 5, 2008 at $0.0031 per share 20,000,000   62,000   -   -   -   62,000
Capital stock issued for directors fees on June 30, 2008 at $0.0045 per share 3,750,000   16,875   -   -   -   16,875
Capital stock issued for management fees on June 30, 2008 at $0.0045 per share 30,000,000   135,000   -   -   -   135,000
Capital stock issued for expenses incurred on behalf of the Company on June 30, 2008 at $0.0045 per share 5,007,415   22,534   -   -   -   22,534
Net loss for the year ended June 30, 2008 -   -   -   -   (337,799)   (337,799)
Balance, June 30, 2008  180,884,920  $    5,427,746 $  53,221 $  (5,253,808) $  (337,799) $  (110,640)
Capital stock issued as deposit on agreement on November 15, 2008 at $0.0042 per share 15,000,000   63,000   -   -   -   63,000
Capital stock issued for expenses incurred on behalf of the Company on October 13, 2008 at $0.0041 per shares 666,667   2,733   -   -   -   2,733
Capital stock issued for expenses incurred on behalf of the Company on November 20, 2008 at $0.0041 per share 800,000   3,280   -   -   -   3,280
Capital stock issued for expenses incurred on May 22, 2009 at $0.009 per share 3,000,000   27,000   -   -   -   27,000
Capital stock issued for expenses incurred on behalf of the Company on June 30, 2009 at $0.0045 per share 6,592,724   29,758   -   -   -   29,758
Capital stock issued for management fees on June 30, 2009 at $0.0045 per share 28,155,555   126,700   -   -   -   126,700
Net loss for the year ended June 30, 2009 -   -   -   -   (229,637)   (229,637)
Balance, June 30, 2009  235,099,866  $  5,680,217    $  53,221  $  (5,253,808)  $  (567,436)  $  (87,806)
Net loss for the period ended March 31, 2010 -   -   -   -   (133,751)   (133,751)
Balance, March 31, 2010  235,099,866  $  5,680,217  $  53,221  $  (5,253,808)  $  (701,187)  $  (221,557)

The accompanying notes are an integral part of these financial statements

F-3


BIOMASS SECURE POWER INC.
 (A development stage company)
INTERIM STATEMENTS OF CASH FLOWS
For the Nine Months Ended March 31
(Unaudited)

     2010     2009     From July 1, 2007, the date of entering into development stage, to March 31, 2010  
                     
Cash Flows From (Used By) Operating Activities                    
Net loss for the period  $  (133,751)   $ (158,325)   $ (701,187 )
Items not involving cash:                    
Amortization     170     -     170  
Shares issued for management fees     -     50,400     340,575  
Shares issued for services     -     4,400     113,397  
Change in non-cash operating working capital items:                    
Accounts payable and accrued liabilities     (2,339)     -     53,482  
      (135,920)     (103,135 )   (193,563 )
                     
Cash Flows From (Used By) Investing Activity                    
Acquisition of capital assets     (894)     -     (894 )
                     
                     
Cash Flows From (Used By) Financing Activities                    
Loan proceeds from related party     132,522     103,275     190,289  
bank overdraft (repayment)     4,168     -     4,168  
      136,690     103,275     194,457  
Increase (Decrease) in Cash     (124)     140     -  
Cash, Beginning of Period     124     50     -  
Cash, End of Period  $  -   $ 190   $ -  
                     
Supplemental Cash Flow Information                    
Shares issued as deposit  $  -   $ 63,000   $ 63,000  
Common stock issued to settle debt  $      $ 73,159   $ 73,159  
Interest Paid  $  -   $ -   $ -  
Income Taxes Paid  $  -   $ -   $ -  

The accompanying notes are an integral part of these financial statements

F-4


BIOMASS SECURE POWER INC.
(A development stage company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
As At March 31, 2010
(Unaudited)

1.   NATURE OF BUSINESS AND OPERATIONS

Biomass Secure Power Inc., formerly Virtual Media Holdings Inc., (“Biomass” or the “Company”), became a development stage enterprise July 1, 2007. Prior to July 1, 2007, the company was conducting internet sales of videos, CDs, DVDs and books as Virtual Media Holdings Inc, (formerly VMH VideoMovieHouse.com Inc.). As at June 30, 2007, the company ceased all operations in connection with internet sales, wrote-off all related assets and was seeking a new business.  The Company plans to build, own and operates cellulose pelletizing plants that utilizes proprietary technology. The Company’s headquarters are located in Abbottsford, British Columbia.

The Company is presently a delinquent filer with the Securities Exchange Commission and is filing for relief from filing audited financial statements for the years ended June 30, 2007 and 2006. At this time, it is not known if the relief will be granted.

2.   ABILITY TO CONTINUE AS A GOING CONCERN

The accompanying financial statements have been prepared in US dollars and in accordance with accounting principles generally accepted in the United States on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.  The Company only commenced its development of a cellulose pelletizing activities in the first quarter of 2008.  Previously, the Company had been actively operating an internet sales company. On June 30, 2007, the Company disposed of all of its assets in connection with the internet sales activities.  During the period ended March 31, 2010, the Company incurred a net loss of $133,751 (2009 - $157,935).  Since the Company had re-entered the development stage, it has an accumulated deficit of $701,187 at March 31, 2010.  These conditions raise substantial doubt about the Company's ability to continue as a going concern.

 The Company's ability to continue as a going concern is dependent on its ability to develop its cellulose pelletizing plant and ultimately achieve profitable operations and to generate sufficient cash flow from financing and operations to meet its obligations as they become payable. The Company expects that it will need approximately $390,000 to fund its operations during the next twelve months.  Management has plans to seek additional capital through a private placement, public offering of its common stock and joint arrangements.  Although there are no assurances that management’s plans will be realized, management believes that the Company will be able to continue operations in the future.  Accordingly, no adjustment relating to the recoverability and classification of recorded asset amounts and the classification of liabilities has been made to the accompanying financial statements in anticipation of the Company not being able to continue as a going concern.

3.   SIGNIFICANT ACCOUNTING POLICIES

(a) Management’s Estimates and Assumptions

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet date, and revenues and expenses for the period then ended.  Actual results could differ significantly from those estimates

(b) Cash

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates market value.

(c) Equipment

Equipment is stated at cost, net of accumulated depreciation. Depreciation is computed by using the straight-line method at rates based on the estimated useful lives of the various classes of property, plant and equipment. Estimates of useful lives are based upon a variety of factors including durability of the asset, the amount of usage that is expected from the asset, the rate of technological change and the Company’s business plans for the asset. Should the Company change its plans with respect to the use and productivity of the equipment, it may require a change in the useful life of the asset or incur a charge to reflect the difference between the carrying value of the asset and the proceeds expected to be realized upon the asset’s sale or abandonment. Expenditures for maintenance and repairs are expensed as incurred and significant major improvements are capitalized and depreciated over the estimated useful life of the asset.

F-5


BIOMASS SECURE POWER INC.
(A development stage company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
As At March 31, 2010
(Unaudited)

Computer equipment is amortized over three years on the straight-line basis.

(d) Intangible assets

The Company accounts for intangible assets in accordance with ASC 350, “Intangibles- Goodwill and Other.” This standard requires that goodwill and other intangible assets with indefinite useful lives not be amortized but instead tested annually for impairment, or immediately if conditions indicate that impairment could exist. Intangible assets with definite useful lives are amortized over their estimated useful lives and reviewed for impairment in accordance with ASC 360, “Accounting for Impairment or Disposal of Long-Lived Assets.” Substantial judgment is necessary in the determination as to whether an event or circumstance has occurred that may trigger an impairment analysis and in the determination of the related cash flows from the asset. Estimating cash flows related to long-lived assets is a difficult and subjective process that applies historical experience and future business expectations to revenues and related operating costs of assets. Should impairment appear to be necessary, subjective judgment must be applied to estimate the fair value of the asset, for which there may be no ready market, which often times results in the use of discounted cash flow analysis and judgmental selection of discount rates to be used in the discounting process. If the Company determines an asset has been impaired based on the projected undiscounted cash flows of the related asset or the business unit, and if the cash flow analysis indicates that the carrying amount of an asset exceeds related undiscounted cash flows, the carrying value is reduced to the estimated fair value of the asset. There were no intangible assets for the periods ended March 31, 2010 and June 30, 2009.

(e) Impairment of long-lived assets

The Company evaluates its long-lived assets, such as equipment, and specifically identified intangibles, when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. When the Company believes an impairment condition may have occurred, it is required to estimate the undiscounted future cash flows associated with a long-lived asset or group of long-lived assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities for long-lived assets that are expected to be held and used. If the Company determines that the undiscounted cash flows from an asset to be held and used are less than the carrying amount of the asset, or if the Company has classified an asset as held for sale, it estimates fair value to determine the amount of any impairment charge.

(f) Income taxes

The Company accounts for income taxes using the asset and liability method. Deferred tax liabilities and assets are determined based on temporary differences between the basis of assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences. Valuation allowances are established when necessary based upon the judgment of management to reduce deferred tax assets to the amount expected to be realized and could be necessary based upon estimates of future profitability and expenditure levels over specific time horizons in particular tax jurisdictions. The Company recognizes the tax benefit from an uncertain tax position when, based on technical merits, it is more likely than not the position will be sustained on examination by the taxing authorities.

F-6


BIOMASS SECURE POWER INC.
(A development stage company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
As At March 31, 2010
(Unaudited)

(g) Stock-based compensation

The Company has a stock-based compensation plan under which stock-based awards have been granted to employees and non-employees. Stock-based compensation is accounted for in accordance with ASC 718, “Compensation – Stock Compensation.” The Company establishes fair values for its equity awards to determine its cost and recognizes the related expense over the appropriate vesting period. The Company recognizes expense for stock options and restricted stock awards. For stock-based awards vesting based on service period, the value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service period on a straight-line basis for each separately vesting portion of the award as if the award was, in substance, multiple awards. (h) Fair value measurements

Accounting standards require that fair value measurements be classified and disclosed in one of the following categories:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 – Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Determining which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter.

On July 1, 2009, the Company adopted a newly issued accounting standard for fair value measurements of all nonfinancial assets and nonfinancial liabilities not recognized or disclosed at fair value in the financial statements on a nonrecurring basis. This accounting standard has not had a material impact on the Company’s financial position, results of operations or liquidity.

The Company uses observable inputs when available. When observable inputs are not available, the Company uses internally developed, unobservable inputs (Level 3 inputs in the fair value hierarchy of fair value accounting) to estimate cash flow projections used in its analysis to determine whether its long-lived assets are impaired.

(i) Earnings (loss) per share of common stock

Basic earnings (loss) per share of common stock is computed by dividing net income (loss) available to common shareholders by the weighted-average number of common shares outstanding for the period.  Diluted earnings per share of common stock reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company.

At March 31, 2010 and June 30, 2009, there were no potential common shares, related to stock options and warrants were excluded from the computation of diluted earnings per share since their effect was anti-dilutive.

(j) Foreign exchange translation

The Company's functional currency is the United States (“US”) dollar, and reports its financial statements in US dollars. The Company translates its Canadian dollar balances to US dollars in the following manner:  Assets and liabilities have been translated using the rate of exchange at the balance sheet date.  The Company’s results of operations have been translated using average rates.  Exchange differences arising on translation are disclosed as a separate component of shareholders’ equity. Realized gains and losses from foreign currency transactions are reflected in the Company’s results from operations.

F-7


BIOMASS SECURE POWER INC.
(A development stage company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
As At March 31, 2010
(Unaudited)

All amounts included in the accompanying financial statements and footnotes are stated in U.S. dollars.

4.   RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2007, the Financial Accounting Standards Board (“FASB”) issued ASC 805-10-65 and revised the authoritative guidance for business combinations which establishes principles and requirements for how the acquirer in a business combination (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree, (2) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and (3) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This guidance applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.  The Company’s adoption of this revised guidance on July 1, 2009 did not have any impact on its results of operations or financial condition as it did not have any business combination activity during the period ended March 31, 2010.

Additionally, the FASB amended the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset under the current guidance concerning business combinations and other U.S. generally accepted accounting principles.  This new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years.  The Company’s adoption of the new guidance on July 1, 2009 did not have a significant impact on its financial position, results of operations or cash flows.

On January 1, 2009, the Company adopted FASB ASC 815- Derivatives and Hedging (EITF 07-5, Determining Whether an Instrument (or embedded Feature) is Indexed to an Entity’s Own Stock. As part of the adoption of FASB ASC 815, the Company determined that its option instruments have an exercise price that is not in the Company’s functional currency and are therefore the option instruments are not considered indexed to the Company’s stock.  Thus, the Company is now required to separately account for the option as a derivative instrument liability, carried at fair value and marked-to-market each period, with the changes in the fair value each period charged or credited to the statement of operations.

The transition provisions of ASC 815-40-15 require cumulative effect adjustments as of July 1, 2009 to reflect the amounts that would have been recognized if derivative fair value accounting had been applied from the original issuance date of an equity- equity-linked financial instrument through the implementation date of the revised guidance. The Company’s adoption of the new guidance on July 1, 2009 did not have a significant impact on its financial position, results of operations or cash flows.

In May 2008, the FASB issued new authoritative guidance which establishes general standards of accounting and disclosure of events that occur after the balance sheet date but before the financial statements are issued.  ASC 855 guidance sets forth (1) the period after the balance sheet date during which management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date and (3) the disclosures an entity should make about such events or transactions.  The Company’s adoption of the new guidance on July 1, 2009 did not have a significant impact on its financial position, results of operations or cash flows.

F-8


BIOMASS SECURE POWER INC.
(A development stage company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
As At March 31, 2010
(Unaudited)

In June 2009, the FASB issued the FASB Accounting Standards Codification (“Codification”). The Codification became the single source for all authoritative generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied for financial statements issued for periods ending after September 15, 2009. The Codification does not change GAAP and did not have an effect on our financial position, results of operations or cash flows.  The Company does not expect the adoption of the new guidance will have a significant impact on its financial position, results of operations or cash flows.

In August 2009, FASB issued ASU No. 2009-5 “Fair Value of Measurements and Disclosure (Topic 820) – Measuring Liabilities at Fair Value”.  The new guidance, which is now part of ASC 820, provides clarification that in certain circumstances in which a quoted price in an active market for the identical liability is not available, a company is required to measure fair value using one or more of the following valuation techniques:  the quoted price of the identical liability when traded as an asset, the quoted prices for similar liabilities when traded as assets, or another valuation technique that is consistent with the principles of fair value measurements.  The new guidance clarifies that a company is not required to include an adjustment for restrictions that prevent the transfer of the liability and if an adjustment is applied to the quoted price used in a valuation technique, the result is a Level 2 or 3 fair value measurement.  The new guidance is effective for interim and annual periods beginning after August 27, 2009.  The adoption of this standard is being reviewed by the company and is not expected to materially impact the Company’s financial statements.

In September 2009, FASB issued ASU No. 2009-09, “Accounting for Investments – Equity Method and Joint Ventures and Accounting for Equity-Based Payments to Non-Employees.  This update is an amendment to ASC 323-10-S99 and 505-50-S99.  The amendment to ASC 323-10-S99 provides guidance on the accounting by an investor for stock-based compensation based on the investor’s stock granted to employees of an equity method investee.  Investors that are SEC registrants should classify any income or expense resulting from application of this guidance in the same income statement caption as the equity in earnings (or losses) of the investee. The amendment to ASC 505-50-S99 clarifies the accounting by the grantee or grantor in transactions involving equity instruments granted to other than employees if the accounting does not reflect the same commitment date or similar values.  The adoption of this standard did not have a material effect on the Company’s financial statements

In January 2010, the FASB issued ASU, on codification, fair value measurement and disclosures (Topic 820-10).  The amendment requires new disclosures related to transfers in and out of Levels 1 and 2 and activity in Level 3 fair value measurements.  A reporting entity is required to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers.  Additionally, in the reconciliation for fair value measurements in Level 3, a reporting entity must present separately information about purchases, sales, issuances and settlements (on a gross basis rather than a net number).  The new disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements.  Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years.  The Company does not anticipate the adoption of this amendment will have a material effect on its financial position, results of operations or cash flows.

In April 2010, the FASB issued accounting guidance for the milestone method of revenue recognition. This guidance allows entities to make a policy election to use the milestone method of revenue recognition and provides guidance on defining a milestone and the criteria that should be met for applying the milestone method. The scope of this guidance is limited to transactions involving milestones relating to research and development deliverables. The guidance includes enhanced disclosure requirements about each arrangement, individual milestones and related contingent consideration, information about substantive milestones and factors considered in the determination. This guidance is effective prospectively to milestones achieved in fiscal years, and interim periods within those years, beginning after June 15, 2010. Early application and retrospective application are permitted. The Company is currently evaluating the impact, if any, that this new guidance will have on the determination or reporting of its financial results.

F-9


BIOMASS SECURE POWER INC.
(A development stage company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
As At March 31, 2010
(Unaudited)

The FASB issued new guidance relating to revenue recognition for contractual arrangements with multiple revenue-generating activities. The ASC Topic for revenue recognition includes identification of a unit of accounting and how arrangement consideration should be allocated to separate the units of accounting, when applicable. The new guidance, including expanded disclosures, is applied on a prospective basis beginning on or after June 15, 2010.

5.   MERGER AGREEMENT WITH 0625920 BC LTD.

On June 30, 2009, the Company entered into an agreement with 0625920 BC Ltd. (“0625920”) whereby the Company is acquiring certain intellectual property of 0625920 by way of merger of the two Companies.  0625920 is a related party by a common director. Pursuant to the terms of a Merger Agreement one share of the Company will be issued in exchange for each 0625920 share outstanding at the agreement date of the acquisition and merger.  At June 30, 2009, 0625920 had 225,269,250 shares outstanding.  As a result of a cease-trade order issued by the securities commission the shares have not been issued and therefore, the transaction has not been reflected in the financial statements.

6.   PROPERTY AND EQUIPMENT

   March 31, 2010 June 30, 2009
    Cost      Accumulated Amortization     Cost     Accumulated Amortization  
Computers $ 894   $ 170   $ -   $ -  
Net Book Value                         $ 724         $ -  

7.   DUE TO RELATED PARTIES

The Company is indebted to directors and officers of the Company for operating expenses paid by those individuals.  The amounts are payable on demand, unsecured and without interest.

8.   CAPITAL STOCK

Share issuances in 2009

On November 15, 2008 the Company issued 15,000,000 common shares at $0.0042 per share for a total of $63,000 as a deposit in connection with the acquisition agreement with 0625920 BC Ltd. (Note 5).  The stock was recorded based upon the quoted market price of the Company’s common stock on the date of director’s approval for the issuance.

On October 13, 2008 the Company issued 666,667 common shares at $0.0041 per share for a total of $2,733 for expenses incurred on behalf of the Company by a director.  The stock was recorded based upon the quoted market price of the Company’s common stock on the date of director’s approval for the issuance.

On November 20, 2008 the Company issued 800,000 common shares at $0.0041 per share for a total of $3,280 for expenses incurred on behalf of the Company by a director.  The stock was recorded based upon the quoted market price of the Company’s common stock on the date of director’s approval for the issuance.

On May 22, 2009 the Company issued 3,000,000 common shares at $0.009 per share for a total of $27,000 for investor relations.  The stock was recorded based upon the quoted market price of the Company’s common stock on the date of director’s approval for the issuance.

On June 30, 2009 the Company issued 6,592,724 common shares at $0.0045 per share for a total of $29,758 for expenses incurred on behalf of the Company by directors.  The stock was recorded based upon the quoted market price of the Company’s common stock on the date of director’s approval for the issuance.

F-10


BIOMASS SECURE POWER INC.
(A development stage company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
As At March 31, 2010
(Unaudited)

On June 30, 2009 the Company issued 28,155,555 common shares at $0.0045 per share for a total of $126,700 for management fees paid to a director and officer of the Company for services provided in the current period.  The stock was recorded based upon the quoted market price of the Company’s common stock on the date of director’s approval for the issuance.

Share issuances in 2008

On August 29, 2007 the Company issued 2,844,325 common shares at $0.0075 per share for a total of $21,332 for expenses incurred on behalf of the Company by a director.  Of those amounts 1,487,881 common shares for a total of $11,159 was for settlement of debt related to expenses incurred in a prior year and 1,356,444 common shares for a total of $10,173 was for expenses incurred in the current year.  The stock was recorded based upon the quoted market price of the Company’s common stock on the date of director’s approval for the issuance.

On October 23, 2007 management returned 3,000,000 common shares for cancellation.  As the expense related to the issuance of these common shares was properly recorded, there is no accounting impact for the returned shares.

On February 5, 2008 the Company issued 5,780,463 common shares at $0.0031 per share for a total of $17,919 for expenses incurred on behalf of the Company by directors.  The stock was recorded based upon the quoted market price of the Company’s common stock on the date of director’s approval for the issuance.

On February 5, 2008 the Company issued 40,000,000 common shares at $0.0031 per share for a total of $124,000 for management fees paid to a director and officer of the Company.  Of those amounts 20,000,000 shares for a total of $62,000 was for settlement of debt related to management fees of a prior year and 20,000,000 for a total of $62,000 was for management fees incurred in the current year.  The stock was recorded based upon the quoted market price of the Company’s common stock on the date of director’s approval for the issuance.

On June 30, 2008 the Company issued 3,750,000 common shares at $0.0045 per share for a total of $16,875 for directors’ fees.  The stock was recorded based upon the quoted market price of the Company’s common stock on the date of director’s approval for the issuance.

On June 30, 2008 the Company issued 30,000,000 common shares at $0.0045 per share for a total of $135,000 for management fees paid to a director and officer of the Company for services in the current year.  The stock was recorded based upon the quoted market price of the Company’s common stock on the date of director’s approval for the issuance.

On June 30, 2008 the Company issued 5,007,415 common shares at $0.0045 per share for a total of $22,534 for expenses incurred on behalf of the Company by directors.  The stock was recorded based upon the quoted market price of the Company’s common stock on the date of director’s approval for the issuance.

Stock Options

On March 24, 2004, the Company’s Board of Directors approved a nonqualified stock option plan. This plan, subject to authorization of the Company’s Board of Directors, allows the Company to distribute up to 5,000,000 options on common stock to officers, directors, employees and consultants at an exercise price of up to $0.25 per share. On October 8, 2004, the Board of Directors approved an increase in S-8 stock to 15,000,000 options on common stock to officers, directors, employees and consultants at an exercise price of up to $0.03 per share.

During the periods ended March 31, 2010 and 2009, there were no common stock options granted. As of March 31, 2010 and June 30, 2009, there were no outstanding exercisable or un-exercisable common stock options.

F-11


BIOMASS SECURE POWER INC.
(A development stage company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
As At March 31, 2010
(Unaudited)

9.   COMMITMENT TO ISSUE STOCK

The Company’s shares are traded on the OTC Bulletin Board in the United States and the Company is subject to the securities laws of both the United States and British Columbia, Canada.  On November 19, 2009 the British Columbia Securities Commission issued a cease trade order against the Company thereby preventing the Company from issuing or exchanging shares of the Company until the cease trade order is removed. 

Subsequent to the date of the cease trade order the Company entered into the following transactions approved by the directors requiring the issuance of shares upon the removal of the cease trade order:

  i. On June 30, 2009 the Company entered into an acquisition and merger agreement with 0625920 BC Ltd (Note 5) for exchange of 225,269,250 common shares of the Company. This has not been recorded in the balance sheet of the company.
     
  ii. On February 24, 2010 the board of directors, subject to the removal of the cease trade order, approved the issuance of 81,864,686 common shares for settlement of indebtedness to a director and officer. 
     
  iii. On March 12, 2010 the board of directors, subject to the removal of the cease trade order, approved the acceptance of share subscriptions of 1,456,013 common shares at $0.0158 per share for proceeds of $23,005.  The subscription agreements and the related proceeds were received by the Company between March 12, 2010 and June 16, 2010. As the shares have not been issued, the subscription payable has been recorded in accounts payable and accrued liabilities for the period ended March 31, 2010.

10.  RELATED PARTY TRANSACTIONS

During the period ended March 31, 2010, the Company was charged management fees totaling $120,000 (2009 - $140,000) by directors and officers of the Company.

The above-noted transactions were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

11.  COMMITMENTS AND CONTINGENCIES

A statement of claim was issued against the Company for breach of employment contract. The Company has filed a statement of defense disputing the action. The claim is presently being disputed by the Company and the settlement is undeterminable at this time. Any legal costs relating to this claim have been recorded in the financial statements. The likelihood of loss is remote.

A second statement of claim was issued against the Company to remove the trading restriction on the restricted stock. The Company has filed a statement of defense disputing the action. Subsequent to year end, this claim was settled with no financial impact to the Company.

We establish reserves for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. The actual costs of resolving legal claims may be higher or lower than any amounts reserved for the claims. On the basis of information currently available, advice of counsel, available insurance coverage, if applicable, and established reserves, it is the opinion of management that the eventual outcome of the actions against us are remote will not have a material adverse effect on our financial condition, results of operations, or cash flows. However, in the event of unexpected future developments, it is possible that the ultimate resolution of legal matters, if unfavorable, may be material to our financial condition, results of operations, or cash flow.

F-12


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Cautionary Statement Regarding Forward-Looking Statements

This interim report on Form 10-Q contains forward-looking statements.  Forward-looking statements are projections of events, revenues, income, future economic performance or management’s plans and objectives for future operations.  In some cases, you can identify forward-looking statements by the use of terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology.  Examples of forward-looking statements made in this annual report on Form 10-Q include statements about:

  • Our business plans,
  • Our belief regarding the impact of various lawsuits,
  • Our ability to raise additional finances,
  • Our future customers,
  • Our design of torrefied wood pellet plants, and
  • Our future investments and allocation of capital resources.

These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including:

  • Our inability to obtain an unqualified audit report for the 2006 and 2007 fiscal years,
  • The impact of various lawsuits that have been filed against us,
  • General economic and business conditions,
  • Fluctuations in worldwide prices and demand for torrefied wood pellets,
  • Our lack of operating history,
  • Our limited experience manufacturing pellets,
  • Our dependence on a limited number of customers, and 
  • The risks in the section of this interim report entitled “Risk Factors”,

any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

While these forward-looking statements and any assumptions upon which they are based are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results

2


As used in this report, the terms “we”, “us” and “our” mean Biomass Secure Power Inc. In this report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

Corporate History

We were incorporated in the Province of British Columbia on August 24, 1989 as Flamingos Beach Resort Inc. On August 10, 1999, we changed our name to VMH Videomoviehouse.com Inc. On May 18, 2006, we changed our name to Virtual Media Holdings Inc. On February 9, 2009, we changed our name to Biomass Secure Power Inc. On June 30, 2009, we legally have amalgamated with 0625920 BC Ltd., previous known as Biomass Secure Power Inc., as more particularly described under the heading “The Amalgamation”. As we have not issued any shares to the 20 shareholders of 0625920 BC Ltd. to date, the accounting treatment for the amalgamation has been deferred until such time as the shares have been transferred to complete the transaction.

Corporate Developments

From incorporation in August 1989 until August 1999, our only operation consisted of developing an Internet web-site. The web-site was developed by our past president. In August 1999, we switched our focus to the generation of revenues from the sale of video tapes, DVDs, and CDs and rental of DVDs over the internet. In October 2005, we were removed as an authorized seller at Amazon.com. Our sales through Amazon.com accounted for virtually all of our revenues.

We have ceased our movie selling business and are focused on the development of our torrefied wood pellet plant business beginning July 1, 2007.

Previous Audits

Our previous auditors, Dale Matheson Carr-Hilton Lebonte LLP (“DMCL”), had challenges in obtaining and management had challenges in providing sufficient and appropriate information relating to the issuance of shares; transfers of funds between company bank accounts; and payments to management. As such, we were unable to produce accurate and complete financial statements and DMCL was unable to provide us with an audit report for our 2006 and 2007 fiscal year ends. We may apply to the Securities and Exchange Commission for relief from the requirement to produce annual audited and interim non-audited financial statements as well as the applicable annual reports on form 10-Ks and interim reports on Form 10-Q for the 2006 and 2007 fiscal year. Until we file audited financial statements for the 2006 and 2007 fiscal year or obtain relief from the requirement to file those financial statements, we will not be in compliance with our reporting obligations under the Securities and Exchange Act of 1934.

The Amalgamation

On June 30, 2009, the following events occurred:

  • we entered into a share exchange agreement (the “Share Exchange Agreements”) with each of the 20 shareholders of 0625920 BC Ltd., previously known as Biomass Secure Power Inc., whereby we agreed to purchase all of the issued and outstanding shares of 0625920 BC Ltd. in consideration for the issuance of an aggregate of 225,269,250 of our common shares (the “Consideration Shares”);
  • each of the 20 shareholders of 0625920 BC Ltd. requested that the board of directors of 0625920 BC Ltd.  consent to and approve the  transfer all of the issued and outstanding shares of 0625920 BC Ltd. to our company;
  • all outstanding share certificates of 0625920 BC Ltd. were cancelled and one new share certificate was issued in the name of our company, representing all of the issued and outstanding shares of 0625920 BC Ltd.; and

3


  • pursuant to section 273 of the British Columbia Business Corporations Act, Biomass Secure Power Inc. and 0625920 BC Ltd. amalgamated, with the resulting company adopting the name, articles, and notice of articles of Biomass Secure Power Inc.

0625920 BC Ltd. was a related party due to a common director and shareholder. A form of the Share Exchange Agreement is attached to our annual report on Form 10-K/A for the fiscal year ended June 30, 2009. On November 19, 2009, the British Columbia Securities Commission issued a cease trade order against our company, which prohibits us from issuing the Consideration Shares. As of December 13, 2010, we have not issued the Consideration Shares. As such, for accounting purposes the merger transaction has not been completed nor reflected in the financial statements as we have not delivered any consideration for the shares of 0625920 BC Ltd. We anticipate that we will issue the Consideration Shares upon the revocation of the cease trade order.

Results of Operations

Revenue

During the nine month period ended March 31, 2010 and March 31, 2009, we did not generate any revenues. Since 2007, we discontinued our internet media sales operations and commenced focusing on our current business plan.

Expenses for the nine month period ended March 31, 2010

Our expenses for the nine month period ended March 31, 2010 were $133,751 compared to $157,935 for the nine month period ended March 31, 2009 or a decrease of $24,184. This decrease was primarily attributable to a decrease in our management fees of $120,000 for the nine month period ended March 31, 2010 compared to $140,000 for the nine month period ended March 31, 2009. The decrease in our management fees was a result of internal controls put into place and some management agreeing to reduced compensation. During the three month period ended March 31, 2010, some of our managers increased their workload and as a result, their salaries increased. Our office and general administrative fees decreased from $10,187 for the nine month period ended March 31, 2009 to $4,617 for the nine month period ended March 31, 2010. The change in office and general administrative expenses was primarily attributable to our efforts to reduce our general and administrative expenses while we focus on developing our current business plan.

Expenses for the three month period ended March 31, 2010

Our expenses for the three month period ended March 31, 2010 were $62,417 compared to $34,654 for the three month period ended March 31, 2009 or an increase of $32,417. This increase was primarily attributable to a increase in our management fees of $60,000 for the three month period ended March 31, 2010 compared to $30,000 for the three month period ended March 31, 2009. The increase in our management fees was primarily attributable to an increase in salaries to our management due in the three month period ended March 31, 2010 due to an increased workload of two of our officers. Our office and general administrative fees decreased from $3,288 for the three month period ended March 31, 2009 to $915 for the three month period ended March 31, 2010. The change in office and general administrative expenses was primarily attributable to our efforts to reduce our general and administrative expenses while we focus on developing our current business plan.

Plan of Operation

Financing

Discussions have been held with conventional lenders and private funding sources regarding financing for our projects. There are no assurances that we will be successful in obtaining the necessary capital. If we are unsuccessful in obtaining additional capital we may have to cut back or suspend activities until such time that we can raise capital by way of loans, private placements or public offerings. Current management has been lending us funds to pay our expenses on a monthly basis.

4


There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, if and when it is needed, we will be forced to delay or scale down some or all of our operations or perhaps even cease the operation of our business.

Since inception we have funded our operations primarily through equity and debt financings and we expect that we will continue to fund our operations through equity and debt financing. If the cease trade order issued by the British Columbia Securities Commission is revoked and we raise additional financing by issuing equity securities, our existing stockholders’ ownership will be diluted. Obtaining loans, assuming any loans would be available, will increase our liabilities and future cash commitments.

Cash Requirements

Our plan of operation over the next 12 months is to enter into a long term sales contract for the purchase of our torrefied wood pellets. Once we have secured a buyer, we will begin to work on securing the supply for our plant and to eventually begin construction of our torrefied wood pellet plant. Our cash requirements are dependent on whether or not we begin construction of our torrefied wood pellet plant. The construction process will require a substantial amount of capital, which will we have to raise by way of loans, private placements or public offerings.

Below, we have provided an estimate of our operating expenses and working capital requirements for the next 12 months provided we do not begin construction of our torrefied wood pellet plant. Our capital requirements, if we begin construction, will be dependant on the final site location and initial production of the plant.

Expense    Amount   
Management Fees $ 240,000  
Professional Fees (accounting and legal) $ 100,000  
Travel $ 50,000  
Total: $ 390,000  

Even without beginning construction of our torrefied wood pellet plant, which we do not anticipate will occur within the next 12 months, we anticipate that we will require additional funds of $390,000. As of March 31, 2010, we have a working capital deficit of $222,281. We have a shortfall of $612,281 between our working capital deficit and anticipated cash requirements for the next 12 months. If we begin construction of our torrefied wood pellet plant, this shortfall will greatly increase. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, if and when it is needed, we will not be able to commence our business plan.

Liquidity and Capital Resources

We have suffered recurring losses since inception. Our ability to meet our financial liabilities and commitments is primarily dependent upon the continued financial support of our directors and shareholders, the continued issuance of equity to new or existing shareholders, and our ability to achieve and maintain profitable operations.

Working Capital

     As at       As at   
     March 31, 2010       June 30, 2009   
                   
Current Assets $ 63,000   $ 63,124  
Current Liabilities   285,281     150,930  
Working Capital (deficit) $  (222,281)    $  (87,806)   

Our working capital deficit increased by $134,475 as a result of us incurring debt to pay for our expenses instead of issuing equity. We have incurred recurring losses from inception. Our ability to meet our financial obligations and commitments is primarily dependent upon continued financial support of our shareholders, directors and the continued issuance of equity to new and existing shareholders.

5


Cash Flow

Operating Activities

     Nine Months Ended      Nine Months Ended  
     March 31, 2010      March 31, 2009  
Cash flow from (used by) operating activities $ (135,920 ) $ (103,135 )
Cash flow from (used by) investing activities   (894 )   nil  
Cash flow from (used by) financing activities   136,690     103,275  
Net increase (decrease) in cash $ (124 ) $ 140  

Our cash used by operating activities increased by $32,785 primarily due to an increase in our expenses being paid by incurring debt rather than through the issuance of stock.

Investing Activities

Our cash used by investing activities in the nine month period ended March 31, 2010 was for the acquisition of property and equipment.

Cash Provided by Financing Activities

Our cash provided by financing activities increased by $33,415 due largely to a loan from a related party used to pay our expenses.

Off-Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations that provide financing, liquidity, market risk or credit risk support to us

Going Concern

We have historically incurred losses and have incurred a net loss of $133,751 during the nine month period ended March 31, 2010 and approximately $701,187 from July 1, 2007, the date of entering into our development stage, to March 31, 2010. Because of these historical losses, we will require additional working capital to develop our business operations. We intend to raise additional working capital through equity financing, bank financing and/or advances from related parties or stockholder loans. We are currently prohibited from raising funds through the sale of any securities due to a cease trade order issued by the British Columbia Securities Commission.

The continuation of our business is dependent upon obtaining further financing and achieving a break even or profitable level of operations. We will not achieve a break even or profitable level of operations until the successful construction of our torrefied wood pellet plant, which we do not anticipate will occur within the next 12 months. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current or future stockholders. Obtaining loans, assuming any loans would be available, will increase our liabilities and future cash commitments.

There are no assurances that we will be able to either (i) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (ii) obtain additional financing through either equity financing and/or bank financing necessary to support our working capital requirements. To the extent that funds generated from operations and any equity financing and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us. If adequate working capital is not available, we may not be able to begin our operations.

Our auditors have included an explanatory paragraph in the audit report of the year ended June 30, 2009 financial statements that we have sustained losses since inception and have limited cash resources.

6


These conditions raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure.

As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act, our chief executive officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Interim Report, being March 31, 2010.  Our chief executive officer evaluated our company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of March 31, 2010.

Based on that evaluation, our chief executive officer concluded that as of the end of the period covered by this quarterly report on Form 10-Q, our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to the material weaknesses as disclosed in our annual report on Form 10-K/A for the fiscal year ended June 30, 2009.

We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies at some time in the future. This will depend on our financial position and the management’s determination of which changes should be made and when. We intend to consider the results of our remediation efforts and related testing as part of our year-end assessment of the effectiveness of our internal control over financial reporting.

We continue to have material weaknesses in our internal control over financial reporting as disclosed in our annual report on Form 10-K/A for the fiscal year ended June 30, 2009. We have not implemented remediation measures for the material weaknesses described in our annual report due to lack of funds.

Changes in Internal Controls

There were no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are involved in lawsuits involving prior management and individuals associated with them.

On April 21, 2009, Calvin Kantonen filed a statement of claim with the Supreme Court of British Columbia, Vancouver Registry No. S092943 alleging that the defendants: our company and our transfer agent, Computershare Trust Company of Canada, have improperly refused to remove the legend on 1,500,000 of our common shares held by Mr. Kantonen. On May 15, 2009, the defendants filed a statement of defence whereby we denied the allegations of Mr. Kantonen and alleged that the shares were not validly issued. No further proceedings have been undertaken in this lawsuit. The Company plans to vigorously defend this claim and denies the allegations of Mr. Kantonen. We anticipate that even if Mr. Kantonen’s lawsuit is successful, it should not have a material adverse effect on our financial condition, results of operations, or cash flows.

7


On July 19, 2007, we filed a petition with the Supreme Court of British Columbia, Vancouver Registry No. S107252 alleging that 34,678,993 common shares held by the following parties: AI International Holdings, Joga Bassi, Canaccord Capital Corp ITF (Steve Gasper Control Stock), Jim Carroll, Brian Dean, Steven Frye, Grant Galloway, Steve Gaspar, Chris Gaspar, Christopher Gaspar, Brian Holden, Calvin Kantonen, George Matin, Peter Matousak, Novak Capital, Penson Financial Services Canada Inc ITF 6/13/2006 Stephen Gaspar A/C 15ER95B, Sukhjit Purewal, Deanna Sherban, Debby Skipper, Clay Smith, Nick Smith, Viligant Trader Inc., Wide Open Technologies should be cancelled because we did not receive adequate consideration for the issuance of these shares.  No further proceedings have been undertaken in this lawsuit.

On August 2, 2007, Steve Gaspar filed a statement of claim with the Supreme Court of British Columbia, Vancouver Registry No. S075257, alleging that the defendants: our company and our current president Jim Carroll, issued a press release on July 27, 2007 which contained false and defamatory statements concerning Mr. Gaspar. On June 5, 2008, we filed a statement of defence denying the claims in the statement of claim and alleging that the statements were in substance true and made without malice and that Mr. Gaspar has not suffered any damages as a result of the press release. A default judgment was obtained on December 11, 2007 but was set aside by consent on June 5, 2008 when we filed our statement of defence.

On June 25, 2007, Steve Gaspar, Stephen Gaspar, Christopher Gaspar, and Jonathan Gaspar (collectively, the “Gaspars”) filed a statement of claim with the Supreme Court of British Columbia, Vancouver Registry No. S074362, alleging that the defendants: our company, our current president Jim Carroll, our current director Len Klassen, and our current director Slawomir Kownacki, for damages for breach of contract, inducing breach of contract and wrongful interference with economic relations of the Gaspars, and requesting following orders:

  • that the defendants purchase the shares of the Gaspars at fair value;
  • that the Gaspars are not liable for any profits that accrued to them as a result of any employment contracts;
  • for specific performance that we deliver 65,735,211 free trading shares;
  • a declaration that Steve Gaspar is entitled to exercise an option to purchase 12,000,000 of our common shares at a price of $0.01 per share; and
  • a declaration that Christopher Gaspar is entitled to exercise an option to purchase 5,205,000 of our common shares at a price of $0.01 per share.

On July 23, 2007, we filed a statement of defence denying the allegations and alleging that none of the Gaspars are owed any money or shares. On December 4, 2009, a notice of motion was filed regarding the production of documents.  No further proceedings have been undertaken in this lawsuit. We anticipate that even if the plaintiffs are successful, it should not have a material adverse effect on our financial condition, results of operations, or cash flows.

On September 11, 2007, the Canadian Imperial Bank of Commerce (“CIBC”) filed a statement of claim against the defendants: Virtual Media Holdings Inc., Steve Gaspar, and Darlene Gaspar alleging that the defendants owed CIBC $19,982.12 as of September 10, 2007 with a daily interest rate of $5.22. On November 21, 2007, we filed a statement of defence denying each and every allegation. We anticipate that this lawsuit should not have a material adverse effect on our financial condition, results of operations, or cash flows.

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We have been in discussions with Steve Gaspar regarding settling all outstanding actions with the Gaspars, including final settlement of the lawsuit with CIBC. While we believe we do not have any liability to any of the Gaspars, we believe it is in our best interest to settle all outstanding matters with the Gaspars. If we cannot settle all outstanding claims, we will vigorously defend all claims.

On November 12, 2007, Brian Holden filed a statement of claim in Clark Country Nevada, Case No A550988, alleging that the defendant: our company, breached two employment contracts resulting in unjust enrichment and breach of implied covenant of good faith and fair dealing. Mr. Holden alleges that pursuant to two employment agreements we are obligated to issue him 2,400,000 of our common shares and options to purchase 12,000,000 of our common shares at a price of $0.05 per common share. On November 30, 2007, we filed a statement of defence denying all of Mr. Holden’s claims and a containing a counterclaiming alleging that Mr. Holden was improperly issued certain common shares. On August 10, 2010 we entered into a settlement agreement with Mr. Holden whereby Mr. Holden has deposited 2,770,000 of our common shares with our transfer agent, which will be cancelled upon the cease trade order issued by the British Columbia Securities Commission against our company being revoked, which settled all outstanding claims with Mr. Holden.

ITEM 1A. RISK FACTORS.

An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this report in evaluating our company and its business before purchasing shares of our company's common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. You could lose all or part of your investment due to any of these risks.

Risks Related to our Failure to File our Disclosure Documents

As at December 13, 2010, our stock has been cease traded in British Columbia.

Our common shares have been cease traded in British Columbia since November 19, 2009 for failure to file our audited annual financial statements for the year ended June 30, 2009. As a result, trading in our common shares is prohibited in British Columbia and by residence of British Columbia no matter where they trade. Until the cease trade order is revoked, we are prohibited from raising additional funds through the sale of our debt or equity. If we cannot revoke the cease trade order, we will be unable to raise the funds required to commence our business plan.

As at December 13, 2010, we are non-compliant with FINRA Rule 6530 and, as a result, our company has been delisted from the OTC Bulletin Board.

Companies trading on the OTC Bulletin Board generally must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board.  More specifically, FINRA has enacted Rule 6530, which determines eligibility of issuers quoted on the OTC Bulletin Board by requiring an issuer to be current in its filings with the Securities and Exchange Commission, subject to a 30 day grace period. While we have filed previous disclosure documents, we have not filed audited financial statements for fiscal years after June 30, 2005. As a result, we are non-compliant with FINRA Rule 6530 and the quotation of our securities on the OTC Bulletin Board is prohibited. Until we are compliant with FINRA Rule 6530, the market liquidity for our securities will be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. Our securities will be ineligible for quotation on the OTC Bulletin Board until one year after we have filed all outstanding disclosure documents or we obtain an exemption from the requirement to file all outstanding disclosure documents.

Risks Related to our Financial Condition

We anticipate that we will be unable to prepare reliable and accurate financial statements because of insufficient documents and available information for our fiscal years ended 2006 and 2007.

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We have been unable to prepare reliable and accurate information to obtain an unqualified opinion regarding our financial statements for our fiscal years 2006 and 2007. We anticipate that we will be unable to obtain an unqualified audit report on our financial statements for those periods. This may adversely affect our ability to raise additional funds through financing and our shareholders’ ability to sell their shares. If we are unable to raise additional funds, there is a substantial risk that our business will fail.

The fact that we have not earned any operating revenues since we switched the focus of our company to our current business plan raises substantial doubt about our ability to continue as a going concern.

We incurred a net loss of $701,187 from the start of our development stage on July 1, 2007 to March 31, 2010. We anticipate that we will continue to incur operating expenses without revenues for the foreseeable future. Because we have incurred losses from operations since inception, have not attained profitable operations and are dependent upon obtaining adequate financing to commence our business operations, in their report on our financial statements for the fiscal year ended June 30, 2009, our independent auditors included an explanatory paragraph regarding the substantial doubt about our ability to continue as a going concern.

As of March 31, 2010, we had no substantial cash or cash equivalents and a working capital deficit of $222,281. We estimate our average monthly operating expenses over the next 12 months to be approximately $32,500 per month, excluding any expenses incurred in the building of any plants. In addition, our budget could increase during the year in response to matters that cannot be currently anticipated and we might find that we need to raise more capital in order to properly address these items. As we cannot assure a lender that we will be able to successfully build our plants, we will probably be unable to raise debt financing from traditional lending sources. We have traditionally raised our operating capital from sales of equity and debt securities, but there can be no assurance that we will continue to be able to do so. We are currently subject to a cease trade order imposed by the British Columbia Securities Commission and cannot raise any funds until it has been revoked.

The recent economic uncertainty and market instability may make it harder for us to raise capital as and when we need it and have made it difficult for us to assess the impact of the crisis on our operations or liquidity and to determine if the prices we might receive on the sale of our torrefied wood pellets. If we cannot raise the money that we need to continue development of our torrefied wood pellet plant, we may be forced to delay, scale back, or cease our business plan. If any of these were to occur, there is a substantial risk that our business would fail.

Risks Related to our Company

Various lawsuits have been filed against us.

Various lawsuits have been filed against us. For details on these lawsuits, see the information in the section entitled “Legal Proceedings”. While we do not believe that any of these lawsuits have merit and we intend to defend the lawsuits vigorously, we cannot predict the outcome and we cannot predict the amount of time and expense that may be required to resolve them. Such litigation could also divert the attention of management and resources in general from day-to-day operations. Further, if any of the plaintiffs in these lawsuits are successful, we may be required to issue additional common shares, which will dilute the holdings of our existing shareholders or may be ordered to make cash payments, which due to our financial condition, we may be unable to make. If we are ordered to make a substantial payment, there is a substantial risk that our business would fail.

We have no prior experience in manufacturing and operating a large torrefied wood pellet plant.

Our success will be dependent on our management’s ability to manufacture and operate a torrefied wood pellet plant. To our knowledge, our plants will be the first of their kind in Canada. As such, we have no experience building and operating a large torrefied wood pellet plant and limited experience manufacturing similar products at the volume we anticipate will be required to sustain our operations.  As a result, we may not be able to develop and implement efficient, low-cost manufacturing capabilities and processes that will enable us to manufacture our torrefied wood pellets in significant volumes, while meeting the legal, regulatory, quality, price, durability, engineering, design and production standards required to market our products successfully. Further, we have no experience selling torrefied wood pellets to power producers. As a result, we may not be able to enter into a contract for the purchase and sale of our torrefied wood pellets on favourable terms or at all.

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We have no operating history relating to our current business plan.

We have no operating history relating to our current business plan on which to base an evaluation of our business and prospects. Our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies seeking to establish a new business opportunity. Some of these risks and uncertainties relate to our ability to build our plants, secure long term sales contracts, and obtain an adequate supply for our plants.

We cannot be sure that we will be successful in addressing these risks and uncertainties and our failure to do so could have a materially adverse effect on our financial condition. In addition, our operating results are dependent to a large degree upon factors outside of our control. There are no assurances that we will be successful in addressing these risks, and failure to do so may adversely affect our business.

It is unlikely that we will generate any or significant revenues while we implement our business plan. In order for us to make a profit, we will need to successfully build our plants and secure long term supply and sales contracts for our torrefied wood pellets. Even if we become profitable, we may not sustain or increase our profits on a quarterly or annual basis in the future.

We will, in all likelihood, sustain operating expenses without corresponding revenues and significant capital expense in the construction of our plants, for the foreseeable future.

We anticipate that we will depend on a limited number of customers for a high percentage of our revenue.

We anticipate that we will sell our torrefied wood pellets to power producers in Europe. We do not anticipate that we will enter into agreements with a large number of producers and will have a limited number of customers. Once we begin operations, we anticipated that our revenues will be volatile because of the loss of sales to any one of our customers would have a significant negative impact on our business. Due to our anticipated dependence on a limited number of customers, any one of the following events may cause material fluctuations or declines in our revenue and have a material adverse effect on our financial condition and results of operations:

  • reduction, delay or cancellation of orders from one or more of our significant customers;
  • selection by one or more of our significant customers of another product;
  • loss of one or more of our significant customers and our failure to identify additional or replacement customers; and
  • failure of any of our significant customers to make timely payment for our products.

We will be dependent on the price of torrefied wood pellets.

Our business plan is based on certain assumptions regarding the price of torrefied wood pellets. The price of torrefied wood pellets is dependent on many factors, including the cost for similar products such as coal.  If our assumptions are inaccurate and we cannot sell our torrefied wood pellets for more than the cost to produce them, our business will fail and you may lose your entire investment.

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Economic conditions may adversely affect our business.

Adverse worldwide economic conditions may have adverse implications on our business. For example, our potential customers' ability to borrow money from their existing lenders or to obtain credit from other sources to fund operations may impair their ability to purchase our torrefied wood pellets, which would result in decreased in sales.

Risks Relating to Our Common Stock

If we issue additional shares in the future, it will result in the dilution of our existing shareholders.

Our articles of incorporation authorize the issuance of an unlimited amount of shares of common stock with no par value. Our board of directors may choose to issue some or all of such shares to acquire one or more products and to fund our overhead and general operating requirements. The issuance of any such shares will reduce the book value per share and may contribute to a reduction in the market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will reduce the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our corporation.

We are currently prohibited from issuing any shares due to a cease trade order issued by the British Columbia Securities Commission. Pursuant to our acquisition of 0625920 BC Ltd., we agreed to issue 225,269,250 of our common shares, of which none of been issued. Once this cease trade order has been revoked, we anticipate issuing these shares. The issuance of these shares will cause our book value per share to decrease, which may contribute to a reduction in the market price of the outstanding shares of our common stock.

Trading of our stock is restricted by the Securities Exchange Commission's penny stock regulations, which may limit a stockholder's ability to buy and sell our common stock.

The Securities and Exchange Commission has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

FINRA sales practice requirements may also limit a stockholder's ability to buy and sell our stock.

In addition to the "penny stock" rules described above, the Financial Industry Regulatory Authority (known as "FINRA") has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

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Our common stock is illiquid and the price of our common stock may be negatively impacted by factors which are unrelated to our operations.

Although our common stock is currently listed for quotation on the Pink Sheets, trading through the Pink Sheets is frequently thin and highly volatile. There is no assurance that a sufficient market will develop in our stock, in which case it could be difficult for shareholders to sell their stock. The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

We do not intend to pay dividends on any investment in the shares of stock of our company.

We have never paid any cash dividends and do not currently intend to pay any dividends for the foreseeable future. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock's price. This may never happen and investors may lose all of their investment in our company.

ITEM 2 UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS.

We did not have any unregistered sale of equity securities during the period covered by this interim report.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable

ITEM 4. [REMOVED AND RESERVED]

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibit Document Description
3.1(1) Articles of Biomass Secure Power Inc.
3.2(2) Certificate Of Change Of Name, Notice Of Articles
3.3(2) Notice Of Alteration, Notice Of Articles
10.1(1) A form of the share exchange agreement entered into between our company and the 20 shareholders of 0625920 B.C. Ltd. on June 30, 2009
10.2(1) Settlement Agreement with Brian Holden dated August 10, 2010
31.1* Section 302 Certification under Sarbanes-Oxley Act of 2002
32.1* Section 906 Certification under Sarbanes-Oxley Act of 2002
99.1(3) Audit Committee Charter
99.2(3) Disclosure Committee Charter

(1)           Attached as an exhibit to our annual report on Form 10-K/A for the fiscal year ended June 30, 2009 filed on              December 15, 2010
(2)           Attached as an exhibit to our current report on Form 6-K filed on May 15, 2009
(3)           Attached as an exhibit to our annual report on Form 10-KSB filed on September 25, 2003
* Filed herewith

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SIGNATURES

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

BIOMASS SECURE POWER INC.

By

/s/ James Carroll
James Carroll
President, CEO, Chief Financial Officer, and Director
Principle Executive Officer, Principal Financial Officer and Principal Accounting Officer
December 15, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By

/s/ James Carroll
James Carroll
President, CEO, Chief Financial Officer, and Director
Principle Executive Officer, Principal Financial Officer and Principal Accounting Officer
December 15, 2010