New
Jersey
|
000-27592
|
22-1436279
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
Exhibit
Number
|
Description
|
|
10.1
|
Agreement
and Plan of Merger, dated July 2, 2007, among Tech Laboratories,
Inc., BSI
Acquisitions, Inc. and Biodeisel Solutions, Inc. (incorporated by
reference to the exhibits to Registrant's Form 8-K filed on July
6,
2007)
|
|
10.2
|
Securities
Purchase Agreement, dated July 2, 2007, by and between Tech Laboratories,
Inc. and Cornell Capital Partners L.P. (incorporated by reference to
the exhibits to Registrant's Form 8-K filed on July 6,
2007)
|
|
10.3
|
$2,000,000
principal amount Secured Convertible Debenture, dated July 2, 2007,
by and
between Tech Laboratories, Inc. and Cornell Capital Partners
L.P. (incorporated by reference to the exhibits to Registrant's Form
8-K filed on July 6, 2007)
|
|
10.4
|
Warrant
to purchase 33,750,000 shares of Common Stock of Tech Laboratories,
Inc.
dated April 20, 2007 (incorporated by reference to the exhibits to
Registrant's Form 8-K filed on July 6, 2007)
|
|
10.5
|
Registration
Rights Agreement, dated April 20, 2007, by and between Tech Laboratories,
Inc. and Cornell Capital Partners L.P. (incorporated by reference
to the
exhibits to Registrants Form 8-K filed on April 26,
2007).
|
|
10.6
|
Amendment
No. 1 to Registration Rights Agreement, dated July 2, 2007, by and
between
Tech Laboratories, Inc. and Cornell Capital Partners L.P. (incorporated
by
reference to the exhibits to Registrant's Form 8-K filed on July
6,
2007)
|
|
10.7
|
Security
Agreement, dated July 2, 2007, by and between Biodeisel Solutions,
Inc.,
Renewal Fuels, Inc. and Cornell Capital Partners L.P. (incorporated
by
reference to the exhibits to Registrant's Form 8-K filed on July
6,
2007)
|
TECH LABORATORIES, INC. | ||
|
|
|
Dated: September 17, 2007 | By: | /s/ John King |
Name: John King |
||
Title:
Chief Executive Officer
|
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
1
|
Financial
Statements as of December 31, 2006 and for the
Years
Ended December 31, 2006 and 2005:
|
|
Balance
Sheet
|
2
|
Statements
of Operations
|
3
|
Statements
of Changes in Stockholder’s Equity (Deficiency)
|
4
|
Statements
of Cash Flows
|
5
|
Notes
to Financial Statements
|
6
|
ASSETS
|
||||
Current
assets:
|
||||
Cash
|
$
|
52,626
|
||
Inventories
|
49,769
|
|||
Prepaid
expenses and other current assets
|
36,287
|
|||
Total
current assets
|
138,682
|
|||
Property
and equipment - net
|
92,425
|
|||
Other
assets
|
17,437
|
|||
Total
assets
|
$
|
248,544
|
||
LIABILITIES
AND STOCKHOLDER’S DEFICIENCY
|
||||
Current
liabilities:
|
||||
Accounts
payable
|
$
|
222,160
|
||
Line
of credit
|
60,000
|
|||
Current
maturities of capital lease obligation
|
3,446
|
|||
Customer
deposits
|
137,224
|
|||
Accrued
employee bonuses
|
91,218
|
|||
Other
accrued expenses
|
10,801
|
|||
Total
current liabilities
|
524,849
|
|||
Long-term
portion of capital lease obligation - net of current
maturities
|
6,362
|
|||
531,211
|
||||
Commitments
and contingencies
|
||||
REDEEMABLE,
CONVERTIBLE PREFERRED STOCK SUBSCRIBED
|
100,000
|
|||
Stockholder’s
deficiency:
|
||||
Capital
stock:
|
||||
Preferred
stock, Class A - par value of $.001; 40,000,000 shares
|
||||
authorized;
no shares issued
|
-
|
|||
Common
stock - par value of $.001; 10,000,000 shares authorized;
|
||||
7,000,000
shares issued and outstanding
|
7,000
|
|||
Additional
paid-in capital
|
132,924
|
|||
Deficit
|
(522,591
|
)
|
||
Total
stockholder’s deficiency
|
(382,667
|
)
|
||
Total
liabilities and stockholder’s deficiency
|
$
|
248,544
|
2006
|
2005
|
||||||
Revenues
|
$
|
1,838,156
|
$
|
2,362,418
|
|||
Cost
of goods sold
|
1,307,643
|
1,276,682
|
|||||
Gross
profit
|
530,513
|
1,085,736
|
|||||
Other
operating expenses:
|
|||||||
Employee
compensation and benefits
|
494,646
|
301,934
|
|||||
Occupancy
and equipment
|
254,078
|
106,459
|
|||||
Advertising
|
90,149
|
162,257
|
|||||
Research
and development
|
84,283
|
183,893
|
|||||
Other
general and administrative
|
198,232
|
218,591
|
|||||
Total
other operating expenses
|
1,121,388
|
973,134
|
|||||
Other
expense - interest
|
3,073
|
1,020
|
|||||
Net
income (loss)
|
$
|
(593,948
|
)
|
$
|
111,582
|
||
Net
income (loss) per share:
|
|||||||
Basic
|
$
|
(0.08
|
)
|
$
|
0.02
|
||
Diluted
|
$
|
(0.08
|
)
|
$
|
0.02
|
||
Weighted
average shares outstanding:
|
|||||||
Basic
|
7,000,000
|
7,000,000
|
|||||
Diluted
|
7,000,000
|
7,000,000
|
Additional
|
|||||||||||||
Common
|
Paid-In
|
||||||||||||
Stock
|
Capital
|
Deficit
|
Total
|
||||||||||
BALANCES
- December 31, 2004
|
$
|
7,000
|
$
|
41,144
|
$
|
(31,891
|
)
|
$
|
16,253
|
||||
|
|||||||||||||
Capital
contributions
|
-
|
59,280
|
-
|
59,280
|
|||||||||
|
|||||||||||||
Stock
option expense
|
-
|
19,500
|
-
|
19,500
|
|||||||||
|
|||||||||||||
Net
income
|
-
|
-
|
111,582
|
111,582
|
|||||||||
BALANCES
- December 31, 2005
|
7,000
|
119,924
|
79,691
|
206,615
|
|||||||||
|
|||||||||||||
S
Corporation distributions
|
-
|
-
|
(8,334
|
)
|
(8,334
|
)
|
|||||||
|
|||||||||||||
Stock
option expense
|
-
|
13,000
|
-
|
13,000
|
|||||||||
|
|||||||||||||
Net
loss
|
-
|
-
|
(593,948
|
)
|
(593,948
|
)
|
|||||||
|
|||||||||||||
BALANCES
- December 31, 2006
|
$
|
7,000
|
$
|
132,924
|
$
|
(522,591
|
)
|
$
|
(382,667
|
)
|
2006
|
2005
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
Net
income (loss)
|
$
|
(593,948
|
)
|
$
|
111,582
|
||
Adjustments
to reconcile net income (loss) to
net
cash provided by (used in) operating activities:
|
|||||||
Depreciation
and amortization
|
32,637
|
8,538
|
|||||
Stock-based
compensation
|
13,000
|
19,500
|
|||||
Changes
in operating assets and liabilities, net:
|
|||||||
Receivables
|
11,198
|
(10,703
|
)
|
||||
Inventories
|
109,470
|
(134,243
|
)
|
||||
Prepaid
expenses
|
(3,227
|
)
|
(33,060
|
)
|
|||
Accounts
payable
|
71,691
|
117,380
|
|||||
Accrued
bonuses
|
47,002
|
44,216
|
|||||
Other
accrued expenses
|
2,034
|
8,513
|
|||||
Customer
deposits
|
(19,425
|
)
|
156,154
|
||||
NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
(329,568
|
)
|
287,877
|
||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Purchases
of property and equipment
|
(29,383
|
)
|
(82,050
|
)
|
|||
Refund
(payment) of deposit
|
4,646
|
(16,707
|
)
|
||||
CASH
USED IN INVESTING ACTIVITIES
|
(24,737
|
)
|
(98,757
|
)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Net
increase (decrease) in line of credit
|
41,107
|
(9,791
|
)
|
||||
Repayments
of capital lease obligation
|
(2,692
|
)
|
-
|
||||
Receipt
of deposit for subscription of preferred stock
|
100,000
|
-
|
|||||
Capital
contributions
|
-
|
59,280
|
|||||
S
Corporation distributions
|
(8,334
|
)
|
-
|
||||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
130,081
|
49,489
|
|||||
NET
INCREASE (DECREASE) IN CASH
|
(224,224
|
)
|
238,609
|
||||
Cash
- beginning of year
|
276,850
|
38,241
|
|||||
Cash
- end of year
|
$
|
52,626
|
$
|
276,850
|
|||
SUPPLEMENTAL
DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES -
|
|||||||
Equipment
acquired under capital lease
|
$
|
12,500
|
$
|
-
|
|||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|||||||
Interest
paid
|
$
|
3,073
|
$
|
1,020
|
|||
Income
taxes paid
|
$
|
-
|
$
|
-
|
NOTE 1 |
NATURE
OF BUSINESS AND GOING
CONCERN
|
NOTE 2 |
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
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”
|
NOTE 3 |
FINANCIAL
INSTRUMENTS AND CONCENTRATIONS OF CREDIT
RISK
|
NOTE 4 |
PROPERTY
AND EQUIPMENT
|
Computer
equipment
|
$
|
50,242
|
||
Production
and shop equipment
|
15,092
|
|||
Office
furniture and equipment
|
18,406
|
|||
Vehicles
|
16,284
|
|||
Leasehold
improvements
|
34,024
|
|||
Subtotal
|
134,048
|
|||
Less
accumulated depreciation and amortization
|
41,623
|
|||
Property
and equipment - net
|
$
|
92,425
|
NOTE 5 |
LINE
OF CREDIT
|
NOTE 6 |
LEASE
COMMITMENTS
|
2007
|
$
|
4,814
|
||
2008
|
4,814
|
|||
2009
|
2,407
|
|||
Total
future minimum lease payments
|
12,035
|
|||
Less
amount representing interest
|
2,227
|
|||
Present
value of future minimum lease payments
|
9,808
|
|||
Less
current maturities
|
3,446
|
|||
Long-term
portion of capital lease obligation
|
$
|
6,362
|
NOTE 7 |
CAPITAL
STOCK
|
NOTE 8 |
STOCK
OPTION PLANS
|
NOTE 9 |
EMPLOYMENT
AGREEMENT
|
NOTE 10 |
OTHER
COMMITMENTS AND
CONTINGENCIES
|
NOTE 11 |
SUBSEQUENT
EVENTS
|
Pro
Forma Adjustments
|
||||||||||||||||||||||
Renewal
Fuels
|
Biodiesel
Solutions
Inc
|
Combined
|
Note
|
Debit
|
Credit
|
Pro
Forma Combined
|
||||||||||||||||
ASSETS
|
||||||||||||||||||||||
|
||||||||||||||||||||||
Current
assets
|
||||||||||||||||||||||
Cash
|
$
|
116,030
|
$
|
77,986
|
|
|
A
|
1,770,000
|
|
|
|
|||||||||||
|
$
|
194,016
|
B
|
500,000
|
$
|
1,464,016
|
||||||||||||||||
Inventories
|
51,461
|
-
|
51,461
|
51,461
|
||||||||||||||||||
Accounts
receivable
|
-
|
3,877
|
3,877
|
3,877
|
||||||||||||||||||
Other
current assets
|
24,578
|
11,450
|
36,028
|
36,028
|
||||||||||||||||||
Total
current assets
|
192,069
|
93,313
|
285,382
|
1,800,000
|
500,000
|
1,555,382
|
||||||||||||||||
|
||||||||||||||||||||||
Property
and equipment, net
|
57,672
|
90,447
|
148,119
|
148,119
|
||||||||||||||||||
Note
receivable - Biodiesel
|
200,000
|
-
|
200,000
|
C
|
200,000
|
-
|
||||||||||||||||
Other
assets
|
-
|
31,074
|
31,074
|
31,074
|
||||||||||||||||||
Deferred
financing fees
|
1,678,896
|
-
|
1,678,896
|
A
|
230,000
|
1,908,896
|
||||||||||||||||
Intangible
assets
|
177,833
|
-
|
177,833
|
B
|
800,000
|
977,833
|
||||||||||||||||
Tradename
|
118,000
|
-
|
118,000
|
118,000
|
||||||||||||||||||
Goodwill
|
93,705
|
-
|
93,705
|
93,705
|
||||||||||||||||||
|
||||||||||||||||||||||
Total
assets
|
$
|
2,518,175
|
$
|
214,834
|
$
|
2,733,009
|
$
|
2,800,000
|
$
|
700,000
|
$
|
4,833,009
|
||||||||||
|
||||||||||||||||||||||
LIABILITIES
and SHAREHOLDERS’ EQUITY
|
||||||||||||||||||||||
|
||||||||||||||||||||||
Current
liabilities
|
||||||||||||||||||||||
Credit
facilities
|
-
|
$
|
101,130
|
$
|
101,130
|
$
|
101,130
|
|||||||||||||||
Accounts
payable and accrued expenses
|
$
|
199,409
|
102,419
|
301,828
|
301,828
|
|||||||||||||||||
Other
current liabilities
|
-
|
47,083
|
47,083
|
47,083
|
||||||||||||||||||
Note
payable - Renewal
|
-
|
200,000
|
200,000
|
C
|
200,000
|
-
|
||||||||||||||||
Convertible
debt - current
|
1,276,686
|
-
|
1,276,686
|
1,276,686
|
||||||||||||||||||
Customer
deposits
|
2,932
|
-
|
2,932
|
2,932
|
||||||||||||||||||
Total
current liabilities
|
1,479,027
|
450,632
|
1,929,659
|
200,000
|
-
|
1,729,659
|
||||||||||||||||
Convertible
debt - non-current
|
764,169
|
-
|
764,169
|
A
|
547,308
|
1,311,477
|
||||||||||||||||
Preferred
stock of subsidiary
|
-
|
-
|
-
|
B
|
800,000
|
800,000
|
||||||||||||||||
Shareholders’
Equity
|
||||||||||||||||||||||
Common
stock
|
23,805
|
-
|
23,805
|
B
|
2,360
|
26,165
|
||||||||||||||||
Additional
paid in capital
|
6,410,378
|
245,011
|
-
|
|
245,011
|
|||||||||||||||||
A
|
348,287
|
|||||||||||||||||||||
A
|
1,104,405
|
|||||||||||||||||||||
B
|
2,357,640
|
|||||||||||||||||||||
|
-
|
-
|
6,655,389
|
B
|
|
48,181
|
10,268,891
|
|||||||||||||||
Retained
earnings
|
(6,159,204
|
)
|
(480,809
|
)
|
(6,640,013
|
)
|
B
|
3,143,979
|
480,809
|
(9,303,183
|
)
|
|||||||||||
Total
Shareholders’ Equity
|
274,979
|
(235,798
|
)
|
39,181
|
3,388,990
|
4,341,682
|
991,873
|
|||||||||||||||
Total
Liabilities and Shareholders’ Equity
|
$
|
2,518,175
|
$
|
214,834
|
$
|
2,733,009
|
$
|
3,588,990
|
$
|
5,688,990
|
$
|
4,833,009
|
Pro
Forma Adjustments
|
||||||||||||||||||||||
Renewal
Fuels
|
Biodiesel
Solutions
Inc
|
Combined
|
Notes
|
Debit
|
Credit
|
Pro
Forma Combined
|
||||||||||||||||
Revenue
|
$
|
244,087
|
$
|
162,623
|
$
|
406,710
|
H
|
55,218
|
$
|
351,492
|
||||||||||||
Cost
of goods sold
|
142,342
|
99,451
|
241,793
|
D-1
|
55,300
|
-
|
297,093
|
|||||||||||||||
Gross
margin
|
101,745
|
63,172
|
164,917
|
110,518
|
-
|
54,399
|
||||||||||||||||
Operating
expenses:
|
||||||||||||||||||||||
Employee
compensation and benefits
|
34,272
|
164,700
|
198,972
|
198,972
|
||||||||||||||||||
Stock-based
transaction expense
|
5,131,231
|
-
|
5,131,231
|
I
|
5,131,231
|
-
|
||||||||||||||||
Occupancy
and equipment
|
8,257
|
95,165
|
103,422
|
103,422
|
||||||||||||||||||
Advertising
|
43,983
|
24,018
|
68,001
|
68,001
|
||||||||||||||||||
Research
and development
|
-
|
39,863
|
39,863
|
39,863
|
||||||||||||||||||
Other
general and administrative
|
447,285
|
88,292
|
535,577
|
H
|
55,218
|
480,359
|
||||||||||||||||
5,665,028
|
412,038
|
6,077,066
|
-
|
5,186,449
|
890,617
|
|||||||||||||||||
Income
(loss) from operations
|
(5,563,283
|
)
|
(348,866
|
)
|
(5,912,149
|
)
|
110,518
|
5,186,449
|
836,218
|
|||||||||||||
Other
expenses:
|
||||||||||||||||||||||
Deferred
financing fees
|
181,249
|
-
|
181,249
|
F1
|
336,000
|
517,249
|
||||||||||||||||
Interest
expense - existing debt
|
34,585
|
-
|
34,585
|
E-1
|
54,000
|
88,585
|
||||||||||||||||
Interest
expense - existing debt - BCF
|
333,574
|
333,574
|
G
|
333,574
|
-
|
|||||||||||||||||
Interest
expense - additional debt
|
47,268
|
-
|
47,268
|
E-1
|
767,000
|
814,268
|
||||||||||||||||
Interest
expense - other
|
13,788
|
13,788
|
13,788
|
|||||||||||||||||||
Interest
income
|
(755
|
)
|
-
|
(755
|
)
|
J
|
96,500
|
(97,255
|
)
|
|||||||||||||
Gain
on sale of Fuelmeister Business, net of expenses
|
-
|
(410,512
|
)
|
(410,512
|
)
|
K
|
410,512
|
-
|
||||||||||||||
595,921
|
(396,724
|
)
|
199,197
|
1,567,512
|
430,074
|
(1,336,635
|
)
|
|||||||||||||||
Income
(loss) before income taxes
|
(6,159,204
|
)
|
47,858
|
(6,111,346
|
)
|
(1,678,030
|
)
|
(5,616,523
|
)
|
(2,172,853
|
)
|
|||||||||||
Income
tax expense
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||
Net
income (loss)
|
$
|
(6,159,204
|
)
|
$
|
47,858
|
$
|
(6,111,346
|
)
|
$
|
(1,678,030
|
)
|
$
|
(5,616,523
|
)
|
$
|
(2,172,853
|
)
|
|||||
Earnings
per share:
|
||||||||||||||||||||||
Shares
outstanding:
|
||||||||||||||||||||||
Basic
|
23,650,442
|
7,000,000 |
26,957,566
|
|||||||||||||||||||
Fully
diluted
|
23,650,442
|
7,700,000 |
26,957,566
|
|||||||||||||||||||
Earnings
(loss) per share:
|
||||||||||||||||||||||
Basic
|
$
|
(0.26
|
)
|
$
|
0.01 |
$
|
(0.08
|
)
|
||||||||||||||
Fully
diluted
|
$
|
(0.26
|
)
|
$
|
0.01 |
$
|
(0.08
|
)
|
Pro
Forma Adjustments
|
||||||||||||||||||||||
Renewal
Fuels
|
Biodiesel
Solutions
Inc
|
Combined
|
Notes
|
Debit
|
Credit
|
Pro
Forma Combined
|
||||||||||||||||
Revenue
|
$
|
-
|
$
|
1,838,156
|
$
|
1,838,156
|
$
|
1,838,156
|
||||||||||||||
Cost
of goods sold
|
-
|
1,307,643
|
1,307,643
|
D-2
|
108,000
|
1,415,643
|
||||||||||||||||
Gross
margin
|
-
|
530,513
|
530,513
|
108,000
|
-
|
422,513
|
||||||||||||||||
Operating
expenses:
|
||||||||||||||||||||||
Employee
compensation and benefits
|
-
|
494,646
|
494,646
|
494,646
|
||||||||||||||||||
Stock-based
transaction expense
|
-
|
-
|
-
|
I
|
5,131,231
|
5,131,231
|
||||||||||||||||
Occupancy
and equipment
|
-
|
254,078
|
254,078
|
254,078
|
||||||||||||||||||
Advertising
|
-
|
90,149
|
90,149
|
90,149
|
||||||||||||||||||
Research
and development
|
-
|
84,283
|
84,283
|
B
|
3,143,979
|
3,228,262
|
||||||||||||||||
Other
general and administrative
|
-
|
198,232
|
198,232
|
198,232
|
||||||||||||||||||
|
-
|
1,121,388
|
1,121,388
|
8,275,210
|
-
|
9,396,598
|
||||||||||||||||
Income
(loss) from operations
|
-
|
(590,875
|
)
|
(590,875
|
)
|
8,383,210
|
(8,974,085
|
)
|
||||||||||||||
Other
expenses:
|
||||||||||||||||||||||
Deferred
financing fees
|
-
|
-
|
-
|
F-2
|
1,028,500
|
1,028,500
|
||||||||||||||||
Interest
expense - existing debt
|
-
|
-
|
-
|
E-2
|
162,000
|
162,000
|
||||||||||||||||
Interest
expense - existing debt - BCF
|
-
|
-
|
-
|
G
|
333,574
|
333,574
|
||||||||||||||||
Interest
expense - additional debt
|
-
|
-
|
-
|
E-2
|
931,000
|
931,000
|
||||||||||||||||
Interest
expense - other
|
-
|
3,073
|
3,073
|
3,073
|
||||||||||||||||||
Interest
income
|
-
|
-
|
-
|
J
|
193,000
|
(193,000
|
)
|
|||||||||||||||
|
-
|
3,073
|
3,073
|
2,455,074
|
193,000
|
2,265,147
|
||||||||||||||||
Income
(loss) before income taxes
|
-
|
(593,948
|
)
|
(593,948
|
)
|
10,838,284
|
193,000
|
(11,239,232
|
)
|
|||||||||||||
Income
tax expense
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Net
income (loss)
|
$
|
-
|
$
|
(593,948
|
)
|
$
|
(593,948
|
)
|
$
|
10,838,284
|
$
|
193,000
|
$
|
(11,239,232
|
)
|
|||||||
Earnings
per share:
|
||||||||||||||||||||||
Shares
outstanding:
|
||||||||||||||||||||||
Basic
|
7,000,000 |
26,914,012
|
||||||||||||||||||||
Fully
diluted
|
7,000,000 |
26,914,012
|
||||||||||||||||||||
Earnings
(loss) per share:
|
||||||||||||||||||||||
Basic
|
$
|
(0.08 | ) |
$
|
(0.42
|
)
|
||||||||||||||||
Fully
diluted
|
$
|
(0.08 | ) |
$
|
(0.42
|
)
|
1. |
BASIS
OF PRESENTATION
|
·
|
our
acquisition on July 2, 2007 of Biodiesel Solutions, Inc. (“BSl”),
accounted for as a purchase in accordance with accounting principles
generally accepted in the United States of
America;
|
·
|
additional
debt financing of $2,000,000 provided by Cornell Capital Partners
LP
(“Cornell”) on July 2, 2007, the proceeds of which were used in part to
fund our acquisition of BSI;
|
·
|
our
reverse merger and reorganization as of April 20,
2007;
|
·
|
the
March 30, 2007 acquisition of the assets of the Fuelmeister business
(the
“FuelMeister Business’) of BSI;
|
·
|
additional
debt financing provided by Cornell on April 20, 2007 and May 31, 2007, the
proceeds of which were used in part to fund the acquisition of
the assets
of the FuelMeister Business;
|
·
|
the
continuation of existing debt obligations, primarily to
Cornell;
|
·
|
our
acquisition on July 2, 2007 of BSl, in a transaction accounted
for as a
purchase in accordance with accounting principles generally accepted
in
the United States of America; and
|
·
|
the
additional debt financing of $2,000,000 provided by Cornell on
July 2,
2007, the proceeds of which were used in part to fund our acquisition
of
BSI,
|
2. |
PRO FORMA
ADJUSTMENTS - AS OF JUNE 30, 2007
|
A.
|
To
record the issuance to Cornell of $2,000,000 convertible debentures
and
2,250,000 common stock warrants (33,750,000 prior to our 1-for-15
reverse
stock split on August 1, 2007), net of financing and other fees,
the
proceeds of which were used in part to fund the acquisition of
BSI.
|
Dr.
|
Cr.
|
||||||
Cash
|
$
|
1,770,000
|
|||||
Deferred
financing fees
|
230,000
|
||||||
Convertible
long-term debt - $2,000,000 face amount, net of discount of
$1,452,692
|
$
|
547,308
|
|||||
Additional
paid-in capital - beneficial conversion feature
|
348,287
|
||||||
Additional
paid-in capital - freestanding warrants
|
1,104,405
|
||||||
$
|
2,000,000
|
$
|
2,000,000
|
B. |
To
record the acquisition of BSI in exchange for cash, common stock,
common
stock options and convertible preferred stock of BSI. We have not
yet
fully completed the identification of the intangible assets acquired;
the
purchase price allocation reflected below is based on management’s best
estimate at this time and is not expected to change
significantly.
|
Dr.
|
Cr.
|
||||||
Common
stock - par value
|
$
|
2,360
|
|||||
Common
stock - additional paid-in capital
|
2,357,640
|
||||||
Common
stock issued
|
2,360,000
|
||||||
Preferred
stock of BSI issued
|
800,000
|
||||||
Common
stock options issued
|
48,181
|
||||||
Cash
($500,000, net of cash acquired of $77,986)
|
422,014
|
||||||
Total
consideration issued
|
3,630,195
|
||||||
Net
assets acquired:
|
|||||||
Accounts
receivable
|
$
|
3,877
|
|||||
Other
current assets
|
11,450
|
||||||
Property
& equipment
|
90,447
|
||||||
Other
assets
|
31,074
|
||||||
Credit
facilities
|
101,130
|
||||||
Accounts
payable
|
102,419
|
||||||
Other
current liabilities
|
47,083
|
||||||
Note
payable - Renewal Fuels
|
200,000
|
||||||
In-process
research & development - expensed
|
3,143,979
|
||||||
Intangible
assets
|
800,000
|
||||||
$
|
4,080,827
|
$
|
4,080,827
|
C.
|
To
eliminate the note receivable due from BSI to
Renewal.
|
Dr.
|
Cr.
|
||||||
Note
receivable - Biodiesel
|
$
|
200,000
|
|||||
Note
payable - Renewal
|
$
|
200,000
|
|||||
$
|
200,000
|
$
|
200,000
|
3. |
PRO
FORMA ADJUSTMENTS - AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2006
AND THE
SIX MONTHS ENDED JUNE 30, 2007
|
D-1. |
To
record the depreciation and amortization of acquired property and
equipment and intangible assets of the FuelMeister Business and
BSI for
the six months ended June 30, 2007, as if the assets had been acquired
as
of January 1, 2006.
|
Dr.
|
Cr.
|
||||||
Property
and equipment - assumed blended 10 year life
|
9,300
|
||||||
Intangible
assets - assumed blended 10 year life
|
46,000
|
||||||
Cost
of goods sold - depreciation & amortization expense
|
$
|
55,300
|
|||||
$
|
55,300
|
$
|
55,300
|
D-2. |
To
record the depreciation and amortization of acquired property and
equipment and intangible assets of the FuelMeister Business and
BSI for
the year ended December 31, 2006, as if the assets had been acquired
as of
January 1, 2006.
|
Dr.
|
Cr.
|
||||||
Property
and equipment - assumed blended 10 year life
|
10,000
|
||||||
Intangible
assets - assumed blended 10 year life
|
98,000
|
||||||
Cost
of goods sold - depreciation & amortization expense
|
$
|
108,000
|
|||||
$
|
108,000
|
$
|
108,000
|
E-1. |
To
record interest expense on -
|
(a) |
the
existing convertible debt assumed by the company on April 20, 2007
as a
result of the reverse merger and
|
(b) |
on
the $3,400,000 additional convertible debt financing provided by
Cornell
($1,000,000 on April 20, 2007; $400,000 on May 31, 2007 and $2,000,000
on
July 2, 2007), including amortization of debt discount on an effective
interest method,
|
Dr.
|
Cr.
|
||||||
Interest
expense - existing convertible debt
|
$
|
54,000
|
|||||
Interest
expense - effective interest, including discount amortization,
on
additional convertible debt
|
767,000
|
||||||
$
|
821,000
|
-
|
E-2. |
To
record interest expense on -
|
(a) |
the
existing convertible debt assumed by the company on April 20, 2007
as a
result of the reverse merger and
|
(b) |
on
the $3,400,000 additional convertible debt financing provided by
Cornell
($1,000,000 on April 20, 2007; $400,000 on May 31, 2007 and $2,000,000
on
July 2, 2007), including amortization of debt discount on an effective
interest method,
|
Dr.
|
Cr.
|
||||||
Interest
expense - existing convertible debt
|
$
|
162,000
|
|||||
Interest
expense - effective interest, including discount amortization,
on
additional convertible debt
|
931,000
|
||||||
$
|
1,093,000
|
-
|
F-1. |
To
record amortization of deferred financing fees, on a straight-line
basis,
for the six months ended June 30, 2007 as if the related debt obligations
and associated fees had been incurred as of January 1, 2006 ($514,000,
net
of $178,000 already recognized in our historical statement of
operations).
|
Dr.
|
Cr.
|
||||||
Deferred
financing fees - amortization
|
$
|
336,000
|
|||||
$
|
336,000
|
-
|
F-2. |
To
record amortization of deferred financing fees, on a straight-line
basis,
for the year ended December 31, 2006 as if the related debt obligations
and associated fees had been incurred as of January 1,
2006.
|
Dr.
|
Cr.
|
||||||
Deferred
financing fees - amortization
|
$
|
1,028,500
|
|||||
$
|
1,028,500
|
-
|
G. |
To
adjust the timing of recognition of amortization of beneficial
conversion
feature discount related to existing debt obligations assumed on
April 20,
2007, from the period ended June 30, 2007 to the year ended December
31,
2006, as if such obligations had been assumed as of January 1,
2006.
|
Dr.
|
Cr.
|
||||||
Interest
expense - year ended December 31, 2006
|
$
|
333,574
|
|||||
Interest
expense - six months ended June 30, 2007
|
$
|
333,574
|
|||||
$
|
333,574
|
$
|
333,574
|
H. |
To
remove management fees associated with the Fuelmeister business
received
by BSI and charged to Renewal. At the time we acquired the FuelMeister
Business from BSI, BSI
agreed to provide general management and administrative services
for us,
as well as the use of its facilities. We reimbursed BSI for the
direct
cost of services and facilities, as provided. The agreement effectively
terminated when we acquired BSI on July 2, 2007.
|
Dr.
|
Cr.
|
||||||
Revenues
- six months ended June 30, 2007
|
$
|
55
218
|
|||||
Other
general & administrative expenses
|
$
|
55,218
|
|||||
$
|
55,218
|
$
|
55,218
|
I. |
To
adjust the timing of the recognition of stock-based transaction
expense
related to common stock sold to our founders, as if the transaction
had
taken place as of January 1, 2006
|
Dr.
|
Cr.
|
||||||
Stock
based transaction expense - year ended December 31, 2006
|
$
|
5,131,231
|
|||||
Stock
based transaction expense - six months ended June 30, 2007
|
$
|
5,131,231
|
|||||
$
|
5,131,231
|
$
|
5,131,231
|
J. |
To
record estimated interest income at an assumed rate of 10% p.a.
on net
proceeds of approximately $2,013,560 available from additional
Cornell
debt proceeds ($3,400,000, net of financing and other fees paid
($470,000), and the funding of the cash acquisition costs associated
with
the acquisitions of Fuelmeister $494,426) and Biodiesel $422,014
(net of
cash acquired of $77,986).
|
Dr.
|
Cr.
|
||||||
Interest
income - year ended December 31, 2006
|
$
|
193,000
|
|||||
Interest
income - six months ended June 30, 2007
|
-
|
$
|
96,500
|
K. |
To
remove the net gain on sale of the Fuelmeister Business from the
statement
of operations of BSI.
|
Dr.
|
Cr.
|
||||||
Net
gain on sale of FuelMeister Business
|
$
|
410,512
|
|||||
$
|
410,512
|
L.
|
For
the purposes of pro forma earnings per share for the year ended
December
31, 2006 and the six months ended June 30, 2007, shares issued
in
connection with the reverse merger and re-organization and the
acquisition
of BSI are assumed to have been issued as of January 1, 2006 Because
there
is a pro forma net loss for each period, the effect of outstanding
warrants and conversion options are anti-dilutive and are not recognized
in the calculation of fully diluted pro forma earnings per
share.
|