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64
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65
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66
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68
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68
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69
|
Common
stock offered by selling stockholders
|
119,732,425 shares
|
Common
stock outstanding before the offering
|
296,114,497
shares
(1)
|
Common
stock outstanding after the offering
|
296,114,497
shares
|
Proceeds
to us
|
We
will not receive any proceeds from the sale of common stock covered
by
this prospectus. To the extent that the selling stockholders exercise,
for
cash, all of the warrants covering the 24,486,169
shares of common stock registered for resale under this prospectus,
we
would receive approximately $13,649,627 in
the aggregate from such exercises. We intend to use such proceeds
for
working capital, and other general corporate
purposes.
|
(1)
|
Represents
the number of shares outstanding on the effective date of the
Merger.
|
o |
Fuel
fabrication: The relatively high melting point of thorium oxide will
require fuel pellet manufacturing techniques that are different from
those
currently used for uranium pellets.
|
o |
Fuel
fabrication: Novastar’s
fuel rod designs are greater than 3 meters long compared to conventional
Russian fuel rods that are 1 meter long. The longer rods will required
new
equipment and experience making longer
extrusions.
|
o |
Fuel
design: Novastar’s “seed-and-blanket” fuel assembly design has a
detachable central part which is not in conventional fuel designs.
|
o |
Fuel
design: Novastar’s fuel design includes plutonium-zirconium fuel rods
which will operate in a soluble boron environment . Current reactor
operating experience is with uranium-zirconium fuel in a boron-free
environment.
|
o |
Fuel
use: Novastar’s fuel is expected to be capable of producing more gigawatt
days per ton of fuel than is allowed by current reactor licenses,
so to
gain full economic benefits, reactor operators will have to get regulatory
approval.
|
o |
Fuel
use: Novastar’s fuel are expected to produce energy economically for up to
9 years in the reactor core. Current fuel demonstrates the cladding
can
remain corrosion-free for up to 5 years. Testing is needed to prove
corrosion resistance for the longer residence time.
|
o |
Fuel
reprocessing: The IAEA has identified a number of ways that reprocessing
spent thorium fuel would require technologies different from existing
uranium fuel reprocessing. Management’s current marketing plans do not
assume or depend on the ability to reprocess and recycle spent fuel.
Management expects spent thorium fuel will go into long term storage.
This
is current U.S. Government policy.
|
o |
use
of thorium instead of only uranium,
|
o |
higher
uranium enrichment level,
|
o |
seed-and
blanket fuel assembly design integrating thorium and
uranium,
|
o |
high
burn-up levels of uranium,
|
o |
use
of metallic seed rods,
|
o |
longer
residence time of the blanket in the reactor, and
|
o |
the
ability of Novastar’s
fuels to dispose of reactor-grade plutonium and/or weapons-grade
plutonium
through the use of a new fuel design and in reactors that have never
used
plutonium-bearing fresh fuels.
|
o |
costs
of bringing each property into production, including exploration
work,
preparation of production feasibility studies and construction of
production facilities;
|
o |
availability
and costs of financing;
|
o |
ongoing
costs of production;
|
o |
market
prices for the minerals to be
produced;
|
o |
environmental
compliance regulations and restraints;
and
|
o |
political
climate and/or governmental regulation and
control.
|
o |
quarterly
variations in operating results;
|
o |
changes
in financial estimates by securities
analysts;
|
o |
changes
in market valuations of other similar
companies;
|
o |
announcements
by Novastar or its competitors of new products or of significant
technical
innovations, contracts, receipt of (or failure to obtain) government
funding or support, acquisitions, strategic partnerships or joint
ventures;
|
o |
additions
or departures of key personnel;
|
o |
any
deviations in net sales or in losses from levels expected by securities
analysts or any reduction in political support from levels expected
by
securities analysts;
|
o |
future
sales of common stock; and
|
o |
results
of analyses of mining and resources
assets.
|
FISCAL
YEAR
|
QUARTER
ENDING
|
|
HIGH
|
|
LOW
|
|||||
2006
|
June
30, 2006
|
$
|
0.74
|
$
|
0.43
|
|||||
|
March
31, 2006
|
$
|
0.88
|
$
|
0.19
|
|||||
|
December
31, 2005
|
$
|
0.28
|
$
|
0.14
|
|||||
|
September
30, 2005
|
$
|
0.29
|
$
|
0.13
|
|||||
2005
|
June
30, 2005
|
$
|
0.22
|
$
|
0.077
|
|||||
March 31, 2005 |
$
|
0.22
|
$
|
0.09
|
||||||
|
December
31, 2004
|
$
|
0.29
|
$
|
0.07
|
|||||
September
30, 2004
|
$
|
0.04
|
$
|
0.017
|
o |
industrial
super alloys used in the aerospace and nuclear
industries
|
o |
crystals
manufactured for the production of
lasers
|
o |
the
refining of petroleum products
|
o |
in
magnetic refrigeration technology
|
o |
as
catalysts used in the manufacture of
fuel-cells
|
o |
in
cellular phones and other wireless
equipment
|
o |
magnetic
plastic technology used in computer data memory
devices
|
o |
fiber-optic
lines and to color, polarize and polish
glass
|
o |
the
creation of high temperature
superconductors
|
o |
catalytic
converters for the automotive
industry
|
Line
Item
|
6/30/06
|
|
6/30/05
|
|
Increase
(Decrease)
|
|
Percentage
Increase (Decrease)
|
||||||
Revenues
|
$
|
0.00
|
$
|
0.00
|
$
|
0.00
|
0
|
%
|
|||||
Operating
expenses
|
$
|
13,147,485
|
$
|
2,691,516
|
$
|
10,455,969
|
388
|
%
|
|||||
Other
income (expense) - net
|
$
|
(197,050
|
)
|
$
|
0
|
$
|
197,050
|
--
|
%
|
||||
Net
loss
|
$
|
13,344,535
|
$
|
2,691,516
|
$
|
10,653,019
|
396
|
%
|
|||||
Loss
per common share
|
$
|
(0.12
|
)
|
$
|
0.05
|
$
|
0.07
|
140
|
% |
· |
Payroll
expenses and related fringe benefits increased $116,436 due to the
hiring
of additional key management and staff. Novastar
increased
its payroll and related fringe benefits costs in its first fiscal
quarter
ended September 30, 2006, as it has hired an additional 6 employees.
|
· |
Professional
fees expense increased approximately $672,000 due primarily to legal
fees
incurred in connection with the upcoming merger with Thorium Power,
Inc.
and financing activities. Novastar
anticipates
that its legal fees will decrease once it is able to complete the
merger
with Thorium Power, Inc., unless it engages in other financing or
acquisition activities.
|
· |
Travel,
business development, and public relations expense increased $93,385.
Novastar
anticipates
that its travel, business development and public relations expense
will
increase as it continues to promote its business and seek other
opportunities in the Nuclear Industry.
|
· |
Consulting
expense increased $3,466,600, which included costs associated with
finance, geological work, government advocacy work, technical advisory
board, and international advisory board.
|
· |
Stock
Based Compensation was $4,949,729, which included stock and stock
option
grants to Novastar
executive
officers and advisory board members. Novastar
implementation
of SFAS No. 123R (a modification to the existing standard - SFAS
No. 123)
in 2006 (see notes to the financial statements), changed the way
it
accounts for Stock-Based Compensation in 2006, and required Novastar
to
record expenses for equity instruments for which it would not have
been
required to report under SFAS No. 123.
|
· |
Novastar
incurred a net impairment loss of $670,544 on the mineral property
acquisition costs, as it wrote off the entire amounts expended to
acquire
the rights to mine properties in Alabama and Australia. This
impairment was based on management's assesment of future projected
undiscounted and discounted cash flows from the properties.
|
· |
Mineral
exploration costs increased $394,516 due to Novastar’s
exploration
activities in its mining operations.
|
· |
Director
and officer liability insurance expense increased $91,506 due to
liability
insurance related to the merger agreement
|
· |
Novastar
recorded
a warrant liability in the amount of $3,678,278 for the fair value
of
warrants accruing under a Registration Rights Agreement entered into
on
May 4, 2006 (see Item 7 of Part II, “Financial Statements—Note 9(ii)
—Share Capital”). The change in the fair value of the warrants, from May
4, 2006 to June 30, 2006 was a loss recorded of
$139,220.
|
· |
Increased
overhead expenses attributable to the addition of key management
and
staff.
|
· |
Payroll
expenses and related fringe benefits increased $116,436 due to
the hiring
of additional key management and staff. Novastar increased its
payroll and
related fringe benefits costs in its first fiscal quarter ended
September
30, 2006, as it has hired an additional 6 employees.
|
· |
Professional
fees expense increased $672,000 due primarily to legal fees incurred
in
connection with the upcoming merger with Thorium Power, Inc. and
financing
activities. Novastar anticipates that its legal fees will decrease
once
its is able to complete the merger with Thorium Power, Inc., unless
it
engages in other financing or acquisition
activities.
|
· |
Travel,
business development, and public relations expense increased $93,385.
Novastar anticipates that its travel, business development and
public
relations expense will increase as it continues to promote its
business
and seek other opportunities in the Nuclear
Industry.
|
· |
Other
general and administrative expenses increased $358,000, which consisted
primarily of insurance expense, other office expenses, which were
offset
by a payable due to Thorium Power Inc.
|
Line
Item
|
12/31/05
|
|
12/31/04
|
|
$
Increase (Decrease)
|
|
%
Increase (Decrease)
|
||||||
Revenues
|
-
|
-
|
-
|
-
|
|||||||||
Operating
Expenses
|
$
|
760,558
|
$
|
974,779
|
(214,221
|
)
|
(21.2
|
)%
|
|||||
Other
Income
|
$
|
54
|
$
|
105
|
(51
|
)
|
(48.5
|
)%
|
|||||
Net
Loss
|
$
|
760,504
|
$
|
974,674
|
(214,170
|
)
|
(21.9
|
)%
|
|||||
Loss
per common share
|
$
|
0.23
|
$
|
0.30
|
(0.07
|
)
|
23.3
|
%
|
Line
Item
|
06/30/06
|
06/30/05
|
$
Increase (Decrease)
|
%
Increase (Decrease)
|
|||||||||
Revenues
|
--
|
--
|
--
|
--
|
|||||||||
Operating
Expenses
|
$
|
356,795
|
$
|
270,796
|
85,999
|
32
|
%
|
||||||
Other
Expenses
|
$
|
555,553
|
--
|
555,553
|
--
|
||||||||
Net
Loss
|
$
|
912,348
|
$
|
270,796
|
641,552
|
237
|
%
|
||||||
Loss
per common share
|
$
|
(0.25
|
)
|
$
|
(0.08
|
)
|
0.17
|
213
|
%
|
· |
Increase
in salaries paid to our executives of
$33,250
|
· |
An
increase in total professional fees incurred in preparation for Thorium
Power’s upcoming merger with Novastar of $250,386. This increase was
offset by a charge back to Novastar for professional fees and other
expenses that were paid for on their
behalf.
|
· |
Increase
in travel and other general and administrative expenses of
$91,789
|
· |
Increase
in its contribution to the construction of a high-temperature nuclear
research reactor in Texas of $550,000
|
· |
Expenses
that were charges to Novastar for expenses incurred on their behalf,
regarding the upcoming merger, which totaled
$264,741
|
o |
Accounting
for expenses in connection with stock options and warrants by using
the
Black-Scholes option pricing
method;
|
o |
Valuation
of intangible assets;
|
o |
Valuation
of contingent liabilities
|
· |
the
market for U.S. and Russian weapons grade plutonium
disposition;
|
· |
the
market for disposition of plutonium in spent nuclear fuel;
and
|
· |
the
market for commercial nuclear fuel.
|
● |
Patent
No. 6,026,136, a seed-blanket unit fuel assembly for a nuclear
reactor
|
● |
Patent
No. 5,949,837, a nuclear reactor having a core including a plurality
of
seed-blanket units
|
● |
Patent
No. 5,864,593, a method for operating a nuclear reactor core comprised
of
at least first and second groups of seed-blanket
units
|
● |
Patent
No. 5,737,375, a nuclear reactor having a core including a plurality
of
seed-blanket units
|
● |
Russia
- Patent No. 2,176,826
|
● |
Russia
- Patent No. 2,222,837
|
● |
South
Korea - Patent No. 301,339
|
● |
South
Korea - Patent No. 336,214
|
● |
China
- Patent No. ZL 96196267.4
|
NAME
|
AGE
|
POSITION
|
Seth
Grae
|
43
|
President,
Chief Executive Officer and Director
|
Thomas
Graham, Jr.
|
72
|
Interim
Secretary and Director
|
Cornelius
J. Milmoe
|
59
|
Chief
Operating Officer and Director
|
Andrey
Mushakov
|
29
|
Executive
Vice President - International Nuclear Operations
|
Larry
Goldman
|
50
|
Treasurer
and Acting Chief Financial Officer
|
Victor Alessi |
66
|
Director |
Title
of Class
|
Name
and
Address
of Beneficial Owner
|
Amount
and
Nature
of Beneficial Owner (1)
|
Percent
of Class(2)
|
|||
Common
|
Seth
Grae
|
20,420,076
|
(3) |
6.86
|
%
|
|
Common
|
Thomas
Graham, Jr.
|
3,861,894
|
(4) |
1.31
|
%
|
|
Common
|
Cornelius
J. Milmoe
|
75,000
|
0.03
|
%
|
||
Common
|
Larry
Goldman
|
104,166
|
(5) |
0.03
|
%
|
|
Common
|
OTC
Investments Ltd.
1710-1177
West Hastings Street
Vancouver,
BC V6E 2L3
Canada
|
15,000,000
|
5.13
|
%
|
||
Common
|
Thunder
Investors, LLC
200
West Madison Street
Chicago,
IL 60606
|
24,150,825
|
8.26
|
%
|
||
Common
|
Andrey
Mushakov
1701
East West Hwy., Apt. 401
Silver
Spring, MD 20910
|
2,789,175
|
(6) |
0.95
|
%
|
|
Common
|
Directors
& Officers as a Group
(5
people)
|
|
27,250,311
|
(7) |
9.04
|
%
|
LONG
TERM COMPENSATION
|
||||||||||||||||||||||||
ANNUAL
COMPENSATION
|
AWARDS
|
PAYOUTS
|
||||||||||||||||||||||
Name
And
Principal
Position
|
Year
|
Salary(1)
($)
|
Bonus
($)
|
Other
Annual
Compensation
($)
(4)
|
Restricted
Stock
Award(s)
($)
|
Securities
Under-Lying
Options/SARs (#)
|
LTIP
Payouts ($)
|
All
Other Compensation
($)
|
||||||||||||||||
Seth
Grae (1)
|
2006
|
$
|
200,595
|
$
|
0
|
$
|
0
|
$
|
4,150,000
|
$
|
647,133
|
$
|
0
|
$
|
0
|
|||||||||
President,
Chief
|
2005
|
$
|
158,333
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
150,000
|
$
|
0
|
$
|
0
|
|||||||||
Executive
Officer and Director
|
2004
|
$
|
150,000
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|||||||||
Paul
Carter (2)
|
2006
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|||||||||
Chief
Executive
|
2005
|
$
|
0
|
$
|
0
|
$
|
40,000
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|||||||||
Officer,
President, Chairman and Director
|
2004
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|||||||||
Charles
H. Merchant (3)
|
2006
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
127,500
|
$
|
0
|
$
|
0
|
$
|
0
|
|||||||||
Interim
Chief Executive Officer and Chief Operating Officer
|
2005
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|||||||||
Secretary
|
2004
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
(1)
|
Mr.
Grae’s aggregate salary in 2006, 2005 and 2004, includes
$14,583,
$145,833 and $125,000 of accrued, but unpaid salary. All of such
accrued
salary was paid to Mr. Grae in the first quarter of calendar 2006.
All of
Mr. Grae’s salary during the periods indicated was paid by our subsidiary,
Thorium Power.
|
(2)
|
Mr.
Carter served as Novastar’s Chief Executive Officer from 2002 until
December 1, 2005.
|
(3)
|
Mr.
Merchant served as Novastar’s interim Chief Executive Officer from
December 1, 2005 until March 17,
2006.
|
(4)
|
The
value of perquisites and other personal benefits, securities and
property
for the named executive officers that do not exceed the lesser of
$1,000
or 10% of the total of the annual salary and bonus is not reported
herein.
|
Name
|
Number
of
Securities
Underlying Options
Granted
(1)
|
%
of Total Options Granted To Employees in the
Fiscal Year
|
Exercise
Price
|
Expiration
Date
|
||||||||
Seth
Grae - Novastar
|
7,200,000(1
|
)
|
69
|
%
|
$
|
0.80
|
February
2016
|
|||||
Paul
Carter
|
0
|
0
|
0
|
0
|
||||||||
Charles
H. Merchant
|
0
|
0
|
0
|
0
|
Number
of Shares of Common Stock Underlying Unexercised Options at Year
End
June 30, 2006
|
Value
of Unexercised In-The-Money Options at Year
End June 30, 2006 (1)
|
||||||||||||||||||
Name
|
Shares
Acquired on
Exercise
|
Value
Realized
($)
|
|
Exercisable
|
|
Unexercisable
|
|
Exercisable
|
|
Unexercisable
|
|||||||||
Seth
Grae - Thorium
|
0
|
0
|
6,380,624
|
|
0
|
1,875,903
|
0
|
||||||||||||
Seth
Grae - Novastar
|
0
|
0
|
1,650,000
|
5,550,000
|
N/A
|
N/A
|
|||||||||||||
Paul
Carter
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||
Charles
H. Merchant
|
0
|
0
|
0
|
0
|
0
|
0
|
(1)
|
Options
are "in-the-money" if the market price of a share of common stock
exceeds
the exercise price of the option. The value of unexercised in-the-money
stock options is shown as of June 30,
2006.
|
· |
4,209,998
shares of our common stock, and 2,104,999 shares underlying warrants
issued pursuant to the private placement completed in November 23,
2005;
|
· |
4,208,331
shares of our common stock, and 2,104,165 shares underlying warrants
issued pursuant to the private placement completed on February 14,
2006;
|
· |
36,659,837
shares of our common stock, and 18,329,915 shares underlying warrants
issued pursuant to the private placement completed on May 4, 2006;
and
|
· |
1,466,393
shares of our common stock, and 733,197 shares underlying warrants,
which
represent the current number of securities that are issuable pursuant
to
the liquidated damages provisions of a registration rights agreement
entered into in conjunction with the May 4, 2006 private placement;
and
|
· |
49,808,090
shares of our common stock and
107,500 shares underlying warrants that have been issued to
consultants of the Company or that have been issued on the effective
date
of the Merger to persons who were affiliates of Thorium Power prior
to the
Merger.
|
· |
the
name of the selling stockholder and any material relationship the
selling
stockholder has had with us over the past three
years;
|
· |
the
number of shares of our common stock beneficially owned by the selling
stockholder as of the date of this
prospectus;
|
· |
the
number of shares of our common stock being offered for sale by the
selling
stockholder pursuant to this prospectus;
and
|
· |
the
number of shares of our common stock and percentage that will be
beneficially owned by the selling stockholder assuming the selling
stockholder disposes of all of the shares being offered pursuant
to this
prospectus.
|
Name
|
Beneficials
before the Offering
|
Shares
of Common Stock included in
Prospectus
|
Beneficial
Ownership
After
the Offering
|
Percentage
of
Common
Stock
Owned
After the
Offering*
|
|||||||||
Magnetar
Capital Master Fund, Ltd.
|
14,850,000
(1
|
)
|
14,850,000
(1
|
)
|
0
|
0
|
%
|
||||||
WTC-CIF
Technical Equity Portfolio (nominee: Finwell & Co.)
|
2,590,950
(2
|
)
|
2,590,950
(2
|
)
|
0
|
0
|
%
|
||||||
Raytheon
Master Pension Trust (nominee: Bost & Co.)
|
2,584,650
(3
|
)
|
2,584,650
(3
|
)
|
0
|
0
|
%
|
||||||
Raytheon
Master Pension Trust
|
1,261,200
(4
|
)
|
1,261,200
(4
|
)
|
0
|
0
|
%
|
||||||
WTC-CIF
Opportunistic Equity Portfolio (nominee: Finwell &
Co.)
|
1,177,200
(5
|
)
|
1,177,200
(5
|
)
|
0
|
0
|
%
|
||||||
Raytheon
Master Pension Trust (nominee: Bost & Co.)
|
678,000
(6
|
)
|
678,000
(6
|
)
|
0
|
0
|
%
|
||||||
Madeira
Partners, L.P.
|
614,700
(7
|
)
|
614,700
(7
|
)
|
0
|
0
|
%
|
||||||
Madeira
Investors (Bermuda) L.P.
|
594,600
(8
|
)
|
594,600
(8
|
)
|
0
|
0
|
%
|
||||||
The
Hartford Mutual Funds, Inc.: The Hartford Capital Appreciation
II Fund
(nominee: Bamaclewind & Co.)
|
562,500
(9
|
)
|
562,500
(9
|
)
|
0
|
0
|
%
|
||||||
WTC-CIF
Special Equity Portfolio (nominee: Finwell & Co.)
|
524,205
(10
|
)
|
524,205
(10
|
)
|
0
|
0
|
%
|
||||||
Highfields
Capital III LP
|
3,811,770
(11
|
)
|
3,811,770
(11
|
)
|
0
|
0
|
%
|
||||||
Highfields
Capital II LP
|
1,058,820
(12
|
)
|
1,058,820
(12
|
)
|
0
|
0
|
%
|
||||||
Highfields
Capital I LP
|
423,525
(13
|
)
|
423,525
(13
|
)
|
0
|
0
|
%
|
||||||
Cumberland
Partners
|
1,860,234
(14
|
)
|
1,860,234
(14
|
)
|
0
|
0
|
%
|
||||||
Cumberland
Benchmarked Partners, L.P.
|
1,260,480
(15
|
)
|
1,260,480
(15
|
)
|
0
|
0
|
%
|
||||||
Cumber
International S.A.
|
554,325
(16
|
)
|
554,325
(16
|
)
|
0
|
0
|
%
|
||||||
LongView
Partners B, L.P.
|
437,220
(17
|
)
|
437,220
(17
|
)
|
0
|
0
|
%
|
Name
|
Beneficial
Before
the
Offering
|
Shares
of
Common
Stock
Included
in
Prospectus
|
Beneficial
Ownership
After
the Offering
|
Percentage
of
Common
Stock
Owned
After the
Offering*
|
|||||||||
Summer
Street Cumberland Investors, LLC
|
185,370
(18
|
)
|
185,370
(18
|
)
|
0
|
0
|
%
|
||||||
HFR
HE Platinum Master Trust
|
109,290
(19
|
)
|
109,290
(19
|
)
|
0
|
0
|
%
|
||||||
Cumberland
Long Partners, L.P.
|
4,845
(20
|
)
|
4,845
(20
|
)
|
0
|
0
|
%
|
||||||
SF
Capital Partners Ltd.
|
3,529,413
(21
|
)
|
3,529,413
(21
|
)
|
0
|
0
|
%
|
||||||
Sunrise
Equity Partners, L.P.
|
2,647,057
(22
|
)
|
2,647,057
(22
|
)
|
0
|
0
|
%
|
||||||
CAMOFI
Master LDC
|
1,764,705
(23
|
)
|
1,764,705
(23
|
)
|
0
|
0
|
%
|
||||||
Whalehaven
Capital Fund Limited
|
1,764,705
(24
|
)
|
1,764,705
(24
|
)
|
0
|
0
|
%
|
||||||
SDS
Capital Group SPC, Ltd.
|
1,764,705
(25
|
)
|
1,764,705
(25
|
)
|
0
|
0
|
%
|
||||||
GUNDYCO
ITF Excalibur Limited Partnership
|
1,500,000
(26
|
)
|
1,500,000
(26
|
)
|
0
|
0
|
%
|
||||||
RHP
Master Fund, Ltd.
|
882,354
(27
|
)
|
882,354
(27
|
)
|
0
|
0
|
%
|
||||||
Springbok
Capital Master Fund, LP
|
1,716,441
(28
|
)
|
1,716,441
(28
|
)
|
0
|
0
|
%
|
||||||
David
Hovey
|
1,205,882
(29
|
)
|
1,205,882
(29
|
)
|
225,000
|
.08
|
%
|
||||||
Nite
Capital
|
529,500
(30
|
)
|
529,500
(30
|
)
|
0
|
0
|
%
|
||||||
AJW
Off Shore Ltd.
|
416,823
(31
|
)
|
416,823
(31
|
)
|
0
|
0
|
%
|
||||||
Amnon
Mandelbaum
|
352,941
(32
|
)
|
352,941
(32
|
)
|
0
|
0
|
%
|
||||||
Ethel
Marie Grossfeld
|
352,941
(33
|
)
|
352,941
(33
|
)
|
0
|
0
|
%
|
||||||
Daniel
M. Kornhauser
|
352,941
(34
|
)
|
352,941
(34
|
)
|
0
|
0
|
%
|
||||||
BH
Capital Investmets LP
|
352,500
(35
|
)
|
352,500
(35
|
)
|
0
|
0
|
%
|
||||||
David
M. Lewis
|
1,170,000
(36
|
)
|
1,170,000
(36
|
)
|
0
|
0
|
%
|
||||||
Richard
and Linda Grossfeld as Joint Tenants
|
264,705
(37
|
)
|
264,705
(37
|
)
|
0
|
0
|
%
|
||||||
Aaron
Foley
|
225,000
(38
|
)
|
225,000
(38
|
)
|
0
|
0
|
%
|
||||||
AJW
Qualified Partners, LLC
|
201,175
(39
|
)
|
201,175
(39
|
)
|
0
|
0
|
%
|
Name
|
Beneficial
Before
the
Offering
|
Shares
of
Common
Stock
Included
in
Prospectus
|
Beneficial
Ownership
After
the Offering
|
Percentage
of
Common
Stock
Owned
After the
Offering*
|
|||||||||
Gloria
Kassin
|
190,587
(40
|
)
|
190,587
(40
|
)
|
0
|
0
|
%
|
||||||
Thomas
Heinlein
|
1,540,500
(41
|
)
|
1,540,500
(41
|
)
|
0
|
0
|
%
|
||||||
Francis
X. Colannino
|
150,000
(42
|
)
|
150,000
(42
|
)
|
0
|
0
|
%
|
||||||
DCM
Limited
|
383,559
(43
|
)
|
383,559
(43
|
)
|
0
|
0
|
%
|
||||||
AS
Capital Partners, LLC
|
90,000
(44
|
)
|
90,000
(44
|
)
|
0
|
0
|
%
|
||||||
Bruce
L. Lewis
|
240,000
(45
|
)
|
240,000
(45
|
)
|
0
|
0
|
%
|
||||||
Marilyn
Adler
|
88,234
(46
|
)
|
88,234
(46
|
)
|
0
|
0
|
%
|
||||||
David
Goodfriend
|
88,234
(47
|
)
|
88,234
(47
|
)
|
0
|
0
|
%
|
||||||
AJW
Partners LLC
|
78,352
(48
|
)
|
78,352
(48
|
)
|
0
|
0
|
%
|
||||||
Jeffrey
Grossfeld
|
35,293
(49
|
)
|
35,293
(49
|
)
|
0
|
0
|
%
|
||||||
Kevin
Grossfeld
|
35,293
(50
|
)
|
35,293
(50
|
)
|
0
|
0
|
%
|
||||||
Michael
P. Murphy
|
22,500
(51
|
)
|
22,500
(51
|
)
|
0
|
0
|
%
|
||||||
New
Millenium Capital Partners II, LLC
|
9,528
(52
|
)
|
9,528
(52
|
)
|
0
|
0
|
%
|
||||||
Aaron
Leiben
|
1,639,999
(53
|
)
|
1,639,999
(53
|
)
|
0
|
0
|
%
|
||||||
Dynamis
Energy Fund L.P.
|
637,500
(54
|
)
|
637,500
(54
|
)
|
0
|
0
|
%
|
||||||
REF
Securities & Co.
|
499,999
(55
|
)
|
499,999
(55
|
)
|
0
|
0
|
%
|
||||||
John
S. Lemak
|
375,000
(56
|
)
|
375,000
(56
|
)
|
0
|
0
|
%
|
||||||
Keith
Bolognese
|
249,999
(57
|
)
|
249,999
(57
|
)
|
0
|
0
|
%
|
||||||
Philippe
Allain
|
225,000
(58
|
)
|
225,000
(58
|
)
|
0
|
0
|
%
|
||||||
Arthur
Veytsman
|
225,000
(59
|
)
|
225,000
(59
|
)
|
0
|
0
|
%
|
||||||
Michael
Karp
|
162,500
(60
|
)
|
162,500
(60
|
)
|
0
|
0
|
%
|
||||||
David
S. Cannizzo
|
124,999
(61
|
)
|
124,999
(61
|
)
|
0
|
0
|
%
|
||||||
Dynamis
Energy Fund Ltd.
|
112,500
(62
|
)
|
112,500
(62
|
)
|
0
|
0
|
%
|
||||||
Stuart
Fox
|
99,999
(63
|
)
|
99,999
(63
|
)
|
0
|
0
|
%
|
||||||
David
DiRicco (64)
|
182,291
(64
|
)
|
182,291
(64
|
)
|
0
|
0
|
%
|
||||||
Alan
Gelband Company Inc. (65)
|
2,642,256
(65
|
)
|
2,642,256
(65
|
)
|
0
|
0
|
%
|
Name
|
Beneficial
Before
the
Offering
|
Shares
of
Common
Stock
Included
in
Prospectus
|
Beneficial
Ownership
After
the Offering
|
Percentage
of
Common
Stock
Owned
After the
Offering*
|
|||||||||
Mark
Mamolen
|
11,628,175
|
11,628,175
|
0
|
0
|
%
|
||||||||
Gilliette
Lee Chukat and/or Annette M. Radkowsky
|
10,989,543
|
10,989,543
|
0
|
0
|
%
|
||||||||
Thunder
Investors, LLC
|
24,150,825
(66
|
) |
24,150,825
(66
|
) |
0
|
0
|
%
|
||||||
Russell
Nichols
|
105,000
(67
|
)
|
105,000
(67
|
)
|
0
|
0
|
%
|
||||||
Scott
Renninger
|
375,000
(68
|
)
|
375,000
(68
|
)
|
0
|
0
|
%
|
||||||
Richard
P. Howard
|
1,500,000
(69
|
)
|
1,500,000
(69
|
)
|
0
|
0
|
%
|
||||||
George
Weiss Associates Profit Sharing Plan; George Weiss Associates,
Inc. Profit
Sharing Plan
|
1,000,001
(70
|
)
|
1,000,001
(70
|
)
|
0
|
0
|
%
|
||||||
David
Karp
|
237,499
(71
|
) |
159,999
(71
|
)
|
77,500
|
0.03
|
%
|
||||||
Kenneth
M. Ferjo
|
127,500
(72
|
)
|
127,500
(72
|
)
|
0
|
0
|
%
|
||||||
Sarah
V. Carrasco
|
15,000
(73
|
)
|
15,000
(73
|
)
|
0
|
0
|
%
|
||||||
Douglas
M. Jones
|
30,000
(74
|
)
|
30,000
(74
|
)
|
0
|
0
|
%
|
||||||
Richard
J. Tijaden
|
60,000
(75
|
)
|
60,000
(75
|
)
|
0
|
0
|
%
|
||||||
Pactrans
Limited LLC
|
15,000
(76
|
)
|
15,000
(76
|
)
|
0
|
0
|
%
|
||||||
Thomas
B. Nelis
|
22,500
(77
|
)
|
22,500
(77
|
)
|
0
|
0
|
%
|
||||||
Mel
W. Ortner
|
15,000
(78
|
)
|
15,000
(78
|
)
|
0
|
0
|
%
|
||||||
J.F.
Miller Sales Company
|
52,500
(79
|
)
|
52,500
(79
|
)
|
0
|
0
|
%
|
||||||
John
E. Kiesel
|
300,000
(80
|
)
|
300,000
(80
|
)
|
0
|
0
|
%
|
||||||
Sean
Mulhearn
|
174,999
(81
|
)
|
174,999
(81
|
)
|
0
|
0
|
%
|
||||||
Seth
M. Shaw
|
2,434,999
(82
|
)
|
199,999
(82
|
)
|
2,235,000
|
0.82
|
%
|
||||||
Gary
S. Wade
|
22,500
(83
|
)
|
22,500
(83
|
)
|
0
|
0
|
%
|
||||||
Raj Pamnani |
322,500
(84
|
) |
322,500
(84
|
) |
0
|
0
|
%
|
||||||
Possible Liquidated Damages |
2,199,590(85
|
) |
2,199,590(85
|
) | N/A | N/A | |||||||
TOTAL
SHARES BEING REGISTERED
|
119,732,425
|
( 1 ) |
Includes
4,950,000 shares of common stock issuable upon exercise of the
May 4
Warrants. Magnetar Financial LLC is the investment advisor of Magnetar
Capital Master Fund, Ltd. (“Magnetar Master Fund”) and consequently has
voting control and investment discretion over securities held by
Magnetar
Master Fund. FMagnetar Financial LLC disclaims beneficial ownership
of the
shares held by Magnetar Master Fund. Alec Litowitz has voting control
over
Supernova Management LLC, the general partner of Magnetar Capital
Partners
LP, the sole managing member of Magnetar Financial LLC. As a result,
Mr.
Litowitz may be considered the beneficial owner of any shares deemed
to be
beneficially owed by Magnetar Financial LLC. Mr. Litowitz disclaims
beneficial ownership of these
shares.
|
( 2 ) |
Includes
863,650 shares of common stock issuable upon exercise of the May
4
Warrants. Wellington
Management Company, LLP (“Wellington”) is an investment adviser registered
under the Investment Advisers Act of 1940, as amended. Wellington,
in such capacity, may be deemed to share beneficial ownership over
the
shares held by its client accounts.
|
( 3 ) |
Includes
861,550 shares of common stock issuable upon exercise of the May
4
Warrants. Wellington
Management Company, LLP (“Wellington”) is an investment adviser registered
under the Investment Advisers Act of 1940, as amended. Wellington,
in such capacity, may be deemed to share beneficial ownership over
the
shares held by its client accounts.
|
( 4 ) |
Includes
420,400 shares of common stock issuable upon exercise of the May
4
Warrants. Wellington
Management Company, LLP (“Wellington”) is an investment adviser registered
under the Investment Advisers Act of 1940, as amended. Wellington,
in such capacity, may be deemed to share beneficial ownership over
the
shares held by its client accounts.
|
( 5 ) |
Includes
392,400 shares of common stock issuable upon exercise of the May
4
Warrants. Wellington
Management Company, LLP (“Wellington”) is an investment adviser registered
under the Investment Advisers Act of 1940, as amended. Wellington,
in such capacity, may be deemed to share beneficial ownership over
the
shares held by its client accounts.
|
( 6 ) |
Includes
226,000 shares of common stock issuable upon exercise of the May
4
Warrants. Wellington
Management Company, LLP (“Wellington”) is an investment adviser registered
under the Investment Advisers Act of 1940, as amended. Wellington,
in such capacity, may be deemed to share beneficial ownership over
the
shares held by its client accounts.
|
( 7 ) |
Includes
204,900 shares of common stock issuable upon exercise of the May
4
Warrants. Wellington
Management Company, LLP (“Wellington”) is an investment adviser registered
under the Investment Advisers Act of 1940, as amended. Wellington,
in such capacity, may be deemed to share beneficial ownership over
the
shares held by its client accounts.
|
( 8 ) |
Includes
198,200 shares of common stock issuable upon exercise of the May
4
Warrants. Wellington
Management Company, LLP (“Wellington”) is an investment adviser registered
under the Investment Advisers Act of 1940, as amended. Wellington,
in such capacity, may be deemed to share beneficial ownership over
the
shares held by its client accounts.
|
( 9) |
Includes
187,500 shares of common stock issuable upon exercise of the May
4
Warrants. Wellington
Management Company, LLP (“Wellington”) is an investment adviser registered
under the Investment Advisers Act of 1940, as amended. Wellington,
in such capacity, may be deemed to share beneficial ownership over
the
shares held by its client accounts.
|
(10) |
Includes
174,735 shares of common stock issuable upon exercise of the May
4
Warrants. Wellington
Management Company, LLP (“Wellington”) is an investment adviser registered
under the Investment Advisers Act of 1940, as amended. Wellington, in
such capacity, may be deemed to share beneficial ownership over
the shares
held by its client accounts.
|
(11) |
Includes
1,270,590 shares of common stock issuable upon exercise of the
May 4
Warrants. Highfields Associates LLC is the General Partner of Highfields
Capital III LP.; Jonathan S. Jacobson and Richard L. Grubmann are
senior
managing members of Highfields LLC and they have voting and/or
investment
control over the Novastar securities held by Highlands Capital
Ltd.
|
(12)
|
Includes
352,940 shares of common stock issuable upon exercise of the May
4
Warrants. Highfields Associates LLC is the General Partner of Highfields
Capital II LP; Jonathan S. Jacobson and Richard L. Grubmann are senior
managing members of Highfields LLC and they have voting and/or investment
control over the Novastar securities held by Highlands Capital II
LP.
|
(13) |
Includes
141,175 shares of common stock issuable upon exercise of the May
4
Warrants. Highfields Associates LLC is the General Partner of Highfields
Capital I LP; Jonathan S. Jacobson and Richard L. Grubmann are senior
managing members of Highfields LLC and they have voting and/or investment
control over the Novastar securities held by Highlands Capital I
LP.
|
(14) |
Includes
620,078 shares of common stock issuable upon exercise of the May
4
Warrants. Bruce Wilcox, Andrew Wallach, Gary Tynes and Brad Gendell
have
voting and/or investment control over the Novastar securities owned
by
Cumberland Partners.
|
(15) |
Includes
420,160 shares of common stock issuable upon exercise of the May
4
Warrants. Bruce Wilcox, Andrew Wallach, Gary Tynes and Brad Gendell
have
voting and/or investment control over the Novastar securities owned
by
Cumberland Benchmarked Partners,
L.P.
|
(16) | Includes 184,775 shares of common stock issuable upon exercise of the May 4 Warrants. Bruce Wilcox, Andrew Wallach, Gary Tynes and Brad Gendell have voting and/or investment control over the Novastar securities owned by Cumber International S.A. |
•
|
1%
of the number of shares of common stock then outstanding, which
as of the effective date of the Merger would equal approximately
2,961,145; or
|
•
|
the
average weekly trading volume of our common stock during the four
calendar
weeks preceding the filing of a notice on Form 144 with respect to
such sale.
|
– |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
– |
block
trades in which the broker-dealer will attempt to sell the shares
as
agent, but may position and resell a portion of the block as principal
to
facilitate the transaction;
|
– |
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
– |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
– |
privately
negotiated transactions;
|
– |
short
sales effected after the date the registration statement of which
this
Prospectus is a part is declared effective by the
SEC;
|
– |
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 stockholders to sell a specified number
of such
shares at a stipulated price per share;
and
|
– |
a
combination of any such methods of
sale.
|
Page
|
|
F-2
|
|
F-3
|
|
|
|
F-4
|
|
F-5
|
|
F-6
|
|
F-7
|
|
F-11
|
|
F-42
|
|
F-43
|
|
F-44
|
|
F-45
|
|
F-47
|
|
F-48
|
|
F-60
|
|
F-61
|
|
F-62
|
|
F-64
|
|
F-65
|
|
F-68
|
|
F-70
|
|
F-84
|
|
F-85
|
|
F-86
|
June
30
|
|||||||
2006
|
2005
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
14,431,407
|
$
|
802
|
|||
Prepaid
expenses and other current assets
|
808,425
|
-
|
|||||
Total
current assets
|
15,239,832
|
802
|
|||||
Investment
- Thorium Power Inc.
|
1,350,000
|
-
|
|||||
Total
assets
|
$
|
16,589,832
|
$
|
802
|
|||
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
463,354
|
$
|
121,438
|
|||
Accrued
liabilities
|
103,541
|
103,542
|
|||||
Due
to related parties
|
128,675
|
-
|
|||||
Due
to Thorium Power Inc.
|
264,740
|
-
|
|||||
Warrant
Liability - Note 9(ii)
|
3,678,278
|
-
|
|||||
Accrued
payroll tax liability
|
635,000
|
-
|
|||||
Total
Current Liabilities
|
5,273,588
|
224,980
|
|||||
Total
Liabilities
|
5,273,588
|
224,980
|
|||||
Commitments
- Note 13
|
|||||||
Common
Stock With Registration Rights - Note 9(ii):
|
|||||||
Common
Stock subject to continuing registration, $0.001 par
value, 36,659,837
shares issued and outstanding at June 30, 2006
(2005
- 0 shares)
|
12,041,373
|
-
|
|||||
STOCKHOLDERS’
DEFICIENCY
|
|||||||
Preferred
stock, $0.001 par value; 50,000,000 authorized shares;
no
shares issued and outstanding
|
-
|
- | |||||
Voting
Common stock, $0.001 par value; 250,000,000 authorized
shares; 118,101,637
shares issued and outstanding
(
2005 - 86,072,532)
|
118,101
|
86,073
|
|||||
Additional
paid-in capital
|
14,913,153
|
4,328,081
|
|||||
Deferred
Stock Compensation
|
(83,328
|
)
|
(499,967
|
)
|
|||
Common
Stock and Warrants Reserved for Future Issuance
|
1,807,445
|
-
|
|||||
Accumulated
Deficit
|
(17,482,900
|
)
|
(4,138,365
|
)
|
|||
Accumulated
Other Comprehensive Income
|
2,400
|
-
|
|||||
Total
Stockholders’ Deficiency
|
(725,129
|
)
|
(224,178
|
)
|
|||
Total
Liabilities and Stockholders’ Deficiency
|
$
|
16,589,832
|
$
|
802
|
Years
Ended
|
Cumulative
Period from
June
28, 1999
(Inception)
to
|
|||||||||
June
30
|
June
30
|
|||||||||
2006
|
2005
|
2006
|
||||||||
Revenue
|
$
|
-
|
$
|
-
|
$
|
184,162
|
||||
Operating
Expenses
|
||||||||||
Consulting
|
5,770,133
|
2,303,533
|
8,268,046
|
|||||||
Forgiveness
of debt
|
-
|
(169,818
|
)
|
(169,818
|
)
|
|||||
General
and administrative
|
1,362,563
|
114,988
|
2,714,493
|
|||||||
Impairment
loss - equipment
|
-
|
-
|
12,445
|
|||||||
Impairment
loss - Mineral property acquisition costs
|
670,544
|
-
|
720,544
|
|||||||
Interest
attributable to beneficial conversion feature for notes
payable
|
-
|
442,813
|
580,057
|
|||||||
Mineral
property exploration expenses
|
394,516
|
-
|
394,516
|
|||||||
Stock-based
compensation
|
4,949,729
|
-
|
4,949,729
|
|||||||
13,147,485
|
2,691,516
|
17,470,012
|
||||||||
Operating
Loss
|
(13,147,485
|
)
|
(2,691,516
|
)
|
(17,285,850
|
)
|
||||
Other
Income and Expenses
|
||||||||||
Dividend
income
|
8,136
|
-
|
8,136
|
|||||||
Interest
income
|
72,435
|
-
|
72,435
|
|||||||
Legal
Settlement
|
(146,445
|
)
|
-
|
(146,445
|
)
|
|||||
Loss
on fair value of warrant derivatives
|
(139,220
|
)
|
-
|
(139,220
|
)
|
|||||
Other
income
|
8,044
|
-
|
8,044
|
|||||||
Net
Loss
|
$
|
(13,344,535
|
)
|
$
|
(2,691,516
|
)
|
$
|
(17,482,900
|
)
|
|
Net
Loss Per Common Share, Basic and diluted
|
$
|
(0.12
|
)
|
$
|
(0.05
|
)
|
||||
Weighted
Average Number Of Common Shares
|
||||||||||
Outstanding
|
111,913,155
|
57,188,970
|
Years
Ended
|
Cumulative
Period from
June
28, 1999 (Inception) to
|
|||||||||
June
30
|
June
30
|
|||||||||
2006
|
2005
|
2006
|
||||||||
Operating
Activities
|
||||||||||
Loss
for the year
|
$
|
(13,344,535
|
)
|
$
|
(2,691,516
|
)
|
$
|
(17,482,900
|
)
|
|
Adjustments
to reconcile net loss from operations to net cash used
in operating
activities:
|
||||||||||
Shares
issued for other than cash for payment of expences
|
10,686,652
|
2,339,533
|
13,071,185
|
|||||||
Loss
on fair value of warrant liability
|
139,220
|
-
|
139,220
|
|||||||
Interest
attributable to beneficial conversion feature
|
||||||||||
for
notes payable
|
-
|
442,813
|
580,057
|
|||||||
Amortization
of equipment
|
-
|
774
|
3,813
|
|||||||
Impairment
loss - mineral property acquisition costs
|
670,544
|
-
|
670,544
|
|||||||
Forgiveness
of debt
|
-
|
(169,818
|
)
|
(169,818
|
)
|
|||||
Impairment
loss - equipment
|
-
|
-
|
12,445
|
|||||||
Unrealized
gain on investment
|
2,400
|
-
|
2,400
|
|||||||
Changes
in non-cash operating working capital items:
|
||||||||||
Prepaid
expenses and other current liabilities
|
(808,425
|
)
|
-
|
(808,425
|
)
|
|||||
Accounts
payable and accrued liabilities
|
379,415
|
71,135
|
859,454
|
|||||||
Due
to related party
|
128,675
|
-
|
42,756
|
|||||||
Due
to Thorium Power Inc.
|
264,740
|
-
|
264,740
|
|||||||
Accrued
payroll tax liability
|
635,000
|
-
|
635,000
|
|||||||
Net
Cash (Used In) Operating Activities
|
(1,246,314
|
)
|
(7,079
|
)
|
(2,179,529
|
)
|
||||
Investing
Activities
|
||||||||||
Purchase
of equipment
|
-
|
-
|
(1,808
|
)
|
||||||
Acquisition
of long-term investment
|
(1,350,000
|
)
|
-
|
(1,350,000
|
)
|
|||||
Net
Cash (Used In) Investing Activities
|
(1,350,000
|
)
|
-
|
(1,351,808
|
)
|
|||||
Financing
Activities
|
||||||||||
Proceeds
from loan payable to shareholder
|
-
|
-
|
16,097
|
|||||||
Issue
of common shares
|
1,846,488
|
-
|
1,865,438
|
|||||||
Net
proceeds from issuance of common stock with registration
rights
|
15,580,431
|
-
|
15,580,431
|
|||||||
Cash
paid for redemption of shares
|
(400,000
|
)
|
-
|
(400,000
|
)
|
|||||
Advances
on notes payable
|
-
|
7,881
|
900,000
|
|||||||
Cash
acquired on acquisition of subsidiary
|
-
|
-
|
778
|
|||||||
Net
Cash Provided By Financing Activities
|
17,026,919
|
7,881
|
17,962,744
|
|||||||
Net
Increase In Cash and Cash Equivalents
|
14,430,605
|
802
|
14,431,407
|
|||||||
Cash
and Cash Equivalents, Beginning Of Period
|
802
|
-
|
-
|
|||||||
Cash
and Cash Equivalents, End Of Period
|
$
|
14,431,407
|
$
|
802
|
$
|
14,431,407
|
||||
Supplemental
Disclosure of Cash Flow Information
|
||||||||||
Cash
paid during the year:
|
||||||||||
Interest
paid
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
Income
taxes paid
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
Other (Note 12)
|
Common
Stock
|
Additional
Paid-in
|
Deferred
|
Common
Stock and Warrants Reserved for Future
|
Accumulated
|
Accumulated
Other Comprehensive
|
||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Compensation
|
Issuance
|
Deficit
|
Income
|
Total
|
||||||||||||||||||
Issuance
of shares to founders
|
3,465
|
$
|
3
|
$
|
18,947
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
18,950
|
||||||||||
Net
loss for the period
|
-
|
-
|
-
|
-
|
-
|
(159,909
|
)
|
-
|
(159,909
|
)
|
|||||||||||||||
Balance,
June 30, 2000
|
3,465
|
3
|
18,947
|
-
|
-
|
(159,909
|
)
|
-
|
(140,959
|
)
|
|||||||||||||||
Repurchase
of common stock by consideration of forgiveness of loan
payable to
shareholder
|
(1,445
|
)
|
(1
|
)
|
16,098
|
-
|
-
|
-
|
-
|
16,097
|
|||||||||||||||
2,020
|
2
|
35,045
|
-
|
-
|
(159,909
|
)
|
-
|
(124,862
|
)
|
||||||||||||||||
Adjustment
to number of shares issued and outstanding as a result
of the reverse
take-over transaction -
|
|||||||||||||||||||||||||
Custom
Branded Networks, Inc.
|
(2,020
|
)
|
(2
|
)
|
2
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Aquistar
Ventures (USA) Inc.
|
15,463,008
|
15,463
|
(15,463
|
)
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||
15,463,008
|
15,463
|
19,584
|
-
|
-
|
(159,909
|
)
|
-
|
(124,862
|
)
|
||||||||||||||||
Shares
allotted in connection with the acquisition of Custom Branded
Networks,
Inc.
|
25,000,000
|
25,000
|
(9,772
|
)
|
-
|
-
|
-
|
-
|
15,228
|
||||||||||||||||
Less:
Allotted and not yet issued
|
(8,090,476
|
)
|
(8,090
|
)
|
8,090
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Common
stock conversion rights
|
-
|
-
|
421,214
|
-
|
-
|
-
|
-
|
421,214
|
|||||||||||||||||
Net
loss for the year
|
-
|
-
|
-
|
-
|
-
|
(723,239
|
)
|
-
|
(723,239
|
)
|
|||||||||||||||
Balance,
June 30, 2001
|
32,372,532
|
32,373
|
439,116
|
-
|
-
|
(883,148
|
)
|
-
|
(411,659
|
)
|
Common
Stock
|
Additional
Paid-in
|
Deferred
|
Common
Stock and Warrants Reserved for Future
|
Accumulated
|
Accumulated
Other Comprehensive
|
||||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Compensation
|
Issuance
|
Deficit
|
Income
|
Total
|
|||||||||||||||||
Balance,
June 30, 2001
|
32,372,532
|
$
|
32,373
|
$
|
439,116
|
$
|
-
|
$
|
-
|
$
|
(883,148
|
)
|
$
|
-
|
$
|
(411,659
|
)
|
||||||||
Additional
shares issued in connection with the acquisition of
Custom Branded
Networks, Inc.
|
1,500,000
|
1,500
|
(1,500
|
)
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||
Common
stock conversion rights
|
-
|
-
|
109,748
|
-
|
-
|
-
|
-
|
109,748
|
|||||||||||||||||
Net
loss for the year
|
-
|
-
|
-
|
-
|
-
|
(326,038
|
)
|
-
|
(326,038
|
)
|
|||||||||||||||
Balance,
June 30, 2002
|
33,872,532
|
33,873
|
547,364
|
-
|
-
|
(1,209,186
|
)
|
-
|
(627,949
|
)
|
|||||||||||||||
Issue
of common stock for deferred compensation expense
|
4,500,000
|
4,500
|
40,500
|
(45,000
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||
Amortization
of deferred compensation
|
-
|
-
|
-
|
22,500
|
-
|
-
|
-
|
22,500
|
|||||||||||||||||
Common
stock conversion rights
|
-
|
-
|
45,116
|
-
|
-
|
-
|
-
|
45,116
|
|||||||||||||||||
Net
loss for the year
|
-
|
-
|
-
|
-
|
-
|
(142,233
|
)
|
-
|
(142,233
|
)
|
|||||||||||||||
Balance,
June 30, 2003
|
38,372,532
|
38,373
|
632,980
|
(22,500
|
)
|
-
|
(1,351,419
|
)
|
-
|
(702,566
|
)
|
||||||||||||||
Amortization
of deferred compensation
|
-
|
-
|
-
|
22,500
|
-
|
-
|
-
|
22,500
|
|||||||||||||||||
Common
stock conversion rights
|
-
|
-
|
3,301
|
-
|
-
|
-
|
-
|
3,301
|
|||||||||||||||||
Net
loss for the year
|
-
|
-
|
-
|
-
|
-
|
(95,430
|
)
|
-
|
(95,430
|
)
|
|||||||||||||||
Balance,
June 30, 2004
|
38,372,532
|
38,373
|
636,281
|
-
|
-
|
(1,446,849
|
)
|
-
|
(772,195
|
)
|
|||||||||||||||
Issue
of common stock for services
|
14,800,000
|
14,800
|
901,200
|
-
|
-
|
-
|
-
|
916,000
|
|||||||||||||||||
Issue
of common stock for convertible notes
|
20,000,000 | 20,000 | 484,166 |
-
|
-
|
-
|
-
|
504,166 | |||||||||||||||||
Issue
of warrants for convertible notes
|
-
|
-
|
495,834
|
-
|
-
|
-
|
-
|
495,834
|
|||||||||||||||||
Issue
of common stock for services
|
11,600,000
|
11,600
|
1,583,900
|
(598,000
|
)
|
-
|
-
|
-
|
997,500
|
||||||||||||||||
Issue
of common stock for services
|
1,300,000
|
1,300
|
226,700
|
-
|
-
|
-
|
-
|
228,000
|
|||||||||||||||||
Amortization
of deferred compensation
|
-
|
-
|
-
|
98,033
|
-
|
-
|
-
|
98,033
|
|||||||||||||||||
Net
loss for the year
|
-
|
-
|
-
|
-
|
-
|
(2,691,516
|
)
|
-
|
(2,691,516
|
)
|
|||||||||||||||
Balance,
June 30, 2005
|
86,072,532
|
86,073
|
4,328,081
|
(499,967
|
)
|
-
|
(4,138,365
|
)
|
-
|
(224,178
|
)
|
Common
Stock
|
Additional
Paid-in
|
Deferred
|
Common
Stock and Warrants Reserved for Future
|
Accumulated
|
Accumulated
Other Comprehensive
|
||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Compensation
|
Issuance
|
Deficit
|
Income
|
Total
|
||||||||||||||||||
Balance,
June 30, 2005
|
86,072,532
|
$
|
86,073
|
$
|
4,328,081
|
$
|
(499,967
|
)
|
$
|
-
|
$
|
(4,138,365
|
)
|
$
|
-
|
$
|
(224,178
|
)
|
|||||||
Issuance
of common stock for services
|
17,610,776
|
17,611
|
3,679,269
|
-
|
-
|
-
|
-
|
3,696,880
|
|||||||||||||||||
Issuance
of common stock for settlement of debt
|
249,999
|
250
|
29,681
|
-
|
-
|
-
|
-
|
29,931
|
|||||||||||||||||
Issuance
of warrants for settlement of debt
|
-
|
-
|
7,569
|
-
|
-
|
-
|
-
|
7,569
|
|||||||||||||||||
Issuance
of common stock for property acquisition
|
6,000,000
|
6,000
|
1,604,000
|
-
|
-
|
-
|
-
|
1,610,000
|
|||||||||||||||||
Stock
based compensation - employment agreement
|
5,000,000
|
5,000
|
4,145,000
|
-
|
-
|
-
|
-
|
4,150,000
|
|||||||||||||||||
Private
placement for issuance of common stock
|
44,828,167
|
44,827
|
13,494,852
|
-
|
-
|
-
|
-
|
13,539,679
|
|||||||||||||||||
Reallocation
of proceeds from sales of common stock with registration
rights
|
(36,659,837
|
)
|
(36,660
|
)
|
(12,004,713
|
)
|
-
|
-
|
-
|
-
|
(12,041,373
|
)
|
|||||||||||||
Warrants
issued pursuant to private placement
|
-
|
-
|
348,185
|
-
|
-
|
-
|
-
|
348,185
|
|||||||||||||||||
Issuance
of stock as compensation for warrants cancelled by
shareholder
|
15,000,000
|
15,000
|
1,739,166
|
-
|
-
|
-
|
-
|
1,754,166
|
|||||||||||||||||
Amortization
of deferred compensation
|
-
|
-
|
-
|
499,967
|
-
|
-
|
-
|
499,967
|
|||||||||||||||||
Deferred
compensation
|
-
|
-
|
-
|
(83,328
|
)
|
-
|
-
|
-
|
(83,328
|
)
|
|||||||||||||||
Repurchase
of issued stock
|
(5,000,000
|
)
|
(5,000
|
)
|
(1,445,000
|
)
|
-
|
-
|
-
|
-
|
(1,450,000
|
)
|
|||||||||||||
Stock
returned to treasury
|
(15,000,000
|
)
|
(15,000
|
)
|
(1,739,166
|
)
|
-
|
-
|
-
|
-
|
(1,754,166
|
)
|
|||||||||||||
Stock
reserved for future issuance
|
-
|
-
|
-
|
-
|
1,690,700
|
-
|
-
|
1,690,700
|
|||||||||||||||||
Stock
based compensation - stock reserved for future issuance
|
-
|
-
|
-
|
-
|
73,500
|
-
|
-
|
73,500
|
|||||||||||||||||
Warrants
reserved for future issuance
|
-
|
-
|
-
|
-
|
43,245
|
-
|
-
|
43,245
|
|||||||||||||||||
Stock-based
compensation - options
|
-
|
-
|
726,229
|
-
|
-
|
-
|
-
|
726,229
|
|||||||||||||||||
Other
comprehensive income
|
-
|
-
|
-
|
-
|
-
|
-
|
2,400
|
2,400
|
|||||||||||||||||
Net
loss for the year
|
-
|
-
|
-
|
-
|
-
|
(13,344,535
|
)
|
-
|
(13,344,535
|
)
|
|||||||||||||||
Balance,
June 30, 2006
|
118,101,637
|
$
|
118,101
|
$
|
14,913,153
|
$
|
(83,328
|
)
|
$
|
1,807,445
|
$
|
(17,482,900
|
)
|
$
|
2,400
|
$
|
(725,129
|
)
|
Common
Stock
|
Additional
Paid-in
|
Deferred
|
Common
Stock and Warrants Reserved for Future
|
Accumulated
|
Accumulated
Other Comprehensive
|
||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Compensation
|
Issuance
|
Deficit
|
Income
|
Total
|
||||||||||||||||||
Deficit
accumulated during the development stage
|
$
|
(1,351,419
|
)
|
||||||||||||||||||||||
Deficit
accumulated during the exploration stage
|
(16,131,481
|
)
|
|||||||||||||||||||||||
Balance,
June 30, 2006
|
$
|
(17,482,900
|
)
|
1.
|
NATURE
OF OPERATIONS
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
a)
|
Consolidation
|
These
financial statements include the accounts of the Company
(a Nevada
corporation) and its wholly-owned subsidiary, Custom Branded
Networks,
Inc. (a Delaware corporation) and TP Acquisition Corp., (a
Delaware
corporation). All significant intercompany transactions and
balances have
been eliminated.
|
b) |
Use
of Estimates
|
c) | Prior Year Reclassifications |
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
c) | Prior Year Reclassifications (Continued) |
d) | Cash and Cash Equivalents |
e)
|
Equipment
|
f)
|
Income
Taxes
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
f)
|
Income
Taxes (Continued)
|
g)
|
Mineral
Property Acquisition Costs and Exploration
Expenditures
|
The
Company follows a policy of capitalizing mineral property
acquisition
costs and expensing mineral property exploration expenditures
until a
production decision is made in respect of the project and
the Company is
reasonably assured that it will receive regulatory approval
to permit
mining operations which may include the receipt of a legally
binding
project approval certificate.
|
Management
periodically reviews the carrying value of its investments
in mineral
leases and claims with internal and external mining related
professionals.
A decision to abandon, reduce or expand a specific project
is based upon
many factors including general and specific assessments of
mineral
deposits, anticipated future mineral prices, anticipated
future costs of
exploring, developing and operating a production mine, the
expiration term
and ongoing expenses of maintaining mineral properties and
the general
likelihood that the Company will continue exploration on
such project. The
Company does not set a pre-determined holding period for
properties with
unproven deposits, however, properties which have not demonstrated
suitable metal concentrations at the conclusion of each phase
of an
exploration program are re-evaluated to determine if future
exploration is
warranted, whether there has been any impairment in value
and that their
carrying values are appropriate.
|
If
an area of interest is abandoned or it is determined that
its carrying
value cannot be supported by future production or sale, the
related costs
or impairment loss is charged against operations in the year
of
abandonment or determination of value. The amounts recorded
as mineral
leases and claims represent costs to date and do not necessarily
reflect
present or future values.
|
The
Company’s exploration activities and proposed mine development are
subject
to various laws and regulations governing the protection
of the
environment. These laws are continually changing, generally
becoming more
restrictive. The Company has made, and expects to make in
the future, if
it continues its mining operations, expenditures to comply
with such laws
and regulations.
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
g)
|
Mineral
Property Acquisition Costs and Exploration Expenditures
(Continued)
|
The
accumulated costs of properties that are developed on the
stage of
commercial production will be amortized to operations using
the
unit-of-production depletion method.
|
h)
|
Financial
Instruments
|
i)
|
Stock-Based
Compensation
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
i)
|
Stock-Based
Compensation (Continued)
|
· |
A
“modified prospective” method in which compensation cost is recognized
beginning with the effective date (a) based on the requirements
of
FAS-123R for all share-based payments granted after the effective
date and
(b) based on the requirements of FAS-123 for all awards granted
to
employees prior to the effective date of FAS-123R that remain
unvested on
the effective date; or
|
· |
A
“modified retrospective” method, which includes the requirements of the
modified prospective method described above but also permits
entities to
restate, based on the amounts previously recognized under
FAS-123 for
purposes of pro forma disclosures, either (a) all prior periods
presented
for which FAS-123 was effective or (b) prior interim periods
of the year
in which FAS-123R is adopted.
|
j) | Warrants |
k)
|
Basic
and Diluted Loss per Share
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
l)
|
Impairment
Charges
|
m) |
Foreign
Currency Translation
|
a. |
monetary
items at the rate prevailing at the balance sheet
date;
|
b. |
non-monetary
items at the historical exchange
rate;
|
c. |
revenue
and expenses that are monetary items are valued at the average
rate in
effect during the applicable accounting
period.
|
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
n) |
Revenue
Recognition
|
o) |
Comprehensive
Income
|
p) |
Asset
Retirement Obligations
|
q) |
Environmental
Protection and Reclamation Costs
|
r) |
Advertising
Costs
|
s)
|
Exploration
Stage Enterprise
|
t) |
Investments
|
3. |
RECENT
ACCOUNTING PRONOUNCEMENTS
|
a) | In March 2005, the FASB issued FASB Interpretation (“FIN”) No. 47, “Accounting for Conditional Asset Retirement Obligations.” FIN 47 is an interpretation of SFAS No. 143, “Asset Retirement Obligations,” which was issued in June 2001. FIN 47 was issued to address diverse accounting practices that have developed with regard to the timing of liability recognition for legal obligations associated with the retirement of a tangible long-lived asset in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. According to FIN 47, uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than December 31, 2005 for the Company. The Company is currently evaluating the impact of the adoption of FIN 47 on its financial statements. |
3. |
RECENT
ACCOUNTING PRONOUNCEMENTS (Continued)
|
b) |
In
May 2005, the Financial Accounting Standards Board (FASB)
issued SFAS No.
154, “Accounting Changes and Error Corrections” (SFAS No. 154) which
replaces APB No. 20, “Accounting Changes” and SFAS No. 3, “Reporting
Accounting Changes in Interim Financial Statements - an Amendment
of APB
Opinion No. 28”. SFAS No. 154 provides guidance on the methods issuers
should use to account for and reporting accounting changes
and error
corrections. Specifically, this statement requires that issuers
retrospectively apply any voluntary change in accounting
principles to
prior period financial statements, if it is practicable to
do so. This
principle replaces APB No. 20, which required that most voluntary
changes
in accounting principle be recognized by including the cumulative
effect
of the change to the new accounting principle on prior periods
in the net
income reported by the issuer in the period in which it instituted
the
change. SFAS No. 154 also redefines the term “restatement” to mean the
correction of an error by revising previously issued financial
statements.
Unless adopted early, SFAS No. 154 is effective for accounting
changes and
corrections of errors made in fiscal years beginning after
December 15,
2005. The Company does not expect the adoption of SFAS No.
154 to have an
impact on its financial position or result of
operations.
|
JUNE
30
|
|||||||
2006
|
2005
|
||||||
Cash
on deposit
|
$
|
1,316,993
|
$
|
802
|
|||
Investment
grade commercial paper - Note 2(d)
|
12,019,947
|
-
|
|||||
Money
market funds
|
1,043,235
|
-
|
|||||
Funds
held in attorney trust account
|
51,232
|
-
|
|||||
Total
cash and cash equivalents
|
$
|
14,431,407
|
$
|
802
|
5. |
INVESTMENT
/ DUE TO THORIUM POWER
INC.
|
6. |
OFFICER
COMPENSATION / ACCRUED PAYROLL TAX
LIABILITY
|
7.
|
MINERAL
PROPERTIES
|
i) | Properties |
a) | On May 1, 2005 the Company entered into an agreement to purchase a 92.25% interest in three mineral interests located in the state of Queensland, Australia. This agreement was replaced and superseded by an agreement dated September 30, 2005, to increase the Company’s purchase to a 100% interest. As consideration, the Company issued 5,000,000 restricted common shares of the Company to the vendor at a deemed value price of $1,450,000 (issued on October 21, 2005). In addition, the Company must incur the following exploration expenditures, not to exceed $695,000: |
i)
|
$125,000
by December 31, 2006;
|
b) |
On
September 14, 2005 the Company entered into an agreement
whereby certain
mineral leases in the Clay County District of Alabama were
assigned to the
Company. The Company assumed a lease held by the lessee,
for consideration
of $100,000 cash (paid as of June 30, 2006), 1,000,000 restricted
common
shares of the Company at a deemed price of $160,000 (issued
on October 21,
2005) and a $15 per ton net royalty of Thorium/monazite removed
from the
leased properties.
|
7.
|
MINERAL
PROPERTIES
(Continued)
|
i) | Properties (Continued) |
c) |
On
December 31, 2005 the Company entered into an agreement
with CM Properties
and Mr. Merchant, whereby certain mineral leases in the Cleburne
County District of Alabama can be assigned to the Company.
The Company
will assume 51% of a lease held by the lessee, who subsequently
became an
officer of the Company but no longer serves as an officer
as of June 30,
2006, for consideration of 2,000,000 restricted common
shares of the
Company. In addition, the Company must incur $1,500,000 on property
expenditures and for each $100,000 in additional expenditures;
the Company
will receive an additional 4% interest in the lease up
to a maximum of an
extra 40% interest. Upon reaching a 91% interest, the lessee
shall retain
a 9% interest and shall receive $17.50 per ounce of pure
Platinum Group
Metal (PGM) produced. For each 2,500 ounces of PGM produced,
the lessee
shall receive an additional 1,000,000 restricted common
shares of the
Company, up to a maximum of 8,000,000 shares, for a period
of two years
from the acquisition of the Company’s 91% interest being
obtained. Aspects
of the contract remain executory, and the company has not
issued the
2,000,000 shares, while entities controlled by CM Properties continue
to oversee the properties and are reimbursed by the Company
for their
services. In February 2006, the Company and CM Properties
amended the
lease agreements to make the sole remedy to CM Properties
for a breach of
the agreement by the Company termination of the mineral
lease agreements,
with no further relief or recourse against the Company.
Accordingly, the balance sheet does not reflect the value
of the property
(this value determined by the stock value of the 2 million
shares at
the date of the agreement - $380,000) as an asset nor does it
reflect the Company's obligation to issue the shares (valued
at
the stock value of $380,000) as common stock reserved for
future issuance (an equity account on the balance
sheet).
|
ii) |
Impairment
Loss
|
In 2006, during the course of the Company’s strategic review of its mineral exploration operations, the Company recorded a net impairment charge of $670,544 (non-deductible for income tax purposes) relating to the impairment of all mineral acquisition costs when it was determined that future undiscounted and discounted cash flows associated with these assets were insufficient to recover their carrying values. These assets may have a nominal value, but were written down at June 30, 2006 to $0. |
9.
|
SHARE
CAPITAL
|
i)
|
Common
Stock
|
a)
|
On
August 3, 2005 the Company issued 800,000 restricted shares
of common
stock to its former advisory board as compensation for consulting
services
performed. The value attributed to these shares was $128,000
($0.16 per
share).
|
9.
|
SHARE
CAPITAL
(Continued)
|
i)
|
Common
Stock (Continued)
|
b)
|
On
September 22, 2005 the Company issued a total of 4,187,500
shares of
common stock to outside consultants as payment for various
services
rendered on behalf of the Company. Of the total issuance,
4,000,000 were
issued pursuant to the March 2005 Compensation Plan, while
187,500 were
issued pursuant to the August 2005 Augmented Compensation
Plan. The value
attributed to these shares in total was $462,828 ($0.11 per
share).
|
c)
|
On
September 30, 2005 the Company issued 300,000 shares of restricted
common
stock to an outside consultant as payment for services rendered
for
mineral exploration activities. These shares were issued
pursuant to the
August 2005 Augmented Compensation Plan, and the value attributed
was
$51,000 ($0.17 per share).
|
d)
|
On
October 21, 2005 the Company issued 1,000,000 restricted
common shares
with value of $160,000 ($0.16 per share at the agreement
date) for mineral
property acquisition costs, as described in note
7(i)(b).
|
e)
|
On
October 21, 2005 the Company issued 5,000,000 restricted
common shares
with value of $1,450,000 ($0.29 per share at the agreement
date) for
mineral property acquisition costs, as described in note
7(i)(c).
|
f)
|
On
November 1, 2005 the Company issued 300,000 shares of common
stock to an
outside consultant as payment for his services rendered for
mineral
exploration activities. These shares were issued pursuant
to the August
2005 Augmented Compensation Plan and the value attributed
to these shares
was $51,000 ($0.17 per share).
|
g)
|
On
November 23, 2005 the Company closed a private placement
of $631,500,
consisting of an offering of 4,209,998 units of at a price
of $0.15 per
unit. Each unit consists of one common share of restricted
stock and
one-half of a non-transferable share purchase warrant. Each
warrant
entitles the holder thereof to acquire one additional share
of common
stock at a price of $0.30 per share and have an expiry date
of twelve
months from the closing date of the subscription. The warrants
were valued
using the Black Scholes option pricing model using the following
assumptions: weighted average expected life of 1 year, volatility
of 141%,
rate of quarterly dividends -0%, risk free interest rate
of 3.61%. The
amount allocated to the share purchase warrants was $127,467.
Of the
4,209,998 units issued in the private placement, 249,999
units were issued
as settlement of debt of $37,500. The remainder of the units
were issued
for total cash proceeds of
$594,000.
|
9.
|
SHARE
CAPITAL (Continued)
|
i)
|
Common
Stock (Continued)
|
h)
|
On
December 1, 2005 the Company issued 15,000,000 shares of
restricted common
stock as compensation for the cancellation of 20,000,000
share purchase
warrants, which were issued during the year ended June 30,
2005, as
described in note 8, with a value of $495,834. The total
value
attributable to the compensating shares was $2,250,000 ($0.15
per share).
On February 20, 2006, all 15,000,000 of these shares were
returned to the
Company’s treasury for
cancellation.
|
i)
|
On
December 1, 2005 the Company issued 3,658,333 shares of common
stock to
various outside consultants as payment for various services
rendered on
behalf of the Company. The total issuance was pursuant to
the August 2005
Augmented Compensation Plan. The value attributed to these
shares was
$621,916 ($0.17 per share).
|
j)
|
On
December 1, 2005 the Company issued 1,250,000 shares of restricted
common
stock to an outside consultant, who subsequently became the
Company’s
Chief Executive Officer, as payment for services rendered.
The value
attributable to these shares was $192,500 ($0.15 and $0.17
per share
issuances).
|
k)
|
On
December 1, 2005 the Company issued 550,000 shares of common
stock to
outside consultants as payment for their services rendered
regarding our
mineral exploration activities. These shares were issued
pursuant to the
August 2005 Augmented Compensation Plan and the value attributed
to these
shares was $93,500 ($0.17 per
share).
|
l)
|
On
January 9, 2006 the Company issued 355,714 shares of restricted
common
stock to 3West LLC for drilling services in the Clay County
District of
Alabama. These shares were issued pursuant to a drilling
agreement at
$0.29 per share for total consideration of
$104,173.
|
m)
|
On
January 11, 2006 the Company issued 3,100,000 shares of common
stock to
various outside consultants as payment for various services
rendered on
behalf of the Company. The total issuance was pursuant to
the August 2005
Augmented Compensation Plan. The value attributed to these
shares was
$527,000 ($0.17 per share), which was the market price on
the date of the
agreements.
|
n)
|
On
January 24, 2006 the Company issued 181,428 shares of restricted
common
stock to 3West LLC for drilling services in the Clay County
District of
Alabama. The shares were issued pursuant to a drilling agreement
at $0.29
per share for total consideration of
$53,132.
|
9.
|
SHARE
CAPITAL (Continued)
|
i)
|
Common
Stock (Continued)
|
o)
|
On
January 27, 2006 the Company issued 150,000 shares of restricted
common
stock to an outside consultant as payment for his services
rendered. The
value attributed to these shares was $94,500 ($0.63 per
share).
|
p)
|
On
February 2, 2006 the Company issued 135,545 shares of restricted
common
stock to 3West LLC for drilling services in the Clay County
District of
Alabama. The shares were issued pursuant to a drilling agreement
at $0.29
per share for total consideration of
$39,695.
|
q)
|
On
February 13, 2006 the Company issued 2,389,558 shares of
restricted common
stock to an outside consultant as payment for services rendered,
and a
portion for services to be rendered. The value attributed
to these shares
was $955,823 ($0.40 per share).
|
r)
|
On
February 20, 2006 15,000,000 shares at the Company’s common stock were
returned to treasury for cancellation, as described in Note
8.
|
s)
|
On
February 20, 2006 5,000,000 shares of the Company’s common stock were
returned to treasury for cancellation, as described in Note
7(a).
|
t)
|
On
March 30, 2006 3,374,998 shares of the Company’s common stock were issued
pursuant to a private placement whereby the Company offered
4,208,331
units at $0.30 per unit for cash proceeds of $1,262,500.
The proceeds were
used to complete the proposed merger with Thorium Power Inc.
as described
in Note 14. Each unit consists of one share of restricted
common stock and
one-half of a non-transferable share purchase warrant. Each
whole warrant
entitles the holder thereof to acquire one additional share
of common
stock at a price of $0.50 per share and expires twelve months
from the
closing date of the subscription. The warrants were valued
using the Black
Scholes option pricing model using the following assumptions:
weighted
average expected life of 1 year, volatility of 148%, rate
of quarterly
dividends 0%, risk free interest rate of 2.86%. The amount
allocated to
the share purchase warrants was $281,117. The remaining 833,333
shares
were issued on April 25, 2006.
|
u) | On June 29, 2006, the Company issued 252,698 shares of restricted common stock to an outside consultant as payment for services rendered. The value attributable to these shares was $101,079 ($0.40 per share). |
9.
|
SHARE
CAPITAL (Continued)
|
ii) |
Common
Stock Issued With Registration
Rights
|
9.
|
SHARE
CAPITAL (Continued)
|
ii) Common Stock Issued With Registration Rights (Continued) |
9.
|
SHARE
CAPITAL (Continued)
|
a)
|
No
more than 10,000.000 options can be granted for the purchase of
restricted common shares.
|
b)
|
No
more than 8,000,000 options can be granted to any one
person.
|
c) |
No
more than 5,000,000 options can be granted to any one person
for the
purchase of restricted common
shares.
|
a)
|
No
more than 37,500,000 options can be granted for the purchase of
restricted common shares.
|
b)
|
No
more than 8,000,000 options can be granted to any one
person.
|
c) |
No
more than 5,000,000 options can be granted to any one
person for the
purchase of restricted common
shares.
|
9.
|
SHARE
CAPITAL (Continued)
|
9.
|
SHARE
CAPITAL (Continued)
|
iii)
|
Stock
Options (Continued)
|
JUNE
30
|
||
2006
|
2005
|
|
Outstanding
at beginning of year
|
-
|
-
|
Granted
|
10,425,000
|
-
|
Exercised
|
-
|
-
|
Expired
|
-
|
-
|
Forfeited
|
-
|
-
|
Outstanding
at end of year
|
10,425,000
|
-
|
Options
exercisable at end of year
|
1,669,445
|
-
|
9.
|
SHARE
CAPITAL (Continued)
|
iii)
|
Stock
Options (Continued)
|
· |
A
total of 2,350,000 non-qualified 10 year options have been
issued to
advisory board members at exercise prices of $0.50 to $0.64
a share and a
weighted average exercise price and fair value per share
of $0.62 and
$0.62 respectively;
|
· |
A
total of 8,075,000 non-qualified 10 year options have been
issued to
directors and officers of the Company, at exercise prices
of $0.50 to
$0.80 per share and a weighted average exercise price and
fair value per
share of $0.77 and $0.79 respectively. From this total, 7,200,000
options
were issued on February 14, 2006, with a remaining contractual
life of 9.6
years. All other options issued have a remaining contractual
life of 9.9
years.
|
Exercise
Prices
|
Stock
Options Outstanding and Exercisable
|
Weighted
Average Remaining Contractual Life - Years
|
$0.50
|
5,556
|
9.9
|
$0.51
|
13,889
|
9.9
|
$0.80
|
1,650,000
|
9.6
|
Total
|
1,669,445
|
9.
|
SHARE
CAPITAL (Continued)
|
iii)
|
Stock
Options (Continued)
|
2006
|
|
Average
risk-free interest rate
|
4.30%
- 4.35%
|
Average
expected life
|
5
years
|
Expected
volatility
|
279%
- 284%
|
Expected
dividends
|
0%
|
iv)
|
Stock-Based
Compensation
|
a) |
On
February 14, 2006, the Company, pursuant to an employment
agreement
granted its Chief Executive Officer and director options
to purchase
7,200,000 shares at $0.80 per share. The options will vest
over a period
of 42 months; with 900,000 options vesting immediately and
150,000 options
vesting each month thereafter. As at June 30, 2006, stock-based
compensation of $647,133 has been recorded, in accordance
with SFAS 123R,
to the statement of operations as a result of this
grant.
|
b)
|
On
April 24, 2006, the Company issued to its Chief Executive
Officer and
Director an aggregate of 5,000,000 shares of the Company’s restricted
common stock. The shares were valued at $4,150,000 ($0.83
per share) using
the closing stock price on the date of the employment agreement.
This
stock issuance resulted in the Company having a payroll tax
liability, see
note 6.
|
c) |
On
June 13, 2006, the Company entered into a consulting agreement
with
interim Acting Chief Financial Officer whereby they are committed
to issue
an aggregate of 75,000 shares of restricted common stock.
As at June 30,
2006, this stock has not been issued, but has been accrued
for on the
balance sheet as common stock reserved for future issuance.
The value of
the stock was calculated using the closing share price on
the date of the
agreement, for a total commitment of $35,250 ($0.47 per share).
The stock
was issued subsequent to the Company’s year end, see Note
9(vi).
|
9.
|
SHARE
CAPITAL (Continued)
|
iv)
|
Stock-Based
Compensation (Continued)
|
d) |
On
June 5, 2006, the Company entered into an employment agreement
with its
Chief Operating Officer and Director whereby they are committed
to issue
an aggregate of 75,000 shares of restricted common stock.
As at June 30,
2006, this stock has not been issued, but has been accrued
for on the
balance sheet as common stock reserved for issuance. The
value of the
stock was calculated using the closing share price on the
date of the
agreement, for a total commitment of $38,250 ($0.51 per share).
The stock
was issued subsequent to the Company’s year end, see Note
9(vi).
|
e) |
On
June 20, 2006, the Company granted an advisory board member
options to
purchase 150,000 shares at $0.51 per share. The options will
vest over a
period of 36 months; with 4,167 options vesting each month.
As at June 30,
2006, stock-based compensation of $1,997 has been recorded
to the
statement of operations as a result of this
grant.
|
f) |
On
June 19, 2006, the Company granted an advisory board member
options to
purchase 200,000 shares at $0.50 per share. The options will
vest over a
period of 36 months; with 5,556 options vesting each month.
As at June 30,
2006, stock-based compensation of $2,773 has been recorded
to the
statement of operations as a result of this
grant.
|
g) |
On
April 25, 2006, the Company granted an advisory board member
options to
purchase 2,000,000 shares at $0.64 per share. The options
will vest over a
period of 42 months; with 500,000 options vesting on October
1, 2006 and
41,667 options vesting each month thereafter. As at June
30, 2006,
stock-based compensation of $62,337 has been recorded to
the statement of
operations as a result of this
grant.
|
9.
|
SHARE
CAPITAL (Continued)
|
v)
|
Warrants
|
Number
of Warrants
|
Weighted
Average Exercise Price
|
Warrants
Exercisable
|
Weighted
Average Exercise Price
|
|
Outstanding,
June 30, 2004
|
-
|
-
|
-
|
-
|
Granted
|
20,000,000
|
$0.05
|
20,000,000
|
$0.05
|
Exercised
|
-
|
-
|
-
|
-
|
Expired/Cancelled
|
-
|
-
|
-
|
-
|
Outstanding,
June 30, 2005
|
20,000,000
|
$0.05
|
20,000,000
|
$0.05
|
Granted
|
23,272,279
|
$0.60
|
23,272,279
|
$0.60
|
Exercised
|
-
|
-
|
-
|
-
|
Expired/Cancelled
|
(20,000,000)
|
-
|
(20,000,000)
|
-
|
Outstanding,
June 30, 2006
|
23,272,279
|
$0.60
|
23,272,279
|
$0.60
|
Warrants
Outstanding and Exercisable
|
||
Warrants
- Exercise Price
|
Number
of Warrants
|
Weighted
Average Remaining Contractual Life - Years
|
$0.30
|
2,104,999
|
0.40
|
$0.50
|
2,104,166
|
0.75
|
$0.65
|
19,063,114
|
0.86
|
Total
|
23,272,279
|
9.
|
SHARE
CAPITAL (Continued)
|
v)
|
Warrants
(Continued)
|
|
2006
|
Average
risk-free interest rate
|
2.86%
- 4.30%
|
Average
expected life
|
1
year
|
Expected
volatility
|
142%
- 153%
|
Expected
dividends
|
0%
|
vi)
|
Common
Stock and Warrants reserved for Future
Issuance
|
SHARES
OF
|
STOCK
|
|||
COMMON
|
PURCHASE
|
|||
STOCK
|
WARRANTS
|
AMOUNT
|
||
Consulting
|
3,182,291
|
-
|
$
|
1,587,500
|
Settlement
of lawsuit - see Note 13(f)
|
215,000
|
107,500
|
146,445
|
|
Employment
agreements - see Note 9(iv)(c) and Note 9(iv)(d)
|
150,000
|
-
|
73,500
|
|
|
||||
Total
|
3,547,291
|
107,500
|
$
|
1,807,445
|
10.
|
DEFERRED
COMPENSATION
|
11. |
RELATED
PARTY TRANSACTIONS
|
a) |
During
the year ended June 30, 2006, an officer and director of
the Company made
payments on behalf of the Company in the amount of $51,613.
These amounts
were advanced without interest and are due on demand. A total
of $50,000
was reimbursed to this individual through cash payment and
the issuance of
common stock.
|
b) |
During
the year
ended June 30, 2006, officer and director of the Company
was paid $100,000
in cash and issued 1,000,000 restricted common shares of
the Company
pursuant to the mineral property agreement discussed in Note
7(b).
|
11. |
RELATED
PARTY TRANSACTIONS
(Continued)
|
c)
|
During
the year ended June 30, 2006, the Company paid
or
accrued a total of $32,932 in consulting fees to one of its
officers, of
which $21,572 remains payable as of the year end.
|
12.
|
SUPPLEMENTAL
DISCLOSURE ON NON-CASH FINANCING AND INVESTING
ACTIVITIES
|
a) |
The
Company issued 6,000,000 common shares to two individuals
for mineral
property acquisition costs with value of $1,610,000 as described
in Notes
7(a), 7(b) and 7(c). On February 20, 2006, 5,000,000 of these
shares were
purchased and returned to the Company’s treasury for
cancellation.
|
b) |
The
Company issued 250,000 shares to settle a liability of $37,500,see
Note
9(i)(g).
|
a)
|
On
February 1, 2006 the Company entered into an employment contract
with an
individual whereby the Company is obligated to pay $600 per
week for a
period of one year.
|
b)
|
On
January 24, 2006 the Company entered into an employment contract
with an
individual whereby the Company is obligated to pay $600 per
week for a
period of one year.
|
c) |
The
Company has employment agreements with its executive officers,
the terms
of which expire at various times through February 28, 2011.
Such
agreements, which have been revised from time to time, provide
for minimum
salary levels as well as for incentive bonuses that are payable
if
specified management goals are attained.
|
d) |
The
Company’s Certificate of Incorporation provides that the Company
indemnify
its officers and directors for certain events or occurrences
that happen
by reason of the fact that the officer or director is, was,
or has agreed
to serve as an officer or director of the Company. The Company
has a
Director and Officer insurance policy that limits its exposure
and enables
the Company to recover a portion of any future amounts paid.
|
e) |
The
Company has a contractual obligation to lease office space
until April 30,
2007 on a monthly basis. Payment of $1,800 per month is
required.
|
14.
|
DEFINITIVE
MERGER AGREEMENT
|
14.
|
DEFINITIVE
MERGER AGREEMENT
(Continued)
|
15.
|
INCOME
TAXES
|
Year
ended June 30
|
|||||||
2006
|
2005
|
||||||
Federal
statutory rate
|
$
|
(4,670,587
|
)
|
$
|
(942,031
|
)
|
|
Nondeductible
stock - based compensation
|
2,854,180
|
0
|
|||||
Impairment
loss on mineral acquisition assets
|
234,690
|
0
|
|||||
Change
in valuation allowance
|
1,581,717
|
942,031 | |||||
Total
|
$
|
0
|
$
|
0
|
16.
|
SUBSEQUENT
EVENTS
|
a) |
On
July 7, 2006, the Company’s board of directors approved a proposal to
amend the Certificate of Incorporation to increase the number
of
authorized shares of common stock from 250,000,000 shares
to 500,000,000
shares and to amend the total shares authorized to be issued
under the
2006 stock option plan from 20 million shares to 75 million
shares. This
amendment and other proposals will be voted on by the stockholders
on
October 5, 2006.
|
16.
|
SUBSEQUENT
EVENTS
(Continued)
|
b) |
On
July 3, 2006, the Company granted a total of 4,000,000 stock
options to
its international advisory board members. The stock options
will be
exercisable at $0.445 per share and will expire five years
after the date
of grant.
|
c) |
On
July 27, 2006, the Company granted 3,750,000 stock options
to two
executives pursuant to employment agreements entered into
subsequently.
The options will be exercisable at $0.49 per share and will
expire ten
years after the date of grant. The Company also issued 1,500,000
shares to
one of these employees pursuant to their employment
agreement.
|
d) |
On
July 15, 2006, the Company granted 600,000 stock options
to an employee
pursuant to an employment
agreement.
|
e) |
On
August 8, 2006, the Company amended the Agreement and Plan
of Merger with
Thorium Power Inc. by changing the share exchange ratio with
the Thorium
Power stockholders. Pursuant to the merger the Thorium Power
stockholders
will have the right to receive 25.628 shares of the Company's
stock for 1
share of Thorium Power stock.
|
f) |
On
July 1, 2006, the Company entered into a consulting agreement
for
financial advisory services, for a 1 year period. As compensation
for the
services to be provided, the Company issued 850,000 shares
of the
Company’s common stock, pursuant to Company’s Amended and Restated Stock
Plan. The shares shall vest in equal monthly installments
from the date of
the agreement.
|
g) |
On
July 18, 2006, the Company entered into consulting agreements
with two
individuals for financial advisory services to be provided
for a 1 year
period. As compensation for the services to be provided,
the Company
issued a total of 285,000 shares of the Company’s restricted common
stock.
|
ASSETS
|
||||
CURRENT
ASSETS
|
||||
Cash
and cash equivalents
|
$
|
528,213
|
||
Prepaid
expenses and other current assets
|
990
|
|||
Due
from Novastar Resources, Ltd.
|
264,741
|
|||
Total
Current Assets
|
793,944
|
|||
PROPERTY,
PLANT AND EQUIPMENT
|
||||
Property,
plant and equipment
|
40,777
|
|||
Accumulated
depreciation
|
(19,243
|
)
|
||
Total
Property, Plant and Equipment
|
21,534
|
|||
OTHER
ASSETS
|
||||
Patent
costs - net of accumulated amortization of $202,358
|
209,311
|
|||
Security
deposits
|
7,567
|
|||
Total
Other Assets
|
216,878
|
|||
TOTAL
ASSETS
|
$
|
1,032,356
|
||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||
CURRENT
LIABILITIES
|
||||
Accounts
payable and accrued expenses
|
468,081
|
|||
Note
payable
|
17,500
|
|||
Current
portion of long-term debt
|
3,913
|
|||
Other
current liabilities
|
5,882
|
|||
Total
Current Liabilities
|
495,376
|
|||
LONG-TERM
LIABILITIES
|
||||
Note
payable
|
12,657
|
|||
Total
Liabilities
|
508,033
|
|||
STOCKHOLDERS'
EQUITY
|
||||
Common
Stock-$.05 par value-authorized 20,000,000 shares; issued
and outstanding
3,852,519 shares
|
192,626
|
|||
Common
stock and warrants - Additional paid-in capital
|
16,713,707
|
|||
Deficit
accumulated during the development stage
|
(16,382,010
|
)
|
||
Total
Stockholders' Equity
|
524,323
|
|||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
1,032,356
|
For
the six months
ended
June 30,
|
Cumulative
from January 8, 1992 (Inception) through
June
30,
|
|||||||||
2006
|
2005
|
2006
|
||||||||
Revenue
|
||||||||||
License
revenue
|
$
|
-
|
-
|
$
|
624,985
|
|||||
Total
Revenue
|
-
|
-
|
624,985
|
|||||||
Costs
and expenses
|
||||||||||
Research
and development
|
10,000
|
30,000
|
3,902,158
|
|||||||
Salaries
|
147,400
|
114,150
|
3,652,414
|
|||||||
Professional
fees
|
306,822
|
56,435
|
2,369,947
|
|||||||
Allocated
expenses - Novastar Resources Ltd
|
(264,741
|
)
|
-
|
(264,741
|
)
|
|||||
Other
selling, general and administrative expenses
|
157,314
|
70,211
|
4,593,494
|
|||||||
Total
operating expenses
|
356,795
|
270,796
|
14,253,272
|
|||||||
Loss
from operations
|
356,795
|
270,796
|
13,628,287
|
|||||||
Other
(income) expenses
|
||||||||||
Interest
(income) expense - net
|
1,253
|
-
|
(106,889
|
)
|
||||||
Other
(income) expense
|
(200
|
)
|
-
|
(359
|
)
|
|||||
Foreign
Currency Translation
|
4,500
|
-
|
4,500
|
|
||||||
Stock
based compensation
|
-
|
-
|
2,229,871
|
|||||||
Settlement
costs
|
-
|
-
|
76,600
|
|||||||
Contributions
|
550,000
|
-
|
550,000
|
|||||||
Net
Loss
|
$
|
912,348
|
270,796
|
$
|
16,382,010
|
|||||
Basic
and diluted net loss per share
|
0.25
|
0.08
|
-
|
|||||||
Number
of shares used to compute per share data
|
3,691,805
|
3,297,027
|
-
|
Common
Stock
|
Additional
|
Accumulated
|
Stockholders’
|
|||||||||||||
Shares
|
Amount
|
Paid-in
Capital
|
(Deficit)
|
Equity
|
||||||||||||
Balance
- January 1, 2002
|
2,983,661
|
$ |
149,183
|
$
|
10,987,798
|
$
|
(8,940,174
|
)
|
$
|
2,196,807
|
||||||
Issuance
of common stock and warrants for cash
|
5,000
|
250
|
49,750
|
-
|
50,000
|
|||||||||||
Exercise
of stock options and warrants
|
5,000
|
250
|
22,750
|
-
|
23,000
|
|||||||||||
Issuance
of common stock not previously recognized
|
1,000
|
50
|
(50
|
)
|
-
|
-
|
||||||||||
Net
(loss) for the year ended December 31, 2002
|
-
|
-
|
-
|
(2,224,775
|
)
|
(2,224,775
|
)
|
|||||||||
Balance
- January 1, 2003
|
2,994,661
|
149,733
|
11,060,248
|
(11,164,949
|
)
|
45,032
|
||||||||||
Issuance
of common stock and warrants for cash
|
115,000
|
5,750
|
604,250
|
610,000
|
||||||||||||
Exercise
of stock options and warrants
|
106,300
|
5,315
|
157,685
|
163,000
|
||||||||||||
Modifications
of options and warrants
|
-
|
-
|
1,506,427
|
1,506,427
|
||||||||||||
Issuance
of common stock not previously recognized
|
5,000
|
250
|
(250
|
)
|
-
|
|||||||||||
Net
(loss) for the year ended December 31, 2003
|
-
|
-
|
-
|
(2,569,534
|
)
|
(2,569,534
|
)
|
|||||||||
Balance
- January 1, 2004
|
3,220,961
|
|
161,048
|
|
13,328,360
|
|
(13,734,483
|
)
|
|
(245,075
|
)
|
|||||
Issuance
of common stock and warrants for cash
|
63,500
|
3,175
|
254,576
|
257,751
|
||||||||||||
Loan
conversion into stock
|
1,750
|
87
|
6,913
|
7,000
|
||||||||||||
Issuance
of options to non-employees for services
|
-
|
-
|
351,253
|
-
|
351,253
|
|||||||||||
Net
(loss) for the year ended December 31, 2004
|
-
|
-
|
-
|
(974,675
|
)
|
(974,675
|
)
|
|||||||||
Balance
- January 1, 2005
|
3,286,211
|
|
164,310
|
13,941,102
|
|
(14,709,158
|
)
|
|
(603,746
|
)
|
||||||
Issuance
of common stock and warrants for cash
|
65,998
|
3,300
|
257,692
|
260,992
|
||||||||||||
Loan
conversion into stock
|
10,775
|
539
|
42,561
|
43,100
|
||||||||||||
Issuance
of options to non-employees for services
|
-
|
-
|
303,055
|
-
|
303,055
|
|||||||||||
Net
(loss) for the year ended December 31, 2005
|
-
|
-
|
-
|
(760,504
|
)
|
(760,504
|
)
|
Common
Stock
|
Additional
|
Accumulated
|
Stockholders’
|
|||||||||||||
Shares
|
Amount
|
Paid-in
Capital
|
(Deficit)
|
Equity
|
||||||||||||
Balance
- January 1, 2006
|
3,362,984
|
$
|
168,149
|
$
|
14,544,410
|
$
|
(15,469,662
|
)
|
$
|
(757,103
|
)
|
|||||
Issuance
of common stock and warrants for cash
|
488,510
|
24,426
|
2,165,248
|
2,189,674
|
||||||||||||
Loan
conversion into stock
|
1,025
|
51
|
4,049
|
4,100
|
||||||||||||
Issuance
of options to non-employees for services
|
-
|
-
|
-
|
-
|
0
|
|||||||||||
Net
(loss) for the six months ended June 30, 2006
|
-
|
-
|
-
|
(912,348
|
)
|
(912,348
|
)
|
|||||||||
Balance
Forward - June 30, 2006
|
3,852,519
|
$
|
192,626
|
$
|
16,713,707
|
$
|
(16,382,010
|
)
|
$
|
524,323
|
For
the six months
ended
June
30,
|
Cumulative
from January 8, 1992 (Inception) through June 30,
|
|||||||||
2006
|
2005
|
2006
|
||||||||
Cash
flows from operating activities:
|
||||||||||
Net
(loss)
|
$
|
(912,348
|
)
|
(270,796
|
)
|
(16,382,010
|
)
|
|||
Adjustments
to reconcile net (loss) to net cash provided by (used
by) operating
activities:
|
||||||||||
Write-off
of foreign patent, including amortization
|
-
|
-
|
75,000
|
|||||||
Depreciation
and amortization
|
12,926
|
13,017
|
284,251
|
|||||||
(Gain)
loss on disposition of fixed assets
|
-
|
-
|
86,855
|
|||||||
Issuance
of stock in exchange for technology and services
|
-
|
-
|
88,250
|
|||||||
Due
from Novastar Resources, Ltd.
|
(264,741
|
)
|
-
|
(264,741
|
)
|
|||||
Stock
based compensation
|
-
|
-
|
2,229,871
|
|||||||
(Increase)
decrease in prepaid and other expenses
|
5,290
|
3,711
|
(990
|
)
|
||||||
Increase
(decrease) in accrued expenses
|
(464,814
|
)
|
141,764
|
473,964
|
||||||
Net
cash used by operating activities
|
(1,623,687
|
)
|
(112,304
|
)
|
(13,409,550
|
)
|
||||
Cash
flows from investing activities:
|
||||||||||
Patent
costs
|
(6,664
|
)
|
(2,311
|
)
|
(411,669
|
)
|
||||
Security
deposits
|
-
|
32
|
(7,567
|
)
|
||||||
Purchase
of equipment
|
(4,682
|
)
|
(22,217
|
)
|
(278,866
|
)
|
||||
Loans
granted - related parties
|
-
|
-
|
(160,365
|
)
|
||||||
Repayment
of loans - related parties
|
-
|
-
|
160,365
|
|||||||
Proceeds
from sale of fixed assets
|
-
|
13,583
|
||||||||
Net
cash used by investing activities
|
(11,346
|
)
|
(24,496
|
)
|
(684,519
|
)
|
||||
Cash
flows from financing activities:
|
||||||||||
Proceeds
from issuance of stock
|
2,193,774
|
72,992
|
14,485,012
|
|||||||
Proceeds
from loans - related parties
|
-
|
42,590
|
388,790
|
|||||||
Repayment
of loans - related parties
|
(28,430
|
)
|
-
|
(268,090
|
)
|
|||||
Proceeds
from loan from payroll service
|
-
|
-
|
42,663
|
|||||||
Repayment
of loan from payroll service
|
-
|
(42,663
|
)
|
|||||||
Net
changes in current portion of long-term debt
|
2,625
|
|||||||||
Proceeds
from issuance of long-term debt
|
61
|
18,953
|
21,995
|
|||||||
Principal
repayments of long-term debt
|
(2,444
|
)
|
-
|
(5,425
|
)
|
|||||
Net
cash provided by financing activities
|
2,162,961
|
137,160
|
14,622,282
|
|||||||
Net
increase in cash and cash equivalents
|
527,928
|
360
|
528,213
|
|||||||
|
||||||||||
Cash
and cash equivalents - beginning
|
285
|
462
|
-
|
|||||||
Cash
and cash equivalents - end
|
$
|
528,213
|
822
|
528,213
|
||||||
Supplemental
disclosures
|
||||||||||
Cash
paid - interest
|
$
|
1,253
|
2,621
|
6,063
|
||||||
Cash
paid - taxes
|
-
|
-
|
-
|
|||||||
Non-Cash
Transactions:
|
||||||||||
Conversion
of debt to equity
|
4,100
|
38,100
|
103,200
|
1. |
The
Company and Business
Operations
|
2. |
Summary
of Significant Accounting
policies
|
a. |
Revenue Recognition
- All of the Company’s revenue to date had been derived from
licensing fees from nuclear industry commercial
partners.
Once the Company’s technology has advanced to the level
when it is funded by the US Government on an ongoing basis
as part of the
plutonium disposition program, the Company will seek to
license its
technology to major government contractors or nuclear companies,
working
for the US and other governments. We expect that our revenue
from license
fees will be recognized on a straight-line basis over the
expected period
of the related license term.
The Company may receive employment
and research grants
from various U.S. governmental agencies, and these grants
will be
recognized in earnings in the period in which the related
expenditures are
incurred. Capital grants for the acquisition of equipment
will be recorded
as reductions of the related equipment cost and reduce
future depreciation
expense.
Total subsidies and grants from the
US government
totaled $5.45 million, cumulative from inception to June
30, 2006. These
amounts were not paid to us but paid directly from the
US government to
third party research and development companies that work
on our project,
as well as other projects.
|
b. |
Patent
Costs - Patent
costs represent legal fees and filing costs capitalized
and amortized over
their estimated useful lives of 20 years. Amortization
expense for Patents
was $8,564 and $8,522 for the six month periods ended June
30, 2006 and
2005 and $202,358 for the cumulative period from January
8, 1992
(Inception) to June 30, 2006.
|
c. |
Cash
Equivalents - Cash
equivalents consist of cash and cash investments with maturities
of three
months or less at the time of
purchase.
|
d. |
Start-Up
Costs -
The Company, in accordance with the provisions of the American
Institute
of Certified Public Accountants' Statement of Position
(SOP) 98-5,
"Reporting on the Costs of Start-up Activities”, expenses all start-up and
organizational costs as they are
incurred.
|
e. |
Property,
Plant and Equipment - Property,
Plant and Equipment is comprised of leasehold improvements,
an automobile,
and office equipment and is stated at cost less accumulated
depreciation.
Depreciation of furniture, computer and office equipment
is computed over
the estimated useful life of the asset, generally five
and seven years
respectively, utilizing the double declining balance methodology.
Depreciation for the leasehold improvements is computed
using the
straight-line method over the 5 year term of the lease.
Upon disposition
of assets, the related cost and accumulated depreciation
are eliminated
and any gain or loss is included in the statement of income.
Expenditures
for major improvements are capitalized. Maintenance and
repairs are
expensed as incurred.
|
2.
|
Summary
of Significant Accounting policies
(continued)
|
f. |
Long-Lived
Assets -
Long-lived assets are reviewed for impairment whenever
events or changes
in circumstances indicate that the carrying amount of the
assets might not
be recoverable. Conditions that would necessitate an impairment
assessment
include a significant decline in the observable market
value of an asset,
a significant change in the extent or manner in which an
asset is used, or
any other significant adverse change that would indicate
that the carrying
amount of an asset or group of assets is not recoverable.
For
long-lived assets used in operations, impairment losses
are only recorded
if the asset’s carrying amount is not recoverable through its
undiscounted, probability-weighted cash flows. We measure
the impairment
loss based on the difference between the carrying amount
and estimated
fair value.
|
g. |
Estimates
and Assumptions - The
preparation of financial statements in conformity with
generally accepted
accounting principles 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
reported amounts of revenue and expenses during the reporting
period.
Actual results could differ from those estimates.
The
financial statements include some amounts
that are based on management’s best estimates and judgments. The most
significant estimates relate to contingencies, and the
valuation of stock
options, stock warrants and stock issued for services.
These estimates may
be adjusted as more current information becomes available,
and any
adjustment could be significant.
|
h. |
Stock-based
Compensation - Employees.
When stock based compensation is issued to employees and
directors, in
connection with their services as directors, the revised
Statement of
Financial Accounting Standards No. 123 ‘Accounting for Stock Based
Compensation’ (“SFAS 123(R)”) requires companies to record compensation
cost for stock based employee compensation plans at fair
value. From
inception through 2003, the Company accounted for stock
based compensation
using the intrinsic value method prescribed in Accounting
Principles Board
Opinion No. 25, ‘Accounting for Stock Issued to Employees’ (“APB No. 25”).
APB No. 25 requires no recognition of compensation expense
for the stock
based compensation arrangements provided by the Company
where the exercise
price is equal to the market price at the date of the grants.
Non-Employees
- When stock based compensation
is issued to non-employees, the Company records these transactions
at the
fair market value of the equity instruments issued or the
goods or
services received whichever is more reliably measurable.
In
December 2004, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standards No. 123
(Revised 2004), Share-Based Payment, (SFAS-123R). This
statement replaces
SFAS-123, Accounting for Stock-Based Compensation,
supersedes
APB Opinion No. 25, Accounting for Stock Issued to Employees,
and
amends SFAS-95, Statement of Cash Flows.
SFAS-123R
requires companies to apply a fair-value-based measurement
method in
accounting for shared-based payment transactions with employees
and to
record compensation cost for all stock awards granted after
the required
effective date and for awards modified, repurchased, or
cancelled after
that date. The scope of SFAS-123R encompasses a wide range
of share-based
compensation arrangements, including share options, restricted
share
plans, performance-based awards, share appreciation rights,
and employee
share purchase plans.
SFAS-123R
is effective for our Company January
1, 2006, however the Company has decided to adopt SFAS-123R
in 2004.
Companies are permitted to apply the modified retrospective
method either
(a) to all prior periods presented for which SFAS-123 was
effective or (b)
to prior interim periods of the year in which SFAS-123R
is adopted. Under
the modified retrospective method, the recognition of compensation
cost
under SFAS-123R is generally the same as the accounting
under the modified
prospective method discussed previously for (a) awards
granted, modified,
or settled subsequent to the adoption of SFAS-123R, and
(b) awards granted
prior to the date of adoption of SFAS-123R for which the
requisite service
period has not been completed (i.e., unvested awards).
There were no
restatements or transition adjustments
recorded.
|
2.
|
Summary
of Significant Accounting policies
(continued)
|
i. |
Income
Taxes - Deferred
tax assets and liabilities are recognized for the future
tax consequences
attributable to differences between the financial statement
carrying
amounts of existing assets and liabilities and their respective
tax bases.
Deferred tax assets, including tax loss and credit carry-forwards,
and
liabilities are measured using enacted tax rates expected
to apply to
taxable income in the years in which those temporary differences
are
expected to be recovered or settled. The effect on deferred
tax assets and
liabilities of a change in tax rates is recognized in income
in the period
that includes the enactment date. Deferred income tax expense
represents
the change during the period in the deferred tax assets
and deferred tax
liabilities. The components of the deferred tax assets
and liabilities are
individually classified as current and non-current based
on their
characteristics. 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.
|
j. |
Earnings
per Share - Basic
net earnings (loss) per common share is computed by dividing
net earnings
(loss) applicable to common shareholders by the weighted-average
number of
common shares outstanding during the period. Diluted net
earnings (loss)
per common share is determined using the weighted-average
number of common
shares outstanding during the period, adjusted for the
dilutive effect of
common stock equivalents. In periods where losses are reported,
the
weighted-average number of common shares outstanding excludes
common stock
equivalents because their inclusion would be
anti-dilutive.
|
k. |
New
Accounting Pronouncements - In
December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary
Assets, an amendment of APB Opinion No. 29”. SFAS
153 is effective for nonmonetary asset exchanges occurring
in fiscal
periods beginning after June 15, 2005, with earlier application
permitted.
The adoption of SFAS 153 is not expected to have a material
impact on our
results of operations or financial position.
In
March 2005, the FASB issued FASB Interpretation No. 47,
“Accounting for
Conditional Asset Retirement Obligations,” (FIN 47). FIN 47 is an
interpretation of SFAS No. 143, “Asset Retirement Obligations,” which was
issued in June 2001. FIN 47 was issued to address diverse
accounting
practices that have developed with regard to the timing
of liability
recognition for legal obligations associated with the
retirement of a
tangible long-lived asset in which the timing and/or
method of settlement
are conditional on a future event that may or may not
be within the
control of the entity. According to FIN 47, uncertainty
about the timing
and/or method of settlement of a conditional asset retirement
obligation
should be factored into the measurement of the liability
when sufficient
information exists. FIN 47 also clarifies when an entity
would have
sufficient information to reasonably estimate the fair
value of an asset
retirement obligation. FIN 47 is effective no later than
December 31, 2005
for our Company. The Company is currently evaluating
the impact of the
adoption of FIN 47 on its financial statements.
In
May 2005, the Financial Accounting Standards Board
(FASB) issued SFAS No.
154, “Accounting Changes and Error Corrections” (SFAS No. 154) which
replaces APB No. 20, “Accounting Changes” and SFAS No. 3, “Reporting
Accounting Changes in Interim Financial Statements
- an Amendment of APB
Opinion No. 28”. SFAS No. 154 provides guidance on the methods issuers
should use to account for and reporting accounting
changes and error
corrections. Specifically, this statement requires
that issuers
retrospectively apply any voluntary change in accounting
principles to
prior period financial statements, if it is practicable
to do so. This
principle replaces APB No. 20, which required that
most voluntary changes
in accounting principle be recognized by including
the cumulative effect
of the change to the new accounting principle on prior
periods in the net
income reported by the issuer in the period in which
it instituted the
change. SFAS No. 154 also redefines the term “restatement” to mean the
correction of an error by revising previously issued
financial statements.
Unless adopted early, SFAS No. 154 is effective for
accounting changes and
corrections of errors made in fiscal years beginning
after December 15,
2005. The Company does not expect the adoption of SFAS
No. 154 to have an
impact on its financial position or result of
operations.
|
3. |
Status
of the Company
|
4. |
Research
and Development Costs
|
5. |
Property
Plant and Equipment
|
Original
|
Accumulated
|
Net
Book
|
||||||||
Cost
|
Depreciation
|
Value
|
||||||||
Furniture,
computer and office equipment
|
$
|
18,560
|
$
|
12,383
|
$
|
6,177
|
||||
Automobile
|
22,217
|
6,860
|
15,357
|
|||||||
$
|
40,777
|
$
|
19,243
|
$
|
21,534
|
6. |
Stock
Options and Warrants
|
2002
and prior
|
2003
|
2004-2005
|
|
Expected
life of options
|
Actual
life
|
Actual
life
|
Actual
life
|
Risk-free
interest rate
|
5%
|
4%
|
4%
|
Volatility
of stock
|
100%
|
100%
|
32%
|
Expected
dividend yield
|
-
|
-
|
-
|
|
|
|
|
|
|
In
Connection
|
|
Issued
|
|
Converted
|
|
|
|
|
|
|
|
|
Beginning
|
|
In
Exchange
|
|
with
purchase
|
|
as
|
|
to
stock/
|
|
|
|
|
|
Ending
|
|
|
Balance
|
|
for
Services
|
|
of
stock
|
|
Incentive
|
|
Exercised
|
|
Expired
|
|
Repriced
|
|
Balance
|
1/1/1993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/1993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
0
|
|
1,040,000
|
|
35,000
|
|
15,000
|
|
(10,000)
|
|
|
|
|
|
1,080,000
|
$5
per share
|
|
0
|
|
|
|
220,000
|
|
|
|
|
|
|
|
|
|
220,000
|
$10
per share
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/1994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/1994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
1,080,000
|
|
95,000
|
|
|
|
|
|
|
|
|
|
|
|
1,175,000
|
$5
per share
|
|
220,000
|
|
50,000
|
|
25,000
|
|
|
|
|
|
|
|
|
|
295,000
|
$10
per share
|
|
0
|
|
55,000
|
|
36,100
|
|
|
|
|
|
|
|
|
|
91,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,561,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/1995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/1995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
1,175,000
|
|
|
|
|
|
|
|
(10,000)
|
|
|
|
25,000
|
|
1,190,000
|
$5
per share
|
|
295,000
|
|
155,000
|
|
|
|
|
|
|
|
|
|
(25,000)
|
|
425,000
|
$10
per share
|
|
91,100
|
|
30,000
|
|
41,500
|
|
5,000
|
|
|
|
|
|
|
|
167,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,782,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/1996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/1996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
1,190,000
|
|
|
|
|
|
|
|
(34,000)
|
|
|
|
100,000
|
|
1,256,000
|
$5
per share
|
|
425,000
|
|
60,000
|
|
|
|
|
|
|
|
|
|
(82,500)
|
|
402,500
|
$10
per share
|
|
167,600
|
|
25,000
|
|
30,300
|
|
14,000
|
|
|
|
|
|
(17,500)
|
|
219,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,877,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/1997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/1997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
1,256,000
|
|
|
|
|
|
|
|
(47,500)
|
|
|
|
81,000
|
|
1,289,500
|
$5
per share
|
|
402,500
|
|
|
|
|
|
|
|
|
|
|
|
(42,500)
|
|
360,000
|
$10
per share
|
|
219,400
|
|
118,000
|
|
56,700
|
|
|
|
(3,500)
|
|
|
|
(38,500)
|
|
352,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,001,600
|
|
|
|
|
In
Connection
|
|
Issued
|
|
Converted
|
|
|
||||||
|
|
Beginning
|
|
In
Exchange
|
|
with
purchase
|
|
as
|
|
to
stock/
|
|
|
|
|
|
Ending
|
|
|
Balance
|
|
for
Services
|
|
of
stock
|
|
Incentive
|
|
Exercised
|
|
Expired
|
|
Repriced
|
|
Balance
|
1/1/1998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/1998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
1,289,500
|
|
|
|
|
|
|
|
(232,500)
|
|
(95,000)
|
|
55,000
|
|
1,017,000
|
$5
per share
|
|
360,000
|
|
|
|
|
|
|
|
(47,500)
|
|
(172,500)
|
|
(50,000)
|
|
90,000
|
$10
per share
|
|
352,100
|
|
2,500
|
|
9,500
|
|
|
|
|
|
|
|
(5,000)
|
|
359,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,466,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/1999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/1999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
1,017,000
|
|
|
|
|
|
|
|
(5,000)
|
|
(20,000)
|
|
|
|
992,000
|
$5
per share
|
|
90,000
|
|
|
|
|
|
|
|
(25,000)
|
|
|
|
|
|
65,000
|
$10
per share
|
|
359,100
|
|
|
|
|
|
|
|
(5,250)
|
|
(26,850)
|
|
|
|
327,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,384,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/2000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
992,000
|
|
|
|
|
|
|
|
(60,000)
|
|
|
|
|
|
932,000
|
$5
per share
|
|
65,000
|
|
|
|
600,000
|
|
|
|
(5,000)
|
|
|
|
|
|
660,000
|
$10
per share
|
|
327,000
|
|
|
|
|
|
|
|
(37,000)
|
|
(13,500)
|
|
|
|
276,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,868,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
932,000
|
|
|
|
|
|
|
|
(5,000)
|
|
|
|
|
|
927,000
|
$5
per share
|
|
660,000
|
|
|
|
|
|
|
|
(20,000)
|
|
|
|
|
|
640,000
|
$10
per share
|
|
276,500
|
|
223,000
|
|
700,000
|
|
625,000
|
|
(3,600)
|
|
(51,200)
|
|
|
|
1,769,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,336,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
927,000
|
|
-
|
|
-
|
|
-
|
|
(3,000)
|
|
(7,000)
|
|
-
|
|
917,000
|
$5
per share
|
|
640,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
640,000
|
$10
per share
|
|
1,769,700
|
|
-
|
|
10,000
|
|
(625,000)
|
|
(2,000)
|
|
(97,700)
|
|
-
|
|
1,055,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,612,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
917,000
|
|
-
|
|
-
|
|
-
|
|
(100,000)
|
|
-
|
|
1,200,000
|
|
2,017,000
|
$5
per share
|
|
640,000
|
|
-
|
|
40,000
|
|
-
|
|
-
|
|
-
|
|
(600,000)
|
|
80,000
|
$10
per share
|
|
1,055,000
|
|
-
|
|
20,000
|
|
1,590
|
|
(1,300)
|
|
(62,795)
|
|
(600,000)
|
|
412,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,509,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
2,017,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
2,017,000
|
$4
per share
|
|
0
|
|
250,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
250,000
|
$5
per share
|
|
80,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
80,000
|
$9.73-$10
per share
|
|
412,495
|
|
-
|
|
-
|
|
600
|
|
-
|
|
-
|
|
-
|
|
413,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,760,095
|
|
|
|
|
|
|
In
Connection
|
|
Issued
|
|
Converted
|
|
|
|
|
|
|
|
|
Beginning
|
|
In
Exchange
|
|
with
purchase
|
|
as
|
|
to
stock/
|
|
|
|
|
|
Ending
|
|
|
Balance
|
|
for
Services
|
|
of
stock
|
|
Incentive
|
|
Exercised
|
|
Expired
|
|
Repriced
|
|
Balance
|
01/01/2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2005
& 6/30/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
2,017,000
|
|
-
|
|
-
|
|
-
|
|
(1,000)
|
|
-
|
|
-
|
|
2,016,000
|
$4
per share
|
|
250,000
|
|
225,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
475,000
|
$5
per share
|
|
80,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
80,000
|
$9.60-$10
per share
|
|
413,095
|
|
-
|
|
-
|
|
705
|
|
-
|
|
-
|
|
-
|
|
413,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,984,800
|
June
30, 2006
|
|
Number
|
|
Weighted
average Remaining Life
|
|
Weighted-
average exercise price
|
|
|
|
|
|
|
|
Range
of Prices
|
|
|
|
|
|
|
$1.00
|
|
2,016,000
|
|
1.8
years
|
|
$1.00
|
$4.00
|
|
475,000
|
|
4.3
years
|
|
$4.00
|
$5.00
|
|
80,000
|
|
1.7
years
|
|
$5.00
|
$9.60-10.00
|
|
413,800
|
|
1.1
years
|
|
$9.95
|
|
|
2,984,800
|
|
|
|
$2.83
|
7. |
Income
Taxes
|
Assets
|
||||
Approximate
net operating loss
|
$
|
6,552,804
|
||
Less:
valuation allowance
|
(6,552,804
|
)
|
||
$
|
-
|
8. |
Profit
Sharing Plan
|
9. |
Research
Agreement
|
10. |
Commitments
and Contingencies
|
11. |
Related
Parties
|
12. | Capital Stock Transactions |
2005
|
2004
|
||||||
ASSETS
|
|||||||
CURRENT
ASSETS
|
|||||||
Cash
and cash equivalents
|
$
|
283
|
$
|
462
|
|||
Prepaid
expenses and other current assets:
|
|||||||
Prepayment
of premium for directors & officers liability
insurance
|
3,881
|
3,881
|
|||||
Prepayment
of premium for life insurance
|
911
|
911
|
|||||
Other
prepaid expenses and current assets
|
1,488
|
2,014
|
|||||
Total
Current Assets
|
6,563
|
7,268
|
|||||
PROPERTY,
PLANT AND EQUIPMENT
|
|||||||
Property,
plant and equipment
|
36,096
|
31,235
|
|||||
Accumulated
depreciation
|
(14,881
|
)
|
(22,156
|
)
|
|||
Total
Property, Plant and Equipment
|
21,215
|
9,079
|
|||||
OTHER
ASSETS
|
|||||||
Patent
costs - net of accumulated amortization of $193,794 and $176,524
respectively
|
211,211
|
223,959
|
|||||
Security
deposits
|
7,567
|
7,412
|
|||||
Total
Other Assets
|
218,778
|
231,371
|
|||||
TOTAL
ASSETS
|
$
|
246,556
|
$
|
247,718
|
2005
|
2004
|
||||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
|||||||
CURRENT
LIABILITIES
|
|||||||
Current
portion of long-term debt
|
4,135
|
-
|
|||||
Accrued
expenses and accounts payable:
|
|||||||
Accrued
salaries
|
387,500
|
205,000
|
|||||
Accrued
legal fees
|
207,276
|
238,405
|
|||||
Other
accrued expenses and accounts payable
|
338,090
|
346,560
|
|||||
Note
payable
|
45,930
|
55,600
|
|||||
Other
current liabilities
|
5,910
|
5,899
|
|||||
Total
Current Liabilities
|
988,841
|
851,464
|
|||||
LONG-TERM
LIABILITIES
|
|||||||
Note
payable
|
14,818
|
||||||
Total
Liabilities
|
1,003,659
|
851,464
|
|||||
STOCKHOLDERS'
DEFICIENCY
|
|||||||
Common
Stock-$.05 par value-authorized 20,000,000 shares; issued
and outstanding
3,362,984 shares and 3,286,211 shares, respectively
|
168,149
|
164,311
|
|||||
Common
stock and warrants - Additional paid-in capital
|
14,544,410
|
13,941,101
|
|||||
Deficit
accumulated during the development stage
|
(15,469,662
|
)
|
(14,709,158
|
)
|
|||
Total
Stockholders' Deficiency
|
(757,103
|
)
|
(603,746
|
)
|
|||
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
|
$
|
246,556
|
$
|
247,718
|
Cumulative
|
||||||||||
From
|
||||||||||
January
8, 1992
|
||||||||||
For
the years ended December 31
|
Through
December
31
|
|||||||||
2005
|
|
|
2004
|
|
|
2005
|
||||
Revenue
|
||||||||||
License
revenue
|
$
|
-
|
-
|
$
|
624,985
|
|||||
Total
Revenue
|
-
|
-
|
624,985
|
|||||||
Costs
and expenses
|
||||||||||
Research
and development
|
17,500
|
-
|
3,892,158
|
|||||||
Salaries
|
257,383
|
231,271
|
3,505,014
|
|||||||
Professional
fees
|
14,527
|
32,257
|
2,063,125
|
|||||||
Stock
based compensation
|
303,055
|
351,253
|
2,229,871
|
|||||||
Other
selling, general and administrative expenses
|
168,093
|
359,998
|
4,436,180
|
|||||||
Total
operating expenses
|
760,558
|
974,779
|
16,126,348
|
|||||||
Loss
from operations
|
760,558
|
974,779
|
15,501,363
|
|||||||
Other
(income) expenses
|
||||||||||
Interest
income
|
-
|
0
|
(108,142
|
)
|
||||||
Other
income
|
(54
|
)
|
(105
|
)
|
(159
|
)
|
||||
Settlement
costs
|
-
|
0
|
76,600
|
|||||||
Net
Loss
|
$
|
760,504
|
974,674
|
$
|
15,469,662
|
|||||
Basic
and diluted net loss per share
|
0.23
|
0.30
|
||||||||
Number
of shares used to compute per share data
|
3,314,862
|
3,249,421
|
Common
Stock
|
Additional
Paid-in
|
Accumulated
|
Stockholders’
|
||||||||||||
Shares
|
Amount
|
Capital
|
(Deficit)
|
Equity
|
|||||||||||
Inception
- January 8, 1992
|
|||||||||||||||
Authorized
2,500,000 shares - $.05 par value
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Issuance
of common stock for technology and service
|
1,200,000
|
60,000
|
-
|
-
|
60,000
|
||||||||||
Net
(loss) for the period ended
|
-
|
-
|
-
|
(60,000
|
)
|
(60,000
|
)
|
||||||||
Balance
- January 1, 1993
|
1,200,000
|
60,000
|
-
|
(60,000
|
)
|
-
|
|||||||||
Issuance
of common stock and warrants for cash
|
258,500
|
12,925
|
535,030
|
-
|
547,955
|
||||||||||
Issuance
of stock in exchange for services
|
47,000
|
2,350
|
20,000
|
-
|
22,350
|
||||||||||
Exercise
of stock options and warrants
|
10,000
|
500
|
99,500
|
100,000
|
|||||||||||
Net
(loss) for the year ended December 31, 1993
|
-
|
-
|
-
|
(81,526
|
)
|
(81,526
|
)
|
||||||||
Balance
- January 1, 1994
|
1,515,500
|
75,775
|
654,530
|
(141,526
|
)
|
588,779
|
|||||||||
Authorized
10,000,000 shares - $.05 par value
|
|||||||||||||||
Issuance
of common stock and warrants for cash
|
26,200
|
1,310
|
260,690
|
-
|
262,000
|
||||||||||
Issuance
of stock in exchange for services
|
10,000
|
500
|
9,500
|
-
|
10,000
|
||||||||||
Issuance
of options to non-employees for services
|
-
|
-
|
15,400
|
-
|
15,400
|
||||||||||
Net
(loss) for the year ended December 31, 1994
|
-
|
-
|
-
|
(639,861
|
)
|
(639,861
|
)
|
||||||||
Balance
- January 1, 1995
|
1,551,700
|
77,585
|
940,120
|
(781,387
|
)
|
236,318
|
|||||||||
Issuance
of common stock and warrants for cash
|
41,500
|
2,075
|
412,925
|
-
|
415,000
|
||||||||||
Issuance
of stock in exchange for services
|
7,800
|
390
|
7,410
|
-
|
7,800
|
||||||||||
Exercise
of stock options and warrants
|
10,000
|
500
|
9,500
|
-
|
10,000
|
||||||||||
Net
(loss) for the year ended December 31, 1995
|
-
|
-
|
-
|
(1,088,082
|
)
|
(1,088,082
|
)
|
||||||||
Balance
- January 1, 1996
|
1,611,000
|
80,550
|
1,369,955
|
(1,869,469
|
)
|
(418,964
|
)
|
||||||||
Issuance
of common stock for cash
|
30,300
|
1,515
|
301,485
|
-
|
303,000
|
||||||||||
Issuance
of common stock for services
|
8,000
|
400
|
7,600
|
-
|
8,000
|
||||||||||
Exercise
of stock options and warrants
|
34,000
|
1,700
|
32,300
|
-
|
34,000
|
||||||||||
Issuance
of options to non-employees for services
|
-
|
-
|
7,950
|
-
|
7,950
|
||||||||||
Net
(loss) for the year ended December 31, 1996
|
-
|
-
|
-
|
(763,179
|
)
|
(763,179
|
)
|
||||||||
Balance
Forward
|
1,683,300
|
$
|
84,165
|
$
|
1,719,290
|
$
|
(2,632,648
|
)
|
$
|
(829,193
|
)
|
Common
Stock
|
Additional
|
Accumulated
|
Stockholders’
|
||||||||||||
Shares
|
Amount
|
Paid-in
Capital
|
(Deficit)
|
Equity
|
|||||||||||
Balance
- January 1, 1997
|
1,683,300
|
$
|
84,165
|
$
|
1,719,290
|
$
|
(2,632,648
|
)
|
$
|
(829,193
|
)
|
||||
Issuance
of common stock and warrants for cash
|
56,700
|
2,835
|
564,165
|
-
|
567,000
|
||||||||||
Exercise
of stock options and warrants
|
51,000
|
2,550
|
79,450
|
-
|
82,000
|
||||||||||
Issuance
of options to non-employees for services
|
-
|
-
|
15,960
|
-
|
15,960
|
||||||||||
Net
(loss) for the year ended December 31, 1997
|
-
|
-
|
-
|
(598,718
|
)
|
(598,718
|
)
|
||||||||
Balance
- January 1, 1998
|
1,791,000
|
89,550
|
2,378,865
|
(3,231,366
|
)
|
(762,951
|
)
|
||||||||
Issuance
of common stock and warrants for cash
|
66,536
|
3,327
|
662,033
|
-
|
665,360
|
||||||||||
Exercise
of stock options and warrants
|
280,000
|
14,000
|
456,000
|
-
|
470,000
|
||||||||||
Issuance
of options to non-employees for services
|
1,325
|
1,325
|
|||||||||||||
Net
(loss) for the year ended December 31, 1998
|
-
|
-
|
-
|
(792,185
|
)
|
(792,185
|
)
|
||||||||
Balance
- January 1, 1999
|
2,137,536
|
106,877
|
3,498,223
|
(4,023,551
|
)
|
(418,451
|
)
|
||||||||
Issuance
of common stock for cash
|
35,675
|
1,784
|
354,966
|
-
|
356,750
|
||||||||||
Exercise
of stock options and warrants
|
35,250
|
1,762
|
180,738
|
-
|
182,500
|
||||||||||
Net
(loss) for the year ended December 31, 1999
|
-
|
-
|
-
|
(822,803
|
)
|
(822,803
|
)
|
||||||||
Balance
- January 1, 2000
|
2,208,461
|
110,423
|
4,033,927
|
(4,846,354
|
)
|
(702,004
|
)
|
||||||||
Issuance
of common stock for cash
|
284,600
|
14,230
|
2,831,770
|
-
|
2,846,000
|
||||||||||
Issuance
of common stock for services
|
102,000
|
5,100
|
449,900
|
-
|
455,000
|
||||||||||
Net
(loss) for the year ended December 31, 2000
|
-
|
-
|
-
|
(1,487,354
|
)
|
(1,487,354
|
)
|
||||||||
Balance
- January 1, 2001
|
2,595,061
|
129,753
|
7,315,597
|
(6,333,708
|
)
|
1,111,642
|
|||||||||
Issuance
of common stock and warrants for cash
|
350,000
|
17,500
|
3,468,031
|
-
|
3,485,531
|
||||||||||
Issuance
of common stock for settlement
|
10,000
|
500
|
36,100
|
-
|
36,600
|
||||||||||
Exercise
of stock options and warrants
|
28,600
|
1,430
|
139,570
|
-
|
141,000
|
||||||||||
Modification
of options
|
-
|
-
|
28,500
|
-
|
28,500
|
||||||||||
Net
(loss) for the year ended December 31, 2001
|
-
|
-
|
-
|
(2,606,466
|
)
|
(2,606,466
|
)
|
||||||||
Balance
Forward
|
2,983,661
|
$
|
149,183
|
$
|
10,987,798
|
$
|
(8,940,174
|
)
|
$
|
2,196,807
|
Common
Stock
|
Additional
|
Accumulated
|
Stockholders’
|
|||||||||||||
Shares
|
Amount
|
Paid-in
Capital
|
(Deficit)
|
Equity
|
||||||||||||
Balance
- January 1, 2002
|
2,983,661
|
149,183
|
10,987,798
|
(8,940,174
|
)
|
2,196,807
|
||||||||||
Issuance
of common stock and warrants for cash
|
5,000
|
250
|
49,750
|
-
|
50,000
|
|||||||||||
Exercise
of stock options and warrants
|
5,000
|
250
|
22,750
|
-
|
23,000
|
|||||||||||
Issuance
of common stock not previously recognized
|
1,000
|
50
|
(50
|
)
|
-
|
-
|
||||||||||
Net
(loss) for the year ended December 31, 2002
|
-
|
-
|
-
|
(2,224,775
|
)
|
(2,224,775
|
)
|
|||||||||
Balance
- January 1, 2003
|
2,994,661
|
149,733
|
11,060,248
|
(11,164,949
|
)
|
45,032
|
||||||||||
Issuance
of common stock and warrants for cash
|
115,000
|
5,750
|
604,250
|
610,000
|
||||||||||||
Exercise
of stock options and warrants
|
106,300
|
5,315
|
157,685
|
163,000
|
||||||||||||
Modifications
of options and warrants
|
-
|
-
|
1,506,427
|
1,506,427
|
||||||||||||
Issuance
of common stock not previously recognized
|
5,000
|
250
|
(250
|
)
|
-
|
|||||||||||
Net
(loss) for the year ended December 31, 2003
|
-
|
-
|
-
|
(2,569,534
|
)
|
(2,569,534
|
)
|
|||||||||
Balance
- January 1, 2004
|
3,220,961
|
$
|
161,048
|
$
|
13,328,360
|
$
|
(13,734,483
|
)
|
$
|
(245,075
|
)
|
|||||
Issuance
of common stock and warrants for cash
|
63,500
|
3,175
|
254,576
|
257,751
|
||||||||||||
Loan
conversion into stock
|
1,750
|
88
|
6,913
|
7,000
|
||||||||||||
Issuance
of options to non-employees for services
|
-
|
-
|
351,253
|
-
|
351,253
|
|||||||||||
Net
(loss) for the year ended December 31, 2004
|
-
|
-
|
-
|
(974,674
|
)
|
(974,674
|
)
|
|||||||||
Balance
- January 1, 2005
|
3,286,211
|
$
|
164,311
|
$
|
13,941,101
|
$
|
(14,709,158
|
)
|
$
|
(603,746
|
)
|
|||||
Issuance
of common stock and warrants for cash
|
65,998
|
3,300
|
257,692
|
260,992
|
||||||||||||
Loan
conversion into stock
|
10,775
|
539
|
42,561
|
43,100
|
||||||||||||
Issuance
of options to non-employees for services
|
-
|
-
|
303,055
|
-
|
303,055
|
|||||||||||
Net
(loss) for the year ended December 31, 2005
|
-
|
-
|
-
|
(760,504
|
)
|
(760,504
|
)
|
|||||||||
Balance
Forward
|
3,362,984
|
$
|
168,149
|
$
|
14,544,410
|
$
|
(15,469,662
|
)
|
$
|
(757,103
|
)
|
Cumulative
|
||||||||||
From
|
||||||||||
January
8, 1992
|
||||||||||
For
the years ended December 31
|
Through
December 31
|
|||||||||
2005
|
2004
|
2005
|
||||||||
Cash
flows from operating activities:
|
||||||||||
Net
loss
|
$
|
(760,504
|
)
|
$
|
(974,674
|
)
|
$
|
(15,469,662
|
)
|
|
Adjustments
to reconcile net (loss) to net cash
|
||||||||||
provided
by (used by) operating activities:
|
||||||||||
Write-off
of foreign patent, including amortization
|
-
|
-
|
75,000
|
|||||||
Depreciation
and amortization
|
22,704
|
40,700
|
271,325
|
|||||||
(Gain)
loss on disposition of fixed assets
|
3,710
|
80,227
|
86,855
|
|||||||
Issuance
of stock in exchange for technology and services
|
-
|
-
|
88,250
|
|||||||
Stock
based compensation
|
303,055
|
351,253
|
2,229,870
|
|||||||
(Increase)
decrease in prepaid and other expenses
|
525
|
38,651
|
(6,280
|
)
|
||||||
Increase
(decrease) in accrued and other expenses
|
142,913
|
198,279
|
938,777
|
|||||||
Net
cash used by operating activities
|
(287,597
|
)
|
(265,564
|
)
|
(11,785,865
|
)
|
||||
Cash
flows from investing activities:
|
||||||||||
Patent
costs
|
(4,523
|
)
|
(40,238
|
)
|
(405,005
|
)
|
||||
Security
deposits
|
(154
|
)
|
(1,520
|
)
|
(7,567
|
)
|
||||
Purchase
of equipment
|
(22,217
|
)
|
-
|
(274,184
|
)
|
|||||
Loans
granted - related parties
|
-
|
-
|
(160,365
|
)
|
||||||
Repayment
of loans - related parties
|
-
|
-
|
160,365
|
|||||||
Proceeds
from sale of property and equipment
|
937
|
12,596
|
13,583
|
|||||||
Net
cash used by investing activities
|
(25,957
|
)
|
(29,162
|
)
|
(673,173
|
)
|
||||
Cash
flows from financing activities:
|
||||||||||
Proceeds
from issuance of stock
|
260,992
|
257,750
|
12,295,338
|
|||||||
Proceeds
from loans - related parties
|
85,227
|
26,750
|
384,690
|
|||||||
Repayment
of loans - related parties
|
(51,796
|
)
|
(15,550
|
)
|
(239,659
|
)
|
||||
Proceeds
from loan from payroll service
|
-
|
-
|
42,663
|
|||||||
Repayment
of loan from payroll service
|
-
|
-
|
(42,663
|
)
|
||||||
Net
changes in current portion of long-term debt
|
4,135
|
-
|
4,135
|
|||||||
Proceeds
from issuance of long-term debt
|
18,082
|
-
|
18,082
|
|||||||
Principal
repayments of long-term debt
|
(3,265
|
)
|
-
|
(3,265
|
)
|
|||||
Net
cash provided by financing activities
|
313,375
|
268,950
|
12,459,321
|
|||||||
Net
increase (decrease) in cash and cash equivalents
|
(179
|
)
|
(25,776
|
)
|
283
|
Cumulative
|
||||||||||
From
|
||||||||||
January
8, 1992
|
||||||||||
For
the years ended December 31
|
Through
DEcember 31
|
|||||||||
2005
|
2004
|
2005
|
||||||||
Cash
and cash equivalents - beginning
|
462
|
26,238
|
-
|
|||||||
Cash
and cash equivalents - end
|
$
|
283
|
$
|
462
|
$
|
283
|
||||
Supplemental
disclosures
|
||||||||||
Cash
paid - interest
|
$
|
2,621
|
$
|
-
|
$
|
4,810
|
||||
Non-Cash
Transactions:
|
||||||||||
Conversion
of debt to equity
|
43,100
|
7,000
|
99,100
|
1. |
The
Company and Business Operations
|
2.
|
Summary
of Significant Accounting
policies
|
b. |
Patent
Costs - Patent
costs represent legal fees and filing costs capitalized and
amortized over
their estimated useful lives of 20 years. Amortization expense
for Patents
was $17,270 and $17,044 for the years ended December 31, 2005
and 2004 and
$193,794 for the cumulative period from Inception to December
31,
2005.
|
c. |
Cash
Equivalents - Cash
equivalents consist of cash and cash investments with maturities
of three
months or less at the time of purchase.
|
d. |
Start-Up
Costs -
The Company, in accordance with the provisions of the American
Institute
of Certified Public Accountants' Statement of Position (SOP)
98-5,
"Reporting on the Costs of Start-up Activities”, expenses all start-up and
organizational costs as they are
incurred.
|
e. |
Property,
Plant and Equipment - Property,
Plant and Equipment is comprised of leasehold improvements,
an automobile,
and office equipment and is stated at cost less accumulated
depreciation.
Depreciation of furniture, computer and office equipment is
computed over
the estimated useful life of the asset, generally five and
seven years
respectively, utilizing the double declining balance methodology.
Depreciation for the leasehold improvements is computed using
the
straight-line method over the 5 year term of the lease. Upon
disposition
of assets, the related cost and accumulated depreciation are
eliminated
and any gain or loss is included in the statement of income.
Expenditures
for major improvements are capitalized. Maintenance and repairs
are
expensed as incurred.
|
f. |
Long-Lived
Assets -
Long-lived assets are reviewed for impairment whenever events
or changes
in circumstances indicate that the carrying amount of the assets
might not
be recoverable. Conditions that would necessitate an impairment
assessment
include a significant decline in the observable market value
of an asset,
a significant change in the extent or manner in which an asset
is used, or
any other significant adverse change that would indicate that
the carrying
amount of an asset or group of assets is not
recoverable.
|
g. |
Estimates
and Assumptions - The
preparation of financial statements in conformity with generally
accepted
accounting principles 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
reported amounts of revenue and expenses during the reporting
period.
Actual results could differ from those
estimates.
|
h. |
Stock-based
Compensation - Employees.
When stock based compensation is issued to employees and directors,
in
connection with their services as directors, the revised Statement
of
Financial Accounting Standards No. 123 ‘Accounting for Stock Based
Compensation’ (“SFAS 123(R)”) requires companies to record compensation
cost for stock based employee compensation plans at fair value.
From
inception through 2003, the Company accounted for stock based
compensation
using the intrinsic value method prescribed in Accounting Principles
Board
Opinion No. 25, ‘Accounting for Stock Issued to Employees’ (“APB No. 25”).
APB No. 25 requires no recognition of compensation expense
for the stock
based compensation arrangements provided by the Company where
the exercise
price is equal to the market price at the date of the grants.
|
i. |
Income
Taxes - Deferred
tax assets and liabilities are recognized for the future tax
consequences
attributable to differences between the financial statement
carrying
amounts of existing assets and liabilities and their respective
tax bases.
Deferred tax assets, including tax loss and credit carryforwards,
and
liabilities are measured using enacted tax rates expected to
apply to
taxable income in the years in which those temporary differences
are
expected to be recovered or settled. The effect on deferred
tax assets and
liabilities of a change in tax rates is recognized in income
in the period
that includes the enactment date. Deferred income tax expense
represents
the change during the period in the deferred tax assets and
deferred tax
liabilities. The components of the deferred tax assets and
liabilities are
individually classified as current and non-current based on
their
characteristics. 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.
|
j. |
Earnings
per Share - Basic
net earnings (loss) per common share is computed by dividing
net earnings
(loss) applicable to common shareholders by the weighted-average
number of
common shares outstanding during the period. Diluted net earnings
(loss)
per common share is determined using the weighted-average number
of common
shares outstanding during the period, adjusted for the dilutive
effect of
common stock equivalents, consisting of shares that might be
issued upon
exercise of common stock options. In periods where losses are
reported,
the weighted-average number of common shares outstanding excludes
common
stock equivalents, because their inclusion would be
anti-dilutive.
|
k. |
New
Accounting Pronouncements - In
December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary
Assets, an amendment of APB Opinion No. 29”. SFAS
153 is effective for nonmonetary asset exchanges occurring
in fiscal
periods beginning after June 15, 2005, with earlier application
permitted.
The adoption of SFAS 153 is not expected to have a material
impact on our
results of operations or financial
position.
|
3. |
Status
of the Company
|
4. |
Research
and Development Costs
|
5. |
Property
Plant and Equipment
|
|
Original
|
Accumulated
|
Net
Book
|
|||||
December
31, 2005
|
Costs
|
Depreciation
|
Value
|
|||||
Furniture,
computer and office equipment
|
13,879
|
11,821
|
2,058
|
|||||
Automobile
|
22,217
|
3,060
|
19,157
|
|||||
$
|
36,096
|
$
|
14,881
|
$
|
21,215
|
December
31, 2004
|
Original
Costs
|
Accumulated
Depreciation
|
Net
Book Value
|
|||||
Furniture,
computer and office equipment
|
31,235
|
22,156
|
9,079
|
|||||
$
|
31,235
|
$
|
22,156
|
$
|
9,079
|
6. |
Stock
Options and Warrants
|
2002
and prior
|
2003
|
2004-2005
|
|
Expected
life of options
|
Actual
life
|
Actual
life
|
Actual
life
|
Risk-free
interest rate
|
5%
|
4%
|
4%
|
Volatility
of stock
|
100%
|
100%
|
32%
|
Expected
dividend yield
|
-
|
-
|
-
|
|
|
In
Connection
|
|
Issued
|
|
Converted
|
|
|
|
|
|
|
||||
|
|
Beginning
|
|
In
Exchange
|
|
with
purchase
|
|
as
|
|
to
stock/
|
|
|
|
|
|
Ending
|
|
|
Balance
|
|
for
Services
|
|
of
stock
|
|
Incentive
|
|
Exercised
|
|
Expired
|
|
Repriced
|
|
Balance
|
1/1/1993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/1993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
0
|
|
1,040,000
|
|
35,000
|
|
15,000
|
|
(10,000)
|
|
|
|
|
|
1,080,000
|
$5
per share
|
|
0
|
|
|
|
220,000
|
|
|
|
|
|
|
|
|
|
220,000
|
$10
per share
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/1994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/1994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
1,080,000
|
|
95,000
|
|
|
|
|
|
|
|
|
|
|
|
1,175,000
|
$5
per share
|
|
220,000
|
|
50,000
|
|
25,000
|
|
|
|
|
|
|
|
|
|
295,000
|
$10
per share
|
|
0
|
|
55,000
|
|
36,100
|
|
|
|
|
|
|
|
|
|
91,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,561,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/1995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/1995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
1,175,000
|
|
|
|
|
|
|
|
(10,000)
|
|
|
|
25,000
|
|
1,190,000
|
$5
per share
|
|
295,000
|
|
155,000
|
|
|
|
|
|
|
|
|
|
(25,000)
|
|
425,000
|
$10
per share
|
|
91,100
|
|
30,000
|
|
41,500
|
|
5,000
|
|
|
|
|
|
|
|
167,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,782,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/1996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/1996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
1,190,000
|
|
|
|
|
|
|
|
(34,000)
|
|
|
|
100,000
|
|
1,256,000
|
$5
per share
|
|
425,000
|
|
60,000
|
|
|
|
|
|
|
|
|
|
(82,500)
|
|
402,500
|
$10
per share
|
|
167,600
|
|
25,000
|
|
30,300
|
|
14,000
|
|
|
|
|
|
(17,500)
|
|
219,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,877,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/1997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/1997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
1,256,000
|
|
|
|
|
|
|
|
(47,500)
|
|
|
|
81,000
|
|
1,289,500
|
$5
per share
|
|
402,500
|
|
|
|
|
|
|
|
|
|
|
|
(42,500)
|
|
360,000
|
$10
per share
|
|
219,400
|
|
118,000
|
|
56,700
|
|
|
|
(3,500)
|
|
|
|
(38,500)
|
|
352,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,001,600
|
|
|
|
In
Connection
|
|
Issued
|
|
Converted
|
|
|
|
|
|
|
|||
|
|
Beginning
|
|
In
Exchange
|
|
with
purchase
|
|
as
|
|
to
stock/
|
|
|
|
|
|
Ending
|
|
|
Balance
|
|
for
Services
|
|
of
stock
|
|
Incentive
|
|
Exercised
|
|
Expired
|
|
Repriced
|
|
Balance
|
01/01/1998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/1998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
1,289,500
|
|
|
|
|
|
|
|
(232,500)
|
|
(95,000)
|
|
55,000
|
|
1,017,000
|
$5
per share
|
|
360,000
|
|
|
|
|
|
|
|
(47,500)
|
|
(172,500)
|
|
(50,000)
|
|
90,000
|
$10
per share
|
|
352,100
|
|
2,500
|
|
9,500
|
|
|
|
|
|
|
|
(5,000)
|
|
359,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,466,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/01/1999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/1999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
1,017,000
|
|
|
|
|
|
|
|
(5,000)
|
|
(20,000)
|
|
|
|
992,000
|
$5
per share
|
|
90,000
|
|
|
|
|
|
|
|
(25,000)
|
|
|
|
|
|
65,000
|
$10
per share
|
|
359,100
|
|
|
|
|
|
|
|
(5,250)
|
|
(26,850)
|
|
|
|
327,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,384,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/01/2000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
992,000
|
|
|
|
|
|
|
|
(60,000)
|
|
|
|
|
|
932,000
|
$5
per share
|
|
65,000
|
|
|
|
600,000
|
|
|
|
(5,000)
|
|
|
|
|
|
660,000
|
$10
per share
|
|
327,000
|
|
|
|
|
|
|
|
(37,000)
|
|
(13,500)
|
|
|
|
276,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,868,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/01/2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
932,000
|
|
|
|
|
|
|
|
(5,000)
|
|
|
|
|
|
927,000
|
$5
per share
|
|
660,000
|
|
|
|
|
|
|
|
(20,000)
|
|
|
|
|
|
640,000
|
$10
per share
|
|
276,500
|
|
223,000
|
|
700,000
|
|
625,000
|
|
(3,600)
|
|
(51,200)
|
|
|
|
1,769,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,336,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/01/2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
927,000
|
|
-
|
|
-
|
|
-
|
|
(3,000)
|
|
(7,000)
|
|
-
|
|
917,000
|
$5
per share
|
|
640,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
640,000
|
$10
per share
|
|
1,769,700
|
|
-
|
|
10,000
|
|
(625,000)
|
|
(2,000)
|
|
(97,700)
|
|
-
|
|
1,055,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,612,000
|
|
|
|
|
|
|
In
Connection
|
|
Issued
|
|
Converted
|
|
|
|
|
|
|
|
|
Beginning
|
|
In
Exchange
|
|
with
purchase
|
|
as
|
|
to
stock/
|
|
|
|
|
|
Ending
|
|
|
Balance
|
|
for
Services
|
|
of
stock
|
|
Incentive
|
|
Exercised
|
|
Expired
|
|
Repriced
|
|
Balance
|
01/01/2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
2,017,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
2,017,000
|
$4
per share
|
|
0
|
|
250,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
250,000
|
$5
per share
|
|
80,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
80,000
|
$9.73-$10
per share
|
|
412,495
|
|
-
|
|
-
|
|
600
|
|
-
|
|
-
|
|
-
|
|
413,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,760,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/01/2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1
per share
|
|
2,017,000
|
|
-
|
|
-
|
|
-
|
|
(1,000)
|
|
-
|
|
-
|
|
2,016,000
|
$4
per share
|
|
250,000
|
|
225,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
475,000
|
$5
per share
|
|
80,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
80,000
|
$9.60-$10
per share
|
|
413,095
|
|
-
|
|
-
|
|
705
|
|
-
|
|
-
|
|
-
|
|
413,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,984,800
|
December
31, 2005
|
Number
|
Weighted
average Remaining Life
|
Weighted-
average exercise price
|
Range
of Prices
|
|||
$1.00
|
2,016,000
|
1.8
years
|
$1.00
|
$4.00
|
475,000
|
4.3
years
|
$4.00
|
$5.00
|
80,000
|
1.7
years
|
$5.00
|
$9.60-10.00
|
413,800
|
1.1
years
|
$9.95
|
|
2,984,800
|
|
$2.83
|
December
31, 2004
|
Number
|
Weighted
average Remaining Life
|
Weighted-
average exercise price
|
|
|
|
|
Range
of Prices
|
|
|
|
$1.00
|
2,017,000
|
2.8
years
|
$1.00
|
$4.00
|
250,000
|
5.0
years
|
$4.00
|
$5.00
|
80,000
|
2.7
years
|
$5.00
|
$9.73-10.00
|
413,095
|
2.1
years
|
$9.97
|
|
2,760,095
|
|
$2.73
|
7. |
Income
Taxes
|
Assets
|
||
Net
operating loss
|
12,850,000
|
|
Less:
Valuation allowance
|
(12,850,000)
|
|
$
|
-
|
8. |
Profit
Sharing Plan
|
9. |
Research
Agreement
|
10. |
Commitments
and Contingencies
|
|
Dollars
|
Year
ending December 31, 2006
|
6,000
|
11. |
Related
Parties
|
12. |
Subsequent
Events
|
a. |
Merger
Agreement
|
b. |
Firm
Price Commitments
|
c. |
Private
equity financing
|
Unaudited
Pro Forma Consolidated Balance Sheet
|
June
30, 2006
|
Pro
Forma
|
|||||||||||||||||||
Novastar
|
|
Thorium
|
|
Total
|
|
Adjustment
|
|
Pro
Forma
|
|||||||||||
ASSETS
|
|||||||||||||||||||
Currrent
Assets
|
|||||||||||||||||||
Cash
|
$
|
14,431,407
|
$
|
528,213
|
$
|
14,959,620
|
$
|
0
|
14,959,620
|
||||||||||
Prepaid
Expenses and othr current assets
|
808,425
|
990
|
809,415
|
0
|
809,415
|
||||||||||||||
Due
From Novastar Resources Inc.
|
0
|
264,740
|
264,740
|
5
|
(264,740
|
)
|
0
|
||||||||||||
Total
Current Assets
|
15,239,832
|
793,943
|
16,033,775
|
(264,740
|
)
|
15,769,035
|
|||||||||||||
Property
Plant and Equipment -net
|
0
|
21,534
|
21,534
|
21,534
|
|||||||||||||||
Other
Assets
|
|||||||||||||||||||
Investment
in Thorium Power
|
1,350,000
|
0
|
1,350,000
|
1
|
(1,350,000
|
)
|
0
|
||||||||||||
Patent
Costs - net
|
0
|
209,311
|
209,311
|
209,311
|
|||||||||||||||
Security
Deposits
|
0
|
7,567
|
7,567
|
7,567
|
|||||||||||||||
Total
Other Assets
|
1,350,000
|
216,878
|
1,566,878
|
(1,350,000
|
)
|
216,878
|
|||||||||||||
Total
Assets
|
$ |
16,589,832
|
$ |
1,032,355
|
$ |
17,622,187
|
$ |
(1,614,740
|
)
|
$
|
16,007,447
|
||||||||
Liabilities
and Stockholdes Equity
|
|||||||||||||||||||
Current
Liabilities
|
|||||||||||||||||||
Current
portion long term debt
|
$ |
0
|
$ |
3,913
|
$ |
3,913
|
$ |
3,913
|
|||||||||||
Accounts
Payable
|
463,354
|
131,478
|
594,832
|
594,832
|
|||||||||||||||
Accrued
Liabilities
|
103,541
|
336,502
|
440,043
|
440,043
|
|||||||||||||||
Due
to related party
|
128,675
|
17,500
|
146,175
|
146,175
|
|||||||||||||||
Accrued
payroll tax and other liability
|
635,000
|
5,983
|
640,983
|
640,983
|
|||||||||||||||
Warrant
Liability
|
3,678,278
|
0
|
3,678,278
|
3,678,278
|
|||||||||||||||
Due
to Thorium Power Inc.
|
264,740
|
0
|
264,740
|
5
|
(264,740
|
)
|
0
|
||||||||||||
Total
Current Liabilities
|
5,273,588
|
495,376
|
5,768,964
|
(264,740
|
)
|
5,504,224
|
|||||||||||||
Notes
Payable - long term
|
0
|
12,657
|
12,657
|
0
|
12,657
|
||||||||||||||
Total
Liabilites
|
5,273,588
|
508,033
|
5,781,621
|
(264,740
|
)
|
5,516,881
|
|||||||||||||
Common
Stock with Registration Rights
|
12,041,373
|
0
|
12,041,373
|
12,041,373
|
|||||||||||||||
Stockholders
Equity
|
|||||||||||||||||||
Common
Stock
|
118,101
|
192,626
|
310,727
|
253,739
|
|||||||||||||||
1
|
(8,750
|
)
|
|||||||||||||||||
2
|
135,638
|
||||||||||||||||||
4
|
(183,876
|
)
|
|||||||||||||||||
Additional
Paid in Capital - Stock and Warrants
|
14,913,153
|
16,713,706
|
31,626,859
|
12,850,947
|
|||||||||||||||
1
|
(1,341,250
|
)
|
|||||||||||||||||
2
|
(135,638
|
)
|
|||||||||||||||||
3
|
(17,482,900
|
)
|
|||||||||||||||||
4
|
183,876
|
||||||||||||||||||
Accumulated
deficit - development stage
|
(17,482,900
|
)
|
(16,382,010
|
)
|
(33,864,910
|
3
|
17,482,900
|
(16,382,010
|
)
|
||||||||||
Deferred
stock compensation
|
(83,328
|
)
|
0
|
(83,328
|
(83,328
|
)
|
|||||||||||||
Common
Stock and Warrants reserved future issue
|
1,807,445
|
1,807,445
|
1,807,445
|
||||||||||||||||
Accumulated
Other Comprehensive Income
|
2,400
|
2,400
|
2,400
|
||||||||||||||||
Total
Stockholders Equity
|
(725,129
|
)
|
524,322
|
(200,807
|
(1,350,000
|
)
|
(1,550,807
|
)
|
|||||||||||
Total
Liabilities and Stockholders Equity
|
$ |
16,589,832
|
$ |
1,032,355
|
$ |
17,622,187
|
$ |
(1,614,740
|
)
|
$ |
16,007,447
|
||||||||
Pro-Forma
Adjustments
|
|||||||||||||||||||
Pro-Forma
Adjustment - 1
|
|||||||||||||||||||
Common
Stock - Thorium
|
8,750
|
||||||||||||||||||
Additonal
Paid in Capital - Thorium
|
1,341,250
|
||||||||||||||||||
Investment
- Thorium Power
|
1,350,000
|
||||||||||||||||||
To
eliminate Novastar's investment in Thorium
|
|||||||||||||||||||
175,000
shares at $4 per share
|
|||||||||||||||||||
Pro-Forma
Adjustment - 2
|
|||||||||||||||||||
Additional
paid in Capital
|
135,638
|
||||||||||||||||||
Common
Stock
|
135,638
|
||||||||||||||||||
To
record the issuance of Novastar stock pursuant to the merger
agreement
|
|||||||||||||||||||
Novastar
will issue 135,638,023 common shares at $.001 par value granting
Thorium
|
|||||||||||||||||||
Sharholders
a 54.5% interest in Novastar, prior to the private placement.
In addition,
Thorium management will control
|
|||||||||||||||||||
the
combined entity and Board of Directors, therefore this will
be accounted
for as a recapitalization of Thorium Power Inc.
|
|||||||||||||||||||
Novastar
was a shell with minimal assets prior to the merger agreement
and the
fundraising that took place after the merger agreement
|
|||||||||||||||||||
Pro-Forma
Adjustment - 3
|
|||||||||||||||||||
Additional
Paid in Captial - Novastar
|
17,482,900
|
||||||||||||||||||
Retained
Earnings - Novastar
|
17,482,900
|
||||||||||||||||||
To
eliminate Novastar's retained earnings
|
|||||||||||||||||||
Pro-Forma
Adjustment - 4
|
|||||||||||||||||||
Common
Stock - Thorium
|
183,876
|
||||||||||||||||||
Additonal
Paid In Capital
|
183,876
|
||||||||||||||||||
To
eliminate Thorium's capital stock - recapitalization
|
|||||||||||||||||||
March
31, 2006 Balance 192,626
|
|||||||||||||||||||
Elimin.
Of Novastar Invest (8,750)
|
|||||||||||||||||||
Pro-Forma
Adjustment - 5
|
|||||||||||||||||||
Due
to Thorium Power Inc.
|
264,740
|
||||||||||||||||||
Due
from Novastar Resources Ltd
|
264,740
|
||||||||||||||||||
To
eliminate interco. balance
|
Unaudited
Pro Forma Consolidated Statement of Operations
|
Fiscal
Year Ended June 30, 2006
|
Pro
Forma
|
|||||||||||||
Novastar
|
Thorium
|
Adjustment
|
Pro
Forma
|
||||||||||
Revenue
|
$ |
0
|
$ |
0
|
$ | $ |
0
|
||||||
Operating
Expenses
|
$ |
13,147,485
|
$ |
755,714
|
$ | $ |
13,903,199
|
||||||
Other
Income and Expense
|
$ |
197,050
|
$ |
803,867
|
$ | $ |
1,000,917
|
||||||
Net
Loss
|
$ |
13,344,535
|
$ |
1,559,581
|
$ | $ |
14,904,116
|
||||||
Basic
and Dilluted Loss Per Share
|
$ |
0.12
|
$ | $ | $ |
0.06
|
|||||||
Common
Shares Outstanding
|
111,913,155
|
1 |
135,638,023
|
247,551,178
|