As filed with the Securities and Exchange Commission on June 11, 2008
REGISTRATION NO. 333-_______
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GLOBAL RESOURCE CORPORATION
(Exact name of registrant as specified in charter)
NEVADA 3559 84-1565820
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
408 BLOOMFIELD DRIVE-UNIT # 1
WEST BERLIN, NJ 08091
(856) 767-5661
(Address, including zip code, and telephone number, including area code
of registrant's principal executive offices)
408 BLOOMFIELD DRIVE-UNIT # 1
WEST BERLIN, NJ 08091
(Address of principal place of business or intended principal place of business)
FRANK G. PRINGLE
President and Chief Executive Officer
408 BLOOMFIELD DRIVE-UNIT #1
WEST BERLIN, NJ 08091
(480) 219-5005
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
COPIES TO:
SOL V. SLOTNIK, P.C.
11 EAST 44TH STREET-19TH FLOOR
NEW YORK, NEW YORK 10017
(212) 687-1222
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this registration statement.
If any securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM REGISTRATION FEE
SECURITIES TO BE REGISTERED OFFERING PRICE PER AGGREGATE OFFERING
REGISTERED (2) (3) SHARE (1) PRICE
Common Stock Par value $.001 1,900,000 $2.10 $3,990,00 $157.20
Common Stock Par value, $.001 625,000 $2.10(4) $1,312,500 $52.50
(1) The price is estimated in accordance with Rule 457(c) under the
Securities Act of 1933, as amended, solely for the purpose of calculating the
registration fee and represents the average of the bid and asked prices of the
Common Stock on June 4, 2008 as reported on the Pink Sheets.
(2) 2,525,000 shares are being registered, of which 1,900,000 are issued
and outstanding and 625,000 are issuable upon conversion of certain warrants to
purchase shares of our common stock held by the selling security holder.
(3) In the event of a stock split, stock dividend or similar transaction
involving our shares of common stock, the number of shares and warrants
registered shall automatically be increased to cover the additional shares of
common stock issuable pursuant to Rule 416 under the Securities Act of 1933, as
amended.
(4) Pursuant to Rule 457(g) calculated based on the offering price of
common stock included in this offering.
The registrant herby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
SUBJECT TO COMPLETION DATED June --, 2008
The information in this prospectus is not complete and may be changed. The
selling security holders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
GLOBAL RESOURCE CORPORATION
1,900,000 shares of common stock
625,000 shares of common stock issuable upon exercise of warrants
This prospectus relates to the periodic offers and sales by the selling
security holder listed on page 43, or its transferees, of up to 1,900,000 shares
of our common stock already issued and outstanding, of which 1,000,000 are held
by the selling security holder, and an additional 900,000 shares are in escrow
and subject to release in accordance with the terms of the escrow agreement
under which they are held, and up to 625,000 shares issuable upon the exercise
of warrants held by the selling security holder. We will receive no proceeds
from the disposition of 1,000,000 outstanding shares of our common stock held by
the selling security holder, and we may receive up to a maximum of $250,000 if
the selling security holder chooses to purchase 250,000 of the 900,000 shares of
our common stock that are the subject of the escrow arrangement. We also may
receive up to $937,500 in gross proceeds in connection with the exercise of the
warrants held by the selling security holder.
For a description of the escrow agreement and the plan of distribution of the
shares of the selling security holder, please see pages 43 and 44, respectively,
of this prospectus.
Our common stock is quoted on the Pink Sheets under the symbol "GBRC.PK". On
June 4, 2008, the closing price of our common stock on the Pink Sheets was
$2.01 per share.
You should rely only on the information contained in this prospectus. We
have not, and the selling security holder has not, authorized anyone to provide
you with different information. If anyone provides you with different
information, you should not rely on it. We are not, and the selling security
holder is not, making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that the information
contained in this prospectus is accurate only as of the date on the front cover
of this prospectus. Our business, financial condition, results of operations and
prospects may have changed since that date. This prospectus is not an offer to
sell or solicitation of an offer to buy these securities in any circumstances
under which the offer or solicitation is unlawful.
OUR BUSINESS AND AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVE A HIGH
DEGREE OF RISK. PLEASE READ THE "RISK FACTORS" SECTION OF THIS PROSPECTUS WHICH
BEGINS ON PAGE 8.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities or passed upon the adequacy or accuracy
of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is June __, 2008.
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TABLE OF CONTENTS
Special Note Regarding Forward Looking Statements........................... 4
Prospectus Summary.......................................................... 4
Risk Factors................................................................ 8
Use of Proceeds............................................................. 18
Market Price of Common Stock and Other Stockholder Matters.................. 18
Management's Discussion and Analysis and Plan of Operation.................. 19
Business.................................................................... 24
Directors, Executive Officers, Promoters and Control Persons................ 29
Executive Compensation...................................................... 32
Security Ownership of Certain Beneficial Owners and Management ............. 39
Certain Relationships and Related Transactions.............................. 41
Selling Security Holder..................................................... 43
Plan of Distribution........................................................ 44
Legal Proceedings .......................................................... 47
Description of Securities................................................... 47
Experts..................................................................... 53
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities............................................................... 53
Where You Can Find More Information......................................... 54
Index to Financial Statements............................................... F-1
You should rely only on the information contained in this prospectus. We
have not authorized anyone, including any salesperson or broker, to give oral or
written information about this offering, our company, or the shares offered
hereby that is different from the information included in this prospectus. If
anyone provides you with different information, you should not rely on it.
Throughout this prospectus, the terms "we" "us" our" and "our company", the
"Company", refer only to Global Resource Corporation, a Nevada corporation,
unless the context otherwise requires.
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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This prospectus contains forward-looking statements, which reflect the
views of our management with respect to future events and financial performance.
These forward-looking statements are subject to a number of uncertainties and
other factors that could cause actual results to differ materially from such
statements. Forward-looking statements are identified by words such as
"anticipates," "believes," "estimates," "expects," "plans," "projects,"
"targets" and similar expressions. Readers are cautioned not to place undue
reliance on these forward-looking statements, which are based on the information
available to management at this time and which speak only as of this date. We
undertake no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. For a
discussion of some of the factors that may cause actual results to differ
materially from those suggested by the forward-looking statements, please read
carefully the information under "Risk Factors" beginning on page 8.
The identification in this document of factors that may affect future
performance and the accuracy of forward-looking statements is meant to be
illustrative and by no means exhaustive. All forward-looking statements should
be evaluated with the understanding of their inherent uncertainty. You may rely
only on the information contained in this prospectus.
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS; BUT IT DOES NOT CONTAIN ALL INFORMATION YOU SHOULD CONSIDER BEFORE
INVESTING IN OUR COMMON STOCK. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE
MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS INCLUDING THE NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS. READ THE ENTIRE PROSPECTUS BEFORE MAKING
AN INVESTMENT DECISION.
Company Summary:
We are a development stage company with patent pending proven microwave
technology that allows for removal of oil and alternative petroleum products at
very low cost from various resources, including shale deposits, tar sands,
capped oil wells, waste oil streams and tires, with significantly greater yields
and lower costs than are available using existing known technologies. The
process uses specific frequencies of microwave radiation to extract oils and
alternative petroleum products from secondary raw materials. 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 construction of plants
to exploit certain technology for decomposing petroleum-based materials by
subjecting them to variable frequency microwave radiation at specifically
selected frequencies for a time sufficient to at least partially decompose the
materials; (ii) the design, manufacture and sale of machinery and equipment
units, embodying the technology and focused on specific applications; and (iii)
the licensing of our technology to third parties to exploit that technology.
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For 9 months prior to the Carbon Recovery and Mobilestream asset acquisitions,
we were a shell corporation, and prior thereto we were engaged in various
businesses. For a description of our prior business history see:
"Business-History of the Company."
Our purchase of the assets of Carbon Recovery Corporation:
On or about July 26, 2006, we entered into a plan and agreement of
reorganization (the "CRC Acquisition Agreement") with Carbon Recovery
Corporation pursuant to which we agreed to purchase substantially all of the
assets of, and assume certain specified liabilities of, Carbon Recovery, in
exchange for the consideration described below. At the time of the acquisition,
Carbon Recovery was controlled by Mobilestream Oil, Inc. ("Mobilestream") which
in turn was controlled by Frank G. Pringle, our Chairman and President. We
issued to Carbon Recovery 48,688,996 shares of our common stock, and we also
assumed a convertible debenture and accrued interest in the amount of $120,682.
Subsequently, we eliminated the convertible debenture by issuing 2,681,837 of
our common stock to the debenture holder. We also issued to Carbon Recovery
3,908,340 Class B warrants, 1,397,600 Class D warrants and 1,397,600 Class E
warrants (together the "Carbon Recovery Warrants") to replace the identical
number of outstanding warrant classes of Carbon Recovery. The Class B and Class
D warrants have an exercise price of $2.75 and the Class E warrants have an
exercise price of $4.00. All of the warrants were originally scheduled to expire
at different times in 2007 and 2008, but our Board has extended the expiration
date for all of the Carbon Recovery Warrants to December 31, 2008. See
"Description of Securities-Warrants."
The parties intended that the acquisition of Carbon Recovery in the CRC
Acquisition Agreement be treated as a "C" reorganization under the Internal
Revenue Code of 1986 as amended (the "IRC"). No Carbon Recovery stockholder was
a party to the CRC Acquisition Agreement. In the CRC Acquisition Agreement,
Carbon Recovery agreed that it would liquidate, and would distribute the shares
and warrants received as consideration for the sale of the assets to its
shareholders. We covenanted that we would file a registration statement for the
shares of our common stock and warrants (and shares of our common stock issuable
upon conversion of the warrants) issued to Carbon Recovery in order to permit
the distribution. Carbon Recovery agreed to deposit our common stock and the
three classes of our Carbon Recovery Warrants in a liquidating trust.
Following the closing of the Carbon Recovery acquisition on or about September
22, 2006, Carbon Recovery and Olde Monmouth Stock Transfer Co., Inc., our
transfer agent, entered into a liquidating trust agreement (the "CRC Liquidating
Trust Agreement") in which Olde Monmouth agreed to act as the Liquidating
Trustee under the Carbon Recovery Liquidating Trust Agreement for the shares of
our common stock and our Carbon Recovery Warrants. The beneficiaries of the
Carbon Recovery Liquidating Trust are the stockholders of Carbon Recovery. We
have filed a registration statement on Form S-1 for the shares of our common
stock, the Carbon Recovery Warrants and the shares of our common stock
underlying the Carbon Recovery Warrants with the Securities and Exchange
Commission ("SEC"). The ability of the Trustee to distribute the shares of the
Company's common stock and the Warrants for the Carbon Recovery acquisition
depends upon the effectiveness of that registration statement.
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Our purchase of the assets of Mobilestream Oil, Inc.:
On December 31, 2006, we acquired the assets of Mobilestream Oil, Inc.
("Mobilestream")pursuant to a plan and agreement of reorganization dated
November 28, 2006 (the "Mobilestream Acquisition Agreement") between the Company
and Mobilestream. At the time of the Mobilestream acquisition, Mobilestream was
controlled by Frank G. Pringle, the Company's Chairman and President. No
Mobilestream stockholder was a party to the Mobilestream Acquisition Agreement.
We issued to Mobilestream 11,145,225 shares of our Common Stock. We also issued
to Mobilestream 35,236,188 shares of our 2006 Series of Convertible Preferred
Stock. Lastly, we issued common stock purchase warrants (the "Mobilestream
Warrants") on the basis of 1 Mobilestream Warrant for each 3 shares of either
Mobilestream common stock or preferred stock exercisable at $4.75 per share for
a period ending on December 31, 2007. Subsequently, our Board of Directors
extended the exercise date of the Mobilestream Warrants to December 31, 2008. We
also assumed Mobilestream's liabilities which were extremely minimal.
Pursuant to the terms of the Mobilestream Acquisition Agreement, we were to have
issued 70,472,376 shares of our 2006 Series of Convertible Preferred Stock to
Mobilestream for distribution to the holder of Mobilestream's 2006 Series of
Convertible Preferred Stock. The sole holder of Mobilestream's 2006 Series of
Convertible Preferred Stock was Frank G. Pringle, our Chairman, 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). 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. Our Chairman, President and CEO, Frank G. Pringle
is the holder of all but 5,000 of our 2006 Series of Convertible Preferred
Stock.
Under the terms of the Company's 2006 Series Mr. Pringle has the right to vote
70,466,376 shares of the 2006 Series together with the common stock for the
election of directors or for any other matter presented to our stockholders for
a vote, a total of 59.8% of all shares entitled to vote. Furthermore, Mr.
Pringle is entitled to elect a majority of our Board of Directors as long as he
owns shares of 2006 Series of Convertible Preferred Stock. See "Risk
Factors-Risks Related to our Shares," Security Ownership of Certain Beneficial
Owners and Management" and "Description of Securities-Preferred Stock."
The Mobilestream assets we acquired consisted, essentially, of only (1) the 4
patents pending for the technology together with the Combined Technology License
and (2) 37,5000,000 shares of our own common stock, which were issued to
Mobilestream, as a stockholder of Carbon Recovery, at the time of the closing of
the Carbon Recovery acquisition in September 2007. These 37,500,000 shares were
cancelled as part of the Mobilestream acquisition.
6
Mobilestream was a development stage company which developed certain proprietary
technology and related custom software for the use of microwaves for breaking
down petroleum-based products, such as used tires, into their component parts,
and capturing those components for resale. Mobilestream licensed this technology
to Carbon Recovery Corporation, whose assets we previously acquired in September
2006. The Mobilestream acquisition by the Company re-united the rights to the
technology in one entity, the Company.
The parties intended that the acquisition of Mobilestream would qualify as a "D"
Reorganization under Section 368(a)(1)(D) of the Internal Revenue Code. In the
Mobilestream Acquisition Agreement, Mobilestream agreed that it would liquidate,
and would distribute the shares and warrants received as consideration for the
sale of its assets to its shareholders. We covenanted that we would file a
registration statement for the shares of our common stock and the Mobilestream
Warrants (and shares of our common stock issuable upon conversion of the
Mobielstream Warrants) issued to Mobilestream in order to permit the
distribution. Mobilestream agreed to deposit our common stock and the
Mobilestream Warrants in a liquidating trust.
Following the closing of the Mobilestream acquisition, on or about December 29,
2006, Mobilestream and Olde Monmouth Stock Transfer Co., Inc., our transfer
agent, entered into a liquidating trust agreement (the "Mobilestream Liquidating
Trust Agreement") in which Olde Monmouth agreed to act as the Liquidating
Trustee under the Mobilestream Liquidating Trust Agreement for the shares of our
common stock and the Mobilestream Warrants. The beneficiaries of the
Mobilestream Liquidating Trust are the stockholders of Mobilestream. We have
filed a registration statement on Form S-1 for the shares of our common stock,
the Mobilestream Warrants and the shares of our common stock underlying the
Mobilestream Warrants with the SEC. The ability of the Trustee to distribute the
shares of the Company's common stock and the Warrants for the Mobilestream
acquisition depends upon the effectiveness of that registration statement.
The Offering:
Key Facts of the Offering:
Shares of common stock being registered
(including 625,000 shares issuable upon
the exercise of warrants) 2,525,000 shares of common stock
Total shares of common stock outstanding
as of May 23, 2008 47,378,713
Total proceeds raised by us from the We will not receive any proceeds
disposition of the common stock by the from the disposition of
selling security holder 1,000,000 shares of our common
stock by the selling security
holder or its transferees. There
are an additional 900,000 shares
of our common stock in escrow,
and if the Company does not
fulfill certain conditions by
June 30, 2008 then (i) the
selling security holder may
exercise its right to purchase
250,000 of the escrowed shares
for $1.00 per share, and we will
receive $250,000 and (ii the
remaining 650,000 shares will be
distributed to the selling
security holder without
consideration. If the escrow
conditions are met, then all
900,000 shares will be returned
to the Company for cancellation.
See "Selling Security Holder."
We also may receive up to
$937,500 in gross proceeds from
the exercise of warrants held by
the selling security holder.
Our offices are currently located at 408 Bloomfield Drive, Unit #1, West
Berlin, New Jersey 08091, and our telephone number is (856) 767-5661. We have a
website at www.globalresourcecorp.com but the contents of the website and all
hyperlinks therefrom are expressly excluded from this prospectus.
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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.
We cannot be certain our strategy will be successful or that we will
successfully address these risks. In the event that we do not successfully
address these risks, our business, prospects, financial condition, and results
of operations could be materially and adversely affected.
8
WE ARE A DEVELOPMENT STAGE COMPANY WITH A HISTORY OF LOSSES AND CAN
PROVIDE NO ASSURANCE OF OUR FUTURE OPERATING RESULTS.
We are a development stage company with no revenues from our contemplated
principal business activity. We have incurred net losses and negative cash flows
since inception and expect such losses and negative cash flows to continue in
the foreseeable future. We currently have no product revenues, and may not
succeed in developing or commercializing any products which will generate
product or licensing revenues. We do not know when we will have any products on
the market, and each such product will be manufactured only upon receipt of an
order. In addition, the sale completion for each of our machines requires a
process of testing, during which our products could fail. We may not be able to
enter into agreements with 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 financial statements were prepared on the assumption that we will
continue as a going concern. At December 31, 2007, we reported that we had
incurred substantial net losses for the years ended December 31, 2007 and 2006
and that we had not commenced operations to have a revenue stream. These factors
raised substantial doubt about our ability to continue as a going concern at
that time. However, during the four months ended April 30, 2008, we raised over
$9.1 million in cash through a private placement of units consisting of common
stock and warrants. 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 for
the next 36 months from the date of this prospectus. However, we plan to
increase sales and marketing efforts, research and development, and
administrative expenses relating to our business in 2008. 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."
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WE WILL NEED ADDITIONAL CAPITAL IN ORDER TO SATISFY OUR BUSINESS
OBJECTIVES.
To date, we have financed our operations principally through offerings of
securities exempt from the registration requirements of the Securities Act. We
believe that our available resources will be sufficient to meet our anticipated
working capital needs for the next 36 months from the date of this prospectus,
assuming no change in our monthly operating expenses. 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.
WE CAN PROVIDE NO ASSURANCE OF THE SUCCESSFUL AND TIMELY DEVELOPMENT OF
OUR PRODUCTS.
Our products are at various stages of research and development. Further
development and extensive testing will be required to determine their technical
feasibility and commercial viability. Our success will depend on our ability to
10
achieve scientific and technological advances and to translate such advances
into reliable, commercially competitive products on a timely basis. Products
that we have developed and may in the future develop are not likely to be
commercially available for some time because of the time and expense in building
an individual machine. The proposed development schedules for our products may
be affected by a variety of factors, including technological difficulties,
proprietary technology of others, and changes in governmental regulation, many
of which will not be within our control. Any delay in the development,
introduction, or marketing of our products could result either in such products
being marketed at a time when their cost and performance characteristics would
not be competitive in the marketplace or in the shortening of their commercial
lives. In light of the long-term nature of our projects, the technology
involved, and the other factors described elsewhere in "Risk Factors", there can
be no assurance that we will be able to complete successfully the development or
marketing of any new products.
WE LACK THE RESOURCES AND EXPERIENCE NEEDED TO MANUFACTURE OUR PRODUCTS.
We currently lack the resources and experience needed to manufacture any
of our products. Our ability to conduct trials and commercialize our products
will depend, in part, on our ability to manufacture our products, either
directly or, as currently intended, through contract manufacturers, at a
competitive cost and in accordance with current good manufacturing practices and
safety, environmental, health and other regulatory requirements. We anticipate
that we will be required to depend on contract manufacturers or collaborative
partners for the manufacturing of our products during the testing phases and
intend to use contract manufacturers to produce any products we may eventually
commercialize. We have identified and entered into an arrangement with one such
manufacturer thus far. If we are not able to obtain or maintain contract
manufacturing on commercially reasonable terms, we may not be able to conduct or
complete trials of our machines or commercialize our products. We have
identified multiple suppliers for most if not all of the components of our
machines, although we can provide no assurance that these components will be
available when needed on commercially reasonable terms.
In order to succeed, we ultimately will be required to either develop such
manufacturing capabilities or to outsource manufacturing on a long-term basis to
third parties. We can provide no assurance that third parties will be interested
in manufacturing our products on a timely basis, on commercially reasonable
terms, or at all. If we are unable to establish manufacturing capabilities
either by developing our own organization or by entering into agreements with
others, we may be unable to commercialize our products, which would have a
material adverse effect upon our business, prospects, financial condition, and
results of operations. Further, in the event that we are required to outsource
these functions on disadvantageous terms, we may be required to pay a relatively
large portion or our net revenue to these organizations, which would have a
material adverse effect upon our business, prospects, financial condition, and
results of operations.
11
IN THE FUTURE, WE MAY RELY UPON COLLABORATIVE AGREEMENTS WITH LARGE
INDUSTRIAL AND MANUFACTURING COMPANIES.
In the future, we may rely heavily on collaborative agreements with large
industrial and manufacturing companies, governments, or other parties for our
revenues. Our inability to obtain any one or more of these agreements, on
commercially reasonable terms, or at all, or to circumvent the need for any such
agreement, could cause significant delays and cost increases and materially
affect our ability to develop and commercialize our products.
WE HAVE LIMITED SALES, MARKETING, AND DISTRIBUTION CAPABILITIES. WE WILL
BE REQUIRED TO EITHER DEVELOP SUCH CAPABILITIES OR TO OUTSOURCE THESE
ACTIVITIES TO THIRD PARTIES.
We currently have limited sales, marketing and distribution capabilities.
In order to succeed, we ultimately will be required to either develop such
capabilities or to outsource these activities to third parties. We can provide
no assurance that third parties will be interested in acting as our outsourced
sales, marketing, and distribution arms on a timely basis, on commercially
reasonable terms, or at all. If we are unable to establish sales, marketing, or
distribution capabilities either by developing our own organization or by
entering into agreements with others, we may be unable to successfully sell any
products that we are able to begin to commercialize, which would have a material
adverse effect upon our business, prospects, financial condition, and results of
operations. Further, in the event that we are required to outsource these
functions on disadvantageous terms, we may be required to pay a relatively large
portion of our net revenue to these organizations, which would have a material
adverse effect upon our business, prospects, financial condition, and results of
operations.
WE RELY UPON OUR PATENT APPLICATIONS TO PROTECT OUR TECHNOLOGY. WE MAY BE
UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, AND WE MAY BE LIABLE
FOR INFRINGING THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Our ability to compete effectively will depend on our ability to maintain
the proprietary nature of our technologies. We currently hold several pending
patent applications in the United States and corresponding patent applications
filed in certain other countries covering the proposed use of microwaves for the
recovery of hydrocarbons and fossil fuels. Further, we intend to rely on a
combination of trade secrets and non-disclosure, and other contractual
agreements and technical measures to protect our rights in our technology. We
intend to depend upon confidentiality agreements with our officers, directors,
employees, consultants, and subcontractors, as well as collaborative partners,
to maintain the proprietary nature of our technology. These measures may not
afford us sufficient or complete protection, and others may independently
develop technology similar to ours, otherwise avoid our confidentiality
12
agreements, or produce patents that would materially and adversely affect our
business, prospects, financial condition, and results of operations. We believe
that our technology is not subject to any infringement actions based upon the
patents of any third parties; however, our technology may in the future be found
to infringe upon the rights of others. Others may assert infringement claims
against us, and if we should be found to infringe upon their patents, or
otherwise impermissibly utilize their intellectual property, our ability to
continue to use our technology or the licensed technology could be materially
restricted or prohibited. If this event occurs, we may be required to obtain
licenses from the holders of this intellectual property, enter into royalty
agreements, or redesign our products so as not to utilize this intellectual
property, each of which may prove to be uneconomical or otherwise impossible.
Licenses or royalty agreements required in order for us to use this technology
may not be available on terms acceptable to us, or at all. These claims could
result in litigation, which could materially adversely affect our business,
prospects, financial condition, and results of operations.
The patent position of petroleum extraction and decomposition technology
firms is generally uncertain and involves complex legal and factual questions.
We do not know whether any of our current or future patent applications will
result in the issuance of any patents. Even issued patents may be challenged,
invalidated or circumvented. Patents may not provide a competitive advantage or
afford protection against competitors with similar technology. Competitors or
potential competitors may have filed applications for, or may have received
patents and may obtain additional and proprietary rights to processes
competitive with ours. In addition, laws of certain foreign countries do not
protect intellectual property rights to the same extent as do the laws of the
United States or Canada.
Patent litigation may occur in our industry and we cannot predict how this
will affect our efforts to form strategic alliances, conduct testing or
manufacture and market any products under development. If challenged, our
pending patents may not be held valid. We could also become involved in
interference proceedings in connection with one or more of our patent
applications to determine priority of invention. If we become involved in any
litigation, interference or other administrative proceedings, we will likely
incur substantial expenses and the efforts of our technical and management
personnel will be significantly diverted. In addition, an adverse determination
could subject us to significant liabilities or require us to seek licenses that
may not be available on favorable terms, if at all. We may be restricted or
prevented from manufacturing and selling our products in the event of an adverse
determination in a judicial or administrative proceeding or if we fail to obtain
necessary licenses.
13
Our commercial success will also depend significantly on our ability to
operate without infringing the patents and other proprietary rights of third
parties. Patent applications are, in many cases, maintained in secrecy until
patents are issued. The publication of discoveries in the scientific or patent
literature frequently occurs substantially later than the date on which the
underlying discoveries were made and patent applications are filed. In the event
of infringement or violation of another party's patent, we may be prevented from
pursuing product development or commercialization. See "Business--Patents and
Licenses".
WE CAN PROVIDE NO ASSURANCE THAT OUR PRODUCTS WILL OBTAIN REGULATORY
APPROVALS AT OR PRIOR TO THE TIME OF INSTALLATION.
The installation of any of our products at a customer site may require the
prior approval of various federal and state regulatory authorities governing
such areas as the environment, hazardous waste, health and worker safety. We
cannot predict with any certainty the amount of time necessary to obtain such
approvals and whether any such approvals will ultimately be granted. Operational
trials of our built to scale machines as opposed to laboratory scale models may
reveal that one or more of our products are ineffective or unsafe, in which
event further development of such products could be seriously delayed or
terminated. Delays in obtaining any necessary regulatory approvals of any
proposed product and failure to receive such approvals would have an adverse
effect on the product's potential commercial success and on our business,
prospects, financial condition, and results of operations. In addition, it is
possible that a product may be found to be ineffective or unsafe due to
conditions or facts which arise after development has been completed and
regulatory approvals have been obtained. In this event we may be required to
withdraw such product from the market. See "Business - Governmental Regulation".
WE DEPEND UPON OUR SENIOR MANAGEMENT AND SKILLED PERSONNEL AND THEIR LOSS
OR UNAVAILABILITY COULD PUT US AT A COMPETITIVE DISADVANTAGE.
We currently depend upon the efforts and abilities of our senior
executives, as well as the services of other key personnel. The loss or
unavailability of the services of any of these individuals for any significant
period of time could have a material adverse effect on our business, prospects,
financial condition, and results of operations. We have purchased "Key Man"
insurance policies for Frank G. Pringle, our Chairman, President and CEO (in the
amount of $6,000,000, of which $2,000,000 is payable to his wife and the other
$4,000,000 is payable to the Company) but not for any other 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.
14
RISKS RELATED TO OUR SHARES
IN RECENT YEARS, THE STOCK MARKET IN GENERAL HAS EXPERIENCED PERIODIC
PRICE AND VOLUME FLUCTUATIONS. THIS VOLATILITY HAS HAD A SIGNIFICANT
EFFECT ON THE MARKET PRICE OF SECURITIES ISSUED BY MANY COMPANIES FOR
REASONS OFTEN UNRELATED TO THEIR OPERATING PERFORMANCE. THESE BROAD MARKET
FLUCTUATIONS MAY ADVERSELY AFFECT OUR STOCK PRICE, REGARDLESS OF OUR
OPERATING RESULTS. THE MARKET PRICE OF OUR COMMON STOCK MAY FLUCTUATE
SIGNIFICANTLY, AND IT MAY BE DIFFICULT TO SELL OUR SHARES OF COMMON STOCK
WHEN YOU WANT OR AT PRICES YOU FIND ATTRACTIVE.
The price of our common stock is quoted on the Pink Sheets and constantly
changes. We expect that the market price of the common stock will continue to
fluctuate. These fluctuations may result from a variety of factors, many of
which are beyond our control. These factors include:
o quarterly variations in our financial results;
o operating results that vary from the expectations of management,
securities analysts and investors;
o changes in expectations as to our business, prospects, financial
condition, and results of operations;
o announcements by us or our competitors of material developments;
o the operating and securities price performance of other companies
that investors believe are comparable to us;
o future sales of our equity or equity-related securities;
o changes in general conditions in our industry and in the economy,
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.
15
FUTURE SALES OF COMMON STOCK OR THE ISSUANCE OF SECURITIES SENIOR TO OUR
COMMON STOCK OR CONVERTIBLE INTO, OR EXCHANGEABLE OR EXERCISABLE FOR, OUR
COMMON STOCK COULD MATERIALLY ADVERSELY AFFECT THE TRADING PRICE OF THE
COMMON STOCK, AND OUR ABILITY TO RAISE FUNDS IN NEW EQUITY OFFERINGS.
Future sales of substantial amounts of our common stock or other
equity-related securities in the public market or privately, or the perception
that such sales could occur, could adversely affect prevailing trading prices of
our common stock and could impair our ability to raise capital through future
offerings of equity or other equity-related securities. We can make no
prediction as to the effect, if any, that future sales of shares of common stock
or equity-related securities, or the availability of shares of common stock for
future sale, will have on the trading price of our common stock. However, it
should be noted that upon the effectiveness of this registration statement,
there will immediately be up to an additional 1,900,000 free-trading shares of
our common stock issued and outstanding and, subject to exercise of the
warrants, another 625,000 shares of our common stock that could be introduced
into the public markets during the next 36 months. Furthermore, we have already
filed a registration statement 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. Finally, under the terms of other private placement transactions
we have closed, we are required to register up to an additional 400,000 shares
of our common stock within the next 60 days.
OUR COMMON STOCK IS SUBJECT TO THE PENNY STOCK REGULATIONS THAT IMPOSE
RESTRICTIONS ON THE MARKETABILITY OF OUR COMMON STOCK. AS A CONSEQUENCE,
THE ABILITY OF OUR STOCKHOLDERS TO SELL SHARES OF OUR COMMON STOCK COULD
BE IMPAIRED.
The Securities and Exchange Commission (the "Commission") has adopted
regulations that generally define a "penny stock" to be an equity security that
has a market price of less than $5.00 per share or an exercise price of less
than $5.00 per share subject to certain exceptions that are not applicable to
our company at present. Our common stock is subject to the penny stock rules
that impose additional sales practice requirements on broker-dealers who sell
these securities to persons other than established customers and accredited
investors. The regulations require that prior to any transaction involving a
penny stock, a risk disclosure schedule must be delivered to the buyer
explaining the penny stock market and its risks. For transactions covered by
these rules, the broker-dealer must make a special suitability determination for
the purchase, and must have received the purchaser's written consent to the
transaction prior to sale. As such the market liquidity for the common stock
will be limited to the ability of broker-dealers to sell it in compliance with
the above-mentioned disclosure requirements.
16
You should be aware that, according to the Commission, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include:
o control of the market for the security by one or a few
broker-dealers;
o "boiler room" practices involving high-pressure sales tactics;
o manipulation of prices through prearranged matching of purchases and
sales;
o the release of misleading information;
o excessive and undisclosed bid-ask differentials and markups by
selling broker-dealers; and
o dumping of securities by broker-dealers after prices have been
manipulated to a desired level, which hurts the price of the stock
and causes investors to suffer loss.
We are aware of the abuses that have occurred in the penny stock market.
Although we do not expect to be in a position to dictate the behavior of the
market or of broker-dealers who participate in the market, we will strive within
the confines of practical limitations to prevent such abuses with respect to our
common stock.
ONE EXISTING SHAREHOLDER CURRENTLY OWNS MORE THAN 59.8% OF OUR VOTING STOCK,
AND, AS A RESULT, YOU WILL HAVE MINIMAL INFLUENCE OVER SHAREHOLDER DECISIONS.
Our Chairman, President and CEO, Frank G. Pringle, presently owns directly
and through one or more affiliated entities, almost 60% of all of our issued and
outstanding voting stock through his ownership of shares of common stock and
35,231,188 shares of our 2006 Series of Convertible Preferred Stock. Under the
terms of the 2006 Series, Mr. Pringle has 2 votes per share of Convertible
Preferred Stock, a total of 70,462,376 votes, and votes together with the common
stock as a single class. See "Security Ownership of Certain Beneficial Owners
and Management." In addition, under the terms of our 2006 Series of Convertible
Preferred Stock ("2006 Series Preferred"), Mr. Pringle has the right to elect a
majority of our Board of Directors until such time as he converts all of the
2006 Series Preferred into shares of our common stock. Furthermore, prior to
January 1, 2009 Mr. Pringle may not convert that number of 2006 Series Preferred
Shares as will result in his ownership of more than 4.9% of all of the issued
and outstanding shares of the Company's common stock. See "Description of
Securities-Preferred Shares." As a result, Mr. Pringle will retain significant
control of the Company in the future and will have significant influence over
the management and affairs of our business. Mr. Pringle will also exert
considerable, ongoing influence over matters subject to stockholder approval,
including the election of directors and significant corporate transactions, such
as a merger, sale of assets or other business combination or sale of our
business. This concentration of ownership may have the effect of delaying,
deferring, or preventing a change in control, impeding a merger, consolidation,
takeover or other business combination involving us, or discouraging a potential
acquirer from making a tender offer or otherwise attempting to obtain control of
our business, even if such a transaction would benefit other shareholders.
17
WE HAVE NEVER PAID ANY CASH DIVIDENDS BECAUSE WE HAVE NEVER HAD ANY
EARNINGS, AND WE WILL NOT PAY CASH DIVIDENDS IN THE FORESEEABLE FUTURE.
We have never paid any cash dividends on our common stock since we began
our microwave technology related business operations because we have never had
earnings from which any such dividends could be declared. Assuming we attain
earnings in the future, we do not intend to pay cash dividends. We intend to
retain future earnings, if any, for reinvestment in the development and
expansion of our business. Any credit agreements which we may enter into with
institutional lenders or otherwise may restrict our ability to pay dividends.
Whether we pay cash dividends in the future will be at the discretion of our
board of directors and will be dependent upon our financial condition, results
of operations,capital requirements, and any other factors that the board of
directors decides is relevant. See "Dividend Policy" and "Description of
Securities - Common Stock".
USE OF PROCEEDS
We will not receive any proceeds from the disposition of 1,250,000 shares
of our common stock by the selling security holder or its transferees. However,
there are an additional 900,000 shares of our common stock in escrow, and if the
Company does not fulfill certain conditions by June 30, 2008 then (i) the
selling security holder may exercise its right to purchase 250,000 of the
escrowed shares for $1.00 per share, and we will receive $250,000 and (ii) the
remaining 650,000 shares will be distributed to the selling security holder
without consideration. If the escrow conditions are met, then all 900,000 shares
will be returned to the Company for cancellation. See "Selling Security Holder."
We also may receive up to $937,500 in gross proceeds from the exercise of
warrants held by the selling security holder. 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 "GRBC.PK." From September
2004 to April 2007 our common stock traded on the OTCBB. In April 2007 our
common stock was delisted from the OTCBB for failure to satisfy applicable
maintenance criteria. The following table sets forth quarterly high and low bid
prices for the Common Stock for the periods presented, as reported by the OTCBB
and, since April 2007, the Pink Sheets. Quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions. We consider our stock to be "thinly-traded" and
any reported sales prices may not be a true market based valuation of the stock.
Fiscal Year Ended December 31, 2005
HIGH BID LOW BID
First Quarter* $.047 $.006
Second Quarter* .074 .011
Third Quarter* .034 .013
Fourth Quarter* .0265 .012
Fiscal Year Ended December 31, 2006
First Quarter* .035 .013
Second Quarter* .032 .015
Third Quarter 3.00 1.75
Fourth Quarter 4.60 1.10
Fiscal Year Ended December 31, 2007
First Quarter
Second Quarter 2.43 0.70
Third Quarter 5.13 1.55
Fourth Quarter 3.59 1.73
Fiscal Year Ending December 31, 2008
First Quarter 3.50 1.56
*This period was prior to the 1 for 100 reverse stock split of our common stock
which became effective on August 14, 2006, following which there were only
72,150 shares of our common stock issued and outstanding. On September 22, 2006
the Company acquired the assets of Carbon Recovery Corporation by the issuance
of 48,188,996 shares of its common stock. On December 31, 2006 the Company
acquired the assets of Mobilestream Oil, Inc. by the issuance of 11,145,225
shares of its common stock; however, the Mobilestream acquired assets included
37,000,000 shares of our own common stock, all of which have been cancelled. As
of May 23, 2008 our issued and outstanding shares of common stock total
47,378,713 shares.
18
Shares eligible for future sale could depress the price of our common
stock, thus lowering the value of a buyer's investment. Sales of substantial
amounts of our common stock, or the perception that such sales could occur,
could adversely affect prevailing market prices for shares of our common stock.
On June 4, 2008 the prices of our common stock were $2.20_high, $2.01
low and $2.01 close as quoted on the Pink Sheets.
Holders
As of May 23, 2008 there were approximately 309 record holders of our
common stock.
Dividends
We have never paid a cash dividend on our common stock because we have
never had earnings from our current microwave technology based business from
which any dividend could be paid. Assuming we have earnings in the future, we
anticipate that any such earnings will be retained for use in our business.
Accordingly, we do not anticipate the payment of any cash dividends in the
foreseeable future.
MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following discussion of our financial condition and results of
operations should be read in conjunction with our Financial Statements and Notes
and the other financial information included elsewhere in this prospectus.
Overview
Since the acquisitions of the assets of Carbon Recovery and Mobilestream
in 2006, our business became, and continues to be: (i) the construction of
plants to exploit certain technology for decomposing petroleum-based materials
by subjecting them to variable frequency microwave radiation at specifically
selected frequencies for a time sufficient to at least partially decompose the
materials; (ii) the design, manufacture and sale of machinery and equipment
units, embodying the technology and focused on specific applications; and (iii)
the licensing of third parties to exploit that technology.
Plan of operation
We have not had any revenues from operations since the closing of the
asset acquisitions of Carbon Recovery Corporation in September 2006 and
Mobilestream Oil, Inc. in December 2006. Our immediate predecessors in interest
never received any revenues from their respective businesses before we acquired
their assets. Prior to September 2006, all revenues we received from operations
were derived from lines of business unrelated to our current activities, and in
which we no longer have any ownership interest or other participation. See
"Business-History of the Company." We have financed our operations principally
through private sales of equity securities, and convertible notes and
debentures. In 2007 we raised net proceeds of $1,168,461 through the sale of
1,519,564 shares of our common stock.
As of March 31, 2008, our total current assets were $7,027,165, of which
cash and cash equivalents were $6,665,654. As of March 31, 2008, our total
current liabilities were $5,384,376 and our total liabilities were $5,425,080.
19
We have no manufacturing capability of our own. Accordingly, we have
entered into an agreement with a manufacturing facility in the Midwest for the
manufacture of our machines. We are expecting completion of our first GRFR model
1 ton microwave reactor automotive shredded residual (ASR) processing machine by
June 30, 2008. This machine is designed to apply our microwave technology
to the decomposition of tires as waste and to retrieve usable and saleable
components therefrom in the form of carbon, electricity, and gas.
We have begun our marketing efforts in various industry sectors. We have
hired dedicated sales and marketing personnel. We have submitted several
proposals to build one or more forms of microwave reactor ASR processing
machines with varying processing speeds. We reasonably expect to sign our first
contract for a GRFR 10-ton microwave reactor ASR processing machine for
application in the tire recycling industry by October 31, 2008. We are also in
negotiation with a company in the oil industry concerning funding for
construction and testing of a microwave processing machine to decompose
hydrocarbons in a different segment of the petroleum materials market. If the
results of the operation of this machine are successful, then the company will
have the right to enter into a five year exclusive agreement with our company
for the right to purchase, market and distribute machines that perform in this
segment of the market place.
We have entered into exclusive distributorship and sales representative
agreements with several companies. Each agreement is limited in the type of
equipment and process that is the subject of the exclusive arrangement,
geographical area, duration and commissions or other payment terms for sourcing
potential customers for our equipment. Under each agreement, a distributor or
other representative is paid only from the proceeds we receive from an actual
sale or lease transaction.
We also intend to consider the development of additional machines and
equipment using our core technology in areas outside of the tire recycling
industry, but, as discussed in the section on our business, we will require the
assistance of outside capital equity investments on a large scale, or we will
need to align ourselves with joint venture or strategic alliance partners in
order to have the funds available to exploit these other potential applications.
We plan to continue to finance our operations with the sale of additional
common stock or sale of convertible securities. We also have alternative plans
which include, among others, reducing our expenses to the required level based
on our financial situation. Although we raised approximately $9,100,000 during
the first four months of 2008 from the private placement of our common stock,
there are no assurances that we will be successful in obtaining an adequate
level of financing needed for the long term research, development and
commercialization of our planned products.
20
We estimate that we can satisfy our current operational cash requirements
and will not have to raise additional funds during the next 36 months. 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,
the demand for our product and the costs of product sales, and the receipt of
orders for our products. Our actual operations may be affected by increases in
our operating expenses, increases in our payroll and staff related matters,
technological or engineering difficulties, deviation from the timetables for
experimentation and testing trials, unexpected regulatory problems, delays in
receipt and acceptance of orders for our machines, low demand for our products
or the effects of competition.
Through April 30, 2008, we raised approximately $9,100,000 from the sale
of our common stock and warrants to purchase shares of our common stock in
private placements. We raised $1,250,000 from a private placement of our common
stock and warrants in December 2007. The investor, in its sole discretion, may
choose to purchase an additional 250,000 shares of our common stock currently in
escrow for $250,000, and will receive 400,000 shares without additional
consideration if we do not met certain conditions in the escrow agreement. We
expect to continue to raise funds through the private sale of convertible debt
or equity in our Company during the remainder of 2008, but as yet no terms have
been established for the sale of such debt and equity and there can be no
assurance we will be successful in raising required capital.
As an additional, but not complete, alternative we may enter into
strategic alliances joint ventures and similar arrangements for the development,
testing, construction, marketing and sale of our machines. In each such
arrangement we will be required to share our revenues from sale of our products
with the other party to the arrangement. The methods, terms and amounts of these
arrangements may vary greatly for each such transaction. One such alliance is
currently under discussion, but the terms including revenue sharing and funding,
have not been finalized. In the proposal, the other company will fund research
and development of a machine for application in an area of the petroleum
recovery sector using our technology in return for which it will have a five
year exclusive right to market and sell the machines if the product is
commercially successful.
We also estimate an increase in the number of our employees in the next
twelve months. The increase in number of employees is expected mostly in
marketing and sales and operations as we start to market our machines for a
variety of purposes. The expected increase in the number of employees in the
next twelve months is between 3-5 employees.
21
Critical Accounting Policies
The discussion and analysis of our financial condition and results of
operations are based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these consolidated financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities and expenses and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates based on historical
experience and various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments and other short-
term investments with an initial maturity of three months or less to be cash or
cash equivalents. At March 31, 2008, the Company maintained cash and cash
equivalent balances at two financial institution that are insured by the Federal
Deposit Insurance Corporation up to $100,000. At March 31, 2008 the Company's
uninsured cash balances total $6,424,200.
Start-up Costs
In accordance with the American Institute of Certified Public Accountants
Statement of Position 98-5, "REPORTING ON THE COSTS OF START-UP ACTIVITIES", the
Company expenses all costs incurred in connection with the start-up and
organization of the Company.
Income Taxes
Deferred income taxes are reported using the liability method. Deferred
tax assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
22
Effective December 31, 2006 the Company acquired substantially all of the
assets of Mobilestream Oil, Inc. and due to the transfer of assets between
entities under common control, the total cost of the acquisition of Mobilestream
has been allocated to the assets acquired and the liabilities assumed based on
their fair market values in accordance with SFAS 141, BUSINESS COMBINATIONS. All
account amounts and share amounts have been updated and presented to reflect the
change.
Earnings (loss) per Share of Common Stock
Historical net loss per common share is computed using the weighted
average number of common shares outstanding. Diluted earnings per share (EPS)
includes additional dilution from common stock equivalents, such as stock
issuable pursuant to the exercise of stock options and warrants. Common stock
equivalents were not included in the computation of diluted earnings per share
when the Company reported a loss because to do so would be antidilutive.
Recent Accounting Pronouncements
In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140." SFAS No. 156 requires
an entity to recognize a servicing asset or liability each time it undertakes an
obligation to service a financial asset by entering into a servicing contract
under a transfer of the servicer's financial assets that meets the requirements
for sale accounting, a transfer of the servicer's financial assets to a
qualified special-purpose entity in a guaranteed mortgage securitization in
which the transferor retains all of the resulting securities and classifies them
as either available-for-sale or trading securities in accordance with SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities" and an
acquisition or assumption of an obligation to service a financial asset that
does not relate to financial assets of the servicer or its consolidated
affiliates.
Additionally, SFAS No. 156 requires all separately recognized servicing
assets and servicing liabilities to be initially measured at fair value, permits
an entity to choose either the use of an amortization or fair value method for
subsequent measurements, permits at initial adoption a one-time reclassification
of available-for-sale securities to trading securities by entities with
recognized servicing rights and requires separate presentation of servicing
assets and liabilities subsequently measured at fair value and additional
disclosures for all separately recognized servicing assets and liabilities. SFAS
No. 156 is effective for transactions entered into after the beginning of the
first fiscal year that begins after September 15, 2006. The Company is currently
evaluating the effect the adoption of SFAS No. 156 will have on its financial
position or results of operations.
23
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
BUSINESS
Introduction
Prior to our acquisition of the assets and development stage business of
Carbon Recovery Corporation on September 22, 2006, and the subsequent
acquisition of the assets of Mobilestream Oil, Inc. on December 31, 2006 we had
been a shell corporation since approximately December 15, 2005. Our business
history prior to September 22, 2006 may be found at "Business-History of the
Company."
We are a development stage company with patent pending proven microwave
technology that allows for removal of oil and alternative petroleum products at
very low cost from various sources, including shale deposits, tar sands, capped
oil wells, tires and waste oil streams, with significantly greater yields and
lower costs than are available using existing known technologies. The process
uses specific frequencies of microwave radiation to extract oils and alternative
petroleum products from secondary raw materials, and is expected to dramatically
reduce the cost for oil and gas recovery from a variety of these unconventional
hydrocarbon sources.
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 construction of plants to exploit
certain technology for decomposing petroleum-based materials by subjecting them
to variable frequency microwave radiation at specifically selected frequencies
for a time sufficient to at least partially decompose the materials; (ii) the
design, manufacture and sale of machinery and equipment units, embodying the
technology and focused on specific applications; and (iii) the licensing of
third parties to exploit that technology.
One application of the process utilizes the technology to decompose waste
tires into their components of carbon black, scrap steel, and hydrocarbon liquid
and gas. Since the tires are manufactured with a combination of different grades
of carbon black, the collected carbon black product is a composite of 4 to 6
different grades. The hydrocarbon liquid is not truly "oil". A tire is
manufactured from hydrocarbons (60%), and rubber and steel (40% together). The
hydrocarbons used to make a tire are "process oil". This "process oil" is a
refined product, but with our technology it is broken into a gas which is then
partially 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 readily sold for fuel value.
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.
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At the present time, the process operates successfully in laboratory mode.
There will have to be a transition from the "one batch at a time" operation,
used in the laboratory to a "continuous feed" line in order to commercialize our
process for application to tires in a large scale manner. We have not
demonstrated the ability to repeat these results at the macro level because we
have not had funds sufficient to build the equipment to apply the technology at
the requisite sizes for mass commercial application. However, we have entered
into a contract with Ingersoll Production Systems to build a prototype reactor
system and one GRFR 1 ton ASR microwave reactor system. The estimated delivery
date is May 31, 2008. We are also negotiating with tire recycling facilities for
the purchase of a GRFR 10 ton microwave reactor ASR processing machine for use
in the tire recycling industry with a capability of processing ten (10) tons of
tires per hour with the final purchase price to be determined.
We are also in negotiation with a company in the oil industry to fund the
construction and testing of a similar microwave processing machine to decompose
hydrocarbons in a different segment of the petroleum materials market. If the
results of the operation of this machine are successful, then the oil industry
company will have the right to enter into a five year exclusive purchase,
marketing and sales distribution agreement with us for machines that perform in
this segment of the market place. We have not finalized the economic
arrangements or other terms of this agreement.
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. Medicinal 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.
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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, the manufacturer
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 first
GRFR 1 ton ASR prototype reactor system is currently under construction, and its
estimated delivery date is June 30, 2008. 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. We are currently in negotiation with one such
company in the oil industry concerning the funding for construction and testing
of a microwave processing machine to decompose hydrocarbons in a segment of the
petroleum materials market other than the tire recycling industry. If the
results of the operation of this machine are successful, then, at the option of
the oil industry company, we likely will enter into a five year exclusive
purchase, marketing and sales distribution agreement with this company for
machines that perform in this segment of the market place. We have not
negotiated the terms of the exclusive agreement.
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. Subject to
obtaining additional funding, 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.
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Intellectual Property
We currently have six patent pending applications at the United States
Patent and Trademark Office ("PTO") and internationally for applications of our
proprietary microwave technology to decompose and recover hydrocarbons and
fossil fuels from sources such as tires, oil shale, capped wells, shale
deposits, and waste oil streams. The same pending patents also cover certain
medical applications of our technology. We rely on a combination of trade
secrets and non-disclosure, and other contractual agreements and technical
measures to protect our rights in our technology. We maintain confidentiality
agreements with our officers, directors, employees, consultants, and
subcontractors, as well as collaborative partners, to maintain the proprietary
nature of our technology. We believe that our technology is not subject to any
infringement actions based upon the patents of any third parties.
We do not currently have any trademark or service mark protection other
than that available at common-law, if any. We intend to file appropriate
applications for protection upon receipt of funds allocated to that purpose.
Regulatory Issues
At this time, there are no direct federal or state certification or
regulatory requirements for our products, except for the requirement that all
our equipment conform to regulations for microwave devices. We are not aware of
any pending federal or state legislation which would introduce regulatory
requirements that would negatively impact or impede the manufacture, sale and
distribution of our equipment in the United States or elsewhere.
There will be federal, state and local environmental, health and hazardous
substance regulations that will apply at each location at which one of our
machines is installed. It is not possible to discuss the variety of these
regulations in detail; however, we believe that the design of our equipment for
the decomposition of hydrocarbons for the applications in which they are
currently being marketed--namely waste tires--will protect the environment from
any harmful releases or waste products.
Wholly apart from any regulatory requirements, we will maintain product
liability insurance for our products as a condition of our ability to market
them. Our purchase agreements will require our customers to maintain adequate
amounts of product liability insurance naming us as an additional insured.
History of the Company
The Company was organized as a Colorado corporation on March 28, 2000
under the name "Email Mortgage Com, Incorporated ("Email Mortgage Com"). Its
business focus was the marketing of first and second mortgages, principally
through its website. The Company was not successful with that business and in
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2002 it discontinued those operations, liquidated its loan inventory, and paid
off its then existing liabilities. Also in 2002, Email Mortgage Com changed its
state of domicile from Colorado to Nevada and changed its name to "Advanced
Healthcare Technologies, Inc." ("Advanced Healthcare"). Under such name, the
Company first owned and operated a subsidiary named "Advanced Hyperbaric
Industries, Inc." ("Advanced Hyperbaric") which engaged in the manufacture and
marketing of rigid extremity hyperbaric chambers and a sacral patch device, both
of which utilized oxygen therapy for the treatment of open sores and wounds,
including bedsores. On December 4, 2003, the Company acquired a 100% interest in
"Nutratek LLC" ("Nutratek") which was engaged in the research and development of
nutritional dietary supplements, functional food products and natural
sweeteners, which products were manufactured by non-related third parties. On
March 31, 2004, as a consequence of the Nutratek acquisition, the Company spun
off and sold the intellectual properties and oxygen therapy products and
business of Advanced Hyperbaric in exchange for the assumption of Advanced
Hyperbaric's liabilities. On June 30, 2004 the former President, Chief Executive
Officer, Director and majority stockholder sold his interest in the Company to
an unrelated third party. In connection with that sale and change in control,
the Company's operating subsidiary, Nutratek was spun off to the selling
majority stockholder and the purchaser determined to change the business of the
Company to that of a business development company. On September 17, 2004 the
Company filed a notice with the Securities and Exchange Commission ("SEC")
electing to be regulated as a business development company ("BDC") under the
Investment Company Act of 1940, as amended. The intent was to focus on acquiring
interests in portfolio companies doing business in the energy sector.
While operating as a BDC, and seeking energy-related portfolio companies,
on January 11, 2005 the Company acquired a 50% interest in Well Renewal, LLC
("Well Renewal"), an entity which managed and operated approximately 30 oil
wells in Oklahoma by utilizing a nitrogen and carbon dioxide gas injection unit
to "pump up" and re-pressurize the wells to increase oil output. In December
2005 we assigned our Well Renewal ownership interest to Transnix Global
Corporation in settlement of sums past due under a $137,900 8% debenture we
issued to Transnix. We filed a notice withdrawing our BDC election on December
17, 2005, and the Company became a "development stage company" and a shell
corporation from that date until the Carbon Recovery acquisition in September
2006.
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On June 7, 2006, an unrelated third party acquired the Restated and
Amended Debenture owned by Transnix Global Corporation, which represented the
balance of the indebtedness by the Company to Transnix in the principal amount
of $102,345 and accrued interest of $16,274. In conjunction with the assignment
of the Debenture, all of the Company's then directors (Messrs. Caldwell,
Ferandell, Jordan, Mangiarelli and van Adelsberg) and the Company's sole
officer, Richard Mangiarelli, resigned. Contemporaneously, Mary K. Radomsky was
elected as a director and as the sole officer of the Company. Mrs. Radomsky
began negotiations for the acquisition of Carbon Recovery Corporation ("Carbon
Recovery" or "CRC"). On September 22, 2006, we acquired the assets and
development stage business of CRC. The technology owned by CRC was licensed to
it by Mobilestream Oil, Inc. ("Mobilestream"). On December 31, 2006 we acquired
the assets of Mobilestream, thus bringing all of the variable microwave
frequency technology under its umbrella.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
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 options to
purchase shares of our common stock under our 2008 Employees Incentive Stock
Option Plan for each meeting attended, and they also receive $200 for expenses
in attending each meeting.
Name Age Position
----- --- --------
Frank G. Pringle 65 Chairman of the Board of Directors,
President and Chief Executive Officer
Jeffrey J. Andrews 56 Chief Financial Officer,
Secretary and Treasurer
Jeffrey T. Kimberly 46 Chief Operating Officer
Wayne J. Koehl 56 Executive Vice President
Frederick A. Clark 44 Director
Lincoln Jones III
Major General, USA (Ret.) 75 Director
Kim Thorne O'Brien 49 Director
Jonathan L. Simon 56 Director
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Business Experience
The following describes the business backgrounds of our executive officers
and directors.
Frank G. Pringle has served as our Chairman of the Board, President and
Chief Executive Officer since September 22, 2006. For the four years prior
thereto Mr. Pringle was the Chairman and President/CEO of our predecessor
corporations, Carbon Recovery Corporation and Mobilestream Oil, Inc., both of
which were engaged in the same business as the Company. Mr. Pringle is the
inventor of the process and related apparatus covered by the patent pending
covering portions of the described technology. Mr. Pringle attended Kent State
from 1962 to 1963, Hiram College from 1963 to 1964, Lake Erie College from 1963
to 1964 and Towson State College from 1965 to 1966, majoring in Chemistry and
Mathematics. Since 1964: he has (i) designed and installed "turn key"
engineering operations for food, soft drink, brewery, glass and plastic
manufacturing plants, (ii) been a consultant to clients for previously designed
and installed manufacturing plants, (iii) designed, built and managed the
operations of a plant for recycling glass, and (iv) since approximately 1999,
worked on the development of the technology.
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 was appointed our Chief Operating Officer effective
February 7, 2008. Mr. Kimberly has over 27 years experience in the machine tool
industry. From September 2006 to January 2008, Mr. Kimberly served as President
of Ingersoll Productions Systems, a custom engineer and manufacturer of high
quality production machinery and a subsidiary of the Dalian Tool Machine Group
Co., Ltd. Previously at Ingersoll Production Systems, Mr. Kimberly served as the
Director of Planning and Process Control (January 2006 to September 2006) and as
the Director of Projects and Materials (2002 to July 2005). From July 2005 to
January 2006, Mr. Kimberly served as the Senior Project Manager and Master
Scheduler at ITT Pure-Flo MPC, a manufacturer of process systems (single-purpose
systems - containing pumps, valves, pressure vessels and instrumentation)
primarily for biopharmaceutical and pharmaceutical companies. From 1981 to 2002,
Mr. Kimberly served in various capacities at Ingersoll Milling Machine Co.,
including Process Control Manager (1999 - 2002), Project Manager (1997 - 1999)
and Sales & Simultaneous Engineering Project Manager (1990 - 1997). Mr.
Kimberly's educational background includes training in mechanical design and
machine shop and assembly floor manufacturing.
30
Wayne J. Koehl was appointed our Executive Vice Pesident effective May 15,
2008. Mr. Koehl is a licensed title agent in 8 states and a member of the
Mortgage Bankers Association. From 2006 until he joined the Company, Mr. Koehl
was the General Manager of the National Division of Surety Lender Services, a
division of Surety Title Corp. From 2003 to 2006 Mr. Koehl was self-employed and
provided lending and real estate options to builders and developers. From 1992
to 2003 Mr. Koehl was a Senior Vice President of Tri-Star Financial Services,
Inc. Mr. Koehl served as Chairman of the Planning and Zoning Board of the
Borough of Mount Ephraim, New Jersey from 2004 to 2007, and on the Advisory
Committee of the New Jersey Department of Transportation from 2004 to 2008. Mr.
Koehl graduated from William Penn College in 1973.
Frederick A. Clark has served as a director of the Company since December
14, 2006. Mr. Clark is President/CEO of Clark Resources, Inc., a governmental
relations consulting firm located in Harrisburg, Pennsylvania. Mr. Clark
graduated from Pennsylvania State University with a B.A. in Elementary Education
in 1985. Mr. Clark has served as a member of the Board of Education of the
Harrisburg School District, has served as the President of the African American
Chamber of Commerce, is the former CEO of the Urban League of Metropolitan
Harrisburg, and is currently Chairman of the National African American Cultural
Center. For the past several years, Mr. Clark has been a part-time lecturer at
the Pennsylvania Governor's School on Business and Industry and has been
appointed by the past three Pennsylvania governors to serve on boards and
commissions. Clark Resources, Inc. is representing the Company in Pennsylvania
for matters with respect to the proposed tire disposal facility.
Lincoln Jones III has served as a director of the Company since May 21,
2008. General Jones served in the United States Army from 1958 to 1990 from
which he retired with the rank of Major General. From 2004 to the present
General Jones has been Chairman of the Board of International Spectrum and
Development Corporation, a company engaged in operating family entertainment
centers. From 1998 to the present General Jones has also been President of
Lincoln Associates, Inc., a company that provides assistance and consulting
services for political-military subjects and energy related projects in the
United States and overseas. From 1996-1998 General Jones served as Vice Chairman
31
of Enron Europe, and from 1990 to 1998 he held positions as President of various
subsidiaries or affiliates of Enron Corp. General Jones graduated from the
United States Military Academy, West Point with a B.S. in Engineering and
received a M.S in International Relations and Political Science from Auburn
University. General Jones is also a graduate of the United States Air Force
Command and Staff College and the National War College, National Defense
University in Washington, D.C. General Jones has received numerous awards and
decorations including the Distinguished Service Medal with oak leaf cluster and
the Department of the Army Outstanding Civilian Service Medal in 2002. General
Jones is a member of the board of directors of several associations including
St. Thomas University (College of International Studies) and National Defense
University Foundation.
Ms. Kim Thorne O'Brien has served as a director of the Company since
September 20, 2007. Since May, 2004 Ms. O'Brien has been President of
Independence, Inc., a firm engaged in providing consulting services to start-up
biotechnology companies. From December, 2001 to May, 2004 Kim was Vice
President, Business Development & Marketing, of 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 BS in Biology (with
honors).
There are no family relationships between any of the executive officers
and directors.
Executive Compensation
The following table sets forth all compensation awarded to, earned by, or
paid for services in all capacities during 2007 and 2006 by our Chief Executive
Officer and Chief Financial Officer.
32
NAME AND STOCK OPTION ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS AWARDS COMPENSATION TOTAL
Frank G. Pringle, 2007 $354,166.50 N/A $2,189,000 $(1) $44,175.00 $2,587,341.50
President and CEO (1) 2006 N/A N/A N/A N/A $37,002.50 $ 37,002.50
Richard Mangerilli 2007 N/A N/A N/A N/A N/A $-0-
Former Pres. and 2006 $30,000 $-0- N/A N/A N/A $30,000
CEO(2)
Jeffrey J Andrews 2007 $162,439.00 $-0- $579,000 $ $(3) $741,439.00
CFO, Treasurer(3) 2006 $30,000 $-0- N/A $ N/A N/A
(1) Mr. Pringle received $26,000 as the President of Carbon Recovery
Corporation, a predecessor of the Company, and $259,416.67 as the President of
Mobilestream Oil, Inc., another predecessor of the Company during 2006. In 2007
Mr. Pringle was compensated under an unsigned employment arrangement with the
Company. The Company awarded Mr. Pringle shares of its common stock on the
following dates and at the following prices: (i) 300,000 shares on April 20,
2007 at a price of $1.38 per share or a total value of $414,000; (ii) 250,000
shares on August 1, 2007 at a price of $2.60 per share or a total value of
$650,000 and (iii) 250,000 shares on August 16, 2007 at a price of $4.50 per
share or a total value of $1,125,000. In 2006 the Company paid the rental value
of three used automobiles for the use of Mr. Pringle and two members of his
family who were also employees of the Company. In 2007, however, the Company
sold all 3 automobiles to Mr. Pringle. Under the employment arrangement, in 2007
the Company paid for a $6,000,000 life insurance policy on Mr. Pringle's life,
$2,000,000 of which is payable to his wife and $4,000,000 to the Company. The
annual premium paid was $44,175.00 in 2007 and $37,002.50 in 2006, and was
included in All Other Compensation.
(2) Mr. Mangierelli was President and CEO of the Company from 2003 through June
2006. The sum shown represents his accrued and unpaid salary for that period and
they were paid to him prior to filing the Company's Form 10-KSB for the fiscal
year ended March 31, 2006.
(3) Mr. Andrews does 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 $2,748.90
33
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Option Awards Stock Awards
Equity Equity
Incentive Incentive
Plan Plan
Awards: Awards:
Equity Number Market or
Incentive of Payout
Plan Unearned Value of
Awards: Market Shares, Unearned
Number of Number of Number of Number of Value of Units or Shares,
Securities Securities Securities Shares or Shares or Other Units or
Underlying Underlying Underlying Units of Units of Rights Other
Unexercised Unexercised Unexercised Option Option Stock That Stock That Rights
Options (#) Options (#) Unearned Exercise Expiration Have Not That Have Have Not That Have
Name Exercisable Unexercisable Options Price Date Vested Not Vested Vested Not Vested
(#) ($) (#)(1) ($) (#) ($)
------------------------------------------------------------------------------------------------------------------------------------
Frank G. Pringle -0- -0- -0- -0- -0- -0- -0- -0- -0-
Jeffrey J.Andrews 160,000 40,000 -0- $1.00 40,000 108,000 -0- -0-
Executive Employment Arrangements
Mr. Pringle did not have a written employment agreement with the Company
in 2007. Under the terms of his employment arrangement, Frank G. Pringle, the
President and CEO, received a salary of $354,166.50 in 2007. In 2007 the Board
of Directors awarded Mr. Pringle a total of 800,000 shares of common stock
pursuant to the 2007 Employees Compensation and Stock Option Plan having an
aggregate value of $2,189,000. We also paid an annual premium of $7273.00 and
$3597.50 in 2007 and 2006, respectively, for a disability policy for Mr.
Pringle. We paid premiums of $44,175.00 and $37,002.50 in 2007 and 2006,
respectively for a $6,000,000 life insurance policy, of which $4,000,000 is paid
to the Company and $2,000,000 is for the benefit of Mr. Pringle's family.
The Company and 888 Corporation, a corporation of which Mr. Pringle is the
sole stockholder, director and President, have entered into a consulting
agreement effective January 1, 2008 (the "Consulting Agreement") for his
services, the terms and conditions of which are as follows:
TERM. The term of the Consulting Agreement is for the life of the patent
pending technology owned by the Company which is estimated to be approximately
12 years. The term will be extended for the life of any additional patents filed
relating to the Company's underlying technology.
SERVICES. Mr. Pringle will furnish his consulting services for all matters
related to the development and improvement of Company's technology and related
business matters to the Company. Among such services, Mr. Pringle will perform
research to identify additional applications of our technology, identify
mixtures and compounds to which the technology may currently be applied, and
identify additional sources of renewable energy to which our technology may be
applicable. Mr. Pringle will also advise us concerning continuing education of
our engineers and scientists, assist us in the installation of our equipment and
trouble shoot performance related issues, interface with our internal and third
party engineers, designers and manufacturers of our products, interact with
scientists in various disciplines with respect to developments in microwave
technology and potential applications to our business, supervise overall
research projects we may undertake and cooperate with our intellectual property
counsel regarding protection of our intellectual property. Under the Consulting
Agreement, Mr. Pringle is required to devote such time to the business of the
Company as he deems reasonably necessary to perform his duties thereunder. All
such services shall be performed at our corporate headquarters, and Mr. Pringle
will report to the Company President with respect to his services.
34
INTELLECTUAL PROPERTY ISSUES. Under the Consulting Agreement all
discoveries of Mr. Pringle relating to our technology belong to the Company, and
888 Corporation and Mr. Pringle agree to cooperate as required to perfect the
Company's rights in any such discovery. Mr. Pringle has also agreed that for an
18 month period from the effective date of the Consulting Agreement, to disclose
promptly to us any new developments he makes in "New Technology", defined as
technology unrelated to our business and to give us a 90 day exclusive period in
which to negotiate a license or purchase agreement with him. Mr. Pringle has
also agreed that during the term of the Consulting Agreement he will not
compete, directly or indirectly, with us by offering products or services
similar to our own to anyone else, and that he will disclose to us any business
opportunity coming to the attention of 888 Corporation or its affiliates
including Mr. Pringle, or developed by any of them, relating to the business of
the Company. The Consulting Agreement provides for enforcement mechanisms if a
breach of these conditions occurs. Under the Consulting Agreement, Mr. Pringle
will maintain in confidence all of the Company's confidential information as
therein defined, and will return to us all of our confidential information at
the time of termination of the Consulting Agreement.
FEES. For providing Mr. Pringle's services, 888 Corporation will receive
an annual consulting fee, payable bi-weekly in arrears, in accordance with the
following schedule.
2008 and 2009--$378,000
2010--$448,000
2011--$488,000
2012--$538,000
2013--$588,000
2014 and thereafter (until expiration of our final patent) $668,000
We will not withhold any tax or other forms of withholdings from our
payments to 888 Corporation, all of which will be made by that corporation. 888
Corporation has agreed to indemnify us against all tax related claims arising
from the payments. We will not pay 888 Corporation any benefits for Mr. Pringle,
and Mr. Pringle will not be eligible to participate in our health, 401(k) or
similar employee benefit related plans; however, we will reimburse him for any
business related expense which, for this purpose, means any expense reasonably
incurred in connection with the performance of his duties.
In the event the Consulting Agreement is terminated as discussed below
under "Termination", we will continue to pay 888 Corporation an annual
post-termination royalty payment, payable monthly in arrears, in accordance with
the following schedule:
2008 and 2009--$378,000
2010--$448,000
2011--$488,000
2012--$538,000
2013--$588,000
2014 and thereafter (until expiration of our final patent) $668,000
35
EVENTS OF DEFAULT. The following constitute events of default under the
Consulting Agreement:
(i) Our failure to pay any 2 consecutive fee payments or royalty
payments due under the Consulting Agreement;
(ii) Our failure to make any 3 payments within a 12 month calendar year;
(iii) Our default in performing any other covenant or obligation under the
Consulting Agreement that continues for 30 days after written notice
of the default is received by us; or
(iv) Our dissolution, liquidation,insolvency or similar event.
CONSULTANT SECURITY INTEREST UNDER CONSULTING AGREEMENT AND RIGHTS UPON
COMPANY EVENT OF DEFAULT.
In order to protect 888 Corporation and Mr. Pringle against an event of
default under the Consulting Agreement, we have granted 888 Corporation a first
priority security interest in our intellectual property including our pending
patents. In addition, we have executed and delivered to 888 Corporation an
assignment of our intellectual property which may be recorded in the U.S. Patent
Office if an event of default occurs; however, 888 Corporation may not file the
assignment with the Patent Office unless it is accompanied by an affidavit of
our Chief Executive Officer or our Chief Financial Officer (neither of whom may
be an affiliate of 888 Corporation). 888 Corporation has agreed to subordinate
its security position to any institutional financing the Company may undertake.
In the event our intellectual property is assigned to 888 Corporation, we are
released from any and all subsequent payments under the Consulting Agreement.
TERMINATION. The Consulting Agreement may be terminated in any of the
following ways:
(i) Mr. Pringle's death;
(ii) The dissolution or liquidation of 888 Corporation;
(iii) For cause which is defined as the conviction of Mr. Pringle for a
crime involving "moral turpitude."
(iv) By mutual consent of the parties.
CONSEQUENCES OF TERMINATION. If the Consulting Agreement is terminated for
any reason then 888 Corporation or its successor shall receive the following:
(i) all payments due under the Consulting Agreement to the date of termination;
(ii) all royalty payments due under the post-termination royalty schedule above
payable monthly in arrears until expiration of our final patent; (iii) medical
benefits for a 10 year period.
Jeffrey J. Andrews, the Chief Financial Officer, Treasurer and Corporate
Secretary, is employed pursuant to at will agreement with the Company. 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
36
Mr. Kimberly, the Chief Operating Officer, is employed pursuant to a term
sheet executed on November 4, 2007 outlining the terms of his employment under
which Mr. Kimberly commenced his employment on February 11, 2008. The initial
term of employment under the term sheet is five years. The Company paid Mr.
Kimberly a signing bonus of $100,000 in connection with his execution of the
term sheet.
Mr. Kimberly will receive a base salary of $200,000 per annum which will
be increased to $225,000 on August 11, 2008, the sixth month anniversary of his
start date on February 11, 2008. Mr. Kimberly also is 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 will be established by our Board of Directors.
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 will also
pay 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.
If Mr. Kimberly terminates his employment at any time prior to the end of the
five year term, he will receive (1) any prior annual bonuses that were earned
but not yet paid as of the date of his resignation and (2) accrued but unpaid
salary through the effective date of his resignation along with any outstanding
travel or entertainment expenses. If the Company terminates Mr. Kimberly's
employment prior to the end of the five year term, the Company will continue to
pay Mr. Kimberly his base salary then in effect and provide medical insurance
until the earlier of (i) the first anniversary of the effective date of the
termination by the Registrant or (ii) Mr. Kimberly's acceptance of employment
with another company. Mr. Kimberly will also be entitled to any annual bonus
earned but not yet paid prior to the Company's termination of his employment
(which may include a bonus that was earned in the year of such termination). Mr.
Kimberly is not entitled to any severance in the event his employment is
terminated in connection with a change in control of the Company.
37
Mr. Koehl, the Executive Vice President, is employed pursuant to an unwritten
agreement under which Mr. Koehl commenced his employment on May 15, 2008. The
initial term of employment is five years. Mr. Koehl will receive a base salary
of $160,000 per annum which will be increased to $200,000 on November 5, 2008.
Mr. Koehl will also participate in the Company's benefit plans and will receive
an automobile allowance. The Company paid Mr. Koehl a bonus of 100,000 shares of
our common stock at the time of commencement of his employment. Mr. Koehl will
also be awarded options to purchase 100,000 shares of our common stock under our
2008 Stock Option Plan.
Compensation of Directors
DIRECTOR COMPENSATION
---------------------
Non-Equity Change in Pension
Incentive Value and
Fees Earned Plan Non-Qualified All Other
or Paid in Stock Option Compensation Deferred Compensation
Cash ($) Awards ($) Awards ($) ($) Earnings Compensation ($)(1) Total ($)
Frank G. Pringle $ - $ - $ - $ - $ - $ - $ -
Jeffrey J. Andrews $ - $ - $ - $ - $ - $ - $ -
Frederick A. Clark $ - $ - $ - $ - $ - $ - $ -
Kim Thorne O'Brien $ - $ - $ - $ - $ - $ - $ -
Jonathan L. Simon $ - $ - $ - $ - $ - $ - $ -
Mary K. Rdomsky $ - $50,000 - $ - $ - $ - $ - $ -
(1)For the fiscal year ended December 31, 2006 and December 31, 2007, neither
the former directors (except as discussed below) nor the current directors were
compensated for their services as directors. We do not intend to compensate our
current directors, or any additional directors who may be elected; however,
expenses of attending meetings will be reimbursed. During the fiscal year ended
December 31, 2006 there were no formal meetings of the Board of Directors;
action was taken by written consent.
Mary K. Radomsky served as the sole director and officer from June 7, 2006 to
September 22, 2006. Although she was not compensated, the in-coming directors
voted to give her an honorarium by the issuance of 25,000 shares of our Common
Stock.
38
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 23, 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 May 23,
2008, there were 47,378,713 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 5/23/2008(1)
------------------------------------- --------- --------------
Frank G. Pringle 17,984,594(2) 27.62%(2)
109 Bortons Road
Marlton, New Jersey 08053
Jeffrey J. Andrews 200,000(3) 0.0031%(3)
8 Cushman Road
Rosemount, Pennsylvania 19010
Jeffrey T. Kimble -0- -0-
462 Oakshade Road
Shamong, NJ 08088
Wayne J. Koehl 100,000 0.0015%(4)
207 Lowell Avenue
Mt. Ephraim, NJ 08059
Frederick A. Clark -0- -0-
321 N. Front Street
Harrisburg, Pennsylvania 17101
Lincoln Jones III -0- -0-
9 Fernglen Drive
The Woodlands, TX 77380
Kim Thorne O'Brien -0- -0-
19 Sawmill Road
Medford, NJ 08055
Jonathan L. Simon -0- -0-
1722 Garfield Street
Wyomissing, PA 19610
Lois Augustine Pringle 1,557,237(5) 2.39%(5)
109 Bortons Road
Marlton, NJ 08053
Olde Monmouth Stock Transfer Co., Inc., Trustee
Carbon Recovery Corporation
Liquidating Trust 11,188,996(6) 17.18%(6)
200 Memorial Parkway
Atlantic Highlands, NJ 07716
Olde Monmouth Stock Transfer Co., Inc., Trustee
Mobilestream Oil, Inc.
Liquidating Trust 11,145,225(7) 17.12%(7)
200 Memorial Parkway
Atlantic Highlands, New Jersey 07716
All Directors and Officers as a Group (5 persons) 18,287,094(2)(3) 28.08%
39
1. The ownership percentages below are calculated based on 47,378,713 shares of
common stock issued and outstanding as of May 23, 2008 to which are added
17,618,094 shares of common stock issuable upon conversion of the 2006 Series of
Convertible Preferred Stock at the rate of 1/2 of 1 share of common stock for
each 1 share of 2006 Series of Convertible Preferred or a combined total of
64,996,807 shares of common stock. For purposes of making all calculations of
voting percentages in the table we have assumed that all 35,236,188 shares of
our 2006 Series of Convertible Preferred Stock were converted to shares of our
common stock. However, if the calculations are made while the 2006 Series of
Preferred Stock are issued and outstanding, then all voting percentages shown in
the table above are reduced significantly except for that of Mr. Pringle, our
Chairman, President and CEO, whose voting percentage increases from 27.62% to
approximately 59.8% of all shares entitled to vote. See note 2 below. 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 and stock options.
2. Includes 17,615,594 shares of common stock issuable upon conversion of
35,231,188 shares of the Company's 2006 Series of Convertible Preferred Stock
that are owned by Mr. Pringle, 119,000 shares distributable from the Carbon
Recovery Corporation liquidating trust as a shareholder of Carbon Recovery
Corporation, and 250,000 shares issued under our 2007 Employees Compensation and
Stock Option Plan. For purposes of calculating Mr. Pringle's percentage of
ownership, however, the 35,231,188 shares of 2006 Series of Convertible
Preferred Stock he owns were assumed to have been converted into common stock at
the rate of 1/2 of 1 share of common stock for each share of 2006 Convertible
Preferred Stock. If the calculation of Mr. Pringle's ownership percentage for
voting purposes is made while he continues to own the 2006 Series of Convertible
Preferred Stock, then his voting percentage is 59.8% because each share of the
2006 Series has two votes per share and votes together with our common stock on
all matters presented to stockholders. Therefore, currently Mr. Pringle has the
right to vote 70,831,376 shares on all matters. Does not include common stock
purchase options to purchase 200,000 shares of the Company's common stock, 80%
of which have not yet vested and are therefore not exercisable. Does not include
1,557,237 shares of Carbon Recovery common stock that are convertible on a 1 for
1 basis into shares of our common stock held by Lois Augustine-Pringle, Mr.
Pringle's wife, in which Mr. Pringle disclaims a beneficial interest.
3. Includes 200,000 shares issued under our 2007 Employees Compensation and
Stock Option Plan, but does not include 200,000 options issued under a stock
option agreement between the Company and Mr. Andrews entered into in 2005, of
which 160,000 options have vested as of December 31, 2007, and the remaining
40,000 options will vest on December 31, 2008 if Mr. Andrews is employed by the
Company as at that date.
4. Does not include 100,000 options issued under our 2008 Stock Option Plan.
40
5. Ms. Pringle does not own shares of our Company's common stock. Ms. Pringle
owns 1,557,237 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 50,000
shares of common stock and 35,231,188 shares of 2006 Series of Convertible
Preferred Stock that are convertible into 17,615,594 shares of common stock held
by Frank G. Pringle, her husband.
6. 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. See "Business-Our Acquisition of Carbon Recovery."
7. See also Note 1 with respect to voting percentage calculation. Old Monmouth
Stock Transfer Co., Inc. is the Trustee of both Liquidating Trusts; it has no
beneficial interest in the shares of our common stock held in the trusts;
however until such time as our shares of common stock are distributed, Olde
Monmouth has the right to vote these shares. With the exceptions of Frank G.
Pringle and Lois Augustine Pringle, no person or entity has a 5% or greater
interest in the Company as the result of his/her/its beneficial interest in
either Liquidating Trust.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 2005 we formalized a prior intended agreement with Careful Sell
Holding, L.L.C. ("Careful Sell"), a Delaware limited liability company formed by
the President of our Company. Our President and his wife, at the time a director
of the Company, own all of the limited liability interests of Careful Sell. Our
President is also the Manager of Careful Sell. Under the revised agreement we
entered into a technology contribution agreement (the "Contribution Agreement"),
with Careful Sell. Careful Sell is the owner of all the rights to the inventions
of our President. Under the Contribution Agreement, Careful Sell transferred to
us the rights to commercialize such inventions and to operate and use the
related processes and apparatus to make, sell, use and otherwise dispose of
products, which may be processed utilizing the inventions. In the Contribution
Agreement we agreed to pay Careful Sell royalties of 2% of all revenues derived
from the inventions. In further consideration for the transfer of the
inventions, we issued to Careful Sell a total of 37,500,000 shares of our common
stock. The Contribution Agreement supersedes a prior agreement not formalized
between ourselves and Careful Sell in 2002.
41
We have engaged in two transactions for the acquisition of our assets and
our business with related persons. On September 22, 2006 we closed an
acquisition for substantially all of the assets and certain liabilities of
Carbon Recovery Corporation (the "CRC Acquisition") pursuant to a plan and
agreement of reorganization dated July 27, 2006 (the "CRC Acquisition
Agreement") with Carbon Recovery Corporation ("CRC" or "Carbon Recovery") for
the acquisition of substantially all of the assets and certain liabilities of
CRC. Mr. Frank Pringle, the controlling stockholder of CRC is also our Chairman
of the Board, President and CEO. Under the CRC Agreement, on September 22, 2006
we issued to Carbon Recovery the following: (i)48,688,996 shares of our common
stock (the "CRC Common Stock") for the assets of CRC, and (ii) 3,908,340 Class B
Warrants, 1,397,000 Class D Warrants and 1,397,000 Class E Warrants (together
the "CRC Warrants" and individually by their respective class names) to assume
the liabilities of CRC to its warrant holders under similar classes of warrants
of CRC. The CRC Warrants have the following characteristics: (i) the CRC Class B
Warrants and the CRC Class D Warrants have an exercise price of $2.75 per
Warrant, and (ii) the CRC Class E Warrants have an exercise price of $4.00 per
Warrant. The CRC Class E Warrants can only be exercised together with the
exercise of a similar number of CRC Class D Warrants. Initially, all of the CRC
Warrants expired on September 21, 2007; however, we have extended the expiration
date of the CRC Class B Warrants, the CRC Class D Warrants and the CRC Class E
Warrants to December 31, 2008.
Frank G. Pringle, our Chairman, President and CEO, was elected to our
Board of Directors in connection with the closing of the Carbon Recovery
acquisition. Mr. Andrews, our Secretary, Treasurer and CFO, was also elected to
the Board at that time, following which they appointed themselves to the
respective offices each of them holds.
In December 2006 we acquired the assets of Mobilestream Oil, Inc., a
Delaware corporation controlled by Mr. Pringle. Mr. Pringle is the inventor of
the variable microwave technology embodied in the four patent applications which
he assigned to a predecessor of Mobilestream Oil, Inc. and which is now owned by
us as the result of the acquisition of the assets of Mobilestream. At the time
of the Mobilestream Acquisition, Mr. Pringle's previously owned shares of
Mobilestream Oil, Inc.'s common stock had been converted into 503,374,112 shares
of Mobilestream's 2006 Series of Convertible Preferred Stock. Pursuant to the
terms of the Mobilestream Acquisition Agreement, we were to have issued
70,472,376 shares of our 2006 Series of Convertible Preferred Stock to
Mobilestream for distribution to Mr. Pringle. However, at the time of the
Mobilestream acquisition closing we were only authorized to issue 50,000,000
shares of Preferred Stock. Accordingly, at the closing the terms were amended to
provide for the issuance of 35,236,188 shares of our 2006 Series of Convertible
Preferred Stock (the "2006 Series of Convertible Preferred"), each having 2
votes per share (instead of 1) and each convertible into 2 shares of our common
stock (instead of 1).
When we acquired the assets of Mobilestream Oil, Inc., we issued
11,145,225 shares of our common stock to Mobilestream for the benefit of the
holders of Mobilestream's common stock, and we issued 35,236,188 shares of our
own 2006 Series of Convertible Preferred Stock to Mobilestream for the benefit
of Mr. Pringle (the sole holder of Mobilestream's 2006 Series) using the same
conversion ratio as for the common stock. At the time of the acquisition
closing, each share of our 2006 Series of Convertible Preferred was convertible
into 2 shares of our common stock. At the time of the Mobilestream closing,
37,500,000 shares of our common stcok issued to Mobilestream at the time of the
Carbon Recovery closing were cancelled.
42
In October 2007, Mr. Pringle and the Company agreed to amend the
conversion terms of our 2006 Series of Convertible Preferred such that each
share of our 2006 Series is now convertible into 1/2 of 1 share of our common
stock. However, until conversion each share of our 2006 Series of Convertible
Preferred has 2 votes per share, voting with the common stock as a single class.
Therefore, currently Mr. Pringle has the right to vote 70,831,376 shares
(inclusive of his ownership of common stock) on all matters presented to
stockholders for a vote, and his voting percentage is 59.8% of the shares
entitled to vote on all matters presented to stockholders. Furthermore, under
the terms of the 2006 Series of Convertible Preferred Stock until Mr. Pringle
converts the 2006 Series of Convertible Preferred Stock, he has the right to
elect a majority of our Board of Directors. Prior to January 1, 2009, conversion
of the 2006 Series of Convertible Preferred is limited to that number of shares
of common stock which is less than 4.99% of our issued and outstanding common
stock after conversion.
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 Chairman,
President and Chief Executive Officer.
In 2007 two individuals, one of whom is a director of our Company,
purchased shares of Carbon Recovery Corporation in a private sale from Lois
Augustine Pringle, the wife of our Chairman, President and CEO. The purchasers
were incorrectly informed that as part of the consideration in the transaction
they would receive warrants to purchase shares of our common stock that attached
to the Carbon Recovery shares. Ms. Pringle's Carbon Recovery shares did not have
any warrant attachment. Although the Company was not a party to this
transaction, the Company issued a total of 505,040 warrants to purchase shares
of our common stock to the purchasers at exercise prices of $2.50 (290,000
warrants) and $2.75 (215,040 warrants). Using the Black-Scholes formula
currently the transaction is valued at $8730 because the majority of the
warrants are "out of the money."
SELLING SECURITY HOLDER
We are registering shares of our common stock (i) purchased by
Professional Offshore Opportunity Fund, Ltd. ("POOF"), the selling security
holder, in connection with a private placement transaction in December 2007,
(ii) currently in escrow under the terms of an escrow agreement eentered into as
part of the private placement transaction, and (iii) issuable upon the exercise
of warrants issued by us to POOF in the private placement.
Beneficial ownership is determined in accordance with Rule 13d-3(d)
promulgated by the Commission under the Securities Exchange Act of 1934. Unless
otherwise noted, each person or group identified possesses sole voting and
investment power with respect to the shares.
POOF (i) acquired the securities covered by this prospectus in the
ordinary course of business, and (ii) at the time of such acquisition, POOF had
no agreement or understanding, directly or indirectly, with any person to
distribute such securities.
43
Other than the costs of preparing this prospectus, a registration fee to
the SEC and applicable state securities filing fees, we are not paying any costs
relating to the sales by POOF.
Selling Stockholder Common Stock Shares of Common Shares of Common Percent Owned
Beneficially Stock Being Stock Owned After after the
Owned Before Offered in the the Offering Offering
Offering Offering
Professional Offshore 2,525,000(1)(2) 2,525,000(1)(2) -0- -0-
Opportunity Fund, Ltd.
c/o Professional Traders
Management, LLC
1400 Old Country Road
Suite 206
Westbury, NY 11590
(1) Includes 900,000 shares of our common stock held in escrow subject to the
following terms and conditions: If the price per share of our common stock falls
below $1.00 per share for one day at any time prior to June 30, 2008 or if this
registration statement is not declared effective prior to June 30, 2008, then
the escrow agent shall release 900,000 shares in escrow to POOF which may then
do one of the following: (x) purchase 250,000 of the escrowed shares for an
additional $250,000 which is also held in escrow or return the 250,000 shares to
the Company and receive the return of its $250,000 held in escrow, and (y) in
either case, retain 650,000 shares of our common stock for no additional
consideration. If the escrow conditions are satisfied, then all 900,000 shares
in escrow will be returned to the Company for cancellation.
(2)Includes 625,000 shares of common stock issuable upon exercise by the selling
security holder of 625,000 warrants issued by the Company at an exercise price
of $1.50 per share of common stock.
PLAN OF DISTRIBUTION
The selling security holder, 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 its shares of common stock or interests in
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These dispositions may
be at fixed prices, at prevailing market prices at the time of sale, at prices
related to the prevailing market price, at varying prices determined at the time
of sale, or at negotiated prices.
The selling security holder may use any one or more of the following
methods when disposing of shares or interests therein:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares
as agent, but may position and resell a portion of the block as principal to
facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
44
- privately negotiated transactions;
- short sales;
- through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
- broker-dealers may agree with the selling security holders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The selling security holder may, from time to time, pledge or grant a
security interest in some or all of the shares of common stock owned by it and,
if it defaults in the performance of its secured obligations, the pledgees or
secured parties may offer and sell the shares of common stock, from time to
time, under this prospectus, or under an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act amending the list
of selling security holder to include the pledgee, transferee or other
successors in interest as selling security holders under this prospectus. The
selling security holder also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.
In connection with the sale of the common stock or interests therein, the
selling security holder may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The selling
security holder may also sell shares of the common stock short and deliver these
securities to close out its short positions, or loan or pledge the common stock
to broker-dealers that in turn may sell these securities. The selling security
holder may also enter into option or other transactions with broker-dealers or
other financial institutions or the creation of one or more derivative
securities which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The aggregate proceeds to the selling security holder from the sale of the
common stock offered by it will be the purchase price of the common stock less
discounts or commissions, if any. The selling security holder reserves the right
to accept and, together with its agents from time to time, to reject, in whole
or in part, any proposed purchase of common stock to be made directly or through
agents. We will not receive any of the proceeds from this offering. Upon any
exercise of the warrants by payment of cash, however, we will receive the
exercise price of the warrants.
45
The selling security holders also may resell all or a portion of the
shares in open market transactions in reliance upon Rule 144 under the
Securities Act of 1933, provided that they meet the criteria and conform to the
requirements of that rule.
The selling security holder and any underwriters, broker-dealers or agents
that participate in the sale of the common stock or interests therein may be
"underwriters" within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities Act.
Selling security holders who are "underwriters" within the meaning of Section
2(11) of the Securities Act will be subject to the prospectus delivery
requirements of the Securities Act.
To the extent required, the shares of the common stock to be sold, the
names of the selling security holder, the respective purchase prices and public
offering prices, the names of any agents, dealer or underwriter, any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.
In order to comply with the securities laws of some states, if applicable,
the common stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states the common stock may
not be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.
We have advised the selling security 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 holder for the
purpose of satisfying the prospectus delivery requirements of the Securities
Act. The selling security holder may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act.
We have agreed to indemnify the selling security holder against
liabilities, including liabilities under the Securities Act and state securities
laws, relating to the registration of the shares offered by this prospectus.
We have agreed with the selling security 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) of the
Securities Act.
46
LEGAL PROCEEDINGS
There is no material litigation pending or threatened by or against us or
any of our former or current officers or directors.
DESCRIPTION OF SECURITIES
The following information describes our common stock, our preferred stock,
options and warrants to purchase our common stock, the warrants issued to POOF,
the selling security holder, 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 POOF, the selling security
holder, and each other class of warrants we have issued in connection with
various private placements of our shares.
We are presently authorized to issue 200,000,000 shares of common stock,
$0.001 par value, and 100,000,000 shares of preferred stock, $0.001 par value.
As of May 23, 2008, we have 47,378,713 shares of common stock issued and
outstanding, and 35,236,188 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; however, see the description under "Preferred
Stock" for certain rights to elect a majority of our Board of Directors by the
holders of our 2006 Series of Convertible Preferred Stock. There is no
cumulative voting. We have not paid any dividends on our common stock because we
have never had any earnings from which dividends may be payable, and even if we
have earnings, we do not anticipate that we will be paying dividends in the
foreseeable future.
Under the Carbon Recovery Acquisition Agreement and the Mobilestream
Acquisition Agreement, we were obligated to file a registration statement on
Form S-1 for the shares of our common stock issued respectively to Carbon
Recovery and Mobilestream. Accordingly, we have filed a separate registration
statement on Form S-1 registering 11,188,996 shares of our common stock and
11,145,225 shares of our common stock for the Carbon Recovery and Mobilestream
Acquisitions. We also have filed a registration statement with respect to the
Carbon Recovery and Mobilestream Warrants. See below under "Warrants."
47
Preferred Stock
Under our Articles of Incorporation, the board of directors has the power,
without further action by the holders of the common stock, to designate the
relative rights and preferences of the preferred stock, and to issue the
preferred stock in one or more series as designated by the board of directors.
The designation of rights and preferences could include preferences as to
liquidation, redemption and conversion rights, voting rights, dividends or other
preferences, any of which may be dilutive of the interest of the holders of the
common stock or the preferred stock of any other series. The issuance of
preferred stock may have the effect of delaying or preventing a change in
control of the Company without further stockholder action and may adversely
affect the rights and powers, including voting rights, of the holders of the
common stock.
In December 2006, the Board authorized the issuance of 70,472,376 shares
of our 2006 Series of Convertible Preferred Stock (the "2006 Series of
Convertible Preferred Stock") in exchange for 503,374,112 shares of Mobilestream
2006 Series Convertible Preferred Stock at the exchange rate of 1 share of our
2006 Series of Preferred Stock for each 7.143 shares of Mobilestream 2006 Series
of Convertible Preferred Stock. Initially,the sole holder of the Mobilestream
2006 Series of Convertible Preferred Stock was Frank G. Pringle, our Chairman,
President and CEO.
On December 31, 2006, at the closing of the Mobilestream Acquistion, we
issued only 35,236,188 (instead of 70,472,376) shares of our 2006 Series of
Convertible Preferred Stock to Mobilestream because of limitations on the number
of authorized preferred shares in our Articles of Incorporation. To maintain the
proper share numbers for the Mobilestream Acquisition, the Certificate of
Designation for our 2006 Series of Convertible Preferred Stock initially
provided that the preferred shares could be converted into our common stock at
the rate of 2 shares of our common stock for each share of our 2006 Series of
Convertible Preferred Stock. In October 2007, Mr. Pringle and the Company agreed
to amend the conversion terms of the 2006 Series of Convertible Preferred such
that each share of our 2006 Series is now 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. Therefore, currently
Mr. Pringle, our Chairman, President and CEO, has the right to vote 70,831,376
shares (inclusive of his ownership of common stock) on all matters presented to
stockholders for a vote, and his voting percentage is 59.8% of the shares
entitled to vote on all matters presented to stockholders. Furthermore, under
the terms of the 2006 Series of Convertible Preferred Stock until Mr. Pringle
converts the 2006 Series of Convertible Preferred Stock, he has the right to
elect a majority of our Board of Directors. Prior to January 1, 2009 conversion
of the 2006 Series of Convertible Preferred is limited to that number of shares
of common stock which is less than 4.99% of our issued and outstanding common
stock after conversion.
Warrants
We currently have eleven 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 POOF Warrants, the Taylor Warrants and the 2008
private placement warrants, all of which may be converted into shares of our
common stock, with these characteristics:
48
CLASS NUMBER EXERCISE PRICE EXPIRATION DATE
Mobilestream(1) 3,705,867 $4.75 December 31, 2008
Carbon Recovery B(2) 3,908,340 $2.75 December 31, 2008
Carbon Recovery D(2) 1,397,600 $2.75(3) December 31, 2008
Carbon Recovery E(2) 1,397,600 $4.00(3) December 31, 2008
Black Diamond(4) 150,000 $0.80 December 31, 2009
Mercury/Nutmeg(5) 250,000 $0.80 December 31, 2009
Augustine(6) 290,000 $2.50 December 31, 2008
Augustine(6) 215,040 $2.75 December 31, 2008
POOF private offering(7) 625,000 $1.50 December 31, 2012
Taylor(8) 1,000,000 $1.50 December 31,2008
2008 private offerings(9) 9,327,741 $2.00 September 15, 2009(10)
(1) The Mobilestream Warrants were issued by the Company in connection
with its acquisition of substantially all of the assets of
Mobilestream in December 2006.
(2) The Carbon Recovery B, D and E Warrants were issued by the Company
in connection with its acquisition of substantially all of the
assets of Carbon Recovery Corporation in September 2006.
(3) The Carbon Recovery Class D Warrant and the Class E Warrant can only
be exercised in tandem with each other, i.e., one Class E Warrant
must be exercised for each Class D Warrant exercised.
(4) 300,000 warrants were issued to Black Diamond Fund LLP in connection
with settlement of claims arising from a private placement
transaction that was rescinded. 150,000 of the warrants issued to
Black Diamond Fund LLP have been exercised.
(5) 500,000 warrants were issued to Nutmeg/Mercury Fund LLP in
connection with settlement of claims in a private placement
transaction that was rescinded. 250,000 warrants issued to
Nutmeg/Mercury Fund LLP have been exercised.
(6) The Company issued the Augustine Warrants to two different
purchasers of shares of Carbon Recovery Corporation common stock
from Ms. Lois Augustine Pringle. See "Certain Relationships and
Related Transactions."
(7) The Company issued 625,000 warrants to POOF in connection with its
sale of 1,250,000 shares of its common stock for $1,250,000 to POOF
in December 2007.
(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 les then all, of the
shares our common stock, by payment in full of the purchase price,
and (ii) Taylor must pay to the escrow agent at the time of exercise
all other sums due and payable the settlement and termination
agreement pursuant to which the warrants were issued.
(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. 49
WARRANT CHARACTERISTICS. Set forth below are certain characteristics with
respect to our different classes of warrants.
REGISTRATION RIGHTS. Certain classes of our warrants have registration
rights as follows:
(a) Under the Carbon Recovery Acquisition Agreement and the Mobilestream
Acquisition Agreement, we were obligated to file a registration statement on
Form S-1 for the Carbon Recovery Acquisition B Warrants, D Warrants and E
Warrants, and the Mobilestream Acquisition Warrants, and to register the shares
of our common stock underlying such warrant classes. Accordingly, we have filed
as part of the same registration statement on Form S-1 described above with
respect to our common stock for the Carbon Recovery and Mobliestream
acquisitions, a registration statement for all classes of the Carbon Recovery
Acquisition Warrants, the Mobilestream Acquistion Warrants and the shares of
common stock issuable upon exercise of any class of said warrants.
(b) Under the 2007 POOF Warrants we are obligated to register 625,000
shares of our common stock issuable upon exercise of the POOF Warrants. These
shares of common stock are included within this registration statement.
(c) Under the 2007 Black Diamond and Mercury Nutmeg Warrants we are
obligated to register a combined total of 400,000 warrants and 400,000 shares of
our common stock issuable upon exercise of the warrants. We intend to file this
registration statement as soon as possible.
(d) Under the Augustine Warrants we are obligated to register a total of
505,040 shares of our common stock issuable upon exercise of the warrants. We
intend to file this registration statement as soon as possible; however, under
the registration rights agreement between the Company and POOF we may not file a
registration statement for the shares underlying the Augustine Warrants until 90
days after the effective date of the registration statement for the POOF shares.
(e) Under the Taylor Warrants we are obligated to register a total of
1,000,000 shares of our common stock issuable upon exercise of the warrants. We
intend to file this registration statement as soon as possible; however, under
the registration rights agreement between the Company and POOF we may not file a
registration statement for the shares underlying the Taylor Warrants until 90
days after the effective date of the registration statement for the POOF shares.
(f) Our remaining classes of warrants do not have registration rights.
Transferability. The warrants are not listed for trading on any exchange
or for quotation on any Nasdaq Market, the OTC Bulletin Board or the Pink
Sheets, but are transferable privately or in accordance with the terms and
conditions of Rule 144.
Adjustments. The exercise price and the number of shares of our common
stock issuable upon the exercise of the warrants are subject to adjustment from
time to time as set forth hereinafter.
50
(a) Stock dividends, Stock Splits, Reclassification. If we pay a dividend
or make a distribution on our common stock in shares of common stock, subdivide
our outstanding shares of common stock into a greater number of shares or
combine our outstanding shares of common stock into a smaller number of shares
or issue by reclassification of our outstanding shares of common stock any
shares of our capital stock (including any such reclassification in connection
with a consolidation or merger in which we are the continuing corporation), then
the number of shares of common stock issuable upon the exercise of the warrants
and the exercise price then in effect shall be adjusted by us so that the holder
of the warrant thereafter exercising his, her or its warrants shall be entitled
to receive the number of shares of our common stock or other capital stock which
the holder of the warrant would have received if the warrant had been exercised
immediately prior to such event upon payment of the exercise price that has been
adjusted to reflect a fair allocation of the economics of such event to the
holder of the warrant.
(b) Reorganization, reclassification, consolidation, merger or sale of all
or substantially all of our assets. If any capital reorganization,
reclassification of our capital stock, our consolidation or merger with another
corporation in which we are not the survivor, or sale, transfer or other
disposition of all or substantially all of our assets to another corporation
shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition,
lawful and adequate provision shall be made whereby each holder of warrants
shall thereafter have the right to purchase and receive in lieu of shares of our
common stock, securities or assets as would have been issuable or payable with
respect to or in exchange for a number of shares of our common stock for which
the holder's warrants were exercisable immediately prior to such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition.
(c) Distribution of indebtedness or assets other than cash or shares of
our common stock. In case we fix a payment date for the making of a distribution
to all holders of common stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness or assets (other than cash dividends
or cash distributions payable out of consolidated earnings or earned surplus or
dividends or distributions for stock splits and stock dividends), or
subscription rights or warrants, the exercise price then in effect will be
adjusted by multiplying the exercise price in effect immediately prior to such
payment date by a fraction, (x) the numerator of which shall be the total number
of shares of our common stock outstanding multiplied by the market price per
share of our common stock immediately prior to such payment date, less the fair
market value (as determined by our Board of Directors in good faith) of the
assets or evidences of indebtedness so distributed, or of related subscription
rights or warrants, and (y) the denominator of which shall be the total number
of shares of our common stock outstanding multiplied by such market price per
share of Common Stock immediately prior to such payment date.
51
Shares Eligible for Future Sale
As of May 23, 2008, we had 47,378,713 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)
35,236,188 shares of 2006 Series of Convertible Preferred Stock that are
convertible into 17,618,094 shares of 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, (v) 625,000 shares of common stock
underlying the POOF warrants; (vi) 400,000 shares of our common stock underlying
the Black Diamond and Mercury/Nutmeg Warrants; (vii) 505,040 shares of our
common stock underlying the Augustine Warrants; (viii) 1,000,000 shares of our
common stock underlying the Taylor Warrants; (viii) 9,327,741
shares of our common stock underlying the 2008 private placement warrants; and
(ix) 2,665,666 shares of our common stock that are currently in the process of
being returned to the Company from an escrow account and which the Company is
treating as not issued and outstanding for any purpose.
Freely Tradable Shares After Offering.
As of June 4, 2008, excluding the shares that are covered by this prospectus,
38,471,185 of our currently outstanding shares are deemed "restricted"
securities, and 9,121,039 shares of our common stock can be publicly resold
without restriction. Upon the resale of the 1,900,000 currently outstanding
shares of our common stock covered by this prospectus, and the exercise of,
issuance and sale of the 625,000 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, 11,646,039 shares of our common stock will be tradable without
restriction under the Securities Act.
Rule 144. In general, under Rule 144 as currently in effect, a person (or
persons whose shares are aggregated) who has beneficially owned restricted
securities for at least one year, including persons who may be deemed our
"affiliates," as that term is defined under the Securities Act, would be
entitled to sell within any three month period a number of shares that does not
exceed the greater of 1% of the then outstanding shares (approximately 477,131
shares if the currently outstanding warrants and options are not exercised) or
the average weekly trading volume of shares during the four calendar weeks
preceding such sale. Sales under Rule 144 are subject to certain manner-of-sale
provisions, notice requirements and the availability of current public
information about the company. A person who has not been our affiliate at any
time during the three months preceding a sale, and who has beneficially owned
his shares for at least six months, would be entitled under Rule 144(k) to sell
such shares without regard to any volume limitations under Rule 144. Subject to
certain volume limitations and other conditions, all of the currently
outstanding unregistered shares are eligible for public resale under Rule 144.
The availability of Rule 144 to our holders of restricted securities is,
however, conditioned on various factors, including the availability of certain
public information concerning our company.
Form S-8 Registration of Shares. We have registered 2,500,000 shares of
our common stock on Form S-8 that are eligible for sale under our 2008 Employees
Compensation Plan. Accordingly, except for shares held by affiliates of our
Company, these shares may be resold in the public market without restriction.
52
TRANSFER AGENT
Our transfer agent is Olde Monmouth Stock Transfer Co., Inc., 200 Memorial
Parkway, Atlantic Highlands, New Jersey 07716.
EXPERTS
The financial statements for the years ended December 31, 2007 and 2006
included in this prospectus have been audited by Bagell, Josephs, Levine &
Company, L.L.C. to the extent and for the periods indicated in their report
thereon, which report included an explanatory paragraph concerning our Company's
ability to continue as a going concern. Such financial statements have been
included in this prospectus and registration statement in reliance upon the
report of Bagell, Josephs, Levine & Company, L.L.C. and upon the authority of
such firm as experts in auditing and accounting.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
The Nevada Private Corporations Law generally provides that a corporation
is empowered to indemnify any person who is made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that he is
or was a director, officer, employee or agent of the corporation or is or was
serving, at the request of the corporation, in any of such capacities of another
corporation or other enterprise, if such director, officer, employee or agent
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Under Nevada law, a director or officer may not be indemnified
where his act or failure to act constitutes a breach of is fiduciary duty and
such breach involved intentional misconduct, fraud, or a knowing violation of
law. This statute describes in detail the right of corporations such as our
Company to indemnify any such person.
Our Articles of Incorporation and our By-laws provide generally for
mandatory indemnification of our directors and officers to the fullest extent
permitted under the Nevada Private Corporations Law if they have been successful
in the defense of any claim asserted against them, and permissive
indemnification for any claim asserted against them if it appears they acted in
good faith and in a manner not opposed to the best interests of the Company. We
are also permitted to indemnify all other persons whom we requested to act on
behalf of the Company in the same manner. Our By-Laws permit us to advance
expenses on behalf of any person, including officers and directors, with regard
to any action or proceeding, provided that we receive an undertaking to repay
all such advances if it is determined that such person was not entitled to be
indemnified by us.
53
We have entered into indemnification agreements with our directors and
officers. The agreements provide that we will indemnify the indemnitee to the
fullest extent permitted by applicable law against expenses, including
reasonable attorneys' fees, judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with any civil
or criminal action or administrative proceeding arising out of his performance
of his duties as a director or officer of our company other than an action
initiated by a director or officer. Such indemnification is available if the
indemnitee acted in good faith and in a manner he reasonably believed to be in,
or not opposed to, our best interests, and, with respect to any criminal action,
had no reasonable cause to believe his conduct was unlawful.
Under each indemnification agreement, the entitlement of a director or
officer to indemnification shall be determined by a majority vote of a quorum of
disinterested directors, or if such quorum either is not obtainable or so
directs, by independent counsel or by our stockholders, as determined by such
quorum of disinterested directors. Under certain circumstances, a party to the
indemnification agreement will be conclusively presumed to have met the
applicable statutory standard of conduct unless our board of directors,
stockholders or independent legal counsel determines that the relevant standard
has not been met. If a change of control of our company has occurred, the
entitlement of such director or officer to indemnification shall be determined
by independent counsel selected by such director or officer, unless such
director or officer requests that either the board of directors or the
stockholders make such determination.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
LEGAL MATTERS
Sol V. Slotnik, P.C., New York, New York, has provided us with an opinion
concerning legality of the securities being registered by this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We have filed electronically with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act for the common stock
and warrants offered under this prospectus. We are subject to the informational
requirements of the Exchange Act, and file annual reports, quarterly reports,
special reports, proxy statements and other information with the Commission. The
reports, proxy statements and other information we file can be read and copied
at prescribed rates at the Public Reference Room of the Commission at Station
Place, 100 F Street, N.E., Washington, D.C. 20549 on official business days
during the hours of 10 a.m. to 3 p.m. Information about the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. The Commission also maintains a web site http://www.sec.gov that
contains our reports, proxy statements, information statements and other
information concerning Global Resource in the registration statement and its
exhibits, which we have filed with the Commission under the Securities Act and
to which reference is made.
54
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm.................... F-2
Consolidated Balance Sheets as of December 31, 2007 and 2006............... F-4
Consolidated Statements of Operations (with Cumulative Totals Since
Inception) for the Years Ended December 31, 2007 and 2006.................. F-5
Consolidated Statements of Cash Flows (with Cumulative Totals Since
Inception) for the Years Ended December 31, 2007 and 2006.................. F-6
Consolidated Statements of Stockholders' Equity/(Deficit) for the
Years Ended December 31, 2007 and 2006..................................... F-7
Notes to Consolidated Financial Statements for the
Years Ended December 31, 2007 and 2006..................................... F-11
Condensed Balance Sheet (unaudited) at March 31, 2008 ..................... F-24
Condensed Statement of Operations (unaudited) (with Cumulative
Totals Since Inception) for three months ended
March 31, 2008 and 2007.................................................... F-25
Condensed Statement of Stockholders' Equity (unaudited) at
March 31, 2008..............................................................F-26
Condensed Statement of Cash Flows (unaudited) (with Cumulative
Totals Since Inception) for three months ended
March 31, 2008 and 2007.....................................................F-31
Notes to Condensed Financial Statements (unaudited) for three months ended March
31, 2008 F-32
F-1
FINANCIAL STATEMENTS
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.
Certified Public Accountants
406 Lippincott Drive, Ste. J
Marlton, NJ 08053-4168
(856) 346-2828 Fax (856) 396-0022
Board of Directors and Stockholders
Global Resource Corporation
408 Bloomfield Drive, #3
West Berlin, NJ 08091-2415
We have audited the accompanying consolidated balance sheet of Global Resource
Corporation, a development stage enterprise, as of December 31, 2007, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the two-year period ended December 31, 2007 and
the period from July 19, 2002 (Date of Inception) through December 31, 2007.
Global Resource Corporation's management is responsible for these financial
statements. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Global Resource
Corporation as of December 31, 2007, and the results of its operations and its
cash flows for each of the years in the two-year period ended December 31, 2007
and the period from July 19, 2002 (Date of Inception) through December 31, 2007
in conformity with accounting principles generally accepted in the United States
of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 8 to the financial
statements, unless the Company is successful in generating new sources of
revenue, or obtaining debt or equity financing, or restructuring its business,
the Company is likely to deplete its working capital during 2008. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plan in regard to these matters is also described in Note
8. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/S/ BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.
Bagell, Josephs, Levine & Company, L.L.C.
Marlton, NJ 08053
March 20, 2008
F-2
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (AICPA)
CENTER FOR AUDIT QUALITY (CAQ)
NEW JERSEY SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
The management of Global Resources Corporation is responsible for establishing
and maintaining adequate internal control over financial reporting. The
Company's internal control over financial reporting is designed to provide
reasonable assurance as to the reliability of the Company's financial reporting
and the preparation of financial statements in accordance with generally
accepted accounting principles.
All internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation.
Management conducted an evaluation of the effectiveness of the Company's
internal control over financial reporting as of December 31, 2007. In making
this assessment, it used the criteria set forth in INTERNAL CONTROL--INTEGRATED
FRAMEWORK issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
We identified the following material weakness in our internal control over
financial reporting- we did not have adequately segregation of duties, in that
we only had one person performing all accounting-related on-site duties. Because
of the "barebones" level of relevant personnel, however, certain deficiencies
which are cured by separation of duties cannot be cured, but only a monitored as
a weakness.
Our independent registered public accounting firm, Bagell, Josephs, Levine &
Company, LLC, has reviewed our management's assessment of our internal controls
over the financial reporting and will issue their report in 2008 per SEC rules
for non-accelerated filers.
F-3
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Balance Sheet
December 31, 2007
ASSETS
------
Year Ended
December 31, 2007
-----------------
CURRENT ASSETS
Cash $ 780,425
------------
TOTAL CURRENT ASSETS 780,425
------------
Fixed Assets, Net of depreciation 373,135
------------
OTHER ASSETS
Investments & Deposits on Investments 74,860
------------
TOTAL OTHER ASSETS 74,860
TOTAL ASSETS $ 1,228,420
============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 119,588
Current portion - loan payable - equipment 40,964
Loan Payable - to officer of company 150,000
------------
TOTAL CURRENT LIABILITIES 310,552
------------
LONG-TERM LIABILITIES
Loan payable - equipment, net of current portion 51,629
------------
Total liabilities 362,181
------------
STOCKHOLDERS' EQUITY
Preferred Stock A - $.001 par value 100,000,000 shares authorized, 35,236
35,236,188 issued and outstanding at Dec. 31, 2007
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,
30,263,330 shares issued and outstanding at Dec. 31, 2007 30,358
Subscription receivable (185,693)
Additional paid-in capital 20,497,849
Deficit accumulated in the development stage (17,418,997)
------------
2,958,754
Treasury Stock (66,473)
Prepaid Services (1,808,042)
Deferred compensation (218,000)
------------
Total stockholders' equity 866,239
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,228,420
============
The accompanying notes are an integral part of these financial statements.
F-4
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Operations
(With Cumulative Totals Since Inception)
JULY 19, 2002
TWELVE MONTHS ENDED (INCEPTION)
------------------- TO
DECEMBER 31 DECEMBER 31 DECEMBER 31,
2007 2006 2007
------------ ------------ ------------
REVENUES $ - $ - $ -
COST OF SALES - -
------------ ------------ ------------
GROSS PROFIT - - -
------------ ------------ ------------
OPERATING EXPENSES
Consulting fees 117,881 313,870 1,422,258
Professional fees for Legal and Accounting 572,411 368,215 1,260,188
Investment Banking Fees and investor relations 4,813,322 1,078,936 5,892,258
Other general and administrative expenses 4,799,415 2,495,840 8,555,648
Depreciation expense 93,864 58,154 183,730
------------ ------------ ------------
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) $ (0.66)
============ ============ ============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 26,489,850 47,939,917 26,489,850
============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-5
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Cash Flows
(With Cumulative Totals Since Inception)
JULY 19, 2002
TWELVE MONTHS ENDED (INCEPTION)
TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2007 2006 2007
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
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 7,107,000 64,746 7,639,300
Amortization of deferred compensation 109,000 109,000 327,250
Allowance reserve for note payable 650,000 650,000
Loss on sale of fixed asset 11,775 - 11,775
Loss on real estate - 87,035
Common stock issued as charitable contribution 50,000
CHANGES IN ASSETS AND LIABILITIES
(Increase) in prepaid expenses - - -
(Increase) decrease in deposits 70,140 16,911 70,140
(Increase) in notes receivable (650,000) (650,000)
(Decrease) in accounts receivable -
(Decrease) in accounts payable 5,542 (66,750) (218,677)
------------ ------------ ------------
TOTAL ADJUSTMENTS 7,797,321 182,061 8,549,865
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (2,689,565) (4,063,997) (8,869,132)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (24,033) (503,902) (602,152)
Proceeds from sale of Fixed assets 34,200 34,200
Proceeds from sale of real estate - 617,864
Investment - (135,000) (145,000)
Investment in real estate, net - - (80,800)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 10,167 (638,902) (175,888)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for cash 1,168,461 2,810,877 4,893,845
Issuance of equity securities and paid-in capital for merger and other 201,464 2,876,575 5,974,413
Liability for stock to be issued (201,343) 200,367 (975)
(Increase) decrease in stock subscription receivable 475,000 (582,511) (1,217,957)
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 - equipment 73,817 100,133
Repayment of loan payable - vehicle (25,131) (31,937)
Proceeds from loan payable - equipment 75,000 75,000
Repayment of loan payable - equipment (37,288) (13,315) (50,603)
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,689,821 5,398,629 9,825,445
------------ ------------ ------------
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 OF
NON-CASH ACTIVITIES:
Common stock issued for services $ 6,333,542 $ 64,746 $ 6,865,842
============ ============ ============
Common stock issued for services net of prepaid contra equity account $ 773,458 $ 773,458
============ ============ ============
Common stock issued for land investment $ 45,000 $ 125,800
============ ============ ============
Common stock issued as charitable contribution $ 50,000
============ ============ ============
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
PREFERRED STOCK COMMON STOCK DISCOUNT
----------------------------- ----------------------------- ADDITIONAL ON
PREFERRED PAR VALUE $.001 COMMON PAR VALUE $.001 PAID-IN COMMON
SHARES $ AMOUNT SHARES $ AMOUNT CAPITAL STOCK
------------ ------------ ------------ ------------ ------------ ------------
BALANCE - JULY 19, 2002 (INCEPTION) - $ - $ - $ -
Issuance of initial founders'
shares, September 2002, net
of subsequent cancellations 2,555,000 - - -
Shares issued for services,
September 2002 1,000,000 - 472,000 -
Shares issued for cash,
November 2002 29,000 - 14,500 -
Shares issued for services,
November and December 2002 13,600 - 6,800 -
Net loss for the period
July 19, 2002 (Inception)
through December 31, 2002,
as originally stated - - - -
Prior period adjustment,
Note 11 - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 2002 - - 3,597,600 - 493,300 -
------------ ------------ ------------ ------------ ------------ ------------
Re-issuance of founders'
shares - July 2003 1,455,000 - - -
Shares issued for cash 519,800 - 259,900 -
Issuance of subscription
receivable from shareholders - - - -
Net loss for the year ended
December 31, 2003, as
originally stated - - - -
Prior period adjustment,
Note 11 - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 2003 - - 5,572,400 - 753,200 -
------------ ------------ ------------ ------------ ------------ ------------
Shares issued for cash 917,645 - 553,105 -
Shares issued in exchange
for real estate 650,000 - 650,000 -
Shares issued for compensation 545,000 - 545,000 -
Shares issued as charitable
contribution 50,000 - 50,000 -
Initial founders' shares
cancelled (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.
(CONTINUED ON NEXT PAGE)
F-7
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
At December 31, 2007
(CONTINUED FROM PREVIOUS PAGE)
DEFICIT
ACCUMULATED
DURING THE CONTRA
DEVELOPMENT DEFERRED PREPAID FOR SUBSCRIPTION TREASURY
STAGE COMPENSATION SERVICES RECEIVABLE STOCK TOTAL
------------ ------------ ------------ ------------ ------------ ------------
BALANCE - JULY 19, 2002 (INCEPTION) $ - $ - $ - $ -
Issuance of initial founders'
shares, September 2002, net
of subsequent cancellations - - - -
Shares issued for services,
September 2002 - - - 472,000
Shares issued for cash,
November 2002 - - - 14,500
Shares issued for services,
November and December 2002 - - - 6,800
Net loss for the period
July 19, 2002 (Inception)
through December 31, 2002,
as originally stated (2,008,508) - - (2,008,508)
Prior period adjustment,
Note 11 1,500,000 - - 1,500,000
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 2002 (508,508) - - - (15,208)
------------ ------------ ------------ ------------ ------------ ------------
Re-issuance of founders'
shares - July 2003 - - - -
Shares issued for cash - - - 259,900
Issuance of subscription
receivable from shareholders - - (14,340) (14,340)
Net loss for the year ended
December 31, 2003, as
originally stated (931,159) - - (931,159)
Prior period adjustment,
Note 11 727,500 - 727,500
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 2003 (712,167) - - (14,340) 26,693
------------ ------------ ------------ ------------ ------------ ------------
Shares issued for cash - - - 553,105
Shares issued in exchange
for real estate - - - 650,000
Shares issued for compensation - (545,000) - -
Shares issued as charitable
contribution - - - 50,000
Initial founders' shares
cancelled - - - -
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-8
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
At December 31, 2007
PREFERRED STOCK COMMON STOCK DISCOUNT
----------------------------- ----------------------------- ADDITIONAL ON
PREFERRED PAR VALUE $.001 COMMON PAR VALUE $.001 PAID-IN COMMON
SHARES $ AMOUNT SHARES $ AMOUNT CAPITAL STOCK
------------ ------------ ------------ ------------ ------------ ------------
Shares issued for cash 745,655 - 914,507 -
Shares issued to acquire
technology 37,500,000 - 37,500,000 (37,500,000)
Remaining shares issued in
exchange for real estate 80,800 - 80,800 -
Shares issued for services 53,500 - 53,500 -
Accounts payable converted
to equity 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 - 41,101,199 (37,500,000)
------------ ------------ ------------ ------------ ------------ ------------
Shares issued for cash 2,786,286 - 2,810,877 -
Stock subscriptions received,
net - - - -
Amortization of deferred
compensation - - - -
Shares issued for services 14,123 - 14,746 -
Shares issued for investment
in land 22,500 - 45,000 -
Effect of reverse merger 72,241 48,761 (37,669,444) 37,500,000
Shares issued for conversion
of debt 2,681,837 2,682 118,000 -
Shares issued for consulting 25,000 25 49,975 -
Shares issued for merger
with Mobilestream Inc 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 conversion
into common 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 $ 9,818,127 $
============ ============ ============ ============ ============ ============
Shares issued for cash 1,519,564 1,520 1,166,941
Shares issued for Stock
to be issued (liability) 186,822 187 201,156
Stock subscriptions received,
net - - - -
Amortization of deferred
compensation
Shares issued for services 2,613,576 2,613 6,331,050
Shares issued for services
& Prepaid in Equity 925,000 925 2,580,576
Treasury Stock (94,961)
Perferred Shares issued for
settlement of services 1,000 1 399,999
Net loss for the period
ended December 31, 2007 - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 2007 35,237,188 $ 35,237 30,263,330 $ 30,358 $ 20,497,849 $ -
============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
(CONTINUED ON NEXT PAGE)
F-9
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
At December 31, 2007
(CONTINUED FROM PREVIOUS PAGE)
DEFICIT
ACCUMULATED
DURING THE CONTRA
DEVELOPMENT DEFERRED PREPAID FOR SUBSCRIPTION TREASURY
STAGE COMPENSATION SERVICES RECEIVABLE STOCK TOTAL
------------ ------------ ------------ ------------ ------------ ------------
Shares issued for cash - - - 914,507
Shares issued to acquire
technology - - - -
Remaining shares issued in
exchange for real estate - - - 80,800
Shares issued for services - - - 53,500
Accounts payable converted
to equity - - - 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
------------ ------------ ------------ ------------ ------------ ------------
Shares issued for cash - - - 2,810,877
Stock subscriptions received,
net - - (582,511) (582,511)
Amortization of deferred
compensation - 109,000 - 109,000
Shares issued for services - - - 14,746
Shares issued for investment
in land - - - 45,000
Effect of reverse merger - - - (120,683)
Shares issued for conversion
of debt - - - 120,682
Shares issued for consulting - - - 50,000
Shares issued for merger
with Mobilestream Inc (10,498) 2,842,783
Cancellation of shares for
merger with Mobilestream Inc -
Preferred convertible stock
issued for merger with
Mobilestream 2 for 1 conversion
into common 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) $ (327,000) $ - $ (660,693) $ - $ 1,958,672
============ ============ ============ ============ ============ ============
Shares issued for cash 1,168,461
Shares issued for Stock
to be issued (liability) 201,343
Stock subscriptions received,
net - - 475,000 475,000
Amortization of deferred
compensation 109,000 109,000
Shares issued for services 6,333,663
Shares issued for services
& Prepaid in Equity (1,808,042) 773,459
Treasury Stock (66,473) (66,473)
Perferred Shares 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) $ (218,000) $ (1,808,042) $ (185,693) $ (66,473) $ 866,239
============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-10
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 at
specifically selected frequencies for a time sufficient to at least
partially decompose the materials, converting the materials into
industrial products and chemicals for the petroleum chemical industry.
The Company's business goals are as follows:
1) The construction of plants to exploit certain technology for
decomposing petroleum-based materials by subjecting them to variable
frequency microwave radiation at specifically selected frequencies
for a time sufficient to at least partially decompose the materials;
2) The design, manufacture and sale of machinery and equipment units,
embodying the technology;
3) The sub-licensing of third parties to exploit that technology.
At the present time, the process is in a laboratory mode. There will have
to be a transition from the "one batch at a time" operation, used in the
laboratory to a "continuous feed" line in order to commercialize the
process. A prototype one ton "continuous feed" line machine is scheduled
for delivery in the first quarter 2008.
The Company believes that the design of the machinery and equipment for
the decomposition of waste tires fully protects the environment from the
release of components during the decomposition process.
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: 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.
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 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. Medicinal applications.
To date, the Company has allocated a substantial portion of their time and
investment in bring their product to the market and the raising of
capital. The Company has not commenced any commercial operations as of
December 31, 2007.
F-11
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)
On December 31, 2006, Global Resource Corporation acquired all the assets
and assumed all of the liabilities of Mobilestream Oil, Inc. in exchange
for; a) 11,145,255 shares of the Company's Common Stock; b) the issuance
by the Company for the benefit of the holders of the 2006 series of
convertible preferred stock of Mobilestream of 35,236,188 shares of the
Company's own "2006 Series" in the process of designation (see "Subsequent
Events" note 13 below for changes); c) the issuance of 27,205,867 common
stock purchase warrants on the basis of 1 warrant for each 3 shares of
either common stock or preferred stock (the 2006 Series), exercisable at
$4.75 per share for a period ending on December 31, 2007. The ownership
Mobilestream owned 37,500,000 shares of the Company's stock which were
cancelled. The total cost of the acquisition of Mobilestream has been
allocated to the assets acquired and the liabilities assumed based on
their fair values in accordance with SFAS 141, BUSINESS COMBINATIONS. The
net asset and liabilities of Mobilestream equal approximately $2.4
million. The assets consisted of cash approximately $1,678,000, and fixed
assets of $149,000 offset by liabilities of approximately $91,000.
On September 22, 2006, the 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 the assumption of a convertible debenture and
accrued interest in the amount of $120,682 by Carbon Recovery Corporation,
subsequent the convertible debenture was eliminated by issuing 2,681,837
of the Company's common stock.. The holders of Global Resource
Corporation's capital stock before the Agreement retained 72,241 shares of
common stock. Prior to the Agreement, Carbon Recovery Corporation had
warrants outstanding. Pursuant to the Agreement, those outstanding
warrants were exchanged for outstanding 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. All of the
warrants originally schedule to expire on September 21, 2007, but the
Board of directors of the Company has extended the expiration date to
December 31, 2007 fore 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 merger, Carbon Recovery Corporation
changed its name to Global Resource Corporation.
On December 11, 2007 the company adapted 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 Convertible Preferred stock. 4) Indemnify the
F-12
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)
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, 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.
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.
F-13
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BUSINESS COMBINATIONS
Effective December 31, 2006 the Company completed a merger with
Mobilestream Corp. and due to the transfer of assets between entities
under common control, the total cost of the acquisition of Mobilesstream
has been allocated to the assets acquired and the liabilities assumed
based on their fair values in accordance with SFAS 141, BUSINESS
COMBINATIONS. 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.
STOCK-BASED COMPENSATION
Effective January 1, 2006, the Company adopted the provisions of Financial
Accounting Standards Board ("FASB") published Statement of Financial
Accounting Standards No. 123 (Revised 2004), "SHARE-BASED PAYMENT" ("SFAS
123R"). SFAS 123R requires that compensation cost related to share-based
payment transactions be recognized in the financial statements.
Share-based payment transactions within the scope of SFAS 123R include
stock options, restricted stock plans, performance-based awards, stock
appreciation rights, and employee share purchase plans. Prior to January
1, 2006, the Company accounts for its share-based payment transactions
under the provisions of APB 25, which does not necessarily require the
recognition of compensation cost in the financial statements. Accordingly,
no compensation expense was recognized for the stock option grants in
periods prior to the adoption of SFAS 123R. The Company has not issued any
options during the reporting periods and as such, the effect of SFAS 123R
has no impact on the results of operations for the Twelve months ended
December 31, 2007 and 2006. The company did issue stock grants in 2007
that were 100% vested at time of issuance and were expense to the Company
at the market price.
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Historical net loss per common share is computed using the weighted
average number of common shares outstanding. Diluted earnings per share
(EPS) include additional dilution from common stock equivalents, such as
stock issuable pursuant to the exercise of stock options and warrants.
Common stock equivalents were not included in the computation of diluted
earnings per share when the Company reported a loss because to do so would
be 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
=============== ===============
F-14
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Weighted-average common stock Equivalents for preferred stock convertible
to 1/2 for 1 of common are 17,618,094 and warrants common stock
equivalents are 11,036,907. There are also common stock purchase options
equivalents totaling 200,000, these warrants and options are not part of
the weighted-average outstanding common stock calculation because
inclusion would have been anti-dilutive as of December 31, 2007 and
December 31, 2006.
ADVERTISING COSTS
The Company will expense the costs associated with advertising as they are
incurred. The Company did not incur any advertising costs for the years
ended December 31, 2007 and 2006.
RECLASSIFICATIONS
Certain amounts for the year ended December 31, 2006 have been
reclassified in the comparative financial statements to be comparable to
the presentation for the year ended December 31, 2007. These
reclassifications had no effect on net loss.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2007, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141 (revised
2007), BUSINESS COMBINATIONS, which replaces SFAS No 141. The statement
retains the purchase method of accounting for acquisitions, but requires a
number of changes, including changes in the way assets and liabilities are
recognized in the purchase accounting. It also changes the recognition of
assets acquired and liabilities assumed arising from contingencies,
requires the capitalization of in-process research and development at fair
value, and requires the expensing of acquisition-related costs as
incurred. SFAS No. 141R is effective for us beginning January 1, 2008 and
will apply prospectively to business combinations completed on or after
that date.
In December 2007, the FASB issued SFAS No. 160, NONCONTROLLING INTERESTS
IN CONSOLIDATED FINANCIAL STATEMENTS, AN AMENDMENT OF ARB 51, which
changes the accounting and reporting for minority interests. Minority
interests will be recharacterized as noncontrolling interests and will be
reported as a component of equity separate from the parent's equity, and
purchases or sales of equity interests that do not result in a change in
control will be accounted for as equity transactions. In addition, net
income attributable to the noncontrolling interest will be included in
consolidated net income on the face of the income statement and, upon a
loss of control, the interest sold, as well as any interest retained, will
be recorded at fair value with any gain or loss recognized in earnings.
SFAS No. 160 is effective for us beginning January 1, 2008 and will apply
prospectively, except for the presentation and disclosure requirements,
which will apply retrospectively. We are currently assessing the potential
impact that adoption of SFAS No. 160 would have on our financial
statements.
F-15
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In 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, 2008, 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.
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
================
F-16
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 3 - FIXED ASSETS (CONTINUED)
There was $93,864 and $58,154 charged to operations for depreciation
expense for the twelve months ended December 31, 2007 and 2006,
respectively.
The Company sold three vehicles to the President and Chairman of the
Company for $34,200 in cash and which was $11,776 below net book value.
NOTE 4 - LOAN PAYABLE - OFFICER OF THE COMPANY
On November 28, 2007 the Chief Financial Officer, Jeff Andrews, loan 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
==========
Deferred income taxes will be determined using the liability method for
the temporary differences between the financial reporting basis and income
tax basis of the Company's assets and liabilities. Deferred income taxes
will be measured based on the tax rates expected to be in effect when the
temporary differences are included in the Company's tax return. Deferred
tax assets and liabilities are recognized based on anticipated future tax
consequences attributable to differences between financial statement
carrying amounts of assets and liabilities and their respective tax bases.
At December 31, 2007 the deferred tax assets consist of the following:
2007
---------------
Deferred taxes due to net operating
carryforwards $ 5,225,000
Less: Valuation Allowance (5,225,000)
---------------
Net Deferred Tax asset $ --
---------------
F-17
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 6 - PROVISION FOR INCOME TAXES (CONTINUED)
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
==============
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
acquire an operating, cash flow positive company.
The financial statements do not include any adjustments relating to the
recoverability or classification of recorded assets and liabilities that
might result should the Company be unable to continue as a going concern.
NOTE 9 - STOCKHOLDERS' EQUITY
COMMON STOCK
The following details the stock transactions for the twelve months ended
December 31, 2007:
The Company issued 1,519,564 shares of stock for $1,168,461 cash.
The Company issued 186,822 shares of common stock for cash received in
2006 which was classified as liability in stock to be issued $210,343.
F-18
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 9 - STOCKHOLDERS EQUITY (CONTINUED)
The Company re-purchased 94,961 shares of common stock for $66,473 in
cash. (See "Related Party Transaction" Note 11 below Treasury stock
purchase from Lois Pringle)
The Company issued 3,538,576 shares of common stock in exchange for
services rendered, valued at $7,107,000. Included in service rendered
value is the issuance of 925,000 shares of stock for services which have a
gross value at $2,581,500 and is being amortized and expensed over one
year period beginning in September of 2007 (see Prepaid Services below).
Also included in service rendered value is stock issued under the "2007
Employee Compensation and Stock Plan Option Plan", a total 1,144,500
shares were issued, with a value of $3,050,520 which was expensed in 2007.
800,000 Shares were issued to the Company's Chairman and CEO/President,
200,000 shares were issued to the Company's CFO.
The Company issued 900,000 shares to an escrow account for future
transaction with Professional Offshore Opportunity Fund, Ltd, "PROOF".
(See "Commitments and Contingencies" note 10 below). The issuance of these
shares are dependant on following future events occurring; if (i) the
Company does not file and have an effective registration statement for the
Shares, Warrants and Warrant Shares by June 30, 2008 or (ii) in the event
that during the period of six months from the date of Closing, the market
price of the Company's Common Stock has a closing price of less than
$1.00.
PREFERRED STOCK
On October 22, 2007 Frank G. Pringle, the Company's Chairman and
CEO/President, the owner of all 35,236,188 issued and outstanding shares
of the Company's 2006 Series of Convertible Preferred Stock offered to
reduce the number of common stock, 1 preferred for 2 common stock shares
to 1 preferred for 1/2 of 1 common stock shares which the Board of
Directors has accepted.
The Company issued 1,000 shares of new convertible preferred to complete a
settlement agreement for services rendered. These shares can be converted
into common stock after 1 year, applicable to rule 144, 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.
SUBSCRIPTION RECEIVABLE
In 2006 the Company has contract to sell some of it common stock on
installment basis, and is waiting to receive the final balance of payment.
The Company fully expects to receive the December 31, 2007 balance of
$185,693 by the end of year 2008.
PREPAID SERVICES
In September 2007 the Company issued 925,000 shares of stock for services
which has a gross value at $2,581,500 which is being amortized and
expensed over one year period, the unamortized amount as of December 31,
2007 is $1,808,042.
F-19
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 9 - STOCKHOLDERS' EQUITY (CONTINUED)
WARRANTS
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, originally schedule to expire on September 21,
2007, but the Board of directors of the Company has extended the
expiration date for all classes of warrants to December 31, 2008. 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 December 31, 2008.
On October 22, 2007 the Board of Directors accepted an offer from Frank
Pringle, Chairman and CEO, to cancel the 23,500,000 Common Stock Purchase
Warrants received by him in the transaction when the Company acquired the
assets of Mobilestream Oil, Inc.. This action does not affect the
remaining 3,705,867 warrants held by the Mobilestream Oil Liquidating
Trust and to be issued to the other shareholders of Mobilestream Oil, Inc.
upon their registration.
The Company issued an additional 627,500 warrants in 2007, (See
"Commitments and Contingencies" note 10 below "PROOF"). 625,000 warrants
have an exercise price of $1.50, an expiration date of December 20, 2012
and 2,500 have an exercise price of $2.50 with an expiration date of
October 25, 2008.
A summary of the status of the Company's outstanding stock warrants as of
December 31, 2007 is as follows:
Weighted Average
Shares Exercise Price
--------------- -----------------
Outstanding at January 1, 2007 33,909,407 $ 4.41
Granted 627,500 $ 1.50
Exercised - -
Forfeited 23,500,000 $ 4.75
--------------- -----------------
Outstanding at December 31, 2007 11,036,907 $ 3.51
--------------- -----------------
Exercisable at December 31, 2007 11,036,907 $ 3.51
--------------- -----------------
In March 2005 the Company issued 200,000 of common stock purchase options
(under Carbon Recovery Corporation) to the CFO. The options have an
exercise price of $1.00 per share and will be 100% vested on 12/31/2008.
As of 12/31/2007 none were exercised.
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
F-20
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 10 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
of five years. The President has the option to renew this agreement for a
second five-year term. In addition to the base salary the Company has
granted the President 545,000 shares of restricted common stock as
deferred compensation. The common stock vests to the President over a
five-year period commencing January 1, 2005.
On March 12, 2007 the Company entered into an Exclusive Placement Agent
Agreement with an investment banker pursuant to which the investment
banker was to place up to $3,000,000 of debt securities (with related
warrants) within a 45 day period following approval of offering documents.
During the offering term, two subscriptions, for a total of $800,000, were
received, of which amount $400,000 was paid-in. After payment of Escrow
Agent fees and costs of $2,510 and transaction fees and costs of $62 200,
which costs and fees have been contemporaneously expensed, the Company
netted $335,299. On June 13, 2007, following expiration of the 45-day
term, the Company notified the Escrow Agent and the investment banker (1)
that the Exclusive Placement Agent Agreement would not be extended and (2)
that the offering was withdrawn. The Company determined to rescind the two
subscriptions and on August 1, 2007 returned the $400,000 together with 9%
interest of $9,640. The interest was expensed in June 2007. The Company
concurrent with the rescind agreement settle all outstanding claims for
$25,000, which was expensed in the third quarter 2007.
The Company set up a prepaid in the amount of $250,000 in June 2007 for a
finder fee related to the $3,000,000 debt securities funding discuss
above. In the 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 purchase agreement with Ingersoll
Production Systems of Rockford Illinois to build one 1 ton microwave
reactor system. The total purchase commitment is $300,000, the microwave
reactor system is expected to be delivered by end of first quarter 2008.
On December 17, 2007 the Company has signed a letter of intent with
Warwick Communications, Inc., ("Warwick"), a Canadian corporation based in
Calgary, for an exclusive twenty-year license agreement, which enables
Warwick to use the Company's microwave machinery to recover energy from
oil, gas, mining and waste resources in Canada. Payment for the license
will be by issuance of 2,000,000 shares of Warwick's common stock,
together with two warrants; one to purchase 1.000,000 additional shares of
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 the 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
F-21
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE 10 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
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.
NOTE 11 - RELATED PARTY TRANSACTION
On May 17, 2007, the Company authorized the purchase of the Company stock
from Lois Pringle, officer and wife of the Company's Chief Executive
officer. The Company purchased 94,961 shares for $66,471 in cash.
On November 28, 2007 the Chief Financial Officer, Jeff Andrews, loan the
Company $150,000. This loan has no stated principal payment due date,
interest agreement 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 loans.
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 stock held in
escrow will be sold by the Escrow agent to satisfy the loan amount.
The note has been fully reserved due to market price volatility of the
Company's common stock price in 2006 and written off in 2007.
F-22
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 has decided not to pursue the acquisition of ESP and the deposit
was deemed not refundable and was expensed in June 2007.
NOTE 14 - SUBSEQUENT EVENTS
Subsequent to the balance sheet date of December 31, the following
transactions occurred:
The Company filed on January 29, 2008 a Registration Statement on Form S-8
under the Securities Act of 1933 for its "2008 Employee Compensation Plan"
in order to register 2,500,000 shares, par value $.001 per share for the
plan. The granting of shares of common stock under this plan shall be
entirely discretionary with the Company's Board of Directors.
In January and February the Company received $89,000 in cash for the sales
of common stock.
On February 12, 2008, the Company filed a Registration Statement on Form
S-1 under the Securities Act of 1933 in order to register securities
issued in the acquisition of Carbon Recovery Corporation ("CRC") in
September 2006 and the acquisition of Mobilestream Oil, Inc.
("Mobilsteam") in December 2006. Summary of securities register:
Mobilestream acquisition shares of common stock 11,145,225
Mobilestream acquisition of warrants 3,705,867
Mobilestream acquisition of common stock 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 Class B common stock warrants 3,908,340
CRC acquisition of Class D warrants 1,397,600
CRC acquisition of Class D common stock warrants 1,397,600
CRC acquisition of Class E warrants 1,397,600
CRC acquisition of Class E common stock warrants 1,397,600
On February 28, 2008, in an 8-K filing, the Company disclosed the hiring
of Mr. Jeff T. Kimberly as the Company's Chief Operating officer. The
employment of Mr. Kimberly is effective as of February 11, 2008 and was
approved by the board of directors on February 7, 2008. Mr. Kimberly will
be responsible the Company's production, sales and administrative
operations. In connection with his employment, Mr. Kimberly will receive a
$100,000 signing bonus, his base salary will be $200,000 per year which
will increase to $225,000 on August 11, 2008, his sixth month anniversary
with the company. In addition to his base salary, Mr. Kimberly is eligible
to receive a yearly performance bonus to be paid in the Company's common
stock issued under the GRC 2008 Employee compensation plan, as well as a
relocation compensation package and Company medical benefits.
F-23
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Balance Sheet
March 31, 2008
(Unaudited)
ASSETS Period Ended
------ March 31, 2008
------------
CURRENT ASSETS
Cash $ 1,595,782
Cash - Restricted 5,069,872
Inventory 361,511
------------
TOTAL CURRENT ASSETS 7,027,165
------------
Fixed Assets, Net of depreciation 362,044
------------
OTHER ASSETS
Investments & Deposits on Investments 74,860
------------
TOTAL OTHER ASSETS 74,860
TOTAL ASSETS $ 7,464,069
============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 122,461
Current portion - loan payable - equipment 42,043
Loan Payable - to officer of company 150,000
Stock to be issued 5,069,872
------------
TOTAL CURRENT LIABILITIES 5,384,376
------------
LONG-TERM LIABILITIES
Loan payable - equipment, net of current portion 40,704
------------
Total liabilities 5,425,080
------------
STOCKHOLDERS' EQUITY
Preferred Stock A - $.001 par value 100,000,000 shares authorized,
35,236,188 issued and outstanding at March 31, 2008 35,236
Preferred Stock B - $.001 par value 1,000 shares authorized
and issued as March 31, 2008 1
Common stock, $.001 par value; 200,000,000 shares authorized,
33,197,056 issued and outstanding at March 31, 2008 33,292
Subscription receivable (130,518)
Additional paid-in capital 24,553,559
Deficit accumulated in the development stage (21,032,691)
------------
3,458,879
Treasury Stock (66,473)
Prepaid Services (1,162,667)
Deferred compensation (190,750)
------------
Total stockholders' equity 2,038,989
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,464,069
============
The accompanying notes are an integral part of these financial statements.
F-24
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Operations
(With Cumulative Totals Since Inception)
(Unaudited)
Three Months Ended
------------------ JULY 19, 2002
(INCEPTION)
March 31 MARCH 31 TO
2008 2007 MARCH 31, 2008
------------ ------------ ------------
REVENUES $ -- $ -- $ --
COST OF SALES -- --
------------ ------------ ------------
GROSS PROFIT -- -- --
------------ ------------ ------------
OPERATING EXPENSES
Consulting fees -- 8,239 1,422,258
Professional fees for Legal and Accounting 204,129 174,975 1,464,317
Investment Banking Fees and investor relations 2,599,802 60,000 8,492,060
Other general and administrative expenses 786,785 486,388 9,342,544
Depreciation expense 20,692 23,282 204,422
------------ ------------ ------------
TOTAL OPERATING EXPENSES 3,611,408 752,884 20,925,601
------------ ------------ ------------
LOSS BEFORE OTHER INCOME (EXPENSE) (3,611,408) (752,884) (20,925,601)
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Loss on deposit / real estate - net -- -- (172,712)
Interest expense (6,073) (3,479) (44,564)
Interest income 3,787 14,499 110,186
------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) (2,286) 11,020 (107,090)
------------ ------------ ------------
NET LOSS BEFORE PROVISION FOR INCOME TAXES (3,613,694) (741,864) (21,032,691)
PROVISION FOR INCOME TAXES -- -- --
------------ ------------ ------------
NET LOSS APPLICABLE TO COMMON SHARES $ (3,613,694) $ (741,864) $(21,032,691)
============ ============ ============
BASIC AND DILUTED LOSS
PER SHARE $ (0.12) $ (0.03) $ (0.68)
============ ============ ============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 30,743,131 25,180,668 30,743,131
============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-25
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At March 31, 2008
PREFERRED STOCK COMMON STOCK DISCOUNT
----------------------------- ----------------------------- ADDITIONAL ON
PREFERRED PAR VALUE $.001 COMMON PAR VALUE $.001 PAID-IN COMMON
SHARES $ AMOUNT SHARES $ AMOUNT CAPITAL STOCK
------------ ------------ ------------ ------------ ------------ ------------
BALANCE - JULY 19, 2002 (INCEPTION) - $ - $ - $ -
Issuance of initial founders'
shares, September 2002, net
of subsequent cancellations 2,555,000 - - -
Shares issued for services,
September 2002 1,000,000 - 472,000 -
Shares issued for cash,
November 2002 29,000 - 14,500 -
Shares issued for services,
November and December 2002 13,600 - 6,800 -
Net loss for the period
July 19, 2002 (Inception)
through December 31, 2002,
as originally stated - - - -
Prior period adjustment,
Note 11 - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 2002 - - 3,597,600 - 493,300 -
------------ ------------ ------------ ------------ ------------ ------------
Re-issuance of founders'
shares - July 2003 1,455,000 - - -
Shares issued for cash 519,800 - 259,900 -
Issuance of subscription
receivable from shareholders - - - -
Net loss for the year ended
December 31, 2003, as
originally stated - - - -
Prior period adjustment,
Note 11 - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 2003 - - 5,572,400 - 753,200 -
------------ ------------ ------------ ------------ ------------ ------------
Shares issued for cash 917,645 - 553,105 -
Shares issued in exchange
for real estate 650,000 - 650,000 -
Shares issued for compensation 545,000 - 545,000 -
Shares issued as charitable
contribution 50,000 - 50,000 -
Initial founders' shares
cancelled (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 -
------------ ------------ ------------ ------------ ------------ ------------
(CONTINUED ON NEXT PAGE)
F-26
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At March 31, 2008
(CONTINUED FROM PREVIOUS PAGE)
DEFICIT
ACCUMULATED CONTRA
DURING THE DEFERRED PREPAID FOR SUBSCRIPTION TREASURY
DEVELOPMENT STAGE COMPENSATION SERVICES RECEIVABLE STOCK TOTAL
------------ ------------ ------------ ------------ ------------ ------------
BALANCE - JULY 19, 2002 (INCEPTION) $ - $ - $ - $ -
Issuance of initial founders'
shares, September 2002, net
of subsequent cancellations - - - -
Shares issued for services,
September 2002 - - - 472,000
Shares issued for cash,
November 2002 - - - 14,500
Shares issued for services,
November and December 2002 - - - 6,800
Net loss for the period
July 19, 2002 (Inception)
through December 31, 2002,
as originally stated (2,008,508) - - (2,008,508)
Prior period adjustment,
Note 11 1,500,000 - - 1,500,000
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 2002 (508,508) - - - (15,208)
------------ ------------ ------------ ------------ ------------ ------------
Re-issuance of founders'
shares - July 2003 - - - -
Shares issued for cash - - - 259,900
Issuance of subscription
receivable from shareholders - - (14,340) (14,340)
Net loss for the year ended
December 31, 2003, as
originally stated (931,159) - - (931,159)
Prior period adjustment,
Note 11 727,500 - 727,500
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 2003 (712,167) - - (14,340) 26,693
------------ ------------ ------------ ------------ ------------ ------------
Shares issued for cash - - - 553,105
Shares issued in exchange
for real estate - - - 650,000
Shares issued for compensation - (545,000) - -
Shares issued as charitable
contribution - - - 50,000
Initial founders' shares
cancelled - - - -
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
------------ ------------ ------------ ------------ ------------ ------------
F-27
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At March 31, 2008
PREFERRED STOCK COMMON STOCK DISCOUNT
----------------------------- ----------------------------- ADDITIONAL ON
PREFERRED PAR VALUE $.001 COMMON PAR VALUE $.001 PAID-IN COMMON
SHARES $ AMOUNT SHARES $ AMOUNT CAPITAL STOCK
------------ ------------ ------------ ------------ ------------ ------------
Shares issued for cash 745,655 - 914,507 -
Shares issued to acquire
technology 37,500,000 - 37,500,000 (37,500,000)
Remaining shares issued in
exchange for real estate 80,800 - 80,800 -
Shares issued for services 53,500 - 53,500 -
Accounts payable converted
to equity 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 - 41,101,199 (37,500,000)
------------ ------------ ------------ ------------ ------------ ------------
Shares issued for cash 2,786,286 - 2,810,877 -
Stock subscriptions received,
net - - - -
Amortization of deferred
compensation - - - -
Shares issued for services 14,123 - 14,746 -
Shares issued for investment
in land 22,500 - 45,000 -
Effect of reverse merger 72,241 48,761 (37,669,444) 37,500,000
Shares issued for conversion
of debt 2,681,837 2,682 118,000 -
Shares issued for consulting 25,000 25 49,975 -
Shares issued for merger
with Mobilestream Inc 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 conversion
into common 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 $ 9,818,127 $ -
============ ============ ============ ============ ============ ============
Shares issued for cash 1,519,564 1,520 1,166,941
Shares issued for Stock
to be issued (liability) 186,822 187 201,156
Stock subscriptions received,
net - - - -
Amortization of deferred
compensation
Shares issued for services 2,613,576 2,613 6,331,050
Shares issued for services
& Prepaid in Equity 925,000 925 2,580,576
Treasury Stock (94,961)
Perferred Shares issued for
settlement of services 1,000 1 399,999
Net loss for the period
ended December 31, 2007 - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 2007 35,237,188 $ 35,237 30,263,330 $ 30,358 $ 20,497,849 $ -
============ ============ ============ ============ ============ ============
(CONTINUED ON NEXT PAGE)
F-28
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At March 31, 2008
(CONTINUED FROM PREVIOUS PAGE)
DEFICIT
ACCUMULATED CONTRA
DURING THE DEFERRED PREPAID FOR SUBSCRIPTION TREASURY
DEVELOPMENT STAGE COMPENSATION SERVICES RECEIVABLE STOCK TOTAL
------------ ------------ ------------ ------------ ------------ ------------
Shares issued for cash - - - 914,507
Shares issued to acquire
technology - - - -
Remaining shares issued in
exchange for real estate - - - 80,800
Shares issued for services - - - 53,500
Accounts payable converted
to equity - - - 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
------------ ------------ ------------ ------------ ------------ ------------
Shares issued for cash - - - 2,810,877
Stock subscriptions received,
net - - (582,511) (582,511)
Amortization of deferred
compensation - 109,000 - 109,000
Shares issued for services - - - 14,746
Shares issued for investment
in land - - - 45,000
Effect of reverse merger - - - (120,683)
Shares issued for conversion
of debt - - - 120,682
Shares issued for consulting - - - 50,000
Shares issued for merger
with Mobilestream Inc (10,498) 2,842,783
Cancellation of shares for
merger with Mobilestream Inc -
Preferred convertible stock
issued for merger with
Mobilestream 2 for 1 conversion
into common 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) $ (327,000) $ - $ (660,693) $ - $ 1,958,672
============ ============ ============ ============ ============ ============
Shares issued for cash 1,168,461
Shares issued for Stock
to be issued (liability) 201,343
Stock subscriptions received,
net - - 475,000 475,000
Amortization of deferred
compensation 109,000 109,000
Shares issued for services 6,333,663
Shares issued for services
& Prepaid in Equity (1,808,042) 773,459
Treasury Stock (66,473) (66,473)
Perferred Shares 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) $ (218,000) $ (1,808,042) $ (185,693) $ (66,473) $ 866,239
============ ============ ============ ============ ============ ============
(CONTINUED ON NEXT PAGE)
F-29
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Stockholders' Equity
At March 31, 2008
(CONTINUED FROM PREVIOUS PAGE)
PREFERRED STOCK COMMON STOCK DISCOUNT
----------------------------- ----------------------------- ADDITIONAL ON
PREFERRED PAR VALUE $.001 COMMON PAR VALUE $.001 PAID-IN COMMON
SHARES $ AMOUNT SHARES $ AMOUNT CAPITAL STOCK
------------ ------------ ------------ ------------ ------------ ------------
Shares issued for cash 2,046,226 2,046 2,081,743
Stock subscriptions received, net
Amortization of deferred compensation
Shares issued for services 887,500 888 1,959,387
Shares issued for services
& Prepaid in Equity
Treasury Stock
Warrants issued for services 14,580
Net loss for the period ended
March 31, 2008 - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
BALANCE AT MARCH 31, 2008 35,237,188 $ 35,237 33,197,056 $ 33,292 $24,553,559 $ -
============ ============ ============ ============ ============ ============
DEFICIT
ACCUMULATED CONTRA
DURING THE DEFERRED PREPAID FOR SUBSCRIPTION TREASURY
DEVELOPMENT STAGE COMPENSATION SERVICES RECEIVABLE STOCK TOTAL
------------ ------------ ------------ ------------ ------------ ------------
Shares issued for cash 2,083,789
-
Stock subscriptions received, net 55,175 55,175
Amortization of deferred compensation 27,250 27,250
-
Shares issued for services 1,960,275
Shares issued for services
& Prepaid in Equity 645,375 645,375
Treasury Stock -
Warrants issued for services 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) $ (190,750) $(1,162,667) $ (130,518) $ (66,473) $ 2,038,989
============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-30
GLOBAL RESOURCE CORPORATION
(A Development Stage Company)
Condensed Statement of Cash Flows
(With Cumulative Totals Since Inception)
(Unaudited)
THREE MONTHS ENDED July 19, 2002
------------------ (INCEPTION)
MARCH 31, MARCH 31, TO
2008 2007 MARCH 31, 2008
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (3,613,694) $ (741,864) $(21,032,691)
------------ ------------ ------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH (USED IN)
OPERATING ACTIVITIES:
Depreciation 20,692 23,282 203,734
Preferred stock issued for services -- -- 400,000
Common stock issued for services 1,960,275 26,000 9,599,575
Common stock Warrants issued for services 14,580 -- 14,580
Amortization of deferred compensation 27,250 27,250 354,500
Allowance reserve for note payable -- -- 650,000
Loss on sale of fixed asset -- -- 11,775
Loss on real estate -- -- 87,035
Common stock issued as charitable contribution -- -- 50,000
CHANGES IN ASSETS AND LIABILITIES -- -- --
(Increase) in Inventory (361,511) -- (361,511)
(Increase) decrease in deposits -- -- 70,140
(Increase) in notes receivable -- -- (650,000)
(Decrease) in accounts receivable -- -- --
(Decrease) in accounts payable 2,872 (24,536) (215,805)
------------ ------------ ------------
TOTAL ADJUSTMENTS 1,664,158 51,996 10,214,023
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (1,949,536) (689,868) (10,818,668)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (9,601) -- (611,753)
Proceeds from sale of Fixed assets 34,200
Proceeds from sale of real estate -- -- 617,864
Investment -- -- (145,000)
Investment in real estate, net -- -- (80,800)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIE (9,601) -- (185,489)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for cash 2,083,789 5,250 6,977,634
Issuance of equity securities and paid-in
capital for merger and other 645,375 201,342 6,619,788
Liability for stock to be issued 5,069,872 (201,342) 5,068,897
(Increase) decrease in stock subscription receivable 55,175 -- (1,162,782)
Proceeds from officer's loan -- -- 188,550
Repayment of officer's loan -- -- (38,550)
Purchase of Treasury Stock -- -- (66,473)
Proceeds from loan payable - equipment -- -- 100,133
Repayment of loan payable - vehicle (9,845) (8,878) (41,782)
Proceeds from loan payable - equipment -- -- 75,000
Repayment of loan payable - equipment -- -- (50,603)
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,844,366 (3,628) 17,669,811
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,885,229 (693,496) 6,665,654
CASH AND CASH EQUIVALENTS
- BEGINNING OF PERIOD 780,425 1,770,002 --
------------ ------------ ------------
CASH AND CASH EQUIVALENTS
- END OF PERIOD $ 6,665,654 $ 1,076,506 $ 6,665,654
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF
NON-CASH ACTIVITIES:
Common stock issued for services $ 1,960,275 $ 26,000 $ 8,826,117
============ ============ ============
Common stock issued for services net of prepaid
contra equity account $ 645,375 -- $ 1,418,833
============ ============ ============
Common stock issued for land investment -- -- $ 125,800
============ ============ ============
Common stock issued as charitable contribution -- -- $ 50,000
============ ============ ============
Common stock Warrants issued for services $ 14,580 -- $ 14,580
============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-31
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 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 three months ended March 31, 2008 are not
necessarily indicative of the results that maybe expected for the year
ended December 31, 2008.
Global Resource Corporation (the Company") was formed on July 19, 2002 in
the State of New Jersey under the name Carbon Recovery Corporation as a
development stage company. The Company's business plan is to research and
develop and market the business of decomposing petroleum-based materials by
subjecting them to variable frequency microwave radiation at specifically
selected frequencies for a time sufficient to at least partially decompose
the materials, converting the materials into industrial products and
chemicals for the petroleum chemical industry.
The Company's business goals are as follows:
1) The construction of plants to exploit certain technology for
decomposing petroleum-based materials by subjecting them to variable
frequency microwave radiation at specifically selected frequencies for
a time sufficient to at least partially decompose the materials;
2) The design, manufacture and sale of machinery and equipment units,
embodying the technology;
3) The sub-licensing of third parties to exploit that technology.
At the present time, the process is in a laboratory mode. There will have
to be a transition from the "one batch at a time" operation, used in the
laboratory to a "continuous feed" line in order to commercialize the
process. A prototype one ton "continuous feed" line machine is scheduled
for delivery in the second 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.
F-32
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008
NOTE 1 - BASIS OF PRESENTATION AND NATURE OF BUSINESS AND ORGANIZATION
---------------------------------------------------------------
(CONTINUED)
-----------
The Company is currently offering three models: one which disposes of five
tons per hour, one which disposes of ten tons per hour and one which
disposes of fifteen tons per hour. The Company is soliciting orders and has
issued various proposals.
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 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. Medicinal applications.
To date, the Company has allocated a substantial portion of their time and
investment in bring their product to the market and the raising of capital.
The Company has not commenced any commercial operations as of March 31,
2008.
On December 31, 2006, Global Resource Corporation acquired all the assets
and assumed all of the liabilities of Mobilestream Oil, Inc. in exchange
for; a) 11,145,255 shares of the Company's Common Stock; b) the issuance by
the Company for the benefit of the holders of the 2006 series of
convertible preferred stock of Mobilestream of 35,236,188 shares of the
Company's own "2006 Series" in the process of designation (see "Subsequent
Events" note 14 below "liquidation trust"); 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. A stockholder of
Mobilestream owned 37,500,000 shares of the Company's stock which were
cancelled. The total cost of the acquisition of Mobilestream has been
allocated to the assets acquired and the liabilities assumed based on their
fair values in accordance with SFAS 141, BUSINESS COMBINATIONS. The net
asset and liabilities of Mobilestream equal approximately $2.4 million. The
assets consisted of cash approximately $1,678,000, and fixed assets of
$149,000 offset by liabilities of approximately $91,000.
On September 22, 2006, the 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 the assumption of a convertible debenture and
accrued interest in the amount of $120,682 by Carbon Recovery Corporation.
Subsequent to the acquisition the convertible debenture was eliminated by
issuing 2,681,837 of the Company's common stock. The holders of Global
Resource Corporation's capital stock before the Agreement retained 72,241
shares of common stock. Prior to the Agreement, Carbon Recovery Corporation
had warrants
F-33
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008
NOTE 1 - BASIS OF PRESENTATION AND NATURE OF BUSINESS AND ORGANIZATION
--------------------------------------------------------------
(CONTINUED)
-----------
outstanding. Pursuant to the Agreement, those outstanding warrants were
exchanged for outstanding 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. All of the warrants were
originally scheduled to expire on September 21, 2007, but the Board of
Directors of the Company has extended the expiration date to December 31,
2008 for Class B warrants, Class D warrants and for Class E warrants.
The above transaction has been accounted for as a reverse merger
(recapitalization) with Carbon Recovery Corporation being deemed the
accounting acquirer and Global Resource Corporation being deemed the legal
acquirer. Accordingly, the historical financial information presented in
the financial statements is that of Carbon Recovery Corporation as adjusted
to give effect to any difference in the par value of the issuer's and the
accounting acquirer's stock with an offset to additional paid in capital.
The basis of the assets and liabilities of Carbon Recovery Corporation, the
accounting acquirer, have been carried over in the recapitalization.
Concurrent with the merger, Carbon Recovery Corporation changed its name to
Global Resource Corporation.
On December 11, 2007 the company adapted 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 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, Company 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-34
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 2008, 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 March 31, 2008 the Company's
uninsured cash balances total $6,424,200.
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 all the assets and assumed
all of the liabilites of Mobilestream Oil Inc. and due to the transfer of
assets between entities under common control, the total cost of the
acquisition of Mobilesstream has been allocated to the assets acquired and
the liabilities assumed based on their fair values in accordance with SFAS
141, BUSINESS COMBINATIONS. 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.
F-35
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------
STOCK-BASED COMPENSATION
------------------------
Effective January 1, 2006, the Company adopted the provisions of Financial
Accounting Standards Board ("FASB") published Statement of Financial
Accounting Standards No. 123 (Revised 2004), "SHARE-BASED PAYMENT" ("SFAS
123R"). SFAS 123R requires that compensation cost related to share-based
payment transactions be recognized in the financial statements. Share-based
payment transactions within the scope of SFAS 123R include stock options,
restricted stock plans, performance-based awards, stock appreciation
rights, and employee share purchase plans. 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 three months ended March
31, 2008 and 2007.
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:
Three Months Ended
March 31,
--------------------------
2008 2007
------------ -----------
Net loss ($3,613,694) ($741,864)
------------ -----------
Weighted-average common shares
Outstanding (Basic) 30,743,131 25,180,668
------------ -----------
Weighted-average common shares
Outstanding (Diluted) 30,743,131 25,180,668
============ ===========
Weighted-average common stock equivalents for preferred stock convertible
to 1/2 for 1 of common are 17,618,094 and warrants common stock equivalents
are 13,026,076. 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 March 31, 2008 and 2007.
F-36
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------
INVENTORIES
-----------
Inventory is stated at the lower of cost or market. Cost is determined
using actual job costs per machine. Currently inventories consist of only
work in process.
ADVERTISING COSTS
-----------------
The Company will expense the costs associated with advertising as they are
incurred. The Company did not incur any advertising costs for the years
ended March 31, 2008 and 2007.
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, 2008 and will apply
prospectively to business combinations completed on or after that date.
In December 2007, the FASB issued SFAS No. 160, NONCONTROLLING INTERESTS IN
CONSOLIDATED FINANCIAL STATEMENTS, AN AMENDMENT OF ARB 51, which changes
the accounting and reporting for minority interests. Minority interests
will be recharacterized as noncontrolling interests and will be reported as
a component of equity separate from the parent's equity, and purchases or
sales of equity interests that do not result in a change in control will be
accounted for as equity transactions. In addition, net income attributable
to the noncontrolling interest will be included in consolidated net income
on the face of the income statement and, upon a loss of control, the
interest sold, as well as any interest retained, will be recorded at fair
value with any gain or loss recognized in earnings. SFAS No. 160 is
effective for us beginning January 1, 2008 and will apply prospectively,
except for the presentation and disclosure requirements, which will apply
retrospectively. We are currently assessing the potential impact that
adoption of SFAS No. 160 would have on our financial statements.
In February 2007, the FASB issued SFAS No. 159, THE FAIR VALUE OPTION FOR
FINANCIAL ASSETS AND FINANCIAL LIABILITIES. SFAS No. 159 gives us the
irrevocable option to carry many financial assets and liabilities at fair
values, with changes in fair value recognized in earnings. SFAS No. 159 is
effective for us beginning January 1, 2008, although early adoption is
permitted. We are currently assessing the potential impact that electing
fair value measurement would have on our financial statements and have not
determined what election we will make.
F-37
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------
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.
NOTE 3 - FIXED ASSETS
------------
Fixed assets as of March 31, 2008 were as follows:
Estimated Useful
Lives (Years) Amount
----------------- ----------
Testing Equipment 5 - 7 $ 454,013
Vehicles 5 34,425
Office & Computer Equip. 5 18,719
Leasehold improvements 3 12,195
----------
Total $ 519,352
==========
Less accumulated Depreciation & amortization 157,308
----------
NET FIXED ASSETS $ 362,044
==========
There was $20,692 and $23,282 charged to operations for depreciation
expense for the three months ended March 31, 2008 and 2007, respectively.
F-38
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008
NOTE 4 - LOAN PAYABLE - OFFICE OF COMPANY
--------------------------------
On November 28, 2007 the Chief Financial Officer, Jeff Andrews, lent the
Company $150,000. This loan has no stated principal payment due date,
interest agreement is prime plus 2%. An expense was recorded for three
months 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 (see "Subsequent Events" note 14 on payment below).
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 $ 82,747
Less current maturities (42,043)
----------
Long-Term payable $ 40,704
==========
The amount of principal maturities of the
loans payable by years is as follows:
2008 31,118
2009 35,416
2010 16,213
----------
$ 82,747
==========
NOTE 6 - INVENTORY
---------
Inventory consists of a one ton machine currently in the work in
process stage.
March 31, 2008 March 31, 2007
-------------- --------------
Work in Process $ 361,511 $ 0
F-39
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008
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 March 31, 2008 the deferred tax assets consist of the following:
2008
--------------
Deferred taxes due to net operating $ 6,310,000
carryforwards
Less: Valuation Allowance (6,310,000)
--------------
Net Deferred Tax asset $ --
--------------
At March 31, 2008, the Company had deficits accumulated during the
development stage in the approximate amount of $21,033,691 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 8 - 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 March 31 Amount
2008 $ 45,000
2009 21,700
---------------
$ 67,700
===============
F-40
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008
NOTE 9 - 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 three months ended March 31, 2008, the Company raised over
$7.1 million dollars in cash through a private placement of common stock.
(The Company also raised another $2 million in a private placement of
common stock subsequent to the balance sheet date as described in Note
13). With this additional capital and projected cash flow expenditures
over the next twelve months, Company's management considers the facts and
circumstances which raised substantial doubt about the Company's ability
to continue as going concern to be alleviated.
The Company also expects to successfully demonstrate its one ton per hour
microwave reactor system by end of this second quarter 2008 and deliver
the machine in the third quarter of 2008. The Company projects to have
significant sales revenue and positive cash flow in the 2008 fourth
quarter. In 2009, the Company also expects to continue generating
positive cash flow from projected sales.
NOTE 10 - RELATED PARTY TRANSACTION
-------------------------
On May 17, 2007, the Company authorized the purchase of the Company stock
from Lois Pringle, officer and wife of the Company's Chief Executive
officer. The Company purchased 94,961 shares for $66,471 in cash.
NOTE 11 - STOCKHOLDERS' EQUITY
--------------------
COMMON STOCK
------------
The following details the stock transactions for the three months ended
March 31, 2008:
The Company issued 2,046,226 shares of stock for $2,083,789 cash.
The Company issued 887,500 shares of common stock in exchange for
services rendered, valued at $1,960,275.
F-41
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008
NOTE 11 - STOCKHOLDERS' EQUITY (CONTINUED)
--------------------------------
PREFERRED STOCK
---------------
There was no activity for the three months ended March 31, 2008 (see
subsequent note 14 on conversion).
WARRANTS
--------
The Company issued an additional 1,989,169 warrants, which have an
exercise price of $2.00 and expire September 2009, in a private
placement sale in the first quarter 2008. In addition the Company
issued 6,000 warrants with a warrant price of $2.63 for services
performed in first quarter, theses warrant will expire in 5 years.
A summary of the status of the Company's outstanding stock warrants as
of March 31, 2008 is as follows:
Weighted Average
Shares Exercise Price
------------- -----------------
Outstanding at December 31, 2007 11,036,907 $ 3.51
Granted 1,995,169 $ 2.00
Exercised - -
Forfeited / expired $ -
------------- -----------------
Outstanding at March 31, 2008 13,032,076 $ 3.28
------------- -----------------
Exercisable at March 31, 2008 13,032,076 $ 3.28
------------- -----------------
In March 2005 the Company issued 200,000 of common stock purchase
options (under Carbon Recovery Corporation) to the CFO, they have an
exercise price of $1.00 per share and will be 100% vested on
12/31/2008. As of 03/31/2008 none were exercised.
F-42
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008
NOTE 12 - COMMITMENTS AND CONTINGENCIES
-----------------------------
Effective January 1, 2005 the Company entered into an employment
agreement with its President. Under the agreement the President shall
be entitled to an annual base salary of $250,000 in 2005 escalating to
$366,025 in 2009. In 2005, $156,000 of the salary shall be paid ratably
during the course of the year and the remaining $94,000 will be paid in
accordance with the terms of the agreement. The initial term of the
agreement is for a period of five years. The President has the option
to renew this agreement for a second five-year term. In addition to the
base salary the Company has granted the President 545,000 shares of
restricted common stock as deferred compensation. The common stock
vests to the President over a five-year period commencing January 1,
2005.
In June 2007 the Company entered into purchase agreement with Ingersoll
Production Systems of Rockford Illinois to build one 1 ton microwave
reactor system. The total purchase commitment is approximately $400,000
and the microwave reactor system is expected to be delivered by end of
second quarter 2008. The Company has currently paid $350,000 as of
March 31, 2008, this amount is reflected in the balance sheet as part
of the Inventory - WIP.
In October, 2007 the Company revived an Agreement which had previously
expired for the sale of shares of its Common Stock to Mercatus &
Partners, Limited ("Mercatus"), a private limited company organized and
existing under the laws of the United Kingdom, having an address of Via
S. Roberto Bellarmino #4, 00142 Roma, Italy. The proposed transaction
was for the placement of shares of its Common Stock to a value of
$2,000,000. The original agreement had expired on March 31, 2007.
Following protracted discussions, on October 16, 2007 the Company
agreed to revive the Agreement, with certain modifications, and the
parties executed an Addendum to the original Agreement. Under the
revived Agreement and Addendum, Mercatus was to have purchased shares
to the total of $2,000,000 on or before November 30, 2007. The Company
had deposited 2,665,666 shares of its Common Stock in escrow, with any
unpurchased balance of such shares as of November 30th to be returned
for cancellation. Mercatus failed to make any of the installment
payments as promised and did not complete any of the purchase by
November 30, 2007. The Company no longer has any confidence in
Mercatus, has advised Mercatus that the Agreement has expired and will
not be extended or further revived, and has demanded a return of the
2,665,666 shares which were escrowed. These shares have not been
included in the outstanding shares and weighted average number of
common stock share calculation.
On March 25, 2008 the parties amended the Letter of Intent which had
been entered into on December 17, 2007 between the Company and Warwick
Communications, Inc. ("Warwick"), previously reported. The Letter of
Intent remains non-binding and subject to final mutually agreeable
documents including the License Agreement. The major change is that
Warwick is to order a 5 ton per hour machine by May 30, 2008, subject
still to the waivable condition precedent of a successful demonstration
of the pilot plant, anticipated to be held on April 23, 2008. The total
net purchase price will be $3,572,100. Payment is divided into 4
payments: (1) an initial deposit of $1,178,793 divided into a $10,000
refundable deposit to accompany the order and the balance of $1,168,793
due within 30 business days; (2) a second payment of $1,178,793 due
within 3
F-43
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008
NOTE 12 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
-----------------------------------------
months of the first payment; (3) $857,304 due upon delivery and
successful testing; and (4) a final payment of $357,210 due upon
successful installation. Subject to Warwick's meeting of the first
year's order requirement, Warwick will earn the right of first refusal
for the territories of Mexico, Cuba, Venezuela, Brazil, Morocco, Panama
and Trinidad & Tobago. Payment for the license continues to be by
issuance of 2,000,000 shares of Warwick's Common Stock, together with 2
warrants; one to purchase 1,000,000 additional shares of Warwick's
Common Stock at a price of US$.50 per share and the other to purchase
750,000 shares of Warwick's Common Stock at a price of US$1.00 per
share; however, now the issuance by Warwick of its 2,000,000 shares of
Common Stock in payment for the license will be subject to a one year
hold and a mutual sign off by the Company, Warwick and Warwick's lessee
to the effect that the machine has operated successfully for at least
90 days and that the lessee will continue its lease of such machine.
Under the license, when and if issued, Warwick will be obligated to
purchase one operational plant per year for the first five years with
orders aggregating US$25,000,000 at the end of the 5 years.
On December 21, 2007 the Company entered into a certain Securities
Purchase agreement with Professional Offshore Opportunity Fund, Ltd.
("PROOF") pursuant to which PROOF agreed to purchase 1,250,000 shares
of the Company's common stock together with warrants for additional
625,000 shares at an exercise price of $1.50 per share. The Company
received $1,000,000 of the purchase price 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 agent an additional
625,000 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
625,000 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. As
of March 31, 2008 shares have not been register.
Effectively February 11, 2008, the Company entered into employment
agreement with Mr. Jeff T. Kimberly as the Company's Chief Operating
officer. Mr. Kimberly received a $100,000 signing bonus, his base
salary will be $200,000 per year which will increase to $225,000 on
August 11, 2008, his sixth month anniversary with the company. In
addition to his base salary, Mr. Kimberly is eligible to receive a
yearly performance bonus to be paid in the Company's common stock
issued under the GRC 2008 Employee compensation plan, as well as a
relocation compensation package and Company medical benefits.
F-44
GLOBAL RESOURCE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2008
NOTE 13 - IVESTMENTS AND DEPOSITS ON INVESTMENTS
--------------------------------------
The March 31, 2008 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.
NOTE 14 - SUBSEQUENT EVENTS
-----------------
Subsequent to the balance sheet date of March 31, the following
transactions occurred:
The company issued 5,538,573 shares of common stock for $5,538,573 in
cash in the month of April, $5,069,872 of this cash was included as
restricted cash and stock to be issued in the 3/31/2008 balance sheet.
Also one warrant was issued for each share of common stock shares. The
warrants have a $2.00 exercise price and expire 18 months from date of
issuance. The Company has also received an additional $1.8 million in
cash for shares of common stock and warrants stock to be issued in
April.
In April the Company paid $120,000 to the CFO, as partial payment for
the loan payable from officer of Company, with the remaining balance of
$30,000 is expected to be paid by year end 2008.
In April 2008 all of the Class B Preferred Stock 1,000 shares was
converted into 206,559 shares of common stock.
F-45
PART II---INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. 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 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration Fee $210
Legal and Accounting Fees and Expenses* $30,000
Transfer Agent and Registrar Fees*$5,000
Printing Expenses*$-0-
Miscellaneous*$-0-
Total $35,210
*Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below in chronological order is information regarding the
numbers of shares of capital stock sold by us, the number of options and
warrants issued by us, and the principal amount of debt instruments issued by us
since September 1, 2004, the consideration received by us 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 affect to all stock splits, reverse stock
splits and stock dividends to date.
On September 14, 2004 we borrowed $25,000 from Javelin Holdings, Inc. and
issued a $25,000 convertible debenture (the "Javelin Debenture") to the lender.
The Javelin Debenture bears interest at the rate of 8% per annum, and is
convertible into shares of our common stock at (i) a floating conversion price
of 50% of the closing bid price on the date of conversion or (ii) the lowest
price set by the Company in a registration statement for the converted shares to
be filed and declared effective under the Securities Act of 1933, as amended
(the "Securities Act"). Subsequent thereto the transaction was rescinded and the
Javelin Debenture was cancelled, and 175,000 shares of common stock that had
been issued for a partial conversion of the Javelin Debenture were returned to
the Company.
II-1
In September 2004 we commenced an offering of one billion (1,000,000,000)
shares of our common stock under Regulation E of the Securities Act at prices
ranging between $.05 and $.005 per share. As of November 12, 2004 we had sold
1,220,000 shares of common stock for $12,200. Pursuant to this offering, holders
of the convertible debentures described immediately below converted $17,975 of
the debentures into 3,595,000 shares of our common stock.
On September 30, 2004 our Board of Directors adopted the "Global Resource
Corporation Stock Option Plan" which was subsequently approved by our
stockholders. No options were ever granted under the 2004 Plan. We terminated
the 2004 Plan when we discovered that it was not permissible for a BDC to adopt
an option plan.
Between October 2004 to January 2005 we sold $155,000 convertible
debentures in a private placement. The debentures bear interest at the rate of
8% per annum and are due five (5) months after issuance. At the option of the
Company or the holder, the debentures are convertible into shares of our common
stock at any time at (i) a floating conversion price of 50% of the closing bid
price per on the conversion date, or (ii) the lowest price set by the Company in
a registration statement for the converted shares to be filed and declared
effective under the Securities Act. During the period between September 27, 2004
and December 6, 2004, $17,975 face amount of the debentures were converted into
3,595,000 shares of our common stock. We have an obligation to register the
resale of the shares to be converted under the Securities Act.
On September 1, 2004 we effected a 1 for 100 reverse stock split of our
issued and outstanding shares without a similar change to our authorized shares.
On September 7, 2004 we elected to register as a small business development
company under the Investment Company Act of 1940.
In January 2005 the Company issued 37,000,000 shares of its common stock
to Careful Sell Holding, L.L.C. ("Careful Sell"), a Delaware limited liability
company, as part of the consideration for the transfer and assignment of the
patents, technology and intellectual property used 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.
On December 15, 2005 we transferred our 50% membership interest in Well
Renewal, LLC to Transnix Global Corporation in exchange for the surrender and
cancellation of $35,555 principal and accrued and past due interest on our
$137,900 8% convertible debentures previously issued to Transnix and terminated
the pledge agreement dated as of November 18, 2005 between the Company and
Transnix.
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.
II-2
On September 22, 2006 we closed an acquisition for substantially all of
the assets and certain liabilities of Carbon Recovery Corporation (the "CRC
Acquisition") pursuant to a plan and agreement of reorganization dated July 27,
2006 (the "CRC Agreement") with Carbon Recovery Corporation ("CRC") for the
acquisition of substantially all of the assets and certain liabilities of CRC
(the "CRC Acquisition"). Under the CRC Agreement, on September 22, 2006 we
issued to the Carbon Recovery Liquidating Trust for the benefit of the
stockholders of CRC the following: (i) 48,688,996 shares of our common stock
(the "CRC Common Stock") for the assets of CRC, and (ii) 3,908,340 Class B
Warrants, 1,397,000 Class D Warrants and 1,397,000 Class E Warrants (together
the "CRC Warrants" and individually by their respective class names) to assume
the liabilities of CRC to its warrant holders under similar classes of warrants
of CRC. The CRC Warrants have the following characteristics: (i) the CRC Class B
Warrants and the CRC Class D Warrants have an exercise price of $2.75 per
warrant, and (ii) the CRC Class E Warrants have an exercise price of $4.00 per
warrant. The CRC Class E Warrants can only be exercised together with the
exercise of a similar number of CRC Class D Warrants. Initially, all of the CRC
Warrants expired on September 21, 2007; however, we have extended the expiration
date of all of the CRC Warrants to December 31, 2008. Mr. Frank Pringle, the
controlling stockholder of CRC is also our Chairman of the Board, President and
CEO.
On September 22, 2006 we issued 25,000 shares of our 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 we issued 2,560,974 shares of our common stock out
of a total of 2,681,837 such shares to [identify names] two holders of our 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 issued on [GET DATE] as a
result of certain limitations in the convertible debenture.
On September 22, 2006, Mobilestream Oil, Inc. loaned $650,000 to M J
Advanced Communications Corporation ("MJACC") with the understanding that MJACC
would advance money to CRCIC, LLC a limited liability company for the purpose of
acquiring a shell corporation (Global Resources Corporation) for Carbon Recovery
Corporation to perfect a reverse merger. Subsequent to the acquisition date, a
dispute arose with respect to the agreement. A resolution was agreed upon where
400,000 shares of Global Resources Corporation stock owned by MJACC and CRCIC
have been transferred to an attorney as escrow for satisfaction of the note
payable to the Company and MJACC and CRCIC relinquished all rights. The 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.
On December 29, 2006 we issued 20,000 shares of common stock to a
consultant in partial payment for services.
Between November 2005 and June 2006 we issued 1,786,286 shares of our
common stock for $1,810,877 cash.
In August 2006 we issued 25,000 shares of our common stock to one of our
directors for her services valued at $50,000.
In August 2006 we issued 14,746 shares of our common stock to a consultant
for services valued at $14,746.
On [insert date] we issued 22,500 shares of our common stock to [insert
name or identity marker] in exchange for land valued at $45,000.
On August 2006 we issued 2,500,000 shares of common stock to MJACC in
connection with the purchase and conversion of a convertible debenture of
$120,682.
II-3
On December 31, 2006 we closed an acquisition for substantially all of the
assets and certain liabilities of Mobilestream Oil, Inc. (the "Mobilestream
Acquisition") pursuant to a plan and agreement of reorganization dated November
28, 2006 (the "Mobilestream Agreement") with Mobilestream Oil, Inc.
("Mobilestream"). Under the Mobilestream Agreement, on January 3, 2007 we issued
to the Mobilestream Oil Liquidating Trust for the benefit of the stockholders of
Mobilestream the following: (i) 11,145,255 shares of our common stock (the
"Mobilestream Acquisition Common Stock") for all of the shares of Mobilestream
common stock at the exchange rate of one share of our common stock for each
7.143 shares of Mobilestream common stock; (ii) 70,472,376 shares of our 2006
Series Convertible Preferred Stock (the "2006 Mobilestream Acquisition Preferred
Stock") in exchange for 503,374,112 shares of Mobilestream 2006 Series
Convertible Preferred Stock at the exchange rate of one share of our 2006
Mobilestream Preferred Stock for each 7.143 shares of Mobilestream 2006 Series
Convertible Preferred Stock; and (iii) 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. Under the Mobilestream Agreement, if we file a
registration statement with the Commission under the Securities Act, we must
give written notice to the trustee of the liquidation trust and, if the trustee
so elects, we must include in any such registration statement such number of
shares of Mobilestream Common Stock, Mobilestream 2006 Preferred Stock and
common stock underlying the Mobilestream Warrants as the trustee may demand. If
the categories of shares are not registered by December 31, 2007, then the
trustee of the liquidating trust may demand that we register the shares of
Mobilestream Common Stock, the Mobilestream 2006 Preferred Stock and the common
stock underlying the Mobilestream Warrants. Mr. Frank Pringle, the controlling
stockholder of Mobilestream and our Chairman of the Board, President and CEO,
agreed to convert 503,374,112 shares of his Mobilestream common stock into
503,374,112 shares of Mobilestream "2006 Series of Convertible Preferred Stock"
prior to the acquisition closing.
On December 31, 2006, at the closing of the Mobilestream Acquistion, we
issued the shares of Mobilestream Common Stock and the Mobilestream Warrants
shares for the benefit of the Mobilestream stockholders and deposited them with
the Liquidating Trustee under the Mobilestream Oil Liquidating Trust; however,
we issued only 35,236,188 (instead of 70,472,376) shares of our Mobilestream
2006 Series of Convertible Preferred Stock to the Liquidating Trustee for the
benefit of Mr. Pringle because of limitations on the number of authorized
preferred shares in our Articles of Incorporation. To maintain the proper share
numbers for the Mobilestream Acquisition, the current Mobilestream 2006 Series
of Convertible Preferred Stock provides that the shares of Preferred Stock can
be converted into our common stock at the rate of 2 shares of our common stock
for each share of our Mobilestream 2006 Series of Convertible Preferred Stock.
In addition, we acquired 37,000,000 shares of our own common stock from
Mobilestream as one of the assets in the Mobilestream Acquisition. As part of
the transaction, we cancelled the 37,000,000 shares of our common stock that we
acquired.
On March 8, 2007 we issued 186,822 shares of our common stock to 25 non-US
persons under a Regulation S offering for $201,342 actually received in 2006.
On March 19, 2007 we issued 5,000 shares of our common stock to the
Director of Microwave Processing and Engineering Center at Pennsylvania State
University for consulting services valued at $5000.
On March 20, 2007 we issued 20,000 shares of our common stock to a
financial consultant in exchange for services regarding the Mobilestream
acquisition performed in 2006 and valued at $20,000.
On March 21, 2007 we issued 11,000 shares of common stock to an
engineering consultant in exchange for services regarding testing of customer
samples valued at $11,000.
In March 2007 we issued 36,000 shares of common stock in exchange for
services valued at $36,000.
In March 2007 we issued 17,500 shares of common stock in exchange for
$5250 in cash.
II-4
In April 2007 we issued 155,300 shares of our common stock for $46,950 in
cash in a Regulation S offering.
During the three months ended June 30, 2007 we issued 499,564 shares of
our common stock for $157,711 in cash in a Regulation S offering.
On July 18, 2007 we issued 37,500 shares of our common stock to a
consultant for engineering services valued at $37,500.
In 2007 we issued 30,041 shares of our common stock in exchange for
services valued at $20,728.
On August 28, 2007 we issued a total of 800,000 common stock purchase
warrants to two private placement investors in connection with the rescission
of, and settlement of, a set of claims and counterclaims arising out of a
private placement transaction. 400,000 of the warrants are exercisable at $0.80
per share and expire on December 31, 2009 and 400,000 warrants are exercisable
for a cashless exercise price and expire on December 31, 2009.
On December 3, 2007 we issued a total of 45,094 shares of our common stock
to one consultant for services relating to a listing on the Frankfurt Stock
Exchange.
On December 5, 2007 we issued 55,000 shares and 22,500 shares of our
common stock, respectively, to two consultants for military related marketing
services with a value of $55,000 and $45,000.
On December 11, 2007 we issued a total of 200,000 shares of our common
stock to three investor relation firms.
On December 17, 2007 we issued a total of 100,000 shares of our common
stock to plaintiffs in settlement of a pending litigation against the Company.
On December 17, 2007 we issued a total of 400,000 shares of our common
stock upon conversion of the MJACC Series Convertible Preferred Stock.
On December 18, 2007 we issued a total of 50,000 shares of our common
stock to two consultants for military marketing and other marketing related
services.
On December 21, 2007 we issued 1,900,000 shares of our common stock in
connection with a private placement to one investor. 900,000 of the shares are
being held by investor's counsel pursuant to an escrow arrangement.
On December 27, 2007 we issued a total of 50,000 shares of our common
stock in settlement of two claims arising from a dispute involving two investors
in the Company.
On February 1, 2008 we issued a total of 100,000 shares of our common
stock to one investor relation firms.
On February 6, 2008, we issued a total of 150,000 shares of our common
stock to three investor relation firms.
II-5
On February 15, 2008 the Company issued 10,000 shares to each of two
consultants, 20,000 shares in total, in payment of consulting fees valued at
$10,000 each. The issuance of the shares was considered exempt pursuant to
Section 4(2) of the Securities Act of 1933 as amended.
On February 19, 2008 the Company issued 5,000 shares to an accredited
investor for an investment of $10,000. The issuance of the shares was considered
exempt pursuant to Section 4(2) of the Securities Act of 1933 as amended.
On February 19, 2008 the Company also issued 12,000 shares to an
accredited investor for an investment of $24,000. The issuance of the shares was
considered exempt pursuant to Section 4(2) of the Securities Act of 1933 as
amended.
On February 23, 2008 and February 29, 2008 the Company issued a total of
200,000 shares to a consultant in payment of consulting fees valued at $200,000.
The issuance of the shares was considered exempt pursuant to Section 4(2) of the
Securities Act of 1933 as amended.
On March 5, 2008 the Company issued 31,057 shares to an accredited
investor for an investment of $50,000. The issuance of the shares was considered
exempt pursuant to Section 4(2) of the Securities Act of 1933 as amended.
On March 5, 2008 the Company issued 9,000 shares to an accredited investor
for an investment of $10,620. The issuance of the shares was considered exempt
pursuant to Section 4(2) of the Securities Act of 1933 as amended.
On March 18, 2008 the Company issued a total of 850,669 shares (as a part
of 850,669 Units) to a group of non-U.S. citizens for a total investment of
$850,669. The issuance of the shares was considered exempt pursuant to Section
4(2) of the Securities Act of 1933 as amended.
On March 19, 2008 the Company issued 10,000 shares to each of two
consultants, 20,000 shares in total, in payment of consulting fees valued at
$10,000 each. The issuance of the shares was considered exempt pursuant to
Section 4(2) of the Securities Act of 1933 as amended.
On March 26, 2008 the Company issued a total of 1,138,500 shares (as a
part of 1,138,500 Units) to a group of non-U.S. citizens for a total investment
of $1,138,500. The issuance of the shares was considered exempt pursuant to
Section 4(2) of the Securities Act of 1933 as amended.
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. The issuance of the Warrants was
considered exempt pursuant to Section 4(2) of the Securities Act of 1933 as
amended.
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. The issuance of the Warrants was
considered exempt pursuant to Section 4(2) of the Securities Act of 1933 as
amended.
On March 31, 2008 the Company issued 350,000 shares to a consultant in
payment of consulting fees valued at $350,000. The issuance of the shares was
considered exempt pursuant to Section 4(2) of the Securities Act of 1933 as
amended.
On April 1, 2008 the Company issued a total of 3,387,980 shares (as a part
of 3,387,980 Units) to a group of non-U.S. citizens for a total investment of
$3,387,980. The issuance of the shares was considered exempt pursuant to Section
4(2) of the Securities Act of 1933 as amended.
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. The issuance of the Warrants was
considered exempt pursuant to Section 4(2) of the Securities Act of 1933 as
amended.
II-6
On April 2, 2008, pursuant to the terms of the mutually agreed rescission
agreement with the two funds which had invested in the terminated private
placement, the Company issued 18,750 shares of its Common Stock and 31,250
shares of its Common Stock, respectively, to such funds. The issuance of the
shares was considered exempt pursuant to Section 4(2) of the Securities Act of
1933 as amended.
On April 2, 2008, the Company issued 58,478 shares to one of the
above-referenced funds upon a cashless exercise of certain warrants previously
issued to such fund. The issuance of the shares was considered exempt pursuant
to Section 4(2) of the Securities Act of 1933 as amended.
On April 4, 2008, the Company issued 10,000 shares to each of two
consultants, 20,000 shares in total, in payment of consulting fees valued at
$10,000 each. The issuance of the shares was considered exempt pursuant to
Section 4(2) of the Securities Act of 1933 as amended.
On April 4, 2008, the Company issued 1,166,666 to a consultant for
services valued at $1,166,666. The issuance of the shares was considered exempt
pursuant to Section 4(2) of the Securities Act of 1933 as amended.
On April 11, 2008, the Company issued total of 1,929,775 shares (as a part
of 1,929,775 Units) to a group of non-U.S. citizens for a total investment of
$1,929,775. The issuance of the shares was considered exempt pursuant to Section
4(2) of the Securities Act of 1933 as amended.
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. The issuance of the Warrants was
considered exempt pursuant to Section 4(2) of the Securities Act of 1933 as
amended.
On April 25, 2008 the Company issued a total of 1,487,139 shares (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. The issuance of the shares was considered exempt pursuant to
Section 4(2) of the Securities Act of 1933 as amended.
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. The issuance of the Warrants was
considered exempt pursuant to Section 4(2) of the Securities Act of 1933 as
amended.
On April 29, 2008 the Company issued a total of 833,333 shares (350,000
and 533,333 shares, respectively) to two consultants in payment of consulting
fees valued at $892,500 and $1359,999, respectively. The issuance of the shares
was considered exempt pursuant to Section 4(2) of the Securities Act of 1933 as
amended.
On May 7, 2008 the Company issued 1,000,000 shares to a consultant in
payment of consulting fees valued at $2,550,000. The issuance of the shares was
considered exempt pursuant to Section 4(2) of the Securities Act of 1933 as
amended.
On May 12, 2008 the Company issued 20,000 shares (3,600, 3,600, 3,600 and
9,200 shares, respectively) to four consultants in payment for consulting
services valued at $9,540, $9,540, $9,540 and $24,380 respectively. The issuance
of the shares was considered exempt pursuant to Section 4(2) of the Securities
Act of 1933 as amended.
II-7
On May 13, 2008 the Company issued 50,000 shares (22,500, 12,500, 7,500,
and 7,500 shares, respectively) to 4 consultants in payment of consulting fees
valued at $62,775, $34,875, $20,925 and $20,925, respectively. The issuance of
the shares was considered exempt pursuant to Section 4(2) of the Securities Act
of 1933 as amended.
ITEM 27. EXHIBITS.
Exhibits required by Item 601 of Regulation S-K. The following exhibits are
filed as a part of, or incorporated by reference into, this Registration
Statement:
Number Description
------ -----------
3.1 Certificate of Incorporation of E-mail Mortgage.com, Inc., filed as
Exhibit 3 to the Company Registration Statement on Form SB-2 SEC File
Number 333-51058 filed on December 21, 2002 (the "2002 Registration
Statement") and incorporated herein by reference
3.1.1 Certificate of Amendment of Articles of Incorporation, filed as Exhibit
3(i) to the Company's Registration Statement on Form 8-A, filed on
September 17 2002 (the "2004 Registration Statement"), and incorporated
herein by reference.
3.1.2 Certificate of Amendment to the Articles of Incorporation filed as
Graphic to the Company's 2004 Registration Statement filed on September
17, 2004, and incorporated herein by reference.
3.1.3 Certificate of Designation of Series A Convertible Preferred Stock,
filed as Exhibit 3.1 to the Company's Current Report on Form 8-K, dated
September 17, 2004, filed on February 23, 2005, and incorporated herein
by reference.
3.1.4 Amendment to Articles of Incorporation of the Company filed herewith.
3.1.7 Certificate of Designation for 2006 Series of Convertible Preferred
Stock of the Company, filed herewith.
3.1.8 Amendment to Certificate of Designation for 2006 Series of Convertible
Preferred Stock of the Company, filed herewith.
3.2 Company Bylaws, filed as Exhibit 3 to the Company 2002 Registration
Statement filed on December 21, 2002 (the "2002 Registration
Statement") and incorporated herein by reference.
3.2(ii) Company Amended By-laws filed as Graphic to the Company Registration
Statement on Form 8-A filed on September 17, 2004 (the "2004
Registration Statement"), and incorporated by reference.
4.1 Specimen Common Stock Certificate filed as Exhibit 4.1 to the Company's
2002 Registration Statement filed on December 21, 2002, and
incorporated herein by reference.
4.2 $25,000 8% Convertible Debenture issued September 15, 2004 from the
Company to Javelin Holdings, Inc. filed as Exhibit 4 to the Company's
Current Report on Form 8-K filed on November 15, 2004, and incorporated
herein by reference.
II-8
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, filed herewith.
4.6.1 Form of Carbon Recovery Acquisition Class D Warrant dated September 26,
2006, filed herewith.
4.6.2 Form of Carbon Recovery Acquisition Class E Warrant dated September 26,
2006, filed herewith.
4.6.3 Form of Mobilestream Acquisition Warrant dated December 31, 2006, filed
herewith.
4.6.4 Black Diamond Fund, L.P. Warrant, filed herewith.
4.6.5 Nutmeg/Mercury Fund, L.P. Warrant, filed herewith.
4.6.6 Form of Augustine Warrant for George Birch, filed herewith.
4.6.6.1 Form of Augustine Warrant for Jonathan Simon, filed herewith.
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"), filed herewith.
4.6.8 Terence Taylor Warrant, filed herewith.
4.6.9 Form of 2008 private placement Warrant, filed herewith.
4.7 2008 Employees Compensation Plan filed as Exhibit 10.7 to the Company's
Registration Statement on Form S-8, SEC File Number 333-148916, filed
January 29, 2008, and incorporated herein by reference.
5.1 Opinion of Sol V. Slotnik, P.C. *
10.1 Agreement and Plan of Reorganization dated as of October 29, 2003,
2001, by and between Advanced Healthcare Technologies, Inc. and
Nutratek, Ltd., filed as Exhibit 99 to the Company's Current Report on
Form 8-K filed on January 12, 2004, and incorporated herein by
reference.
10.2 Stock Purchase Agreement dated as of June 30, 2004 by and among
Advanced Healthcare Technologies, Inc., Richard Mangierelli and Johnny
Sanchez filed as Exhibit 2.1 to the Company's Report on Form 8-K filed
on June 30, 2004, and incorporated herein by reference.
II-9
10.3 Release and Indemnity Agreement dated as of June 30, 2004 by and among
Advanced Healthcare Technologies, Inc., Richard Mangierelli and Johnny
Sanchez filed as Exhibit 10.1 to the Company's Report on Form 8-K filed
on June 30, 2004, and incorporated herein by reference.
10.4 Articles of Merger by and between E-mail Mortgage.com, Inc. and Mariner
Health Care, Inc. dated as of July 29, 2002 filed as Exhibit pig3 to
the Company 2004 Registration Statement, and incorporated herein by
reference.
10.5 Operating Agreement dated as of January 11, 2005 by and between Global
Resource Corporation and Well Renewal, LLC filed as Exhibit 10.1 to the
Company's Current Report on Form 8-K, dated September 17, 2004, filed
on February 23, 2005, and incorporated herein by reference.
10.6 Agreement and Plan of Reorganization dated as of July 26, 2006 by and
between Global Resource Corporation and Carbon Recovery Corporation,
filed herewith.
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, filed herewith.
10.7 Form of Indemnity Agreement between the Company and each of its
directors and executive officers filed as Exhibit 10.4 to the Company's
Current Report on Form 8-K for the period September 22, 2006, filed on
September 26, 2006, and incorporated herein by reference.
10.8 Pledge Agreement dated November 18, 2005 by and between the Company and
Transnix Global Corporation filed as Exhibit 10.1 to the Company's
Report on Form 10-QSB for the period ended December 31, 2005, filed
October 31, 2006, and incorporated herein by reference.
10.9 Settlement Agreement dated December 15, 2005 by and between the Company
and Transnix Global Corporation filed as Exhibit 10.1 to the Company's
Report on Form 10-QSB for the period ended December 31, 2005, filed
October 31, 2006, and incorporated herein by reference.
10.10 Combined Technology Agreement dated November 28, 2006 by and among the
Company, Carbon Recovery Corporation, Frank G. Pringle, Lois Augustine
Pringle, and Mobilestream Oil Corporation, filed herewith.
10.11 Plan and Agreement of Reorganization dated as of November 28, 2006 by
and between the Company and Mobilestream Oil Corporation, filed
herewith.
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, filed herewith.
10.12 Securities Purchase Agreement, dated as of December 21, 2007, by and
between the Company and Professional Offshore Opportunity Fund, Ltd.
("POOF"), filed herewith.
10.13 Registration Rights Agreement dated as of December 21, 2007, by and
between the Company and POOF, filed herewith.
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,filed herewith.
II-10
10.15 Form of Registration Rights Agreement, filed herewith.
10.16 Consulting agreement dated as of January 1, 2008 by and between 888
Corporation and the Company, filed herewith.
10.17 Settlement agreement dated as of January 15, 2008 by and among, Global
Resource Corporation, Terence Taylor, Tomahawk Trading Corp., and
Frank G. Pringle
10.18 Employment agreement dated as of November 7, 2007 by and between Jeff
Kimberly and the Company, filed herewith.
23.1 Consent of Bagell, Josephs, Levine and Company, L.L.C.*
23.3 Consent of Sol V. Slotnik, P.C. (included in Exhibit 5.1). *
ITEM 28. UNDERTAKINGS
(a) 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.
(b) The registrant hereby undertakes:
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 paragraphs (a)1(i) and (a)(1)(ii) of this section do not
apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic 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.
II-11
That, for purposes of determining liability under the Securities Act to
any purchaser:
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.
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.
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.
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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That, for the purpose of determining any liability under the Securities
Act, to treat each post-effective amendment that contains a form of prospectus
as a new registration statement relating to the securities offered therein, and
the offering of such securities at that time as the initial bona fide offering
thereof.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-1 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of West
Berlin, State of New Jersey on June 9, 2008.
(Registrant) GLOBAL RESOURCE CORPORATION
By (Signature and Title) /s/ Frank G. Pringle
--------------------------------------------
Frank G. Pringle, Chief Executive Officer
and Chairman of the Board of Directors
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
(Signature) /s/ Frank G. Pringle
--------------------------------------------
Frank G. Pringle,
(Title) Chief Executive Officer and Chairman of the
Board of Directors
(Principal Executive Officer)
(Date) June 9, 2008
(Signature) /s/ Jeffrey J. Andrews
--------------------------------------------
Jeffrey J. Andrews
(Title) Chief Financial Officer
(Principal Financial Officer and Accounting
Officer)
(Date) June 9, 2008
/s/ Frederick A. Clark Director June __, 2008
------------------------
Frederick A. Clark
/s/ Kim Thorne O'Brien Director June 3, 2008
------------------------
Kim Thorne O'Brien
/s/ Lincoln Jones III
------------------------
Lincoln Jones III Director June 5, 2008
/s/ Jonathan L. Simon
------------------------
Jonathan L. Simon Director June 5, 2008
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