x
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 2007
|
o
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
|
For the transition period from _______________ to _______________ |
Delaware
|
22-1436279
|
|
(State or other jurisdiction of incorporation or organization)
|
(IRS Employer Identification No.)
|
·
|
We
previously concluded that an important trademark acquired in a business
combination had an indefinite life. The accompanying financial statements
and notes have been revised to provide for an expected life for this
trademark of ten years. Amortization of this intangible asset is
reflected
in statements of operations.
|
·
|
We
previously recognized as an asset certain deferred financing costs
in
connection with our reverse merger with Tech Labs, Inc. Since principles
of accounting for reverse merger preclude the recognition of assets
other
than those of the accounting acquiree, we have revised our balance
sheet
to eliminate this asset.
|
·
|
We
have certain debt agreements and registration rights agreements that
are
in default. We have modified our disclosures to provide more information
about the nature of defaults, the remedies of the investors and our
conclusions related to the accounting consequences.
|
|
PART
1 FINANCIAL INFORMATION
|
|
|
|
|
Item
1.
|
Financial
Statements (Unaudited)
|
|
|
|
|
|
Consolidated
Balance Sheet (Restated)
|
5
|
|
|
|
|
Consolidated
Statements of Operations (Restated)
|
6
|
|
|
|
|
Consolidated
Statement of Stockholders’ Equity (Deficit) (Restated)
|
7
|
|
|
|
|
Consolidated
Statements of Cash Flows (Restated)
|
9
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
11
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
31
|
|
|
|
Item
3.
|
Controls
and Procedures
|
51
|
|
|
|
|
PART
II OTHER INFORMATION
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
52
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
52
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
52
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
52
|
|
|
|
Item
5.
|
Other
Information
|
52
|
|
|
|
Item
6.
|
Exhibits
|
52
|
|
|
|
SIGNATURES
|
|
55
|
ASSETS
|
|
|||
|
|
|||
Current
assets:
|
|
|||
Cash
|
$
|
540,056
|
||
Inventories
|
47,282
|
|||
Prepaid
expenses and other current assets
|
83,016
|
|||
Total
current assets
|
670,354
|
|||
|
||||
Property
and equipment - net
|
240,986
|
|||
Finance
fees, net of accumulated amortization of $73,757
|
376,243
|
|||
Intangibles,
net of accumulated amortization of $58,707
|
462,293
|
|||
Goodwill
|
323,684
|
|||
|
||||
Total
assets
|
$
|
2,073,560
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
280,571
|
|
Other
payables
|
|
|
88,931
|
|
Convertible
debt, in default
|
|
|
1,099,626
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
1,469,128
|
|
|
|
|
|
|
Convertible
debt
|
|
|
1,348,487
|
|
Convertible
preferred stock of subsidiary (preference in liquidation -
$1,000,000)
|
|
|
800,000
|
|
|
|
|
|
|
Total
liabilities
|
|
|
3,617,615
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity (deficit):
|
|
|
|
|
Capital
stock:
|
|
|
|
|
Preferred
stock - par value of $.001; 20,000,000 shares authorized;
no shares issued and outstanding |
|
|
—
|
|
Common
stock - par value of $.001; 3,000,000,000 shares authorized;
27,488,705 shares issued and outstanding |
|
|
27,488
|
|
Common
stock - 1,343,750 shares to be issued
|
|
|
215,000
|
|
Additional
paid-in capital
|
|
|
8,376,581
|
|
Accumulated
deficit
|
|
|
(10,163,124
|
)
|
Total
stockholders’ equity (deficit)
|
|
|
(1,544,055
|
)
|
|
|
|
|
|
Total
liabilities and stockholders’ equity (deficit)
|
|
$
|
2,073,560
|
|
|
|
Successor
Business
|
|
Predecessor
Business
|
|
|||||||||||
|
|
Three
Months
Ended
September
30,
2007 (Restated)
|
|
March 9,
2007(Date
of Inception) to
September
30,
2007 (Restated)
|
|
Three
Months
Ended
March
31,
2007
|
|
Three
Months
Ended
September
30,
2006
|
|
Nine
Months
Ended
September
30,
2006
|
||||||
Sales
|
$
|
148,800
|
$
|
392,887
|
$
|
104,360
|
$
|
571,386
|
$
|
1,638,813
|
||||||
|
||||||||||||||||
Cost
of sales
|
109,048
|
251,390
|
76,802
|
350,804
|
1,034,220
|
|||||||||||
|
||||||||||||||||
Gross
profit
|
39,752
|
141,497
|
27,558
|
220,582
|
604,593
|
|||||||||||
|
||||||||||||||||
Operating
expenses:
|
||||||||||||||||
Employee
compensation and benefits
|
243,101
|
277,373
|
52,320
|
65,405
|
197,103
|
|||||||||||
Stock-based
transaction expense
|
-
|
5,131,231
|
-
|
-
|
-
|
|||||||||||
Occupancy
and equipment
|
71,045
|
79,302
|
18,666
|
24,705
|
98,481
|
|||||||||||
Advertising
|
96,187
|
140,170
|
8,474
|
37,452
|
55,542
|
|||||||||||
Research
and development
|
3,140,000
|
3,140,000
|
-
|
-
|
-
|
|||||||||||
Professional
fees
|
80,150
|
429,891
|
8,474
|
6,588
|
18,617
|
|||||||||||
Other
general and administrative
|
217,665
|
315,209
|
19,085
|
34,918
|
119,299
|
|||||||||||
Amortization
of intangible assets
|
45,268
|
58,707
|
-
|
-
|
-
|
|||||||||||
Total
operating expenses
|
3,893,416
|
9,571,883
|
107,019
|
169,068
|
489,042
|
|||||||||||
|
||||||||||||||||
Operating
income (loss)
|
(3,853,664
|
)
|
(9,430,386
|
)
|
(79,461
|
)
|
51,514
|
115,551
|
||||||||
|
||||||||||||||||
Interest
income
|
68
|
823
|
-
|
-
|
-
|
|||||||||||
Interest
expense
|
(221,050
|
)
|
(636,477
|
)
|
-
|
-
|
-
|
|||||||||
Financing
fees
|
(55,750
|
)
|
(73,757
|
)
|
-
|
-
|
-
|
|||||||||
Other
expense
|
(23,326
|
)
|
(23,326
|
)
|
-
|
-
|
-
|
|||||||||
|
||||||||||||||||
Net
income (loss)
|
$
|
(4,153,722
|
)
|
$
|
(10,163,124
|
)
|
$
|
(79,461
|
)
|
$
|
51,514
|
$
|
115,551
|
|||
|
||||||||||||||||
Net
income (loss) per share:
|
||||||||||||||||
Basic
|
$
|
(0.16
|
)
|
$
|
(0.41
|
)
|
$
|
(0.01
|
)
|
$
|
0.01
|
$
|
0.02
|
|||
Diluted
|
$
|
(0.16
|
)
|
$
|
(0.41
|
)
|
$
|
(0.01
|
)
|
$
|
0.01
|
$
|
0.02
|
|||
Weighted
average shares outstanding:
|
||||||||||||||||
Basic
|
26,228,929
|
24,795,793
|
7,000,000
|
7,000,000
|
7,000,000
|
|||||||||||
Diluted
|
26,228,929
|
24,795,793
|
7,000,000
|
7,000,000
|
7,000,000
|
|
|
Preferred
Stock
|
|
Common Stock
|
|
Common
Stock to be
|
|
Additional
Paid-In
|
|
Accumulated
|
|
|
|
||||||||||||
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Issued
|
|
Capital
|
|
Deficit
|
|
Total
|
|||||||||
Balances,
March 9, 2007 (Inception)
|
-
|
$
|
-
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||||
|
|||||||||||||||||||||||||
Common
stock sold on March 9, 2007 to founders for cash
|
-
|
-
|
-
|
-
|
-
|
57,279
|
-
|
57,279
|
|||||||||||||||||
Assumption
of net liabilities
|
-
|
-
|
-
|
-
|
-
|
(1,677,020
|
)
|
-
|
(1,677,020
|
)
|
|||||||||||||||
|
|||||||||||||||||||||||||
Stock-based
transaction expense related to common stock sold to founders
|
-
|
-
|
-
|
-
|
-
|
5,131,231
|
-
|
5,131,231
|
|||||||||||||||||
|
|||||||||||||||||||||||||
Common
stock issued in exchange for net liabilities in a recapitalization
on
April 20, 2007
|
-
|
-
|
673,356
|
673
|
-
|
(673
|
)
|
-
|
-
|
||||||||||||||||
|
|||||||||||||||||||||||||
Preferred
stock issued in reverse merger on April 20, 2007
|
343,610
|
343
|
-
|
-
|
-
|
(343
|
)
|
-
|
-
|
||||||||||||||||
|
|||||||||||||||||||||||||
Common
stock warrants issued on April 20, 2007 in connection with issuance
of
convertible debentures
|
-
|
-
|
-
|
-
|
-
|
238,932
|
-
|
238,932
|
|||||||||||||||||
|
|||||||||||||||||||||||||
Beneficial
conversion feature of convertible debt instruments issued or assumed
|
-
|
-
|
-
|
-
|
-
|
923,841
|
-
|
923,841
|
|||||||||||||||||
|
|||||||||||||||||||||||||
Conversion
of preferred stock to common stock on June 21, 2007
|
(343,610
|
)
|
(343
|
)
|
22,907,323
|
22,907
|
-
|
(22,564
|
)
|
-
|
-
|
||||||||||||||
|
|||||||||||||||||||||||||
Common
stock issued on conversion of convertible debentures
|
-
|
-
|
224,447
|
225
|
-
|
82,675
|
-
|
82,900
|
|||||||||||||||||
|
|||||||||||||||||||||||||
Common
stock issued for purchase of BSI on July 2, 2007
|
-
|
-
|
3,333,333
|
3,333
|
-
|
1,996,667
|
-
|
2,000,000
|
|||||||||||||||||
|
|||||||||||||||||||||||||
Fair
value of options granted in conjunction with the purchase of BSI
on July
2, 2007
|
-
|
-
|
-
|
-
|
-
|
48,181
|
-
|
48,181
|
|||||||||||||||||
|
|||||||||||||||||||||||||
Common
stock warrants issued on July 2, 2007 in connection with issuance
of
convertible debentures
|
-
|
-
|
-
|
-
|
-
|
1,104,405
|
-
|
1,104,405
|
|||||||||||||||||
|
|||||||||||||||||||||||||
Beneficial
conversion feature of convertible debentures issued on July 2,
2007
|
-
|
-
|
-
|
-
|
-
|
348,287
|
-
|
348,287
|
Shares
issued on conversion of convertible debentures on July 12 and July
13,
2007
|
-
|
-
|
350,360
|
350
|
-
|
145,750
|
-
|
146,100
|
|||||||||||||||||
|
|||||||||||||||||||||||||
Cash
paid in lieu of fractional shares from the 1-for-15 reverse stock
split on
July 31, 2007
|
-
|
-
|
(114
|
)
|
-
|
-
|
(68
|
)
|
-
|
(68
|
)
|
||||||||||||||
|
|||||||||||||||||||||||||
Common
stock issued on October 5, 2007 for conversion of convertible debentures
on September 21, 2007 - 1,343,750 shares
|
-
|
-
|
-
|
-
|
215,000
|
-
|
-
|
215,000
|
|||||||||||||||||
|
|||||||||||||||||||||||||
Net
loss for the period
|
-
|
-
|
-
|
-
|
-
|
-
|
(10,163,124
|
)
|
(10,163,124
|
)
|
|||||||||||||||
|
|||||||||||||||||||||||||
Balances,
September 30, 2007
|
-
|
$
|
-
|
27,488,705
|
$
|
27,488
|
$
|
215,000
|
$
|
8,376,581
|
$
|
(10,163,124
|
)
|
$
|
(1,544,055
|
)
|
|
Successor
Business
|
Predecessor
Business
|
||||||||
|
March
9, 2007
(Date
of
Inception)
to
September 30,
2007 (Restated)
|
Three
Months
Ended
March 31, 2007
|
Nine
Months
Ended
September
30,
2006
|
|||||||
Cash
Flows From Operating Activities:
|
|
|
|
|||||||
Net
income (loss)
|
$
|
(10,163,124
|
)
|
$
|
(79,461
|
)
|
$
|
115,551
|
||
Adjustments
to reconcile net income (loss) to net cash
provided
by (used in) operating activities:
|
||||||||||
Depreciation
and amortization
|
68,599
|
471
|
16,344
|
|||||||
Amortization
financing fees
|
73,757
|
-
|
-
|
|||||||
Accrued
interest and amortization of debt discounts
|
634,550
|
-
|
-
|
|||||||
Stock-based
transaction expense
|
5,131,231
|
-
|
-
|
|||||||
Research
and development expense
|
3,140,000
|
-
|
-
|
|||||||
Write
off of acquired fixed assets
|
22,931
|
-
|
-
|
|||||||
Changes
in operating assets and liabilities, net:
|
||||||||||
Accounts
receivable
|
-
|
-
|
11,198
|
|||||||
Inventories
|
(12,856
|
)
|
26,151
|
26,320
|
||||||
Other
current assets
|
(83,016
|
)
|
11,915
|
(1,252
|
)
|
|||||
Accounts
payable and accrued expenses
|
(316,707
|
)
|
(5,857
|
)
|
154,124
|
|||||
Customer
deposits
|
-
|
(12,224
|
)
|
(31,488
|
)
|
|||||
Net
Cash Provided By (Used In) Operating Activities
|
(1,504,634
|
)
|
(59,005
|
)
|
290,797
|
|||||
|
||||||||||
Cash
Flows From Investing Activities:
|
||||||||||
Acquisition
of FuelMeister assets
|
(494,426
|
)
|
-
|
-
|
||||||
Acquisition
of Biodiesel Solutions
|
(422,014
|
)
|
-
|
-
|
||||||
Purchases
of property and equipment
|
(46,081
|
)
|
-
|
(28,623
|
)
|
|||||
Net
Cash Provided By (Used In) Investing Activities
|
(962,521
|
)
|
-
|
(28,623
|
)
|
|||||
|
||||||||||
Cash
Flows From Financing Activities:
|
||||||||||
Proceeds
from issuance of common stock
|
57,279
|
-
|
-
|
|||||||
Proceeds
from issuance of warrants
|
1,343,337
|
-
|
-
|
|||||||
Proceeds
from issuance of beneficial conversion feature
|
938,554
|
|||||||||
Proceeds
from issuance of long-term debt
|
1,118,109
|
-
|
-
|
|||||||
Payment
of debt issuance costs
|
(450,000
|
)
|
-
|
-
|
||||||
Payment
for fractional shares
|
(68
|
)
|
-
|
-
|
||||||
Net
contributions (distributions) from (to) owner
|
-
|
31,953
|
(348,584
|
)
|
||||||
Net
Cash Provided By (Used In) Financing Activities
|
3,007,211
|
31,953
|
(348,584
|
)
|
|
Successor
Business
|
Predecessor
Business
|
||||||||
Net
Increase (Decrease) In Cash
|
540,056
|
(27,052
|
)
|
(86,410
|
)
|
|||||
Cash
- Beginning of period
|
-
|
52,626
|
276,850
|
|||||||
Cash
- End of period
|
$
|
540,056
|
$
|
25,574
|
$
|
190,440
|
||||
|
||||||||||
Supplemental
Disclosure Of Cash Flow Information -
|
||||||||||
Interest
paid
|
$
|
1,927
|
$
|
-
|
$
|
-
|
||||
Income
taxes paid
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
|
||||||||||
Supplemental
Disclosures Of Non-Cash Investing And Financing
Activities:
|
||||||||||
Net
liabilities assumed in a recapitalization
|
$
|
1,677,020
|
$
|
-
|
$
|
-
|
Net
liabilities assumed:
|
|
|||
Accounts
payable
|
$
|
203,992
|
||
Long
term debt, including accrued interest
|
1,473,028
|
|||
Net
liabilities assumed
|
$
|
1,677,020
|
Net
assets acquired:
|
|
|||
Inventory
|
$
|
34,426
|
||
Fixed
assets
|
9,145
|
|||
Website
domain
|
50,150
|
|||
Trade
name
|
118,000
|
|||
Customer
lists, engineering drawings and other intangibles
|
189,000
|
|||
Goodwill
|
93,705
|
|||
Net
assets acquired
|
$
|
494,426
|
3,333,333
shares of common stock
|
$
|
2,000,000
|
||
1,000,000
shares of preferred stock of BSI
|
800,000
|
|||
96,400
common stock options
|
48,181
|
|||
Note
receivable from BSI reclassified to contributed capital
|
200,000
|
|||
Cash
paid, net of $77,986 cash acquired
|
422,014
|
|||
Total
purchase price
|
$
|
3,470,195
|
|
Purchase
Price
|
Asset Life
|
|||||
Allocation
|
In
Years
|
||||||
Working
capital, net and excluding cash acquired
|
$
|
(204,231
|
)
|
-
|
|||
Fixed
assets
|
90,447
|
3
-
10
|
|||||
In
process research and development
|
3,140,000
|
-
|
|||||
Employee
contracts
|
114,000
|
2
|
|||||
Non-compete
agreements
|
100,000
|
1.5
|
|||||
Goodwill
|
229,979
|
Indefinite
|
|||||
Net
Assets Acquired
|
$
|
3,470,195
|
Three Months
Ended September, 30,
|
For The Nine Months Ended
September 30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Revenues
|
$
|
148,800
|
$
|
459,539
|
$
|
500,292
|
$
|
1,378,617
|
|||||
Loss
from Operations
|
$
|
(615,896
|
)
|
$
|
(178,488
|
)
|
$
|
(1,452,114
|
)
|
$
|
(8,794,637
|
)
|
|
Net
Loss
|
$
|
(1,216,899
|
)
|
$
|
(743,966
|
)
|
$
|
(3,389,752
|
)
|
$
|
(10,491,193
|
)
|
|
Per
Share - basic and fully diluted
|
$
|
(0.04
|
)
|
$
|
(0.12
|
)
|
$
|
(0.07
|
)
|
$
|
(0.38
|
)
|
|
Weighted
average shares outstanding
|
27,488,705
|
27,488,705
|
27,488,705
|
27,488,705
|
Issued
|
|
Statement
|
|
|
|
February
2006
|
|
FAS
155 - “Accounting for Certain Hybrid Financial Instruments; an amendment
of Financial Accounting Standard Nos. 133 and 140"
|
|
|
|
March
2006
|
|
FAS
156 - “Accounting for Servicing of Financial Assets, an amendment of FASB
Statement No. 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities”
|
|
|
|
June
2006
|
|
FAS
Interpretation 48 - "Accounting for Uncertainty in Income
Taxes"
|
|
|
|
September
2006
|
|
FAS
157 - “Fair Value Measurements”
|
|
|
|
September
2006
|
|
FAS
158 - “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans” - an amendment of FASB Statements No. 87, 88, 106,
and 132(R)”
|
|
|
|
February
2007
|
|
FAS
159 - “The Fair Value Option for Financial Assets and Financial
Liabilities—Including an amendment of FASB Statement No.
115”
|
Computer
equipment and software
|
$
|
39,929
|
||
Production
and shop equipment
|
64,061
|
|||
Vehicles
|
3,303
|
|||
Tenant
Improvements
|
12,810
|
|||
Greenhouses
and improvements
|
64,247
|
|||
Office
furniture and equipment
|
15,878
|
|||
Website
domain
|
50,150
|
|||
|
250,378
|
|||
Less
accumulated depreciation and amortization
|
9,392
|
|||
Property
and equipment - net
|
$
|
240,986
|
As of September 30, 2007
|
||||||||||
Gross Carrying
Amount
|
Accumulated
Amortization
|
Net Carrying
Amount
|
||||||||
|
|
|
|
|||||||
Amortized
Intangible Assets:
|
|
|
|
|||||||
Customer
lists
|
$
|
70,000
|
$
|
2,333
|
$
|
67,667
|
||||
Engineering
drawings
|
70,000
|
7,000
|
63,000
|
|||||||
Non-compete
agreement
|
146,000
|
27,938
|
118,062
|
|||||||
Trade
name
|
118,000
|
5,900
|
112,100
|
|||||||
Patent
application
|
3,000
|
1,500
|
1,500
|
|||||||
Employment
agreements
|
114,000
|
14,036
|
99,964
|
|||||||
|
$
|
521,000
|
$
|
58,707
|
$
|
462,293
|
||||
Unamortized
Intangible Assets:
|
||||||||||
Goodwill
|
$
|
323,684
|
||||||||
Aggregate
Amortization Expense:
|
||||||||||
Quarter
ended September 30, 2007
|
$
|
58,707
|
||||||||
|
||||||||||
Estimated
Amortization Expense:
|
||||||||||
Quarter
ending December 31, 2007
|
$
|
44,918
|
||||||||
Year
ending December 31, 2008
|
177,975
|
|||||||||
Year
ending December 31, 2009
|
64,834
|
|||||||||
Year
ending December 31, 2010
|
30,467
|
|||||||||
Year
ending December 31, 2011
|
30,467
|
|||||||||
Year
ending December 31, 2012
|
19,967
|
|||||||||
Thereafter
|
93,665
|
|||||||||
|
$
|
462,293
|
New
Obligations:
|
|
|||
YA
Global Investments, L.P., $1,000,000 convertible debenture, due
April 20,
2009, including interest at prime + 2.75% (11% at September 30,
2007)
|
$
|
1,048,945
|
||
Less
unamortized discount from warrants and beneficial conversion
feature
|
(372,825
|
)
|
||
|
676,120
|
|||
|
||||
YA
Global Investments, L.P.,, $400,000 convertible debenture, due
May 31,
2009, including interest at prime + 2.75% (11% at September 30,
2007)
|
414,515
|
|||
Less
unamortized discount from beneficial conversion feature
|
(400,000
|
)
|
||
|
14,515
|
|||
YA
Global Investments, L.P., $2,000,000 convertible debenture, due
July 2,
2009, including interest at prime + 2.75% (11% at September 30,
2007)
|
2,053,890
|
|||
Less
unamortized discount from warrants and beneficial conversion
feature
|
(1,396,038
|
)
|
||
|
657,852
|
|||
Prior
Obligations (in default):
|
||||
Montgomery
Equity Partners, Ltd., $322,220 15% convertible debenture, due
on demand,
including accrued interest of $140,722
|
462,942
|
|||
|
||||
Montgomery
Equity Partners, Ltd., $300,000 15% convertible debenture, due
on demand,
including accrued interest of $79,027
|
379,027
|
|||
LH
Financial, $156,080 18% convertible promissory note, due on demand,
including accrued interest of $101,577
|
257,657
|
|||
|
||||
|
2,448,113
|
|||
Less:
prior obligations in default classified as current
|
1,099,626
|
|||
Long-term
debt
|
$
|
1,348,487
|
Stock Options
|
Warrants
|
||||||||||||||||||
Weighted
|
Weighted
|
||||||||||||||||||
Average Exercise Price
|
Average Exercise Price
|
||||||||||||||||||
Shares
|
Per Share
|
Shares
|
Per Share
|
Total
|
Exercisable
|
||||||||||||||
Balance
at 03/09/2007 (Inception):
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
|
|||||||||||||||||||
Granted
|
96,400
|
$
|
0.750
|
3,553,667
|
$
|
0.590
|
3,456,667
|
3,456,667
|
|||||||||||
Excercised
|
-
|
-
|
-
|
||||||||||||||||
Expired
|
-
|
-
|
-
|
||||||||||||||||
Forfeited
|
-
|
-
|
-
|
||||||||||||||||
Balance
at 06/30/2007:
|
96,400
|
$
|
0.750
|
3,553,667
|
$
|
0.590
|
3,553,067
|
1,230,767
|
The
following table summarizes information concerning options and warrants
outstanding and excercisable at September 30,
2007:
|
Options Outstanding
|
Options Exercisable
|
|||||||||||||||
Weighted
|
Average
|
|||||||||||||||
Weighted
|
Number
|
Average
|
Number
|
Exercise
|
||||||||||||
Average
|
of
|
Exercise
|
of
|
Price Per
|
||||||||||||
Range of Exercise Prices
|
Remaining Life
|
Options
|
Price Per Share
|
Options
|
Share
|
|||||||||||
$0.750
|
4.75
|
96,400
|
$
|
0.750
|
24,100
|
$
|
0.750
|
|||||||||
|
||||||||||||||||
$0.750
|
4.75
|
96,400
|
$
|
0.750
|
24,100
|
$
|
0.750
|
Warrants
Outstanding
|
Warrants
Exercisable
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Weighted
|
Average
|
Average
|
||||||||||||||
Average
Remaining
|
Number
of
|
Exercise
Price
Per
|
Number
of
|
Exercise
Price
Per
|
||||||||||||
Range
of Exercise Prices
|
Life
|
Warrants
|
Share
|
Warrants
|
Share
|
|||||||||||
$0.015
|
4.75
|
6,667
|
$
|
0.015
|
6,667
|
$
|
0.015
|
|||||||||
$0.150
|
4.75
|
1,200,000
|
$
|
0.150
|
1,200,000
|
$
|
0.150
|
|||||||||
$0.900
|
4.75
|
2,250,000
|
$
|
0.900
|
2,250,000
|
$
|
0.900
|
|||||||||
$0.015
- 0.900
|
4.75
|
3,456,667
|
$
|
0.586
|
3,456,667
|
$
|
0.149
|
As
Reported
|
Restatement
Adjustments |
As
Restated
|
||||||||
Balance
Sheet as of September 30, 2007
|
||||||||||
Finance
fees net
|
$
|
1,679,695
|
$
|
(1,303,452
|
)(A)
|
376,243
|
||||
Intangible
assets, net
|
350,193
|
112,100
|
(B)
|
462,293
|
||||||
Paid-in
capital
|
10,053,601
|
(1,677,020
|
)(A)
|
8,376,581
|
||||||
Accumulated
Deficit
|
(10,530,791
|
)
|
367,667
|
(C)
|
(10,163,124
|
)
|
||||
Statement
of Operations, Three Months Ended September 30,
2007
|
||||||||||
Amortization
of intangible assets
|
52,807
|
(7,539
|
)(B)
|
45,268
|
||||||
Financing
fees
|
266,076
|
(210,326
|
)(A)
|
55,750
|
||||||
Net
income (loss) per share
|
||||||||||
Basic
|
(0.17
|
)
|
0.01
|
(C)
|
(0.16
|
)
|
||||
Diluted
|
(0.17
|
)
|
0.01
|
(C)
|
(0.16
|
)
|
||||
Statement
of Operations, March 9, 2007 (Date of Inception) to September 30,
2007
|
||||||||||
Amortization
of intangible assets
|
52,807
|
5,900
|
(B)
|
58,707
|
||||||
Financing
fees
|
447,325
|
(373,568
|
)(A)
|
73,757
|
||||||
Net
income (loss) per share
|
||||||||||
Basic
|
(0.43
|
)
|
0.02
|
(C)
|
(0.41
|
)
|
||||
Diluted
|
(0.43
|
)
|
0.02
|
(C)
|
(0.41
|
)
|
·
|
Overview
|
·
|
History
|
·
|
Business
Strategy, Core Philosophies, and Current
Operations
|
·
|
Results
of Operations
|
·
|
Going
Concern Statement
|
·
|
Critical
Accounting Policies and Estimates
|
·
|
Recent
Accounting Pronouncements
|
·
|
Liquidity
and Capital Resources
|
·
|
Off-Balance-Sheet
Arrangements
|
·
|
Qualitative
and Quantitative Disclosures About Market
Risk
|
·
|
Outlook
|
Net
liabilities assumed:
|
|
|||
Accounts
payable
|
$
|
203,992
|
||
Long
term debt, including accrued interest
|
1,473,028
|
|||
Net
liabilities assumed
|
$
|
1,677,020
|
Name
|
Common
Shares
Received
|
Renewal
Biodiesel
Shares
Owned
|
Average
Price
Paid
|
|||||||
|
|
|
|
|||||||
Crivello
Group LLC (1)
|
666,666
|
166,700
|
$
|
0.01
|
||||||
Frank
P. Crivello SEP IRA (1)
|
13,333,333
|
3,334,000
|
$
|
0.01
|
||||||
John
King
|
2,300,000
|
575,115
|
$
|
0.01
|
||||||
David
Marks (2)
|
2,700,000
|
675,135
|
$
|
0.01
|
||||||
Other
investors as a group (17)
|
3,907,324
|
977,029
|
$
|
0.01
|
||||||
|
22,907,323
|
5,727,979
|
(1)
|
Mr.
Crivello is also the managing member of Crivello Group,
LLC.
|
|
(2)
|
Of
the shares attributed to Mr. Marks, 200,000 shares are registered
in the
name of the Irrevocable Children’s Trust of which Mr. Marks is a trustee
and 200,000 are registered in the name of Phoenix Investors, LLC
of which
Mr. Marks is Managing
Director.
|
Net
assets acquired:
|
|
|||
Inventory
|
$
|
34,426
|
||
Fixed
assets
|
9,145
|
|||
Website
domain
|
50,150
|
|||
Tradename
|
118,000
|
|||
Customer
lists, engineering drawings and other intangibles
|
189,000
|
|||
Goodwill
|
93,705
|
|||
Net
assets acquired
|
$
|
494,426
|
3,333,333
shares of common stock
|
$
|
2,000,000
|
||
1,000,000
shares of preferred stock of BSI
|
800,000
|
|||
96,400
common stock options
|
48,181
|
|||
Note
receivable from BSI reclassified to contributed capital
|
200,000
|
|||
Cash
paid, net of $77,986 cash acquired
|
422,014
|
|||
Total
purchase price
|
$
|
3,470,195
|
Purchase
Price
|
Asset
Life
|
||||||
Allocation
|
In
Years
|
||||||
Working
capital, net and excluding cash acquired
|
$
|
(204,231
|
)
|
-
|
|||
Fixed
assets
|
90,447
|
3
- 10
|
|||||
In
process research and development
|
3,140,000
|
-
|
|||||
Employee
contracts
|
114,000
|
2
|
|||||
Non-compete
agreements
|
100,000
|
1.5
|
|||||
Goodwill
|
229,979
|
Indefinite
|
|||||
Net
Assets Acquired
|
$
|
3,470,195
|
Three Months
Ended September, 30,
|
For The Nine Months Ended
September 30, |
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Revenues
|
$
|
148,800
|
$
|
459,539
|
$
|
500,292
|
$
|
1,378,617
|
|||||
Loss
from Operations
|
$
|
(615,896
|
)
|
$
|
(178,488
|
)
|
$
|
(1,452,114
|
)
|
$
|
(8,794,637
|
)
|
|
Net
Loss
|
$
|
(1,216,899
|
)
|
$
|
(743,966
|
)
|
$
|
(3,389,752
|
)
|
$
|
(10,491,193
|
)
|
|
Per
Share - basic and fully diluted
|
$
|
(0.04
|
)
|
$
|
(0.12
|
)
|
$
|
(0.07
|
)
|
$
|
(0.38
|
)
|
|
Weighted
average shares outstanding
|
27,488,705
|
27,488,705
|
27,488,705
|
27,488,705
|
·
|
Results
of operations for the three months ended September 30, 2007
(Successor)
|
·
|
Results
of operations for the period March 9, 2007 (date of inception) through
September 30, 2007 (Successor)
|
·
|
Results
of operations for the three months ended September 30, 2006
(Predecessor);
|
·
|
Results
of operations for the three months ended March 31, 2007
(Predecessor);
|
·
|
Results
of operations for the nine months ended September 30, 2006
(Predecessor);
|
Net
Sales
|
$
|
148,800
|
100.0
|
%
|
|||
Cost
of sales
|
109,048
|
73.3
|
%
|
||||
Gross
Profit
|
39,752
|
26.7
|
%
|
||||
Operating
Expenses:
|
|||||||
Employee
compensation and benefits
|
243,101
|
163.4
|
%
|
||||
Occupancy
and equipment
|
71,045
|
47.7
|
%
|
||||
Advertising
|
96,187
|
64.6
|
%
|
||||
Research
and development
|
3,140,000
|
2110.2
|
%
|
||||
Professional
fees
|
80,150
|
53.9
|
%
|
||||
Other
general and administrative expenses
|
217,665
|
146.3
|
%
|
||||
Amortization
of intangible assets
|
45,268
|
30.4
|
%
|
||||
Total
Operating Expenses
|
3,893,4160
|
2616.5
|
%
|
||||
Operating
Income (Loss)
|
(3,853,664
|
)
|
(2589.8
|
)%
|
|||
Interest
income
|
68
|
0.0
|
%
|
||||
Deferred
financing fees
|
(55,750
|
)
|
(37.8
|
)%
|
|||
Interest
expense
|
(221,050
|
)
|
(148.6
|
)%
|
|||
Other
expenses
|
(23,326
|
)
|
(15.7
|
)%
|
|||
|
|
||||||
Net
Income (Loss)
|
$
|
(4,153,722
|
)
|
(2791.5
|
)%
|
Net
Sales
|
$
|
392,887
|
100.0
|
%
|
|||
Cost
of Sales
|
251,390
|
64.0
|
%
|
||||
Gross
Profit
|
141,497
|
36.0
|
%
|
||||
Operating
Expenses:
|
|||||||
Employee
compensation and benefits
|
277,373
|
70.6
|
%
|
||||
Stock-based
transaction expense
|
5,131,231
|
1306.0
|
%
|
||||
Occupancy
and equipment
|
79,302
|
20.2
|
%
|
||||
Advertising
|
140,170
|
35.7
|
%
|
||||
Research
and development
|
3,140,000
|
799.2
|
%
|
||||
Professional
fees
|
429,891
|
109.4
|
%
|
||||
Other
general and administrative expenses
|
315,209
|
80.2
|
%
|
||||
Amortization
of intangible assets
|
58,707
|
14.9
|
%
|
||||
Total
Operating Expenses
|
9,571,883
|
2436.3
|
%
|
||||
Operating
Income (Loss)
|
(9,430,386
|
)
|
(2400.3
|
)%
|
|||
Interest
income
|
823
|
0.2
|
%
|
||||
Deferred
financing fees
|
(73,757
|
)
|
(18.8
|
)%
|
|||
Interest
expense
|
(636,477
|
)
|
(162.0
|
)%
|
|||
Other
expenses
|
(23,326
|
)
|
(5.9
|
)%
|
|||
|
|
0.0
|
%
|
||||
Net
Income (Loss)
|
$
|
(10,163,124
|
)
|
(2586.8
|
)%
|
Net
Sales
|
$
|
571,386
|
100
|
%
|
|||
Cost
of sales
|
350,804
|
61.4
|
%
|
||||
Gross
Profit
|
220,582
|
38.6
|
%
|
||||
Operating
Expenses:
|
|
||||||
Employee
compensation and benefits
|
65,405
|
11.4
|
%
|
||||
Occupancy
and equipment
|
24,705
|
4.3
|
%
|
||||
Advertising
|
37,452
|
6.6
|
%
|
||||
Professional
fees
|
6,588
|
1.2
|
%
|
||||
Other
general and administrative expenses
|
34,918
|
6.1
|
%
|
||||
Total
Operating Expenses
|
169,069
|
29.6
|
%
|
||||
Operating
Income (Loss)
|
51,513
|
9.0
|
%
|
||||
Net
Income (Loss)
|
$
|
51,513
|
9.0
|
%
|
Net
Sales
|
$
|
104,360
|
100.0
|
%
|
|||
Cost
of Sales
|
76,802
|
73.6
|
%
|
||||
Gross
Profit
|
27,558
|
26.4
|
%
|
||||
Operating
Expenses:
|
|||||||
Occupancy
and equipment
|
18,666
|
17.9
|
%
|
||||
Advertising
|
8,474
|
8.1
|
%
|
||||
Other
general and administrative expenses
|
79,879
|
76.5
|
%
|
||||
Total
Operating Expenses
|
107,019
|
102.5
|
%
|
||||
Operating
Income (Loss)
|
(79,461
|
)
|
(76.1
|
)%
|
|||
Net
Income (Loss)
|
$
|
(79,461
|
)
|
(76.1
|
)%
|
Net
Sales
|
$
|
1,638,813
|
100
|
%
|
|||
Cost
of Sales
|
1,034,220
|
63.1
|
%
|
||||
Gross
Profit
|
604,593
|
36.9
|
%
|
||||
Operating
Expenses:
|
|||||||
Employee
compensation and benefits
|
197,103
|
12.0
|
%
|
||||
Occupancy
and equipment
|
98,481
|
6.0
|
%
|
||||
Advertising
|
55,542
|
3.4
|
%
|
||||
Professional
fees
|
18,617
|
1.1
|
%
|
||||
Other
general and administrative expenses
|
119,299
|
7.3
|
%
|
||||
Total
Operating Expenses
|
489,042
|
29.8
|
%
|
||||
Operating
Income (Loss)
|
115,551
|
7.1
|
%
|
||||
Net
Income (Loss)
|
$
|
115,551
|
7.1
|
%
|
|
·
|
Revenue
Recognition
|
|
·
|
Allowance
for Doubtful Accounts
|
|
·
|
Derivative
Financial Instruments
|
|
·
|
Warranty
Obligations
|
|
·
|
Inventory
Obsolescence
|
Issued
|
Statement
|
|
February
2006
|
FAS
155 - “Accounting for Certain Hybrid Financial Instruments; an amendment
of Financial Accounting Standard Nos. 133 and 140" (“FAS
155”)
|
|
March
2006
|
FAS
156 - “Accounting for Servicing of Financial Assets, an amendment of FASB
Statement No. 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities”
|
|
June
2006
|
FAS
Interpretation 48 - "Accounting for Uncertainty in Income
Taxes"
|
|
September
2006
|
FAS
157 - “Fair Value Measurements”
|
|
September
2006
|
FAS
158 - “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans” - an amendment of FASB Statements No. 87, 88, 106,
and 132(R)”
|
|
February
2007
|
FAS
159 - “The Fair Value Option for Financial Assets and Financial
Liabilities—Including an amendment of FASB Statement No.
115”
|
Exhibit Number
|
|
Description
|
|
|
|
3.1
|
|
Amendment
to Certificate of Incorporation of Tech Laboratories, Inc.
(1)
|
|
|
|
3.2
|
|
Amended
and Restated By-laws of Tech Laboratories, Inc. (1)
|
|
|
|
10.1
|
|
Agreement
and Plan of Merger, dated April 20, 2007, among Tech Laboratories,
Inc.,
Renewal Fuels Acquisitions, Inc. and Renewal Fuels, Inc.
(1)
|
|
|
|
10.2
|
|
Asset
Purchase Agreement, dated March 30, 2007, among Crivello Group, LLC,
Renewal Fuels, Inc. and Biodiesel Solutions, Inc. (1)
|
|
|
|
10.3
|
|
Securities
Purchase Agreement, dated April 20, 2007, by and between Tech
Laboratories, Inc. and Cornell Capital Partners L.P.
(1)
|
|
|
|
10.4
|
|
$1,000,000
principal amount Secured Convertible Debenture, dated April 20, 2007,
by
and between Tech Laboratories, Inc. and Cornell Capital Partners
L.P.
(1)
|
|
|
|
10.5
|
|
Warrant
to purchase 18,000,000 shares of Common Stock of Tech Laboratories,
Inc.
dated April 20, 2007 (1)
|
|
|
|
10.6
|
|
Registration
Rights Agreement, dated April 20, 2007, by and between Tech Laboratories,
Inc. and Cornell Capital Partners L.P.
(1)
|
10.7
|
|
Pledge
and Escrow Agreement, dated April 20, 2007, by and between Tech
Laboratories, Inc., David Gonzalez and Cornell Capital Partners L.P.
(1)
|
|
|
|
10.8
|
|
Restated
Security Agreement, dated April 20, 2007, by and between Tech
Laboratories, Inc. and Cornell Capital Partners L.P.
(1)
|
|
|
|
10.9
|
|
Services
Agreement between Renewal Fuels, Inc. and Biodiesel Solutions, Inc.,
dated
as of March 30, 2007 (1)
|
|
|
|
10.10
|
|
Settlement
Agreement between Tech Laboratories, Inc. and Stursburg & Veith, dated
as of April 25, 2007 (1)
|
|
|
|
10.11
|
|
Amendment
No. 1 to Secured Convertible Debenture No. TCHL-1-1, dated May 31,
2007,
by and between Tech Laboratories, Inc. and Cornell Capital Partners
L.P.
(2)
|
|
|
|
10.12
|
|
Amended
and Restated $1,000,000 principal amount Secured Convertible Debenture,
dated May 31, 2007, by and between Tech Laboratories, Inc. and Cornell
Capital Partners L.P. (2)
|
|
|
|
10.13
|
|
Amendment
No. 1 to Secured Convertible Debenture No. TCHL-1-2, dated May 31,
2007,
by and between Tech Laboratories, Inc. and Cornell Capital Partners
L.P.
(2)
|
|
|
|
10.14
|
|
$400,000
principal amount Secured Convertible Debenture, dated May 31, 2007,
by and
between Tech Laboratories, Inc. and Cornell Capital Partners L.P.
(2)
|
|
|
|
10.15
|
|
$300,000
principal amount Secured Convertible Debenture, dated December 27,
2005,
by and between Tech Laboratories, Inc. and Montgomery Equity Partners,
Ltd. (incorporated by reference to the exhibits to Registrant’s Form 8-K
filed on January 10, 2006).
|
|
|
|
10.16
|
|
Amendment
No. 1 to Secured Convertible Debenture No. MEP-2, dated May 31, 2007,
by
and between Tech Laboratories, Inc. and Montgomery Equity Partners,
Ltd.
(2)
|
|
|
|
10.17
|
|
Amended
and Restated $537,220 principal amount Secured Convertible Debenture,
dated December 27, 2005, by and between Tech Laboratories, Inc. and
Montgomery Equity Partners, Ltd. (incorporated by reference to the
exhibits to Registrant’s Form 8-K filed on January 10,
2006).
|
|
|
|
10.18
|
|
Amendment
No. 1 to Secured Convertible Debenture No. MEP-3, dated May 31, 2007,
by
and between Tech Laboratories, Inc. and Montgomery Equity Partners,
Ltd.
(2)
|
|
|
|
10.19
|
|
Agreement
and Plan of Merger, dated July 2, 2007, among Tech Laboratories,
Inc., BSI
Acquisitions, Inc. and Biodiesel Solutions, Inc. (3)
|
|
|
|
10.20
|
|
Securities
Purchase Agreement, dated July 2, 2007, by and between Tech Laboratories,
Inc. and Cornell Capital Partners L.P. (3)
|
|
|
|
10.21
|
|
$2,000,000
principal amount Secured Convertible Debenture, dated July 2, 2007,
by and
between Tech Laboratories, Inc. and Cornell Capital Partners L.P.
(3)
|
|
|
|
10.22
|
|
Warrant
to purchase 33,750,000 shares of Common Stock of Tech Laboratories,
Inc.
dated July 2, 2007 (3)
|
|
|
|
10.23
|
|
Amendment
No. 1 to Registration Rights Agreement, dated July 2, 2007, by and
between
Tech Laboratories, Inc. and Cornell Capital Partners L.P.
(3)
|
10.24
|
|
Security
Agreement, dated July 2, 2007, by and between Biodeisel Solutions,
Inc.,
Renewal Fuels, Inc. and Cornell Capital Partners L.P.
(3)
|
10.25
|
Waiver
of Penalties, dated November 13, 2007, between the Company and Montgomery
Equity Partners, Ltd.
|
|
|
|
|
31.1
|
|
Certification
by Chief Executive Officer and Chief Financial Officer pursuant to
Rule
13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
32.1
|
|
Certification
by Chief Executive Officer and Chief Financial Officer pursuant to
18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
RENEWAL
FUELS, INC.
|
|
|
|
|
Dated: April
8, 2008
|
By:
|
/s/ John
King
|
|
John
King,
|
|
|
Chief
Executive Officer and Chief Financial Officer
(Principal
Financial and Accounting Officer)
|