U.S.
Securities and Exchange Commission
Washington,
D.C. 20549
FORM
10-KSB
(Mark
One)
x
ANNUAL REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the
fiscal year ended December 31, 2007.
o
TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the
transition period from _____
to
_____
Commission
file number
NNRF,
INC.
(Name
of
Small Business Issuer in its Charter)
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Nevada
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98-0216309
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(State
of Incorporation)
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(IRS
Employer Identification No.)
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1574
Gulf Rd., #242, Point Roberts, WA
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98281
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(Address
of principal executive offices)
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(Zip
Code)
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Issuer’s
telephone number (
604
)
943
-
0706
Securities
Registered Pursuant of Section 12(b) of the Act: None
Securities
Registered Pursuant of Section 12(g) of the Act: Common Stock, $0.001 Par
Value
Indicate
by check mark of the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act. Yes
o
No
x
Indicate
by check mark whether the issuer (1) 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
x
No
o
Indicate
by check mark if disclosure of delinquent filers in response to Item 405 of
Regulation S-K (229.405)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 of this Form 10-K.
o
Indicate
by check mark whether the registrant is a shell company (as defined by Rule
12b-2 of the Exchange Act). Yes
o
No
x
State
the
aggregate market value of voting stock held by non-affiliates computed by
reference to the price at which the common equity was sold, or the average
bid
and asked price of such common equity, as of a specified date within the past
60
days. $23,587,107 (based upon $0.66 per share as of April 8, 2008).
State
the
number of shares outstanding of each of the issuer’s classes of common stock, as
of the latest practicable date.
Common
Stock, $0.001 par value, 47,973,240 shares outstanding as of April 8, 2008,
which includes 669,144 shares held in escrow.
DOCUMENTS
INCORPORATED BY REFERENCE
None.
Transitional
Small Business Disclosure Format (check one) Yes
o
No
x
NNRF,
Inc.
FORM
10-KSB
December
31, 2007
TABLE
OF CONTENTS
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Page
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PART
I
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ITEM
1.
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Description
of Business
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1
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ITEM
2.
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Description
of Property
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0ITEM
3.
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Legal
Proceedings
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ITEM
4.
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Submission
of Matters to a Vote of Security Holders
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PART
II
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ITEM
5.
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Market
for Common Equity, Related Stockholder Matters and Small
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Business
Issuer Purchases of Equity Securities
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ITEM
6.
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Management's
Discussion and Analysis or Plan of Operation
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ITEM
7.
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Financial
Statements and Supplementary Data
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ITEM
8.
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Changes
In and Disagreements With Accounting and Financial
Disclosure
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ITEM
8A(T)
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Controls
and Procedures
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ITEM
8B.
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Other
Information
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PART
III
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ITEM
9.
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Directors,
Executive Officers, Promoters, Control Persons and Corporate
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Governance;
Compliance with Section 16(a) of the Exchange Act
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ITEM
10.
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Executive
Compensation
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ITEM
11.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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ITEM
12.
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Certain
Relationships and Related Transactions and Director
Independence
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ITEM
13.
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Exhibits
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ITEM
14.
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Principal
Accounting Fees and Services
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SIGNATURES
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EXHIBIT
INDEX
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PART
I
Item
1.
Description of Business.
FORWARD-LOOKING
STATEMENT NOTICE:
Certain
information included herein contains statements that may be considered
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934, or the Exchange
Act, such as statements relating to plans for product development, product
placement, capital spending and financing sources. Such forward-looking
information involves important risks and uncertainties that could significantly
affect anticipated results in the future and, accordingly, such results may
differ from those expressed in any forward-looking statements made herein.
These
risks and uncertainties include, but are not limited to, relatively limited
operating history, history of operating losses, the inability to obtain
additional capital, the failure to successfully expand our operations, the
legal
and regulatory requirements related to our industry and the countries within
which we operate, the inability to enter into strategic partnerships with state
and private owned entities, the loss of key personnel, adverse economic
conditions, adverse currency rate fluctuations, the inability to protect our
proprietary information against unauthorized use by third parties, the control
of our common stock by our management, the classification of our common stock
as
“penny stock,” the absence of any right to dividends, the costs associated with
the issuance of and the rights granted to additional securities, the
unpredictability of the trading of our common stock and the ability of our
Board
of Directors to issue up to 10,000,000 shares, $0.001 par value, of Class A
and
Class B preferred stock, collectively.
Historical
Summary
Nucon,
Inc. was organized on August 25, 2005 under the laws of the State of Nevada.
On
May 23, 2006, Stafford Energy, Inc., a Nevada corporation (“Stafford”), acquired
100% of the issued and outstanding capital stock of Nucon, Inc., a Nevada
corporation, in exchange for 22,500,000 shares of common stock pursuant to
that
certain merger and share exchange agreement (“Merger Agreement”). At the
closing, Stafford amended its articles of incorporation and changed its name
to
Nucon-RF, Inc. (“Nucon”), and its two wholly-owned subsidiaries, Abucco
Technologies, Inc., a Canadian corporation (“Abucco”), and Stafford Energy
Canada, Ltd., a Canadian corporation (“Stafford Canada”), became wholly owned
subsidiaries of Nucon. Nucon, Inc., a Nevada corporation, remains a wholly
owned
subsidiary of Nucon. On July 19, 2007, we amended our articles of incorporation
to change our name to “NNRF, Inc.”.
As
the
shares of Stafford common stock issued to Nucon shareholders in the merger
transaction represented a controlling interest, the transaction has been
accounted for as a recapitalization, or reverse merger, with Nucon being
considered the acquirer. The recapitalization has been accounted for at
historical cost.
Abucco
Technologies Inc. and Stafford Energy Canada, Ltd have been inactive since
December 31, 2006. The Company intends to divest itself of, or dissolve, both
subsidiaries in 2008.
In
addition to the two foregoing subsidiaries, the Company incorporated OOO
Nucon-RUS (“Nucon-RUS”), a limited liability company formed under the laws of
the Russian Federation (“RF”) in 2007. Nucon-RUS is a wholly owned subsidiary of
Nucon. In January 2007, Nucon became fully accredited to do business in the
RF
by the Russian Ministry of Justice.
Overview
NNRF
provides technologies, either owned or licensed, that are intended for use
in
nuclear facilities, nuclear and hazardous waste management, and the public
health sector.
NNRF
has
made investments in, and anticipates making further investments in, strategic
businesses that either operate or intend to operate in the nuclear, automotive
and aviation industries in Russia. In addition, the Company has, and will
continue to, either develop and market, or license and market, internationally,
technologies related to the nuclear industry. NNRF has invested in
companies currently operating in the nuclear and automotive industries in Russia
and has entered into a joint venture with a Russian company, the Engineering
Center for Nuclear Containers, to design and develop containers for
transportation and long term storage of high level radioactive waste. Further,
the Company presently has technologies that it has either licensed or acquired
in the areas of nuclear safety and remediation, wastewater treatment, and power
quality. NNRF has, and will continue to, market and either distribute to
resellers or sell the products and services related to the foregoing
technologies in various international markets. During 2007, NNRF concentrated
its international marketing efforts in Europe. NNRF has offices in Moscow,
Russia and Munich, Germany.
NNRF’s
has relationships, through its investment in ATOLL (defined below with which
it
participates in management decisions), with Rosenergoatom, the operating utility
of Russia’s nuclear civil facilities; and has direct relationships with
Atomstroyexport, established by the Russian government to promote the export
of
Russian construction, operation and modernization of nuclear power plants
abroad; the International Center for Environmental Sciences of the Federal
Agency of Nuclear Energy (“ICES”), an agency that is focused on nuclear waste
decontamination matters in Russia; the Russian based Engineering Center for
Nuclear Containers; and Stroikomplektinvest, a construction supply distributor
serving as NNRF’s marketing partner for power quality equipment in the Republic
of Tatarstan.
NNRF
began its operations in November 2005 and has accomplished the initial stages
of
its business strategy. With several key strategic alliances established as
noted
above, NNRF has the present capability of providing product, technological
and
technical service support addressing radioactive waste, wastewater and power
quality challenges, and energy efficiency, shielding, transport and storage
requirements, and plant equipment protection. NNRF also has in-house expertise
in radiological protection and radiological waste management. In addition,
with
NNRF’s acquisition of 50% of ZAO Electro Machinery Building Plant ATOLL
(“ATOLL”), NNRF, via ATOLL, is manufacturing and supplying parts and equipment
for new and existing nuclear facilities in the RF. In accordance with Russian
law, 26% of the shares of ATOLL are held and managed by Nucon-RUS, a
wholly-owned subsidiary of NNRF. The remaining 24% of the shares are held by
NNRF.
NNRF
owns, has licensed, or distributes the following technologies:
1.
FEECOM/BIECOM - is a non-toxic polymer-based shielding material that can
be molded as needed into various forms, including bricks and plates, containers
or plaster on fixed walls. This material which encapsulates and shields nuclear
radiation could replace the toxic lead walls currently used in nuclear reactors
and x-ray rooms around the world. NNRF previously acquired the FEECOM/BIECOM
technology from Dr. Hans-Jürgen Engelmann in consideration for options to
purchase 150,000 shares of common stock, exercisable for a period of ten (10)
years at $0.75 per share. In addition, Dr. Engelmann will receive a royalty
equal to 2.5% of the gross revenues relating to the sale of FEECOM/BIECOM to
third parties. A patent application has been filed with the European Patent
Office for this technology.
2.
Bicoflex
-
is a
flexible mixture of silicone and bismuth powder material that provides radiation
shielding. The product can be manufactured in various forms including aprons,
mats, curtains and garments. Bicoflex is produced by NNRF in Hannover, Germany
and has been fully tested and proven to effectively block radiation.
Quality
assurance is tested by the Fachhoschule Hannover University of Applied Sciences
in its special department for radioecology and nuclear safety.
3.
Radseal
-
Manufactured in Germany, this radioactive two-part geopolymer has been fully
tested by a European-based nuclear research center and has been cleared by
the
customs department in Russia for importation into Russia. NNRF plans to offer
Radseal for use as dust suppression in contaminated areas in former nuclear
facilities in the RF and other international markets.
4.
Trumem
-
NNRF has entered into a Cooperation Agreement with ASPECT, a Russian research,
production and marketing entity engaged in the development, introduction and
transfer of innovative high-tech technologies and projects, to jointly engage
in
the implementation and commercialization of complex technologies and equipment
of a gradient-porous metal-ceramic membrane known as Trumem. Trumem is a
high-output, long-lasting, inexpensive and compact purification unit for all
types of liquid wastes, including radioactive wastes. The principal application
of Trumem will involve the rehabilitation of water basins which have become
contaminated with liquid radioactive wastes. NNRF’s Chief Scientific Officer,
Dr. Valery Lebedev, co-invented Trumem. This technology may provide the basis
for a technological breakthrough in solving the current problems of radioactive
liquid wastes. Trumem is patent protected in Russia and the European Union.
To
accomplish its objectives, NNRF’s strategy consists of the
following:
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Maintain
and establish further key alliances with government funding agencies
and
other international groups responsible for nuclear waste
remediation;
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Enter
into strategic relationships and acquire an interest in companies
which
supply products and services to agencies responsible for nuclear
markets;
and
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Identify,
develop and acquire innovative, proprietary technologies which have
international environmental and economic
applications.
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Acquisition
of 50% of ATOLL
In
March
2007, NNRF completed the acquisition of 50% of the issued and outstanding stock
of ATOLL, a private joint stock Russian company. NNRF owns 24% of ATOLL and
Nucon-RUS, a wholly-owned subsidiary of NNRF, owns 26% of ATOLL. In November
2007, two members of NNRF management were appointed to the board of directors
of
ATOLL. Additionally, the Director of Strategic Development of ATOLL, has taken
a
management position with NNRF assisting in overseeing operations in Russia.
ATOLL’s
headquarters are located in Moscow, Russia, and its production facilities are
located in St. Petersburg, Moscow, and near the city of Kirov, Russia. ATOLL
is
a manufacturer and supplier of spare parts for existing nuclear power plants,
products for the modernization of nuclear power plants. and equipment for
facilities currently under construction, among other things.
The
original terms of the acquisition agreement with ATOLL provided that NNRF pay
$4,290,000 to ATOLL and issue ATOLL 2,000,000 shares of NNRF common stock.
The
original agreement was subsequently modified to reflect the following: (i)
two
closings, the first of which was completed in the fourth quarter of 2006 when
NNRF paid $1,166,250 in consideration for 13.25% of the issued and outstanding
capital stock of ATOLL, and the second of which occurred in March 2007 and
consisted of NNRF acquiring an additional 36.75% of ATOLL for $1,000,000 and
the
issuance of 4,000,000 shares of common stock; and (ii) certain real estate
interests of ATOLL were spun-out of ATOLL for the benefit of ATOLL stockholders,
not including NNRF. As a result, NNRF has no real estate holdings, either on
its
own or through its 50% ownership in ATOLL. In the future, NNRF will provide
ATOLL the sum of $2,000,000 for the purchase of new equipment to meet expected
increases in demand for ATOLL products.
The
primary purchaser of equipment for nuclear power plants in Russia is
Rosenergoatom, with whom ATOLL has an established relationship to provide
technologies, services and equipment as discussed below.
During
the third and fourth quarter of 2007, ATOLL moved a portion of its production
facilities from St. Petersburg into a facility owned by Velcont located in
the
Kirov region of Russia. This relocation is intended to improve production
efficiencies and reduce overall production costs. The Kirov region is more
closely located to customers and material suppliers than St. Petersburg,
Russia.
The
business model of ATOLL is to supply spare parts for existing nuclear power
plants, supply products for the modernization of nuclear power plants, supply
equipment for facilities currently under construction, and supply its storage
container products to the Federal dry storage facility currently under
construction in Zelesnogorsk, Krasnoyarsk region in Siberia. The Chief
Scientific Officer of NNRF, Professor Dr. Valery Lebedev, from 1989-1999 was
the
General Director of the Mining Chemical Combine in Zelesnogorsk, in which the
dry storage facility will become a separate business unit, served as the Deputy
Minister of the Ministry of Atomic Energy (1999-2002), and formerly served
as an
advisor to the Minister of Atomic Energy of the RF.
The
ATOLL
manufacturing process utilizes advanced computer numerically controlled (“CNC”)
machinery. The products manufactured at the ATOLL facility include spare parts
for the entire nuclear cycle, including spare parts and mechanisms for nuclear
power plants, and handling equipment for nuclear waste containers designed
for
long term storage of radioactive wastes and spent fuel. The foregoing
manufacturing capabilities have applicability in the foreign markets of China
and India, among other countries utilizing Russian designed nuclear
reactors.
ATOLL
has
approximately 120 employees consisting of engineers, nuclear industry
specialists, technical experts in nuclear equipment design and construction,
and
skilled manufacturing operators of CNC based machinery. The technical level
of
the ATOLL employee base has established ATOLL as a designated supplier to
facilities operated by Rosenergoatom, the operator of all 31 nuclear reactors
in
the RF.
ATOLL
has
its own construction design division and develops all of its own drawings and
technical specifications for the manufacturing cycle. ATOLL has established
its
production as the technical standard for spare parts and mechanisms for the
WWER-440 and WWER-1000 nuclear reactors presently in operation and under
construction in both the RF and certain foreign markets. The drawings and
technical specifications for the spare parts and mechanisms of the foregoing
nuclear reactors are the proprietary intellectual property of
ATOLL.
ATOLL
has
existing and prior foreign trade contracts with operators of nuclear power
plants outside of the RF (e.g., Ukraine and Bulgaria), and exports spare parts
for WWER-440 and WWER-1000 nuclear reactors to each of these countries. ATOLL
also has technical support and production capacity to support sales to other
export markets. NNRF believes that marketing opportunities exist which may
result in increases in sales to these foreign markets and other markets. The
WWER-440 and WWER-1000 nuclear reactors are the latest designs from Russia.
The
WWER-440 and WWER-1000 nuclear reactors, similar to all reactors worldwide,
require continuous replacement of their operating parts due to strict safety
standards established by the nuclear industry. Government mandated requirements
establish consistent and long term contracts for the production output of ATOLL
in the RF, existing foreign markets and, potentially, future markets such as
China and India. ATOLL currently has booked advance sales through the year
2010.
NNRF
believes the ATOLL acquisition offers opportunities for cash dividends and
opens
up future market opportunities for the technical innovations, acquired and
licensed technologies, and further acquisitions currently in the due diligence
phase or under investigation by NNRF There can be no assurance that ATOLL will
operate profitably.
Acquisition
of 25.5% of JSC Electroprivod and Velcont
NNRF
has
executed agreements and has commenced the acquisition of 25.5% of JSC
Electroprivod and 25.5% of Velcont for the collective sum of $8,000,000. Each
of
the acquisitions will be made together with management of ATOLL, who will
purchase an equal share of JSC Electroprivod and Velcont, and collectively
the
parties will own 51% of each entity upon the closing. To date, NNRF has acquired
3.3% of Velcont in consideration for $525,000.
Velcont
is located in the city of Kirov-Chepetsk, Russia, and JSC Electroprivod is
located in the city of Kirov, Russia. JSC Electroprivod intends to relocate
certain aspects of its manufacturing to the Velcont facility. This relocation
is
intended to result in higher levels of efficiency and may result in substantial
cost savings.
Velcont
is fully licensed by the Federal Ministry of Atomic Energy of the Russian
Federation (“Minatom”) for the production of nuclear power plant equipment and
holds other licenses for the production of equipment and microelectronics for
the aeronautical and automotive industries. Presently, Velcont has approximately
500,000 square feet of production facilities and employs approximately 1,200
skilled workers.
JSC
Electroprivod is a scientific and technical complex and a leading designer
of
micro-electronic equipment in the RF and is licensed by the Federal Ministry
of
Nuclear Energy of the RF and other federal ministries. Over the last 50 years,
JSC Electroprivod has designed and developed over 1,500 products used in the
Russian and the CIS aeronautical and automotive industries. More than 200 of
these items are currently being manufactured at factories in the cities of
Kirov, Kirovo-Chepetsk, Kizlyar, Kursk, Saratov and Tyumen.
Alliances
and Strategic Partnerships
In
addition to the ATOLL 50% acquisition, and the ongoing acquisition of interests
in JSC Electroprivod and Velcont, since its inception, NNRF has focused on
procuring key strategic partnerships and alliances principally in the RF and
acquiring or licensing key technologies. A description of the current alliances
and strategic partnerships of NNRF follows.
Rosenergoatom
NNRF
has
a working relationship with Rosenergoatom to co-lead an international consortium
(“Consortium”) of European and Russian companies to provide equipment,
technologies and services to Rosenergoatom. This working relationship is
anticipated to be evidenced by a definitive agreement in the future upon further
advancements of the Russian state entity, Atomprom, which controls all energy
generating nuclear facilities in Russia.
Rosenergoatom
is the operating utility of all nuclear power plants in the RF and is
responsible for insuring nuclear and radiation safety in all phases of nuclear
power plant operations in compliance with RF legislation as well as providing
scientific and technical support. Rosenergoatom operates all ten (10)
state-owned RF nuclear power plants consisting of 31 reactor
units representing approximately 23,242-MW of installed electrical
capacity. The foregoing represents approximately 18% of the RF power
grid.
Increasing
demands on technical safety regulations and radiation protection standards
at
the Russian nuclear energy facilities has caused ever increasing demands on
equipment, plants and technologies for the construction, modernization and
operation of the facilities operated by Rosenergoatom.
Atomstroyexport
Atomstroyexport
(“ASE”) was established in 1998 by the Ministry of the Russian Federation for
Atomic Energy in order to promote the export of Russian-made products for
nuclear power projects abroad. ASE was created upon the merger of
"Atomenergoexport" and "Zarubezhatomenergostroy." In the 25 years prior to
the
merger, the two Russian companies worked with foreign countries in the
construction, operation and modernization of nuclear power plants.
ASE
possesses the experience and engineering capabilities to operate in the global
market. The nuclear power plants built for its customers in the former Soviet
Union (“FSU”), China, India and other countries constitute a future market for
NNRF technologies and services. The latest projects of ASE include construction
of two nuclear power units (2000 MW total) in China, two nuclear power units
of
similar capacity in India, as well as other activities in Eastern Europe. There
can be no assurance that NNRF and ASE will enter into a joint cooperation
agreement for the Indian, and East European markets.
Engineering
Center for Nuclear Containers (ECNC)
ECNC
is a
Moscow and St. Petersburg based company that designs and manufactures containers
for the long term storage of nuclear and other types of waste. ECNC has worked
with Minatom and provides waste storage containers fully licensed for the
storage of radioactive and toxic waste.
International
Center for Environmental Sciences (ICES)
ICES
is
located in Moscow and is a Russian State agency dealing with ecological security
and environmental matters related to the handling (including transportation
and
storage) of radioactive and toxic waste in Russia. ICES is also actively
involved in environmental issues concerning the dismantling of Russian nuclear
powered submarines.
TPA,
Ltd.
During
2007, TPA became a department of Atomenergomash a Russian state entity. As
a
result of the restructuring of TPA, the relationship between the Company and
TPA
was terminated.
Products
and Technologies
FEECOM/BIECOM
FEECOM/BIECOM
is a polymer with a metal blocker additive which NNRF believes provides new
methods in providing radiation safety. A distinctive feature of this new
material is that it is possible to modify its protection and construction
properties in different ways based upon the demands of each application. The
shielding material also surpasses steel in withstanding corrosion attacks and
can be modified with the same structural integrity as steel to be used as a
construction material. The shielding materials are not toxic, can be
manufactured in an environmentally friendly manner, and have excellent thermal
stability.
The
moldable nature of the new shielding material provides a significant number
of
applications for many general shielding devices. Variations in mould
configurations for the product include bricks and plates, containers and plaster
on fixed walls.
On
March
1, 2007, NNRF retained Fachhochschule Hannover (a German testing facility)
to
undertake the following independent tests on FEECOM/BIECOM: tensile tests;
pressure tests; notched-bar impact-binding-tests; 240 hour salt spray tests
as
corrosion tests; determination of flash point; determination of combustibility;
resistance to leaching in weak acid, in weak alkalis, and in normal tap water;
sorption ability; and gas diffusion hydrogen. The purpose of the foregoing
tests
is to provide further independent determination of the efficacy and multi-uses
of FEECOM/BIECOM.
NNRF
is
establishing a sale and marketing office in Lower Saxony (Germany). On May
1,
2007, NNRF retained Klaus Rose to serve as the sales and marketing manager
of
the Company’s shielding, decommissioning and recycling technology portfolio
(i.e., FEECOM/BIECOM) to nuclear facilities and multi-national nuclear service
companies. Mr. Rose has extensive experience in the nuclear shielding materials
field. Mr. Rose’s consulting firm, RCE Rose Consulting & Engineering
(“RCE”), has provided various on-site radiological shielding solutions,
including dosimetry services, as well as nuclear power plant safety training
programs to nuclear utility companies in the European Union. These companies
include British Nuclear Fuel Corporation, Risley, U.K., Siemens KWU, Erlangen,
ENSA, Santander, Spain and others. Prior to founding RCE, Mr. Rose held advanced
positions at several European companies manufacturing products for use in
nuclear power plants. Mr. Rose served in the capacities of project engineer,
radiation protection officer, and marketing and sales manager while working
at
NOELL GmbH, NUKEM Group and VOEST ALPINE mce.
Dr.
Engelmann, who serves as our Director of Project and Sales Division - Shielding
and Encapsulation EU, will provide technical assistance to Mr. Rose. The goal
for this marketing office in Western Europe is the development of new
modifications of the shielding material, with a particular focus on applications
targeted for German governmental funding from the State of Lower Saxony for
further research and development, and manufacturing anticipated to be
established in Lower Saxony, Germany.
Bicoflex
Bicoflex,
formulated by NNRF, is a flexible mixture of silicone and bismuth powder
material that provides radiation shielding. The product can be manufactured
in
various forms including aprons, mats, curtains and garments. Bicoflex is
manufactured in Germany and has been fully tested and proven to effectively
block radiation. In addition, in curtain form, the product can be used in
geometrically challenging situations where FEECOM/BIECOM cannot be effectively
used as a radiation blocker.
Radseal
Radseal
is a radioactive two-part geopolymer that can be used for the containment and
encapsulation of radioactive dust, radioactive sludge, broken fuel assembly
elements and highly radioactive fuel pieces, and for general containment on
radioactive floors and walls. Such containment, once complete, increases the
safety for construction personnel to perform decontamination services. NNRF
anticipates delivering an initial shipment of Radseal to Russia during 2008
for
field and demonstration testing in cooperation with ICES.
Radioactive
Waste Containers
NNRF
has
entered into a joint venture agreement with Moscow-based Engineering Center
for
Nuclear Containers (“ECNC”) to design, develop and market containers which will
hold high level radioactive waste generated by nuclear power plants and other
radioactive waste producing operations. This joint venture is planned to be
named the Nuclear Container Corporation (“NCC”). NNRF will own 50% of NCC. The
goal at the conclusion of the design and development process will be the
certification of the containers by the Russian
Federal
Service on Environmental, Technology and Nuclear Control
Rostechnadzor
for use
in the RF and internationally. This certification will be conducted under the
aegis of the International Atomic Energy Agency (“IAEA”). ECNC currently
supplies containers in Russia which are designed for other radioactive
waste.
ASPECT
In
April
2007, Nucon entered into an agreement with ASPECT, a Russian research,
production and marketing center that develops, introduces and transfers
innovative high-tech technologies and projects. ASPECT is the official managing
company in the development of international and Russian environmental projects
for the Federal Ministry of Nuclear Energy of the Russian Federation and
Rosenergoatom, the operator of all Russian nuclear reactors, and includes the
participation of all companies in the nuclear industry within the RF. ASPECT
has
decades of experience as a contractor in improving systems for the handling
of
radioactive waste and recycling at sites of the Federal Ministry of Nuclear
Energy.
The
agreement between ASPECT and NNRF is to engage in joint efforts to incorporate
complex technologies and equipment in the form of a gradient-porous
metal-ceramic membrane known as Trumem. NNRF will be responsible for
establishing global strategic alliances to introduce and market the Trumem
technology internationally.
EP
Waveform Correction Absorber
The
EP
Waveform Correction Absorber is a high quality transient voltage surge
suppression (“TVSS”) and high frequency noise filtering modular technology that
is manufactured in the United States. The TVSS technology filters damaging
power
pollution being used by electrical equipment, thereby lowering operating costs
and downtime and increasing productivity.
Poor
power quality involves pollution on electrical lines resulting from high
frequency induced electrical noise, switching transients, and nonlinear and
unbalanced load reflections. Power surges, both voltage and current, are
occurring continually in today’s power systems. Power surges may occur
naturally, such as from lighting and static electricity, or are manmade, such
as
inductive surges from motors, transformers, solenoids, etc. This poor power
quality can reduce operating efficiency and create excess heat that displaces
normal power distribution and output. This in turn causes electrical systems
and
equipment to deteriorate and to malfunction, and is critical in microprocessor
based manufacturing industries.
NNRF
intends to market this product in Russia to users of expensive electrical
equipment such as high output office printers, CT scanners, robots, offices
with
multiple computer installations and other users where power surges cause
significant damage or pose significant danger to operations.
Fire
Resistant Cable - Fireproof Swelling Cable Cover
Fire
resistant cable and fireproof swelling cable cover technology is for use in
nuclear and fossil fuel power plants and other high-impact utility industry
applications. When exposed to fire and/or extreme heat, the
cable expands and blocks off all connections through the chases where the
cables go from room to room. The technology allows the electrical cable to
withstand temperatures up to 1100 Celsius for 45 minutes and prevents the spread
of fire which is critical in all power generation facilities. The fireproof
swelling cable cover is non-toxic with high adhesive properties and has been
approved for use by the fire authorities in Russia and is fully licensed. The
proven technology has immediate applications in the nuclear power plants of
Rosenergoatom and Atomstroyexport and other facilities in the RF.
NNRF
has
concluded negotiations to acquire this technology subject to completion of
due
diligence by NNRF which is expected to be completed in the last half of 2008.
Representatives from Nucon-RUS will be meeting with management of Seversk
(formerly known as Tomsk-7), Ministry of the Russian Federation for Atomic
Energy, Russian Research Institute of Organic Materials, Bochvar Institute
to
finalize the terms of the agreement.
Tri-Ion
- Wasser Technik
On
December 12, 2005, NNRF entered into an agreement with the German company,
Tri-Ion -Wasser Technik (“Tri-Ion”) to represent it in the RF. Tri-Ion
specializes in cleaning water which contains heavy metals and other isotopes,
and is licensed to operate in the food industry. The Russian industrial partner
for hardware and pumps is Hydromshservice. NNRF intends to market Tri-Ion’s
technologies and engineering services within the Russian and Ukrainian
Vodokanals.
Tri-Ion
specializes in cleaning water which contains heavy metals and other isotopes.
It
is licensed and permitted to work in the food industry. NNRF will receive
approximately 15% of the revenues in consideration for these services. Tri-Ion
is currently providing water cleaning services in Europe and South
America.
COMPETITION
NNRF’s
technologies may be subject to significantly greater competition from other
companies, many of which have far greater intellectual, financial, marketing
and
other resources than NNRF. Other technologies may be developed that are superior
or less expensive than those owned or licensed by NNRF. Alliances and
partnerships may be subject to change.
GOVERNMENT
APPROVAL AND GOVERNMENT REGULATIONS
The
Company is required to comply with the following environmental regulations,
presently consisting of (i) the Federal Nuclear and Radiation Safety Authority
of the Russian Federation with respect to the Russian Federation, (ii) the
EURATOM Treaty with respect to all European Union member countries, and (iii)
the U.S. Nuclear Regulatory Commission Regulations Title 10, Code of Federal
Regulations with respect to U.S. matters, the latter of which will apply only
upon the placement of the Company’s products in the U.S., which is not
applicable at this time. Each of the foregoing regulations generally requires
testing and certification of the Company’s products by an independent third
party prior to placement in nuclear or other facilities. In the event our
products are not tested on a timely basis, or we experience a delay in
receiving, or fail to receive, the necessary certifications, government
approvals, permits, consents and clearances, our business and results of
operations may be adversely affected. There can be no assurance that we will
receive each of the foregoing on a timely basis.
At
the
present time, no further governmental approvals are required for the operation
of our business. From time to time we do expect that we will have to obtain
custom and other clearances to offer certain of our products and services in
countries that we have not previously operated within.
COSTS
AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
The
costs
and effects of compliance with environmental laws are not anticipated to prevent
the Company from achieving its business objectives nor have a materially adverse
effect on its results of operations.
EMPLOYEES
We
employ
five (5) full-time employees
and one
(1) part time employee in our Moscow, Russia office, three (3) employees in
Germany, and two (2) employees in North America. In addition, the Company
utilizes a total of seven (7) consultants. The consultants provide public
relation services, merger and acquisition advisory services, business
development services, legal services, corporate and media awareness services,
investment banking services, and sales and marketing services.
Item
2.
Description of Property.
We
lease
approximately 800 square feet of office space in Moscow, Russia, located at
117393Moscow,
20 Architect Vlassov’s st
.
The
monthly lease rate is approximately $6,000 and the lease has a term of
12-months, expiring on March 1, 2009.
We
lease
executive office space in Munich, Germany, located at Theresienstrasse 6-8,80333
Munich, Germany. The lease is month-month and has a lease rate of approximately
$3,000 per month.
Item
3.
Legal
Proceedings.
We
are
not involved in any litigation that we believe could have a materially adverse
effect on our financial condition or results of operations. There is no action,
suit, proceeding, formal inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body pending or,
to
the knowledge of the executive officers of the Company, or any of our
subsidiaries, threatened against or affecting the Company, our common stock,
any
of our subsidiaries, or our officers or directors in their capacities with
each,
in which an adverse decision could have a material adverse effect.
Item
4.
Submission
of Matters to a Vote of Security Holders.
No
matter
was submitted to a vote of the security holders, through the solicitation of
proxies or otherwise, during the fourth quarter of the fiscal year covered
by
this report.
PART
II
Item
5.
Market for Common Equity Related Stockholder Matters and Small Business Issuer
Purchases of Equity Securities.
Market
Information
Our
common stock is currently quoted on the Pink Sheets Electronic Interdealer
Quotation and Trading System under the symbol “NNRI.PK.”
For
the
periods indicated, commencing with the date on which NNRF merged with Stafford
Energy, Inc., May 23, 2006, and concluding on April 8, 2008, the following
table
sets forth the high and low bid prices per share of common stock, as reported
by
www.pinksheets.com. These prices represent inter-dealer quotations without
retail markup, markdown, or commission and may not necessarily represent actual
transactions.
|
Periods
|
|
High
|
|
Low
|
|
|
Fiscal
Year 2006
|
|
|
|
|
|
|
|
|
Second
Quarter (May 23-June 2006)
|
|
|
2.20
|
|
|
1.01
|
|
|
Third
Quarter (July-September 2006)
|
|
|
1.42
|
|
|
0.70
|
|
|
Fourth
Quarter (October-December 2006)
|
|
|
1.01
|
|
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year 2007
|
|
|
|
|
|
|
|
|
First
Quarter (January-March 2007)
|
|
|
1.79
|
|
|
0.55
|
|
|
Second
Quarter (April-June 2007)
|
|
|
8.96
|
|
|
1.74
|
|
|
Third
Quarter (July 1 - September 30, 2007)
|
|
|
5.35
|
|
|
1.94
|
|
|
Fourth
Quarter (October 1 - December 31, 2007)
|
|
|
2.74
|
|
|
1.12
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year 2008
|
|
|
|
|
|
|
|
|
First
Quarter (January 1 - March 31, 2008)
|
|
|
1.10
|
|
|
0.44
|
|
|
Second
Quarter (April 1 - April 8, 2008)
|
|
|
0.66
|
|
|
0.42
|
|
On
April
8, 2008, the closing price of our common stock was $0.66.
Holders
of Record
As
of
April 8, 2008, we had approximately 268 holders of record of our common stock.
The number of record holders was determined from the records of our transfer
agent and does not include beneficial owners of common stock whose shares are
held in the names of various security brokers, dealers, and registered clearing
agencies.
Dividends
There
are
no restrictions imposed on the Company which limit its ability to declare or
pay
dividends on its common stock, except for corporate state law limitations.
No
cash dividends have been declared or paid to date and none are expected to
be
paid in the foreseeable future.
Recent
Sales of Unregistered Securities
In
May
2006, Stafford Energy, Inc. issued 3,000,000 shares of common stock to two
individuals in consideration for the settlement of $3,000 owed to the
individuals for mergers and acquisitions services provided to Stafford prior
to
the merger between it and the Company. The shares were valued at $1.05 per
share, which was the fair value of the shares on the date of issuance and
resulted in the recognition of $3,147,000 of compensation expense. The issuance
of the above securities was effected in reliance on the exemptions for sales
of
securities not involving a public offering, as set forth in Section 4(2) of
the
Securities Act of 1933, as amended (the “Act”) and Rule 506 promulgated
thereunder. Each offeree was provided access to the financial statements and
any
other information that they deemed relevant or necessary in making their
respective decision to accept shares of common stock in exchange for the monies
owed to them by them by the Company. Each offeree was deemed to have the
financial or business experience necessary to evaluate the risks of the
foregoing decision.
On
May
23, 2006, the Company issued 22,500,000 shares of common stock to forty-nine
(49) individuals in exchange for 100% of the issued and outstanding common
stock
of Nucon, Inc., a Nevada corporation, in conjunction with the Merger and Plan
of
Share Exchange between Stafford Energy, Inc. and Nucon, Inc. The 22,500,000
shares of common stock were valued at $5,000, or $0.00022 per share. The
issuance of the above securities was effected in reliance on the exemptions
for
sales of securities not involving a public offering, as set forth in Section
4(2) of the Act and Rule 506 promulgated thereunder. Each offeree was provided
access to the financial statements and any other information of Stafford Energy,
Inc. that they deemed relevant or necessary in making their respective decision
to accept shares of common stock in exchange for their shares of common stock
of
Nucon, Inc. Each offeree was deemed to have the financial or business experience
necessary to evaluate the risks associated with the share exchange.
On
June
1, 2006, the Company issued a total of 1,080,000 shares of common stock to
five
(5) consultants for services consisting of legal, accounting, marketing,
strategic and financial consulting. The 1,080,000 shares of common stock were
valued at $1,512,000, or $1.40 per share. The issuance of the above securities
was effected in reliance on the exemptions for sales of securities not involving
a public offering, as set forth in Section 4(2) of the Act and Rule 506
promulgated thereunder. Each offeree was provided access to the Company’s
financial statements and any other information that they deemed relevant or
necessary in making their respective decision to accept shares of common stock
in exchange for services. Each offeree was deemed to have the financial or
business experience necessary to evaluate the risks of the foregoing decision.
During
the period from inception through June 30, 2006, the Company received $342,128
in loans from ten (10) individuals. The loans were non-interest bearing and
were
payable on demand. On July 1, 2006, the lenders made demand on the Company,
and
the Company agreed to the conversion of $342,128 of outstanding principal into
4,593,073 shares of common stock, conversion of $0.07 per share. The issuance
of
the above securities was effected in reliance on the exemptions for sales of
securities not involving a public offering, as set forth in Section 4(2) of
the
Act and Rule 506 promulgated thereunder. Each offeree was provided access to
the
Company’s financial statements and any other information that they deemed
relevant or necessary in making their respective decision to accept shares
of
common stock in exchange for their outstanding loans. Each offeree was deemed
to
have the financial or business experience necessary to evaluate the risks of
exchanging their outstanding notes for shares of common stock in the
Company.
On
July
1, 2006, the Company sold 185,000 shares of common stock to ten (10) third
parties in consideration for $138,750, or $0.75 per share. The issuance of
the
above securities was effected in reliance on the exemptions for sales of
securities not involving a public offering, as set forth in Section 4(2) of
the
Act and Rule 506 promulgated thereunder. Each offeree was provided access to
the
Company’s financial statements and any other information that they deemed
relevant or necessary in making their respective decision to purchase shares
of
common stock of the Company. Each offeree was deemed to have the financial
or
business experience necessary to evaluate the risks of their investment in
the
Company.
On
September 10, 2006, the Company issued 400,000 common shares to a consultant
for
public relation services rendered to the Company. The 400,000 shares of common
stock were valued at $556,000, or $1.39 per share. The issuance of the above
securities was effected in reliance on the exemptions for sales of securities
not involving a public offering, as set forth in Section 4(2) of the Act and
Rule 506 promulgated thereunder. The offeree was provided access to the
Company’s financial statements and any other information that they deemed
relevant or necessary in making their respective decision to accept shares
of
common stock in exchange for services. The offeree was deemed to have the
financial or business experience necessary to evaluate the risks of the
foregoing decision.
During
the period October 2006 through March 2007, the Company sold 274,167 shares
of
common stock to twenty-three (23) third parties in consideration for $205,755,
or $0.75 per share. The issuance of the above securities was effected in
reliance on the exemptions for sales of securities not involving a public
offering, as set forth in Section 4(2) of the Act and Rule 506 promulgated
thereunder. Each offeree was provided access to the Company’s financial
statements and any other information that they deemed relevant or necessary
in
making their respective decision to purchase shares of common stock of the
Company. Each offeree was deemed to have the financial or business experience
necessary to evaluate the risks of their investment in the Company.
In
December 2006, the Company issued 750,000 shares of common stock to a consultant
for investor relations and merger and acquisition consulting services. The
750,000 shares of common stock were valued at $562,500, or $0.75 per share.
The
issuance of the above securities was effected in reliance on the exemptions
for
sales of securities not involving a public offering, as set forth in Section
4(2) of the Act and Rule 506 promulgated thereunder. The offeree was provided
access to the Company’s financial statements and any other information that they
deemed relevant or necessary in making their respective decision to accept
shares of common stock in exchange for services. The offeree was deemed to
have
the financial or business experience necessary to evaluate the risks of the
foregoing decision.
In
December 2006, the Company issued a total of 432,000 shares of common stock
to
seven (7) individuals, consisting of members of management and certain key
consultants, as partial payment for services rendered in 2006. The 432,000
shares were valued at $324,000, or $0.75 per share. The issuance of the above
securities was effected in reliance on the exemptions for sales of securities
not involving a public offering, as set forth in Section 4(2) of the Act and
Rule 506 promulgated thereunder. Each offeree was provided access to the
Company’s financial statements and any other information that they deemed
relevant or necessary in making their respective decision to accept shares
of
common stock in exchange for services. Each offeree was deemed to have the
financial or business experience necessary to evaluate the risks of the
foregoing decision.
On
February 16, 2007, the Company issued the sum of 50,000 shares of common stock
to a consultant for marketing and investor relations consulting services. The
50,000 shares were valued at $39,500, or $0.79 per share. The issuance of the
above securities was effected in reliance on the exemptions for sales of
securities not involving a public offering, as set forth in Section 4(2) of
the
Act and Rule 506 promulgated thereunder. The offeree was provided access to
the
Company’s financial statements and any other information that they deemed
relevant or necessary in making their respective decision to accept shares
of
common stock in exchange for services. The offeree was deemed to have the
financial or business experience necessary to evaluate the risks of the
foregoing decision.
During
the period commencing in late July 2006 and concluding in March 2007, the
Company issued 8% convertible promissory notes (“Notes”) in the collective
original principal amount of $4,700,000 to seventy-four (74) third parties.
The
Notes have a term of two (2) years and bear simple interest at the rate of
8%
per annum, payable at maturity. The Notes were convertible as follows (i) at
seventy-five ($0.75) cents per share at any time prior to the Company’s common
stock being quoted on the OTCBB; (ii) for a period of ninety (90) days from
the
date the Company’s common stock is quoted on the OTCBB, at the lesser of a 25%
discount to the closing price on the business day preceding the date of
conversion or One ($1.00) Dollar with a floor of seventy-five ($0.75) cents;
or
(iii) thereafter, at the greater of a 25% discount to the closing price on
the
business day preceding the date of conversion or seventy-five ($0.75) cents.
In
addition, as of February 9, 2007, the Company has issued warrants to purchase
2,350,000 shares of common stock, exercisable for a period of two (2) years
at
$1.50 per share (“Warrants”). The Notes and Warrants have been placed by Mercer
Capital Ltd. (“Mercer”) on a best efforts basis. Mercer receives (i) a
commission of ten (10%) percent and a non-accountable expense allowance of
three
(3%) percent on all Notes sold, and (ii) a warrant to purchase shares of common
stock equal to ten (10%) percent of the common stock issuable upon conversion
of
the Notes (“Mercer Warrants”). The Mercer Warrants are exercisable on a cashless
basis at the rate of $0.75 per share for a period of five (5) years. The Mercer
Warrants consist of the right to purchase 861,667 shares on the above terms.
In
addition, Mercer was issued, in consideration for serving as the placement
agent, warrants to purchase 500,000 shares of common stock, exercisable at
$0.10
per share, on a cashless basis, for a period of five (5) years. The issuance
of
the above securities was effected in reliance on the exemptions for sales of
securities not involving a public offering, as set forth in Section 4(2) of
the
Act and Rule 506 promulgated thereunder. Each offeree was provided access to
the
Company’s financial statements and any other information that they deemed
relevant or necessary in making their respective decision to purchase the Notes.
Each offeree was deemed to have the financial or business experience necessary
to evaluate the risks of their investment in the Company.
On
May
17, 2007, the Company issued 250,000 shares of common stock pursuant to a
Business Advisory Agreement (“Advisory Agreement”). The Advisory Agreement
provides that the third party will render financial and business advisory
consulting advice, among other services. The 250,000 shares were valued at
$1,362,500, or $5.45 per share.
On
June
18, 2007, 8% convertible notes, in the original principal amount of $4,700,000
and accrued interest of $196,539, were converted into 6,528,719 shares of common
stock, a conversion rate of $0.75 per share. On the date of conversion, the
closing market price of the Company’s common stock was $5.35. Since the accrued
interest was converted at a rate lower that the fair value, the Company recorded
the per share difference of $4.60 (totaling $1,205,440) as additional expense.
On
June
19, 2007, the Company issued 50,000 shares of common stock to a third party
to
serve as an advisor on the foreign capital markets (i.e., the Middle East and
Europe), waste management services and potential contracts in the Middle East
and Europe, as well as strategic alliances. The 50,000 shares were valued at
$257,500, or $5.15 per share.
On
August
27, 2007, the Company entered into a revolving credit facility agreement
(“Credit Facility”) in the amount of $2,500,000, with Professional Offshore
Opportunity Fund, Ltd. (the “Lender”). Under the terms of the Credit
Facility, the Company may borrow up to $2,500,000 from Lender, with $500,000
advanced on closing and additional amounts to be advanced in increments not
to
exceed $250,000, or more if the parties agree, in any thirty-day period, unless
waived by Lender, in which case the loan amount could exceed $250,000 in that
period. The Company is required to repay all principal and accrued but
unpaid interest on amounts advanced pursuant to the Credit Facility no later
than August 28, 2009. The initial $500,000 advance under the Credit Facility
was
made on September 6, 2007. The material terms of the Credit Facility are as
follows: (i) the Company has arranged for restricted shares of common stock,
held by third parties, to be pledged as collateral for the loans pursuant to
a
Pledge Agreement between Lender and such third parties; (ii) Lender may reduce
the amount of the outstanding loans by retaining for its own account pledged
stock, subject to the volume restrictions of Rule 144 (no more than 1% of the
outstanding shares for a 90 day period.); (iii) the loans bear interest at
the
rate of 8% per annum; (iv) on each advance, the Company must repay any accrued
but unpaid interest and Lender may withhold two months interest from any advance
as prepaid interest; (v) the Company may prepay the principal and interest
on
the loan without penalty; (vi) Lender may withhold from any advance a retention
fee equal to 5% of the amount loaned; (vi) in connection with the issuance
of
the loan, the Company provided Lender a commitment fee of $50,000 and common
stock equal to $250,000 (the shares were valued at the closing price on
September 6, 2007, or $2.97 per share, the date on which the first funding
in
the amount of $500,000 occurred under the Credit Facility. The foregoing equates
to 84,746 shares of common stock. The shares of common stock include piggyback
registration rights. In consideration for the pledge of a total of 1,842,859
of
restricted shares of common stock (“Pledged Shares”), held by third parties, as
collateral against the Credit Facility, the Company entered into a Common Stock
and Warrant Agreement with each of such third parties providing for the
following consideration, collectively: (i) restricted shares of common stock
in
the amount of 2,763,489 shares (“Pledge Share Consideration”), or 150% of the
amount of shares of common stock pledged; and (ii) warrants to purchase
1,842,859 shares of common stock, exercisable for a period of two (2) years
at
$2.95 per share (“Pledge Warrant Consideration”), the closing price of the
Company’s common stock on August 27, 2007. The Common Stock and Warrant
Agreements provide that in the event Lender does not reduce the amount of the
outstanding loans under the Credit Facility by retaining for its own account
Pledged Shares, then the Pledge Share Consideration shall be reduced in
proportion to the amount of Pledged Shares not retained for Lender’s account for
the purpose of reducing the amount of the outstanding loans under the Credit
Facility. In addition, the third parties received one (1) demand registration
right. In November 2007, the Company issued the Lender an additional 500,000
shares of common stock pursuant to the terms of the Credit Facility. The Company
valued the shares of common stock at $935,000 based on the current fair value
of
the Company’s common stock on the date of issuance. The Company expensed the
value of the common stock upon issuance.
During
the fiscal year ended December 31, 2007, the Company received $1,282,000 in
net
proceeds pursuant to the Credit Facility, and issued 2,092,860 shares of common
stock, collectively, to third parties in consideration for the pledges under
the
terms of the Credit Facility. In the three months ended March 31, 2008, the
Company received $416,991 in net proceeds pursuant to the Credit Facility,
and
issued 669,144 shares of common stock, collectively, to third parties in
consideration for the pledges under the terms of the Credit
Facility.
The
Company paid Newbridge Securities Corporation the sum of $100,000 and issued
150,000 shares of restricted common stock in consideration for placing the
Credit Facility.
Securities
Issued under Equity Compensation Plans
The
following table summarizes our equity compensation plan information as of
December 31, 2007. Information is included for equity compensation plans not
approved by our security holders.
Equity
Compensation Plan Information.
|
Plan Category
|
|
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a)
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
|
|
Number of
securities remaining
available for future
issuance under
equity compensation
plans (excluding
securities reflected
in column (a)
(c)
|
|
|
Equity
compensation plans approved by security holders(1)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Equity
compensation plans not approved by security holders(2)
|
|
|
5,821,667
|
|
$
|
0.75
|
|
|
178,333
|
|
|
Total
|
|
|
5,821,667
|
|
|
|
|
|
178,333
|
|
|
(1)
|
As
of December 31, 2007, the Company did not have any equity compensation
plans that were approved by its
stockholders.
|
|
(2)
|
Includes
the 2007 Stock Option and Incentive
Plan.
|
Repurchases
of Equity Securities
The
Company did not repurchase any shares of its common stock during fiscal year
2007 or fiscal year 2006.
Item
6.
Management’s Discussion and Analysis or Plan of Operation.
Certain
statements in this Form 10-KSB may constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995
(the
"Reform Act"). Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements, expressed or implied by such
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed herein. The
words "believe", "expect", "anticipate", "seek" and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance
on
these forward-looking statements that speak only as of the date the statement
was made.
Plan
of Operation
NNRF
has
made investments in, and anticipates making further investments in, strategic
businesses that either operate or intend to operate in the nuclear, automotive
and aviation industries in Russia. In addition, the Company has, and will
continue to, either develop and market, or license and market, internationally,
technologies related to the nuclear industry. NNRF has invested in
companies currently operating in the nuclear and automotive industries in Russia
and has entered into a joint venture with a Russian company, the Engineering
Center for Nuclear Containers, to design and develop containers for
transportation and long term storage of high level radioactive waste. Further,
the Company presently has technologies that it has either licensed or acquired
in the areas of nuclear safety and remediation, wastewater treatment, and power
quality. NNRF has, and will continue to, market and either distribute to
resellers or sell the products and services related to the foregoing
technologies in various international markets. During 2007, NNRF concentrated
its international sales and marketing efforts in Europe. NNRF has offices in
Moscow, Russia and Munich, Germany.
Our
current clients and partners include Rosenergoatom, the operating utility of
Russia’s nuclear facilities; Atomstroyexport, established by the Russian
government to promote the export of Russian construction, operation and
modernization of nuclear power plants abroad; and Stroikomplektinvest, a
construction supply distributor acting as NNRF’s marketing partner for power
quality equipment in the Republic of Tatarstan.
During
2007 we completed the purchase of 50% of ATOLL, a m
anufacturer
of spare parts for the entire nuclear cycle, including spare parts and
mechanisms for nuclear power plants, and handling equipment for nuclear waste
containers designed for long term storage of radioactive wastes and spent fuel.
We anticipate that our 50% ownership in ATOLL will result in us booking revenues
and profits in fiscal year 2008 based on the existing on-hand orders of ATOLL.
We completed the due diligence phase of our proposed acquisitions of 25.5%
of
JSC Electroprivod and 25.5% of Velcont, and are currently considering other
potential acquisitions in the RF.
In
November 2007 we entered into a 50-50 joint venture with the Moscow based
Engineering Center for Nuclear Containers to design and develop containers
designed for the transportation and long term storage of high level radioactive
waste.
Our
scientific group developed our radiation blocking and shielding product line
FEECOM/BIECOM and commenced limited commercial production of these products.
In
addition our group developed a unique flexible version of this product called
Bicoflex. This product has specific applications for use in the manufacture
of
radiation garments and the Company has been in discussions with European
manufacturers for the supply of this product. The users of these products are
nuclear and medical facilities
The
following discussion of our financial condition and results of operations should
be read in conjunction with our consolidated financial statements and the notes
to those statements included elsewhere in this statement. In addition to the
historical consolidated financial information, the following discussion and
analysis contains forward-looking statements that involve risks and
uncertainties.
Our
actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those
set
forth under "Risk Factors" and elsewhere in this statement.
Results
of Operations for the Fiscal Year Ended December 31, 2007 and December 31,
2006.
Revenues.
For
the
fiscal year ended December 31, 2007, revenues were $NIL as compared to $5,343
at
December 31, 2006. Cost of sales was $NIL during the year ended December 31,
2007, and gross profit was $NIL during the period. Cost of sales was $1,615
during the year ended December 31, 2006, and gross profit was $3,728 during
the
period.
Operating
Expenses
.
During
the fiscal year ended December 31, 2007, general and administrative expenses
totaled $7,101,548 as compared to $7,153,429 for the period ended December
31,
2006. The general and administrative expenses during 2007 principally related
to
non-cash items consisting of the issuance of shares of common stock as payment
for services of $3,230,225 and stock-based compensation related to the issuance
of options of $3,492,566. Foreign currency exchange loss was $NIL during the
fiscal year ended December 31, 2007 and $5,558 during the fiscal year ended
December 31, 2006.
Interest
Expense
.
Interest expense was $14,706,771 during the fiscal year ended December 31,
2007.
Interest expense was $5,072,484 during the fiscal year ended December 31, 2006.
Significant items included interest expense for 2007 related to various non-cash
items, including $4,847,482 in fair value of warrants issued to pledgees in
connection with the credit facility provided by Professional Offshore
Opportunity Fund, Ltd.; $3,325,299 in the excess of fair value of shares issued
to pledgees in connection with the credit facility; and $3,671,644 in
amortization of loan debt issuance costs.
Equity
Income from ATOLL.
During
the fiscal years ended December 31, 2007 and 2006, income recognized from the
Company’s investment in ATOLL was $5,662,717 and $39,780, respectively. The
increase is related to the increased ownership in ATOLL and an increase in
ATOLL’s net income.
Net
Loss
.
For the
fiscal year ended December 31, 2007, net loss was $16,145,602 as compared to
net
loss of $12,187,963 for the fiscal year ended December 31, 2006.
The
foregoing revenues, operating expenses and net losses are not indicative of
what
future operating results are anticipated to be. Management for the Company
believes that revenues should outpace operating expenses in 2008 and result
in
net income for fiscal year 2008.
Liquidity
and Capital Resources
.
At
December 31 2007, our principal source of liquidity consisted of $73,248 of
cash, as compared to $130,249 of cash at December 31, 2006. As of December
31,
2007, we had working capital deficit of $58,085, as compared to a working
capital deficit of $363,880 at December 31, 2006. In addition, our stockholders’
equity was $10,825,407 at December 31, 2007, as compared to $375,590 at December
31, 2006.
Our
operations used net cash of $2,215,946 during the twelve months ended December
31, 2007, as compared to $893,863 during the twelve months ended December 31,
2006.
Investing
activities for the year ended December 31, 2007 used net cash of $1,523,142,
as
compared to cash used of $1,161,591 in the twelve months ended December 31,
2006. The majority of the cash used in the fiscal year ended December 31, 2007
related to the purchase of 36.75% of ATOLL and 3% of Velcont.
Financing
activities provided $3,682,116 during the twelve months ended December 31,
2007,
as compared to $2,162,060 during the twelve months ended December 31, 2006.
The
majority of the financing provided during the fiscal year ended December 31,
2007 related to proceeds from our private placement of 8% convertible promissory
notes.
We
will
require additional capital in the future to possibly expand the manufacturing
facilities of ATOLL, to make acquisitions, and for general working capital.
We
anticipate that we will require a minimum of $15,000,000 to fund the JSC
Electroprivod and Velcont acquisitions, our investment in our container joint
venture, and additional equipment for ATOLL. While we hope to achieve some,
or
all, of the foregoing through cash flow, there is no assurance that we will
be
successful in doing so. To the extent we are not, we will require additional
capital to achieve our long-term business objectives. There can be no assurance
that such financing will be available, or if available, on acceptable terms.
If
a future financing is procured in the form of equity, the shareholdings of
the
current stockholders of the Company will be diluted.
Off
Balance Sheet Arrangements
We
have
no off-balance sheet arrangements.
Qualitative
and Quantitative Disclosures About Market Risk
In
the
future, we anticipate deriving the large majority of our revenues from foreign
markets, thereby subjecting us to potential foreign currency exposure risks.
In
addition, given that a significant portion of our current business is located
in
Russia, we are subject to potential uncertainty when doing business therein,
including political, economic and other uncertainties, a major change in any
of
which could subject us to significant exposure.
Going
Concern Qualification
The
Company's independent auditors have included an explanatory paragraph in their
report on the December 31, 2007 financial statements discussing issues which
raise substantial doubt about the Company's ability to continue as a "going
concern." The going concern qualification is attributable to the Company's
historical operating losses, the Company's lack of cash reserves and capital,
and the amount of capital which the Company projects it needs to achieve
profitable operations.
Risk
Factors
The
Company is subject to a high degree of risk. The following risks, if any one
or
more occurs, could materially harm the business, financial condition or future
results of operations of the Company. If that occurs, the trading price of
the
Company’s common stock could decline.
The
Company has a limited operating history and has experienced operating losses
since its inception.
From
inception through December 31, 2007, the Company has incurred a net loss of
$28,587,870 and has generated minimal revenues. As a development stage entity,
the Company may continue to incur losses until it is able to generate sufficient
revenues and cash flows from its various business initiatives outlined herein,
including receipt of cash dividends from ATOLL. If the Company is unable to
generate sufficient revenues and cash flows to meet its costs of operations,
it
will be forced to raise additional capital in the form of debt or equity, which
may or may not be available, the result of which would dilute the stockholders
of the Company, and the Company could be forced to curtail or cease its business
operations.
The
Company’s auditors have included a going concern risk in their
opinion.
The
opinion of the Company’s auditors includes a going concern risk due to the
Company being a development stage enterprise that has had nominal sales, has
experienced losses from operations and has had negative cash flows from
operating activities since inception through the twelve months ended December
31, 2007. Accordingly, in the opinion of the Company’s auditors, the foregoing
conditions raise substantial doubt about the Company’s ability to continue as a
going concern.
The
Company’s capitalization is limited and will require additional
funds.
A
limiting factor on the growth of the Company, including its ability to penetrate
new markets, make acquisitions, attract new customers, and deliver products
and
services in the areas of nuclear facility construction and periodic replacement
of equipment therein, remediation of nuclear and radioactive waste, wastewater
treatment, and power quality, among others, is the limited capitalization of
the
Company compared to other companies in the industry. The Company believes that
currently available capital resources will be sufficient to fund the Company
for
a short period of time, and the Company will require additional funding
near-term and in the future to achieve all of its proposed objectives. Any
delay
in meeting the Company’s anticipated funding requirements will affect its
ability to fully implement its business plan, and in the event the Company
is
unsuccessful in procuring the requisite additional equity or debt financing,
the
Company’s business, operating results and financial condition will be materially
adversely affected.
A
change in the current political landscape or general economic conditions in
the
Russian Federation could have a major impact on the future success of the
Company.
The
existing and future strategic and contractual relationships between the Company
and governmental agencies in the Russian Federation are significantly dependent
on the current political environment remaining status quo. Any change, elected
or otherwise, in the political landscape in the Russian Federation could have
a
material adverse effect on the Company’s business, operating results and
financial condition. In addition, the Company's business, earnings, asset values
and prospects may be materially and adversely affected by developments with
respect to inflation, interest rates, currency fluctuations, price and wage
controls, exchange control regulations, taxation, expropriation, social
instability, or other economic developments in or affecting the Russian
Federation. The Company has no control over such conditions and developments,
and can provide no assurance that such conditions and developments will not
adversely affect the Company's future operations.
If
the Company fails to establish and maintain key alliances with Russian
government agencies responsible for the nuclear waste remediation and power
quality industries, among others, or enter into strategic relationships or
acquire companies which supply products and services to such agencies, the
Company’s growth will be limited.
A
key
component of the Company’s business plan is (i) establishing and maintaining key
alliances with Russian government agencies responsible for the construction
and
ongoing maintenance of the 31 nuclear reactors in the RF, waste remediation
and
power quality industries, (ii) entering into strategic relationships and
acquiring companies, both Russian and foreign, which supply products and
services to the Russian Federation government agencies responsible for the
domestic and export nuclear markets, and (iii) identifying, developing and
acquiring innovative, proprietary technologies which have environmental and
economic applications for the Russian, European and Asian markets. The Company
views each of the foregoing as critically important to its near, mid and
long-term strategy, however there can be no assurance that the Company will
achieve and maintain some, or all, of the foregoing. In the event the Company
is
unsuccessful, the Company’s overall business, financial condition and results of
operations may be materially adversely affected.
The
Company’s future revenues are difficult to predict given that its various
business initiatives are at an early stage.
It
is not
feasible to predict with assurance the timing or the amount of revenues that
the
Company will receive from its various business initiatives. Any substantial
delay in the introduction of products and services could result in significant
delays in revenues and the need to raise additional capital through the issuance
of additional equity or debt securities. In view of the emerging nature of
certain of the technologies to be offered by the Company, there can be no
assurance that the Company will capture market share and that revenues will
be
significant.
The
Company will rely upon various third party manufacturers to produce most of
its
products and, accordingly, will be subject to risks inherent in outsourcing
manufacturing.
Our
future success will depend, in large part, on our manufacturers’ ability,
including most importantly the Company’s we have invested in, or plan to invest
in, our joint venture partners, to meet customers’ expectations with respect to
volume, quality, consistency, and performance. Additionally, our manufacturing
partners will be required to manufacture new and existing products with design
improvements as developed by the Company or third party partners. Further,
as we
are, and will be, competing in a competitive marketplace comprised of numerous
multi-billion dollar entities that manufacture products in-house, we will,
from
time to time, be subject to potential manufacturing delays and other matters
outside of our direct control. Unless we acquire a manufacturing facility for
each of our products, we will be reliant upon our manufacturing partners, each
of which have other clients for which they manufacture products, to produce
high
quality products on what we anticipate will be a rapidly increasing production
schedule.
The
Company will need to sell additional securities to finance future growth, which
will dilute our stockholders’ equity interests.
Our
business strategy includes expansion through internal growth, acquiring
complementary technologies and businesses, and the establishment of additional
strategic alliances. To accomplish the foregoing, we will issue additional
equity securities that will dilute our stockholders' stock ownership. We may
also issue, as well as, assume debt and incur impairment losses related to
goodwill and other tangible assets if we acquire another company, all of which
could negatively impact our results of operations.
There
exists a risk of environmental liability and we presently lack environmental
liability insurance.
The
Company's radioactive contaminant technology is subject to numerous federal
and
local laws and regulations relating to the storage, handling, emission,
transportation and discharge of such materials, and the use of specialized
technical equipment in the processing of such materials. There is always the
risk that such materials might be mishandled, or that there might be equipment
or technology failures, which could result in significant claims for personal
injury, property damage, and clean-up or remediation. Any such claims against
the Company could have a material adverse effect on the Company. The Company
does not presently carry any environmental liability insurance, and may be
required to obtain such insurance in the future in amounts that are not
presently predictable. There can be no assurance that such insurance will
provide coverage against all claims, and claims may be made against the Company
(even if covered by insurance policies) for amounts substantially in excess
of
applicable policy limits. Any such event could have a material adverse effect
on
the Company. We cannot provide any assurance that we will be able to afford
a
sufficient level of environmental liability insurance, if it were offered to
us.
We
may be subject to product liability claims relating to ATOLL in the future,
and
may not have sufficient product liability insurance to cover any claims, thereby
potentially exposing us to substantial liabilities.
As
a 50%
owner of ATOLL, the Company could become subject to product liability claims
from consumers of ATOLL products. The Company’s two executive officers who serve
on the board of directors of ATOLL intend to have ATOLL maintain adequate
product liability insurance, but product liability insurance alone may not
be
sufficient to cover any potential product liability claim. Failure to maintain
sufficient insurance coverage could have a material adverse effect on ATOLL’s
business, and consequently the Company’s business, prospects and results of
operations if claims are made that exceed the coverage ATOLL has in place or
obtains in the future.
Currency
rate fluctuations may have an adverse effect on our business and results of
operations.
We
expect
to derive most, if not all, of our revenues from operations outside of the
U.S.
As a result, the majority of our revenues will typically be denominated in
non-U.S. currencies, and our operating results may be affected by changes in
the
relative values of the applicable non-U.S. currencies and the U.S. dollar.
We
are not utilizing hedging instruments, nor do we anticipate doing so in the
future.
We
are dependent on our key personnel and will have a need for additional
personnel.
The
Company’s future performance will be substantially dependent on the continued
services and on the performance of our management. In particular, Peter Goerke,
Executive Vice President and Secretary, J.P. Todd Sinclair, Chief Financial
Officer, Dr. Valery Lebedev, Chief Scientific Officer, and Dr. Hans-Jürgen
Engelmann, Director of Project and Sales Division, Shielding and Encapsulation
EU. The Company’s performance also depends on our ability to attract, retain and
motivate additional key employees. The loss of the services of Messrs. Goerke,
Sinclair, Lebedev, or Engelmann, or any other key personnel could have a
material adverse effect on our business, prospects, financial condition and
results of operations. We do not currently carry key man insurance on any of
the
foregoing parties. We anticipate doing so in the future with respect to certain
members of management.
The
acquisition of 50% of ATOLL along with the various strategic partnerships and
other business initiatives are anticipated to result in an increase in the
demands on our management and our operating systems and internal
controls.
Messrs.
Goerke and Sinclair are members of the board of directors of ATOLL and spend
a
measurable amount of time on ATOLL matters. The Company’s anticipated future
growth will likely strain existing management resources and operational,
financial, human and management information systems and controls, which may
not
be adequate to support our operations and will require us to develop further
financial and management controls, reporting systems and procedures. There
can
be no assurance that we will be able to develop such controls, systems or
procedures effectively, or on a timely basis. Our failure to do so could have
a
material adverse effect on our business, operating results and financial
condition.
We
have issued stock options to all of our directors, officers, key employees
and
certain consultants, pursuant to our 2007 Stock Option and Incentive Plan,
which
will have a dilutive effect on our book value.
We
have
implemented our 2007 Stock Option and Incentive Plan to provide a mechanism
for
issuance of stock options and restricted stock to our officers, directors,
key
employees and consultants. As of December 31, 2007, we have issued and
outstanding options to purchase 5,821,667 shares of common stock. Because stock
options granted under the Plan will generally only be exercised when the
exercise price for such option is below the then market value of our common
stock, the exercise of stock options will cause dilution to the book value
per
share of our common stock. The grant of restricted stock awards will have a
similar dilutive effect on our book value. The 2007 Stock Option and Incentive
Plan must still be approved by a majority of the stockholders of the Company
at
the next annual stockholders meeting.
If
we are unable to protect our proprietary information against unauthorized use
by
others, our competitive position could be harmed.
Our
proprietary information is critically important to our competitive position
and
is a significant aspect of the products we provide. If we are unable to protect
our proprietary information against unauthorized use by others, our competitive
position could be harmed. We generally enter into confidentiality and
non-compete agreements with our employees and consultants, and control access
to, and distribution of, our documentation and other proprietary information.
Despite these precautions, we cannot assure you that these strategies will
be
adequate to prevent misappropriation of our proprietary information. Therefore,
we could be required to expend significant amounts to defend our rights to
proprietary information in the future if a breach were to occur. No assurance
can be given that we will have the financial ability to defend and/or protect
our proprietary rights.
There
is a limited market for the securities of the Company at this
time.
Our
common stock currently trades on the Pink Sheets and there is a limited market.
In addition, our common stock is considered a "penny stock" which subjects
our
shares to rules affecting their ability to be sold.
Under
the penny stock regulations, a broker-dealer selling penny stocks to anyone
other than an established customer or “accredited investor" (generally, an
individual with a net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 together with his or her spouse) must make a special
suitability determination for the purchaser and must receive the purchaser’s
written consent to the transaction prior to the sale, unless the broker-dealer
is otherwise exempt. In addition, unless the broker-dealer or the transaction
is
otherwise exempt, the penny stock regulations require the broker-dealer to
(i)
deliver, prior to any transaction involving a penny stock, a disclosure schedule
relating to the penny stock, (ii) to disclose commissions payable to the
broker-dealer and the registered representative and current quotations for
the
securities, (iii) send monthly statements disclosing recent price information
with respect to the penny stock held in a customer's account and information
with respect to the limited market in penny stocks.
Sarbanes-Oxley
Act of 2002.
In
future
periods, we will be required to evaluate our internal controls under Section
404
of the Sarbanes-Oxley Act of 2002 (“SOX”), and any adverse results from such
evaluation could result in a loss of investor confidence in our financial
reports and have an adverse effect on the price of our shares of common stock.
For the fiscal year ended December 31, 2007, we were not required to assess
our
system of internal controls. Pursuant to Section 404 of SOX, in the near future,
smaller reporting companies, such as NNRF, Inc. will be required to furnish
a
report by management on our internal controls over financial reporting.
This report will contain among other matters, an assessment of the
effectiveness of our internal control over financial reporting, including a
statement as to whether or not our internal control over financial reporting
is
effective. This assessment must include disclosure of any material
weaknesses in our internal control over financial reporting identified by our
management. This report must also contain a statement that our auditors
have issued an attestation report on our management’s assessment of these
internal controls. Public Company Accounting Oversight Board Auditing
Standard No. 2 provides the professional standards for auditors to attest to,
and report on, our management’s assessment of the effectiveness of internal
control over financial reporting under Section 404.
We
cannot
be certain that we will be able to complete our assessment, testing and any
required remediation in a timely fashion. During the evaluation and
testing process, if we identify one or more material weaknesses in our internal
control over financial reporting, we will be unable to assert that such internal
control is effective. If we are unable to assert that our internal control
over financial reporting is effective (or if our auditors are unable to attest
that our management’s report is fairly stated or they are unable to express an
opinion on the effectiveness of our internal controls), we could lose investor
confidence in the accuracy and completeness of our financial reports, which
could have a material adverse effect on our stock price.
Failure
to comply with the new rules may make it more difficult for us to obtain certain
types of insurance, including director and officer liability insurance. We
may be forced to accept reduced policy limits and coverage and/or incur
substantially higher costs to obtain the same or similar coverage. The
impact of these events could also make it more difficult for us to attract
and
retain qualified persons to serve on our board of directors, on committees
of
our board of directors, or as executive officers.
We
do not intend to pay dividends on our common stock in the foreseeable
future.
Our
current plan is to reinvest all future earnings, if applicable, for working
capital, future acquisitions, marketing and capital expenditures. Therefore,
stockholders in the Company should not expect to receive dividends on their
shares of common stock.
The
Company’s articles of incorporation, bylaws and state law contain provisions
that preserve current management.
Provisions
of state law, the Company’s articles of incorporation and bylaws may discourage,
delay or prevent a change in the Company’s management team that stockholders may
consider favorable. These provisions include: authorizing the issuance of “blank
check” preferred stock without any need for action by stockholders; permitting
stockholder action by written consent; and establishing advance notice
requirements for nominations for election to the board of directors or for
proposing matters that can be acted on by stockholders at stockholder meetings.
These provisions could allow the Company’s board of directors to affect the
investor’s rights as a stockholder since the board of directors can make it more
difficult for preferred stockholders, if applicable, or common stockholders
to
replace members of the board of directors. Because the board of directors is
responsible for appointing the members of the management team, these provisions
could in turn affect any attempt to replace the current or future management
team.
Item
7. Financial Statements.
NNRF,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
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Page
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|
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|
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Report
of Independent Registered Public Accounting Firm
|
|
F-2
|
|
|
|
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Consolidated
Balance Sheets
|
|
F-3
|
|
|
|
|
|
Consolidated
Statements of Operations
|
|
F-4
|
|
|
|
|
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Consolidated
Statements of Stockholders’ Equity
|
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F-5
|
|
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Consolidated
Statements of Cash Flows
|
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F-6
|
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Notes
to Consolidated Financial Statements
|
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F-7
|
|
HANSEN,
BARNETT & MAXWELL, P.C.
A
Professional Corporation
CERTIFIED
PUBLIC ACCOUNTANTS
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
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and the Stockholders
NNRF,
Inc.
We
have
audited the accompanying consolidated balance sheets of NNRF, Inc. and
subsidiaries (a development stage company) as of December 31, 2007 and 2006
and
the related consolidated statements of operations, stockholders’ equity, and
cash flows for the years then ended and for the period from August 25, 2005
(date of inception) through December 31, 2007. These 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 was not required
to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits 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 includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes 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 NNRF, Inc. and subsidiaries
(a development stage company) as of December 31, 2007 and 2006 and the results
of their operations and their cash flows for the years then ended and for
the period from August 25, 2005 (date of inception) through December 31, 2007
in
conformity with accounting principles generally accepted in the United
States.
The
accompanying consolidated financial statements have been prepared assuming
that
the Company will continue as a going concern. As discussed in Note 2, the
Company is a development stage enterprise that has had no sales from its planned
operations, has experienced losses from operations and has had negative cash
flows from operating activities since inception. These conditions 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 2. The
financial statements do not include any adjustments that might result from
the
outcome of this uncertainty.
HANSEN,
BARNETT & MAXWELL,
P.C.
Salt
Lake
City, Utah
April
14,
2008
NNRF,
Inc.
CONSOLIDATED
BALANCE SHEETS
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
As Restated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
73,248
|
|
$
|
130,249
|
|
|
Prepaid
expenses and other current assets
|
|
|
276,059
|
|
|
6,249
|
|
|
Total
Current Assets
|
|
|
349,307
|
|
|
136,498
|
|
|
Furniture
and Equipment, net of accumulated depreciation of $4,015 and $3,415
at
December 31, 2007 and 2006, respectively
|
|
|
6,329
|
|
|
9,442
|
|
|
Deferred
loan costs, net of accumulated amortization of $66,579 at December
31,
2006
|
|
|
-
|
|
|
307,881
|
|
|
Equity
method investment in ATOLL
|
|
|
10,352,228
|
|
|
1,206,030
|
|
|
Investments,
at cost
|
|
|
525,655
|
|
|
-
|
|
|
Total
Assets
|
|
$
|
11,233,519
|
|
$
|
1,659,851
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
136,413
|
|
$
|
133,128
|
|
|
Management
fee payable
|
|
|
230,816
|
|
|
271,625
|
|
|
Accrued
interest
|
|
|
1,842
|
|
|
56,584
|
|
|
Shareholder
advances
|
|
|
39,041
|
|
|
39,041
|
|
|
Total
Current Liabilities
|
|
|
408,112
|
|
|
500,378
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Convertible Notes Payable, net of unamortized discount of $1,165,617
at
December 31, 2006
|
|
|
-
|
|
|
783,883
|
|
|
Total
Liabilities
|
|
|
408,112
|
|
|
1,284,261
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
Class
A Preferred Stock - $0.001 par value; 5,000,000 shares authorized;
none
outstanding
|
|
|
-
|
|
|
-
|
|
|
Class
B Preferred Stock - $0.001 par value; 5,000,000 shares authorized;
none
outstanding
|
|
|
-
|
|
|
-
|
|
|
Common
stock - $0.001 par value; 100,000,000 shares authorized; 47,008,810
shares
and 33,529,406, shares issued and outstanding,
respectively
|
|
|
47,009
|
|
|
33,529
|
|
|
Additional
paid-in capital
|
|
|
39,052,399
|
|
|
12,787,497
|
|
|
Deficit
accumulated during the development stage
|
|
|
(28,587,870
|
)
|
|
(12,442,268
|
)
|
|
Accumulated
other comprehensive loss
|
|
|
313,869
|
|
|
(3,168
|
)
|
|
Total
Stockholders' Equity
|
|
|
10,825,407
|
|
|
375,590
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
|
11,233,519
|
|
$
|
1,659,851
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
NNRF,
Inc.
CONSOLIDATED
STATEMENT OF OPERATIONS
|
|
|
|
|
For the Period from
|
|
|
|
|
|
|
August 25, 2005
|
|
|
|
|
For the Year Ended
|
|
(Date of Inception)
|
|
|
|
|
December 31,
|
|
through
|
|
|
|
|
2007
|
|
2006
|
|
December 31, 2007
|
|
|
|
|
|
|
As Restated
|
|
|
|
|
Sales
|
|
$
|
-
|
|
$
|
5,343
|
|
$
|
5,343
|
|
|
Cost
of Sales
|
|
|
-
|
|
|
1,615
|
|
|
1,615
|
|
|
Gross
Profit
|
|
|
-
|
|
|
3,728
|
|
|
3,728
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
7,101,548
|
|
|
7,153,429
|
|
|
14,508,995
|
|
|
Foreign
currency exchange loss
|
|
|
-
|
|
|
5,558
|
|
|
5,845
|
|
|
Total
Operating Expenses
|
|
|
7,101,548
|
|
|
7,158,987
|
|
|
14,514,840
|
|
|
Operating
Loss
|
|
|
(7,101,548
|
)
|
|
(7,155,259
|
)
|
|
(14,511,112
|
)
|
|
Interest
expense
|
|
|
(14,706,771
|
)
|
|
(5,072,484
|
)
|
|
(19,779,255
|
)
|
|
Equity
in income from ATOLL
|
|
|
5,662,717
|
|
|
39,780
|
|
|
5,702,497
|
|
|
Net
Loss
|
|
$
|
(16,145,602
|
)
|
$
|
(12,187,963
|
)
|
$
|
(28,587,870
|
)
|
|
Basic
and Diluted Loss per Share
|
|
$
|
(0.39
|
)
|
$
|
(0.44
|
)
|
|
|
|
|
Basic
and Diluted Weighted-Average Common Shares
Outstanding
|
|
|
40,954,215
|
|
|
27,693,415
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
NNRF,
Inc.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
For
the period from April 25, 2005 (Date of Inception) through December 31,
2005 and
for the Years ended December 31, 2006 and 2007
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
Accumulated
|
|
Accumulated
|
|
Total
|
|
|
|
|
|
|
Paid-in
|
|
During the
|
|
Other
|
|
Stockholders'
|
|
|
|
|
Common Stock
|
|
Capital
|
|
Development
|
|
Comprehensive
|
|
Equity
|
|
|
|
|
Shares
|
|
Amount
|
|
(Deficit)
|
|
Stage
|
|
Loss
|
|
(Deficit)
|
|
|
August
25, 2005 (Date of Inception)
|
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
Issuance
of common stock for cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August
2005 - $0.0002 per share
|
|
|
22,500,000
|
|
|
22,500
|
|
|
(17,500
|
)
|
|
-
|
|
|
-
|
|
|
5,000
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(254,305
|
)
|
|
-
|
|
|
(254,305
|
)
|
|
Balance
- December 31, 2005
|
|
|
22,500,000
|
|
|
22,500
|
|
|
(17,500
|
)
|
|
(254,305
|
)
|
|
-
|
|
|
(249,305
|
)
|
|
Net
loss (Restated)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(12,187,963
|
)
|
|
-
|
|
|
(12,187,963
|
)
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,168
|
)
|
|
(3,168
|
)
|
|
Comprehensive
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,191,131
|
)
|
|
Acquisition
of Stafford - May 2006
|
|
|
359,500
|
|
|
359
|
|
|
(136,542
|
)
|
|
-
|
|
|
-
|
|
|
(136,183
|
)
|
|
Issuance
of common stock for cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
2006 - $0.75 per share
|
|
|
185,000
|
|
|
185
|
|
|
138,565
|
|
|
-
|
|
|
-
|
|
|
138,750
|
|
|
October
2006 - $0.75 per share
|
|
|
128,500
|
|
|
129
|
|
|
95,996
|
|
|
-
|
|
|
-
|
|
|
96,125
|
|
|
December
2006 - $0.75 per share
|
|
|
101,333
|
|
|
101
|
|
|
75,899
|
|
|
-
|
|
|
-
|
|
|
76,000
|
|
|
Issuance
of commons stock for conversion of liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May
2006 - $1.05 per share
|
|
|
2,857
|
|
|
3
|
|
|
2,997
|
|
|
-
|
|
|
-
|
|
|
3,000
|
|
|
July
2006 - $1.10 per share
|
|
|
311,025
|
|
|
311
|
|
|
341,817
|
|
|
-
|
|
|
-
|
|
|
342,128
|
|
|
December
2006 - $0.75 per share
|
|
|
432,000
|
|
|
432
|
|
|
323,568
|
|
|
-
|
|
|
-
|
|
|
324,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for payment of interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
2006 - $1.10 per share
|
|
|
4,282,048
|
|
|
4,282
|
|
|
4,705,970
|
|
|
-
|
|
|
-
|
|
|
4,710,252
|
|
|
Issuance
of common stock for services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May
2006 - $1.05 per share
|
|
|
2,997,143
|
|
|
2,997
|
|
|
3,144,003
|
|
|
-
|
|
|
-
|
|
|
3,147,000
|
|
|
July
2006 - $1.40 per share
|
|
|
1,080,000
|
|
|
1,080
|
|
|
1,510,920
|
|
|
-
|
|
|
-
|
|
|
1,512,000
|
|
|
September
2006 - $1.39 per share
|
|
|
400,000
|
|
|
400
|
|
|
555,600
|
|
|
-
|
|
|
-
|
|
|
556,000
|
|
|
December
2006 - $0.75 per share
|
|
|
750,000
|
|
|
750
|
|
|
561,750
|
|
|
-
|
|
|
-
|
|
|
562,500
|
|
|
Value
of warrants issued to placement agent
|
|
|
-
|
|
|
-
|
|
|
240,810
|
|
|
-
|
|
|
-
|
|
|
240,810
|
|
|
Beneficial
conversion feature and allocated value of warrants related to convertible
debt, net $161,220 in allocated offering costs
|
|
|
-
|
|
|
-
|
|
|
1,243,644
|
|
|
-
|
|
|
-
|
|
|
1,243,644
|
|
|
Balance
- December 31, 2006 (Restated)
|
|
|
33,529,406
|
|
|
33,529
|
|
|
12,787,497
|
|
|
(12,442,268
|
)
|
|
(3,168
|
)
|
|
375,590
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(16,145,602
|
)
|
|
-
|
|
|
(16,145,602
|
)
|
|
Foreign
currency translation adjustment
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
317,037
|
|
|
Comprehensive
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,828,565
|
)
|
|
Issuance
of common stock for cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
2007 - $0.75 per share
|
|
|
44,334
|
|
|
44
|
|
|
33,206
|
|
|
-
|
|
|
-
|
|
|
33,250
|
|
|
Issuance
of common stock for investment in ATOLL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
2007 - $0.60 per share
|
|
|
4,000,000
|
|
|
4,000
|
|
|
2,396,000
|
|
|
-
|
|
|
-
|
|
|
2,400,000
|
|
|
Issuance
of common stock for services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February
2007 - $0.79 per share
|
|
|
50,000
|
|
|
50
|
|
|
39,450
|
|
|
-
|
|
|
-
|
|
|
39,500
|
|
|
March
2007 - $0.87 per share
|
|
|
2,500
|
|
|
3
|
|
|
3,422
|
|
|
-
|
|
|
-
|
|
|
3,425
|
|
|
March
2007 - $1.79 per share
|
|
|
20,000
|
|
|
20
|
|
|
35,780
|
|
|
-
|
|
|
-
|
|
|
35,800
|
|
|
May
2007 - $5.45 per share
|
|
|
250,000
|
|
|
250
|
|
|
1,362,250
|
|
|
-
|
|
|
-
|
|
|
1,362,500
|
|
|
June
2007 - $5.15 per share
|
|
|
50,000
|
|
|
50
|
|
|
257,450
|
|
|
-
|
|
|
-
|
|
|
257,500
|
|
|
August
2007 - $2.95 per share
|
|
|
84,746
|
|
|
85
|
|
|
249,915
|
|
|
-
|
|
|
-
|
|
|
250,000
|
|
|
September
2007 - $2.31 per share
|
|
|
150,000
|
|
|
150
|
|
|
346,350
|
|
|
-
|
|
|
-
|
|
|
346,500
|
|
|
November
2007 - $1.87 per share
|
|
|
500,000
|
|
|
500
|
|
|
934,500
|
|
|
-
|
|
|
-
|
|
|
935,000
|
|
|
Issuance
of common stock for conversion of convertible debt and accrued
interest
|
|
|
6,528,719
|
|
|
6,529
|
|
|
6,095,450
|
|
|
-
|
|
|
-
|
|
|
6,101,979
|
|
|
Issuance
of common stock in satisfaction of credit facility:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
2007 - $3.22 per share
|
|
|
571,989
|
|
|
572
|
|
|
1,841,233
|
|
|
-
|
|
|
-
|
|
|
1,841,805
|
|
|
November
2007 - $2.71 per share
|
|
|
688,664
|
|
|
689
|
|
|
1,865,590
|
|
|
-
|
|
|
-
|
|
|
1,866,279
|
|
|
December
2007 - $1.67 per share
|
|
|
538,452
|
|
|
538
|
|
|
898,677
|
|
|
-
|
|
|
-
|
|
|
899,215
|
|
|
Warrants
issued to placement agent
|
|
|
-
|
|
|
-
|
|
|
824,394
|
|
|
-
|
|
|
-
|
|
|
824,394
|
|
|
Beneficial
conversion feature and allocated value of warrants related to convertible
debt, net $278,904 in allocated offering costs
|
|
|
-
|
|
|
-
|
|
|
741,187
|
|
|
-
|
|
|
-
|
|
|
741,187
|
|
|
Fair
value of warrants issued to pledgors of credit facility
|
|
|
-
|
|
|
-
|
|
|
4,847,482
|
|
|
-
|
|
|
-
|
|
|
4,847,482
|
|
|
Stock-based
compensation
|
|
|
-
|
|
|
-
|
|
|
3,492,566
|
|
|
-
|
|
|
-
|
|
|
3,492,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2007
|
|
|
47,008,810
|
|
$
|
47,009
|
|
$
|
39,052,399
|
|
$
|
(28,587,870
|
)
|
$
|
313,869
|
|
$
|
10,825,407
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
NNRF,
Inc.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
For the Period from
|
|
|
|
|
|
|
August 25, 2005
|
|
|
|
|
|
|
(Date of Inception)
|
|
|
|
|
December 31,
|
|
through
|
|
|
|
|
2007
|
|
2006
|
|
December 31, 2007
|
|
|
|
|
|
|
As Restated
|
|
|
|
|
Cash
Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(16,145,602
|
)
|
$
|
(12,187,963
|
)
|
$
|
(28,587,870
|
)
|
|
Adjustments
to reconcile net loss to net cash from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
600
|
|
|
2,143
|
|
|
4,015
|
|
|
Amortization
of loan costs and debt discount
|
|
|
3,671,644
|
|
|
305,833
|
|
|
3,977,477
|
|
|
Common
stock issued for interest and services
|
|
|
7,510,964
|
|
|
10,508,752
|
|
|
18,019,716
|
|
|
Fair
value of warrants issued to pledgors
|
|
|
4,847,482
|
|
|
-
|
|
|
4,847,482
|
|
|
Stock-based
compensation
|
|
|
3,492,566
|
|
|
-
|
|
|
3,492,566
|
|
|
Equity
in income of ATOLL
|
|
|
(3,421,592
|
)
|
|
(39,780
|
)
|
|
(5,461,372
|
)
|
|
Changes
in assets and liabilities, net of effects from acquisition of Stafford
Energy:
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
-
|
|
|
3,559
|
|
|
3,559
|
|
|
Accounts
receivable
|
|
|
-
|
|
|
33,035
|
|
|
33,035
|
|
|
Prepaid
expenses and other current assets
|
|
|
(252,774
|
)
|
|
5,112
|
|
|
(259,023
|
)
|
|
Accounts
payable and accrued liabilities
|
|
|
80,766
|
|
|
475,446
|
|
|
706,711
|
|
|
Net
Cash Used in Operating Activities
|
|
|
(2,215,946
|
)
|
|
(893,863
|
)
|
|
(3,223,704
|
)
|
|
Cash
Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
2,513
|
|
|
(1,044
|
)
|
|
(10,344
|
)
|
|
Purchase
of investment in ATOLL and Velcont
|
|
|
(1,525,655
|
)
|
|
(1,166,250
|
)
|
|
(2,691,905
|
)
|
|
Cash
acquired in acquisition of Stafford Energy
|
|
|
-
|
|
|
5,703
|
|
|
5,703
|
|
|
Net
Cash Used in Investing Activities
|
|
|
(1,523,142
|
)
|
|
(1,161,591
|
)
|
|
(2,696,546
|
)
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from shareholder advances
|
|
|
-
|
|
|
196,562
|
|
|
344,163
|
|
|
Proceeds
from issuance of convertible notes payable
|
|
|
2,366,866
|
|
|
1,654,630
|
|
|
4,021,496
|
|
|
Proceeds
from issuance of common shares
|
|
|
33,250
|
|
|
310,868
|
|
|
349,118
|
|
|
Proceeds
from credit facility
|
|
|
1,282,000
|
|
|
-
|
|
|
1,282,000
|
|
|
Net
proceeds from line of credit
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Cash
Flows Provided by Financing Activities:
|
|
|
3,682,116
|
|
|
2,162,060
|
|
|
5,996,777
|
|
|
Effect
on Exchange Rate Changes on Cash
|
|
|
(29
|
)
|
|
(3,250
|
)
|
|
(3,279
|
)
|
|
Net
Change in Cash
|
|
|
(57,001
|
)
|
|
103,356
|
|
|
73,248
|
|
|
Cash
at Beginning of Period
|
|
|
130,249
|
|
|
26,893
|
|
|
-
|
|
|
Cash
at End of Period
|
|
$
|
73,248
|
|
$
|
130,249
|
|
$
|
73,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplement
Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncash
Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued for additional investment
|
|
$
|
2,400,000
|
|
$
|
-
|
|
|
|
|
|
Conversion
of liabilities to equity
|
|
$
|
6,178,539
|
|
$
|
648,128
|
|
|
|
|
|
Purchase
of Stafford Energy, net of cash acquired
|
|
$
|
-
|
|
$
|
141,866
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
NNRF,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization
–
Nucon,
Inc. (“Nucon”) was organized on August 25, 2005, under the laws of the State of
Nevada. On May 23, 2006, Stafford Energy, Inc. a Nevada corporation,
(“Stafford”), acquired 100% of the issued and outstanding common stock of Nucon
from the Nucon shareholders in exchange for the issuance of 22,500,000 shares
of
common stock. The Nucon shareholders received a majority of the common stock
of
Stafford; accordingly, the reorganization of Nucon into Stafford was accounted
for as the recapitalization of Nucon at historical cost. The accompanying
consolidated financial statements include the historical operations of Nucon
and
have been restated on a retroactive basis to reflect the 22,500,000 shares
of
Stafford’s common stock issued to the Nucon shareholders for all periods
presented. In connection with the recapitalization of Nucon, Stafford changed
its name to Nucon-RF, Inc. On July 19, 2007, Nucon-RF, Inc. changed its name
to
NNRF, Inc. (“NNRF”). All references herein to NNRF or the Company refer to
Nucon, Inc. prior to May 23, 2006 and to NNRF, Inc. and subsidiaries
thereafter.
In
2007,
the Company formed OOO Nucon-RUS (“Nucon-RUS”), a limited liability company
under the laws of the Russian Federation. Nucon-RUS is a wholly owned subsidiary
of NNRF. In January 2007, Nucon-RUS became fully accredited to do business in
the Russian Federation by the Russian Ministry of Justice.
Basis
of Presentation and Consolidation
–
The
accompanying consolidated financial statements include the accounts of NNRF,
Inc. and the following wholly owned subsidiaries after May 23, 2006: Nucon,
Inc., Abucco Technologies Inc. (Abucco), Stafford Energy Canada Inc. (“Stafford
Canada”) and OOO Nucon-RUS from the dates of their acquisition or formation.
Intercompany accounts and transactions have been eliminated in consolidation.
Investments
are accounted for by the equity method if the Company has the ability to
exercise significant influence over their operating and financial policies.
Consolidated net loss includes the Company’s proportionate share of the net
income or net loss from these investments.
The
Company uses the cost method to account for investments that the Company
does
not control or have the ability to exercise significant influence over operating
and financial policies. In accordance with the cost method, these investments
are recorded at the lower of cost or fair value.
Nature
of Operations
–
NNRF
is
a development stage company whose planned principal operations have not
commenced. NNRF plans to market products, technologies, technical and
engineering services to government and private sector clients in the Russian
Federation, European and Asian markets to enable the clients to manage high-end
environmental impacts. NNRF intends to acquire manufacturing facilities,
technical support companies and proprietary technologies to enable it to
manufacture its planned products and to provide its planned technical and
engineering services. To date, NNRF has had no sales or revenue from its planned
environmental impact services business.
Use
of Estimates
–
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements. These same estimates may
affect the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual amounts and results could differ from those
estimates.
Functional
Currency
–
The
United States dollar is the functional currency for the Company’s operations.
The Company has significant agreements denominated in United States dollars,
which comprise a majority of the Company’s obligations and expenses.
NNRF,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
Canadian dollar is the functional currency for the operations of Abucco. These
assets and liabilities are translated into U.S. dollars at exchange rates as
of
the balance sheet date. Related revenues, expenses, gains and losses are
translated at the average exchange rates during the period. Foreign currency
translation adjustments from translating the financial statements of Abucco
are
included as a component of accumulated other comprehensive loss.
Transaction
gains and losses for the Company’s investment in ATOLL, which is accounted for
by the equity method in the consolidated financial statements, will not be
included in determining net income but will be accounted for in the same
manner
as
foreign
currency
translation adjustments and reported as a component of other comprehensive
income as part of shareholder’s equity. The functional currency of ATOLL is the
Russian Ruble.
Fair
Value of Financial Instruments –
At
December 31, 2007, the carrying amount of the accounts payable, management
fee
payable and the shareholder advances payable approximate their estimated fair
values because of the immediate or short-term maturity of these financial
instruments.
Furniture
and Equipment –
Furniture
and Equipment is carried at cost, net of accumulated depreciation. Depreciation
is computed using the straight-line method over the estimated useful lives
of
the related equipment. Estimated useful lives range from 3 to 5 years.
Depreciation expense was $600 and $1,272 for the years ended December 31,
2007 and 2006, respectively.
Investments
in Other Entities
-
Investments in corporate entities with less than a 20% voting interest are
generally accounted for under the cost method. The Company uses the equity
method to account for investments in common stock or in-substance common stock
of corporate entities, in which it has a voting interest of 20% to 50% or in
which it otherwise has the ability to exercise significant influence. Under
the
equity method, the investment is originally recorded at cost and adjusted to
recognize any distributions and the Company’s share of net earnings or losses of
the investee, limited to the extent of the Company’s investment in and advances
to the investee.
The
Company regularly monitors and evaluates the realizable value of its
investments. When assessing an investment for an other-than-temporary decline
in
value, the Company considers such factors as, among other things, the
performance of the investee in relation to its own operating targets and its
business plan, the investee’s revenue and cost trends, as well as liquidity and
cash position, including its cash burn rate. If events and circumstances
indicate that a decline in the value of these assets has occurred and is
other-than-temporary, the Company records a charge to investment income.
Long-Lived
Assets
–
The
Company reviews its long-lived assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the asset to estimated undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of
an
asset exceeds its estimated future cash flows, an impairment charge is
recognized for the amount by which the carrying amount exceeds the fair value.
The Company has evaluated its investment in ATOLL and concluded that the
investment was not impaired at December 31, 2007. Management believes there
is
no impairment of any other long-lived assets as of December 31,
2007.
Revenue
Recognition
–
Revenues
are recognized when shipment of the product has occurred, no significant Company
obligation exists, the fee is fixed or determinable, and collectibility is
probable. To date the Company has generated no revenues from its intended
operations.
NNRF,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Income
Taxes
–
The
Company recognizes an asset or liability for the tax benefit from operating
loss
carryforwards and for the deferred tax consequences of temporary differences
between the tax bases of assets or liabilities and their reported amounts in
the
financial statements. Temporary differences will result in taxable or deductible
amounts in future years when the amounts reported in the financial statements
are recovered or settled. Deferred tax assets or liabilities are measured using
enacted tax rates that are anticipated to be in effect when operating losses
are
expected to be realized and the temporary differences are expected to reverse.
Deferred tax assets are reviewed periodically for recoverability and a valuation
allowance is provided when it is more likely than not that the deferred tax
assets will not be realized.
In
July
2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes— an interpretation of FASB Statement No. 109 ("FIN 48")”. FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, Accounting
for Income Taxes. FIN 48 describes a recognition threshold and measurement
attribute for the recognition and measurement of tax positions taken or expected
to be taken in a tax return and also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The cumulative effect of adopting FIN 48 is required to
be
reported as an adjustment to the opening balance of retained earnings (or other
appropriate components of equity) for that fiscal year, presented separately.
The adoption of FIN 48 did not have a material impact to the Company’s
consolidated financial statements.
Basic
and Diluted Loss Per Common Share –
Basic
loss per share is computed by dividing net loss by the weighted-average number
of common shares outstanding during the period. Diluted loss per share is
computed by dividing net loss by the weighted-average number of common shares
and dilutive potential common shares that were outstanding during the period.
The following potential common shares were not included in the calculation
of
diluted loss per share as there effects would be anti-dilutive:
|
|
|
For
the Year Ended
|
|
|
|
|
December
31,
|
|
December
31,
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Convertible
notes payable
|
|
|
-
|
|
|
2,674,779
|
|
|
Warrants
|
|
|
5,554,526
|
|
|
1,234,685
|
|
|
Options
|
|
|
5,821,667
|
|
|
-
|
|
|
|
|
|
11,376,193
|
|
|
3,909,464
|
|
Comprehensive
Loss –
Comprehensive
loss includes the net loss for the period and the foreign currency translation
adjustment.
Stock
Based Compensation
–
The
Company recognizes stock-based compensation in accordance with the fair value
recognition provisions of SFAS No. 123(R), “Share-Based Payment.” SFAS
No. 123(R) generally requires share-based payments to employees, including
grants of employee stock options and other equity awards, to be recognized
in
the statement of operations based on their fair values. Thus, the Company
records compensation expense for all share-based awards granted, based on the
grant date fair value estimated in accordance with the provisions of SFAS
123(R). The Company adopted SFAS 123(R) using the modified prospective method,
which requires that compensation expense for the portion of awards for which
the
requisite service has not yet been rendered and that are outstanding as of
the
adoption date be recorded over the remaining service period. Prior to the
adoption of SFAS No. 123(R) on January 1, 2006, the Company had no
share-based compensation arrangements and no share-based compensation was
awarded during the year ended December 31, 2006. Accordingly, there was no
impact from adoption of SFAS 123(R) on net loss for the year ended December
31,
2006, and no pro forma amounts are presented for 2006 had the Company recognized
stock-based compensation in accordance with SFAS No. 123(R).
NNRF,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Stock-based
compensation expense recognized during the period is based on the value of
the
stock-based payment awards that is ultimately expected to vest. SFAS 123(R)
requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates.
New
Accounting Pronouncements
–
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
157”). SFAS 157 establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value
measurements. SFAS 157 is effective for the Company as of January 1, 2008.
In February 2008, the FASB issued FASB Staff Position No. 157-2 which
extended the effective date to fiscal years beginning after November 15, 2008.
The Company is currently assessing the potential effect, if any, of SFAS 157
on
its consolidated financial statements.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities — Including an amendment of FASB
Statement No. 115 ("SFAS 159")”. SFAS 159 permits an entity to elect fair value
as the initial and subsequent measurement attribute for many financial assets
and liabilities. Entities electing the fair value option would be required
to
recognize changes in fair value in earnings. Entities electing the fair value
option are required to distinguish, on the face of the statement of financial
position, the fair value of assets and liabilities for which the fair value
option has been elected and similar assets and liabilities measured using
another measurement attribute. SFAS 159 is effective for fiscal years beginning
after November 15, 2007. The adjustment to reflect the difference between the
fair value and the carrying amount would be accounted for as a cumulative-effect
adjustment to retained earnings as of the date of initial adoption. The Company
is currently evaluating the impact, if any, of SFAS 159 on its consolidated
financial statements.
In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations ("SFAS
141(R)"), which replaces FAS 141. SFAS 141(R) establishes principles and
requirements for how an acquirer in a business combination recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any controlling interest; recognizes and measures
the
goodwill acquired in the business combination or a gain from a bargain purchase;
and determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. FAS 141(R) is to be applied prospectively to business
combinations.
In
December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in
Consolidated Financial Statements-an amendment of ARB No. 51”. (“SFAS 160”)
establishes accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the deconsolidation of a subsidiary. The guidance will
become effective for the fiscal year beginning after December 15, 2008. The
Company is currently evaluating the impact, if any, of SFAS 160 on its
consolidated financial statements.
NNRF,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 – BUSINESS CONDITION
The
Company is in the development stage as of December 31, 2007 and 2006. The
Company had generated revenue of zero and $5,343, respectively from sales of
Abucco’s wireless technology products for the years ended December 31, 2007 and
2006, respectively. At December 31, 2007 and 2006 the Company has generated
no
revenue from its planned environmental-impact products and services. During
the
fiscal year ended December 31, 2007 and 2006, the Company incurred losses of
$16,145,602 and $12,187,963, respectively. Since inception, the Company has
an
accumulated deficit of $28,587,870. In addition, the Company used cash in
operating activities of $2,215,946 and $893,863, during the fiscal years ended,
December 31, 2007 and 2006, respectively. Since inception, the Company has
used
$3,223,704 in operating activities. At December 31, 2007, the Company had a
working capital deficiency of $58,805. These conditions raise substantial doubt
about the Company’s ability to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amount of liabilities that
might
be necessary should the Company be unable to continue as a going concern.
The
Company's ability to continue as a going concern depends on its ability to
acquire manufacturing facilities, technical support companies and proprietary
technologies for its core business, to generate sufficient revenue and cash
flows to meet the Company’s obligations and to obtain additional financing as
may be required to fund operations. Management’s plans include generating income
from the Company’s existing licensed technologies and from dividend income from
ATOLL to permit the Company to generate sufficient income and cash flow to
continue as a going concern. There is no assurance these plans will be
realized.
NOTE
3 – ACQUISITION OF STAFFORD ENERGY, INC.
Prior
to
the reorganization of NNRF, Stafford had 359,500 shares of common stock
outstanding. The reverse acquisition of Stafford was recognized by NNRF as
the
constructive issuance of the 359,500 shares of common that remained outstanding.
The consolidated financial statements include the operations of Stafford and
its
wholly owned subsidiary, Abucco Technologies, Inc., from May 23, 2006. At the
date of acquisition, Stafford was a development stage enterprise; therefore,
the
shares constructively issued to the Stafford shareholders were recognized at
the
fair value of net liabilities assumed on the date of the acquisition. The net
liabilities assumed consisted of the following:
|
Cash
|
|
$
|
5,703
|
|
|
Trade
accounts receivable
|
|
|
33,307
|
|
|
Inventory
|
|
|
3,584
|
|
|
Accounts
payable
|
|
|
(59,492
|
)
|
|
Accrued
liabilities
|
|
|
(82,285
|
)
|
|
Advances
from shareholders
|
|
|
(37,000
|
)
|
|
Net
Liabilities Assumed
|
|
$
|
(136,183
|
)
|
NOTE
4 – INVESTMENTS
Zao
Electro Machinery Building Plant Atoll
On September
30, 2006, the Company acquired 13.25% of the equity interests of Zao Electro
Machinery Building Plant Atoll (“ATOLL”), a Russian company, for $1,166,250. In
March 2007, the Company acquired an additional 36.75% interest for $1,000,000
in
cash payments and the issuance of 4,000,000 shares of the Company’s common stock
valued at $2,400,000 or $0.60 per share, which was equal to the closing price
of
the common stock on the date of the transaction. The remaining 50% ownership
of
ATOLL is concentrated among a very small group of shareholders. Due to this
concentration and the nature of the industry that ATOLL operates in, the Company
initially was unable to influence significant control over the entity at the
time of investment. Accordingly, the investment in ATOLL was recognized at
the
lower of cost or fair value in accordance with FASB Interpretation 35
“Criteria
for Applying the Equity Method of Accounting for Investments in Common
Stock.”
The 50%
ownership of ATOLL was recorded at cost of $4,566,250.
NNRF,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
In
December 2007, the Company determined that it had obtained significant influence
of ATOLL and thus needed to record the investment under the equity method.
The
Company evaluated the change from
cost
to
the
equity
method under APB No. 18 “The Equity Method of Accounting for Investments in
Common Stock,” and determined that the adjustment should be retroactively
restated. Thus, the financial statements as of and for the year ended December
31, 2006, have been retroactively restated to reflect the investment as an
equity method investment. The impact on the 2006 financial statements was to
increase the investment in ATOLL and record equity in income of ATOLL of
$39,780.
ATOLL
is
a manufacturing and research facility established to develop, manufacture and
sell products designated for nuclear facilities such as nuclear power plants.
The carrying amount of this investment was approximately $2.7 million more
than
the underlying equity in net assets due to acquired goodwill, which is not
subject to amortization but is evaluated for impairment annually. No impairment
was recorded during the years ended December 31, 2007 and 2006.
The
condensed summarized balance sheet information of ATOLL as of December 31,
2007,
is as follows:
|
Current
Assets
|
|
$
|
23,420,760
|
|
|
Property
and Equipment (net)
|
|
|
498,416
|
|
|
Other
Assets
|
|
|
1,243,113
|
|
|
Total
Assets
|
|
$
|
25,162,289
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
$
|
9,408,152
|
|
|
Non-current
Liabilities
|
|
|
886,266
|
|
|
Members'
Equity
|
|
|
14,867,871
|
|
|
Total
Liabilities and Members' Equity
|
|
$
|
25,162,289
|
|
|
Company
Equity Investment
|
|
$
|
10,352,228
|
|
The
condensed summarized income statement information for ATOLL for the year ended
December 31, 2007, is as follows:
|
Net
Revenues
|
|
$
|
43,123,001
|
|
|
Gross
Profit
|
|
$
|
17,908,447
|
|
|
Net
Income
|
|
$
|
14,288,205
|
|
For
the
years ended December 31, 2007 and 2006, the Company recorded equity in its
share
of ATOLL’s net income of $5,662,717 and $39,780, respectively. During the
year ended December 31, 2007, the Company received dividends of $241,125 from
ATOLL. ATOLL had one customer in which accounted for approximately 50% of total
revenues for the year ended December 31, 2007.
NNRF,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Electro
Machinery Building Plant Velcont
The
Company has commenced the acquisition of a 10% interest in Electro Machinery
Building Plant Velcont (“VELCONT”), a Russian company, at a purchase price of
$1.6 million. As of December 31, 2007, the Company had acquired a 3.3% interest
in VELCONT for $525,000. In addition, the agreement gives the Company the
option to purchase an additional 15% interest in VELCONT at the same rate per
interest as the initial investment.
VELCONT
is a manufacturer operating in the automotive, aviation and nuclear industries.
The Company has recorded its investment in VELCONT at cost. The Company has
evaluated its investment in VELCONT and concluded that due to the close
proximity of the investment, at December 31, 2007, the investment was not
impaired. The Company intends to periodically review the carrying value of
the
investment. In the case of an other-than-temporary decline in the value of
the
investment, the Company will decrease the investment.
NOTE
5 – SHAREHOLDER ADVANCES
Various
current shareholders loaned the Company $147,601 from August 25, 2005 through
December 31, 2005 and loaned the Company an additional $194,527 through June
2006. In July 2006, the Company issued 4,593,073 shares of common stock at
$0.07
per share upon conversion of the $342,128 of loans payable to the shareholders.
Of this amount, $20,000 was loaned to the Company by a member of management.
The
fair value per share of the common stock on July 1, 2006 was $1.10 based upon
the trading price of the common stock and the price the Company had issued
common stock for cash about the same time, and resulted in the shareholders
receiving a beneficial conversion option of $1.03 per share, or $4,710,252,
which was charged to interest expense on the date of issuance.
The
remaining $39,041 payable to the shareholders is from prior loans from Stafford
shareholders and is due on demand and does not have a stated interest rate.
NOTE
6 – CONVERTIBLE NOTES PAYABLE
$1,949,500
Convertible Notes
From
July
through December 2006, the Company issued $1,949,500 of 8% convertible notes
payable and 974,750 warrants in a private placement offering for $1,654,630,
net
of a 13% cash commission paid to the placement agent of $294,870. The placement
agent was also issued 259,935 warrants. The warrants issued to the note holders
are exercisable for two years from the date issued at $1.50 per share; the
warrants issued to the placement agent are exercisable through June 30, 2011
at
$0.75 per share. The notes were due two years from the date of issuance and
were
convertible into common stock at $0.75 per share.
The
fair
value of the warrants was determined by the Black-Scholes option pricing model
using the following weighted-average assumptions: volatility of 255%, risk-free
interest rate of 4.86%, dividend yield of 0% and a term of 2.60 years. The
fair
value of the placement agent warrants was $240,810 and the fair value of the
warrants issued to the note holders was $831,013. Based on the effective
conversion price of the convertible notes payable, the note holders received
a
beneficial conversion option of $829,660.
NNRF,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
The
net
proceeds were allocated between the convertible notes payable and the warrants
issued to the note holders based on their relative fair values and resulted
in
$544,629 being allocated to the convertible notes payable (before $374,460
of
capitalized deferred loan costs), $413,992 allocated to the warrants issued
to
the note holders, $240,810 allocated to the warrants issued to the placement
agent and $829,660 allocated to the beneficial conversion option. The resulting
discount to the convertible notes payable of $1,404,871 and the deferred loan
costs were amortized over the term of the convertible notes.
$2,750,500
Convertible Notes
In
February and March 2007, the Company issued $2,750,500 of 8% convertible notes
payable and 1,375,250 warrants (exercisable at $1.50 per share) in a private
placement offering for $2,367,935, net of a 13% cash commission plus expenses
paid to the placement agent of $382,565. The placement agent was also issued
601,732 warrants exercisable at $0.75 per share and 500,000 warrants exercisable
at $0.10 per share. The warrants issued to the note holders are exercisable
for
two years from the date issued and the warrants issued to the placement agent
are exercisable for five years from the date of issuance.
The
notes
are due two years from the date of issuance and were convertible into common
stock at $0.75 per share
The
fair
value of the warrants was determined by the Black-Scholes option pricing model
using the following weighted-average assumptions: volatility of 241%, risk-free
interest rate of 4.77%, dividend yield of 0% and a term of 3.08 years. The
fair
value of the placement agent warrants was $824,394 and the fair value of the
warrants issued to the note holders was $824,343. Based on the effective
conversion price of the convertible notes payable, the note holders received
a
beneficial conversion option of $386,560.
The
net
proceeds were allocated between the convertible notes payable and the warrants
issued to the note holders based on their relative fair values and resulted
in
$1,732,009 being allocated to the convertible notes payable (before $928,055
of
capitalized deferred loan costs), $353,027 allocated to the warrants issued
to
the note holders, $824,394 allocated to the warrants issued to the placement
agent and $386,560 allocated to the beneficial conversion option. The resulting
discount to the convertible notes payable of $1,018,491 and the deferred loan
costs are being amortized over the term of the convertible notes.
Conversion
of Convertible Notes
In
total,
the Company issued $4,700,000 of 8% convertible notes, 2,350,000 subscriber
warrants, and 1,361,667 placement agent warrants. On June 18, 2007, the
convertible notes of $4,700,000 and accrued interest of $196,539 were converted
into 6,528,719 shares of common stock, a conversion rate of $0.75 per share.
On
the date of conversion, the closing market price of the Company’s common stock
was $5.35. Since the accrued interest was converted at a rate lower than the
fair value, the Company recorded the per share difference of $4.60 (totaling
$1,205,440) as additional interest expense. In addition, at the time of
conversion, the Company amortized the remaining discounts on the convertible
notes of $1,960,634 and the remaining deferred loan costs of $1,158,442 to
interest expense.
NNRF,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Revolving
Credit Facility
On
August
27, 2007, the Company entered into a revolving credit facility agreement
(“Credit Facility”) in the amount of $2,500,000, with Professional Offshore
Opportunity Fund, Ltd. (the “Lender”). Under the terms of the Credit
Facility, the Company may borrow up to $2,500,000 from Lender, with $500,000
advanced on closing and additional amounts to be advanced in increments not
to
exceed $250,000, or more if the parties agree, in any thirty-day period, unless
waived by Lender, in which case the loan amount could exceed $250,000 in that
period. The Company is required to repay all principal and accrued but
unpaid interest on amounts advanced pursuant to the Credit Facility no later
than August 28, 2009. The initial $500,000 advance under the Credit Facility
was
made on September 6, 2007.
The
material terms of the Credit Facility are as follows: (i) the Company has
arranged for restricted shares of common stock, held by third parties, to be
pledged as collateral for the loans pursuant to a Pledge Agreement between
Lender and such third parties; (ii) Lender may reduce the amount of the
outstanding loans by retaining for its own account pledged stock, subject to
the
volume restrictions of Rule 144 (no more than 1% of the outstanding shares
for a
90 day period.); (iii) the loans bear interest at the rate of 8% per annum;
(iv)
on each advance, the Company must repay any accrued but unpaid interest and
Lender may withhold two months interest from any advance as prepaid interest;
(v) the Company may prepay the principal and interest on the loan without
penalty; (vi) Lender may withhold from any advance a retention fee equal to
5%
of the amount loaned; (vi) in connection with the issuance of the loan, the
Company provided Lender a commitment fee of $50,000 and common stock equal
to
$250,000 (the shares were valued at the closing price on September 6, 2007,
or
$2.97 per share, the date on which the first funding in the amount of $500,000
occurred under the Credit Facility. The foregoing equates to 84,175 shares
of
common stock. The shares of common stock include piggyback registration rights.
In November 2007, the Company issued the lender an additional 500,000 shares
of
common stock pursuant to the terms of the Credit Facility. The Company valued
the shares of common stock at $935,000 based on the current fair value of the
Company’s common stock on the date of issuance. The Company expensed the value
of the common stock upon issuance.
In
consideration for the pledge of a total of 1,842,859 restricted shares of
common stock (“Pledged Shares”), held by third parties, as collateral against
the Credit Facility, the Company entered into a Common Stock Agreement with
each
of such third parties providing the following consideration: restricted shares
of common stock in the amount of 2,763,489 shares (“Pledge Share
Consideration”), or 150% of the amount of shares of common stock pledged. The
Common Stock Agreement provides that the third party must return any common
shares to the Company to the extent the Lender does not retain the Pledged
Shares pledged by the third party. In addition, the Company has filed with
the
transfer agent a Stop Transfer Resolution, whereby, the Company must authorize
in writing to the transfer agent whether the Pledge Share Consideration can
be
sold and or transferred by the third parties. Therefore, treating the Pledge
Share Consideration as being held in escrow. During the year ended December
31,
2007, the Company issued the 2,763,489 Pledge Share Consideration to the third
parties. The shares will not be reflected as outstanding and accounted for
until
the contingent event has been triggered. Upon triggering, conversion of amounts
due to the Lender satisfied with Pledged Shares, the Company will value the
vested portion of the Pledge Share Consideration and expense the excess value
of
the shares over the liability satisfied.
NNRF,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Also,
in
connection with Credit Facility the Company issued warrants to purchase
1,842,859 shares of common stock, vesting immediately and exercisable for a
period of two years at $2.95 per share to one of the third parties pledging
the
shares above. In connection with this issuance, the Company valued the warrants
at $4,847,482 and immediately expensed the amount to interest expense. The
fair
value of the warrants was determined by the Black-Scholes option pricing model
using the following weighted-average assumptions: volatility of 224%, risk-free
interest rate of 4.28%, dividend yield of 0% and a term of two
years.
The
Company paid the placement agent $100,000 and issued 150,000 shares of
restricted common stock in consideration for placing the Credit Facility. The
consideration paid to the placement agent was expensed to interest expense
upon
issuance. The shares were valued at $2.31 per share, which was the fair value
of
the shares on the date of issuance and resulted in the recognition of $346,500
of compensation for services during the year ended December 31, 2007. The
150,000 shares of common stock were issued for consulting services. The 150,000
shares of common stock vested fully upon grant and there were no future
performance requirements.
During
the year ended December 31, 2007, the Company requested advances totaling
$1,282,000 under the Credit Facility. Net proceeds received from these advances
were $1,071,750. These costs related to prepaid interest and funding fees
withheld by the Lender. The Company expensed these costs immediately to interest
expense. Subsequent to funding of the $1,282,000, the Lender elected to reduce
the amounts due to them by 1,199,403 Pledged Shares. In connection with this
conversion, the Company released the Pledge Share Consideration of 1,799,105
shares on the date of the election. The Company valued the shares at $4,607,299
using the closing market price of the Company’s common stock on the date of the
election of $2.56. The Company accounted for the excess of the fair value of
the
common stock over the $1,282,000 satisfied of $3,325,299 as additional interest
expense during the year ended December 31, 2007.
As
of
December 31, 2007, the total number of shares available under the Pledged Shares
and Pledge Share Consideration agreements was 643,456 and 964,384, respectively.
As of December 31, 2007, proceeds available under the Credit Facility are
$1,218,000.
NOTE
7 – INCOME TAXES
The
components of the net deferred tax asset and liability at December 31, 2007
and
2006 were as follows:
|
|
|
2007
|
|
2006
|
|
|
Operating
loss carry forwards
|
|
$
|
11,647,811
|
|
$
|
4,239,783
|
|
|
Equity
in
undistributed earnings of ATOLL
|
|
|
(1,925,324
|
)
|
|
-
|
|
|
Less:
Valuation allowance
|
|
|
(9,722,487
|
)
|
|
(4,239,783
|
)
|
|
Net
Deferred Tax Asset
|
|
$
|
-
|
|
$
|
-
|
|
The
Company had tax operating loss carry forwards totaling approximately $34,258,268
at December 31, 2007, that will expire if unused in 2026.
There
was
no provision for, or benefit from, income taxes since inception. The following
is a reconciliation of the amount of tax benefit that would result from applying
the federal and European statutory rate to net loss with the provision for
income taxes for the years ended December 31, 2007 and 2006:
NNRF,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
2007
|
|
2006
|
|
|
Tax
benefit at blended rate
|
|
$
|
(5,399,151
|
)
|
$
|
(4,239,783
|
)
|
|
Permanent
difference
|
|
|
20,000
|
|
|
12,099
|
|
|
Change
in deferred tax asset valuation allowance
|
|
|
5,482,704
|
|
|
4,153,319
|
|
|
Effect
of difference in statutory tax rates
|
|
|
(103,553
|
)
|
|
74,365
|
|
|
Net
Income Tax Expense
|
|
$
|
-
|
|
$
|
-
|
|
NOTE
8 – STOCKHOLDERS’ EQUITY
The
Company is authorized to issue 100,000,000 shares of common stock with a par
value of $0.001 per share. The Company is authorized to issue 5,000,000 shares
of Class A preferred stock and 5,000,000 shares of Class B preferred stock.
Each
share of Class A preferred stock, if issued, can be convertible into ten shares
of common stock and each share of Class B preferred stock can be convertible
into 12 shares of common stock. The preferred stock is non-voting and may have
such rights, preferences and other limitations as determined by the Board of
Directors.
Issuance
of Common Stock for Cash
-
In July
2006, the Company issued 185,000 common shares for $138,750 at $0.75 per share.
During October through December, 2006, the Company issued 229,833 common shares
for $172,125 of cash at $0.75 per share. During January through March 31, 2007,
the Company issued 44,334 common shares for $33,250 of cash at $0.75. These
issuances for cash were to unrelated individuals and entities.
Issuance
of Common Stock for Settlement of Payables and Services
-
In May
2006, the Company issued 3,000,000 common shares to two individuals for the
settlement of $3,000 owed to the individuals and for investor relation services
rendered to the Company. The shares were valued at $1.05 per share, which was
the fair value of the shares on the date of issuance and resulted in the
recognition of $3,147,000 of compensation for services. The 3,000,000 shares
of
common stock were issued in consideration for the outstanding debt as well
as
for investor relations services. The 3,000,000 shares of common stock vested
fully upon grant and there were no future performance requirements.
In
June
2006, the Company issued 1,080,000 common shares to five individuals for
services rendered to the Company. The shares were valued at $1.40 per share,
which was the fair value of the shares on the date of issuance and resulted
in
the recognition of $1,512,000 of compensation for services. Of the total shares
issued, 250,000 shares of common stock were issued for investor relations
services and 830,000 shares of common stock were issued for consulting services.
The 1,080,000 shares of common stock vested fully upon grant and there were
no
future performance requirements.
In
September 2006, the Company issued 400,000 common shares to a consultant for
services rendered to the Company. The shares were valued at $1.39 per share,
which was the fair value of the shares on the date of issuance and resulted
in
the recognition of $556,000 of compensation for services. The 400,000 shares
of
common stock were issued for public relations services. The 400,000 shares
of
common stock vested fully upon grant and there were no future performance
requirements.
NNRF,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
In
December 2006, the Company issued 750,000 common shares to a consultant for
services rendered to the Company. The shares were valued at $0.75 per share,
which was the fair value of the shares on the date of issuance and resulted
in
the recognition of $562,500 of compensation for services. The 750,000 shares
of
common stock were issued for merger and acquisition and strategic advisory
services rendered. The 750,000 shares of common stock vested fully upon grant
and there were no future performance requirements.
In
December 2006, the Company issued 432,000 common shares to several members
of
management in satisfaction of a monthly share commitment. The shares were valued
at $0.75 per share, which was the fair value of the shares on the date of
issuance and resulted in the satisfaction of $324,000 of management fees
payable. The 432,000 shares of common stock accrued monthly until December
31,
2006 and the related liability was revalued on a monthly basis. The 432,000
shares of common stock vested fully upon grant on December 31, 2006 and there
were no future performance requirements.
In
February 2007, the Company issued 50,000 common shares to one individual for
services rendered to the Company. The shares were valued at $0.79 per share,
which was the fair value of the shares on the date of issuance and resulted
in
the recognition of $39,500 of compensation for services. The 50,000 shares
of
common stock were issued for investor relations services. The 50,000 shares
of
common stock vested fully upon grant and there were no future performance
requirements.
In
March
2007, the Company issued 2,500 common shares to a consultant for services
rendered to the Company. The shares were valued at $1.37 per share, which was
the fair value of the shares on the date of issuance and resulted in the
recognition of $3,425 of compensation for services. The 2,500 shares of common
stock were issued for consulting services. The 2,500 shares of common stock
vested fully upon grant and there were no future performance
requirements.
In
March
2007, the Company issued 20,000 common shares to a consultant for services
rendered to the Company. The shares were valued at $1.79 per share, which was
the fair value of the shares on the date of issuance and resulted in the
recognition of $35,800 of compensation for services. The 20,000 shares of common
stock were issued for consulting services. The 20,000 shares of common stock
vested fully upon grant and there were no future performance
requirements.
In
May
2007, the Company issued 250,000 common shares to a consultant for services
rendered to the Company. The shares were valued at $5.45 per share, which was
the fair value of the shares on the date of issuance and resulted in the
recognition of $1,362,500 of compensation for services. The 250,000 shares
of
common stock were issued for consulting services. The 250,000 shares of common
stock vested fully upon grant and there were no future performance
requirements.
In
June
2007, the Company issued 50,000 common shares to a consultant for services
rendered to the Company. The shares were valued at $5.15 per share, which was
the fair value of the shares on the date of issuance and resulted in the
recognition of $257,500 of compensation for services. The 50,000 shares of
common stock were issued for consulting services. The 50,000 shares of common
stock vested fully upon grant and there were no future performance
requirements.
NNRF,
INC. AND SUBSIDIARIES
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
9 – COMMITMENTS AND CONTINGIENCIES
The
Company had management agreements to pay monthly management fees totaling
$55,500. During the year ended December 31, 2006, the Company had a commitment
to issue 24,000 common shares per month to several members of management. On
December 29, 2006, the Company issued 432,000 shares to these individuals with
a
value of $0.75 per share which was the fair value of the Company’s stock on the
date of issuance. On December 31, 2006, the Company had management fees payable
of $271,625. Management fees paid during the year ended December 31, 2007 were
$271,000, and $167,000 were payable at December 31, 2007.
NOTE
10– STOCK OPTIONS AND WARRANTS
Stock
Options
Effective
March 1, 2007, the Company implemented the 2007 Stock Option and Incentive
plan
(“Plan”). The Plan allows the Company to grant to employees, officers, directors
and consultants stock options and bonuses in the form of stock and options.
Under the Plan, the Company can grant awards for the purchase of up to 6,000,000
shares of common stock in the aggregate, including incentive and non-qualified
stock options.
On
March
1, 2007, the Company issued non-qualified options to purchase 5,821,667 shares
of common stock, exercisable at $0.75 per share to officers, directors and
consultants. These options vested upon issuance and expire in ten years. The
options were valued at $3,492,566 as determined by using the Black-Scholes
option pricing model with the following assumptions: volatility of 240%,
risk-free interest rate of 4.56%, dividend yield of 0% and a term of 10.0 years.
The expected volatility is based on the historical price volatility of our
common stock. The risk-free interest rate represents the U.S. Treasury bill
rate
for the expected life of the related stock options. The dividend yield
represents our anticipated cash dividend over the expected life of the stock
options. The value was expensed during the year ended December 31, 2007 and
included in general and administrative expenses.
As
of
December 31, 2007, 5,821,667 options were vested and outstanding, with a
weighted average exercise price of $0.75, and a weighted average remaining
life
of 9.17 years. The aggregate intrinsic value of options exercisable at December
31, 2007 was $2,154,017.
Warrants
During
the years ended December 31, 2007 and 2006, the Company issued warrants to
purchase 4,319,841 and 1,234,685 shares of common stock at weighted average
exercise prices of $1.85 and $1.34, respectively. As of December 31, 2007,
there
were 5,554,526 warrants outstanding which had a weighted average contractual
life was 1.97 years and a weighted average exercise price of $1.74. See Note
6
for additional information regarding the issuances.
NOTE
11 – SUBSEQUENT EVENT
In
January and March 2008, the Company requested draws aggregating $450,000 under
the Credit Facility discussed in Note 6 above of which $416,991 in net proceeds
was received. Upon funding of the $450,000 the Lender elected to reduce the
amounts due to them by 446,096 Pledged Shares. In connection with this
conversion, the Company valued the Pledge Share Consideration of 669,144 shares
on the date of the election. The Company valued the shares at $516,824 using
the
closing market price of the Company’s common stock on the date of the elections
of $0.77. The Company accounted for the excess of the fair value of the common
stock over the $450,000 satisfied of $66,824 as additional interest expense.
Subsequent to this draw, the Credit Facility was cancelled.
NOTE
12 – SEGMENTS
The
Company has facilities in the North America and Europe. The following are
the
disclosures related to the facilities and operations in those
demographics.
|
|
|
Year
Ended December 31,
|
|
|
Net
Loss
|
|
2007
|
|
2006
|
|
|
North
America
|
|
$
|
(20,904,784
|
)
|
$
|
(11,717,396
|
)
|
|
Europe
|
|
|
4,759,182
|
|
|
(470,567
|
)
|
|
Total
Consolidated
|
|
$
|
(16,145,602
|
)
|
$
|
(12,187,963
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
December
31,
|
|
|
Assets
|
|
|
2007
|
|
|
2006
|
|
|
North
America
|
|
$
|
330,307
|
|
$
|
451,691
|
|
|
Europe
|
|
|
10,903,212
|
|
|
1,208,160
|
|
|
Total
Consolidated
|
|
$
|
11,233,519
|
|
$
|
1,659,851
|
|
Item
8.
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure.
We
have
had no disagreements on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures with our
accountants for the year ended December 31, 2007, or any interim period. We
have not had any other changes in nor have we had any disagreements, whether
or
not resolved, with our accountants on accounting and financial disclosures
during our recent fiscal year or any interim period.
Item
8A(T).
Controls
and Procedures.
Evaluation
of Disclosure Controls.
As
of the
end of the reporting period, December 31, 2007, we carried out an evaluation,
under the supervision and with the participation of our management, including
the Company's President and the Chief Financial Officer, of the effectiveness
of
the design and operation of our disclosure controls and procedures pursuant
to
Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934 (the
"Exchange Act"), which disclosure controls and procedures are designed to insure
that information required to be disclosed by a company in the reports that
it
files under the Exchange Act is recorded, processed, summarized and reported
within required time periods specified by the SEC's rules and forms. Based
upon
that evaluation, the President and the Chief Financial Officer concluded that
our disclosure controls and procedures are effective at a reasonable assurance
level based upon their evaluation of these controls and procedures as required
by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.
Management’s
Report on Internal Control Over Financial Reporting.
Our
management is responsible for establishing and maintaining adequate internal
control over our financial reporting. Internal control over financial reporting
is a process to provide reasonable assurance regarding the reliability of our
financial reporting for external purposes in accordance with generally accepted
accounting principles. Internal control over financial reporting includes
policies and procedures that: (i) pertain to maintaining records that in
reasonable detail accurately and fairly reflect our transactions;
(ii) provide reasonable assurance that transactions are recorded as
necessary for preparation of our financial statements and that receipts and
expenditures of company assets are made in accordance with management
authorization; and (iii) provide reasonable assurance that unauthorized
acquisition, use or disposition of company assets that could have a material
effect on our financial statements would be prevented or detected on a timely
basis. Because of its inherent limitations, internal control over financial
reporting is not intended to provide absolute assurance that a misstatement
of
our financial statements would be prevented or detected.
Our
management evaluated the effectiveness of our internal control over financial
reporting based on the framework in
Internal
Control—Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway Commission. Based
upon that evaluation, management concluded that the company's internal control
over financial reporting was effective as of December 31, 2007.
Changes
in Internal Controls.
During
the fiscal quarter ended December 31, 2007, there were no changes in our
internal controls over financial reporting that have materially affected or
are
reasonably likely to materially affect our internal controls over financial
reporting.
Limitations.
Our
management, including our Principal Executive Officer and Principal Financial
Officer, does not expect that our disclosure controls or internal controls
over
financial reporting will prevent all errors or all instances of fraud. A control
system, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the control system's objectives will be met.
Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems,
no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within our company have been detected. These
inherent limitations include the realities that judgments in decision-making
can
be faulty, and that breakdowns can occur because of simple error or mistake.
Controls can also be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the controls.
The
design of any system of controls is based in part upon certain assumptions
about
the likelihood of future events, and any design may not succeed in achieving
its
stated goals under all potential future conditions. Over time, controls may
become inadequate because of changes in conditions or deterioration in the
degree of compliance with policies or procedures. Because of the inherent
limitation of a cost-effective control system, misstatements due to error or
fraud may occur and not be detected.
ITEM
8B. Other Information.
None.
PART
III
|
Item 9.
|
Directors,
Executive Officers, Promoters and Control Persons; Compliance with
Section
16(a) of the Exchange Act.
|
The
following information is furnished with respect to our directors and executive
officers. There are no family relationships between or among any of our
directors or executive officers. Our executive officers serve at the discretion
of our board of directors
|
Name
|
|
Age
|
|
Title
|
|
|
|
|
|
|
|
Lawrence
C. McQuade
|
|
80
|
|
Chairman
of the Board
|
|
|
|
|
|
|
|
J.
Holt Smith, Esq.
|
|
66
|
|
President
and Director
|
|
|
|
|
|
|
|
J.P.
Todd Sinclair
|
|
58
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
Peter
Goerke
|
|
48
|
|
Executive
Vice President and Secretary
|
|
|
|
|
|
|
|
Prof.
Valery A. Lebedev, Ph.D.
|
|
66
|
|
Chief
Scientific Officer
|
Lawrence
C. McQuade
serves
as the Chairman of the Board of NNRF. Mr. McQuade is a founder and partner
of
River Capital International, a financial services company which focuses on
Russia and Eastern Europe, and manages the Volga Fund - an open ended limited
partnership investing in Russian securities. Mr. McQuade also serves as the
Chairman of Qualitas International and worked with Price Waterhouse as
co-advisor to the Russian Federal Securities Commission in establishing the
Russian mutual fund industry. Mr. McQuade was previously the Vice Chairman
of
Prudential-Bache Mutual Fund Management, the Executive Vice President and
Director of W.R. Grace & Co and the President and CEO of Procon
Incorporated. Mr. McQuade has held many public positions in the U.S. government
including Assistant Secretary of the U.S. Department of Commerce and Assistant
Secretary of the U.S. Department of Defense. Lastly, Mr. McQuade has also served
as director, chairman or trustee on over 20 prestigious councils and commissions
throughout his career, including the U.S. Council on Foreign Relations, the
President’s Commission on White House Fellows and the Foreign Policy Institute.
Mr. McQuade graduated from Yale with a B.A. in Economics, Oxford with a B.A.
in
Jurisprudence (Rhodes Scholar) and Harvard Law School with a LLB.
J.
Holt Smith
serves
as President and a Director of NNRF. Mr. Smith commenced his career in 1967
when
he joined the Fort Worth, Texas law firm of McDonald, Sanders, Ginsburg,
Phillips, Maddox and Newkirk, becoming a partner in 4 years. In 1979, he joined
The United States Trust Company of New York opening their Beverly Hills,
California office. In 1980, he became a member of the Los Angeles law firm
of
Bushkin, Gaims, Gaines and Jonas serving as head of the Securities
Department. From 1988 to present he practiced law with his own firm,
Smith & Associates during which time he also joined the politically active
firm of Kelley, Lytton & Vann in Los Angeles. Mr. Smith brings a wealth of
experience in business and securities law that will be instrumental in guiding
NNRF through its stages of growth. Mr. Smith is a graduate of Vanderbilt
University with a Bachelor of Arts degree in English and Philosophy and a Juris
Doctorate degree in Law in 1966.
J.P.
Todd Sinclair
serves
as Chief Financial Officer of NNRF. Mr. Sinclair commenced his career as an
auditor with Price Waterhouse and served in various capacities for a period
of
eight years. From 1985 to 1992, Mr. Sinclair served as Chief Financial Officer
and Secretary of XCAN Grain Ltd., at that time Canada’s largest privately owned
grain exporter with annual sales and shipment of grains in excess of $500
million dollars. Mr. Sinclair oversaw all foreign exchange activities,
documentary negotiations and trade finance (over $100 million dollars of lines
of credit). From 1992 to 1994, Mr. Sinclair has served as Controller/Chief
Financial Officer of BSE Limited, Canada’s largest golf course
contractor/builder. From 1994 to 1996, Mr. Sinclair served as Vice President
Finance and Corporate Secretary of AVCAN Limited, a publicly traded company
involved in early stage GPS technology. Since 1997, Mr. Sinclair served as
a
consultant to several public and private operating companies. Mr. Sinclair
received a Bachelor of Arts (Hons) and Bachelor of Commerce (Hons) from the
University of Manitoba. Mr. Sinclair received his Chartered Accountant
designation from the Canadian Institute of Chartered
Accountants.
Peter
Goerke
serves
as Executive Vice President and Secretary of NNRF. Mr. Goerke was born in East
Germany and was educated in Russia at the prestigious Moscow State Institute
for
International Relations and has been conducting business in Russia and the
Former Soviet Union for the past 25 years. Mr. Goerke also served for several
years with the German Foreign Service. With a specialization in economics and
business administration, Mr. Goerke was appointed to assist in the
post-unification efforts of Germany as the representative in Siberia of the
Privatization Agency of the German government, the Treuhandanstalt, in 1993.
Mr.
Goerke has consulted for many German companies doing business in Russia and
has
also taught economics, business administration and economic law at the Deutsche
Private Finanzakademie AG in Munich. Mr. Goerke’s talents in facilitating
business between Germany, the US and Russia and his fluency in German, Russian
and English have made him an integral part of the NNRF team.
Professor
Valery A. Lebedev,
Ph.D.
, is
the Chief Scientific Officer of NNRF. Prof. Lebedev is the former General
Director of the Mining Chemical Combine at Zhelesnogorsk where NNRF plans on
conducting a portion of its nuclear waste remediation business. After receiving
his PhD from the Moscow Institute of Energetics,
Prof.
Lebedev rapidly advanced at the Mining Chemical Combine from Engineer to
General Director of the facility. During this time, Prof. Lebedev was appointed
as the Deputy Minister of the Ministry of Atomic Energy (1999-2002). Through
his
scientific and management skills and persistence, Prof.
Lebedev
has gained the trust and confidence of his
colleagues in the international nuclear industry which provides
NNRF
with an essential advantage in its marketing activities. Prof. Lebedev enjoys
the highest status of science in the Russian Federation as an Academician of
the
Russian Federation Academy of Science, the International Engineering Academy,
and a member of the Central Board of the Nuclear Association of
Russia.
Involvement
in Certain Legal Proceedings
During
the past five years, no director, person nominated to be a director, executive
officer, promoter or control person of the Company has been involved in any
of
the following:
|
(1)
|
Any
bankruptcy petition filed by or against any business of which such
person
was a general partner or executive officer either at the time of
the
bankruptcy or within two years prior to that time;
|
|
|
|
|
(2)
|
Any
conviction in a criminal proceeding or being subject to a pending
criminal
proceeding (excluding traffic violations and other minor
offenses);
|
|
|
|
|
(3)
|
Being
subject to any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limited
his
involvement in any type of business, securities or banking activities;
and
|
|
(4)
|
Being
found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated
a
federal or state securities or commodities law, and the judgment
has not
been reversed, suspended or
vacated.
|
Auditors;
Committees of the Board of Directors; Board of Advisors
Hansen,
Barnett & Maxwell, P.C., an independent registered public accounting firm,
serves as our independent auditors.
We
do not
presently have an audit committee, but intend to form such committee in 2008.
In
the interim, our board of directors serves in the capacity of the audit
committee.
We
do not
presently have a compensation, nominating or corporate governance committee,
but
intend to form each such committee in 2008.
Each
of
the Company’s directors receives $48,000 in cash compensation annually.
Advisory
Board
The
Company has established a board of advisors (“Advisory Board”). Members thereof
serve for a minimum term of one (1) year and receive, on an annual basis,
$12,000 and an option to purchase 20,000 shares of common stock (“Options”)
pursuant to the Company’s 2007 Stock Option and Incentive Plan. The Options are
exercisable for a period of ten (10) years at an exercise price equal to or
greater than the closing price of the Company’s common stock on the date of
grant.
The
Advisory Board consists of Professor Valery Zubov, Ph.D. and Victor Achunov.
The
biographies for Messrs. Zubov and Achnuov follow:
Dr.
Valery Zubov was re-elected in 2008 as a Deputy of the Federal Duma, which
is
the lower house of the Russian Parliament. Dr. Zubov is primarily responsible
for drafting legislation pertaining to the formation of more effective financial
markets in Russia and modernizing Russia’s banking system. Dr. Zubov served as a
member of the Russian Federal Parliament Committee on Credit Organizations
and
Financial Markets. In addition, Dr. Zubov is the former Governor of Russia’s
Krasnoyarsk region and of the founders and deputy directors of the Krasnoyarsk
region stock exchange.
Victor
Achunov has served as Head of the Department of Disposal of Nuclear Objects
and
Nuclear-Powered Submarines in Russia since 1999. Commencing in 1971, Mr. Achunov
worked at VNIPIPT, a Soviet Union scientific-research and design institute
of
industrial engineering. Previously, Mr. Achunov served in the Nuclear Power
Ministry of the Russian Federation, in Rosatom. In 1971, Mr. Achunov received
a
degree from the Moscow Engineering and Technical Institute.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section
16(a) of the Securities Exchange Act of 1934 requires the Company's directors
and executive officers, and persons who own more than 10% of the Company's
common stock, to file with the Securities and Exchange Commission initial
reports of beneficial ownership and reports of changes in beneficial ownership
of common stock of the Company. Officers, directors and greater than 10%
shareholders are required by the Securities and Exchange Commission to furnish
the Company with copies of all Section 16(a) reports they file.
Our
officers, directors and persons who own more than 10% of the Company’s common
stock have not yet filed Forms 3, 5, and Schedule 13(D) and Schedule 13(G),
as
applicable. Each of the foregoing applicable forms will be filed by the
respective officers, directors and 10% stockholders in April 2008.
Code
of Ethical Conduct
.
On
March
14, 2008, our board of directors adopted our code of ethical conduct that
applies to all of our employees and directors, including our principal executive
officer and principal financial and accounting officer.
Our
Code
of Ethical Conduct is designed to deter wrongdoing and to promote:
|
·
|
Honest
and ethical conduct, including the ethical handling of actual or
apparent
conflicts of interest between personal and professional
relationships;
|
|
·
|
Full,
fair, accurate, timely and understandable disclosure in reports and
documents that we file or submit to the Securities & Exchange
Commission and in other public communications made by
us;
|
|
·
|
Compliance
with applicable governmental laws, rules and
regulations;
|
|
·
|
Prompt
internal reporting to an appropriate person or persons identified
in the
code of violations of our Code of Ethical Conduct;
and
|
|
·
|
Accountability
for adherence to the Code.
|
Item
10. Executive Compensation
The
following table sets forth summary information concerning the total remuneration
paid or accrued by NNRF, Inc. to or on behalf of our executive officers whose
total annual salary exceeded $100,000 during the fiscal years ended December
31,
2007 and 2006. In accordance with the rules of the Securities and Exchange
Commission, the compensation described in this table does not include
perquisites and other personal benefits received by the executive officers
named
in the table below which does not exceed the lesser of $10,000 or 10% of the
total salary and bonus reported for the executive officers.
|
Name
and
Principal
Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Stock
Awards
|
|
Option
Awards
|
|
Non-Equity
Incentive
Plan
Compensation
|
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
|
|
All
other
Compensation
|
|
Total
|
|
|
|
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
J.
Holt Smith, President(1)
|
|
|
2006
|
|
|
48,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
48,000
|
|
|
|
|
|
2007
|
|
|
48,000
|
|
|
-
|
|
|
-
|
|
|
383,953
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
431,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J.P.
Todd Sinclair,
|
|
|
2006
|
|
|
32,000
|
|
|
-
|
|
|
336,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
368,000
|
|
|
Chief
Financial Officer (2)
|
|
|
2007
|
|
|
90,000
|
|
|
-
|
|
|
-
|
|
|
383,953
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
473,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter
Goerke,
|
|
|
2006
|
|
|
72,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12,000
|
|
|
84,000
|
|
|
EVP
and Secretary (3)
|
|
|
2007
|
|
|
90,000
|
|
|
-
|
|
|
-
|
|
|
699,193
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
789,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valery
A. Lebedev, Ph.D.,
|
|
|
2006
|
|
|
100,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12,000
|
|
|
112,000
|
|
|
Chief
Scientific Officer (4)
|
|
|
2007
|
|
|
100,000
|
|
|
-
|
|
|
-
|
|
|
297,881
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
397,881
|
|
(1)
J.
Holt Smith, our President and a Director, was issued an option to purchase
640,000 shares of common stock, exercisable at $0.75 per share through March
1,
2017, valued at $383,953, in 2007.
(2) J.P.
Todd Sinclair, our Chief Financial Officer, was issued 240,000 shares of
restricted common stock, valued at $336,000, in 2006, and an option to purchase
640,000 shares of common stock, exercisable at $0.75 per share through March
1,
2017, valued at $383,953, in 2007.
(3) Peter
Goerke, our Executive Vice President and Secretary, was issued an option to
purchase 1,166,667 shares of common stock, exercisable at $0.75 per share
through March 1, 2017, valued at $699,193, in 2007.
(4) Valery
A. Lebedev, our Chief Scientific Officer, was issued an option to purchase
500,000 shares of common stock, exercisable at $0.75 per share through March
1,
2017, valued at $297,881, in 2007.
Compensation
of Directors
The
following table sets forth the equity awards made to members of our board of
directors during the fiscal year ended December 31, 2007:
DIRECTOR
COMPENSATION
|
Name
|
|
Cash
Awards
|
|
Stock
Awards
|
|
Option
Awards
|
|
Total
|
|
|
Lawrence
C. McQuade, Chairman(1)
|
|
$
|
48,000
|
|
$
|
-
|
|
$
|
149,981
|
|
$
|
197,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J.
Holt Smith
|
|
$
|
48,000
|
|
$
|
-
|
|
$
|
|
|
$
|
446,953
|
|
(1)
Mr.
McQuade was issued an option to purchase 250,000 shares of common stock,
exercisable at $0.75 per share through March 1, 2017, valued at
$149,981.
|
Item 11.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
|
The
following table is a list of the beneficial ownership of common stock as of
April 8, 2008 of (i) all persons who beneficially owned more than 5% of our
outstanding common stock, (ii) all directors, (iii) all executive
officers and (iv) all directors and executive officers as a group,
according to record-ownership listings as of that date.
The
beneficial ownership is calculated based on 47,973,240 shares of common stock
outstanding as of December 31, 2007. Beneficial ownership is determined in
accordance with the rules of the Commission and generally includes voting or
investment power with respect to securities and, accordingly, includes shares
issuable upon exercise of options that are exercisable within 60 days of
December 31, 2007.
Unless
otherwise indicated, the persons identified in this table have sole voting
and
sole investment powers with regard to the shares beneficially
owned.
|
Title
of Class
|
|
Name
and Address of
Beneficial
Owner (1)
|
|
Amount and
Nature of Beneficial
Owner
|
|
Percent of
Class
|
|
|
Common
|
|
|
J.
Holt Smith - President and Director (2,6
)
|
|
|
640,000
|
|
|
1.33
|
%
|
|
Common
|
|
|
J.P.
Todd Sinclair (1) - CFO (2,7)
|
|
|
1,243,669
|
|
|
2.59
|
%
|
|
Common
|
|
|
Peter
Goerke - EVP & Secretary (3,8)
|
|
|
3,354,000
|
|
|
6.99
|
%
|
|
Common
|
|
|
Valery
A. Lebedev, Ph.D. - CEO (4,9)
|
|
|
3,147,334
|
|
|
6.56
|
%
|
|
Common
|
|
|
Lawrence
C. McQuade - Chairman (5,10)
|
|
|
350,000
|
|
|
0.73
|
%
|
|
|
|
|
Officers
and Directors as a Group (5 parties)
|
|
|
8,735,003
|
|
|
18.20
|
%
|
|
(1)
|
Each
of the parties named above have sole voting and investment
power.
|
|
(2)
|
The
business address for Messrs. Smith and Sinclair is c/o NNRF, Inc.,
1574
Gulf Rd., # 242, Point Roberts, WA
98281.
|
|
(3)
|
The
business address for Mr. Goerke is Theresienstrasse 6-8,80333 Munich,
Germany.
|
|
(4)
|
The
business address for Dr. Lebedev is 117393Moscow, 20 Architect Vlassov’s
st.
|
|
(5)
|
The
business address for Mr. McQuade is 51 East 42
nd
Street, 11
th
Floor, New York, NY 10017.
|
|
(6)
|
J.
Holt Smith, our President and a Director, holds an option to purchase
640,000 shares of common stock, exercisable at $0.75 per share through
March 1, 2017.
|
|
(7)
|
J.P.
Todd Sinclair, our Chief Financial Officer, holds 603,669 shares
of common
stock, and an option to purchase 640,000 shares of common stock,
exercisable at $0.75 per share through March 1,
2017.
|
|
(8)
|
Peter
Goerke, our Executive Vice President and Secretary, holds 2,187,333
shares
of common stock, and an option to purchase 1,166,667 shares of common
stock, exercisable at $0.75 per share through March 1,
2017.
|
|
(9)
|
Valery
A. Lebedev, our Chief Scientific Officer, holds 2,647,334 shares
of common
stock, and an option to purchase 500,000 shares of common stock,
exercisable at $0.75 per share through March 1,
2017.
|
|
(10)
|
Lawrence
C. McQuade, our Chairman of the Board, holds 100,000 shares of common
stock, and an option to purchase 250,000 shares of common stock,
exercisable at $0.75 per share through March 1, 2017.
|
Item
12. Certain Relationships and Related Transactions and Director
Independence.
Transactions
with Management and Others.
Except
as
otherwise set forth in this report, no member of management, executive officer,
director, nominee for a director or security holder who is known to the Company
to own of record or beneficially more than five percent of any class of the
Company’s voting securities, nor any member of the immediate family of any of
the foregoing persons, has had any direct or indirect material interest in
any
transaction to which the Company was or is to be a party.
During
the period August 25, 2005 through June 30, 2006, our President, J. Holt Smith,
loaned the Company a total of $20,000 (“Loan”) for working capital. The Loan was
non interest bearing. On July 1, 2006, Mr. Smith converted the Loan into 259,740
shares of common stock, or approximately $0.07 per share.
Except
as
otherwise set forth in this report, no member of management, executive officer,
director, nominee for a director or security holder who is known to the Company
to own of record or beneficially more than five percent of any class of the
Company's voting securities, nor any member of the immediate family of any
of
the foregoing persons, has had any direct or indirect material interest in
any
transaction to which the Company was or is to be a party.
Certain
Business Relationships.
Except
as
set forth in (a) above, and to the knowledge of management, or as previously
filed in the Company’s periodic reports, no director or nominee for director is
or has been related to any person who has been a party to any transaction with
the Company.
Indebtedness
of Management.
No
member
of the Company’s management is or has been indebted to the Company since the
beginning of its last fiscal year.
Transactions
with Promoters.
None.
Item
13.
Exhibits
and Financial Statement Schedules
|
Exhibit Number
|
|
Description
of Exhibits
|
|
2.1
|
|
Merger
and Plan of Share Exchange by and between Stafford Energy, Inc.,
and
Nucon, Inc. dated May 23, 2006 (1)
|
|
|
|
|
|
3.1
|
|
Articles
of Incorporation (1)
|
|
|
|
|
|
3.11
|
|
Amendment
to Articles of Incorporation (3)
|
|
|
|
|
|
3.2
|
|
Amended
and Restated Bylaws (1)
|
|
|
|
|
|
4.1
|
|
Form
of Common Stock Certificate (1)
|
|
|
|
|
|
4.2
|
|
Form
of Convertible Promissory Note (1)
|
|
|
|
|
|
4.3
|
|
Form
of Common Stock Purchase Warrant (2)
|
|
|
|
|
|
4.4
|
|
Form
of Registration Rights Agreement (2)
|
|
|
|
|
|
10.1
|
|
Employment
Agreement of Valery Alexandrovitch Lebedev dated October 31, 2005
(1)
|
|
|
|
|
|
10.2
|
|
Employment
Agreement of Todd Sinclair dated May 23, 2006 (1)
|
|
|
|
|
|
10.3
|
|
Employment
Agreement of Alexander S. Stepanenko (1)
|
|
|
|
|
|
10.4
|
|
Consultant
Agreement of Peter Goerke dated October 3, 2005 (1)
|
|
|
|
|
|
10.5
|
|
Stock
Option and Incentive Plan (2)
|
|
|
|
|
|
10.6
|
|
Investment
Banking Letter Agreement by and between Mercer Capital, Ltd. and
Nucon-RF,
Inc. dated January 23, 2007 (2)
|
|
|
|
|
|
10.7
|
|
Acquisition
Agreements by and between ZAO Electro Machinery Building Plant ATOLL
and
Nucon-RF, Inc. dated July 26, 2006 and March 7, 2007
(2)
|
|
10.8
|
|
Cooperation
Agreement between Association “ASPECT” and Nucon-RF, Inc. dated April 17,
2007 (3)
|
|
|
|
|
|
10.9
|
|
Cooperation
Agreement between Nucon, Inc. and Atomstroyexport dated November
22, 2005
(3)
|
|
|
|
|
|
10.10
|
|
Territorial
Sub-Distributor Agreement between Power Quality Holdings, Inc. and
Nucon,
Inc. dated December 14, 2005 (3)
|
|
|
|
|
|
10.11
|
|
Cooperation
Agreement between Tri Ion Wassertechnik and Nucon, Inc. dated February
8,
2006 (3)
|
|
|
|
|
|
10.12
|
|
Cooperation
Agreement between Truboprovodnaya armatura (TPA) and Nucon, Inc.
dated
December 12, 2005 (3)
|
|
|
|
|
|
10.13
|
|
Consulting
Agreement between Hanover Capital Corporation and Nucon, Inc. dated
October 1, 2006 (3)
|
|
|
|
|
|
10.14
|
|
Agreement
for Corporate Communications/Media and Investor Relations between
Eisenberg Communications and Nucon-RF, Inc. dated August 7, 2006
(3)
|
|
|
|
|
|
10.15
|
|
Consultancy
Agreement between Rose Consulting and Engineering and Nucon-RF, Inc.
dated
April 20, 2007 (3)
|
|
10.16
|
|
Consulting
Services Agreement between StockTiger.com - Richard Crockett and
Nucon-RF,
Inc. dated February 16, 2007 (3)
|
|
|
|
|
|
10.17
|
|
Business
Advisory Agreement between Newbridge Securities Corporation and Nucon-RF,
Inc. dated May 17, 2007 (3)
|
|
|
|
|
|
10.18
|
|
Sales
Agreement between Global Matrechs, Inc. and Nucon, Inc. dated April
25,
2006 (3)
|
|
|
|
|
|
10.19
|
|
Asset
Purchase Agreement between Dr. Hans-Jürgen Engelmann and Nucon-RF, Inc.
dated July 2006 (3)
|
|
|
|
|
|
10.20
|
|
Consulting
Agreement between Claridge Management and Nucon-RF, Inc. dated June
19,
2007 (3)
|
|
10.21
|
|
Revolving
Credit Facility Agreement between Professional Offshore Opportunity
Fund,
Ltd. and NNRF, Inc. dated August 27, 2007 (4)
|
|
|
|
|
|
10.22
|
|
Registration
Rights Agreement between Professional Offshore Opportunity Fund,
Ltd. and
NNRF, Inc. dated August 27, 2007 (4)
|
|
|
|
|
|
10.23
|
|
Pledge
Agreement between Professional Offshore Opportunity Fund, Ltd, on
the one
hand, and Janet Wall Separate Property Rev. Trust 10/1/02 and Darin
Nellis, on the other hand, dated August 27, 2007 (4)
|
|
|
|
|
|
10.24
|
|
Common
Stock and Warrant Agreement between Darin Nellis and NNRF, Inc. dated
August 27, 2007 (4)
|
|
|
|
|
|
10.25
|
|
Common
Stock and Warrant Agreement between Janet Wall Separate Property
Rev.
Trust 10/1/02 and NNRF, Inc. dated August 27, 2007 (4)
|
|
|
|
|
|
10.26
|
|
Fee
Agreement between Newbridge Securities Corporation and NNRF, Inc.
dated
September 2, 2007 (4)
|
|
|
|
|
|
10.27
|
|
Registration
Rights Agreement between Newbridge Securities Corporation and NNRF,
Inc.
dated September 2, 2007 (4)
|
|
|
|
|
|
10.28
|
|
Code
of Ethical Conduct adopted by the NNRF, Inc. board of directors on
March
14, 2008*
|
|
|
|
|
|
10.29
|
|
Investment
Contract between Engineering Center of Nuclear Containers OOO and
NNRF,
Inc. dated December 4, 2007*
|
|
|
|
|
|
10.30
|
|
Agreement
on Sale and Purchase of Shares between JSC Electroprivod and NNRF,
Inc.
dated March 8, 2008*
|
|
|
|
|
|
10.31
|
|
Agreement
on Sale and Purchase of Shares between Velcont and NNRF, Inc.. dated
August 1, 2007*
|
|
|
|
|
|
11.1
|
|
Statement
regarding computation of per share earnings (5)
|
|
|
|
|
|
21.1
|
|
List
of Subsidiaries*
|
|
|
|
|
|
31.1
|
|
Certifications
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002*
|
|
|
|
|
|
31.2
|
|
Certifications
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002*
|
|
32.1
|
|
Certifications
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
Section 1350)*
|
*
Filed
Herewith
(1)
Previously filed as an exhibit to the Company’s Form 10-SB filing with the
Securities and Exchange Commission on February 22, 2007.
(2)
Previously filed as an exhibit to the Company’s Form 10-SB filing with the
Securities and Exchange Commission on May 15, 2007.
(3)
Previously filed as an exhibit to the Company’s Form 10-SB filing with the
Securities and Exchange Commission on July 24, 2007.
(4)
Previously filed as an exhibit to the Company’s Form 10-SB filing with the
Securities and Exchange Commission on September 25, 2007.
(5)
The
information required by this exhibit can be determined from the Financial
Statements included in Part F/S hereto.
Item
14.
Principal
Accounting Fees and Services.
The
Company paid, or accrued, the following fees to its independent auditors for
the
fiscal years ended December 31, 2006 and 2007:
|
|
|
FYE
12/31/07
|
|
FYE
12/31/06
|
|
|
Audit
Fees
|
|
$
|
82,035
|
|
$
|
35,495
|
|
|
Audit-related
Fees
|
|
$
|
-
|
|
$
|
-
|
|
|
Tax
Fees
|
|
$
|
-
|
|
$
|
-
|
|
|
All
other fees
|
|
$
|
-
|
|
$
|
-
|
|
|
Total
Fees
|
|
$
|
82,035
|
|
$
|
35,495
|
|
The
Company has no formal audit committee. The entire board of directors serves
as
the Company’s audit committee.
To
our
knowledge, in 2007 the Company's principal accountant did not engage any other
persons or firms other than the principal accountant's full-time, permanent
employees.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly
authorized.
Dated:
April 15, 2008
NNRF,
Inc.
|
/s/ J. Holt Smith
|
|
/s/ J.P. Todd Sinclair
|
|
By:
J. Holt Smith
|
|
By:
J.P. Todd Sinclair
|
|
Title:
President, Director
|
|
Title:
Chief Financial Officer
|
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the
dates indicated.
|
/s/
J. Holt Smith
|
|
April
15, 2008
|
|
By:
J. Holt Smith
|
|
|
|
Title:
President, Director
|
|
|
|
|
|
|
|
/s/
J.P. Todd Sinclair
|
|
April
15, 2008
|
|
By:
J.P. Todd Sinclair
|
|
|
|
Title:
Chief Financial Officer
|
|
|
|
|
|
|
|
/s/
Peter Goerke
|
|
April
15, 2008
|
|
By:
Peter Goerke
|
|
|
|
Title:
Executive Vice President and Secretary
|
|
|
|
|
|
|
|
/s/
Lawrence McQuade
|
|
April
15, 2008
|
|
By:
Lawrence McQuade
|
|
|
|
Title:
Director
|
|
|
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