As filed with the Securities and Exchange Commission on October 22, 2008
REGISTRATION NO. 333-151584
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO.1
to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GLOBAL RESOURCE CORPORATION
(Exact name of registrant as specified in charter)
NEVADA 3559 84-1565820
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
408 BLOOMFIELD DRIVE-UNIT # 1
WEST BERLIN, NJ 08091
(856) 767-5661
(Address, including zip code, and telephone number, including area code
of registrant's principal executive offices)
408 BLOOMFIELD DRIVE-UNIT # 1
WEST BERLIN, NJ 08091
(Address of principal place of business or intended principal place of business)
ERIC SWAIN
Chief Executive Officer
408 BLOOMFIELD DRIVE-UNIT #1
WEST BERLIN, NJ 08091
(480) 219-5005
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
COPIES TO:
SOL V. SLOTNIK, P.C.
11 EAST 44TH STREET-19TH FLOOR
NEW YORK, NEW YORK 10017
(212) 687-1222
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this registration statement.
If any securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. [x]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM REGISTRATION FEE
SECURITIES TO BE REGISTERED OFFERING PRICE PER AGGREGATE OFFERING
REGISTERED (2) (3) SHARE (1) PRICE
Common Stock Par value $.001 1,900,000 $2.10 $3,990,000 $157.20
Common Stock Par value, $.001 625,000(4) $2.10(4) $1,312,500 $52.50
(1) The price is estimated in accordance with Rule 457(c) under the
Securities Act of 1933, as amended, solely for the purpose of calculating the
registration fee and represents the average of the bid and asked prices of the
Common Stock on June 4, 2008 as reported on the Pink Sheets.
(2) Initially 2,525,000 shares were being registered, of which 1,900,000
were issued and outstanding and 625,000 were issuable upon conversion of certain
warrants to purchase shares of our common stock held by the selling security
holder. On July 3, 2008 the selling security holder exercised its right to
convert the warrants into 325,957 shares of our common stock using a cashless
conversion formula permitted under the warrants. Accordingly, pursuant to Rule
416 the total number of shares covered by this registration statement has been
reduced to 2,225,957 shares of our common stock, all of which are issued and
outstanding.
(3) In the event of a stock split, stock dividend or similar transaction
involving our shares of common stock, the number of shares and warrants
registered shall automatically be increased to cover the additional shares of
common stock issuable pursuant to Rule 416 under the Securities Act of 1933, as
amended.
(4) Pursuant to Rule 457(c) calculated based on the offering price of
common stock included in this offering. The number of shares issuable upon
conversion of 625,000 of our warrants has been reduced from 625,000 to 391,730
shares of our common stock as a result of the conversion by the selling security
holder of the warrants into 325,957 shares of our common stock using a cashless
conversion formula permitted under the warrants.
The registrant herby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
SUBJECT TO COMPLETION DATED October --, 2008
The information in this prospectus is not complete and may be changed. The
selling security holders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
GLOBAL RESOURCE CORPORATION
2,225,957 shares of common stock
This prospectus relates to the periodic offers and sales by the selling
security holder listed on page 43, or its transferees, of up to 2,225,957 shares
of our common stock already issued and outstanding, all of which are held by
Professional Offshore Opportunity Fund, Ltd. ("POOF"), the selling security
holder, of which 325,957 are shares we issued upon the exercise of 625,000
warrants held by POOF. We will receive no proceeds from the disposition of the
outstanding shares of our common stock held by POOF. We did not receive any
proceeds in connection with the exercise of the warrants held by POOF because it
used a cashless form of conversion.
For a description of the plan of distribution of the shares owned by POOF,
please see page 44 of this prospectus
Our common stock is quoted on the Pink Sheets under the symbol "GBRC.PK".
On October 10, 2008, the closing price of our common stock on the Pink Sheets
was $1.10 per share.
You should rely only on the information contained in this prospectus. We
have not, and POOF has not, authorized anyone to provide you with different
information. If anyone provides you with different information, you should not
rely on it. We are not, and POOF is not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. You
should assume that the information contained in this prospectus is accurate only
as of the date on the front cover of this prospectus. Our business, financial
condition, results of operations and prospects may have changed since that date.
This prospectus is not an offer to sell or solicitation of an offer to buy these
securities in any circumstances under which the offer or solicitation is
unlawful.
OUR BUSINESS AND AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVE A HIGH
DEGREE OF RISK. PLEASE READ THE "RISK FACTORS" SECTION OF THIS PROSPECTUS WHICH
BEGINS ON PAGE 8.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities or passed upon the adequacy or accuracy
of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is October __, 2008.
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TABLE OF CONTENTS
Special Note Regarding Forward Looking Statements........................... 4
Prospectus Summary.......................................................... 4
Risk Factors................................................................ 8
Use of Proceeds............................................................. 18
Market Price of Common Stock and Other Stockholder Matters.................. 18
Management's Discussion and Analysis and Plan of Operation.................. 19
Business.................................................................... 24
Directors, Executive Officers, Promoters and Control Persons................ 29
Executive Compensation...................................................... 32
Security Ownership of Certain Beneficial Owners and Management ............. 39
Certain Relationships and Related Transactions.............................. 41
Selling Security Holder..................................................... 43
Plan of Distribution........................................................ 44
Legal Proceedings .......................................................... 47
Description of Securities................................................... 47
Experts..................................................................... 53
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities............................................................... 53
Where You Can Find More Information......................................... 54
Index to Financial Statements............................................... F-1
You should rely only on the information contained in this prospectus. We
have not authorized anyone, including any salesperson or broker, to give oral or
written information about this offering, our company, or the shares offered
hereby that is different from the information included in this prospectus. If
anyone provides you with different information, you should not rely on it.
Throughout this prospectus, the terms "we" "us" our" and "our company", the
"Company", refer only to Global Resource Corporation, a Nevada corporation,
unless the context otherwise requires.
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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This prospectus contains forward-looking statements, which reflect the
views of our management with respect to future events and financial performance.
These forward-looking statements are subject to a number of uncertainties and
other factors that could cause actual results to differ materially from such
statements. Forward-looking statements are identified by words such as
"anticipates," "believes," "estimates," "expects," "plans," "projects,"
"targets" and similar expressions. Readers are cautioned not to place undue
reliance on these forward-looking statements, which are based on the information
available to management at this time and which speak only as of this date. We
undertake no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. For a
discussion of some of the factors that may cause actual results to differ
materially from those suggested by the forward-looking statements, please read
carefully the information under "Risk Factors" beginning on page 8.
The identification in this document of factors that may affect future
performance and the accuracy of forward-looking statements is meant to be
illustrative and by no means exhaustive. All forward-looking statements should
be evaluated with the understanding of their inherent uncertainty. You may rely
only on the information contained in this prospectus.
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS; BUT IT DOES NOT CONTAIN ALL INFORMATION YOU SHOULD CONSIDER BEFORE
INVESTING IN OUR COMMON STOCK. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE
MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS INCLUDING THE NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS. READ THE ENTIRE PROSPECTUS BEFORE MAKING
AN INVESTMENT DECISION.
Company Summary:
We are a development stage company with three utility patent applications
pending in the United States Patent and Trademark Office ("PTO"), and
approximately ten corresponding utility patent applications pending in
commercially relevant countries. Our patent applications cover our proprietary
microwave technology for recovering hydrocarbons and fossil fuels from sources
including shale deposits, tar sands, capped oil wells, waste oil streams and
tires. The process uses specific frequencies of microwave radiation to extract
oils and alternative petroleum products from secondary raw materials, and is
expected to reduce the cost for oil and gas recovery from a variety of these
unconventional hydrocarbon sources. Our patent applications also cover certain
medical applications.
With the acquisitions of (i) the assets and (ii) the development stage
business of Carbon Recovery Corporation ("Carbon Recovery" or "CRC"), and
Mobilestream Oil, Inc. ("Mobilestream") in September 2006 and December 2006,
respectively, described below, our business became and continues to be: (i) the
design, manufacture and sale of machinery and equipment units, embodying the
technology and focused on specific applications; (ii) the licensing of our
technology to third parties to exploit that technology; and (iii) the
construction of plants to exploit certain technology for decomposing
petroleum-based materials by subjecting them to variable frequency microwave
radiation at specifically selected frequencies for a time sufficient to at least
partially decompose the materials.
4
For 9 months prior to the Carbon Recovery and Mobilestream asset
acquisitions, we were a shell corporation, and prior thereto we were engaged in
various businesses. For a description of our prior business history see:
"Business-History of the Company."
Our purchase of the assets of Carbon Recovery Corporation:
On or about July 26, 2006, we entered into a plan and agreement of
reorganization (the "CRC Acquisition Agreement") with Carbon Recovery
Corporation pursuant to which we agreed to purchase substantially all of the
assets of, and assume certain specified liabilities of, Carbon Recovery, in
exchange for the consideration described below. At the time of the acquisition,
Carbon Recovery was controlled by Mobilestream Oil, Inc. ("Mobilestream") which
in turn was controlled by Frank G. Pringle, currently our Chairman and formerly
our President and CEO. We issued to Carbon Recovery 48,688,996 shares of our
common stock, and we also assumed a convertible debenture and accrued interest
in the amount of $120,682. Subsequently, we eliminated the convertible debenture
by issuing 2,681,837 of our common stock to the debenture holder. We also issued
to Carbon Recovery 3,908,340 Class B warrants, 1,397,600 Class D warrants and
1,397,600 Class E warrants (together the "Carbon Recovery Warrants") to purchase
shares of our common stock and to replace the identical number of outstanding
warrant classes of Carbon Recovery. The Class B and Class D warrants have an
exercise price of $2.75 and the Class E warrants have an exercise price of
$4.00. All of the warrants were originally scheduled to expire at different
times in 2007 and 2008, but our Board has extended the expiration date for all
of the Carbon Recovery Warrants to December 31, 2008. See "Description of
Securities-Warrants."
The parties intended that the acquisition of Carbon Recovery in the CRC
Acquisition Agreement be treated as a "C" reorganization under the Internal
Revenue Code of 1986 as amended (the "IRC"). No Carbon Recovery stockholder was
a party to the CRC Acquisition Agreement. In the CRC Acquisition Agreement,
Carbon Recovery agreed that it would liquidate, and would distribute the shares
and warrants received as consideration for the sale of the assets to its
shareholders. We covenanted that we would file a registration statement for the
shares of our common stock and warrants (and shares of our common stock issuable
upon conversion of the warrants) issued to Carbon Recovery in order to permit
the distribution. Carbon Recovery agreed to deposit our common stock and the
three classes of our Carbon Recovery Warrants in a liquidating trust.
Following the closing of the Carbon Recovery acquisition on or about
September 22, 2006, Carbon Recovery and Olde Monmouth Stock Transfer Co.,Inc.,
our transfer agent, entered into a liquidating trust agreement (the "CRC
Liquidating Trust Agreement") in which Olde Monmouth agreed to act as the
Liquidating Trustee under the Carbon Recovery Liquidating Trust Agreement for
the shares of our common stock and our Carbon Recovery Warrants. The
beneficiaries of the Carbon Recovery Liquidating Trust are the stockholders of
Carbon Recovery. We have filed a registration statement on Form S-1 for the
shares of our common stock, the Carbon Recovery Warrants and the shares of our
common stock underlying the Carbon Recovery Warrants with the Securities and
Exchange Commission ("SEC"). The ability of the Trustee to distribute the shares
of the Company's common stock and the Carbon Recovery Warrants for the Carbon
Recovery acquisition depends upon the effectiveness of that registration
statement.
5
Our purchase of the assets of Mobilestream Oil, Inc.:
On December 31, 2006, we acquired the assets of Mobilestream Oil, Inc.
("Mobilestream")pursuant to a plan and agreement of reorganization dated
November 28, 2006 (the "Mobilestream Acquisition Agreement") between the Company
and Mobilestream. At the time of the Mobilestream acquisition, Mobilestream was
controlled by Frank G. Pringle, our Chairman, and at the time of the
acquisition, our President and CEO. No Mobilestream stockholder was a party to
the Mobilestream Acquisition Agreement. We issued to Mobilestream 11,145,225
shares of our Common Stock. We also issued 35,236,188 shares of our 2006 Series
of Convertible Preferred Stock to Mr. Pringle. Lastly, we issued to Mobilestream
common stock purchase warrants (the "Mobilestream Warrants") to purchase shares
of our common stock on the basis of 1 Mobilestream Warrant for each 3 shares of
either Mobilestream common stock or preferred stock exercisable at $4.75 per
share for a period ending on December 31, 2007. Subsequently, our Board of
Directors extended the exercise date of the Mobilestream Warrants to December
31, 2008. We also assumed Mobilestream's liabilities which were minimal.
Pursuant to the terms of the Mobilestream Acquisition Agreement, we were
to have issued 70,472,376 shares of our 2006 Series of Convertible Preferred
Stock to Mobilestream for distribution to the holder of Mobilestream's 2006
Series of Convertible Preferred Stock. The sole holder of Mobilestream's 2006
Series of Convertible Preferred Stock was Frank G. Pringle, our Chairman.
However, at the time of the Mobilestream acquisition closing we were only
authorized to issue 50,000,000 shares of Preferred Stock. Accordingly, at the
closing the terms were amended to provide for the issuance of 35,236,188 shares
of our 2006 Series of Convertible Preferred Stock, each having 2 votes per share
(instead of 1) and each convertible into 2 shares of our common stock (instead
of 1). As noted, these shares were issued directly to Mr. Pringle. In October
2007 the terms of conversion of our 2006 Series of Convertible Preferred Stock
were changed from 2 shares of common for each share of preferred to 1/2 of 1
share of our common stock for each share of our 2006 Series of Convertible
Preferred Stock.
Until August 13, 2008 our Chairman, Frank G. Pringle, was the holder of
all but 5,000 of our 2006 Series of Convertible Preferred Stock. In June 2008
and on August 13, 2008 Mr. Pringle converted all of his 2006 Series of
Convertible Preferred Stock into shares of our common stock and sold 6,600,000
of his shares to the Company for $1,250,000. See "Security Ownership of Certain
Beneficial Owners and Management" and "Description of Securities."
The Mobilestream assets we acquired consisted, essentially, of only (1)
the 4 patents pending for the technology together with the Combined Technology
License and (2) 37,500,000 shares of our own common stock, which were issued to
Mobilestream, as a stockholder of Carbon Recovery, at the time of the closing of
the Carbon Recovery acquisition in September 2007. These 37,500,000 shares were
cancelled as part of the Mobilestream acquisition. The Combined Technology
License, which was entered into in September 2006, represented a license from
Mobilestream to the Company under which Mobilestream licensed all of the
technology it owned to the Company in return for a set of royalty payments that
varied with the use made of the technology, the revenues received by the Company
and the passage of time. The Company's royalty obligations under the Combined
Technology License ended when the Company acquired substantially all of the
assets of Mobilestream.
6
Mobilestream was a development stage company which developed certain
proprietary technology and related custom software for the use of microwaves to
break down petroleum-based products, such as used tires, into their component
parts, and capture those components in usable form for resale. Mobilestream
licensed this technology to Carbon Recovery Corporation, whose assets we
previously acquired in September 2006. The Mobilestream acquisition by the
Company re-united the rights to the technology in one entity, the Company.
The parties intended that the acquisition of Mobilestream would qualify as
a "D" Reorganization under Section 368(a)(1)(D) of the Internal Revenue Code. In
the Mobilestream Acquisition Agreement, Mobilestream agreed that it would
liquidate, and would distribute the shares and Mobilestream Warrants received as
consideration for the sale of its assets to its shareholders. We covenanted that
we would file a registration statement for the shares of our common stock and
the Mobilestream Warrants (and shares of our common stock issuable upon
conversion of the Mobielstream Warrants) issued to Mobilestream in order to
permit the distribution. Mobilestream agreed to deposit our common stock and the
Mobilestream Warrants in a liquidating trust.
Following the closing of the Mobilestream acquisition, on or about
December 29, 2006, Mobilestream and Olde Monmouth Stock Transfer Co., Inc., our
transfer agent, entered into a liquidating trust agreement (the "Mobilestream
Liquidating Trust Agreement") in which Olde Monmouth agreed to act as the
Liquidating Trustee under the Mobilestream Liquidating Trust Agreement for the
shares of our common stock and the Mobilestream Warrants. The beneficiaries of
the Mobilestream Liquidating Trust are the stockholders of Mobilestream. We have
filed a registration statement on Form S-1 for the shares of our common stock,
the Mobilestream Warrants and the shares of our common stock underlying the
Mobilestream Warrants with the SEC. The ability of the Trustee to distribute the
shares of the Company's common stock and the Mobilestream Warrants for the
Mobilestream acquisition depends upon the effectiveness of that registration
statement.
The Offering:
Key Facts of the Offering:
Shares of common stock being registered
(including 325,957 shares issued upon
the cashless exercise of 625,00 warrants) 2,225,957 shares of common stock
Total shares of common stock outstanding
as of October 3, 2008 60,920,689
Total proceeds raised by us from the We will not receive any proceeds
disposition of the common stock by the from the disposition of
selling security holder the shares of our common
stock by POOF or its transferees.
Our offices are currently located at 408 Bloomfield Drive, Unit #1, West
Berlin, New Jersey 08091, and our telephone number is (856) 767-5661. We have a
website at www.globalresourcecorp.com but the contents of the website and all
hyperlinks therefrom are expressly excluded from this prospectus.
7
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this prospectus before buying shares of
our common stock. Our business, prospects, financial condition, and results of
operations may be materially and adversely affected as a result of any of the
following risks. The trading and price per share of our common stock could
decline as a result of any of these risks. You could lose all or part of your
investment in our common stock. Some of the statements in "risk factors" are
forward looking statements. See "Special Note Regarding Forward Looking
Statements."
RISKS RELATED TO OUR BUSINESS OPERATIONS
WE HAVE A LIMITED OPERATING HISTORY, AND INVESTORS MAY NOT HAVE A
SUFFICIENT HISTORY ON WHICH TO BASE AN INVESTMENT DECISION.
Although we were incorporated in 2000, we acquired our operating assets
for our current business only in September and December 2006 and are a
development stage company. Accordingly, we have a limited operating history upon
which investors may evaluate our prospects for success. Investors must consider
the risks and difficulties frequently encountered by early stage companies. Such
risks include, without limitation, the following:
o amount and timing of operating costs and capital expenditures
relating to expansion of our business, operations, and
infrastructure;
o time line to develop, test, manufacture, market and sell our
products;
o our inability to successfully research, develop, commercialize or
o exploit one or more potential applications of our technology;
o challenges to the legal protection afforded our technology through
our patent application or other successful assertions of adverse
intellectual property claims;
o negotiation and implementation of strategic alliances or similar
arrangements with companies with sufficient resources to support our
research and manufacturing efforts;
o need for acceptance of products;
o ability to anticipate and adapt to a competitive market and rapid
technological developments;
o dependence upon key personnel.
We cannot be certain our strategy will be successful or that we will
successfully address these risks. In the event that we do not successfully
address these risks, our business, prospects, financial condition, and results
of operations could be materially and adversely affected.
8
WE ARE A DEVELOPMENT STAGE COMPANY WITH A HISTORY OF LOSSES AND CAN
PROVIDE NO ASSURANCE OF OUR FUTURE OPERATING RESULTS.
We are a development stage company with no revenues from our contemplated
principal business activity. We have incurred net losses and negative cash flows
since inception and expect such losses and negative cash flows to continue in
the foreseeable future. We currently have no product revenues, and may not
succeed in developing or commercializing any products which will generate
product or licensing revenues. We do not know when we will have any products on
the market, and each such product will be manufactured only upon receipt of an
order. In addition, the sale completion for each of our machines requires a
process of testing, during which our products could fail. We may not be able to
enter into agreements with more than one company experienced in the
manufacturing and marketing of complex equipment machines and, to the extent
that we are unable to do so, we will not be able to market our products.
Eventual profitability will depend on our success in developing, manufacturing,
and marketing our products. We may never achieve profitability.
THE DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN HAS BEEN
ALLEVIATED.
Our financial statements were prepared on the assumption that we will
continue as a going concern. At December 31, 2007, we reported that we had
incurred substantial net losses for the years ended December 31, 2007 and 2006
and that we had not commenced operations to have a revenue stream. These factors
raised substantial doubt about our ability to continue as a going concern at
that time. However, during the eight months ended August 31, 2008, we raised
over $10.4 million in cash with approximately $10.2 million or almost 99% raised
through a private placement of units consisting of common stock and warrants
with one group of investors. With this additional capital and projected
operating expenses, inventory purchases and capital expenditures over the next
12 months, our management considers the facts and circumstances which raised
substantial doubt about our ability to continue as going concern to be
alleviated. We estimate that our current cash reserves will be sufficient to
permit us to continue our current level of operations for the next 24 months
using June 30, 2008 as the start date. However, we plan to increase sales and
marketing efforts, research and development, and administrative expenses
relating to our business in 2008 and 2009. We intend to use these reserves, as
well as other funding resources, in the event they shall be available on
commercially reasonable terms, to fund these activities and other activities
described herein, although we can provide no assurance that these additional
funds will be available in the amounts or at the times we may require.
Furthermore, our ability to develop other applications of our technology will
require the infusion of even larger amounts of capital than we currently
possess. If we use some of our current funds for new research applications, then
our estimate of 24 months will be reduced. See "Risk Factors-We will need
additional capital in order to satisfy our business objectives."
9
WE WILL NEED ADDITIONAL CAPITAL IN ORDER TO SATISFY OUR BUSINESS
OBJECTIVES.
To date, we have financed our operations principally through offerings of
securities exempt from the registration requirements of the Securities Act. We
believe that our available resources will be sufficient to meet our anticipated
working capital needs for the next 24 months from June 30, 2008, assuming no
change in our monthly operating expenses, capital expenditures and inventory
purchases. Notwithstanding the foregoing, we estimate that we will require
substantial additional financing at various intervals in order to continue our
research and development programs, including significant requirements for
operating expenses including intellectual property protection, and for
commercialization of our products. We can provide no assurance that additional
funding will be available on a timely basis, on terms acceptable to us, or at
all. Furthermore, recent and still unfolding events in the credit, securities
and banking markets may also contribute to difficulty in our capital raising
ability. In the event that we are unable to obtain such financing, we will not
be able to fully develop and commercialize our technology.
Our future capital requirements will depend upon many factors, including:
o effects of commercialization activities and facility expansions if
and as required;
o our ability to establish collaborative relationships;
o increases in our management, research, sales and marketing
personnel;
o competing technological and market developments;
o continued progress in our research and development programs; and
o patent prosecutions.
If we cannot secure adequate financing when needed, we may be required to
delay, scale back or eliminate one or more of our research and development
programs or to enter into license or other arrangements with third parties to
commercialize products or technologies that we would otherwise seek to develop
and commercialize ourselves. In such event, our business, prospects, financial
condition, and results of operations may be adversely affected as we may be
required to scale-back, eliminate, or delay development efforts or product
introductions or enter into royalty, sales or other agreements with third
parties in order to commercialize our products.
WE MAY LOSE OUR INTELLECTUAL PROPERTY IF WE DEFAULT UNDER OUR CONSULTING
AGREEMENT WITH OUR CHAIRMAN
We have entered into a consulting agreement ("Consulting Agreement") with
a corporation controlled by our Chairman pursuant to which we have agreed to pay
him a consulting fee for the life of the pending patents, estimated to be 12
years. The fee increases from $378,000 in 2008 to a maximum of $668,000
beginning in 2014 and beyond and is payable in equal monthly installments during
the term of the Consulting Agreement. If the Consulting Agreement terminates,
then we are obligated to pay the Chairman a royalty in the same amounts for the
same time periods payable in the same manner. See "MANAGEMENT-Executive
Compensation." Under the Consulting Agreement, we pledged our pending patents as
collateral security for the payments to the Chairman. We also executed a
conditional assignment of the pending patents to the corporation he controls,
such that the Chairman can file the assignment with the U.S. Patent and
Trademark Office ("PTO") if we default under the Consulting Agreement and the
default is not cured. In order to make the filing with the PTO, the Chairman
must obtain a certification of our Chief Executive Officer or Chief Financial
Officer that a default has occurred and has not been cured. Defaults under the
Consulting Agreement are defined as our missing two consecutive payments or our
failing to make three payments in any one calendar year. We currently have
sufficient funds to assure our ability to make these payments for the next two
years from June 30, 2008; however, if we do not begin to receive revenues from
the sale of our products or raise additional capital, then we may default under
the Consulting Agreement, and ownership of our pending patents may revert to the
Chairman. In such event, we would be unable to continue our business without
entering into a license agreement or similar agreement with the Chairman. We
cannot predict whether such an agreement could be completed, or what the terms
and conditions of such an agreement might be, but in either case there would
likely be a material adverse effect on the business of the Company.
WE CAN PROVIDE NO ASSURANCE OF THE SUCCESSFUL AND TIMELY DEVELOPMENT OF
OUR PRODUCTS.
Our products are at various stages of research and development. Further
development and extensive testing will be required to determine their technical
feasibility and commercial viability. Our success will depend on our ability to
10
achieve scientific and technological advances and to translate such advances
into reliable, commercially competitive products on a timely basis. Products
that we have developed and may in the future develop are not likely to be
commercially available for some time because of the time and expense in building
an individual machine. The proposed development schedules for our products may
be affected by a variety of factors, including technological difficulties,
proprietary technology of others, and changes in governmental regulation, many
of which will not be within our control. Any delay in the development,
introduction, or marketing of our products could result either in such products
being marketed at a time when their cost and performance characteristics would
not be competitive in the marketplace or in the shortening of their commercial
lives. In light of the long-term nature of our projects, the technology
involved, and the other factors described elsewhere in "Risk Factors", there can
be no assurance that we will be able to complete successfully the development or
marketing of any new products.
WE LACK THE RESOURCES AND EXPERIENCE NEEDED TO MANUFACTURE OUR PRODUCTS.
We currently lack the resources and experience needed to manufacture any
of our products. Our ability to conduct trials and commercialize our products
will depend, in part, on our ability to manufacture our products, either
directly or, as currently intended, through contract manufacturers, at a
competitive cost and in accordance with current good manufacturing practices and
safety, environmental, health and other regulatory requirements. We anticipate
that we will be required to depend on contract manufacturers or collaborative
partners for the manufacturing of our products during the testing phases and
intend to use contract manufacturers to produce any products we may eventually
commercialize. We have identified and entered into an arrangement with one such
manufacturer thus far. If we are not able to obtain or maintain contract
manufacturing on commercially reasonable terms, we may not be able to conduct or
complete trials of our machines or commercialize our products. We have
identified multiple suppliers for most if not all of the components of our
machines, although we can provide no assurance that these components will be
available when needed on commercially reasonable terms.
In order to succeed, we ultimately will be required to either develop such
manufacturing capabilities or to outsource manufacturing on a long-term basis to
third parties. We can provide no assurance that third parties will be interested
in manufacturing our products on a timely basis, on commercially reasonable
terms, or at all. If we are unable to establish manufacturing capabilities
either by developing our own organization or by entering into agreements with
others, we may be unable to commercialize our products, which would have a
material adverse effect upon our business, prospects, financial condition, and
results of operations. Further, in the event that we are required to outsource
these functions on disadvantageous terms, we may be required to pay a relatively
large portion or our net revenue to these organizations, which would have a
material adverse effect upon our business, prospects, financial condition, and
results of operations.
11
IN THE FUTURE, WE MAY RELY UPON COLLABORATIVE AGREEMENTS WITH LARGE
INDUSTRIAL AND MANUFACTURING COMPANIES.
In the future, we may rely heavily on collaborative agreements with large
industrial and manufacturing companies, governments, or other parties for our
revenues. Our inability to obtain any one or more of these agreements, on
commercially reasonable terms, or at all, or to circumvent the need for any such
agreement, could cause significant delays and cost increases and materially
affect our ability to develop and commercialize our products.
WE HAVE LIMITED SALES, MARKETING, AND DISTRIBUTION CAPABILITIES. WE WILL
BE REQUIRED TO EITHER DEVELOP SUCH CAPABILITIES OR TO OUTSOURCE THESE
ACTIVITIES TO THIRD PARTIES.
We currently have limited sales, marketing and distribution capabilities.
In order to succeed, we ultimately will be required to either develop such
capabilities or to outsource these activities to third parties. We can provide
no assurance that third parties will be interested in acting as our outsourced
sales, marketing, and distribution arms on a timely basis, on commercially
reasonable terms, or at all. If we are unable to establish sales, marketing, or
distribution capabilities either by developing our own organization or by
entering into agreements with others, we may be unable to successfully sell any
products that we are able to begin to commercialize, which would have a material
adverse effect upon our business, prospects, financial condition, and results of
operations. Further, in the event that we are required to outsource these
functions on disadvantageous terms, we may be required to pay a relatively large
portion of our net revenue to these organizations, which would have a material
adverse effect upon our business, prospects, financial condition, and results of
operations.
WE RELY UPON OUR PATENT APPLICATIONS TO PROTECT OUR TECHNOLOGY. WE MAY BE
UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, AND WE MAY BE LIABLE
FOR INFRINGING THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Our ability to compete effectively will depend on our ability to maintain
the proprietary nature of our technologies. We currently hold several pending
patent applications in the United States and corresponding patent applications
filed in certain other countries covering the proposed use of microwaves for the
recovery of hydrocarbons and fossil fuels. Further, we intend to rely on a
combination of trade secrets and non-disclosure, and other contractual
agreements and technical measures to protect our rights in our technology. We
intend to depend upon confidentiality agreements with our officers, directors,
employees, consultants, and subcontractors, as well as collaborative partners,
to maintain the proprietary nature of our technology. These measures may not
afford us sufficient or complete protection, and others may independently
develop technology similar to ours, otherwise avoid our confidentiality
12
agreements, or produce patents that would materially and adversely affect our
business, prospects, financial condition, and results of operations. We believe
that our technology is not subject to any infringement actions based upon the
patents of any third parties; however, our technology may in the future be found
to infringe upon the rights of others. Others may assert infringement claims
against us, and if we should be found to infringe upon their patents, or
otherwise impermissibly utilize their intellectual property, our ability to
continue to use our technology or the licensed technology could be materially
restricted or prohibited. If this event occurs, we may be required to obtain
licenses from the holders of this intellectual property, enter into royalty
agreements, or redesign our products so as not to utilize this intellectual
property, each of which may prove to be uneconomical or otherwise impossible.
Licenses or royalty agreements required in order for us to use this technology
may not be available on terms acceptable to us, or at all. These claims could
result in litigation, which could materially adversely affect our business,
prospects, financial condition, and results of operations.
The patent position of petroleum extraction and decomposition technology
firms is generally uncertain and involves complex legal and factual questions.
We do not know whether any of our current or future patent applications will
result in the issuance of any patents. Even issued patents may be challenged,
invalidated or circumvented. Patents may not provide a competitive advantage or
afford protection against competitors with similar technology. Competitors or
potential competitors may have filed applications for, or may have received
patents and may obtain additional and proprietary rights to processes
competitive with ours. In addition, laws of certain foreign countries do not
protect intellectual property rights to the same extent as do the laws of the
United States or Canada.
Patent litigation may occur in our industry and we cannot predict how this
will affect our efforts to form strategic alliances, conduct testing or
manufacture and market any products under development. If challenged, our
pending patents may not be held valid. We could also become involved in
interference proceedings in connection with one or more of our patent
applications to determine priority of invention. If we become involved in any
litigation, interference or other administrative proceedings, we will likely
incur substantial expenses and the efforts of our technical and management
personnel will be significantly diverted. In addition, an adverse determination
could subject us to significant liabilities or require us to seek licenses that
may not be available on favorable terms, if at all. We may be restricted or
prevented from manufacturing and selling our products in the event of an adverse
determination in a judicial or administrative proceeding or if we fail to obtain
necessary licenses.
13
Our commercial success will also depend significantly on our ability to
operate without infringing the patents and other proprietary rights of third
parties. Patent applications are, in many cases, maintained in secrecy until
patents are issued. The publication of discoveries in the scientific or patent
literature frequently occurs substantially later than the date on which the
underlying discoveries were made and patent applications are filed. In the event
of infringement or violation of another party's patent, we may be prevented from
pursuing product development or commercialization. See "Business--Patents and
Licenses."
WE CAN PROVIDE NO ASSURANCE THAT OUR PRODUCTS WILL OBTAIN REGULATORY
APPROVALS AT OR PRIOR TO THE TIME OF INSTALLATION.
The installation of any of our products at a customer site may require the
prior approval of various federal and state regulatory authorities governing
such areas as the environment, hazardous waste, health and worker safety. We
cannot predict with any certainty the amount of time necessary to obtain such
approvals and whether any such approvals will ultimately be granted. Operational
trials of our built to scale machines as opposed to laboratory scale models may
reveal that one or more of our products are ineffective or unsafe, in which
event further development of such products could be seriously delayed or
terminated. Delays in obtaining any necessary regulatory approvals of any
proposed product and failure to receive such approvals would have an adverse
effect on the product's potential commercial success and on our business,
prospects, financial condition, and results of operations. In addition, it is
possible that a product may be found to be ineffective or unsafe due to
conditions or facts which arise after development has been completed and
regulatory approvals have been obtained. In this event we may be required to
withdraw such product from the market. See "Business - Governmental Regulation."
WE DEPEND UPON OUR SENIOR MANAGEMENT AND SKILLED PERSONNEL AND THEIR LOSS
OR UNAVAILABILITY COULD PUT US AT A COMPETITIVE DISADVANTAGE.
We currently depend upon the efforts and abilities of our senior
executives, as well as the services of other key personnel. The loss or
unavailability of the services of any of these individuals for any significant
period of time could have a material adverse effect on our business, prospects,
financial condition, and results of operations. We have terminated the "Key Man"
insurance policy for Frank G. Pringle, our Chairman, and former President and
CEO, in connection with his becoming a consultant to the Company. Moreover, we
do have such insurance for only one other executive. In addition, recruiting and
retaining qualified engineering and scientific personnel to perform future
research and development work will be critical to our success. There is
currently a shortage of employees with expertise in our areas of research, and
this shortage is likely to continue. Competition for skilled personnel is
intense and turnover rates are high. Our ability to attract and retain qualified
personnel may be limited. Our inability to attract and retain qualified skilled
personnel would have a material adverse effect on our business, prospects,
financial condition, and results of operations.
14
RISKS RELATED TO OUR SHARES
IN RECENT YEARS, THE STOCK MARKET IN GENERAL HAS EXPERIENCED PERIODIC
PRICE AND VOLUME FLUCTUATIONS. THIS VOLATILITY HAS HAD A SIGNIFICANT
EFFECT ON THE MARKET PRICE OF SECURITIES ISSUED BY MANY COMPANIES FOR
REASONS OFTEN UNRELATED TO THEIR OPERATING PERFORMANCE. THESE BROAD MARKET
FLUCTUATIONS MAY ADVERSELY AFFECT OUR STOCK PRICE, REGARDLESS OF OUR
OPERATING RESULTS. THE MARKET PRICE OF OUR COMMON STOCK MAY FLUCTUATE
SIGNIFICANTLY, AND IT MAY BE DIFFICULT TO SELL OUR SHARES OF COMMON STOCK
WHEN YOU WANT OR AT PRICES YOU FIND ATTRACTIVE.
The price of our common stock is quoted on the Pink Sheets and constantly
changes. We expect that the market price of the common stock will continue to
fluctuate. These fluctuations may result from a variety of factors, many of
which are beyond our control. These factors include:
o quarterly variations in our financial results;
o operating results that vary from the expectations of management,
securities analysts and investors;
o changes in expectations as to our business, prospects, financial
condition, and results of operations;
o announcements by us or our competitors of material developments;
o the operating and securities price performance of other companies
that investors believe are comparable to us;
o future sales of our equity or equity-related securities;
o changes in general conditions in our industry and in the economy and
the financial markets including developing regulatory and other
changes brought about by the recent implosions and business failures
and "rescues" in the investment banking and commercial banking
industries;
o changes in the domestic or international political situation
including the upcoming Presidential election;
o departures of key personnel; and
o regulatory and intellectual property considerations.
As a result of these fluctuations, you may experience difficulty selling shares
of our common stock when desired or at acceptable prices.
15
FUTURE SALES OF COMMON STOCK OR THE ISSUANCE OF SECURITIES SENIOR TO OUR
COMMON STOCK OR CONVERTIBLE INTO, OR EXCHANGEABLE OR EXERCISABLE FOR, OUR
COMMON STOCK COULD MATERIALLY ADVERSELY AFFECT THE TRADING PRICE OF THE
COMMON STOCK, AND OUR ABILITY TO RAISE FUNDS IN NEW EQUITY OFFERINGS.
Future sales of substantial amounts of our common stock or other
equity-related securities in the public market or privately, or the perception
that such sales could occur, could adversely affect prevailing trading prices of
our common stock and could impair our ability to raise capital through future
offerings of equity or other equity-related securities. We can make no
prediction as to the effect, if any, that future sales of shares of common stock
or equity-related securities, or the availability of shares of common stock for
future sale, will have on the trading price of our common stock. However, it
should be noted that upon the effectiveness of this registration statement,
there will immediately be up to an additional 2,291,730 free-trading shares of
our common stock issued and outstanding. Furthermore, we have already
filed a registration statement on Form S-1 (No. 333-149199)for 22,334,221 shares
of our common stock and warrants to purchase another 10,409,407 shares of our
common stock as a result of registration covenants in the Carbon Recovery and
Mobilestream acquisition transactions, and separately filed a registration
statement on Form S-1 (No. 333-152188)for 1,905,040 shares of our common stock
that could be issued upon exercise of various classes of warrants we have
issued.
OUR COMMON STOCK IS SUBJECT TO THE PENNY STOCK REGULATIONS THAT IMPOSE
RESTRICTIONS ON THE MARKETABILITY OF OUR COMMON STOCK. AS A CONSEQUENCE,
THE ABILITY OF OUR STOCKHOLDERS TO SELL SHARES OF OUR COMMON STOCK COULD
BE IMPAIRED.
The Securities and Exchange Commission (the "Commission") has adopted
regulations that generally define a "penny stock" to be an equity security that
has a market price of less than $5.00 per share or an exercise price of less
than $5.00 per share subject to certain exceptions that are not applicable to
our company at present. Our common stock is subject to the penny stock rules
that impose additional sales practice requirements on broker-dealers who sell
these securities to persons other than established customers and accredited
investors. The regulations require that prior to any transaction involving a
penny stock, a risk disclosure schedule must be delivered to the buyer
explaining the penny stock market and its risks. For transactions covered by
these rules, the broker-dealer must make a special suitability determination for
the purchase, and must have received the purchaser's written consent to the
transaction prior to sale. As such the market liquidity for the common stock
will be limited to the ability of broker-dealers to sell it in compliance with
the above-mentioned disclosure requirements.
16
You should be aware that, according to the Commission, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include:
o control of the market for the security by one or a few
broker-dealers;
o "boiler room" practices involving high-pressure sales tactics;
o manipulation of prices through prearranged matching of purchases and
sales;
o the release of misleading information;
o excessive and undisclosed bid-ask differentials and markups by
selling broker-dealers; and
o dumping of securities by broker-dealers after prices have been
manipulated to a desired level, which hurts the price of the stock
and causes investors to suffer loss.
We are aware of the abuses that have occurred in the penny stock market.
Although we do not expect to be in a position to dictate the behavior of the
market or of broker-dealers who participate in the market, we will strive within
the confines of practical limitations to prevent such abuses with respect to our
common stock.
17
WE HAVE NEVER PAID ANY CASH DIVIDENDS BECAUSE WE HAVE NEVER HAD ANY
EARNINGS, AND WE WILL NOT PAY CASH DIVIDENDS IN THE FORESEEABLE FUTURE.
We have never paid any cash dividends on our common stock since we began
our microwave technology related business operations because we have never had
earnings from which any such dividends could be declared. Assuming we attain
earnings in the future, we do not intend to pay cash dividends. We intend to
retain future earnings, if any, for reinvestment in the development and
expansion of our business. Any credit agreements which we may enter into with
institutional lenders or otherwise may restrict our ability to pay dividends.
Whether we pay cash dividends in the future will be at the discretion of our
board of directors and will be dependent upon our financial condition, results
of operations, capital requirements, and any other factors that the board of
directors decides is relevant. See "Dividend Policy" and "Description of
Securities - Common Stock."
USE OF PROCEEDS
We will not receive any proceeds from the disposition of 2,225,957
shares of our common stock by POOF, the selling security holder, or its
transferees. See "Selling Security Holder." We did not receive any proceeds from
the exercise of 625,000 warrants held by POOF because POOF paid the purchase
price in the form of a cashless exercise of the warrants.
MARKET PRICE OF COMMON STOCK AND OTHER STOCKHOLDER MATTERS
Market information
Our common stock has been traded over the counter in the Pink Sheets since
April 2007. The trading symbol for our common stock is "GBRC.PK." From September
2004 to April 2007 our common stock traded on the OTCBB. In April 2007 our
common stock was delisted from the OTCBB for failure to satisfy applicable
maintenance criteria. The following table sets forth quarterly high and low bid
prices for the Common Stock for the periods presented, as reported by the OTCBB
and, since April 2007, the Pink Sheets. Quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions. We consider our stock to be "thinly-traded" and
any reported sales prices may not be a true market based valuation of the stock.
Fiscal Year Ended December 31, 2005
HIGH BID LOW BID
First Quarter* $.047 $.006
Second Quarter* .074 .011
Third Quarter* .034 .013
Fourth Quarter* .0265 .012
Fiscal Year Ended December 31, 2006
First Quarter* .035 .013
Second Quarter* .032 .015
Third Quarter 3.00 1.75
Fourth Quarter 4.60 1.10
Fiscal Year Ended December 31, 2007
First Quarter
Second Quarter 2.43 0.70
Third Quarter 5.13 1.55
Fourth Quarter 3.59 1.73
Fiscal Year Ending December 31, 2008
First Quarter 3.50 1.56
Second Quarter 3.88 1.82
Third Quarter 2.37 0.73
*This period was prior to the 1 for 100 reverse stock split of our common stock
which became effective on August 14, 2006, following which there were only
72,150 shares of our common stock issued and outstanding. On September 22, 2006
the Company acquired the assets of Carbon Recovery Corporation by the issuance
of 48,188,996 shares of its common stock. On December 31, 2006 the Company
acquired the assets of Mobilestream Oil, Inc. by the issuance of 11,145,225
shares of its common stock; however, the Mobilestream acquired assets included
37,500,000 shares of our own common stock, all of which have been cancelled. As
of October 3, 2008 our issued and outstanding shares of common stock total
60,920,689 shares.
18
Shares eligible for future sale could depress the price of our common
stock, thus lowering the value of a buyer's investment. Sales of substantial
amounts of our common stock, or the perception that such sales could occur,
could adversely affect prevailing market prices for shares of our common stock.
On October 10, 2008 the prices of our common stock were $1.14 high, $1.03
low and $1.10 close as quoted on the Pink Sheets.
Holders
As of October 10, 2008 there were approximately 312 record holders of our
common stock.
Dividends
We have never paid a cash dividend on our common stock because we have
never had earnings from our current microwave technology based business from
which any dividend could be paid. Assuming we have earnings in the future, we
anticipate that any such earnings will be retained for use in our business.
Accordingly, we do not anticipate the payment of any cash dividends in the
foreseeable future.
MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following discussion of our financial condition and results of
operations should be read in conjunction with our Financial Statements and Notes
and the other financial information included elsewhere in this prospectus.
Overview
Since the acquisitions of the assets of Carbon Recovery and Mobilestream
in 2006, our business became, and continues to be: (i) the design, manufacture
and sale of machinery and equipment units, embodying the technology for
decomposing petroleum-based materials by subjecting them to variable frequency
microwave radiation at specifically selected frequencies for a time sufficient
to at least partially decompose the materials and focused on specific
applications; (ii) the licensing of third parties to exploit that technology;
and (iii) the construction of plants to exploit that technology. Currently, our
efforts are directed principally to the design, manufacture and sale of
machinery and equipment.
We recently completed the first one ton prototype that uses our technology
for decomposing tires, and it is now undergoing testing and refinement at the
manufacturing facility in Rockford, Illinois. We are conducting negotiations
with prospective purchasers of machines, but do not have any committed orders
for our equipment. We are also in negotiations with at least one distributor for
an exclusive license for our technology covering a designated geographic area,
but the terms and conditions are in flux. In almost all cases a final purchase
order agreement or a license agreement is unlikely to be consummated until we
can demonstrate that the prototype is capable of processing large amounts of
material in an efficient and timely manner. We are not presently devoting any
time or funds to the construction of plants to exploit our technology. Any such
effort will require capital in excess of funds available to us, and will require
us to "partner" with a company with much larger resources.
Plan of operation
We have not had any revenues from operations since the closing of the
asset acquisitions of Carbon Recovery Corporation in September 2006 and
Mobilestream Oil, Inc. in December 2006. Our immediate predecessors in interest
never received any revenues from their respective businesses before we acquired
their assets. Prior to September 2006, all revenues we received from operations
were derived from lines of business unrelated to our current activities, and in
which we no longer have any ownership interest or other participation. See
"Business-History of the Company." We have financed our operations principally
through private sales of equity securities, and convertible notes and
debentures. In 2007 we raised net proceeds of $1,168,461 through the sale of
1,519,564 shares of our common stock. In the eight months ended August 31, 2008
we raised $10,413,411 through the sale of shares of our common stock and
warrants to purchase such shares, of which $10,287,321, or almost 99%, was
through a private placement with one group of investors.
As of June 30, 2008, our total current assets were $5,195,622, of which
cash and cash equivalents were $4,613,193. As of June 30, 2008, our total
current liabilities were $634,032 and our total liabilities were $684,310.
19
We have no manufacturing capability of our own. Accordingly, we have
entered into an agreement with a manufacturing facility in the Midwest for the
manufacture of our machines. Shortly before September 30, 2008 we completed our
first working prototype GRFR model 1 ton microwave reactor automotive shredded
residual (ASR) processing machine. This machine, which is currently undergoing
testing, is designed to apply our microwave technology to the decomposition of
tires as waste and to retrieve usable and saleable components therefrom in the
form of carbon, liquid hydrocarbons which can be converted to electricity, and
gas.
We have begun our marketing efforts in various industry sectors. We have
hired dedicated sales and marketing personnel. We have submitted several
proposals to build one or more forms of microwave reactor ASR processing
machines with varying processing speeds.
We have entered into an exclusive distributorship and sales representative
agreement with one company for a defined geographic area overseas which is
currently being renegotiated. We intend to actively seek other distribution
agreements with partners who have demonstrable economic and marketing contact
resources. Each agreement will be limited in the type of equipment and process
that is the subject of the exclusive arrangement, geographical area, duration
and commissions or other payment terms for sourcing potential customers for our
equipment. Under each agreement, a distributor or other representative is paid
only from the proceeds we receive from an actual sale or lease transaction.
We also intend to consider the development of additional machines and
equipment using our core technology in areas outside of the tire recycling
industry, but, as discussed in the section on our business, we will require the
assistance of outside capital equity investments on a large scale, or we will
need to align ourselves with joint venture or strategic alliance partners in
order to have the funds available to exploit these other potential applications.
We plan to continue to finance our operations with the sale of additional
common stock or sale of convertible debt or equity securities. We also have
alternative plans which include, among others, reducing our expenses to the
required level based on our financial situation. Although we raised $10,413,411
during the first eight months of 2008 from the private placement of our common
stock and, in some cases warrants, there are no assurances that we will be
successful in obtaining an adequate level of financing needed for the long term
research, development and commercialization of our planned products.
20
We estimate that we can satisfy our current operational cash requirements
and will not have to raise additional funds during the next 24 months from June
30, 2008. Our assessment of our cash needs, however, is based on certain
assumptions including that our quarterly operating expenses will remain at
$1,000,000 per quarter, and our annual inventory purchases and capital
expenditures will remain at approximately $1,000,000. However, our actual
operating expenses will likely increase during this same two year period as a
result of the technological and engineering challenges in the development of our
products, the projected development times, the equipment construction and
testing trials required along with their projected timetable, the demand for our
product and the costs of product sales, and the receipt of orders for our
products. Our actual operations also may be affected by increases in our
operating expenses, increases in our payroll and staff related matters,
technological or engineering difficulties, deviation from the timetables for
experimentation and testing trials, unexpected regulatory problems, delays in
receipt and acceptance of orders for our machines, low demand for our products
or the effects of competition.
Through August 31, 2008, we raised $10,413,411 from the sale of our common
stock and warrants to purchase shares of our common stock in private placements,
of which we received almost 99% or $10,287,326 from one group of investors. We
raised $1,000,000 from a private placement of our common stock and warrants in
December 2007, and an additional $250,000 from the same investor in July 2008 as
part of the same private placement. We expect to continue to raise funds through
the private sale of common stock, or convertible debt or equity in our Company
during the remainder of 2008, but as yet no terms have been established for the
sale of such debt and equity and there can be no assurance we will be successful
in raising required capital.
As an additional, but not complete, alternative we may enter into
strategic alliances joint ventures and similar arrangements for the development,
testing, construction, marketing and sale of our machines. In each such
arrangement we will be required to share our revenues from sale of our products
with the other party to the arrangement. The methods, terms and amounts of these
arrangements may vary greatly for each such transaction.
We also estimate an increase in the number of our employees in the next
twelve months. The increase in number of employees is expected mostly in
marketing and sales and operations as we start to market our machines for a
variety of purposes. The expected increase in the number of employees in the
next twelve months is between 3-5 employees.
21
Critical Accounting Policies
The discussion and analysis of our financial condition and results of
operations are based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these consolidated financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities and expenses and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates based on historical
experience and various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments and other short-
term investments with an initial maturity of three months or less to be cash or
cash equivalents. At June 30, 2008, the Company maintained cash and cash
equivalent balances at four financial institution that are insured by the
Federal Deposit Insurance Corporation up to $100,000. At June 30, 2008 the
Company's uninsured cash balances total $4,280,400.
Start-up Costs
In accordance with the American Institute of Certified Public Accountants
Statement of Position 98-5, "REPORTING ON THE COSTS OF START-UP ACTIVITIES", the
Company expenses all costs incurred in connection with the start-up and
organization of the Company.
Income Taxes
Deferred income taxes are reported using the liability method. Deferred
tax assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
22
Effective December 31, 2006 the Company acquired substantially all of the
assets of Mobilestream Oil, Inc. and due to the transfer of assets between
entities under common control, the total cost of the acquisition of Mobilestream
has been allocated to the assets acquired and the liabilities assumed based on
their fair market values in accordance with SFAS 141, BUSINESS COMBINATIONS. All
account amounts and share amounts have been updated and presented to reflect the
change.
Earnings (loss) per Share of Common Stock
Historical net loss per common share is computed using the weighted
average number of common shares outstanding. Diluted earnings per share (EPS)
includes additional dilution from common stock equivalents, such as stock
issuable pursuant to the exercise of stock options and warrants. Common stock
equivalents were not included in the computation of diluted earnings per share
when the Company reported a loss because to do so would be antidilutive.
Recent Accounting Pronouncements
In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140." SFAS No. 156 requires
an entity to recognize a servicing asset or liability each time it undertakes an
obligation to service a financial asset by entering into a servicing contract
under a transfer of the servicer's financial assets that meets the requirements
for sale accounting, a transfer of the servicer's financial assets to a
qualified special-purpose entity in a guaranteed mortgage securitization in
which the transferor retains all of the resulting securities and classifies them
as either available-for-sale or trading securities in accordance with SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities" and an
acquisition or assumption of an obligation to service a financial asset that
does not relate to financial assets of the servicer or its consolidated
affiliates.
Additionally, SFAS No. 156 requires all separately recognized servicing
assets and servicing liabilities to be initially measured at fair value, permits
an entity to choose either the use of an amortization or fair value method for
subsequent measurements, permits at initial adoption a one-time reclassification
of available-for-sale securities to trading securities by entities with
recognized servicing rights and requires separate presentation of servicing
assets and liabilities subsequently measured at fair value and additional
disclosures for all separately recognized servicing assets and liabilities. SFAS
No. 156 is effective for transactions entered into after the beginning of the
first fiscal year that begins after September 15, 2006. The Company is currently
evaluating the effect the adoption of SFAS No. 156 will have on its financial
position or results of operations.
23
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
BUSINESS
Introduction
Prior to our acquisition of the assets and development stage business of
Carbon Recovery Corporation on September 22, 2006, and the subsequent
acquisition of the assets of Mobilestream Oil, Inc. on December 31, 2006 we had
been a shell corporation since approximately December 15, 2005. Our business
history prior to September 22, 2006 may be found below at "Business-History of
the Company."
We are a development stage company with three utility patent applications
pending in the United States Patent and Trademark Office ("PTO"), and
approximately ten corresponding utility patent applications pending in
commercially relevant countries. Our patent applications cover our proprietary
microwave technology for recovering hydrocarbons and fossil fuels from sources
including shale deposits, tar sands, capped oil wells, waste oil streams and
tires. The process uses specific frequencies of microwave radiation to extract
oils and alternative petroleum products from secondary raw materials, and is
expected to reduce the cost for oil and gas recovery from a variety of these
unconventional hydrocarbon sources. Our patent applications also cover certain
medical applications.
With the acquisition of (i) the assets and (ii) the development stage
business from Carbon Recovery, our business became that of Carbon Recovery. That
business was, and continues to be: (i) the design, manufacture and sale of
machinery and equipment units, to exploit certain technology for decomposing
petroleum-based materials by subjecting them to variable frequency microwave
radiation at specifically selected frequencies for a time sufficient to at least
partially decompose the materials; (ii) the licensing of third parties to
exploit that technology; and (iii) the construction of plants embodying the
technology and focused on specific applications.
One application of the process utilizes the technology to decompose waste
tires into their components of carbon black, scrap steel, and hydrocarbon liquid
and gas. Since the tires are manufactured with a combination of different grades
of carbon black, the collected carbon black product is a composite of 4 to 6
different grades. The hydrocarbon liquid is not truly "oil". A tire is
manufactured from hydrocarbons (60%), and rubber and steel (40% together). The
hydrocarbons used to make a tire are "process oil". This "process oil" is a
refined product, but with our technology it is broken into a gas which is then
partially liquefied. The precise composition of the resulting condensed liquid
is not known but it has been tested and has a BTU content comparable to diesel
fuel so we believe that it can be sold for fuel, though it may potentially
require additional refining.
The tire decomposition process involves a series of steps including
repeated break down of the materials into smaller components to fit the machine
size, repeated washings and dryings, and repeated exposure of the materials to
the microwave process at temperatures and for time periods applicable to this
kind of material.
24
At the present time, the process operates successfully in laboratory mode.
There will have to be a transition from the "one batch at a time" operation,
used in the laboratory to a "continuous feed" line in order to commercialize our
process for application to tires in a large scale manner. We have begun to
demonstrate the ability to repeat these results at the macro level using small
batches of tires for short periods of time in the prototype 1-ton GRFR ASR
microwave reactor system we have built together with Ingersoll Production
Systems. The system is currently undergoing testing and refinement.
There are other potential applications for our microwave technology
covered by the pending patents. These include:
1. Stimulation of production of mature oil and gas wells ("stripper"
wells);
2. Reduction of hydrocarbons in drilling cuttings to permit on-site
disposal;
3. Volatilization of heavy or slurry oil;
4. Recovery of oil from oil shale and oil sands; and
5. Medical applications.
Each potential application will require additional testing and refinement
in the laboratory, creation and design of equipment that will use the technology
to recover hydrocarbons from these alternate sources, the construction of test
units in situ that are sufficiently large to determine whether the application
works on a large scale and has commercial value, securing orders for the
manufacture of machines designed to implement the process, and the manufacture,
sale and distribution of such equipment. Currently, we do not have adequate
funds available to take these steps for any of these alternate applications.
Therefore, our ability to expand our business in any such direction will depend
upon our success in finding joint venture or strategic alliance partners to
underwrite these activities, or licensees with the resources to develop these
applications while paying us royalties and similar fees. There can be no
assurance that we will succeed.
25
Manufacturing Outsourcing
We do not have our own factory site nor the equipment, personnel and funds
required to manufacture the machines designed to implement applications of our
pending patents technology. Accordingly, our strategy will be to enter into
manufacturing agreements with companies that have the physical sites, manpower
and financial strength to manufacture our equipment to our specifications. We
have entered into one five year joint cooperation agreement with Ingersoll
Production Systems in Rockford, Illinois. The first GRFR 1 ton ASR prototype
reactor system has been completed, subject to further testing. Under our
agreement, Ingersoll will build a piece of equipment against payment in stages
which will be linked to the payments we receive from a customer under a purchase
agreement. The agreement also grants us discounts based on larger units orders.
Under the agreement, Ingersoll will also increase its staff and dedicate certain
facilities to the production of our equipment once the backlog value of orders
reaches $20,000,000. Subject to our obligations under the cooperation agreement,
we will seek to develop similar arrangements with other manufacturers.
Joint Ventures or Strategic Alliances
We currently have limited funds available to pursue research and
development of our technology in other potential areas of application. These
additional applications require the investment of large amounts of capital over
extended time periods to investigate, refine and eventually develop the correct
techniques for the use of microwave technology for the relevant application,
build test units to evaluate the viability of the techniques on a large scale,
determine the commercial usefulness of the application, and develop a sales and
marketing force with expertise in the intended area of use. Accordingly, our
strategy will be to negotiate collaborative agreements with large industrial and
manufacturing companies, governments, or other parties to pursue opportunities
in these areas of application.
Marketing and Distribution Arrangements
We currently have 1 full time sales person and several part time
consultants for the sale, marketing and distribution of our products. We intend
to increase our sales force during the next twelve months by hiring at least 3-5
sales persons. If we cannot expand our own sales and marketing personnel, then
we will be required to partly outsource these activities to third parties.
Currently, we do not have any discussions or plans underway to do so, and we do
not know what terms and conditions may be required to obtain this assistance
from third party sales organizations.
26
Intellectual Property
We currently have three utility patent applications penduing in the United
States Patent and Trademark Office ("PTO") and approximately ten corresponding
utility patent applications pending in international patent offices in
commercially relevanyt countries. Additional provisional patent applications
have been filed and/or are currently being prepared for filing in the PTO. Our
patent applications cover our proprietary microwave technology for recovering
hydrocarbons and fossil fuels from sources such as tires, oil shale, capped
wells, shale deposits, and waste oil streams. Our patent applications also cover
certain medical applications of our technology. We rely on a combination of
trade secrets and non-disclosure, and other contractual agreements and technical
measures to protect our rights in our technology. We maintain confidentiality
agreements with our officers, directors, employees, consultants, and
subcontractors, as well as collaborative partners, to maintain the proprietary
nature of our technology. We believe that our technology is not subject to any
infringement actions based upon the patents of any third parties.
We do not currently have any trademark or service mark protection other
than that available at common-law, if any. We intend to file appropriate
applications for protection upon receipt of funds allocated to that purpose.
Regulatory Issues
At this time, there are no direct federal or state certification or
regulatory requirements for our products, except for the requirement that all
our equipment conform to regulations for microwave devices. We are not aware of
any pending federal or state legislation which would introduce regulatory
requirements that would negatively impact or impede the manufacture, sale and
distribution of our equipment in the United States or elsewhere.
There will be federal, state and local environmental, health and hazardous
substance regulations that will apply at each location at which one of our
machines is installed. It is not possible to discuss the variety of these
regulations in detail; however, we believe that the design of our equipment for
the decomposition of hydrocarbons for the applications in which they are
currently being marketed--namely waste tires--will protect the environment from
any harmful releases or waste products.
Wholly apart from any regulatory requirements, we will maintain product
liability insurance for our products as a condition of our ability to market
them. Our purchase agreements will require our customers to maintain adequate
amounts of product liability insurance naming us as an additional insured.
History of the Company
The Company was organized as a Colorado corporation on March 28, 2000
under the name "Email Mortgage Com, Incorporated ("Email Mortgage Com"). Its
business focus was the marketing of first and second mortgages, principally
through its website. The Company was not successful with that business and in
27
2002 it discontinued those operations, liquidated its loan inventory, and paid
off its then existing liabilities. Also in 2002, Email Mortgage Com changed its
state of domicile from Colorado to Nevada and changed its name to "Advanced
Healthcare Technologies, Inc." ("Advanced Healthcare"). Under such name, the
Company first owned and operated a subsidiary named "Advanced Hyperbaric
Industries, Inc." ("Advanced Hyperbaric") which engaged in the manufacture and
marketing of rigid extremity hyperbaric chambers and a sacral patch device, both
of which utilized oxygen therapy for the treatment of open sores and wounds,
including bedsores. On December 4, 2003, the Company acquired a 100% interest in
"Nutratek LLC" ("Nutratek") which was engaged in the research and development of
nutritional dietary supplements, functional food products and natural
sweeteners, which products were manufactured by non-related third parties. On
March 31, 2004, as a consequence of the Nutratek acquisition, the Company spun
off and sold the intellectual properties and oxygen therapy products and
business of Advanced Hyperbaric in exchange for the assumption of Advanced
Hyperbaric's liabilities. On June 30, 2004 the former President, Chief Executive
Officer, Director and majority stockholder sold his interest in the Company to
an unrelated third party. In connection with that sale and change in control,
the Company's operating subsidiary, Nutratek was spun off to the selling
majority stockholder and the purchaser determined to change the business of the
Company to that of a business development company. On September 17, 2004 the
Company filed a notice with the Securities and Exchange Commission ("SEC")
electing to be regulated as a business development company ("BDC") under the
Investment Company Act of 1940, as amended. The intent was to focus on acquiring
interests in portfolio companies doing business in the energy sector.
While operating as a BDC, and seeking energy-related portfolio companies,
on January 11, 2005 the Company acquired a 50% interest in Well Renewal, LLC
("Well Renewal"), an entity which managed and operated approximately 30 oil
wells in Oklahoma by utilizing a nitrogen and carbon dioxide gas injection unit
to "pump up" and re-pressurize the wells to increase oil output. In December
2005 we assigned our Well Renewal ownership interest to Transnix Global
Corporation in settlement of sums past due under a $137,900 8% debenture we
issued to Transnix. We filed a notice withdrawing our BDC election on December
17, 2005, and the Company became a "development stage company" and a shell
corporation from that date until the Carbon Recovery acquisition in September
2006.
28
On June 7, 2006, an unrelated third party acquired the Restated and
Amended Debenture owned by Transnix Global Corporation, which represented the
balance of the indebtedness by the Company to Transnix in the principal amount
of $102,345 and accrued interest of $16,274. In conjunction with the assignment
of the Debenture, all of the Company's then directors (Messrs. Caldwell,
Ferandell, Jordan, Mangiarelli and van Adelsberg) and the Company's sole
officer, Richard Mangiarelli, resigned. Contemporaneously, Mary K. Radomsky was
elected as a director and as the sole officer of the Company. Mrs. Radomsky
began negotiations for the acquisition of Carbon Recovery Corporation ("Carbon
Recovery" or "CRC"). On September 22, 2006, we acquired the assets and
development stage business of CRC. The technology owned by CRC was licensed to
it by Mobilestream Oil, Inc. ("Mobilestream"). On December 31, 2006 we acquired
the assets of Mobilestream, thus bringing all of the variable microwave
frequency technology under our umbrella.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Effective August 13, 2008 we increased our Board of Directors from 5 to 7
members and appointed Mr. Paul J. Sweeney and Mr. Peter A. Worthington to fill
the vacancies created by the increased size. There were also changes to our
officers as follows: our Chairman, Frank G. Pringle, resigned as President
effective as of January 1, 2008 and as Chief Executive Officer effective August
13, 2008, and the Board appointed Mr. Jeffrey T. Kimberly, formerly our Chief
Operating Officer, as our new President. Mr. Wayne J. Koehl was promoted from
Executive Vice President to Chief Operating Officer to fill the vacancy created
by Mr. Kimberly's promotion. On September 24, 2008 the Board of Directors
appointed Mr. Eric Swain as our new Chief Executive Officer. Mr. Swain also will
become a director as soon as the size of our Board is increased from seven to
eight directors.
The following table sets forth the name, age and position held by each of
our directors and executive officers. Directors are elected at each annual
meeting and thereafter serve until the next annual meeting at which their
successors are duly elected by the stockholders. Effective January 1, 2008, our
directors are compensated for their services by awarding them 3,000 warrants to
purchase shares of our common stock for each meeting attended which, effective
with the September 23, 2008 Board meeting was increased to 5,000 warrants for
each meeting attended. The directors also receive $200 per meeting and
reimbursement for travel expenses.
Name Age Position
----- --- --------
Frank G. Pringle 65 Chairman of the Board of Directors
Eric Swain 49 Chief Executive Officer
Jeffrey J. Andrews 56 Chief Financial Officer,
Secretary and Treasurer
Jeffrey T. Kimberly 46 President
Wayne J. Koehl 56 Chief Operating Officer
Frederick A. Clark 44 Director
Lincoln Jones III
Major General, USA (Ret.) 75 Director
Kim Thorne O'Brien 49 Director
Jonathan L. Simon 56 Director
Paul J. Sweeney 40 Director
Peter A. Worthington 56 Director
29
Business Experience
The following describes the business backgrounds of our executive officers
and directors.
Frank G. Pringle, who has served as our Chairman of the Board, President
and Chief Executive Officer since September 22, 2006, resigned his positions as
President and Chief Executive Officer on August 13, 2008 with his resignation as
President effective as of January 1, 2008. For the four years prior thereto Mr.
Pringle was the Chairman and President/CEO of our predecessor corporations,
Carbon Recovery Corporation and Mobilestream Oil, Inc., both of which were
engaged in the same business as the Company. Mr. Pringle is the inventor of the
process and related apparatus covered by the patent pending covering portions of
the described technology. Mr. Pringle attended Kent State from 1962 to 1963,
Hiram College from 1963 to 1964, Lake Erie College from 1963 to 1964 and Towson
State College from 1965 to 1966, majoring in Chemistry and Mathematics. Since
1964: he has (i) designed and installed "turn key" engineering operations for
food, soft drink, brewery, glass and plastic manufacturing plants, (ii) been a
consultant to clients for previously designed and installed manufacturing
plants, (iii) designed, built and managed the operations of a plant for
recycling glass, and (iv) since approximately 1999, worked on the development of
the technology.
Eric Swain has served as our Chief Executive Officer since September 24,
2008. Mr. Swain has worked on Wall Street since 1982 and has extensive
experience in capital raising, business planning and development, capital
raising, marketing and promotional campaigns, long-term financial planning and
compensation planning. From May 2006 to October 2008 Mr. Swain was a Senior Vice
President at Morgan Stanley managing assets of institutional, corporate and hign
net worth individuals. From September 2000 to May 2006 Mr. Swain was a Senior
Vice President at Smith Barney/Citigroup Capital Markets performing similar
services. Mr. Swain graduated Syracuse University in 1981 with a B.A in
Psychology.
Jeffrey J. Andrews has served as our Chief Financial Officer, Treasurer
and Secretary since September 22, 2006, and as a director from that date until
his resignation on May 21, 2008. Mr. Andrews graduated from Villanova University
in May, 1974 with a B.S. in Accounting. He has been a C.P.A. in Pennsylvania
since 1978. He commenced his accounting career as an Audit Manager for a
regional firm, and over his career has served as the Controller, Treasurer
and/or CFO of various companies, and has had experience in corporate
restructurings and reorganizations as well as IPO's and SEC periodic reporting.
From April, 1999 to June, 2002 Mr. Andrews served as CFO of Collectible Concepts
Group, Inc., a public company. From June 2002 to October 2004 Mr. Andrews was
the Controller of Encapsulation Systems Inc. He joined the Company upon the
acquisition of Carbon Recovery Corporation on September 22, 2006, but he had
been employed by Carbon Recovery Corporation since November 1, 2004.
Jeffrey T. Kimberly, who was appointed our Chief Operating Officer
effective February 7, 2008, became our President on August 13, 2008. Mr.
Kimberly has over 27 years experience in the machine tool industry. From
September 2006 to January 2008, Mr. Kimberly served as President of Ingersoll
Productions Systems, a custom engineer and manufacturer of high quality
production machinery and a subsidiary of the Dalian Tool Machine Group Co., Ltd.
Previously at Ingersoll Production Systems, Mr. Kimberly served as the Director
of Planning and Process Control (January 2006 to September 2006) and as the
Director of Projects and Materials (2002 to July 2005). From July 2005 to
January 2006, Mr. Kimberly served as the Senior Project Manager and Master
Scheduler at ITT Pure-Flo MPC, a manufacturer of process systems (single-purpose
systems - containing pumps, valves, pressure vessels and instrumentation)
primarily for biopharmaceutical and pharmaceutical companies. From 1981 to 2002,
Mr. Kimberly served in various capacities at Ingersoll Milling Machine Co.,
including Process Control Manager (1999 - 2002), Project Manager (1997 - 1999)
and Sales & Simultaneous Engineering Project Manager (1990 - 1997). Mr.
Kimberly's educational background includes training in mechanical design and
machine shop and assembly floor manufacturing.
30
Wayne J. Koehl, who was appointed our Executive Vice Pesident effective
May 15, 2008, became our Chief Operating Officer on August 13, 2008. Mr. Koehl
is a licensed title agent in eight states and a member of the Mortgage Bankers
Association. From 2006 until he joined the Company, Mr. Koehl was the General
Manager of the National Division of Surety Lender Services, a division of Surety
Title Corp. From 2003 to 2006 Mr. Koehl was self-employed and provided lending
and real estate options to builders and developers. From 1992 to 2003 Mr. Koehl
was a Senior Vice President of Tri-Star Financial Services, Inc. Mr. Koehl
served as Chairman of the Planning and Zoning Board of the Borough of Mount
Ephraim, New Jersey from 2004 to 2007, and on the Advisory Committee of the New
Jersey Department of Transportation from 2004 to 2008. Mr. Koehl graduated from
William Penn College in 1973.
Frederick A. Clark has served as a director of the Company since December
14, 2006. Mr. Clark is President/CEO of Clark Resources, Inc., a governmental
relations consulting firm located in Harrisburg, Pennsylvania. Mr. Clark
graduated from Pennsylvania State University with a B.A. in Elementary Education
in 1985. Mr. Clark has served as a member of the Board of Education of the
Harrisburg School District, has served as the President of the African American
Chamber of Commerce, is the former CEO of the Urban League of Metropolitan
Harrisburg, and is currently Chairman of the National African American Cultural
Center. For the past several years, Mr. Clark has been a part-time lecturer at
the Pennsylvania Governor's School on Business and Industry and has been
appointed by the past three Pennsylvania governors to serve on boards and
commissions. Clark Resources, Inc. is representing the Company in Pennsylvania
for matters with respect to the proposed tire disposal facility.
Lincoln Jones III has served as a director of the Company since May 21,
2008. General Jones served in the United States Army from 1958 to 1990 from
which he retired with the rank of Major General. From 2004 to the present
General Jones has been Chairman of the Board of International Spectrum and
Development Corporation, a company engaged in operating family entertainment
centers. From 1998 to the present General Jones has also been President of
Lincoln Associates, Inc., a company that provides assistance and consulting
services for political-military subjects and energy related projects in the
United States and overseas. From 1996-1998 General Jones served as Vice Chairman
31
of Enron Europe, and from 1990 to 1998 he held positions as President of various
subsidiaries or affiliates of Enron Corp. General Jones graduated from the
United States Military Academy, West Point with a B.S. in Engineering and
received a M.S in International Relations and Political Science from Auburn
University. General Jones is also a graduate of the United States Air Force
Command and Staff College and the National War College, National Defense
University in Washington, D.C. General Jones has received numerous awards and
decorations including the Distinguished Service Medal with oak leaf cluster and
the Department of the Army Outstanding Civilian Service Medal in 2002. General
Jones is a member of the board of directors of several associations including
St. Thomas University (College of International Studies) and National Defense
University Foundation.
Ms. Kim Thorne O'Brien has served as a director of the Company since
September 20, 2007. Since May, 2004 Ms. O'Brien has been President of
Independence, Inc., a firm engaged in providing consulting services to start-up
biotechnology companies. From December, 2001 to May, 2004 Kim was Vice
President, Business Development & Marketing, of Advanced Traces, Inc. a company
engaged in the development of supersensitive detectors of biowarfare agents.
Prior to that, Ms. O'Brien was Regional Business Director, Northeast Region, of
MedImmune, Inc. from October 1995 to October 2001. Ms. O'Brien graduated from
Ursinius College in 1980 with a B.S. in Health & Physical Education, graduated
from Temple University with an M.S.Ed in Exercise Physiology in 1981 and
completed all work except for the dissertation for a Ph.D. in Cardiovascular
Physiology from Temple University. Thereafter, and until October 1995, Ms.
O'Brein held various jobs in the health industry.
Jonathan L. Simon has been a director of the Company since September 20,
2007. Mr. Simon has been engaged in the recycling industry since approximately
the mid-1970's. From 1990 to March, 2006 he was President of Royal Green Corp.,
a company engaged primarily in recycling ferrous metals. From April, 2006 to the
present, Mr. Simon has been President of Royal Green LLC, a successor company to
the corporation, still engaged in recycling ferrous metals. In addition, since
May, 2006 Mr. Simon has been a director of Green Energy Technologies. Mr. Simon
graduated from the University of Pittsburgh in 1973 with a B.S. in Biology (with
honors).
Paul J. Sweeney has been a director of the Company since August 13, 2008.
Mr. Sweeney From February 2007 to the present Mr. Sweeney has been a financial
advisor acting as a principal in Paul Sweeney Financial Services. From 2002
until February 2007 Mr. Sweeney was an Investment Manager with the Bank of
Ireland. Prior thereto, from 1990 to 2002 Mr. Sweeney was a bank manager for
National Irish Bank. Mr. Sweeney has a Diploma in Financial Services and a B.A
in Finance. Mr. Sweeney received the Investor Manager of the Year Award in 2006.
Peter A. Worthington has been a director of the Company since August 13,
2008. From February 2008 to the present Mr. Worthington has been self-employed
as a consultant in the oil and gas industry. From January 2004 through December
2007 Mr. Worthington was Vice President-Global Business Development (Petroleum)
for BHP Billiton, plc, a natural resources extraction and development company
with world-wide operations in more than 25 countries and employing more than
38,000 persons. From January 2002 through December 2004, Mr. Worthington was
Vice President-Algeria Assets (Petroleum) with BHP Billiton, plc. During the
past five years Mr. Billiton also served as a director or officer of various BHP
wholly-owned subsidiaries. In July 2008 Mr. Worthington became a director of
Lapp Plats, plc, a company engaged in natural resources (minerals and petroleum)
exploration and production. Mr. Worthington graduated from Australian National
University in 1975 with a Bachelor of Laws degree and a Bachelor of Economics
degree.
There are no family relationships between any of the executive officers
and directors.
Executive Compensation
The following table sets forth all compensation awarded to, earned by, or
paid for services in all capacities during 2007 and 2006 by our Chief Executive
Officer and Chief Financial Officer.
32
NAME AND STOCK OPTION ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS AWARDS COMPENSATION TOTAL
Frank G. Pringle, 2007 $354,166.50 N/A $2,189,000 $(1) $44,175.00 $2,587,341.50
President and CEO (1) 2006 N/A N/A N/A N/A $37,002.50 $ 37,002.50
Richard Mangerilli 2007 N/A N/A N/A N/A N/A $-0-
Former Pres. and 2006 $30,000 $-0- N/A N/A N/A $30,000
CEO(2)
Jeffrey J Andrews 2007 $162,439.00 $-0- $579,000 $ $(3) $741,439.00
CFO, Treasurer(3) 2006 $30,000 $-0- N/A $ N/A N/A
(1) Mr. Pringle received $26,000 as the President of Carbon Recovery
Corporation, a predecessor of the Company, and $259,416.67 as the President of
Mobilestream Oil, Inc., another predecessor of the Company during 2006. In 2007
Mr. Pringle was compensated under an unsigned employment arrangement with the
Company. The Company awarded Mr. Pringle shares of its common stock on the
following dates and at the following prices: (i) 300,000 shares on April 20,
2007 at a price of $1.38 per share or a total value of $414,000; (ii) 250,000
shares on August 1, 2007 at a price of $2.60 per share or a total value of
$650,000 and (iii) 250,000 shares on August 16, 2007 at a price of $4.50 per
share or a total value of $1,125,000. In 2006 the Company paid the rental value
of three used automobiles for the use of Mr. Pringle and two members of his
family who were also employees of the Company. In 2007, however, the Company
sold all 3 automobiles to Mr. Pringle. Under the employment arrangement, in 2007
the Company paid for a $6,000,000 life insurance policy on Mr. Pringle's life,
$2,000,000 of which is payable to his wife and $4,000,000 to the Company. The
annual premium paid was $44,175.00 in 2007 and $37,002.50 in 2006, and was
included in All Other Compensation.
(2) Mr. Mangierelli was President and CEO of the Company from 2003 through June
2006. The sum shown represents his accrued and unpaid salary for that period and
they were paid to him prior to filing the Company's Form 10-KSB for the fiscal
year ended March 31, 2006.
(3) Mr. Andrews did not have a written employment agreement in 2007. In 2006 Mr.
Andrews received $30,800 for serving as CFO of the Company, and was paid an
additional $69,200 for acting as the CFO and Treasurer of Carbon Recovery
Corporation. In 2007 Mr. Andrews received $162,439.00 as his salary. The Company
awarded Mr. Andrews shares of its common stock on the following dates and at the
following prices: (i) 100,000 shares on June 1, 2007 at a price of $1.36 per
share or a total value of $136,000; and (ii) 100,000 shares on August 1, 2007 at
a price of $4,43 per share or a total value of $443,000. We pay $344.00 each
month for a disability policy for Mr. Andrews and we pay for a life insurance
policy for which his family is the beneficiary. In 2007 the annual premium for
the policy was $5,010.00 and in 2006 it was $2,748.90
33
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Option Awards Stock Awards
Equity Equity
Incentive Incentive
Plan Plan
Awards: Awards:
Equity Number Market or
Incentive of Payout
Plan Unearned Value of
Awards: Market Shares, Unearned
Number of Number of Number of Number of Value of Units or Shares,
Securities Securities Securities Shares or Shares or Other Units or
Underlying Underlying Underlying Units of Units of Rights Other
Unexercised Unexercised Unexercised Option Option Stock That Stock That Rights
Options (#) Options (#) Unearned Exercise Expiration Have Not That Have Have Not That Have
Name Exercisable Unexercisable Options Price Date Vested Not Vested Vested Not Vested
(#) ($) (#)(1) ($) (#) ($)
------------------------------------------------------------------------------------------------------------------------------------
Frank G. Pringle -0- -0- -0- -0- -0- -0- -0- -0- -0-
Jeffrey J.Andrews 160,000 40,000 -0- $1.00 40,000 108,000 -0- -0-
Executive Employment Arrangements
Mr. Pringle did not have a written employment agreement with the Company
in 2007. Under the terms of his employment arrangement, Frank G. Pringle, the
President and CEO, received a salary of $354,166.50 in 2007. In 2007 the Board
of Directors awarded Mr. Pringle a total of 800,000 shares of common stock
pursuant to the 2007 Employees Compensation and Stock Option Plan having an
aggregate value of $2,189,000. We also paid an annual premium of $7273.00 and
$3597.50 in 2007 and 2006, respectively, for a disability policy for Mr.
Pringle. We paid premiums of $44,175.00 and $37,002.50 in 2007 and 2006,
respectively for a $6,000,000 life insurance policy, of which $4,000,000 is paid
to the Company and $2,000,000 is for the benefit of Mr. Pringle's family.
The Company and 888 Corporation, a corporation of which Mr. Pringle is the
sole stockholder, director and President, have entered into a consulting
agreement effective January 1, 2008 (the "Consulting Agreement") for his
services, the terms and conditions of which are as follows:
TERM. The term of the Consulting Agreement is for the life of the patent
pending technology owned by the Company which is estimated to be approximately
12 years. The term will be extended for the life of any additional patents filed
relating to the Company's underlying technology.
SERVICES. Mr. Pringle will furnish his consulting services for all matters
related to the development and improvement of Company's technology and related
business matters to the Company. Among such services, Mr. Pringle will perform
research to identify additional applications of our technology, identify
mixtures and compounds to which the technology may currently be applied, and
identify additional sources of renewable energy to which our technology may be
applicable. Mr. Pringle will also advise us concerning continuing education of
our engineers and scientists, assist us in the installation of our equipment and
trouble shoot performance related issues, interface with our internal and third
party engineers, designers and manufacturers of our products, interact with
scientists in various disciplines with respect to developments in microwave
technology and potential applications to our business, supervise overall
research projects we may undertake and cooperate with our intellectual property
counsel regarding protection of our intellectual property. Under the Consulting
Agreement, Mr. Pringle is required to devote such time to the business of the
Company as he deems reasonably necessary to perform his duties thereunder. All
such services shall be performed at our corporate headquarters, and Mr. Pringle
will report to the Company President with respect to his services.
34
INTELLECTUAL PROPERTY ISSUES. Under the Consulting Agreement all
discoveries of Mr. Pringle relating to our technology belong to the Company, and
888 Corporation and Mr. Pringle agree to cooperate as required to perfect the
Company's rights in any such discovery. Mr. Pringle has also agreed that for an
18 month period from the effective date of the Consulting Agreement, to disclose
promptly to us any new developments he makes in "New Technology", defined as
technology unrelated to our business and to give us a 90 day exclusive period in
which to negotiate a license or purchase agreement with him. Mr. Pringle has
also agreed that during the term of the Consulting Agreement he will not
compete, directly or indirectly, with us by offering products or services
similar to our own to anyone else, and that he will disclose to us any business
opportunity coming to the attention of 888 Corporation or its affiliates
including Mr. Pringle, or developed by any of them, relating to the business of
the Company. The Consulting Agreement provides for enforcement mechanisms if a
breach of these conditions occurs. Under the Consulting Agreement, Mr. Pringle
will maintain in confidence all of the Company's confidential information as
therein defined, and will return to us all of our confidential information at
the time of termination of the Consulting Agreement.
FEES. For providing Mr. Pringle's services, 888 Corporation will receive
an annual consulting fee, payable bi-weekly in arrears, in accordance with the
following schedule.
2008 and 2009--$378,000
2010--$448,000
2011--$488,000
2012--$538,000
2013--$588,000
2014 and thereafter (until expiration of our final patent) $668,000
We will not withhold any tax or other forms of withholdings from our
payments to 888 Corporation, all of which will be made by that corporation. 888
Corporation has agreed to indemnify us against all tax related claims arising
from the payments. We will not pay 888 Corporation any benefits for Mr. Pringle,
and Mr. Pringle will not be eligible to participate in our health, 401(k) or
similar employee benefit related plans; however, we will reimburse him for any
business related expense which, for this purpose, means any expense reasonably
incurred in connection with the performance of his duties.
In the event the Consulting Agreement is terminated as discussed below
under "Termination", we will continue to pay 888 Corporation an annual
post-termination royalty payment, payable monthly in arrears, in accordance with
the following schedule:
2008 and 2009--$378,000
2010--$448,000
2011--$488,000
2012--$538,000
2013--$588,000
2014 and thereafter (until expiration of our final patent) $668,000
35
EVENTS OF DEFAULT. The following constitute events of default under the
Consulting Agreement:
(i) Our failure to pay any 2 consecutive fee payments or royalty
payments due under the Consulting Agreement;
(ii) Our failure to make any 3 payments within a 12 month calendar year;
(iii) Our default in performing any other covenant or obligation under the
Consulting Agreement that continues for 30 days after written notice
of the default is received by us; or
(iv) Our dissolution, liquidation,insolvency or similar event.
CONSULTANT SECURITY INTEREST UNDER CONSULTING AGREEMENT AND RIGHTS UPON
COMPANY EVENT OF DEFAULT.
In order to protect 888 Corporation and Mr. Pringle against an event of
default under the Consulting Agreement, we have granted 888 Corporation a first
priority security interest in our intellectual property including our pending
patents. In addition, we have executed and delivered to 888 Corporation an
assignment of our intellectual property which may be recorded in the U.S. Patent
Office if an event of default occurs; however, 888 Corporation may not file the
assignment with the Patent Office unless it is accompanied by an affidavit of
our Chief Executive Officer or our Chief Financial Officer (neither of whom may
be an affiliate of 888 Corporation). 888 Corporation has agreed to subordinate
its security position to any institutional financing the Company may undertake.
In the event our intellectual property is assigned to 888 Corporation, we are
released from any and all subsequent payments under the Consulting Agreement.
TERMINATION. The Consulting Agreement may be terminated in any of the
following ways:
(i) Mr. Pringle's death;
(ii) The dissolution or liquidation of 888 Corporation;
(iii) For cause which is defined as the conviction of Mr. Pringle for a
crime involving "moral turpitude."
(iv) By mutual consent of the parties.
CONSEQUENCES OF TERMINATION. If the Consulting Agreement is terminated for
any reason then 888 Corporation or its successor shall receive the following:
(i) all payments due under the Consulting Agreement to the date of termination;
(ii) all royalty payments due under the post-termination royalty schedule above
payable monthly in arrears until expiration of our final patent; (iii) medical
benefits for a 10 year period.
Eric Swain, the Chief Executive Officer, is employed pursuant to a five
year summary term sheet entered into on September 24, 2008 that will be expanded
into a formal employment agreement ("Formal Agreement") as follows: Mr. Swain
will become a member of the Board of Directors as soon as the Board is increased
from seven to eight members. Mr. Swain's salary will be $450,000 per annum from
commencement until December 31, 2009, and will be increased to $525,000 per
annum effective January 1, 2010, if the Company has received a contract sale for
its equipment with a minimum purchase value of $25,000,000 (the "Milestone").
Subsequent increases in base salary will be determined by the Compensation
Committee in consultation with the Board of Directors. Mr. Swain will also be
entitled to receive a bonus of between 0.75% and 1.0% of our "net profits",
payable in a combination of our common stock and cash in the discretion of Mr.
Swain, from all revenues we receive for orders exceeding the Milestone. We will
pay the bonus each time we receive a payment under an existing order. Mr. Swain
was awarded options to purchase 5,000,000 shares of our common stock at $1.18
per share which will vest in equal installments of 1,000,000 options beginning
on the execution date of the Formal Agreement and on each anniversary thereafter
for the next four years. Each option will be exercisable for 15 years from the
respective vesting dates. Mr. Swain will be provided with medical, dental, group
life and long term disability insurance. We will pay the premium for a
$2,500,000 term life insurance policy for Mr. Swain, the proceeds of which will
be paid to Mr. Swain's designee. If Mr. Swain resigns voluntarily during the 5
year term for "Good Reason" (as defined in the Formal Agreement but which will
include a diminution of his responsibility), then we will pay him his salary and
the Milestone bonus for 18 months from the resignation date, and all of his
remaining options will vest immediately. If we (i) terminate the agreement
without "Cause" or undergo a "change in control" (both as defined in the Formal
Agreement) before the end of the 5 year term, then: (i) we will pay Mr. Swain
his current salary and benefits for a period of 18 months from the date of the
termination event, (ii) all remaining options will vest immediately and (iii)
all earned Milestone bonuses will be paid in full. Mr. Swain will receive 4
weeks paid vacation per year beginning in 2009. We will reimburse Mr. Swain for
his legal fees in negotiating the Formal Agreement and his legal expenses in
connection with his early termination with his existing employer.
Jeffrey J. Andrews, the Chief Financial Officer, Treasurer and Corporate
Secretary, was employed pursuant to an at will agreement with the Company until
September 23, 2008. In 2007 Mr. Andrews received a salary of $162,439.00. In
2007 the Board of Directors awarded Mr. Andrews a total of 200,000 shares of
common stock pursuant to the 2007 Employees Compensation and Stock Option Plan
having an aggregate value of $741,439.We pay $344.00 each month for a disability
policy for Mr. Andrews and we pay for a life insurance policy for which his
family is the beneficiary. In 2007 the annual premium for the policy was
$5,010.00 and in 2006 it was $2,748.90
On September 23, 2008 we entered into a new five year employment term
sheet agreement with Mr. Andrews as follows: Mr. Andrews's salary will be
increased to $180,000 per annum effective September 23, 2008, and will be
increased to $225,000 per annum starting September 23, 2009 if the Company has
received (i) orders for 6 of our machines or (ii) orders for a minimum purchase
value of $24,000,000 (the "Milestone"). Subsequent increases in base salary will
be determined by our Chief Executive Officer in consultation with the Board of
Directors. Mr. Andrews will also be entitled to receive a bonus of between 0.75%
and 1.0% of our estimated profits, payable in a combination of our common stock
and cash determined in our discretion, from all revenues we receive for orders
exceeding the Milestone. We will pay the bonus each time we receive a payment
under an existing order. Mr. Andrews was awarded options to purchase 1,000,000
shares of our common stock at $1.18 per share which will vest in equal
installments of 200,000 options on September 23, 2008 and on each anniversary
thereafter for the next four years, provided Mr. Andrews is employed by the
Company on each such anniversary. Each installment of options will be
exercisable for 10 years from the respective vesting dates. Mr. Andrews will be
provided with medical, dental, group life and long term disability insurance. We
will pay the premium for a $1,500,000 term life insurance policy for Mr.
Andrews, the proceeds of which will be paid to Mr. Andrews's family. If Mr.
Andrews resigns voluntarily during the 5 year term, then we will pay him only
the salary and Milestone bonus earned to the date of resignation, and he will
retain only the options that have vested to that date. If we: (i) relocate to a
geographic area unacceptable to Mr. Andrews, (ii) eliminate his position as a
result of our sale, reorganization or restructuring, (iii) cease to exist as the
Company or (iv) terminate the agreement before the end of the 5 year term, then:
(i) we will pay Mr. Andrews his then current salary and benefits until the first
to occur of (x) 1 year from termination or (y) his acceptance of another
position of employment, (ii) all remaining options will vest immediately and
(iii) all earned Milestone bonuses will be paid in full.
36
Mr. Kimberly, the President, initially was employed pursuant to a term
sheet executed on November 4, 2007 outlining the terms of his employment under
which Mr. Kimberly commenced his employment on February 11, 2008. The initial
term of employment under the term sheet is five years. The Company paid Mr.
Kimberly a signing bonus of $100,000 in connection with his execution of the
term sheet.
Mr. Kimberly will receive a base salary of $200,000 per annum which was
increased to $225,000 on August 11, 2008, the sixth month anniversary of his
start date on February 11, 2008. Initially, Mr. Kimberly also was eligible to
receive a yearly performance bonus to be paid in shares of our common stock
issued under the Company 2008 Employees Compensation Plan in accordance with the
following schedule:
(a) up to 50,000 shares for fiscal 2008;
(b) up to 40,000 shares for fiscal 2009;
(c) up to 35,000 shares for fiscal 2010;
(d) up to 35,000 shares for fiscal 2011; and
(e) up to 35,000 shares for fiscal 2012.
The number of shares to be issued for each fiscal year bonus and the
performance criteria for such bonus was to be established by our Board of
Directors. However, on September 23, 2008 the Company and Mr. Kimberly entered
into a new employment agreement, and as part of the new arrangement, the bonus
plan was eliminated.
On September 23, 2008 we entered into a new five year employment term
sheet agreement with Mr. Kimberly as follows: Mr. Kimberly's salary will be
increased to $300,000 per annum effective January 1, 2009, and will be increased
to $375,000 per annum starting January 1, 2010 if the Company has received (i)
orders for 6 of our machines or (ii) orders for a minimum purchase value of
$24,000,000 (the "Milestone"). Subsequent increases in base salary will be
determined by the Chief Executive Officer in consultation with the Board of
Directors. Mr. Kimberly will also be entitled to receive a bonus of between
0.75% and 1.0% of our estimated profits, payable in a combination of our common
stock and cash determined in our discretion, from all revenues we receive for
orders exceeding the Milestone. We will pay the bonus each time we receive a
payment under an existing order. Mr. Kimberly was awarded options to purchase
1,500,000 shares of our common stock at $1.18 per share which will vest in equal
installments of 300,000 options on September 23, 2008 and on each anniversary
thereafter for the next four years, provided Mr. Kimberly is employed by the
Company on each such anniversary. Each installment of options will be
exercisable for 10 years from the respective vesting dates. We will pay the
premium for a $2,000,000 term life insurance policy for Mr. Kimberly, the
proceeds of which will be divided equally between the Company and Mr. Kimberly's
family. If Mr. Kimberly resigns voluntarily during the 5 year term, then we will
pay him only the salary and Milestone bonus earned to the date of resignation,
and he will retain only the options that have vested to that date. If we: (i)
relocate to a geographic area unacceptable to Mr. Kimberly, (ii) eliminate his
position as a result of our sale, reorganization or restructuring, (iii) cease
to exist as the Company or (iv) terminate the agreement before the end of the 5
year term, then: (i) we will pay Mr. Kimberly his then current salary and
benefits until the first to occur of (x) 1 year from termination or (y) his
acceptance of another position of employment, (ii) all remaining options will
vest immediately and (iii) all earned Milestone bonuses will be paid in full.
During the two year period commencing February 11, 2008, we will make
monthly car payments to Mr. Kimberly in the amount of $509.88. At the end of
such two year period, the Company will pay to Mr. Kimberly the amount equal to
(a) the balance of his auto loan for his current automobile and (b) the amounts
paid for such auto loan by Mr. Kimberly prior to February 11, 2008. The Company
has also paid Mr. Kimberly a relocation package which consists of (i) the cost
of a moving company to pack and move Mr. Kimberly's household to New Jersey,
(ii) temporary housing costs until he acquires a home in New Jersey and (iii)
the expense for travel to and from Illinois on weekends until Mr. Kimberly's
family relocates. Mr. Kimberly will be provided with medical, dental, group life
and long term disability insurance. Mr. Kimberly will receive three weeks paid
vacation per year increasing to four weeks per year beginning in 2009.
37
Mr. Koehl, the Chief Operating Officer, was employed pursuant to an
unwritten agreement under which Mr. Koehl commenced his employment on May 15,
2008. The initial term of employment is five years. Initially Mr. Koehl received
a base salary of $160,000 per annum which will be increased to $200,000 on
November 5, 2008. Mr. Koehl will also participate in the Company's benefit plans
and will receive an automobile allowance. The Company paid Mr. Koehl a bonus of
100,000 shares of our common stock at the time of commencement of his Employment
which the Company has repurchased for $100,000 from Mr. Koehl as part of the new
employment agreement entered into between the Company and Mr. Koehl on September
23,2008.
On September 23, 2008 we entered into a five year employment term sheet
agreement with Mr. Koehl as follows: Mr. Koehl's salary will be increased to
$225,000 per annum effective January 1, 2009, and will be increased to $250,000
per annum upon the first to occur of (i) our receipt of orders for 6 of our
machines or (ii) orders for a minimum purchase value of $24,000,000 (the
"Milestone"). Subsequent increases in base salary will be determined by the
Chief Executive Officer in consultation with the Board of Directors. Mr. Koehl
will also be entitled to receive a bonus of between 0.75% and 1.0% of our
estimated profits, payable in a combination of our common stock and cash
determined in our discretion, from all revenues we receive for orders exceeding
the Milestone. We will pay the bonus each time we receive a payment under an
existing order. Mr. Koehl was awarded options to purchase 1,000,000 shares of
our common stock at $1.18 per share which will vest in equal installments of
200,000 options on September 23, 2008 and on each anniversary thereafter for the
next four years, provided Mr. Koehl is employed by the Company at each such
anniversary. Each installment of options will be exercisable for 10 years from
the respective vesting dates. Mr. Koehl will be provided with medical, dental,
group life and long term disability insurance. We will pay the premium for a
$2,000,000 term life insurance policy for Mr. Koehl, the proceeds of which will
be divided equally between the Company and Mr. Koehl's family. If Mr. Koehl
resigns voluntarily during the 5 year term, then we will pay him only the salary
and Milestone bonus earned to the date of resignation, and he will retain only
the options that have vested to that date. If we: (i) relocate to a geographic
area unacceptable to Mr. Koehl, (ii) eliminate his position as a result of our
sale, reorganization or restructuring, (iii) cease to exist as the Company or
(iv) terminate the agreement before the end of the 5 year term, then: (i) we
will pay Mr. Koehl his then current salary and benefits until the first to occur
of (x) 1 year from termination or (y) his acceptance of another position of
employment, (ii) all remaining options will vest immediately and (iii) all
earned Milestone bonuses will be paid in full.
Compensation of Directors
DIRECTOR COMPENSATION
---------------------
Non-Equity Change in Pension
Incentive Value and
Fees Earned Plan Non-Qualified All Other
or Paid in Stock Option Compensation Deferred Compensation
Cash ($) Awards ($) Awards ($) ($) Earnings Compensation ($)(1) Total ($)
Frank G. Pringle $ - $ - $ - $ - $ - $ - $ -
Jeffrey J. Andrews $ - $ - $ - $ - $ - $ - $ -
Frederick A. Clark $ - $ - $ - $ - $ - $ - $ -
Kim Thorne O'Brien $ - $ - $ - $ - $ - $ - $ -
Jonathan L. Simon $ - $ - $ - $ - $ - $ - $ -
Mary K. Rdomsky $ - $ 50,000 $ - $ - $ - $ - $ -
(1)For the fiscal year ended December 31, 2006 and December 31, 2007, neither
the former directors (except as discussed below) nor the current directors were
compensated for their services as directors. We do not intend to compensate our
current directors, or any additional directors who may be elected; however,
expenses of attending meetings will be reimbursed. During the fiscal year ended
December 31, 2006 there were no formal meetings of the Board of Directors;
action was taken by written consent.
Mary K. Radomsky served as the sole director and officer from June 7, 2006
to September 22, 2006. Although she was not compensated, the in-coming directors
voted to give her an honorarium by the issuance of 25,000 shares of our Common
Stock.
38
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 3, 2008, information
regarding the beneficial ownership of shares of our common stock (i) by each
person known by us to own 5% or more of the outstanding shares of our common
stock, (ii) by each of our named executive officers and our directors, and (iii)
by all executive officers and directors as a group. At the close of business on
October 3, 2008, there were 60,920,689 shares of our common stock issued and
outstanding. Unless otherwise noted, we believe that all persons named in the
table have sole voting power and investment power with respect to all shares
beneficially owned by them.
Shares of
Percentage
Common of Class as of
Name and Address of Beneficial Owners Stock 10/3/2008(1)
------------------------------------- --------- --------------
Frank G. Pringle 10,842,828(2) 17.80%(2)
109 Bortons Road
Marlton, New Jersey 08053
Eric Swain -0-(3) -0-(3)
151 Summit Avenue
Pompton Lakes, New Jersey 07442
Jeffrey J. Andrews -0-(4) -0-(4)
8 Cushman Road
Rosemount, Pennsylvania 19010
Jeffrey T. Kimberly -0-(5) -0-(5)
462 Oakshade Road
Shamong, New Jersey 08088
Wayne J. Koehl -0-(6) -0-(6)
207 Lowell Avenue
Mt. Ephraim, New Jersey 08059
Frederick A. Clark -0- -0-
321 N. Front Street
Harrisburg, Pennsylvania 17101
Lincoln Jones III 6,250(7) 0.00001(7)
9 Fernglen Drive
The Woodlands, Texas 77380
Kim Thorne O'Brien -0-(8) -0-(8)
19 Sawmill Road
Medford, New Jersey 08055
Jonathan L. Simon 15,000(9) 0.00002(9)
1722 Garfield Street
Wyomissing, Pennsylvania 19610
Paul J. Sweeney 5,405,187(10) 8.87%(10)
30 Port Road
Letterkenney County
Donegal Ireland
Peter Worthington -0- -0-
52 Chesilton Road
London SW6 5AB, UK
Lois Augustine Pringle 1,967,937(11) 3.23%(11)
109 Bortons Road
Marlton, New Jersey 08053
Olde Monmouth Stock Transfer Co., Inc., Trustee
Carbon Recovery Corporation
Liquidating Trust 11,188,996(12) 18.36%(12)
200 Memorial Parkway
Atlantic Highlands, NJ 07716
Olde Monmouth Stock Transfer Co., Inc., Trustee 11,145,225(13) 18.29%(13)
Mobilestream Oil, Inc.
Liquidating Trust
200 Memorial Parkway
Atlantic Highlands, New Jersey 07716
All Directors and Officers as a Group (5 persons) 16,269,285(2)(3) 26.70%
39
1. The ownership percentages below are calculated based on 60,920,689 shares of
common stock issued and outstanding as of October 3, 2008. Excluded are: shares
of our common stock issuable upon exercise of the Company's Mobilestream
Acquisition Warrants, the Carbon Recovery Acquisition Warrants, or other warrant
issuances. Also excluded are shares of our common stock issuable upon exercise
of options granted by the Company. For a list of the different classes of our
warrants and their characteristics see "DESCRIPTION OF CAPITAL STOCK-Warrants."
2. Includes 119,000 shares distributable from the Carbon Recovery Corporation
liquidating trust as a shareholder of Carbon Recovery Corporation, and 250,000
shares issued under our 2007 Employees Compensation and Stock Option Plan. Does
not include 447,766 shares of our common stock and 1,520,171 shares of Carbon
Recovery common stock that are convertible on a 1 for 1 basis into shares of our
common stock, that are owned by Lois Augustine Pringle, Mr. Pringle's wife. Does
not include warrants to purchase shares of our common stock for each meeting of
our Board attended by Mr. Pringle.
3. Does not include 5,000,000 options issued to Mr. Swain under a term sheet
agreement executed on September 24, 2008, 1,000,000 of which vested on September
24, 2008 and the remainder of which will vest in equal installments of 1,000,000
options on each anniversary thereafter for the next four years if Mr. Swain is
employed by the Company at each anniversary date. Each installment of options
will be exercisable for 15 years from the respective vesting dates.
4. Does not include 200,000 options issued under a stock option agreement
between the Company and Mr. Andrews entered into in 2005, all of which have
vested as of September 23, 2008. Does not include 1,000,000 options issued to
Mr. Andrews under a term sheet agreement executed on September 23, 2008, 200,000
of which vested on September 23, 2008 and the remainder of which will vest in
equal installments of 200,000 options on each anniversary thereafter for the
next four years if Mr. Andrews is employed by the Company at each anniversary
date. Each option installment will be exercisable for 10 years from the
respective vesting dates.
5. Does not include 100,000 options issued under our 2008 Stock Option Plan.
Does not include 1,500,000 options issued to Mr. Kimberly under a term sheet
agreement executed on September 23, 2008, 300,000 of which vested on September
23, 2008 and the remainder of which will vest in equal installments of 300,000
options on each anniversary thereafter for the next four years if Mr. Kimberly
is employed by the Company at each anniversary date. Each option installment
will be exercisable for 10 years from the respective vesting dates.
6. Does not include 1,000,000 options issued to Mr. Koehl under a term sheet
agreement executed on September 23, 2008, 200,000 of which vested on September
23, 2008 and the remainder of which will vest in equal installments of 200,000
options on each anniversary thereafter for the next four years if Mr. Koehl is
employed by the Company at each anniversary date. Each option installment will
be exercisable for 10 years from the respective vesting dates.
7. Lincoln Jones III is the beneficial owner of 6,200 shares of our common stock
through his ownership of a controlling interest in Worldwide Strategic
Consulting, Inc. Does not include warrants to purchase shares of our common
stock for each meeting of our Board attended by General Jones.
8. Does not include the following: (i) 25,000 shares of common stock of Carbon
Recovery Corporation Ms. O'Brien owns which will be exchanged for the equivalent
number of shares of the Company's common stock upon the liquidation of the
Carbon Recovery Liquidating Trust which is anticipated to occur at the time the
SEC declares effective our registration statement on Form S-1 with respect to
these shares, and (ii) 25,000 Carbon Recovery Warrants to purchase shares of the
Company's common stock at $2.75 per share that will expire on December 31,2008.
Does not include warrants to purchase shares of our common stock for each
meeting of our Board attended by Ms. O'Brien.
40
9. Does not include the following: (i) 108,000 shares of common stock of Carbon
Recovery that will be exchanged for the equivalent number of shares of the
Company's Common Stock upon the liquidation of the Carbon Recovery Liquidating
Trust which is anticipated to occur at the time the SEC declares effective our
registration statement on Form S-1 with respect to these shares; (ii) 108,000
Company Warrants to purchase shares of the Company's common stock at $2.50 per
share that expire on December 31, 2008; and (iii) warrants to purchase shares of
our common stock for each meeting of our Board attended by Mr. Simon.
10. Does not include the following: (i) 3,749,387 warrants to purchase shares of
the Company's common stock at an exercise price of $2.00 per share; (ii) 316,550
Carbon Recovery Warrants to purchase shares of the Company's common stock at
$2.75 per share; (iii) 316,550 Carbon Recovery warrants to purchase shares of
the Company's common stock at $4.00 per share; and (iv) warrants to purchase
shares of our common stock for each meeting of our Board attended by Mr.
Sweeney. Both classes of Carbon Recovery warrants expire on December 31, 2008;
the warrants to purchase shares of our common stock expire on September 15,
2009.
11. Ms. Pringle owns 447,766 shares of our Company's common stock. Ms. Pringle
owns 1,520,171 shares of the common stock of Carbon Recovery Corporation which
will be exchanged for the equivalent number of shares of the Company's common
stock upon the liquidation of the Carbon Recovery Liquidating Trust which is
anticipated to occur at the time the SEC declares effective our registration
statement on Form S-1 with respect to these shares. Does not include 10,842,828
shares of common stock held by Frank G. Pringle, her husband.
12. See also Note 1 with respect to voting percentage calculation. The
48,688,996 shares the Company issued for the acquisition of the assets of Carbon
Recovery Corporation was subsequently reduced to 11,188,996 shares by the
cancellation of 37,500,000 shares of the Company's common stock indirectly owned
by the Company in the Carbon Recovery Liquidating Trust after the acquisition of
the assets of Mobilestream Oil, Inc. which had owned the 37,500,000 shares of
Carbon Recovery Corporation. Olde Monmouth Stock Transfer Co., Inc. is the
Trustee of the Carbon Recovery Liquidating Trust. Olde Monmouth has no
beneficial interest in the shares of our common stock held in the Trust;
however, until such time as our shares of common stock are distributed, Olde
Monmouth has the right to vote these shares. The right to vote our shares in the
Carbon Recovery Liquidating Trust is exercised by Mr. John Troster, Sr. as
President of Olde Monmouth. See "Business-Our Acquisition of Carbon Recovery."
13. See also Note 1 with respect to voting percentage calculation. Olde Monmouth
Stock Transfer Co., Inc. is the Trustee of the Mobilestream Liquidating Trust.
Olde Monmouth has no beneficial interest in the shares of our common stock held
in the Trust; however, until such time as our shares of common stock are
distributed, Olde Monmouth has the right to vote these shares. The right to vote
our shares held in the Mobilestream Liquidating Trust is exercised by Mr. John
Troster, Sr. as President of Olde Monmouth. See-"Business-Our Acquisition of
Mobilestream." With the exceptions of Lois Augustine Pringle, no person or
entity has a 5% or greater interest in the Company as the result of his/her/its
beneficial interest in either Liquidating Trust.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 2005 we formalized a prior intended agreement with Careful Sell
Holding, L.L.C. ("Careful Sell"), a Delaware limited liability company formed by
Mr. Pringle, currently our Chairman, and until August 13, 2008 our President and
CEO. Mr. Pringle and his wife, at the time a director of the Company, own all of
the limited liability interests of Careful Sell. Mr. Pringle was also the
Manager of Careful Sell. Under the revised agreement we entered into a
technology contribution agreement (the "Contribution Agreement"), with Careful
Sell. Careful Sell is the owner of all the rights to the inventions of Mr.
Pringle. Under the Contribution Agreement, Careful Sell transferred to us the
rights to commercialize such inventions and to operate and use the related
processes and apparatus to make, sell, use and otherwise dispose of products,
which may be processed utilizing the inventions. In the Contribution Agreement
we agreed to pay Careful Sell royalties of 2% of all revenues derived from the
inventions. In further consideration for the transfer of the inventions, we
issued to Careful Sell a total of 37,500,000 shares of our common stock. The
Contribution Agreement supersedes a prior agreement not formalized between
ourselves and Careful Sell in 2002.
41
We have engaged in two transactions for the acquisition of our assets and
our business with related persons. On September 22, 2006 we closed an
acquisition for substantially all of the assets and certain liabilities of
Carbon Recovery Corporation (the "CRC Acquisition") pursuant to a plan and
agreement of reorganization dated July 27, 2006 (the "CRC Acquisition
Agreement") with Carbon Recovery Corporation ("CRC" or "Carbon Recovery") for
the acquisition of substantially all of the assets and certain liabilities of
CRC. Mr. Frank Pringle, the controlling stockholder of CRC is also our Chairman
of the Board, served as our President (until January 1, 2008) and our CEO (until
August 13, 2008). Under the CRC Agreement, on September 22, 2006 we issued to
Carbon Recovery the following: (i)48,688,996 shares of our common stock (the
"CRC Common Stock") for the assets of CRC, and (ii) 3,908,340 Class B Warrants,
1,397,000 Class D Warrants and 1,397,000 Class E Warrants (together the "CRC
Warrants" and individually by their respective class names) to assume the
liabilities of CRC to its warrant holders under similar classes of warrants of
CRC. The CRC Warrants have the following characteristics: (i) the CRC Class B
Warrants and the CRC Class D Warrants have an exercise price of $2.75 per
Warrant, and (ii) the CRC Class E Warrants have an exercise price of $4.00 per
Warrant. The CRC Class E Warrants can only be exercised together with the
exercise of a similar number of CRC Class D Warrants. Initially, all of the CRC
Warrants expired on September 21, 2007; however, we have extended the expiration
date of the CRC Class B Warrants, the CRC Class D Warrants and the CRC Class E
Warrants to December 31, 2008.
Frank G. Pringle, our Chairman, and our President (until January 1, 2008)
and our CEO (until August 13, 2008), was elected to our Board of Directors in
connection with the closing of the Carbon Recovery acquisition. Mr. Andrews, our
Secretary, Treasurer and CFO, was also elected to the Board at that time,
following which they appointed themselves to their respective offices.
In December 2006 we acquired the assets of Mobilestream Oil, Inc., a
Delaware corporation controlled by Mr. Pringle. Mr. Pringle is the inventor of
the variable microwave technology embodied in the utility patent applications
which he assigned to a predecessor of Mobilestream Oil, Inc. and which are now
owned by us as the result of the acquisition of the assets of Mobilestream. At
the time of the Mobilestream Acquisition, Mr. Pringle's previously owned shares
of Mobilestream Oil, Inc.'s common stock had been converted into 503,374,112
shares of Mobilestream's 2006 Series of Convertible Preferred Stock. Pursuant to
the terms of the Mobilestream Acquisition Agreement, we were to have issued
70,472,376 shares of our 2006 Series of Convertible Preferred Stock to
Mobilestream for distribution to Mr. Pringle. However, at the time of the
Mobilestream acquisition closing we were only authorized to issue 50,000,000
shares of Preferred Stock. Accordingly, at the closing the terms were amended to
provide for the issuance of 35,236,188 shares of our 2006 Series of Convertible
Preferred Stock (the "2006 Series of Convertible Preferred"), each having 2
votes per share (instead of 1) and each convertible into 2 shares of our common
stock (instead of 1).
When we acquired the assets of Mobilestream Oil, Inc., we issued
11,145,225 shares of our common stock to Mobilestream for the benefit of the
holders of Mobilestream's common stock, and we issued 35,236,188 shares of our
own 2006 Series of Convertible Preferred Stock to Mr. Pringle (the sole holder
of Mobilestream's 2006 Series) using the same conversion ratio as for the common
stock. At the time of the acquisition closing, each share of our 2006 Series of
Convertible Preferred was convertible into 2 shares of our common stock. At the
time of the Mobilestream closing, 37,500,000 shares of our common stock issued
to Mobilestream at the time of the Carbon Recovery closing were cancelled.
42
In October 2007, Mr. Pringle and the Company agreed to amend the
conversion terms of our 2006 Series of Convertible Preferred such that each
share of our 2006 Series became convertible into 1/2 of 1 share of our common
stock. However, until conversion each share of our 2006 Series of Convertible
Preferred had 2 votes per share, voting with the common stock as a single class.
On May 17, 2007 we purchased 94,961 shares of our common stock for $66,473
in cash from Ms. Lois Pringle, the wife of Mr. Frank G. Pringle, our Chairman,
and then also our President and Chief Executive Officer.
In 2007 two individuals, one of whom, Jonathan L. Simon, is a director of
our Company, purchased 108,000 shares of Carbon Recovery Corporation in a
private sale from Lois Augustine Pringle, the wife of our Chairman, and then
President and CEO. The purchasers were incorrectly informed that as part of the
consideration in the transaction they would receive warrants to purchase shares
of our common stock that attached to the Carbon Recovery shares. Ms. Pringle's
Carbon Recovery shares did not have any warrant attachment. Although the Company
was not a party to this transaction, the Company issued a total of 505,040
warrants to purchase shares of our common stock to the purchasers at exercise
prices of $2.50 (290,000 warrants) and $2.75 (215,040 warrants), of which Mr.
Simon received 108,000 such warrants. Using the Black-Scholes formula currently
the transaction is valued at $8730 because all of the warrants are "out of the
money."
In November 2007, the Company entered into a six month consulting
agreement with Worldwide Strategic Partners, Inc., a corporation in which
Lincoln Jones III, one of our directors, has an ownership interest in excess of
ten percent. The consultant agreement was executed and delivered approximately 6
months before General Jones became a director of our Company. Subsequent to the
execution of the consultant agreement with Worldwide, the Company has issued a
total of 122,500 shares of its Common Stock to Worldwide valued at $370,775
through June 30, 2008, of which 31,250 were distributed to General Jones. On May
26, 2008 the Company and Worldwide terminated the November 2007 consulting
agreement by agreeing to pay Worldwide a total of 275,000 shares for its
services inclusive of the 122,500 shares already issued. On May 26, 2008 the
Company entered into a new 5 year consulting agreement with Worldwide expiring
May 26, 2013, pursuant to which Worldwide will identify potential acquisition
candidates or joint venture partners for the Company and upon closing a
transaction with any such candidate, the Company will pay Worldwide a fee based
upon a percentage of the value of the transaction beginning with 5% of the first
$1,000,000 dollars, and declining 1% for each successive $1,000,000 increase in
transaction value until Worldwide receives 1% of the transaction value in excess
of $4,000,000.
On November 28, 2007 the Chief Financial Officer, Jeffery J. Andrews,
loaned the Company $150,000 at a interest rate of prime plus 2%. This loan has
no stated principal payment due date. In April 2008 the Company repaid $120,000.
The remaining balance of $30,000 is expected to be paid by year end 2008.
Interest expense will be accrued and expensed monthly until the Company pays off
the loan.
In June 2008 Mr. Pringle converted 2,241,064 of his shares of 2006 Series
Convertible Preferred Stock into 1,120,532 shares of our common stock. In August
2008 Mr. Pringle converted all 33,440,124 shares of his remaining shares of 2006
Series of Convertible Preferred Stock into 16,720,062 shares of our common
stock. At the time of the conversion Mr. Pringle and the Company entered into a
stock redemption agreement pursuant to which the Company purchased 6,600,000
shares of Mr. Pringle's common stock for $1,650,000 or a price of $0.25 per
share.
Paul J. Sweeney, who became a director of our Company on August 13, 2008,
has had the following transactions with the Company:
(i) on March 18, 2008, Mr. Sweeney acquired 190,320 shares of our
common stock for a purchase price of $1.00 per share and in connection
therewith received warrants for the purchase of an additional 190,320
shares of common stock at an exercise price of $2.00 per share;
(ii) on March 26, 2008, Mr. Sweeney acquired 441,010 shares of
common stock from the Company at a purchase price of $1.00 per share and
in connection therewith received warrants for the purchase of an
additional 441,010 shares of common stock at an exercise price of $2.00
per share;
(iii) on April 1, 2008, Mr. Sweeney acquired 2,018,057 shares of
common stock from the Issuer at a purchase pr ice of $1.00 per share and
in connection therewith received warrants for the purchase of an
additional 2,018,057 shares of common stock at an exercise price of $2.00
per share;
(iv) on April 11, 2008, Mr. Sweeney acquired 1,100,000 shares of
common stock from the Company at a purchase price of $1.11 per share and
in connection therewith received warrants for the purchase of an
additional 1,100,000 shares of common stock at an exercise price of $2.00
per share; and
(v) on September 9, 2008, Mr. Sweeney acquired 1,500,000 shares of
common stock from the Company, valued at $1,440,000 as consideration for
consulting services he provided and will provide to the Company pursuant
to an Investor Relations Agreement entered into on September 8, 2008
between the Company and Mr. Sweeney for a period of one year.
On October 1, 2008 the Company and LP (Origination) Limited, a United
Kingdom company owned by Peter A. Worthington, a director, entered into a
consulting agreement with an effective date of August 1, 2008, pursuant to which
LP Origination agreed to perform management advisory and strategic planning
services for a term ending on February 1, 2009, in return for a payment of
$90,000 and the issuance of 100,000 shares of our common stock valued at
$158,000 using the average of the bid and ask price on that day. On September
30, 2008 we paid $50,000 to LP Origination with the remaining $40,000 payment
due on November 1, 2008. Either party may renew the agreement for one additional
one year term by notice not less than 30 days before expiration upon mutually
acceptable terms and conditions.
SELLING SECURITY HOLDER
We are registering shares of our common stock (i) purchased by
Professional Offshore Opportunity Fund, Ltd. ("POOF"), the selling security
holder, in connection with a private placement transaction in December 2007, and
(ii) issued upon the cashless exercise of 625,000 warrants issued by us to POOF
in the private placement.
Beneficial ownership is determined in accordance with Rule 13d-3(d)
promulgated by the Commission under the Securities Exchange Act of 1934. Unless
otherwise noted, each person or group identified possesses sole voting and
investment power with respect to the shares.
On December 21, 2007 the Company and POOF entered into a series of
agreements in connection with the Company's sale to POOF of 1,000,000 shares of
its common stock for $1.00 per share, or a total purchase price of $1,000,000.
The agreements and the material terms and conditions were as follows: a
securities purchase agreement pursuant to which POOF agreed to purchase
1,000,000 shares of our common stock for $1,000,000, and a five year warrant to
purchase 625,000 shares of our common stock at an exercise price of $1.50 per
share. As part of the purchase agreement we also entered into an escrow
agreement with POOF and its counsel, as escrow agent, pursuant to which we
deposited 250,000 shares of our common stock and POOF deposited $250,000 with
its counsel, as escrow agent, with the right, in POOF's discretion, to purchase
the escrowed shares at any time. We also deposited in escrow another 650,000
shares as liquidated damages under which if (x) the price per share of our
common stock fell below $1.00 at any time before June 30, 2008 or (y) we did not
have a registration statement for the shares purchased (including the warrant
shares issuable upon conversion) declared effective by June 30, 2008, then POOF
could do one or more of the following: (a) take the 650,000 shares as its
damages for violation of the covenant, and (b) either purchase the remaining
250,000 shares in escrow for $250,000, or have the escrow agent return the
250,000 shares to the Company and the $250,000 in escrow to POOF. Our stock
price never went below $1.00 per share; however, we did not meet the condition
of having the registration statement for the POOF shares declared effective by
June 30, 2008. Therefore, in July 2008, POOF exercised its right to purchase the
250,000 shares in escrow for $250,000 and also received the 650,000 penalty
shares. In addition, POOF exercised the 625,000 warrants in a cashless
conversion and received 325,957 shares of our common stock. In December 2007 we
also entered into a registration rights agreement wi th POOF under which we
agreed to file a registration statement for all of our shares POOF purchased or
received under the remaining transaction documents.
POOF (i) acquired the securities covered by this prospectus in the
ordinary course of business, and (ii) at the time of such acquisition, POOF had
no agreement or understanding, directly or indirectly, with any person to
distribute such securities.
43
Other than the costs of preparing this prospectus, a registration fee to
the SEC and applicable state securities filing fees, we are not paying any costs
relating to the sales by POOF.
Selling Stockholder Common Stock Shares of Common Shares of Common Percent Owned
Beneficially Stock Being Stock Owned After after the
Owned Before Offered in the the Offering Offering
Offering Offering
Professional Offshore 2,525,000(2)(3) 2,225,957(2)(3) -0- -0-
Opportunity Fund, Ltd.(1)
c/o Professional Traders
Management, LLC
1400 Old Country Road
Suite 206
Westbury, NY 11590
(1) POOF is owned equally by Howard Berger and Marc Swickler.
(2) Includes 900,000 shares of our common stock formerly held in escrow and
released to POOF in July 2008 as follows: (i) 250,000 shares purchased for
$250,000 and (ii) 650,000 shares released to POOF for no consideration upon the
Company's failure to have the registration statement for POOF's shares of our
common stock declared effective by June 30, 2008.
(3)Includes 625,000 shares of common stock issuable upon exercise by the selling
security holder of 625,000 warrants issued by the Company at an exercise price
of $1.50 per share of common stock. On July 3, 2008 POOF exercised its right to
convert the 625,000 warrants into 325,957 shares of our common stock using a
cashless conversion formula permitted under the warrants. Accordingly, the total
number of shares covered by this registration statement has been reduced from
2,525,000 to 2,225,957 shares of our common stock, all of which are issued and
outstanding.
PLAN OF DISTRIBUTION
The selling security holder, which as used herein includes POOF, its
donees, pledgees, transferees or other successors-in-interest selling shares of
common stock or interests in shares of common stock received after the date of
this prospectus from a selling security holder as a gift, pledge, partnership
distribution or other transfer, may, from time to time, sell, transfer or
otherwise dispose of any or all of its shares of common stock or interests in
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These dispositions may
be at fixed prices, at prevailing market prices at the time of sale, at prices
related to the prevailing market price, at varying prices determined at the time
of sale, or at negotiated prices.
The selling security holder may use any one or more of the following
methods when disposing of shares or interests therein:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares
as agent, but may position and resell a portion of the block as principal to
facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
44
- privately negotiated transactions;
- short sales;
- through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
- broker-dealers may agree with the selling security holders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The selling security holder may, from time to time, pledge or grant a
security interest in some or all of the shares of common stock owned by it and,
if it defaults in the performance of its secured obligations, the pledgees or
secured parties may offer and sell the shares of common stock, from time to
time, under this prospectus, or under an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act amending the list
of selling security holder to include the pledgee, transferee or other
successors in interest as selling security holders under this prospectus. The
selling security holder also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.
In connection with the sale of the common stock or interests therein, the
selling security holder may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The selling
security holder may also sell shares of the common stock short and deliver these
securities to close out its short positions, or loan or pledge the common stock
to broker-dealers that in turn may sell these securities. The selling security
holder may also enter into option or other transactions with broker-dealers or
other financial institutions or the creation of one or more derivative
securities which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The aggregate proceeds to the selling security holder from the sale of the
common stock offered by it will be the purchase price of the common stock less
discounts or commissions, if any. The selling security holder reserves the right
to accept and, together with its agents from time to time, to reject, in whole
or in part, any proposed purchase of common stock to be made directly or through
agents. We will not receive any of the proceeds from this offering. Upon any
exercise of the warrants by payment of cash, however, we will receive the
exercise price of the warrants.
45
The selling security holders also may resell all or a portion of the
shares in open market transactions in reliance upon Rule 144 under the
Securities Act of 1933, provided that they meet the criteria and conform to the
requirements of that rule.
The selling security holder and any underwriters, broker-dealers or agents
that participate in the sale of the common stock or interests therein may be
"underwriters" within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities Act.
Selling security holders who are "underwriters" within the meaning of Section
2(11) of the Securities Act will be subject to the prospectus delivery
requirements of the Securities Act.
To the extent required, the shares of the common stock to be sold, the
names of the selling security holder, the respective purchase prices and public
offering prices, the names of any agents, dealer or underwriter, any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.
In order to comply with the securities laws of some states, if applicable,
the common stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states the common stock may
not be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.
We have advised the selling security holder that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling security holder and its affiliates.
In addition, we will make copies of this prospectus (as it may be supplemented
or amended from time to time) available to the selling security holder for the
purpose of satisfying the prospectus delivery requirements of the Securities
Act. The selling security holder may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act.
We have agreed to indemnify the selling security holder against
liabilities, including liabilities under the Securities Act and state securities
laws, relating to the registration of the shares offered by this prospectus.
We have agreed with the selling security holder to keep the registration
statement of which this prospectus constitutes a part effective until the
earlier of (1) such time as all of the shares covered by this prospectus have
been disposed of pursuant to and in accordance with the registration statement
or (2) the date on which the shares may be sold pursuant to Rule 144(k) of the
Securities Act.
46
LEGAL PROCEEDINGS
There is no material litigation pending or threatened by or against us or
any of our former or current officers or directors.
DESCRIPTION OF SECURITIES
The following information describes our common stock, our preferred stock,
options and warrants to purchase our common stock, and provisions of our amended
Articles of Incorporation and our bylaws. This description is only a summary.
You should also refer to our amended Articles of Incorporation and our bylaws,
which have been filed with the SEC. With respect to our warrants, you should
also refer to (i) the Mobilestream Acquisition Warrants,(ii) each of the Carbon
Recovery Class B, D and E Acquisition Warrants, (iii) and each other class of
warrants we have issued in connection with various private placements of our
shares.
We are presently authorized to issue 200,000,000 shares of common stock,
$0.001 par value, and 100,000,000 shares of preferred stock, $0.001 par value.
As of October 3, 2008, we have 60,920,689 shares of common stock issued and
outstanding.
Common Stock
The holders of our common stock are entitled to equal dividends and
distributions per share with respect to the common stock when, as and if
declared by the board of directors from funds legally available therefor. No
holder of any shares of common stock has a preemptive right to subscribe for any
of our securities, nor are any of our shares of common stock subject to
redemption or convertibility into any other securities. Upon liquidation,
dissolution or winding-up of our Company, and after payment of creditors and
preferred stockholders, if any, the assets will be divided pro-rata on a share
for share basis among the holders of the shares of common stock. All shares of
common stock now outstanding are fully paid, validly issued, and non-assessable.
Each share of our common stock is entitled to one vote with respect to the
election of any director or any other matter upon which stockholders are
required or permitted to vote, There is no cumulative voting. We have not paid
any dividends on our common stock because we have never had any earnings from
which dividends may be payable, and even if we have earnings, we do not
anticipate that we will be paying dividends in the foreseeable future.
Under the Carbon Recovery Acquisition Agreement and the Mobilestream
Acquisition Agreement, we were obligated to file a registration statement on
Form S-1 for the shares of our common stock issued respectively to Carbon
Recovery and Mobilestream. Accordingly, we have filed a separate registration
statement on Form S-1 (No. 333-149199) registering 11,188,996 shares of our
common stock and 11,145,225 shares of our common stock for the Carbon Recovery
and Mobilestream Acquisitions. In the same registration statement we also filed
to register shares of our common stock to be issued upon exercise of the Carbon
Recovery and Mobilestream Warrants. See below under "Warrants."
47
Preferred Stock
Under our Articles of Incorporation, the board of directors has the power,
without further action by the holders of the common stock, to designate the
relative rights and preferences of the preferred stock, and to issue the
preferred stock in one or more series as designated by the board of directors.
The designation of rights and preferences could include preferences as to
liquidation, redemption and conversion rights, voting rights, dividends or other
preferences, any of which may be dilutive of the interest of the holders of the
common stock or the preferred stock of any other series. The issuance of
preferred stock may have the effect of delaying or preventing a change in
control of the Company without further stockholder action and may adversely
affect the rights and powers, including voting rights, of the holders of the
common stock.
Currently, there are no series of preferred shares issued and outstanding,
except for 5,000 shares of 2006 Series of Convertible Preferred Stock with the
following characteristics: each share of our 2006 Series is convertible into 1/2
of 1 share of our common stock. Each share of our 2006 Series of Convertible
Preferred has 2 votes per share, voting with the common stock as a single class.
Warrants
We currently have twelve different classes of warrants outstanding as
follows: Mobilestream Acquisition Warrants and Carbon Recovery Class B, D, and E
Acquisition Warrants, the Black Diamond Warrants, the Nutmeg Mercury Warrants,
the Augustine Warrants, the Taylor Warrants, the 2008 private placement
warrants, the New Millennium Warrants and warrants we issue to our directors for
attending Board meetings, all of which may be converted into shares of our
common stock, with these characteristics:
48
CLASS NUMBER EXERCISE PRICE EXPIRATION DATE
Mobilestream(1) 3,705,867 $4.75 December 31, 2008
Carbon Recovery B(2) 3,908,340 $2.75 December 31, 2008
Carbon Recovery D(2) 1,397,600 $2.75(3) December 31, 2008
Carbon Recovery E(2) 1,397,600 $4.00(3) December 31, 2008
Black Diamond(4) 150,000 $0.80 December 31, 2009
Mercury/Nutmeg(5) 250,000 $0.80 December 31, 2009
Augustine(6) 290,000 $2.50 December 31, 2008
Augustine(6) 215,040 $2.75 December 31, 2008
Taylor(7) 1,000,000 $1.50 December 31,2008
2008 private offerings(8) 9,327,741 $2.00 September 15, 2009(9)
New Millennium(10) 76,000 $2.75 September 3, 2010
Director Warrants(11) 45,000 (11) (11)
(1) The Mobilestream Warrants were issued by the Company in connection
with its acquisition of substantially all of the assets of
Mobilestream in December 2006.
(2) The Carbon Recovery B, D and E Warrants were issued by the Company
in connection with its acquisition of substantially all of the
assets of Carbon Recovery Corporation in September 2006.
(3) The Carbon Recovery Class D Warrant and the Class E Warrant can only
be exercised in tandem with each other, i.e., one Class E Warrant
must be exercised for each Class D Warrant exercised.
(4) 300,000 warrants were issued to Black Diamond Fund LLP in connection
with settlement of claims arising from a private placement
transaction that was rescinded. 150,000 of the warrants issued to
Black Diamond Fund LLP have been exercised.
(5) 500,000 warrants were issued to Nutmeg/Mercury Fund LLP in
connection with settlement of claims in a private placement
transaction that was rescinded. 250,000 warrants issued to
Nutmeg/Mercury Fund LLP have been exercised.
(6) The Company issued the Augustine Warrants to two different
purchasers of shares of Carbon Recovery Corporation common stock
from Ms. Lois Augustine Pringle. See "Certain Relationships and
Related Transactions.
(7) The Company issued 1,000,000 Taylor Warrants in January 2008 to Mr.
Terence Taylor as part of a settlement and termination agreement for
various claims among the Company, Mr. Taylor and Tomahawk Trading
Corp. The Taylor Warrants are held in escrow and can only be
exercised under all of the following conditions: all of the warrants
must be exercised at one time for all, but not les then all, of the
shares our common stock, by payment in full of the purchase price,
and (ii) Taylor must pay to the escrow agent at the time of exercise
all other sums due and payable the settlement and termination
agreement pursuant to which the warrants were issued.
(8) The Company issued 9,327,741 warrants to purchasers of its common
stock in a private placement between January 1 to April 30, 2008.
(9) If at any time between the issuance date of the 2008 Warrants and
the expiration date, the closing price per share of our common stock
exceeds $5.00 per share on any exchange or market on which the
shares are then quoted or traded for five consecutive trading days,
then the warrant holders will have a period of thirty (30) days from
the expiration of the fifth such consecutive day to exercise their
warrants or the warrants will expire.
(10) The New Millennium Warrants were issued to New Millennium PR
Communications in connection with certain public relations
consulting work New Millennium performed for the Company for the
last 12 months.
(11) We issue warrants to purchase shares of our common stock to each
director who attends a meeting of our Board. Until September 23,
2008, we issued 3,000 such warrants for each meeting, which number
has been increased to 5,000 warrants commencing with the September
23, 2008 meeting of our directors. The exercise price for each group
of warrants is the price of a share of our common stock on the date
of each board meeting. The warrants are exercisable for a period of
five years from the date of each meeting.
49
WARRANT CHARACTERISTICS. Set forth below are certain characteristics with
respect to our different classes of warrants.
REGISTRATION RIGHTS. Certain classes of our warrants have registration
rights as follows:
(a) Under the Carbon Recovery Acquisition Agreement and the Mobilestream
Acquisition Agreement, we were obligated to file a registration statement on
Form S-1 for the Carbon Recovery Acquisition B Warrants, D Warrants and E
Warrants, and the Mobilestream Acquisition Warrants, and to register the shares
of our common stock underlying such warrant classes. Accordingly, we have filed
as part of the same registration statement on Form S-1 described above with
respect to our common stock for the Carbon Recovery and Mobilestream
acquisitions, a registration statement for all classes of the Carbon Recovery
Acquisition Warrants, the Mobilestream Acquistion Warrants and the shares of
common stock issuable upon exercise of any class of said warrants.
(b) Under the 2007 Black Diamond and Mercury Nutmeg Warrants we are
obligated to register a combined total of 400,000 warrants and 400,000 shares of
our common stock issuable upon exercise of the warrants. We filed this
registration statement on Form S-1 (No. 333-152118) on July 3, 2008.
(c) Under the Augustine Warrants we are obligated to register a total of
505,040 shares of our common stock issuable upon exercise of the warrants. We
filed this registration statement on Form S-1 (No. 333-152118) on July 3, 2008.
(d) Under the Taylor Warrants we are obligated to register a total of
1,000,000 shares of our common stock issuable upon exercise of the warrants. We
filed this registration statement on Form S-1 (No. 333-152118) on July 3, 2008.
(e) Our remaining classes of warrants do not have registration rights.
Transferability. The warrants are not listed for trading on any exchange
or for quotation on any Nasdaq Market, the OTC Bulletin Board or the Pink
Sheets, but are transferable privately or in accordance with the terms and
conditions of Rule 144.
Adjustments. The exercise price and the number of shares of our common
stock issuable upon the exercise of the warrants are subject to adjustment from
time to time as set forth hereinafter.
50
(a) Stock dividends, Stock Splits, Reclassification. If we pay a dividend
or make a distribution on our common stock in shares of common stock, subdivide
our outstanding shares of common stock into a greater number of shares or
combine our outstanding shares of common stock into a smaller number of shares
or issue by reclassification of our outstanding shares of common stock any
shares of our capital stock (including any such reclassification in connection
with a consolidation or merger in which we are the continuing corporation), then
the number of shares of common stock issuable upon the exercise of the warrants
and the exercise price then in effect shall be adjusted by us so that the holder
of the warrant thereafter exercising his, her or its warrants shall be entitled
to receive the number of shares of our common stock or other capital stock which
the holder of the warrant would have received if the warrant had been exercised
immediately prior to such event upon payment of the exercise price that has been
adjusted to reflect a fair allocation of the economics of such event to the
holder of the warrant.
(b) Reorganization, Reclassification, Consolidation, Merger or Sale of all
or Substantially all of our Assets. If any capital reorganization,
reclassification of our capital stock, our consolidation or merger with another
corporation in which we are not the survivor, or sale, transfer or other
disposition of all or substantially all of our assets to another corporation
shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition,
lawful and adequate provision shall be made whereby each holder of warrants
shall thereafter have the right to purchase and receive in lieu of shares of our
common stock, securities or assets as would have been issuable or payable with
respect to or in exchange for a number of shares of our common stock for which
the holder's warrants were exercisable immediately prior to such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition.
(c) Distribution of indebtedness or assets other than cash or shares of
our common stock. In case we fix a payment date for the making of a distribution
to all holders of common stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness or assets (other than cash dividends
or cash distributions payable out of consolidated earnings or earned surplus or
dividends or distributions for stock splits and stock dividends), or
subscription rights or warrants, the exercise price then in effect will be
adjusted by multiplying the exercise price in effect immediately prior to such
payment date by a fraction, (x) the numerator of which shall be the total number
of shares of our common stock outstanding multiplied by the market price per
share of our common stock immediately prior to such payment date, less the fair
market value (as determined by our Board of Directors in good faith) of the
assets or evidences of indebtedness so distributed, or of related subscription
rights or warrants, and (y) the denominator of which shall be the total number
of shares of our common stock outstanding multiplied by such market price per
share of common stock immediately prior to such payment date.
51
Shares Eligible for Future Sale
As of October 3, 2008, we had 60,920,689 shares of common stock
outstanding. That number does not include (i) 200,000 shares of common stock
underlying outstanding options, $1.00 per share, (ii) 110,000 shares of common
stock underlying outstanding notes in the aggregate principal amount of
$110,000, which are convertible into our common stock at a rate of $1.00 per
share, (iii) 10,409,407 shares of common stock underlying the Mobilestream
Acquisition Warrants and the Carbon Recovery B, D and E Warrants that are
covered by a separate registration statement we have filed with the Commission,
(iv) 400,000 shares of our common stock underlying the Black Diamond and
Mercury/Nutmeg Warrants; (v) 505,040 shares of our common stock underlying the
Augustine Warrants; (vi) 1,000,000 shares of our common stock underlying the
Taylor Warrants; (vii) 9,327,741 shares of our common stock underlying the 2008
private placement warrants; (viii) 76,000 shares of our common stock underlying
the New Millennium Warrants and (ix) 45,000 shares of our common stock
underlying the warrants issued to our directors.
Freely Tradable Shares After Offering.
As of October 3, 2008, excluding the shares that are covered by this
prospectus, 47,614,523 of our currently outstanding shares are deemed
"restricted" securities, and 13,306,437 shares of our common stock can be
publicly resold without restriction. Upon the resale of the 2,225,957 currently
outstanding shares of our common stock covered by this prospectus, all of these
shares will also be freely tradable without restriction or limitation under the
Securities Act. As a result, after the completion of this offering, 15,532,394
shares of our common stock will be tradable without restriction under the
Securities Act.
Rule 144. In general, under Rule 144 as currently in effect, a person (or
persons whose shares are aggregated) who has beneficially owned restricted
securities for at least one year, including persons who may be deemed our
"affiliates," as that term is defined under the Securities Act, would be
entitled to sell within any three month period a number of shares that does not
exceed the greater of 1% of the then outstanding shares (approximately 593,058
shares if the currently outstanding warrants and options are not exercised) or
the average weekly trading volume of shares during the four calendar weeks
preceding such sale. Sales under Rule 144 are subject to certain manner-of-sale
provisions, notice requirements and the availability of current public
information about the company. A person who has not been our affiliate at any
time during the three months preceding a sale, and who has beneficially owned
his shares for at least six months, would be entitled under Rule 144(k) to sell
such shares without regard to any volume limitations under Rule 144. Subject to
certain volume limitations and other conditions, all of the currently
outstanding unregistered shares are eligible for public resale under Rule 144.
The availability of Rule 144 to our holders of restricted securities is,
however, conditioned on various factors, including the availability of certain
public information concerning our company.
Form S-8 Registration of Shares. We have registered 2,500,000 shares of
our common stock on Form S-8 that are eligible for sale under our 2008 Employees
Compensation Plan. Accordingly, except for shares held by affiliates of our
Company, these shares may be resold in the public market without restriction.
52
TRANSFER AGENT
Our transfer agent is Olde Monmouth Stock Transfer Co., Inc., 200 Memorial
Parkway, Atlantic Highlands, New Jersey 07716.
EXPERTS
The financial statements for the years ended December 31, 2007 and 2006
included in this prospectus have been audited by Bagell, Josephs, Levine &
Company, L.L.C. to the extent and for the periods indicated in their report
thereon, which report included an explanatory paragraph concerning our Company's
ability to continue as a going concern. Such financial statements have been
included in this prospectus and registration statement in reliance upon the
report of Bagell, Josephs, Levine & Company, L.L.C. and upon the authority of
such firm as experts in auditing and accounting.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
The Nevada Private Corporations Law generally provides that a corporation
is empowered to indemnify any person who is made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that he is
or was a director, officer, employee or agent of the corporation or is or was
serving, at the request of the corporation, in any of such capacities of another
corporation or other enterprise, if such director, officer, employee or agent
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Under Nevada law, a director or officer may not be indemnified
where his act or failure to act constitutes a breach of is fiduciary duty and
such breach involved intentional misconduct, fraud, or a knowing violation of
law. This statute describes in detail the right of corporations such as our
Company to indemnify any such person.
Our Articles of Incorporation and our By-laws provide generally for
mandatory indemnification of our directors and officers to the fullest extent
permitted under the Nevada Private Corporations Law if they have been successful
in the defense of any claim asserted against them, and permissive
indemnification for any claim asserted against them if it appears they acted in
good faith and in a manner not opposed to the best interests of the Company. We
are also permitted to indemnify all other persons whom we requested to act on
behalf of the Company in the same manner. Our By-Laws permit us to advance
expenses on behalf of any person, including officers and directors, with regard
to any action or proceeding, provided that we receive an undertaking to repay
all such advances if it is determined that such person was not entitled to be
indemnified by us.
53
We have entered into indemnification agreements with our directors and
officers. The agreements provide that we will indemnify the indemnitee to the
fullest extent permitted by applicable law against expenses, including
reasonable attorneys' fees, judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with any civil
or criminal action or administrative proceeding arising out of his performance
of his duties as a director or officer of our company other than an action
initiated by a director or officer. Such indemnification is available if the
indemnitee acted in good faith and in a manner he reasonably believed to be in,
or not opposed to, our best interests, and, with respect to any criminal action,
had no reasonable cause to believe his conduct was unlawful.
Under each indemnification agreement, the entitlement of a director or
officer to indemnification shall be determined by a majority vote of a quorum of
disinterested directors, or if such quorum either is not obtainable or so
directs, by independent counsel or by our stockholders, as determined by such
quorum of disinterested directors. Under certain circumstances, a party to the
indemnification agreement will be conclusively presumed to have met the
applicable statutory standard of conduct unless our board of directors,
stockholders or independent legal counsel determines that the relevant standard
has not been met. If a change of control of our company has occurred, the
entitlement of such director or officer to indemnification shall be determined
by independent counsel selected by such director or officer, unless such
director or officer requests that either the board of directors or the
stockholders make such determination.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
LEGAL MATTERS
Sol V. Slotnik, P.C., New York, New York, has provided us with an opinion
concerning legality of the securities being registered by this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We have filed electronically with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act for the common stock
and warrants offered under this prospectus. We are subject to the informational
requirements of the Exchange Act, and file annual reports, quarterly reports,
special reports, proxy statements and other information with the Commission. The
reports, proxy statements and other information we file can be read and copied
at prescribed rates at the Public Reference Room of the Commission at Station
Place, 100 F Street, N.E., Washington, D.C. 20549 on official business days
during the hours of 10 a.m. to 3 p.m. Information about the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. The Commission also maintains a web site http://www.sec.gov that
contains our reports, proxy statements, information statements and other
information concerning Global Resource in the registration statement and its
exhibits, which we have filed with the Commission under the Securities Act and
to which reference is made.
54
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm.................... F-2
Consolidated Balance Sheets as of December 31, 2007 and 2006............... F-4
Consolidated Statements of Operations (with Cumulative Totals Since
Inception) for the Years Ended December 31, 2007 and 2006.................. F-5
Consolidated Statements of Cash Flows (with Cumulative Totals Since
Inception) for the Years Ended December 31, 2007 and 2006.................. F-6
Consolidated Statements of Stockholders' Equity(Deficit) for the
Years Ended December 31, 2007 and 2006..................................... F-7
Notes to Consolidated Financial Statements for the
Years Ended December 31, 2007 and 2006..................................... F-18
Condensed Balance Sheets at June 30, 2008 (unaudited) and
December 31, 2007 (audited) .............................................. F-35
Condensed Statement of Operations (unaudited) (with Cumulative
Totals Since Inception) for six months ended
June 30, 2008 and 2007.................................................... F-36
Condensed Statement of Cash Flows (unaudited) (with Cumulative
Totals Since Inception) for six months ended
June 30, 2008 and 2007.................................................... F-37
Condensed Statement of Stockholders' Equity (unaudited) at
June 30, 2008............................................................. F-38
Notes to Condensed Financial Statements (unaudited) for six
months ended June 30, 2008................................................ F-56
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.
Certified Public Accountants
406 Lippincott Drive, Ste. J
Marlton, NJ 08053-4168
(856) 346-2828 Fax (856) 396-0022
Board of Directors and Stockholders
Global Resource Corporation
408 Bloomfield Drive, #3
West Berlin, NJ 08091-2415
We have audited the accompanying consolidated balance sheet of Global Resource
Corporation, a development stage enterprise, as of December 31, 2007, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the two-year period ended December 31, 2007 and
the period from July 19, 2002 (Date of Inception) through December 31, 2007.
Global Resource Corporation's management is responsible for these financial
statements. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Global Resource
Corporation as of December 31, 2007, and the results of its operations and its
cash flows for each of the years in the two-year period ended December 31, 2007
and the period from July 19, 2002 (Date of Inception) through December 31, 2007
in conformity with accounting principles generally accepted in the United States
of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 8 to the financial
statements, unless the Company is successful in generating new sources of
revenue, or obtaining debt or equity financing, or restructuring its business,
the Company is likely to deplete its working capital during 2008. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plan in regard to these matters is also described in Note
8. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
As discussed in Note 15 to the financial statements, the accompanying financial
statements have been restated.
/S/ BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.
Bagell, Josephs, Levine & Company, L.L.C.
Marlton, NJ 08053
F-2
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2007
ASSETS Year Ended Year Ended
------ December 31, December 31,
2007 2006
------------ ------------
(Restated) (Restated)
CURRENT ASSETS
Cash $ 780,425 $ 1,770,002
Prepaid Services 1,808,042 --
------------ ------------
TOTAL CURRENT ASSETS 2,588,467 1,770,002
------------ ------------
Fixed Assets, Net of depreciation 373,135 488,940
------------ ------------
OTHER ASSETS
Notes Receivable net - (reserved $650,000 for doubtful collection) --
Investments & Deposits on Investments 74,860 145,000
------------ ------------
TOTAL OTHER ASSETS 74,860 145,000
TOTAL ASSETS $ 3,036,462 $ 2,403,942
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 119,588 $ 114,047
Current portion - loan payable - equipment 40,964 36,929
Liabilities to be settled in common stock 201,342
Loan Payable - to officer of company 150,000 --
------------ ------------
TOTAL CURRENT LIABILITIES 310,552 352,318
------------ ------------
LONG-TERM LIABILITIES
Loan payable - equipment, net of current portion 51,629 92,952
------------ ------------
TOTAL LIABILITIES 362,181 445,270
------------ ------------
STOCKHOLDERS' EQUITY
Preferred Stock A - $.001 par value 100,000,000 shares authorized,
35,236,188 issued and outstanding at Dec. 31, 2007
Preferred Stock B - $.001 par value 1,000 shares authorized and issued
at Dec. 31, 2007
Common stock, $.001 par value; 200,000,000 shares authorized,
30,263,330 30,358 issued 25,113 and outstanding at Dec. 31, 2007
Subscription receivable (185,693) (660,693)
Additional paid-in capital 20,279,849 9,491,127
Deficit accumulated in the development stage (17,418,997) (6,932,111)
------------ ------------
2,740,754 1,958,672
Treasury Stock (66,473)
MOVED CONTRA PREPAID TO ASSET AND ELIMINATED DEFERRED COMPENSATION
------------ ------------
Total stockholders' equity 2,674,281 1,958,672
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,036,462 $ 2,403,942
============ ============
The accompanying notes are an integral part of these financial statements.
F-3
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Operations
(With Cumulative Totals Since Inception)
Twelve Months Ended July 19, 2002
------------------- (Inception)
to
December 31 December 31 December 31,
2007 2006 2007
------------ ------------ ------------
(Restated) (Restated) (Restated)
REVENUES $ -- $ -- $ --
COST OF SALES -- --
------------ ------------ ------------
GROSS PROFIT -- -- --
------------ ------------ ------------
OPERATING EXPENSES
Professional fees -Consulting, legal, other 690,292 682,085 2,682,446
Investment Banking Fees and investor relations 4,813,322 1,078,936 5,892,258
Other general and administrative expenses 4,670,749 2,417,107 8,329,961
Research and Development 222,530 136,887 409,417
------------ ------------ ------------
TOTAL OPERATING EXPENSES 10,396,893 4,315,015 17,314,082
------------ ------------ ------------
LOSS BEFORE OTHER INCOME (EXPENSE) (10,396,893) (4,315,015) (17,314,082)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Loss on deposit / real estate - net (100,000) 14,324 (172,712)
Interest expense (23,322) (13,428) (38,491)
Interest income 33,329 68,172 106,399
------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) (89,993) 69,068 (104,804)
------------ ------------ ------------
NET LOSS BEFORE PROVISION FOR INCOME TAXES (10,486,886) (4,245,947) (17,418,886)
PROVISION FOR INCOME TAXES -- 111 111
------------ ------------ ------------
NET LOSS APPLICABLE TO COMMON SHARES $(10,486,886) $ (4,246,058) $(17,418,997)
============ ============ ============
BASIC AND DILUTED LOSS
PER SHARE $ (0.40) $ (0.09)
============ ============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 26,489,850 47,939,917
============ ============
The accompanying notes are an integral part of these financial statements.
F-4
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Cash Flows
(With Cumulative Totals Since Inception)
July 19, 2002
Twelve Months Ended (Inception)
----------------------------- to
December 31, December 31, December 31,
2007 2006 2007
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES (Restated) (Restated) (Restated)
Net loss $ (10,486,886) $(4,246,058) $ (17,418,997)
------------ ------------ ------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH (USED IN)
OPERATING ACTIVITIES:
Depreciation 93,864 39,912 164,800
Preferred stock issued for services 400,000 -- 400,000
Common stock issued for services 7,107,122 64,746 7,704,168
Amortization of deferred compensation 109,000 109,000 327,000
Impairment of investment in real estate 25,900
Allowance reserve for note payable 650,000 650,000
Loss on sale of fixed asset 11,775 -- 11,775
Forfeit loss on real estate 100,000 -- 187,035
Common stock issued as charitable contribution 50,000
Retained deficit from merger under common control (Mobilestream) 1,484,158 1,494,658
CHANGES IN ASSETS AND LIABILITIES
(Increase) in prepaid expenses -- --
(Increase) decrease in deposits -- 16,911 --
(Increase) in notes receivable (650,000) (650,000)
(Decrease) in accounts receivable --
(Decrease) in accounts payable 5,541 36,336 223,758
------------ ------------ ------------
TOTAL ADJUSTMENTS 7,827,302 1,751,063 10,589,094
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (2,659,584) (2,494,995) (6,829,903)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (24,033) (336,912) (435,162)
Proceeds from sale of fixed assets 34,200 34,200
Proceeds from sale of real estate -- 617,864
Purchase of investment (29,860) (90,000) (129,860)
Cash acquired with merger under common control (Mobilestream) 1,678,362 1,678,362
Investment in real estate, net -- -- (80,800)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (19,693) 1,251,450 1,684,604
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for cash 1,168,461 2,810,877 5,692,345
Liability for stock to be issued 200,367 311,147
Proceeds from stock subscription receivable 475,000 585,000 1,060,000
(Increase) decrease in stock subscription receivable (1,167,510) (1,245,692)
Proceeds from officer's loan 150,000 188,550
Repayment of officer's loan (17,050) (38,550)
Purchase of Treasury Stock (66,473) (66,473)
Proceeds from loan payable 75,000 101,316
Repayment of loan payable (37,288) (32,825) (76,919)
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,689,700 2,453,859 5,925,724
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (989,577) 1,210,314 780,425
CASH AND CASH EQUIVALENTS
- BEGINNING OF YEAR 1,770,002 559,688 --
------------ ------------ ------------
CASH AND CASH EQUIVALENTS
- END OF YEAR $ 780,425 $ 1,770,002 $ 780,425
============ ============ ============
SUPPLEMENTAL DISCLOSURES:
CASH ACTIVITIES:
INTEREST PAID $ 22,134 $ 14,743 $ 40,877
INCOME TAX PAID $ -- $ -- $ --
NON-CASH ACTIVITIES SEE FOOTNOTE 16
The accompanying notes are an integral part of these financial statements.
F-5
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
At December 31, 2007
PREFERRED STOCK COMMON STOCK
------------------------------------- ----------------------------
PREFERRED PAR VALUE $.001 COMMON PAR VALUE $.001
SHARES $ AMOUNT SHARES $ AMOUNT
---------- -------- ---------- --------------
BALANCE - JULY 19, 2002 (INCEPTION) -- $ --
Issuance of initial founders' shares, September 9, 2002
2002, net of subsequent cancellations 2,555,000 --
Common stock issued for services rendered, in September
2002, at $0.472 per share 1,000,000 --
Common stock issued for cash, November 2002 at $0.50 per share 29,000 --
Common stock issued for services rendered, in November and
December 2002, at $0.50 per share 13,600 --
Net loss for the period July 19, 2002 (Inception)
through December 31, 2002, as originally stated -- --
Prior period adjustment, Note 15 -- -- -- --
---------- -------- ---------- ----------
BALANCE AT DECEMBER 31, 2002 -- -- 3,597,600 --
---------- -------- ---------- ----------
Re-issuance of founders' shares - July 2003 1,455,000 --
Common stock issued for cash, from January to
December 2003 at $0.50 per share 519,800 --
Issuance of subscription receivable from shareholders -- --
Net loss for the year ended December 31, 2003,
as originally stated -- --
Prior period adjustment, Note 15 -- -- -- --
---------- -------- ---------- ----------
BALANCE AT DECEMBER 31, 2003 -- -- 5,572,400 --
---------- -------- ---------- ----------
Common stock issued for cash, from January to December
2004 at $0.6027 per share 917,645 --
Common stock issued in exchange for real estate in Aug.
and Sept. 2004 at $1.00 per share 650,000 --
Common stock issued for compensation on October 12, 2004
at $1.00 per share 545,000 --
Common stock issued as charitable contribution on
October 12, 2004 at $1.00 per share 50,000 --
Initial founders' shares cancelled on October 28, 2004 (250,000) --
Issuance of subscription receivable from shareholders -- --
Net loss for the year ended December 31, 2004 -- -- -- --
---------- -------- ---------- ----------
BALANCE AT DECEMBER 31, 2004 -- -- 7,485,045 --
---------- -------- ---------- ----------
[table continued]
The accompanying notes are an integral part of these financial statements.
F-6
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
At December 31, 2007
(Restated) (Restated)
DEFICIT
ADDITIONAL ACCUMULATED
PAID-IN DURING THE DEFERRED
CAPITAL DEVELOPMENT STAGE COMPENSATION
------------ ------------- ------------
BALANCE - JULY 19, 2002 (INCEPTION) $ -- $ -- $ --
Issuance of initial founders' shares, September 9, 2002
2002, net of subsequent cancellations -- -- --
Common stock issued for services rendered, in September
2002, at $0.472 per share 472,000 -- --
Common stock issued for cash, November 2002 at $0.50 per share 14,500 -- --
Common stock issued for services rendered, in November and
December 2002, at $0.50 per share 6,800 -- --
Net loss for the period July 19, 2002 (Inception)
through December 31, 2002, as originally stated -- (2,008,508) --
Prior period adjustment, Note 15 -- 1,500,000 --
------------ ------------- -----------
BALANCE AT DECEMBER 31, 2002 493,300 (508,508) --
------------ ------------- -----------
Re-issuance of founders' shares - July 2003 -- -- --
Common stock issued for cash, from January to
December 2003 at $0.50 per share 259,900 -- --
Issuance of subscription receivable from shareholders -- -- --
Net loss for the year ended December 31, 2003,
as originally stated -- (931,159) --
Prior period adjustment, Note 15 -- 727,500 --
------------ ------------- -----------
BALANCE AT DECEMBER 31, 2003 753,200 (712,167) --
------------ ------------- -----------
Common stock issued for cash, from January to December
2004 at $0.6027 per share 553,105 -- --
Common stock issued in exchange for real estate in Aug.
and Sept. 2004 at $1.00 per share 650,000 -- --
Common stock issued for compensation on October 12, 2004
at $1.00 per share 545,000 -- (545,000)
Common stock issued as charitable contribution on
October 12, 2004 at $1.00 per share 50,000 -- --
Initial founders' shares cancelled on October 28, 2004 -- -- --
Issuance of subscription receivable from shareholders -- -- --
Net loss for the year ended December 31, 2004 -- (672,219) --
------------ ------------- -----------
BALANCE AT DECEMBER 31, 2004 2,551,305 (1,384,386) (545,000)
------------ ------------- -----------
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-7
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
At December 31, 2007
(Restated)
SUBSCRIPTION TREASURY
RECEIVABLE STOCK TOTAL
---------- --------- ------------
BALANCE - JULY 19, 2002 (INCEPTION) $ -- $ --
Issuance of initial founders' shares, September 9, 2002
2002, net of subsequent cancellations -- --
Common stock issued for services rendered, in September
2002, at $0.472 per share -- 472,000
Common stock issued for cash, November 2002 at $0.50 per share -- 14,500
Common stock issued for services rendered, in November and
December 2002, at $0.50 per share -- 6,800
Net loss for the period July 19, 2002 (Inception)
through December 31, 2002, as originally stated -- (2,008,508)
Prior period adjustment, Note 15 -- 1,500,000
---------- --------- -----------
BALANCE AT DECEMBER 31, 2002 -- (15,208)
---------- --------- -----------
Re-issuance of founders' shares - July 2003 -- --
Common stock issued for cash, from January to
December 2003 at $0.50 per share -- 259,900
Issuance of subscription receivable from shareholders (14,340) (14,340)
Net loss for the year ended December 31, 2003,
as originally stated -- (931,159)
Prior period adjustment, Note 15 727,500
---------- --------- -----------
BALANCE AT DECEMBER 31, 2003 (14,340) 26,693
---------- --------- -----------
Common stock issued for cash, from January to December
2004 at $0.6027 per share -- 553,105
Common stock issued in exchange for real estate in Aug.
and Sept. 2004 at $1.00 per share -- 650,000
Common stock issued for compensation on October 12, 2004
at $1.00 per share -- --
Common stock issued as charitable contribution on
October 12, 2004 at $1.00 per share -- 50,000
Initial founders' shares cancelled on October 28, 2004 -- --
Issuance of subscription receivable from shareholders (74,240) (74,240)
Net loss for the year ended December 31, 2004 -- (672,219)
---------- --------- -----------
BALANCE AT DECEMBER 31, 2004 (88,580) 533,339
---------- --------- -----------
The accompanying notes are an integral part of these financial statements.
F-8
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
At December 31, 2007
PREFERRED STOCK COMMON STOCK
--------------------------------- ----------------------------
PREFERRED PAR VALUE $.001 COMMON PAR VALUE $.001
SHARES $ AMOUNT SHARES $ AMOUNT
---------- --------------- -------- -------------
Common stock issued for cash, from January to December
2005 at $1.2264 per share average for year 745,655 --
Common stock issued to acquire technology with zero value 37,500,000 --
Common stock issued in exchange for real estate in on
January 18, 2005 at $1.00 per share 80,800 --
Common stock issued for services rendered, in Sept., Oct.
and November 2005, at $1.00 per share 53,500 --
Common stock issued for payment of debts on March 11,2005
at $1.00 per share 1,087 --
Stock subscriptions received, net -- --
Amortization of deferred compensation -- --
Net loss for the year ended December 31, 2005 -- -- -- --
---------- -------- ---------- ----------
BALANCE AT DECEMBER 31, 2005 -- -- 45,866,087 --
---------- -------- ---------- ----------
Common stock issued for cash, from January to December
2006 at $1.0088 per share average for year 2,786,286 --
Stock subscriptions received, net -- --
Reclass deferred compensation due adoption SFAS 123r
Amortization of deferred compensation -- --
Common stock issued for services rendered, on September 22,
2006, at $1.044 per share 14,123 --
Common stock issued in exchange for investment in real
estate in September 2006 at $2.00 per share 22,500 --
Effect of reverse merger September 23, 2006 72,241 48,761
Common stock issued for conversion of debt on
September 23, 2005 at $0.045 per share 2,681,837 2,682
Common stock issued for services rendered, on
September 23, 2006, at $2.00 per share 25,000 25
Common stock issued for merger with Mobilestream Oil, Inc. on
December 31, 2006, at $0.255 per share 11,145,255 11,145
Cancellation of shares for merger with Mobilestream Oil, Inc. (37,500,000) (37,500)
Preferred convertible stock issued for merger with
Mobilestream Oil, Inc. 2 for 1 convertible into common,
on December 31, 2006 35,236,188 $ 35,236
Net loss for the year ended December 31, 2006 -- -- -- --
---------- -------- ---------- ----------
BALANCE AT DECEMBER 31, 2006 35,236,188 $ 35,236 25,113,329 $ 25,113
========== ======== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-9
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
At December 31, 2007
(Restated) (Restated)
DEFICIT
ADDITIONAL ACCUMULATED
PAID-IN DURING THE DEFERRED
CAPITAL DEVELOPMENT STAGE COMPENSATION
------------- ----------------- ------------
Common stock issued for cash, from January to December
2005 at $1.2264 per share average for year -- -- --
Common stock issued to acquire technology with zero value -- -- --
Common stock issued in exchange for real estate in on
January 18, 2005 at $1.00 per share -- -- --
Common stock issued for services rendered, in Sept., Oct.
and November 2005, at $1.00 per share -- -- --
Common stock issued for payment of debts on March 11,2005
at $1.00 per share -- -- --
Stock subscriptions received, net -- -- 10,398
Amortization of deferred compensation -- 109,000 --
Net loss for the year ended December 31, 2005 (1,291,169) -- --
------------- ----------- ----------
BALANCE AT DECEMBER 31, 2005 (2,675,555) (436,000) (78,182)
------------- ----------- ----------
Common stock issued for cash, from January to December
2006 at $1.0088 per share average for year -- -- --
Stock subscriptions received, net -- -- (582,511)
Reclass deferred compensation due adoption SFAS 123r 436,000
Amortization of deferred compensation -- --
Common stock issued for services rendered, on September 22,
2006, at $1.044 per share -- -- --
Common stock issued in exchange for investment in real
estate in September 2006 at $2.00 per share -- -- --
Effect of reverse merger September 23, 2006 -- -- --
Common stock issued for conversion of debt on
September 23, 2005 at $0.045 per share -- -- --
Common stock issued for services rendered, on
September 23, 2006, at $2.00 per share -- -- --
Common stock issued for merger with Mobilestream Oil, Inc. on
December 31, 2006, at $0.255 per share (10,498)
Cancellation of shares for merger with Mobilestream Oil, Inc.
Preferred convertible stock issued for merger with
Mobilestream Ol, Inc. 2 for 1 convertible into common,
on December 31, 2006
Net loss for the year ended December 31, 2006 (4,246,058) -- --
------------- ----------- ----------
BALANCE AT DECEMBER 31, 2006 $ (6,932,111) $ -- $ (660,693)
============= =========== ==========
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-10
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
At December 31, 2007
(Restated)
SUBSCRIPTION TREASURY
RECEIVABLE STOCK TOTAL
---------- --------- ------------
Common stock issued for cash, from January to December
2005 at $1.2264 per share average for year -- 914,507
Common stock issued to acquire technology with zero value -- --
Common stock issued in exchange for real estate in on
January 18, 2005 at $1.00 per share -- 80,800
Common stock issued for services rendered, in Sept., Oct.
and November 2005, at $1.00 per share -- 53,500
Common stock issued for payment of debts on March 11,2005
at $1.00 per share -- 1,087
Stock subscriptions received, net 10,985 10,398
Amortization of deferred compensation -- 109,000
Net loss for the year ended December 31, 2005 -- (1,291,169)
--------- -----------
BALANCE AT DECEMBER 31, 2005 (78,182) 411,462
--------- ---------- -----------
Common stock issued for cash, from January to December
2006 at $1.0088 per share average for year -- 2,810,877
Stock subscriptions received, net (582,511) (582,511)
Reclass deferred compensation due adoption SFAS 123r
Amortization of deferred compensation 109,000
Common stock issued for services rendered, on September 22,
2006, at $1.044 per share -- 14,746
Common stock issued in exchange for investment in real
estate in September 2006 at $2.00 per share -- 45,000
Effect of reverse merger September 23, 2006 -- (120,683)
Common stock issued for conversion of debt on
September 23, 2005 at $0.045 per share -- 120,682
Common stock issued for services rendered, on
September 23, 2006, at $2.00 per share -- 50,000
Common stock issued for merger with Mobilestream Oil, Inc. on
December 31, 2006, at $0.255 per share -- 2,842,783
Cancellation of shares for merger with Mobilestream Oil, Inc. -- --
Preferred convertible stock issued for merger with
Mobilestream Oil, Inc. 2 for 1 convertible into common,
on December 31, 2006 -- 503,374
Net loss for the year ended December 31, 2006 -- -- (4,246,058)
--------- ---------- -----------
BALANCE AT DECEMBER 31, 2006 $ -- $ -- $ 1,958,672
========== ========== ===========
The accompanying notes are an integral part of these financial statements.
F-11
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
At December 31, 2007
PREFERRED STOCK COMMON STOCK
------------------------------- ----------------------------
PREFERRED PAR VALUE $.001 COMMON PAR VALUE $.001
SHARES $ AMOUNT SHARES $ AMOUNT
---------- --------------- -------- --------------
Common stock shares issued for cash:
Common stock issued for cash in March 2007,
at $0.30 per share 17,500 17
Common stock issued for cash from April to
June 30, 2007, at $0.32 per share, regulation S offering 499,564 500
Common stock issued for cash on October 25, 2007,
at $2.00 per share 2,500 3
Common stock issued for cash on December 20, 2007,
at $1.00 per share 1,000,000 1,000
Common stock issued for Stock to be issued (liability)
on March 7, 2007, at $1.0777 per share 186,822 187
Stock subscriptions received, net -- --
Amortization of deferred compensation
Common Stock Shares issued for services rendered:
Common stock issued for services rendered, on
March 19, 2007, at $1.00 per share 5,000 5
Common stock issued for services rendered, on
March 19, 2007, at $0.50 per share 20,000 20
Common stock issued for services rendered, on
March 20, 2007, at $0.50 per share 11,000 11
Common stock issued for services rendered, on
April 20, 2007, at $1.38 per share 250,000 250
Common stock issued for services rendered, on
May 30, 2007, at $1.05 per share 3,417 3
Common stock issued for services rendered, on
June 1, 2007, at $1.36 per share 194,500 195
Common stock issued for services rendered, on
July 9, 2007, at $1.00 per share 4,700 5
Common stock issued for services rendered,
on July 18, 2007, at $0.80 per share 37,500 37
Common stock issued for services rendered,
on August 1, 2007, at $4.43 per share 100,000 100
Common stock issued for services rendered,
on August 19, 2007, at $4.50 per share 250,000 250
Common stock issued for services rendered,
on August 30, 2007, at $2.27 per share 3,745 4
Common stock issued for services rendered, on
August 30, 2007, at $0.69 per share 30,041 30
Common stock issued for services rendered,
on August 31, 2007, at $3.41 per share 1,000 1
Common stock issued for services rendered, on
August 31, 2007, at $3.41 per share 10,000 10
Common stock issued for services rendered, on
October 1, 2007, at $2.60 per share 300,000 300
Common stock issued for services rendered,
on October 9, 2007, at $2.69 per share 47,579 48
Common stock issued for services rendered,
on October 22, 2007, at $1.86 per share 50,000 50
Common stock issued for services rendered,
on October 29 2007, at $2.25 per share 150,000 150
Common stock issued for services rendered,
on November 9, 2007, at $3.23 per share 130,000 130
Common stock issued for services rendered,
on November 19, 2007, at $3.50 per share 50,000 50
Common stock issued for services rendered,
on November 26, 2007, at $3.01 per share 30,000 30
Common stock issued for services rendered,
on December 3, 2007, at $2.00 per share 45,094 45
Common stock issued for services rendered,
on December 4, 2007, at $3.15 per share 50,000 50
Common stock issued for services rendered,
on December 11, 2007, at $2.50 per share 200,000 200
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-12
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
At December 31, 2007
(Restated) (Restated)
DEFICIT
ADDITIONAL ACCUMULATED
PAID-IN DURING THE DEFERRED
CAPITAL DEVELOPMENT STAGE COMPENSATION
------------- ----------------- -------------
Common stock shares issued for cash:
Common stock issued for cash in March 2007,
at $0.30 per share 5,233
Common stock issued for cash from April to
June 30, 2007, at $0.32 per share, Regulation S offering 157,711
Common stock issued for cash on October 25, 2007,
at $2.00 per share 4,997
Common stock issued for cash on December 20, 2007,
at $1.00 per share 999,000
Common stock issued for Stock to be issued (liability)
on March 7, 2007, at $1.0777 per share 201,156
Stock subscriptions received, net -- -- --
Amortization of deferred compensation 109,000
Common Stock Shares issued for services rendered:
Common stock issued for services rendered, on
March 19, 2007, at $1.00 per share 4,995
Common stock issued for services rendered, on
March 19, 2007, at $0.50 per share 9,980
Common stock issued for services rendered, on
March 20, 2007, at $0.50 per share 10,989
Common stock issued for services rendered, on
April 20, 2007, at $1.38 per share 344,750
Common stock issued for services rendered, on
May 30, 2007, at $1.05 per share 3,301
Common stock issued for services rendered, on
June 1, 2007, at $1.36 per share 264,325
Common stock issued for services rendered, on
July 9, 2007, at $1.00 per share 4,695
Common stock issued for services rendered,
on July 18, 2007, at $0.80 per share 29,963
Common stock issued for services rendered,
on August 1, 2007, at $4.43 per share 442,900
Common stock issued for services rendered,
on August 19, 2007, at $4.50 per share 1,124,750
Common stock issued for services rendered,
on August 30, 2007, at $2.27 per share 8,496
Common stock issued for services rendered, on
August 30, 2007, at $0.69 per share 20,698
Common stock issued for services rendered,
on August 31, 2007, at $3.41 per share 3,409
Common stock issued for services rendered, on
August 31, 2007, at $3.41 per share 34,090
Common stock issued for services rendered, on
October 1, 2007, at $2.60 per share 779,700
Common stock issued for services rendered,
on October 9, 2007, at $2.69 per share 127,702
Common stock issued for services rendered,
on October 22, 2007, at $1.86 per share 92,950
Common stock issued for services rendered,
on October 29 2007, at $2.25 per share 337,350
Common stock issued for services rendered,
on November 9, 2007, at $3.23 per share 419,770
Common stock issued for services rendered,
on November 19, 2007, at $3.50 per share 174,950
Common stock issued for services rendered,
on November 26, 2007, at $3.01 per share 90,270
Common stock issued for services rendered,
on December 3, 2007, at $2.00 per share 89,955
Common stock issued for services rendered,
on December 4, 2007, at $3.15 per share 157,450
Common stock issued for services rendered,
on December 11, 2007, at $2.50 per share 499,800
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-13
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
At December 31, 2007
(Restated)
SUBSCRIPTION TREASURY
RECEIVABLE STOCK TOTAL
---------- --------- ------------
Common stock shares issued for cash: --
Common stock issued for cash in March 2007,
at $0.30 per share 5,250
Common stock issued for cash from April to
June 30, 2007, at $0.32 per share, Regulation S offering 158,211
Common stock issued for cash on October 25, 2007,
at $2.00 per share 5,000
Common stock issued for cash on December 20, 2007,
at $1.00 per share 1,000,000
--
Common stock issued for Stock to be issued (liability)
on March 7, 2007, at $1.0777 per share 201,343
Stock subscriptions received, net 475,000 475,000
Amortization of deferred compensation 109,000
--
Common Stock Shares issued for services rendered: --
Common stock issued for services rendered, on
March 19, 2007, at $1.00 per share 5,000
Common stock issued for services rendered, on
March 19, 2007, at $0.50 per share 10,000
Common stock issued for services rendered, on
March 20, 2007, at $0.50 per share 11,000
Common stock issued for services rendered, on
April 20, 2007, at $1.38 per share 345,000
Common stock issued for services rendered, on
May 30, 2007, at $1.05 per share 3,304
Common stock issued for services rendered, on
June 1, 2007, at $1.36 per share 264,520
Common stock issued for services rendered, on
July 9, 2007, at $1.00 per share 4,700
Common stock issued for services rendered,
on July 18, 2007, at $0.80 per share 30,000
Common stock issued for services rendered,
on August 1, 2007, at $4.43 per share 443,000
Common stock issued for services rendered,
on August 19, 2007, at $4.50 per share 1,125,000
Common stock issued for services rendered,
on August 30, 2007, at $2.27 per share 8,500
Common stock issued for services rendered, on
August 30, 2007, at $0.69 per share 20,728
Common stock issued for services rendered,
on August 31, 2007, at $3.41 per share 3,410
Common stock issued for services rendered, on
August 31, 2007, at $3.41 per share 34,100
Common stock issued for services rendered, on
October 1, 2007, at $2.60 per share 780,000
Common stock issued for services rendered,
on October 9, 2007, at $2.69 per share 127,750
Common stock issued for services rendered,
on October 22, 2007, at $1.86 per share 93,000
Common stock issued for services rendered,
on October 29 2007, at $2.25 per share 337,500
Common stock issued for services rendered,
on November 9, 2007, at $3.23 per share 419,900
Common stock issued for services rendered,
on November 19, 2007, at $3.50 per share 175,000
Common stock issued for services rendered,
on November 26, 2007, at $3.01 per share 90,300
Common stock issued for services rendered,
on December 3, 2007, at $2.00 per share 90,000
Common stock issued for services rendered,
on December 4, 2007, at $3.15 per share 157,500
Common stock issued for services rendered,
on December 11, 2007, at $2.50 per share 500,000
The accompanying notes are an integral part of these financial statements.
F-14
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
At December 31, 2007
PREFERRED STOCK COMMON STOCK
-------------------------------- ----------------------------
PREFERRED PAR VALUE $.001 COMMON PAR VALUE $.001
SHARES $ AMOUNT SHARES $ AMOUNT
----------- --------------- ---------- ---------------
Common stock issued for services rendered,
on December 17, 2007, at $1.446 per share 400,000 400
Common stock issued for services rendered,
on December 17, 2007, at $2.50 per share 100,000 100
Common stock issued for services rendered,
on December 18, 2007, at $3.02 per share 50,000 50
Common stock issued for services rendered,
on December 21, 2007, at $3.00 per share 40,000 40
Common stock issued for services rendered,
on December 27, 2007, at $3.10 per share 50,000 50
Common stock issued for services rendered,
on March 19, 2007, at $0.50 per share
Common stock issued for services rendered,
on March 19, 2007, at $0.50 per share
Common stock Shares issued for services rendered
classified as Prepaid:
Common stock issued for services rendered,
on August 31, 2007, at $3.41 per share recorded as prepaid 350,000 350
Common stock issued for services rendered,
on September 14, 2007, at $2.29 per share recorded as prepaid 150,000 150
Common stock issued for services rendered,
on October 02, 2007, at $2.47 per share recorded as prepaid 350,000 350
Common stock issued for services rendered,
on October 02, 2007, at $2.40 per share recorded as prepaid 75,000 75
Treasury Stock (94,961)
Preferred Shares issued for settlement of services 1,000 1
Net loss for the period ended December 31, 2007 -- -- -- --
---------- -------- ---------- ----------
BALANCE AT DECEMBER 31, 2007 35,237,188 $ 35,237 30,263,330 $ 30,358
========== ======== ========== ==========
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-15
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
At December 31, 2007
(Restated) (Restated)
DEFICIT
ADDITIONAL ACCUMULATED
PAID-IN DURING THE DEFERRED
CAPITAL DEVELOPMENT STAGE COMPENSATION
------------- ----------------- ------------
Common stock issued for services rendered,
on December 17, 2007, at $1.446 per share 578,051
Common stock issued for services rendered,
on December 17, 2007, at $2.50 per share 249,900
Common stock issued for services rendered,
on December 18, 2007, at $3.02 per share 150,950
Common stock issued for services rendered,
on December 21, 2007, at $3.00 per share 119,960
Common stock issued for services rendered,
on December 27, 2007, at $3.10 per share 154,950
Common stock issued for services rendered,
on March 19, 2007, at $0.50 per share
Common stock issued for services rendered,
on March 19, 2007, at $0.50 per share
Common stock Shares issued for services rendered
classified as Prepaid:
Common stock issued for services rendered,
on August 31, 2007, at $3.41 per share recorded as prepaid 1,193,150
Common stock issued for services rendered,
on September 14, 2007, at $2.29 per share recorded as prepaid 343,350
Common stock issued for services rendered,
on October 2, 2007, at $2.47 per share recorded as prepaid 864,150
Common stock issued for services rendered,
on October 2, 2007, at $2.40 per share recorded as prepaid 179,926
Treasury Stock
Preferred Shares issued for settlement of services 399,999
Net loss for the period ended December 31, 2007 -- (10,486,886) --
------------ ------------- -----------
BALANCE AT DECEMBER 31, 2007 $ 20,279,849 $ (17,418,997) $ --
============ ============= ===========
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-16
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
At December 31, 2007
(Restated)
SUBSCRIPTION TREASURY
RECEIVABLE STOCK TOTAL
---------- --------- ------------
Common stock issued for services rendered,
on December 17, 2007, at $1.446 per share 578,451
Common stock issued for services rendered,
on December 17, 2007, at $2.50 per share 250,000
Common stock issued for services rendered,
on December 18, 2007, at $3.02 per share 151,000
Common stock issued for services rendered,
on December 21, 2007, at $3.00 per share 120,000
Common stock issued for services rendered,
on December 27, 2007, at $3.10 per share 155,000
Common stock issued for services rendered,
on March 19, 2007, at $0.50 per share --
Common stock issued for services rendered,
on March 19, 2007, at $0.50 per share
Common stock Shares issued for services rendered
classified as Prepaid:
Common stock issued for services rendered,
on August 31, 2007, at $3.41 per share recorded as prepaid 1,193,500
Common stock issued for services rendered,
on September 14, 2007, at $2.29 per share recorded as prepaid 343,500
Common stock issued for services rendered,
on October 2, 2007, at $2.47 per share recorded as prepaid 864,500
Common stock issued for services rendered,
on October 2, 2007, at $2.40 per share recorded as prepaid 180,001
--
--
Treasury Stock (66,473) (66,473)
Preferred Shares issued for settlement of services 400,000
--
Net loss for the period ended December 31, 2007 -- -- (10,486,886)
---------- --------- -----------
BALANCE AT DECEMBER 31, 2007 $ (185,693) $ (66,473) $ 2,674,281
========== ========= ===========
The accompanying notes are an integral part of these financial statements.
F-17
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 1 - BASIS OF PRESENTATION AND NATURE OF BUSINESS AND ORGANIZATION
Global Resource Corporation (the Company") was formed on July 19, 2002 in the
State of New Jersey under the name Carbon Recovery Corporation as a development
stage company. The Company's business plan is to research and develop and market
the business of decomposing petroleum-based materials, including shale deposits,
tar sands, capped oil wells, waste oil streams and tires, by subjecting them to
variable frequency microwave radiation at specifically selected frequencies for
a time sufficient to at least partially decompose the materials, converting the
materials into oils and alternative petroleum products.
The Company's business goals are as follows:
1) The construction of plants to exploit certain technology for
decomposing petroleum-based materials by subjecting them to variable
frequency microwave radiation at specifically selected frequencies for a
time sufficient to at least partially decompose the materials; 2) The
design, manufacture and sale of machinery and equipment units, embodying
the technology; 3) The sub-licensing of third parties to exploit that
technology.
At the present time, the process is in a laboratory mode. There will
have to be a transition from the "one batch at a time" operation, used
in the laboratory to a "continuous feed" line in order to commercialize
the process. A prototype one ton "continuous feed" line machine is
scheduled for delivery in the first quarter 2008.
The Company believes that the design of the machinery and equipment for
the decomposition of waste tires fully protects the environment from the
release of components during the decomposition process.
The Company is currently offering three models: one which disposes of
five tons per hour, one which disposes of ten tons per hour and one
which disposes of fifteen tons per hour. The Company is soliciting
orders and has issued various proposals.
F-18
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 1 - BASIS OF PRESENTATION AND NATURE OF BUSINESS AND ORGANIZATION
(CONTINUED)
There are other potential applications for the microwave technology
covered by the pending patent applications, in addition to the application
for decomposing waste tires. These include:
1. Stimulation of production of mature oil and gas wells ("stripper"
wells);
2. Reduction of hydrocarbons in drilling cuttings to permit on-site
disposal;
3. Volatilization of heavy or slurry oil;
4. Recovery of oil from oil shale and oil sands; and
5. Medical applications.
To date, the Company has allocated a substantial portion of its time and
investment in bring its product to the market and the raising of capital.
The Company has not commenced any commercial operations as of December 31,
2007.
On December 31, 2006, Global Resource Corporation acquired all the assets
and assumed all of the liabilities of Mobilestream Oil, Inc. in exchange
for: (a) 11,145,255 shares of the Company's Common Stock; (b) the issuance
by the Company for the benefit of the holders of the 2006 series of
convertible preferred stock of Mobilestream of 35,236,188 shares of the
Company's own "2006 Series" in the process of designation (see "Subsequent
Events" note 13 below for changes); (c) the issuance of 27,205,867 common
stock purchase warrants on the basis of 1 warrant for each 3 shares of
either common stock or preferred stock (the 2006 Series), exercisable at
$4.75 per share for a period ending on December 31, 2007. Mobilestream
agreed to cancel 37,500,000 shares of the Company's stock which it owned
after the Carbon Recovery acquisition described below. The total cost of
the acquisition of Mobilestream has been allocated to the assets acquired
and the liabilities assumed based on their fair values in accordance with
SFAS 141, BUSINESS COMBINATIONS. The net asset and liabilities of
Mobilestream equal approximately $2.4 million. The assets consisted of
cash of approximately $1,678,000 and fixed assets of $149,000, offset by
liabilities of approximately $91,000.
On September 22, 2006, Carbon Recovery Corporation entered into a Plan and
Agreement of Reorganization ("Agreement") with Global Resource
Corporation. Pursuant to the Agreement, Global Resource Corporation
acquired all of the assets and assumed all of the liabilities and related
development stage business of Carbon Recovery Corporation in exchange for:
(a) 48,688,996 common shares and (b) the assumption of a convertible
debenture issued by Carbon Recovery Corporation and accrued interest in
the amount of $120,682. Subsequently the Company eliminated the
convertible debenture by issuing 2,681,837 of the Company's common stock..
The holders of Global Resource Corporation's capital stock before the
Agreement retained 72,241 shares of common stock. Pursuant to the
Agreement, various classes of Carbon Recovery Corporation warrants were
exchanged for warrants of Global Resource Corporation as follows:
F-19
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 1- BASIS OF PRESENTATION AND NATURE OF BUSINESS AND ORGANIZATION
(CONTINUED)
Global Resource Corporation issued 3,908,340 Class B warrants, 1,397,600
Class D warrants and 1,397,600 Class E warrants in exchange for an equal
number of warrants of Carbon Recovery. The Class B and Class D warrants
have an exercise price of $2.75 and the Class E warrants have an exercise
price of $4.00. All of the warrants were originally scheduled to expire on
September 21, 2007, but the Board of Directors of the Company has extended
the expiration date to December 31, 2007 for Class B and Class D warrants
and March 31, 2008 for Class E warrants (see "Subsequent Events" Note 13
below).
The above transaction has been accounted for as a reverse merger
(recapitalization) with Carbon Recovery Corporation being deemed the
accounting acquirer and Global Resource Corporation being deemed the legal
acquirer. Accordingly, the historical financial information presented in
the financial statements is that of Carbon Recovery Corporation as
adjusted to give effect to any difference in the par value of the issuer's
and the accounting acquirer's stock with an offset to additional paid in
capital. The basis of the assets and liabilities of Carbon Recovery
Corporation, the accounting acquirer, have been carried over in the
recapitalization. Concurrent with the acquisition, Carbon Recovery
Corporation changed its name to Global Resource Corporation.
On December 11, 2007 the Company adopted the following Amendments to the
Articles of Incorporation: 1) Reduce the authorized number of shares of
common stock which the Company may issue from 2,000,000,000 to 200,000,000
shares. 2) Increase the authorized number of preferred shares which the
Company may issue from 50,000,000 to 100,000,000. 3)Reduce the number of
2006 Series of Convertible Preferred Stock which may be converted into
common stock, from 2 shares of common stock to 1/2 of 1 share of common
stock for each share of 2006 Series of Convertible Preferred Stock. 4)
Indemnify the Company's directors and officers to the maximum extent
permitted under the laws of the State of Nevada. 5) Limit the liability
of the Company's directors and officers to the Company, its stockholders
and creditors to the maximum extent provided under the Private
Corporations Law of the State of Nevada (the "Nevada PCL"). 6) Permit the
Board of Directors to declare reverse stock splits of its issued and
outstanding shares without approval of the stockholders under section
78-2055 of the Nevada PCL.
The Company is considered to be in the development stage as defined in
Statement of Financial Accounting Standards (SFAS) No. 7, "ACCOUNTING AND
REPORTING BY DEVELOPMENT STAGE ENTERPRISES". The Company has devoted
substantially all of its efforts to business planning and development, as
well as allocating a substantial portion of its time and investment in
bringing its product to the market, and the raising of capital.
F-20
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments and other
short-term investments with an initial maturity of three months or less to
be cash or cash equivalents.
At December 31, 2007, the Company maintained cash and cash equivalent
balances at two financial institutions that are insured by the Federal
Deposit Insurance Corporation up to $100,000. At December 31, 2007 the
Company's uninsured cash balances total $680,425.
START-UP COSTS
In accordance with the American Institute of Certified Public Accountants
Statement of Position 98-5, "REPORTING ON THE COSTS OF START-UP
ACTIVITIES", the Company expenses all costs incurred in connection with
the start-up and organization of the Company.
INCOME TAXES
Deferred income taxes are reported using the liability method. Deferred
tax assets are recognized for deductible temporary differences and
deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of
assets and liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is
more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date of enactment.
BUSINESS COMBINATIONS
Effective December 31, 2006 the Company acquired the assets of
Mobilestream Oil, Inc. and due to the transfer of assets between entities
under common control, the total cost of the acquisition of Mobilestream
has been allocated to the assets acquired and the liabilities assumed
based on their historical costs in accordance with SFAS 141, BUSINESS
COMBINATIONS, PARAGRAPHS D11 - D18, entities under common control. All
account amounts and shares amounts have been retroactively applied and
presented to reflect the change. Effective July 31, 2006 the Company
completed a reverse split of its common stock. All share amounts have been
retroactively applied and presented to reflect the change
F-21
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
Effective January 1, 2006, the Company adopted the provisions of Financial
Accounting Standards Board ("FASB") published Statement of Financial
Accounting Standards No. 123 (Revised 2004), "SHARE-BASED PAYMENT" ("SFAS
123R"). SFAS 123R requires that compensation cost related to share-based
payment transactions be recognized in the financial statements.
Share-based payment transactions within the scope of SFAS 123R include
stock options, restricted stock plans, performance-based awards, stock
appreciation rights, and employee share purchase plans. Prior to January
1, 2006, the Company accounts for its share-based payment transactions
under the provisions of APB 25, which does not necessarily require the
recognition of compensation cost in the financial statements. Accordingly,
no compensation expense was recognized for the stock option grants in
periods prior to the adoption of SFAS 123R. The Company has not issued any
options during the reporting periods and as such, the effect of SFAS 123R
has no impact on the results of operations for the twelve months ended
December 31, 2007 and 2006. The company did issue stock grants in 2007
that were 100% vested at time of issuance and were expensed to the Company
at the market price.
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Historical net loss per common share is computed using the weighted
average number of common shares outstanding. Diluted earnings per share
(EPS) include additional dilution from common stock equivalents, such as
stock issuable pursuant to the exercise of stock options and warrants.
Common stock equivalents were not included in the computation of diluted
earnings per share when the Company reported a loss because to do so would
be anti-dilutive.
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
The following is a reconciliation of the computation for basic and
diluted earnings per share:
Twelve Months Ended December 31,
-------------------------------
2007 2006
------------ ------------
Net loss ($10,486,886) ($ 4,246,058)
------------ ------------
Weighted-average common shares
Outstanding (Basic) 26,489,850 47,939,917
------------ ------------
Weighted-average common shares
Outstanding (Diluted) 26,489,850 47,939,917
============ ============
Weighted-average common stock equivalents for preferred stock convertible
to 1/2 for 1 of common are 17,618,094 and warrants common stock
equivalents are 11,036,907. There are also common stock purchase options
equivalents totaling 200,000. These warrants and options are not part of
the weighted-average outstanding common stock calculation because
inclusion would have been anti-dilutive as of December 31, 2007 and
December 31, 2006.
F-22
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS
The Company will expense the costs associated with advertising as they are
incurred. The Company did not incur any advertising costs for the years
ended December 31, 2007 and 2006.
RECLASSIFICATIONS
Certain amounts for the year ended December 31, 2006 have been
reclassified in the comparative financial statements to be comparable to
the presentation for the year ended December 31, 2007. These
reclassifications had no effect on net loss.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2007, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141 (revised
2007), BUSINESS COMBINATIONS, which replaces SFAS No. 141. The statement
retains the purchase method of accounting for acquisitions, but requires a
number of changes, including changes in the way assets and liabilities are
recognized in the purchase accounting. It also changes the recognition of
assets acquired and liabilities assumed arising from contingencies,
requires the capitalization of in-process research and development at fair
value, and requires the expensing of acquisition-related costs as
incurred. SFAS No. 141R is effective for us beginning January 1, 2009 and
will apply prospectively to business combinations completed on or after
that date.
In December 2007, the FASB issued SFAS No. 160, NONCONTROLLING INTERESTS
IN CONSOLIDATED FINANCIAL STATEMENTS, AN AMENDMENT OF ARB 51, which
changes the accounting and reporting for minority interests. Minority
interests will be recharacterized as noncontrolling interests and will be
reported as a component of equity separate from the parent's equity, and
purchases or sales of equity interests that do not result in a change in
control will be accounted for as equity transactions. In addition, net
income attributable to the noncontrolling interest will be included in
consolidated net income on the face of the income statement and, upon a
loss of control, the interest sold, as well as any interest retained, will
be recorded at fair value with any gain or loss recognized in earnings.
SFAS No. 160 is effective for us beginning January 1, 2008 and will apply
prospectively, except for the presentation and disclosure requirements,
which will apply retrospectively. We are currently assessing the potential
impact that adoption of SFAS No. 160 would have on our financial
statements.
In February 2007, the FASB issued SFAS No. 159, THE FAIR VALUE OPTION FOR
FINANCIAL ASSETS AND FINANCIAL LIABILITIES. SFAS No. 159 gives us the
irrevocable option to carry many financial assets and liabilities at fair
values, with changes in fair value recognized in earnings. SFAS No. 159 is
effective for us beginning January 1, 2009, although early adoption is
permitted. We are currently assessing the potential impact that electing
fair value measurement would have on our financial statements and have not
determined what election we will make.
F-23
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In September 2006, the FASB issued SFAS No. 157, FAIR VALUE MEASUREMENTS,
which defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles, and expands disclosures about
fair value measurements. This statement does not require any new fair
value measurements, but provides guidance on how to measure fair value by
providing a fair value hierarchy used to classify the source of the
information. SFAS No. 157 is effective for us beginning January 1, 2008.
In December 2007, the FASB released a proposed FASB Staff Position (FSP
FAS 157-b - EFFECTIVE DATE OF FASB STATEMENT NO. 157) which, if adopted as
proposed, would delay the effective date of SFAS No. 157 for all
nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). We are currently assessing the
potential impact that adoption of this statement would have on our
financial statements.
On January 1, 2007, the Company adopted the provisions of FASB issued SFAS
No. 156, "Accounting for Servicing of Financial Assets, an amendment of
FASB Statement No. 140." SFAS No. 156 requires an entity to recognize a
servicing asset or liability each time it undertakes an obligation to
service a financial asset by entering into a servicing contract under a
transfer of the servicer's financial assets that meets the requirements
for sale accounting, a transfer of the servicer's financial assets to a
qualified special-purpose entity in a guaranteed mortgage securitization
in which the transferor retains all of the resulting securities and
classifies them as either available-for-sale or trading securities in
accordance with SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" and an acquisition or assumption of an obligation
to service a financial asset that does not relate to financial assets of
the servicer or its consolidated affiliates. Additionally, SFAS No. 156
requires all separately recognized servicing assets and servicing
liabilities to be initially measured at fair value, permits an entity to
choose either the use of an amortization or fair value method for
subsequent measurements, permits at initial adoption a one-time
reclassification of available-for-sale securities to trading securities by
entities with recognized servicing rights and requires separate
presentation of servicing assets and liabilities subsequently measured at
fair value and additional disclosures for all separately recognized
servicing assets and liabilities. The adoption of SFAS No. 156 did not
have a material impact on the Company's financial position, results of
operations, or cash flows.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations when incurred and
are included in operating expenses. The amounts charged in calendar 2007
and 2006 were $222,530 and $136,887 respectively.
F-24
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 3- FIXED ASSETS
Fixed assets as of December 31, 2007 were as follows:
Estimated
Useful Lives
(Years) Amount
------- ------
Testing Equipment 5 - 7 $454,013
Vehicles 5 34,454
Office & Computer Equip. 5 16,643
Leasehold improvements 3 4,670
--------
Total $509,780
========
Less accumulated depreciation & amortization 136,645
--------
NET FIXED ASSETS $373,135
========
There was $93,864 and $58,154 charged to operations for depreciation
expense for the twelve months ended December 31, 2007 and 2006,
respectively.
The Company sold three vehicles to the President and Chairman of the
Company for $34,200 in cash and which was $11,776 below net book value.
NOTE 4- LOAN PAYABLE - OFFICER OF COMPANY
On November 28, 2007 the Chief Financial Officer, Jeffrey J. Andrews,
loaned the Company $150,000. This loan has no stated principal payment due
date, interest agreement is prime plus 2%. An expense was recorded for one
month based on terms stated above, interest expense will be accrued and
expense monthly in the amount of $1,187 until the Company pays off the
loan.
NOTE 5- LOAN PAYABLE - EQUIPMENT
In January 2006 the Company entered into a five year loan related to the
purchase of new equipment. The principal amount of the loan is $75,000 at
an interest rate of 13.43% annually. Monthly payments on the loan are
approximately $1,723. In October 2006 the Company entered into a three
year loan related to lab equipment. The principal amount of the loan is
$73,817 at an interest rate of 8.71% annually. Monthly payments on the
loan are approximately $2,396.
2007
--------
Total Loans Payable $ 92,593
Less current maturities (40,964)
--------
Long-Term payable $ 51,629
========
The amount of principal maturities of the loans payable by years is as
follows:
2008 40,964
2009 35,416
2010 16,213
-------
$92,593
=======
F-25
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 6- PROVISION FOR INCOME TAXES
Deferred income taxes will be determined using the liability method for
the temporary differences between the financial reporting basis and income
tax basis of the Company's assets and liabilities. Deferred income taxes
will be measured based on the tax rates expected to be in effect when the
temporary differences are included in the Company's tax return. Deferred
tax assets and liabilities are recognized based on anticipated future tax
consequences attributable to differences between financial statement
carrying amounts of assets and liabilities and their respective tax bases.
At December 31, 2007 the deferred tax assets consist of the following:
2007
-----------
Deferred taxes due to net operating carryforwards $ 5,225,000
Less: Valuation Allowance (5,225,000)
-----------
Net Deferred Tax asset $ --
-----------
At December 31, 2007, the Company had deficits accumulated during the
development stage in the approximate amount of $17,418,997 available to
offset future taxable income through 2027. The Company established
valuation allowances equal to the full amount of the deferred tax assets
due to the uncertainty of the utilization of the operating losses in
future periods.
NOTE 7- OPERATING LEASES
The Company leases office space under a lease agreement that commenced
June 1, 2006, the monthly lease payments are $5,000 per month and the
leases expires on May 31, 2009. The Company is required to pay property
taxes, utilities, insurance and other costs relating to the leased
facilities.
Minimum lease payments under the operating lease are as follows:
For the periods Ending
Dec. 31 Amount
2008 $ 60,000
2009 21,700
------
$ 81,700
======
F-26
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 8- GOING CONCERN
As shown in the accompanying financial statements, the Company incurred
substantial net losses for the periods ended December 31, 2007 and 2006,
and has no revenue stream to support itself. This raises doubt about the
Company's ability to continue as a going concern.
The Company's future success is dependent upon its ability to raise
additional capital or to secure a future business combination. There is no
guarantee that the Company will be able to raise enough capital or
generate revenues to sustain its operations. Management believes they can
raise the appropriate funds needed to support their business plan and
become an operating, cash flow positive company.
The financial statements do not include any adjustments relating to the
recoverability or classification of recorded assets and liabilities that
might result should the Company be unable to continue as a going concern.
NOTE 9-STOCKHOLDERS' EQUITY
COMMON STOCK
The following details the stock transactions for the twelve months ended
December 31, 2007:
The Company issued 1,519,564 shares of stock for $1,168,461 cash.
The Company issued 186,822 shares of common stock for cash received in
2006 which was classified as liability in stock to be issued $210,343.
The Company re-purchased 94,961 shares of common stock for $66,473 in
cash. (See "Related Party Transaction" Note 11 below Treasury stock
purchase from Lois Pringle)
The Company issued 3,538,576 shares of common stock in exchange for
services rendered, valued at $7,107,000. Included in service rendered
value is the issuance of 925,000 shares of stock for services which have a
gross value at $2,581,500 and is being amortized and expensed over one
year period beginning in September of 2007 (see Prepaid Services below).
Also included in service rendered value is stock issued under the "2007
Employee Compensation and Stock Option Plan." A total of 1,144,500 shares
were issued, with a value of $3,050,520 which was expensed in 2007.
800,000 Shares were issued to the Company's Chairman and CEO/President,
200,000 shares were issued to the Company's CFO.
F-27
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 9- STOCKHOLDERS' EQUITY (CONTINUED)
The Company issued 900,000 shares to an escrow account for future
transaction with Professional Offshore Opportunity Fund, Ltd, "PROOF".
(See "Commitments and Contingencies" note 10 below). The issuance of these
shares are dependent on following future events occurring; if (i) the
Company does not file and have an effective registration statement for the
Shares, Warrants and Warrant Shares by June 30, 2008 or (ii) in the event
that during the period of six months from the date of Closing, the market
price of the Company's Common Stock has a closing price of less than
$1.00.
PREFERRED STOCK
On October 22, 2007 Frank G. Pringle, the Company's Chairman and
CEO/President, the owner of all 35,236,188 issued and outstanding shares
of the Company's 2006 Series of Convertible Preferred Stock, offered to
reduce the number of shares of common stock into which the preferred stock
may be converted from 1 preferred share for 2 shares of common stock to 1
preferred share for 1/2 of 1 share of common stock which the Board of
Directors has accepted.
The Company issued 1,000 shares of new convertible preferred to complete a
settlement agreement for services rendered. These shares can be converted
into common stock after 1 year, for which Rule 144 will apply, by dividing
the $400 stated capital by the average of the closing bid prices of such
common stock for the twenty (20) consecutive trading days prior to and
including the day of conversion.
Preferred stock A has rights to convert 2 shares of preferred into one
share of the Company's common stock, votes together with the common stock
on a fully converted basis and has the right to elect a majority of the
Board of Directors as long as the Preferred stock A remains outstanding.
Preferred stock B has rights to convert as stated above and has no other
rights attached.
SUBSCRIPTION RECEIVABLE
In 2006 the Company contracted to sell some of it common stock on
installment basis, and is waiting to receive the final balance of payment.
The Company fully expects to receive the December 31, 2007 balance of
$185,693 by the end of year 2008.
PREPAID SERVICES
In September 2007 the Company issued 925,000 shares of stock for services
which has a gross value at $2,581,500 which is being amortized and
expensed over one year period. The unamortized amount as of December 31,
2007 is $1,808,042.
F-28
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 9- STOCKHOLDERS' EQUITY (CONTINUED)
WARRANTS
In September 2006, the Company issued 3,908,340 Class B warrants,
1,397,600 Class D warrants and 1,397,600 Class E warrants. The Class B and
Class D warrants have an exercise price of $2.75 and the Class E warrants
have an exercise price of $4.00. All of the warrants were originally
scheduled to expire on September 21, 2007, but the Board of Directors of
the Company has extended the expiration date to December 31, 2007 for
Class B and Class D warrants and March 31, 2008 for Class E warrants. The
Company also issued 27,205,867 Common Stock Purchase warrants on the basis
of 1 warrant for each 3 shares of either common stock or preferred stock
(the 2006 Series), exercisable at $4.75 per share. These warrants expire
on March 31, 2007, but the Board of Directors of the Company has extended
the expiration date to March 31, 2008.
On October 22, 2007 the Board of Directors accepted an offer from Frank
Pringle, Chairman and CEO, to cancel the 23,500,000 Common Stock Purchase
warrants received by him in the transaction when the Company acquired the
assets of Mobilestream Oil, Inc. This action does not affect the remaining
3,705,867 warrants held by the Mobilestream Oil Liquidating Trust and to
be distributed to the other shareholders of Mobilestream Oil, Inc. upon
their registration.
The Company issued an additional 627,500 warrants in 2007, (See
"Commitments and Contingencies" note 10 below "PROOF"). 625,000 warrants
have an exercise price of $1.50, an expiration date of December 20, 2012
and 2,500 have an exercise price of $2.50 with an expiration date of
October 25, 2008.
A summary of the status of the Company's outstanding stock warrants as of
December 31, 2007 is as follows:
Weighted Average
Shares Exercise Price
---------- -------------
Outstanding at January 1, 2007 33,909,407 $ 4.41
Granted 627,500 $ 1.50
Exercised -- --
Forfeited 23,500,000 $ 4.75
---------- -------------
Outstanding at December 31, 2007 11,036,907 $ 3.51
---------- -------------
Exercisable at December 31, 2007 11,036,907 $ 3.51
---------- -------------
In March 2005 the Company issued 200,000 of common stock purchase options
(under Carbon Recovery Corporation) to the CFO. The options have an
exercise price of $1.00 per share and will be 100% vested on 12/31/2008.
As of 12/31/2007 none were exercised.
F-29
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 10- COMMITMENTS AND CONTINGENCIES
Effective January 1, 2005 the Company entered into an employment agreement
with its President. Under the agreement the President shall be entitled to
an annual base salary of $250,000 in 2005 escalating to $366,025 in 2009.
In 2005, $156,000 of the salary shall be paid ratably during the course of
the year and the remaining $94,000 will be paid in accordance with the
terms of the agreement. The initial term of the agreement is for a period
of five years. The President has the option to renew this agreement for a
second five-year term. In addition to the base salary the Company has
granted the President 545,000 shares of restricted common stock as
deferred compensation. The common stock vests to the President over a
five-year period commencing January 1, 2005.
On March 12, 2007 the Company entered into an Exclusive Placement Agent
Agreement with an investment banker pursuant to which the investment
banker was to place up to $3,000,000 of debt securities (with related
warrants) within a 45 day period following approval of offering documents.
During the offering term, two subscriptions, for a total of $800,000, were
received, of which amount $400,000 was paid-in. After payment of Escrow
Agent fees and costs of $2,510 and transaction fees and costs of $62,200,
which costs and fees have been contemporaneously expensed, the Company
netted $335,299. On June 13, 2007, following expiration of the 45-day
term, the Company notified the Escrow Agent and the investment banker (1)
that the Exclusive Placement Agent Agreement would not be extended and (2)
that the offering was withdrawn. The Company determined to rescind the two
subscriptions and on August 1, 2007 returned the $400,000 together with 9%
interest of $9,640. The interest was expensed in June 2007. The Company
concurrent with the rescission agreement settle all outstanding claims for
$25,000, which was expensed in the third quarter 2007.
The Company set up a prepaid in the amount of $250,000 in June 2007 for a
finder fee related to the $3,000,000 debt securities funding discussed
above. In connection with the rescission of these debt securities the
Company has expensed the $250,000 in the fourth quarter 2007.
In June 2007 the Company entered into a purchase agreement with Ingersoll
Production Systems of Rockford Illinois to build one 1 ton microwave
reactor system. The total purchase commitment is $300,000, and the
microwave reactor system is expected to be delivered by end of first
quarter 2008.
On December 17, 2007 the Company signed a letter of intent with Warwick
Communications, Inc., ("Warwick"), a Canadian corporation based in
Calgary, for an exclusive twenty-year license agreement, which enables
Warwick to use the Company's microwave machinery to recover energy from
oil, gas, mining and waste resources in Canada. Payment for the license
will be by issuance of 2,000,000 shares of Warwick's common stock,
together with two warrants; one to purchase 1,000,000 additional shares of
F-30
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 10- COMMITMENTS AND CONTINGENCIES (CONTINUED)
Warwick's common stock at a price of US$1.50 and the other to purchase
750,000 shares of Warwick common stock at a price of US$1.00 per share.
Execution of definitive agreement and issuance of the license is subject
to a demonstration, acceptable to the licensee, of the continuous
operation of the initial one ton machine, anticipated to occur by end of
first quarter 2008. Under the license, when and if issued, Warwick will be
obligated to purchase a minimum of one microwave machine each year for the
next five years. This will total $25,000,000 or $5,000,000 per year.
In October, 2007 the Company revived an agreement which had previously
expired for the sale of shares of its Common Stock to Mercatus & Partners,
Limited ("Mercatus"), a private limited company organized and existing
under the laws of the United Kingdom, having an address of Via S. Roberto
Bellarmino #4, 00142 Roma, Italy. The proposed transaction was for the
placement of shares of its Common Stock to a value of $2,000,000. The
original agreement had expired on March 31, 2007. Following protracted
discussions, on October 16, 2007 the Company agreed to revive the
Agreement, with certain modifications, and the parties executed an
Addendum to the original Agreement. Under the revived Agreement and
Addendum, Mercatus was to have purchased shares to the total of $2,000,000
on or before November 30, 2007. The Company had deposited 2,665,666 shares
of its Common Stock in escrow, with any unpurchased balance of such shares
as of November 30th to be returned for cancellation. Mercatus failed to
make any of the installment payments as promised and did not complete any
of the purchase by November 30, 2007. The Company no longer has any
confidence in Mercatus, has advised Mercatus that the Agreement has
expired and will not be extended or further revived, and has demanded a
return of the 2,665,666 shares which were escrowed. These shares have not
been included in the outstanding shares and weighted average number of
common stock share calculation.
On December 21, 2007 the Company entered into a certain Securities
Purchase agreement with Professional Offshore Opportunity Fund, Ltd.
("PROOF") pursuant to which PROOF agreed to purchase 1,250,000 shares of
the Company's common stock together with warrants for additional 625,000
shares at an exercise price of $1.50 per share. The Company received
$1,000,000 from PROOF with the balance of $250,000 being held in escrow,
together with the 250,000 common stock shares being purchased pending
certain future events. In addition, the Company has issued to the Escrow
an additional 650,000 shares to be delivered to PROOF or returned to the
Company, depending upon those certain future events (the "Trigger Event").
The Trigger Event will occur if (i) the Company does not file and have an
effective registration statement for the Shares, Warrants and Warrant
Shares by June 30, 2008 or (ii) in the event that during the period of six
months from the date of Closing, the market price of the Company's Common
Stock has a closing price of less than $1.00. In case of either Trigger
Event, the Escrow is authorized to transfer to PROOF the 650,000 escrowed
shares. In addition, PROOF may, at its option, instruct the Escrow to (i)
pay over (to PROOF) the escrowed $250,000 of proceeds and (ii) return to
the Company the 250,000 escrowed shares.
F-31
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 11- RELATED PARTY TRANSACTION
On May 17, 2007, the Company authorized the purchase of Company stock from
Lois Pringle, wife of the Company's Chief Executive Officer. The Company
purchased 94,961 shares for $66,471 in cash.
In January 2005 the Company formalized a prior intended agreement with
Careful Sell Holding, L.L.C. ("Careful Sell"), a Delaware limited
liability company formed by the President of the Company. The Company's
President and his spouse, a Director of the Company, own all of the
limited liability interests of Careful Sell. The Company's President is
also the Manager of Careful Sell. Under the revised agreement the Company
entered into a Technology Contribution Agreement (the "Agreement"), with
Careful Sell. Careful Sell is the owner of all the rights to the
inventions of the Company's President. The Agreement transfers to the
Company the rights to commercialize such inventions and to operate and use
the related processes and apparatus to make, sell, use and otherwise
dispose of products, which may be processed utilizing the inventions. The
terms of the Agreement include a provision whereby the Company will pay
Careful Sell royalties of 2% of all revenues derived from the inventions.
In further consideration for the transfer of the inventions, the Company
has issued to Careful Sell a total of 37,500,000 shares of common stock of
the Company. This Agreement supersedes a prior agreement not formalized
between the Company and Careful Sell in 2002.
In January 2006 Careful Sell merged with PSO Enterprises, Inc., a Delaware
corporation ("PSO"). At that time the separate existence of Careful Sell
ceased and PSO continues as the surviving corporation. At that time the
members of Careful Sell were issued 10,000,000 shares of PSO representing
a 100% interest in PSO. In February 2006 PSO reversed merged into
Mobilestream Oil.
NOTE 12- NOTE RECEIVABLE
On September 22, 2006, Mobilestream Oil, Inc. loaned $650,000 to M J
Advanced Corporation Communications ("MJACC") with the understanding that
MJACC would advance money to CRCIC, LLC a limited liability company, for
the purpose of acquiring a shell corporation (Global Resource
Corporation) for Carbon Recovery Corporation to perfect a reverse merger.
Subsequent to the balance sheet date, a dispute arose with respect to the
agreement. A resolution was agreed upon where 400,000 shares of Global
Resource Corporation stock owned by MJACC and CRCIC have been transferred
to an attorney in escrow for satisfaction of the note payable to the
Company and MJACC and CRCIC relinquished all rights. The stocks held in
escrow will be sold by the escrow agent to satisfy the loan amount.
The note has been fully reserved due to market price volatility of the
Company's common stock price in 2006 and written off in 2007.
F-32
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 13- INVESTMENTS AND DEPOSITS ON INVESTMENTS
The December 31, 2007 balance of investments and deposits, totaling
$74,860, consists of a $45,000 investment in land which occurred in 2006
and a $29,860 deposit made in August of 2007 on a future lease for
additional equipment. The lease deposit for equipment is expected to be
returned to the Company in 2008. The Company entered into preliminary
sales agreement to purchase the Equipment Service Parts Company (ESP), a
$100,000 deposit was made to ESP in December 2006. In June 2007 the
Company decided not to pursue the acquisition of ESP, and the deposit was
deemed not refundable and was expensed in June 2007.
NOTE 14- SUBSEQUENT EVENTS
Subsequent to the balance sheet date of December 31, the following
transactions occurred:
The Company filed on January 29, 2008 a Registration Statement on Form S-8
under the Securities Act of 1933 for its "2008 Employee Compensation Plan"
in order to register 2,500,000 shares, par value $.001 per share, for the
plan. The granting of shares of common stock under this plan shall be
entirely discretionary with the Company's Board of Directors.
In January and February the Company received $89,000 in cash for the sales
of common stock.
On February 12, 2008, the Company filed a Registration Statement on Form
S-1 under the Securities Act of 1933 in order to register securities
issued in the acquisition of Carbon Recovery Corporation ("CRC") in
September 2006 and the acquisition of Mobilestream Oil, Inc.
("Mobilestream") in December 2006. Summary of securities registered:
Mobilestream acquisition shares of common stock 11,145,225
Mobilestream acquisition warrants 3,705,867
Mobilestream acquisition common stock underlying warrants 3,705,867
CRC acquisition of shares of common stock 11,188,996
CRC acquisition of Class B warrants 3,908,340
CRC acquisition of common stock underlying Class B warrants 3,908,340
CRC acquisition of Class D warrants 1,397,600
CRC acquisition of common stock underlying Class D warrants 1,397,600
CRC acquisition of Class E warrants 1,397,600
CRC acquisition of common stock underlying Class E warrants 1,397,600
On February 28, 2008, in an 8-K filing, the Company disclosed the hiring
of Mr. Jeff T. Kimberly as the Company's Chief Operating officer. The
employment of Mr. Kimberly is effective as of February 11, 2008 and was
approved by the board of directors on February 7, 2008. Mr. Kimberly will
be responsible the Company's production, sales and administrative
operations. In connection with his employment, Mr. Kimberly will receive a
$100,000 signing bonus, his base salary will be $200,000 per year which
will increase to $225,000 on August 11, 2008, his sixth month anniversary
with the company. In addition to his base salary, Mr. Kimberly is eligible
to receive a yearly performance bonus to be paid in the Company's common
stock issued under the
F-33
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
GRC 2008 Employee compensation plan, as well as a relocation compensation
package and Company medical benefits.
NOTE 15 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 2003 AND 2002
The Company has restated its previously issued financial statements for
the period July 19, 2002 (inception) through December 31, 2002 on its
report dated May 29, 2003. The Company has also restated its financial
statements for the year ended December 31, 2003. The Company has restated
its financial statements to reverse the effect of a transaction during the
period ended December 31, 2002. The transaction reflected the issuance of
preferred stock shares in exchange for an intangible asset and the
subsequent impairment of the asset acquired. The financial statements have
been restated as the transaction was subsequently rescinded, as the
preferred stock shares were not formally issued. For the year ended
December 31, 2003 the Company had initially reflected the issuance of
1,455,000 shares of common stock to two of its founders as being issued
for services provided. The Company has restated its financial statements
to reflect the common stock as re-issuance of founders shares. These
transactions resulted in a decrease in net loss applicable to common
shares of $727,500 and $1,500,000 for the year ended December 31, 2003 and
period July 19, 2002 (inception) through December 31, 2002 to a net loss
of $203,659 and $508,508 as restated, and a decrease in the deficits
accumulated during the development stage to $712,617 and $508,508,
respectively.
NOTE 16 - SUPPLEMENTAL DISCLOSURE NON-CASH ACTIVITY FROM CASH FLOW STATEMENT
12/31/2007 12/31/2006 July 19, 2002
(Inception) to
12/31/2007
---------- ---------- ----------
Common stock issued for services $6,333,664 $ 64,746 $6,930.710
Common stock issued for services prior year included in prepaids $ 773,458 $ 0 $ 773,458
---------- ---------- ----------
Sub-total of Common stock issued for services including prepaids $7,107,122 $ 64,746 $7,704,168
Common stock issued for land 0 $ 45,000 $ 125,800
Common stock issued as chartable contribution $ 50,000
Common stock issued to covert accounts payable to equity $ 1,807
Preferred stock issued for services $ 400.000 $ 400,000
F-34
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
JUNE 30, 2008
(UNAUDITED) (AUDITED)
ASSETS Period Ended Year Ended
------
June 30, 2008 December 31, 2007
------------ ------------
(Restated) (Restated)
CURRENT ASSETS
Cash and Cash equivalents $ 4,613,193 $ 780,425
Short-term Investments 287,449 --
Prepaid Services 517,292 1,808,042
Inventory 294,980 --
------------ ------------
TOTAL CURRENT ASSETS 5,712,914 2,588,467
------------ ------------
Fixed Assets, Net of depreciation 398,626 373,135
------------ ------------
OTHER ASSETS
Deposits 76,576 74,860
Long-term Investments 3,468,860
------------ ------------
TOTAL OTHER ASSETS 3,545,436 74,860
TOTAL ASSETS $ 9,656,976 $ 3,036,462
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 86,147 $ 119,588
Current portion - loan payable - equipment 42,572 40,964
Current portion - lease - equipment 10,103
Loan Payable - to officer of company 30,000 150,000
Stock to be issued 465,210 --
------------ ------------
TOTAL CURRENT LIABILITIES 634,032 310,552
------------ ------------
LONG-TERM LIABILITIES
Lease - equipment, net of current portion 20,207
Loan payable - equipment, net of current portion 30,071 51,629
------------ ------------
TOTAL LIABILITIES 684,310 362,181
------------ ------------
STOCKHOLDERS' EQUITY
Preferred Stock A - $.001 par value 100,000,000 shares authorized, 33,445,124 issued 33,445 35,236
issued and outstanding at June 30, 2008, 35,237,188 issued and outstanding at
Dec. 31, 2007
Preferred Stock B - $.001 par value, no shares authorized and issued as of
June 30, 2008 and 1,000 shares authorized and issued at Dec. 31, 2007 1
Common stock, $.001 par value; 200,000,000 shares authorized, 46,372,288 shares issued 46,467 30,358
and outstanding at June 30, 2008, 30,263,330 Shares issued and outstanding at
Dec. 31, 2007
Subscription receivable (130,518) (185,693)
Additional paid-in capital 43,469,195 20,279,849
Accumulated other comprehensive income (142,312)
Deficit accumulated in the development stage (34,237,138) (17,418,997)
------------ ------------
9,039,139 2,740,754
Treasury Stock (66,473) (66,473)
------------ ------------
Total stockholders' equity 8,972,666 2,674,281
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,656,976 $ 3,036,462
============ ============
The accompanying notes are an integral part of these financial statements.
F-35
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Operations
(With Cumulative Totals Since Inception)
(Unaudited)
Three Months Ended Six Months Ended Restated)
------------------------------ ----------------------------- July 19, 2002
(Restated) (Restated) (Restated) (Restated) (Inception)
June 30, June 30, June 30, June 30, to
2008 2007 2008 2007 June 30, 2008
------------ ------------ ------------ ------------ ------------
REVENUES $ -- $ -- $ -- $ -- $ --
COST OF SALES -- -- -- --
------------ ------------ ------------ ------------ ------------
GROSS PROFIT -- -- -- -- --
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES
Professional fees -Consulting, legal, other 9,100,724 169,881 11,741,728 353,095 14,424,174
Investment Banking Fees and investor relations 2,396,850 67,754 2,559,777 127,754 8,452,035
Other general and administrative expenses 1,433,913 375,079 2,115,132 831,843 10,445,204
Research and Development 308,735 44,407 434,993 97,313 844,410
------------ ------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 13,240,222 657,121 16,851,630 1,410,005 34,165,823
------------ ------------ ------------ ------------ ------------
LOSS BEFORE OTHER INCOME (EXPENSE) (13,240,222) (657,121) (16,851,630) (1,410,005) (34,165,823)
------------ ------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Loss on deposits, and other (100,000) (100,000) (172,712)
Net realized gain / (loss) on investments (1,194) (1,194) (1,194)
Interest expense (3,320) (12,886) (9,393) (16,365) (47,884)
Interest income 40,289 10,015 44,076 24,514 150,475
------------ ------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) 35,775 (102,871) 33,489 (91,851) (71,315)
------------ ------------ ------------ ------------ ------------
NET LOSS BEFORE PROVISION FOR INCOME TAXES (13,204,447) (759,992) (16,818,141) (1,501,856) (34,237,138)
PROVISION FOR INCOME TAXES -- -- --
------------ ------------ ------------ ------------ ------------
NET LOSS APPLICABLE TO COMMON SHARES $(13,204,447) $ (759,992) $(16,818,141) $ (1,501,856) $(34,237,138)
============ ============ ============ ============ ============
BASIC AND DILUTED LOSS
PER SHARE $ (0.31) $ (0.03) $ (0.46) $ (0.06)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 42,450,685 25,565,553 36,596,908 25,374,174
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-36
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Cash Flows
(With Cumulative Totals Since Inception)
(Unaudited)
(Restated) (Restated)
Six Months Ended July 19, 2002
------------------------------ (Inception)
June 30, June 30, to
2008 2007 June 30, 2008
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES (Restated)
Net loss $(16,818,141) $ (1,501,856) $(34,237,138)
------------ ------------ ------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH (USED IN)
OPERATING ACTIVITIES:
Depreciation 43,323 47,877 208,123
Preferred stock issued for services 0 -- 400,000
Common stock issued for services 13,194,734 26,000 20,898,902
Amortization of Prepaid common stock issued for services from 2007 1,290,750 1,290,750
Common stock Warrants issued for services 29,375 -- 29,375
Amortization of deferred compensation 54,500 54,500 381,500
Allowance reserve for note payable 650,000
Loss on sale of fixed asset -- 11,775
Loss on real estate -- 212,935
Common stock issued as charitable contribution 50,000
Retained deficit from merger under common control (Mobilestream) 1,494,658
CHANGES IN ASSETS AND LIABILITIES
(Increase) in inventory (294,980) -- (294,980)
(Increase) decrease in deposits (1,716) 100,000 (1,716)
(Increase) in notes receivable -- (650,000)
(Increase) in prepaid expenses (250,000) --
(Decrease) in accounts payable (33,441) (13,872) 190,317
------------ ------------ ------------
TOTAL ADJUSTMENTS 14,282,545 (35,495) 24,871,639
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (2,535,596) (1,537,351) (9,365,499)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (38,504) (2,733) (473,666)
Proceeds from sale of fixed assets 34,200
Proceeds from sale of real estate -- 617,864
Purchase of investment funds (4,045,113) -- (4,174,973)
Proceeds from sale of Investment funds 146,492 146,492
Cash acquired with merger under common control (Mobilestream) 1,678,362
Investment in real estate, net -- -- (80,800)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (3,937,125) (2,733) (2,252,521)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for cash 9,925,054 162,961 15,617,399
Liability for stock to be issued 465,210 776,357
Proceeds from stock subscription receivable 1,060,000
(Increase) decrease in stock subscription receivable 55,175 15,000 (1,190,517)
Proceeds from Debenture financing activity 400,000
Proceeds from officer's loan 188,550
Repayment of officer's loan (120,000) -- (158,550)
Purchase of Treasury Stock (66,473) (66,473)
Proceeds from loan payable - equipment 101,316
Repayment of loan payable - vehicle (19,950) (17,987) (96,869)
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,305,489 493,501 16,231,213
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,832,768 (1,046,583) 4,613,193
CASH AND CASH EQUIVALENTS
- BEGINNING OF PERIOD 780,425 1,770,002 --
------------ ------------ ------------
CASH AND CASH EQUIVALENTS
- END OF PERIOD $ 4,613,193 $ 723,419 $ 4,613,193
============ ============ ============
SUPPLEMENTAL DISCLOSURES:
CASH ACTIVITIES:
INTEREST PAID $ 4,762 $ 11,661 $ 45,639
INCOME TAX PAID $ -- $ -- $ --
NON-CASH ACTIVITIES SEE FOOTNOTE 16
The accompanying notes are an integral part of these financial statements.
F-37
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
At June 30, 2008
PREFERRED STOCK COMMON STOCK
------------------------------------- ----------------------------
PREFERRED PAR VALUE $.001 COMMON PAR VALUE $.001
SHARES $ AMOUNT SHARES $ AMOUNT
---------- -------- ---------- --------------
BALANCE - JULY 19, 2002 (INCEPTION) -- $ --
Issuance of initial founders' shares, September 9, 2002
2002, net of subsequent cancellations 2,555,000 --
Common stock issued for services rendered, in September
2002, at $0.472 per share 1,000,000 --
Common stock issued for cash, November 2002 at $0.50 per share 29,000 --
Common stock issued for services rendered, in November and
December 2002, at $0.50 per share 13,600 --
Net loss for the period July 19, 2002 (Inception)
through December 31, 2002, as originally stated -- --
Prior period adjustment, Note 15 -- -- -- --
---------- -------- ---------- ----------
BALANCE AT DECEMBER 31, 2002 -- -- 3,597,600 --
---------- -------- ---------- ----------
Re-issuance of founders' shares - July 2003 1,455,000 --
Common stock issued for cash, from January to
December 2003 at $0.50 per share 519,800 --
Issuance of subscription receivable from shareholders -- --
Net loss for the year ended December 31, 2003,
as originally stated -- --
Prior period adjustment, Note 15 -- -- -- --
---------- -------- ---------- ----------
BALANCE AT DECEMBER 31, 2003 -- -- 5,572,400 --
---------- -------- ---------- ----------
Common stock issued for cash, from January to December
2004 at $0.6027 per share 917,645 --
Common stock issued in exchange for real estate in Aug.
and Sept. 2004 at $1.00 per share 650,000 --
Common stock issued for compensation on October 12, 2004
at $1.00 per share 545,000 --
Common stock issued as charitable contribution on
October 12, 2004 at $1.00 per share 50,000 --
Initial founders' shares cancelled on October 28, 2004 (250,000) --
Issuance of subscription receivable from shareholders -- --
Net loss for the year ended December 31, 2004 -- -- -- --
---------- -------- ---------- ----------
BALANCE AT DECEMBER 31, 2004 -- -- 7,485,045 --
---------- -------- ---------- ----------
[table continued]
The accompanying notes are an integral part of these financial statements.
F-38
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
(Restated) (Restated)
DEFICIT
ADDITIONAL ACCUMULATED
PAID-IN DURING THE DEFERRED
CAPITAL DEVELOPMENT STAGE COMPENSATION
------------ ------------- ------------
BALANCE - JULY 19, 2002 (INCEPTION) $ -- $ -- $ --
Issuance of initial founders' shares, September 9, 2002
2002, net of subsequent cancellations -- -- --
Common stock issued for services rendered, in September
2002, at $0.472 per share 472,000 -- --
Common stock issued for cash, November 2002 at $0.50 per share 14,500 -- --
Common stock issued for services rendered, in November and
December 2002, at $0.50 per share 6,800 -- --
Net loss for the period July 19, 2002 (Inception)
through December 31, 2002, as originally stated -- (2,008,508) --
Prior period adjustment, Note 15 -- 1,500,000 --
------------ ------------- -----------
BALANCE AT DECEMBER 31, 2002 493,300 (508,508) --
------------ ------------- -----------
Re-issuance of founders' shares - July 2003 -- -- --
Common stock issued for cash, from January to
December 2003 at $0.50 per share 259,900 -- --
Issuance of subscription receivable from shareholders -- -- --
Net loss for the year ended December 31, 2003,
as originally stated -- (931,159) --
Prior period adjustment, Note 15 -- 727,500 --
------------ ------------- -----------
BALANCE AT DECEMBER 31, 2003 753,200 (712,167) --
------------ ------------- -----------
Common stock issued for cash, from January to December
2004 at $0.6027 per share 553,105 -- --
Common stock issued in exchange for real estate in Aug.
and Sept. 2004 at $1.00 per share 650,000 -- --
Common stock issued for compensation on October 12, 2004
at $1.00 per share 545,000 -- (545,000)
Common stock issued as charitable contribution on
October 12, 2004 at $1.00 per share 50,000 -- --
Initial founders' shares cancelled on October 28, 2004 -- -- --
Issuance of subscription receivable from shareholders -- -- --
Net loss for the year ended December 31, 2004 -- (672,219) --
------------ ------------- -----------
BALANCE AT DECEMBER 31, 2004 2,551,305 (1,384,386) (545,000)
------------ ------------- -----------
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-39
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
(Restated)
SUBSCRIPTION TREASURY
RECEIVABLE STOCK TOTAL
---------- --------- ------------
BALANCE - JULY 19, 2002 (INCEPTION) $ -- $ --
Issuance of initial founders' shares, September 9, 2002
2002, net of subsequent cancellations -- --
Common stock issued for services rendered, in September
2002, at $0.472 per share -- 472,000
Common stock issued for cash, November 2002 at $0.50 per share -- 14,500
Common stock issued for services rendered, in November and
December 2002, at $0.50 per share -- 6,800
Net loss for the period July 19, 2002 (Inception)
through December 31, 2002, as originally stated -- (2,008,508)
Prior period adjustment, Note 15 -- 1,500,000
---------- --------- -----------
BALANCE AT DECEMBER 31, 2002 -- (15,208)
---------- --------- -----------
Re-issuance of founders' shares - July 2003 -- --
Common stock issued for cash, from January to
December 2003 at $0.50 per share -- 259,900
Issuance of subscription receivable from shareholders (14,340) (14,340)
Net loss for the year ended December 31, 2003,
as originally stated -- (931,159)
Prior period adjustment, Note 15 727,500
---------- --------- -----------
BALANCE AT DECEMBER 31, 2003 (14,340) 26,693
---------- --------- -----------
Common stock issued for cash, from January to December
2004 at $0.6027 per share -- 553,105
Common stock issued in exchange for real estate in Aug.
and Sept. 2004 at $1.00 per share -- 650,000
Common stock issued for compensation on October 12, 2004
at $1.00 per share -- --
Common stock issued as charitable contribution on
October 12, 2004 at $1.00 per share -- 50,000
Initial founders' shares cancelled on October 28, 2004 -- --
Issuance of subscription receivable from shareholders (74,240) (74,240)
Net loss for the year ended December 31, 2004 -- (672,219)
---------- --------- -----------
BALANCE AT DECEMBER 31, 2004 (88,580) 533,339
---------- --------- -----------
The accompanying notes are an integral part of these financial statements.
F-40
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
PREFERRED STOCK COMMON STOCK
--------------------------------- ----------------------------
PREFERRED PAR VALUE $.001 COMMON PAR VALUE $.001
SHARES $ AMOUNT SHARES $ AMOUNT
---------- --------------- -------- -------------
Common stock issued for cash, from January to December
2005 at $1.2264 per share average for year 745,655 --
Common stock issued to acquire technology with zero value 37,500,000 --
Common stock issued in exchange for real estate in on
January 18, 2005 at $1.00 per share 80,800 --
Common stock issued for services rendered, in Sept., Oct.
and November 2005, at $1.00 per share 53,500 --
Common stock issued for payment of debts on March 11,2005
at $1.00 per share 1,087 --
Stock subscriptions received, net -- --
Amortization of deferred compensation -- --
Net loss for the year ended December 31, 2005 -- -- -- --
---------- -------- ---------- ----------
BALANCE AT DECEMBER 31, 2005 -- -- 45,866,087 --
---------- -------- ---------- ----------
Common stock issued for cash, from January to December
2006 at $1.0088 per share average for year 2,786,286 --
Stock subscriptions received, net -- --
Reclass deferred compensation due adoption SFAS 123r
Amortization of deferred compensation -- --
Common stock issued for services rendered, on September 22,
2006, at $1.044 per share 14,123 --
Common stock issued in exchange for investment in real
estate in September 2006 at $2.00 per share 22,500 --
Effect of reverse merger September 23, 2006 72,241 48,761
Common stock issued for conversion of debt on
September 23, 2005 at $0.045 per share 2,681,837 2,682
Common stock issued for services rendered, on
September 23, 2006, at $2.00 per share 25,000 25
Common stock issued for merger with Mobilestream Oil, Inc. on
December 31, 2006, at $0.255 per share 11,145,255 11,145
Cancellation of shares for merger with Mobilestream Oil, Inc. (37,500,000) (37,500)
Preferred convertible stock issued for merger with
Mobilestream 2 for 1 convertible into common,
on December 31, 2006 35,236,188 $ 35,236
Net loss for the year ended December 31, 2006 -- -- -- --
---------- -------- ---------- ----------
BALANCE AT DECEMBER 31, 2006 35,236,188 $ 35,236 25,113,329 $ 25,113
========== ======== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-41
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
(Restated) (Restated)
DEFICIT
ADDITIONAL ACCUMULATED
PAID-IN DURING THE DEFERRED
CAPITAL DEVELOPMENT STAGE COMPENSATION
------------- ----------------- ------------
Common stock issued for cash, from January to December
2005 at $1.2264 per share average for year -- -- --
Common stock issued to acquire technology with zero value -- -- --
Common stock issued in exchange for real estate in on
January 18, 2005 at $1.00 per share -- -- --
Common stock issued for services rendered, in Sept., Oct.
and November 2005, at $1.00 per share -- -- --
Common stock issued for payment of debts on March 11,2005
at $1.00 per share -- -- --
Stock subscriptions received, net -- -- 10,398
Amortization of deferred compensation -- 109,000 --
Net loss for the year ended December 31, 2005 (1,291,169) -- --
------------- ----------- ----------
BALANCE AT DECEMBER 31, 2005 (2,675,555) (436,000) (78,182)
------------- ----------- ----------
Common stock issued for cash, from January to December
2006 at $1.0088 per share average for year -- -- --
Stock subscriptions received, net -- -- (582,511)
Reclass deferred compensation due adoption SFAS 123R 436,000
Amortization of deferred compensation -- --
Common stock issued for services rendered, on September 22,
2006, at $1.044 per share -- -- --
Common stock issued in exchange for investment in real
estate in September 2006 at $2.00 per share -- -- --
Effect of reverse merger September 23, 2006 -- -- --
Common stock issued for conversion of debt on
September 23, 2005 at $0.045 per share -- -- --
Common stock issued for services rendered, on
September 23, 2006, at $2.00 per share -- -- --
Common stock issued for merger with Mobilestream Oil, Inc. on
December 31, 2006, at $0.255 per share (10,498)
Cancellation of shares for merger with Mobilestream Oil, Inc.
Preferred convertible stock issued for merger with
Mobilestream 2 for 1 convertible into common,
on December 31, 2006
Net loss for the year ended December 31, 2006 (4,246,058) -- --
------------- ----------- ----------
BALANCE AT DECEMBER 31, 2006 $ (6,932,111) $ -- $ (660,693)
============= =========== ==========
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-42
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
(Restated)
SUBSCRIPTION TREASURY
RECEIVABLE STOCK TOTAL
---------- --------- ------------
Common stock issued for cash, from January to December
2005 at $1.2264 per share average for year -- 914,507
Common stock issued to acquire technology with zero value -- --
Common stock issued in exchange for real estate in on
January 18, 2005 at $1.00 per share -- 80,800
Common stock issued for services rendered, in Sept., Oct.
and November 2005, at $1.00 per share -- 53,500
Common stock issued for payment of debts on March 11,2005
at $1.00 per share -- 1,087
Stock subscriptions received, net 10,985 10,398
Amortization of deferred compensation -- 109,000
Net loss for the year ended December 31, 2005 -- (1,291,169)
--------- -----------
BALANCE AT DECEMBER 31, 2005 (78,182) 411,462
--------- ---------- -----------
Common stock issued for cash, from January to December
2006 at $1.0088 per share average for year -- 2,810,877
Stock subscriptions received, net (582,511) (582,511)
Reclass deferred compensation due adoption SFAS 123R
Amortization of deferred compensation 109,000
Common stock issued for services rendered, on September 22,
2006, at $1.044 per share -- 14,746
Common stock issued in exchange for investment in real
estate in September 2006 at $2.00 per share -- 45,000
Effect of reverse merger September 23, 2006 -- (120,683)
Common stock issued for conversion of debt on
September 23, 2005 at $0.045 per share -- 120,682
Common stock issued for services rendered, on
September 23, 2006, at $2.00 per share -- 50,000
Common stock issued for merger with Mobilestream Oil, Inc. on
December 31, 2006, at $0.255 per share -- 2,842,783
Cancellation of shares for merger with Mobilestream Oil, Inc. -- --
Preferred convertible stock issued for merger with
Mobilestream 2 for 1 convertible into common,
on December 31, 2006 -- 503,374
Net loss for the year ended December 31, 2006 -- -- (4,246,058)
--------- ---------- -----------
BALANCE AT DECEMBER 31, 2006 $ -- $ -- $ 1,958,672
========== ========== ===========
The accompanying notes are an integral part of these financial statements.
F-43
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
PREFERRED STOCK COMMON STOCK
------------------------------- ----------------------------
PREFERRED PAR VALUE $.001 COMMON PAR VALUE $.001
SHARES $ AMOUNT SHARES $ AMOUNT
---------- --------------- -------- --------------
Common stock shares issued for cash:
Common stock issued for cash in March 2007,
at $0.30 per share 17,500 17
Common stock issued for cash from April to
June 30, 2007, at $0.32 per share, Regulation S offering 499,564 500
Common stock issued for cash on October 25, 2007,
at $2.00 per share 2,500 3
Common stock issued for cash on December 20, 2007,
at $1.00 per share 1,000,000 1,000
Common stock issued for Stock to be issued (liability)
on March 7, 2007, at $1.0777 per share 186,822 187
Stock subscriptions received, net -- --
Amortization of deferred compensation
Common Stock Shares issued for services rendered:
Common stock issued for services rendered, on
March 19, 2007, at $1.00 per share 5,000 5
Common stock issued for services rendered, on
March 19, 2007, at $0.50 per share 20,000 20
Common stock issued for services rendered, on
March 20, 2007, at $0.50 per share 11,000 11
Common stock issued for services rendered, on
April 20, 2007, at $1.38 per share 250,000 250
Common stock issued for services rendered, on
May 30, 2007, at $1.05 per share 3,417 3
Common stock issued for services rendered, on
June 1, 2007, at $1.36 per share 194,500 195
Common stock issued for services rendered, on
July 9, 2007, at $1.00 per share 4,700 5
Common stock issued for services rendered,
on July 18, 2007, at $0.80 per share 37,500 37
Common stock issued for services rendered,
on August 1, 2007, at $4.43 per share 100,000 100
Common stock issued for services rendered,
on August 19, 2007, at $4.50 per share 250,000 250
Common stock issued for services rendered,
on August 30, 2007, at $2.27 per share 3,745 4
Common stock issued for services rendered, on
August 30, 2007, at $0.69 per share 30,041 30
Common stock issued for services rendered,
on August 31, 2007, at $3.41 per share 1,000 1
Common stock issued for services rendered, on
August 31, 2007, at $3.41 per share 10,000 10
Common stock issued for services rendered, on
October 1, 2007, at $2.60 per share 300,000 300
Common stock issued for services rendered,
on October 9, 2007, at $2.69 per share 47,579 48
Common stock issued for services rendered,
on October 22, 2007, at $1.86 per share 50,000 50
Common stock issued for services rendered,
on October 29 2007, at $2.25 per share 150,000 150
Common stock issued for services rendered,
on November 9, 2007, at $3.23 per share 130,000 130
Common stock issued for services rendered,
on November 19, 2007, at $3.50 per share 50,000 50
Common stock issued for services rendered,
on November 26, 2007, at $3.01 per share 30,000 30
Common stock issued for services rendered,
on December 3, 2007, at $2.00 per share 45,094 45
Common stock issued for services rendered,
on December 4, 2007, at $3.15 per share 50,000 50
Common stock issued for services rendered,
on December 11, 2007, at $2.50 per share 200,000 200
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-44
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
(Restated) (Restated)
DEFICIT
ADDITIONAL ACCUMULATED
PAID-IN DURING THE DEFERRED
CAPITAL DEVELOPMENT STAGE COMPENSATION
------------- ----------------- -------------
Common stock shares issued for cash:
Common stock issued for cash in March 2007,
at $0.30 per share 5,233
Common stock issued for cash from April to
June 30, 2007, at $0.32 per share, Regulation S offering 157,711
Common stock issued for cash on October 25, 2007,
at $2.00 per share 4,997
Common stock issued for cash on December 20, 2007,
at $1.00 per share 999,000
Common stock issued for Stock to be issued (liability)
on March 7, 2007, at $1.0777 per share 201,156
Stock subscriptions received, net -- -- --
Amortization of deferred compensation 109,000
Common Stock Shares issued for services rendered:
Common stock issued for services rendered, on
March 19, 2007, at $1.00 per share 4,995
Common stock issued for services rendered, on
March 19, 2007, at $0.50 per share 9,980
Common stock issued for services rendered, on
March 20, 2007, at $0.50 per share 10,989
Common stock issued for services rendered, on
April 20, 2007, at $1.38 per share 344,750
Common stock issued for services rendered, on
May 30, 2007, at $1.05 per share 3,301
Common stock issued for services rendered, on
June 1, 2007, at $1.36 per share 264,325
Common stock issued for services rendered, on
July 9, 2007, at $1.00 per share 4,695
Common stock issued for services rendered,
on July 18, 2007, at $0.80 per share 29,963
Common stock issued for services rendered,
on August 1, 2007, at $4.43 per share 442,900
Common stock issued for services rendered,
on August 19, 2007, at $4.50 per share 1,124,750
Common stock issued for services rendered,
on August 30, 2007, at $2.27 per share 8,496
Common stock issued for services rendered, on
August 30, 2007, at $0.69 per share 20,698
Common stock issued for services rendered,
on August 31, 2007, at $3.41 per share 3,409
Common stock issued for services rendered, on
August 31, 2007, at $3.41 per share 34,090
Common stock issued for services rendered, on
October 1, 2007, at $2.60 per share 779,700
Common stock issued for services rendered,
on October 9, 2007, at $2.69 per share 127,702
Common stock issued for services rendered,
on October 22, 2007, at $1.86 per share 92,950
Common stock issued for services rendered,
on October 29 2007, at $2.25 per share 337,350
Common stock issued for services rendered,
on November 9, 2007, at $3.23 per share 419,770
Common stock issued for services rendered,
on November 19, 2007, at $3.50 per share 174,950
Common stock issued for services rendered,
on November 26, 2007, at $3.01 per share 90,270
Common stock issued for services rendered,
on December 3, 2007, at $2.00 per share 89,955
Common stock issued for services rendered,
on December 4, 2007, at $3.15 per share 157,450
Common stock issued for services rendered,
on December 11, 2007, at $2.50 per share 499,800
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-45
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
(Restated)
SUBSCRIPTION TREASURY
RECEIVABLE STOCK TOTAL
---------- --------- ------------
Common stock shares issued for cash: --
Common stock issued for cash in March 2007,
at $0.30 per share 5,250
Common stock issued for cash from April to
June 30, 2007, at $0.32 per share, Regulation S offering 158,211
Common stock issued for cash on October 25, 2007,
at $2.00 per share 5,000
Common stock issued for cash on December 20, 2007,
at $1.00 per share 1,000,000
--
Common stock issued for Stock to be issued (liability)
on March 7, 2007, at $1.0777 per share 201,343
Stock subscriptions received, net 475,000 475,000
Amortization of deferred compensation 109,000
--
Common Stock Shares issued for services rendered: --
Common stock issued for services rendered, on
March 19, 2007, at $1.00 per share 5,000
Common stock issued for services rendered, on
March 19, 2007, at $0.50 per share 10,000
Common stock issued for services rendered, on
March 20, 2007, at $0.50 per share 11,000
Common stock issued for services rendered, on
April 20, 2007, at $1.38 per share 345,000
Common stock issued for services rendered, on
May 30, 2007, at $1.05 per share 3,304
Common stock issued for services rendered, on
June 1, 2007, at $1.36 per share 264,520
Common stock issued for services rendered, on
July 9, 2007, at $1.00 per share 4,700
Common stock issued for services rendered,
on July 18, 2007, at $0.80 per share 30,000
Common stock issued for services rendered,
on August 1, 2007, at $4.43 per share 443,000
Common stock issued for services rendered,
on August 19, 2007, at $4.50 per share 1,125,000
Common stock issued for services rendered,
on August 30, 2007, at $2.27 per share 8,500
Common stock issued for services rendered, on
August 30, 2007, at $0.69 per share 20,728
Common stock issued for services rendered,
on August 31, 2007, at $3.41 per share 3,410
Common stock issued for services rendered, on
August 31, 2007, at $3.41 per share 34,100
Common stock issued for services rendered, on
October 1, 2007, at $2.60 per share 780,000
Common stock issued for services rendered,
on October 9, 2007, at $2.69 per share 127,750
Common stock issued for services rendered,
on October 22, 2007, at $1.86 per share 93,000
Common stock issued for services rendered,
on October 29 2007, at $2.25 per share 337,500
Common stock issued for services rendered,
on November 9, 2007, at $3.23 per share 419,900
Common stock issued for services rendered,
on November 19, 2007, at $3.50 per share 175,000
Common stock issued for services rendered,
on November 26, 2007, at $3.01 per share 90,300
Common stock issued for services rendered,
on December 3, 2007, at $2.00 per share 90,000
Common stock issued for services rendered,
on December 4, 2007, at $3.15 per share 157,500
Common stock issued for services rendered,
on December 11, 2007, at $2.50 per share 500,000
The accompanying notes are an integral part of these financial statements.
F-46
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
PREFERRED STOCK COMMON STOCK
-------------------------------- ----------------------------
PREFERRED PAR VALUE $.001 COMMON PAR VALUE $.001
SHARES $ AMOUNT SHARES $ AMOUNT
----------- --------------- ---------- ---------------
Common stock issued for services rendered,
on December 17, 2007, at $1.446 per share 400,000 400
Common stock issued for services rendered,
on December 17, 2007, at $2.50 per share 100,000 100
Common stock issued for services rendered,
on December 18, 2007, at $3.02 per share 50,000 50
Common stock issued for services rendered,
on December 21, 2007, at $3.00 per share 40,000 40
Common stock issued for services rendered,
on December 27, 2007, at $3.10 per share 50,000 50
Common stock issued for services rendered,
on March 19, 2007, at $0.50 per share
Common stock issued for services rendered,
on March 19, 2007, at $0.50 per share
Common stock Shares issued for services rendered
classified as Prepaid:
Common stock issued for services rendered,
on August 31, 2007, at $3.41 per share recorded as prepaid 350,000 350
Common stock issued for services rendered,
on September 14, 2007, at $2.29 per share recorded as prepaid 150,000 150
Common stock issued for services rendered,
on October 02, 2007, at $2.47 per share recorded as prepaid 350,000 350
Common stock issued for services rendered,
on October 02, 2007, at $2.40 per share recorded as prepaid 75,000 75
Treasury Stock (94,961)
Preferred Shares issued for settlement of services 1,000 1
Net loss for the period ended December 31, 2007 -- -- -- --
---------- -------- ---------- ----------
BALANCE AT DECEMBER 31, 2007 35,237,188 $ 35,237 30,263,330 $ 30,358
========== ======== ========== ==========
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-47
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
(Restated) (Restated)
DEFICIT
ADDITIONAL ACCUMULATED
PAID-IN DURING THE DEFERRED
CAPITAL DEVELOPMENT STAGE COMPENSATION
------------- ----------------- ------------
Common stock issued for services rendered,
on December 17, 2007, at $1.446 per share 578,051
Common stock issued for services rendered,
on December 17, 2007, at $2.50 per share 249,900
Common stock issued for services rendered,
on December 18, 2007, at $3.02 per share 150,950
Common stock issued for services rendered,
on December 21, 2007, at $3.00 per share 119,960
Common stock issued for services rendered,
on December 27, 2007, at $3.10 per share 154,950
Common stock issued for services rendered,
on March 19, 2007, at $0.50 per share
Common stock issued for services rendered,
on March 19, 2007, at $0.50 per share
Common stock Shares issued for services rendered
classified as Prepaid:
Common stock issued for services rendered,
on August 31, 2007, at $3.41 per share recorded as prepaid 1,193,150
Common stock issued for services rendered,
on September 14, 2007, at $2.29 per share recorded as prepaid 343,350
Common stock issued for services rendered,
on October 02, 2007, at $2.47 per share recorded as prepaid 864,150
Common stock issued for services rendered,
on October 02, 2007, at $2.40 per share recorded as prepaid 179,926
Treasury Stock
Preferred Shares issued for settlement of services 399,999
Net loss for the period ended December 31, 2007 -- (10,486,886) --
------------ ------------- -----------
BALANCE AT DECEMBER 31, 2007 $ 20,279,849 $ (17,418,997) $ --
============ ============= ===========
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-48
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
(Restated)
SUBSCRIPTION TREASURY
RECEIVABLE STOCK TOTAL
---------- --------- ------------
Common stock issued for services rendered,
on December 17, 2007, at $1.446 per share 578,451
Common stock issued for services rendered,
on December 17, 2007, at $2.50 per share 250,000
Common stock issued for services rendered,
on December 18, 2007, at $3.02 per share 151,000
Common stock issued for services rendered,
on December 21, 2007, at $3.00 per share 120,000
Common stock issued for services rendered,
on December 27, 2007, at $3.10 per share 155,000
Common stock issued for services rendered,
on March 19, 2007, at $0.50 per share --
Common stock issued for services rendered,
on March 19, 2007, at $0.50 per share
Common stock Shares issued for services rendered
classified as Prepaid:
Common stock issued for services rendered,
on August 31, 2007, at $3.41 per share recorded as prepaid 1,193,500
Common stock issued for services rendered,
on September 14, 2007, at $2.29 per share recorded as prepaid 343,500
Common stock issued for services rendered,
on October 02, 2007, at $2.47 per share recorded as prepaid 864,500
Common stock issued for services rendered,
on October 02, 2007, at $2.40 per share recorded as prepaid 180,001
--
--
Treasury Stock (66,473) (66,473)
Preferred Shares issued for settlement of services 400,000
--
Net loss for the period ended December 31, 2007 -- -- (10,486,886)
---------- --------- -----------
BALANCE AT DECEMBER 31, 2007 $ (185,693) $ (66,473) $ 2,674,281
========== ========= ===========
The accompanying notes are an integral part of these financial statements.
F-49
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
PREFERRED STOCK COMMON STOCK
---------------------------------- -------------------------
PREFERRED R VALUE $.001 COMMON PAR VALUE $.001
SHARES $ AMOUNT SHARES $ AMOUNT
---------- -------- ---------- --------
Common stock shares issued for cash:
Common stock issued for cash on February 19, 2008,
at $2.00 per share 17,000 17
Common stock issued for cash on March 5, 2008, at $1.61
per share 31,057 31
Common stock issued for cash on March 18, 2008, at
$1.00 per share, non-US citizens investment group 850,669 851
Common stock issued for cash on March 26, 2008,
at $1.00 per share, non-US citizens investment group 1,138,500 1,138
Common stock issued for cash on March 26, 2008,
at $1.18 per share 9,000 9
Common Stock subscriptions received, net Jan. to March 2008
Amortization of deferred compensation
Common stock shares issued for services rendered:
Common stock issued for services rendered, on
February 1, 2008, at $2.95 per share 100,000 100
Common stock issued for services rendered, on
February 6, 2008, at $2.63 per share 150,000 150
Common stock issued for services rendered, on
February 13, 2008, at $2.39 per share 12,500 13
Common stock issued for services rendered, on
February 15, 2008, at $2.42 per share 20,000 20
Common stock issued for services rendered, on
February 28, 2008, at $2.15 per share 25,000 25
Common stock issued for services rendered, on
February 29, 2008, at $2.19 per share 175,000 175
Common stock issued for services rendered, on
March 14, 2008, at $2.10 per share 5,000 5
Common stock issued for services rendered, on
March 18, 2008, at $1.60 per share 30,000 30
Common stock issued for services rendered, on
March 19, 2008, at $1.60 per share 20,000 20
Common stock issued for services rendered, on
March 31, 2008, at $1.90 per share 350,000 350
Common Stock Warrants issued for services (BOD)
on February 7, 2008, at $2.429
Net loss for the period ended March 31, 2008 -- -- -- --
---------- -------- ---------- --------
BALANCE AT MARCH 31, 2008 35,237,188 $ 35,237 33,197,056 $ 33,292
========== ======== ========== ========
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-50
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
(Restated) (Restated)
DEFICIT
ADDITIONAL ACCUMULATED
PAID-IN DURING THE DEFERRED SUBSCRIPTION
CAPITAL DEVELOPMENT STAGE COMPENSATION RECEIVABLE
------------ ------------- ----------- ----------
Common stock shares issued for cash:
Common stock issued for cash on February 19, 2008,
at $2.00 per share 33,983
Common stock issued for cash on March 5, 2008, at $1.61
per share 49,969
Common stock issued for cash on March 18, 2008, at
$1.00 per share, non-US citizens investment group 849,818
Common stock issued for cash on March 26, 2008,
at $1.00 per share, non-US citizens investment group 1,137,362
Common stock issued for cash on March 26, 2008,
at $1.18 per share 10,611
Common Stock subscriptions received, net Jan. to March 2008 55,175
Amortization of deferred compensation 27,250
Common stock shares issued for services rendered:
Common stock issued for services rendered, on
February 1, 2008, at $2.95 per share 294,900
Common stock issued for services rendered, on
February 6, 2008, at $2.63 per share 394,350
Common stock issued for services rendered, on
February 13, 2008, at $2.39 per share 29,862
Common stock issued for services rendered, on
February 15, 2008, at $2.42 per share 48,380
Common stock issued for services rendered, on
February 28, 2008, at $2.15 per share 53,725
Common stock issued for services rendered, on
February 29, 2008, at $2.19 per share 383,075
Common stock issued for services rendered, on
March 14, 2008, at $2.10 per share 10,495
Common stock issued for services rendered, on
March 18, 2008, at $1.60 per share 47,970
Common stock issued for services rendered, on
March 19, 2008, at $1.60 per share 31,980
Common stock issued for services rendered, on
March 31, 2008, at $1.90 per share 664,650
Common Stock Warrants issued for services (BOD)
on February 7, 2008, at $2.429 14,580
Net loss for the period ended March 31, 2008 -- (3,613,694) -- --
------------ ------------- ----------- ----------
BALANCE AT MARCH 31, 2008 $ 24,362,809 $ (21,032,691) $ -- $ (130,518)
============ ============= =========== ==========
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-51
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
(Restated)
ACCUMULATED
OTHER
TREASURY COMPREHENSIVE
STOCK INCOME (LOSS) TOTAL
--------- ---------- ----------
Common stock shares issued for cash: --
Common stock issued for cash on February 19, 2008,
at $2.00 per share 34,000
Common stock issued for cash on March 5, 2008, at $1.61
per share 50,000
Common stock issued for cash on March 18, 2008, at
$1.00 per share, non-US citizens investment group 850,669
Common stock issued for cash on March 26, 2008,
at $1.00 per share, non-US citizens investment group 1,138,500
Common stock issued for cash on March 26, 2008,
at $1.18 per share 10,620
Common Stock subscriptions received, net Jan. to March 2008 55,175
Amortization of deferred compensation 27,250
--
Common stock shares issued for services rendered:
Common stock issued for services rendered, on
February 1, 2008, at $2.95 per share 295,000
Common stock issued for services rendered, on
February 6, 2008, at $2.63 per share 394,500
Common stock issued for services rendered, on
February 13, 2008, at $2.39 per share 29,875
Common stock issued for services rendered, on
February 15, 2008, at $2.42 per share 48,400
Common stock issued for services rendered, on
February 28, 2008, at $2.15 per share 53,750
Common stock issued for services rendered, on
February 29, 2008, at $2.19 per share 383,250
Common stock issued for services rendered, on
March 14, 2008, at $2.10 per share 10,500
Common stock issued for services rendered, on
March 18, 2008, at $1.60 per share 48,000
Common stock issued for services rendered, on
March 19, 2008, at $1.60 per share 32,000
Common stock issued for services rendered, on
March 31, 2008, at $1.90 per share 665,000
--
--
Common Stock Warrants issued for services (BOD)
on February 7, 2008, at $2.429 14,580
--
Net loss for the period ended March 31, 2008 -- -- (3,613,694)
--------- ---------- ----------
BALANCE AT MARCH 31, 2008 $ (66,473) $ -- $3,201,656
========= ========== ==========
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-52
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
PREFERRED STOCK COMMON STOCK
---------------------------------- -----------------------------
PREFERRED PAR VALUE $.001 COMMON PAR VALUE $.00
SHARES $ AMOUNT SHARES $ AMOUNT
---------- -------- ---------- --------
Common stock shares issued for cash:
Common stock issued for cash on April 1, 2008, at
$1.00 per share, non-US citizens investment group 3,387,980 3,388
Common stock issued for cash on April 11, 2008,
at $1.11 per share, non-US citizens investment group 1,929,775 1,930
Common stock issued for cash on April 25, 2008,
at $1.19 per share, non-US citizens investment group 1,487,139 1,487
Common stock issued for cash on May 15, 2008,
at $1.10 per share 39,100 39
Common stock issued for cash on June 12, 2008,
at $1.00 per share, non-US citizens investment group 236,909 237
Common stock issued for cash on June 23, 2008,
at $1.00 per share 250,000 250
Preferred stock B - converted to common stock
on April 8,2008 (1,000) (1) 206,559 207
Preferred stock A - converted to common stock
on June 25,2008 (1,791,064) (1,791) 895,532 895
Amortization of deferred compensation
Common stock shares issued for services rendered:
Common stock issued for services rendered, on
April 1, 2008, at $1.95 per share 70,000 70
Common stock issued for services rendered, on
April 2, 2008, at $1.84 per share 108,478 108
Common stock issued for services rendered, on
April 4, 2008, at $1.90 per share 20,000 20
Common stock issued for services rendered, on
April 4, 2008, at $1.90 per share 1,066,666 1,067
Common stock issued for services rendered, on
April 14, 2008, at $3.05 per share 150,000 150
Common stock issued for services rendered, on
April 29, 2008, at $3.07 per share 833,333 833
Common stock issued for services rendered, on
May 7, 2008, at $2.55 per share 1,000,000 1,000
Common stock issued for services rendered, on
May 12, 2008, at $2.65 per share 20,000 20
Common stock issued for services rendered, on
May 13, 2008, at $2.79 per share 50,000 50
Common stock issued for services rendered, on
May 23, 2008, at $2.67 per share 102,000 102
Common stock issued for services rendered, on
May 30, 2008, at $2.20 per share 66,011 66
Common stock issued for services rendered, on
June 3, 2008, at $2.10 per share 150,000 150
Common stock issued for services rendered, on
June 11, 2008, at $2.25 per share 88,750 89
Common stock issued for services rendered, on
June 13, 2008, at $2.25 per share 125,000 125
Common stock issued for services rendered, on
June 26, 2008, at $2.08 per share 242,000 242
Common stock issued for services rendered, on
June 30, 2008, at $2.09 per share, "PROOF" trigger event 650,000 650
Common Stock Warrants issued for services (BOD)
on May 21, 2008, at $2.465
Other comprehensive income - net unrealized gain / (loss)
Net loss for the period ended June 30, 2008 -- -- -- --
---------- -------- ---------- --------
BALANCE AT JUNE 30, 2008 33,445,124 $ 33,445 46,372,288 $ 46,467
========== ======== ========== ========
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-53
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
DEFICIT
ADDITIONAL ACCUMULATED
PAID-IN DURING THE DEFERRED
CAPITAL DEVELOPMENT STAGE COMPENSATION
------------ ------------- -----------
Common stock shares issued for cash:
Common stock issued for cash on April 1, 2008, at
$1.00 per share, non-US citizens investment group 3,384,593
Common stock issued for cash on April 11, 2008,
at $1.11 per share, non-US citizens investment group 2,148,662
Common stock issued for cash on April 25, 2008,
at $1.19 per share, non-US citizens investment group 1,771,366
Common stock issued for cash on May 15, 2008,
at $1.10 per share 42,891
Common stock issued for cash on June 12, 2008,
at $1.00 per share, non-US citizens investment group 236,672
Common stock issued for cash on June 23, 2008,
at $1.00 per share 249,750
Preferred stock B - converted to common stock
on April 8,2008 (206)
Preferred stock A - converted to common stock
on June 25,2008 896
Amortization of deferred compensation 27,250
Common stock shares issued for services rendered:
Common stock issued for services rendered, on
April 1, 2008, at $1.95 per share 136,430
Common stock issued for services rendered, on
April 2, 2008, at $1.84 per share 199,492
Common stock issued for services rendered, on
April 4, 2008, at $1.90 per share 37,980
Common stock issued for services rendered, on
April 4, 2008, at $1.90 per share 2,025,598
Common stock issued for services rendered, on
April 14, 2008, at $3.05 per share 457,350
Common stock issued for services rendered, on
April 29, 2008, at $3.07 per share 2,557,499
Common stock issued for services rendered, on
May 7, 2008, at $2.55 per share 2,549,000
Common stock issued for services rendered, on
May 12, 2008, at $2.65 per share 52,980
Common stock issued for services rendered, on
May 13, 2008, at $2.79 per share 139,450
Common stock issued for services rendered, on
May 23, 2008, at $2.67 per share 272,238
Common stock issued for services rendered, on
May 30, 2008, at $2.20 per share 145,158
Common stock issued for services rendered, on
June 3, 2008, at $2.10 per share 314,850
Common stock issued for services rendered, on
June 11, 2008, at $2.25 per share 199,599
Common stock issued for services rendered, on
June 13, 2008, at $2.25 per share 281,125
Common stock issued for services rendered, on
June 26, 2008, at $2.08 per share 503,118
Common stock issued for services rendered, on
June 30, 2008, at $2.09 per share, "PROOF" trigger event 1,357,850
Common Stock Warrants issued for services (BOD) on May 21, 2008 14,795
Other comprehensive income - net unrealized gain / (loss)
Net loss for the period ended June 30, 2008 -- (13,204,447) --
------------ ------------- -----------
BALANCE AT JUNE 30, 2008 $ 43,469,195 $ (34,237,138) $ --
============ ============= ===========
[TABLE CONTINUED]
The accompanying notes are an integral part of these financial statements.
F-54
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At June 30, 2008
ACCUMULATED
OTHER
SUBSCRIPTION TREASURY COMPREHENSIVE
RECEIVABLE STOCK INCOME (LOSS) TOTAL
---------- --------- ---------- ----------
Common stock shares issued for cash: --
Common stock issued for cash on April 1, 2008, at
$1.00 per share, non-US citizens investment group 3,387,981
Common stock issued for cash on April 11, 2008,
at $1.11 per share, non-US citizens investment group 2,150,592
Common stock issued for cash on April 25, 2008,
at $1.19 per share, non-US citizens investment group 1,772,853
Common stock issued for cash on May 15, 2008,
at $1.10 per share 42,930
Common stock issued for cash on June 12, 2008,
at $1.00 per share, non-US citizens investment group 236,909
Common stock issued for cash on June 23, 2008,
at $1.00 per share 250,000
--
Preferred stock B - converted to common stock
on April 8,2008 (0)
Preferred stock A - converted to common stock
on June 25,2008 --
--
Amortization of deferred compensation 27,250
--
Common stock shares issued for services rendered: --
Common stock issued for services rendered, on
April 1, 2008, at $1.95 per share 136,500
Common stock issued for services rendered, on
April 2, 2008, at $1.84 per share 199,600
Common stock issued for services rendered, on
April 4, 2008, at $1.90 per share 38,000
Common stock issued for services rendered, on
April 4, 2008, at $1.90 per share 2,026,665
Common stock issued for services rendered, on
April 14, 2008, at $3.05 per share 457,500
Common stock issued for services rendered, on
April 29, 2008, at $3.07 per share 2,558,332
Common stock issued for services rendered, on
May 7, 2008, at $2.55 per share 2,550,000
Common stock issued for services rendered, on
May 12, 2008, at $2.65 per share 53,000
Common stock issued for services rendered, on
May 13, 2008, at $2.79 per share 139,500
Common stock issued for services rendered, on
May 23, 2008, at $2.67 per share 272,340
Common stock issued for services rendered, on
May 30, 2008, at $2.20 per share 145,224
Common stock issued for services rendered, on
June 3, 2008, at $2.10 per share 315,000
Common stock issued for services rendered, on
June 11, 2008, at $2.25 per share 199,688
Common stock issued for services rendered, on
June 13, 2008, at $2.25 per share 281,250
Common stock issued for services rendered, on
June 26, 2008, at $2.08 per share 503,360
Common stock issued for services rendered, on
June 30, 2008, at $2.09 per share, "PROOF" trigger event 1,358,500
--
Common Stock Warrants issued for services (BOD) on May 21, 2008 14,795
--
Other comprehensive income - net unrealized gain / (loss) (142,312) (142,312)
--
Net loss for the period ended June 30, 2008 -- -- -- (13,204,447)
---------- --------- ---------- ----------
BALANCE AT JUNE 30, 2008 $ (130,518) $ (66,473) $ (142,312) $8,972,666
========== ========= ========== ==========
The accompanying notes are an integral part of these financial statements.
F-55
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 1 - BASIS OF PRESENTATION AND NATURE OF BUSINESS AND ORGANIZATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial reporting and should be read in conjunction with the
consolidated financial statements of Global Resource Corporation included
in Form 10-K for the year ending December 31, 2007. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six months ended June 30, 2008 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 2008.
Global Resource Corporation (the Company") was formed on July 19, 2002 in
the State of New Jersey under the name Carbon Recovery Corporation as a
development stage company. The Company's business plan is to research and
develop and market the business of decomposing petroleum-based materials,
including shale deposits, tar sands, capped oil wells, waste oil streams
and tires, by subjecting them to variable frequency microwave radiation at
specifically selected frequencies for a time sufficient to at least
partially decompose the materials, converting the materials into oils and
alternative petroleum products.
The Company's business goals are as follows:
1) The construction of plants to exploit certain technology for
decomposing petroleum-based materials by subjecting them to variable
frequency microwave radiation at specifically selected frequencies for a
time sufficient to at least partially decompose the materials;
2) The design, manufacture and sale of machinery and equipment units,
embodying the technology;
3) The sub-licensing of third parties to exploit that technology.
At the present time, the process is in a laboratory mode. There will have
to be a transition from the "one batch at a time" operation, used in the
laboratory to a "continuous feed" line in order to commercialize the
process. A prototype one ton "continuous feed" line machine is scheduled
for delivery in the third quarter 2008.
The Company believes that the design of the machinery and equipment for
the decomposition of waste tires fully protects the environment from the
release of components during the decomposition process.
F-56
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 1 - BASIS OF PRESENTATION AND NATURE OF BUSINESS AND ORGANIZATION
(CONTINUED)
The Company is currently offering three models: one which disposes of five
tons per hour, one which disposes of ten tons per hour and one which
disposes of fifteen tons per hour. The Company is soliciting orders and
has issued various proposals to prospective customers.
There are other potential applications for the microwave technology
covered by the pending patent applications, in addition to the application
for decomposing waste tires and fluff. These include:
1. Stimulation of production of mature oil and gas wells ("stripper"
wells);
2. Reduction of hydrocarbons in drilling cuttings to permit on-site
disposal;
3. Volatilization of heavy or slurry oil;
4. Recovery of oil from oil shale and oil sands; and
5. Medical applications.
To date, the Company has allocated a substantial portion of its time and
investment in bring its product to the market and the raising of capital.
The Company has not commenced any commercial operations as of June 30,
2008.
On December 31, 2006, Global Resource Corporation acquired all the assets
and assumed all of the liabilities of Mobilestream Oil, Inc. in exchange
for: a) 11,145,255 shares of the Company's Common Stock; b) the issuance
by the Company for the benefit of the holders of the 2006 series of
convertible preferred stock of Mobilestream of 35,236,188 shares of the
Company's own "2006 Series" in the process of designation c) the issuance
of 27,205,867 common stock purchase warrants on the basis of 1 warrant for
each 3 shares of either common stock or preferred stock (the 2006 Series),
exercisable at $4.75 per share for a period ending on December 31, 2008.
Mobilestream agreed to surrender for cancellation 37,500,000 shares of the
Company's common stock which it owned after the Carbon Recovery
Corporation acquisition described below. The total cost of the acquisition
of Mobilestream has been allocated to the assets acquired and the
liabilities assumed based on their historical cost in accordance with SFAS
141, BUSINESS COMBINATION,(PARAGRAPHS D11 -D18), entities under common
control. The net asset and liabilities of Mobilestream equal approximately
$2.0 million. The assets consisted of primarily cash of approximately
$1,678,000 and fixed assets of $149,000 offset by liabilities of
approximately $91,000.
On September 22, 2006, Carbon Recovery Corporation entered into a Plan and
Agreement of Reorganization ("Agreement") with Global Resource
Corporation. Pursuant to the Agreement, Global Resource Corporation
acquired all of the assets and assumed all of the liabilities and related
development stage business of Carbon Recovery Corporation in exchange for:
(a) 48,688,996 common shares and (b) the assumption of a convertible
debenture issued by Carbon Recovery Corporation and accrued interest in
the amount of $120,682. Subsequently the Company eliminated the
convertible debenture by issuing 2,681,837 of the Company's common stock.
The holders of Global Resource Corporation's capital stock before the
Agreement retained 72,241 shares of common stock. Pursuant to the
Agreement, various classes of Carbon Recovery Corporation warrants were
exchanged for warrants of Global Resource Corporation as follows:
F-57
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 1 - BASIS OF PRESENTATION AND NATURE OF BUSINESS AND ORGANIZATION
(CONTINUED)
Global Resource Corporation issued 3,908,340 Class B warrants, 1,397,600
Class D warrants and 1,397,600 Class E warrants in exchange for an equal
number of warrants of Carbon Recovery Corporation. The Class B and Class D
warrants have an exercise price of $2.75 and the Class E warrants have an
exercise price of $4.00. All of the warrants were originally scheduled to
expire on September 21, 2007, but the Board of Directors of the Company
has extended the expiration date to December 31, 2008 for Class B, Class D
and Class E warrants.
The above transaction has been accounted for as a reverse merger
(recapitalization) with Carbon Recovery Corporation being deemed the
accounting acquirer and Global Resource Corporation being deemed the legal
acquirer. Accordingly, the historical financial information presented in
the financial statements is that of Carbon Recovery Corporation as
adjusted to give effect to any difference in the par value of the issuer's
and the accounting acquirer's stock with an offset to additional paid in
capital. The basis of the assets and liabilities of Carbon Recovery
Corporation, the accounting acquirer, have been carried over in the
recapitalization. Concurrent with the acquisition, Carbon Recovery
Corporation changed its name to Global Resource Corporation.
On December 11, 2007 the Company adopted the following Amendments to the
Articles of Incorporation: 1) Reduce the authorized number of shares of
common stock which the Company may issue from 2,000,000,000 to 200,000,000
shares. 2) Increase the authorized number of preferred shares which the
Company may issue from 50,000,000 to 100,000,000. 3)Reduce the number of
common shares into which shares of 2006 Series of Convertible Preferred
Stock which is convertible into common stock, from 2 shares of common
stock to 1/2 of 1 share of common stock for each share of 2006 Series of
Convertible Preferred Stock. 4) Indemnify the Company's directors and
officers to the maximum extent permitted under the laws of the State of
Nevada. 5) Limit the liability of the Company's directors and officers to
the Company, its stockholders and creditors to the maximum extent provided
under the Private Corporations Law of the State of Nevada (the "Nevada
PCL"). 6) Permit the Board of Directors to declare reverse stock splits of
its issued and outstanding shares without approval of the stockholders
under section 78-2055 of the Nevada PCL.
The Company is considered to be in the development stage as defined in
Statement of Financial Accounting Standards (SFAS) No. 7, "ACCOUNTING AND
REPORTING BY DEVELOPMENT STAGE ENTERPRISES". The Company has devoted
substantially all of its efforts to business planning and development, as
well as allocating a substantial portion of its time and investment in
bringing its product to the market, and the raising of capital.
F-58
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments and other
short-term investments with an initial maturity of three months or less to
be cash or cash equivalents.
At June 30, 2008, the Company maintained cash and cash equivalent balances
at four financial institutions that are insured by the Federal Deposit
Insurance Corporation up to $100,000. At June 30, 2008 the Company's
uninsured cash balances total $4,280,400.
SHORT-TERM INVESTMENTS
Cash in excess of operating requirements is invested in certificates of
deposits with an original maturity of greater than three months. (See note
15 for detail valuation)
INVESTMENTS IN MARKETABLE SECURITIES
Investments in marketable equity securities, all of which are classified
as available for sale, are carried at their market value. Investments with
a maturity date greater than three months but less than twelve months are
included in short-term investments. Investments in equity stocks and bonds
with a maturity date greater than twelve months are considered also
available for sale and are carried at their market value in Long-term
Investments on the balance sheet. The unrealized gains or losses of these
investments are recorded directly to stockholders' equity and any realized
gains or losses are recognized in income. (See note 15 for detail
valuation)
START-UP COSTS
In accordance with the American Institute of Certified Public Accountants
Statement of Position 98-5, "REPORTING ON THE COSTS OF START-UP
ACTIVITIES", the Company expenses all costs incurred in connection with
the start-up and organization of the Company.
INCOME TAXES
Deferred income taxes are reported using the liability method. Deferred
tax assets are recognized for deductible temporary differences and
deferred tax liabilities are recognized for taxable temporary differences.
(see note 7 for detail)
F-59
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BUSINESS COMBINATIONS
Effective December 31, 2006 the Company acquired the assets of
Mobilestream Oil, Inc. and due to the transfer of assets between entities
under common control, the total cost of the acquisition of Mobilestream
has been allocated to the assets acquired and the liabilities assumed
based on their historical costs in accordance with SFAS 141, BUSINESS
COMBINATIONS, PARAGRAPHS D11 - D18, entities under common control. All
account amounts and shares amounts have been updated and presented to
reflect the change.
Effective July 31, 2006 the Company completed a reverse split of its
common stock. All share amounts have been updated and presented to reflect
the change.
STOCK-BASED COMPENSATION
Effective January 1, 2006, the Company adopted the provisions of Financial
Accounting Standards Board ("FASB") published Statement of Financial
Accounting Standards No. 123 (Revised 2004), "SHARE-BASED PAYMENT" ("SFAS
123R"). SFAS 123R requires that compensation cost related to share-based
payment transactions be recognized in the financial statements. The
Company accounts for stock grants and stock options issued for services
and compensation by employees under fair value method. The Company
determined the fair market value of the options/warrants under the
Black-Sholes pricing model. Stock grants to employees are valued at the
fair market value at date of issuance.
For non-employees, stock grants are valued at the value of service or fair
market value of the Company's stock on the date of stock issuance
whichever is more readily determinable.
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Historical net loss per common share is computed using the weighted
average number of common shares outstanding. Diluted earnings per share
(EPS) include additional dilution from common stock equivalents, such as
stock issuable pursuant to the exercise of stock options and warrants.
Common stock equivalents were not included in the computation of diluted
earnings per share when the Company reported a loss because to do so would
be anti-dilutive.
RECLASSIFICATIONS
Certain amounts for the quarter ended June 30, 2007 have been reclassified
in the comparative financial statements to be comparable to the
presentation for the quarter ended June 30, 2008. These reclassifications
had no effect on net loss.
F-60
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
The following is a reconciliation of the computation for basic and diluted
earnings per share:
Six Months Ended June 30,
-----------------------------
2008 2007
------------ ------------
Net loss ($16,818,141) ($ 1,501,856)
------------ ------------
Weighted-average common shares
Outstanding (Basic) 36,596,908 25,374,174
------------ ------------
Weighted-average common shares
Outstanding (Diluted) 36,596,908 25,374,174
============ ============
Weighted-average common stock Equivalents for preferred stock convertible
to 1/2 for 1 of common are 15,827,030 and warrants common stock
equivalents are 20,118,979. There are also common stock purchase options
equivalents totaling 200,000. These warrants and options are not part of
the weighted-average outstanding common stock calculation because
inclusion would have been anti-dilutive as of June 30, 2008 and 2007.
INVENTORIES
Inventory is stated at the lower of cost or market. Cost is determined
using actual job costs per machine. Currently inventories consist of only
work in process.
ADVERTISING COSTS
The Company will expense the costs associated with advertising as they are
incurred. The Company did not incur any advertising costs for the years
ended June 30, 2008 and 2007.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations when incurred and
are included in operating expenses. The amounts charged as of June 30,
2008 and 2007 were $434,993 and $97,313 respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2007, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141 (revised
F-61
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
2007), BUSINESS COMBINATIONS, which replaces SFAS No 141. The statement
retains the purchase method of accounting for acquisitions, but requires a
number of changes, including changes in the way assets and liabilities are
recognized in the purchase accounting. It also changes the recognition of
assets acquired and liabilities assumed arising from contingencies,
requires the capitalization of in-process research and development at fair
value, and requires the expensing of acquisition-related costs as
incurred. SFAS No. 141R is effective for us beginning January 1, 2009 and
will apply prospectively to business combinations completed on or after
that date.
In December 2007, the FASB issued SFAS No. 160, NONCONTROLLING INTERESTS
IN CONSOLIDATED FINANCIAL STATEMENTS, AN AMENDMENT OF ARB 51, which
changes the accounting and reporting for minority interests. Minority
interests will be recharacterized as noncontrolling interests and will be
reported as a component of equity separate from the parent's equity, and
purchases or sales of equity interests that do not result in a change in
control will be accounted for as equity transactions. In addition, net
income attributable to the noncontrolling interest will be included in
consolidated net income on the face of the income statement and, upon a
loss of control, the interest sold, as well as any interest retained, will
be recorded at fair value with any gain or loss recognized in earnings.
SFAS No. 160 is effective for the Company beginning January 1, 2008 and
will apply prospectively, except for the presentation and disclosure
requirements, which will apply retrospectively. The Company is currently
assessing the potential impact that adoption of SFAS No. 160 would have on
its financial statements.
In February 2007, the FASB issued SFAS No. 159, THE FAIR VALUE OPTION FOR
FINANCIAL ASSETS AND FINANCIAL LIABILITIES. SFAS No. 159 gives the Company
the irrevocable option to carry many financial assets and liabilities at
fair values, with changes in fair value recognized in earnings. SFAS No.
159 is effective for the Company beginning January 1, 2009, although early
adoption is permitted. The Company is currently assessing the potential
impact that electing fair value measurement would have on its financial
statements and has not determined what election it will make.
On January 1, 2007, the Company adopted the provisions of FASB issued SFAS
No. 156, "Accounting for Servicing of Financial Assets, an amendment of
FASB Statement No. 140." SFAS No. 156 requires an entity to recognize a
servicing asset or liability each time it undertakes an obligation to
service a financial asset by entering into a servicing contract under a
transfer of the servicer's financial assets that meets the requirements
for sale accounting, a transfer of the servicer's financial assets to a
qualified special-purpose entity in a guaranteed mortgage securitization
in which the transferor retains all of the resulting securities and
classifies them as either available-for-sale or trading securities in
accordance with SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" and an acquisition or assumption of an obligation
to service a financial asset that does not relate to financial assets of
the servicer or its consolidated affiliates. Additionally, SFAS No. 156
requires all separately recognized servicing assets and servicing
liabilities to be initially measured at fair value, permits an entity to
choose either the use of an amortization or fair value method for
subsequent measurements, permits at initial adoption a one-time
reclassification of available-for-sale securities to trading securities by
F-62
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008
entities with recognized servicing rights and requires separate
presentation of servicing assets and liabilities subsequently measured at
fair value and additional disclosures for all separately recognized
servicing assets and liabilities. The adoption of SFAS No. 156 did not
have a material impact on the Company's financial position, results of
operations, or cash flows.
NOTE 3 - FIXED ASSETS
Fixed assets as of June 30, 2008 were as follows:
Estimated
Useful Lives
(Years) Amount
-------- --------
Testing Equipment 5 - 7 $454,013
Vehicles 5 34,425
Office & Computer Equip. 5 41,997
Leasehold improvements 3 17,820
Phone Equipment - leased 3 30,310
--------
Total $578,565
========
Less accumulated Depreciation & amortization 179,939
--------
NET FIXED ASSETS $398,626
========
There was $43,323 and $47,877 charged to operations for depreciation
expense for the six months ended June 30, 2008 and 2007, respectively.
NOTE 4 - LOAN PAYABLE - OFFICER OF THE COMPANY
On November 28, 2007 the Chief Financial Officer, Jeffrey J. Andrews,
loaned the Company $150,000 at a interest rate of prime plus 2%. This loan
has no stated principal payment due date. In April 2008 the Company repaid
$120,000. The remaining balance of $30,000 is expected to be paid by year
end 2008. Interest expense will be accrued and expensed monthly until the
Company pays off the loan.
NOTE 5 - LOAN PAYABLE - EQUIPMENT
In January 2006 the Company entered into a five year loan related to the
purchase of new equipment. The principal amount of the loan is $75,000 at
an interest rate of 13.43% annually. Monthly payments on the loan are
approximately $1,723. In October 2006 the Company entered into a three
year loan related to lab equipment. The principal amount of the loan is
$73,817 at an interest rate of 8.71% annually. Monthly payments on the
loan are approximately $2,396.
2008
--------
Total Loans Payable $ 72,643
Less current maturities (42,572)
--------
Long-Term payable $ 30,071
========
F-63
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 5 - LOAN PAYABLE - EQUIPMENT CONTINUED
The amount of principal maturities of the loans payable by years is as
follows:
2008 $21,014
2009 35,416
2010 16,213
-------
$72,643
=======
NOTE 6 - INVENTORY
Inventory consists of a one ton machine currently in the work in process
stage. Modifications to the original design have been made to improve
efficiencies. It was determine that these modification made some inventory
WIP obsolete, so a charge of $303,449 was charged to R & D expense and WIP
inventory was reduced in the second quarter 2008.
June 30, 2008 June 30, 2007
------------- --------------
Work in Process $ 294,980 $ 0
NOTE 7 - PROVISION FOR INCOME TAXES
Deferred income taxes will be determined using the liability method for
the temporary differences between the financial reporting basis and income
tax basis of the Company's assets and liabilities. Deferred income taxes
will be measured based on the tax rates expected to be in effect when the
temporary differences are included in the Company's tax return. Deferred
tax assets and liabilities are recognized based on anticipated future tax
consequences attributable to differences between financial statement
carrying amounts of assets and liabilities and their respective tax bases.
At June 30, 2008 the deferred tax assets consist of the following:
2008
------------
Deferred taxes due to net operating carryforwards $ 10,271,000
Less: Valuation Allowance (10,271,000)
------------
Net Deferred Tax asset $ --
------------
At June 30, 2008, the Company had deficits accumulated during the
development stage in the approximate amount of $34,237,138 available to
offset future taxable income through 2027. The Company established
valuation allowances equal to the full amount of the deferred tax assets
due to the uncertainty of the utilization of the operating losses in
future periods.
F-64
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 8 - CAPITAL LEASES
In June 2006 the Company entered into a three year capital lease related
to the purchase of new phone equipment. The monthly lease payments are
$1,293 per month. As of June 30, 2008 the minimum lease payments under the
capital lease are as follows:
For the periods Ending June 30 Amount
-------------
2008 $ 7,758
2009 $ 15,516
2010 $ 15,516
2011 $ 7,758
------------
$ 51,700
============
NOTE 9 - OPERATING LEASES
The Company leases office space under a lease agreement that commenced
June 1, 2006, the monthly lease payments are $5,000 per month and the
leases expires on May 31, 2009. The Company is required to pay property
taxes, utilities, insurance and other costs relating to the leased
facilities.
Minimum lease payments under the operating lease are as follows:
For the periods Ending June 30 Amount
------------
2008 $ 30,000
2009 21,700
------------
$ 51,700
============
NOTE 10 -ALLEVIATION OF GOING CONCERN
At December 31, 2007, the Company reported that it had incurred
substantial net losses for the years ended December 31, 2007 and 2006 and
the Company had not commenced operations to have a revenue stream to
support itself. These factors raised substantial doubt about the Company's
ability to continue as a going concern at that time.
During the six months ended June 30, 2008, the Company has raised over $9
million dollars in cash through a private placement of common stock. With
this additional capital and projected cash flow expenditures over the next
twelve months, Company's management considers the facts and circumstances
which raised substantial doubt about the Company's ability to continue as
going concern to be alleviated.
The Company currently has $4.9 million in cash & cash equivalents and
short-term investments and $3.5 million in debt securities in long-term
investments (see note 15). If the Company did not raise any additional
cash as of June 30, 2008 it would still have funds available to meet its
cash operating expenses and inventory and capital expenditures
requirements. Cash operating expenses
F-65
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 10 - ALLEVIATION OF GOING CONCERN CONTINUED
are projected to be $1 million a quarter, a $4 million total for the
twelve month period following the date of financial statements being
reported upon. Inventory and other capital expenditures for twelve month
period is projected to be $1 million, for a total cash expenditure of $5
million for the twelve month period following the date of financial
statements being reported upon.
The Company also expects to successfully demonstrate its one ton per hour
microwave reactor system by end of the fourth quarter 2008 and deliver the
machine in the fourth quarter of 2008. In 2009, the Company also expects
to generate significant positive cash flow from projected sales.
NOTE 11 - RELATED PARTY TRANSACTION
On May 17, 2007, the Company authorized the purchase of Company stock from
Lois Pringle, wife of the Company's Chief Executive Officer. The Company
purchased 94,961 shares for $66,471 in cash.
NOTE 12 - STOCKHOLDERS' EQUITY
COMMON STOCK
The following details the stock transactions for the three months ended
June 30, 2008:
The Company issued 7,291,803 shares of stock for $7,841,265 cash.
The Company issued 4,781,338 shares of common stock in exchange for
services rendered, valued at $11,234,459.
PREFERRED STOCK
The following details the stock transactions for the three months ended
June 30, 2008:
In April 2008 all of the Preferred stock B, 1,000 shares was converted
into 206,559 shares of common stock.
In June 2008 CEO and President Frank Pringle converted 1,791,064 shares of
Preferred stock A into 895,532 shares of common stock. Preferred stock A
has right to convert 2 shares of preferred into one share of the Company's
common stock, votes together with the common stock on a fully converted
basis and has the right to elect a majority of the Board of Directors as
long as the Preferred stock A remains outstanding.
WARRANTS
The Company issued an additional 7,080,904 warrants, which have an
exercise price of $2.00 and expire December 2009, in a private placement
sale in the second quarter 2008. In addition, the Company issued 6,000
warrants with a warrant price of $2.83 for services performed in first
quarter; these warrants will expire in 5 years.
F-66
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 12 - STOCKHOLDERS' EQUITY( CONTINUED)
A summary of the status of the Company's outstanding stock warrants as of
June 30, 2008 is as follows:
Weighted Average
Shares Exercise Price
---------- --------
Outstanding at December 31, 2007 11,036,907 $ 3.51
Granted 9,082,072 $ 2.00
Exercised -- --
Forfeited / expired $ --
Outstanding at June 30, 2008 20,118,979 $ 2.83
---------- --------
Exercisable at June 30, 2008 20,118,979 $ 2.83
---------- --------
In March 2005 the Company issued 200,000 of common stock purchase options
(under Carbon Recovery Corporation) to the CFO. They have an exercise
price of $1.00 per share and will be 100% vested as of 12/31/2008. As of
06/30/2008 none had been exercised.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
On May 21, 2008 the Board of Directors approved a consulting agreement
with its President and CEO, Frank G. Pringle. Under the consulting
agreement Mr. Pringle will provide consulting services on a management and
executive level to the Company as an independent contractor, not an
employee, on an as-needed basis with respect to the business of the
Company. This consulting agreement replaces prior employment agreement and
is effective as of January 1, 2008. Under this consulting agreement Mr.
Pringle is entitled to an annual fee of $378,000 for years 2008 and 2009,
and $448,000 in years 2010 and 2011. The term of the agreement is tied to
the duration of the patent property rights which the Company owns. For
complete details of the contract see the Company's Form 8-K filed with the
SEC on May 21, 2008. In 2005 in addition to his base salary the Company
granted Mr. Pringle 540,000 shares of restricted common stock valued at
$545,000. This common stock vests to Mr. Pringle over a five-year period
and is expensed in the financial statements at a rate of $27,250 a quarter
F-67
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 13 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
until December 31, 2009. In June 2007 the Company entered into a purchase
agreement with Ingersoll Production Systems of Rockford, Illinois to build
one 1-ton microwave reactor system. The total purchase commitment is
approximately $600,000, and the microwave reactor system is expected to be
completed in fourth quarter 2008. The Company has currently paid
approximately $400,000 as of June 30, 2008, and this amount is reflected
in the balance sheet as part of the Inventory - WIP and in the income
statement as R & D expense. In addition to Ingersoll Production Systems
there are various other suppliers with which the Company has purchase
commitments. These purchase commitment are approximately $300,000 and the
Company has paid approximately $200,000 as of June 30, 2008. These amounts
are also reflected in the financial statements as Inventory - WIP.
In October, 2007 the Company revived an Agreement which had previously
expired for the sale of shares of its Common Stock to Mercatus & Partners,
Limited ("Mercatus"), a private limited company organized and existing
under the laws of the United Kingdom, having an address of Via S. Roberto
Bellarmino #4, 00142 Roma, Italy. The proposed transaction was for the
placement of shares of its Common Stock to a value of $2,000,000. The
original agreement had expired on March 31, 2007. Following protracted
discussions, on October 16, 2007 the Company agreed to revive the
Agreement, with certain modifications, and the parties executed an
Addendum to the original Agreement. Under the revived Agreement and
Addendum, Mercatus was to have purchased shares to the total of $2,000,000
on or before November 30, 2007. The Company had deposited 2,665,666 shares
of its Common Stock in escrow, with any unpurchased balance of such shares
as of November 30th to be returned for cancellation. Mercatus failed to
make any of the installment payments as promised and did not complete any
of the purchase by November 30, 2007. The Company no longer has any
confidence in Mercatus, has advised Mercatus that the Agreement has
expired and will not be extended or further revived, and has demanded a
return of the 2,665,666 shares which were escrowed. These shares have not
been included in the outstanding shares and weighted average number of
common stock share calculation. (See Subsequent events note 15 return of
stock certificates.)
On March 25, 2008 the parties amended the Letter of Intent which had been
entered into on December 17, 2007 between the Company and Warwick
Communications, Inc. ("Warwick"), previously reported. The Letter of
Intent remains non-binding and subject to final mutually agreeable
documents including the License Agreement. The major change is that
Warwick is to order a 5 ton per hour machine by May 30, 2008, subject
still to the waivable condition precedent of a successful demonstration of
the pilot plant, anticipated to be held on April 23, 2008. The total net
purchase price will be $3,572,100. Payment is divided into 4 payments: (1)
an initial deposit of $1,178,793 divided into a $10,000 refundable deposit
to accompany the order and the balance of $1,168,793 due within 30
business days; (2) a second payment of $1,178,793 due within 3 months of
the first payment; (3) $857,304 due upon delivery and successful testing;
and (4) a final payment of $357,210 due upon successful installation.
Subject to Warwick's meeting of the first year's order requirement,
Warwick will earn the right of first refusal for the territories of
Mexico, Cuba, Venezuela, Brazil, Morocco, Panama and Trinidad & Tobago.
Payment for the license continues to be by issuance of 2,000,000 shares of
Warwick's Common Stock, together
F-68
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 13 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
with 2 warrants; one to purchase 1,000,000 additional shares of Warwick's
Common Stock at a price of US$.50 per share and the other to purchase
750,000 shares of Warwick's Common Stock at a price of US$1.00 per share;
however, now the issuance by Warwick of its 2,000,000 shares of Common
Stock in payment for the license will be subject to a one year hold and a
mutual sign off by the Company, Warwick and Warwick's lessee to the effect
that the machine has operated successfully for at least 90 days and that
the lessee will continue its lease of such machine. Under the license,
when and if issued, Warwick will be obligated to purchase one operational
plant per year for the first five years with orders aggregating
US$25,000,000 at the end of the 5 years. (See Subsequent events note 15
termination of Warwick agreement.)
On December 21, 2007 the Company entered into a certain Securities
Purchase agreement with Professional Offshore Opportunity Fund, Ltd.
("PROOF") pursuant to which PROOF agreed to purchase 1,250,000 shares of
the Company's common stock together with warrants for additional 625,000
shares at an exercise price of $1.50 per share. The Company received
$1,000,000 from PROOF with the balance of $250,000 being held in escrow,
together with the 250,000 common stock shares being purchased pending
certain future events. In addition, the Company has issued to the Escrow
an additional 650,000 shares to be delivered to PROOF or returned to the
Company, depending upon those certain future events (the "Trigger Event").
The Trigger Event occurred because the Company did not get an effective
registration statement for the Shares, Warrants and Warrant Shares by June
30, 2008. In June PROOF exercised its option to purchase from the escrow
the 250,000 shares for $250,000. The Company also had to issue 650,000
shares from the escrow account to PROOF which was expensed in June 2008.
Effective February 11, 2008, the Company entered into employment agreement
with Mr. Jeffrey T. Kimberly as the Company's Chief Operating Officer. Mr.
Kimberly received a $100,000 signing bonus, his base salary will be
$200,000 per year which will increase to $225,000 on August 11, 2008, his
sixth month anniversary with the company. In addition to his base salary,
Mr. Kimberly is eligible to receive a yearly performance bonus to be paid
in the Company's common stock issued under the GRC 2008 Employee
Compensation Plan, as well as a relocation compensation package and
Company medical benefits.
In May 2008, the Company entered into employment agreement with Mr. Wayne
J. Koehl as Executive Vice President. Mr. Koehl base salary will be
$160,000 per annum, increasing to $200,000 as of November 5, 2008, the
contract is for five years. He will receive a signing bonus of 100,000
shares of the Company's common stock along with automobile allowance and
fringe benefits.
NOTE 14 - DEPOSITS
The June 30, 2008 balance of deposits, totaling $76,576, consists of a
$45,000 investment in land which occurred in 2006, $29,860 deposit made in
August of 2007 on a future lease for additional equipment and the balance
of $1,716 lease deposit for offices. The lease deposit for equipment is
expected to be returned to the Company in 2008.
F-69
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 15 - INVESTMENTS -SHORT-TERM AND LONG-TERM
Cash in excess of operating requirements is invested in notes, bonds and
equity securities.
The following table summarizes the Company's marketable securities
investments as of June 30, 2008:
Cost Fair Market Unrealized gain /
Value (Loss)
--------- --------- -----------
SHORT-TERM INVESTMENTS
Certificates of Deposits 288,000 287,449 (551)
========= ========= ===========
LONG-TERM INVESTMENTS
Fixed-rate capital securities 125,000 124,450 (550)
Corporate Bonds 1,554,211 1,504,831 (49,281)
Preferred Stocks 1,931,411 1,839,580 (91,830)
--------- --------- -----------
TOTAL LONG-TERM INV. 3,610,622 3,468,860 (141,761)
========= ========= ===========
The unrealized gains or losses of these investments total $142,312, they
are recorded directly to stockholders' equity and any realized gains or
losses are recognized in income.
NOTE 16 - SUBSEQUENT EVENTS
Subsequent to the balance sheet date of June 30, 2008 the following
transactions occurred:
The Company issued 465,210 shares of common stock for $465,210 in cash in
the month of July, $465,210 of this cash was included as cash and stock to
be issued in the June 30th balance sheet. Also one warrant was issued for
each common stock share, the warrants have a $2.00 exercise price and
expire 18 months from date of issuance.
On July 14, 2008 the Company cancelled the previously reported Amended
Letter of Intent which it had entered into with Warwick Communications,
Inc. on December 17, 2007 and which had been amended on March 25, 2008. No
definitive agreement had been entered into and no license, as contemplated
in the Letter of Intent, was issued. Warwick's deposit of $10,000 is being
returned. (See Note 13 above)
As of July 14, 2008 the Company has been delivered back the two
certificates previously held in escrow for Mercatus & Partners. (See Forms
8-K filed October 16, 2007 and December 18, 2007). The certificates
received represented 888,889 shares and 1,776,777 shares of the Company's
Common Stock, respectively. These shares have been cancelled. (See Note 13
above)
F-70
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 17 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS FOR
THE YEARS ENDED DECEMBER 31, 2003 AND 2002
The Company has restated its previously issued financial statements for
the period July 19, 2002 (inception) through December 31, 2002 on its
report dated May 29, 2003. The Company has also restated its financial
statements for the year ended December 31, 2003. The Company has restated
its financial statements to reverse the effect of a transaction during the
period ended December 31, 2002. The transaction reflected the issuance of
preferred stock shares in exchange for an intangible asset and the
subsequent impairment of the asset acquired. The financial statements have
been restated as the transaction was subsequently rescinded, as the
preferred stock shares were not formally issued. For the year ended
December 31, 2003 the Company had initially reflected the issuance of
1,455,000 shares of common stock to two of its founders as being issued
for services provided. The Company has restated its financial statements
to reflect the common stock as re-issuance of founders shares. These
transactions resulted in a decrease in net loss applicable to common
shares of $727,500 and $1,500,000 for the year ended December 31, 2003 and
period July 19, 2002 (inception) through December 31, 2002 to a net loss
of $203,659 and $508,508 as restated, and a decrease in the deficits
accumulated during the development stage to $712,617 and $508,508,
respectively.
NOTE 18-SUPPLEMENTAL DISCLOSURE NON-CASH ACTIVITY FROM CASH FLOW STATEMENT
06/30/2008 06/30/2007 July 19, 2002
(Inception)
to 06/30/2008
Common stock issued for services $13,194,734 $ 26,000 $20,125,444
Common stock issued for services prior year included in prepaids $ 1,290,750 $ 0 $ 2,064,208
Sub-total of Common stock issued for services including prepaids $14,485,484 $ 26,000 $22,189,652
Common stock issued for land 0 $ 45,000 $ 125,800
Common stock issued as chartable contribution $ 50,000
Common stock issued to covert accounts payable to equity $ 1,807
Preferred stock issued for services $ 400,000 $ 400,000
Common stock Warrants issued for services $ 29,375 $ 29,375
F-71
PART II---INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution.
SEC Registration Fee $ 210
Legal and Accounting Fees and Expenses* $40,000
Transfer Agent and Registrar Fees* $ 5,000
Printing Expenses* $ 5,000
Miscellaneous* $ 5,000
Total $55,210
*Estimated
ITEM 14. Indemnification of Directors and Officers
Global Resource Corporation's Articles of Incorporation, as amended,
contain provisions to indemnify the directors, officers, employees or other
agents to the fullest extent permitted by the Private Corporations Law of
Nevada. These provisions may have the practical effect in certain cases of
eliminating the ability of shareholders to collect monetary damages from
directors. Global Resource Corporation believes that these provisions will
assist Global Resource in attracting or retaining qualified individuals to serve
as Directors.
ITEM 15. Recent Sales of Unregistered Securities
Set forth below in chronological order is information regarding the
numbers of shares of capital stock sold by the Company, the number of options
and warrants issued by the Company, and the principal amount of debt instruments
issued by the Company since September 15, 2005, the consideration received by
the Company for such shares, options and debt instruments and information
relating to the section of the Securities Act or rule of the Securities and
Exchange Commission under which exemption from registration was claimed. None of
these securities was registered under the Securities Act. Except as otherwise
indicated, no sales of securities involved the use of an underwriters and no
commissions were paid in connection with the sale of any securities.
Each of such transactions was exempt from registration under the
Securities Act by virtue of the provisions of Section 4(2) and/or Section 3(b)
of the Securities Act. Each purchaser of the securities described below has
represented that he/she/it understands that the securities acquired may not be
sold or otherwise transferred absent registration under the Securities Act or
the availability of an exemption from the registration requirements of the
Securities Act, and each certificate evidencing the securities owned by each
purchaser bears or will bear upon issuance a legend to that effect.
II-1
The information below gives affect to all stock splits, reverse stock
splits and stock dividends to date.
On September 22, 2006 the Company acquired substantially all of the
assets and certain liabilities of Carbon Recovery Corporation (the "CRC
Acquisition") pursuant to a plan and agreement of reorganization dated July 27,
2006 (the "CRC Agreement") with Carbon Recovery Corporation ("CRC"). Under the
CRC Agreement, on September 22, 2006 the Company issued to the Carbon Recovery
Liquidating Trust for the benefit of the stockholders of CRC the following: (i)
48,688,996 shares of the Company's Common Stock (the "CRC Common Stock") for the
assets of CRC, and (ii) 3,908,340 Class B Warrants, 1,397,000 Class D Warrants
and 1,397,000 Class E Warrants (together the "CRC Warrants" and individually by
their respective class names) to assume the liabilities of CRC to its warrant
holders under similar classes of warrants of CRC.
On September 22, 2006 the Company issued 25,000 shares of its Common
Stock to Ms. Mary Radomsky as compensation for her services as former director
and CEO of the Company from May to September 22, 2006.
On September 26, 2006 the Company issued 2,560,974 shares of its Common
Stock out of a total of 2,681,837 such shares to two holders of the Company's 8%
convertible debenture in connection with the conversion of $102,345 principal
amount of, and $18,337.68 in accrued interest, of the debentures. The remaining
120,863 shares issuable upon the conversion were subsequently issued as a result
of certain ownership percentage limitations set forth in the convertible
debenture.
On September 22, 2006, Mobilestream Oil, Inc. loaned $650,000 to M J
Advanced Communications Corporation ("MJACC") with the understanding that MJACC
would advance money to CRCIC, LLC a limited liability company for the purpose of
acquiring a shell corporation (Global Resources Corporation) for Carbon Recovery
Corporation to perfect a reverse merger. Subsequent to the acquisition date, a
dispute arose with respect to the agreement. A resolution was agreed upon where
400,000 shares of Global Resources Corporation stock owned by MJACC and CRCIC
have been transferred to an attorney as escrow for satisfaction of the note
payable to the Company and MJACC and CRCIC relinquished all rights. The stock
held in escrow will be sold by the escrow agent to satisfy the loan amount. The
note has been fully reserved due to market price volatility of the Company's
Common Stock price.
On December 29, 2006 the Company issued 14,123 shares of Common Stock
to a consultant in partial payment for services.
Between November 2005 and December 31, 2006 the Company issued
2,786,286 shares of its Common Stock for $2,810,877 cash.
On December 31, 2006 the Company closed an acquisition for
substantially all of the assets and certain liabilities of Mobilestream Oil,
Inc. (the "Mobilestream Acquisition") pursuant to a plan and agreement of
reorganization dated November 28, 2006 (the "Mobilestream Agreement") with
II-2
Mobilestream Oil, Inc. ("Mobilestream"). Under the Mobilestream Agreement, on
January 3, 2007 the Company issued to the Mobilestream Oil Liquidating Trust for
the benefit of the stockholders of Mobilestream the following: (i) 11,145,255
shares of the Company's Common Stock (the "Mobilestream Acquisition Common
Stock") for all of the shares of Mobilestream common stock at the exchange rate
of one share of the Company's Common Stock for each 7.143 shares of Mobilestream
common stock; and (ii) 27,205,867 Common Stock purchase warrants having an
exercise price of $4.75 per share and an expiration date of December 31, 2007
(the "Mobilestream Warrants") on the basis of one Mobilestream Warrant for each
three shares of Mobilestream common stock or Mobilestream 2006 Series
Convertible Preferred Stock. Although intended for the Mobilestream Liquidating
Trust and for eventual distribution to Frank G. Pringle, the Company issued
directly to Frank G. Pringle 35,236,188 shares of the Company's 2006 Series
Convertible Preferred Stock (the "2006 Mobilestream Acquisition Preferred
Stock") in exchange for 503,374,112 shares of Mobilestream 2006 Series
Convertible Preferred Stock at the exchange rate of one share of the Company's
2006 Mobilestream Acquisition Preferred Stock for each 7.143 shares of
Mobilestream 2006 Series Convertible Preferred Stock. In addition, the Company
acquired 37,500,000 shares of its own Common Stock from Mobilestream as one of
the assets in the Mobilestream Acquisition.
On March 8, 2007 the Company issued 186,822 shares of its Common Stock
to 25 non-US persons under a Regulation S offering for $201,342 actually
received in 2006.
On March 19, 2007 the Company issued 25,000 shares of its Common Stock
to the Director of Microwave Processing and Engineering Center at Pennsylvania
State University for consulting services valued at $15,000.
On March 20, 2007 the Company issued 11,000 shares of its Common Stock
to the Director of Microwave Processing and Engineering Center at Pennsylvania
State University for consulting services valued at $11,000.
In March 2007 the Company issued 17,500 shares of its Common Stock in
exchange for $5250 in cash.
On May 30, 2007 the Company issued 3,147 shares of its Common Stock to
Coast to Coast Funding Consultants for consulting services valued at $3304.50.
On July 9, 2007 the Company issued 4700 shares of its Common Stock to
Kenneth Dicks for consulting services valued at $4700.
During the three months ended June 30, 2007 the Company issued 499,564
shares of its Common Stock for $157,711 in cash in a Regulation S offering.
On July 18, 2007 the Company issued 37,500 shares of its Common Stock
to a consultant for engineering services valued at $30,000.
II-3
On August 28, 2007 the Company issued 400,000 Common Stock Purchase
Warrants to each of Black Diamond Fund, LLP and Nutmeg Mercury Fund, LLP in
connection with the rescission of, and settlement of, a set of claims and
counterclaims arising out of a private placement transaction.
On August 30, 2007 the Company issued 30,041 shares of its Common Stock
to Four Seasons Financial Group in exchange for consulting services valued at
$20,728.
On August 30, 2007 the Company issued 3,745 shares of its Common Stock
to Coast to Coast Funding Consulting in exchange for consulting services valued
at $8,500.
On August 31, 2007, the Company issued 1,000 shares of its Common Stock
to Jerry Sainsbury for services valued at $1000.
On August 31, 2007, the Company issued 10,000 shares of its Common
Stock to Todd Heinzl for consulting services valued at $34,100.
On August 31, 2007, the Company issued 350,000 shares of its Common
Stock to Daniel Katz for services valued at $1,193,500.
On September 14, 2007, the Company issued 150,000 shares of its Common
Stock to Joseph Bianco for services valued at $343,500.
On October 2, 2007, the Company issued 350,000 shares of its Common
Stock to C. Jones Consulting, Inc. for marketing and investor relations services
valued at $864,500.
On October 2, 2007, the Company issued 75,000 shares of its Common
Stock to Leading Edge for consulting services valued at $180,000.
On October 22, 2007, the Company issued 50,000 shares of its Common
Stock to Patrick Hogan for services valued at $93,000.
On October 25, 2007, the Company sold 2,500 shares of its Common Stock
to Robert T. Leach for $5000.
On October 29, 2007, the Company issued 150,000 shares of its Common
Stock to Tommy Viewig and Brian Conway for consulting services valued at
$337,500.
On November 9, 2007, the Company issued 130,000 shares of its Common
Stock to Tommy Viewig and Brian Conway for consulting services valued at
$419,900.
On November 19, 2007, the Company issued 50,000 shares of its Common
Stock to Aero Financial, Inc. for services valued at $175,000.
On November 26, 2007, the Company issued 30,000 shares of its Common
Stock to Robert Sullivan for services valued at $90,300.
II-4
On December 3, 2007 the Company issued 45,094 shares of its Common
Stock to Todd Heinzl for services relating to a listing on the Frankfurt Stock
Exchange valued at $90,000.
On December 4, 2007 the Company issued 50,000 shares of its Common
Stock to Worldwide Strategic Partners, Inc. for consulting services valued at
$157,000.
On December 11, 2007, the Company issued 200,000 shares of its Common
Stock to Tommy Viewig and Brian Conway for consulting services valued at
$500,000.
On December 17, 2007 the Company issued a total of 400,000 shares of
its Common Stock upon conversion of the MJACC Series Convertible Preferred Stock
valued at $432,000.
On December 17, 2007 the Company issued a total of 100,000 shares of
its Common Stock to Starr Consulting/Thomas Pierson, in settlement of a pending
litigation by them against the Company, valued at $250,000.
On December 18, 2007 the Company issued a total of 50,000 shares of its
Common Stock to Worldwide Strategic Partners, Inc. for consulting services
valued at $151,000.
On December 21, 2007 the Company (i) sold 1,000,000 shares of its
Common Stock to Professional Opportunity Offshore Fund, Ltd. for $1,000,000,
(ii) issued an additional 650,000 shares of its Common Stock to be held in
escrow in connection with the transaction, 250,000 of which are subject to
purchase for $250,000 and the remaining 400,000 are subject to release from
escrow for no consideration if the Company does not meet certain registration
statement requirements or the price of its stock falls below $1.00 per share
prior to June 30, 2008, and (iii) issued a warrant to purchase 625,000 shares of
its Common Stock at an exercise price of $1.50 per share.
On December 21, 2007 the Company issued 40,000 shares of its Common
Stock to Robert Sullivan for consulting services valued at $120,000.
On December 27, 2007 the Company issued a total of 50,000 shares of its
Common Stock upon a partial cashless exercise of certain Common Stock purchase
warrants issued in settlement of two claims arising from a dispute involving
Nutmeg Mercury Fund, LLP and Black Diamond Fund, LLP, in the respective amounts
of 31,250 and 18,750 shares, valued respectively at $96,875 and $58,125.
On February 1, 2008 the Company issued a total of 100,000 shares of its
Common Stock to Robert Sullivan for investor relation services valued at
$295,000.
II-5
On February 6, 2008, the Company issued a total of 150,000 shares of
its Common Stock to Tomas Viewig and Brian Conway for investor relation services
valued at $394,500.
On February 13, 2008 the Company issued 12,500 shares of its Common
Stock to Todd Heinzl for consulting services valued at $29,875.
On February 15, 2008 the Company issued 20,000 shares of its Common
Stock to Robert Sullivan and Associates and Steve Urbanski for consulting
services valued at $48,400.
On February 19, 2008 the Company issued 5,000 shares of its Common
Stock to Kelly Meddick for $10,000.
On February 19, 2008 the Company issued 12,000 shares of its Common
Stock to Fred Mayers for $24,000.
On February 28, 2008 the Company issued 25,000 shares of its Common
Stock to Brian Conway for consulting services valued at $53,750.
On February 29, 2008 the Company issued 175,000 shares of its Common
Stock to Brian Conway for consulting services valued at $383,250.
On March 5, 2008 the Company issued 31,057 shares of its Common Stock
to David Barnes for $50,000.
On March 14, 2008 the Company issued 5,000 shares of its Common Stock
to Carl Everleigh for scientific consulting services valued at $10,500.
On March 18, 2008 the Company issued 30,000 shares of its Common Stock
to Carl Everleigh for scientific consulting services valued at $48,000.
On March 18, 2008 the Company issued a total of 850,669 shares of its
Common Stock (as a part of 850,669 Units) to a group of non-U.S. citizens for a
total investment of $850,669.
On March 18, 2008, as a part of the 850,669 Units sold to the group of
non-U.S. citizens, the Company issued a total of 850,669 Common Stock Purchase
Warrants, exercisable at $2.00 per share.
On March 19, 2008 the Company issued 20,000 shares of its Common Stock
to Robert Sullivan and Associates and Steve Urbans for consulting services
valued at $32,000.
II-6
On March 26, 2008 the Company issued a total of 1,138,500 shares of its
Common Stock (as a part of 1,138,500 Units) to a group of non-U.S. citizens for
a total investment of $1,138,500.
On March 26, 2008 as a part of the 1,138,500 Units sold to the group of
non-U.S. citizens, the Company issued a total of 1,138,500 Common Stock Purchase
Warrants, exercisable at $2.00 per share.
On March 31, 2008 the Company issued 350,000 shares of its Common Stock
to Robert Sullivan & Associates for consulting services valued at $665,000.
On April 1, 2008 the Company issued a total of 3,387,980 shares of its
Common Stock (as a part of 3,387,980 Units) to a group of non-U.S. citizens for
a total investment of $3,387,980.
On April 1, 2008 the Company issued 70,000 shares of its Common Stock
to Joseph Bianco for consulting services valued at $136,500.
On April 1, 2008, as a part of the 3,387,980 Units sold to the group of
non-U.S. citizens, the Company issued a total of 3,387,980 Common Stock Purchase
Warrants, exercisable at $2.00 per share.
On April 2, 2008 the Company issued a total of 108,478 shares of its
Common Stock upon a partial cashless exercise of certain Common Stock purchase
warrants issued in settlement of two claims arising from a dispute involving
Nutmeg Mercury Fund, LLP and Black Diamond Fund, LLP, in the respective amounts
of 89,728 and 18,750 shares, valued respectively at $165,099 and $34,500.
On April 4, 2008, the Company issued 10,000 shares of its Common Stock
to each of Robert Sullivan and Associates and Steve Urbanski for their
respective consulting services valued at $38,000.
On April 4, 2008, the Company issued 1,066,666 shares of its Common
Stock to TJV Management Corp., for consulting services valued at $2,026,666.
On April 11, 2008, the Company issued total of 1,929,775 shares of its
Common Stock (as a part of 1,929,775 Units) to a group of non-U.S. citizens for
a total investment of $1,929,775.
On April 11, 2008, as a part of the 1,929,775 Units sold to the group
of non-U.S. citizens, the Company issued a total of 1,929,775 Common Stock
Purchase Warrants, exercisable at $2.00 per share.
On April 14, 2008 the Company issued 150,000 shares of its Common Stock
to Jane Auderied for consulting services valued at $457,500
II-7
On April 25, 2008 the Company issued a total of 1,487,139 shares of its
Common Stock (as a part of 1,487,139 Units) to a group of non-U.S. citizens for
a total investment of $1,772,853.94.
On April 25, 2008, as a part of the 1,487,139 Units sold to the group
of non-U.S. citizens, the Company issued a total of 1,487,139 Common Stock
Purchase Warrants, exercisable at $2.00 per share.
On April 29, 2008 the Company issued a total of 833,333 shares of its
Common Stock (350,000 and 533,333 shares, respectively) to Robert Sullivan and
Associates and Steve Urbanski for consulting services valued at $892,500 and
$1,359,999, respectively.
On May 7, 2008 the Company issued 1,000,000 shares of its Common Stock
to TJV Management Corp. for consulting services valued at $2,550,000.
On May 12, 2008 the Company issued 20,000 shares of its Common Stock to
Martin Canouse for consulting services valued at $53,000.
On May 13, 2008 the Company issued 50,000 shares of its Common Stock to
Robert Sullivan and Associates, Worldwide Strategic Partners, American
International Finance, Ltd. and Steve Urbanski in the respective amounts of
7,500, 22,500, 12,500 and 7,500 for consulting services with a respective value
of $20,925, $62,775, $34,875 and $20,925.
On May 15, 2008 the Company issued 39,100 shares of its Common Stock to
Adam Swainson for $42,930.
On May 30, 2008 the Company issued 66,011 shares of its Common Stock to
Nutmeg Mercury Fund, LLP upon a partial cashless exercise of certain Common
Stock purchase warrants issued in settlement of its claims, valued at $145,224.
On June 3, 2008 the Company issued 150,000 shares of its Common Stock
to Robert Sullivan and Associates for consulting services valued at $315,000.
On June 11, 2008 the Company issued 88,750 shares of its Common Stock
to Todd Heinzl for consulting services valued at $199,687.50
On June 12, 2008 the Company issued a total of 236,909 shares of its
Common Stock (as a part of 236,909 Units) to a group of non-U.S. citizens for a
total investment of $236,909.
On June 12, 2008, as a part of the 236,909 Units sold to the group of
non-U.S. citizens, the Company issued a total of 236,909 Common Stock Purchase
Warrants, exercisable at $2.00 per share.
II-8
On June 13, 2008 the Company issued a total of 125,000 shares of its
Common Stock for consulting services in the following amounts to Robert Sullivan
and Associates (5,000 shares), Brian Ettinger (57,500 shares), Steve Urbanski
(5,000), Ron Russo (28,750, shares) and Harrymax Consultants, LLC (28,750
shares) for consulting services valued respectively at $11,250, $129,375,
$11,250, $64,687.50 and $64,687.50.
On June 23, 2008 the Company sold 250,000 shares of its Common Stock to
Professional Offshore Opportunity Fund, Ltd. for $250,000.
On June 30, 2008 the Company issued 650,000 shares of its Common Stock
to Professional Offshore Opportunity Fund, Ltd. for no consideration pursuant to
the terms and conditions of an escrow agreement between the Company and the
Fund, valued at $1,358,500.
On June 25, 2008 the Company issued 895,532 shares of its Common Stock
to Frank G. Pringle upon his conversion of 1,791,064 shares of the Company's
2006 Series of Convertible Preferred Stock for no consideration pursuant to the
terms of the 2006 Series of Convertible Preferred Stock.
On July 1, 2008 the Company sold 391,730 shares of its Common Stock to
a private investor for $391,730.
On July 3, 2008 the Company issued 325,957 shares of its Common Stock
to Professional Offshore Opportunity Fund, Ltd. as a cashless exercise of common
stock purchase warrants owned by the Fund.
On July 14, 2008 the Company issued 100,000 shares of its Common Stock
to Alliance Advisors for investor relations services valued at $166,000.
On July 14, 2008 the Company issued 100,000 shares of its Common Stock
to Robert Sullivan and Associates for consulting services valued at $166,000.
On July 21, 2008 the Company sold 73,480 shares of its Common Stock to
a private investor for $73,480.
On July 25, 2008 the Company issued 75,000 shares of its Common Stock
to Private Capital Group for financial consulting services valued at $105,000.
On August 8, 2008 the Company issued 75,000 shares of its Common Stock
to Private Capital Group for financial consulting services valued at $77,250.
On August 13, 2008 the Company issued 16,720,062 shares of its Common
Stock to Frank G. Pringle upon his conversion of 33,440,124 shares of the
Company's 2006 Series of Convertible Preferred Stock for $1,791.06, representing
the par value of the shares surrendered.
II-9
On August 21, 2008 the Company sold 10,000 shares of its Common Stock
to Austin Whittaker for $10,000.
On August 25, 2008 the Company sold 10,000 shares of its Common Stock
to Fiona Lavery for $10,000.
On September 4, 2008, the Company issued 13,867 shares of its Common
Stock to individual investors for $14,397.80.
On September 9, 2008 the Company issued 1,500,000 shares of its Common
Stock to Paul Sweeney for consulting services under an investor relations
agreement, valued at $1,440,000.
On September 18, 2008 the Company issued 76,000 warrants to purchase
shares of its Common Stock to New Millennium PR Communications for public
relations services.
On September 29, 2008, the Company issued 1,723,844 shares of its
Common Stock to 15 individual investors for an aggregate cash consideration of
$1,723,844.
ITEM 16. Exhibits and Financial Statement Schedules.
Exhibits required by Item 601 of Regulation S-K. The following exhibits are
filed as a part of, or incorporated by reference into, this Registration
Statement:
Number Description
------ -----------
3.1 Certificate of Incorporation of E-mail Mortgage.com, Inc., filed as
Exhibit 3 to the Company Registration Statement on Form SB-2 SEC File
Number 333-51058 filed on December 21, 2002 (the "2002 Registration
Statement") and incorporated herein by reference
3.1.1 Certificate of Amendment of Articles of Incorporation, filed as Exhibit
3(i) to the Company's Registration Statement on Form 8-A, filed on
September 17 2002 (the "2004 Registration Statement"), and incorporated
herein by reference.
3.1.2 Certificate of Amendment to the Articles of Incorporation filed as
Graphic to the Company's 2004 Registration Statement filed on September
17, 2004, and incorporated herein by reference.
3.1.3 Certificate of Designation of Series A Convertible Preferred Stock,
filed as Exhibit 3.1 to the Company's Current Report on Form 8-K, dated
September 17, 2004, filed on February 23, 2005, and incorporated herein
by reference.
3.1.4 Amendment to Articles of Incorporation of the Company, previously
filed.
3.1.7 Certificate of Designation for 2006 Series of Convertible Preferred
Stock of the Company, previously filed.
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3.1.8 Amendment to Certificate of Designation for 2006 Series of Convertible
Preferred Stock of the Company, previously filed.
3.1.9 Composite of Articles of Incorporation of the Company, filed herewith.
3.2 Company Bylaws, filed as Exhibit 3 to the Company 2002 Registration
Statement filed on December 21, 2002 (the "2002 Registration
Statement") and incorporated herein by reference.
3.2(ii) Company Amended By-laws filed as Graphic to the Company Registration
Statement on Form 8-A filed on September 17, 2004 (the "2004
Registration Statement"), and incorporated by reference.
3.2(iii) Company Amended By-laws, filed herewith.
4.1 Specimen Common Stock Certificate filed as Exhibit 4.1 to the Company's
2002 Registration Statement filed on December 21, 2002, and
incorporated herein by reference.
4.2 $25,000 8% Convertible Debenture issued September 15, 2004 from the
Company to Javelin Holdings, Inc. filed as Exhibit 4 to the Company's
Current Report on Form 8-K filed on November 15, 2004, and incorporated
herein by reference.
4.3 Form of 8% Convertible Debenture filed as Exhibit 4.1 to the Company's
Current Report on Form 8-K, dated September 17, 2004, filed on February
23, 2005, and incorporated herein by reference.
4.4 2004 Stock Option Plan filed as Exhibit 4 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2004, filed on
July 17, 2005, and incorporated herein by reference.
4.5 2007 Employee Compensation and Stock Option Plan filed as Exhibit 10.7
to the Company's Registration Statement on Form S-8, SEC File Number
333-141442, filed on March 20, 2007, and incorporated herein by
reference.
4.6 Form of Carbon Recovery Acquisition Class B Warrant dated September 26,
2006, previously filed.
4.6.1 Form of Carbon Recovery Acquisition Class D Warrant dated September 26,
2006, previously filed.
4.6.2 Form of Carbon Recovery Acquisition Class E Warrant dated September 26,
2006, previously filed.
4.6.3 Form of Mobilestream Acquisition Warrant dated December 31, 2006,
previously filed.
II-11
4.6.4 Black Diamond Fund, L.P. Warrant, previously filed.
4.6.5 Nutmeg/Mercury Fund, L.P. Warrant, previously filed.
4.6.6 Form of Augustine Warrant for George Birch, previously filed.
4.6.6.1 Form of Augustine Warrant for Jonathan Simon, previously filed.
4.6.7 Warrant dated December 21, 2007 for 625,000 shares of the Company's
common stock issued to Professional Offshore Opportunity Fund, Ltd.
("POOF"), previously filed.
4.6.8 Terence Taylor Warrant, previously filed.
4.6.9 Form of 2008 private placement Warrant, previously filed.
4.6.10 Form of New Millenium PR Warrant, filed herewith.
4.6.11 Form of directors warrant, filed herewith.
4.7 2008 Employees Compensation Plan filed as Exhibit 10.7 to the Company's
Registration Statement on Form S-8, SEC File Number 333-148916, filed
January 29, 2008, and incorporated herein by reference.
5.1 Opinion of Sol V. Slotnik, P.C., previously filed.
10.1 Agreement and Plan of Reorganization dated as of October 29, 2003,
2001, by and between Advanced Healthcare Technologies, Inc. and
Nutratek, Ltd., filed as Exhibit 99 to the Company's Current Report on
Form 8-K filed on January 12, 2004, and incorporated herein by
reference.
10.2 Stock Purchase Agreement dated as of June 30, 2004 by and among
Advanced Healthcare Technologies, Inc., Richard Mangierelli and Johnny
Sanchez filed as Exhibit 2.1 to the Company's Report on Form 8-K filed
on June 30, 2004, and incorporated herein by reference.
10.3 Release and Indemnity Agreement dated as of June 30, 2004 by and among
Advanced Healthcare Technologies, Inc., Richard Mangierelli and Johnny
Sanchez filed as Exhibit 10.1 to the Company's Report on Form 8-K filed
on June 30, 2004, and incorporated herein by reference.
10.4 Articles of Merger by and between E-mail Mortgage.com, Inc. and Mariner
Health Care, Inc. dated as of July 29, 2002 filed as Exhibit pig3 to
the Company 2004 Registration Statement, and incorporated herein by
reference.
10.5 Operating Agreement dated as of January 11, 2005 by and between Global
Resource Corporation and Well Renewal, LLC filed as Exhibit 10.1 to the
Company's Current Report on Form 8-K, dated September 17, 2004, filed
on February 23, 2005, and incorporated herein by reference.
II-12
10.6 Agreement and Plan of Reorganization dated as of July 26, 2006 by and
between Global Resource Corporation and Carbon Recovery Corporation,
previously filed.
10.6.1 Carbon Recovery Corporation Liquidating Trust Agreement made this 22nd
day of September 2006 between Carbon Recovery Corporation and Olde
Monmouth Stock Transfer Co., Inc. as Trustee, previously filed.
10.7 Form of Indemnity Agreement between the Company and each of its
directors and executive officers filed as Exhibit 10.4 to the Company's
Current Report on Form 8-K for the period September 22, 2006, filed on
September 26, 2006, and incorporated herein by reference.
10.8 Pledge Agreement dated November 18, 2005 by and between the Company and
Transnix Global Corporation filed as Exhibit 10.1 to the Company's
Report on Form 10-QSB for the period ended December 31, 2005, filed
October 31, 2006, and incorporated herein by reference.
10.9 Settlement Agreement dated December 15, 2005 by and between the Company
and Transnix Global Corporation filed as Exhibit 10.1 to the Company's
Report on Form 10-QSB for the period ended December 31, 2005, filed
October 31, 2006, and incorporated herein by reference.
10.10 Combined Technology Agreement dated November 28, 2006 by and among the
Company, Carbon Recovery Corporation, Frank G. Pringle, Lois Augustine
Pringle, and Mobilestream Oil Corporation, previously filed.
10.11 Plan and Agreement of Reorganization dated as of November 28, 2006 by
and between the Company and Mobilestream Oil Corporation, previously
filed.
10.11.1 Mobilestream Liquidating Trust Agreement made this 29th day of December
2006 between Mobilestream Oil, Inc. and Olde Monmouth Stock Transfer
Co., Inc. as Trustee, previously filed.
10.12 Securities Purchase Agreement, dated as of December 21, 2007, by and
between the Company and Professional Offshore Opportunity Fund, Ltd.
("POOF"), previously filed.
10.13 Registration Rights Agreement dated as of December 21, 2007, by and
between the Company and POOF, previously filed.
10.14 Escrow Agreement dated as of December 21, 2007 by and among the
Company, POOF and Sullivan & Worcester, LLP dated as of December 21,
2007, previously filed.
II-13
10.15 Form of Registration Rights Agreement, previously filed.
10.16 Consulting agreement dated as of January 1, 2008 by and between 888
Corporation and the Company, previously filed.
10.17 Settlement agreement dated as of January 15, 2008 by and among Global
Resource Corporation, Terence Taylor, Tomahawk Trading Corp., and
Frank G. Pringle, previously filed.
10.18 Employment agreement dated as of November 7, 2007 by and between
Jeffrey T. Kimberly and the Company, previously filed.
10.19 Consultant agreement dated as of November 26, 2007 by and between the
Company and Worldwide Strategic Partners, Inc., filed herewith.
10.20 Consultant agreement dated as of May 26, 2008 by and between the
Company and Worldwide Strategic Partners, Inc., filed herewith.
10.21 Investor relations agreement dated as of September 8, 2008 by and
between the Company and Paul J. Sweeney, filed herewith.
10.22 Stock redemption agreement dated as of August 13, 2008 by and between
the Company and Frank G. Pringle, filed herewith.
10.23 Term sheet employment agreement dated September 23, 2008 by and between
the Company and Wayne Koehl, filed herewith.
10.24 Term sheet employment agreement dated September 23, 2008 by and between
the Company and Jeffrey T. Kimberly, filed herewith.
10.25 Term sheet employment agreement dated September 23, 2008 by and between
the Company and Jeffrey A. Andrews, filed herewith.
10.26 Summary of terms of proposed employment agreement (undated) by and
between the Company and Eric Swain, filed herewith.
23.1 Consent of Bagell, Josephs, Levine and Company, L.L.C., filed herewith.
23.3 Consent of Sol V. Slotnik, P.C. (included in Exhibit 5.1), previously
filed.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(a) The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
II-14
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the maximum
offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
Provided, however, That:
A. Paragraphs (a)1(i) and (a)(1)(ii) of this section do not
apply if the registration statement is on Form S-8, and
the information required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement; and
B. Paragraphs (a)1(i), (a)(1)(ii) and (a)(1)(iii) of this section do
not apply if the registration statement is on Form S-3 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the Commission by
the registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement, or is contained in a foirm of prospectus filed pursuant to Rule
424(b) that is part of the registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
5. That, for purposes of determining liability under the Securities Act
to any purchaser:
(i) A. If the registrant is relying on Rule 430B:Each prospectus filed
by the registrant pursuant to Rule 424(b)(3)shall be deemed to be part of the
registration statement as of the date the filed prospectus was deemed part of
and included in the registration statement; and B. Each prospectus required to
be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration
statement in reliance on Rule 430B relating to an offering made pursuant to Rule
415(a)(1)(i), (vii), or (x) for the purpose of providing the information
required by section 10(a) of the Securities Act of 1933 shall be deemed to be
part of and included in the registration statement as of the earlier of the date
such form of prospectus is first used after effectiveness or the date of the
first contract of sale of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability purposes of the issuer and
any person that is at that date an underwriter, such date shall be deemed to be
a new effective date of the registration statement relating to the securities in
the registration statement to which that prospectus relates, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a
document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such effective date,
supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such
document immediately prior to such effective date; or
(ii) If the registrant is subject to Rule 430C, each prospectus filed
pursuant to Rule 424(b) As part of a registration statement relating to an
offering, other than registration Statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and
included in the registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a
document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a
purchaser with a timeof contract of sale prior to such first use, supersede or
modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document
immediately prior to such date of first use.
6. That, for the purpose of determining liability of the registrant
under the Securities Act of 1933 to any purchaser in the initial distribution of
the securities: The undersigned registrant undertakes that in a primary offering
of
II-15
securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to
the purchaser, if the securities are offered or sold to such purchaser by means
of any of the following communications, the undersigned registrant will be a
seller to the purchaser and will be considered to offer or sell such securities
to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or
on behalf of the undersigned registrant or used or referred to by the
undersigned registrant;
(iii) The portion of any free writing prospectus relating to the offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the
undersigned registrant to the purchaser.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
To determine any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this registration statement as of the time
the Commission declared it effective.
II-16
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant has duly caused this Amendment No. 1 to Form S-1 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of West Berlin, State of New Jersey, on October 13,
2008.
(Registrant) GLOBAL RESOURCE CORPORATION
By (Signature and Title) /a/ Eric Swain
------------------------------------
Eric Swain, Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 1 to Form S-1 Registration Statement has been signed by the
following persons in the capacities and on the dates stated:
Signature Title Date
/s/ Eric Swain
------------------------ Chief Executive Officer October 13, 2008
Eric Swain (Principal Executive Officer)
/s/ Jeffrey J. Andrews
------------------------ Chief Financial Officer October 13, 2008
Jeffrey J. Andrews (Principal Financial and
Accounting Officer)
------------------------- Chairman of the Board of Directors October , 2008
Frank G. Pringle
/s/ Fred A. Clark Director October 22, 2008
------------------------
Frederick A. Clark
/s/ Kim Thorne O'Brien Director October 13, 2008
------------------------
Kim Thorne O'Brien
/s/ Lincoln Jones III Director October 13, 2008
------------------------
Lincoln Jones III
/s/ Jonathan L. Simon Director October 13, 2008
------------------------
Jonathan L. Simon
/s/ Paul J. Sweeney Director October 13, 2008
------------------------
Paul J. Sweeney
/s/ Peter A. Worthington Director October 13, 2008
------------------------
Peter A. Worthington