As filed with the Securities and Exchange Commission on December 24, 2008
REGISTRATION NO. 333-152118
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 84-1565820
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3559
(Primary Standard Industrial
Classification Code 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
(856) 767-5661
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
COPY 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. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, a
non-accelerated filer, or a smaller reporting company.
Large accelerated filer [_] Accelerated filer [_]
Non-accelerated filer [_] Smaller reporting company [X]
CALCULATION OF REGISTRATION FEE
TITLE of EACH CLASS of AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM REGISTRATION
SECURITIES to be BE REGISTERED OFFERING PRICE PER AGGREGATE OFFERING FEE AMOUNT (3)
REGISTERED (2) SHARE (1) PRICE
---------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 150,000 (4) $1.55 $232,500 $13.26
Common Stock, par value $.001 250,000 (5) $1.55 $387,500 $22.11
Common Stock, par value $.001 352,106 (6) $1.55 $545,764 $21.45
Common Stock, par value $.001 290,000 (7) $1.55 $449,500 $25.64
Common Stock, par value $.001 1,000,000 (8) $1.55 $1,155,000 $88.43
------
Total 2,042,106 $180.57(9)
--------- =======
(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 December 9, 2008 as reported on the Pink Sheets.
(2) 2,042,106 shares are being registered, all of which are issuable upon
exercise of warrants to purchase shares of our common stock held by the selling
security holders.
(3) Pursuant to Rule 457(c) calculated based on the offering price of common
stock included in this offering.
(4) Represents 150,000 shares of common stock issuable upon exercise of 150,000
warrants issued with an exercise price of $0.80 per warrant.
(5) Represents 250,000 shares of common stock issuable upon exercise of 250,000
warrants issued with an exercise price of $0.80 per warrant.
(6) Represents 352,106 shares of common stock issuable upon exercise of 352,106
warrants with an exercise price of $2.75 per warrant.
(7) Represents 290,000 shares of common stock issuable upon exercise of 290,000
warrants with an exercise price of $2.50 per warrant.
(8) Represents 1,000,000 shares of common stock issuable upon exercise of
1,000,000 warrants issued with an exercise price of $1.50 per warrant. These
warrants are subject to certain conditions concerning terms of exercise. See
"Selling Security Holders" and "Description of Securities--Warrants."
(9) Fee previously paid except for $8.35, which is being paid with respect to
the additional 137,066 shares covered by this registration statement.
The registrant hereby 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.
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.
SUBJECT TO COMPLETION DATED December --, 2008
PROSPECTUS
GLOBAL RESOURCE CORPORATION
2,042,106 shares of common stock issuable upon exercise of warrants
This prospectus relates to the periodic offers and sales by the selling security
holders listed on pages 37-38, or their transferees, of up to 2,042,106 shares
of our common stock issuable upon the exercise of warrants held by the selling
security holders. We will receive no proceeds from the disposition of any shares
of our common stock sold by the selling security holders after exercise of the
warrants. We may receive up to $3,513,291 in gross proceeds in connection with
the exercise of the various warrants held by the selling security holders.
For a description of the plan of distribution of the shares of the selling
security holders, please see page 40 of this prospectus.
Our common stock is quoted on the Pink Sheets under the symbol "GBRC.PK". On
December 9, 2008, the closing price of our common stock on the Pink Sheets was
$1.60 per share.
You should rely only on the information contained in this prospectus. We have
not, and the selling security holders have 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 the selling security holders are 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 2.
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 December __, 2008.
TABLE OF CONTENTS
Prospectus Summary.......................................................... 1
Risk Factors................................................................ 2
Special Note Regarding Forward Looking Statements........................... 8
Use of Proceeds............................................................. 8
Market Price of Common Stock and Other Stockholder Matters.................. 8
Management's Discussion and Analysis and Plan of Operation.................. 9
Business.................................................................... 16
Directors, Executive Officers, Promoters and Control Persons................ 20
Executive Compensation...................................................... 24
Security Ownership of Certain Beneficial Owners and Management ............. 29
Certain Relationships and Related Transactions.............................. 32
Selling Security Holders.................................................... 36
Plan of Distribution........................................................ 39
Legal Proceedings .......................................................... 42
Description of Securities................................................... 42
Transfer Agent.............................................................. 46
Experts..................................................................... 46
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities............................................................... 46
Legal Matters............................................................... 46
Where You Can Find More Information......................................... 46
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.
i
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.
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.
The following summary contains basic information about this offering. It
does not contain all of the information that is important to you.
Company Summary:
We are a development stage company with three provisional patent applications
and two utility patent applications pending in the United States Patent and
Trademark Office ("PTO") and approximately twelve foreign corresponding 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 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 the technology, and
(iii) the construction of plants to exploit that technology.
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."
The Offering:
Key Facts of the Offering:
Shares of common stock being registered 2,042,106
(all of the shares are issuable upon
the exercise of various classes of warrants)
Total shares of common stock outstanding
as of December 9, 2008 62,211,564
Total proceeds raised by us from the We will not receive any proceeds from the disposition of
disposition of the common stock by the shares of our common stock by the selling security holders.
selling security holders See "Selling Security Holders." We also may receive up to
$3,513,291 in gross
proceeds from the exercise
of warrants held by the
selling security holders.
Our offices are currently located at 408 Bloomfield Drive, Unit #1 - 3,
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.
1
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 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.
2
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.
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 one or more companies 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 audited 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.
We also have had substantial losses for the nine months ended September 30, 2008
and we have 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 nine months ended September 30, 2008, we raised
over $11 million in cash through private placements of shares of common stock.
With this additional capital and projected cash flow 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 anticipated level of operations until December 31,
2009. However, we plan to increase sales and marketing efforts, research and
development, and administrative expenses relating to our business in 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. See "Risk Factors-We will need additional capital in order
to satisfy our business objectives."
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 and cash will be sufficient to meet our
anticipated working capital needs until December 31, 2009. 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. 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.
3
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
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.
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.
4
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
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.
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."
5
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 no "Key Man" insurance
policies on any of our senior executives. 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.
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 RESELL YOUR 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,
the financial markets and the domestic or international political
situation;
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.
6
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, and,
subject to exercise of the various classes of warrants, another 2,042,106 shares
of our common stock that could be introduced into the public markets.
Furthermore, we have also filed a registration statements 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.
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.
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.
7
WE WILL NOT PAY CASH DIVIDENDS IN THE FORESEEABLE FUTURE.
We have not paid any cash dividends on our common stock and do not intend
to pay cash dividends in the foreseeable future. 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".
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This document 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 3.
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.
USE OF PROCEEDS
We will not receive any proceeds from the disposition of the shares of our
common stock by the selling security holders or their transferees. See "Selling
Security Holders." We also may receive up to $3,513,292 in gross proceeds from
the exercise of warrants held by the selling security holders. We expect to use
the proceeds, if any, we receive from the sale of the shares in escrow or the
exercise of warrants for general working capital purposes.
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 2006, 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
8
*This period was prior to the 1 for 100 reverse stock split of our common stock
which was 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 December 9, 2008 our issued and outstanding shares of common stock total
62,211,564 shares.
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 December 9, 2008 the prices of our common stock were $1.60 high, $1.50
low and $1.60 close as quoted on the Pink Sheets.
HOLDERS
As of December 9, 2008 there were approximately 303 record holders of our
common stock. We believe that the number of beneficial holders of our common
stock on such date was approximately 2,570. On December 9, 2008, we had
62,211,564 shares of our common stock issued and outstanding.
DIVIDENDS
We have never paid a cash dividend on our common stock and for the
foreseeable future any 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
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
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 our first prototype machine that uses our technology
for decomposing tires. It is now undergoing additional testing and refinement at
the manufacturing facility the Company leases in Rockford, Illinois. Although we
anticipated completion of the prototype earlier in the year, there were several
factors that contributed to the delay we experienced. These included: delays in
delivery of klystron microwave tubes, changes in the design of the prototype,
and changes in the conveying procedures for the material. The Company will
continue to test and refine the features of the prototype for use with tires and
other "feedstocks", i.e. materials that would amenable to the Company's
technology. The Company will work with prospective customers to create systems
for the manipulation of large amounts of tires to be processed through a
machine.
We have no manufacturing capability of our own. Accordingly, we have
entered into an agreement with Ingersoll Production Systems, a manufacturing
facility in Rockford, Illinois, for research on and the manufacture of our
machines. In October 2008 we completed a prototype machine at the facility. The
prototype is being tested initially to apply our microwave technology to the
decomposition of tires as waste and to retrieve commercially viable components
therefrom in the form of carbon, liquid hydrocarbons which can be converted to
electricity, and gas. We will use our prototype primarily to confirm and refine
the principles that will be utilized in commercial scale operations of our
technology. We also will use it to test various feedstocks, materials that can
benefit from the application of our technology, prior to releasing processes for
production. The prototype will also be used on a limited basis to show customers
that the process works as applied to a specific feedstock and is viable for
commercialization.
We do not research nor represent to potential customers the commercial
uses or revenues they may derive from the end-products generated using our
technology. Each potential customer evaluates for itself whether the
commercialization and disposition of the end products justifies the cost to
purchase and install one of our machines.
9
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 not completed. 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.
RESULTS OF OPERATIONS
(A) REVENUES
We had no revenues for the year ended December 31, 2007 and revenues were $-0-
for the nine months ended September 30, 2008. We have had no revenues from
operations since the closing of the asset acquisitions of Carbon Recovery
Corporation in September 2006 and Mobilestream Oil, Inc. in December 2006. All
revenues we received from operations prior to September 2006 were derived from
lines of business unrelated to our current activities, and in which we no longer
have any ownership interest or other participation. The Company has never had
revenues from operations since it began its current business.
The Company has completed a prototype microwave reactor
system which it has used to demonstrate the decomposition of tires. The Company
will work with prospective customers to create systems for the manipulation of
large amounts of tires to be processed through a machine. It will take the
Company approximately twelve months to deliver a system from the time the
Company receives an order. Each order will be accompanied by a cash deposit from
the purchaser which will be recorded as deferred revenue until the equipment is
shipped, installed and operating successfully at the destination site.
(B) TOTAL OPERATING EXPENSES
Total operating expenses were $21,101,932 for the nine months ended September
30, 2008 compared to $4,186,957 for the nine months ended September 30, 2007, an
increase of $16,914,975 or approximately 404%. Total operating expenses were
$4,250,302 for the three months ended September 30, 2008 compared to $2,776,952
for the three months ended September 30, 2007, an increase of $1,473,350 or
approximately 53%.
Operating expenses consist of Professional fees, Investor relations and
Investment banking fees, general and administrative expenses, and Research and
Development costs.
Total Professional Fees and Investment banking fees and investor relations
expenses were $17,798,364 for the nine months ended September 30, 2008 compared
to $857,018 for the nine months ended September 30, 2007, an increase of
$16,941,346. Total Professional Fees and Investment banking fees and investor
relations expenses were $3,496,859 for the three months ended September 30, 2008
compared to $376,169 for the three months ended September 30, 2007, an increase
of $3,120,690. The Company has recorded expenses for Investment banking fees,
investor relations, and Professional fees broadly to include expenses incurred
for ancillary activities and expenses for penalties and settlements related to
professional services, investment banking and public relations activities. For
the nine months ended September 30, 2008 these expenses were $16.6 million
higher than for same period in 2007. The Company issued 7,232,838 shares of
common stock for services performed or to be performed by non-employees, valued
in the amount of $16.4 million dollars. In addition, however, all expenses
related to stock issuances or investor relations, including shares issued as
penalties or settlements were charged to Investment Banking Fees. Other
increases in Professional fees were due to an increase of $266,000 in legal fees
and $84,000 in accounting fees compared to the nine months ended September 30,
2007. The increase in legal fees was caused by the filing of additional foreign
patent applications, the expenses of conducting an annual stockholder meeting,
the settlement of certain claims for investment banking services and the filing
of three registration statements by the Company. A $3.1 million increase in
investment banking fees for three month period ended September 30, 2008 can also
be attributed to the issuance of common stock for services performed or to be
performed by non-employees. The value of services was determined to be the stock
market price at the date the stock was issued.
General and administrative expenses were $2,691,403 for the nine months ended
September 30, 2008 compared to $3,194,165 for the nine months ended September
30, 2007, a decrease of $502,762 or approximately 16% decrease. General and
administrative expenses were $576,271 for the three months ended September 30,
2008 compared to $2,362,322 for the three months ended September 30, 2007, a
decrease of $1,786,051 or approximately 76% decrease. The decrease in expenses
for nine month was due to the following: First, lower salary costs of
approximately $400,000 inasmuch as the 2007 salary expenses included a stock
bonus received by then President and CEO Frank Pringle which was approximately
$700,000 higher than what he received in 2008. This decrease was offset by an
increase of approximately $300,000 in salary expense due to additions of full
time employees and employee salary increases. Second, in 2007 the Company
incurred a one time settlement cost in the amount of $400,000 for a claim
arising out of a private placement transaction. This decrease in general and
administrative expenses was offset by an increase of approximately $97,200 in
board of director fees, expensing warrants issued as payments and increases in
travel expenses of $76,400. The three month decrease of $1.8 million dollars in
general and administrative expenses can be mainly attributed to reduction in
salary expenses, since no bonus stock was issued to employees in the third
quarter of 2008.
10
Research and development (R&D) costs consist of all activities associated with
the development and enhancement of products using the Company's microwave
technology. R & D costs consist primarily of contract engineer labor and
salaries of our in-house engineers, lab supplies used in testing and expenses of
equipment used to test and develop our technology. Research and development
costs are charged to R & D when incurred. R & D costs for nine months ended
September 30, 2008 and 2007 were $612,165 and $135,774, respectively. The
increase of $476,421 as compared to prior year can be attributed to the increase
in material costs of approximately $350,000 used in research, and the increased
salary costs due to addition of personnel in May 2008.
(C) Other Income (Expense)
Interest expense, interest income and other income are included in Other Income
(Expense). Other Income (expenses) was $56,722 for the nine months ended
September 30, 2008 compared to an expense of ($87,597) for the nine months ended
September 30, 2007, an increase of $144,319. Other Income (Expenses) were
$23,233 for the three months ended September 30, 2008 compared to $4,254 for the
three months ended September 30, 2007, an increase of $18,979.
Interest expense for the nine months ended September 30, 2008 was $14,424
compared to $19,373 for the nine months ended September 30, 2007, a decrease of
$4,949 or 34%. The interest expense was $5,031 for the three months ended
September 30, 2008 compared to $3,008 for the three months ended September 30,
2007, an increase of $2,023 or 67%. The nine month lower interest expense is the
result of certain Company loans being near maturity. The increase for three
months was interest expense associated with the addition of a new capital lease
in June 2008.
Interest Income for the nine months ended September 30, 2008 and September 30,
2007 was $114,378 and $31,776, respectively. The nine month increase of $82,602
or 260% in interest income is attributed to the Company having a surplus of cash
as a result of sale of common stock to investors. Interest income was $70,302
for the three months ended September 30, 2008, compared to $7,262 for the three
months ended September 30, 2007, an increase of $63,040. The three month
increase in interest income is also a result of the Company's surplus cash. In
April of 2008 $4,000,000 of surplus cash was invested with in Marketable
Securities. The average cash balance excluding our marketable securities has
been between $3.6 million and $4.4 million for the quarters ended June and
September 2008.
Other expenses for the nine months ended September 30, 2008 and September 30,
2007 were ($42,038) and ($100,000), respectively. The nine month decrease of
$76,941 in other losses was caused by the fact that in 2007 the Company incurred
a one time loss of $100,000 as a result of forfeit in land investment.
11
(D) NET LOSS.
The net loss for the nine months ended September 30, 2008 was $21,045,210 ($0.50
per share) compared to $4,274,554 ($0.17 per share) for the nine months ended
September 30, 2007, a change of $16,770,656 or 392%. The net loss was $4,227,069
($0.08 per share) for the three months ended September 30, 2008 compared to
$2,772,698 ($0.11 per share) for the three months ended September 30, 2007, an
increase in losses of $1,454,371 or approximately 52%. The Company's expenses
have increased significantly as a result of non-cash charges related to expenses
for investment banking, investor relations and public relations services from
payments by the issuance of common stock for such services rendered during the
year.
OPERATING ACTIVITIES
Net cash used in operating activities was $3,370,270 for the nine months ended
September 30, 2008 compared to $2,046,868 for the nine months ended September
30, 2007, a change of $1,323,402 or approximately 65%. This $1.3 million use of
cash is a result of operating losses adjusted for non-cash expenses. Net cash
used in operating activities was $834,674 for the three months ended September
30, 2008 compared to $509,517 for the three months ended September 30, 2007, a
change of $325,157 or approximately 64%. The primary reasons for the changes in
the three month period and year to date were expenses associated with operating
expenses.
INVESTING ACTIVITIES
Net cash used in investing activities was $4,705,682 for the nine months ended
September 30, 2008 compared to proceeds of cash in amount of $17,967 for the
nine months ended September 30, 2007, a change of $4,723,649. Net cash used in
investing activities was $768,557 for the three months ended September 30, 2008
compared to net proceeds of $20,700 for the three months ended September 30,
2007, a change of $789,257. The primary reasons for the changes in the year to
date were: Purchases of marketable securities in amount of $4 million dollars
and purchases of materials in the amount of approximately $745,000 for
construction of our prototype machine. The three month change is also due to
materials purchased for our prototype machine.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2008, the Company had total current assets of $4,097,424 and
total current liabilities of $864,903, resulting in a working capital of
$3,232,521. At September 30, 2008, the Company's current assets consisted of
$3.8 million in cash, and short-term marketable securities of $.3 million. As a
development stage company that began operations in 2002, the Company has
incurred $38,464,207 in cumulative total losses from inception through September
30, 2008.
The Company currently has $4.1 million in cash and cash equivalents and
short-term investments and $2.7 million in long-term marketable securities. If
the Company did not raise any additional cash, as of September 30, 2008 it would
still have funds available to meet its current cash operating expenses and
inventory and capital expenditures requirements for the next fifteen months
ending December 31, 2009. The Company projects total cash expenditures for the
next twelve months ending September 30, 2009 to be approximately $5 million,
(operating expenses to be $4 million, and inventory and capital expenditures to
be $1 million). Our assessment of our cash needs, however, is based on
assumptions concerning the rate of our cash expenses, 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. Our actual operations may be affected by
increases in our payroll and staff related matters, technological or engineering
difficulties, deviations from the timetables for experimentation and testing
trials.
The Company has been successful in obtaining the required cash resources by
issuing stock to service the Company's operations through the third quarter of
2008. Net cash provided by financing activities was $11,105,018 for the nine
months ended September 30, 2008 compared to $514,413 for the nine months ended
September 30, 2007, a change of $10,590,605. This increase was primarily the
result of sale of common stock. During the nine months ended September 30, 2008
the Company sold 11,550,950 shares of common stock for gross proceeds of
$12,137,256.
The Company has continued to issue stock or options or warrants to various
vendors (non-employee) as payments for services rendered. In the nine months
ending September 30, 2008, the Company issued 7,232,838 shares of common stock
in payment of services valued at $14,539,624. The value of services was
determined to be the stock market price at the date the stock was issued. The
Company also issued 233,000 shares of common stock to employees in the nine
months ending September 30, 2008 for services valued at $484,640. The value of
services was also determined to be the market price of the stock on the date the
stock was issued. The Company also granted 116,000 warrants for services
rendered valued at $175,055. The Company also issued 625,000 warrants to an
investor as part of liquidating damages valued at $567,938 on June 30, 2008.
Warrants issued for services were valued using the Black-Scholes option-pricing
model. The Company also issued 9,461,802 warrants with an average excise price
of $2.00 in conjunction with the sale of common stock in a private placement.
These warrants had no impact on the Company's profit or loss.
12
The Company has issued stock options to employees for services to be rendered or
to be performed. In September 2008 as part of a series of employment term
sheets, the Company authorized a total of 8,500,000 stock options to key
executives, with 5,000,000 approved for the new CEO and 3,500,000 options
subject to shareholder approval for three other officers of the Company. These
options have an exercise price of $1.18. 1,700,000 of the options vested
immediately, however, 700,000 of the options are subject to approval by
shareholders (expected in 2009). The remaining 6,800,000 options will vest in
equal annual installments of 1,700,000 options on September 23, 2009 and on each
anniversary thereafter for the next three years, provided that the executives
are employed by the Company at each vesting date. As of September 30, 2008 the
total unrecognized compensation cost related to unvested stock options was
$5,450,000, which is expected to be recognized over a weighted-average period of
5 years beginning October 1, 2008. The 3,700,000 options awaiting shareholder
approval are not included in compensation expense yet because options under an
arrangement that is subject to shareholder approval are not deemed to be granted
until that approval is obtained unless approval is essentially a formality which
the Company has deemed not to be the case.
CAPITAL RESOURCES
(A) LONG-TERM DEBT OBLIGATION
The Company entered in two loan agreements for the purchase of equipment. The
principal amount of a five year loan entered into in January 2006 is $75,000
with an interest rate of 13.43% annually and a monthly payment of approximately
$1,723. In October 2006 the Company entered into second loan with a principal
amount of $73,817 at an interest rate of 8.71% annually. The monthly payments on
this loan are approximately $2,396. The total loan payment including interest
payments is approximately $69,431, for the two loans.
(B) CAPITAL LEASES
The Company leases certain phone and computer equipment under agreements that
are classified as capital leases. The cost of equipment under capital leases is
included in the balance sheets as part of Fixed assets. The monthly lease
payments are $1,293 per month, until June 2011. The total minimum lease payments
are approximately $42,700.
(C) OPERATING LEASES
The Company leases office space and manufacturing space under two separate lease
agreements that are classified as operating leases. The Company leases office
space in West Berlin, New Jersey, which has a monthly lease payment of $5,000
per month and the lease expires on May 31, 2009. The Company also leases
manufacturing space in Rockford, Illinois, which has a monthly lease payment of
$2,703 and this lease expires on April 30, 2010. The total minimum lease
payments are approximately $88,059.
(D) PURCHASE OBLIGATION
We have made commitments of approximately $150,000 for future purchases of
equipment. In June 2007, we entered into a purchase agreement with Ingersoll
Production Systems, a manufacturing facility in Rockford, Illinois, for the
manufacture of our first prototype which was completed in October 2008. The
prototype is designed to apply our microwave technology to the decomposition of
tires as waste. We have paid $800,000 of the $900,000 due under this agreement.
We have also entered into agreements with other suppliers for components of the
prototype. We have paid approximately all of the $300,000 due under all of these
agreements as of September 30, 2008.
OFF BALANCE SHEET ARRANGEMENTS
Other than operating leases, the only other off balance sheet arrangement that
would have a future effect on our financial condition, revenues, results of
operations, liquidity or capital expenditures would be the severance arrangement
with our former Chairman and CEO. On November 12, 2008, the Company entered into
a Severance Agreement with Frank G. Pringle, the Chairman of its Board of
Directors, and 888 Corporation, a New Jersey corporation owned by Mr. Pringle
(the "Severance Agreement"). Pursuant to the Severance Agreement, the Company
has agreed to pay Mr. Pringle $200,000.00 per year for the six (6) year period
commencing on January 1, 2009 subject to Mr. Pringle and 888 Corp.'s continued
compliance with the terms of the Severance Agreement.
13
---------------------------------------------------------------------
Contractual obligations Payments due by period
---------------------------------------------------------------------------------------------------------------------
Less than More than
Total 1 year 1-3 years 3-5 years 5 years
-------- -------- -------- -------- --------
Equipment Loans $ 69,431 $ 47,032 $ 22,399 $ 0 $ 0
Capital Lease-Phone equipment $ 41,391 $ 15,521 $ 25,870 $ 0 $ 0
Operating Lease-rent $ 88,059 $ 69,138 $ 18,922 $ 0 $ 0
Purchase Obligations $150,000 $150,000 $ 0 $ 0 $ 0
Other Long-Term Liabilities Reflected on the Balance
Sheet under GAAP $ 0 $ 0 $ 0 $ 0 $ 0
-------- -------- -------- -------- --------
Total $348,882 $281,691 $ 67,191 $ 0 $ 0
======== ======== ======== ======== ========
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 September 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 $250,000. At September 30, 2008 the
Company's uninsured cash balances total $3,118,700.
SHORT-TERM INVESTMENTS
Cash in excess of operating requirements is invested in certificates of
deposits with an original maturity of greater than three months.
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 as part
of accumulated other comprehensive income(loss) which is included in the
stockholders' equity statement and any realized gains or losses are recognized
in statement of operations.
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.
14
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 historical costs in accordance with SFAS 141, BUSINESS COMBINATIONS,
PARAGRAPHS D11 - D18, entities under common control. All account amounts and
share 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 costs 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 on the grant date. The Company has issued
8,700,000 stock options to key executives, 3,500,000 of these options are
awaiting shareholder approval (see note 12 & 13 below for more details)
For non-employees, stock grants and warrants/options issued for services
are valued at either the invoiced/contracted value of services provided or to be
provided or the fair value of stock at the date the agreement is reached, which
is every 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)
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.
RECLASSIFICATIONS
Certain amounts for the quarter ended September 30, 2007 have been
reclassified in the comparative financial statements to be comparable to the
presentation for the quarter ended September 30, 2008. These reclassifications
had no effect on net loss. (Also see Note # 20 for restatement of 12/31/07
balance sheet).
INVENTORIES
Inventory is stated at the lower of cost or market. Cost is determined
using actual job costs per machine. Currently the Company has no value stated
for inventories. Prior quarter reported inventory has been reclassified to
Construction in Progress (see note # 6 below)
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
September 30, 2008 and 2007.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs consist of all activities associated with
the development and enhancement of products using the Company's microwave
technology. R & D costs consist primarily of contract engineer labor and
salaries of our in-house engineers, lab supplies used in testing and expenses of
equipment used to test and develop our technology. Research and development
costs are charged to R & D when incurred. The amounts charged as of September
30, 2008 and 2007 were $612,165 and $135,774 respectively.
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 use
beginning, January 1, 2009 and will apply prospectively to business combinations
completed on or after that date.
15
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. The adoption of SFAS No. 160 is not expected
to have a material impact on the Company's financial position, results of
operations, or cash flows.
On January 1, 2007, the Company adopted the provisions of 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.
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 at "BUSINESS-History of the
Company."
We are a development stage company with three provisional patent
applications and two utility patent applications pending in the United States
Patent and Trademark Office ("PTO") and approximately twelve corresponding
foreign patent applications pending in commercially relevant countries. Our
patent applications cover our variable frequency 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 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, embodying the technology 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.
One application of the process utilizes the technology to decompose waste
tires into their components of carbon ash, scrap steel, and hydrocarbon liquid
and gas. When the waste tires are processed, we recover carbon ash which has
residual energy value; i.e. it can be used for the production of electricity.
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 liquified.
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.
16
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.
At the present time, the process operates successfully in laboratory mode.
We are in 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 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.
We have no manufacturing capability of our own. Accordingly, we have
entered into an agreement with Ingersoll Production Systems, a manufacturing
facility in Rockford, Illinois, for research on and the manufacture of our
machines. In October 2008 we completed a prototype machine at the facility. The
prototype is being tested initially to apply our microwave technology to the
decomposition of tires as waste and to retrieve commercially viable components
therefrom in the form of carbon, liquid hydrocarbons which can be converted to
electricity, and gas. We will use our prototype primarily to confirm and refine
the principles that will be utilized in commercial scale operations of our
technology. We also will use it to test various feedstocks, materials that can
benefit from the application of our technology, prior to releasing processes for
production. The prototype will also be used on a limited basis to show customers
that the process works as applied to a specific feedstock and is viable for
commercialization.
We do not research nor represent to potential customers the commercial
uses or revenues they may derive from the end-products generated using our
technology. Each potential customer evaluates for itself whether the
commercialization and disposition of the end products justifies the cost to
purchase and install one of our machines.
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 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.
17
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.
In June 2008 we hired three employees who conduct research and development
activities on the prototype at the premises we lease from Ingersoll Productions
in Rockford. We also estimate another increase in the number of our employees in
the next twelve months. The increase 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.
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. 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.
INTELLECTUAL PROPERTY
We currently have three provisional patent applications and two utility
patent applications pending in the United States Patent and Trademark Office
("PTO") and approximately twelve corresponding foreign patent applications
pending in commercially relevant 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 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 a variety of these unconventional hydrocarbon sources.
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.
18
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 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 14, 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.
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").
19
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, our former Chairman (until November
12, 2008) and our former President and Chief Executive Officer (until August 13,
2008). We issued to Carbon Recovery 48,688,996 shares of our common stock. 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 successively extended the
expiration dates to a date that is one hundred and twenty (120) days after the
U.S. Securities and Exchange Commission ("SEC") shall declare effective the
registration of the shares, Carbon Recovery Warrants (and shares underlying the
warrants) under the Securities Act of 1933. 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 deposit the shares and
warrants it received as consideration for the sale of the assets in a
liquidating trust until they could be distributed to the Carbon Recovery
stockholders. We covenanted that we would file a registration statement for the
shares of our common stock, the warrants (and the warrant shares) issued to
Carbon Recovery in order to permit the distribution.
In order to clarify the ownership and licensure of certain intellectual
property licensed to Carbon Recovery, on September 22, 2006 Mobilestream Oil,
Inc., Mr. Pringle and his wife, Lois Augustine Pringle entered into a combined
technology license agreement (the "Combined Technology License Agreement"). This
Agreement confirmed (i) Mobilestream as the sole owner of the licensed
intellectual property, and (ii) the exclusive license of the intellectual
property by Mobilestream to Carbon Recovery. In the same agreement, Carbon
Recovery assigned all of its interest in the intellectual property license to
the Company, and the Company agreed to pay Mobilestream royalty payments in
perpetuity that varied with the use made of the intellectual property and the
revenues received by the Company. The Company's royalty obligations under the
Combined Technology License Agreement ended when the Company acquired
substantially all of the assets of Mobilestream.
Following the closing of the Carbon Recovery acquisition and the decision
of Carbon Recovery to liquidate, Carbon Recovery and Olde Monmouth Stock
Transfer Co., Inc. ("Olde Monmouth"), 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 (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 SEC. The ability of the
Liquidating Trustee to distribute the shares of the Company's common stock and
the Carbon Recovery Warrants to the stockholders of Carbon Recovery depends upon
the effectiveness of that registration statement.
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. Mobilestream was a development stage company which owned
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 capturing those components in usable form for resale.
The Mobilestream assets we acquired consisted, essentially, of (1) the then four
patents pending for the technology together with Mobilestream's position as the
licensor under the Combined Technology License Agreement and (2) 37,500,000
shares of our own common stock, which had been issued for the benefit of
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,
which were being held in the Carbon Recovery Liquidating Trust, were cancelled
as part of the Mobilestream acquisition, and the Combined Technology License
Agreement was terminated by virtue of the merger of the interests of the
licensor and the licensee.
20
At the time of the Mobilestream acquisition, Mobilestream was controlled
by Frank G. Pringle, our former Chairman (until November 12, 2008), and at the
time of the acquisition, our then President and CEO. No Mobilestream stockholder
was a party to the Mobilestream Acquisition Agreement. We issued to Mobilestream
(i) 11,145,225 shares of our Common Stock for the benefit of the holders of
Mobilestream's common stock, and (ii) 35,236,188 shares of our 2006 Series of
Convertible Preferred Stock for the benefit of the holder of Mobilestream's 2006
Series of Convertible Preferred Stock. Lastly, we issued to Mobilestream
22,205,867 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. Mr.
Pringle, who was to receive 23,500,000 of the Mobilestream Warrants agreed to
their cancellation. Subsequently, our Board of Directors successively extended
the exercise date of the warrants to a date that is one hundred and twenty (120)
days after the SEC shall declare effective the registration of the shares and
Mobilestream Warrants under the Securities Act of 1933. See "Description of
Securities-Warrants." We also assumed Mobilestream's liabilities which were
minimal. As a result of the Mobilestream assets acquisition, we own all of the
microwave technology.
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. No
Mobilestream stockholder was a party to the Mobilestream Acquisition Agreement.
In the Mobilestream Acquisition Agreement, Mobilestream agreed that it would
liquidate, and would deposit the shares and warrants it received as
consideration for the sale of the assets in a liquidating trust until they could
be distributed to the Mobilestream stockholders. We covenanted that we would
file a registration statement for the shares of our common stock and the
Mobilestream Warrants (and warrant shares) issued to Mobilestream in order to
permit the distribution.
Following the closing of the Mobilestream acquisition and the decision of
Mobilestream to liquidate, Mobilestream and Olde Monmouth 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 Liquidating Trustee to distribute the shares of
the Company's common stock and the Mobilestream Warrants to the Mobilestream
stockholders depends upon the effectiveness of that registration statement.
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 the benefit of, and eventual 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 then Chairman, President and CEO. 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). The 2006 Series of
Convertible Preferred Stock shares were issued to Mobilestream; however, since
Mr. Pringle was the sole holder of the 2006 Series of Mobilestream Preferred
Stock and therefore the sole distributee of our 2006 Series of Convertible
Preferred Stock, Mr. Pringle received the Company's 2006 Series of Convertible
Preferred Stock in a private placement. 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
$1,650,000. See "Security Ownership of Certain Beneficial Owners and Management"
and "Description of Securities."
21
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 then 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. On November 12,
2008 Mr. Pringle resigned as Chairman and as a member of the Board of Directors.
Mr. Swain was appointed as a director to fill the vacancy created by Mr.
Pringle's resignation.
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
----- --- --------
Eric Swain 49 Chief Executive Officer
Chairman of the Board of Directors
Jeffrey J. Andrews 57 Chief Financial Officer,
Secretary and Treasurer
Jeffrey T. Kimberly 46 President
Wayne J. Koehl 57 Chief Operating Officer
Frederick A. Clark 46 Director
Lincoln Jones III
Major General, USA (Ret.) 75 Director
Kim Thorne O'Brien 50 Director
Jonathan L. Simon 57 Director
Paul J. Sweeney 40 Director
Peter A. Worthington 56 Director
Business Experience
The following describes the business backgrounds of our executive officers
and directors.
Eric Swain has served as our Chief Executive Officer since September 24,
2008 and became a member and Chairman of our Board of Directors on November 12,
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
high 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.
22
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.
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
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.
23
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 Ms. O'Brien was Vice
President, Business Development & Marketing, of AdvancedTraces, 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.
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.
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.
24
(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) Until September 23, 2008, Mr. Andrews did not have a written employment
agreement. 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
$2,748.90
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Option Awards Stock Awards
Equity Equity
Incentive Incentive
Plan Plan
Awards: Awards:
Equity Number Market or
Incentive of Payout
Plan Unearned Value of
Awards: Market Shares, Unearned
Number of Number of Number of Number of Value of Units or Shares,
Securities Securities Securities Shares or Shares or Other Units or
Underlying Underlying Underlying Units of Units of Rights Other
Unexercised Unexercised Unexercised Option Option Stock That Stock That Rights
Options (#) Options (#) Unearned Exercise Expiration Have Not That Have Have Not That Have
Name Exercisable Unexercisable Options Price Date Vested Not Vested Vested Not Vested
(#) ($) (#)(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- -0-
EXECUTIVE EMPLOYMENT ARRANGEMENTS
The consulting agreement among the Company, Mr. Pringle, and 888
Corporation, a corporation wholly-owned by Mr. Pringle, was terminated on
November 12, 2008 when the parties entered into a severance agreement. The terms
and conditions of the severance agreement are described in "Certain
Relationships and Related Transactions."
Eric Swain, the Chief Executive Officer, is employed pursuant to a five
year summary term sheet entered into on September 24, 2008 as follows: 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 September 23,2008 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" (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" 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 his
employment arrangement and his legal expenses in connection with his early
termination with his existing employer.
25
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.
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.
Initially, Mr. Kimberly received 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.
26
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.
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 was five years. Initially Mr. Koehl
received a base salary of $160,000 per annum which was increased to $200,000 on
November 5, 2008. Mr. Koehl also participated in the Company's benefit plans and
received 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 under our 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 $2,000,000 term life insurance policy for Mr. Koehl,
the proceeds of which will be divided equally between the Company and Mr.
Koehl's family. If Mr. Koehl resigns voluntarily during the 5 year term, then we
will pay him only the salary and Milestone bonus earned to the date of
resignation, and he will retain only the options that have vested to that date.
If we: (i) relocate to a geographic area unacceptable to Mr. Koehl, (ii)
eliminate his position as a result of our sale, reorganization or restructuring,
(iii) cease to exist as the Company or (iv) terminate the agreement before the
end of the 5 year term, then: (i) we will pay Mr. Koehl his then current salary
and benefits until the first to occur of (x) 1 year from termination or (y) his
acceptance of another position of employment, (ii) all remaining options will
vest immediately and (iii) all earned Milestone bonuses will be paid in full.
27
COMPENSATION OF DIRECTORS
DIRECTOR COMPENSATION
---------------------
Non-Equity Change in Pension
Incentive Value and
Fees Earned Plan Non-Qualified All Other
or Paid in Stock Option Compensation Deferred Compensation
Cash ($) 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) The table above presents director compensation for the fiscal year ended
December 31, 2006 and December 31, 2007, during which neither the former
directors (except as discussed below) nor the current directors were compensated
for their services as directors. Effective January 1, 2008, we began to
compensate our directors by awarding them warrants to purchase shares of our
common stock as well as paying their expenses of attending meetings. 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.
28
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 9, 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
December 9, 2008, there were 62,211,564 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 12/9/2008(1)
------------------------------------- --------- --------------
Frank G. Pringle 10,592,828(2) 17.0%(2)
109 Bortons Road
Marlton, New Jersey 08053
Eric Swain 1,000,000(3) 1.6%(3)
151 Summit Avenue
Pompton Lakes, New Jersey 07442
Jeffrey J. Andrews 400,000(4) *(4)
8 Cushman Road
Rosemount, Pennsylvania 19010
Jeffrey T. Kimberly 300,000(5) *(5)
462 Oakshade Road
Shamong, New Jersey 08088
Wayne J. Koehl 200,000(6) *(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) *(7)
9 Fernglen Drive
The Woodlands, Texas 77380
Kim Thorne O'Brien 50,000(8) *(8)
19 Sawmill Road
Medford, New Jersey 08055
Jonathan L. Simon 190,000(9) *(9)
1722 Garfield Street
Wyomissing, Pennsylvania 19610
Paul J. Sweeney 10,104,224(10) 16.24%(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) 3.16%(11)
109 Bortons Road
Marlton, New Jersey 08053
Olde Monmouth Stock Transfer
Co., Inc., Trustee
Carbon Recovery Corporation
Liquidating Trust 11,188,996(12) 17.87%(12)
200 Memorial Parkway
Atlantic Highlands, NJ 07716
Olde Monmouth Stock Transfer
Co., Inc., Trustee 11,145,225(13) 17.91%(13)
Mobilestream Oil, Inc.
Liquidating Trust
200 Memorial Parkway
Atlantic Highlands, New Jersey 07716
All Directors and Officers
as a Group (10 persons) 12,250,474(2)(3) 19.97%
*Less than one percent (1%).
29
1. Based on 62,211,564 shares of our common stock issued and outstanding on
December 9, 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. 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 Mr. Pringle attended prior to his resignation.
3. Includes 1,000,000 options issued to Mr. Swain under a term sheet agreement
executed on September 24, 2008, which vested on September 24, 2008, and the
remaining 4,000,000 options granted to Mr. Swain on such date 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. Does not include warrants to purchase shares of our common stock
for each meeting of our Bord Mr. Swain attended.
4. Includes 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. Includes 200,000 options issued to Mr. Andrews under a term
sheet agreement executed on September 23, 2008, which vested on September 23,
2008, and the remaining 800,000 options granted on such date to Mr. Andrews 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. Includes 300,000 options issued to Mr. Kimberly under a term sheet agreement
executed on September 23, 2008, which vested on September 23, 2008, and the
remaining 1,200,000 options granted to Mr. Kimberly on such date 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. Includes 200,000 options issued to Mr. Koehl under a term sheet agreement
executed on September 23, 2008, which vested on September 23, 2008, and the
remaining 800,000 options granted to Mr. Koehl on such date 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. Includes 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 the date that is
120 days after the SEC shall declare effective the registration of the shares
and the Carbon Recovery Warrants under the Securities Act of 1933. Does not
include warrants to purchase shares of our common stock for each meeting of our
Board attended by Ms. O'Brien.
9. Includes the following: (i) 85,000 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) 85,000 Company Warrants
to purchase shares of the Company's common stock at $2.50 per share that expire
on the date that is 120 days after the SEC shall declare effective the
registration of the shares and the Carbon Recovery Warrants under the Securities
Act of 1933.; and (iii)10,000 shares of common stock issuable upon the exercise
of warrants owned by Mr. Simon's children and 10,000 shares of our common stock
to be distributed by the Carbon Recovery Liquidating Trust which is anticipated
to occur at the time the SEC declares effective the Company's registration
statement on Form S-1 with respect to such shares. Does not include warrants to
purchase shares of our common stock for each meeting of our Board attended by
Mr. Simon.
30
10. Includes 5,405,187 shares of common stock and 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 the date that is 120 days after the SEC shall declare effective the
registration of the shares and the Carbon Recovery Warrants under the Securities
Act of 1933; the warrants to purchase shares of our common stock expire on
September 15, 2009. Also includes 316,550 shares of our common stock
distributable from 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.
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." 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.
31
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, our former Chairman (November 12, 2008) and, until August 13, 2008
our former 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 was then 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.
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, our former Chairman (until November
12, 2008) and our former President and Chief Executive Officer (until August 13,
2008). We issued to Carbon Recovery 48,688,996 shares of our common stock. 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 successively extended the
expiration dates to a date that is one hundred and twenty (120) days after the
U.S. Securities and Exchange Commission ("SEC") shall declare effective the
registration of the shares, Carbon Recovery Warrants (and shares underlying the
warrants) under the Securities Act of 1933. 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 deposit the shares and
warrants it received as consideration for the sale of the assets in a
liquidating trust until they could be distributed to the Carbon Recovery
stockholders. We covenanted that we would file a registration statement for the
shares of our common stock, the warrants (and the warrant shares) issued to
Carbon Recovery in order to permit the distribution.
In order to clarify the ownership and licensure of certain intellectual
property licensed to Carbon Recovery, on September 22, 2006 Mobilestream Oil,
Inc., Mr. Pringle and his wife, Lois Augustine Pringle entered into a combined
technology license agreement (the "Combined Technology License Agreement"). This
Agreement confirmed (i) Mobilestream as the sole owner of the licensed
intellectual property, and (ii) the exclusive license of the intellectual
property by Mobilestream to Carbon Recovery. In the same agreement, Carbon
Recovery assigned all of its interest in the intellectual property license to
the Company, and the Company agreed to pay Mobilestream royalty payments in
perpetuity that varied with the use made of the intellectual property and the
revenues received by the Company. The Company's royalty obligations under the
Combined Technology License Agreement ended when the Company acquired
substantially all of the assets of Mobilestream.
Following the closing of the Carbon Recovery acquisition and the decision
of Carbon Recovery to liquidate, Carbon Recovery and Olde Monmouth Stock
Transfer Co., Inc. ("Olde Monmouth"), 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 (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 this 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 SEC. The ability of the
Liquidating Trustee to distribute the shares of the Company's common stock and
the Carbon Recovery Warrants to the stockholders of Carbon Recovery depends upon
the effectiveness of this registration statement.
32
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. Mobilestream was a development stage company which owned
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 capturing those components in usable form for resale.
The Mobilestream assets we acquired consisted, essentially, of (1) the then four
patents pending for the technology together with Mobilestream's position as the
licensor under the Combined Technology License Agreement and (2) 37,500,000
shares of our own common stock, which had been issued for the benefit of
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,
which were being held in the Carbon Recovery Liquidating Trust, were cancelled
as part of the Mobilestream acquisition, and the Combined Technology License
Agreement was terminated by virtue of the merger of the interests of the
licensor and the licensee.
At the time of the Mobilestream acquisition, Mobilestream was controlled
by Frank G. Pringle, our former Chairman (until November 12, 2008), and at the
time of the acquisition, our then President and CEO. No Mobilestream stockholder
was a party to the Mobilestream Acquisition Agreement. We issued to Mobilestream
(i) 11,145,225 shares of our Common Stock for the benefit of the holders of
Mobilestream's common stock, and (ii) 35,236,188 shares of our 2006 Series of
Convertible Preferred Stock for the benefit of the holder of Mobilestream's 2006
Series of Convertible Preferred Stock. Lastly, we issued to Mobilestream
27,205,867 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. Mr.
Pringle, who was to receive 23,500,000 of the warrants, agreed to their
cancellation. Subsequently, our Board of Directors successively extended the
exercise date of the warrants to a date that is one hundred and twenty (120)
days after the SEC shall declare effective the registration of the shares and
Mobilestream Warrants under the Securities Act of 1933. See "Description of
Securities-Warrants." We also assumed Mobilestream's liabilities which were
minimal. As a result of the Mobilestream assets acquisition, we own all of the
microwave frequency technology.
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. No
Mobilestream stockholder was a party to the Mobilestream Acquisition Agreement.
In the Mobilestream Acquisition Agreement, Mobilestream agreed that it would
liquidate, and would deposit the shares and warrants it received as
consideration for the sale of the assets in a liquidating trust until they could
be distributed to the Mobilestream stockholders. We covenanted that we would
file a registration statement for the shares of our common stock and the
Mobilestream Warrants (and warrant shares) issued to Mobilestream in order to
permit the distribution.
Following the closing of the Mobilestream acquisition and the decision of
Mobilestream to liquidate, Mobilestream and Olde Monmouth 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 this 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 Liquidating Trustee to distribute the shares of
the Company's common stock and the Mobilestream Warrants for the Mobilestream
acquisition to the Mobilestream stockholders depends upon the effectiveness of
this registration statement.
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 the benefit of, and eventual 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 then Chairman, President and CEO. 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). The 2006 Series of
Convertible Preferred Stock shares were issued to Mobilestream; however, since
Mr. Pringle was the sole holder of the 2006 Series of Mobilestream Preferred
Stock and therefore the sole distributee of our 2006 Series of Convertible
Preferred Stock, Mr. Pringle received the Company's 2006 Series of Convertible
Preferred Stock in a private placement. 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
$1,650,000. See "Security Ownership of Certain Beneficial Owners and Management"
and "Description of Securities."
33
On May 17, 2007 we purchased 94,961 shares of our common stock for $66,471
in cash from Ms. Lois Pringle, the wife of Mr. Frank G. Pringle, our then
President and Chief Executive Officer.
In August 2007, 25 individuals purchased an aggregate of 642,106 shares of
Carbon Recovery Corporation in a private sale from Lois Augustine Pringle, the
wife of Frank Pringle, who was, at the time, our Chairman, President and CEO.
IThe 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 642,106 warrants to purchase
shares of our common stock to the purchasers at exercise prices of $2.50
(290,000 warrants) and $2.75 (352,106 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 was paid in full in August 2008.
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.
34
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.
On November 12, 2008 the Company and Mr. Pringle, its former CEO and
President, and 888 Corporation ("888 Corp."), a New Jersey corporation
controlled by Mr. Pringle, entered into a severance agreement pursuant to which
(i) the Company has agreed to pay Mr. Pringle $200,000.00 per year for the six
(6) year period commencing on January 1, 2009, in consideration for (i) Mr.
Pringle's return of 225,000 shares of common stock previously issued to Mr.
Pringle on or about June 26, 2008 and which Mr. Pringle held in "street name" at
UBS and (ii) the continued compliance by Mr. Pringle and 888 Corp. with the
covenants, agreements and other terms of the Severance Agreement (as described
in more detail below). The payments to Mr. Pringle made by the Company will be
made in monthly installments and will be offset by approximately $15,000 that
Mr. Pringle is obligated to reimburse the Company by March 1, 2009, which amount
includes personal expenses of Mr. Pringle incurred by the Company and 50% of the
legal fees and expenses incurred by the Company in regard to the negotiation and
preparation of the Severance Agreement. The Company's severance payments to Mr.
Pringle would also be offset by any indemnification payments that Mr. Pringle
may become obligated to pay under the Severance Agreement.
In addition to the return of the 225,000 shares of Company Common Stock
previously issued to him, Mr. Pringle also agreed to restrict the amount of
shares of Company Common Stock that he or his immediate family or any entity
directly or indirectly controlled by any of them may sell, transfer or encumber
to the following amounts: no shares prior to February 1, 2009; an aggregate of
Four Hundred Thousand (400,000) shares of Company Common Stock during the three
(3) month period beginning February 1, 2009; an aggregate of Three Hundred
Thousand (300,000) shares of Company Common Stock during the three (3) month
period beginning May 1, 2009; and an aggregate of Two Hundred Fifty Thousand
(250,000) shares of Company Common Stock during any three month period
thereafter beginning August 1, 2009. These restrictions will remain in place
unless and until (i) Mr. Pringle and his family members directly or indirectly
own less than 5,000,000 shares of Company Common Stock, and (ii) Mr. Pringle and
his family members have fully complied with the restrictions on sales, transfers
and encumbrances set forth in the Severance Agreement and are not in breach of
such provisions.
Any transfers by Mr. Pringle or any of his affiliates that are permitted
under the Severance Agreement are subject to the Company's right of first
refusal, which the Company has 10 days to exercise. The Company may assign this
right of first refusal or designate a third party to exercise such right.
Pursuant to the Severance Agreement, Mr. Pringle immediately resigned as
Chairman and as a member of the Company's Board of Directors and in all other
capacities (in each case effective as of the date of the Severance Agreement).
The Severance Agreement also provides for: (i) the immediate termination
of the Consulting Agreement between the Company and 888 Corp. dated as of
January 1, 2008 with no further payments or benefits due from the Company to 888
Corp. except for payments to 888 Corp. of any sums otherwise due under the
Consulting Agreement through December 31, 2008); (ii) Mr. Pringle to be subject
to a nine year non-compete and non-solicit agreement, which runs from the date
of the agreement until the end of the third year after his last scheduled
payment under the Severance Agreement; (iii) Mr. Pringle to be subject to a
non-disclosure obligation and to return to the Company all copies of
confidential information directly or indirectly in his possession or control;
and (iv) mutual general releases and non-disparagement provisions.
Under the Severance Agreement, Mr. Pringle unconditionally waived any
rights, claims and causes of action against the Company with respect to any of
its intellectual property (including claims he has made in the past). Further,
Mr. Pringle made extensive representations regarding the validity of the
Company's intellectual property and that such intellectual property is free and
clear of all liens, claims and/or encumbrances. The Company may obtain
indemnification from Mr. Pringle for any breach or alleged breach of Mr.
Pringle's representation and warranties regarding the intellectual property
and/or for any breach or alleged breach of any other representation, warranty,
covenant or agreement of Mr. Pringle or 888 Corp. under the Severance Agreement.
35
SELLING SECURITY HOLDERS
SELLING SECURITY HOLDERS TABLE
The shares to be offered by the selling security holders are "restricted"
securities under applicable federal and state securities laws, and are being
registered under the Securities Act of 1933, as amended (the "Securities Act"),
to give the selling security holders the opportunity to publicly sell or
otherwise dispose of those shares. The registration of these shares does not
require that any of the shares be offered or sold by the selling security
holders. Furthermore, they cannot be sold unless and until the selling security
holders exercise the warrants with respect to which the shares have been
registered in accordance with their terms. The shares of common stock included
in this prospectus may be disposed of by the selling security holders or their
transferees 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. We will not control or determine the price at which a
selling security holder decides to dispose of its shares. We are registering
shares of our common stock issuable upon the exercise of warrants issued by us
to each of the selling security holders named below.
No estimate can be given as to the amount or percentage of our common
stock that will be held by the selling security holders after any sales or other
dispositions made pursuant to this prospectus because the selling security
holders are not required to sell any of the shares registered under this
registration statement. The following table assumes that the selling security
holders will sell all of their shares listed in this prospectus.
The following table sets forth the beneficial ownership of the selling
security holders prior to the offering to which this prospectus relates.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to the securities. Shares of common stock subject to options,
warrant and convertible securities currently exercisable or convertible within
60 days, are deemed outstanding, including for purposes of computing the
percentage ownership of the person holding the option, warrant or convertible
security, but not for purposes of computing the percentage of any other holder.
Information concerning the selling security holders may change from time to time
after the date of this prospectus. Any such changed information will be
described if and when necessary in supplements to this prospectus or, if
appropriate, a post-effective amendment to the registration statement of which
this prospectus is a part.
36
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 the selling security holders.
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
---------------------------------------------------------------------------------------------------------
Ademas Fund, LLLP 150,000 (1) 150,000 -0- -0-
1800 Second Street
Suite 758
Sarasota, FL 34236
Nutmeg Mercury Fund, LLLP 250,000 (2) 250,000 -0- -0-
155 Revere Dr.
Northbrook, IL 60062
Jonathan L. Simon 190,000 180,000 -0- -0-
1722 Garfield Ave.
Reading, PA 19610
Albert N. Epstein 250,006 250,006 -0- -0-
4076 Tinkerhill Road
Phoenixville, PA 19460
Penrose H. Frey 9,000 9,000 -0- -0-
1192 Marshallton Thorndale Rd.
West Chester, PA 19380
Joseph & Patricia Bianchini 20,000 20,000 -0- -0-
950 Willow Valley Lakes Dr.
K-111
Willow Street, PA 17584
Anthony J. Gable 15,000 15,000 -0- -0-
12 Apple Dr.
Downingtown, PA 19335
Russell M. Pease 5,000 5,000 -0- -0-
604 Walnut Tree Dr.
Blandon, PA 19510
Josephine Carulli 20,000 20,000 -0- -0-
11 Songbird Cir.
Glenmoore, PA 19343
Donna G. Wert 10,000 10,000 -0- -0-
27 Wendy Dr.
Pequea, PA 17565
Walter & Bonnie Reagin 1,000 1,000 -0- -0-
2204 Cranberry La
Coatesville, PA 19320
Mel King 10,000 10,000 -0- -0-
450 Creekside Dr.
Downingtown, PA 19335
James J. McGrath III 10,000 10,000 -0- -0-
1921 Strasburg Rd.
Coatesville, PA 19320
Jon & Jeanette Glesecke 50,000 50,000 -0- -0-
112 Wildbriar Dr.
Downingtown, PA 19335
Mark & Patricia Famigletti 5,000 5,000 -0- -0-
112 Wildbriar Dr.
Downingtown, PA 19335
Lee A. Greenburg 4,000 4,000 -0- -0-
642 Valley Stream Rd.
Langhorne, PA 19053
Thomas Betz 5,000 5,000 -0- -0-
642 Valley Stream Rd.
Langhorne, PA 19053
37
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
-----------------------------------------------------------------------------------------------------
Sande Jacobson 5,000 (4) 5,000 -0- -0-
95 Andover Dr.
Langhorne, PA 19047
Sarah Simon 10,000 (4) 10,000 -0- -0-
1722 Garfield Ave.
Reading, PA 19610
Zachary Simon 10,000 (4) 10,000 -0- -0-
1722 Garfield Ave.
Reading, PA 19610
Scott Orr 20,000 (4) 20,000 -0- -0-
909 Denise Drive
Birdsboro, PA 19508
Jim Spears 40,000 (4) 40,000 -0- -0-
104 Vincent Dr.
Honeybrook, PA 19344
Joseph Sterchak 40,000 (4) 40,000 -0- -0-
1004 Holy Circle
Collegeville, PA 19426
Dale Martin 80,000 (4) 80,000 -0- -0-
570 Stonehenge Dr.
Littiz, PA 17543
Jim Clark 145,000 (4) 145,000 -0- -0-
526 Blandon Rd.
Fleetwood, PA 19522
Lori Clark 20,000 (4) 20,000 -0- -0-
526 Blandon Rd.
Fleetwood, PA 19522
Bill Kahres 45,000 (4) 45,000 -0- -0-
2242 New Castle Dr.
Shillington, PA 19607
Terence Taylor/
Tomahawk Trading Corp. 1,000,000 (5) 1,000,000 -0- -0-
55 Whispering Pines
Ithaca, NY 14850
(1) Includes 150,000 shares of our common stock underlying currently exercisable
warrants expiring December 31, 2008. The warrant exercise price is $0.80 per
share of common stock. In 2008, Black Diamond Fund, LLLP changed its name to
Ademas Fund, LLLP. Ademas Fund hired Stevens Research Group as its investment
adviser. George Stevens, a principal of Stevens Research Group, has investment
and voting power over the shares of Common Stock issuable upon the exercise of
the warrants held by Ademas Fund.
(2) Includes 250,000 shares of our common stock underlying currently exercisable
warrants expiring December 31, 2008. The warrant exercise price is $0.80 per
share of common stock. Randall Goulding has investment and voting power over the
shares of Common Stock issuable upon the exercise of the warrants held by Nutmeg
Mercury Fund, LLLP. Mr. Goulding is the manager of the Nutmeg Group LLC, the
general partner of Nutmeg Mercury Fund.
(3) Includes the following: (i) 85,000 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) 85,000 Company Warrants
to purchase shares of the Company's common stock at $2.50 per share that expire
on December 31, 2008; and (iii) 10,000 shares of common stock issuable upon the
exercise of warrants owned by Mr. Simon's children and 10,000 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 the Company's registration statement on Form S-1 with respect to such
shares.
38
(4) Includes 1,000,000 shares of our common stock underlying currently
exercisable warrants expiring December 31, 2008. The warrant exercise price is
$1.50 per share of common stock; however, the Taylor Warrants are held in escrow
and can only be exercised under all of the following conditions: (i) all of the
warrants must be exercised at one time for all, but not less then all, of the
shares of our common stock, by payment in full of the purchase price of
$1,500,000, and (ii) Terence Taylor ("Taylor") and/or Tomahawk Trading Corp.,
Taylor's affiliated corporation ("Tomahawk") must pay to the escrow agent at the
time of exercise a total of $1,199,500 payable under the settlement and
termination agreement pursuant to which the warrants were issued and the escrow
arrangement created. The settlement and termination agreement covers the
following matters: during the past three years: (i) Frank G. Pringle, who at the
time was our Chairman, CEO and President ("Pringle"), transferred shares of his
Company common stock in satisfaction of a $250,000 loan from Taylor to Pringle.
Taylor sold the shares and owes Pringle $87,500 as the difference Taylor
realized over and above the loan amount; (ii) in April 2006 the Company loaned
Taylor $7,000; (iii) Tomahawk owes the Company $650,000 as a result of the
settlement of various claims among the Company, MJCCC and Taylor, pursuant to
which the Company transferred 400,000 shares of its common stock to Tomahawk for
sale, the proceeds of which were to be used by Tomahawk to satisfy a loan from
MJCCC to the Company. Tomahawk sold the shares but has not delivered the sale
proceeds to MJCCC in satisfaction of the Company loan; (iv) as of January 2007
Taylor owes the Company $25,000 for reimbursement of the private placement agent
fee of a private placement that was terminated; (v) in May 2007 the Company paid
Taylor $250,000 as commissions in anticipation of a private placement that was
subsequently terminated, therefore, Taylor owes the Company $250,000 for
unearned commissions; (vi) in October 2006 Mobilestream Oil, Inc., a predecessor
of the Company issued 2,000,000 shares of its common stock to Tomahawk in full
satisfaction of certain financial public relations services Tomahawk performed;
(vii) Taylor and Tomahawk have waived certain other claims to commissions and
fees to which they might otherwise be entitled under various oral and written
agreements for referring private placement investors to the Company and for
handling other financial transactions and have delivered a general release to
the Company with respect to all such claims. In order to exercise the warrants
issued to Taylor and Tomahawk, Taylor and Tomahawk must pay at one time to the
escrow agent holding the Taylor Warrants the sum of $1,199,500 in satisfaction
of the various items described above. Mr. Taylor has voting and investment power
over the shares of Common Stock owned by or issuable to Tomahawk.
Relationships with Selling Security Holders
Except as set forth in the table, none of the selling security holders has held
any position or office with us or any of our affiliates, or has had any other
material relationship (other than as purchasers of securities) with us or any of
our affiliates, within the past three years.
The selling security holders acquired their respective warrants as follows:
(i) Ademas Fund (formerly known as Black Diamond Fund LLLP) and Nutmeg Mercury
Fund acquired their warrants as part of a rescission and settlement of a private
placement transaction that was terminated. Each of the Funds had invested in the
private placement pursuant to the Company's terminated relationship with Westor
Capital Group, Inc. Each of the Funds mutually agreed upon a termination of
their investments by rescission. On August 28, 2007, the Company and each of the
Funds agreed to reinvest the amounts which they invested in the private
placement ($250,000 in the case of Nutmeg Mercury and $150,000 in the case of
Ademas), by the exercise of certain warrants mirroring those in the private
placement documents, including an exercise price of $0.80 per share of Common
Stock. The warrants were issued to the Funds on August 28, 2007. Further, the
Company has agreed to register for resale the shares of common stock underlying
the warrants issued to Ademas and Nutmeg Mercury.
(ii) In August 2007, 25 individuals purchased an aggregate of 642,106 shares of
Carbon Recovery Corporation common stock in a private sale from Lois Augustine
Pringle, the wife of Frank Pringle who was, at that time, our Chairman,
President and CEO. These individual 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 642,106 warrants to purchase shares of the Company's common stock to
the purchasers of Lois Pringle's Carbon Recovery stock at exercise prices of
$2.50 (290,000 warrants) and $2.75 (352,106 warrants).
(iii) Terence Taylor and Tomahawk Trading Corp. received their warrants as part
of a Settlement and Termination agreement, made as of January 15, 2008, by and
among, Mr. Taylor, Tomahawk Trading Corp., the Company, Patrick Hogan and Frank
G. Pringle, who was our Chairman, and at the time of the settlement agreement,
our CEO and President. Pursuant to this Settlement and Termination Agreement,
and in consideration for various agreements and releases by Mr. Taylor and
39
Tomahawk Trading, the Company issued to Mr. Taylor and Tomahawk Trading a
warrant exercisable to purchase 1,000,000 shares of common stock at an exercise
price of $1.50. The Settlement Agreement required that the warrant be held by an
escrow agent and that Mr. Taylor and Tomahawk Trading could only the exercise
the warrant in full, with no partial exercises. The Company is required, under
the Settlement Agreement, to register for resale the shares underlying the
warrants issued to Mr. Taylor and Tomahawk Trading. The Settlement Agreement
also provides that in order to exercise the warrant, Mr. Taylor and Tomahawk
Trading are required to deliver the following amounts: (A) $1,500,000 for the
exercise price for all 1,000,000 warrants, (B) the total of the amounts owed
under the Settlement Agreement ($1,199,500) (as described below) and (C) a fee
of $5,000 payable to escrow agent for its services. Upon receipt of clear funds
from Mr. Taylor and Tomahawk Trading's payments, the escrow agent will pay over
the exercise price ($1,500,000) to the Company and the $1,199,500 to the various
creditors (as described below) and retain for its services the $5,000 escrow
fee. Simultaneously, the escrow agent will caused to be delivered, as instructed
by Mr. Taylor and/or Tomahawk.
Under the Settlement Agreement, Mr. Taylor and/or Tomahawk Trading agreed that
as part of the exercise of the warrants, they would make the following payments:
(i) $178,000 to Patrick Hogan which amount represents the proceeds from the sale
of Company common stock sold by Tomahawk Trading on behalf of Mr. Hogan, along
with interest and reimbursement of tax expenses, (ii) $87,500 to Mr. Frank
Pringle which amount represents the excess value of Company common stock that
Mr. Pringle transferred to Mr. Taylor and Tomahawk Trading as payment for a
$250,000 debt Mr. Pringle owed to Mr. Taylor, (iii) $9,000 to the Company which
amount represents a loan of $7,000 the Company made to Mr. Taylor in April 2006,
along with $2,000 in accrued but unpaid interest and loan costs, (iv) $650,000
which amount represents indebtedness that M J Advanced Corporation
Communications owed to the Company and which Mr. Taylor and Tomahawk Trading
agreed to assume, (v) $25,000 to the Company which Mr. Taylor and Tomahawk
Trading agreed to pay the Company in the event that Westor Capital Group Inc. to
raise funds for the Company, and (vi) $250,000 to the Company which amount the
Company prepaid to Mr. Taylor and Tomahawk Trading as commissions payable in
anticipation of completion of the private offering by Westor Capital, which
offering was terminated and the sales which had occurred were rescinded. These
amounts are also described in footnote 4 to the selling security holders table
on page 39 of this prospectus.
The Settlement Agreement also contained waivers and releases by the Company, Mr.
Taylor and Tomahawk Trading of any and all claims in regard to (i) 2,000,000
shares of the Common Stock of Mobilestream Oil, Inc., which shares were
free-trading and which M J Advanced Corporation Communications transferred to
Tomahawk Trading for the performance by Tomahawk Trading of financial public
relations services; (ii) various agreements, understandings, memoranda,
contracts and undertakings with Mr. Taylor and/or Tomahawk Trading entered into
by the Company, Mobilestream Oil, Inc. or Carbon Recovery Corporation, including
the letter Agreement of February 22, 2007 and the Consultant Agreement of
October 25, 2006, (iii) commissions or finder's fees with respect to a December
2007 private offering with Professional Offshore Opportunity Fund, and
(iv)compensation, whether deemed commissions or finder's fees, with respect to 2
various financial transactions that Mr. Taylor and/or Tomahawk Trading handled
for Mr. Pringle.
The Settlement Agreement also had a mutual non-disparagement clause, which
prohibited any party to the Settlement Agreement from making any statements
relating to such party's former relationships, the terms and conditions of any
agreements with any other party to the Settlement Agreement or the personal or
business reputations of any other party to the Settlement which are disparaging
or negative or tending to place the other party in a poor light.
PLAN OF DISTRIBUTION
The selling security holders, which as used herein includes 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 their respective 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.
40
The selling security holders 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;
- 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.
A 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 any of
them 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 holders 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 holders 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 holders 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 a 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. A 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.
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 holders 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.
41
To the extent required, the shares of the common stock to be sold, the
names of the selling security holders, 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 holders 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 holders for the
purpose of satisfying the prospectus delivery requirements of the Securities
Act. The selling security holders 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 holders 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 holders 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) (now
Rule 144(b)(1)(i)) of the Securities Act.
LEGAL PROCEEDINGS
There is no material litigation pending or threatened by or against us.
DESCRIPTION OF SECURITIES
The following information describes our common stock, our preferred stock,
options and warrants to purchase our common stock, the warrants issued to the
selling security holders, 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 2006 Series of Convertible
Preferred Stock, and our warrants, you should also refer to (i) the 2006 Series
of Convertible Preferred Stock Certificate of Designation as amended, (ii) the
Mobilestream Acquisition Warrants, (iii) each of the Carbon Recovery Class B, D
and E Acquisition Warrants, (iv) the warrants of each of the selling security
holders, and (iv) 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 December 9, 2008, we have 62,211,564 shares of common stock issued and
outstanding, and 5,000 shares of 2006 Series of Convertible Preferred 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 earnings from our
current microwave technology business and operations from which a dividend might
be paid, and even if we have such earnings in the future, we do not anticipate
that we will be paying dividends.
42
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 that are
required to be delivered for conversion into common stock under the severance
agreement among the Company, Mr. Pringle and 888 Corporation. In the view of the
Company the 5,000 shares are being treated as if they were converted, although
the Company's transfer agent has not received the stock certificate for the
preferred shares. The preferred shares have 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, and is entitled to elect a
majority of the Board of Directors. Each share of the
2006 Series has a liquidation preference of $.001 per share.
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 the warrants issued to directors, all
of which may be converted into shares of our common stock, with these
characteristics:
CLASS NUMBER EXERCISE PRICE EXPIRATION DATE
Mobilestream(1) 3,705,867 $4.75 (4)
Carbon Recovery B(2) 3,908,340 $2.75 (4)
Carbon Recovery D(2) 1,397,600 $2.75(3) (4)
Carbon Recovery E(2) 1,397,600 $4.00(3) (4)
Black Diamond(5) 150,000 $0.80 December 31, 2009
Mercury/Nutmeg(6) 250,000 $0.80 December 31, 2009
Augustine(7) 290,000 $2.50 December 31, 2008
Augustine(7) 352,106 $2.75 December 31, 2008
Taylor(8) 1,000,000 $1.50 December 31,2008
2008 private offerings(9) 9,327,741 $2.00 September 15, 2009(10)
New Millennium (11) 76,000 $2.75 September 30, 2010
Director Warrants 45,000 (12) (12)
(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) The expiration date is 120 days after the SEC declares effective the
registration statement for these warrants.
(5) 300,000 warrants were issued to Ademas Fund LLLP (then known as
Black Diamond Fund LLLP) in connection with settlement of claims
arising from a private placement transaction that was rescinded.
150,000 of the warrants issued to Ademas Fund LLLP have been
exercised.
(6) 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.
(7) The Company issued the Augustine Warrants to 25 individual investors
who purchased shares of Carbon Recovery Corporation common stock
from Ms. Lois Augustine Pringle in August 2007. See "Certain
Relationships and Related Transactions.
(8) 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 less 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.
43
(9) The Company issued 9,327,741 warrants to purchasers of its common
stock in a private placement between January 1 to April 30, 2008.
(10) 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.
(11) 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.
(12) 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.
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 Mobliestream
acquisitions, a registration statement for all classes of the Carbon Recovery
Acquisition Warrants, the Mobilestream Acquisition 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, the
Augustine Warrants and the Taylor Warrants we are obligated to register for
resale a combined total of 2,042,106 share of our common stock issuable upon
exercise of these warrants. This registration statement on Form S-1 (No.
333-152118) was originally filed on July 3, 2008.
(c) Our remaining classes of warrants do not have registration rights with
respect to the shares of common stock issuable upon the exercise of such
warrants.
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.
(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, such 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.
44
(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.
SHARES ELIGIBLE FOR FUTURE SALE
As of December 9, 2008, we had 62,211,564 shares of common stock
outstanding. That number does not include (i) 160,000 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) 5,000 shares of Convertible Preferred Stock that are convertible
into 2,500 shares of our common stock, (iv) 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) 642,106 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 Director Warrants.
FREELY TRADABLE SHARES AFTER OFFERING
As of December 9, 2008, excluding the shares that are covered by this
prospectus, 48,658,371 of our currently outstanding shares are deemed
"restricted" securities, and 13,553,193 shares of our common stock can be
publicly resold without restriction. Upon the exercise of the classes of
warrants and the issuance and sale of the 2,042,106 shares covered by the
Warrants included in 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, 15,579,492 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, persons who
have beneficially owned restricted securities for at least six months and who
are not our "affiliates" (as that term is defined under the Securities Act) or
have not been our affiliates for at least 90 days, may sell their securities
without any volume limitations or manner of sale limitations although the
Company must be current in its periodic filings with the SEC. Persons who are
not "affiliates" and have beneficially owned restricted securities for least one
year, may sell their securities without any limitation. Persons who may be
deemed our "affiliates" who have beneficially owned restricted Securities for at
least six months may sell within any three month period a number of shares that
does not exceed the greater of 1% of the then outstanding shares (approximately
622,115 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 by our affiliates made under Rule 144
are subject to certain manner-of-sale provisions, notice requirements and the
availability of current public information about the company. Subject to certain
volume limitations and other conditions, all of the currently outstanding
unregistered shares are eligible for public resale under Rule 144.
45
TRANSFER AGENT
Our transfer agent currently 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 his or her 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.
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 or her 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 or she 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 or her 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
Company 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. 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
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 the Company in the registration statement and
its exhibits, which we have filed with the Commission under the Securities Act
and to which reference is made.
46
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm.................. F-2
Consolidated Balance Sheets as of December 31, 2007 and 2006............. F-3
Consolidated Statements of Operations (with Cumulative Totals Since
Inception) for the Years Ended December 31, 2007 and 2006................ F-4
Consolidated Statements of Cash Flows (with Cumulative Totals Since
Inception) for the Years Ended December 31, 2007 and 2006................ F-5
Consolidated Statements of Stockholders' Equity(Deficit) for the
Year Ended December 31, 2007............................................. F-6
Notes to Consolidated Financial Statements for the
Year Ended December 31, 2007............................................. F-16
Condensed Balance Sheets at September 30, 2008 (unaudited) and
December 31, 2007 (audited) ............................................ F-39
Condensed Statement of Operations (unaudited) (with Cumulative
Totals Since Inception) for nine months ended September 30, 2008 and 2007
and for three months ended September 30, 2008 and 2007........... ....... F-40
Condensed Statement of Cash Flows (unaudited) (with Cumulative
Totals Since Inception) for nine months ended
September 30, 2008 and 2007.............................................. F-41
Condensed Statement of Stockholders' Equity (unaudited) at
September 30, 2008....................................................... F-42
Notes to Condensed Financial Statements (unaudited) for nine
months ended September 30, 2008.......................................... F-60
F-1
BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.
Certified Public Accountants
406 Lippincott Drive, Ste. J
Marlton, New Jersey 08053-4168
(856) 346-2828 Fax (856) 396-0022
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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 2006,
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 2006, 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 18 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
March 2O, 2008 (September 16, 2OO8 as to the effects of the restatement
discussed in Note 18)
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 35,236 35,236
Preferred Stock B - $.001 par value 1,000 shares
authorized and issued as Dec 31, 2007 1 --
Common stock, $.001 par value; 200,000,000 shares
authorized, 30,358,291 issued and 30,263,330 outstanding
at Dec. 31, 2007 30,358 25,113
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) --
------------ ------------
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)
DECEMBER 31 DECEMBER 31 TO
2007 2006 DECEMBER 31, 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)
TWELVE MONTHS ENDED JULY 19, 2002
------------------------------ (INCEPTION)
DECEMBER 31, DECEMBER 31, TO
2007 2006 DECEMBER 31, 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 58,154 183,042
Preferred stock issued for services 400,000 -- 400,000
Common stock issued for services 7,107,122 1,024,746 8,664,168
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
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 (66,750) 120,901
------------ ------------ ------------
TOTAL ADJUSTMENTS 7,827,302 1,142,061 9,969,821
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (2,659,584) (3,103,997) (7,449,176)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (24,033) (458,902) (557,151)
Proceeds from sale of Fixed assets 34,200 34,200
Proceeds from sale of real estate -- 617,864
Purchase of Investment (29,860) (135,000) (174,860)
Investment in real estate, net -- -- (80,800)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (19,693) (593,902) (160,747)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for cash 1,168,461 4,682,452 8,399,920
Liability for stock to be issued 200,367
Proceeds from stock subscription receivable 475,000 585,000 1,060,000
(Increase) decrease in stock subscription receivable (1,167,511) (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 148,817 175,133
Repayment of loan payable (37,288) (38,446) (82,540)
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,689,700 4,393,629 8,390,348
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (989,577) 695,730 780,425
CASH AND CASH EQUIVALENTS
- BEGINNING OF YEAR 1,770,002 1,074,272 --
------------ ------------ ------------
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 A Preferred Stock B Common Stock
------------------------ ------------------------ ------------------------ (Restated)
Par Value Par Value Par Value Additional
Preferred $.001 Preferred $.001 Common $.001 Paid-In
Shares $ Amount Shares $ Amount Shares $ Amount Capital
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE - JULY 19, 2002
(INCEPTION) -- $ -- $ -- -- -- $ -- $ --
Issuance of initial founders' shares,
September 9, 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 -- 472,000
Common stock issued for cash,
November 2002 at $0.50 per share -- -- -- -- 29,000 -- 14,500
Common stock issued for services
rendered, in November and
December 2002, at $0.50 per share -- -- -- -- 13,600 -- 6,800
Net loss for the period July 19,
2002 (Inception) through December
31, 2002, restated see Note 15 -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT
DECEMBER 31, 2002 (RESTATED) -- -- -- -- 3,597,600 -- 493,300
----------- ----------- ----------- ----------- ----------- ----------- -----------
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 -- 259,900
Issuance of subscription receivable
from shareholders -- -- -- -- --
Net loss for the year ended December
31, 2003, restated see note 15 -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT
DECEMBER 31,
2003 (RESTATED) -- -- -- -- 5,572,400 -- 753,200
----------- ----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for cash,
from January to December 2004
at $0.6027 per share -- -- -- -- 917,645 -- 553,105
Common stock issued in exchange for
real estate in Aug. and Sept.
2004 at $1.00 per share -- -- -- -- 650,000 -- 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 -- 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 -- 2,551,305
----------- ----------- ----------- ----------- ----------- ----------- -----------
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
Deficit Accumulated
Accumulated Other
during the (Restated) Comprehensive
Development Deferred Subscription Treasury Income (Restated)
Stage Compensation Receivable Stock (Loss) Total
----------- ----------- ----------- ----------- ----------- -----------
BALANCE - JULY 19, 2002
(INCEPTION) $ -- $ -- $ -- $ -- $ -- $ --
Issuance of initial founders' shares,
September 9, 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, restated see Note 15 (508,508) -- -- -- -- (508,508)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT
DECEMBER 31, 2002 (RESTATED) (508,508) -- -- -- -- (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, restated see note 15 (203,659) -- -- (203,659)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT
DECEMBER 31,
2003 (RESTATED) (712,167) -- (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 -- (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 (74,240) (74,240)
Net loss for the year ended
December 31, 2004 (672,219) -- -- (672,219)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT
DECEMBER 31, 2004 (1,384,386) (545,000) (88,580) 533,339
----------- ----------- ----------- ----------- ----------- -----------
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
Preferred Stock A Preferred Stock B Common Stock
------------------------ ------------------------ -------------------------- (Restated)
Par Value Par Value Par Value Additional
Preferred $.001 Preferred $.001 Common $.001 Paid-In
Shares $ Amount Shares $ Amount Shares $ Amount Capital
----------- ----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for cash,
from January to December 2005 at
$1.2264 per share average for year 745,655 - 914,507
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 - 80,800
Common stock issued for services
rendered, in Sept., Oct. and
November 2005, at $1.00 per share 53,500 - 53,500
Common stock issued for payment
of debts on March 11, 2005 at
$1.00 per share 1,087 - 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 -- 3,601,199
----------- ----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for cash,
from January to December 2006 at
$1.0088 per share average for year 2,786,286 - 2,810,877
Stock subscriptions received, net - - -
Reclass deferred compensation due
adoption SFAS 123r (436,000)
Amortization of deferred compensation - - 109,000
Common stock issued for services
rendered, on September 22, 2006,
at $1.044 per share 14,123 - 14,746
Common stock issued in exchange
for investment in real estate in
September 2006 at $2.00 per share 22,500 - 45,000
Effect of reverse merger September 23,
2006 72,241 48,761 (169,444)
Common stock issued for conversion
of debt on September 23, 2005 at
$0.045 per share 2,681,837 2,682 118,000
Common stock issued for services
rendered, on September 23, 2006,
at $2.00 per share 25,000 25 49,975
Common stock issued for merger with
Mobilestream Inc on December 31,
2006, at $0.255 per share 11,145,255 11,145 2,842,136
Cancellation of shares for merger
with Mobilestream Inc (37,500,000) (37,500) 37,500
Preferred convertible stock issued
for merger with Mobilestream.
2 for 1 convertible into common,
on December 31, 2006 35,236,188 $ 35,236 468,138
Net loss for the year ended
December 31, 2006 -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 2006 35,236,188 $ 35,236 -- $ -- 25,113,329 $ 25,113 $ 9,491,127
=========== =========== =========== =========== =========== =========== ===========
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
Deficit Accumulated
Accumulated Other
during the (Restated) Comprehensive
Development Deferred Subscription Treasury Income (Restated)
Stage Compensation Receivable Stock (Loss) 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 - - 10,398 10,398
Amortization of deferred compensation - 109,000 - 109,000
Net loss for the year ended
December 31, 2005 (1,291,169) -- -- (1,291,169)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 2005 (2,675,555) (436,000) (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 436,000 --
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 Inc on December 31,
2006, at $0.255 per share (10,498) 2,842,783
Cancellation of shares for merger
with Mobilestream 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) -- -- -- -- (4,246,058)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 2006 $(6,932,111) $ -- $ (660,693) $ -- $ -- $ 1,958,672
=========== =========== =========== =========== =========== ===========
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
Preferred Stock A Preferred Stock B Common Stock
------------------------ ------------------------ -------------------------- (Restated)
Par Value Par Value Par Value Additional
Preferred $.001 Preferred $.001 Common $.001 Paid-In
Shares $ Amount Shares $ Amount Shares $ Amount Capital
----------- ----------- ----------- ----------- ----------- ----------- -----------
Common stock shares issued for cash:
Common stock issued for cash in
March 2007, at $0.30 per share 17,500 17 5,233
Common stock issued for cash from
April to June 30, 2007, at $0.32 per
share, regulation S offering 499,564 500 157,711
Common stock issued for cash on
October 25, 2007, at $2.00 per share 2,500 3 4,997
Common stock issued for cash on
December 20, 2007, at $1.00 per share 1,000,000 1,000 999,000
Common stock issued for Stock to
be issued (liability) on March 7,
2007, at $1.0777 per share 186,822 187 201,156
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 5,000 5 4,995
Common stock issued for services
rendered, on March 19, 2007, at
$0.50 per share 20,000 20 9,980
Common stock issued for services
rendered, on March 20, 2007, at
$0.50 per share 11,000 11 10,989
Common stock issued for services
rendered, on April 20, 2007, at
$1.38 per share 250,000 250 344,750
Common stock issued for services
rendered, on May 30, 2007, at
$1.05 per share 3,417 3 3,301
Common stock issued for services
rendered, on June 1, 2007, at
$1.36 per share 194,500 195 264,325
Common stock issued for services
rendered, on July 9, 2007, at
$1.00 per share 4,700 5 4,695
Common stock issued for services
rendered, on July 18, 2007, at
$0.80 per share 37,500 37 29,963
Common stock issued for services
rendered, on August 1, 2007, at
$4.43 per share 100,000 100 442,900
Common stock issued for services
rendered, on August 19, 2007, at
$4.50 per share 250,000 250 1,124,750
Common stock issued for services
rendered, on August 30, 2007, at
$2.27 per share 3,745 4 8,496
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
Deficit Accumulated
Accumulated Other
during the (Restated) Comprehensive
Development Deferred Subscription Treasury Income (Restated)
Stage Compensation Receivable Stock (Loss) 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
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 A Preferred Stock B Common Stock
----------------------- ------------------------ -------------------------- (Restated)
Par Value Par Value Par Value Additional
Preferred $.001 Preferred $.001 Common $.001 Paid-In
Shares $ Amount Shares $ Amount Shares $ Amount Capital
----------- ----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for services
rendered, on August 30, 2007, at
$0.69 per share 30,041 30 20,698
Common stock issued for services
rendered, on August 31, 2007, at
$3.41 per share 1,000 1 3,409
Common stock issued for services
rendered, on August 31, 2007, at
$3.41 per share 10,000 10 34,090
Common stock issued for services
rendered, on October 1, 2007, at
$2.60 per share 300,000 300 779,700
Common stock issued for services
rendered, on October 9, 2007, at
$2.69 per share 47,579 48 127,702
Common stock issued for services
rendered, on October 22 2007, at
$1.86 per share 50,000 50 92,950
Common stock issued for services
rendered, on October 29 2007, at
$2.25 per share 150,000 150 337,350
Common stock issued for services
rendered, on November 9, 2007, at
$3.23 per share 130,000 130 419,770
Common stock issued for services
rendered, on November 19, 2007, at
$3.50 per share 50,000 50 174,950
Common stock issued for services
rendered, on November 26, 2007, at
$3.01 per share 30,000 30 90,270
Common stock issued for services
rendered, on December 3, 2007, at
$2.00 per share 45,094 45 89,955
Common stock issued for services
rendered, on December 4, 2007, at
$3.15 per share 50,000 50 157,450
Common stock issued for services
rendered, on December 11, 2007, at
$2.50 per share 200,000 200 499,800
Common stock issued for services
rendered, on December 17, 2007, at
$1.446 per share 400,000 400 578,051
Common stock issued for services
rendered, on December 17, 2007, at
$2.50 per share 100,000 100 249,900
Common stock issued for services
rendered, on December 18, 2007, at
$3.02 per share 50,000 50 150,950
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
Deficit Accumulated
Accumulated Other
during the (Restated) Comprehensive
Development Deferred Subscription Treasury Income (Restated)
Stage Compensation Receivable Stock (Loss) Total
----------- ----------- ----------- ----------- ----------- -----------
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
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
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
Preferred Stock A Preferred Stock B Common Stock
------------------------- -------------------------- ------------------------ (Restated)
Par Value Par Value Par Value Additional
Preferred $.001 Preferred $.001 Common $.001 Paid-In
Shares $ Amount Shares $ Amount Shares $ Amount Capital
----------- ----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for services
rendered, on December 21, 2007, at
$3.00 per share 40,000 40 119,960
Common stock issued for services
rendered, on December 27, 2007, at
$3.10 per share 50,000 50 154,950
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 to be provided (see note #21):
Common stock issued for services to be provided, Service valued on August 31,
2007, at $3.41 per share
recorded as prepaid 350,000 350 1,193,150
Common stock issued for services to
be provided, service valued on
September 14, 2007, at $2.29 per
share recorded as prepaid 150,000 150 343,350
Common stock issued for services to be provided, valued on October 02, 2007, at
$2.47 per share recorded
as prepaid 350,000 350 864,150
Common stock issued for services to
be provided, service valued on
October 02, 2007, at $2.40 per
share recorded as prepaid 75,000 75 179,926
Treasury Stock, purchase at $.70 share (94,961)
Preferred Shares B issued for
settlement of services 1,000 1 399,999
Net loss for the period ended
December 31, 2007 - - - - - - -
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 2007 35,236,188 $ 35,236 1,000 $ 1 30,263,330 $ 30,358 $20,279,849
=========== =========== =========== =========== =========== =========== ===========
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
Deficit Accumulated
Accumulated Other
during the (Restated) Comprehensive
Development Deferred Subscription Treasury Income (Restated)
Stage Compensation Receivable Stock (Loss) Total
----------- ----------- ----------- ----------- ----------- -----------
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 to be provided (see note #21)
Common stock issued for services to be provided, Service valued on August 31,
2007, at $3.41 per share
recorded as prepaid 1,193,500
Common stock issued for services to
be provided, service valued on
September 14, 2007, at $2.29 per
share recorded as prepaid 343,500
Common stock issued for services to be provided, valued on October 02, 2007, at
$2.47 per share recorded
as prepaid 864,500
Common stock issued for services to
be provided, service valued on
October 02, 2007, at $2.40 per
share recorded as prepaid 180,001
Treasury Stock, purchase at $.70 share (66,473) (66,473)
Preferred Shares B issued for
settlement of services 400,000
Net loss for the period ended
December 31, 2007 (10,486,886) - - - - (10,486,886)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 2007 $(17,418,997) $ - $ (185,693) $ (66,473) $ - $ 2,674,281
============ =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-15
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 by subjecting them to
variable frequency microwave radiation ("Technology") at specifically selected
frequencies for a time sufficient to at least partially decompose the materials,
converting the materials into industrial products and chemicals and easily
disposable waste material.
The Company's business goals for exploitation of the Technology are as follows:
1) The design, manufacture and sale of machinery and equipment units,
embodying the technology;
2) The licensing of third parties to use that technology.
3) The construction of plants to use 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
"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.
In a similar decomposition process, the Company has designed machinery and
equipment which will decompose "fluff", which is the non-metallic portions of
scrap motor vehicles, primarily, the interiors. It appears that although scrap
vehicles are specifically taken without the tires due to environmental rules,
they are often removed but then placed ("hidden") in the trunk of the vehicle
and crushed into it, thus "disposing" of the tires. The Company's machinery
will, of course, permit any tires to be decomposed together with the other
materials.
The Company is currently offering three models for tire decomposition: 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.
F-16
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 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 bringing 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 for the benefit
of the holders of Mobilestream's common stock; (b) the issuance by the
Company for the benefit of the holders of Mobilestream's 2006 series of
convertible preferred stock 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. 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 assets and liabilities of Mobilestream equal
approximately $2.0 million. The assets consisted primarily of cash of
approximately $1,678,000 and fixed assets of $149,000 offset by
liabilities of approximately $91,000. Mobilestream owned 37,500,000 shares
of Carbon Recovery Corporation whose assets were acquired by the Company
(see paragraph below); these shares were cancelled upon the acquisition of
Mobilestream by the Company.
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) Global Resource Corporation warrants.
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-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
(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) Limiting 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-18
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-19
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.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs consist of all activities associated with
the development and enhancement of products using the Company's microwave
technology. R & D costs consist primarily of contract engineer labor and
salaries of our in-house engineers, lab supplies used in testing and
equipment expenses use to test and develop our technology. Research and
development costs are charged to R & D when incurred. The amounts charged
in calendar 2007 and 2006 were $222,530 and $136,887 respectively.
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. (also see Note 18 for
restatements of 12/31/06 financials)
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 accounted 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.
For non-employees, stock grants and warrants/options issued for services
are valued at either the invoiced/contracted value of services provided or
to be provided or the fair value of stock at the date the agreement is
reached, which is every more readily determinable.
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 (CONTINUED)
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 antidilutive.
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
============ ============
The weighted-average common stock equivalent for Preferred Stock A is
17,618,094. The weighted-average common stock equivalents for the
outstanding warrants is 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.
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
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)
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. The adoption of SFAS No. 160 is not expected to have a
material impact on the Company's financial position, results of
operations, or cash flows.
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.
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.
F-22
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, which was $11,776 below net book value.
NOTE 4 - LOAN PAYABLE - OFFICE OF COMPANY
On November 28, 2007 the Chief Financial Officer, Jeff 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-23
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 $ 5,225,000
loss carryforwards
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-24
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 in cash.
Included in these totals are 517,064 shares sold at a discount to market
in a private placement to foreign investors; after discounts the company
received $163,502. 1 million shares were sold at $1 per share in a
private placement (see "POOF" note below and "Commitments and
Contingencies" note 10 below).
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)
Common stock issued for services to non-employees:
The Company issued 1,311,726 shares of common stock to non-employees for
services rendered during the year, these services were value at
$2,956,765. The more readily determinable value of services was
determined to be the stock market price at the date the stock was issued.
The Company issued 277,943 shares of common stock to non-employees for
services rendered during the year, these services were value at $326,257.
The more readily determinable value of services was determined to be the
stated invoice or contract price for services rendered.
F-25
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 9 - STOCKHOLDERS' EQUITY (CONTINUED)
The Company issued 925,000 shares of common stock during September and
October 2007 for services to be performed by non-employees and the
accounting basis for recording the shares as part of prepaid expenses was
the fair value of the stock on the commitment dates in the amount of
$2,581,500 as that was deemed to be the more readily determinable value.
Per the agreements, the services are being provided over a twelve month
period. The fair value of the stock of $2,581,500 is being amortized over
a 12 month period; the unamortized amount as of December 31, 2007 is
$1,808,042. Through December 31, 2007 an amount of $773,500 of
compensation expense was recorded related to the amortization of the
actual services performed during 2007.
The total costs of Services provide by non-employees discussed above was
$4,056,480 and were expensed to the financial statements and were
classified as general consulting fees, investment banking fees or G & A
expenses.
Common stock issued for services to employees:
The Company issued common stock under the "2007 Employee Compensation and
Stock Option Plan". A total of 1,144,500 shares were issued during the
year, and were valued at $3,050,520. This $3.1 million was expensed as
salaries in G & A in 2007. The value of services was determined to be the
stock market price at the date the stock was issued. 800,000 shares,
valued at $2,250,000 were issued to the Company's Chairman and
CEO/President and 200,000 shares, valued at $579,000 were issued to the
Company's CFO during 2007.
The Company issued 900,000 shares to an escrow account for future
transaction with Professional Offshore Opportunity Fund, Ltd, "POOF".
(See "Commitments and Contingencies" note 10 below). The release of these
shares is dependant on the 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
Preferred Stock A has rights to convert one share of preferred into 1/2
of 1 shares 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. In the event of the liquidation, dissolution or winding-up
of the Company, the holders of the 2006 Series shall be entitled to
receive a preferred distribution of $.001 per share, before any
distribution to junior series of Preferred Stock or the Common Stock.
F-26
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 9 - STOCKHOLDERS' EQUITY (CONTINUED)
PREFERRED STOCK (CONTINUED)
The Company issued 1,000 shares of new convertible preferred (Preferred
Stock B) 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 B has no other rights attached other than conversion.
SUBSCRIPTION RECEIVABLE
In 2006 the Company contracted to sell some of its 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.
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 Class D and Class E warrants can only be exercised in
tandem with each other. 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. These warrants were issued as part of the reverse merger with
Carbon Recovery, outstanding warrants of Carbon Recovery were exchanged
for outstanding warrants of Global Resource Corporation.
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.
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 an additional 627,500 warrants in 2007, (See
"Commitments and Contingencies" note 10 below "POOF"). 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.
No warrants issued in 2006 and 2007 were issued for services rendered,
and all warrants issued were associated solely in conjunction with the
sale and issuance of common stock, consequently no expenses were recorded
to the financial statements that would impact operating loss.
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 1,523,540 $ 1.68
Exercised -- --
Forfeited 23,500,000 $ 4.75
---------- ----------
Outstanding at December 31, 2007 11,941,947 $ 3.38
---------- ----------
Exercisable at December 31, 2007 11,941,947 $ 3.38
---------- ----------
The fair value of each warrant granted during 2007 is estimated on the
date grant using the Black-Scholes option-pricing model with the
following assumptions:
2007 2006
----------- ------
Dividend yield -- --
Expected volatility 146 - 149% 240%
Risk-free interest rate 3.26 -3.49% 4.97%
Expected life 1- 1.5 yrs 1 yrs
In March 2005 the Company issued 200,000 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-28
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 2005 the Company granted the President 545,000 shares of common stock
as deferred compensation, the market value of the stock on the date of
agreement was $1 per share and was used to determined fair value of this
transaction. The common stock vested to the President over a five-year
period commencing January 1, 2005, with 27,250 shares vesting quarterly,
109,000 shares vesting annually and is expensed in the financial
statements at a rate of $27,250 a quarter, annually $109,000 per year,
until December 31, 2009. As of December 31, 2007, there was $218,000
unrecognized compensation costs related to non-vested shares. The total
fair value of shares vested during the years ended December 31, 2005 to
2007, was $327,000.
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 rescind agreement settled all outstanding claims for
$25,000, which was expensed in the third quarter 2007.
The Company set up a prepaid account 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
F-29
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 10 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
issuance of 2,000,000 shares of Warwick's common stock, together with two
warrants; one to purchase 1.000,000 additional shares of 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 a
$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-30
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.
In order to clarify the ownership and licensure of certain intellectual
property licensed to Carbon Recovery, on September 22, 2006 Mobilestream
Oil, Inc., Mr. Pringle and his wife, Lois Augustine Pringle entered into a
combined technology license agreement (the "Combined Technology License
Agreement"). This Agreement confirmed (i) Mobilestream as the sole owner
of the licensed intellectual property, and (ii) the exclusive license of
the intellectual property by Mobilestream to Carbon Recovery. In the same
agreement, Carbon Recovery assigned all of its interest in the
intellectual property license to the Company, and the Company agreed to
pay Mobilestream royalty payments in perpetuity that varied with the use
made of the intellectual property and the revenues received by the
Company. The Company's royalty obligations under the Combined Technology
License Agreement was terminated by virtue of the merger of the interests
of the licensor and the licensee when the Company acquired substantially
all of the assets of Mobilestream.
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 Resources
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
Resources 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-31
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. The Company did not
have any investments that are considered marketable securities as of
December 31, 2007 and 2006
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 ("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
F-32
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 14 - SUBSEQUENT EVENTS (CONTINUED)
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.
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 and its
financial statements for the year ended December 31, 2003. In 2002 the
Company had a transaction in which it reflected the issuance of 150,000
shares of preferred stock, par value $10, in exchange for an intangible
asset valued at $1.5 million dollars. The intangible asset was
subsequently deemed impaired and accordingly was expensed in 2002. The
financial statements have been restated as the transaction was
subsequently rescinded, due to the fact that the preferred stock shares
were not formally issued because the Company did not have authorization to
issue preferred shares, therefore the transaction was voidable and no
expense should have been recorded. In 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, valued at $727,500. The
Company has restated its financial statements to reflect the common stock
as re-issuance of founders shares and, as such, no expense should have
been initially associated with the issuance of the founders shares. These
transactions resulted in a decrease in net loss applicable to accumulated
deficits of $727,500 and $1,500,000 for the year ended December 31, 2003
and December 31, 2002, respectively. Annual net loss of $203,659 and
$508,508 as restated, and a decrease in the accumulated deficits during
the development stage to $712,617 and $508,508, respectively for years
2003 & 2002.
The impact of these adjustments on the Company's financial results as
originally reported are summarized below:
Year Ended Year Ended
December 31, 2003 December 31, 2002
-------------------------------- -------------------------------
As Reported As Restated As Reported As Restated
----------- ----------- ----------- -----------
Accumulated deficit $(2,939,667) $ (712,167) $(2,008,508) $ (508,508)
Net Loss from Operations $ (931,159) $ (203,659) $(2,008,508) $ (508,508)
Basic and diluted Loss per share $ (0.19) $ (0.04) $ (0.42) $ (0.11)
Net Assets $ 26,693 $ 26,693 $ (15,208) $ 866,239
F-33
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 16 - SUPPLEMENTAL DISCLOSURE NON-CASH INVESTING AND FINANCING ACTIVITIES
FROM CASH FLOW STATEMENTS
July 19, 2002
(Inception)
12/31/2007 12/31/2006 to 12/31/2007
---------- ---------- -------------
Common stock issued for land $ 0 $ 45,000 $125,800
Common stock issued as charitable $ 0 $ 0 $ 50,000
contribution
Common stock issued to convert accounts $ 0 $ 0 $ 1,807
payable to equity
Preferred stock issued for services $400,000 $ 0 $400,000
Conversion of debenture into common stock $ 0 $120,683 $123,683
NOTE 17 - PREPAID SERVICES
During September and October 2007 the Company issued an aggregate 925,000
shares of stock to non-employees for services to be performed. The
agreements were valued at the fair value of the stock at the commitment
date in the amount of $2,581,500 as that was deemed to be the more readily
determinable value. Per the agreements the services are being provided
over one year. The fair value of the stock of $2,581,5000 is being
amortized over a 12 month period, the unamortized amount as of December
31, 2007 is $1,808,042. Through December 31,2007 an amount of $773,500 of
compensation expense was recorded related to the amortization of prepaid
services.
F-34
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 18 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 2007 AND 2006
The Company restated its financial statements for years ended December 31, 2007
and 2006. The restated financial results reflect the following errors:
SUMMARY OF CHANGES TO THE BALANCE SHEET ORIGINALLY SUBMITTED IN 10K FOR
DECEMBER 31, 2007, 2006 AND 2005.
1. Inclusion of the audit 2006 Balance Sheet previously not included.
2. Reclassified contra prepaid equity from the Stockholders' Equity
section of the balance sheet, in the amount of $1,808,042 to current
assets section as prepaid services (also see new note #? Prepaid
above). The total current assets balance was changed to $2,588,467
from $780,425 and the total assets were changed to $3,036,462 from
$1,228,420. Stockholders' Equity was revised to $2,674,281 from
$866,239.
3. Elimination of Deferred Compensation in the amount of $218,000 from
the stockholders equity section to comply with SFAS 123R, additional
paid capital was reduced by the $218,000. This change had a neutral
impact on stockholders' equity.
SUMMARY OF CHANGES TO THE STATEMENT OF OPERATIONS ORIGINALLY SUBMITTED IN
10K FOR DECEMBER 31, 2007.
4. There was no change to the net operating loss for the years 2007 and
2006, what was changed was additional classification of expenses, R&D
expense was separated from G&A expenses to be compliance with FAS 2.
Depreciation expense was reclassified back into G&A and consulting fee
was combined with professional fees.
a) For year ended December 31, 2007, consulting fees combines with
professional fees in the amended statements in amount of $117,881
for new total of $690,292 for Consulting, legal, other.
b) For year ended December 31, 2007, R&D cost in the amount of
$222,530 was reclassified from G&A and shown as a new separate
line. Depreciation expense in the amount of $93,864 was
reclassified back to G&A, for a new total of $4,670,749.
c) For year ended December 31, 2006, consulting fees combines with
professional fees in the amended statements in amount of
$313,870for new total of $682,085 for consulting, legal, other
d) For year ended December 31, 2006, R&D cost in the amount of
$136,887 was reclassified from G&A and shown as a new separate
line. Depreciation expense in the amount of $58,154 reclassified
back to G&A for a new total of $2,495,840
F-35
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 18 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 2007 AND 2006 (CONTINUED)
SUMMARY OF CHANGES TO THE STATEMENT OF STOCKHOLDERS' EQUITY STATEMENT
ORIGINALLY SUBMITTED IN 10K FOR DECEMBER 31, 2007, 2006 AND 2005.
5. For year ended December 31, 2006 reclassified the beginning
balance from Deferred Compensation, $436,000 and debit APIC and
eliminate deferred comp.
6. Record the deferred compensation expense for the years 2006 and
2007 in the amount of $109,000 per year and crediting APIC in
corresponding years.
7. For the year ended December 31, 2005, eliminate the discount on
common stock account 37,500,000. No impact on stockholders'
equity in 2007 and 2006. The changes for items 5 to 7 above had
neutral impact on the total balance for stockholders' equity for
2006 - no change - still $1,958,672. The changes for items 2 and
3 above changed the total balance of stockholders' equity for
2007 from $866,239 to $2,674,281.
8. Prior submissions of the stockholders' equity statement had
summaries stock equity transaction information. Detail stock
equity information provide in the stockholders' equity statement
to comply with SFAS 7, stock transactions include date stock
issued, and share price for each stock issuance.
SUMMARY OF CHANGES TO THE CASH FLOW STATEMENT ORIGINALLY SUBMITTED IN 10K
FOR DECEMBER 31, 2007 AND 2006.
9. The following account balances were reclassified in the December
31, 2006 cash flow statement in order to comply with SFAS 141,
reporting merger with common control for years ended December 31,
2006.
12/31/06
As Previously 12/31/06
ACCOUNT BALANCES RESTATED IN THE CASH FLOW REPORTED ADJUSTMENT RESTATED
------------------------------------------ -------- ---------- --------
Common stock issued for services $ 64,746 $ 960,000 a $ 1,024,746
----------- ----------- -----------
Net cash used in operating activities (4,063,997) 960,000 (3,103,997)
----------- ----------- -----------
Purchase of Fixed Assets (503,902) 45,000 b (458,902)
----------- ----------- -----------
Net cash provided by (used in ) investing activities (638,902) 45,000 (593,902)
----------- ----------- -----------
Issuance of common stock for cash 2,810,877 1,871,575 c 4,682,452
Issuance of equity securities and paid-in capital from 2,876,575 (2,876,575) d --
merger and other
Proceeds from stock subscription receivable (582,511) 1,167,511 e 585,000
Increase in stock subscription receivable -- (1,167,511) e (1,167,511)
----------- ----------- -----------
Net cash provided by financing activities 5,398,629 (1,005,000) 4,393,629
----------- ----------- -----------
F-36
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 18 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 2007 AND 2006 (CONTINUED)
a) We have added the omitted 960,000 shares of Mobilstream issued of
services for non-employee valued at $1 per share, which was
previously included as part of "Issuance of equity securities and
paid-in capital from merger and other".
b) Originally included $45,000 for purchase of land for cash; the
land was purchased via issuance of 22,500 shares of Mobilstream
stock.
c) We omitted sale of Mobilstream stock for cash; this was
previously included as part of "Issuance of equity securities and
paid-in capital from merger and other."
d) "Issuance of equity securities and paid-in capital from merger
and other" is being eliminated in the restated cash flow and
proper accounts now reflect the equity transactions that occurred
in 2006.
e) We originally netted the proceeds and subscription receivable;
correction provides the detail of proceeds received and the new
issuance of subscription receivable.
10. Revised balances from the following accounts for December 31, 2007
12/31/07
As Previously 12/31/07
ACCOUNT BALANCES RESTATED IN THE CASH FLOW REPORTED ADJUSTMENT RESTATED
------------------------------------------ -------- ---------- --------
Common stock issued for services $ 7,107,000 $ 122 f $ 7,107,122
Forfeit loss on real estate -- 100,000 g 100,000
(Increase) decrease in deposits 70,140 (70,140) g --
----------- ----------- -----------
Net cash used in operating activities (2,689,565) 100,122 (2,659,584)
----------- ----------- -----------
Purchase of Investment -- (29,860) g (29,860)
----------- ----------- -----------
Net cash provided by (used in ) investing activities 10,167 (29,860) (19,693)
----------- ----------- -----------
Issuance of equity securities and paid-in capital from 201,464 (201,464) h --
merger and other
Liability for stock to be issued (201,343) 201,343 i --
----------- ----------- -----------
Net cash provided by financing activities 1,689,821 (121) 1,689,700
----------- ----------- -----------
a) Correction of $122 to common stock issued for services
b) Reclassify transaction in which forfeit rights on real estate,
previously accounted for as an increase to deposits.
c) Elimination of the incorrect use of Issuance of equity securities
and paid-in capital from merger and other.
d) The balance of stock to be issued account was changed to zero to
correctly reflect issuance of stock previously incorrectly stated
in cash flow incorrectly.
F-37
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 18 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 2007 AND 2006(CONTINUED)
Revisions to the original footnotes were made to include and add
additional information contained in the financial statements. The
following footnotes note were revised: 2, 9, 10, 11, 13, 15, 17, and 18.
The impact of these adjustments on the Company's financial results as
originally reported are summarized below:
Year Ended Year Ended
December 31, 2007 December 31, 2006
--------------------------------- ----------------------------------
As Reported As Restated As Reported As Restated
------------ ------------ ------------ ------------
Accumulated deficit $(17,418,997) $(17,418,997) $ (6,932,111) $ (6,932,111)
Net Loss from Operations $(10,486,886) $(10,486,886) $ (4,246,058) $ (4,246,058)
Basic and diluted Loss per share $ (0.40) $ (0.40) $ (0.09) $ (0.09)
Net Assets $ 866,239 $ 2,674,281 $ 1,958,672 $ 1,958,672
F-38
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEET
SEPTEMBER 30, 2008
(UNAUDITED) (AUDITED)
ASSETS PERIOD ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
2008 2007
------------ ------------
(Restated)
CURRENT ASSETS
Cash and Cash equivalents $ 3,809,491 $ 780,425
Short-term Investments 287,933 --
Prepaid Services -- 1,808,042
Inventory -- --
------------ ------------
TOTAL CURRENT ASSETS 4,097,424 2,588,467
------------ ------------
Fixed Assets, Net of depreciation 1,119,785 373,135
------------ ------------
OTHER ASSETS
Deposits 73,639 74,860
Long-term Investments 2,672,100
------------ ------------
TOTAL OTHER ASSETS 2,745,739 74,860
TOTAL ASSETS $ 7,962,948 $ 3,036,462
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 66,154 $ 119,588
Current portion - loan payable - equipment 41,619 40,964
Current portion - lease - equipment 9,154
Loan Payable - to officer of company -- 150,000
Stock to be issued 747,976 --
------------ ------------
TOTAL CURRENT LIABILITIES 864,903 310,552
------------ ------------
LONG-TERM LIABILITIES
Lease - equipment, net of current portion 18,167
Loan payable - equipment, net of current portion 20,696 51,629
------------ ------------
TOTAL LIABILITIES 903,766 362,181
------------ ------------
STOCKHOLDERS' EQUITY
Preferred Stock A - $.001 par value 100,000,000 shares authorized, 5,000
issued and outstanding at September 30, 2008,
35,237,188 issued and outstanding at Dec. 31, 2007 5 35,236
Preferred Stock B - $.001 par value, no shares authorized and
issued as of September 30, 2008 and 1,000 shares authorized
and issued at Dec. 31, 2007 1
Common stock, $.001 par value; 200,000,000 shares authorized,
67,523,167 shares issued and 60,828,228 outstanding at
September 30, 2008, 30,358,291 Shares issued and
outstanding at Dec. 31, 2007 67,523 30,358
Subscription receivable -- (185,693)
Additional paid-in capital 48,133,661 20,279,849
Accumulated other comprehensive income (loss) (961,327) --
Deficit accumulated in the development stage (38,464,207) (17,418,997)
------------ ------------
8,775,655 2,740,754
Treasury Stock (1,716,473) (66,473)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 7,059,182 2,674,281
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,962,948 $ 3,036,462
============ ============
The accompanying notes are an integral part of these
financial statements.
F-39
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Operations
(With Cumulative Totals Since Inception)
(Unaudited)
Three Months Ended Nine Months Ended (Restated)
------------------------------ ------------------------------ July 19, 2002
(Restated) (Restated) (Restated) (Restated) (Inception)
September 30, September 30, September 30, September 30, To
2008 2007 2008 2007 Sept. 30, 2008
------------ ------------ ------------ ------------ ------------
REVENUES $ -- $ -- $ -- $ -- $ --
COST OF SALES -- -- -- -- --
------------ ------------ ------------ ------------ ------------
GROSS PROFIT -- -- -- -- --
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES
Professional fees - Consulting,
legal, other 293,879 205,486 12,035,607 558,581 14,718,053
Investment Banking Fees and
investor relations 3,202,980 170,683 5,762,757 298,437 11,655,015
Other general and administrative
expenses 576,271 2,362,322 2,691,403 3,194,165 11,021,475
Research and Development 177,172 38,461 612,165 135,774 1,021,582
------------ ------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 4,250,302 2,776,952 21,101,932 4,186,957 38,416,125
------------ ------------ ------------ ------------ ------------
LOSS BEFORE OTHER INCOME (EXPENSE) (4,250,302) (2,776,952) (21,101,932) (4,186,957) (38,416,125)
------------ ------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Loss on deposits, and other (100,000) (172,712)
Net realized gain / (loss) on
investments (42,038) -- (43,232) -- (43,232)
Interest expense (5,031) (3,008) (14,424) (19,373) (52,915)
Interest income 70,302 7,262 114,378 31,776 220,777
------------ ------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) 23,233 4,254 56,722 (87,597) (48,082)
------------ ------------ ------------ ------------ ------------
NET LOSS BEFORE PROVISION FOR INCOME TAXES (4,227,069) (2,772,698) (21,045,210) (4,274,554) (38,464,207)
PROVISION FOR INCOME TAXES -- -- --
------------ ------------ ------------ ------------ ------------
NET LOSS APPLICABLE TO COMMON SHARES $ (4,227,069) $ (2,772,698) $(21,045,210) $ (4,274,554) $(38,464,207)
============ ============ ============ ============ ============
BASIC AND DILUTED LOSS
PER SHARE $ (0.08) $ (0.11) $ (0.50) $ (0.17)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 53,273,853 26,145,531 42,221,919 25,634,118
The accompanying notes are an integral part of these financial statements.
F-40
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Cash Flows
(With Cumulative Totals Since Inception)
(Unaudited)
NINE MONTHS ENDED JULY 19, 2002
------------------------------ (INCEPTION)
SEPTEMBER 30, SEPTEMBER 30, TO
2008 2007 JUNE 30, 2008
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES (Restated) (Restated) (Restated)
Net loss $(21,045,210) $ (4,274,554) $(38,464,207)
------------ ------------ ------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH (USED IN)
OPERATING ACTIVITIES:
Depreciation 70,104 72,222 253,146
Preferred stock issued for services 0 400,000 400,000
Common stock issued for services 15,024,264 26,000 22,914,974
Amortization of common stock issued for services from 2007 1,808,042 1,797,522 2,581,500
Common stock Warrants issued for services 742,993 -- 742,993
Amortization of deferred compensation 81,750 81,750 408,750
Allowance reserve for note payable -- -- 650,000
Loss on sale of fixed asset -- 2,141 11,775
Loss on real estate -- -- 212,935
Common stock issued as charitable contribution -- -- 50,000
CHANGES IN ASSETS AND LIABILITIES
(Increase) in Inventory -- -- --
(Increase) decrease in deposits 1,221 70,140 1,221
(Increase) in notes receivable (650,000)
(Increase) in prepaid expenses -- (250,000) --
(Decrease) in accounts payable (53,434) 27,911 67,467
------------ ------------ ------------
TOTAL ADJUSTMENTS 17,674,940 2,227,686 27,644,761
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (3,370,270) (2,046,868) (10,819,446)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets - Equipment & machinery (38,504) (9,033) (595,655)
Purchase of fixed assets - Construction in progress protype machine (745,818) -- (745,818)
Proceeds from sale of Fixed assets -- 27,000 34,200
Proceeds from sale of real estate -- -- 617,864
Purchase of Investment funds (4,586,333) -- (4,761,193)
Proceeds from sale of Investment funds 664,973 -- 664,973
Investment in real estate, net -- -- (80,800)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (4,705,682) 17,967 (4,866,429)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for cash 12,137,256 163,461 20,537,176
Liability for stock to be issued 747,976 -- 747,976
Proceeds from stock subscription receivable 1,060,000
(Increase) decrease in stock subscription receivable 55,175 445,000 (1,190,517)
Proceeds from Debenture financing activity
Proceeds from officer's loan -- -- 188,550
Repayment of officer's loan (150,000) -- (188,550)
Purchase of Treasury Stock (1,650,000) (66,473) (1,716,473)
Proceeds from loan payable - equipment -- -- 175,133
Repayment of loan payable - vehicle (35,389) (27,575) (117,929)
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 11,105,018 514,413 19,495,366
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,029,066 (1,514,488) 3,809,491
CASH AND CASH EQUIVALENTS
- BEGINNING OF PERIOD 780,425 1,770,002 --
------------ ------------ ------------
CASH AND CASH EQUIVALENTS
- END OF PERIOD $ 3,809,491 $ 255,514 $ 3,809,491
============ ============ ============
SUPPLEMENTAL DISCLOSURES:
CASH ACTIVITIES:
INTEREST PAID $ 9,793 $ 11,661 $ 50,670
INCOME TAX PAID $ -- $ -- $ --
NON-CASH ACTIVITIES SEE FOOTNOTE 16
The accompanying notes are an integral part of these financial statements.
F-41
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Preferred Stock A Preferred Stock B Common Stock
------------------------ ------------------------ ------------------------ (Restated)
Par Value Par Value Par Value Additional
Preferred $.001 Preferred $.001 Common $.001 Paid-In
Shares $ Amount Shares $ Amount Shares $ Amount Capital
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE - JULY 19, 2002
(INCEPTION) -- $ -- $ -- -- -- $ -- $ --
Issuance of initial founders' shares,
September 9, 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 -- 472,000
Common stock issued for cash,
November 2002 at $0.50 per share -- -- -- -- 29,000 -- 14,500
Common stock issued for services
rendered, in November and
December 2002, at $0.50 per share -- -- -- -- 13,600 -- 6,800
Net loss for the period July 19,
2002 (Inception) through December
31, 2002, restated see Note 19 -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT
DECEMBER 31, 2002 (RESTATED) -- -- -- -- 3,597,600 -- 493,300
----------- ----------- ----------- ----------- ----------- ----------- -----------
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 -- 259,900
Issuance of subscription receivable
from shareholders -- -- -- -- --
Net loss for the year ended December
31, 2003, restated see note 19 -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT
DECEMBER 31,
2003 (RESTATED) -- -- -- -- 5,572,400 -- 753,200
----------- ----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for cash,
from January to December 2004
at $0.6027 per share -- -- -- -- 917,645 -- 553,105
Common stock issued in exchange for
real estate in Aug. and Sept.
2004 at $1.00 per share -- -- -- -- 650,000 -- 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 -- 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 -- 2,551,305
----------- ----------- ----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these financial statements.
F-42
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Deficit Accumulated
Accumulated Other
during the (Restated) Comprehensive
Development Deferred Subscription Treasury Income (Restated)
Stage Compensation Receivable Stock (Loss) Total
----------- ----------- ----------- ----------- ----------- -----------
BALANCE - JULY 19, 2002
(INCEPTION) $ -- $ -- $ -- $ -- $ -- $ --
Issuance of initial founders' shares,
September 9, 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, restated see Note 19 (508,508) -- -- -- -- (508,508)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT
DECEMBER 31, 2002 (RESTATED) (508,508) -- -- -- -- (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, restated see note 19 (203,659) -- -- (203,659)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT
DECEMBER 31,
2003 (RESTATED) (712,167) -- (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 -- (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 (74,240) (74,240)
Net loss for the year ended
December 31, 2004 (672,219) -- -- (672,219)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT
DECEMBER 31, 2004 (1,384,386) (545,000) (88,580) 533,339
----------- ----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these financial statements.
F-43
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Preferred Stock A Preferred Stock B Common Stock
------------------------ ------------------------ -------------------------- (Restated)
Par Value Par Value Par Value Additional
Preferred $.001 Preferred $.001 Common $.001 Paid-In
Shares $ Amount Shares $ Amount Shares $ Amount Capital
----------- ----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for cash,
from January to December 2005 at
$1.2264 per share average for year 745,655 - 914,507
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 - 80,800
Common stock issued for services
rendered, in Sept., Oct. and
November 2005, at $1.00 per share 53,500 - 53,500
Common stock issued for payment
of debts on March 11, 2005 at
$1.00 per share 1,087 - 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 -- 3,601,199
----------- ----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for cash,
from January to December 2006 at
$1.0088 per share average for year 2,786,286 - 2,810,877
Stock subscriptions received, net - - -
Reclass deferred compensation due
adoption SFAS 123r (436,000)
Amortization of deferred compensation - - 109,000
Common stock issued for services
rendered, on September 22, 2006,
at $1.044 per share 14,123 - 14,746
Common stock issued in exchange
for investment in real estate in
September 2006 at $2.00 per share 22,500 - 45,000
Effect of reverse merger September 23,
2006 72,241 48,761 (169,444)
Common stock issued for conversion
of debt on September 23, 2005 at
$0.045 per share 2,681,837 2,682 118,000
Common stock issued for services
rendered, on September 23, 2006,
at $2.00 per share 25,000 25 49,975
Common stock issued for merger with
Mobilestream Inc on December 31,
2006, at $0.255 per share 11,145,255 11,145 2,842,136
Cancellation of shares for merger
with Mobilestream Inc (37,500,000) (37,500) 37,500
Preferred convertible stock issued
for merger with Mobilestream.
2 for 1 convertible into common,
on December 31, 2006 35,236,188 $ 35,236 468,138
Net loss for the year ended
December 31, 2006 -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 2006 35,236,188 $ 35,236 -- $ -- 25,113,329 $ 25,113 $ 9,491,127
=========== =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-44
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Deficit Accumulated
Accumulated Other
during the (Restated) Comprehensive
Development Deferred Subscription Treasury Income (Restated)
Stage Compensation Receivable Stock (Loss) 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 - - 10,398 10,398
Amortization of deferred compensation - 109,000 - 109,000
Net loss for the year ended
December 31, 2005 (1,291,169) -- -- (1,291,169)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 2005 (2,675,555) (436,000) (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 436,000 --
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 Inc on December 31,
2006, at $0.255 per share (10,498) 2,842,783
Cancellation of shares for merger
with Mobilestream 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) -- -- -- -- (4,246,058)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 2006 $(6,932,111) $ -- $ (660,693) $ -- $ -- $ 1,958,672
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-45
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Preferred Stock A Preferred Stock B Common Stock
------------------------ ------------------------ -------------------------- (Restated)
Par Value Par Value Par Value Additional
Preferred $.001 Preferred $.001 Common $.001 Paid-In
Shares $ Amount Shares $ Amount Shares $ Amount Capital
----------- ----------- ----------- ----------- ----------- ----------- -----------
Common stock shares issued for cash:
Common stock issued for cash in
March 2007, at $0.30 per share 17,500 17 5,233
Common stock issued for cash from
April to June 30, 2007, at $0.32 per
share, regulation S offering 499,564 500 157,711
Common stock issued for cash on
October 25, 2007, at $2.00 per share 2,500 3 4,997
Common stock issued for cash on
December 20, 2007, at $1.00 per share 1,000,000 1,000 999,000
Common stock issued for Stock to
be issued (liability) on March 7,
2007, at $1.0777 per share 186,822 187 201,156
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 5,000 5 4,995
Common stock issued for services
rendered, on March 19, 2007, at
$0.50 per share 20,000 20 9,980
Common stock issued for services
rendered, on March 20, 2007, at
$0.50 per share 11,000 11 10,989
Common stock issued for services
rendered, on April 20, 2007, at
$1.38 per share 250,000 250 344,750
Common stock issued for services
rendered, on May 30, 2007, at
$1.05 per share 3,417 3 3,301
Common stock issued for services
rendered, on June 1, 2007, at
$1.36 per share 194,500 195 264,325
Common stock issued for services
rendered, on July 9, 2007, at
$1.00 per share 4,700 5 4,695
Common stock issued for services
rendered, on July 18, 2007, at
$0.80 per share 37,500 37 29,963
Common stock issued for services
rendered, on August 1, 2007, at
$4.43 per share 100,000 100 442,900
Common stock issued for services
rendered, on August 19, 2007, at
$4.50 per share 250,000 250 1,124,750
Common stock issued for services
rendered, on August 30, 2007, at
$2.27 per share 3,745 4 8,496
The accompanying notes are an integral part of these financial statements.
F-46
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Deficit Accumulated
Accumulated Other
during the (Restated) Comprehensive
Development Deferred Subscription Treasury Income (Restated)
Stage Compensation Receivable Stock (Loss) 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
The accompanying notes are an integral part of these financial statements.
F-47
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Preferred Stock A Preferred Stock B Common Stock
----------------------- ------------------------ -------------------------- (Restated)
Par Value Par Value Par Value Additional
Preferred $.001 Preferred $.001 Common $.001 Paid-In
Shares $ Amount Shares $ Amount Shares $ Amount Capital
----------- ----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for services
rendered, on August 30, 2007, at
$0.69 per share 30,041 30 20,698
Common stock issued for services
rendered, on August 31, 2007, at
$3.41 per share 1,000 1 3,409
Common stock issued for services
rendered, on August 31, 2007, at
$3.41 per share 10,000 10 34,090
Common stock issued for services
rendered, on October 1, 2007, at
$2.60 per share 300,000 300 779,700
Common stock issued for services
rendered, on October 9, 2007, at
$2.69 per share 47,579 48 127,702
Common stock issued for services
rendered, on October 22 2007, at
$1.86 per share 50,000 50 92,950
Common stock issued for services
rendered, on October 29 2007, at
$2.25 per share 150,000 150 337,350
Common stock issued for services
rendered, on November 9, 2007, at
$3.23 per share 130,000 130 419,770
Common stock issued for services
rendered, on November 19, 2007, at
$3.50 per share 50,000 50 174,950
Common stock issued for services
rendered, on November 26, 2007, at
$3.01 per share 30,000 30 90,270
Common stock issued for services
rendered, on December 3, 2007, at
$2.00 per share 45,094 45 89,955
Common stock issued for services
rendered, on December 4, 2007, at
$3.15 per share 50,000 50 157,450
Common stock issued for services
rendered, on December 11, 2007, at
$2.50 per share 200,000 200 499,800
Common stock issued for services
rendered, on December 17, 2007, at
$1.446 per share 400,000 400 578,051
Common stock issued for services
rendered, on December 17, 2007, at
$2.50 per share 100,000 100 249,900
Common stock issued for services
rendered, on December 18, 2007, at
$3.02 per share 50,000 50 150,950
The accompanying notes are an integral part of these financial statements.
F-48
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Deficit Accumulated
Accumulated Other
during the (Restated) Comprehensive
Development Deferred Subscription Treasury Income (Restated)
Stage Compensation Receivable Stock (Loss) Total
----------- ----------- ----------- ----------- ----------- -----------
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
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
The accompanying notes are an integral part of these financial statements.
F-49
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Preferred Stock A Preferred Stock B Common Stock
------------------------- -------------------------- ------------------------ (Restated)
Par Value Par Value Par Value Additional
Preferred $.001 Preferred $.001 Common $.001 Paid-In
Shares $ Amount Shares $ Amount Shares $ Amount Capital
----------- ----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for services
rendered, on December 21, 2007, at
$3.00 per share 40,000 40 119,960
Common stock issued for services
rendered, on December 27, 2007, at
$3.10 per share 50,000 50 154,950
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 to be provided (see note #21):
Common stock issued for services to be provided, Service valued on August 31,
2007, at $3.41 per share
recorded as prepaid 350,000 350 1,193,150
Common stock issued for services to
be provided, service valued on
September 14, 2007, at $2.29 per
share recorded as prepaid 150,000 150 343,350
Common stock issued for services to be provided, valued on October 02, 2007, at
$2.47 per share recorded
as prepaid 350,000 350 864,150
Common stock issued for services to
be provided, service vallued on
October 02, 2007, at $2.40 per
share recorded as prepaid 75,000 75 179,926
Treasury Stock, purchase at $.70 share (94,961)
Perferred Shares B issued for
settlement of services 1,000 1 399,999
Net loss for the period ended
December 31, 2007 - - - - - - -
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 2007 35,236,188 $ 35,236 1,000 $ 1 30,263,330 $ 30,358 $20,279,849
=========== =========== =========== =========== =========== =========== ===========
Common stock shares issued for cash:
Common stock issued for cash on
February 19, 2008, at $2.00 per share 17,000 17 33,983
Common stock issued for cash on
March 5, 2008, at $1.61 per share 31,057 31 49,969
Common stock issued for cash on
March 18, 2008, at $1.00 per share,
non-US citizens investment group 850,669 851 849,818
Common stock issued for cash on
March 26, 2008, at $1.00 per share,
non-US citizens investment group 1,138,500 1,138 1,137,362
Common stock issued for cash on
March 26, 2008, at $1.18 per share 9,000 9 10,611
Common Stock subscriptions received,
net Jan. to March 2008
The accompanying notes are an integral part of these financial statements.
F-50
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Deficit Accumulated
Accumulated Other
during the (Restated) Comprehensive
Development Deferred Subscription Treasury Income (Restated)
Stage Compensation Receivable Stock (Loss) Total
----------- ----------- ----------- ----------- ----------- -----------
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 to be provided (see note #21)
Common stock issued for services to be provided, Service valued on August 31,
2007, at $3.41 per share
recorded as prepaid 1,193,500
Common stock issued for services to
be provided, service valued on
September 14, 2007, at $2.29 per
share recorded as prepaid 343,500
Common stock issued for services to be provided, valued on October 02, 2007, at
$2.47 per share recorded
as prepaid 864,500
Common stock issued for services to
be provided, service vallued on
October 02, 2007, at $2.40 per
share recorded as prepaid 180,001
Treasury Stock, purchase at $.70 share (66,473) (66,473)
Perferred Shares B issued for
settlement of services 400,000
Net loss for the period ended
December 31, 2007 (10,486,886) - - - - (10,486,886)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 2007 $(17,418,997) $ - $ (185,693) $ (66,473) $ - $ 2,674,281
============ =========== =========== =========== =========== ===========
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 55,175
The accompanying notes are an integral part of these financial statements.
F-51
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Preferred Stock A Preferred Stock B Common Stock
------------------------ ------------------------ -------------------------- (Restated)
Par Value Par Value Par Value Additional
Preferred $.001 Preferred $.001 Common $.001 Paid-In
Shares $ Amount Shares $ Amount Shares $ Amount Capital
----------- ----------- ----------- ----------- ----------- ----------- -----------
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 100,000 100 294,900
Common stock issued for services
rendered, on February 6, 2008, at
$2.63 per share 150,000 150 394,350
Common stock issued for services
rendered, on February 13, 2008, at
$2.39 per share 12,500 13 29,862
Common stock issued for services
rendered, on February 15, 2008, at
$2.42 per share 20,000 20 48,380
Common stock issued for services
rendered, on February 28, 2008, at
$2.15 per share 25,000 25 53,725
Common stock issued for services
rendered, on February 29, 2008, at
$2.19 per share 175,000 175 383,075
Common stock issued for services
rendered, on March 14, 2008, at
$2.10 per share 5,000 5 10,495
Common stock issued for services
rendered, on March 18, 2008, at
$1.60 per share 30,000 30 47,970
Common stock issued for services
rendered, on March 19, 2008, at
$1.60 per share 20,000 20 31,980
Common stock issued for services
rendered, on March 31, 2008, at
$1.90 per share 350,000 350 664,650
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 - - - - - - -
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT MARCH 31, 2008 35,236,188 $ 35,236 1,000 $ 1 33,197,056 $ 33,292 $24,362,809
=========== =========== =========== =========== =========== =========== ===========
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 3,384,593
Common stock issued for cash on
April 11, 2008, at $1.11 per share,
non-US citizens investment group 1,929,775 1,930 2,148,662
Common stock issued for cash on
April 25, 2008, at $1.19 per share,
non-US citizens investment group 1,487,139 1,487 1,771,366
Common stock issued for cash on
May 15, 2008, at $1.10 per share 39,100 39 42,891
The accompanying notes are an integral part of these financial statements.
F-52
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Deficit Accumulated
Accumulated Other
during the (Restated) Comprehensive
Development Deferred Subscription Treasury Income (Restated)
Stage Compensation Receivable Stock (Loss) Total
----------- ----------- ----------- ----------- ----------- -----------
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) - - - - (3,613,694)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT MARCH 31, 2008 $(21,032,691) $ - $ (130,518) $ (66,473) $ - $ 3,201,656
============ =========== =========== =========== =========== ===========
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
The accompanying notes are an integral part of these financial statements.
F-53
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Preferred Stock A Preferred Stock B Common Stock
------------------------ ------------------------ -------------------------- (Restated)
Par Value Par Value Par Value Additional
Preferred $.001 Preferred $.001 Common $.001 Paid-In
Shares $ Amount Shares $ Amount Shares $ Amount Capital
----------- ----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for cash on
June 12, 2008, at $1.00 per share,
non-US citizens investment group 236,909 237 236,672
Common stock issued for cash on
June 23, 2008, at $1.00 per share 250,000 250 249,750
Preferred stock B - converted to
common stock on April 8, 2008 (1,000) (1) 206,559 207 (206)
Preferred stock A - converted to
common stock on June 25,2008 (1,791,064) (1,791) 895,532 895 896
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 70,000 70 136,430
Common stock issued for services
rendered, on April 2, 2008, at
$1.84 per share 108,478 108 199,492
Common stock issued for services
rendered, on April 4, 2008, at
$1.90 per share 20,000 20 37,980
Common stock issued for services
rendered, on April 4, 2008, at
$1.90 per share 1,066,666 1,067 2,025,598
Common stock issued for services
rendered, on April 14, 2008, at
$3.05 per share 150,000 150 457,350
Common stock issued for services
rendered, on April 29, 2008, at
$3.07 per share 883,333 883 2,710,949
Common stock issued for services
rendered, on May 7, 2008, at
$2.55 per share 1,000,000 1,000 2,549,000
Common stock issued for services
rendered, on May 12, 2008, at
$2.65 per share 20,000 20 52,980
Common stock issued for services
rendered, on May 13, 2008, at
$2.79 per share 50,000 50 139,450
Common stock issued for services
rendered, on May 23, 2008, at
$2.67 per share 102,000 102 272,238
Common stock issued for services
rendered, on May 30, 2008, at
$2.20 per share 66,011 66 145,158
Common stock issued for services
rendered, on June 3, 2008, at
$2.10 per share 150,000 150 314,850
Common stock issued for services
rendered, on June 11, 2008, at
$2.25 per share 88,750 89 199,599
The accompanying notes are an integral part of these financial statements.
F-54
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Deficit Accumulated
Accumulated Other
during the (Restated) Comprehensive
Development Deferred Subscription Treasury Income (Restated)
Stage Compensation Receivable Stock (Loss) Total
----------- ----------- ----------- ----------- ----------- -----------
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 2,711,832
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
The accompanying notes are an integral part of these financial statements.
F-55
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Preferred Stock A Preferred Stock B Common Stock
------------------------ ------------------------ -------------------------- (Restated)
Par Value Par Value Par Value Additional
Preferred $.001 Preferred $.001 Common $.001 Paid-In
Shares $ Amount Shares $ Amount Shares $ Amount Capital
----------- ----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for services
rendered, on June 13, 2008, at
$2.25 per share 125,000 125 281,125
Common stock issued for services
rendered, on June 26, 2008, at
$2.08 per share 242,000 242 503,118
Common stock issued for services
rendered, on June 30, 2008, at
$2.09 per share, "PROOF" trigger event 650,000 650 1,357,850
Common Stock Warrants issued for
services (BOD) on May 21, 2008,
at $2.465 14,795
Common Stock Warrants issued for services
(POOF) on June 30, 2008, valued at
.9087 per share, excerise
price $1.50 Restated see note 20 567,938
Other comprehensive income - net
unrealized gain/(loss)
Net loss for the period ended
June 30, 2008 - restated see note 20
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT JUNE 30, 2008 33,445,124 $ 33,445 - $ - 46,422,288 $ 46,517 $44,190,583
=========== =========== =========== =========== =========== =========== ===========
Common stock shares issued for cash:
Common stock issued for cash on July 1, 2008, at $1.00 per share,
non-US citizens investment group 391,730 392 391,338
Common stock issued for cash on
July 21, 2008, at $1.00 per share,
non-US citizens investment group 73,480 73 73,407
Common stock issued for cash on
August 21, 2008, at $.88 per share 10,000 10 8,740
Common stock issued for cash on
September 9, 2008, at $1.104 per share 13,867 14 14,384
Common stock issued for cash on
August 29, 2008, at $1.00 per share,
non-US citizens investment group 1,723,844 1,724 1,722,120
Preferred stock A - converted to
common stock on August 13,2008 (33,440,124) (33,440) 16,720,062 16,720 16,720
Purchase Treasury stock on
August 13, 2008 for $.25 a share (6,600,000)
Amortization of deferred compensation 27,250
Common stock shares issued for services rendered:
Common stock issued for services rendered, on July 14, 2008, at
$1.66 per share 200,000 200 331,800
Common stock issued for services
rendered, on July 25, 2008, at
$1.40 per share 75,000 75 104,925
----------- ----------- ----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these financial statements.
F-56
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Deficit Accumulated
Accumulated Other
during the (Restated) Comprehensive
Development Deferred Subscription Treasury Income (Restated)
Stage Compensation Receivable Stock (Loss) Total
----------- ----------- ----------- ----------- ----------- -----------
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,
at $2.465 14,795
Common Stock Warrants issued for services
(POOF) on June 30, 2008, valued at
.9087 per share, excerise
price $1.50 Restated see note 20 567,938
Other comprehensive income - net
unrealized gain/(loss) (142,312) (142,312)
Net loss for the period ended
June 30, 2008 - restated see note 20 (13,772,385) - - - - (13,772,385)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT JUNE 30, 2008 $(34,805,076) $ - $ (130,518) $ (66,473) $ (142,312) $ 9,126,166
============ =========== =========== =========== =========== ===========
Common stock shares issued for cash:
Common stock issued for cash on
July 1, 2008, at $1.00 per share,
non-US citizens investment group 391,730
Common stock issued for cash on
July 21, 2008, at $1.00 per share,
non-US citizens investment group 73,480
Common stock issued for cash on
August 21, 2008, at $.88 per share 8,750
Common stock issued for cash on
September 9, 2008, at $1.104 per share 14,398
Common stock issued for cash on
August 29, 2008, at $1.00 per share,
non-US citizens investment group 1,723,844
Preferred stock A - converted to
common stock on August 13, 2008 --
Purchase Treasury stock on
August 13, 2008 for $.25 a share (1,650,000) (1,650,000)
Amortization of deferred compensation 27,250
Common stock shares issued for services rendered:
Common stock issued for services rendered, on July 14, 2008, at
$1.66 per share 332,000
Common stock issued for services
rendered, on July 25, 2008, at
$1.40 per share 105,000
----------- ----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these financial statements.
F-57
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Preferred Stock A Preferred Stock B Common Stock
------------------------ ------------------------ ------------------------ (Restated)
Par Value Par Value Par Value Additional
Preferred $.001 Preferred $.001 Common $.001 Paid-In
Shares $ Amount Shares $ Amount Shares $ Amount Capital
----------- ----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for services
rendered, on August 8, 2008, at
$1.03 per share 75,000 75 77,175
Common stock issued for services
rendered, on August 25, 2008, at
$1.25 per share 6,000 6 7,494
Common stock issued for services
rendered, on September 8, 2008,
at $.96 per share 1,500,000 1,500 1,438,500
Cancel employee stock issue in
prior quarter September (109,000) (109) (285,611)
Common Stock Warrants issued for
services (BOD) on Sept. 23, 2008,
at $2.25 56,000
Common Stock Warrants issued for
services on Sept. 3, 2008, at $2.75
(New Millennium) 89,680
Common Stock Warrants exercised
Cashless on July 3, 2008, at
$1.42 POOF warrants restated see note 20 325,957 326 (326)
Subscriptiion receivable - cancel balance (130,518)
Other comprehensive income - net
unrealized gain/(loss)
Net loss for the period ended
September 30, 2008 Restated
see note 20 - - - - - -
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT SEPTEMBER 30, 2008 5,000 $ 5 - $ - 60,828,228 $ 67,523 $48,133,661
=========== =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-58
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AT SEPTEMBER 30, 2008
Deficit Accumulated
Accumulated Other
during the (Restated) Comprehensive
Development Deferred Subscription Treasury Income (Restated)
Stage Compensation Receivable Stock (Loss) Total
----------- ----------- ----------- ----------- ----------- -----------
Common stock issued for services
rendered, on August 8, 2008, at
$1.03 per share 77,250
Common stock issued for services
rendered, on August 25, 2008, at
$1.25 per share 7,500
Common stock issued for services
rendered, on September 8, 2008,
at $.96 per share 1,440,000
Cancel employee stock issue in
prior quarter September (285,720)
Common Stock Warrants issued for
services (BOD) on Sept. 23, 2008,
at $2.25 56,000
Common Stock Warrants issued for
services on Sept. 3, 2008, at $2.75
(New Millennium) 89,680
Common Stock Warrants exercised
Cashless on July 3, 2008, at
$1.42 POOF warrants restated see note 20 --
Subscriptiion receivable - cancel balance 130,518 --
Other comprehensive income - net
unrealized gain/(loss) (819,015) (819,015)
Net loss for the period ended
September 30, 2008 Restated
see note 20 (3,659,131) - - - - (3,659,131)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT SEPTEMBER 30, 2008 $(38,464,207) $ - $ - $(1,716,473) $ (961,327) $ 7,059,182
============ =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-59
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 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 Resources 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 nine months ended September 30, 2008 are not
necessarily indicative of the results that maybe expected for the year
ended December 31, 2008. The figures from the condensed balance sheet as
of December 31, 2007 are derived from the audited balance sheet per form
10-K for year ended December 31, 2007.
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
by subjecting them to variable frequency microwave radiation
("Technology") at specifically selected frequencies for a time sufficient
to at least partially decompose the materials, converting the materials
into industrial products and chemicals and easily disposable waste
material.
The Company's business goals for exploitation of the Technology are as
follows:
1) The design, manufacture and sale of machinery and equipment
units, embodying the technology;
2) The licensing of third parties to use that technology.
3) The construction of plants using that technology.
At the present time, the process is in a laboratory mode. There will need
to be a transition from the "one batch at a time" operation, used in the
laboratory, to a commercial prototype in order to commercialize the
process. A commercial prototype machine is under construction at Ingersoll
Production Systems.
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.
In a similar decomposition process, the Company has designed machinery and
equipment which will decompose "fluff", which is the non-metallic portions
of scrap motor vehicles, primarily, the interiors. It appears that
although scrap vehicles are specifically taken without the tires due to
environmental rules, they are often removed but then placed ("hidden") in
the trunk of the vehicle and crushed into it, thus "disposing" of the
tires. The Company's machinery will, of course, permit any tires to be
decomposed together with the other materials.
F-60
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 1 - BASIS OF PRESENTATION AND NATURE OF BUSINESS AND ORGANIZATION
(CONTINUED)
The Company is currently offering three models for tire decomposition: 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 license, 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 oil field 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 bringing its product to the market and the raising of
capital. The Company has not commenced any commercial operations as of
September 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 for the benefit of
the holders of Mobilestream's common stock: b) the issuance by the Company
for the benefit of the holders of Mobilstream's 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. 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
primarily of cash of approximately $1,678,000 and fixed assets of $149,000
offset by liabilities of approximately $91,000. Mobilestream owned
37,500,000 shares of Carbon Recovery Corporation whose assets were
acquired by the Company (see paragraph below); these shares were cancelled
upon the acquisition of Mobilestream by the Company.
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
48,688,996 common shares and Global Resource Corporation warrants. The
holders of Global Resource Corporation's capital stock before the
Agreement retained 72,241 shares of common stock. Prior to the Agreement,
Carbon
F-61
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 1 - BASIS OF PRESENTATION AND NATURE OF BUSINESS AND ORGANIZATION
(CONTINUED)
Recovery Corporation had warrants outstanding. Pursuant to the Agreement,
those outstanding warrants were exchanged for warrants of Global Resource
Corporation. Specifically, Global Resource Corporation 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. These warrants
expire on December 31, 2008.
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 merger, 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
common shares into which share of 2006 Series of Convertible preferred
stock which is convertable into common stock, from 2 shares of common
stock to 1/2 of 1 share of common stock for each share of 2006 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, our
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 our
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 their time and investment in
bringing their product to the market, and the raising of capital.
F-62
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 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 September 30, 2008, the Company maintained cash and cash equivalent
balances at four financial institutions, each of which is insured by the
Federal Deposit Insurance Corporation up to $250,000. At September 30,
2008 the Company's uninsured cash balances total $3,118,700.
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
#16 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 as part of accumulated other comprehensive
income(loss) which is included in the stockholders' equity statement and
any realized gains or losses are recognized in statement of operations.
(See note #16 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-63
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BUSINESS COMBINATIONS
Effective December 31, 2006 the Company completed an acquisition of the
assets of Mobilestream Corp. 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 costs 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 on the grant date. The Company has issued 8,700,000
stock options to key executives, 3,500,000 of these options are awaiting
shareholder approval (see note 12 & 13 below for more details)
For non-employees, stock grants and warrants/options issued for services
are valued at either the invoiced/contracted value of services provided or
to be provided or the fair value of stock at the date the agreement is
reached, which is every 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 September 30, 2007 have been
reclassified in the comparative financial statements to be comparable to
the presentation for the quarter ended September 30, 2008. These
reclassifications had no effect on net loss. (Also see Note # 20 for
restatement of 12/31/07 balance sheet).
F-64
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 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:
Nine Months Ended
September 30,
-------------------------------
2008 2007
------------ ------------
Net loss ($21,045,210) ($ 4,274,554)
------------ ------------
Weighted-average common shares
Outstanding (Basic) 42,221,919 25,634,118
------------ ------------
Weighted-average common shares
Outstanding (Diluted) 42,221,919 25,634,118
============ ============
The weighted-average common stock equivalent for the remaining 5,000
shares of Preferred Stock A is 2,500. and the weighted-average common
stock equivalent for the outstanding warrants is 21,891,749. There are
also common stock purchase options; 5,200,000 approved and 3,500,000
awaiting shareholder approval, these warrants and options are not part of
the weighted-average outstanding common stock calculation because
inclusion would have been anti-dilutive as of September 30, 2008 and 2007.
(see note#12 below for detail on warrants & options)
INVENTORIES
Inventory is stated at the lower of cost or market. Cost is determined
using actual job costs per machine. Currently the Company has no value
stated for inventories. Prior quarter reported inventory has been
reclassified to Construction in Progress (see note # 6 below)
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 September 30, 2008 and 2007.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs consist of all activities associated with
the development and enhancement of products using the Company's microwave
technology. R & D costs consist primarily of contract engineer labor and
salaries of our in-house engineers, lab supplies used in testing and
expenses of equipment used to test and develop our technology. Research
and development costs are charged to R & D when incurred. The amounts
charged as of September 30, 2008 and 2007 were $612,165 and $135,774
respectively.
F-65
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 use 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. The adoption of SFAS No. 160 is not expected to have a
material impact on the Company's financial position, results of
operations, or cash flows.
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.
F-66
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 3 - FIXED ASSETS
Fixed assets as of September 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 32,432
Construction in Progress 3 745,818
----------
Total $1,326,506
==========
Less accumulated Depreciation & amortization 206,721
----------
NET FIXED ASSETS $1,119,785
==========
There was $70,107 and $72,222 charged to operations for depreciation
expense for the nine months ended September 30, 2008 and 2007,
respectively.
NOTE 4 - LOAN PAYABLE - OFFICER OF THE COMPANY
On November 28, 2007 the Chief Financial Officer, Jeffery J. Andrews,
loaned the Company $150,000 at a interest rate of prime plus 2%. In April
2008 the Company repaid $120,000. The remaining balance of $30,000, as
well as, the accrued interest amount of $ 6,173, was paid in full in
August 2008. Interest expense had been accrued and expensed monthly.
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 $ 62,232
Less current maturities (41,536)
--------
Long-Term payable $ 20,696
========
F-67
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 5 - LOAN PAYABLE - EQUIPMENT (CONTINUED)
The amount of principal maturities of the loans payable by years is as
follows:
2008 10,265
2009 35,416
2010 16,213
---------
$ 62,232
=========
NOTE 6 - CONSTRUCTION IN PROGRESS
Construction in progress consists of a "Proof of Concept" machine
currently under construction. Modifications to the original design have
been made to improve efficiencies. It was determined that these
modifications made some parts obsolete, so a charge of $303,449 was
charged to R & D expense and Construction in progress (WIP inventory
classified in Q2) was reduced in the second quarter 2008. Once this "Proof
of Concept" machine is completed it will be used to demonstrated the
capabilities and technology for future years and is not planned to be
sold.
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 September 30, 2008 the deferred tax assets consist of the following:
2008
------------
Deferred taxes due to net operating loss $ 11,539,000
carryforwards
Less: Valuation Allowance (11,539,000)
------------
Net Deferred Tax asset $ --
------------
At September 30, 2008, the Company had deficits accumulated during the
development stage in the approximate amount of $38,269,448 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-68
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 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 September 30, 2008 the minimum lease payments
under the capital lease are as follows:
For the periods Ending Sept. 30 Amount
--------
2008 $ 3,880
2009 $ 15,516
2010 $ 15,516
2011 $ 7,758
--------
$ 42,700
========
NOTE 9 - OPERATING LEASES
The Company has two separate lease agreements: The Company leases office
space in New Jersey, under a lease agreement that commenced June 1, 2006,
the monthly lease payments are $5,000 per month and the lease expires on
May 31, 2009. The Company also leases manufacturing space in Rockford,
Ill. Under a lease agreement that commenced May 1, 2008, the monthly lease
payments are $2,703 per month and the lease expires on April 30, 20010.
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 Sept. 30 Amount
--------
2008 $ 23,109
2009 54,138
2010 10,812
--------
$ 88,059
========
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 nine months ended September 30, 2008, the Company has raised
over $11 million dollars in cash through a private placement of common
stock. With this additional capital, given 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.
F-69
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 10 - ALLEVIATION OF GOING CONCERN (CONTINUED)
The Company currently has $4.1 million in cash and cash equivalents and
short-term investments. $2.7 million in debt securities in long-term
investments (see note #16). If the Company did not raise any additional
cash as of September 30, 2008 it would still have funds available to meet
its cash operating expenses and inventory and capital expenditures
requirements. Total cash expenditure are projected to be $5 million for
the twelve month period following the date of financial statements being
reported; Cash operating expenses are projected to be $1 million a
quarter, or $4 million total for the twelve month period. Inventory and
other capital expenditures for the twelve month period are projected to be
$1 million.
The Company also expects to successfully demonstrate its "Proof Concept"
microwave reactor system by end of the fourth quarter 2008.
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 then Chief Executive officer. The
Company purchased 94,961 shares for $66,471 in cash.
On August 13, 2008, the Company authorized the purchase of Company stock
from Frank Pringle, the Company's Chairman. The Company purchased
6,600,000 shares for $1,650,000 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 was
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 was the owner of all the rights to the
inventions of the Company's President. The Agreement transferred 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
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 continued 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 reverse merged into
Mobilestream Oil.
In order to clarify the ownership and licensure of certain intellectual
property licensed to Carbon Recovery, on September 22, 2006 Mobilestream
Oil, Inc., Mr. Pringle and his wife, Lois Augustine
F-70
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 11 - RELATED PARTY TRANSACTION (CONTINUED)
Pringle entered into a combined technology license agreement (the
"Combined Technology License Agreement"). This Agreement confirmed (i)
Mobilestream as the sole owner of the licensed intellectual property, and
(ii) the exclusive license of the intellectual property by Mobilestream to
Carbon Recovery. In the same agreement, Carbon Recovery assigned all of
its interest in the intellectual property license to the Company, and the
Company agreed to pay Mobilestream royalty payments in perpetuity that
varied with the use made of the intellectual property and the revenues
received by the Company. The Company's royalty obligations under the
Combined Technology License Agreement were terminated by virtue of the
merger of the interests of the licensor and the licensee when the Company
acquired substantially all of the assets of Mobilestream.
NOTE 12 - STOCKHOLDERS' EQUITY
COMMON STOCK
The following details the common stock transactions for the Nine months
ended September 30, 2008:
The Company has issued 11,550,950 shares of common stock for $12,137,256
in cash.
Common stock issued for services by non-employees:
The Company issued 7,232,838 shares of common stock to non-employees for
services rendered; these services were value at $14,539,624. The more
readily determinable value of services was determined to be the stock
market price at the date the stock was issued.
Common stock issued for services by employees:
The Company issued common stock under the "2008 Employee Compensation and
Stock Option Plan". A total of 233,000 shares were issued during the nine
months ended September 30, 2008, and were valued at $484,640. This
$484,640 was expensed as salaries in G & A in 2008. The value of services
was determined to be the stock market price at the date the stock was
issued. 225,000 of the total 233,000 shares, valued at $468,000 was issued
to the Company's Chairman, Frank Pringle in the nine months ended
September 30, 2008.
PREFERRED STOCK
The following details the preferred stock transactions for the nine months
ended September 30, 2008:
In June 2008 Frank Pringle, Chairman converted 1,791,064 shares of
Preferred stock A into 895,532 shares of common stock. Preferred Stock A
has rights to convert 1 share of preferred into 1/2 of 1 share of the
Company's common stock.
F-71
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 12 - STOCKHOLDERS' EQUITY( CONTINUED)
PREFERRED STOCK (CONTINUED)
On August 13, 2008 Frank Pringle, Chairman converted all of his 33,440,000
shares of Preferred stock A into 16,720,062 shares of common stock.
Preferred Stock A has voting rights to elect a majority of the Board of
Directors as long as the Preferred Stock A remained outstanding, as well
as the right, in the event of the liquidation, dissolution or winding-up
of the Company, to receive a preferred distribution of $.001 per share,
before any distribution to junior series of Preferred Stock or the Common
Stock.
In April 2008 all of the Preferred stock B, 1,000 shares, was converted
into 206,559 shares of common stock. These shares could 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 B had no other rights
attached other than conversion
WARRANTS
The Company issued 10,577,802 warrants in the first nine month of 2008 and
they have a weighted average exercise price of $1.96. Of this total,
9,461,802 warrants were issued in conjunction with sale of common stock in
a private placement, with an average exercise price of $2.00, and an
expiration date of December 2009. These warrants were issued together with
the sale of common stock and had no expense associated to the Company's
profit and loss. In addition the Company issued 40,000 warrants with an
average warrant price of $2.41 for services performed in first three
quarters of 2008 and the expense was valued at $85,375, these warrants
will expire in 5 years. An addition 76,000 warrants were issued for
services in September and expense was valued at $89,680, they have
exercise price of $2.75 and are exercisable until September 3, 2009.
Warrants issued for services were valued using the Black-Scholes
option-pricing model (see below for volatility, risk free interest rates
and other terms).
On June 30, 2008 Professional Offshore Opportunity Fund, Ltd. ("POOF")
exercised 625,000 warrants issued to it in a private placement in December
2007. The exercise was done via a cashless conversion at an exercise price
of $1.50 per share as a result of which the Company issued 325,957 shares
of its common stock to POOF.
F-72
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 12 - STOCKHOLDERS' EQUITY( CONTINUED)
WARRANTS (CONTINUED)
A summary of the status of the Company's outstanding stock warrants as of
September 30, 2008 is as follows:
Weighted Average
Shares Exercise Price
----------- ---------
Outstanding at December 31, 2007 11,941,947 $ 3.38
Granted 10,577,802 $ 1.96
Exercised 625,000 1.50
Forfeited / expired $ --
----------- --------
Outstanding at September 30, 2008 21,894,749 $ 2.75
----------- --------
Exercisable at September 30, 2008 21,894,749 $ 2.75
----------- --------
The fair value of each warrant granted during 2008 is estimated on the
date grant using the Black-Scholes option-pricing model with the following
assumptions:
2008 2007 2006
------------ ----------- ----------
Dividend yield -- -- --
Expected volatility 79% - 156% 146 - 149% 240%
Risk-free interest rate 2.21% - 2.88% 3.26 - 3.49% 4.97%
Expected life .5 - 5 yrs 1 - 1.5 yrs 1 yrs
These warrants are not part of the weighted-average outstanding common
stock calculation because inclusion would have been anti-dilutive as of
September 30, 2008 and 2007 because of our deficient income.
OPTIONS
In March 2005 the Company issued 200,000 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. In
September 2008 as part of employment contracts, the Company authorized
8,500,000 stock options to key executives, with 5,000,000 approved (new
CEO Eric Swain) and 3,500,000 options subject to shareholder approval (see
note 13 commitments for details). These options have an exercise price of
$1.18. 1,000,000 of Mr. Swain's options vested immediately and upon
approval by shareholders (expected in 2009), another 700,000 options
(together with the initial 1,000,000, 1,700,000 or 20% of the total) vest
immediately. The remaining 6,800,000 options will vest in equal annual
installments of 1,700,000 options on September 23, 2009 and on each
anniversary thereafter for the next three years, provided that the
executives are employed by the Company at each vesting date.
F-73
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 12 - STOCKHOLDERS' EQUITY( CONTINUED)
OPTIONS (CONTINUED)
A summary of the status of the Company's outstanding employee stock
options as of September 30, 2008 is as follows:
---------------------------------------------------------------------------------------------------------------
Number of Option Weighted Average Number of Vested
shares Exercise price option shares
---------------------------------------------------------------------------------------------------------------
Options as of December 31, 2007 200,000 $1.00 160,000
-------------------------------------------------------------------------------------------- ----------------
Granted 5,000,000 $1.18 1,000,000
Exercised 0
Forfeited / expired 0
Outstanding at September 30, 2008 5,200,000 $1.17 1,160,000
The fair value of each option granted during 2008 is estimated on the date
grant using the Black-Scholes option-pricing model with the following
assumptions: Dividend yield is 0%; Expected Volatility is 156%; Risk-free
interest rate is 2.88%; Expected life 5 years
As of September 30, 2008 the total unrecognized compensation cost related
to unvested stock options was $5,450,000, which is expected to be
recognized over a weighted-average period of 5 years beginning October 1,
2008.
The 3,700,000 options waiting shareholder approval are not included in
summary table above because options under an arrangement that is subject
to shareholder approval are not deemed to be granted until that approval
is obtained unless approval is essentially a formality which the Company
has deemed not to be the case.
As of September 30, 2009 1,000,000 options are vested and no options have
been exercised. The weighted average exercise price is $1.18. These
options are not part of the weighted-average outstanding common stock
calculation because inclusion would have been anti-dilutive as of
September 30, 2008 and 2007
TREASURY STOCK
On August 13, 2008 the Company purchased 6,600,000 shares of the Company's
Common Stock from Frank Pringle, Chairman for $1,650,000 in cash. (see
note 11 above).
F-74
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 13 - COMMITMENTS AND CONTINGENCIES
On May 21, 2008 the Board of Directors approved a consulting agreement
with 888 Corporation, a corporation controlled by then President and CEO,
Frank G. Pringle. Under the consulting agreement the Company has agreed to
pay Mr. Pringle a consulting fee for the life of the pending patents,
estimated to be 12 years. This consulting agreement replaces a 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, $448,000 in years 2010 and 2011, $538,000 in
years 2012 and 2013 and 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 the
Company is obligated to pay Mr. Pringle a royalty in the same amounts, for
the same time periods, payable in the same manner. Under the Consulting
Agreement, the Company pledged its pending patents as collateral security
for the payments to the Mr. Pringle. The Company also executed a
conditional assignment of the pending patents to the corporation Mr.
Pringle controls, such that the Mr. Pringle can file the assignment with
the U.S. Patent and Trademark Office ("PTO") if the Company were to
default under the Consulting Agreement and the default were not cured. In
order to make the filing with the PTO, Mr. Pringle 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. If the
Company defaults under the Consulting Agreement, ownership of our pending
patents could revert to Mr. Pringle. In such event, the Company would be
unable to continue its business without entering into a license agreement
or similar agreement with the Mr. Pringle. For complete details of the
contract see the Company's current report on form 8-K filed with the SEC
on May 21, 2008, exhibit 10.16.
In 2005 the Company granted the President 545,000 shares of common stock
as deferred compensation, the market value of the stock on the date of
agreement was $1 per share and was used to determined fair value of this
transaction. The common stock vested to the President over a five-year
period commencing January 1, 2005, with 27,250 shares vesting quarterly,
109,000 shares vesting annually and is expensed in the financial
statements at a rate of $27,250 a quarter, annually $109,000 per year,
until December 31, 2009. As of December 31, 2007, there was $218,000
unrecognized compensation costs related to non-vested shares. The total
fair value of shares vested during the years ended December 31, 2005 to
2007, was $327,000.
On August 13, 2008 Mr. Pringle resigned as CEO of the Company but will
continue to serve as Chairman.
F-75
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 13 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
In June 2007 the Company entered into purchase agreement with Ingersol
Production Systems of Rockford, Illinois to build a commercial prototype.
The total purchase commitment is approximately $900,000. The prototype is
expected to be completed in fourth quarter 2008. The Company has currently
paid approximately $800,000 as of September 30, 2008, this amount is
reflected in the balance sheet as part of the fixed assets as Construction
in progress and in the income statement as R & D expense. In addition to
Ingersol Production systems there are various other suppliers with which
the Company has purchase commitments with, these purchase commitment are
approximately $300,000 and the Company has paid approximately 250,000 as
of September 30, 2008. These amounts are also reflected in the financial
statements in the construction in progress account.
On December 21, 2007 the Company entered into a certain Securities
Purchase Agreement with Professional Offshore Opportunity Fund, Ltd.
("POOF") pursuant to which POOF 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 POOF 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, POOF authorized its option to purchase from the escrow
the 250,000 shares for $250,000. On June 30, 2008 the Company also issue
650,000 shares from the escrow account to POOF as liquidating damages for
not having successful registration statement. The market share price of
the stock on June 30th was $2.09 and was used to calculate the liquidating
damages expense of $1,358,500 which was recorded in the statement of
operations in June 2008. There were also 625,000 warrants issued, with
excise price of $1.50 as part of liquidating damages for failure to file a
successful registration statement. These warrants were excised in a
cashless transaction on July 3, 2008. The Company recognized an expense of
$567,938 on June 30, 2008. The POOF warrants were valued using the
Black-Scholes option-pricing model with the following assumptions:
Dividend yield is 0%; Expected Volatility is 79.1%; Risk-free interest
rate is 2.21%; Expected life 6 months. (also see note #20 for 2008
restatements).
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.
On September 23, 2008, the Board of Directors approved employment letter
agreements with (i) the President of the Company, Jeffrey Kimberly, (ii)
the Chief Operating Officer of the Company, Wayne Koehl, and (iii) the
Chief Financial Officer of the Company, Jeffrey Andrews. These letter
agreements amended and restated the terms and conditions of employment of
each of these executives of the Company.
F-76
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 13 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Mr. Kimberly's employment letter provides for a term of five years at an
annual salary for January 1, 2009 of $300,000, with an increase to
$375,000 if the Company reaches certain sales goals. Any other increase in
annual salary is subject to approval of the Chief Executive Officer of the
Company and the Board. Subject to approval by the shareholders of the
Company, Mr. Kimberly will be granted an option to purchase one million
five hundred thousand (1,500,000) shares of Common Stock. The exercise
price for these options was set at the market closing bid quotation on
September 15, 2008, $1.18. The options will be exercisable from and after
their respective vesting date, and for a period of ten (10) years
thereafter. Options for three hundred thousand (300,000) shares of Common
Stock shall vest immediately on September 23, 2008 and options for three
hundred thousand (300,000) additional shares of Common Stock shall vest on
September 23 of each successive year between the 2010 and 2013 inclusive,
provided that Mr. Kimberly is still employed on the relevant vesting date.
Mr. Kimberly will be entitled to receive bonuses of between 0.75% and
1.00% of the Company's gross profits on sales of equipment after the
Company reaches certain sales milestones. The Company shall pay the
monthly loan payments on Mr. Kimberly's car for two years and then pay off
all of the remaining loan balance on this automobile.
Mr. Andrews' employment letter provides for a term of five years at an
annual salary for 2008 of $180,000, with an increase to $225,000 if the
Company reaches certain sales goals. Any other increase in annual salary
is subject to approval of the Chief Executive Officer of the Company and
the Board. Subject to approval by the shareholders of the Company, Mr.
Andrews will be granted an option to purchase one million (1,000,000)
shares of Common Stock. The exercise price for these options was set at
the market closing bid quotation on September 15, 2008, $1.18. The options
will be exercisable from and after their respective vesting date, and for
a period of ten (10) years thereafter. Options for two hundred thousand
(200,000) shares of Common Stock shall vest immediately on September 23,
2008 and options for two hundred thousand (200,000) additional shares of
Common Stock shall vest on vest on September 23 of each successive year
between 2010 and 2013 inclusive, provided that Mr. Andrews is still
employed on the relevant vesting date. Mr. Andrews will be entitled to
receive bonuses of between 0.75% and 1.00% of the Company's gross profits
on sales of equipment after the Company reaches certain sales milestones.
Mr. Koehl's employment letter provides for a term of five years at an
annual salary for 2009 of $225,000, with an increase to $250,000 if the
Company reaches certain sales goals. Any other increase in annual salary
is subject to approval of the Chief Executive Officer of the Company and
the Board. Subject by approval of the shareholders of the Company, Mr.
Koehl will be granted an option to purchase one million (1,000,000) shares
of common stock of the Company. The exercise price for these options was
set at the market closing bid quotation on September 15, 2008, $1.18. The
options will be exercisable from and after their respective vesting date,
and for a period of ten (10) years thereafter. Options for two hundred
thousand (200,000) shares of Common Stock shall vest immediately on
September 23, 2008 and options for two hundred thousand (200,000)
F-77
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 13 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
additional shares of Common Stock shall vest on September 23 of each
successive year between 2010 and 2013 inclusive, provided that Mr. Koehl
is still employed on the relevant vesting date. Mr. Koehl will be entitled
to receive bonuses of between 0.75% and 1.00% of the Company's gross
profits on sales of equipment after the Company reaches certain sales
milestones. Mr. Koehl shall also receive a monthly automobile allowance of
five hundred dollars ($500).
On September 24, 2008, the Board of Directors of Global Resource
Corporation approved the appointment of Eric Swain as Chief Executive
Officer of the Company. In connection with the appointment of Mr. Swain,
the Board approved a summary of terms of a proposed employment agreement
to be entered into between the Company and Mr. Swain. Mr. Swain's summary
of terms provides for an employment term of five years at an annual salary
of $450,000 from the date of the execution of the employment agreement
through December 31, 2009, with an increase to $525,000 on January 1, 2010
if the Company reaches at least one sales goal as defined in the summary
of terms. Any other increase in annual salary is to be determined in the
employment contract. Mr. Swain shall be entitled to eighteen months of
severance payments equal to his current salary if the Company terminates
his employment without cause or if he terminates his employment with good
reason.
Mr. Swain will be granted an option to purchase five million (5,000,000)
shares of Common Stock. The exercise price for these options was set at
the market closing bid quotation on September 15, 2008. The options will
be exercisable from and after their respective vesting date, and for a
period of fifteen (15) years thereafter. Options for one million
(1,000,000) shares of Common Stock shall vest immediately and options for
one million (1,000,000) additional shares of Common Stock shall vest on
January 1, 2010, January 1, 2011, January 1, 2012 and January 1, 2013,
provided that Mr. Swain is still employed on the relevant vesting date.
Mr. Swain will be entitled to receive bonuses, payable in the form of
Common Stock or options to purchase Common Stock equal to 0.75% of the
Company's gross profits on each sale of equipment over twenty-five million
dollars ($25,000,000). Mr. Swain shall also receive a monthly automobile
allowance of nine hundred dollars ($900). The Company has agreed that, if
Mr. Swain should incur costs (including legal expenses) arising from his
previous employment, the Company would reimburse Mr. Swain for any such
costs. The Company has also agreed to appoint Mr. Swain to the Board.
NOTE 14 - DEPOSITS
The June 30, 2008 balance of Deposits, totaling $73,639, 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 $1,365 lease deposit for offices. The lease deposit for equipment is
expected to be returned to the Company in 2008.
F-78
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 15 - PATENTS
The Company currently has three utility patent applications pending in the
United States Patent and Trademark Office ("PTO") and approximately ten
corresponding utility patent applications pending in international patent
offices in commercially relevant countries. Additional provisional patent
applications have been filed and/or are currently being prepared for
filing in the PTO. The Company's patent applications cover it's
proprietary microwave technology for recovering hydrocarbons and fossil
fuels from sources such as tires, oil shale, capped wells, shale deposits,
and waste oil streams. Currently Patents costs are expensed and are valued
at zero on the balance sheet; once approved they will be valued at their
fair market value. The Company has pledged pending patents rights as
collateral for payments to a corporation controlled by Mr. Pringle,
Chairman (see note#13 consultant agreement).
NOTE 16 - INVESTMENTS -SHORT-TERM AND LONG-TERM MARKETABLE SECURITIES
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 September 30, 2008:
Cost Fair Market Unrealized gain /
Value (Loss)
--------- --------- ---------
SHORT-TERM INVESTMENTS
Certificates of Deposits 288,000 287,933 (67)
========= ========= =========
LONG-TERM INVESTMENTS
Fixed-rate capital securities 125,000 112,354 (12,646)
Corporate Bonds 1,826,949 1,644,856 (182,094)
Preferred Stocks 1,681,410 914,890 (766,520)
--------- --------- ---------
TOTAL LONG-TERM INV. 3,633,359 2,672,100 (961,260)
========= ========= =========
The total unrealized gains or (losses) of these investments are $961,327,
they were recorded directly to the "accumulated other comprehensive
income(loss)" account in the stockholders' equity section of the balance
sheet and net realized gains or losses, in the amount of $43,232 were
recognized in the statement of operations.
F-79
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 17- SUPPLEMENTAL DISCLOSURE NON-CASH ACTIVITY FROM CASH FLOW STATEMENT
-----------------------------------------------------------------------------------------------------------------------
09/30/2008 09/30/2007 July 19, 2002 (Inception)
to 09/30/2008
-----------------------------------------------------------------------------------------------------------------------
Common stock issued for land $0 $ 125,800
Common stock issued as chartable contribution $0 $ 50,000
Common stock issued to covert accounts $0 $ 1,807
payable to equity
Preferred stock issued for services $0 $ 400.000 $ 400,000
Conversion of debenture into common stock $ 123,683
Capital Lease - phone equipment $32,432 $32,432
-----------------------------------------------------------------------------------------------------------------------
NOTE 18 - SUBSEQUENT EVENTS
Subsequent to the balance sheet date of September 30, 2008 the following
transactions occurred:
The company issued 747,976 shares of common stock for $747,976 in cash in
the month of October, $747,976 of this cash was included as cash and stock
to be issued in the September 30th balance sheet.
On November 12, 2008, Global Resource Corporation (the "Company") entered
into a Severance Agreement with Frank G. Pringle, the Chairman of its
Board of Directors, and 888 Corporation, a New Jersey corporation owned
directly or indirectly by Pringle (the "Severance Agreement"). Pursuant to
the Severance Agreement, the Company has agreed to pay Mr. Pringle
$200,000.00 per year for the six (6) year period commencing on January 1,
2009 subject to Mr. Pringle and 888 Corp.'s continued compliance with the
terms of the Severance Agreement. Pursuant to the Severance Agreement, Mr.
Pringle agreed to return 225,000 shares of Company Common Stock previously
issued to him and to resign as a member of the Company's Board of
Directors and in all other capacities. Mr. Pringle also agreed to restrict
the amount of shares of Company Common Stock that he or his affiliates may
sell to the following amounts: an aggregate of Four Hundred Thousand
(400,000) shares of Company Common Stock in the three (3) month period
beginning February 1, 2009, an aggregate of Three Hundred Thousand
(300,000) shares of Company Common Stock in the three (3) month period
beginning May 1,2009 and an aggregate of Two Hundred Fifty Thousand
(250,000) shares of Company Common Stock in any three month period
thereafter beginning with the three (3) month period beginning August 1,
2009. The foregoing restrictions remain in place until Mr. Pringle has
less than 5,000,000 shares of Company Common Stock and any transfers by
Mr. Pringle in accordance with the foregoing restrictions remain subject
to the Company's right of first refusal to purchase the stock. The
Severance Agreement also provides for: (i) the immediate termination of
the Consulting Agreement between the Company and 888 Corp. dated as of
January 1, 2008 (though the Company
F-80
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 18 - SUBSEQUENT EVENTS (CONTINUED)
has agreed to pay 888 Corp. the remainder of any payments otherwise due
there under through December 31, 2008); (ii) a nine year non-compete and
non-solicitation agreement from Mr. Pringle; (iii) certain
representations, warranties and covenants from Mr. Pringle and associated
indemnification obligations; and (iv) mutual general releases and
non-disparagement provisions.
NOTE 19 - 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 and its
financial statements for the year ended December 31, 2003. In 2002 the
Company had a transaction in which it reflected the issuance of 150,000
shares of preferred stock, par value $10, in exchange for an intangible
asset valued at $1.5 million dollars. The intangible asset was
subsequently deemed impaired and accordingly was expensed in 2002. The
financial statements have been restated as the transaction was
subsequently rescinded, as the preferred stock shares were not formally
issued and no expense should have been recorded. In 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, valued at
$727,500. The Company has restated its financial statements to reflect the
common stock as re-issuance of founders' shares and, as such, no expense
should have been initially associated with the issuance of the founders
shares. These transactions resulted in a decrease in net loss applicable
to accumulated deficits of $727,500 and $1,500,000 for the year ended
December 31, 2003 and December 31, 2002, respectively. Annual net loss of
$203,659 and $508,508 as restated, and a decrease in the accumulated
deficits during the development stage to $712,617 and $508,508,
respectively for years 2003 & 2002.
The impact of these adjustments on the Company's financial results as
originally reported are summarized below:
Year Ended Year Ended
December 31, 2003 December 31, 2002
------------------------------- --------------------------------
As Reported As Restated As Reported As Restated
------------ -------------- ------------ ------------
Accumulated deficit $(2,939,667) $ (712,167) $(2,008,508) $ (508,508)
Net Loss from Operations $ (931,159) $ (203,659) $(2,008,508) $ (508,508)
Basic and diluted Loss per share $ (0.19) $ (0.04) $ (0.42) $ (0.11)
Net Assets $ 26,693 $ 26,693 $ (15,208) $ 866,239
F-81
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 20 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 2007 AND SEPTEMBER 30, 2008
SUMMARY OF CHANGES TO THE BALANCE SHEET ORIGINALLY SUBMITTED IN 10K FOR
DECEMBER 31, 2007
1. Reclassified contra prepaid equity from the Stockholders' Equity
section of the balance sheet, in the amount of $1,808,042 to
current assets section as prepaid services (also see new note #?
Prepaid above). The total current assets balance was changed to
$2,588,467 from $780,425 and the total assets were changed to
$3,036,462 from $1,228,420. Stockholders' Equity was revised to
$2,674,281 from $866,239.
2. Elimination of Deferred Compensation in the amount of $218,000
from the stockholders equity section to comply with SFAS 123R,
additional paid capital was reduced by the $218,000. This change
had a neutral impact on stockholders' equity.
SUMMARY OF CHANGES TO THE BALANCE SHEET ORIGINALLY SUBMITTED IN 10-Q FOR
SEPTEMBER 30, 2008
1. The recording of expenses associated with warrants for services
that were issued in June and Sept. 2008 Additional paid in
capital was increased by $194, 759 and deficit accumulated in the
development stage was corresponding offset for same amount, net
impact was no change to net assets or the stockholders' equity.
SUMMARY OF CHANGES TO THE STATEMENT OF OPERATIONS ORIGINALLY SUBMITTED IN
10-Q FOR SEPTEMBER 30, 2008.
1. As part of the liquidating damages associated with POOF
transaction (see note 13 above) 625,000 warrants, were issued on
June 30, 2008, with an excise price of $1.50. The Company should
have recognized an expense of $567,938 on June 30, 2008. The
expense was not recorded until July 2008 in the amount of
$462,859. These warrants were excised in a cashless transaction
on July 3, 2008. For the period ending June 30, 2008, the
financial statement will be restated to reflect the expense of
$567,938 and the September 30, 2008 period ending financials will
be revised to eliminate the expense of $462,859, the year to date
operating loss as of September 30, 2008 will be increased by
$105,079. The POOF warrants were valued using the Black-Scholes
option-pricing model with the following assumptions: Dividend
yield is 0; Expected Volatility is 79.1%; Risk-free interest rate
is 2.21%; Expected life 6 months.
2. Warrants issued for service to non-employees were inadvertently
not recorded in September 2008. 76,000 warrants were issued on
September 3, 2008 to non-employee and should have been expensed
to the P&L in the amount of $89, 680. These warrants were valued
using the Black-Scholes option-pricing model with the following
assumptions: Dividend yield is 0; Expected Volatility is 217.7%;
Risk-free interest rate is 2.24%; Expected life 2 years.
F-82
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
NOTE 20 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 2007 AND SEPTEMBER 30, 2008 (CONTINUED)
SUMMARY OF CHANGES TO THE CASH FLOW STATEMENT ORIGINALLY SUBMITTED IN 10-Q
FOR SEPTEMBER 30, 2007
1. The following account balances were reclassified: "Common stock
issued for services" was changed to $15,024,264 from $15,487,123
and "warrants issued for services" was revised to $742,993 from
$85,375 per the adjustments above.
Revisions to the original footnotes were made to include and add additional
information contained in the financial statements. The following footnotes note
were revised: 1, 2, 11, 12, 13, 16, 18, 19, 20 and 21.
The impact of these adjustments on the Company's financial results as originally
reported are summarized below:
Year Ended Year Ended
September 30, 2008 December 31, 2007
--------------------------------- ---------------------------------
As Reported As Restated As Reported As Restated
------------- ------------- ------------- -------------
Accumulated deficit $(38,269,448) $(38,464,207) $(17,418,997) $(17,418,997)
Net Loss from Operations $(20,850,451) $(21,045,210) $(10,486,886) $(10,486,886)
Basic and diluted Loss per share $ (0.49) $ (0.50) $ (0.40) $ (0.40)
Net Assets $ 7,059,182 $ 7,059,182 $ 866,239 $ 2,674,281
NOTE 21 - PREPAID SERVICES
During September and October 2007 the Company issued an aggregate 925,000
shares of stock to non-employees for services to be performed. The
agreements were valued at the fair value of the stock at the commitment
date in the amount of $2,581,500 as that was deemed to be the more readily
determinable value. Per the agreements the services are being provided
over one year. The fair value of the stock of $2,581,5000 is being
amortized over a 12 month period, the unamortized amount as of December
31, 2007 is $1,808,042. Through September 31, 2008 an amount of $1,808,042
of compensation expense was recorded related to the amortization of
prepaid services.
F-83
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 December 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.
The information below gives effect 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 Carbon Recovery 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 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
II-1
dated November 28, 2006 (the "Mobilestream Agreement") with Mobilestream Oil,
Inc. ("Mobilestream"). Under the Mobilestream Agreement, on January 3, 2007 the
Company issued to the Mobilestream the following: (i) 11,145,255 shares of the
Company's Common Stock (the "Mobilestream Acquisition 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 in a private placement to Frank G.
Pringle 35,236,188 shares of the Company's 2006 Series Convertible Preferred
Stock (the "2006 Mobilestream Acquisition 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.
On August 28, 2007 the Company issued 800,000 Common Stock Purchase
Warrants to each of Ademas Fund, LLLP (then known as Black Diamond Fund LLLP)
and Nutmeg Mercury Fund, LLLP 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.
II-2
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.
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 900,000 shares of its Common Stock to be held in escrow in
connection with the transaction, 250,000 of which were subject to purchase for
$250,000 and the remaining 6500,000 shares were 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, LLLP and Ademas Fund LLLP (formerly known as Black Diamond
Fund, LLLP), 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.
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.
II-3
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.
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 Ademas Fund LLLP (formerly known as Black Diamond
Fund, LLLP), 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
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.
II-4
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.
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.
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.
On October 7, 2008 the Company issued a total of 497,375 shares of its
Common Stock to a group of non-U.S. citizens for a total investment of $497,375,
cash was received in September 2008 was recorded as part of stock to be issued.
On October 15, 2008 the Company issued a total of 241,000 shares of its
Common Stock to a group of non-U.S. citizens for a total investment of $241,000,
cash was received in September 2008 was recorded as part of stock to be issued.
On October 15, 2008 the Company issued 60,000 shares of its Common Stock
to Kalvervo Pesso for consulting services valued at $75,000.
II-5
On October 15, 2008 the Company issued 125,000 shares of its Common Stock
to Private Capital Group Inc. for consulting services valued at $187,500.
On October 15, 2008 the Company sold 10,000 shares of its Common Stock to
private investor for $10,000.
On October 24, 2008 the Company issued 100,000 shares of its Common Stock
to Investor Advantage LLC for consulting services valued at $137,000.
On October 31, 2008 the Company issued 150,000 shares of its Common Stock
to Brian Ettinger for consulting services valued at $232,500.
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 Articles 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 1, 2001 (the "2001 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 2004 (the "2004 Registration Statement"), and incorporated
herein by reference.
3.1.2 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*.
3.1.7 Certificate of Designation for 2006 Series of Convertible Preferred
Stock of the Company*.
3.1.8 Amendment to Certificate of Designation for 2006 Series of Convertible
Preferred Stock of the Company*.
3.1.9 Certificate of Amendment to Articles of Incorporation of the Company,
filed as Exhibit 3.19 to Amendment No. 1 to the Registration Statement
on Form S-1, SEC File Number 333-151584, filed on October 22, 2008 (the
"POOF Registration Statement"), and incorporated herein by reference.
3.2 Company Bylaws, filed as Exhibit 3.2(iii) to the POOF Registration
Statement, and incorporated herein by reference.
4.1 Specimen Common Stock Certificate filed as Exhibit 4.1 to the Company's
2002 Registration Statement, 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*.
4.6.1 Form of Carbon Recovery Acquisition Class D Warrant dated September 26,
2006*.
4.6.2 Form of Carbon Recovery Acquisition Class E Warrant dated September 26,
2006*.
4.6.3 Form of Mobilestream Acquisition Warrant dated December 31, 2006*.
II-6
4.6.4 Black Diamond Fund, L.P. Warrant*.
4.6.5 Nutmeg/Mercury Fund, L.P. Warrant*.
4.6.6 Form of Augustine Warrant for George Birch*.
4.6.6.1 Form of Augustine Warrant for Jonathan Simon*.
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")*.
4.6.8 Terence Taylor Warrant*.
4.6.9 Form of 2008 private placement Warrant*.
4.6.10 Form of New Millenium PR Warrant, filed as Exhibit 4.6.10 to the POOF
Registration Statement and incorporated herein by reference.
4.6.11 Form of directors warrant, filed as Exhibit 4.6.11 to the POOF
Registration Statement and incorporated herein by reference.
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
on January 29, 2008, and incorporated herein by reference.
5.1 Opinion of Sol V. Slotnik, P.C., filed herewith.
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 July 15, 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 July 15, 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 99.1 to
the 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.
10.6 Agreement and Plan of Reorganization dated as of July 26, 2006 by and
between Global Resource Corporation and Carbon Recovery Corporation*.
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*.
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 dated September 22, 2006, filed on September
27, 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 on
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 10.2 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*.
II-7
10.11 Plan and Agreement of Reorganization dated as of November 28, 2006 by
and between the Company and Mobilestream Oil Corporation*.
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*.
10.12 Securities Purchase Agreement, dated as of December 21, 2007, by and
between the Company and Professional Offshore Opportunity Fund, Ltd.
("POOF")*.
10.13 Registration Rights Agreement dated as of December 21, 2007, by and
between the Company and POOF*.
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*.
10.15 Form of Subscription Agreement #1*.
10.16 Consulting agreement dated as of January 1, 2008 by and between 888
Corporation and the Company*.
10.17 Settlement agreement dated as of January 15, 2008 by and among Global
Resource Corporation, Patrick F. Hogan, Terence Taylor, Tomahawk
Trading Corp., and Frank G. Pringle*.
10.18 Employment agreement dated as of November 7, 2007 by and between
Jeffrey T. Kimberly and the Company*.
10.19 Consultant agreement dated as of November 26, 2007 by and between the
Company and Worldwide Strategic Partners, Inc.*.
10.20 Consultant agreement dated as of May 26, 2008 by and between the
Company and Worldwide Strategic Partners, Inc.*.
10.21 Investor relations agreement dated as of September 8, 2008 by and
between the Company and Paul J. Sweeney*.
10.22 Stock redemption agreement dated as of August 13, 2008 by and between
the Company and Frank G. Pringle, filed as Exhibit 10.1 to the
Company's Current Report on Form 8-K, dated August 13, 2008, filed on
August 18, 2008, and incorporated herein by reference.
10.23 Term sheet employment agreement dated September 23, 2008 by and between
the Company and Wayne Koehl, filed as Exhibit 10.1 to the Current
Report on Form 8-K, dated September 23, 2008, and filed on September
26, 2008, and incorporated herein by reference.
10.24 Term sheet employment agreement dated September 23, 2008 by and between
the Company and Jeffrey T. Kimberly filed as Exhibit 10.2 to the
Current Report on Form 8-K, dated September 23, 2008, and filed on
September 26, 2008, and incorporated herein by reference.
10.25 Term sheet employment agreement dated September 23, 2008 by and between
the Company and Jeffrey A. Andrews, filed as Exhibit 10.3 to the
Current Report on Form 8-K, dated September 23, 2008, and filed on
September 26, 2008, and incorporated herein by reference.
10.26 Summary of terms of proposed employment agreement (undated) by and
between the Company and Eric Swain, filed as Exhibit 10.1 to the
Company's Current Report on Form 8-K, dated September 24, 2008, filed
on October 2, 2008, and incorporated herein by reference.
10.27 Form of confidentiality agreement between the Company and each director
filed as Exhibit 10.2 to the Company's quarterly report on Form 10-Q
for the quarter ended September 30, 2008 filed on November 11, 2008
(the "September 30, 2008 Form 10-Q"), and incorporated herein by
reference.
10.28 Form of confidentiality agreement between the Company and each
executive officer, filed as Exhibit 10.3 to the September 30, 2008 Form
10-Q, and incorporated herein by reference.
10.29 Consultant agreement dated as of October 1, 2008 with LP (Origination)
Limited, filed as Exhibit 10.5 to the September 30, 2008 Form 10-Q, and
incorporated herein by reference.
10.30 Option agreement dated October 14, 2008 between the Company and Eric
Swain, filed as Exhibit 10.6 to the September 30, 2008 Form 10-Q, and
incorporated herein by reference.
10.31 Rescission agreement dated as of September 30, 2008 between the Company
and Wayne Koehl, filed as Exhibit 10.7 to the September 30, 2008 Form
10-Q, and incorporated herein by reference.
10.32 Severance agreement dated as of November 12, 2008 between the Company
and Frank G. Pringle, filed as Exhibit 10.1 to the Company's Current
Report on Form 8-K, dated November 12, 2008, filed on November 17, 2008
and incorporated herein by reference.
II-8
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 filed
herewith).
*Filed as an exhibit to the Registration Statement on Form S-1, SEC File Number
333-152118, filed on July 3, 2008.
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
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:
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(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 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.
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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 December 22,
2008.
(Registrant) GLOBAL RESOURCE CORPORATION
By (Signature and Title) /s/ 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 December 22, 2008
Eric Swain Chairman of the Board of Directors
(Principal Executive Officer)
/s/ Jeffrey J. Andrews
------------------------ Chief Financial Officer December 22, 2008
Jeffrey J. Andrews (Principal Financial and
Accounting Officer)
/s/ Fred A. Clark Director December 22, 2008
------------------------
Frederick A. Clark
/s/ Kim Thorne O'Brien Director December 22, 2008
------------------------
Kim Thorne O'Brien
/s/ Lincoln Jones III Director December 22, 2008
------------------------
Lincoln Jones III
Director
------------------------
Jonathan L. Simon
Director
------------------------
Paul J. Sweeney
/s/ Peter A. Worthington Director December 22, 2008
------------------------
Peter A. Worthington