UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
______________________
FORM
10-K/A
Amendment
No. 1
______________________
x
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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,
2008
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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
______
|
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
|
(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 895,
Los
Angeles, California 90045
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|
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(Address
of principal executive offices)
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|
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|
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(310)
641-4234
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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.
Indicate
by check mark if the registrant is a well known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes
o
No
þ
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes
o
No
þ
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and, (2) has been subject to such filing requirements for
the past 90 days.
Yes
þ
No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein and, will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
þ
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer
o
|
Accelerated
filer
o
|
Non-accelerated
filer
o
(Do
not check if a smaller reporting company)
|
Smaller
reporting company
þ
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
Yes
o
No
þ
The
aggregate market value of the common stock held by non-affiliates of the
registrant as of June 30, 2008 (the last business day of the registrant’s most
recently completed second fiscal quarter) was approximately
$8,865,000.
The
outstanding number of shares of common stock as of April 8, 2009 was
229,381,338, which includes 4,567,519 shares of common stock currently held in
escrow.
Documents incorporated by
reference: None
EXPLANATORY
NOTE
We are
filing this amendment (this “Amendment”) to our Annual Report on Form 10-K for
the year ended December 31, 2008 (our “Annual Report”) to reflect changes made
in response to comments received by us from the Staff of the Securities and
Exchange Commission (the “SEC”) in connection with the Staff’s review of our
Annual Report. We are only filing the items of our Annual Report that
have been revised in response to the Staff’s comments and all other information
in our Annual Report remains unchanged. Accordingly, the Amendment should be
read in conjunction with our Annual Report. Unless otherwise provided, all
information contained in this Amendment is as of April 15, 2009, the original
filing date of our Annual Report. This Amendment does not reflect
events that have occurred after the filing of the Annual Report and does not
modify or update the disclosure therein in any way other than as required to
reflect the matters set forth herein.
The only
changes to our Annual Report are in Item 9A(T) “Controls and Procedures” and in
the financial statements and exhibits filed as part of Item 15 “Exhibits and
Financial Statement Schedules.” In Item 9A(T) we have revised our disclosure to
more clearly present the conclusions of our principal executive, principal
financial and principal accounting officers regarding the effectiveness of our
disclosure controls and procedures in our Mexico subsidiary.
We have
amended the exhibits filed as part of the Annual Report to include the following
two additional agreements: (i) Limited Liability Company Agreement of
GCE Mexico I, LLC, and (ii) Service Agreement between this company and
Corporativo LODEMO S.A DE CV. The financial statements
included in Item 15 have been modified (i) to mark as unaudited the information
included in the Consolidated Statements of Operations and Cash Flows which is
designated as “From Inception of the Development Stage on November 20, 1991
through December 31, 2008,” (ii) to mark as unaudited the information
included in the Consolidated Statements of Changes in Stockholders’ Deficit for
the Period from November 20, 1991 (Date of Inception of the Development Stage)
through December 31, 2006, (iii) to remove all language from the Report of
Independent Registered Public Accounting Firm referring to the periods prior to
the year ended December 31, 2007 and to the reports of other auditors, and (iv)
to clarify certain disclosures in the Notes to Consolidated Financial Statements
regarding our Principles of Consolidation as they pertain to Asideros Globales
Corporativo and GCE Mexico I, LLC.
Pursuant
to the rules of the SEC, currently dated certifications from our principal
executive and principal financial officer, as required by Sections 302 and 906
of the Sarbanes-Oxley Act of 2002, are filed or furnished herewith, as
applicable.
ITEM
8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.
Financial
Statements are referred to in Item 15, listed in the Index to Financial
Statements and filed and included elsewhere herein as a part of this Annual
Report on Form 10-K/A.
ITEM
9A(T).
CONTROLS AND PROCEDURES.
Evaluation
of Disclosure Controls and Procedures.
We
maintain disclosure controls and procedures which are designed to ensure that
the information required to be disclosed in the reports it files or submits
under the Securities Exchange Act of 1934 (as amended, the “Act”) is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and that such information is accumulated and communicated
to our management, including the Chief Executive Officer and the Chief Financial
Officer (“Certifying Officers”), to allow timely decisions regarding required
financial disclosures.
In
connection with the preparation of this Annual Report, our Certifying Officers
evaluated the effectiveness of management’s disclosure controls and procedures,
as of December 31, 2008, in accordance with Rules 13a-15(b) and 15d-15(b) of the
Exchange Act. Based on that evaluation, the Certifying Officers
concluded that management’s disclosure controls and procedures were not
effective as of December 31, 2008.
Material
Weakness in Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as defined in Rule 15d-15(f) under the
Exchange Act, and for assessing the effectiveness of internal control over
financial reporting.
Internal
control over financial reporting is intended to provide reasonable assurance
regarding the reliability of our financial reporting and the preparation of
financial statements for external purposes in accordance with accounting
principles generally accepted in the United States. Internal control
over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets, (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with accounting principles generally accepted
in the United States and that our receipts and expenditures are being made only
in accordance with authorizations of our management and directors, and (3)
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisitions, use, or disposition of our assets that could have a
material effect on our financial statements.
Management,
with the participation of our principal executive and financial officers,
conducted an evaluation of the effectiveness of our internal control over
financial reporting, as of December 31, 2008, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on that
evaluation, management concluded that, as of December 31, 2008, our internal
control over financial reporting was not effective.
Based on
our evaluation of our internal control over financial reporting in our Mexico
subsidiary, we have determined that we currently have inadequate controls over
the accounting functions in Mexico and over cash management in Mexico. However,
management does not believe that this material weakness resulted in any material
misstatements in our financial condition for the current reporting period.
Management is attempting to implement new controls to improve both of these
deficiencies. The deficiencies consist of controls over the
disbursement of cash from our accounts in Mexico and the proper categorization
of such expenses for accounting purposes. The Company has begun to
take appropriate steps to remediate these weaknesses as follows: The
Company recently established new bank accounts in Mexico that require dual
control of two persons for most disbursements. The Company has required that the
Company be promptly notified of these disbursements for control and
categorization purposes. Furthermore, we are commencing the
implementation of procedures for remote real time access by the Company U.S.
executives to bank accounts in Mexico. Accordingly, each disbursement
will be able to be monitored in the U.S. to ensure proper use and to properly
record such disbursements. The Company expects to complete the
implementation of real time monitoring in the second half of 2009, assuming
financial resources are available. The effectiveness of our internal controls
following our remediation efforts will not be known until we test those controls
in connection with management’s tests of internal control.
Our Board
of Directors believes that, with the exception of the issues identified relating
to our operations in Mexico, our system of internal controls, disclosure
controls and procedures are adequate to provide reasonable assurance that the
information required to be disclosed in the 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). The Audit Committee
cannot be certain that its remediation efforts will sufficiently cure
management’s identified material financial reporting
weaknesses. Furthermore, the Audit Committee has not tested the
operating effectiveness of the remediated controls, since the process is not yet
complete. However, because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues, 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 errors or
mistakes.
This
annual report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our
independent registered public accounting firm pursuant to temporary rules of the
SEC that permit us to provide only management’s report in this annual
report.
Changes
in Internal Control Over Financial Reporting
Except as
reported above in this Item 9, there was no change in our internal control over
financial reporting during the most recent fiscal quarter that materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
PART
II
I
ITEM
15. EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES.
The
Company’s financial statements and related notes thereto are listed and included
in this Amendment No. 1 to Annual Report beginning on page
F-1. The following documents are furnished as exhibits to this
Form 10-K/A. 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
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Exhibit
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3.1
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Amended
and Restated Articles of Incorporation of the Company (filed as Exhibit
3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and incorporated herein by
reference).
|
3.2
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Amended
Bylaws of the Company (filed as Exhibit 3.2 to the Company’s Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, and incorporated
herein by reference).
|
4.1
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|
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
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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).
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4.5
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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)
|
10.1
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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).
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10.2
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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-K for the
fiscal year ended December 31, 2004, and incorporated herein by
reference).
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10.3
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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)
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10.4
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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)
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10.5
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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).
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10.6
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Note
Amendment And Maturity Date Extension, dated January 12, 2009, between the
Company and Mercator Momentum Fund III, L.P.**
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10.7
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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
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|
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)
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10.9
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Release
and Settlement Agreement dated August 31, 2007 between Medical
Discoveries, Inc. and Richard Palmer (filed as Exhibit 10.4 to the
Company’s Current Report on Form 8-K filed September 17, 2007, and
incorporated herein by reference)
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10.10
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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)
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10.11
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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)
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10.12
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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)
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10.13
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Employment
Agreement dated March 20, 2008 between Global Clean Energy Holdings, Inc.
and Bruce K. Nelson (filed as Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed April 7, 2008, and incorporated herein by
reference)
|
10.14
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|
Exchange
Agreement, effective April 18, 2008, by and between Global Clean Energy
Holdings, Inc., on the one hand, and Mercator Momentum Fund, L.P.,
Mercator Momentum Fund III, L.P., and Monarch Pointe Fund, Ltd. (filed as
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 24,
2008, and incorporated herein by reference)
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10.15
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|
Amendment
to 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 Quarterly Report on Form 10-QSB filed August 14,
2008, and incorporated herein by reference)
|
10.16
|
|
Stock
Purchase Agreement, dated October 30, 2008, between the Global Clean
Energy Holdings, Inc. and the four shareholders of Technology Alternatives
Limited, a Belizean Company formed under the Laws of Belize (filed as
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-QSB filed
November 14, 2008, and incorporated herein by
reference)
|
10.17
|
|
Limited
Liability Company Agreement of GCE Mexico I, LLC, a Delaware
Limited Liability Company, dated April 23, 2008*
|
10.18
|
|
Service
Agreement, dated October 15, 2007, between the Company and Corporativo
LODEMO S.A DE CV, a Mexican corporation*
|
14.1
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|
Medical
Discoveries, Inc. Code of Conduct**
|
23
|
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Consent
of Hansen, Barnett & Maxwell. P.C.*
|
31
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|
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.
|
** Filed
with our Annual Report on Form 10-K for the year ended December 31, 2008,
as originally filed on April 15, 2009.
|
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.
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By:
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/s/ RICHARD
PALMER
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Richard
Palmer
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President
and Chief Executive Officer
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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
|
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Title
|
Date
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/s/ RICHARD PALMER
|
|
Chief
Executive Officer
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December
1, 2009
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Richard
Palmer
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(Principal
Executive Officer) and Director
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/s/ BRUCE NELSON
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Chief
Financial Officer
(Principal Accounting
Officer)
|
December
1, 2009
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Bruce
Nelson
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/s/ DAVID WALKER
|
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Chairman,
the Board of Directors
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December
1, 2009
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David
Walker
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/s/ MARK A. BERNSTEIN
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Director
|
December
1, 2009
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Mark
A. Bernstein
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Index
to Financial Statements
|
Page
|
|
|
Financial
Statements:
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated
Balance Sheets as of December 31, 2008 and 2007
|
F-3
|
Consolidated
Statements of Operations for each of the two fiscal years
|
|
in
the period ended December 31, 2008 and from inception
|
F-4
|
Consolidated
Statements of Changes in Stockholders’ Deficit from
inception
|
|
through
December 31, 2008
|
F-5
|
Consolidated
Statements of Cash Flows for each of the two years
|
|
in
the period ended December 31, 2008 and from inception
|
F-7
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Notes
to Consolidated Financial Statements
|
F-8
|
H
ANSEN
,
B
ARNETT
&
M
AXWELL,
P.C.
A
Professional Corporation
CERTIFIED
PUBLIC ACCOUNTANTS
AND
BUSINESS
CONSULTANTS
5
Triad Center, Suite 750
Salt
Lake City, UT 84180-1128
Phone:
(801) 532-2200
Fax:
(801) 532-7944
www.hbmcpas.com
|
Registered
with the Public Company
Accounting
Oversight Board
A
Member of the Forum of Firms
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Shareholders
Global
Clean Energy Holdings, Inc.
Los
Angeles, CA
We have
audited the accompanying consolidated balance sheets of Global Clean Energy
Holdings, Inc. and subsidiaries (a development stage company) as of December 31,
2008 and 2007, and the related consolidated statements of operations,
stockholders’ deficit, and cash flows for the years then ended. 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
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Global Clean Energy
Holdings, Inc. and subsidiaries as of December 31, 2008 and 2007, and the
results of their operations and their cash flows for the years then ended, 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.
/s/
HANSEN, BARNETT & MAXWELL, P.C.
HANSEN, BARNETT & MAXWELL,
P.C.
Salt Lake City, Utah
April 14,
2009
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
Development Stage Company)
CONSOLIDATED
BALANCE SHEETS
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
291,309
|
|
|
$
|
805,338
|
|
Subscription
receivable
|
|
|
-
|
|
|
|
75,000
|
|
Other
current assets
|
|
|
131,715
|
|
|
|
51,073
|
|
Total
Current Assets
|
|
|
423,024
|
|
|
|
931,411
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT
|
|
|
|
|
|
|
|
|
Land
|
|
|
2,051,282
|
|
|
|
-
|
|
Plantation
development costs
|
|
|
2,117,061
|
|
|
|
308,777
|
|
Plantation
equipment
|
|
|
509,037
|
|
|
|
-
|
|
Office
equipment
|
|
|
10,993
|
|
|
|
1,127
|
|
|
|
|
4,688,373
|
|
|
|
309,904
|
|
Less
accumulated depreciation
|
|
|
(22,296
|
)
|
|
|
(563
|
)
|
|
|
|
4,666,077
|
|
|
|
309,341
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
2,691
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
5,091,792
|
|
|
$
|
1,240,752
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
1,890,999
|
|
|
$
|
1,656,292
|
|
Accrued
payroll and payroll taxes
|
|
|
1,158,808
|
|
|
|
950,971
|
|
Accrued
interest payable
|
|
|
522,097
|
|
|
|
300,651
|
|
Accrued
return on minority interest
|
|
|
138,014
|
|
|
|
-
|
|
Secured
promissory note
|
|
|
460,000
|
|
|
|
250,000
|
|
Notes
payable to shareholders
|
|
|
56,000
|
|
|
|
56,000
|
|
Convertible
notes payable
|
|
|
193,200
|
|
|
|
193,200
|
|
Research
and development obligation
|
|
|
2,607,945
|
|
|
|
2,701,555
|
|
Financial
instrument
|
|
|
-
|
|
|
|
2,166,514
|
|
Total
Current Liabilities
|
|
|
7,027,063
|
|
|
|
8,275,183
|
|
|
|
|
|
|
|
|
|
|
MORTGAGE
NOTE PAYABLE
|
|
|
2,051,282
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
MINORITY
INTEREST
|
|
|
1,962,022
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIT
|
|
|
|
|
|
|
|
|
Preferred
stock - no par value; 50,000,000 shares authorized
|
|
|
|
|
|
|
|
|
Series
A, convertible; zero and 28,928 shares issued and outstanding,
respectively (aggregate liquidation preference of $0 and $2,892,800,
respectively)
|
|
|
-
|
|
|
|
514,612
|
|
Series
B, convertible; 13,000 shares issued or subscribed (aggregate liquidation
preference of $1,300,000)
|
|
|
1,290,735
|
|
|
|
1,290,735
|
|
Common
stock, no par value; 500,000,000 shares authorized; 224,813,819 and
174,838,967 shares issued and outstanding, respectively
|
|
|
17,634,474
|
|
|
|
16,526,570
|
|
Additional
paid-in capital
|
|
|
3,672,724
|
|
|
|
1,472,598
|
|
Deficit
accumulated prior to the development stage
|
|
|
(1,399,577
|
)
|
|
|
(1,399,577
|
)
|
Deficit
accumulated during the development stage
|
|
|
(27,146,931
|
)
|
|
|
(25,439,369
|
)
|
Total
Stockholders' Deficit
|
|
|
(5,948,575
|
)
|
|
|
(7,034,431
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
5,091,792
|
|
|
$
|
1,240,752
|
|
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 OPERATIONS
|
|
|
|
|
|
|
|
From Inception of
|
|
|
|
|
|
|
|
|
|
the Development Stage
|
|
|
|
For the Years Ended
|
|
|
on November 20, 1991
|
|
|
|
December 31,
|
|
|
through
|
|
|
|
2008
|
|
|
2007
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
$
|
1,828,727
|
|
|
$
|
2,949,885
|
|
|
$
|
9,729,285
|
|
Research
and development
|
|
|
-
|
|
|
|
986,584
|
|
|
|
986,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
(1,828,727
|
)
|
|
|
(3,936,469
|
)
|
|
|
(10,715,869
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gain (loss) on financial instrument
|
|
|
5,469
|
|
|
|
(147,636
|
)
|
|
|
4,722,632
|
|
Interest
income
|
|
|
4,310
|
|
|
|
4,441
|
|
|
|
66,915
|
|
Interest
expense
|
|
|
(234,470
|
)
|
|
|
(51,929
|
)
|
|
|
(1,472,019
|
)
|
Interest
expense from amortization of discount on secured promissory
note
|
|
|
(36,369
|
)
|
|
|
(250,000
|
)
|
|
|
(286,369
|
)
|
Gain
on debt restructuring
|
|
|
-
|
|
|
|
485,137
|
|
|
|
2,524,787
|
|
Other
income
|
|
|
-
|
|
|
|
-
|
|
|
|
906,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Income (Expenses)
|
|
|
(261,060
|
)
|
|
|
40,013
|
|
|
|
6,462,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Continuing Operations Before Minority Interest in Net
Loss
|
|
|
(2,089,787
|
)
|
|
|
(3,896,456
|
)
|
|
|
(4,253,438
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest in net loss
|
|
|
315,115
|
|
|
|
-
|
|
|
|
315,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Continuing Operations
|
|
|
(1,774,672
|
)
|
|
|
(3,896,456
|
)
|
|
|
(3,938,323
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) from Discontinued Operations (net of gain on disposal of MDI-P of
$258,809 in 2007)
|
|
|
67,110
|
|
|
|
(518,428
|
)
|
|
|
(22,516,409
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
(1,707,562
|
)
|
|
|
(4,414,884
|
)
|
|
|
(26,454,732
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock dividend from beneficial conversion feature
|
|
|
-
|
|
|
|
-
|
|
|
|
(692,199
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss Applicable to Common Shareholders
|
|
$
|
(1,707,562
|
)
|
|
$
|
(4,414,884
|
)
|
|
$
|
(27,146,931
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted Loss per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Continuing Operations
|
|
$
|
(0.009
|
)
|
|
$
|
(0.029
|
)
|
|
|
|
|
Income
(Loss) from Discontinued Operations
|
|
$
|
0.001
|
|
|
$
|
(0.004
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(0.008
|
)
|
|
$
|
(0.033
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted Weighted-Average Common Shares Outstanding
|
|
|
207,895,116
|
|
|
|
134,707,205
|
|
|
|
|
|
See Notes
to Consolidated Financial Statements
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, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
2006
- $0.18 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
435,556
|
|
|
|
78,400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
78,400
|
|
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
|
|
Conversion
of preferred stock to common stock, 2006
|
|
|
(7,580
|
)
|
|
|
(8,722
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
10,242,424
|
|
|
|
8,722
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
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, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
(7,580
|
)
|
|
$
|
(8,722
|
)
|
|
|
-
|
|
|
$
|
-
|
|
|
|
117,749,868
|
|
|
$
|
12,528,359
|
|
|
$
|
-
|
|
|
$
|
(1,399,577
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
11,120,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
2006
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
67,350
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
67,350
|
|
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, 2006
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(20,332,286
|
)
|
|
|
-
|
|
|
|
(20,332,286
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2006
(Unaudited)
|
|
|
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
|
)
|
Reclassification
of financial instrument to equity
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,161,045
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,161,045
|
|
Exchange
of Series A preferred stock for common stock
|
|
|
(28,928
|
)
|
|
|
(514,612
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
28,927,000
|
|
|
|
514,612
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Issuance
of common stock for cash at $0.036 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,777,778
|
|
|
|
100,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,000
|
|
Issuance
of warrants in satisfaction of accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
payable
and amendment of note payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
160,934
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
160,934
|
|
Share-based
compensation from issuance of options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
184,146
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
184,146
|
|
Amortization
of share-based compensation for common stock held in
escrow
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
187,293
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
187,293
|
|
Release
of escrowed shares upon satisfaction of underlying
milestones
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,270,074
|
|
|
|
493,292
|
|
|
|
(493,292
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
loss for the year ended December 31, 2008
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,707,562
|
)
|
|
|
-
|
|
|
|
(1,707,562
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2008
|
|
|
-
|
|
|
$
|
-
|
|
|
|
13,000
|
|
|
$
|
1,290,735
|
|
|
|
224,813,819
|
|
|
$
|
17,634,474
|
|
|
$
|
3,672,724
|
|
|
$
|
(1,399,577
|
)
|
|
$
|
(27,146,931
|
)
|
|
$
|
-
|
|
|
$
|
(5,948,575
|
)
|
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
|
|
|
|
2008
|
|
|
2007
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Cash
Flows From Operating Activities
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,707,562
|
)
|
|
$
|
(4,414,884
|
)
|
|
$
|
(26,454,732
|
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency transaction loss (gain)
|
|
|
(107,369
|
)
|
|
|
296,370
|
|
|
|
250,022
|
|
Gain
on debt restructuring
|
|
|
-
|
|
|
|
(485,137
|
)
|
|
|
(2,524,787
|
)
|
Share-based
compensation for services, expenses, litigation, and research and
development
|
|
|
371,439
|
|
|
|
3,118,021
|
|
|
|
12,714,180
|
|
Commitment
for research and development obligation
|
|
|
-
|
|
|
|
-
|
|
|
|
2,378,445
|
|
Depreciation
|
|
|
1,365
|
|
|
|
10,494
|
|
|
|
139,031
|
|
Reduction
of escrow receivable from research and development
|
|
|
-
|
|
|
|
-
|
|
|
|
272,700
|
|
Unrealized
loss (gain) on financial instrument
|
|
|
(5,469
|
)
|
|
|
147,636
|
|
|
|
(4,722,632
|
)
|
Interest
expense from amortization of discount on secured promissory
note
|
|
|
36,369
|
|
|
|
250,000
|
|
|
|
286,369
|
|
Minority
interest in net loss
|
|
|
(315,115
|
)
|
|
|
-
|
|
|
|
(315,115
|
)
|
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
|
|
|
-
|
|
|
|
-
|
|
|
|
562,240
|
|
Note
payable issued for litigation
|
|
|
-
|
|
|
|
-
|
|
|
|
385,000
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,529
|
)
|
Other
current assets
|
|
|
(80,642
|
)
|
|
|
(51,073
|
)
|
|
|
(131,715
|
)
|
Accounts
payable and accrued expenses
|
|
|
802,314
|
|
|
|
678,104
|
|
|
|
5,020,326
|
|
Net
Cash Used in Operating Activities
|
|
|
(1,004,670
|
)
|
|
|
(709,278
|
)
|
|
|
(12,384,433
|
)
|
Cash
Flows From Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Plantation
development costs
|
|
|
(1,787,916
|
)
|
|
|
(308,777
|
)
|
|
|
(2,096,693
|
)
|
Purchase
of property and equipment
|
|
|
(518,903
|
)
|
|
|
-
|
|
|
|
(740,237
|
)
|
Proceeds
from disposal of assets
|
|
|
-
|
|
|
|
310,000
|
|
|
|
310,000
|
|
Change
in deposits
|
|
|
(2,691
|
)
|
|
|
-
|
|
|
|
(53,791
|
)
|
Issuance
of note receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
(313,170
|
)
|
Payments
received on note receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
130,000
|
|
Net
Cash Provided by (Used in) Investing Activities
|
|
|
(2,309,510
|
)
|
|
|
1,223
|
|
|
|
(2,763,891
|
)
|
Cash
Flows From Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from common stock, preferred stock, and warrants for cash
|
|
|
175,000
|
|
|
|
1,215,735
|
|
|
|
11,424,580
|
|
Proceeds
from issuance of preferred membership in GCE Mexico I, LLC
|
|
|
2,415,151
|
|
|
|
-
|
|
|
|
2,415,151
|
|
Contributed
equity
|
|
|
-
|
|
|
|
-
|
|
|
|
131,374
|
|
Proceeds
from notes payable and related warrants
|
|
|
260,000
|
|
|
|
350,000
|
|
|
|
1,946,613
|
|
Payments
on notes payable
|
|
|
(50,000
|
)
|
|
|
(100,000
|
)
|
|
|
(951,287
|
)
|
Proceeds
from convertible notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
571,702
|
|
Payments
on convertible notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
(98,500
|
)
|
Net
Cash Provided by Financing Activities
|
|
|
2,800,151
|
|
|
|
1,465,735
|
|
|
|
15,439,633
|
|
Net
Increase (Decrease) in Cash and Cash Equivalents
|
|
|
(514,029
|
)
|
|
|
757,680
|
|
|
|
291,309
|
|
Cash
and Cash Equivalents at Beginning of Year
|
|
|
805,338
|
|
|
|
47,658
|
|
|
|
-
|
|
Cash
and Cash Equivalents at End of Year
|
|
|
291,309
|
|
|
|
805,338
|
|
|
|
291,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
13,024
|
|
|
$
|
12,146
|
|
|
|
|
|
Noncash
Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification
of financial instrument to permanent equity
|
|
$
|
2,161,045
|
|
|
$
|
-
|
|
|
|
|
|
Acquisition
of land in exchange for mortgage note payable
|
|
|
2,051,282
|
|
|
|
-
|
|
|
|
|
|
Exchange
of Series A preferred stock for common stock
|
|
|
514,612
|
|
|
|
-
|
|
|
|
|
|
Release
of common stock held in escrow
|
|
|
493,292
|
|
|
|
123,322
|
|
|
|
|
|
Issuance
of warrants in satisfaction of accounts payable
|
|
|
124,565
|
|
|
|
-
|
|
|
|
|
|
Accrual
of return on minority interest
|
|
|
138,014
|
|
|
|
-
|
|
|
|
|
|
Equipment
depreciation capitalized to plantation development costs
|
|
|
20,638
|
|
|
|
-
|
|
|
|
|
|
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
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. With this
transaction, MDI acquired the SaveCream technology and carried on the research
and development of this drug candidate. As discussed in Note M, 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 C. 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”).
Effective
April 23, 2008, the Company entered into a limited liability company agreement
to form GCE Mexico I, LLC (GCE Mexico) along with six unaffiliated
investors. The Company owns 50% of the common membership interest of
GCE Mexico and five of the unaffiliated investors own the other 50% of the
common membership interest. Additionally, a total of 1,000 preferred
membership units were issued to two of the unaffiliated
investors. GCE Mexico owns a 99% interest in Asideros Globales
Corporativo, (Asideros) a corporation newly organized under the laws of Mexico,
and the Company owns the remaining 1% directly. GCE Mexico was
organized primarily to, among other things, acquire land in Mexico through
Asideros for the cultivation of the Jatropha plant.
Principles
of Consolidation
The
consolidated financial statements include the accounts of Global Clean Energy
Holdings, Inc., its subsidiaries, and the variable interest entities of GCE
Mexico and Asideros. All significant intercompany transactions have been
eliminated in consolidation.
Financial
Accounting Standards Board Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest
Entities,
(FIN 46(R)), requires that if an entity is the primary
beneficiary of a variable interest entity (VIE), the entity should consolidate
the assets, liabilities and results of operations of the VIE in its consolidated
financial statements. Global Clean Energy Holdings, Inc. considers
itself to be the primary beneficiary of GCE Mexico and Asideros, and
accordingly, has consolidated these entities since April 2008, with the equity
interests of the unaffiliated investors in GCE Mexico presented as Minority
Interests in the accompanying consolidated financial
statements.
Development
Stage Company
The
Company has not yet obtained substantial revenue from 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
.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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 $27,891 at December 31,
2008. The Company has maintained its cash balances at what management considers
to be high credit-quality financial institutions.
As
described in Note D, substantially all property and equipment relate to the
development of a plantation to cultivate the
Jatropha Curcas
plant. Property and equipment are stated at
cost. Depreciation of office equipment is computed using the
straight-line method over estimated useful lives of 5
years. Plantation equipment is depreciated using the straight-line
method over estimated useful lives of 5 to 15 years and is currently being
capitalized as part of plantation development costs. 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
(SOP
85-3). Plantation development costs are not currently being
depreciated. Under the provisions of SOP 85-3, land developments and
other improvements with indefinite lives are capitalized and not
depreciated. Other developments that have a limited life and
intermediate-life plants that have growth and production cycles of more than one
year are depreciated over their respective lives once they are placed in
service. Upon completion of the plantation development, the
development costs having a limited life and the costs of cultivating the
Jatropha plants will be depreciated over the useful lives of the related
assets. Land, plantation development costs, and plantation equipment
are located in Mexico.
Except
for costs incurred during the development period of the plantation, normal
maintenance and repair items are charged to costs and expensed as
incurred. During the development period, maintenance, repairs, and
depreciation of plantation equipment have been capitalized as part of the
plantation development costs. 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.
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.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Prior to
the discontinuation of its bio-pharmaceutical business as discussed in Note M,
research and development had been the principal function of the Company. For
fiscal years ended December 31, 2006 and earlier, research and development
expense included certain costs which were 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. For the year ended December 31, 2007, research and development
costs related to the exchange of common stock for the trade secrets, know-how,
etc. of Global Clean Energy Holdings, LLC (See Note C). Research and
development costs totaled $0 and $986,584 for the years ended December 31,
2008 and 2007, respectively. For years prior to the discontinuation
of its bio-pharmaceutical business, research and development costs are included
in loss from discontinued operations.
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. Foreign
currency balances denominated in Euros relate to the discontinued
bio-pharmaceutical business. Consequently, foreign currency gains and
losses have been included in loss from discontinued operations. 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, 2008 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.
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 a) those assumed in determining the valuation of common stock, warrants,
and stock options, b) estimated useful lives of plantation equipment, and c)
undiscounted future cash flows for purpose of evaluating possible impairment of
long-term assets. It is at least reasonably possible that the significant
estimates used will change within the next year.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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 2008 and 2007 as they are anti-dilutive. The potentially
issuable common shares as of December 31, 2008 and 2007 are as
follows:
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
Convertible
notes
|
|
|
128,671
|
|
|
|
128,671
|
|
Convertible
preferred stock - Series A
|
|
|
-
|
|
|
|
57,856,000
|
|
Convertible
preferred stock - Series B
|
|
|
11,818,181
|
|
|
|
11,818,181
|
|
Warrants
|
|
|
29,742,552
|
|
|
|
31,033,379
|
|
Compensation-based
stock options and warrants
|
|
|
51,809,083
|
|
|
|
44,883,000
|
|
Common
stock held in escrow
|
|
|
4,567,519
|
|
|
|
22,837,593
|
|
|
|
|
98,066,006
|
|
|
|
168,556,824
|
|
The
Company recognizes compensation expense for stock-based awards expected to vest
on a straight-line basis over the requisite service period of the award based on
their grant date fair value. The Company estimates the fair value of
stock options using a Black-Scholes option pricing model which requires
management to make estimates for certain assumptions regarding risk-free
interest rate, expected life of options, expected volatility of stock and
expected dividend yield of stock.
Reclassifications
Certain amounts from the 2007
consolidated balance sheet have been reclassified in the current presentation to
conform to the 2008 presentation of current liabilities. These
reclassifications had no effect on the total amount of current liabilities or
the amount of stockholders’ deficit.
Recently
Issued Accounting Statements
In
September 2006, the Financial Accounting Standards Board (FASB) 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 the Company’s fiscal year beginning January 1, 2008 for
financial assets and liabilities and January 1, 2009 for non-financial assets
and liabilities. The adoption of SFAS 157 for financial assets and
liabilities on January 1, 2008 did not have a material impact on the
Company’s financial statements. Management is currently evaluating
the impact of SFAS 157 for non-financial assets and liabilities, if any, on the
reporting of 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. Management is currently evaluating the effects, if any,
that SFAS 141(R) may have on the Company’s financial
statements. Management does not expect that it will have any
immediate effect on the Company’s financial statements; however, the revised
standard will govern the accounting for any future business combinations that
the Company may enter into.
In
December 2007, the FASB issued SFAS 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. Management is
currently evaluating this new statement. Based on the current
consolidated financial statements, if SFAS 160 were effective, the minority
interest in the consolidated balance sheet would be presented as noncontrolling
interest in Owners’ Equity (Deficit), the minority interest in net loss would be
included in consolidated net loss in the consolidated statement of operations,
and the footnotes would include expanded disclosure regarding the ownership
interests of the Company and of the noncontrolling interests.
In March
2008, the FASB issued SFAS No. 161,
Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133
(SFAS 161). SFAS 161 requires enhanced disclosures about an
entity’s derivative and hedging activities. Entities will be required
to provide enhanced disclosures about: (a) how and why an entity uses
derivative instruments; (b) how derivative instruments and related hedge items
are accounted for under SFAS No. 133 and its related interpretations; and
(c) how derivative instruments and related hedge items affect an entity’s
financial position, financial performance and cash flows. The
provisions of SFAS 161 are effective January 1, 2009. Management
is currently evaluating the impact of SFAS 161 on the Company’s financial
statements.
In June
2008, the FASB ratified EITF Issue No. 07-5,
Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity's Own Stock
(EITF 07-5).
EITF 07-5 provides that an entity should use a two step approach to evaluate
whether an equity-linked financial instrument (or embedded feature) is indexed
to its own stock, including evaluating the instrument's contingent exercise and
settlement provisions. It also clarifies on the impact of foreign currency
denominated strike prices and market-based employee stock option valuation
instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning
after December 15, 2008. Management is currently evaluating the
impact of SFAS 161 on the Company’s 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
B — BASIS OF PRESENTATION AND GOING CONCERN
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As shown in the
accompanying financial statements, the Company incurred a net loss applicable to
common shareholders of $1,707,562 during the year ended December 31, 2008,
and has incurred losses applicable to common shareholders since inception of the
development stage of $27,146,931. The Company also used cash in
operating activities of $1,004,670 during the year ended December 31,
2008. At December 31, 2008, the Company has negative working capital
of $6,604,039 and a stockholders’ deficit of $5,948,575. Those
factors raise substantial doubt about the Company’s ability to continue as a
going concern.
The
Company discontinued its former bio-pharmaceutical business during the quarter
ended March 31, 2007. Management plans to meet its cash needs through
various means including selling assets related to its former bio-pharmaceutical
business, securing financing, entering into joint ventures, and developing a new
business model. In order to fund its new operations related to the
cultivation of the Jatropha plant, the Company sold Series B preferred stock
during the quarter ended December 31, 2007 in the amount of $1,300,000 and
issued a secured promissory note under which the Company has borrowings of
$460,000 as of December 31, 2008. The Company is developing a new business
operation to participate in the rapidly growing bio-diesel
industry. The Company continues to expect 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.
NOTE
C — JATROPHA BUSINESS VENTURE
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, the Company entered into various
transactions during September and October of 2007, including: (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 assist with the
development of the Jatropha Business in Mexico. Subsequent to
entering into these transactions, the Company identified certain real property
in Mexico it believed to be suitable for cultivating the Jatropha
plant. During April 2008, the Company entered into a limited
liability company agreement to form GCE Mexico I, LLC (GCE Mexico). In August
2008 the Company terminated the agreement with Mobius Risk Group, LLC. Through
Asideros Globales Corporativo (Asideros), a Mexican corporation of which GCE
Mexico holds a 99% equity interest and Global Clean Energy Holdings, Inc. holds
a 1% equity interest, land has been acquired in Mexico for the cultivation of
the Jatropha plant. All of these transactions are described in
further detail in the remainder of this note to the 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
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 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, 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 were not achieved. Upon the satisfaction, from time to
time, of the operational and market capitalization condition milestones, the
restricted shares would 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 were not
achieved, the restricted shares that had not been released from escrow would 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 were to
be released from escrow if and when i) certain land lease agreements suitable
for the planting and cultivation of
Jatropha curcas
were 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
were executed. These restricted shares were to be held
in escrow subject to the satisfaction of these milestones, at which time such
shares would 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 amortized this compensation over four months, the period of time in which
the satisfaction of the operational milestones was expected to be fulfilled that
would 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 years ended December 31, 2008 and 2007, the
Company amortized and recognized $21,581 and $348,388 of share-based
compensation related to these shares, respectively. With the
acquisition of the land for the Jatropha Farm in April 2008, the operational
milestones were satisfied under the Global Agreement. Consequently,
13,702,556 shares of common stock being held in escrow have been released to the
former owners of Global Clean Energy Holdings, LLC.
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 are to
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 are
to be released as follows:
|
a.
|
4,567,518
shares are to be released upon the achievement of $6 million market
capitalization and 75,000 shares of average daily trading
volume,
|
|
b.
|
4,567,518
shares are to 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 are to be released upon the achievement of $20 million market
capitalization and 125,000 shares of average daily trading
volume.
|
These
restricted shares were placed in escrow subject to the satisfaction of these
milestones, at which time such shares are to 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. During May 2008, the second market-related milestones
under the Global Agreement were satisfied, which resulted in the release of an
additional 4,567,518 shares of common stock being held in
escrow. There are 4,567,519 shares of common stock held in escrow at
December 31, 2008, which will be released upon the satisfaction of the third
market-related milestones. The Company is accounting 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 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 originally 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
years ended December 31, 2008 and 2007, the Company amortized and recognized
$165,712 and $161,860, respectively, of share-based compensation related to
these shares.
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. 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.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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 years
ended December 31, 2008 and 2007, the Company amortized and recognized $88,000
and $29,652, respectively, of share-based compensation related to these
options.
Mobius Consulting
Agreement
Concurrent
with the execution of the Global Agreement, the Company entered into a
consulting agreement with Mobius pursuant to which Mobius 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 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 was twelve months and the scope of work under the agreement has
been completed. Mobius supervised the hiring of certain staff to
serve in management and operations roles of the Company, or hired such persons
to provide similar services as independent contractors. Mobius’
compensation for the services provided under the agreement was a monthly
retainer of $45,000. The Company also reimbursed Mobius for
reasonable business expenses incurred in connection with the services
provided. The agreement contained customary confidentiality
provisions with respect to any confidential information disclosed to Mobius or
which Mobius received while providing services under the
agreement. Under this agreement, the Company has paid Mobius or
accrued $437,279 during the year ended December 31, 2008, of which $42,155 was
expensed as compensation to Mobius and $395,124 was capitalized as plantation
development costs pursuant to AICPA Statement of Position 85-3,
Accounting by Agricultural Producers
and Agricultural Cooperatives
. During the year ended December 31, 2007,
the Company paid Mobius or accrued $191,547, of which $40,797 was expensed as
compensation to Mobius and $150,750 was capitalized as plantation development
costs. The Company owed Mobius $322,897 and $50,700 for accrued, but
unpaid, compensation and costs as of December 31, 2008 and 2007,
respectively.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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 had decided to initiate its Jatropha Business in Mexico, and had
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.
Under the
supervision of the Company’s management and Mobius, the LODEMO Group is
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 is 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
increased yield and a sales commission for biomass sales. Under this
agreement, the Company has paid the LODEMO Group or accrued $1,089,554 and
$158,028 during the years ended December 31, 2008 and 2007, respectively, all of
which was capitalized as plantation development costs pursuant to AICPA
Statement of Position 85-3,
Accounting by Agricultural Producers
and Agricultural Cooperatives
. During the year ended December
31, 2008, the Company issued warrants to acquire 2,076,083 shares of common
stock to the LODEMO Group and an affiliated entity in satisfaction of accounts
payable in the amount of $124,565. As of December 31, 2008, the
Company had prepaid $98,159 of plantation development costs to the LODEMO
Group. As of December 31, 2007, the Company owed the LODEMO Group
$117,758 for accrued, but unpaid, compensation and costs.
GCE Mexico I,
LLC
Effective
April 23, 2008, the Company entered into a limited liability company agreement
(“LLC Agreement”) to form GCE Mexico I, LLC, a Delaware limited liability
company (GCE Mexico), with six unaffiliated investors (collectively,
the Investors). GCE Mexico was organized primarily to acquire
approximately 5,000 acres of farm land (the Jatropha Farm) in the State of
Yucatan in Mexico to be used primarily for the (i) cultivation of
Jatropha curcas
, (ii) the
marketing and sale of the resulting fruit, seeds, or pre-processed crude
Jatropha oil, whether as biodiesel feedstock, biomass or otherwise, and (iii)
the sale of carbon value, green fuel value, or renewable energy credit value
(and other similar environmental attributes) derived from activities at the
Jatropha Farm.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Under the
LLC Agreement, the Company owns 50% of the issued and outstanding common
membership units of GCE Mexico. The remaining 50% of the common
membership units was issued to five of the Investors. The Company and
the other owners of the common membership interest were not required to make
capital contributions to GCE Mexico.
In
addition, two of the Investors agreed to invest approximately $4.2 million in
GCE Mexico through the purchase of preferred membership units and through the
funding of the purchase of land in Mexico. An aggregate of 1,000
preferred membership units were issued to these two Investors who each agreed to
make capital contributions to GCE Mexico of up to $2,232,624, in installments
and as required, to fund the development and operations of the Jatropha
Farm. Shortly after entering into the LLC Agreement, the preferred
members made an initial capital contribution of $957,191 toward the development
of the Jatropha Farm. Additional capital contributions of $1,457,960
have been received by GCE Mexico from these Investors during the remainder of
the year ended December 31, 2008. The agreement calls for additional
contributions from the Investors over and above the initial capital
contributions, as requested by management and as required by the operation in
2009 and the following years. Subsequent to December 31, 2008, these Investors
have made additional capital contributions of $1,071,278. These
Investors are entitled to earn a preferential 12% per annum cumulative
compounded return on the cumulative balance of their preferred membership
interest.
These
investors also directly funded the purchase of approximately 5,000 acres of land
in the State of Yucatan in Mexico by the payment of $2,051,282. The
land was acquired in the name of Asideros and Asideros issued a mortgage in the
amount of $2,051,282 in favor of these two Investors. The mortgage
bears interest at the rate of 12% per annum, payable quarterly. The
Board has directed that this interest shall continue to accrue until such time
as the Board determines that there is sufficient cash flow to pay all accrued
interest. The entire mortgage, including any unpaid interest, is due
April 23, 2018.
Since the
acquisition of the land, approximately 2,500 acres have been improved so far,
approximately 750 acres have been planted, and roads and other infrastructure
have been developed on the farm. Furthermore, heavy equipment is now
in place that will greatly facilitate rapid improvement and planting.
The net
income or loss of Asideros is allocated to its shareholders based on their
respective equity ownership, or 99% to GCE Mexico and 1% directly to the
Company. GCE Mexico has no operations separate from its investment in
Asideros. According to the LLC Agreement of GCE Mexico, the net loss
of GCE Mexico (composed solely of its share of the operating results of
Asideros) is allocated to its members according to their respective investment
balances. Accordingly, since the common membership interest did not
make a capital contribution, all of the losses have been allocated to the
preferred membership interest. The Minority Interest presented
in the accompanying consolidated balance sheet includes the carrying value of
the preferred membership interests and of the common membership interests owned
by the Investors, and excludes any common membership interest in GCE Mexico held
by the Company. Accordingly, the Minority Interest is composed of the
following elements at December 31, 2008:
Capital
contribution from preferred membership interest
|
|
$
|
2,415,151
|
|
Allocation
of net loss of GCE Mexico to the
|
|
|
|
|
preferred
membership interest
|
|
|
(315,115
|
)
|
Accrual
of preferential return for the preferred
|
|
|
|
|
membership
interest
|
|
|
(138,014
|
)
|
Investment
of common membership interest held by
|
|
|
|
|
other
Investors, excluding the Company
|
|
|
-
|
|
|
|
|
|
|
Minority
Interest
|
|
$
|
1,962,022
|
|
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
D – PROPERTY AND EQUIPMENT
Property
and equipment as of December 31, 2008 and 2007 are as
follows:
|
|
2008
|
|
|
2007
|
|
Land
|
|
$
|
2,051,282
|
|
|
$
|
-
|
|
Plantation
development costs
|
|
|
2,117,061
|
|
|
|
308,777
|
|
Plantation
equipment
|
|
|
509,037
|
|
|
|
-
|
|
Office
equipment
|
|
|
10,993
|
|
|
|
1,127
|
|
Total
cost
|
|
|
4,688,373
|
|
|
|
309,904
|
|
Less
accumulated depreciation
|
|
|
(22,296
|
)
|
|
|
(563
|
)
|
Property
and equipment, net
|
|
$
|
4,666,077
|
|
|
$
|
309,341
|
|
The
Company has capitalized farming equipment and costs related to the development
of land for farm use in accordance with AICPA Statement of Position 85-3,
Accounting by Agricultural Producers
and Agricultural Cooperatives
. Plantation equipment is
depreciated using the straight-line method over estimated useful lives of 5 to
15 years and is currently being capitalized as part of plantation development
costs. Plantation development costs are not currently being
depreciated. Upon completion of the plantation development,
development costs having a limited life and intermediate-life plants that have
growth and production cycles of more than one year will be depreciated over the
useful lives of the related assets.
Commencing
in June 2008, Asideros purchased certain equipment for purposes of rapidly
clearing the land, preparing the land for planting, and actually planting the
Jatropha trees. The land, plantation development costs, and
plantation equipment are located in Mexico.
NOTE
E – ACCRUED PAYROLL AND PAYROLL TAXES
Accrued
payroll and payroll taxes principally relate to unpaid compensation for officers
and directors that are no longer affiliated with the Company. Accrued
payroll taxes will become due upon payment of the related accrued
compensation. Accrued payroll and payroll taxes are composed of the
following:
|
|
December
31,
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
Former
Chief Executive Officer, resigned 2007, including
|
|
|
|
|
|
|
$500,000
under the Release and Settlement Agreement
|
|
$
|
570,949
|
|
|
$
|
583,332
|
|
Other
former Officers and Directors
|
|
|
311,200
|
|
|
|
311,200
|
|
Accrued
payroll taxes on accrued compensation to
|
|
|
|
|
|
|
|
|
former
officers and directors
|
|
|
38,510
|
|
|
|
38,510
|
|
Accrued
payroll, vacation, and related payroll taxes
|
|
|
|
|
|
|
|
|
for
current officers
|
|
|
238,149
|
|
|
|
17,929
|
|
Accrued
payroll and payroll taxes
|
|
$
|
1,158,808
|
|
|
$
|
950,971
|
|
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
On August
31, 2007, the Company entered into a Release and Settlement Agreement with Judy
Robinett, the Company’s then-current Chief Executive Officer. Under
the agreement, Ms. Robinett agreed to, among other things, assist the Company in
the sale of its legacy assets and complete the preparation and filing of the
delinquent reports to the Securities and Exchange Commission. 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 stock options, and settlement
of other issues, the Company agreed to, among other things, to pay Ms. Robinett
$500,000 upon the receipt of the cash payment under the agreement to sell the
SaveCream Assets to Eucodis. Pursuant to this agreement, Ms. Robinett
resigned on December 21, 2007.
Secured Promissory
Note
In order
to fund ongoing operations pending closing of the sale of the SaveCream Assets,
the Company entered into a loan agreement with, and issued a promissory note in
favor of, Mercator Momentum Fund III, L.P. (Mercator) in September
2007. At that time, Mercator, along with two other affiliates, owned
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. The loan is secured by a lien on all of the assets of the
Company. Under the loan agreement, interest was originally payable on
the loan at a rate of 12% per annum, payable monthly.
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. In March, 2008, the loan was paid down to $200,000
and the maturity date was extended to June 21, 2008. In May 2008, the
Company and Mercator entered into an amendment to the loan agreement, whereby,
Mercator loaned the Company and additional $250,000 increasing the outstanding
balance to $450,000. In connection with the amendment, the interest
rate was reduced to 8.68% and the due date was extended to August 19,
2008. Additionally, as part of the amendment, the Company issued
Mercator a two-year warrant to purchase 581,395 shares of common stock at $0.129
per share. For the consideration of increasing the note by $10,000,
the maturity date was further extended to January 13, 2009. On December 9, 2008
these notes were assigned to the limited partners of Mercator. Subsequent to
December 31, 2008, these notes were further extended from January 13, 2009 to
July 31, 2009 for consideration of increasing the total principal balance of the
notes by $15,000 and increasing the interest rate to 10.68%.
In
connection with the closing of the original 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.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
proceeds of $250,000 resulting of the amendment of the loan agreement in May
2008 have been allocated between the promissory note and the warrant based on
the relative fair value of each instrument. The fair value of the
warrant was estimated on the date of issuance using the Black-Scholes option
pricing model. The assumptions used for valuing the warrant were
risk-free interest rate of 2.4%, volatility of 168%, expected life of 2.0 years,
and dividend yield of zero. The allocation resulted in a $36,369
discount to the promissory note, which has been amortized as additional interest
over the period from May 19, 2008 through the original extended due date of
August 19, 2008 under the amendment.
Notes
Payable
The
Company has notes payable to shareholders in the aggregate amount of $56,000 at
December 31, 2008 and 2007. The notes originated between 1997
and 1999, bear interest at 12%, are unsecured, and are currently in
default. Accrued interest on the notes totaled $78,821 and $72,091 at
December 31, 2008 and 2007, respectively.
Convertible Notes
Payable
The
Company has convertible notes payable to certain individuals in the aggregate
amount of $193,200 at December 31, 2008 and 2007. 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 $248,799 and $225,552 at December 31, 2008 and 2007,
respectively.
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 M, 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 L, 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.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
G — STOCKHOLDERS’ EQUITY
Common
Stock
As more fully described in Note C, 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 until the
achievement of certain operational and market-related
milestones. During the year ended December 31, 2007, 4,567,518 shares
were released from escrow upon achieving the first market-related
milestones. During the year ended December 31, 2008, an additional
18,270,074 shares were released from escrow upon the achievement of the
operational milestones and the second market-related milestones. At
December 31, 2008, there are 4,567,519 shares still held in escrow pending
achievement of the third market-related milestones. Shares held in
escrow are not reported in the accompanying financial statements as issued and
outstanding.
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 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.
On
November 13, 2008, the Company entered into stock purchase agreements with
certain individuals for the issuance of 2,777,778 shares of common stock for
$100,000, or $0.036 per share.
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. In connection
with the offering, the Company issued to the placement agent warrants to
purchase 1,220,132 shares. Each share of Preferred Stock entitled 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 feature of the Series A Convertible Preferred Stock had 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. 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. 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 recorded an
unrealized loss on financial instrument of $147,636. For the period
from December 31, 2007 through January 29, 2008, the fair value of this
liability decreased by $5,469 resulting in a balance of
$2,161,045. 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 is now able to settle
all ‘freestanding instruments”. Accordingly, the Company reclassified
the liability, characterized in the accompanying financial statements as
“Financial Instrument”, in the amount of $2,161,045, to permanent equity in
January 2008.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Mercator
Momentum Fund, LP; Monarch Pointe Fund, Ltd.; and Mercator Momentum Fund III,
LP, each a private investment entity (collectively, the MAG Funds) were 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.
Effective
April 18, 2008, the Company entered into an exchange agreement ( the Exchange
Agreement) with Mercator Momentum Fund, L.P., Mercator Momentum Fund III, L.P.,
and Monarch Pointe Fund, Ltd. (collectively, the MAG Funds), comprising all of
the holders of the Company’s Series A Convertible Preferred Stock (the Series A
Stock). Pursuant to the Exchange Agreement, the MAG Funds agreed to
exchange 28,928 shares of the Series A Stock, constituting all of the issued and
outstanding shares of the Series A Stock, for an aggregate of 28,927,000 shares
of the Company’s common stock. The exchange ratio was determined by dividing the
$100 purchase price of the preferred shares by $0.10 per share 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
Prior to
the Exchange Agreement, the Series A Stock had been convertible at a price equal
to 75% of the “Market Price”, as defined in the Certificate of Designations of
Preferences and Rights of the Series A Stock. The conversion price could not
exceed $0.1967 and had a conversion price floor of $0.05. On April
18, 2008, the closing price of the Company’s common stock was $0.10 and the
“Market Price” would have been $0.045 per share. In connection with
the Exchange Agreement, the Company agreed to waive the limitation that the MAG
Funds could not own more that 9.99% of the Company’s outstanding common stock as
a concession for the MAG Funds agreeing to a conversion price that was more
favorable to the Company.
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.
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.
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.
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,
2008 and 2007:
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
2008
|
|
|
2007
|
|
Federal
income tax benefit at statutory rate of 34%
|
|
$
|
581,000
|
|
|
$
|
1,501,000
|
|
State
income tax, net of federal benefit
|
|
|
102,000
|
|
|
|
265,000
|
|
Unrealized
gain (loss) on financial instrument
|
|
|
2,000
|
|
|
|
(59,000
|
)
|
Foreign
currency translation adjustment
|
|
|
43,000
|
|
|
|
(119,000
|
)
|
Amortization
of discount on notes payable
|
|
|
(15,000
|
)
|
|
|
(100,000
|
)
|
Share-based
compensation, net
|
|
|
(147,000
|
)
|
|
|
(764,000
|
)
|
Expiration
of operating loss and research credit carryforwards
|
|
|
(511,000
|
)
|
|
|
(164,000
|
)
|
Adjustment
of operating loss carryforwards
|
|
|
-
|
|
|
|
1,627,000
|
|
Research
and development
|
|
|
-
|
|
|
|
(395,000
|
)
|
Other
differences
|
|
|
(1,000
|
)
|
|
|
(4,000
|
)
|
Change
in valuation allowance
|
|
|
(54,000
|
)
|
|
|
(1,788,000
|
)
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The
components of deferred tax assets and liabilities are as follows at December 31,
2008 and 2007, using a combined deferred income tax rate of
40%:
|
|
2008
|
|
|
2007
|
|
Net
operating loss carryforward
|
|
$
|
9,483,000
|
|
|
$
|
9,534,000
|
|
Research
and development credits
|
|
|
-
|
|
|
|
80,000
|
|
Share-based
compensation
|
|
|
716,000
|
|
|
|
714,000
|
|
Accrued
compensation
|
|
|
511,000
|
|
|
|
408,000
|
|
Deferred
revenue
|
|
|
-
|
|
|
|
(80,000
|
)
|
Valuation
allowance
|
|
|
(10,710,000
|
)
|
|
|
(10,656,000
|
)
|
Net
deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
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 $23,700,000 which
can be utilized to offset future earnings of the Company. The utilization of the
net operating losses are dependent upon the tax laws in effect at the time such
losses can be utilized. The loss carryforwards expire between the years 2009 and
2028. 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. The Company 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
had a term of one year. As compensation for its services, the
consultant received $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 was included in the liability for the financial
instrument.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
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 was
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.
NOTE
J – EMPLOYMENT AGREEMENT
On March
20, 2008, the Company entered into an employment agreement with Bruce K. Nelson
pursuant to which the Company hired Mr. Nelson to serve as its Executive
Vice-President and Chief Financial Officer effective April 1, 2008. The initial
term of employment commenced March 20, 2008 and continues through March 20,
2010. Thereafter, the term of employment shall automatically renew for
successive one-year periods unless otherwise terminated in accordance with the
employment agreement.
Mr.
Nelson’s compensation package includes a base salary of $175,000, subject to
annual increases based on the Consumer Price Index for the immediately preceding
12-month period, and a bonus payment based on Mr. Nelson’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. Nelson’s base salary. Mr. Nelson is eligible to participate
in the Company’s employee stock option plan and other benefit
plans.
The
Company granted Mr. Nelson an option (the Initial Option) to acquire up to
2,000,000 shares of the Company’s common stock at an exercise price of $0.05.
The Initial Option vests in tranches of 500,000 shares after 90 days, nine
months, fifteen months, and two years of the employment term. The Initial Option
expires after 10 years. The Company also granted Mr. Nelson an option
(the Performance Option) to acquire up to 2,500,000 shares of the Company’s
common stock at an exercise price of $0.05, subject to the Company’s achievement
of certain market capitalization goals. The Performance Option expires after
five years.
The
Company was permitted to terminate Mr. Nelson’s employment on the first
anniversary of the employment term, provided that the Company pay Mr. Nelson
three (3) months salary if such termination was without “cause.” If Mr. Nelson’s
employment is terminated by the Company without “cause” or by Mr. Nelson for
“good reason” after the first anniversary of the employment term, Mr. Nelson
will be entitled to receive severance payments including (i) an amount equal to
his unpaid salary through the end of the second year of the employment
agreement, and (ii) 100% of Initial Option shall vest, to the extent not already
vested.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company has accounted for the options under Mr. Nelson’s employment agreement as
share-based compensation under SFAS No. 123(R). The Company valued
these options at $189,500 using the Black-Scholes pricing model. The
weighted average fair value of the stock options was $0.042 per
share. The weighted-average assumptions used for the calculation of
fair value were risk-free rate of 2.38%, volatility of 127%, expected life of
5.2 years, and dividend yield of zero. The Company is amortizing this
compensation over the vesting period for the Initial Option and over the period
of time in which the satisfaction of market capitalization milestones for the
Performance Option are 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 for the Performance Options. During the
year ended December 31, 2008, the Company amortized and recognized $91,346 of
share-based compensation related to these options.
NOTE
K – 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
of December 31, 2008, 300,000 shares remain available under these
plans. As more fully described in Notes C, G, I, and J, the Company
has issued stock options and compensation-based warrants during the years ended
December 31, 2008 and 2007 to acquire 4,500,000 and 39,000,000 million shares,
respectively, of the Company’s common stock. Additionally, during the
year ended December 31, 2008, the Company issued warrants to acquire 2,076,083
shares of common stock to Lodemo and an affiliated entity in satisfaction of
accounts payable in the amount of $124,565. The Company also granted
options to acquire 700,000 shares of common stock to independent contractors
during the year ended December 31, 2008. During the year ended
December 31, 2007, as more fully described in Note L, 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. No
income tax benefit has been recognized for share-based compensation arrangements
and no compensation cost has been capitalized in the balance sheet.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
A summary
of the status of options and compensation-based warrants at December 31, 2008
and 2007, 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 December 31, 2006
|
|
|
19,883,000
|
|
|
$
|
0.05
|
|
|
|
|
|
Granted
|
|
|
39,000,000
|
|
|
|
0.02
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Cancelled
|
|
|
(14,000,000
|
)
|
|
|
0.02
|
|
|
|
|
|
Outstanding
at December 31, 2007
|
|
|
44,883,000
|
|
|
|
0.03
|
|
|
|
|
|
Granted
|
|
|
7,276,083
|
|
|
$
|
0.04
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Outstanding
at December 31, 2008
|
|
|
52,159,083
|
|
|
$
|
0.03
|
|
6.4
years
|
|
$
|
316,141
|
|
Exercisable
at December 31, 2008
|
|
|
36,134,083
|
|
|
$
|
0.03
|
|
7.4
years
|
|
$
|
316,141
|
|
At
December 31, 2008, 80,000 of the options outstanding have no stated contractual
life. Except for warrants issued in satisfaction of accounts payable,
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. In the case of the warrants issued in satisfaction of
accounts payable, the warrants were valued at the amount of the accounts payable
satisfied. The weighted-average fair value of stock options and
compensation-based warrants issued during the year ended December 31, 2008 was
$0.039. The weighted-average assumptions used for options granted and
compensation-based warrants issued during the year ended December 31, 2008 were
risk-free interest rate of 2.2%, volatility of 132%, expected life of 4.9 years,
and dividend yield of zero. 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
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.
Share-based
compensation from all sources recorded during the years ended December 31, 2008
and 2007 was $371,439 and $3,118,021, respectively. Share-based
compensation has been included in the accompanying Consolidated Statements of
Operations as follows:
Period
Reported
|
|
General
and
Administrative
Expense
|
|
|
Research
and
Development
Expense
|
|
|
Loss
from
Discontinued
Operations
|
|
|
Total
|
|
Year
ended December 31, 2008
|
|
$
|
371,439
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
371,439
|
|
Year
ended December 31, 2007
|
|
|
2,014,637
|
|
|
|
986,584
|
|
|
|
116,800
|
|
|
$
|
3,118,021
|
|
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
As of
December 31, 2008, there is approximately $295,000 of unrecognized compensation
cost related to stock-based payments that will be recognized over a weighted
average period of approximately 1.6 years.
A summary
of the status of the warrants granted at December 31, 2008 and 2007, and changes
during the years then ended is presented in the following
table:
|
|
|
|
|
Weighted
|
|
|
|
Shares
|
|
|
Average
|
|
|
|
Under
|
|
|
Exercise
|
|
|
|
Warrant
|
|
|
Price
|
|
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
|
|
Issued
|
|
|
581,395
|
|
|
|
0.13
|
|
Expired
|
|
|
(1,872,222
|
)
|
|
|
0.18
|
|
Outstanding
at December 31, 2008
|
|
|
29,742,552
|
|
|
$
|
0.01
|
|
NOTE
L – 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
M – DISCONTINUED OPERATIONS
Prior to
2007, the Company was a developmental-stage bio-pharmaceutical company engaged
in the research, validation, development and ultimate commercialization of two
drugs known as SaveCream and MDI-P. SaveCream is a drug candidate
that the Company was developing to reduce breast cancer tumors. MDI-P
was a drug candidate being developed as an anti-infective treatment for
bacterial infections, viral infections and fungal infections. During
the three months ended March 31, 2007, the Board of Directors determined that it
could no longer fund the development of these drug candidates and could not
obtain additional funding for these drug candidates. The Board
evaluated the value of its developmental stage drug candidates and in March
2007, the Board determined that the best course of action was to discontinue
further development of these drug candidates and sell these
technologies.
Plan to Sell SaveCream
Assets
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 assets to be acquired by Eucodis pursuant to the Asset
Sale Agreement included 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 was
to 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 sale to Eucodis was scheduled to
close at the end of January 2008 after the Company’s 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.
The
Company thereafter commenced discussions with Eucodis regarding the possibility
of obtaining financing and possibly deferring the closing of the sale. However,
as of February 27, 2008, Eucodis still had not obtained sufficient financing to
complete its purchase of the SaveCream technology. Accordingly, on February 27,
2008, the Company delivered to Eucodis a letter formally notifying Eucodis that
the Asset Agreement had been terminated. On February 29, 2008,
Eucodis informed the Company 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 Asset Sale Agreement, and (ii) that it still desired to
complete the transaction contemplated by the Asset Sale Agreement. On February
29, 2008, the Company prepared a letter agreement again agreeing to sell the
SaveCream assets to Eucodis on substantially the terms set forth in the Asset
Sale Agreement (as amended). Under the letter agreement, the sale to
Eucodis was scheduled to occur at such time as Eucodis completed its financing,
but in no event later than April 30, 2008. As of April 30, 2008,
Eucodis had not completed its financing, therefore, the Asset Sale Agreement, as
amended by the Letter Agreement, terminated on its own terms. The
Company continued discussions with Eucodis and explored other potential
purchasers of SaveCream. All discussions and agreements with Eucodis were
terminated in July 2008 due to their inability to obtain their own pending
financing. As a result of the failed funding of Eucodis, they were forced to
cease their operations. However, the principal of Eucodis has agreed to continue
to work with the Company in connection with the sale of the Company’s legacy
assets.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company has engaged investment banking firms to expedite the sale of the
SaveCream asset. The Company continues to seek interested parties
that may purchase the asset. However, the recent contraction of the
capital markets has negatively impacted the abilities for several potential
purchasers to consummate a purchase. Although, management is
continuing to taking steps to market and sell the SaveCream assets to potential
buyers, no assurance can be given that this sale will actually be completed in
the near future, or ever. Due to the inability of the engaged investment bankers
to facilitate a sales transaction of the asset, the Company has terminated the
engagement of the investment banking firms.
Agreement to Sell
MDI-P
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 extinguished 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.
Accounting for Discontinued
Operations
Pursuant
to accounting rules for discontinued operations, the Company has classified all
revenue and expense related to the operations, assets, and liabilities 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. For the year ended December 31, 2007, revenues of
$200,000 are included in the Loss from Discontinued Operations and the Company
has recorded a gain from the sale of MDI-P of $258,809. For the year
ended December 31, 2008, the Income from Discontinued Operations consists of the
foreign currency transaction gains in the amount of $107,369 related to current
liabilities associated with the discontinued operations that are denominated in
euros, less $40,259 of expenses related to the SaveCream asset. The
assets that were under contract to be sold to Eucodis have no carrying value in
the accompanying balance sheet, while the liabilities that were to be assumed in
the planned sale were formerly segregated in the balance sheets and were
previously characterized as Current Liabilities Associated with Assets Held for
Sale. As a consequence of the termination of the Asset Sale Agreement
in 2008, these current liabilities have been reclassified into the captions
Research and Development Obligation and Accounts Payable, as
appropriate. The Company has not recorded any gain or loss through
December 31, 2008 associated with the planned sale of the SaveCream
assets.
Transactions Related to the
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 consisted primarily of
patents, patent applications, pre-clinical study data and clinical trial data
concerning SaveCream, a developmental-stage topical aromatase inhibitor
treatment for breast cancer. The purchase price of the Assets was
€2,350,000, payable as follows: €500,000 at closing, €500,000 upon conclusion of
certain pending transfers of patent and patent application rights from the
inventors to the Company, and the remaining €1,350,000 upon successful
commercialization of the Assets.
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
FORMERLY
KNOWN AS MEDICAL DISCOVERIES, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
pending transfers of patent and patent application rights have not occurred. 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 Research
and Development Obligation in these financial statements. In July
2006 the Company entered into a co-development and license agreement with
Eucodis, which provided 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. The total
obligation of €1,850,000 is included in current liabilities in the amount of
$2,607,945 and $2,701,555, based on exchange rates in effect at December 31,
2008 and 2007, respectively.
On March
27, 2009, the Company was informed by German counsel that pending action in
German courts appears to be settled in favor of the Company.
NOTE
N – SUBSEQUENT EVENTS
Acquisition of Jatropha Farm
in Belize
On
October 29, 2008, the Company entered into a Stock Purchase Agreement with the
four shareholders of Technology Alternatives Limited (TAL), a company formed
under the Laws of Belize. TAL owns and operates a 400 acre farm in subtropical
Belize, Central America, that currently is producing Jatropha. TAL has also been
performing plant science research and has been providing technical advisory
services for propagation of Jatropha for a number of years.
The
shareholders of TAL are unaffiliated persons residing in the United Kingdom.
Pursuant to the Stock Purchase Agreement, the Company will acquire 100% of the
issued and outstanding shares of TAL for common stock in the Company, thereby
making TAL a wholly-owned subsidiary of the Company. It is anticipated that the
Company will issue 8,952,756 common shares in exchange for all of the
outstanding shares of TAL. In addition to receiving the Company’s shares, the
sellers will be repaid the promissory notes previously issued to them by TAL.
However, as of March 27, 2009 all conditions precedent required for the exchange
of consideration had not been satisfied, and shares have not been issued.
Consequently, this transaction is not reflected in the Company’s financial
statements dated as of December 31, 2008.
Furthermore,
the seller had an obligation to maintain the asset in accordance with the Stock
Purchase Agreement and failed to do so. Therefore, the sellers have agreed to
decrease the acquisition price and to decrease the principal amounts of the
promissory notes.
The
selling shareholders had previously made loans to TAL to fund the operations of
TAL. As of October 29, 2008 the transaction contemplated by the Stock Purchase
Agreement, the remaining outstanding balance of these loans, in the aggregate,
was determined to be $453,611. To reflect the current value of TAL, these notes
will be reduced to $303,611 at closing. At the closing, the promissory notes
evidencing these loans will be replaced by new promissory notes issued by TAL to
the selling shareholders. The new notes have the following terms: (i) Interest
free for 90 days; (ii) Interest accrues at an annual rate of 8% per annum
commencing on the 91st day after the issuance of the notes; (iii) Interest
accrues until maturity; (iv) The entire remaining unpaid balance of the notes is
due and payable on August 31, 2009; (v) TAL and/or the Company may prepay the
notes at any time without penalty, and the Company is required to prepay the
notes if and when it receives future funding in an amount that, in the Company’s
reasonable discretion, is sufficient to permit the prepayment of the notes
without adversely affecting the Company’s operations or financial condition. The
new notes are secured by the deed of legal mortgage on the 400 acre farm owned
by TAL. Accordingly, in the event that TAL defaults under the notes, the selling
shareholders will have the right to foreclose on the 400 acre Jatropha
farm.
The
acquisition will be accounted for under the purchase method of accounting and
the results of operations of TAL will be consolidated with the results of
operations of the Company from the date of acquisition.
F-32