GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
869,420
|
|
|
$
|
676,780
|
|
Accounts receivable
|
|
|
3,394
|
|
|
|
2,279
|
|
Inventory
|
|
|
1,580
|
|
|
|
104,782
|
|
Other current assets
|
|
|
417,615
|
|
|
|
327,701
|
|
Total Current Assets
|
|
|
1,292,009
|
|
|
|
1,111,542
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET
|
|
|
14,137,685
|
|
|
|
11,905,182
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT HELD FOR SALE
|
|
|
303,953
|
|
|
|
291,031
|
|
|
|
|
|
|
|
|
|
|
DEFERRED GROWING COST
|
|
|
4,238,909
|
|
|
|
2,780,871
|
|
|
|
|
|
|
|
|
|
|
OTHER NONCURRENT ASSETS
|
|
|
11,455
|
|
|
|
10,814
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
19,984,011
|
|
|
$
|
16,099,440
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,536,383
|
|
|
$
|
1,363,217
|
|
Accrued payroll and payroll taxes
|
|
|
1,011,913
|
|
|
|
1,046,763
|
|
Deferred revenue
|
|
|
63,535
|
|
|
|
152,732
|
|
Capital lease liability - current portion
|
|
|
53,411
|
|
|
|
56,257
|
|
Notes payable to shareholders
|
|
|
26,000
|
|
|
|
26,000
|
|
Convertible notes payable
|
|
|
-
|
|
|
|
193,200
|
|
Total Current Liabilities
|
|
|
2,691,242
|
|
|
|
2,838,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES
|
|
|
|
|
|
|
|
|
Accrued interest payable
|
|
|
1,945,586
|
|
|
|
1,684,186
|
|
Accrued return on noncontrolling interest
|
|
|
4,394,762
|
|
|
|
2,907,678
|
|
Capital lease liability - long term portion
|
|
|
4,190
|
|
|
|
31,258
|
|
Convertible notes payable
|
|
|
567,000
|
|
|
|
567,000
|
|
Mortgage notes payable
|
|
|
5,110,189
|
|
|
|
5,110,189
|
|
Total Long Term Liabilities
|
|
|
12,021,727
|
|
|
|
10,300,311
|
|
|
|
|
|
|
|
|
|
|
EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Preferred stock - $0.001 par value; 50,000,000 shares authorized
|
|
|
|
|
|
|
|
|
Series B, convertible; 13,000 shares issued (aggregate liquidation
|
|
|
|
|
|
|
|
|
preference of $1,300,000)
|
|
|
13
|
|
|
|
13
|
|
Common stock, $0.001 par value; 500,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
293,683,502 and 285,062,812 issued and outstanding
|
|
|
293,683
|
|
|
|
285,062
|
|
Additional paid-in capital
|
|
|
24,541,211
|
|
|
|
24,260,628
|
|
Accumulated deficit
|
|
|
(26,877,863
|
)
|
|
|
(26,662,294
|
)
|
Accumulated other comprehensive loss
|
|
|
(44,019
|
)
|
|
|
(21,996
|
)
|
Total Global Clean Energy Holdings, Inc. Stockholders' Deficit
|
|
|
(2,086,975
|
)
|
|
|
(2,138,587
|
)
|
Noncontrolling interests
|
|
|
7,358,017
|
|
|
|
5,099,547
|
|
Total equity (deficit)
|
|
|
5,271,042
|
|
|
|
2,960,960
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY (DEFICIT)
|
|
$
|
19,984,011
|
|
|
$
|
16,099,440
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements
|
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
78,644
|
|
|
$
|
109,758
|
|
|
$
|
288,080
|
|
|
$
|
165,558
|
|
Subsidy Income
|
|
|
39,431
|
|
|
|
248,429
|
|
|
|
505,017
|
|
|
|
564,181
|
|
Total Revenue
|
|
|
118,075
|
|
|
|
358,187
|
|
|
|
793,097
|
|
|
|
729,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
418,663
|
|
|
|
549,870
|
|
|
|
1,671,040
|
|
|
|
1,639,064
|
|
Write down of impaired long lived assets
|
|
|
526,953
|
|
|
|
-
|
|
|
|
526,953
|
|
|
|
|
|
Plantation operating costs
|
|
|
182,322
|
|
|
|
125,076
|
|
|
|
533,566
|
|
|
|
251,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
1,127,938
|
|
|
|
674,946
|
|
|
|
2,731,559
|
|
|
|
1,890,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(1,009,863
|
)
|
|
|
(316,759
|
)
|
|
|
(1,938,462
|
)
|
|
|
(1,160,772
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
25
|
|
|
|
29
|
|
|
|
82
|
|
|
|
77
|
|
Interest expense
|
|
|
(224,288
|
)
|
|
|
(142,140
|
)
|
|
|
(632,415
|
)
|
|
|
(406,208
|
)
|
Gain on settlement of liabilities
|
|
|
80,817
|
|
|
|
-
|
|
|
|
595,290
|
|
|
|
-
|
|
Foreign currency transaction gain (loss)
|
|
|
84
|
|
|
|
37,173
|
|
|
|
(960
|
)
|
|
|
39,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Other Income (Loss)
|
|
|
(143,362
|
)
|
|
|
(104,938
|
)
|
|
|
(38,003
|
)
|
|
|
(366,518
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
|
|
|
(1,153,225
|
)
|
|
|
(421,697
|
)
|
|
|
(1,976,465
|
)
|
|
|
(1,527,290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Discontinued Operations
|
|
|
1,698
|
|
|
|
22,468
|
|
|
|
-
|
|
|
|
(9,746
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
(1,151,527
|
)
|
|
|
(399,229
|
)
|
|
|
(1,976,465
|
)
|
|
|
(1,537,036
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Net Loss Attributable to the Noncontrolling Interest
|
|
|
(979,876
|
)
|
|
|
(213,099
|
)
|
|
|
(1,760,896
|
)
|
|
|
(897,521
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) attributable to Global Clean Energy Holdings, Inc.
|
|
$
|
(171,651
|
)
|
|
$
|
(186,130
|
)
|
|
$
|
(215,569
|
)
|
|
$
|
(639,515
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to Global Clean Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings, Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
$
|
(173,349
|
)
|
|
$
|
(208,598
|
)
|
|
$
|
(215,569
|
)
|
|
$
|
(629,769
|
)
|
Income (Loss) from Discontinued Operations
|
|
|
1,698
|
|
|
|
22,468
|
|
|
|
-
|
|
|
|
(9,746
|
)
|
Net Loss
|
|
$
|
(171,651
|
)
|
|
$
|
(186,130
|
)
|
|
$
|
(215,569
|
)
|
|
$
|
(639,515
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Income (Loss) per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
$
|
(0.0006
|
)
|
|
$
|
(0.0007
|
)
|
|
$
|
(0.0007
|
)
|
|
$
|
(0.0023
|
)
|
Income Loss from Discontinued Operations
|
|
|
0.0000
|
|
|
|
0.0001
|
|
|
|
-
|
|
|
|
(0.0000
|
)
|
Net Loss per Common Share
|
|
$
|
(0.0006
|
)
|
|
$
|
(0.0007
|
)
|
|
$
|
(0.0007
|
)
|
|
$
|
(0.0023
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Weighted-Average Common Shares Outstanding
|
|
|
293,683,502
|
|
|
|
280,782,920
|
|
|
|
290,694,577
|
|
|
|
274,426,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Income (Loss) per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
|
|
$
|
(0.0006
|
)
|
|
$
|
(0.0007
|
)
|
|
$
|
(0.0007
|
)
|
|
$
|
(0.0023
|
)
|
Income Loss from Discontinued Operations
|
|
|
0.0000
|
|
|
|
0.0001
|
|
|
|
-
|
|
|
|
(0.0000
|
)
|
Net Loss per Common Share
|
|
$
|
(0.0006
|
)
|
|
$
|
(0.0006
|
)
|
|
$
|
(0.0007
|
)
|
|
$
|
(0.0023
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Weighted-Average Common Shares Outstanding
|
|
|
293,304,571
|
|
|
|
280,782,920
|
|
|
|
290,694,577
|
|
|
|
274,426,224
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements
|
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(1,151,527
|
)
|
|
$
|
(399,229
|
)
|
|
$
|
(1,976,465
|
)
|
|
$
|
(1,537,036
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income - foreign currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
translation adjustment
|
|
|
990,579
|
|
|
|
(1,584,711
|
)
|
|
|
1,064,067
|
|
|
|
(1,193,420
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss
|
|
|
(160,948
|
)
|
|
|
(1,983,940
|
)
|
|
|
(912,398
|
)
|
|
|
(2,730,456
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add net loss attributable to the noncontrolling interest
|
|
|
979,876
|
|
|
|
213,099
|
|
|
|
1,760,896
|
|
|
|
897,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less other comprehensive income (loss) attributable to noncontrolling interest
|
|
|
(1,017,240
|
)
|
|
|
1,557,633
|
|
|
|
(1,086,090
|
)
|
|
|
1,162,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss Attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Clean Energy Holdings, Inc.
|
|
$
|
(198,312
|
)
|
|
$
|
(213,208
|
)
|
|
$
|
(237,592
|
)
|
|
$
|
(670,149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
|
(Unaudited)
|
For the Periods Ended September 30, 2011 and 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
Series B
|
|
|
Common stock
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
controlling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Interests
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
13,000
|
|
|
$
|
13
|
|
|
|
270,464,478
|
|
|
$
|
270,464
|
|
|
$
|
23,580,630
|
|
|
$
|
(26,933,430
|
)
|
|
$
|
(2,195
|
)
|
|
$
|
4,241,945
|
|
|
$
|
1,157,427
|
|
Issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
12,708,334
|
|
|
|
12,711
|
|
|
|
487,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,626
|
|
Contributions from noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,780,156
|
|
|
|
4,780,156
|
|
Exercise of Warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
1,890,000
|
|
|
|
1,890
|
|
|
|
54,810
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,700
|
|
Share-based compensation from
issuance of options and compensation-based warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
69,858
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
69,858
|
|
Accrual of preferential return for the
noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,044,264
|
)
|
|
|
(1,044,264
|
)
|
Foreign currency translation gain (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30,634
|
)
|
|
|
(1,162,786
|
)
|
|
|
(1,193,420
|
)
|
Net loss for the period ended September 30, 2011
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(639,515
|
)
|
|
|
-
|
|
|
|
(897,521
|
)
|
|
|
(1,537,036
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2011
|
|
|
13,000
|
|
|
$
|
13
|
|
|
|
285,062,812
|
|
|
$
|
285,065
|
|
|
$
|
24,193,214
|
|
|
$
|
(27,572,945
|
)
|
|
$
|
(32,829
|
)
|
|
$
|
5,917,530
|
|
|
$
|
2,790,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
|
Series B
|
|
|
Common stock
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
controlling
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Interests
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2011
|
|
|
13,000
|
|
|
$
|
13
|
|
|
|
285,062,812
|
|
|
$
|
285,062
|
|
|
$
|
24,260,628
|
|
|
$
|
(26,662,294
|
)
|
|
$
|
(21,996
|
)
|
|
$
|
5,099,547
|
|
|
$
|
2,960,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions from noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,420,360
|
|
|
|
4,420,360
|
|
Issuance of common stock for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
8,620,690
|
|
|
|
8,621
|
|
|
|
241,379
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
250,000
|
|
Share-based compensation from
issuance of options and compensation-based warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,204
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,204
|
|
Accrual of preferential return for the
noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,487,084
|
)
|
|
|
(1,487,084
|
)
|
Foreign currency translation gain (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(22,023
|
)
|
|
|
1,086,090
|
|
|
|
1,064,067
|
|
Net loss for the year ended September 30, 2012
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(215,569
|
)
|
|
|
-
|
|
|
|
(1,760,896
|
)
|
|
|
(1,976,465
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2012
|
|
|
13,000
|
|
|
$
|
13
|
|
|
|
293,683,502
|
|
|
$
|
293,683
|
|
|
$
|
24,541,211
|
|
|
$
|
(26,877,863
|
)
|
|
$
|
(44,019
|
)
|
|
$
|
7,358,017
|
|
|
$
|
5,271,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements
|
GLOBAL
CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(Unaudited)
|
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,976,465
|
)
|
|
$
|
(1,537,036
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Foreign currency transaction gain
|
|
|
960
|
|
|
|
(39,613
|
)
|
Gain on settlement of liabilities
|
|
|
(595,290
|
)
|
|
|
-
|
|
Share-based compensation
|
|
|
39,204
|
|
|
|
69,858
|
|
Write down of impaired assets
|
|
|
526,953
|
|
|
|
-
|
|
Depreciation
|
|
|
211,915
|
|
|
|
201,419
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(2,925
|
)
|
|
|
(23,490
|
)
|
Inventory
|
|
|
109,808
|
|
|
|
(55,781
|
)
|
Other current assets
|
|
|
(52,942
|
)
|
|
|
(352,003
|
)
|
Deferred growing costs
|
|
|
(1,257,539
|
)
|
|
|
(1,459,705
|
)
|
Accounts payable and accrued expenses
|
|
|
795,655
|
|
|
|
501,093
|
|
Deferred revenue
|
|
|
(89,197
|
)
|
|
|
208,329
|
|
Other noncurrent assets
|
|
|
(11,849
|
)
|
|
|
9,497
|
|
Net Cash Used in Operating Activities
|
|
|
(2,301,712
|
)
|
|
|
(2,477,432
|
)
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
Purchase of land
|
|
|
-
|
|
|
|
(178,459
|
)
|
Plantation development costs
|
|
|
(1,902,838
|
)
|
|
|
(2,127,735
|
)
|
Purchase of property and equipment
|
|
|
(256,455
|
)
|
|
|
(221,258
|
)
|
Disposal of property and equipment
|
|
|
(1,637
|
)
|
|
|
-
|
|
Net Cash Used in Investing Activities
|
|
|
(2,160,930
|
)
|
|
|
(2,527,452
|
)
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
250,000
|
|
|
|
500,000
|
|
Proceeds from exercise of warrants
|
|
|
-
|
|
|
|
56,700
|
|
Proceeds from issuance of preferred membership in GCE Mexico I, LLC
|
|
|
4,420,360
|
|
|
|
4,780,156
|
|
Proceeds from notes payable
|
|
|
-
|
|
|
|
562,685
|
|
Payments on capital leases and notes payable
|
|
|
(36,723
|
)
|
|
|
(34,505
|
)
|
Net Cash Provided by Financing Activities
|
|
|
4,633,637
|
|
|
|
5,865,036
|
|
Effect of exchange rate changes on cash
|
|
|
21,645
|
|
|
|
(212,781
|
)
|
Net Increase in Cash and Cash Equivalents
|
|
|
192,640
|
|
|
|
647,371
|
|
Cash and Cash Equivalents at Beginning of Period
|
|
|
676,780
|
|
|
|
1,096,618
|
|
Cash and Cash Equivalents at End of Period
|
|
$
|
869,420
|
|
|
$
|
1,743,989
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
30,764
|
|
|
$
|
56,755
|
|
Noncash Investing and Financing activities:
|
|
|
|
|
|
|
|
|
Accrual of return on noncontrolling interest
|
|
$
|
1,487,084
|
|
|
$
|
1,044,264
|
|
Shares issued for services
|
|
|
-
|
|
|
|
13,125
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements
|
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1 – History and Basis of Presentation
History
The company was originally incorporated under the laws of the State of Utah on November 20, 1991. Until 2007, the Company was a developmental-stage bio-pharmaceutical company engaged in the research, validation, and development of two drug candidates. In 2007, the Company decided to change its business and focus its efforts and resources on the emerging alternative energy fuelsmarket. Accordingly, on September 7, 2007, we acquired certain trade secrets, know-how, business plans and relationships relevant to the cultivation and production of Jatropha. In 2008 we changed our name to “Global Clean Energy Holdings, Inc.” to reflect our energy agricultural business. In November 2009, we sold our remaining legacy bio-pharmaceutical assets to Curadis Gmbh.
On July 19, 2010, the reincorporation of the company from a Utah corporation to a Delaware corporation was completed, as approved by shareholders. In the reincorporation, each outstanding share of the company’s common stock was automatically converted into one share of common stock of the surviving Delaware corporation. In addition, the par value of the Company’s capital stock changed from no par per share to $0.001 per share. The effects of the change in par value have been reflected retroactively in the accompanying condensed consolidated financial statements and notes thereto for all periods presented. The effect of retroactively applying the par value of $0.001 per share resulted in reclassification of $17,409,660 of common stock and $1,290,722 of preferred stock as of December 31, 2008 to additional paid-in capital. The reincorporation did not result in any change in the company’s name, ticker symbol, CUSIP number, business, assets or operations. The management and Board of Directors of the company remained the same.
Principles of Consolidation
The consolidated financial statements include the accounts of Global Clean Energy Holdings, Inc., its subsidiaries, and the variable interest entities of GCE Mexico, and its Mexican subsidiaries (Asideros, Asideros 2 and Asideros 3). All significant intercompany transactions have been eliminated in consolidation.
Generally accepted accounting principles require that if an entity is the primary beneficiary of a variable interest entity (VIE), the entity should consolidate the assets, liabilities and results of operations of the VIE in its consolidated financial statements. Global Clean Energy Holdings, Inc. considers itself to be the primary beneficiary of GCE Mexico, and it’s Mexican subsidiaries, and accordingly, has consolidated these entities since their formation beginning in April 2008, with the equity interests of the unaffiliated investors in GCE Mexico presented as Noncontrolling Interests in the accompanying condensed consolidated financial statements.
Unaudited Interim Condensed Consolidated Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these financial statements have been included and are of normal, recurring nature. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2011, as filed with the Securities and Exchange Commission. The results of operations for the nine months ended September 30, 2012, may not be indicative of the results that may be expected for the year ending December 31, 2012.
Accounting for Agricultural Operations
All costs incurred until the actual planting of the Jatropha Curcas plant are capitalized as plantation development costs, and are included in “Property and Equipment” on the balance sheet. Plantation development costs are being accumulated in the balance sheet during the development period and will be accounted for in accordance with accounting standards for Agricultural Producers and Agricultural Cooperatives. The direct costs associated with each farm and the production of the Jatropha revenue streams have been deferred and accumulated as a noncurrent asset, “Deferred Growing Costs”, on the balance sheet. Other general costs without expected future benefits are expensed when incurred.
Profit/Loss per Common Share
Profit/Loss per share amounts are computed by dividing profit or loss applicable to the common shareholders of the Company by the weighted-average number of common shares outstanding during each period. Diluted profit or loss per share amounts are computed assuming the issuance of common stock for potentially dilutive common stock equivalents.
All outstanding stock options, warrants, convertible notes, and convertible preferred stock are currently antidilutive and have been excluded from the calculations of diluted profit or loss per share at September 30, 2012 and 2011, as follows:
|
|
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Convertible notes
|
|
|
18,900,000
|
|
|
|
19,028,671
|
|
Convertible preferred stock - Series B
|
|
|
11,818,181
|
|
|
|
11,818,181
|
|
Warrants
|
|
|
24,585,662
|
|
|
|
24,585,662
|
|
Compensation-based stock options and warrants
|
|
|
57,981,483
|
|
|
|
70,181,483
|
|
|
|
|
113,285,326
|
|
|
|
125,613,997
|
|
Revenue Recognition
Revenue is recognized when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the seller’s price to the buyer is fixed or determinable; collectability is reasonably assured; and title and the risks and rewards of ownership have transferred to the buyer. Value added taxes collected on revenue transactions are excluded from revenue and are included in accounts payable until remittance to the taxation authority.
Jatropha oil revenue - The Company’s primary source of revenue will be crude Jatropha oil. Revenue will be recognized net of sales or value added taxes and upon transfer of significant risks and rewards of ownership to the buyer. Revenue is not recognized when there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.
Advisory services revenue - The Company provides development and management services to other companies regarding their bio-fuels and/or feedstock-Jatropha development operations, on a fee for services basis. The advisory services revenue is recognized upon completion of the work in accordance with the separate contract.
Agricultural subsidies revenue - the Company receives agricultural subsidies from the Mexican government. Due to the uncertainty of these payments, the revenue is recognized when the payments are received.
Impairment of Long-Lived Assets
- Long-lived assets are reviewed 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 comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount that the carrying amount of the assets exceeds the fair value of the assets. At September 30, 2012, the Company reviewed its long-lived assets and determined the Deferred Growing Cost and Plantation Development Costs were impaired. See Note 10 for details.
New Accounting Guidelines
In June 2011, the FASB issued authoritative guidance requiring entities to report components of other comprehensive income in either a single continuous statement or in two separate, but consecutive statements of net income and other comprehensive income. The company has included a condensed consolidated statement of comprehensive income for the three and nine months ended September 30, 2012 and 2011.
Note 2 – Going Concern Considerations
The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying consolidated financial statements, the Company incurred losses from continuing operations of $1,976,465 and of $1,537,036 for the nine-months ended September 30, 2012 and September 30, 2011 respectively, and has an accumulated deficit applicable to its common shareholders of $26,877,863 at September 30, 2012. The Company also used cash in operating activities of $2,301,712 and $2,477,432 during the nine-month periods ended September 30, 2012 and September 30, 2011, respectively. At September 30, 2012, the Company has negative working capital of $1,399,233 and a stockholders’ deficit attributable to its stockholders of $2,086,975. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The Company commenced its new business related to the cultivation and production of oil from the seed of the Jatropha plant in September 2007. Management plans to meet its cash needs through various means including securing financing, entering into joint ventures, and developing the current business model. In order to fund its new operations, the Company has received $18,360,628 in capital contributions from the preferred membership interest in GCE Mexico I, LLC, and has issued mortgages in the total amount of $5,110,189 for the acquisition of land. The Company is developing the new business operation to participate in the rapidly growing bio-diesel industry. The Company continues to expect to be successful in this new venture, but there is no assurance that its business plan will be economically viable. The ability of the Company to continue as a going concern is dependent on that plan’s success. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Note 3 – Jatropha Business Venture
The Company entered into the bio-fuels business in 2007 by acquiring certain trade secrets, know-how, business plans, term sheets, business relationships, and other information relating to the cultivation and production of seed oil from the Jatropha plant for the production of bio-diesel, and by entering into certain employment agreements and property management agreements. Subsequent to entering into these transactions, the Company identified certain real property in Mexico it believed to be suitable for cultivating the Jatropha plant. During 2008, GCE Mexico acquired the land in Mexico for the cultivation of the Jatropha plant. In July 2009, the Company acquired TAL, which had developed a farm in Belize for cultivation of the Jatropha plant and provided technical advisory services for the propagation of the Jatropha plant. In March 2010, the Company formed Asideros 2, a Mexican corporation, which has acquired additional land in Mexico adjacent to the land acquired by Asideros. All of these transactions are described in further detail in Note 1 above and in the remainder of the notes.
Share Exchange Agreement
The Company entered into a share exchange agreement (the Global Agreement) pursuant to which the Company acquired all of the outstanding ownership interests in Global Clean Energy Holdings, LLC, a Delaware limited liability company (Global), on September 7, 2007 from Mobius Risk Group, LLC (Mobius) and from Richard Palmer (Mr. Palmer). Mr. Palmer owned a 13.33% equity interest in Mobius and became the Company’s new President and Chief Operating Officer in September 2007 and its Chief Executive Officer in December 2007.
Mobius Consulting Agreement
Concurrent with the execution of the Global Agreement, the Company entered into a consulting agreement with Mobius pursuant to which Mobius agreed to provide consulting services to the Company in connection with the Company’s new Jatropha biofuel feedstock business. The Company engaged Mobius as a consultant to obtain Mobius’ experience and expertise in the feedstock/bio-diesel market to assist the Company and Mr. Palmer in developing this new line of operations for the Company. Mobius agreed to provide the following services to the Company: (i) manage and supervise a contemplated research and development program contracted by the Company and conducted by the University of Texas Pan American regarding the location, characterization, and optimal economic propagation of the Jatropha
plant; and (ii) assist with the management and supervision of the planning, construction, and start-up of plant nurseries and seed production plantations in Mexico, the Caribbean or Central America.
Under the agreement, Mobius was required to supervise the hiring of certain staff to serve in management and operations roles of the Company, or to hire such persons to provide similar services to the company as independent contractors. Mobius’ compensation for the services provided under the agreement was a monthly retainer of $45,000. The Company also reimbursed Mobius for reasonable business expenses incurred in connection with the services provided. The Company terminated the agreement in July 2008, with the termination to become effective August 2008. The Company had recorded liabilities to Mobius of $322,897 for accrued, but unpaid, compensation and costs as of September 30, 2012 and December 31, 2011. However, the Company disputes these charges, and the additional amounts that Mobius claims that it is owed. As a result, in April 2010 Mobius filed a complaint against the Company in the United States District Court Southern District of Texas Houston Division, alleging that that the Company breached its agreement with Mobius.
LODEMO Agreement
On October 15, 2007, the Company entered into a service agreement with Corporativo LODEMO S.A DE CV, a Mexican corporation (the LODEMO Group), to provide services related to the establishment, development, and day-to-day operations of the Company’s Jatropha Business in Mexico. The Company had agreed to pay the LODEMO Group a fixed fee per year of $60 per hectare of land planted and maintained with minimum payments based on 10,000 hectares of developed land, to follow a planned planting schedule. The Agreement had a 20-year term but could be terminated or modified earlier by the Company under certain circumstances. In June 2009, the scope of work previously performed by LODEMO was reduced and modified based upon certain labor functions being provided internally by the Company and by Asideros, the Company’s Mexican subsidiary, on a go-forward basis. This agreement was cancelled in 2009. As of September 30, 2012 and as of December 31, 2011, the Company’s financial statement reflect that it owes the LODEMO Group $251,500 for accrued, but unpaid, compensation and cost. The Company disputes the total of these charges and is currently in discussions with LODEMO to resolve this liability.
GCE Mexico I, LLC and Subsidiaries
GCE Mexico was organized primarily to facilitate the acquisition of the initial 5,000 acres of farm land (the Jatropha Farm) in the State of Yucatan in Mexico to be used primarily for the (i) cultivation of
Jatropha curcas
, (ii) the marketing and sale of the resulting fruit, seeds, or pre-processed crude Jatropha oil, whether as biodiesel, feedstock, biomass or otherwise, and (iii) the sale of carbon value, green fuel value, or renewable energy credit value (and other similar environmental attributes) derived from activities at the Jatropha Farm.
Under the LLC Agreement, the Company owns 50% of the issued and outstanding common membership units of GCE Mexico. The remaining 50% of the common membership units was issued to five of the Investors. The Company and the other owners of the common membership interest were not required to make capital contributions to GCE Mexico.
In addition, two of the Investors agreed to invest in GCE Mexico through the purchase of preferred membership units and through the funding of the purchase of land in Mexico. An aggregate of 1,000 preferred membership units were issued to these two Investors who each agreed to make capital contributions to GCE Mexico in installments and as required, fund the development and operations of the Jatropha Farm. The preferred members have made capital contributions of $4,420,360 and $4,780,156 during the nine-month periods ended September 30, 2012 and 2011, respectively, and total contributions of $18,360,628 have been received by GCE Mexico from these Investors since the execution of the LLC Agreement. The LLC Agreement calls for additional contributions from the Investors, as requested by management and as required by the operation in 2011 and the following years. These Investors are entitled to earn a preferential 12% per annum cumulative compounded return on the cumulative balance of their preferred membership interest. The preferential return increased $1,487,084, and $1,044,264 during the nine-month periods ended September 30, 2012 and 2011, respectively, and totals $4,394,762 since the execution of the LLC Agreement.
Two investors holding the preferred membership units of GCE Mexico also directly funded the purchase by Asideros I of approximately 5,000 acres of land in the State of Yucatan in Mexico by the payment of $2,051,282, The land was acquired in the name of Asideros I and Asideros I issued a mortgage in the amount of $2,051,282 in favor of these two investors. These two investors also directly funded the purchase by Asideros 2 of approximately 4,500 acres, and a second parcel by Asideros 2 of approximately 600 acres on land adjacent to the land owned by Asideros I by the total payment of $963,382. The land was acquired in the name of Asideros 2 and Asideros 2 issued mortgages in the amount of $963,382 in favor of these two investors. These mortgages bear interest at the rate of 12% per annum, payable quarterly. The parties agree that interst would accrue until such time as the Board determines that there is sufficient cash flow to pay all accrued interest. The initial mortgage, including any unpaid interest, is due in April 2018. The second mortgage, including any unpaid interest, is due in February 2020.
In October 2011, these two investors also directly funded the purchase by Asideros 3 of approximately 5,600 acres for a total $2,095,525. The land was acquired in the name of Asideros 3 and Asideros 3 issued mortgages in the amount of $2,095,525 in favor of these two investors. These mortgages bear interest at the rate of 12% per annum, payable quarterly. The Board has directed that this interest shall continue to accrue until such time as the Board determines that there is sufficient cash flow to pay all accrued interest. The initial mortgage, including any unpaid interest, is due in October 2021.
The net income or loss of the Mexican subsidiaries is allocated to its shareholders based on their respective equity ownership, which is 99% to GCE Mexico and 1% directly to the Company. GCE Mexico has no operations separate from its investments in the Mexican subsidiaries. According to the LLC Agreement of GCE Mexico, the net loss of GCE Mexico is allocated to its members according to their respective investment balances. Accordingly, since the common membership interest did not make a capital contribution, all of the losses have been allocated to the preferred membership interest. The noncontrolling interest presented in the accompanying condensed consolidated balance sheets includes the carrying value of the preferred membership interests and of the common membership interests owned by the Investors, and excludes any common membership interest in GCE Mexico held by the Company.
Technology Alternatives, Limited
On October 29, 2008, the Company entered into a stock purchase agreement with the shareholders of TAL, a company formed under the laws of Belize in Central America. Subsequently, the terms and conditions of the stock purchase agreement were modified prior to closing. The closing was primarily delayed to allow TAL to complete all required conditions for the closing. On July 2, 2009, all closing requirements were completed and the Company consummated the stock purchase agreement by issuing 8,952,757 shares of its common stock in exchange for 100% of the equity interests of TAL. TAL owns approximately 400 acres of land and has developed a Jatropha farm in stages over the last three years for the cultivation of the Jatropha plant. TAL developed a nursery capable of producing Jatropha seeds, seedlings and rooted cuttings. During 2009, TAL commenced selling seeds, principally to GCE Mexico.
In connection with the acquisition, certain payables to the former shareholders of TAL were renegotiated and converted into promissory notes in the aggregate principal amount of $516,139 Belize Dollars (US $268,036 based on exchange rates in effect at July 2, 2009). These notes payable to shareholders were interest free through September 30, 2009, and then bear interest at 8% per annum through the maturity date. The notes are secured by a mortgage on the land and related improvements. The notes, plus any related accrued interest, were due on August 15, 2012. The holders of these notes have not yet declared a formal default and have not taken any action to foreclose. The holders of the loans have previously voluntarily agreed to extend the maturity date of these loans to the August 15, 2012 maturity date.
During 2010, the Company ceased the TAL operations. The assets are reported as Investment Held for Sale.
Note 4 - Investment Held for Sale
All of TAL’s nursery capabilities have since been transferred to the Company’s other operations in Tizimin, Mexico and the Company is in the process of selling the land. The net assets have been reclassified as Investment Held for Sale at September 30, 2012 and at December 31, 2011; the promissory notes are netted against the net assets. The Net Assets, as of September 30, 2012 were $565,473 Belize Dollars (US $303,953 based on exchange rates in effect at September 30, 2012).
Note 5 – Property and Equipment
Property and equipment are as follows:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
4,587,313
|
|
|
$
|
4,217,604
|
|
Plantation development costs
|
|
|
8,478,489
|
|
|
|
6,945,617
|
|
Plantation equipment
|
|
|
1,552,797
|
|
|
|
1,199,503
|
|
Office equipment
|
|
|
109,018
|
|
|
|
110,031
|
|
|
|
|
|
|
|
|
|
|
Total cost
|
|
|
14,727,617
|
|
|
|
12,472,755
|
|
Less accumulated depreciation
|
|
|
(589,932
|
)
|
|
|
(567,573
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
14,137,685
|
|
|
$
|
11,905,182
|
|
Commencing in June 2008, Asideros I purchased certain equipment for purposes of rapidly clearing the land, preparing the land for planting, and planting the Jatropha trees. The Company has capitalized farming equipment and costs related to the development of land for farm use in accordance with generally accepted accounting principles for accounting by agricultural producers and agricultural cooperatives. Plantation equipment is depreciated using the straight-line method over estimated useful lives of 5 to 15 years. Depreciation expense has been capitalized as part of plantation development costs through the date that the plantation becomes commercially productive. The initial plantations were deemed to be commercially productive on October 1, 2009, at which date the Company commenced the depreciation of plantation development costs over estimated useful lives of 10 to 35 years, depending on the nature of the development. Developments and other improvements with indefinite lives are capitalized and not depreciated. Other developments that have a limited life and intermediate-life plants that have growth and production cycles of more than one year are being depreciated over their useful lives once they are placed in service. The land, plantation development costs, and plantation equipment are located in Mexico and in Belize. During the period we recognized an impairment loss related to the fair value of Plantation Development Cost and Deferred Growing Cost. See Note 10 below.
Note 6 – Accrued Payroll and Payroll Taxes
A significant portion of accrued payroll and payroll taxes relates to unpaid compensation for officers and directors that are no longer affiliated with the Company. Accrued payroll taxes will become due upon payment of the related accrued compensation.
Accrued payroll and payroll taxes are composed of the following:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Accrued payroll, vacation, and related payroll taxes
|
|
|
|
|
|
|
for current officers
|
|
$
|
1,011,913
|
|
|
$
|
965,946
|
|
Other former officers and directors
|
|
|
-
|
|
|
|
77,750
|
|
Accrued payroll taxes on accrued compensation to
|
|
|
|
|
|
|
|
|
former officers and directors
|
|
|
-
|
|
|
|
3,067
|
|
|
|
|
|
|
|
|
|
|
Accrued payroll and payroll taxes
|
|
$
|
1,011,913
|
|
|
$
|
1,046,763
|
|
Note 7 – Debt
Notes Payable to Shareholders
The Company has notes payable to certain shareholders in the aggregate amount of $26,000 at September 30, 2012 and December 31, 2011. The notes originated between 1997 and 1999, bear interest at 12%, are unsecured, and are currently in default. Accrued interest on the notes totaled $65,726 and $46,415 at September 30, 2012 and December 31, 2011, respectively.
As more fully disclosed in Note 4 the Company has promissory notes to the former shareholders of TAL in the amount of $526,462 Belize dollars, (US $282,983 based on exchange rates in effect at September 30, 2012), including capitalized interest of $10,322 Belize Dollars. These notes payable to shareholders were interest free through September 30, 2009, and then bear interest at 8% per annum through the maturity date. The notes are secured by a mortgage on the land and related improvements. The notes, plus any related accrued interest, were due on August 15, 2012. The holders of these notes have not yet declared a formal default and have not taken any action to foreclose. The holders of the loans have previously voluntarily agreed to extend the maturity date of these loans to the August 15, 2012 date.
Mortgage Notes Payable
Two investors holding the preferred membership units of GCE Mexico also directly funded the purchase by Asideros I of approximately 5,000 acres of land in the State of Yucatan in Mexico by the payment of $2,051,282, The land was acquired in the name of Asideros I and Asideros I issued a mortgage in the amount of $2,051,282 in favor of these two investors. These two investors also directly funded the purchase by Asideros 2 of approximately 4,500 acres, and a second parcel by Asideros 2 of approximately 600 acres of land adjacent to the land owned by Asideros I by the total payment of $963,382. The land was acquired in the name of Asideros 2 and Asideros 2 issued mortgages in the amount of $963,382 in favor of these two investors. These mortgages bear interest at the rate of 12% per annum, payable quarterly. The parties have agreed to accrue the interest until such time as the Board determines that there is sufficient cash flow to pay all accrued interest. The initial mortgage, including any unpaid interest, is due in April 2018. The second mortgage, including any unpaid interest, is due in February 2020.
In October 2011, these two investors also directly funded the purchase by Asideros 3 of approximately 5,600 acres for a total $2,095,525. The land was acquired in the name of Asideros 3 and Asideros 3 issued mortgages in the amount of $2,095,525 in favor of these two investors. These mortgages bear interest at the rate of 12% per annum, payable quarterly. The Board has directed that this interest shall continue to accrue until such time as the Board determines that there is sufficient cash flow to pay all accrued interest. The initial mortgage, including any unpaid interest, is due in October 2021.
Settlement of Liabilities
The Company has settled certain liabilities previously carried on the consolidated balance sheet, which settlements resulted in significant gains. The total gain on settlement of liabilities for the nine months ended September 30, 2012 was $595,290. This gain was primarily from the settlement or expiration of historic liabilities primarily incurred by prior management in connection with the discontinued pharmaceutical operations that had been on the Company’s records for several years. In addition, the Company determined that certain liabilities had been extinguished with the passage of time for collection under the laws.
Common Stock
On April 25, 2011 an accredited investor in the Company exercised a Warrant for 945,000 shares at $.03 per share for net cash proceeds paid to the Company of $28,350. The proceeds from this sale were used for general corporate purposes.
On May 31, 2011 an accredited investor in the Company exercised a Warrant for 945,000 shares at $.03 per share for net cash proceeds paid to the Company of $28,350. The proceeds from this sale were used for general corporate purposes.
In April 2012, the Company issued shares to an accredited investor at a price of $.03 per share for cash proceeds paid to the Company of $250,000. The proceeds from this sale were used for general corporate purposes.
Note 8 – Stock Options and Warrants
Stock Options and Compensation-Based Warrants
The Company has three incentive stock option plans wherein 44,000,000 shares of the Company’s common stock are reserved for issuance there under.
On July 19, 2010, the stockholders approved the 2010 Stock Incentive Plan. The granting of options and other stock awards is an important incentive tool for the Company’s employees, officers and directors. The 2010 Plan provides a means by which employees, directors and consultants of the Company may be given an opportunity to benefit from increases in the value of our common stock, and to attract and retain the services of such persons. All of our employees, directors and consultants are eligible to participate in the 2010 Plan. The total number of shares of common stock which may be offered, or issued as restricted stock or on the exercise of options or Stock Appreciation Rights (SARs) under the Plan shall not exceed twenty million (20,000,000) shares of common stock. The shares subject to an option or SAR granted under the Plan that expire, terminate or are cancelled unexercised shall become available again for grants under this Plan. If shares of restricted stock awarded under the Plan are forfeited to the Company or repurchased by the Company, the number of shares forfeited or repurchased shall again be available under the Plan. Where the exercise price of an option is paid by means of the optionee’s surrender of previously owned shares of common stock or the Company’s withholding of shares otherwise issuable upon exercise of the option as may be permitted herein, only the net number of shares issued and which remain outstanding in connection with such exercise shall be deemed “issued” and no longer available for issuance under this Plan. No eligible person shall be granted options or other awards during any twelve-month period covering more than Five Hundred Thousand (500,000) shares of common stock.
No income tax benefit has been recognized for share-based compensation arrangements. The Company has recognized plantation development costs totaling $124,565 related to a liability that was satisfied by the issuance of warrants in 2008. Otherwise, no share-based compensation cost has been capitalized in the condensed consolidated balance sheet.
A summary of the status of options and compensation-based warrants at September 30, 2012, and changes during the period then ended is presented in the following
table:
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
|
Shares
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
|
Under
|
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
|
|
Option
|
|
|
Price
|
|
Life
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2011
|
|
|
74,731,483
|
|
|
$
|
0.03
|
|
4.7 years
|
|
$
|
192,033
|
|
Granted
|
|
|
1,000,000
|
|
|
|
0.04
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
Forfeited
|
|
|
(4,500,000
|
)
|
|
|
0.04
|
|
|
|
|
|
|
Expired
|
|
|
(13,250,000
|
)
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 31, 2012
|
|
|
57,981,483
|
|
|
|
0.03
|
|
4.2 years
|
|
$
|
29,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 31, 2012
|
|
|
40,968,983
|
|
|
$
|
0.03
|
|
3.3 years
|
|
$
|
29,297
|
|
At September 30, 2012, options to acquire 80,000 shares of common stock have no stated contractual life. The fair value of other stock option grants and compensation-based warrants is estimated on the date of grant or issuance using the Black-Scholes option pricing model. No options or warrants were issued in the nine-month period ended September 30, 2012 and 1,350,000 of options were issued the nine months ended September 30, 2011. The expected life of stock options represents the period of time that the stock options granted are expected to be outstanding prior to exercise. The expected volatility is based on the historical price volatility of the Company’s common stock. The risk-free interest rate represents the U.S. Treasury constant maturities rate for the expected life of the related stock options. The dividend yield represents anticipated cash dividends to be paid over the expected life of the stock options. The intrinsic values are based on a September 30, 2012 closing price of $0.010 per share.
Share-based compensation from all sources recorded during the nine months ended September 30, 2012 and 2011 was $39,204 and $69,858, respectively, and is reported as general and administrative expense in the accompanying condensed consolidated statements of operations. As of September 30, 2012, there is approximately $31,359 of unrecognized compensation cost related to stock-based payments that will be recognized over a weighted average period of approximately 1.2 year.
Stock Warrants
A summary of the status of the warrants outstanding at September 30, 2012, and changes during the six months then ended is presented in the following table:
|
|
|
|
|
Weighted
|
|
Weighted
|
|
|
|
|
|
Shares
|
|
|
Average
|
|
Average
|
|
Aggregate
|
|
|
|
Under
|
|
|
Exercise
|
|
Remaining
|
|
Intrinsic
|
|
|
|
Warrant
|
|
|
Price
|
|
Contractual Life
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2011
|
|
|
24,585,662
|
|
|
$
|
0.01
|
|
1.75 years
|
|
$
|
457,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2012
|
|
|
24,585,662
|
|
|
$
|
0.01
|
|
1.00 years
|
|
$
|
45,755
|
|
Note 9 - Discontinued Operations
Pursuant to accounting rules for discontinued operations, the Company has classified all gain, revenue and expense related to the operations, assets, and liabilities of its bio-pharmaceutical business as discontinued operations. For the nine-month period ended September 30, 2012 and year ended December 31, 2011, Income from Discontinued Operations consists of the foreign currency transaction gains or losses related to current liabilities associated with the discontinued operations that are denominated in Euros.
Note 10 – Impairment of assets and fair value measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, a hierarchy has been established by generally accepted accounting principles which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data.
Level 3 – Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
As of September 30, 2012 and 2011, the Company does not have any assets or liabilities measured at fair value on a recurring basis.
Fair value is used on a nonrecurring basis to measure certain assets when applying lower of cost or market accounting or when adjusting carrying values. Fair value is also used when evaluating impairment on certain assets, including deferred growing costs and property and equipment.
The following is a tabular presentation of assets measured at fair value on a nonrecurring basis along with the level within the hierarchy in which the fair value measurement falls as of September 30, 2012 :
|
|
|
|
Fair Value of Measurements at Reporting
|
|
|
|
September 30,
|
|
Date Using
|
|
Description
|
|
2012
|
|
Level 1
|
Level 2
|
|
Level 3
|
|
|
|
$
|
4,238,909
|
|
|
|
|
$
|
4,238,909
|
|
Deferred Growing Cost
|
|
|
8,478,489
|
|
|
|
|
|
8,478,489
|
|
Plantation Development Cost
|
|
$
|
12,717,398
|
|
|
|
|
$
|
12,717,398
|
|
The Company performed an analysis of long-lived assets and has identified 313 hectares (773 acres) considered to be fallow based on the following condition of the trees: no vegetative growth for the age of the trees, bad origins, bad land preparation, and no resistance to fungus. The trees are not expected to produce a yield or generate any future revenues. As such, the Company has identified the costs associated with these hectares originally capitalized as Plantation Development Cost and Deferred Growing Cost, which capitalized costs are not expected to be recoverable, and has recognized the following impairment charges for the period ended September 30, 2012.
Deferred growing costs with a carrying value of $4,310,038 were written down to the fair value of $4,238,909 resulting in an impairment charge of $71,129, which was included in net loss for the period. The Company estimated the fair value of these assets using the income based approach considering the cash flows that would be obtained as a result of distribution of product tied to those deferred growing costs. The income based approach utilizes unobservable inputs. Due to the use of unobservable inputs, we classify the fair value of these growing areas within Level 3.
Plantation development costs (included in property and equipment), which had a carrying value of $8,934,313 were written down to the fair value of $8,478,489, resulting in an impairment charge of $455,824, which was included in net loss for the period. The Company estimated the fair value of these assets using the income based approach considering the cash flows that would be obtained as a result of the production and distribution of product in areas of continued production. The income based approach utilizes unobservable inputs. Due to the use of unobservable inputs, we classify the fair value of these growing areas within Level 3.
There was no impairment charge and no related nonrecurring fair value measurement, for the period ended September 30, 2011.