The carrying amounts of trade receivables and payables, accrued expenses and other current liabilities approximate fair value due to their short-term nature.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities
(“SFAS No. 159”) (now contained in FASB Codification Topic 825-10,
Financial Instruments-Fair Value Option
subsections), which permits companies to choose, at specified election dates, to measure many financial instruments and certain other items at fair value that are not currently measured at fair value. Unrealized gains and losses on items for which the fair
value option has been elected would be reported in earnings at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. The Company did not elect the fair value option for any of its existing financial instruments other than those already measured at fair value. Therefore, our adoption of FASB Codification Topic 825-10 as of January 1, 2008 did not have an impact on our financial position, results of operations or cash flows.
Concentrations of Credit Risk
We maintain our cash with high credit quality financial institutions. The Federal Deposit Insurance Corporation secures each depositor up to $250,000.
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Stock-Based Compensation
Prior to January 1, 2006, we elected to follow Accounting Principles Board Opinion (APB) No. 25,
Accounting for Stock Issued to Employees
, and related interpretations to account for our employee and director stock options, as permitted by Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation
(contained in FASB Codification Topic 718,
Compensation-Stock Compensation
). We accounted for stock-based compensation for non-employees under the fair value method prescribed by SFAS No. 123. Effective January 1, 2006, The Company adopted the fair value recognition provisions of SFAS No. 123 (revised 2004),
Share-Based Payments
, (“SFAS No. 123(R)”) (contained in FASB Codification Topic 718,
Compensation-Stock Compensation
) for all share-based payment awards to employees and directors including stock options, restricted stock units and employee stock purchases related to our employee stock purchase plan. In addition, the Company has applied the provisions of Staff Accounting Bulletin No. 107 (SAB No. 107), issued by the Securities and Exchange Commission, in our adoption of SFAS No. 123(R).
We adopted FASB Codification Topic 718using the modified-prospective-transition method. Under this transition method, stock-based compensation expense recognized after the effective date includes: (1) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the measurement date fair value estimate in accordance with the original provisions of FASB Codification Topic 718, and (2) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the measurement date fair value estimate in accordance with the provisions of FASB Codification Topic 718. Results from prior periods have not been restated and do not include the impact of FASB Codification Topic 718. For the nine-month periods ending September 30, 2012 and year ended December 31, 2011, we recognized no stock-based compensation expense under FASB Codification Topic 718 relating to employee and director stock options, restricted stock units or the employee stock purchase plan.
Stock-based compensation expense recognized each period is based on the greater of the value of the portion of share-base payment awards under the straight-line method or the value of the portion of share-based payment awards that is ultimately expected to vest during the period. FASB Codification Topic 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
Upon adoption of FASB Codification Topic 718, the Company elected to use the Black-Scholes-Merton option-pricing formula to value share-based payments granted to employees subsequent to January 1, 2006 and elected to attribute the value of stock-based compensation to expense using the straight-line single option method. These methods were previously used for our pro forma information required under FASB Codification Topic 718.
On November 10, 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff Position No. FAS 123(R)-3,
Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards
, which detailed an alternative transition method for calculating the tax effects of
stock-based compensation pursuant to FASB Codification Topic 718. This alternative transition method included simplified methods to establish the beginning balance of the additional paid-in capital pool (APIC pool) related to the tax effects of employee stock-based compensation and to determine the subsequent impact on the APIC pool and Statement of Cash Flows of the tax effects of employee stock-based compensation awards that are outstanding upon adoption of FASB Codification Topic 718. Due to the Company’s historical net operating losses, the Company has not recorded the tax effects of employee stock-based compensation and has no APIC pool.
Prior to the adoption of FASB Codification Topic 718, all tax benefits of deductions resulting from the exercise of stock options were required to be presented as operating cash flows in the Consolidated Statement of Cash Flows. FASB Codification Topic 718requires the cash flows resulting from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. Due to our historical net operating loss position, we have not recorded these excess tax benefits as of September 30, 2012.
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Liabilities
We extinguish or write-off liabilities in a manner consistent with ASC 405-20-40-1.
Recently issued Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141 (revised 2007),
Business Combinations
(“SFAS 141R”) (now contained in FASB Codification Topic 805-
Business Combinations)
. Among other changes, FASB Codification Topic 805requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction at fair value; and establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed, including earn-out provisions. Effective January 1, 2009, the Company adopted FASB Codification Topic 805. The adoption of FASB Codification Topic 805has not had and is not expected to have a material impact on the results of operations and financial position.
In April 2008, the FASB issued FASB Staff Position No. 142-3,
Determination of the Useful Life of Intangible Assets
(“FSP No. 142-3”) (now contained in FASB Codification Topic 350-30,
Intangibles other than Goodwill
), which amends the factors that should be considered when developing renewal or extension assumptions used to determine the useful life of an intangible asset under FASB Codification Topic 350-30, in order to improve consistency between FASB Codification Topic 350-30and the period of expected cash flows to measure the fair value of the asset under Statement of Financial Accounting Standards No. 141 (revised 2007),
Business Combinations
, and other U.S. generally accepted accounting practices. Effective January 1, 2009, the Company adopted FASB Codification Topic 350-30. The adoption of FSP No. 142-3 has not had and is not expected to have a material impact on the results of operations and financial position.
In May 2008, the FASB issued SFAS No. 162,
The Hierarchy of Generally Accepted Accounting Principles
(“SFAS 162”). This statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in accordance with GAAP. With the issuance of this statement, the FASB concluded that the GAAP hierarchy should be directed toward the entity and not its auditor, and reside in the accounting literature established by the FASB as opposed to the American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standards No. 69,
The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles
. This statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411,
The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles
. We have evaluated the new statement and have determined that it will not have a significant impact on the determination or reporting of its financial results.
We adopted FIN 48,
Accounting for Uncertainty in Income Taxes – An interpretation of FASB Statement No. 109
(“FIN48”) on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in tax positions by prescribing the recognition threshold a tax position is required to meet before being recognized in the financial statements. It also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We had no unrecognized tax benefits and no accrued interest or penalties recognized as of the date of our adoption of FIN48. During the nine months ended September 30, 2012 there were no changes in our unrecognized tax benefits and we had no accrued interest or penalties as of September 30, 2012.
Reclassifications
Certain reclassifications have been made to the prior period balances to conform to the current period
presentation.
4. Going Concern Uncertainty
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We have incurred net losses in the nine months ended September 30, 2012 and year ended December 31, 2011 and we have had working capital deficiencies both periods.
Ours financial statements have been prepared on the assumption that the Company will continue as a going concern. We are seeking various types of additional funding such as issuance of additional common or preferred stock, additional lines of credit, or issuance of subordinated debentures or other forms of debt. The additional funding would alleviate our working capital deficiency and increase profitability. However, it is not possible to predict the success of management's efforts to achieve profitability or to secure additional funding. Also, there can be no assurance that additional funding will be available when needed or, if available, that its terms will be favorable or acceptable. We are also seeking to renegotiate certain liabilities in order to alleviate the working capital deficiency.
If additional financing arrangements cannot be obtained, we would be materially and adversely affected and there would be substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and realization of assets and classifications of liabilities necessary if the Company becomes unable to continue as a going concern.
5. Income (Loss) Per Share
Basic profit / (loss) per share is computed on the basis of the weighted average number of common stock shares outstanding. At September 30, 2012 the Company had outstanding common stock shares of
469,714,296 used in the calculation of basic earnings per share. Basic Weighted average common stock shares and equivalents for the three months ended September 30, 2012 and 2011 were 474,263,526 and 406,977,049, respectively. As of September 30, 2012 and 2011 the Company had outstanding preferred shares which would have been assumed to be converted and have a dilutive effect of 21,500,000 shares on our common stock. For the nine months ended, September 30, 2012 and 2011, all of the Company's shares of common stock equivalents were excluded from the calculation of diluted loss per common stock share because they were anti-dilutive, due to the Company's net loss in those periods.
6. Property, Plant and Equipment
Property and equipment are stated at cost. Assets held under capital leases are recorded at lease inception at the lower of the present value of the minimum lease payments or the fair market value of the related assets. We follow the practice of capitalizing property and equipment purchased over $5,000. The cost of ordinary
maintenance and repairs is charged to operations. Depreciation and amortization are computed on the straight-line method over the following estimated useful lives of the related assets:
Furniture and fixtures
3 to 7 years
Equipment
7 to 10 years
Leasehold improvements
7 to 10 years
8.
O
ther Intangible Assets
On June 6, 2008, we acquired a mobile water purification plant and computerized ballast water distribution system from Robert Elfstrom. We agreed to purchase these assets in consideration for 1,000,000 shares of the Company’s common stock to be issued as follows: 100,000 shares upon the execution of the Bill of
Sale and the remaining balance of shares to be issued in increments of 300,000 shares each time we accumulate net revenues of $2,000,000 from the utilization of the technology. We initially recorded the asset at the fair value of the full 1,000,000 shares at the date of the sale, which was $215,000, and recorded a liability for the remaining 900,000 shares to be issued. We determined that it was more appropriate to reverse the liability for the remaining contingent shares and to reduce the value of the assets to the fair value of the 100,000 shares issued at execution of the agreement, or $21,500. If and when the remaining shares are issued, they will be recorded as a royalty expense. However, during 2009 a dispute had arisen with Mr. Elfstrom concerning his performance under this arrangement which we felt would directly impact the success of the System. All unpaid compensation whether in stock or fees has been withheld pending final negotiation with Mr. Elfstrom. We have also made arrangements with a manufacturing/ joint venture partner for the production of our own Mobile PureWater System (“MPWS”) which is now being demonstrated in Nigeria and has been offered to several relief agencies. The next generation of the MPWS has been completed by the same manufacturer and is being test in New Jersey.
9.
Investment in Joint Venture and Other
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In March 2008, we entered into a joint venture agreement with Huma-Clean, LLC of Houston Texas. Under the terms of the agreement, the funding for the venture was $800,000, which was advanced in several installments by us. This funding is in the form of a loan that will be repaid out of the initial proceeds of the venture. Any income or loss generated by the joint venture is to be allocated 50% to us and 50% to Huma-Clean, LLC. As of September 30, 2012 we have advanced $780,000 under this agreement, which has been recorded on a cost basis. The investment has not been recorded on an equity method basis because of our inability to exercise significant influence over the venture. Management feels that there is a high degree of uncertainty regarding the collectability of this asset; therefore they have decided to reserve $780,000 for potential impairment of the asset. As of September 30, 2012 the net carrying value of this asset is zero.
10. Notes Payable to Related Parties
From time to time certain employees and/or officers advance funds to the Company in order for the Company to meet its operating needs or make payments directly on the Company’s behalf. Such advances were recorded as liabilities on the Company’s balance sheet in previous years. The amounts were loaned to the Company without any formal note agreement and do not bear interest. In December of 2011, we entered into three separate notes with Peter Ubaldi, our CEO, and Joseph Battiato, our Chairman, and William Merritt, our Managing Director of Business Development, to formalize the advancements that had been made by Mr. Ubaldi and Mr. Battiato. Thus, we entered promissory notes with Mr. Ubaldi for $636,526 and Mr. Battiato for $295,678; which incorporated all previous amounts due to them from previous advancements, notes payable and in the case of Mr. Ubaldi, amounts accrued for wages and benefits (the “Master Notes”). The Master Notes bear interest at 10.00% per annum. At September 31, 2012, the Master Notes had outstanding balances of $632,739 and $290,979, respectively.
11. Notes Payable
In March 2005, we obtained $134,500 under a financing arrangement bearing interest at 7.00% per annum from entity affiliated with our chief executive officer. The note originally matured on September 28, 2005. The note was amended in January 2006 to incorporate the related accrued interest of $7,375 into the principal of the note and extend the maturity date through April 28, 2006. The note is uncollateralized and the proceeds were utilized for working capital. The note is past due and in default. As of September 30, 2012, $183,783 was outstanding on the loan payable.
We have a note payable to Monet Acquisition, LLC, an unaffiliated third party. The note bears interest at a rate of 10.00% per annum and matured on April 25, 2010. It is personally guaranteed by our chief executive officer. The note is past due and in default. As of September 30, 2012, $146,207 is outstanding on the loan payable.
In March 2006, we entered into a note payable for $27,000. This note bears interest at a rate of 7.00% per annum and originally matured on May 27, 2006. The maturity date was extended through December 31, 2007. The note is past due and in default. As of September 30, 2012, $35,986 is outstanding on the loan payable.
On December 1, 2006, we entered into a promissory note with a former director in the amount of $195,000 which bears interest at a fixed rate of 8.00% per annum. The note matured in February of 2007 and is currently in default. As September 30, 2012, $300,700 is outstanding on the loan payable.
In February 2006, we obtained funds under a convertible promissory note with an unaffiliated third party in the amount of $100,000 which bears interest at 10.00% per year. The note matured on February 1, 2007 and is convertible into shares of our common stock at a fixed rate. On January 24, 2011, the company issued 500,000 shares of its common stock as consideration to extend the note due date to December 31, 2011. As of September 30, 2012, $136,446 is outstanding on the loan payable and the note is currently in default.
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From time to time a former employee had advanced the company money to fund operations. As of September 30, 2012, we owe this former employee $54,587 for such advances. There is no interest associated with these advances.
We entered into a letter agreement with a former employee in March 2007. Per the terms of this agreement, we were to pay the former employee $12,000 in monthly installment payments with the entire balance being fully paid no later than November 15, 2007. There is no interest associated with letter agreement. No payments have been made related to this agreement. The note is past due and in default. As of September 30, 2012, $12,000 is outstanding on the loan payable.
In February 2008, we entered into a promissory note for $50,000. The note bears interest at a fixed rate of 12.00% per annum and matured on January 31, 2010. On January 24, 2011 the company issued 500,000 shares of its common stock as consideration to extend the note due date to December 31, 2011. The note is convertible at any time to shares of our common stock at a fixed rate. The note is past due and in default. As of September 30, 2012, $67,000 is outstanding on the loan payable.
In February 2008, we entered into a promissory note for $50,000. The note bears interest at a fixed rate of 12.00% per annum and matures on January 31, 2010. On January 24, 2011 the company issued 500,000 shares of its common stock as consideration to extend the note due date to December 31, 2011.The note is convertible at any time to shares of our common stock at a fixed rate. The note is past due and in default. As of September 30, 2012, $87,500 is outstanding on the loan payable.
In September 2008, we entered into a $100,000 settlement agreement with an unaffiliated third party, of which $25,000 was paid in cash and the remaining $75,000 was to be paid by November 21, 2008. No additional payments have been made. The amount is past due and in default. There is no interest rate associated with this settlement agreement. As of September 30, 2012, $75,000 is outstanding on the loan payable.
In February 2009, we entered into a promissory note for $107,500 with an unaffiliated third party. The note bears interest at a rate of 10.00% per annum and matured on January 31, 2010. The note was extended to August 9, 2010. The note is collateralized by our pledge of 2,150,000 shares of our preferred A shares convertible at a 10 to 1 ratio of common stock. The pledged collateral is to be held in escrow until an event of default or payment in full of the loan. This loan is in default and as of September 30, 2012, $146,598 is outstanding.
On October 29, 2009, our chief executive officer and an affiliated entity entered into a settlement agreement with Lender’s Funding whereby the Company agreed to assume the liability and the parties agreed to enter into an installment note in the principal amount of $7,500 which has no interest rate and payments of $250 are due monthly. The amount is past due and in default. As of September 30, 2012, $6,750 is outstanding. Our chief executive officer is in the process of settling this obligation and the 1,000,000 shares are being held by Lender’s Funding pending final disposition of this obligation.
On September 17, 2010, we entered into a convertible promissory note with Asher Enterprises, Inc., an unaffiliated third party, for a principal amount of $27,500 ($25,000 net to the Company after paying $2,500 in finance related charges). The promissory note has an interest rate of 8.00% per annum, a default interest rate of 22.00%, and matured on June 20, 2011. Asher Enterprises may elect to convert the note in shares of our common stock any time after six months from September 17, 2010 at conversion rate equal to a 42.0% discount to the three lowest closing market prices for the 10 days preceding its election to convert. As a result we booked a beneficial conversion feature of $19,068. As of September 30, 2012, zero is due and outstanding on the note due to the fact that Asher Enterprises elected to convert its note into 1,750,958 shares of our common stock.
On October 8, 2010, we entered into a convertible promissory note with Asher Enterprises, Inc., an unaffiliated third party, for a principal amount of $25,000.The promissory note had an interest rate of 8.00% per annum, a default interest rate of 22.00%, and matured on August 19, 2011. Asher Enterprises had an option to convert the note in shares of our common stock any time after six months from October 8,
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2010 at conversion rate equal to a 49.0% discount to the three lowest closing market prices for the 10 days preceding its election to convert. As a result we booked a beneficial conversion feature of $24,020. As of September 30, 2012, zero is due and outstanding on the note due to the fact that Asher Enterprises elected to convert its note into 3,015,309 shares of our common stock.
On November 17, 2010, we entered into a convertible promissory note with Asher Enterprises, Inc., an unaffiliated third party, for a principal amount of $27,500 ($25,000 net to the Company after paying $2,500 in finance related charges). The promissory note had an interest rate of 8.00% per annum, a default interest rate of 22.00%, and matures on July 12, 2011. Asher Enterprises had an option to convert the note in shares of our common stock any time after six months from November 17, 2010 at conversion rate equal to a 49.0% discount to the three lowest closing market prices for the 10 days preceding its election to convert. As a result we booked a beneficial conversion feature of $26,422. As of September 30, 2012, zero is due and outstanding on the note due to the fact that Asher Enterprises elected to convert its note into 3,647,192 shares of our common stock.
On December 15, 2010, we entered into a convertible promissory note for a principal amount of $200,000 with an unaffiliated third party. The promissory note has an interest rate of 8.00% per annum, and matured
on August 19, 2011. As of September 30, 2012 $228,701 is due and outstanding on the note. The note is currently in default.
On April 1, 2011, we entered into a convertible promissory note with Asher Enterprises, Inc., an unaffiliated third party, for a principal amount of $32,500. The promissory note had an interest rate of 8.00% per annum, a default interest rate of 22.00%, and matures on January 30, 2011. Asher Enterprises had an option to convert the note in shares of our common stock any time after six months from the date of the note at conversion rate equal to a 49.0% discount to the three lowest closing market prices for the 10 days preceding its election to convert. As a result we booked a beneficial conversion feature of $31,225. We made a partial repayment of $4,500 and prepayment penalty of $7,500. This note was converted into 7,413,181 shares of common stock on October 17, 2011. As of September 30, 2012, zero was outstanding.
On May 3, 2011, we entered into a convertible promissory note with Asher Enterprises, Inc., an unaffiliated third party, for a principal amount of $32,500. The promissory note has an interest rate of 8.00% per annum, a default interest rate of 22.00%, and matured on January 30, 2011. Asher Enterprises may elect to convert the note in shares of our common stock any time after six months from the date of the note at conversion rate equal to a 49.0% discount to the three lowest closing market prices for the 10 days preceding its election to convert. As a result we booked a beneficial conversion feature of $31,225. We repaid this note prior to maturity; therefore, we paid a prepayment penalty of $17,532. As of September 30, 2012, zero was outstanding.
On July 18, 2011, we entered into a convertible promissory note with Asher Enterprises, Inc., an unaffiliated third party, for a principal amount of $27,500. The promissory note has an interest rate of 8.00% per annum, a default interest rate of 22.00%, and matures on January 30, 2011. Asher Enterprises may elect to convert the note in shares of our common stock any time after six months from the date of the note at conversion rate equal to a 42.0% discount to the three lowest closing market prices for the 10 days preceding its election to convert. As a result we booked a beneficial conversion feature of $19,914. On January 26, 2012, January 31, 2012 and February 15, 2012, Asher elected to convert this note into 1,904,763, 1,562,500 and 1,081,967 shares of our common stock, respectively, for a total of 4,549,230 shares of our common stock. As of September 30, 2012 the outstanding balance was zero.
On August 12, 2011, we entered into a promissory note to provided financing up to $1,500,000 with an interest rate of 10% per annum on the outstanding balance, with a due date of August 11, 2014. On August 12, 2011 we received the first advance of $225,000. On August 26, 2011 we received a second advance of $225,000. On October 21, 2011 we received the final advance of $1,050,000. As of September 30, 2012, the outstanding balance was $1,649,219. On September 30, 2012, the investor advanced an additional $80,000 under the same terms.
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Effective April 16, 2012, we entered into a convertible promissory note with Asher Enterprises, Inc., an unaffiliated third party, for a principal amount of $78,500. The promissory note has an interest rate of 8.00% per annum, a default interest rate of 22.00%, and matures on January 2, 2013. Asher Enterprises may elect to convert the note in shares of our common stock any time after six months from the date of the note at conversion rate equal to a 42.0% discount to the three lowest closing market prices for the 10 days preceding its election to convert. As a result we booked a beneficial conversion feature of $56,845. As of September 30, 2012 $81,640 was due and outstanding on the convertible promissory note.
12. Defaults of Notes Payable
In March 2005, we obtained $134,500 under a financing arrangement bearing interest at 7.00% per annum from entity affiliated with our chief executive officer. The note originally matured on September 28, 2005. The note was amended in January 2006 to incorporate the related accrued interest of $7,375 into the principal of the note and extend the maturity date through April 28, 2006. The note is uncollateralized and the proceeds were utilized for working capital. The note is past due and in default. As of September 30, 2012, $183,783 was outstanding on the loan payable.
We have a note payable to Monet Acquisition, LLC, an unaffiliated third party. The note bears interest at a rate of 10.00% per annum and matured on April 25, 2010. It is personally guaranteed by our chief executive officer. The note is past due and in default. As of September 30, 2012, $146,207 is outstanding on the loan payable.
In March 2006, we entered into a note payable for $27,000. This note bears interest at a rate of 7.00% per annum and originally matured on May 27, 2006. The maturity date was extended through December 31, 2007. The note is past due and in default. As of September 30, 2012, $35,986 is outstanding on the loan payable.
On December 1, 2006, we entered into a promissory note with a former director in the amount of $195,000 which bears interest at a fixed rate of 8.00% per annum. The note matured in February of 2007 and is currently in default. As September 30, 2012, $300,700 is outstanding on the loan payable.
In February 2006, we obtained funds under a convertible promissory note with an unaffiliated third party in the amount of $100,000 which bears interest at 10.00% per year. The note matured on February 1, 2007 and is convertible into shares of our common stock at a fixed rate. On January 24, 2011, the company issued 500,000 shares of its common stock as consideration to extend the note due date to December 31, 2011. As of September 30, 2012, $136,446 is outstanding on the loan payable and the note is currently in default.
We entered into a letter agreement with a former employee in March 2007. Per the terms of this agreement, we were to pay the former employee $12,000 in monthly installment payments with the entire balance being fully paid no later than November 15, 2007. There is no interest associated with letter agreement. No payments have been made related to this agreement. The note is past due and in default. As of September 30, 2012, $12,000 is outstanding on the loan payable.
In February 2008, we entered into a promissory note for $50,000. The note bears interest at a fixed rate of 12.00% per annum and matured on January 31, 2010. On January 24, 2011 the company issued 500,000 shares of its common stock as consideration to extend the note due date to December 31, 2011. The note is convertible at any time to shares of our common stock at a fixed rate. The note is past due and in default. As of September 30, 2012, $67,000 is outstanding on the loan payable.
In February 2008, we entered into a promissory note for $50,000. The note bears interest at a fixed rate of 12.00% per annum and matures on January 31, 2010. On January 24, 2011 the company issued 500,000 shares of its common stock as consideration to extend the note due date to December 31, 2011.The note is
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convertible at any time to shares of our common stock at a fixed rate. The note is past due and in default. As of September 30, 2012, $87,500 is outstanding on the loan payable.
In September 2008, we entered into a $100,000 settlement agreement with an unaffiliated third party, of which $25,000 was paid in cash and the remaining $75,000 was to be paid by November 21, 2008. No additional payments have been made. The amount is past due and in default. There is no interest rate associated with this settlement agreement. As of September 30, 2012, $75,000 is outstanding on the loan payable.
In February 2009, we entered into a promissory note for $107,500 with an unaffiliated third party. The note bears interest at a rate of 10.00% per annum and matured on January 31, 2010. The note was extended to August 9, 2010. The note is collateralized by our pledge of 2,150,000 shares of our preferred A shares convertible at a 10 to 1 ratio of common stock. The pledged collateral is to be held in escrow until an event of default or payment in full of the loan. This loan is in default and as of September 30, 2012, $146,598 is outstanding.
On October 29, 2009, our chief executive officer and an affiliated entity entered into a settlement agreement with Lender’s Funding whereby the Company agreed to assume the liability and the parties agreed to enter into an installment note in the principal amount of $7,500 which has no interest rate and payments of $250 are due monthly. The amount is past due and in default. As of September 30, 2012, $6,750 is outstanding. Our chief executive officer is in the process of settling this obligation and the 1,000,000 shares are being held by Lender’s Funding pending final disposition of this obligation.
On December 15, 2010, we entered into a convertible promissory note for a principal amount of $200,000 with an unaffiliated third party. The promissory note has an interest rate of 8.00% per annum, and matured on August 19, 2011. As of September 30, 2012 $228,701 is due and outstanding on the note. The note is currently in default.
13. Credit Union Participations
We no longer services automobile finance receivables. However, there was one remaining credit union relationship (Houston Postal Credit Union/Plus4 Credit Union) through our former wholly owned subsidiary, Autocorp Financial Services, Inc., which resulted in a dispute over amounts due on the collection of auto finance contracts. During January 2008, the Company arrived at a $41,000 settlement with this credit union. Per the terms of this agreement, we were to make an initial payment of $5,000, payments of $1,000 per month through February 2009 and a balloon payment of $24,000 at March 1, 2009. This settlement is secured by a $41,000 judgment. As of September 30, 2012, payments totaling $9,000 had been made under the settlement agreement. The remaining settlement obligation is past due.
14. Lines of Credit
In November 2003, the Company executed a revolving credit facility in the amount of $10,000,000 with a financial institution that bore interest at a rate of prime plus 2% and matured in November 2004. The purpose of the credit facility was to provide funding for the purchase of automobile finance installment contracts for sale to banks and credit unions which is no longer our line of business. There was outstanding balance totaling $322,562 at September 30, 2012, including interest and the line of credit was in default. We will negotiate revised payment terms and a settlement with the lender as soon we are able to make a firm commitment.
In April 2007, our chief executive officer at the time provided a line of credit in the amount of $50,000 to us from Atlantic Financial Advisors, Inc. (“AFA”), a corporation which is 100% owned by him. This line was used for the purchase of inventory of GPS hardware. As we have discontinued the GPS business, there is no longer a need for this facility. We have arranged for a settlement for a long term installment payment of $250.00 per month for 30 months to liquidate the remaining balance. The installments are secured by 1,000,000 shares of our common stock.
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15. Related Party Transactions
On January 24, 2011 we issued 1,235,403 as payment for back wages of $41,600 to Peter Ubaldi, our chief executive officer.
On April 18, 2011 we issued 1,821,507 shares of common stock to our CEO, Peter Ubaldi, in lieu of the cash compensation to him under his employment contract.
On November 23, 2011, we issued 8,474945 shares of common stock to our CEO, Peter Ubaldi, in lieu of the cash compensation to him under his employment contract.
On November 23, 2011, we issued 10,000,000 to our Chairman, Mr. Battiato in consideration for the reduction in the principal balance of a promissory note he has with the company.
On November 23, 2011, we issued 10,000,000 to our Managing Director of Business Development, Mr. Merritt in consideration for the reduction in the principal balance of a promissory note he has with the company.
From time to time certain employees and/or officers advance funds to the Company in order for the Company to meet its operating needs or make payments directly on the Company’s behalf. Such advances were recorded as liabilities on the Company’s balance sheet in previous years. The amounts were loaned to the Company without any formal note agreement and do not bear interest. In December of 2011, we entered into two separate notes with Peter Ubaldi, our CEO and Joseph Battiato, our Chairman, to formalize the advancements that had been made by the three individuals. Thus, we entered promissory notes with Mr. Ubaldi for $636,526 and Mr. Battiato for $295,678, which incorporated all previous amounts due to the two executives from previous advancements, notes
payable and in the case of Mr. Ubaldi, amounts accrued for wages and benefits (the “Master Notes”). The Master Notes bear interest at 10.00% per annum.
16. Stock Plans
We have a non-qualified stock option plan (the “Plan”) that was adopted by the Board of Directors in March 1997. The Plan, as authorized, provides for the issuance of up to 2,000,000 shares of our common stock. Persons eligible to participate in the Plan as recipients of stock options include full and part-time employees of the Company, as well as officers, directors, attorneys, consultants and other advisors to the Company or affiliated corporations.
Options issued under the Plan are exercisable at a price that is not less than twenty percent (20%) of the fair market value of such shares (as defined) on the date the options are granted. The non-qualified stock options are generally non-transferable and are exercisable over a period not to exceed
ten (10) years from the date of the grant. Earlier expiration is operative due to termination of employment or death of the issue. The entire Plan expired on March 20, 2007, except as to non-qualified stock options then outstanding, which will remain in effect until they have expired or have been exercised. As of September 30, 2012, 1,990,289 shares had been exercised and issued under the Plan.
On November 8, 2006, we filed a Non-Statutory Stock Option Plan with the SEC. This 2006 Non-Statutory Stock Option Plan was intended as an employment incentive, to aid in attracting and retaining persons of experience and ability and whose services are considered valuable to encourage the sense of proprietorship in such persons, and to stimulate the active interest of such persons in our development and success. This Plan provides for the issuance of non-statutory stock options which are not intended to qualify as incentive stock options within the meaning of section 422 of the
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Internal Revenue Code of 1986, as amended. There were a total of 15,000,000 shares in the Plan at inception; 14,100,000 shares have been issued from the Plan as of September 30, 2012.
17. Stock Transactions
For the nine months ended September 30, 2012, we issued the following securities without registration under the Securities Act of 1933. These shares were issued under the Section 4(2) exemption of the Securities Act:
Effective April 16, 2012, we entered into a convertible promissory note with Asher Enterprises, Inc., an unaffiliated third party, for a principal amount of $78,500. The promissory note has an interest rate of 8.00% per annum, a default interest rate of 22.00%, and matures on January 2, 2013. Asher Enterprises may elect to convert the note in shares of our common stock any time after six months from the date of the note at conversion rate equal to a 42.0% discount to the three lowest closing market prices for the 10 days preceding its election to convert. As a result we booked a beneficial conversion feature of $56,845. As of September 30, 2012 $81,640 was due and outstanding on the convertible promissory note.
18. Commitments and Contingencies
Consulting and Employment Contracts
In May 2004, (amended and restated January 2005) we entered into an Employment Agreement (“Agreement”) with Peter Ubaldi. The Agreement provided that Mr. Ubaldi should serve as our president of through January 1, 2007. In January of 2007, the Company renewed Mr. Ubaldi’s Employment Contract for an additional two years under the same terms and conditions as the original agreement. At any time prior to the expiration of the Agreement, the Company and Mr. Ubaldi may
mutually agree to extend the duration of employment under the terms of the Agreement for an additional period or periods. As payment for services, the Company agrees to pay Mr. Ubaldi, as the president, a minimum base salary of $250,000 per annum. As provided in the Agreement, Mr. Ubaldi is eligible to be paid bonuses, from time to time, at the discretion of the Company’s Board of Directors, of cash, stock or other valid form of compensation. Upon termination of and under the terms of the Agreement, Mr. Ubaldi shall be entitled to severance compensation in an amount equal to twenty-four months of base salary as shall exist at the time of such termination. In January of 2010 we entered into a new Employment Agreement with Peter Ubaldi to continue as president and chief executive officer for the same base salary, medical benefits and expenses as previously agreed to in May 2004. The term of the agreement is for 5 years with renewal options for 5 additional 1 year terms.
In June of 2008, we entered into a consulting agreement with Vincent Nunez for his contribution in developing the business with Huma-Clean, LLC of Houston, Texas. The term of the contract is 5 years. The provisions in the agreement include:
·
Mr. Nunez was issued 500,000 shares of the Company’s common stock upon execution of the consulting agreement.
·
Each time we accumulate $2,000,000 in gross revenues from sales generated in connection with the technology and services of Huma-Clean, LLC, and an additional 500,000 shares of the Company
’
s common stock will be issued to the consultant, limited to 2,500,000 total shares.
·
A quarterly cash distribution equal to 20% of the net revenues generated by the sales of the consultant, limited to $500,000 for any given quarter.
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In June of 2008, the Company entered into an employment agreement with Robert W. Elfstrom. The term of the contract is 2 years with a base compensation of $104,000 per year. Additional provisions in the agreement include:
·
Mr. Elfstrom shall earn a bonus of $50,000 to be paid within 90 days from the date of execution of the employment agreement.
·
A quarterly cash distribution equal to 20% of the net revenues generated by the sales of the employee, or the use of this technology, limited to $250,000 for any given quarter.
Mr. Elfstrom and We are reviewing their arrangement as there are certain disputes in performance on the part of Mr. Elfstrom. As a result, we have withheld the $50,000 bonus referred to below along with the weekly compensation as stated in the contract. These amounts have been accrued for as of December 31, 2009 and no additional accruals have been recorded by us. We expect to reach an amicable conclusion with Mr. Elfstrom for the termination of his services.
On January 1, 2010, we entered into a 5 year consulting agreement with Smith Street Holdings to provide business acquisition services. Consulting fees to include a quarterly cash distribution in an amount to be determined by the Board of Directors based on the net revenue generated by transactions initiated by the consultant. In addition the consultant was granted 5,000,000 shares of company stock upon signing the agreement. Also in addition, each time the consultant accumulates $2,000,000 in net revenue less fees paid to the consultant in any given quarter, 3,000,000 shares of the company stock will be granted, not to exceed 10,500,000 shares.
On January 1, 2010, we entered into a 3 year consulting agreement with BBK Investments, LLC to provide business acquisition and product development services. The consulting fees are to include 2,000,000 shares of company stock to be granted upon signing the agreement. Also in addition, each time the consultant accumulates $2,000,000 in net revenue less fees paid to the consultant in any given quarter, 1,000,000 shares of the company stock will be granted, not to exceed 10,000,000 shares.
On January 1, 2012, we entered into a twelve month consulting agreement with Advent Consulting Group, LLC to provide accounting services for a monthly retainer fee of $5,000, which may be paid in cash or company stock. In addition, we agreed to pay an upfront cash retainer fee of $3,000.
Operating Leases
We currently lease office space in one location. The following table sets forth the Company’s lease commitment at 96 Park Street, Montclair, New Jersey 07042 for the year ended December 31, 2010 until December 31, 2012. The rent for 2012 is $13,200. We also entered into a short term commercial lease for the 70 acres associated with our production facilities in Castleberry, Alabama, with an option to purchase the real estate. The lease will be renewed on September 1, 2012 for an additional 3 months with an extension for another 3 months. The payment to the landlord is $5,000 per month with $3,000 being applied to rent and $2,000 toward the purchase price.
Future minimum annual payments expected under the operating lease are as follows:
Future minimum annual payments expected under the operating lease are as follows:
19. Pension Plans
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The Company does not currently provide, administer or manage a 401(K) plan or any other pension plan.
20. Legal Proceedings
As of September 30, 2012, The Company is presently a party to legal proceeding as follows:
We, through our former wholly owned subsidiary, Autocorp Financial Services, Inc. (“ACFS”) had entered into an auto loan servicing agreement dated January 7, 2003. ACFS and HPCU have disputes over collection of certain auto finance receivables and general performance under the servicing agreement. During 2008, HPCU and the Company entered into a $41,000 settlement agreement. Under the terms of this agreement, we were to pay $5,000 upon signing of the document and make monthly payments of $1,000 through February 2009. A balloon payment of $24,000 was due on March 1, 2009. This settlement
is secured by a $41,000 judgment. As of September 30, 2012, payments totaling $9,000 have been made under this settlement agreement.
We entered into a convertible promissory note for $100,000 with Chris Verrone in May 2008. In June 2008, the note was converted into shares of common stock at the holder’s request. Subsequently, the individual requested additional consideration and even though the Company had no obligation to accommodate the request, the Chairman of the Company advanced him $25,000 of his own funds and the Company signed an agreement in September 2008 to pay him an additional $75,000 within 60 days. We have not been able to meet this deadline and the individual had commenced litigation and received a judgment. This amount has been provided for in the financial statements under the notes payable.
On March 28, 2011 we entered into a settlement agreement, whereby the company would issue 5,000,000 shares of its common stock in settlement of the outstanding balance of $338,459. However if the 5,000,000 shares; when liquidated were not sufficient to cover the outstanding balance then the shortfall would be covered by issuing additional shares of shares of common stock or paid in cash. The shares were issued on April 18, 2011 at a market value of $.02 per share. We booked a reduction in the principal balance of $100,000. Although as of September 30, 2012 the outstanding balance was $238,459, this balance may be adjusted in the future due to the uncertainty of future stock prices and liquidated value of the stock.
In addition to the matter described above, we are involved in various legal actions and claims from time to time, which arise in the normal course of business. In our opinion, the final disposition of these matters will not have a material adverse effect on our financial position or results of operations.
21. Subsequent Events
On October 15, 2012. we entered into a convertible promissory note with RDK Enterprises, LLC, an unaffiliated third party, for a principal amount of $50,000. The promissory note has an interest rate of 8.00% per annum, and matured on April 15, 2013. RDK Enterprises, LLC may elect to convert the note in shares of our common stock any time after six months from the date of the note at conversion rate equal to a 30.0% discount to the three lowest closing market prices for the 10 days preceding its election to convert. As a result we of the conversion rate we will booked a beneficial conversion feature in the fourth quarter of 2012. On September 30, 2012, RDK Enterprises, LLC advanced the company $20,000 prior to entering into the agreement.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation
The use of the words “we,” “us,” “our” or “the Company” refers to Global Ecology Corporation and its subsidiaries, except where the context otherwise requires.
The following discussion of the Company’s financial condition, changes in financial conditions and results of operations should be read in conjunction with the financial statements and notes for the period ended September 30, 2012 contained in this Form 10-Q, and with the audited financial statements and notes as well as other items thereto included in our annual report on Form 10-K for the year ended December 31, 2011. This report, annual reports on Form 10-K, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) of the Exchange Act are made available free of charge through the United States Securities and Exchange Commission’s, or SEC's, website (www.sec.gov), which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. In addition, these documents are made available on our website as soon as reasonably practicable after the material is electronically filed with, or furnished to, the SEC. The public may read and copy of any of our material filed with the SEC at the SEC's Public Reference Room located at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Cautionary Statement Regarding Forward Looking Statements
Certain of the statements contained in this Form 10-Q for the nine months ended September 30, 2012 should be considered “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which reflect the current views of our Company with respect to current events and financial performance. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “could,” “should,” and “continue” or similar words. These forward-looking statements may also use different phrases. From time to time,
We may also provide forward-looking statements in other materials and releases to the public or files with the SEC, as well as oral forward-looking statements. You should consult any further disclosures on related subjects in our previous Annual Report on Form 10-K, quarterly reports filed on Form10-Q and current reports on Form 8-K filed with the SEC.
Such forward-looking statements are and will be subject to many risks, uncertainties and factors relating to our operations and the business environment in which we operate, which may cause our actual results to be materially different from any future results, express or implied, by such forward-looking statements. Statements in this quarterly report and the exhibits to this report should be evaluated in light of these important risks, uncertainties and factors. We are not obligated to, and undertakes no obligation to publicly update any forward-looking statement due to actual results, changes in assumptions, new information or as the result of future events.
Overview
Global Ecology Corporation (“GECO”) is a Nevada corporation formed in 1993. Our principal executive office is located at 96 Park Street Montclair, New Jersey 07042 and our telephone number is (973) 655-9001. GECO’s website is
www.geco.us
. From 1998 until the third quarter of 2004, we provided financial products and related services to the new and pre-owned automotive finance industry. We primarily purchased and subsequently sold automobile finance receivables collateralized by new and pre-owned automobiles. The receivables were predominately purchased from automobile retailers nationwide and sold to banks and credit unions.
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We changed our name to Homeland Security Network, Inc. on March 1, 2005 to reflect the direction of a new course of business. HSNI targeted markets such as commercial trucking and cargo management, commercial fleet management, equipment rental and personal vehicle tracking. During the period from March, 2005 until the end of 2007, we provided the GPS tracking industry with state-of-the-art software, as well as low cost tracking hardware, and the ability to offer a cost-effective data transmission fee.
In the fourth quarter of 2007, we began investing in a new industry and we secured distribution rights to a patented water restoration technology, which represented a substantial opportunity in the multi-billon dollar global water purification market. Our company has proposed the use of its services in the United States and in several foreign countries. On August 18, 2009 we changed our name to Global Ecology Corporation to reflect this shift in business direction to the environmental sector.
GEC Organics Corporation
In addition, we also entered into a joint venture with Huma-Clean, LLC, a Texas-based soil remediation and re-seller of processed soil for consumer and commercial users. The first project is underway in Juarez, Mexico, and we are hopeful that the next sites will be located in the United States. Our initial belief was that revenue from these activities would begin to be recorded in the fourth quarter of 2008 and that the first order of its processed soil has would have been received for in excess of $2,000,000. However, the violence that occurred and continues to occur in the City of Juarez, Mexico, and the surrounding area has taken the government officials’ focus away from the building and expansion of their farmlands.
As a result, on May 25, 2011, we executed letters of intent with the Town of Castleberry, the Town of For Deposit and the City of White Hall, which are located in the State of Alabama for the development of locations in each of the three cities for the accumulation of certain organic waste which will be used in the production of our natural fertilizer/soil additive and allow for the expansion of the market where we can sell our soil and water remediation technologies. On October 25, 2011, we received the first tranche of the funding necessary to begin the construction process on its first domestic organic soil amendment site in Castleberry, Alabama. The location, which encompasses nearly 70 acres, will be one of the largest of its kind in the U.S. Though our wholly-owned subsidiary GEC Organics Corporation, we began to produce our proprietary compost product at our 70-acre facility located in the Town of Castleberry in January 2012. Our proprietary compost product is designed to greatly enhance crop yield and turf growth while continuing to maintain soil integrity. The highly nutritious compost is made from chicken waste blended with green waste and enhanced with GEC's licensed microbial formula. When fully operational, the Castleberry, Alabama site will be able to produce up to 20,000 tons of OAS100 solid compost and in excess of 10,000 gallons of OSA CT1000 liquid compost each month. As of December 31, 2011, we had not begun the production phase; and therefore, no revenues had been generated. While, we have now begun limited production and marketing of our organic soil product, we can provide no assurance that the product will be widely accepted by our targeted consumers in order for us recognize a return on our investment.
GEC Africa
In December 2010, we executed a Joint Venture Agreement with Isongo Water (Pty), Ltd., of Pietermartizburg South Africa (“Isongo”), whereby we have agreed to form a subsidiary company to be named GEC Africa (the “JV Company”) with Isongo, which will be jointly owned 50% by each company. The JV Company will pursue business interests throughout South Africa and neighboring countries that will initially commence with the sale of our Mobile PureWater System (“MPWS”) and our ionized mineral solution, IMS1000. Based on the success of the venture we intend to later incorporate the sale of our other proprietary and licensed technologies through the JV Company in certain African territories. As part of joint venture relationship, Isongo will be granted an exclusive license for the sole benefit of GEC Africa for the sale and distribution of the MPWS and the IMS1000. The intention of the parties is for GEC Africa to have its own local manufacturing facility for the MPWS and its solution, which Isongo has the capability to provide. There will be minimum sales volume requirements for the continuation of the relationship. We can provide no assurances that the
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joint venture relationship with Isongo will be successful or be able to generate significant revenue, if at all. As of December 31, 2011 there has been no activity to report.
We continue to develop our relationships in South Africa through our subsidiary GEC Africa which is a joint partnership with Isongo. Representatives of our company demonstrated our MPWS in real time as it produced potable water from several contaminated sources. These demonstrations were performed in the most challenging conditions where rivers look like dark chocolate and E. coli, streptococcus, and other dangerous pathogens are abundant. Our group met with government officials from municipalities and water processing facilities including, The Department of Water Affairs and The South African Bureau of Standards, which has now agreed to accelerate the registration process for our licensed, proprietary formula, IMS1000. Many public and private entities in Africa are seeking ways to provide safe water without the use of chlorine and our IMS1000 solution will help to accomplish this goal. We also had discussions with two municipalities for the use of our bio-remediation technology for the processing of bio-solids from their waste water treatment facilities. Additional uses of IMS1000 such as the de-contamination of large bodies of water, vegetable washes, poultry processing plants, and mining water reclamation are currently under discussion. GEC Africa has now engaged several distributors to market our products and services throughout the continent. This distribution channel under the supervision of GEC Africa is expected to accelerate the development of our coverage and produce sustainable revenue. As of December 31, 2011 there has been no activity to report.
Clean Tower Technologies, Inc.
In January of 2011, we formed a wholly subsidiary, CleanTower Technologies, Inc., for the purpose of developing a market for our licensed environmentally safe chemical IMS1000. The solution is produced under a private label arrangement with our Canadian supplier, EnvirEau Technologies, Inc. This new company will eventually include a number of affiliates with industry experience to help us build the operation. As of September 30, 2011 there has been no activity to report.
As a part of our ongoing marketing efforts, we have supported a number of events at the United Nations and have established our self as a strategic partner with International Renewable Energy Organization (“IREO”), a Brazilian private partner of the United Nations. Peter Ubaldi, our President
and CEO, has been appointed as Chairman of IREO’s Water Restoration Committee. We have proposed our remediation technology for contaminated bodies of water and for the remediation of soil in South America, Central America, the Philippines and the United States as part of its expanding marketing efforts.
Going Concern
We have incurred net losses in the nine months ended September 30, 2012 and year ended December 31, 2011 and we have had working capital deficiencies both periods.
Ours financial statements have been prepared on the assumption that the Company will continue as a going concern. We are seeking various types of additional funding such as issuance of additional common or preferred stock, additional lines of credit, or issuance of subordinated debentures or other forms of debt. The additional funding would alleviate our working capital deficiency and increase profitability. However, it is not possible to predict the success of management's efforts to achieve profitability or to secure additional funding. Also, there can be no assurance that additional funding will be available when needed or, if available, that its terms will be favorable or acceptable. We are also seeking to renegotiate certain liabilities in order to alleviate the working capital deficiency.
If additional financing arrangements cannot be obtained, we would be materially and adversely affected and there would be substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and realization of assets and classifications of liabilities necessary if the Company becomes unable to continue as a going concern.
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Plan of Operation
Management is taking the following steps to create shareholder value and revenue growth for our company: (i) development of global partnerships to create distribution channels for our products; (ii) entering into and exploring a number of strategic partnerships both domestically within the United States and internationally to assist us in the development of our technologies; (iii) expansion of sales and marketing efforts into various markets impacted by environmental issues such as the water cooling tower market; (iv) continual development of proprietary technologies as well as development of new licensing arrangements for technologies that complement our current product offerings; and (v) aggressively pursuing regulatory approval in both the united states and internationally to allow for the use of our products in a broad range of environmental remedial markets.
Our future success is likely dependent on its ability to create profitable growth and attain additional capital to support growth and ultimately our ability to reach profitability and maintain profitability one we have reached that stage. There can be no assurance that we will be successful in obtaining any such financing, or that it will be able to generate sufficient positive cash flow from operations. The successful outcome of these or any future activities cannot be determined at this time and there is no assurance that if achieved, we will have sufficient funds to execute its business plans. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable to continue as a going concern.
Employees
As of September 30, 2012, we have employed a total of 4 people. No employees are covered by a collective bargaining agreement.
Results of Operations
