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Market access for resource monetization and trade;
and
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Experience in structuring all preceding factors into viable
binding business plans.
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Our plan of
operation will require $2,000,000 in funding over the next 12 months, over $1,000,000 of
which has been raised by an equity financing of our common stock as of the period ending
September 30, 2007. We are confident that the remainder of the $1,400,000 slated for the
Weatherbird II and the $600,000 devoted to the completion of the first stage of our
planting efforts in Hungary through KlimaFa will be made available from additional debt or
equity financings tied to sales of our common stock.
Results of Operations
The Company
has been funded since inception from public or private debt or equity placements or by
major shareholders in the form of loans. Virtually all of the capital raised to date has
been allocated for general and administrative costs, financial obligations tied to the
Iron-Fertilization Prove-Out and Purchase Agreement, the Securities Exchange Agreement and
Plan of Exchange, and the purchase of the research vessel Weatherbird II.
Net
Losses
For the
period from inception until September 30, 2007, the Company incurred a net loss of
$2,612,736. Net losses for the three month period ended September 30, 2007 were $558,127 as
compared to $154,326 for the three months ended September 30, 2006. Net losses for the nine
month period ended September 30, 2007 were $1,871,466 as compared to $436,800 for the nine
months ended September 30, 2006. The Company’s net losses are attributable to vessel
operating expenses, research and development costs, and general and administrative
expenses. The vessel operating expenses and R & D have been incurred in connection with
the first voyage of the Weatherbird II, which set sail subsequent to the period ended
September 30, 2007. General and administrative expenses include financing costs, accounting
costs, consulting fees, leases, employment costs, professional fees and costs associated
with the preparation of disclosure documentation. We did not generate any revenues during
this period.
The Company
expects to continue to incur losses through the year ended 2008.
Income Tax Expense (Benefit)
The Company
has a prospective income tax benefit resulting from a net operating loss carryforward and
start up costs that may offset any future operating profit.
Impact
of Inflation
The Company
believes that inflation has had a negligible effect on operations over the past three
years.
Capital
Expenditures
In the nine
months ended September 30, 2007, the Company expended $800,000 on the Weatherbird II
research vessel and $23,306 on marine equipment. We expended no significant amounts on
capital expenditures for the period from inception to December 31, 2006.
Liquidity and Capital Resources
As of
September 30, 2007, the Company had current assets totaling $670,698 and a working capital
surplus of $103,583. These assets consist of cash on hand of $586,712 as well as prepaid
expenses and a receivable. Net stockholders’ equity in the Company was $905,030 at
September 30, 2007. We are in the
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development
stage and, since inception, have experienced significant changes in liquidity, capital
resources, and shareholders’ equity.
Cash flow
used in operating activities was $2,522,335 for the period from inception to September 30,
2007. Cash flow used in operating activities for the nine month period ended September 30,
2007 was $1,817,855 as compared to $412,503 for the nine months ended September 30, 2006.
The increase in cash flow used in operating activities in the current nine month period was
due primarily to an increase in net losses from operations.
Cash flow
used for investing activities was $1,104,892 for the period from inception to September 30,
2007. Cash flow used for investing activities for the nine month period ended September 30,
2007 was $1,104,892 as compared to $0 for the nine months ended September 30, 2006. Cash
flow used for investing activities is attributed to the acquisition of Planktos.
Cash flow
provided by financing activities was $2,004,155 for the period from inception to September
30, 2007. Cash flow provided by financing activities for the nine month period ended
September 30, 2007 was $1,145,437 as compared to $693,658 for the nine months ended
September 30, 2006. Cash flow provided by financing activities in the current nine month
period can be attributed to the sale of common stock on a private placement basis as well
as related party loans.
The
Company’s current assets are insufficient to conduct our plan of operation over the
next twelve (12) months and we will have to seek debt or equity financing to fund
operations. We have no current commitments or arrangements with respect to, or immediate
sources of funding. Further, no assurances can be given that funding will be available or
available to us on acceptable terms. In addition, any equity financing would result in
dilution to the Company shareholders and any debt financing could involve restrictive
covenants with respect to future capital raising activities or other financial or
operational matters. The Company’s shareholders will be the most likely source of new
funding in the form of loans or equity placements though none have made any commitment for
future investment and we have no agreement formal or otherwise. Our inability to obtain
adequate funds will adversely affect our operations and the Company’s ability to
implement its plan of operation.
The Company
has no current plans for the purchase or sale of any plant or equipment. We have no current
plans to make any changes in the number of employees.
Off
Balance Sheet Arrangements
As of
September 30, 2007, the Company has no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital resources that are material to stockholders.
Forward
Looking Statements and Factors That May Affect Future Results and Financial
Condition
The
statements contained in the section titled
Management’s Plan
of Operation
, with the exception of historical facts, are forward
looking statements within the meaning of Section 27A of the Securities Act. A safe-harbor
provision may not be applicable to the forward looking statements made in this prospectus
because of certain exclusions under Section 27A (b). Forward looking statements reflect our
current expectations and beliefs regarding our future results of operations, performance,
and achievements. These statements are subject to risks and uncertainties and are based
upon assumptions and beliefs that may or may not materialize. These statements include, but
are not limited to, statements concerning:
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our anticipated financial performance and business
plan;
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the sufficiency of existing capital resources;
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our ability to raise additional capital to fund cash
requirements for future operations;
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uncertainties related to the Company’s future business
prospects;
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the ability of the Company to generate revenues to fund
future operations; and
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the volatility of the stock market.
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We wish to
caution readers that the Company’s operating results are subject to various risks and
uncertainties that could cause our actual results to differ materially from those discussed
or anticipated including the factors set forth in the section entitled
Risk Factors
included elsewhere in this report.
We also wish to advise readers not to place any undue reliance on the forward looking
statements contained in this report, which reflect our beliefs and expectations only as of
the date of this report. We assume no obligation to update or revise these forward looking
statements to reflect new events or circumstances or any changes in our beliefs or
expectations, other than is required by law.
Critical
Accounting Policies
In the
notes to the audited consolidated financial statements for the year ended December 31, 2006
included in the Company’s Form 10-KSB, we discuss those accounting policies that are
considered to be significant in determining the results of operations and our financial
position. The Company believes that the accounting principles utilized by us conform to
accounting principles generally accepted in the United States of America.
The
preparation of financial statements requires management to make significant estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses.
By their nature, these judgments are subject to an inherent degree of uncertainty. On an
on-going basis, the Company evaluates our estimates, including those related to bad debts,
inventories, intangible assets, warranty obligations, product liability, revenue, and
income taxes. We base our estimates on historical experience and other facts and
circumstances that are believed to be reasonable, and the results form the basis for making
judgments about the carrying value of assets and liabilities. The actual results may differ
from these estimates under different assumptions or conditions.
Stock-Based Compensation
On January
1, 2006, the Company adopted SFAS No. 123 (revised 2004) (SFAS No. 123R),
“Share-Based Payment,” which addresses the accounting for stock-based payment
transactions in which an enterprise receives employee services in exchange for
(a) equity instruments of the enterprise or (b) liabilities that are based on the
fair value of the enterprise’s equity instruments or that may be settled by the
issuance of such equity instruments. In January 2005, the Securities and Exchange
Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 107, which provides
supplemental implementation guidance for SFAS No. 123R. SFAS No. 123R eliminates
the ability to account for stock-based compensation transactions using the intrinsic value
method under Accounting Principles Board (APB) Opinion No. 25, “Accounting for
Stock Issued to Employees,” and instead requires that such transactions be accounted
for using a fair-value-based method. The Company uses the Black-Scholes-Merton
(“BSM”) option-pricing model to determine the fair-value of stock-based awards
under SFAS No. 123R, consistent with that used for pro forma disclosures under SFAS
No. 123, “Accounting for Stock-Based Compensation.” The Company has
elected the modified prospective transition method as permitted by SFAS No. 123R and
accordingly prior periods have not been restated to reflect the impact of SFAS
No. 123R. The modified prospective transition method requires that stock-based
compensation expense be recorded for all new and unvested stock options, restricted stock,
restricted stock units, and employee stock purchase plan shares that are ultimately
expected to vest as the requisite service is rendered beginning on January 1,
2006.
Stock-based
compensation expense for awards granted prior to January 1, 2006 is based on the grant date
fair-value as determined under the pro-forma provisions of SFAS No. 123.
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Risks
Related to Our Business
Our future
operating results are highly uncertain. Before deciding to invest in us or to maintain or
increase your investment, you should carefully consider the risks described below, in
addition to the other information contained in this quarterly report. If any of these risks
actually occur, our business, financial condition or results of operations could be
seriously harmed. In that event, the market price for our common stock could decline and
you may lose all or part of your investment.
We have
a history of significant operating losses and such losses may continue in the
future.
Since the
beginning or our development stage, our operations have resulted in a continuation of
losses and an accumulated deficit which reached $741,271 at December 31, 2006 and had
increased to $2,612,736 at September 30, 2007. Our net loss for the nine month period ended
September 30, 2007 was $1,871,466. The Company has never realized revenue from operations.
Our only expectation of future profitability is dependent upon the successful
implementation of the company’s business model. Therefore, we may never be able to
achieve profitability.
Planktos
will not likely be profitable in the next twelve months and may never be
profitable.
Planktos is
in the process of implementing its iron-fertilization prove-out program and is not expected
to be profitable within the next twelve months. While the prove out program can
hypothetically produce profits, we cannot be assured that iron-fertilization will live up
to our expectations or that revenue will ever be produced as a result of our attempts to
sequester carbon credits.
We will
need additional financing to fund Planktos.
We will
need additional capital to fund Planktos to completion of its iron-fertilization prove-out
program. In our efforts to raise capital or obtain additional financing, we may be
obligated to issue additional shares of common stock or warrants or other rights to acquire
common stock on terms that will result in dilution to existing shareholders or place
restrictions on operations. If adequate funds are not available our ability to fund
Planktos will be significantly limited.
The
market for our stock is limited and our stock price may be volatile.
The market
for our common stock has been limited due to low trading volume and the small number of
brokerage firms acting as market makers. Because of the limitations of our market and
volatility of the market price of our stock, investors may face difficulties in their
selling shares. The average daily trading volume for our stock has varied significantly
from week to week and from month to month, and the trading volume often varies widely from
day to day.
We may
incur significant expenses as a result of being quoted on the Over the Counter Bulletin
Board, which may negatively impact our financial performance.
We may
incur significant legal, accounting and other expenses as a result of being listed on the
Over the Counter Bulletin Board. The Sarbanes-Oxley Act of 2002, as well as related rules
implemented by the Commission, has required changes in corporate governance practices of
public companies. We expect that compliance with these laws, rules and regulations,
including compliance with Section 404 of the
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Sarbanes-Oxley Act of 2002 as discussed in the following risk factor, may
substantially increase our expenses, including our legal and accounting costs, and make
some activities more time-consuming and costly. As a result, there may be a substantial
increase in legal, accounting and certain other expenses in the future, which would
negatively impact our financial performance and could have a material adverse effect on our
results of operations and financial condition.
Our
internal controls over financial reporting may not be considered effective, which could
result in a loss of investor confidence in our financial reports and in turn have an
adverse effect on our stock price.
Pursuant to
Section 404 of the Sarbanes-Oxley Act of 2002, beginning with our annual report for the
year ending December 31, 2007, we may be required to furnish a report by our management on
our internal controls over financial reporting. Such report will contain, among other
matters, an assessment of the effectiveness of our internal controls over financial
reporting as of the end of the year, including a statement as to whether or not our
internal controls over financial reporting are effective. This assessment must include
disclosure of any material weaknesses in our internal controls over financial reporting
identified by management. If we are unable to assert that our internal controls are
effective as of December 31, 2007, investors could lose confidence in the accuracy and
completeness of our financial reports, which in turn could cause our stock price to
decline.
Going
Concern
Due to the
uncertainty of our ability to meet our current operating expenses and the capital expenses
noted above, in their report on the annual financial statements for the year ended December
31, 2006, our independent auditors included an explanatory paragraph regarding concerns
about our ability to continue as a going concern. Our financial statements contain
additional note disclosures describing the circumstances that lead to this disclosure by
our independent auditors.
The
Company’s ability to continue as a going concern is subject to our ability to realize
a profit and /or obtain funding from outside sources. Management’s plan to address
our ability to continue as a going concern, include: (a) obtaining funding from private
placement sources; (b) obtaining additional funding from the sale of the Company’s
securities; and (c) obtaining loans and grants from various financial institutions, where
possible. Although management believes that we will be able to obtain the necessary funding
to allow us to remain a going concern through the methods discussed above, there can be no
assurances that such methods will prove successful.