UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-KSB
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ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended December 31,
2007 |
o
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TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period from ______ to
______
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Commission
file number: 0-12627
GLOBAL
CLEAN ENERGY HOLDINGS, INC.
(Exact
name of Small Business Issuer as specified in its charter)
Utah
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87-0407858
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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6033 W. Century Blvd, Suite 1090,
Los Angeles, California 90045
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(Address of principal executive offices)
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(310) 670-7911
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Issuer’s telephone number:
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Securities
registered under Section 12(b) of the Act: None.
Securities
registered under Section 12(g) of the Act: Common Stock, no par
value
Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act. ¨
Check
whether the issuer (1) filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes x
No
¨
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained,
to
the best of the registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10KSB or any
amendment to this Form 10KSB. x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act): Yes ¨ No x
The
issuer had $200,000 of revenues for its most recent fiscal year.
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity
was
sold, as of March 27, 2008, was $6,685,065.
As
of
March 27, 2008, the issuer had 197,676,560 shares of common stock outstanding,
which includes 22,837,593 shares of common stock currently held in escrow.
Transitional
Small Business Disclosure Format: Yes ¨ No x
TABLE
OF CONTENTS
PART
I
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ITEM 1.
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DESCRIPTION
OF BUSINESS
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1
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ITEM 2.
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DESCRIPTION
OF PROPERTY
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21
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ITEM 3.
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LEGAL
PROCEEDINGS
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21
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ITEM 4.
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
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22
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PART
II
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ITEM 5.
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MARKET
FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS, AND SMALL BUSINESS
ISSUER’S PURCHASE OF EQUITY SECURITIES
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22
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ITEM 6.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
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23
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ITEM 7.
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FINANCIAL
STATEMENTS
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26
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ITEM 8.
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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54
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ITEM 8A(T)
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CONTROLS
AND PROCEDURES
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54
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ITEM 8B.
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OTHER
INFORMATION
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56
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PART III
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ITEM 9.
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DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
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56
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ITEM 10.
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EXECUTIVE
COMPENSATION
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58
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ITEM 11.
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
SHAREHOLDER MATTERS
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61
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ITEM 12.
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
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62
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ITEM 13.
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EXHIBITS
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64
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ITEM 14.
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PRINCIPAL
ACCOUNTANT FEES AND SERVICES
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66
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DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
This
Report, including any documents which may be incorporated by reference into
this
Report, contains “Forward-Looking Statements” within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements other than statements of
historical fact are “Forward-Looking Statements” for purposes of these
provisions, including our plans to cultivate, produce and market non-food based
feedstock for applications in the biofuels market, any projections of revenues
or other financial items, any statements of the plans and objectives of
management for future operations, any statements concerning proposed new
products or services, any statements regarding future economic conditions or
performance, and any statements of assumptions underlying any of the foregoing.
All Forward-Looking Statements included in this document are made as of the
date
hereof and are based on information available to us as of such date. We assume
no obligation to update any Forward-Looking Statement. In some cases,
Forward-Looking Statements can be identified by the use of terminology such
as
“may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,”
“estimates,” “potential,” or “continue,” or the negative thereof or other
comparable terminology. Although we believe that the expectations reflected
in
the Forward-Looking Statements contained herein are reasonable, there can be
no
assurance that such expectations or any of the Forward-Looking Statements will
prove to be correct, and actual results could differ materially from those
projected or assumed in the Forward-Looking Statements. Future financial
condition and results of operations, as well as any Forward-Looking Statements
are subject to inherent risks and uncertainties, including any other factors
referred to in our press releases and reports filed with the Securities and
Exchange Commission. All subsequent Forward-Looking Statements attributable
to
the company or persons acting on its behalf are expressly qualified in their
entirety by these cautionary statements. Additional factors that may have a
direct bearing on our operating results are described under “Risk Factors” and
elsewhere in this report.
Introductory
Comment
Throughout
this Annual Report on Form 10KSB, the terms “we,” “us,” “our,” and “our company”
refer to Global Clean Energy Holdings, Inc., a Utah corporation, and, unless
the
context indicates otherwise, also includes the following wholly-owned
subsidiaries: (i) MDI Oncology, Inc., a Delaware corporation, and (ii) Global
Clean Energy Holdings LLC, a Delaware limited liability company. During the
fiscal year covered by this Annual Report on Form 10-KSB, we were known as
“Medical Discoveries, Inc.” We changed our name to Global Clean Energy Holdings,
Inc. on January 29, 2008.
PART
I
ITEM
1.
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DESCRIPTION OF BUSINESS.
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Prior
to
2007, Global Clean Energy Holdings, Inc. was a developmental-stage
bio-pharmaceutical company, known as Medical Discoveries, Inc., that was engaged
in the research, validation and development of two drugs. As more fully
described in this report, during 2007 our Board of Directors determined that
we
could no longer fund the development of our two drug candidates and could not
obtain additional funding for these drug candidates. Accordingly, the Board
decided to sell our two drug candidates and to develop a new business in the
rapidly expanding business of renewable alternative energy sources. As a result,
our future business plan, and our current principal business activities include
the planting, cultivation, harvesting and processing of inedible plant feedstock
to generate seed oils and biomass for use in the biofuels industry, including
the production of bio-diesel. Bio-diesel is a diesel-equivalent processed fuel
derived from biological sources (such as plant oils), which can be used in
diesel engines.
Organizational
History.
This
company was incorporated under the laws of the State of Utah on November 20,
1991. Effective as of August 6, 1992, this company merged with and into WPI
Pharmaceutical, Inc., a Utah corporation. Pursuant to merger, the name of this
company was changed to Medical Discoveries, Inc. WPI was incorporated under
the
laws of the State of Utah on February 22, 1984 under the name Westport
Pharmaceutical, Inc. On January 29, 2008, our shareholders approved the change
of our corporate name, and on that date we amended our name to “Global Clean
Energy Holdings, Inc.” to reflect our new focus on the bio-diesel alternative
energy market.
On
March
22, 2005, we formed MDI Oncology, Inc., a Delaware corporation, as a wholly
owned subsidiary to acquire certain breast cancer intellectual property assets
from the liquidation estate of Savetherapeutics, A.G.
In
October 2007, we relocated our principal executive offices from 1338 S. Foothill
Drive, #266, Salt Lake City, Utah 84108 to 6033 W. Century Blvd, Suite 1090,
Los
Angeles, California 90045.
Our
telephone number is (310) 670-7911, and our
website is located at www.gceholdings.com. Our annual reports on Form 10-KSB,
quarterly reports on Form 10-QSB, current reports on Form 8-K and amendments
to
such reports filed or furnished pursuant to section 13(a) or 15(d) of the
Securities and Exchange Act of 1934, as amended, and other related information
are available, free of charge, on our website as soon as we electronically
file
those documents with, or otherwise furnish them to, the Securities and Exchange
Commission. Our Internet websites and the information contained therein, or
connected thereto, are not and are not intended to be incorporated into this
Annual Report on Form 10-KSB or any other Securities and Exchange Commission
filing.
Transition
to new Business
Until
2007, we were a developmental-stage bio-pharmaceutical company engaged in the
research, validation, and development of two drugs we referred to as MDI-P
and
SaveCream. MDI-P is a drug candidate that we were developing as an
anti-infective treatment for bacterial infections, viral infections and fungal
infections. SaveCream is a drug candidate that we were developing to reduce
breast cancer tumors. Both of these drugs were under development, and had not
been approved by the U.S. Food and Drug Administration (FDA). The total cost
to
develop these two drugs, and to receive the approval from the FDA, would have
cost many millions of dollars and taken many more years. In the past, we
attempted to fund our development costs through the sale of equity securities
and the placement of debt, including the sale of our Series A Convertible
Preferred Stock. We had not, however, generated significant revenues from
operations or realized a profit. Through December 31, 2007, we had incurred
cumulative net losses of more than $26
million
since inception.
Early
in
2007, our Board of Directors determined that we could no longer fund the
development of our two drug candidates and that we could not obtain additional
funding for these drug candidates. The Board noted that the commencement of
human clinical trials of the MDI-P drug candidate was on Full Clinical Hold
by
the FDA under 21 CRF 312.42(b) and would not be initiated until deficiencies
in
our IND application were resolved to the FDA’s satisfaction. We considered the
uncertainty of the efficacy and safety of the MDI-P compound, the costs involved
in further developing the compound and the limited market, and thereafter
concluded that we did not have the capability or capacity to take the MDI-P
compound to commercialization. Our Board also evaluated the value of the
SaveCream drug candidate that was being co-developed with Eucodis
Pharmaceuticals Forschungs - und Entwicklungs GmbH, an Austrian company now
known as Eucodis Pharmaceuticals GmbH (“Eucodis”), and the return we could
expect for our shareholders, and determined that the highest value for this
drug
candidate could be realized through a sale of that drug candidate to Eucodis.
Accordingly, our Board sought to maximize the return from these assets through
their sale.
On
July
6, 2007, we entered into an agreement with Eucodis to sell SaveCream for an
aggregate of €4,007,534
(approximately U.S. $6,089,000 based on the currency conversion rate in effect
as of March 3, 2008), which consideration is payable in cash and by the
assumption of certain of our outstanding liabilities. On January 29, 2008,
our
shareholders approved the sale of the SaveCream asset to Eucodis. The sale
of
the SaveCream assets currently is anticipated to occur in April 2008. For
further developments on the sale of the SaveCream asset and the transactions
with Eucodis, please see “Item 1. Description of Business – Recent
Developments –Pending Sale of Bio-Pharmaceutical Assets.”
We
also
entertained various offers to purchase our rights to the MDI-P compound. On
August 9, 2007, we sold the MDI-P compound for $310,000 in cash.
Having
agreed to dispose of the foregoing assets, we considered entering into a number
of other businesses that would enable us to be able to provide our shareholders
with future value. Our Board subsequently decided to develop a business in
the
alternative energy market as a producer of biofuels. Accordingly, our new goal
is to produce and sell seed oils, including seeds oils harvested from the
planting and cultivation of Jatropha
curcas
plant,
for the purpose of providing feedstock oil used for the generation of methyl
ester, otherwise known as bio-diesel (the “Jatropha Business”). Our Board
concluded that there was a significant opportunity to participate in the rapidly
growing biofuels industry, which previously was mainly driven by high priced,
edible oil-based feedstock. In connection with commencing our new Jatropha
Business, effective September 7, 2007, we (i) hired Richard Palmer, an energy
consultant, and a member of Global Clean Energy Holdings LLC (“Global LLC”) to
act as the our new President, Chief Operating Officer and future Chief Executive
Officer, (ii) engaged Mobius Risk Group, LLC, a Texas company engaged in
providing energy risk advisory services, to provide us with consulting services
related to the development of the Jatropha Business, and (iii) acquired certain
trade secrets, know-how, business plans, term sheets, business relationships,
and other information relating to the cultivation and production of seed oil
from the Jatropha plant for the production of bio-diesel from Global LLC. See,
“Item 1. Description of Business — The Jatropha Business,” below.
Recent
Developments.
Name
Change
On
January 29, 2008, at a special meeting, our shareholders voted to approve
certain amendments to our charter, including, changing the name of the company
to “Global Clean Energy Holdings, Inc.” The name change is intended to reflect
our new focus on the bio-diesel alternative energy market.
Pending
Sale of Bio-pharmaceutical Assets
On
July
6, 2007, we entered into a sale and purchase agreement (as amended, the
“SaveCream Asset Sale Agreement”) with Eucodis, pursuant to which Eucodis agreed
to acquire our SaveCream assets in consideration for a cash payment and the
assumption by Eucodis of certain of our current indebtedness (such transactions,
collectively, the “SaveCream Asset Sale”). The purchase of the SaveCream assets
was scheduled to occur at the end of January 2008 after our shareholders
approved the sale. On January 29, 2008, our shareholders voted to approve the
sale of the SaveCream asset to Eucodis. However, shortly before the scheduled
closing, Eucodis informed us that it was unable to complete the acquisition
as
agreed because it had insufficient funds and that it needed to obtain additional
financing. Accordingly, the closing had to be postponed until Eucodis completed
the required financing.
On
February 29, 2008, Eucodis informed us that (i) it was completing an agreement
for financing, which financing would provide Eucodis with sufficient funds
to
purchase the SaveCream assets for the purchase price, and substantially on
the
terms set forth in the initial SaveCream Asset Sale Agreement, and (ii) that
it
still desired to complete the transaction contemplated by the SaveCream Asset
Sale Agreement. Accordingly, on February 29, 2008, we prepared a letter
agreement (the “Letter
Agreement”)
again
agreeing to sell the SaveCream assets to Eucodis on substantially the terms
set
forth in the SaveCream Asset Sale Agreement. The letter agreement was
countersigned by Eucodis on March 3, 2008.
Under
the
Letter Agreement, we agreed to sell the SaveCream assets to Eucodis for the
same
price as the initial SaveCream Asset Sale Agreement and on substantially the
same terms as that initial agreement. Under the initial SaveCream Asset Sale
Agreement, Eucodis had agreed to pay 4,007,534 euros (or U.S. $6,089,000 based
on the currency conversion rate in effect as of March 3, 2008), comprising
a
cash payment of 1,538,462 euros, and Eucodis’ assumption of certain of our
obligations and liabilities aggregating 2,469,072 euros. Under the letter
agreement, Eucodis will continue to pay us 4,007,534 euros for the assets,
of
which 1,538,462 euros (less $200,000 already received from Eucodis in March
2007) is required to be paid at the closing. However, the amount our
indebtedness that Eucodis is required to assume will be reduced by 332,875
euros, and Eucodis will be required to pay us an 332,875 additional euros at
the
closing. Accordingly, at the closing, we will receive a total of 1,871,337
euros
(or approximately U.S. $2,642,000 based on the currency conversion rate in
effect as of March 3, 2008). Except as set forth herein, the purchase and sale
of the SaveCream assets will be effected substantially in accordance with the
SaveCream Asset Sale Agreement. The closing of the sale to Eucodis is currently
scheduled to occur at such time as Eucodis completes its financing, but in
no
event later than April 30, 2008.
The
assets to be acquired by Eucodis pursuant to the SaveCream Asset Sale Agreement
include all of our right, title and interest in all patents, patent
applications, regulatory
files,
pre-clinical study data, anecdotal clinical trial data, and our rights under
certain
other contracts relating to our
“SaveCream” drug candidate. We acquired SaveCream and certain other related
intellectual property assets from the liquidator of Savetherapeutics AG i.L.,
a
German company, pursuant to a certain asset purchase agreement dated as of
March
11, 2005.
As
we
have previously disclosed in our filings with the Securities and Exchange
Commission, in 2006 we had entered into a Definitive Master Agreement (the
“License Agreement”) with Eucodis pursuant to which we licensed to Eucodis the
exclusive right to develop, manufacture and commercialize our SaveCream drug
candidate in the European Union and certain surrounding countries. Under the
License Agreement Eucodis was obligated to develop the products through Phase
II
clinical trials in accordance with U.S. Food and Drug Administration and
European Medicines Agency standards. Because Eucodis had notified us in January
2008 that it needed to obtain additional funding to continue its operations
and,
because of a lack of financing that it had suspended and discontinued its
business operations, on February 27, 2008 we notified Eucodis that, pursuant
to
Sections 4.5(d) and 15.2 of the License Agreement, the License Agreement was
terminated. Accordingly, all rights to the SaveCream rights have reverted to
us
and, if Eucodis does not complete the purchase of the SaveCream assets in
accordance with the Letter Agreement, we will be the sole owner of all of the
SaveCream rights.
The
intellectual property assets that we currently own relating to the SaveCream
drug, include
the
following patents:
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·
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“Substances
and Agents for Positively Influencing Collagen.” This includes a EU patent
application and a Canadian patent.
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“Topical
Treatment for Mastalgia.” This includes U.S. patent application 10/416,096
filed October 30, 2001, and a European Union patent application.
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“Medicament
for Preventing and/or Treating a Mammary Carcinoma Containing a Steroidal
Aromatase Inhibitor.” This includes a U.S. patent application, No.
09/646,355, filed November 16, 2000 and divisional and continuation
applications based upon the initial application.
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·
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“Aromatase
Marking.” This includes a U.S. Patent application, No. 10/487,953, filed
August 28, 2002, as well as a European Union patent application.
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In
the
event that the pending sale to Eucodis is not completed, we will attempt to
license or otherwise dispose of those assets. We do not currently have any
alternate purchasers for those assets, and we have not yet engaged any
investment banker or other agent to assist us with the sale of our SaveCream
assets should the Eucodis sale not be completed.
Global
Clean Energy Holdings, LLC — Share Exchange Agreement
In
connection with our efforts to commence the Jatropha Business, on September
7,
2007, we entered into a share and exchange agreement (the “Global LLC
Agreement”) pursuant to which we acquired all of the outstanding ownership
interests in Global Clean Energy Holdings, LLC, a Delaware limited liability
company (“Global LLC”). Global LLC is a company that owns certain
trade secrets, know-how, business plans, term sheets, business relationships,
and other information relating to the cultivation and production of seed oil
from the seed of the Jatropha plant, for the purpose of providing feedstock
oil
intended for the production of bio-diesel. Richard
Palmer and Mobius Risk Group, LLC, a Texas limited liability company engaged
in
providing energy risk advisory services (“Mobius”), were the sole owners of the
outstanding equity interests of Global LLC. Richard Palmer was also a member
of
Global LLC.
In
exchange for all of the outstanding ownership interests in Global LLC, we issued
63,945,257 shares of our common stock to Richard Palmer and Mobius. The shares
issued to Mr. Palmer and Mobius in the acquisition of Global LLC represented
35%
of our outstanding shares of common stock immediately after the acquisition
(excluding the shares of Series A Convertible Preferred Stock). Of the
63,945,257 shares issued under the Global LLC Agreement, 36,540,146 shares
were
issued and delivered to Mr. Palmer (5,220,021 shares) and Mobius (31,320,125
shares) at the closing of the Global LLC Agreement without any restrictions.
The
remaining 27,405,111 shares of common stock were, however, issued as restricted
shares, subject to forfeiture in the event that certain specified performance
milestones are not achieved. The restricted shares are being held by us in
escrow until such shares are either released or cancelled. An aggregate of
23,490,095 restricted shares were issued to Mobius, and 3,915,016 restricted
shares were being issued to Palmer. If and when certain specified milestones
are
achieved, the restricted shares will be released and delivered to Mr. Palmer
and
Mobius in accordance with the terms and conditions of the Global LLC Agreement.
During the time that the restricted shares are restricted and subject to
forfeiture, the restricted shares shall be outstanding shares for all purposes
and shall be entitled to vote and receive dividends, if any are declared. As
of
December 31, 2007, a total of 4,567,518 of Mr. Palmer and Mobius’ restricted
shares were released from the restrictions and delivered on a pro rata basis
per
the terms of the Global LLC Agreement to Mr. Palmer and Mobius.
In
order
to obtain the expertise necessary to exploit the assets we acquired under the
Global LLC Agreement, we also entered into an employment agreement with Richard
Palmer, and a consulting agreement with Mobius.
Employment
Agreement
On
September 7, 2007, we entered into an employment agreement (effective as of
September 1, 2007) with Richard Palmer pursuant to which we hired Mr. Palmer
to
serve as our President and Chief Operating Officer. Mr. Palmer was also
appointed to serve as director on our Board to serve until the next election
of
directors by our shareholders. Effective December 21, 2007, upon the resignation
of Judy Robinett (our immediately prior Chief Executive Officer), and in
accordance with the terms of the employment agreement, Mr. Palmer became our
Chief Executive Officer. We hired Mr. Palmer to take advantage of his experience
and expertise in the feedstock/bio-diesel industry, and in particular, in the
Jatropha bio-diesel and feedstock business. See, “Item 10. Executive
Compensation — Employment Agreement.”
Loan
Agreement
In
order
to fund our operations pending the closing of the SaveCream Asset Sale
Agreement, on September 7, 2007, we entered into a loan and security agreement
(“Loan Agreement”) with Mercator Momentum Fund III, L.P., a California limited
partnership, pursuant to which Mercator Momentum Fund III, L.P. made available
to us a secured term credit facility in the aggregate principal amount of
$1,000,000 (the “Loan”). Interest is payable on the Loan at a rate of 12% per
annum, payable monthly. We have agreed not to request any further advances
under
the Loan Agreement. As of March 27, 2008, the remaining outstanding principal
balance of amounts we borrowed under the Loan Agreement was $200,000. The Loan
currently matures and becomes due and payable on June 21, 2008. The Loan is
secured by a first priority lien on all of our assets. Mercator Momentum Fund
III, L.P. and its affiliates currently own all of the issued and outstanding
shares of Series A Convertible Preferred Stock. We have used the proceeds of
the
Loan to fund our working capital needs.
Series
B Preferred Stock
In
order
to obtain additional working capital, on November 6, 2007, we entered into
a
Securities Purchase Agreement (the “Securities Purchase Agreement”) with two
accredited investors, pursuant to which we sold a total of 13,000 shares of
our
newly authorized Series B Convertible Preferred Stock (“Series B Shares”) for an
aggregate purchase price of $1,300,000. Each share of the Series B Shares has
a
stated value of $100. The two purchasers of our Series B Shares are parties,
which we expect to be engaged in our Jatropha Business in Mexico.
The
Series B Shares may, at the option of each holder, be converted at any time
or
from time to time into fully paid and non-assessable shares of our common stock
at the conversion price then in effect. The number of shares into which one
Series B Share shall be convertible is determined by dividing $100 per share
by
the conversion price then in effect. The
initial conversion price per share for the Series B Shares is $0.11, which
is
subject to appropriate adjustment for certain events, including stock splits,
stock dividends, combinations, recapitalizations or other recapitalizations
affecting the Series B Shares.
Each
holder of Series B Shares is entitled to the number of votes equal to the number
of shares of our common stock into which the Series B Shares could be converted
on the record date for such vote, and shall have voting rights and powers equal
to the voting rights and powers of the holders of our common stock. In
the
event of our dissolution or winding up, each share of the Series
B
Shares
is entitled to be paid an amount equal to $100 (plus any declared and unpaid
dividends) out of the assets of our company then available for distribution
to
shareholders; subject, however, to the senior rights of the holders of our
Series A Convertible Preferred Stock.
No
dividends are required to be paid to holders of the Series B Shares. However,
we
may not declare, pay or set aside any dividends on shares of any class or series
of our capital stock (other than dividends on shares of our common stock payable
in shares of common stock) unless the holders of the Series B Shares shall
first
receive, or simultaneously receive, an equal dividend on each outstanding share
of Series B Shares.
Judy
Robinett Resignation
On
August
31, 2007, we entered into a release and settlement agreement (effective as
of
September 7, 2007) (“the Release and Settlement Agreement”) with Judy Robinett,
our former Chief Executive Officer, pursuant to which Ms. Robinett agreed to
continue to act as our transitional Chief Executive Officer. Ms. Robinett also
acted as our interim Chief Financial Officer until her resignation. Under the
agreement, Ms. Robinett agreed to, among other things, assist us in the sale
of
our legacy bio-pharmaceutical assets, complete the preparation and filing of
the
delinquent SEC Reports that related to the periods prior to the date of the
agreement, deal with our creditors and handle our creditor issues, and to assist
in maintaining our relations with our shareholders.
Effective
December 21, 2007, upon the completion of the foregoing matters, Ms. Robinett
resigned as our Chief Executive Officer and from our Board, and Mr. Palmer
became our Chief Executive Officer. For additional details on Ms. Robinett’s
release and settlement agreement, please see “Item 10. Executive
Compensation – Judy Robinett Employment and Resignation
Agreements.”
The
Jatropha Business.
Business
Strategy
As
of
September 7, 2007, the day on which we entered into the Global LLC Agreement,
we
changed the business of our company to focus on the cultivation of non-edible
feedstock for certain applications in the biofuels market. In
particular,
we
anticipate that our core activities in the future will include the planting,
cultivation, harvesting and processing of Jatropha plant feedstock to generate
seed oils and biomass for use in the biofuels industry, including the production
of bio-diesel and certain other biofuels.
Bio-diesel
is a diesel-equivalent, processed fuel derived from biological sources (such
as
plant oils), which can be used in diesel engines and as a replacement for fuel
oil. The term “biofuels” refers to a range of biological based fuels including
biodiesel, synthetic diesel, ethanol and biomass, most of which have
environmental benefits that are the major driving force for their introduction.
Using biofuels instead of fossil fuels reduces net emissions of carbon dioxide
and other green house gases, which are associated with global climate change.
Biofuels further the concept of energy independence and environmental
responsibility, while generating new jobs in new markets. This creates a social,
environmental and economic gain from the production, distribution and end use
of
biofuels. As the world consumes larger volumes of fossil fuels, and further
depletes the supplies of such fossil fuels, alternate sources of energy need
to
be developed to support growing economies.
We
have
identified the Jatropha
curcas
plant
as our primary feedstock for producing bio-diesel and other biofuels. The
Jatropha plant is a perennial plant that produces an inedible fruit with large
seeds containing a high percentage of high quality inedible oil. The entire
fruit, including the seeds, has excellent properties necessary for the
production of biofuels. Our current business plan proposes to utilize the entire
fruit of the Jatropha plant for biofuel production, including the oils produced
from the fruit, as well as the hull, seed cover, seed oil and seed cake.
In
connection with our new feedstock operations, we have identified strategic
locations in North America, the Caribbean, Central America and South America
ideally suited to our proposed planting, cultivation, harvesting and processing
activities, in which we plan to establish cultivation, harvesting and processing
operations. All of the areas identified have been selected for a number of
key
strategic reasons, including proximity to large ports for logistics purposes,
relatively stable democratic governments, favorable trade agreements with the
United States, low-cost land, reasonably priced labor, favorable weather
conditions and acceptable soil conditions.
The
Jatropha plant is indigenous to Mexico, and we have decided to initiate
implementation of our new business plan and related agricultural development
activities in Mexico. Our business plan proposes to establish a nursery in
which
we will initially grow and cultivate Jatropha seedlings prior to transferring
them to the plantation for further growth and cultivation. We negotiated a
lease
for approximately 28 hectares of land in the Yucatan Peninsula, on which we
have
set up our initial Jatropha nursery and a plant breeding test farm. We have
already begun planting a wide range of varieties of Jatropha curcas and at
full
planting expect to have over 13 different varieties when the entire 28 hectacre
field is planted. The breeding research and development program on this property
will be used to understand the growing patterns of various varieties of
Jatropha, obtained from all over the world, and evaluate and maximize how they
grow in the climate of the Yucatan.
We
have
identified a wide range of varieties of the Jatropha plant in Mexico, which
we
are currently propagating and studying. Our research and development activities
will focus on plant and soil sciences, plant breeding and other related
activities. We plan to study and identify the proper mix of Jatropha varieties,
as well as optimum growth conditions, in order to maximize our output of the
Jatropha fruit and seed oil.
In
addition, we have identified 2,081 hectares of land (approximately 5,000 acres)
in the State of Yucatan, Mexico, which we believe is ideal for establishing
and
maintaining what we plan to be the first of several multi-thousand hectare
plantations in which we will cultivate the Jatropha plant. Our business plan
is
to acquire the rights to use up to 20,000 hectares in Mexico, by the end of
our
2008 fiscal year for purposes of setting up plantations on which we will
cultivate the Jatropha plant. We anticipate that the 2,081 hectares will yield
1-2 million gallons of feedstock oil when fully planted with mature
plants.
We
are
also evaluating other locations in the Caribbean, Central America and South
America for purposes of establishing Jatropha plantations, and we plan to have
a
Jatropha plantation and related operations in a location outside of Mexico
by
the end of our 2009 fiscal year.
Our
business plan also proposes the construction of a seed oil extracting facility
in which we would extract the feedstock oil from the Jatropha seed, and collect
the remaining biomass for sale to interested buyers. We have not yet identified
a location for the seed oil extracting facility; however, we plan to locate
the
facility relatively close to the ultimate end user of the biomass in order
to
minimize the costs and logistics of transporting the biomass to prospective
buyers.
We
anticipate that our primary focus will be in the feedstock oil market, and
our
operations will primarily comprise the planting, harvesting and sale of
feedstock oil to end users in the energy industry for production of bio-diesel
and other biofuels. In the short term, while developing Jatropha plantations,
we
expect to generate cash through our forward sale contracts for feedstock oil
and
biomass to be produced at our facilities, and the potential sale of carbon
offset credits.
Depending
on future economic, political and other factors, we may in the future expand
our
operations beyond the feedstock oil market. For example, our business plan
contemplates the possibility of entering into a joint venture for the
constructing a bio-diesel refinery in which we would produce bio-diesel using
the feedstock oil that we produce. In any event, we anticipate we will still
remain a feedstock oil company primarily, and that our bio-diesel production,
if
any, would be derived from only a portion of the feedstock oil we produce.
If
economic and other factors at the time encourage us to invest in bio-diesel
production, we anticipate that we may develop or acquire additional refining
capacity in other strategic locations.
Our
employees, advisors and consultants are senior energy professionals with
extensive experience in the energy and biofuels market, the production of
bio-diesel and in the renewable energy sector in general.
We
are
still a development stage company, and we anticipate that it will require
significant time and capital to develop our new operations into a stable and
profitable business.
Principal
Products
The
production of biofuels feedstock is primarily a logistical agricultural
operation. It needs to be supported with strong plant and soils sciences to
improve productivity, quality and plant stability. The Jatropha
curcas
plant
will be our primary agricultural focus. The Jatropha plant is a perennial,
inedible plant, and all of its by-products can be used for fuel and biomass
energy production. It is a very efficient plant that produces high quality
seed
oil and high-energy content biomass.
Bio-diesel
Oil Feedstock
The
feedstock oil needed for the production of bio-diesel that is currently
available on the market today is primarily supplied from edible plant seed
oils
including soy, canola (rapeseed) and palm. There are other types of feedstock
utilized including animal fats and recycled cooking grease, but they make up
a
small portion of the market supply. Our primary source of bio-diesel feedstock
will be from the oil produced from the Jatropha plant. One advantage of the
Jatropha plant is that it’s oil and meal is inedible, and the cultivation of the
plant, which will primarily be for use in the biofuels industry, does not
compete for resources with other crops grown primarily for food consumption.
Since the Jatropha plant does not compete with land or other resources used
in
food crop development, it is an additional feedstock supply, growing the base
and the market capacity.
Biomass
Feedstock
The
Jatropha plant produces a fruit (about the size of a golf ball) containing
three
large seeds that contain 32%-38% oil content by weight. The non-oil components
of the fruit, which represents 62-68% of the total fruit, contains high energy
biomass (carbon values) that is an excellent source of feedstock for a number
of
energy producing processes including direct combustion, gasification, power
production, and cellulostic ethanol (alcohol) production.
Carbon
Credits
Biofuels
production and use is a very effective means to reduce both local and global
pollution from emissions that cause climate change. Growing trees and plants
which sequesters carbon from the atmosphere and burning biofuels offsets the
production of greenhouse gasses resulting from the consumption of petroleum
or
other fossil-based fuels. Many biofuels produce less pollution, including CO2,
NOx, SOx and PM10. Through the 1997 Kyoto Protocol to the United Nations
Framework Convention on Climate Change (Kyoto Protocol), signatory countries
are
required to reduce their overall greenhouse gas emissions, or carbon footprint.
As of November 2007, 174 parties are signatories to and have ratified the Kyoto
Protocol. The United States of America is not a signatory to the Kyoto Protocol.
Signatory countries require local industry and other local energy end-users
to
either reduce their greenhouse gas emissions, or purchase greenhouse gas
emission credits (carbon credits). This requirement has created a worldwide
“Carbon Credit Trading Market” where sellers sell their excess carbon credits
and buyers purchase the carbon credits they need to meet their greenhouse gas
reduction requirements. The development of agricultural-based energy projects
may produce carbon credits through the sequestration (storing) of carbon by
the
growing of trees and plants, or by the offset of other sequestered carbon.
Selling carbon credits represents potential additional revenue that will help
to
offset capital requirements for our plantation and other development
activities.
In
our
case, Certified Emission Reductions (CERs) may be generated through Clean
Development Mechanism projects in non-Annex 1 nations, which include Mexico,
the
Caribbean, Central and South America. Assuming full capacity at a 20,000-hectare
Jatropha plantation, we estimate that we could generate more than 100,000 metric
tons of sellable carbon credits annually.
Technology
Although
we do not currently possess any patentable technology relating to our operations
in the feedstock and biofuels market, we may develop technology as we design
and
implement our business plan. Any technology we develop will be in three main
categories: (i) plant sciences, (ii) agricultural development, and (iii)
material processing and end use applications. Such technologies developed are
expected to assist in reducing costs, improving efficiency and allowing us
to
move the products higher in value creation. We also may pursue patentable
technologies, processes and plant varieties
Operations
in Mexico
We
have
negotiated a lease for a parcel of approximately 28 hectares of land in Mexico,
and have constructed our first nursery facility and plant research planting
operation. We have retained a Mexican law firm to represent our interests in
Mexican legal matters related to our operations in Mexico.
Lodemo
Services Agreement
In
order
to operate the Jatropha cultivation and production business in Mexico will
require a large investment in management, personnel, offices, logistical support
and facilities. In addition, successful operations in Mexico will also require
an understanding of local rules, laws and business practices. Since we do not
have either the resources in Mexico or the understanding of local laws and
business practices, we have decided to engage a large, reputable local operator
to conduct actual day-to-day operation of our Mexico operations for us.
Accordingly, on October 15, 2007, we entered into a Service Agreement (the
“Lodemo Agreement”) with Corporativo LODEMO S.A DE CV, a Mexican corporation
(the “Lodemo Group”) in connection with our new Jatropha Business. The Lodemo
Group is a privately held Mexican company with substantial land holdings,
significant experience in fuel distribution and sales, liquids transportation,
logistics, land development and agriculture that is capable of providing the
logistical and other services we need to operate a large-scale farming and
transportation business in Mexico.
Under
our
supervision, the Lodemo Group will be responsible for the establishment,
development, and day-to-day operations of our Jatropha Business in Mexico,
including the extraction of the oil from the Jatropha seeds, the delivery of
the
Jatropha oil to buyers, the purchase or lease of land in Mexico, the
establishment and operation of one or more Jatropha nurseries, the clearing,
planting and cultivation of the Jatropha fields, the harvesting of the Jatropha
seeds, the operation of the our oil extraction facilities, and the logistics
associated with the foregoing. Although the Lodemo Group will be responsible
for
identifying and acquiring the farmland, ownership of the farmland or any lease
thereto will be held directly by us. The Lodemo Group will be responsible for
hiring and managing all necessary employees. We will bear all direct and
budgeted costs of the Jatropha Business in Mexico.
The
Lodemo Group will provide the foregoing and other necessary services for a
fee
primarily based on the number of hectares of Jatropha under cultivation. We
have
agreed to pay the Lodemo Group a fixed fee per year of $60 per hectare of land
planted and maintained with minimum payments based on 10,000 hectares of
developed land, to follow a planned planting schedule. The agreement has a
20-year term but we may terminate under certain circumstances. The Lodemo Group
also will potentially receive incentive compensation for controlling costs
below
the annual budget established by the parties, production incentives for increase
yield and a sales commission for biomass sales.
Jatropha
Administrative Assistance—Mobius Consulting Agreement
Until
we
can further supplement our Jatropha Business with in-house personnel, we will
need to obtain third party assistance with managing and supervising the
creation, planning, construction, and planting or nurseries, seed production
plantations and Jatropha plantations in the geographical areas that we intend
to
operate in (including South Texas and the Yucatan Peninsula of Mexico). In
order
to obtain the foregoing services, in September 2007 we entered into a consulting
agreement with Mobius pursuant to which Mobius has agreed to provide consulting
services to us in connection with our new Jatropha Business. We engaged Mobius
as consultant to obtain Mobius’ experience and expertise in the
feedstock/bio-diesel market to assist us in developing our new business
operations. Mobius’ compensation for the services provided under the consulting
agreement is a monthly retainer of $45,000; the term of the Mobius consulting
agreement is twelve months, or such shorter period until the scope of work
under
the agreement has been completed.
Market
According
to U.S. Department of Energy estimates, the world demand for crude oil in 2006
was approximately 85 million barrels per day, with approximately 25% of that
demand being diesel and fuel oil (distillate fuel oil). This equates to a global
consumption of distillate fuel oil of approximately 21 million barrels per
day,
or 325 billion gallons per year. At a 5% blend with biodiesel, the world market
for biodiesel exceeds 16 billion gallons per year.
U.S.
distillate fuel oil consumption for 2005 was 4.12 million barrels per
day,
which
equates to over 60 billion gallons of diesel and fuel oil consumed annually.
At
a 5% biodiesel blend, the US biodiesel market is over 3 billion gallons per
year
and growing.
In
2004,
32 U.S. biodiesel refineries produced approximately 30 million gallons of neat
(100%) bio-diesel fuel. In 2005, 50 refineries produced approximately 75 million
gallons and in 2006 approximately 250 million gallons were sold. It is expected
that in 2007 over 300 million gallons of bio-diesel fuel will be produced and
consumed domestically, with an unconfirmed, but announced, biodiesel refinery
construction exceeding a total U.S. domestic refining capacity of 1 billion
gallons.
Direct
Sales
Based
on
our current business plan, our primary market will be in the direct sale of
Jatropha feedstock oil for bio-diesel production and biomass energy production,
and the sale of carbon credits. Our primary customers will be refiners of
bio-diesel. We estimate that there are approximately 165 bio-diesel plants
in
the United States alone, which can utilize up to 100% of our crude or refined
Jatropha oil.
We
will
generate our highest revenues and greatest margins from customers who have
logistical capacity on a water port accessible from the Gulf of Mexico. This
will reduce redundant transportation costs, and allow us to ship large
quantities economical. These customers have historically paid a higher price
for
feedstock oil, since the majority of feedstock oil supplies has been shipped
from the Midwestern United States. We anticipate that our key customer profile
will include well-financed, low-cost bio-diesel refiners.
Distributor
Sales
As
our
business develops, we expect to utilize some distributors for sale of the
Jatropha feedstock oil and the biomass by-products that we will
produce.
Environmental
Impact
Biofuels,
including bio-diesel, have environmental benefits that are a major driving
force
for their introduction. Using biofuels instead of fossil fuels reduces net
emissions of carbon dioxide and other greenhouse gasses, which are associated
with global climate change. Biofuels are produced from renewable plant resources
that “recycle” the carbon dioxide created when biofuels are consumed. Life-cycle
analyses consistently show that using biofuels produced in modern facilities
results in net reductions of greenhouse gas carbon emissions compared to using
fossil fuel-based petroleum equivalents. These life-cycle analyses include
the
total energy requirements for the farming and production of the biomass
resource, as well as harvesting, conversion and utilization. Biofuels help
nations achieve their goals of reducing carbon emissions. Biofuels burn cleanly
in vehicle engines and reduce emissions of unwanted products, particularly
unburned hydrocarbons and carbon monoxide. These characteristics contribute
to
improvements in local air quality. In a life-cycle study published in October
2002, entitled “A Comprehensive Analysis of Bio-diesel Impacts on Exhaust
Emissions, 2002,” the U.S. Environmental Protection Agency (“EPA”) analyzed
bio-diesel produced from virgin soy oil, rapeseed (canola) and animal fats.
The
study concluded that the emission impact of bio-diesel produced slightly
increased NOx emissions while significantly reducing other major
emissions.
Competition
Although
there are a number of producers of biofuels, few are utilizing non-edible oil
feedstock for the production of bio-diesel. The following table lists the
companies we are aware of that are cultivating Jatropha for the production
of
bio-diesel:
British
Petroleum (UK)
|
|
Plans
to establish 100,000 hectares of Jatropha plantations in Indonesia
to feed
the 350,000-tonne-per-year biodiesel refinery that it is building
in the
country.
|
|
|
|
Van
Der Horst Corporation (Singapore)
|
|
Building
a 200,000-tpy biodiesel plant in Juron Island in Singapore that
will
eventually be supplied with Jatropha from plantations it operates
in
Cambodia and China, and possible new plantations in India, Laos
and
Burma.
|
|
|
|
Mission
Biofuels (Australia)
|
|
Hired
Agro Diesel of India to manage a 100,000-heactare Jatropha plantation,
and
a contract farming network in India to feed its Malaysian and
Chinese
biodiesel refineries. Mission Biofuels has raised in excess of
$80 million
to fund its operations.
|
|
|
|
D1
Oils (UK)
|
|
As
of June 2007, together with its partners, D1 Oils has planted
or obtained
rights to offtake from a total approximately 172,000 hectares
of Jatropha
under cultivation worldwide. D1’s Jatropha plantations are located in
Saudi Arabia, Cambodia, Ghana, Indonesia, the Philippines, China,
India,
Zambia, South Africa and Swaziland. In June 2007, D1 Oils and
British
Petroleum entered into a 50:50 joint venture to plant up to an
additional
1 million hectares of Jatropha worldwide. British Petrolum funded
the
first £31.75 million of the Joint Venture’s working capital requirements
through a purchase of D1 Oils equity, and the total Joint Venture
funding
requirement is anticipated to be £80 million over the next five
years.
|
|
|
|
NRG
Chemical Engineering (UK)
|
|
Signed
a $1.3 billion deal with state-owned Philippine National Oil
Co. in May
2007. NRG Chemical will own a 70% stake in the joint venture
which will
involve the construction of a biodiesel refinery, two ethanol
distilleries
and a $600 million investment in Jatropha plantations that will
cover over
1 million hectares, mainly on the islands of Palawan and
Mindanao.
|
1
hectare
= 2.47 acres
We
believe there is sufficient global demand for alternative non-edible biofuel
feedstock to allow a number of companies to successfully compete worldwide.
In
particular, we note that we are the only US-based producer of non-edible oil
feedstock for the production of bio-diesel which gives us a unique competitive
advantage over many foreign competitors when competing in the USA.
The
price
basis for our non-edible oil and biomass feedstock will be equivalent to other
edible seed oil and biomass feedstock. We have not found any substantial effort
towards the production of any other non-edible oil worldwide that could compete
with Jatropha. With the growing demand for feedstock, and the high price of
oil
and biofuels, we anticipate that we will be able to sell our Jatropha oil and
biomass feedstock profitability.
Employees.
As
of
March 27, 2008, we had three (3) employees, including Richard Palmer, our
President and Chief Executive Officer.
During
the initial development of our Jatropha Business, most of our Jatropha-related
services are being provided to us by the Mobius Risk Group and the Lodemo Group.
In addition, certain of our accounting and other administrative functions are
also currently being provided to us by consultants. At such time as capital
resources permit, we will hire full-time employees to assume these
positions.
RISK
FACTORS
Risks
Relating to Our Business
We
have no direct operating history in the feedstock and bio-diesel industries,
which makes it difficult to evaluate our financial position and our business
plan.
Until
early in 2007, we were a development stage bio-pharmaceutical company engaged
in
developing two potential drug candidates. Since our inception through December
31, 2007, we generated only $1,157,000 of revenues and accumulated net losses
of
over $26 million. During 2007, we terminated our operations as a
bio-pharmaceutical company and have commenced developing a new business in
the
biofuels industry. However, since we have only recently commenced our operations
as a biofuels company and have not yet generated any revenues from our new
operations, we have no operating history in that line of business on which
a
decision to invest in our company can be based. The future of our company
currently is dependent upon our ability to implement our new business plan
in
the Jatropha Business. While we believe that our business plan, if implemented
as drafted, will make our company successful, we have no operating history
against which we can test our plans and assumptions, and therefore cannot
evaluate the likelihood of success.
The
Jatropha Business that we are commencing is a new and highly risky business
that
has not been conducted on a similar scale in North America.
Our
business plan calls for a large scale planting and harvesting of Jatropha
plants, primarily outside of the United States, and for the subsequent
production and sale of Jatropha oil (and other Jatropha byproducts) for use
as a
biofuel primarily in the United States. We are commencing a new business and
will be subject to all of the risks normally associated with new businesses,
including risks related to the large scale production of plants that have not
heretofore been grown in large scale plantations, logistical issues related
to
the oil and biomass produced at such new plantations, market acceptance,
uncertain pricing of our products, developing governmental regulations, and
the
lack of an established market for our products.
Since
we currently have a limited amount of cash available, and are not generating
any
revenues from either our legacy bio-pharmaceutical business or our new Jatropha
Business, we are dependent upon the sales proceeds to be derived from the sale
of SaveCream, the potential sale of carbon credit purchase contracts, potential
future delivery of Jatropha oil purchase contracts, and on our ability to raise
additional funds to continue our operations and existence.
We
currently only have a limited amount of cash available, which cash is not
sufficient to fund our anticipated future operating needs beyond April 2008.
In
addition, neither our legacy bio-pharmaceutical business, nor our new Jatropha
Business currently generate any revenues from which we can pay our
administrative and operating expenses. We currently anticipate that we will
receive approximately $2,642,000 based on the currency conversion rate in effect
as of March 3, 2008 ($200,000 of the cash payment was already received in 2007)
upon the sale of our SaveCream rights to Eucodis (in addition to being relieved
of our obligation to pay approximately $3,247,000 of currently outstanding
liabilities). The closing of the SaveCream sale is currently scheduled to occur
in April 2008, and we currently have sufficient funds to operate until that
date. However, in the event that the closing of the SaveCream assets is delayed
or does not occur, we will face an immediate cash shortage, and may not be
able
to fund our anticipated operating expenses after April 2008. No assurance can
be
given that the SaveCream sale will occur, or that it will occur during the
time
period we anticipate.
We
will
continue to incur administrative and general operating expenses without revenues
until we begin selling Jatropha oil, or until we complete the sales of carbon
credit purchase contracts. Based on our current monthly operating expenses
and
our projected future operating expenses, even if the SaveCream sale closes
as
planned, we will need to obtain significant additional funding during 2008
for
our planned Mexico Jatropha plantations and our ongoing operating expenses.
Such
additional funds could be obtained from the sale of equity, from forward
purchase payments for our products, joint venture arrangements, carbon credit
sales, or debt financing. While we are currently engaged in discussions
regarding various of these financial arrangements, there can be no assurance
that we will be able to complete any of these arrangements or that we will
be
able to obtain the capital we require. In addition, we cannot be sure that
any
financing that we do obtain will be on terms that are commercially favorable
for
us. In the event that we do not obtain additional funding in the near future,
we
may not be able to maintain our current operations and will not be able to
implement our business plan.
In
addition, our Jatropha Business will require that we acquire and cultivate
a
large amount of land and otherwise incur significant initial start-up expenses
related to establishing the Jatropha plantations required for our proposed
business. We currently do not have the capital that is necessary to acquire
the
land or to otherwise fund the large up-front expenses, nor has any entity agreed
to provide us with such funds. Accordingly, the success of our new Jatropha
Business is contingent on, among other things, our ability to raise the
necessary capital to fund our planned Jatropha Business expenditures.
Historically, we have raised capital through the issuance of debt and equity
securities. However, given the risks associated with a new, untested biofuels
business, the risks associated with our common stock (as discussed below),
and
our status as a small, unknown public company, we cannot guarantee that we
will
be able to raise capital, or if we are able to raise capital, that such capital
will be in the amounts needed. Our failure to raise capital, when needed and
in
sufficient amounts, will severely impact our ability to develop our Jatropha
Business.
The
closing of the sale of the SaveCream assets to Eucodis is uncertain and is
dependent upon events beyond our control.
We
recently entered into a letter agreement with Eucodis pursuant to which we
agreed to sell our legacy SaveCream drug candidate assets to Eucodis for
4,007,534 euros (or U.S. $6,089,000 based on the currency conversion rate in
effect as of March 3, 2008), of which approximately U.S. $2,642,000 will be
paid
in cash at the closing (we already received $200,000 in 2007), if Eucodis can
complete the purchase by the end of April 2008. Eucodis has informed us that
it
wants to complete the purchase of the SaveCream assets as soon as possible
and
that it has an agreement in place for the funding needed to complete that sale.
However, the financing that Eucodis is obtaining has not yet been received,
and
no assurance can be given that Eucodis will be able to obtain that financing
by
the end of April 2008, or ever. If Eucodis is unable to obtain the funding,
or
for other reasons is not willing or able to complete the purchase of the
SaveCream assets, we will have to commence marketing our SaveCream assets to
other entities. While we believe that our SaveCream assets have substantial
value and will be attractive to other pharmaceutical companies, we neither
know
the exact amount that potential buyers would pay for those assets nor when
we
would be able to sell/license those assets. Accordingly, if Eucodis does not
purchase the SaveCream assets, our ability to monetize our remaining legacy
pharmaceutical assets is uncertain.
Our
business could be significantly impacted by changes in government regulations
over energy policy.
Our
planned operations and the properties we intend to cultivate are subject to
a
wide variety of federal, provincial and municipal laws and regulations,
including those governing the use of land, type of development, use of water,
use of chemicals for fertilizer, pesticides, export or import of various
materials including plants, oil, use of biomass, handling of materials, labor
laws, storage handling of materials, shipping, and the health and safety of
employees. As such, the nature of our operations exposes us to the risk of
claims with respect to such matters and there can be no assurance that material
costs or liabilities will not be incurred in connection with such claims. In
addition, these governmental regulations, both in the U.S. and in the foreign
countries in which we may conduct our business, may restrict and hinder our
operations and may significantly raise our cost of operations. Any breach by
our
company of such legislation may also result in the suspension or revocation
of
necessary licenses, permits or authorizations, civil liability and the
imposition of fines and penalties, which would adversely affect our ability
to
operate and our financial condition.
Further,
there is no assurance that the laws, regulations, policies or current
administrative practices of any government body, organization or regulatory
agency in the United States or any other jurisdiction, will not be changed,
applied or interpreted in a manner which will fundamentally alter the ability
of
our company to carry on our business. The actions, policies or regulations,
or
changes thereto, of any government body or regulatory agency, or other special
interest groups, may have a detrimental effect on our company. Any or all of
these situations may have a negative impact on our operations.
Our
future growth is dependent upon strategic relationships within the feedstock
and
bio-diesel industries. If we are unable to develop and maintain such
relationships, our future business prospects could be significantly
limited.
Our
future growth will generally be dependent on relationships with third parties,
including alliances with feedstock oil and bio-diesel processors and
distributors. In addition, we will likely rely on third parties to oversee
the
operations and cultivation of the Jatropha plants in our non-U.S. properties.
Accordingly, our success will be significantly dependent upon our ability to
establish successful strategic alliances with third parties and on the
performance of these third parties. These third parties may not regard their
relationship with us as important to their own business and operations, and
there is no assurance that they will commit the time and resources to our joint
projects as is necessary, or that they will not in the future reassess their
commitment to our business. Furthermore, these third parties may not perform
their obligations as agreed. In the event that a strategic relationship is
discontinued for any reason, our business, results of operations and financial
condition may be materially adversely affected.
We
will depend on key service providers for assistance and expertise in beginning
operations and any failure or loss of these relationships could delay our
operations, increase our expenses and hinder our success.
Because
of our limited financial and personnel resources, and because our Jatropha
plantations are expected to be established primarily outside of the United
States, we will have to establish and maintain relationships with several key
service providers for land acquisition, the development and cultivation of
Jatropha plantations, labor management, the transportation of Jatropha oil
and
biomass, and other services. We have already established such a relationship
with the Lodemo Group in Mexico concerning the cultivation and management of
our
Jatropha nurseries and plantations in Mexico and the transportation of our
products. Accordingly, our ability to develop our Jatropha Business in Mexico,
and our success in Mexico, will to a large extent be dependent upon the efforts
and services of the Lodemo Group. While the Lodemo Group has significant
experience in diesel distribution and sales, liquids transportation, logistics,
land development and agriculture, no assurance can be given that our joint
operations with the Lodemo Group will be successful or that we will be able
to
achieve our goals in Mexico.
A
significant decline in the price of oil could have an adverse impact in our
profitability.
Our
success is dependent in part to the current high price of crude oil and on
the
high price of seed oils that are currently used to manufacture bio-diesel.
A
significant decline in the price of either crude oil or the alternative seed
oils will have a direct negative impact on our financial performance
projections.
There
are risks associated with conducting our business operations in foreign
countries, including political and social unrest.
Our
proposed agricultural operations will be primarily located in foreign countries,
beginning in Mexico. Accordingly, we are subject to risks not typically
associated with ownership of U.S. companies and therefore should be considered
more speculative than investments in the U.S.
Mexico
is
a developing country that has experienced a range of political, social and
economic difficulties over the last decade. Our operations could be affected
in
varying degrees by political instability, social unrest and changes in
government regulation relating to foreign investment, the biofuels industry,
and
the import and export of goods and services. Operations may also be affected
in
varying degrees by possible terrorism, military conflict, crime, fluctuations
in
currency rates and high inflation.
In
addition, Mexico has a nationalized oil company, and there can be no assurance
that the government of Mexico will continue to allow our business and our assets
to compete in any way with their interests. Our operations could be adversely
affected by political, social and economic unrest in Mexico and the other
foreign countries we plan for commence agricultural operations.
The
cost of developing and operating our agricultural projects significantly exceeds
our current financial budget.
Our
preliminary budget contemplates the cultivation of 20,000-hectare of Jatropa
in
Mexico. According to our business plan, this will be the first of several other
large plantations used in our feedstock/biofuel operations. In addition, we
will
have to construct a plant nursery and research facility as well as a seed oil
extraction facility. We currently do not have the funds necessary to fund our
planned operations. Unless we are able to obtain the necessary funds on
economically viable terms, our Jatropha Business will not succeed, and we will
not be able to meet our business goals. In addition, even if we obtain the
initial funds necessary to establish our plantation and facilities, the costs
to
develop and implement our proposed plantation and support facilities, and our
other operational costs could significantly increase beyond our expectations
due
to economic factors, design modifications, implementation or construction delays
or cost overruns. In such an event, our profitability and ultimately the
financial condition of our company will be adversely affected.
We
plan to grow rapidly and our inability to keep up with such growth may adversely
affect our profitability.
We
plan
to grow rapidly and significantly expand our operations. This growth will place
a significant strain on our management team and other company resources. We
will
not be able to implement our business strategy in a rapidly evolving market
without effective planning and management processes. We have a short operating
history and have not implemented sophisticated managerial, operational and
financial systems and controls. We are required to manage multiple relationships
with various strategic partners, including suppliers, distributors, and other
third parties. To manage the expected growth of our operations and personnel,
we
will have to significantly supplement our existing managerial, financial and
operational staff, systems, procedures and controls. If we are unable to
supplement and complete, in a timely manner, the improvements to our systems,
procedures and controls necessary to support our future operations, our
operations will not function effectively. In addition, our management may be
unable to hire, train, retain, motivate and manage required personnel, or
successfully identify, manage and exploit existing and potential market
opportunities. As a result, our business and financial condition may be
adversely affected.
Our
business will not be diversified because we will be primarily concentrated
in
one industry. As a consequence, we may not be able to adapt to changing market
conditions or endure any decline in the bio-diesel industry.
We
expect
our business to consist primarily of sales of feedstock oil harvested from
the
Jatropha plant, and bio-diesel production and sales. We do not have any other
lines of business or other sources of revenue to rely upon if we are unable
to
produce and sell feedstock oil and bio-diesel, or if the markets for such
products decline. Our lack of diversification means that we may not be able
to
adapt to changing market conditions or to withstand any significant decline
in
the bio-diesel industry.
Reductions
in the price of bio-diesel, and decreases in the price of petroleum-based fuels
could affect the price of our feedstock, resulting in reductions in our actual
revenues.
Historically,
bio-diesel prices have been highly correlated to the Ultra Low Sulfur (“ULS”)
diesel prices. Increased volatility in the crude oil market has an effect on
the
stability and long-term predictability of ULS diesel, and hence the biofuels
prices in the domestic and international markets. Crude oil prices are impacted
by wars and other political factors, economic uncertainties, exchange rates
and
natural disasters. A reduction in petroleum-based fuel prices may have an
adverse effect on bio-diesel prices and could apply downward pressure on
feedstock, affecting revenues and profits in the feedstock industry, which
could
adversely affect our financial condition.
There
are several agreements and relationships that remain to be negotiated, executed
and implemented which will have a critical impact on our operations, expenses
and profitability.
We
have
several agreements, documents and relationships that remain to be negotiated,
executed and implemented before we can develop fully commence our new
operations, including agreements relating to the construction of our proposed
seed processing plant and other support facilities for our Jatropha plantation
in Mexico. In some cases, the parties with whom we would need to establish
a
relationship have yet to be identified. Our expectations regarding the likely
terms of these agreements and relationships could vary greatly from the terms
of
any agreement or relationship that may eventually be executed or established.
If
we are unable to enter into these agreements or relationships on satisfactory
terms, or if revisions or amendments to existing terms become necessary, the
construction of our proposed seed processing plant and the commencement of
our
related operations could be delayed, our expenses could be increased and our
profitability could be adversely affected and the value of your investment
could
decline.
Delays
due to, among others, weather, labor or material shortages, permitting or zoning
delays, or opposition from local groups, may hinder our ability to commence
operations in a timely manner.
Our
development schedule assumes the commencement of planting in the first half
of
2008, with oil production anticipated 18 months thereafter. We could incur
delays in the implementation of that plan or the construction of support
facilities due to permitting or zoning delays, opposition from local groups,
adverse weather conditions, labor or material shortages, or other causes. In
addition, changes in political administrations at the federal, state or local
level that result in policy changes towards the large scale cultivation of
Jatropha or towards biofuels in general could result in delays in our timetable
for development and commencement of operations. Any such delays could adversely
affect our ability to commence operations and generate revenue.
We
may be unable to locate suitable properties and obtain the development rights
needed to build and expand our business.
Our
business plan focuses on identifying and developing agricultural properties
(plantations, nurseries, etc.) for the production of biofuels feedstock. The
availability of land for this activity is key to our projected revenue and
profitability. Our ability to acquire appropriate land in the future is
uncertain and we may be required to delay planting, which may create
unanticipated costs and delays. In the event that we are not successful in
identifying and obtaining rights on suitable land for our agricultural and
processing facilities, our future prospects for profitability will likely be
affected, and our financial condition and resulting operations may be adversely
affected.
Technological
advances in feedstock oil production methods in the bio-diesel industry could
adversely affect our ability to compete and the value of your investment.
Technological
advances could significantly decrease the cost of producing feedstock oil and
biofuels. There is significant research and capital being invested in
identifying more efficient processes, and lowering the cost of producing
feedstock oil and biofuels. We expect that technological advances in feedstock
oil/biofuel production methods will continue to occur. If improved technologies
become available to our competitors, they may be able to produce feedstock
oil,
and ultimately biofuels, at a lower cost than us. If we are unable to adopt
or
incorporate technological advances into our operations, our ability to compete
effectively in the feedstock/biofuels market may be adversely affected, which
in
turn will affect our profitability.
The
development of alternative fuels and energy sources may reduce the demand for
biofuels, resulting in a reduction in our profitability.
Alternative
fuels, including a variety of energy alternatives to biofuels, are continually
under development. Technological advances in fuel-engines and exhaust system
design and performance could also reduce the use of biofuels, which would reduce
the demand for bio-diesel. Further advances in power generation technologies,
based on cleaner hydrocarbon based fuels, fuel cells and hydrogen are actively
being researched and developed. If these technological advances and alternatives
prove to be economically feasible, environmentally superior and accepted in
the
marketplace, the market for biofuels could be significantly diminished or
replaced, which would adversely affect our financial condition.
Our
ability to hire and retain key personnel and experienced consultants will be
an
important factor in the success of our business and a failure to hire and retain
key personnel may result in our inability to manage and implement our business
plan.
We
are
highly dependent upon our management, and on the consulting services provided
to
us by Mobius Risk Group, LLC, a company we have retained to provide us with
consulting services related to the development of our Jatropha Business. The
loss of the services of one or more of these individuals or of Mobius may impair
management's ability to operate our company. We have not purchased key man
insurance on any of our officers, which insurance would provide us with
insurance proceeds in the event of their death. Without key man insurance,
we
may not have the financial resources to develop or maintain our business until
we could replace such individuals or to replace any business lost by the death
of such individuals. We may not be able to attract and retain the necessary
qualified personnel. If we are unable to retain or to hire qualified personnel
as required, we may not be able to adequately manage and implement our
business.
Our
operating costs could be higher than we expect, and this could reduce our future
profitability.
In
addition to general economic conditions, market fluctuations and international
risks, significant increases in operating, development and implementation costs
could adversely affect our company due to numerous factors, many of which are
beyond our control. These increases could arise for several reasons, such
as:
|
·
|
Increased
cost for land acquisition;
|
|
·
|
Increased
unit costs of labor for nursery, field preparation and
planting;
|
|
·
|
Increased
costs for construction of
facilities;
|
|
·
|
Increased
transportation costs for required nursery and field workers;
|
|
·
|
Increased
costs of supplies and sub-contacted labor for preparing of land for
planting;
|
|
·
|
Increase
costs for irrigation, soil conditioning, soil maintenance;
or
|
|
·
|
Increased
time for planting and plant care and
custody.
|
Upon
completion of our field developments, our operations will also subject us to
ongoing compliance with applicable governmental regulations, including those
governing land use, water use, pollution control, worker safety and health
and
welfare and other matters. We may have difficulty complying with these
regulations and our compliance costs could increase significantly. Increases
in
operating costs would have a negative impact on our operating income, and could
result in substantially decreased earnings or a loss from our operations,
adversely affecting our financial condition.
Fluctuations
in the Mexican peso to U.S. dollar exchange rate may adversely affect our
reported operating results.
The
Mexican peso is the primary operating currency for our initial business
operations while our financial results are reported in U.S. dollars. Because
our
costs will be primarily denominated in pesos, a decline in the value of the
dollar to the peso could negatively affect our actual operating costs in U.S.
dollars, and our reported results of operations. We do not currently engage
in
any currency hedging transactions intended to reduce the effect of fluctuations
in foreign currency exchange rates on our results of operations. We cannot
guarantee that we will enter into any such currency hedging transactions in
the
future or, if we do, that these transactions will successfully protect us
against currency fluctuations.
Risk
of abandoned operations or decommissioning costs are unknown and may be
substantial.
We
may be
responsible for costs associated with abandoning land development and product
processing facilities, which we intend to use for production of biofuels
feedstock. We expect to have long term commitments on land and facilities and
short to medium commitments for labor and other services. Abandonment of these
developments and contracts and the associated decommissioning costs could be
substantial and may have an effect on future profitability.
Our
future profitability is dependent upon many natural factors outside of our
control. If these factors do not produce favorable results our future business
profitability could be significantly affected.
Our
future profitability is
mainly
dependent on the production output from our agricultural operations. There
are
many factors that can effect growth and fruit production of the Jatropha plant
including weather, nutrients, pests and other natural enemies of the plant.
Many
of these are outside of our direct control and could be devastating to our
operations.
Risks
Relating to Our Common Stock
Our
stock is thinly traded, so you may be unable to sell your shares at or near
the
quoted bid prices if you need to sell a significant number of your shares.
The
shares of our common stock are thinly traded on the Pink Sheets LLC electronic
trading platform, meaning that the number of persons interested in purchasing
our common shares at or near bid prices at any given time may be relatively
small or non-existent. This situation is attributable to a number of factors,
including the fact that we are a small company which is relatively unknown
to
stock analysts, stock brokers, institutional investors and others in the
investment community that generate or influence sales volume, and that even
if
we came to the attention of such persons, they tend to be risk-averse and would
be reluctant to follow an unproven, early stage company such as ours or purchase
or recommend the purchase of our shares until such time as we became more
seasoned and viable. As a consequence, there may be periods of several days
or
more when trading activity in our shares is minimal or non-existent, as compared
to a seasoned issuer which has a large and steady volume of trading activity
that will generally support continuous sales without an adverse effect on share
price. We cannot give you any assurance that a broader or more active public
trading market for our common shares will develop or be sustained, or that
current trading levels will be sustained. Due to these conditions, we can give
you no assurance that you will be able to sell your shares at or near bid prices
or at all if you need money or otherwise desire to liquidate your shares.
Our
existing directors, officers and key employees hold a substantial amount of
our
common stock and may be able to prevent other shareholders from influencing
significant corporate decisions.
As
of
December 31, 2007, our directors and executive officers, beneficially owned
approximately 35.1% of our outstanding common stock. These shareholders, if
they
act together, may be able to direct the outcome of matters requiring approval
of
the shareholders, including the election of our directors and other corporate
actions such as:
|
·
|
our
merger with or into another company;
|
|
·
|
a
sale of substantially all of our assets; and
|
|
·
|
amendments
to our articles of incorporation.
|
The
decisions of these shareholders may conflict with our interests or those of
our
other shareholders.
The
market price of our stock may be adversely affected by market
volatility.
The
market price of our common stock is likely to be volatile and could fluctuate
widely in response to many factors, including:
|
·
|
fluctuation
in the world price of crude oil;
|
|
·
|
market
changes in the biofuels industry;
|
|
·
|
government
regulations affecting renewable energy businesses and
users;
|
|
·
|
actual
or anticipated variations in our operating
results;
|
|
·
|
our
success in meeting our business goals and the general development
of our
proposed operations;
|
|
·
|
general
economic, political and market conditions in the U.S. and the foreign
countries in which we plan to operate;
and
|
|
·
|
the
occurrence of any of the risks described in this Annual
Report.
|
Obtaining
additional capital though the sale of common stock will result in dilution
of
shareholder interests.
We
plan
to raise additional funds in the future by issuing additional shares of common
stock or other securities, which may include securities such as convertible
debentures, warrants or preferred stock that are convertible into common stock.
Any such sale of common stock or other securities will lead to further dilution
of the equity ownership of existing holders of our common stock. Additionally,
the existing options, warrants and conversion rights may hinder future equity
offerings, and the exercise of those options, warrants and conversion rights
may
have an adverse effect on the value of our stock. If any such options, warrants
or conversion rights are exercised at a price below the then current market
price of our shares, then the market price of our stock could decrease upon
the
sale of such additional securities. Further, if any such options, warrants
or
conversion rights are exercised at a price below the price at which any
particular shareholder purchased shares, then that particular shareholder will
experience dilution in his or her investment.
We
are unlikely to pay dividends on our common stock in the foreseeable
future.
We
have
never declared or paid dividends on our stock. We currently intend to retain
all
available funds and any future earnings for use in the operation and expansion
of our business. We do not anticipate paying any cash dividends in the
foreseeable future, and it is unlikely that investors will derive any current
income from ownership of our stock. This means that your potential for economic
gain from ownership of our stock depends on appreciation of our stock price
and
will only be realized by a sale of the stock at a price higher than your
purchase price.
Trading
of our stock may be restricted by the Securities and Exchange Commission's
penny
stock regulations, which may limit a shareholder's ability to buy and sell
our
stock.
The
Securities and Exchange Commission has adopted regulations which generally
define “penny stock” to be any equity security that has a market price less than
$5.00 per share or an exercise price of less than $5.00 per share, subject
to
certain exceptions. Our securities are covered by the penny stock rules, which
impose additional sales practice requirements on broker-dealers who sell to
persons other than established customers and “accredited investors.” The term
“accredited investor” refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny
stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the Securities and Exchange Commission, which
provides information about penny stocks and the nature and level of risks in
the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer's
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer's confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.
ITEM
2.
|
DESCRIPTION
OF PROPERTY.
|
Currently,
we operate out of offices of an unaffiliated bio-diesel company located at
6033
W. Century Blvd, Suite 1090, Los Angeles, California 90045. We moved to this
location in September 2007 (previously, our offices were located in Salt Lake
City, Utah) and we have been using these facilities without any obligation
to
make any lease or rental payments. We plan to move to our own office in the
near
future and are currently looking for office space.
ITEM
3.
|
LEGAL
PROCEEDINGS.
|
On
August
22, 2006, we initiated legal proceedings in Landgericht Hamburg, a German
Federal Court in Hamburg - Germany, against Dr. Alfred Schmidt to obtain certain
rights concerning “SaveCream”, a developmental topical aromatase inhibitor cream
relevant to our legacy bio-pharmaceutical business. No cross complaints have
been filed against us in this matter. We acquired the “SaveCream” rights and
certain other related intellectual property assets from the liquidator of
Savetherapeutics AG i.L., a German corporation, pursuant to an asset purchase
agreement dated as of March 11, 2005. Pursuant to our agreement with Eucodis,
Eucodis has agreed to assume and become financially responsible for all costs
we
incur in connection with the foregoing litigation. If we do not sell our
SaveCream assets to Eucodis, we will have to bear any future expenses related
to
this litigation.
In
January 2008, in an action titled Bowne
of Los Angeles, Inc. vs. Medical Discoveries, Inc.,
Bowne
of Los Angeles, Inc. filed a lawsuit against us in the Third District Court,
Salt Lake County, State of Utah, alleging that we failed to pay Bowne
$59,399.47. Bowne is also seeking interest and legal fees. We have been in
discussions with Bowne to settle this dispute. However, on March 13, 2008,
Bowne
filed a Notice Of Intent To Take Default Judgment. If the default judgment
is
granted, we will become liable for the entire amount claimed by
Bowne.
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|
No
matters were submitted to a vote of security holders during the fourth quarter
of the fiscal year covered by this report.
PART
II
ITEM
5.
|
MARKET
FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS, AND SMALL BUSINESS
ISSUER’S PURCHASE OF EQUITY SECURITIES.
|
Until
July 2007, our common stock was traded on the OTC Bulletin Board under the
symbol “MLSC.” Due to our failure to timely file reports with the Securities and
Exchange Commission, in July 2007, we were de-listed from the OTC Bulletin
Board. Thereafter, our common stock has traded on the Pink Sheets LLC trading
platform. On February 29, 2008, in connection with our name change, our trading
symbol was changed to “GCEH.” We have submitted an application to have our
common stock re-listed on the OTC Bulletin Board.
The
following table sets forth the range of bid quotations for our common stock
for
the quarters indicated according to data provided by The NASDAQ Stock Market,
Inc. Such quotations reflect inter-dealer prices, without retail mark-ups,
markdowns or commissions, and may not represent actual transactions.
Fiscal Year Ended December 31, 2007
|
|
High Bid
|
|
Low Bid
|
|
First
Quarter
|
|
$
|
0.049
|
|
$
|
0.022
|
|
Second
Quarter
|
|
$
|
0.050
|
|
$
|
0.011
|
|
Third
Quarter
|
|
$
|
0.080
|
|
$
|
0.020
|
|
Fourth
Quarter
|
|
$
|
0.087
|
|
$
|
0.030
|
|
Fiscal Year Ended December 31, 2006
|
|
High Bid
|
|
Low Bid
|
|
First
Quarter
|
|
$
|
0.190
|
|
$
|
0.090
|
|
Second
Quarter
|
|
$
|
0.155
|
|
$
|
0.075
|
|
Third
Quarter
|
|
$
|
0.105
|
|
$
|
0.023
|
|
Fourth
Quarter
|
|
$
|
0.080
|
|
$
|
0.030
|
|
Shareholders
As
of
December 31, 2007, we believe that we have approximately 2,950 shareholders
of
our common stock.
Dividends
We
have
never paid any cash dividends on our common stock and do not anticipate paying
dividends in the foreseeable future. We presently intend to retain any future
earnings for financing our growth and expansion.
Securities
Authorized For Issuance Under Equity Compensation Plans
The
following table contains information regarding our equity compensation plans
as
of December 31, 2007.
Plan Category
|
|
Number of
Securities to be
Issued upon
Exercise of
Outstanding
Options,
Warrants and
Rights
|
|
Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights
|
|
Number of
Securities
Remaining
Available for
Future
Issuance under
Equity
Compensation
Plans
(Excluding
Securities
Reflected in
the First
Column)
|
|
Equity
compensation plans approved by security holders
|
|
|
|
|
|
|
|
|
|
|
1993
Incentive Plan (1)
|
|
|
3,383,000
|
|
$
|
0.13
|
|
|
-0-
|
|
2002
Stock Incentive Plan
|
|
|
14,500,000
|
|
$
|
0.04
|
|
|
5,500,000
|
|
Equity
compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
58,033,379
|
|
$
|
0.02
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
75,916,379
|
|
|
|
|
|
|
|
(1)
The
1993 Incentive Plan has expired and no additional options or awards can be
granted under this plan.
Repurchase
of Shares
We
did
not repurchase any of its shares during the fourth quarter of the fiscal year
covered by this report.
ITEM
6. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
|
Overview
During
the period covered by this Annual Report, we were a development stage company
that devoted substantially all of its efforts to the research and development
of
its two principal drug candidates. During 2007, we decided to discontinue the
development of our two drug candidates, decided to sell our two drug
technologies, and have commenced a new business as a renewable alternative
energy source company. As a result, the “Results of Operations” section below
contains a description of both the results of a business that we no longer
intend to pursue and the results of the new biofuels business that we are
currently conducting.
Critical
Accounting Policies
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States require management to make estimates
and
assumptions that affect the reported assets, liabilities, sales and expenses
in
the accompanying financial statements. Critical accounting policies are those
that require the most subjective and complex judgments, often employing the
use
of estimates about the effect of matters that are inherently uncertain. We
are a
development stage company as defined by the Financial Accounting Standards
Board’s (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 7,
“Accounting and Reporting by Development Stage Enterprises.” Accordingly, all
losses accumulated since inception have been considered as part of our
development stage activities. Certain other critical accounting policies,
including the assumptions and judgments underlying them, are disclosed in the
Note A to the Consolidated Financial Statements included in this annual report.
However, we do not believe that there are any alternative methods of accounting
for our operations that would have a material affect on our financial
statements.
Results
Of Operations
As
discussed previously, in 2007 the Board of Directors determined to discontinue
our prior bio-pharmaceutical operations. Pursuant to accounting rules for
discontinued operations, we have classified all revenue and expense, except
general corporate overhead, for 2007 and prior periods related to the operations
of our bio-pharmaceutical business as discontinued operations.
Revenues
and Gross Profit.
We are
a development stage company and have not had significant revenues from our
operations or reached the level of our planned operations. We discontinued
our
prior bio-pharmaceutical operations in March 2007. In September 2007, we
commenced operations in our new bio-fuels Jatropha business, but we are still
in
the pre-development agricultural stage of our operations and, therefore, do
not
anticipate generating significant revenues from the sale of bio-fuel products
until 2009. We are, however, attempting to generate cash in 2008 from the
forward sale of carbon credits and possibly from future oil delivery contracts.
During the years ended December 31, 2007 and 2006, we recognized revenue of
$200,000 and $800,000, respectively, related to our discontinued
bio-pharmaceutical business, which revenue is included in Loss from Discontinued
Operations in the accompanying Consolidated Statements of Operations.
Operating
Expenses.
Our
general and administrative expenses related to continuing operations for the
year ended December 31, 2007, were $2,950,000 compared to $515,000 for the
year
ended December 31, 2006. In 2007, general and administrative expense includes
general corporate overhead of $935,000 and includes share-based compensation
of
$2,015,000. In 2006, general and administrative expense in the amount of
$515,000 principally consisted of estimated general corporate overhead. We
have
included expenses such as director fees, accounting costs, certain legal costs,
certain consulting expenses, and an allocation of our employees’ compensation as
general corporate overhead. Other general and administrative expenses more
directly related to the operation and disposal of our bio-pharmaceutical
business have been included in Loss from Discontinued Operations.
For
the
year ended December 31, 2007, we have recorded research and development costs
of
$987,000 related to the value of common stock issued in exchange for certain
trade secrets, know-how, business plans, term sheets, business relationships,
and other information in connection with the share exchange with Global Clean
Energy Holdings, LLC. Otherwise, we did not incur any research and development
expenses during the year ended December 31, 2007 due to our Board of Directors’
decision to discontinue funding development of the SaveCream and MDI-P drug
candidate assets. We incurred $2,027,000 of research and development expenses
for the year ended December 31, 2006, which principally related to our
acquisition of the patents and patent rights relating to SaveCream, which are
included in Loss from Discontinued Operations.
Other
Income/ Expense and Net Loss.
Our
interest income increased to $4,000 for the year ended December 31, 2007, from
$3,000 for the year ended December 31, 2006 principally due to cash balances
generated from the sale of Series B preferred stock in the final quarter of
2007.
During
the year ended December 31, 2007, we recorded $148,000 as unrealized loss on
financial instrument to record the accounting for warrants resulting from the
issuance of the Series A Convertible Preferred Stock entered into in
October 2004 and March 2005, the cancellation and reissuance in September
2007 of certain related warrants to purchase 27,452,973 shares of common stock
in connection with a new secured promissory note, and other warrants issued
in
2007 to non-employees. During the year ended December 31, 2006, we recorded
unrealized gains of $2,565,000 as a result of the accounting for these warrants.
This non-cash gain and loss recognition on financial instrument is the result
of
the periodic revaluation of certain warrants classified as a liability in the
financial statements.
In
connection with the accounting for the cancellation and reissuance of warrants
mentioned in the previous paragraph, we recorded a discount to the associated
secured promissory note of $250,000. The discount to the note was amortized
over
the term of the loan agreement from September
7, 2007 to December 14, 2007, and was recorded as “interest expense from
amortization of discount on secured promissory note.” Interest expense increased
from $30,000 for the year ended December 31, 2006 to $52,000 for the year ended
December 31, 2007. The increase in interest expense is primarily attributable
to
interest on the new secured promissory note issued in September
2007.
For
the
year ended December 31, 2007, we recorded “Gain on debt restructuring” of
$485,000. This gain consisted of (i) a gain of $395,000 on settlement of amounts
due to our former Chief Executive Officer, and (ii) a gain of $90,000 on the
settlement of a note payable that was contingent on the outcome on our sale
of
MDI-P. The liability in the amount of $90,000 was extinguished because it was
only payable if and when we received $1 million in cumulative license revenue
from the MDI-P compound in any human indication. Since we sold the MDI-P
compound for less than $1 million, this liability is no longer owed and was
written off. For the year ended December 31, 2006, we recorded “Gain on debt
restructuring” of $608,000 principally related to recognizing certain previously
recorded liabilities as having passed the statute of limitations for
collection.
Our
Loss
from Discontinued Operations was $518,000 for the year ended December 31, 2007,
compared to $2,815,000 for the year ended December 31, 2006.
Liquidity
And Capital Resources
As
of
December 31, 2007 we had $805,338 in cash and a working capital deficit of
$7,344,000, as compared with $48,000 in cash and a working capital deficit
of
$5,527,000 at December 31, 2006.
Since
our
inception, we have financed our operations primarily through private sales
of
our securities. As of December 31, 2006, our financial resources were not
sufficient to fund our on-going research and development activities or to fund
our general and operating expenses. Accordingly, early in 2007 we re-evaluated
our future operations thereafter elected to terminate our bio-pharmaceutical
operations.
Our
ability to fund our liquidity and working capital needs in the near future
will
be dependent upon certain pending and potential transactions. The principal
pending transaction is the sale of certain of our legacy pharmaceutical assets.
In July 2007, we executed the Asset Sale Agreement with Eucodis pursuant to
which we agreed to sell our SaveCream asset for an aggregate of €4,007,534
(or U.S. $6,089,000 based on the currency conversion rate in effect as of March
3, 2008), a portion of which comprised (i) a cash payment of €1,538,462,
which
is due and payable to us at the closing, less $200,000 already received from
Eucodis in March 2007 upon the signing of the Letter of Intent, and (ii)
Eucodis’ assumption of an aggregate of €2,469,072,
constituting specific indebtedness currently owed to certain of our creditors.
We recently entered into a letter agreement with Eucodis pursuant to which
we
agreed that the price for the assets (4,007,534 euros) would remain the same,
but that the amount indebtedness that Eucodis is required to assume will be
reduced by 332,875 euros, and the amount to be paid at closing would be
increased by this 332,875 euro amount. Accordingly, if the closing occurs,
we
will receive a total of 1,871,337 euros (or approximately U.S. $2,642,000 based
on the currency conversion rate in effect as of March 3, 2008) at the closing.
The closing of the sale to Eucodis is currently scheduled to occur at such
time
as Eucodis completes its financing, but in no event later than April 30, 2008.
No assurance can be given that this sale will be completed.
In
August
2007, we sold our second drug candidate, the MDI-P compound, for $310,000 in
cash.
In
order
to fund ongoing operations pending closing of the sale to Eucodis, we entered
into the Loan Agreement with, and issued a promissory note in favor of, with
Mercator Momentum Fund III, L.P. (“Mercator”). Pursuant to the loan agreement,
Mercator made available to us a secured term credit facility in principal amount
of $1,000,000. Interest is payable on the Loan at a rate of 12% per annum,
payable monthly. We have agreed not to request any further advances under the
loan agreement. As of March 27, 2008, the remaining outstanding principal
balance of amounts we borrowed under the loan agreement was $200,000. The loan
currently matures and becomes due and payable on June 21, 2008. The loan is
secured by a first priority lien on all of our assets.
In
November 2007, we issued 13,000 shares of our newly created Series B Convertible
Preferred Stock to two accredited investors for an aggregate of
$1,300,000.
We
are
currently funding our operations from the Mercator loan and from the proceeds
of
the sale of the Series B Convertible Preferred Stock. Assuming that the sale
of
SaveCream to Eucodis is completed in April 2008, we will have sufficient cash
to
fund our projected corporate operating expenses for the balance of 2008.
However, our business plan calls for significant infusion of additional capital
to establish our Jatropha plantations in Mexico and other locations. We
currently do not have the funds necessary to acquire and cultivate those
plantations, nor will the projected proceeds from the Eucodis sale be sufficient
for those purposes. Accordingly, in addition to the proceeds we expect to
receive upon the sale of SaveCream to Eucodis, we will have to obtain
significant additional capital through the sale of additional equity and/or
debt
securities, the forward sale of Jatropha oil and carbon offset credits, and
from
other financing activities, such as strategic partnerships. While we have
commenced negotiations with third parties to obtain additional funding from
strategic partnerships and for the sale of carbon credits, no assurance can
be
given that we will have sufficient capital available to continue to operate
our
business in 2008 or that we will be able to effect our new business plan in
the
Jatropha Business.
We
have
no off-balance sheet arrangements as defined in Item 303(c) of Regulation
S-B.
ITEM
7. FINANCIAL
STATEMENTS.
|
|
A
Professional Corporation
|
Registered
with the Public Company
|
CERTIFIED
PUBLIC ACCOUNTANTS
|
Accounting
Oversight Board
|
AND
|
BUSINESS
CONSULTANTS
|
5
Triad Center, Suite 750
|
Salt
Lake City, UT 84180-1128
|
Phone:
(801) 532-2200
|
Fax:
(801) 532-7944
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Shareholders
Medical
Discoveries, Inc.
We
have
audited the accompanying consolidated balance sheets of Global Clean Energy
Holdings, Inc. and subsidiaries (a development stage company) as of December
31,
2007 and 2006, and the related consolidated statements of operations,
stockholders’ deficit, and cash flows for the years then ended, and for the
period from November 20, 1991 (date of inception of the development stage)
through December 31, 2007. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit
the
financial statements of the Company from November 20, 1991 through December
31,
2003, which statements reflect total revenues and deficit accumulated during
the
development stage of $157,044 and $14,930,259, respectively. Those statements
were audited by other auditors whose reports, dated February 18, 2004 (except
Note K, not included herein, as to which the date is November 15, 2004) and
March 20, 2000, included
an explanatory paragraph stating there was substantial doubt regarding the
Company’s ability to continue as a going concern. Our
opinion, insofar as it relates to the consolidated financial statements for
the
period from November 20, 1991 through December 31, 2003, is based solely on
the
report of the other auditors.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our
opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Global Clean Energy Holdings,
Inc.
and subsidiaries as of December 31, 2007 and 2006, and the results of their
operations and their cash flows for the years then ended and for the period
from
November 20, 1991 through December 31, 2007, in conformity with U.S. generally
accepted accounting principles.
The
accompanying consolidated financial statements have been prepared assuming
that
the Company will continue as a going concern. The
Company is a development stage enterprise previously engaged in developing
bio-pharmaceutical research and currently developing bio-diesel fuels. As
discussed in Note B to the financial statements, the stockholders’ deficit and
the operating losses since inception raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans concerning these
matters are also described in Note B. The financial statements do not include
any adjustments that might result from the outcome of these
uncertainties.
HANSEN,
BARNETT & MAXWELL,
P.C.
Salt
Lake
City, Utah
March
26,
2008
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
Development Stage Company)
CONSOLIDATED
BALANCE SHEETS
|
|
December
31,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
(Restated
for
|
|
|
|
|
|
Discontinued
|
|
|
|
|
|
Operations)
|
|
ASSETS
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
805,338
|
|
$
|
47,658
|
|
Subscription
receivable
|
|
|
75,000
|
|
|
-
|
|
Prepaid
expenses
|
|
|
51,073
|
|
|
-
|
|
Total
Current Assets
|
|
|
931,411
|
|
|
47,658
|
|
|
|
|
|
|
|
|
|
Plantation
development costs and equipment, net
|
|
|
309,341
|
|
|
789
|
|
Assets
held for sale
|
|
|
-
|
|
|
61,460
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
1,240,752
|
|
$
|
109,907
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
1,243,877
|
|
$
|
663,691
|
|
Accrued
payroll and payroll taxes
|
|
|
950,971
|
|
|
1,184,264
|
|
Accrued
interest payable
|
|
|
300,651
|
|
|
267,739
|
|
Secured
promissory note
|
|
|
250,000
|
|
|
-
|
|
Notes
payable to shareholders
|
|
|
56,000
|
|
|
56,000
|
|
Convertible
notes payable
|
|
|
193,200
|
|
|
193,200
|
|
Financial
instrument
|
|
|
2,166,514
|
|
|
294,988
|
|
Current
liabilities associated with assets held for sale
|
|
|
3,113,970
|
|
|
2,914,438
|
|
Total
Current Liabilities
|
|
|
8,275,183
|
|
|
5,574,320
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITY
|
|
|
-
|
|
|
90,000
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
8,275,183
|
|
|
5,664,320
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIT
|
|
|
|
|
|
|
|
Preferred
stock - no par value; 50,000,000 shares authorized
|
|
|
|
|
|
|
|
Series
A, convertible; 28,928 and 34,420 shares issued and outstanding,
respectively; (aggregate liquidation preference of $2,892,800 and
$3,442,000, respectively)
|
|
|
514,612
|
|
|
514,612
|
|
Series
B, convertible; 13,000 and zero shares issued or subscribed, respectively;
(aggregate liquidation preference of $1,300,000 and $0,
respectively)
|
|
|
1,290,735
|
|
|
-
|
|
Common
stock, no par value; 500,000,000 shares authorized; 174,838,967 and
118,357,704 shares issued and outstanding, respectively
|
|
|
16,526,570
|
|
|
15,299,017
|
|
Additional
paid-in capital
|
|
|
1,472,598
|
|
|
1,056,020
|
|
Deficit
accumulated prior to the development stage
|
|
|
(1,399,577
|
)
|
|
(1,399,577
|
)
|
Deficit
accumulated during the development stage
|
|
|
(25,439,369
|
)
|
|
(21,024,485
|
)
|
Total
Stockholders' Deficit
|
|
|
(7,034,431
|
)
|
|
(5,554,413
|
)
|
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
1,240,752
|
|
$
|
109,907
|
|
See
Notes
to Consolidated Financial Statements
FORMERLY
KNOWN AS MEDICAL DISCLOVERIES, INC.
(A
Development Stage Company)
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
From Inception of
|
|
|
|
|
|
the Development Stage
|
|
|
|
For
the Years Ended
|
|
on November 20, 1991
|
|
|
|
December
31,
|
|
through
|
|
|
|
2007
|
|
2006
|
|
December 31, 2007
|
|
|
|
|
|
(Restated
for
|
|
|
|
|
|
|
|
Discontinued
|
|
|
|
|
|
|
|
Operations)
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
General
and administrative
|
|
$
|
2,949,885
|
|
$
|
515,151
|
|
$
|
7,900,558
|
|
Research
and development
|
|
|
986,584
|
|
|
-
|
|
|
986,584
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
(3,936,469
|
)
|
|
(515,151
|
)
|
|
(8,887,142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expenses)
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gain (loss) on financial instrument
|
|
|
(147,636
|
)
|
|
2,564,608
|
|
|
4,717,163
|
|
Interest
income
|
|
|
4,441
|
|
|
2,866
|
|
|
62,605
|
|
Interest
expense
|
|
|
(51,929
|
)
|
|
(29,919
|
)
|
|
(1,237,549
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense from amortization of discount on secured promissory
note
|
|
|
(250,000
|
)
|
|
-
|
|
|
(250,000
|
)
|
Gain
on debt restructuring
|
|
|
485,137
|
|
|
607,761
|
|
|
2,524,787
|
|
Other
income
|
|
|
-
|
|
|
1,373
|
|
|
906,485
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Income (Expenses)
|
|
|
40,013
|
|
|
3,146,689
|
|
|
6,723,491
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) from Continuing Operations
|
|
|
(3,896,456
|
)
|
|
2,631,538
|
|
|
(2,163,651
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Discontinued Operations (net of gain on disposal of MDI-P
of $258,809
in 2007)
|
|
|
(518,428
|
)
|
|
(2,815,309
|
)
|
|
(22,583,519
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
(4,414,884
|
)
|
|
(183,771
|
)
|
|
(24,747,170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock dividend from beneficial conversion feature
|
|
|
-
|
|
|
-
|
|
|
(692,199
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss Applicable to Common Shareholders
|
|
$
|
(4,414,884
|
)
|
$
|
(183,771
|
)
|
$
|
(25,439,369
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted Income (Loss) per Common Share:
|
|
|
|
|
|
|
Income
(Loss) from Continuing Operations
|
|
$
|
(0.029
|
)
|
$
|
0.023
|
|
|
|
|
Loss
from Discontinued Operations
|
|
$
|
(0.004
|
)
|
$
|
(0.025
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(0.033
|
)
|
$
|
(0.002
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted Weighted-Average Common Shares
Outstanding
|
|
|
134,707,205
|
|
|
113,809,546
|
|
|
|
|
See
Notes
to Consolidated Financial Statements
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
Development Stage Company)
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
Period
From November 20, 1991 (Date of Inception of the Development Stage) through
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
Prior
to
|
|
During
the
|
|
Escrow/
|
|
|
|
|
|
Preferred
Stock - Series A
|
|
Preferred
Stock - Series B
|
|
Common
stock
|
|
Paid
in
|
|
Development
|
|
Development
|
|
Subscription
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Stage
|
|
Stage
|
|
Receivables
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at October 31, 1991
|
|
|
|
|
$
|
-
|
|
|
|
|
$
|
-
|
|
|
1,750,000
|
|
$
|
252,997
|
|
$
|
-
|
|
$
|
(1,482,514
|
)
|
$
|
-
|
|
$
|
-
|
|
$
|
(1,229,517
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restatement
for reverse acquisition of WPI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceutical,
Inc. by Medical Discoveries, Inc.
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(252,997
|
)
|
|
-
|
|
|
252,997
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued in merger of WPI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceutical,
Inc.Medical Discoveries, Inc., $0.01 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
10,000,000
|
|
|
135,000
|
|
|
-
|
|
|
(170,060
|
)
|
|
-
|
|
|
-
|
|
|
(35,060
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at November 20, 1991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Date
of Inception of Development Stage)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
11,750,000
|
|
|
135,000
|
|
|
-
|
|
|
(1,399,577
|
)
|
|
-
|
|
|
-
|
|
|
(1,264,577
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1992
- $0.50 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
200,000
|
|
|
100,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
100,000
|
|
1992
- $1.50 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
40,000
|
|
|
60,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
60,000
|
|
1993
- $0.97 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
542,917
|
|
|
528,500
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
528,500
|
|
1994
- $1.20 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
617,237
|
|
|
739,500
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
739,500
|
|
1995
- $0.67 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
424,732
|
|
|
283,200
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
283,200
|
|
1996
- $0.66 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
962,868
|
|
|
635,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(60,000
|
)
|
|
575,000
|
|
1997
- $0.43 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
311,538
|
|
|
135,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
60,000
|
|
|
195,000
|
|
1998
- $0.29 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,236,928
|
|
|
650,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
650,000
|
|
1999
- $0.15 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
13,334
|
|
|
2,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,000
|
|
2001
- $0.15 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
660,000
|
|
|
99,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
99,000
|
|
2003
- $0.04 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
20,162,500
|
|
|
790,300
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
790,300
|
|
2004
- $0.09 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
20,138,024
|
|
|
1,813,186
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,813,186
|
|
2005
- $0.18 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,922,222
|
|
|
281,926
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
281,926
|
|
Services
and Interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1992
- $0.50 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
500,000
|
|
|
250,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
250,000
|
|
1993
- $0.51 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
251,450
|
|
|
127,900
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
127,900
|
|
1993
- $0.50 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
800,000
|
|
|
400,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
400,000
|
|
1994
- $1.00 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
239,675
|
|
|
239,675
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
239,675
|
|
1995
- $0.39 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,333,547
|
|
|
1,683,846
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(584,860
|
)
|
|
1,098,986
|
|
1996
- $0.65 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
156,539
|
|
|
101,550
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
101,550
|
|
1997
- $0.29 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12,500
|
|
|
3,625
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,625
|
|
1998
- $0.16 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
683,000
|
|
|
110,750
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
110,750
|
|
1999
- $0.30 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
100,000
|
|
|
30,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
30,000
|
|
2001
- $0.14 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,971,496
|
|
|
284,689
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
284,689
|
|
2002
- $0.11 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,956,733
|
|
|
332,236
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
332,236
|
|
2003
- $0.04 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
694,739
|
|
|
43,395
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
43,395
|
|
2004
- $0.06 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,189,465
|
|
|
66,501
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
66,501
|
|
2005
- $0.18 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
104,167
|
|
|
11,312
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
11,312
|
|
Conversion
of Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1996
- $0.78 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
239,458
|
|
|
186,958
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
186,958
|
|
1997
- $0.25 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
100,000
|
|
|
25,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
1998
- $0.20 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
283,400
|
|
|
56,680
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
56,680
|
|
2002
- $0.03 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
17,935,206
|
|
|
583,500
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
583,500
|
|
2004
- $0.07 per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
9,875,951
|
|
|
650,468
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
650,468
|
|
Other
Issuances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1993
-License - $0.50 share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,000,000
|
|
|
1,000,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,000,000
|
|
1997
- Settlement of contract
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
800,000
|
|
|
200,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
200,000
|
|
1998
- Issuance of common stock from
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exercise
of warrants, $0.001 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
200
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
200
|
|
2000
- Reversal of shares issued
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(81,538
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Escrow
and Subscription Receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1996
- Common stock canceled -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.34
per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,400,000
|
)
|
|
(472,360
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
472,360
|
|
|
-
|
|
2000
- Issuance for escrow receivable -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.09
per share
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,500,000
|
|
|
500,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(500,000
|
)
|
|
-
|
|
2000
- Write-off of subscription receivable
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
112,500
|
|
|
112,500
|
|
2000
- Research and development costs
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
115,400
|
|
|
115,400
|
|
2001
- Research and development costs
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
132,300
|
|
|
132,300
|
|
2001
- Operating expenses
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
|
25,000
|
|
2004
- Termination of escrow agreement
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,356,200
|
)
|
|
(227,300
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
227,300
|
|
|
-
|
|
(Continued)
See
Notes
to Consolidated Financial Statements
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
Development Stage Company)
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT -
(Continued)
Period
From November 20, 1991 (Date of Inception of the Development Stage) through
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
Prior
to
|
|
During
the
|
|
Escrow/
|
|
|
|
|
|
|
|
Preferred Stock - Series A
|
|
Preferred Stock - Series B
|
|
Common
stock
|
|
Paid
in
|
|
Development
|
|
Development
|
|
Subscription
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Stage
|
|
Stage
|
|
Receivables
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
carried forward
|
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
|
107,071,888
|
|
$
|
12,441,237
|
|
$
|
-
|
|
$
|
(1,399,577
|
)
|
$
|
-
|
|
$
|
-
|
|
$
|
11,041,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of Options and Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1997
- $0.25 per share
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
87,836
|
|
|
21,959
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
21,959
|
|
1999
- Waived option price $0.14 per share
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
170,000
|
|
|
24,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
24,000
|
|
Value
of Options Issued for Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1998
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,336,303
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,336,303
|
|
1999
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
196,587
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
196,587
|
|
2001
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
159,405
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
159,405
|
|
2002
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
124,958
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
124,958
|
|
2003
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
295,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
295,000
|
|
2004
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,675,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,675,000
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1994
- Cash contributed
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
102,964
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
102,964
|
|
1995
- Issuance of common stock option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to
satisfy debt restructuring
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
20,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
20,000
|
|
2004
- Issuance of preferred stock and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
warrants
for cash
|
|
|
|
|
|
12,000
|
|
|
523,334
|
|
|
-
|
|
|
-
|
|
|
350,000
|
|
|
68,845
|
|
|
477,821
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,070,000
|
|
2004
- Convertible preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
beneficial
conversion dividend
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
692,199
|
|
|
-
|
|
|
(692,199
|
)
|
|
-
|
|
|
-
|
|
2005
- Issuance of preferred stock and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
warrants
for cash
|
|
|
|
|
|
30,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
2005
- Reclassification of warrants to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a
financial instrument
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,435,713
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,435,713
|
)
|
Net
loss from inception through
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2005
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(20,148,515
|
)
|
|
-
|
|
|
(20,148,515
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2005
|
|
|
|
|
|
42,000
|
|
|
523,334
|
|
|
-
|
|
|
-
|
|
|
107,679,724
|
|
|
15,211,895
|
|
|
988,670
|
|
|
(1,399,577
|
)
|
|
(20,840,714
|
)
|
|
-
|
|
|
(5,516,392
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of preferred stock to common stock
|
|
(7,580
|
)
|
|
(8,722
|
)
|
|
-
|
|
|
-
|
|
|
10,242,424
|
|
|
8,722
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Issuance
of options for services
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
67,350
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
67,350
|
|
Issuance
of common stock for services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at
$0.18 per share
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
435,556
|
|
|
78,400
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
78,400
|
|
Net
loss for the year ended December 31, 2006
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(183,771
|
)
|
|
-
|
|
|
(183,771
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2006
|
|
|
|
|
|
34,420
|
|
|
514,612
|
|
|
-
|
|
|
-
|
|
|
118,357,704
|
|
|
15,299,017
|
|
|
1,056,020
|
|
|
(1,399,577
|
)
|
|
(21,024,485
|
)
|
|
-
|
|
|
(5,554,413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for Global Clean
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
Holdings, LLC
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
36,540,146
|
|
|
986,584
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
986,584
|
|
Issuance
of Series B preferred stock for cash,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net
of offering costs
|
|
|
|
|
|
-
|
|
|
-
|
|
|
13,000
|
|
|
1,290,735
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,290,735
|
|
Conversion
of preferred stock to common stock
|
|
(5,492
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
10,983,521
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Share-based
compensation from issuance of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
options
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
29,652
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
29,652
|
|
Share-based
compensation from issuance of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
stock, $0.027 per share
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,357,298
|
|
|
117,647
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
117,647
|
|
Amortization
of share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
common stock held in escrow
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
510,248
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
510,248
|
|
Release
of escrowed shares upon satisfaction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
underlying milestones
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,567,518
|
|
|
123,322
|
|
|
(123,322
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Adjustment
of outstanding shares
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
32,780
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
loss for the year ended December 31, 2007
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(4,414,884
|
)
|
|
-
|
|
|
(4,414,884
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2007
|
|
|
|
|
|
28,928
|
|
$
|
514,612
|
|
|
13,000
|
|
$
|
1,290,735
|
|
|
174,838,967
|
|
$
|
16,526,570
|
|
$
|
1,472,598
|
|
$
|
(1,399,577
|
)
|
$
|
(25,439,369
|
)
|
$
|
-
|
|
$
|
(7,034,431
|
)
|
See
Notes
to Consolidated Financial Statements
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
Development Stage Company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
From Inception of
|
|
|
|
|
|
the Development Stage
|
|
|
|
For
the Years Ended
|
|
on November 20, 1991
|
|
|
|
December
31,
|
|
through
|
|
|
|
2007
|
|
2006
|
|
December 31, 2007
|
|
Cash
Flows From Operating Activities
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(4,414,884
|
)
|
$
|
(183,771
|
)
|
$
|
(24,747,170
|
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency transaction loss
|
|
|
296,370
|
|
|
117,501
|
|
|
357,391
|
|
Gain
on debt restructuring
|
|
|
(485,137
|
)
|
|
(607,761
|
)
|
|
(2,524,787
|
)
|
Share-based
compensation for services, expenses, litigation, and research and
development
|
|
|
3,118,021
|
|
|
145,750
|
|
|
12,342,741
|
|
Commitment
for research and development obligation
|
|
|
-
|
|
|
1,712,745
|
|
|
2,378,445
|
|
Depreciation
|
|
|
10,494
|
|
|
18,386
|
|
|
137,666
|
|
Reduction
of escrow receivable from research and development
|
|
|
-
|
|
|
-
|
|
|
272,700
|
|
Unrealized
loss (gain) on financial instrument
|
|
|
147,636
|
|
|
(2,564,608
|
)
|
|
(4,717,163
|
)
|
Interest
expense from amortization of disocunt on secured promissory
note
|
|
|
250,000
|
|
|
-
|
|
|
250,000
|
|
Reduction
of legal costs
|
|
|
-
|
|
|
-
|
|
|
(130,000
|
)
|
Write-off
of subscriptions receivable
|
|
|
-
|
|
|
-
|
|
|
112,500
|
|
Impairment
loss on assets
|
|
|
-
|
|
|
-
|
|
|
9,709
|
|
Gain
on disposal of assets, net of losses
|
|
|
(258,809
|
)
|
|
-
|
|
|
(228,445
|
)
|
Write-off
of receivable
|
|
|
-
|
|
|
317,175
|
|
|
562,240
|
|
Note
payable issued for litigation
|
|
|
-
|
|
|
-
|
|
|
385,000
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
-
|
|
|
-
|
|
|
(7,529
|
)
|
Prepaid
expenses
|
|
|
(51,073
|
)
|
|
-
|
|
|
(51,073
|
)
|
Accounts
payable and accrued expenses
|
|
|
678,104
|
|
|
437,803
|
|
|
4,218,012
|
|
Net
Cash Used in Operating Activities
|
|
|
(709,278
|
)
|
|
(606,780
|
)
|
|
(11,379,763
|
)
|
Cash
Flows From Investing Activities
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from disposal of assets
|
|
|
310,000
|
|
|
-
|
|
|
310,000
|
|
Increase
in deposits
|
|
|
-
|
|
|
-
|
|
|
(51,100
|
)
|
Purchase
of property and equipment
|
|
|
(308,777
|
)
|
|
-
|
|
|
(530,111
|
)
|
Issuance
of note receivable
|
|
|
-
|
|
|
-
|
|
|
(313,170
|
)
|
Payments
received on note receivable
|
|
|
-
|
|
|
-
|
|
|
130,000
|
|
Net
Cash Provided by (Used in) Investing Activities
|
|
|
1,223
|
|
|
-
|
|
|
(454,381
|
)
|
Cash
Flows From Financing Activities
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock, preferred stock, and warrants for cash
|
|
|
1,215,735
|
|
|
-
|
|
|
11,249,580
|
|
Contributed
equity
|
|
|
-
|
|
|
-
|
|
|
131,374
|
|
Proceeds
from notes payable and related warrants
|
|
|
350,000
|
|
|
-
|
|
|
1,686,613
|
|
Payments
on notes payable
|
|
|
(100,000
|
)
|
|
-
|
|
|
(901,287
|
)
|
Proceeds
from convertible notes payable
|
|
|
-
|
|
|
-
|
|
|
571,702
|
|
Payments
on convertible notes payable
|
|
|
-
|
|
|
-
|
|
|
(98,500
|
)
|
Net
Cash Provided by Financing Activities
|
|
|
1,465,735
|
|
|
-
|
|
|
12,639,482
|
|
Net
Increase (Decrease) in Cash and Cash Equivalents
|
|
|
757,680
|
|
|
(606,780
|
)
|
|
805,338
|
|
Cash
and Cash Equivalents at Beginning of Period
|
|
|
47,658
|
|
|
654,438
|
|
|
-
|
|
Cash
and Cash Equivalents at End of Period
|
|
|
805,338
|
|
|
47,658
|
|
|
805,338
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
12,146
|
|
$
|
-
|
|
|
|
|
Noncash
Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
Conversion
of preferred stock to common stock
|
|
$
|
-
|
|
$
|
8,722
|
|
|
|
|
See
Notes
to Consolidated Financial Statements
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
A — ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
History
Medical
Discoveries, Inc. was incorporated under the laws of the State of Utah on
November 20, 1991. Effective as of August 6, 1992, the Company merged
with and into WPI Pharmaceutical, Inc., a Utah corporation (“WPI”), pursuant to
which WPI was the surviving corporation. Pursuant to the MDI-WPI merger, the
name of the surviving corporation was changed to Medical Discoveries, Inc.
(“MDI”). MDI’s initial purpose was the research and development of an
anti-infection drug know as MDI-P.
On
March 22, 2005, MDI formed MDI Oncology, Inc., a Delaware corporation, as a
wholly-owned subsidiary to acquire and operate the assets and business
associated with the Savetherapeutics transaction, discussed further in Note
L.
With this transaction, MDI acquired the SaveCream technology and carried on
the
research and development of this drug candidate. As discussed in Note C, MDI
made the decision in 2007 to discontinue further development of these two drug
candidates and sell these technologies.
On
September 7, 2007, MDI entered into a share exchange agreement pursuant to
which
it acquired all of the outstanding ownership interests in Global Clean Energy
Holdings, LLC, discussed further in Note D. Global Clean Energy Holdings, LLC
was an entity that had certain trade secrets, know-how, business plans, term
sheets, business relationships, and other information relating to the start-up
of a business related to the cultivation and production of seed oil from the
seed of the Jatropha plant. With this transaction, MDI commenced the research
and development of a business whose purpose will be providing feedstock oil
intended for the production of bio-diesel.
On
January 29, 2008, a meeting of shareholders was held and, among other things,
the name Medical Discoveries, Inc. was changed to Global Clean Energy Holdings,
Inc. (the “Company”).
Principles
of Consolidation
The
consolidated financial statements include the accounts of Global Clean Energy
Holdings, Inc. and subsidiaries. All significant intercompany transactions
have
been eliminated in consolidation.
Development
Stage Company
The
Company has not yet commenced its planned principal operations and is,
therefore, considered a development stage company as defined in Statement of
Financial Accounting Standards (SFAS) No. 7, Accounting
and Reporting by Development Stage Enterprises.
Cash
and Cash Equivalents
For
purposes of the statement of cash flows, the Company considers all highly liquid
debt instruments maturing in three months or less to be cash equivalents.
Concentration
of Credit Risk
The
Company’s financial instruments that are exposed to concentration of credit risk
consist primarily of cash and cash equivalents on deposit in excess of
federally-insured limits in the aggregate amount of $632,063 at December 31,
2007. The Company has maintained its cash balances at what management considers
to be high credit-quality financial institutions.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Plantation
Development Costs and Equipment
Plantation
development costs and equipment are stated at cost. Depreciation of equipment
is
computed using the straight-line method over the estimated lives of the related
assets. Estimated useful lives are 5 years. Plantation development costs are
being accumulated in the balance sheet during the development period and will
be
accounted for in accordance with Statement of Position 85-3, Accounting
by Agricultural Producers and Agricultural Cooperatives.
Normal
maintenance and repair items are charged to costs and expensed as incurred.
The
cost and accumulated depreciation of property and equipment sold or otherwise
retired are removed from the accounts and gain or loss on disposition is
reflected in results of operations.
In
accordance with SFAS No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets,
the
carrying value of intangible assets and other long-lived assets is reviewed
on a
regular basis for the existence of facts or circumstances that may suggest
impairment. The Company recognizes impairment when the sum of the expected
undiscounted future cash flows is less than the carrying amount of the asset.
Impairment losses, if any, are measured as the excess of the carrying amount
of
the asset over its estimated fair value.
Income
Taxes
The
Company utilizes the liability method of accounting for income taxes. Under
the
liability method, deferred tax assets and liabilities are determined based
on
differences between financial reporting and tax bases of assets and liabilities
and the carryforward of operating losses and tax credits, and are measured
using
the enacted tax rates and laws that will be in effect when the differences
are
expected to reverse. A valuation allowance against deferred tax assets is
recorded when it is more likely than not that such tax benefits will not be
realized. Research tax credits are recognized as utilized.
Revenue
Recognition
Revenue
is recognized in accordance with Securities and Exchange Commission Staff
Accounting Bulletin No. 104, Revenue
Recognition in Financial Statements.
Revenue
is recognized when all of the following criteria are met: persuasive evidence
of
an arrangement exists; delivery has occurred or services have been rendered;
the
seller’s price to the buyer is fixed or determinable; collectibility is
reasonably assured; and title and the risks and rewards of ownership have
transferred to the buyer.
Research
and Development
Research
and development has been the principal function of the Company. Research and
development expense in the accompanying financial statements include certain
costs which are directly associated with the Company’s research and development
of the Company’s anti-infective pharmaceutical, MDI-P as well as the purchase of
the intellectual property assets of Savetherapeutics AG (See Note L) and the
exchange of common stock for the trade secrets, know-how, etc. of Global Clean
Energy Holdings, LLC (See Note D). These costs amounted to $986,584, $2,026,907
and $8,734,690 for the years ended December 31, 2007 and 2006, and for the
period November 20, 1991 (date of inception of the development stage)
through December 31, 2007, respectively.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Foreign
Currency Translation
The
Company’s functional and reporting currency is the United States dollar.
Monetary assets and liabilities denominated in foreign currencies are translated
using the exchange rate prevailing at the balance sheet date. Gains and losses
arising on translation or settlement of foreign currency denominated
transactions or balances are included in the determination of income or loss.
Foreign currency transactions are primarily undertaken in Euros. The Company
has
not entered into derivative instruments to offset the impact of foreign currency
fluctuations.
Fair
Value of Financial Instruments
The
Company estimates that the fair value of all financial instruments at
December 31, 2007 do not differ materially from the aggregate carrying
values of its financial instruments recorded in the accompanying balance sheet.
The estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies.
Considerable judgment is required in interpreting market data to develop the
estimates of fair value, and accordingly, the estimates are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange.
Estimates
Management
uses estimates and assumptions in preparing financial statements. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and reported revenues
and
expenses. Significant estimates used in preparing these financial statements
include those assumed in determining the valuation of common stock, warrants,
and stock options. It is at least reasonably possible that the significant
estimates used will change within the next year.
Basic
and Diluted Loss per Share
Basic
loss per share is computed on the basis of the weighted-average number of common
shares outstanding during the year. Diluted loss per share is computed on the
basis of the weighted-average number of common shares and all dilutive
potentially issuable common shares outstanding during the year. Common stock
issuable upon conversion of debt and preferred stock, common stock held in
escrow, stock options and stock warrants have not been included in the loss
per
share for 2007 and 2006 as they are anti-dilutive. The potential common shares
as of December 31, 2007 and 2006 are as follows:
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Convertible
notes
|
|
|
128,671
|
|
|
128,671
|
|
Convertible
preferred stock - Series A
|
|
|
57,856,000
|
|
|
114,080,000
|
|
Convertible
preferred stock - Series B
|
|
|
11,818,181
|
|
|
-
|
|
Warrants
|
|
|
31,033,379
|
|
|
38,973,861
|
|
Compensation-based
stock options and warrants
|
|
|
44,883,000
|
|
|
19,983,000
|
|
Common
stock held in escrow
|
|
|
22,837,593
|
|
|
-
|
|
|
|
|
168,556,824
|
|
|
173,165,532
|
|
As
of
December 31, 2007, the Company did not have sufficient authorized shares of
common stock to meet the commitments it had entered into. There was a
stockholders’ meeting on January 29, 2008 and a majority of shareholders voted
to increase the authorized number of shares of common stock from 250 million
to
500 million, which is now sufficient to meet all of the equity commitments
that
the Company has entered into.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Stock
Based Compensation
Effective
January 1, 2006, the Company adopted SFAS No. 123(R), Share-Based
Payment
(“SFAS
123(R)”) using the modified prospective application method. SFAS 123(R) requires
the recognition of the cost of employee services received in exchange for an
award of equity instruments in the financial statements and is measured based
on
the grant date fair value of the award. SFAS 123(R) also requires the stock
option compensation expense to be recognized over the period during which an
employee is required to provide service in exchange for the award (the vesting
period). Prior to adopting SFAS 123(R), the Company accounted for stock-based
compensation plans under Accounting Principles Board Opinion ("APB") No. 25,
Accounting
for Stock Issued to Employees
("APB
25"). Under APB 25, generally no compensation expense was recorded when the
terms of the award are fixed and the exercise price of the employee stock option
equals or exceeds the fair value of the underlying stock on the date of grant.
The Company adopted the disclosure-only provision of SFAS No. 123, Accounting
for Stock-Based Compensation.
As
a
result of adopting SFAS 123(R), compensation expense related to the issuance
of
common stock, options and compensation-based warrants during the years ended
December 31, 2007 and 2006 was recognized in the amounts of $2,131,437 and
$67,350, respectively.
Reclassifications
In
accounting for discontinued operations, the 2006 balance sheet and statement
of
operations have been reclassified to conform to the 2007 presentation. These
reclassifications had no effect on net loss or stockholders’ deficit for the
year ended December 31, 2006.
Recently
Issued Accounting Statements
In
September 2006, the Financial Accounting Standards Board issued SFAS No. 157,
Fair
Value Measurements (SFAS
157). SFAS 157 defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles, and expands disclosures
about
fair value measurements. This statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007. In February 2008,
the
FASB issued FASB Staff Position (FSP FIN) No. 157-2 which extended the effective
date for certain nonfinancial assets and nonfinancial liabilities to fiscal
years beginning after November 15, 2008. The Company is currently evaluating
the
impact of SFAS 157 on the financial statements and anticipates that the
statement will not have a significant impact on the reporting of its financial
position and results of operations.
In
February 2007, the FASB issued SFAS No. 159, The
Fair Value Option for Financial Assets and Financial
Liabilities –
including an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 allows
measurement at fair value of eligible financial assets and liabilities that
are
not otherwise measured at fair value. If the fair value option for an eligible
item is elected, unrealized gains and losses for that item shall be reported
in
current earnings at each subsequent reporting date. SFAS 159 also establishes
presentation and disclosure requirements designed to draw comparison between
the
different measurement attributes the Company elects for similar types of assets
and liabilities. This statement is effective for fiscal years beginning after
November 15, 2007. Accordingly, the Company will adopt SFAS 159 in 2008. The
Company is in the process of evaluating the application of the fair value option
and its effect on its financial position and results of operations.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations
(SFAS
141(R)), which replaces SFAS 141, Business
Combinations.
SFAS
141(R) retains the underlying concepts of SFAS 141 in that all business
combinations are still required to be accounted for at fair value under the
acquisition method of accounting, but SFAS 141(R) changed the method of applying
the acquisition method in a number of significant aspects. Acquisition costs
will generally be expensed as incurred; noncontrolling interests will be valued
at fair value at the acquisition date; in-process research and development
will
be recorded at fair value as an indefinite-lived intangible asset at the
acquisition date; restructuring costs associated with a business combination
will generally be expensed subsequent to the acquisition date; and changes
in
deferred tax asset valuation allowances and income tax uncertainties after
the
acquisition date generally will affect income tax expense. SFAS 141(R) is
effective on a prospective basis for all business combinations for which the
acquisition date is on or after the beginning of the first annual period
subsequent to December 15, 2008, with the exception of the accounting for
valuation allowances on deferred taxes and acquired tax contingencies. SFAS
141(R) amends SFAS 109 such that adjustments made to valuation allowances on
deferred taxes and acquired tax contingencies associated with acquisitions
that
closed prior to the effective date of SFAS 141(R) would also apply the
provisions of SFAS 141(R). Early adoption is not permitted. We are currently
evaluating the effects, if any, that SFAS 141(R) may have on our financial
statements. We do not expect that it will have any immediate effect on our
financial statements, however, the revised standard will govern the accounting
for any future business combinations that we may enter into.
In
December 2007, the FASB issued Financial Accounting Standards No. 160,
Noncontrolling
Interests in Consolidated Financial Statements—an amendment of ARB No. 51
(SFAS
160). This statement is effective for fiscal years, and interim periods within
those fiscal years, beginning on or after December 15, 2008, with earlier
adoption prohibited. This statement requires the recognition of a noncontrolling
interest (minority interest) as equity in the consolidated financial statements
and separate from the parent’s equity. The amount of net income attributable to
the noncontrolling interest will be included in consolidated net income on
the
face of the income statement. It also amends certain of ARB No. 51’s
consolidation procedures for consistency with the requirements of SFAS
141(R).
This
statement also includes expanded disclosure requirements regarding the interests
of the parent and its noncontrolling interest. We are currently evaluating
this
new statement and anticipate that the statement will not have a significant
impact on the reporting of our results of operations.
NOTE
B — BASIS OF PRESENTATION AND GOING CONCERN
As
shown
in the accompanying financial statements, the Company incurred a net loss
applicable to common shareholders of $4,414,884 during the year ended
December 31, 2007, and has incurred losses applicable to common
shareholders since inception of the development stage of $25,439,369. The
Company has discontinued its former bio-pharmaceutical business. At December
31,
2007, the Company has negative working capital of $7,343,772 and a stockholders’
deficit of $7,034,431. Those factors raise substantial doubt about the Company’s
ability to continue as a going concern.
Management
plans to meet its cash needs through various means including selling
intellectual assets, securing financing, and developing a new business model.
The Company has entered into an agreement to sell certain intellectual assets
for an aggregate of €4,007,534
(approximately $5,852,000 using December 31, 2007 exchange rates),
which
consideration is payable in cash and by the assumption of certain of the
Company’s outstanding liabilities. In order to fund its operations pending the
closing of the asset sale, the Company sold Series B preferred stock in the
amount of $1,300,000 and issued a secured promissory note under which the
Company borrowed $350,000. The Company is developing a new business operation
to
participate in the rapidly growing bio-diesel industry. The Company expects
to
be successful in this new venture, but there is no assurance that its business
plan will be economically viable. The ability of the Company to continue as
a
going concern is dependent on that plan’s success. The financial statements do
not include any adjustments that might be necessary if the Company is unable
to
continue as a going concern.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
C – DISCONTINUED
OPERATIONS
During
the year ended December 31, 2007, the Board of Directors determined that it
could no longer fund the development of its two drug candidates and could not
obtain additional funding for these drug candidates. The Board evaluated the
value of both of its developmental stage drug candidates. In March 2007, the
Board determined that the best course of action was to discontinue further
development of these two drug candidates and sell these
technologies.
Eucodis
Agreement
On
March
8, 2007, the Company entered into a binding letter of intent with Eucodis
Pharmaceuticals Forschungs und Entwicklungs GmbH, an Austrian company
(Eucodis),
regarding their intent to proceed with the evaluation, negotiation, and
execution of a sale and purchase agreement related to certain assets of the
Company. On July 6, 2007, the Company entered into a sale and purchase agreement
(the
Asset Sale Agreement)
with
Eucodis, pursuant to which Eucodis agreed to acquire certain assets of the
Company in consideration for a cash payment and the assumption by Eucodis of
certain indebtedness of the Company. The sale to Eucodis was scheduled to close
at the end of January 2008 after our shareholders approved the sale. On January
29, 2008, the shareholders of the Company approved the transaction. Shortly
before the scheduled closing, Eucodis informed the Company that it was unable
to
complete the transaction as agreed because it had insufficient funds and needed
to obtain additional financing. On February 29, 2008, Eucodis informed the
Company that it was completing an agreement for financing and still desired
to
complete the transaction for the purchase of the assets. At that time, the
Company and Eucodis entered into a letter agreement to sell the assets on
substantially the same terms as under the Asset Sale Agreement.
The
assets to be acquired by Eucodis pursuant to the Asset Sale Agreement, as
modified by the letter agreement, include all of the Company’s right, title and
interest in all patents, patent applications, United
States and foreign regulatory files and data,
pre-clinical study data and anecdotal clinical trial data concerning SaveCream.
In addition, at the closing of the sale, the Company will also assign to Eucodis
all of its right, title and interest in a co-development agreement with Eucodis,
dated as of July 29, 2006, related to the co-development and licensing of
SaveCream (including the intellectual property rights acquired in connection
with that development) and their rights under certain
other contracts relating to SaveCream.
The
purchase price to be paid by Eucodis pursuant to the letter agreement for
acquiring these assets will be €4,007,534 (approximately $5,852,000 under
exchange rates in effect as of December 31, 2007), is comprised of (i) a cash
payment of €1,871,337 (approximately $2,732,000 under exchange rates in effect
as of December 31, 2007) less $200,000 received in March 2007 under the binding
letter of intent, and (ii) Eucodis’ assumption of an aggregate of €2,136,197
(approximately $3,119,000 under exchange rates in effect as of December 31,
2007), constituting specific indebtedness currently owed and other commitments
to certain creditors of the Company. In addition, at the closing of the sale,
Eucodis will assume (i) all financial and other obligations of the Company
under
certain contracts to be assigned to Eucodis, and (ii) certain other costs
incurred by the Company since February 28, 2007 in connection with preserving
the acquired assets for the benefit of Eucodis until closing of the
sale.
MDI-P
Agreement
The
Company also entertained various offers to purchase the Company’s rights to the
assets related to the MDI-P compound. On August 9, 2007, the Company sold
the
MDI-P related assets for $310,000 in cash realizing a gain of $258,809. The
sale
included the patents, name, and other intellectual property, research results
and test data, production units and equipment, and other assets related to
this
technology. No liabilities were assumed by the purchaser in this transaction.
A
liability in the amount of $90,000 was extinguished due to the sale. This
liability was only payable when the Company received $1 million in cumulative
license revenue from the MDI-P compound in any human indication. Due to the
sale
of MDI-P for less than $1 million, this liability was no longer owed and
was
written off.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting
for Discontinued Operations
Pursuant
to accounting rules for discontinued operations, the Company has classified
all
revenue and expense for 2007 and prior periods related to the operations of
its
bio-pharmaceutical business as discontinued operations. For all periods prior
to
March 2007, the Company has reclassified all revenue and operating expenses
to
discontinued operations, except for estimated general corporate overhead,
because all of its operations related to the discontinued technologies. The
assets being sold and the liabilities being assumed in the planned sales have
been segregated in the accompanying balance sheets and are characterized as
Assets Held for Sale and Current Liabilities Associated with Assets Held for
Sale, respectively. Revenues of $200,000 and $800,000 for the years ended
December 31, 2007 and 2006, respectively, are included in the loss from
discontinued operations. The Company has recorded a gain from the sale of MDI-P
of $258,809 during the year ended December 31, 2007, but has not recorded any
gain or loss at December 31, 2007 associated with the planned sale of the
SaveCream assets. The following table presents the main classes of assets and
liabilities associated with the discontinued business.
|
|
December 31,
|
|
December 31,
|
|
|
|
2007
|
|
2006
|
|
Assets:
|
|
|
|
|
|
|
|
Equipment,
net of accumulated depreciation
|
|
$
|
-
|
|
$
|
61,460
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
412,415
|
|
$
|
472,993
|
|
Research
and development obligation
|
|
|
2,701,555
|
|
|
2,441,445
|
|
|
|
$
|
3,113,970
|
|
$
|
2,914,438
|
|
NOTE
D — GLOBAL CLEAN ENERGY HOLDINGS, LLC
Having
agreed to discontinue its bio-pharmaceutical operations and dispose of the
related assets, the Company considered entering into a number of other
businesses that would enable it to be able to provide the shareholders with
future value. The Company’s Board of Directors decided to develop a business to
produce and sell seed oils, including seed oils harvested from the planting
and
cultivation of the Jatropha
curcas
plant,
for the purpose of providing feedstock oil intended for the generation of methyl
ester, otherwise known as bio-diesel (the “Jatropha Business”). The Company’s
Board concluded that there was a significant opportunity to participate in
the
rapidly growing biofuels industry, which previously was mainly driven by high
priced, edible oil-based feedstock. In order to commence its new Jatropha
Business, effective September 1, 2007, the Company (i) hired Richard Palmer,
an
energy consultant, and a member of Global Clean Energy Holdings LLC (“Global”)
to act as its new President, Chief Operating Officer and future Chief Executive
Officer, (ii) engaged Mobius Risk Group, LLC, a Texas company engaged in
providing energy risk advisory services, to provide it with consulting services
related to the development of the Jatropha Business, (iii) acquired certain
trade secrets, know-how, business plans, term sheets, business relationships,
and other information relating to the cultivation and production of seed oil
from the Jatropha plant for the production of bio-diesel from Global, and (iv)
engaged Corporativo LODEMO S.A DE CV to initiate the Jatropha Business in
Mexico.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Share
Exchange Agreement
The
Company entered into a share exchange agreement (the Global Agreement) pursuant
to which the Company acquired all of the outstanding ownership interests in
Global Clean Energy Holdings, LLC, a Delaware limited liability company
(Global), on September 7, 2007 from Mobius Risk Group, LLC (Mobius) and from
Richard Palmer (Mr. Palmer). Mr. Palmer owns a 13.33% equity interest in Mobius
and, as described further in this Note, became the Company’s new President and
Chief Operating Officer in September 2007 and its Chief Executive Officer in
December 2007. Mobius and Mr. Palmer are considered related parties to the
Company. Global is an entity that has certain trade secrets, know-how, business
plans, term sheets, business relationships, and other information relating
to
the start-up of a business related to the cultivation and production of seed
oil
from the seed of the Jatropha plant, for the purpose of providing feedstock
oil
intended for the production of bio-diesel. Under the Global Agreement, the
Company issued 63,945,257 shares of its common stock for all of the issued
and
outstanding membership interests of Global. Of the 63,945,257 shares issued
under the Global Agreement, 36,540,146 shares were issued and delivered at
the
closing of the Global Agreement without any restrictions. The remaining
27,405,111 shares of common stock were, however, held in escrow by the Company,
subject to forfeiture in the event that certain specified performance and
market-related milestones are not achieved. Upon the satisfaction, from time
to
time, of the operational and market capitalization condition milestones, the
restricted shares will be released by the Company from escrow and delivered
to
the buyers in accordance with the terms and conditions of the Global Agreement.
In the event that all of the milestone conditions are not achieved, the
restricted shares that have not been released from escrow will be cancelled
by
the Company and thereafter cease to be outstanding.
Prior
to
the exchange of common stock, Global had no tangible assets or operations,
but
rather had certain trade secrets, know-how, business plans, term sheets,
business relationships, and other information relating to the start-up of a
business related to the cultivation and production of seed oil from the seed
of
the Jatropha plant. Accordingly, Global was not considered a business in
accordance with FASB Emerging Issues Task Force Issue 98-3, Determining
Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or
of a
Business.
With the
exchange of the 36,540,146 shares of common stock, the Company acquired the
trade secrets, know-how, business plans, term sheets, business relationships,
and other information relating to the start-up of this new business.
Accordingly, the Company has recorded research and development expense of
$986,584, or $0.027 per share, for the value of the shares issued. The closing
price of the Company’s common stock on September 7, 2007 was $0.027 per
share.
Of
the
restricted shares issued under the Global Agreement, 13,702,556 shares will
be
released from escrow if and when i) certain land lease agreements suitable
for
the planting and cultivation of Jatropha
curcas are
executed and ii) certain operation management agreements with a third-party
land
and operations management company with respect to the management, planting
and
cultivation of Jatropha
curcas
are
executed. These restricted shares will be held in escrow subject to the
satisfaction of these milestones, at which time such shares will be released
from escrow and delivered to the sellers. The Company has accounted for these
potentially issuable shares as share-based compensation under SFAS No.
123(R) for
shares of common stock that contain a performance or service condition. The
Company has determined the value of these shares to be $369,969, or $0.027 per
share, and is amortizing this compensation over four months, the period of
time
in which the satisfaction of the operational milestones is expected to be
fulfilled that will result in the release of the 13,702,556 shares from escrow.
For accounting purposes, shares held in escrow are not considered outstanding,
but are deemed to be potential dilutive shares for loss per share calculations.
During the year ended December 31, 2007, the Company amortized and recognized
$348,388 of share-based compensation related to these shares.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
remaining 13,702,555 restricted shares issued under the Global Agreement will
be
released from escrow upon satisfaction of certain market capitalization levels
(based on the number of outstanding shares at the average closing price of
the
previous sixty trading days) and average daily trading volume (for the previous
sixty trading days). These potentially issuable shares will be released as
follows:
|
a.
|
4,567,518
shares will be released upon the achievement of $6 million market
capitalization and 75,000 shares of average daily trading
volume,
|
|
b.
|
4,567,518
shares will be released upon the achievement of $12 million market
capitalization and 100,000 shares of average daily trading volume,
and
|
|
c.
|
4,567,519
shares will be released upon the achievement of $20 million market
capitalization and 125,000 shares of average daily trading
volume.
|
These
restricted shares are being held in escrow subject to the satisfaction of these
milestones, at which time such shares will be released from escrow and delivered
to the sellers. On November 30, 2007, the first of these milestones was met
and
4,567,518 shares were released from escrow and delivered to the sellers. The
Company has accounted for these potentially issuable shares as share-based
compensation under SFAS No. 123(R), for shares of common stock that contain
a
market condition. The Company has determined the value of these shares to be
$369,969, or $0.027 per share, and is amortizing this compensation over the
periods of time in which the satisfaction of each of the three market
capitalization and trading volume milestones is expected to be fulfilled that
will result in the release of the 13,702,555 shares from escrow. The Company
estimated these time periods to be approximately three months for the first
tranche of stock and two years for the second and third tranches. For accounting
purposes, shares held in escrow are not considered outstanding, but are deemed
to be potential dilutive shares for loss per share calculations. During the
year
ended December 31, 2007, the Company amortized and recognized $161,860 of
share-based compensation related to these shares.
Mobius
Consulting Agreement
Concurrent
with the execution of the Global Agreement, the Company entered into a
consulting agreement with Mobius pursuant to which Mobius has agreed to provide
consulting services to the Company in connection with the Company’s new Jatropha
bio-diesel feedstock business. The Company engaged Mobius as a consultant to
obtain Mobius’ experience and expertise in the feedstock/bio-diesel market to
assist the Company and Mr. Palmer in developing this new line of operations
for
the Company. Mobius has agreed to provide the following services to the Company:
(i) manage and supervise a contemplated research and development program
contracted by the Company and conducted by the University of Texas Pan American
regarding the location, characterization, and optimal economic propagation
of
the Jatropha plant;
and (ii) assist with the management and supervision of the planning,
construction, and start-up of plant nurseries and seed production plantations
in
Mexico, the Caribbean or Central America.
The
term
of the agreement is twelve (12) months, or until the scope of work under the
agreement has been completed. Mobius will supervise the hiring of certain staff
to serve in management and operations roles of the Company, or hire such persons
to provide similar services as independent contractors. Mobius’ compensation for
the services provided under the agreement is a monthly retainer of $45,000.
The
Company will also reimburse Mobius for reasonable business expenses incurred
in
connection with the services provided. The agreement contains customary
confidentiality provisions with respect to any confidential information
disclosed to Mobius or which Mobius receives while providing services under
the
agreement. Under this agreement, the Company has paid Mobius or accrued $191,547
during the year ended December 31, 2007, of which $40,797 was expensed as
compensation to Mobius and $150,750 was capitalized as plantation development
costs pursuant to AICPA Statement of Position 85-3, Accounting
by Agricultural Producers and Agricultural Cooperatives.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Palmer
Employment Agreement
Effective
September 1, 2007, the Company entered into an employment agreement with Richard
Palmer pursuant to which the Company hired Mr. Palmer to serve as its President
and Chief Operating Officer. Mr. Palmer was also appointed to serve as a
director on the Company’s Board of Directors to serve until the next election of
directors by the Company’s shareholders. Upon the resignation of the former
Chief Executive Officer on December 21, 2007, Mr. Palmer also became the
Company’s Chief Executive Officer. The Company hired Mr. Palmer to take
advantage of his experience and expertise in the feedstock/bio-diesel industry,
and in particular, in the Jatropha bio-diesel and feedstock business. The term
of employment commenced September 1, 2007 and ends on September 30, 2010, unless
terminated in accordance with the provisions of the agreement.
Mr.
Palmer’s compensation package includes an annual base salary of $250,000,
subject to annual increases based on changes in the Consumer Price Index, and
a
bonus payment based on Mr. Palmer’s satisfaction of certain performance criteria
established by the compensation committee of the Company’s Board of Directors.
The bonus amount in any fiscal year will not exceed 100% of Mr. Palmer’s base
salary. As of yet, no performance criteria have been established. Mr. Palmer
is
eligible to participate in the Company’s employee stock option plan and other
welfare plans. The Company granted Mr. Palmer an incentive option to purchase
up
to 12,000,000 shares of its common stock at an exercise price of $0.03 per
share
(the trading price on the date the agreement was signed). The options vest
upon
the Company’s achievement of certain market capitalization goals. When the
Company’s market capitalization reaches $75 million, the incentive option will
vest with respect to 6,000,000 shares. When the Company’s market capitalization
reaches $120 million, the incentive option will vest with respect to the
remaining 6,000,000 shares. The option expires five years after grant.
If
Mr.
Palmer’s employment is terminated by the Company without “cause” or by Mr.
Palmer for “good reason”, he will be entitled to severance payments including
100% of his then-current annual base salary, plus 50% of the target bonus for
the fiscal year in which his employment is terminated, and the incentive option
to purchase 12,000,000 shares of common stock shall vest following termination
of Mr. Palmer’s employment.
The
Company has accounted for the options under Mr. Palmer’s employment agreement as
share-based compensation under SFAS No. 123(R), for options to purchase common
stock that contain a market condition. The Company valued these options at
$264,000 using the Black-Scholes pricing model. The weighted average fair value
of the stock options was $0.022 per share. The weighted-average assumptions
used
for the calculation of fair value were risk-free rate of 4.21%, volatility
of
116%, expected life of five years, and dividend yield of zero. The Company
is
amortizing this compensation over the period of time in which the satisfaction
of each of the two market capitalization milestones is expected to be fulfilled
that will result in the vesting of these stock options. The Company currently
estimates these time periods to be three years. During the year ended December
31, 2007, the Company amortized and recognized $29,652 of share-based
compensation related to these options.
LODEMO
Agreement
On
October 15, 2007, the Company entered into a service agreement with Corporativo
LODEMO S.A DE CV, a Mexican corporation (the LODEMO Group).
The
Company has decided to initiate its Jatropha Business in Mexico, and has already
identified parcels of land in Mexico to plant and cultivate Jatropha. In order
to obtain all of the logistical and other services needed to operate a
large-scale farming and transportation business in Mexico, the Company entered
into the service agreement with the LODEMO Group, a privately held Mexican
company with substantial land holdings, significant experience in diesel
distribution and sales, liquids transportation, logistics, land development
and
agriculture.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Under
the
supervision of the Company’s management and Mobius, the LODEMO Group will be
responsible for the establishment, development, and day-to-day operations of
the
Jatropha Business in Mexico, including the extraction of the oil from the
Jatropha seeds, the delivery of the Jatropha oil to buyers, the purchase or
lease of land in Mexico, the establishment and operation of one or more Jatropha
nurseries, the clearing, planting and cultivation of the Jatropha fields, the
harvesting of the Jatropha seeds, the operation of the Company’s oil extraction
facilities, and the logistics associated with the foregoing. Although the LODEMO
Group will be responsible for identifying and acquiring the farmland, ownership
of the farmland or any lease thereto will be held directly by the Company or
by
a Mexican subsidiary of the Company. The LODEMO Group will be responsible for
hiring and managing all necessary employees. All direct and budgeted costs
of
the Jatropha Business in Mexico will be borne by the Company.
The
LODEMO Group will provide the foregoing and other necessary services for a
fee
primarily based on the number of hectares of Jatropha under cultivation. The
Company has agreed to pay the LODEMO Group a fixed fee per year of $60 per
hectare of land planted and maintained with minimum payments based on 10,000
hectares of developed land, to follow a planned planting schedule. The Agreement
has a 20-year term but may be terminated earlier by the Company under certain
circumstances. The LODEMO Group will also potentially receive incentive
compensation for controlling costs below the annual budget established by the
parties, production incentives for increase yield and a sales commission for
biomass sales. Under this agreement, the Company has paid the LODEMO Group
or
accrued $158,028 during the year ended December 31, 2007, all of which was
capitalized as plantation development costs pursuant to AICPA Statement of
Position 85-3, Accounting
by Agricultural Producers and Agricultural Cooperatives.
NOTE
E – PLANTATION DEVELOPMENT COSTS AND EQUIPMENT
Plantation
development costs and equipment as of December 31, 2007 and 2006 are as
follows:
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Plantation
development costs
|
|
$
|
308,777
|
|
$
|
-
|
|
Research
equipment
|
|
|
-
|
|
|
167,341
|
|
Office
equipment
|
|
|
1,127
|
|
|
1,127
|
|
|
|
|
|
|
|
|
|
Total
cost
|
|
|
309,904
|
|
|
168,468
|
|
Less
accumulated depreciation
|
|
|
(563
|
)
|
|
(106,219
|
)
|
|
|
|
|
|
|
|
|
Plantation
development costs and equipment, net
|
|
$
|
309,341
|
|
$
|
62,249
|
|
Of
the
balance of equipment at December 31, 2006, $61,460 is carried as Assets Held
for
Sale in the accompanying Balance Sheet. Depreciation expense was $10,494 and
$18,386 for the years ended December 31, 2007 and 2006, respectively. Plantation
development costs are not currently being depreciated. Upon completion of the
plantation development, those costs will be depreciated over the shorter of
the
useful life of the related asset or over the term of the lease. The plantation
development costs of $308,777 are located in Mexico.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
F — DEBT
Loan
Agreement
In
order
to fund ongoing operations pending closing of the sale to Eucodis, the Company
entered into a loan agreement with, and issued a promissory note in favor of,
Mercator Momentum Fund III, L.P. (Mercator).
Mercator, along with two other affiliates, owns all of the issued and
outstanding shares of the Company’s Series A Convertible Preferred Stock, and is
considered a related party to the Company. Pursuant to the loan agreement,
Mercator made available to the Company a secured term credit facility in
principal amount of $1,000,000. The promissory note initially was due and
payable on December 14, 2007. As of December 13, 2007, the Company owed Mercator
$250,000 under the loan. Mercator agreed to extend the maturity date of the
$250,000 to February 21, 2008. Subsequent to February 2008, the loan was paid
down to $200,000 and the maturity date was extended to June 21, 2008. The
foregoing loan is secured by a lien on all of the assets of the Company.
Under
the
loan agreement, interest is payable on the loan at a rate of 12% per annum,
payable monthly. In connection with the closing of the loan, the Company agreed
to (i)
the
cancellation
of certain warrants
to purchase 27,452,973 shares of common stock at $0.1967 per share previously
issued to the lender and certain of its affiliates and (ii) the issuance of
new
warrants to purchase 27,452,973 shares of common stock at $0.01 per share.
The
new warrants permit the cash-less exercise of the warrants and expire on
September 30, 2013. As more fully described in Note G, the warrants that were
cancelled were being accounted for as a liability in the accompanying financial
statements because the Company was unable to guarantee that there would be
enough shares of common stock to settle other “freestanding instruments.” The
carrying value of the liability related to these warrants on the date of
cancellation was $62,205. The new warrants that were issued in connection with
this loan agreement were also characterized as a liability in these financial
statements. The fair value of the new warrants was determined to be $691,815,
or
$0.0252 per share, using the Black-Scholes pricing model. The
weighted-average assumptions used for the calculation of fair value were
risk-free interest rate of 4.10%, volatility of 123%, expected life of six
years, and dividend yield of zero. On
the
date of issuance, the fair value of the new warrants has been recorded as (i)
a
discount to the note in the amount of $250,000 and (ii) a charge of $441,815
to
“Unrealized Gain (Loss) on Financial Instrument” in the accompanying
Consolidated Statement of Operations. The discount to the note was amortized
over the original term of the loan agreement from September
7, 2007 to December 14, 2007, and recorded as “interest expense from
amortization of discount on secured promissory note” in the amount of $250,000.
Notes
Payable
The
Company has notes payable to shareholders in the aggregate amount of $56,000
at
December 31, 2007 and 2006. The notes originated between 1997 and 1999,
bear interest at 12%, are unsecured, and are currently in default. Accrued
interest on the notes totaled $72,091 and $65,371 at December 31, 2007 and
2006,
respectively.
Convertible
Notes Payable
The
Company has convertible notes payable to certain individuals in the aggregate
amount of $193,200 at December 31, 2007 and 2006. The notes originated in
1996, bear interest at 12%, are unsecured, and are currently in default. Each
$1,000 note is convertible into 667 shares of the Company’s common stock.
Accrued interest on the convertible notes totaled $225,552 and $202,368 at
December 31, 2007 and 2006, respectively.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Long-Term
Liability and Gain on Debt Restructuring
On
June 10, 2006, the Company entered into an agreement with a former creditor
to forgive certain amounts owed. The balance owed before the agreement was
$229,066. According to the agreement, $3,975 was paid on the date of the
agreement, another $3,975 was paid on August 13, 2006, and $131,116 was
forgiven. The remaining balance of $90,000 was to be due and payable immediately
upon the Company’s receipt of $1 million in cumulative license revenue from
the Company’s drug MDI-P in any human indication. The remaining liability of
$90,000 was recorded as Long-Term Liability. As further described in Note C,
this liability was extinguished as a result of the sale of MDI-P for less than
$1 million. Accordingly, this liability was no longer owed and was written
off
in 2007. Additionally, as further described in Note K, the Company entered
into
a settlement agreement with its former chief executive officer during 2007,
which resulted in a gain of $395,137 on the settlement of compensation owing
to
her. As a consequence of these two transactions, the Company recorded gain
on
debt restructuring in the amount of $485,137 in the accompanying financial
statements for the year ended December 31, 2007.
Additionally,
in 2006, the company determined $476,645 of previously recorded accrued payroll
and payroll taxes had passed their statute of limitations for collection, were
written off, and are included in gain on debt restructuring in the accompanying
financial statements for the year ended December 31, 2006.
NOTE
G — STOCKHOLDERS’ EQUITY
Common
Stock
As
more
fully described in Note D, the Company issued 63,945,257 shares of its common
stock for all of the issued and outstanding membership interests of Global
Clean
Energy Holdings, LLC. Of the 63,945,257 shares issued under the Global
Agreement, 36,540,146 shares were issued and delivered at the closing of the
Global Agreement without any restrictions and have been recorded in the
accompanying financial statements as issued and outstanding. The remaining
27,405,111 shares of common stock were held in escrow by the Company and are
not
reported in the accompanying financial statements as issued and outstanding,
except for 4,567,518 shares which were released on November 30, 2007 after
achievement of the related milestones.
On
September 14, 2007, the Company entered into a one-year agreement with a
consultant for investor relations services. Under the agreement, the Company
agreed to pay total compensation of $105,000 over the one-year term. As
additional compensation, the Company issued 4,357,298 shares of restricted
common stock to the consultant and granted piggyback registration rights for
the
stock to be registered in connection with the Company’s next registration of
securities. The issuance of the common stock was expensed as share-based
compensation in the amount of $117,647, or $0.027 per share on the date of
the
agreement.
During
the year ended December 31, 2006 the Company issued 435,556 shares of restricted
common stock
for
services totaling $78,400 or $0.18 per share, which was the fair value of the
services rendered.
Series
A Convertible Preferred Stock, Warrants and Financial
Instrument
During
the year ended December 31, 2005, the Company issued an additional 30,000 shares
of Series A Convertible Preferred Stock and warrants to purchase 22,877,478
shares of common stock for a total offering price of $3.0 million. The Company
incurred $340,000 of offering costs and issued to the placement agent warrants
to purchase 1,220,132 shares of common stock exercisable at $0.1967 per share,
which were exercisable for a period of three years.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Each
share of Preferred Stock entitles the holder to convert the share of Preferred
Stock into the number of shares of common stock resulting from dividing $100
by
the conversion price. The conversion price is 75% of the average of the three
lowest intra-day trading prices for the Company’s common stock during the 10
trading days immediately preceding the conversion date. The conversion price
may
not exceed $0.1967 and has a conversion price floor of $0.05. The warrants
are
subject to equitable adjustment in connection with a stock split, stock dividend
or similar transaction. As originally issued, the warrants entitled the holder
to purchase up to 22,877,478 shares of common stock of the Company at $0.1967
per share and were to expire three years after the date of
issuance.
The
Series A Convertible Preferred Stock has no voting rights. In
the
event of liquidation, the holders are entitled to a liquidating distribution
of
$100 per share. The
Company also entered into a registration rights agreement with
the
investors requiring
the Company to use its “best efforts” to timely file a registration statement
with the Securities and Exchange Commission registering the shares of common
stock issuable upon conversion of the Preferred Stock and exercise of the
warrants. There are no significant liquidation damages in the event the Company
is unable to file its registration statement.
The
conversion feature of the Series A Convertible Preferred Stock has more of
the
attributes of an equity instrument than of a liability instrument, and thus
was
not considered a derivative. However, at the time of issuance, the Company
was
unable to guarantee that there would be enough shares of stock to settle other
“freestanding instruments.” Accordingly, all of the warrants attached to the
convertible preferred stock were measured at their fair value and recorded
as a
liability in the financial statements. As of December 31, 2007, the Company
did
not have enough authorized shares to settle their “freestanding instruments”.
For these same reasons, all other warrants and options outstanding on March
11,
2005 or issued during the remainder of 2005 and through 2007 (except for stock
options issued to employees) were measured at their fair value and recorded
as
additional liability in the financial statements.
At
December 31, 2006, the fair value of the financial instrument was $294,988
based
on a Black-Scholes calculation with the weighted-average assumptions for
volatility of 138%, risk-free interest rate of 5.0%, an expected life of one
year, and a dividend yield of zero. The change in fair value was recorded as
“unrealized gain on financial instrument” in the accompanying Consolidated
Statement of Operations of $2,564,608 for the year ended December 31, 2006.
During
the year ended December 31, 2007, the Company remeasured the fair value of
the
outstanding warrants. At December 31, 2007, the fair value was determined to
be
$2,166,514 based on a Black-Scholes pricing calculation with the weighted-average
assumptions for volatility of 136%, a risk-free interest rate of 3.7%, an
expected life of 7.3 years, and a dividend yield of zero. For
the
year ended December 31, 2007 the Company has recorded an unrealized loss on
financial instrument of $147,636. On
January 29, 2008, the shareholders of the Company approved an increase in the
number of authorized shares of common stock from 250 million to 500 million.
Consequently, as the result of this amendment to the Company’s Articles of
Incorporation, the Company would then be able to settle all ‘freestanding
instruments”. Accordingly, the Company will reclassify the liability,
characterized in the accompanying financial statements as “Financial
Instrument”, in the amount of $2,166,514, to equity in January 2008.
In
January 2006, the preferred stockholders converted 200 shares of Series A
Preferred Stock into 242,424 shares of common stock at a conversion price of
$.0825 per share. The preferred stock had an assigned value of $8,722, which
was
reclassified to common stock at the date of conversion. During May 2006, the
preferred stockholders converted 7,380 shares of Series A Preferred Stock into
10,000,000 shares of common stock at a conversion price of $.0738 per share.
The
preferred stock did not have any assigned value due to all the proceeds being
assigned to the financial instrument liability. In September 2007, the preferred
stockholders converted 5,492 shares of Series A Preferred Stock into 10,983,521
shares of common stock at a conversion price of $0.05 per share. This preferred
stock also did not have any assigned value.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Mercator
Momentum Fund, LP; Monarch Pointe Fund, Ltd.; and Mercator Momentum Fund III,
LP, each a private investment entity (collectively, the MAG Funds) are the
preferred stockholders who purchased all of the shares of the Company’s Series A
Preferred Convertible Stock in 2004 and in 2005. In connection with the 2005
investment, the Company had agreed to eliminate the conversion price floor
of
the Series A Stock. The Company failed to file an amendment to the Series A
Stock Certificate of Designations of Preferences and Rights for the Series
A
Stock that would have eliminated the conversion price floor. Accordingly, in
connection with an intended conversion of some of their Series A Stock in
September 2007, the MAG Funds were required to convert Series A Stock at a
conversion price higher than the price that would have applied if the Amendment
had been filed as agreed.
On
October 22, 2007, the Company executed and entered into a Release and Settlement
Agreement
(the
Release Agreement), with the MAG Funds
to
settle all losses and damages that MAG may have suffered, and may hereafter
suffer, as result of the Company’s failure to file the amendment to the Series A
Stock Certificate of Designations of Preferences and Rights for the Series
A
Stock. Pursuant to the Release Agreement, the Company issued to the MAG Funds
a
ten-year
warrant
to acquire up to 17,000,000 shares of the Company’s
common stock at
an
exercise price of $0.01 per share, expiring October 17, 2017. The
initial warrant
price is subject to adjustments in connection with (i) the Company’s issuance of
dividends in shares of Common Stock, or shares of Common Stock or other
securities convertible into shares of Common Stock without consideration, (ii)
any cash paid or payable to the holders of Common Stock other than as a regular
cash dividend, and (ii) future stock splits, reverse stock splits, mergers
or
reorganizations, and similar changes affecting common stockholders. The issuance
of the warrant has been accounted for as share-based compensation in the amount
of $1,181,890 based
on
a Black-Scholes pricing calculation with the assumptions
for volatility of 141.5%, a risk-free interest rate of 4.57%, an expected life
of 10 years, and a dividend yield of zero. The fair value of the warrant has
been included in the liability for the financial instrument.
The
warrant issued to the MAG Funds contain beneficial ownership limitations, which
preclude the MAG Funds from exercising its warrant if, as a result of such
conversion or exercise, the MAG Funds would own beneficially more than 9.99%
of
the Company’s outstanding common stock then outstanding. Pursuant to the Release
Agreement, the MAG Funds released the Company from any and all claims, past,
present or future, relating to the losses or the Company’s failure to file the
amendment. In addition, MAG has agreed not to pursue litigation against the
Company in connection with the losses or the Company’s failure to file the
amendment.
Series
B Preferred Stock
In
order
to obtain additional working capital, on November 6, 2007, the Company entered
into a Securities Purchase Agreement with two accredited investors, pursuant
to
which the Company sold a total of 13,000 shares of our newly authorized Series
B
Convertible Preferred Stock (“Series B Shares”) for an aggregate purchase price
of $1,300,000, less offering costs of $9,265. Each share of the Series B Shares
has a stated value of $100. The Company collected $1,225,000 of the proceeds
from the sales of the Series B Preferred Stock in 2007. The remaining proceeds
of $75,000 were collected in February 2008, and are reflected as a subscription
receivable in the accompanying Balance Sheet at December 31, 2007.
The
Series B Shares may, at the option of each holder, be converted at any time
or
from time to time into shares of our common stock at the conversion price then
in effect. The number of shares into which one Series B Share shall be
convertible is determined by dividing $100 per share by the conversion price
then in effect. The
initial conversion price per share for the Series B Shares is $0.11, which
is
subject to adjustment for certain events, including stock splits, stock
dividends, combinations, or other recapitalizations affecting the Series B
Shares.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Each
holder of Series B Shares is entitled to the number of votes equal to the number
of shares of our common stock into which the Series B Shares could be converted
on the record date for such vote, and shall have voting rights and powers equal
to the voting rights and powers of the holders of the Company’s common stock.
In
the
event of our dissolution or winding up, each share of the Series
B
Shares
is entitled to be paid an amount equal to $100 (plus any declared and unpaid
dividends) out of the assets of the Company then available for distribution
to
shareholders; subject, however, to the senior rights of the holders of Series
A
Preferred Stock.
No
dividends are required to be paid to holders of the Series B shares. However,
the Company may not declare, pay or set aside any dividends on shares of any
class or series of our capital stock (other than dividends on shares of our
common stock payable in shares of common stock) unless the holders of the Series
B shares shall first receive, or simultaneously receive, an equal dividend
on
each outstanding share of Series B shares.
NOTE
H — INCOME TAXES
Income
taxes are provided for temporary differences between financial and tax bases
of
assets and liabilities. The following is a reconciliation of the amount of
benefit that would result from applying the federal statutory rate to pretax
loss with the benefit from income taxes for the years ended December 31,
2007 and 2006:
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Federal
income tax benefit at statutory rate of 34%
|
|
$
|
1,501,000
|
|
$
|
62,000
|
|
State
income tax, net of federal benefit
|
|
|
265,000
|
|
|
11,000
|
|
Unrealized
gain (loss) on financial instrument
|
|
|
(59,000
|
)
|
|
1,026,000
|
|
Share-based
compensation, net
|
|
|
(764,000
|
)
|
|
-
|
|
Adjustment
of operating loss carryforwards
|
|
|
1,463,000
|
|
|
-
|
|
Other
differences
|
|
|
(1,000
|
)
|
|
-
|
|
Change
in valuation allowance
|
|
|
(2,405,000
|
)
|
|
(1,099,000
|
)
|
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
$
|
-
|
|
The
components of deferred tax assets and liabilities are as follows at December
31,
2007 and 2006, using a combined deferred income tax rate of 40%:
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Net
operating loss carryforward
|
|
$
|
10,106,000
|
|
$
|
7,684,000
|
|
Research
and development credits
|
|
|
80,000
|
|
|
80,000
|
|
Share-based
compensation
|
|
|
714,000
|
|
|
673,000
|
|
Accrued
compensation
|
|
|
373,000
|
|
|
436,000
|
|
Accumulated
depreciation
|
|
|
-
|
|
|
(5,000
|
)
|
Valuation
allowance
|
|
|
(11,273,000
|
)
|
|
(8,868,000
|
)
|
|
|
|
|
|
|
|
|
Net
deferred tax asset
|
|
$
|
-
|
|
$
|
-
|
|
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Inasmuch
as it is not possible to determine when or if the net operating losses will
be
utilized, a valuation allowance has been established to offset the benefit
of
the utilization of the net operating losses.
The
Company has available net operating losses of approximately $25,000,000 which
can be utilized to offset future earnings of the Company. The Company also
has
available approximately $80,000 in research and development credits which expire
in 2008. The utilization of the net operating losses and research and
development credits are dependent upon the tax laws in effect at the time such
losses can be utilized. The loss carryforwards expire between the years 2008
and
2027. Should the Company experience a significant change of ownership, the
utilization of net operating losses could be reduced.
NOTE
I – CONSULTING
AGREEMENTS
In
February 2007, the Company engaged the Emmes Group, a consulting firm, to assist
it in resolving its financial issues, to obtain advice regarding any strategic
alternatives that may be available to it, and to prevent the Company from losing
all of its assets in bankruptcy. The Executive Vice President and Managing
Director of the Emmes Group was appointed to be a director of the Company in
August 2007. During the past several months, the Company has explored a number
of transactions that would (i) prevent the Company’s shareholders from losing
their entire investment in the Company and (ii) enable the Company to repay
some
of its currently outstanding debts and liabilities. The consulting agreement
has
a term of one year. As compensation for its services, the consultant is to
receive $15,000 per month plus a warrant to purchase 5,000,000 shares of the
Company’s common stock. The warrant has an exercise price of $0.03 per share,
contains a cash-less exercise provision, and expires ten years from date of
issue. The Company valued this warrant at $146,000 using the Black-Scholes
pricing model. The weighted average fair value of the stock options was $0.0292
per share. The weighted-average assumptions used for the calculation of fair
value were risk-free interest rate of 4.84%, volatility of 134%, expected life
of ten years, and dividend yield of zero. The fair value of the warrant was
expensed as share-based compensation on the date of issue. The fair value of
the
warrant has been included in the liability for the financial instrument.
In
February 2007, the Company entered into another consulting agreement with an
individual to assist it in the preparation of financial statements and reporting
to the SEC. The consulting agreement had a term of one year. As compensation
for
its services, the consultant was to receive $10,000 per month plus a warrant
to
purchase 5,000,000 shares of the Company’s common stock. The warrant has an
exercise price of $0.03 per share, contains a cash-less exercise provision,
and
expires ten years from date of issue. The Company valued this warrant at
$146,000 using the Black-Scholes pricing model. The weighted average fair value
of the stock options was $0.0292 per share. The weighted-average assumptions
used for the calculation of fair value were risk-free interest rate of 4.84%,
volatility of 134%, expected life of ten years, and dividend yield of zero.
The
fair value of the warrant was expensed as share-based compensation on the date
of issue. The fair value of the warrant has been included in the liability
for
the financial instrument. This consulting agreement was terminated in May 2007.
Since the consulting agreement was terminated prior to its expiration date,
the
Company’s obligations under the consulting agreement, if any, for the period
after the termination date are unclear. No demand for any additional
compensation has been made against the Company under the consulting agreement.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
J – STOCK OPTIONS AND WARRANTS
Stock
Options and Compensation-Based Warrants
The
Company has two incentive stock option plans wherein 24,000,000 shares of
the Company’s common stock are reserved for issuance thereunder. As more fully
described in Notes D, G, and I, the Company has issued stock options and
compensation-based warrants during the year ended December 31, 2007 to acquire
39,000,000 million shares of the Company’s common stock. During the year ended
December 31, 2007, as more fully described in Note K, the Company canceled
an
option to acquire 14,000,000 shares of common stock pursuant to a settlement
agreement with the Company’s former chief executive officer. During the year
ended December 31, 2006, the Company granted a stock option to a former officer
and director. The option was for 500,000 shares exercisable at $0.25 per
share through December 31, 2010. The option was fully vested on January 1,
2006. No income tax benefit has been recognized for share-based compensation
arrangements and no compensation cost has been capitalized in the balance sheet.
A
summary
of the status of options and compensation-based warrants at December 31, 2007
and 2006, and changes during the years then ended is presented in the following
table:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
|
Shares
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
|
Under
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
|
|
Option
|
|
Price
|
|
Life
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at January 1, 2006
|
|
|
19,483,000
|
|
$
|
0.04
|
|
|
|
|
|
|
|
Granted
|
|
|
500,000
|
|
|
0.25
|
|
|
|
|
|
|
|
Expired
|
|
|
(100,000
|
)
|
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2006
|
|
|
19,883,000
|
|
$
|
0.05
|
|
|
|
|
|
|
|
Granted
|
|
|
39,000,000
|
|
|
0.02
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(14,000,000
|
)
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2007
|
|
|
44,883,000
|
|
$
|
0.03
|
|
|
7.6
years
|
|
$
|
790,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at December 31, 2007
|
|
|
32,883,000
|
|
$
|
0.03
|
|
|
8.6
years
|
|
$
|
670,000
|
|
At
December 31, 2007, 80,000 of the options outstanding have no stated contractual
life. The fair value of each stock option grant and compensation-based warrant
is estimated on the date of grant or issuance using the Black-Scholes option
pricing model. The weighted-average fair value of stock options and
compensation-based warrants issued during the year ended December 31, 2007
was
$0.045. The weighted-average assumptions used for options granted and
compensation-based warrants issued during the year ended December 31, 2007
were
risk-free interest rate of 4.5%, volatility of 132%, expected life of 8.5 years,
and dividend yield of zero. The weighted- average fair value of stock options
granted during the year ended December 31, 2006 was $0.13. The weighted-average
assumptions used for options granted during the year ended December 31, 2006
were risk-free interest rate of 4.3%, volatility of 152%, expected life of
5
years, and dividend yield of zero. The assumptions employed in the Black-Scholes
option pricing model include the following. The expected life of stock options
represents the period of time that the stock options granted are expected to
be
outstanding prior to exercise. The expected volatility is based on the
historical price volatility of the Company’s common stock. The risk-free
interest rate represents the U.S. Treasury constant maturities rate for the
expected life of the related stock options. The dividend yield represents
anticipated cash dividends to be paid over the expected life of the stock
options.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Share-based
compensation from all sources recorded during the years ended December 31,
2007
and 2006 was $2,131,437 and $145,750, respectively. Share-based compensation
has
been included in the accompanying Consolidated Statements of Operations as
follows:
Period
Reported
|
|
General
and
Administrative
Expense
|
|
Loss
from
Discontinued
Operations
|
|
Total
|
|
|
|
|
|
|
|
|
|
Year
ended December 31, 2007
|
|
$
|
2,014,637
|
|
$
|
116,800
|
|
$
|
2,131,437
|
|
Year
ended December 31, 2006
|
|
|
-
|
|
|
145,750
|
|
|
145,750
|
|
As
of
December 31, 2007, there is approximately $464,000 of unrecognized compensation
cost related to stock-based payments that will be recognized over a weighted
average period of approximately 2.1 years.
Stock
Warrants
A
summary
of the status of the warrants granted at December 31, 2007 and 2006, and changes
during the years then ended is presented in the following table:
|
|
|
|
Weighted
|
|
|
|
Shares
|
|
Average
|
|
|
|
Under
|
|
Exercise
|
|
|
|
Warrant
|
|
Price
|
|
|
|
|
|
|
|
Outstanding
at January 1, 2006
|
|
|
40,923,861
|
|
$
|
0.23
|
|
Issued
|
|
|
-
|
|
|
-
|
|
Expired
|
|
|
(1,950,000
|
)
|
|
1.00
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2006
|
|
|
38,973,861
|
|
$
|
0.19
|
|
Issued
|
|
|
29,161,157
|
|
|
0.01
|
|
Cancelled
|
|
|
(29,161,157
|
)
|
|
0.20
|
|
Expired
|
|
|
(7,940,482
|
)
|
|
0.15
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2007
|
|
|
31,033,379
|
|
$
|
0.02
|
|
NOTE
K — RELEASE
AND SETTLEMENT AGREEMENT WITH CHIEF EXECUTIVE OFFICER
On
August
31, 2007, the Company entered into a Release and Settlement Agreement with
Judy
Robinett, the Company’s then-current Chief Executive Officer, pursuant to which
Ms. Robinett agreed to continue to act as the Company’s transitional Chief
Executive Officer. Under the agreement, Ms. Robinett agreed to, among other
things, assist the Company in the sale of its legacy assets, complete the
preparation and filing of the delinquent reports to the Securities and Exchange
Commission (the SEC) that related to the periods prior to the appointment of
Mr.
Palmer, and provide certain shareholder and creditor related services. Upon
the
completion of the foregoing matters, in particular the filing of the delinquent
reports to the SEC, Ms. Robinett was to resign, and Mr. Palmer was to thereafter
assume the office of Chief Executive Officer. Under the agreement, Ms. Robinett
agreed to (i) forgive her potential right to receive $1,851,805 in accrued
and
unpaid compensation, un-accrued and pro-rata bonuses, and severance pay and
(ii)
the cancellation of stock options to purchase 14,000,000 shares of common stock
at an exercise price of $0.02 per share. In consideration for her services,
the
forgiveness of the foregoing cash payments, the cancellation of the foregoing
stock options, and settlement of other issues, the Company agreed to (a) pay
Ms.
Robinett $500,000 upon the receipt of the Eucodis cash payment under the
agreement to sell the SaveCream Assets, (b) pay Ms. Robinett a commission of
fifteen percent of the gross proceeds received by the Company from the sale
of
the MDI-P asset, (c) pay Ms. Robinett $20,833 in monthly salary for serving
as
transitional Chief Executive Officer of the Company during the period from
April
1, 2007 until the effective date of her resignation, and (d) permit Ms. Robinett
to retain some of her previously granted incentive stock options in such an
amount allowing her to purchase up to two million shares of common stock, which
options shall continue to have the same terms and conditions as currently in
existence, including an option price of $0.01 per share and expiration date
of
December 31, 2112. Pursuant to this agreement, Ms. Robinett resigned on December
21, 2007. As a consequence of the settlement agreement, the Company i) has
recorded a gain on the settlement of debt of $395,137, representing the
difference between Ms. Robinett’s accrued compensation and the settlement amount
of $500,000, and ii) has cancelled her option to purchase 14,000,000 shares
of
common stock.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
L — OTHER SIGNIFICANT TRANSACTIONS RELATED TO DISCONTINUED
OPERATIONS
Formestane
Cream (formerly SaveCream) Asset Purchase
On
March 16, 2005, the Company completed the purchase of the intellectual
property assets (the “Assets”) of Savetherapeutics AG, a German corporation in
liquidation in Hamburg, Germany (“SaveT”). The Assets consist primarily of
patents, patent applications, pre-clinical study data and clinical trial data
concerning formestane cream (formerly called SaveCream), a developmental-stage
topical aromatase inhibitor treatment for breast cancer. Formestane cream did
not generate revenues for SaveT.
The
purchase price of the Assets was €2,350,000 (approximately $3.4 million
under December 31, 2007 exchange rates), payable as follows: €500,000 at
closing, €500,000 (approximately $665,700 on the date of the transaction) upon
conclusion of certain pending transfers of patent and patent application rights
from formestane cream’s inventors to the Company, and the remaining €1,350,000
($1,971,000 using December 31, 2007 exchange rates) upon successful
commercialization of the Assets.
The
pending transfers of patent and patent application rights have not occurred
as
of December 31, 2007. The Company has deemed the transfers are reasonably likely
to occur due to existing contractual commitments of the inventors and the
reasonably likely success of the Company’s action in German court proceeding to
affect these transfers. Accordingly, the Company has recorded the second
€500,000 payment as a research and development obligation in these financial
statements.
In
July
2006 the Company entered into a co-development and license agreement with
Eucodis Forschungs-und Entwicklungs GmbH (Eucodis), which provides for up-front
licensing fees and milestone payments in excess of the €1,350,000 threshold for
successful commercialization of the Assets. Accordingly, in the year ended
December 31, 2006 the Company recorded the final €1,350,000 purchase price
payment as research and development obligation in the accompanying financial
statements. Consistent with the Company’s conclusion that no business had been
acquired in connection with the purchase of the Assets, the charge has been
reflected as a research and development expense in the accompanying financial
statements. During the years ended December 31, 2007 and 2006, the Company
recognized revenue of $200,000 and $800,000, respectively, from the
co-development and license agreement, which amounts are included in Loss from
Discontinued Operations in the accompanying Consolidated Statements of
Operations.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
receivable and R&D agreement
On
July
15, 2005, the Company entered into an Assignment of Patent, Participation and
Research and Development Agreement (the "Agreement") with the inventor of the
Company’s SaveCream lead drug candidate. The terms of the
Agreement included the Company granting a €500,000 non-interest bearing loan to
the inventor. The loan was secured by profits expected to be received by
the inventor resulting from the inventor's 6% ownership interest in MDI
Oncology, Inc., a wholly-owned subsidiary of the Company. The Agreement
also included a consulting agreement for the inventor to perform research and
development work. The consulting fee was €10,000 (approximately $14,600
under December 31, 2007 exchange rates) per month, under which the Company
paid
€60,000 (approximately $87,600 under December 31, 2007 exchange rates).
On
October 27, 2006 the Company and the inventor amended the Agreement. In exchange
for certain intellectual property rights, the amended agreement (i)
terminated the balance of the non-interest bearing loan (€250,000) not
already advanced to the inventor under the terms of the earlier July 15, 2005
agreement, (ii) terminated the consulting agreement requiring the inventor
to
perform certain research and development work and the fee-for-service payments
anticipated to be made by the Company, and (iii) cancelled the inventor's
6% ownership interest in MDI Oncology, Inc. The amended agreement further
stipulated that the €250,000 already advanced to the inventor in two
installments of €100,000 and €150,000, respectively, as a non-interest
bearing loan under the July 15, 2005 agreement (the "Loan"), would be secured
by
2,301,000 warrants (the "Warrant") for the Company’s common stock issuable to
the inventor upon conclusion of certain pending transfers of patent and patent
application rights to the Company. The Warrant would have a strike price
of $0.001 per share and a 10 year expiration date. The Warrant would
be issued to the inventor upon transfer of all intellectual property rights
related to the SaveCream lead drug candidate. As of December 31,
2006, these intellectual property rights were not transferred. At December
31, 2006, the subject patents had yet to be transferred, and the principal
amount of the Loan outstanding was €250,000 (approximately $365,000 under
December 31, 2007 exchange rates). During the year ended December 31,
2006, the Company provided in the accompanying financial statements an allowance
of the full amount related to collectibility of this note receivable.
NOTE
M — RELATED PARTY BALANCES
At
December 31, 2007 and 2006, the Company had accrued payroll and payroll taxes
to
current and former officers, employees, and directors totaling $950,971 and
$1,184,264 for services performed and costs incurred in behalf of the Company,
including $583,332 and $836,804, respectively, to the Company’s former President
and Chief Executive Officer, and $77,750 and $75,500, respectively, to the
Company’s former controller. As further discussed in Note K, the Company has
entered into a Release and Settlement Agreement with the former President and
Chief Executive Officer which, among other things, provides for the settlement
of amounts due to her.
Other
disclosures of related party transactions are included in Notes D, F, G, and
I
to these Consolidated Financial Statements.
ITEM
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM
8A(T). CONTROLS AND PROCEDURES.
Evaluation
Of Disclosure Controls.
Our
management evaluated the effectiveness of our "disclosure controls and
procedures" (as defined in the Securities Exchange Act of 1934 (Exchange Act)
Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this annual
report, as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.
Based
on
that evaluation, we have concluded that as of the end of the period covered
by
this annual report, our disclosure controls and procedures are effective at
a
reasonable assurance level in ensuring that information required to be disclosed
by us in our reports is recorded, processed, summarized and reported within
the
required time periods. The foregoing conclusion is based, in part, on the fact
that we are a small public company in the development stage of our new Jatropha
Business, with no current revenues and only three employees. In addition, to
date, we have outsourced all of our accounting and bookkeeping functions to
a
third-party accounting firm.
Management's
Report On Internal Control Over Financial Reporting.
Our
management is responsible for establishing and maintaining adequate internal
control over our financial reporting. Internal control over financial reporting
is a process to provide reasonable assurance regarding the reliability of our
financial reporting for external purposes in accordance with generally accepted
accounting principles. Internal control over financial reporting includes
policies and procedures that: (i) pertain to maintaining records that, in
reasonable detail, accurately and fairly reflect our transactions; (ii) provide
reasonable assurance that transactions are recorded as necessary for preparation
of our financial statements and that receipts and expenditures of company assets
are made in accordance with management authorization; and (iii) provide
reasonable assurance that unauthorized acquisition, use or disposition of
company assets that could have a material effect on our financial statements
would be prevented or detected on a timely basis. Because of its inherent
limitations, internal control over financial reporting is not intended to
provide absolute assurance that a misstatement of our financial statements
would
be prevented or detected.
As
of the
end of the period covered by this annual report, we have concluded that our
internal controls over financial reporting are effective at a reasonable
assurance level in ensuring that information required to be disclosed by us
in
our reports is recorded, processed, summarized and reported within the required
time periods. The evaluation of our internal controls over financial reporting
was based on the framework in Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission.
Limitations
on the Effectiveness of Internal Controls.
Our
management does not expect that our internal control over financial reporting
will necessarily prevent all fraud and material error. Our internal controls
over financial reporting are designed to provide reasonable assurance of
achieving our objectives. We have concluded that our internal controls over
financial reporting are effective at that reasonable assurance level. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within our company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
internal control. The design of any system of controls also is based in part
upon certain assumptions about the likelihood of future events, and there can
be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. Over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate.
Changes
in Internal Controls.
In
September 2007, we determined that there were internal control deficiencies.
As
a result, under the direction of the Audit Committee, management developed
and
implemented the following additional measures designed to ensure that
information required to be disclosed in our periodic reports is recorded,
processed, summarized and reported accurately, including the following:
|
·
|
We
retained Gilderman, Garabedian & Flummerfelt, LLP, an independent
accounting firm, to manage our day-to-day internal accounting
functions;
|
|
·
|
We
retained Osborne, Robbins & Buhler, PLLC, an independent accounting
firm, to assist us with the preparation of our financial reports
to be
included in our periodic reports required to be filed under the
Act;
|
|
·
|
We
consolidated all or our record keeping and accounting functions in
our Los
Angeles office;
|
|
·
|
We
developed and implemented improved accounting and management financial
reporting policies and procedures;
|
|
·
|
We
hired ADP, Inc., an outside payroll service, to process all payrolls
and
make the required payroll withholding deductions and deposits;
and,
|
|
·
|
We
implemented additional banking procedures and imposed additional
pre-approval authorization
policies.
|
Management
believes that, with the additional measures we have adopted since October 1,
2007, and given the limited nature of our operations and small number of
employees at this time, our system of internal controls, disclosure controls
and
procedures is adequate to provide reasonable assurance that the information
required to be disclosed in our interim and annual reports is recorded,
processed, summarized, and accurately reported within the time periods specified
in the SEC’s rules and forms, and that such information is accumulated and
communicated to our Board of Directors, the Audit Committee, management,
including our certifying officers, as appropriate, to allow for timely decisions
regarding required disclosure based closely on the definition of “disclosure
controls and procedures” in Rule 13a-15(e).
This
annual report does not include an attestation report of the company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permits us to provide only management’s report in this
annual report.
ITEM
8B. OTHER INFORMATION
None.
PART III
ITEM
9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,
CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF
THE
EXCHANGE ACT.
The
following table sets forth certain information regarding our executive officers
and directors.
Name
|
|
Age
|
|
Title
|
|
|
|
|
|
David
R. Walker
|
|
63
|
|
Chairman
of the Board of Directors and Treasurer
|
|
|
|
|
|
Richard
Palmer
|
|
47
|
|
President,
Chief Executive Officer, Chief Financial Officer and
Director
|
|
|
|
|
|
Eric
J. Melvin
|
|
44
|
|
Director
and Secretary
|
|
|
|
|
|
Martin
Schroeder
|
|
54
|
|
Director
|
David
R. Walker
David
R.
Walker joined the Board of Directors on May 2, 1996, and was appointed Chairman
of the Board of Directors on May 10, 1998. He has served as Chairman of the
Audit Committee since its establishment in 2001. For over 20 years,
Mr. Walker has been the General Manager of Sunheaven Farms, the largest
onion growing and packing entity in the State of Washington. In the capacity
of
General Manager, Mr. Walker performs the functions of a traditional chief
financial officer. Mr. Walker holds a Bachelor of Arts degree in economics
from
Brigham Young University with minors in accounting and finance.
Richard
Palmer
Richard
Palmer was appointed as our President and Chief Operating Officer in September
2007, and has been a member of the Board of Directors since September 2007.
On
December 21, 2007 Mr. Palmer also became our Chief Executive Officer. Mr. Palmer
has over 25 years of hands-on experience in the energy field, holding senior
level management positions with a number of large engineering, development,
operations and construction companies. He is a co-founder of Mobius Risk Group,
LLC, an energy risk advisory services consulting company, and was a principal
and Executive Vice President of that consulting company from January, 2002
until
September 2007. From 1997 to 2002, Mr. Palmer was a Senior Director at Enron
Energy Services. Prior thereto, from 1995 to 1996 Mr. Palmer was a Vice
President of Bentley Engineering, and a Senior Vice President of Southland
Industries from 1993 to 1996. Mr. Palmer received his designation as a Certified
Energy Manager in 1999, holds two Business Management Certificates from
University of Southern California’s Business School, and is an active member of
both the American Society of Plant Biologists and the International Tropical
Farmers Association.
Eric
J. Melvin
Eric
Melvin was elected to our Board of Directors in September 2007 and was appointed
as our Secretary in October 2007. Mr. Melvin is a co-founder of Mobius Risk
Group, LLC, and has been its Chief Executive Officer since January 2002. He
has
extensive commodity trading and marketing experience including: natural gas
(physical and financial), power, crude products, coal, weather, fixed income
and
foreign exchange, as well as a strong track record of developing and managing
profitable energy trading, marketing and origination groups. Eric has
established trading processes and risk guidelines and has selected and
implemented financial and physical trading systems. He received his BGS
(Bachelor of Graduate Studies) from the University of Michigan, Ann Arbor and
a
J.D. from University of Detroit, School of Law.
Martin
Schroeder
Martin
Schroeder has been a member of the Board of Directors since August 2007. He
has
been the Executive Vice-President and Managing Director of The Emmes
Group,
Inc., a
strategic business consulting firm, since August 1998. He has been the principal
of Emmes Group Consulting, LLC since 1998. Mr.
Schroeder holds a Bachelor of Science in Biochemistry from the University of
California at Los Angeles, and a Masters of Science in Biochemistry from
California State University Long Beach.
Compliance
with Section 16(a) of the Exchange Act
Section
16(a) of the Securities Exchange Act of 1934 requires our executive officers
and
directors, and persons who own more than 10% of a registered class of our equity
securities, to file reports of ownership and changes in ownership with the
SEC.
Executive officers, directors and greater than 10% shareholders are required
by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based
solely on information provided to us by our officers and our review of copies
of
reporting forms received by us, we believe that during fiscal year ended
December 31, 2007, our officers and directors complied with the filing
requirements under Section 16(a).
Code
of Ethics
Our
Board
of Directors has adopted a code of ethics that applies to our principal
executive officers, principal financial officer or controller, or persons
performing similar functions (“Code of Ethics”). The text of the Code of Ethics
was filed as an exhibit to a prior Annual Report.
Board
Committees
During
fiscal 2007, the Board of Directors maintained an Audit Committee. The Board
of
Directors does not currently have a Compensation Committee or a Nominating
Committee, but intends to establish these committees in 2008.
The
Audit
Committee meets periodically with management and with our independent registered
public accounting firm to, among other things, review the results of the annual
audit and quarterly reviews and discuss the financial statements. The audit
committee also hires the independent registered public accounting firm, and
receives and considers the accountant’s comments as to controls, adequacy of
staff and management performance and procedures. The Audit Committee is also
authorized to review related party transactions for potential conflicts of
interest. As of December 31, 2007, Mr. Walker and Mr. Schroeder constituted
all
of the members of the Audit Committee. Mr. Walker is a non-employee director
and
independent as defined under the Nasdaq Stock Market’s listing standards. Mr.
Schroeder is a principal of The Emmes Group, a consulting firm that has provided
consulting services to us from February 2007 to January 2008 and has earned
$180,000 in consulting fees from us during that period. Accordingly, Mr.
Schroeder is not an independent member of the Audit Committee as defined under
the Nasdaq Stock Market’s listing standards. Each of the members of the Audit
Committee has significant knowledge of financial matters to be deemed to be
an
“audit committee financial expert” of the Audit Committee. Although Mr.
Schroeder is not independent as defined under the Nasdaq Stock Market’s listing
standards, due to Mr. Schroeder’s experience and because our stock is not
currently listed on any of the Nasdaq markets, our Board of Directors has
determined that he can competently perform the functions required of him as
a
member of the Audit Committee. The Audit Committee met 10 times in 2007 in
connection with filing our Annual Report for the period ended December 31,
2006,
and our subsequent Quarterly Reports on Form 10-QSB. The Audit Committee
operates under a formal charter that governs its duties and
conduct.
ITEM
10. EXECUTIVE COMPENSATION.
Director
Compensation.
Our
Board of Directors previously adopted a plan pursuant to which directors who
are
not officers of this company are entitled to receive $1,000 per meeting attended
in person and are entitled to an annual grant of $50,000 of shares of our common
stock. Directors, however, are entitled to receive compensation for services
unrelated to their service as a director to the extent that they provide such
unrelated services to the Company. See “Related Party Transactions” below.
Summary
Compensation Table.
The
following table sets forth certain summary information concerning compensation
paid by this company to all persons who acted as our Chief Executive Officer
(the “Named Executive Officer”) at any time during the year ended December 31,
2007. No other executive officer received a total annual salary and bonus in
excess of $100,000 during the year ended December 31, 2007.
Summary
Compensation Table
Name and Principal Position(s)
|
|
Year
|
|
Salary
($)
|
|
Bonus ($)
|
|
Other Annual
Compensation
|
|
Securities
Underlying
Options
(#)
|
|
Judy
M. Robinett
|
|
2007
|
|
$
|
275,000
|
|
$
|
46,500
|
|
|
|
|
|
—
|
|
Chief
Executive Officer(1)
|
|
2006
|
|
$
|
350,000
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
2005
|
|
$
|
322,500
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Palmer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President,
Chief Executive Officer, and Chief Operating Officer(2)
|
|
2007
|
|
$
|
83,333
|
|
|
|
|
$
|
7,800
|
(3)
|
|
12,000,000
|
(4)
|
|
(1)
|
Ms.
Robinett served as Chief Executive Officer until December 21,
2007.
|
|
(2)
|
Mr.
Palmer became the Chief Executive Officer on December 21,
2007.
|
|
(3)
|
Represents
payments made for Mr. Palmer’s for health and other insurance
benefits
|
|
(4)
|
Represents a
five-year option to purchase 12,000,000 shares of our common stock
granted
on August 30, 2007 at an exercise price of $0.03 per share (the closing
price of our stock on the date of grant). The options are subject
to
various vesting provisions.
|
Option
Grants.
The
following table contains information concerning grants of stock options during
the fiscal year ended December 31, 2007 by us to the Named Executive Officers.
We have not granted any stock appreciation rights.
Option
Grants in Fiscal Year Ended December 31, 2007
Individual Grants
|
|
Name
|
|
Number of
Shares
Underlying
Options
Granted
|
|
% of Total
Options
Granted to
Employees
In Fiscal Year
|
|
Exercise
Price
|
|
Market
Price on
Date of
Grant
|
|
Expiration
Date
|
|
Richard
Palmer
|
|
|
12,000,000
|
|
|
100
|
%
|
$
|
0.03
|
|
$
|
0.03
|
|
|
August 30,
2012
|
|
Aggregate
Options.
The
following table sets forth the number and value of unexercised options held
by
the Named Executive Officers as of December 31, 2007. There were no exercises
of
options by the Named Executive Officer in fiscal year 2007.
Aggregated
Option/SAR Exercises in Fiscal Year Ended December 31, 2007
and
FY-End Option/SAR Values
Name
|
|
Shares
Acquired on
Exercise (#)
|
|
Value
Realized ($)
|
|
Number of Securities
Underlying Unexercised
Options at
December 31, 2007 (#)
Exercisable/Unexercisable
|
|
Value of Unexercised
In-the-Money Options at
December 31, 2007 ($)
Exercisable/Unexercisable
|
|
Richard
Palmer
|
|
|
—
|
|
|
—
|
|
|
0/12,000,000
|
|
$
|
0/$120,000
|
|
Judy
M. Robinett
|
|
|
—
|
|
|
—
|
|
|
2,000,000
/ 0
|
|
$
|
60,000/$0
|
|
During
the fiscal year ended December 31, 2007, we did not adjust or amend the exercise
price of stock options awarded to the Named Executive Officers.
Employment
Agreement
On
September 7, 2007, we entered into an employment agreement with Richard Palmer
pursuant to which we hired Richard Palmer to serve as our President and Chief
Operating Officer. Mr. Palmer was also appointed to serve as director on our
Board of Directors to serve until the next election of directors by our
shareholders. Pursuant to Mr. Palmer’s employment agreement, effective December
21, 2007, following Ms. Robinett’s resignation as our Chief Executive Office,
Mr. Palmer became our Chief Executive Officer. We hired Richard Palmer to take
advantage of his experience and expertise in the feedstock/bio-diesel space,
and
in particular, in the Jatropha bio-diesel and feedstock business.
Under
our
employment agreement with Mr. Palmer, we granted Mr. Palmer an incentive option
to purchase up to 12,000,000 shares of our common stock at an exercise price
of
$0.03 (the trading price on the date the agreement was signed). The stock
options vest subject to our achievement of certain market capitalization goals.
The option expires after five years. In addition, Mr. Palmer’s compensation
package includes a base salary of $250,000, and a bonus payment contingent
on
Mr. Palmer’s satisfaction of certain performance criteria, which will not exceed
100% of Mr. Palmer’s base salary. The term of employment commenced September 1,
2007 and ends on September 30, 2010.
Judy
Robinett Employment and Resignation Agreements
On
April
1, 2005, we entered into a 3-year employment agreement with Judy Robinett
pursuant to which Ms. Robinett agreed to serve as our Chief Executive Officer
for an annual salary of $350,000 plus annual bonus. As of the effective date
of
employment agreement, Ms. Robinett already held options giving her the right
to
purchase 16,000,000 shares of our common stock.
On
August
31, 2007, we entered into a release and settlement agreement (effective as
of
September 7, 2007) (“the Release and Settlement Agreement”) with Judy Robinett,
our then current Chief Executive Officer, pursuant to which Ms. Robinett agreed
to continue to act as our transitional Chief Executive Officer. Ms. Robinett
also acted as our interim Chief Financial Officer. Under the agreement, Ms.
Robinett agreed to, among other things, assist us in the sale of our legacy
bio-pharmaceutical assets, complete the preparation and filing of the delinquent
SEC Reports that related to the periods prior to the date of the agreement,
deal
with our creditors and handle our creditor issues, and to assist in maintaining
our relations with our shareholders. Effective December 21, 2007, upon the
completion of the foregoing matters, Ms. Robinett resigned as our Chief
Executive Officer and from our Board, and Mr. Palmer became our Chief Executive
Officer.
Under
the
release and settlement agreement, Ms. Robinett agreed to (i) forgive her right
to receive $1,851,805 in accrued and unpaid compensation, un-accrued and
pro-rata bonuses, and severance pay and (ii) the cancellation of stock options
to purchase 14,000,000 shares of common stock at an exercise price of $0.02
per
share. In consideration for her services, the forgiveness of the foregoing
cash
payments, the cancellation of the foregoing stock options, and settlement of
other issues, we agreed to (a) pay Ms. Robinett $500,000 upon the receipt of
a
certain cash payment from Eucodis for the sale of our SaveCream rights under
the
SaveCream Asset Sale Agreement, (b) pay Ms. Robinett a commission of fifteen
percent (15%) of the gross proceed we receive from the sale of the MDI-P drug,
(c) pay Ms. Robinett $20,833 per month in salary and benefits for serving as
our
Chief Executive Officer during the period from April 1, 2007 until the date
of
her resignation according to terms of the Release and Settlement Agreement,
and
(d) permitted Ms. Robinett to retain some of her previously granted incentive
stock options in such an amount allowing her to purchase up to two million
(2,000,000) shares of common stock, which options shall continue to have the
same terms and conditions as currently in existence, including an option price
of $0.01 per share and expiration date of December 31, 2112.
ITEM
11. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
MATTERS.
The
following table sets forth information regarding persons known by us to
beneficially own, as defined by Rule 13d-3 under the Securities Exchange
Act of 1934, more than 5% of Common Stock as of December 31, 2007, based solely
on information regarding such ownership available in filings by such beneficial
owners with the SEC on Schedules 13D and 13G. The following table also sets
forth information regarding beneficial ownership of Common Stock as of December
31, 2007, by our Directors and Judy Robinett, our Chief Executive Officer until
December 21, 2007, and by the Directors and the Named Executive Officers as
a
group.
Name and Address of Beneficial Owner (1)
|
|
Shares Beneficially
Owned (2)
|
|
Percent
of Class
|
|
Certain
Beneficial Owners:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mercator
Momentum Fund, LP
555
S. Flower St., Suite 4500
Los
Angeles, CA 90071
|
|
|
46,861,109
|
(3)(13)
|
|
19.16
|
%
|
Mercator
Momentum Fund III, LP
555
S. Flower St., Suite 4500
Los
Angeles, CA 90071
|
|
|
44,588,559
|
(4)(13)
|
|
18.41
|
%
|
Monarch
Pointe Fund, Ltd.
555
S. Flower St., Suite 4500
Los
Angeles, CA 90071
|
|
|
34,002,509
|
(5)(13)
|
|
14.9
|
%
|
David
Firestone
555
S. Flower St., Suite 4500
Los
Angeles, CA 90071
|
|
|
125,452,177
|
(6)(13)
|
|
38.83
|
%
|
Mobius
Risk Group, LLC
Three
Riverway, Suite 1700
Houston,
Texas 77056
|
|
|
54,810,220
|
(7)
|
|
27.7
|
%
|
|
|
|
|
|
|
|
|
Directors/Named
Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Judy
M. Robinett
|
|
|
2,030,000
|
(8)
|
|
1.0
|
%
|
Richard
Palmer
|
|
|
9,135,037
|
(9)
|
|
4.6
|
%
|
David
R. Walker
|
|
|
1,153,539
|
(10)
|
|
*
|
|
Eric
J. Melvin
Three
Riverway, Suite 1700
Houston,
Texas 77056
|
|
|
54,810,220
|
(11)
|
|
27.7
|
%
|
Martin
Schroeder
92
Natoma Street, Suite 200
San
Francisco, California 94105
|
|
|
5,000,000
|
(12)
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
All
Named Executive Officers and Directors as a group (5
persons)
|
|
|
72,128,796
|
|
|
35.1
|
%
|
*
Less
than 1%
(1)
Unless otherwise indicated, the business address of each person listed is c/o
Global Clean Energy Holdings, Inc., 6033 W. Century Blvd, Suite 1090, Los
Angeles, California.
(2)
For
purposes of this table, shares are considered beneficially owned if the person
directly or indirectly has the sole or shared power to vote or direct the voting
of the securities or the sole or shared power to dispose of or direct the
disposition of the securities. Shares are also considered beneficially owned
if
a person has the right to acquire beneficial ownership of the shares within
60
days of December 31,, 2007.
(3)
Includes 18,638,877 shares that may be acquired upon the exercise of currently
exercisable warrants, and 17,430,000 shares of common stock issuable upon
conversion of 8,715 shares of Series A convertible preferred stock based on
an
assumed conversion price of $0.05, which is the minimum price at which such
shares of Series A convertible preferred stock can be converted.
(4)
Includes 20,100,884 shares that may be acquired upon the exercise of currently
exercisable warrants, and 20,590,000 shares of common stock issuable upon
conversion of 10,295 shares of Series A convertible preferred stock based on
an
assumed conversion price of $0.05, which is the minimum price at which such
shares of Series A convertible preferred stock can be converted.
(5)
Includes 10,403,095 shares that may be acquired upon the exercise of currently
exercisable warrants, and 19,834,000 shares of common stock issuable upon
conversion of 9,917 shares of Series A convertible preferred stock based on
an
assumed conversion price of $0.05, which is the minimum price at which such
shares of Series A convertible preferred stock can be
converted.
(6)
David
Firestone is the managing member of MAG Capital, LLC, a California limited
liability company (“MAG”). Mercator Momentum Fund, LP, and Mercator Momentum
Fund III, LP, are private investment limited partnerships organized under
California law. The general partner of each fund is MAG. Monarch Pointe Fund,
Ltd. is a corporation organized under the laws of the British Virgin Islands.
MAG controls the investment of Monarch Pointe Fund, Ltd.
(7)
Includes 23,490,095 shares subject to forfeiture in the event the company has
not satisfied certain conditions by September 7, 2009.
(8)
Includes 2,000,000 shares that may be acquired upon the exercise of currently
exercisable options.
(9)
Includes 3,262,514 shares subject to forfeiture in the event the company has
not
satisfied certain conditions by September 7, 2009. Mr. Palmer owns 13.33% of
the
outstanding membership interests of Mobius. Mr. Palmer has options to acquire
12,000,000 shares of common stock, which options are not currently exercisable
and will not become exercisable unless certain conditions are met. Neither
the
shares held by Mobius, nor the foregoing options to purchase 12,000,000 shares
have not been included in the table.
(10)
Includes 750,000 shares that may be acquired upon the exercise of currently
exercisable options.
(11)
Includes 54,810,220 shares held in the name of Mobius Risk Group, LLC, a Texas
limited liability company (“Mobius”). Mr. Melvin is the Chief Executive Officer
and a director of Mobius.
(12)
Includes 5,000,000 shares that may be acquired upon the exercise of currently
exercisable warrants held by Emmes Consulting Group, LLC, a California limited
liability company. Mr. Schroeder is the Executive Vice President and Managing
Director of Emmes Consulting Group, LLC.
(13)
Notwithstanding the foregoing percentages, each person identified herein,
individually or in the aggregate is limited by the terms of our Series A
convertible preferred stock and by applicable warrants to owning no more than
9.99% of our outstanding common stock at any given time.
ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE.
Emmes
Consulting Agreement
On
February 1, 2007, we entered into a 12-month consulting agreement (the “Emmes
Agreement”) with Emmes Group Consulting LLC (“Emmes”) pursuant to which we
engaged Emmes to assist with developing an overall strategic business plan
and
recapitalization strategy for our company. As compensation for its services,
Emmes received a consulting fee of $15,000 per month plus a warrant to purchase
5,000,000 shares of our common stock. The warrant vested as of February 1,
2007,
has an exercise price of $0.03 per share, contains a cashless exercise
provision, and expires ten years from date of issue. On January 31, 2008, the
Emmes Agreement expired in accordance with its terms.
Martin
Schroeder, one of our directors, is currently
the Executive Vice-President and Managing Director of Emmes.
Loan
Agreement
In
order
to fund its operations pending the closing of the SafeCream Asset Sale
Agreement, on September 7, 2007, we entered into a loan and security agreement
(“Loan Agreement”) with Mercator Momentum Fund III, L.P., a California limited
partnership and one of our principal shareholders. The lender and its affiliates
currently own all of the issued and outstanding shares of our Series A
Convertible Preferred Stock.
Pursuant
to the Loan Agreement, Mercator Momentum Fund III, L.P. agreed to make available
to us a secured term credit facility in the aggregate principal amount of
$1,000,000 (the “Loan”). In connection with the Loan Agreement, we issued a
secured promissory note to Mercator Momentum Fund III, L.P. that bears interest
at a rate of 12% per annum, payable monthly. During the fiscal year ended
December 31, 2007, we borrowed a total of $350,000 under the Loan Agreement.
We
have agreed not to request any further advances under the Loan Agreement. As
of
March 27, 2008, the remaining outstanding principal balance of amounts we
borrowed under the Loan Agreement was $200,000. The Loan currently matures
and
becomes due and payable on June 21, 2008. The Loan is secured by a first
priority lien on all of our assets.
Share
Exchange Agreement
On
September 7, 2007, we entered into a share and exchange agreement (the “Global
LLC Agreement”) pursuant to which we acquired all of the outstanding ownership
interests in Global Clean Energy Holdings, LLC, a Delaware limited liability
company (“Global LLC”). Richard Palmer and Mobius Risk Group, LLC (“Mobius”)
were the sole owners of the outstanding equity interests of Global LLC. In
exchange for all of the outstanding ownership interests in Global LLC, we issued
63,945,257 shares of our common stock to Richard Palmer and Mobius. Richard
Palmer is our Chief Executive Officer and a director. Mr. Eric Melvin, one
of
our directors, is a principal of Mobius, and Mr. Palmer owns a 13.33% interest
in Mobius.
Mobius
Consulting Agreement
Concurrent
with the execution of the Global LLC Agreement, we also entered into a
consulting agreement with Mobius (the “Mobius Agreement”) pursuant to which
Mobius has agreed to provide consulting services to us in connection with our
new Jatropha Business. Richard Palmer, our President and Chief Operating
Officer, owns 13.33% of the outstanding equity interests of Mobius. In addition,
Eric J. Melvin, one of our directors is a principal and Chief Executive Officer
of Mobius. We have agreed to pay Mobius a monthly retainer of $45,000 for the
services provided under the consulting agreement. The consulting agreement
has a
the term of twelve months, or such shorter period until the scope of work under
the agreement has been completed.
Judy
Robinett Resignation Agreement
On
August
31, 2007, we entered into a release and settlement agreement (effective as
of
September 7, 2007) with Judy Robinett, our current Chief Executive Officer,
pursuant to which Ms. Robinett agreed to continue to act as our transitional
Chief Executive Officer. Effective December 21, 2007, upon completion of certain
tasks relating to our legacy bio-pharmaceutical operations, Ms. Robinett
resigned as our Chief Executive Officer. For additional details about the
resignation agreement, please see “Item 10 - Executive
Compensation.”
Release
Agreement
On
October 22, 2007, we executed and entered into a release and settlement
agreement, dated as of October 19, 2007, with holders of our Series A Preferred
Convertible Stock pursuant to which we issued to such shareholders warrants
to
purchase 17,000,000 shares of our common stock. Mercator Momentum Fund, LP,
Monarch Pointe Fund, Ltd., and Mercator Momentum Fund III, LP, each a private
investment entity (the foregoing three investment funds, collectively, the
“MAG
Funds”) purchased shares of our Series A
Preferred Convertible Stock (the “Series A Stock”) in 2004 and in 2005. The
Series A Stock is exercisable at a conversion price based on the market price
of
our Common Stock, which conversion price however, will not be less than $0.05
per share. In connection with the 2005 investment, we agreed to eliminate the
$0.05 conversion price floor of the Series A Stock. However, in October 2007
we
determined that we failed to file an amendment to the Certificate of
Designations of Preferences and Rights for the Series A Stock, which would
have
eliminated the conversion price floor. Accordingly, the Series A Stock still
is
subject to the $0.05 per share conversion floor limitation, and the MAG Funds
were recently required to convert Series A Stock at a conversion price higher
than the price that would have applied if the amendment had been filed as
agreed.
In
order
to release us from liability related to our failure to remove the $0.05
conversion price floor of the Series A Stock, we executed and entered into
a
Release and Settlement Agreement, dated as of October 19, 2007
(the
“Release Agreement”), with the MAG Funds
to
settle all losses and damages that MAG may have suffered, and may hereafter
suffer, as result of our failure to file the foregoing amendment.
Pursuant
to the Release Agreement, we issued to the MAG Funds a ten-year
warrant
to acquire up to 17,000,000 shares of our
common
stock at
an
exercise price of $0.01 per share expiring October 17, 2017. Pursuant to the
Release Agreement, the MAG Funds agreed not to sue us in connection with, and
released us from all past, present and future claims relating to, our failure
to
file the amendment.
ITEM
13. EXHIBITS.
The
following documents are furnished as exhibits to this Form 10-KSB. Exhibits
marked with an asterisk are filed herewith. The remainder of the exhibits
previously have been filed with the Commission and are incorporated herein
by
reference.
Number
|
|
Exhibit
|
2.1
|
|
Sale
and Purchase Agreement between Attorney Hinnerk-Joachim Müller as
liquidator of Savetherapeutics AG i.L. and Medical Discoveries, Inc.
regarding the purchase of the essential assets of Savetherapeutics
AG i.L.
(filed as Exhibit 2.1 to the Company’s Annual Report on Form 10-KSB for
the fiscal year ended December 31, 2004, and incorporated herein
by
reference).
|
2.2
|
|
Asset
Sale Agreement dated July 6, 2007 among Medical Discoveries, Inc.,
MDI
Oncology, Inc. and Eucodis Pharmaceuticals Forschungs - und Entwicklungs
GmbH (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K
filed September 17, 2007, and incorporated herein by
reference)
|
2.3
|
|
Amendment
to Asset Sale Agreement dated September 30, 2007 among Medical
Discoveries, Inc., MDI Oncology, Inc. and Eucodis Pharmaceuticals
Forschungs - und Entwicklungs GmbH (filed as Exhibit 2.1 to the Company’s
Current Report on Form 8-K filed October 4, 2007, and incorporated
herein
by reference)
|
2.4
|
|
Second
Amendment to Asset Sale Agreement dated October 30, 2007 among Medical
Discoveries, Inc., MDI Oncology, Inc. and Eucodis Pharmaceuticals
Forschungs - und Entwicklungs GmbH (filed as Exhibit 2.1 to the Company’s
Current Report on Form 8-K filed November 2, 2007, and incorporated
herein
by reference)
|
2.5
|
|
Share
Exchange Agreement dated September 7, 2007 among Medical Discoveries,
Inc., Richard Palmer, and Mobius Risk Group, LLC (filed as Exhibit
2.2 to
the Company’s Current Report on Form 8-K filed September 17, 2007, and
incorporated herein by reference)
|
3.1
|
|
Amended
and Restated Articles of Incorporation of the Company (filed as Exhibit
3.1 to the Company’s Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1994, and incorporated herein by
reference).
|
3.2
|
|
Amended
Bylaws of the Company (filed as Exhibit 3.2 to the Company’s Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1994, and
incorporated herein by reference).
|
4.1
|
|
Registration
Rights Agreement dated October 18, 2004 among Monarch Pointe Fund,
Ltd.,
Mercator Advisory Group, LLC and Medical Discoveries, Inc. (filed
as
Exhibit 4.1 to the Company’s Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2004, and incorporated herein by
reference).
|
4.2
|
|
Registration
Rights Agreement dated December 3, 2004 among Mercator Momentum Fund,
LP,
Mercator Momentum Fund III, LP, Mercator Advisory Group, LLC and
Medical
Discoveries, Inc. (filed as Exhibit 4.2 to the Company’s Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2004, and incorporated
herein by reference).
|
4.3
|
|
Certificate
of Designations of Preferences and Rights of Series A Convertible
Preferred Stock of Medical Discoveries, Inc. (filed as Exhibit 4.1
to
Registration Statement No. 333-121635 filed on Form SB-2 on December
23, 2004, and incorporated herein by reference).
|
4.4
|
|
Amendment
to Certificate of Designations of Preferences and Rights of Series
A
Convertible Preferred Stock of Medical Discoveries, Inc. (filed as
Exhibit
4.2 to Registration Statement No. 333-121635 filed on Form SB-2 on
December 23, 2004, and incorporated herein by
reference).
|
4.5
|
|
Certificate
Of Designation of Preferences and Rights Series B Convertible Preferred
Stock of Medical Discoveries, Inc. (filed as Exhibit 4.1 to the Company’s
Current Report on Form 8-K filed November 13, 2007, and incorporated
herein by reference)
|
Number
|
|
Exhibit
|
10.1
|
|
2002
Stock Incentive Plan adopted by the Board of Directors as of July
11, 2002
(filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-QSB
for the quarter ended June 30, 2002, and incorporated herein by
reference).
|
10.2
|
|
Subscription
Agreement dated October 18, 2004 among Monarch Pointe Fund, Ltd.,
Mercator
Advisory Group, LLC, and Medical Discoveries, Inc. (filed as Exhibit
10.2
to Amendment No. 2 to Registration Statement No. 333-121635 filed
on form
SB-2 on June 2, 2005, and incorporated herein by
reference).
|
10.3
|
|
Subscription
Agreement dated December 3, 2004 among Mercator Momentum Fund, LP,
Mercator Momentum Fund III, LP, Mercator Advisory Group, LLC, and
Medical
Discoveries, Inc. (filed as Exhibit 10.3 to Amendment No. 2 to
Registration Statement No. 333-121635 filed on form SB-2 on June
2, 2005,
and incorporated herein by reference).
|
10.4
|
|
Employment
Agreement dated March 1, 2005 between Medical Discoveries, Inc. and
Judy M. Robinett. (filed as Exhibit 10.4 to Amendment No. 3 to
Registration Statement No. 333-121635 filed on Form SB-2 on October
13,
2005, and incorporated herein by reference).
|
10.5
|
|
Definitive
Master Agreement dated as of July 29, 2006, by and between MDI Oncology,
Inc. and Eucodis Forschungs und Entwicklungs GmbH (filed as Exhibit
10.1
to the Company’s Current Report on Form 8-K filed August 3, 2006, and
incorporated herein by reference).
|
10.6
|
|
Loan
and Security Agreement, dated September 7, 2007, between Medical
Discoveries, Inc. and Mercator Momentum Fund III, L.P. (filed as
Exhibit
10.1 to the Company’s Current Report on Form 8-K filed September 17, 2007,
and incorporated herein by reference)
|
10.7
|
|
Consulting
Agreement dated September 7, 2007 between Medical Discoveries, Inc.
and
Mobius Risk Group, LLC (filed as Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed September 17, 2007, and incorporated herein
by
reference)
|
10.8
|
|
Employment
Agreement dated September 7, 2007 between Medical Discoveries, Inc.
and
Richard Palmer (filed as Exhibit 10.3 to the Company’s Current Report on
Form 8-K filed September 17, 2007, and incorporated herein by
reference)
|
10.9
|
|
Release
and Settlement Agreement dated August 31, 2007 between Medical
Discoveries, Inc. and Judy Robinett (filed as Exhibit 10.4 to the
Company’s Current Report on Form 8-K filed September 17, 2007, and
incorporated herein by reference)
|
10.10
|
|
Release
and Settlement Agreement, dated as of October 19, 2007,
by and among the Company, on the one hand, and Mercator
Momentum Fund, LP, Monarch Pointe Fund, Ltd., and Mercator Momentum
Fund
III, LP, on the other hand. (filed as Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed October 26, 2007, and incorporated
herein
by reference)
|
10.11
|
|
Form
of Warrant (filed as Exhibit 10.2 to the Company’s Current Report on Form
8-K filed October 26, 2007, and incorporated herein by
reference)
|
10.12
|
|
Securities
Purchase Agreement, dated as of November 6, 2007, by and among Medical
Discoveries, Inc. and the Purchasers (as defined therein) (filed
as
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November
13, 2007, and incorporated herein by reference)
|
14.1
|
|
Medical
Discoveries, Inc. Code of Conduct*
|
23
|
|
Consent
of Hansen, Barnett & Maxwell. P.C.*
|
31
|
|
Rule
13a-14(a) Certification, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 *
|
32
|
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.*
|
* Filed
herewith.
ITEM
14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES.
Audit
Fees
The
aggregate fees we paid Hansen, Barnett & Maxwell. P.C. during the fiscal
year ended December 31, 2007 and 2006 for professional services for the audit
of
our financial statements and the review of financial statements included in
our
Forms 10-QSB and SEC filings were $43,038 and $54,199,
respectively.
Audit-Related
Fees
Hansen,
Barnett & Maxwell. P.C. did not provide and did not bill and it was not paid
any fees for, audit-related services in the fiscal years ended December 31,
2007
and 2006.
Tax
Fees
Hansen,
Barnett & Maxwell. P.C. did not provide, and did not bill and was not paid
any fees for, tax compliance, tax advice, and tax planning services for the
fiscal years ended December 31, 2007 and December 31, 2006.
All
Other Fees
Hansen,
Barnett & Maxwell. P.C. did not provide, and did not bill and were not paid
any fees for, any other services in the fiscal years ended December 31, 2007
and
2006.
Audit
Committee Pre-Approval Policies and Procedures
Consistent
with SEC policies, the Audit Committee charter provides that the Audit Committee
shall pre-approve all audit engagement fees and terms and pre-approve any other
significant compensation to be paid to the independent registered public
accounting firm. No other significant compensation services were performed
for
us by Hansen, Barnett & Maxwell. P.C. during 2007 and 2006.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
GLOBAL
CLEAN ENERGY HOLDINGS, INC.
|
|
|
Date:
March 27, 2008
|
By:
|
/s/
RICHARD PALMER
|
|
|
Richard
Palmer
|
|
|
Chief
Executive Officer and
President
|
In
accordance with the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant in the capacities
and
on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
RICHARD PALMER
Richard
Palmer
|
|
Chief
Executive Officer, President and Director
|
|
March
27, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
DAVID R. WALKER
David
R. Walker
|
|
Treasurer,
Chairman, the Board of Directors
|
|
March
27, 2008
|
|
|
|
|
|
|
|
|
|
|
/s/
ERIC MELVIN
|
|
Director
and Secretary
|
|
March
27, 2008
|
Eric
Melvin
|
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/s/
MARTIN SCHROEDER
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Director
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March
27, 2008
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Martin
Schroeder
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