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Registration No. 333-140718
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SECURITIES AND EXCHANGE COMMISSION
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007 |
o | TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
NEVADA (State or Other Jurisdiction of Incorporation Organization) | 20-3240178 (I.R.S. Employer Identification No.) | |
1070 Flynn Road, Camarillo, California (Address of Principal Executive Offices) | 93012 (Zip Code) |
Securities registered pursuant to Section 12(b) of the Exchange Act: NONE
Securities registered pursuant to Section 12(g) of the Exchange Act: NONE
Item | Page | |||||
PART I | ||||||
1. | 3 | |||||
2. | 28 | |||||
3. | 28 | |||||
4. | 28 | |||||
PART II | ||||||
5. | 29 | |||||
6. | 30 | |||||
7. | 37 | |||||
8. | 37 | |||||
8A. | 38 | |||||
8B. | 39 | |||||
PART III | ||||||
9. | 39 | |||||
10. | 39 | |||||
11. | 39 | |||||
12. | 39 | |||||
13. | 40 | |||||
14. | 43 | |||||
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• | extending domestic diesel fuel supplies; | ||
• | reducing dependence on foreign crude oil supplies; | ||
• | expanding markets for domestic and international agricultural products; | ||
• | reducing emissions of greenhouse gases and other gases that are regulated by the EPA; and | ||
• | being usable by existing diesel engines, while extending their useful lives. |
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• | diesel will become less toxic and is considered to be “clean diesel” after compliance with the new low-sulfur requirements; | ||
• | diesel is generally recognized as more fuel efficient than gasoline; |
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• | use of diesel engines in larger numbers of automobiles; and | ||
• | light vehicles that use clean diesel provide governmentally-owned fleets with an option for increasing vehicle efficiency. |
• | biodiesel is made from renewable resources; | ||
• | when burned, in comparison to petrodiesel, biodiesel results in a substantial reduction of unburned hydrocarbons, carbon monoxide and particulate matter; | ||
• | biodiesel is biodegradable, nontoxic and not considered a hazardous material when spilled; | ||
• | biodiesel is essentially free of sulfur and aromatics; | ||
• | the overall ozone (smog) forming potential of the hydrocarbon exhaust emissions from biodiesel is nearly 50% less than that for petrodiesel fuel; | ||
• | biodiesel is registered as a fuel and fuel additive with the EPA and meets clean diesel standards established by the California Air Resources Board;; | ||
• | biodiesel can be safer to manufacture and handle; | ||
• | because of its greater lubricity, biodiesel is used as a premium additive to petrodiesel to improve engine performance and durability, to reduce wear on engines and to extend their life; | ||
• | biodiesel can use domestic feedstock, reducing the $250 billion the United States pays other countries each year for crude oil; |
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• | primarily as a result of higher petroleum crude oil prices, increased petrodiesel refining costs, increased agricultural productivity, improvements in biodiesel processing technology and government subsidies, biodiesel could become less expensive to produce than petrodiesel; and | ||
• | public policy, both as enacted into law and as enunciated by governmental agencies in the United States and elsewhere, favors the production and use of biodiesel fuel. |
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• | vegetable oils; | ||
• | animal fats; and | ||
• | used cooking oils and trap grease. |
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• | hire manufacturing, production plant operations, sales, marketing and business development personnel; | ||
• | construct at least one of our owned production plants equipped with STT® Production Units; and | ||
• | enter into discussion with parties interested in licensing the STT® Production Units for both domestic and international biodiesel production. |
• | relative reactant volumes (i.e., ratio of feedstock to alcohol to catalyst); | ||
• | reaction temperature (and ensuring that the temperature is consistent everywhere in the reactor); | ||
• | reactor residence time; and | ||
• | laminar shear field. |
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• | dramatically reduced biodiesel reactor residence time of less than one second, compared to more than 30 minutes total reactor residence time required by conventional systems; | ||
• | more efficient transesterification process that produces negligible soap and requires less downstream processing; | ||
• | multi-feedstock flexibility that enables switching between alternative feedstocks in a few hours rather than days for conventional production units; | ||
• | lower-cost catalysts; | ||
• | less energy consumption; and | ||
• | absence of contaminated production waste water. |
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Wilmington Plant — Processing Area | Wilmington Plant — Facility Area |
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2009 | 500 | million gallons | |
2010 | 650 | million gallons | |
2011 | 800 | million gallons | |
2012 | 1,000 | million gallons |
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U.S. Issue Number | ||||
Title | U.S. Issue Date | Expiration Date | ||
“METHODS AND APPARATUS FOR TREATING MATERIALS IN LIQUIDS” | US 5,279,463 1/18/1994 | 1/18/2011 | ||
“METHODS AND APPARATUS FOR HIGH-SHEAR MATERIAL TREATMENT” | US 5,538,191 7/23/1996 | 7/23/2013 | ||
“METHODS AND APPARATUS FOR MATERIALS PROCESSING” | US 6,471,392B1 10/29/2002 | 3/7/2021 | ||
“METHODS AND APPARATUS FOR MATERIALS PROCESSING” | US 6,752,529 6/22/2004 | 3/7/2021 | ||
“METHODS AND APPARATUS FOR HIGH-SHEAR MIXING AND REACTING OF MATERIALS” | US 7,165,881 1/23/2007 | 9/29/2023 |
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• | dramatically reduced biodiesel reactor residence time of less than one second, compared to more than 30 minutes total reactor residence time required by conventional systems; | ||
• | more efficient transesterification process that produces negligible soap and requires less downstream processing; | ||
• | multi-feedstock flexibility that enables switching between alternative feedstocks in a few hours rather than days for conventional production units; | ||
• | lower-cost catalysts; | ||
• | less energy consumption; and | ||
• | absence of contaminated production waste water. |
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• | obtaining all required permits, consents and regulatory approvals from government agencies and other third parties for our anticipated construction and operation of owned biodiesel production plants and related facilities, as well as for the future operation of those facilities; | ||
• | successfully commercializing the STT® Reactor technology for biodiesel; | ||
• | arranging reasonably priced insurance to cover operating risks and other adverse outcomes which could impair the business; and | ||
• | market conditions for feedstocks and fuels that make biodiesel a competitively priced product. |
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• | meet our capital needs; | ||
• | expand our systems effectively, efficiently or in a timely manner; | ||
• | allocate our human resources optimally; | ||
• | identify and hire qualified employees or retain valued employees; or | ||
• | incorporate effectively the components of any business that we may acquire in our effort to achieve growth. |
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• | adequate rail capacity, including sufficient numbers of dedicated tanker cars; | ||
• | the availability of ships and ports with the ability to receive raw materials from domestic and international sources and to transport our products to domestic and international destinations; | ||
• | sufficient storage and transport facilities for feedstock and biodiesel; | ||
• | increases in truck fleets capable of transporting biodiesel within localized markets; and | ||
• | expansion of blending facilities and pipelines to handle biodiesel. |
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• | the degree and range of protection any patents will afford us against competitors, including whether third parties will find ways to invalidate or otherwise circumvent our patents; | ||
• | if and when patents will issue; |
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• | if our issued patents will be valid or enforceable; | ||
• | whether or not others will obtain patents claiming aspects similar to those covered by our patents and patent applications; or | ||
• | whether we will need to initiate litigation or administrative proceedings which may be costly whether we win or lose. |
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• | actual or anticipated variations in operating results; |
• | the limited number of holders of the common stock, and the limited liquidity available through the OTC Bulletin Board; |
• | the timing and type of financing and related dilution impact on the stockholders; |
• | changes in the cost or availability of feedstock on commercially economic terms; |
• | changes in the demand for biodiesel fuel, including changes resulting from the expansion of other alternative fuels; |
• | changes in the market for biodiesel fuel commodities or the capital markets generally, or both; |
• | changes in financial estimates by securities analysts; |
• | changes in the economic performance and/or market valuations of other energy companies; |
• | our announcement of significant acquisitions, strategic partnerships, joint ventures or capital commitments; |
• | additions or departures of key personnel; |
• | sales or other transactions involving our capital stock; |
• | changes in the social, political and/or legal climate; |
• | announcements of technological innovations or new products available to the biodiesel production industry; and/or |
• | announcements by relevant domestic and foreign government agencies related to incentives for alternative energy development programs. |
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2007 | 2006 | |||||||||||||||
High | Low | High | Low | |||||||||||||
First Quarter | $ | 3.50 | $ | 1.68 | N/A | N/A | ||||||||||
Second Quarter | $ | 1.09 | $ | 0.80 | N/A | N/A | ||||||||||
Third Quarter | $ | 0.68 | $ | 0.41 | N/A | N/A | ||||||||||
Fourth Quarter | $ | 0.90 | $ | 0.30 | $ | 5.00 | $ | 1.50 |
• | we would not be able to pay our debts as they become due in the usual course of business; or |
• | our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution. |
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Number of securities | ||||||||||||
remaining available for | ||||||||||||
Number of securities | future issuance under | |||||||||||
to be issued upon exercise | Weighted-average | equity compensation | ||||||||||
of outstanding options, | exercise price of | plans (excluding | ||||||||||
warrants, restricted shares, | outstanding options, | securities reflected in | ||||||||||
Plan category | stock awards and rights | warrants and rights | column (a)) | |||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders(1) | 3,344,190 | $ | 0.75 | 505,810 | ||||||||
Equity compensation plans not approved by security holders(2) | 1,164,983 | $ | 0.36 | — | (3) | |||||||
Total | 4,509,173 | $ | 0.65 | 505,810 |
(1) | Includes options and stock awards granted under the 2006 Plan, including options awarded to outside directors under the Outside Director Compensation Program. | |
(2) | 1,164,983 shares of common stock are issuable upon exercise of outstanding options associated with the 1997 Program, which we adopted at the closing of the Merger. These options are exercisable for shares of our common stock. | |
(3) | As of the January 12, 2007, the 1997 Program was frozen and no additional securities are available for future issuance under the 1997 Program. Following the consummation of the Merger, all awards granted under the 1997 Program are exercisable for shares of our common stock, on an as converted basis at the same ratio at which Kreido Labs’ common stock converted into our common stock pursuant to the Merger. |
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• | hire additional manufacturing, production plant operations, sales, marketing and business development personnel; |
• | construct at least one company owned production plants equipped with STT® Production Units; and |
• | enter into discussion with parties interested in licensing the STT® Production Units for both domestic and international biodiesel production. |
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• | Sources of cash consisted of private placement net proceeds of $22.8 million and interest income of $689,000 for total sources of cash of $23.5 million. |
• | Uses of cash consisted of plant development costs including purchases of fixed assets and construction of plant components and reactors of $13.9 million, general and administrative cost of $3.6 million, repayment of capital leases of $210,000 and investments in patents of $195,000 for a total use of cash of $17.9 million. |
• | The cash balance of $6.5 million results from net sources of $23.5 million less uses of cash of $17.9 million plus an increase in the amounts due to vendors and employees of $1.3 million which will be paid in future periods less a $400,000 deposit made as credit security to Vopak. |
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Name | Age | Position | Date First Elected or Appointed | |||||
G.A. Ben Binninger | 59 | Chief Executive Officer; Director | January 12, 2007 | |||||
John M. Philpott | 47 | Chief Financial Officer | March 19, 2007 | |||||
Philip Lichtenberger | 51 | Chief Operating Officer | January 12, 2007 | |||||
Alan McGrevy | 60 | Vice President of Engineering | January 12, 2007 | |||||
Larry Sullivan | 58 | Chief Technology Officer | April 28, 2007 | |||||
Betsy Wood Knapp | 64 | Chairperson of the Board; Director | January 12, 2007 | |||||
David Mandel | 41 | Director | October 31, 2007 | |||||
David Nazarian | 46 | Director | October 31, 2007 | |||||
Richard Redoglia | 50 | Director | July 27, 2007 | |||||
Murli Tolaney | 66 | Director | July 27, 2007 |
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Exhibit No. | Description | Reference | ||||
2.1 | Agreement and Plan of Merger and Reorganization, dated as of January 12, 2007, by and among Kreido Biofuels, Inc., a Nevada corporation, Kreido Acquisition Corp., a California corporation and Kreido Laboratories, a California corporation. | Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
3.1 | Amended and Restated Articles of Incorporation of Kreido Biofuels, Inc. (f/k/a Gemwood Productions, Inc.). | Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on November 3, 2006 (File No. 333-130606). | ||||
3.3 | Amended and Restated Bylaws of Kreido Biofuels, Inc. | Incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on April 4, 2007 (File No. 333-130606). | ||||
4.1 | Form of Investor Warrant of Kreido Biofuels, Inc. | Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
4.2 | Form of Lock-Up Agreement by and between Tompkins Capital Group and each of the officers and directors of Kreido Biofuels, Inc., and certain stockholders of Kreido Laboratories. | Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
10.1 | Escrow Agreement, dated as of January 12, 2007, by and between Kreido Biofuels, Inc., Joel A. Balbien and Gottbetter & Partners, LLP. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
10.2 | Form of Subscription Agreement, dated as of January 12, 2007, by and between Kreido Biofuels, Inc. and the investors in the Offering. | Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
10.3 | Form of Registration Rights Agreement, dated as of January 12, 2007, by and between Kreido Biofuels, Inc. and the investors in the Offering. | Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
10.4 | Split-Off Agreement, dated as of January 12, 2007, by and among Kreido Biofuels, Inc., Victor Manuel Savceda, Kreido Laboratories and Gemwood Leaseco, Inc. | Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). |
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Exhibit No. | Description | Reference | ||||
10.5 | Form of Indemnity Agreement by and between Kreido Biofuels, Inc. and Outside Directors of Kreido Biofuels, Inc. | Incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
10.6 | 2006 Equity Incentive Plan. | Incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
10.7 | Form of Incentive Stock Option Agreement by and between Kreido Biofuels, Inc. and participants under the 2006 Equity Incentive Plan. | Incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
10.8 | Form of Non-Qualified Stock Option Agreement by and between Kreido Biofuels, Inc. and participants under the 2006 Equity Incentive Plan. | Incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
10.9 | Employment Agreement, dated March 19, 2007, by and between Kreido Biofuels, Inc. and John M. Philpott. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 23, 2007 (File No. 333-130606). | ||||
10.10 | Binding Term Sheet by and between Kreido Labratories and Tompkins Capital Group dated as of September 1, 2006. | Incorporated by reference to Exhibit 10.12 to the Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on April 4, 2007 (File No. 333-130606). | ||||
10.11 | Amendment to Binding Term Sheet by and between Kreido Labratories and Tompkins Capital Group dated as of October 25, 2006. | Incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on April 4, 2007 (File No. 333-130606). | ||||
10.12 | Form of Indemnity Agreement for officers and directors. | Incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on April 4, 2007 (File No. 333-130606). |
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Exhibit No. | Description | Reference | ||||
10.13 | Employment Agreement, dated April 4, 2007, by and between Kreido Biofuels, Inc. and Philip Lichtenberger. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 10, 2007 (File No. 333-130606). | ||||
10.14 | Employment Agreement, dated April 10, 2007, by and between Kreido Biofuels, Inc. and Alan McGrevy. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2007 (File No. 333-130606). | ||||
10.15 | Employment Agreement, dated April 28, 2007, by and between Kreido Biofuels, Inc. and Larry Sullivan. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 2, 2007 (File No. 333-130606). | ||||
10.16 | Purchase Order Agreement, dated May 22, 2007, by and between Kreido Biofuels, Inc. and Certified Technical Services, L.P. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on June 6, 2007 (File No. 333-130606). | ||||
10.17 | Amendment No. 1 to Registration Rights Agreement, dated June 12, 2007, by and between Kreido Biofuels, Inc. and certain investors in the Offering. | Incorporated by reference to Exhibit 10.19 to the Registration Statement on Form SB-2/A filed with the Securities and Exchange Commission on June 22, 2007 (File No. 333-140718). | ||||
10.18 | Separation Agreement and General Release dated July 27, 2007 by and between Kreido Biofuels, Inc. and Joel Balbien. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 30, 2007 (File No. 333-130606). | ||||
10.19 | Kreido Biofuels, Inc. Outside Director Compensation Program adopted July 27, 2007. | Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 30, 2007 (File No. 333-130606). | ||||
10.20 | Commercial Lease Agreement by and between Kreido Biofuels, Inc. and Acaso Partners, LLC effective August 1, 2007. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on September 12, 2007 (File No. 333-130606). |
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Exhibit No. | Description | Reference | ||||
10.21 | Employment Agreement executed December 10, 2007 but effective December 1, 2007, by and between Kreido Biofuels, Inc. and G.A. Ben Binninger. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on December 13, 2007 (File No. 333-130606). | ||||
14.1 | Code of Ethics. | Incorporated by reference to Exhibit 14.1 to the Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on April 4, 2007 (File No. 333-130606). | ||||
21.1 | Subsidiaries of Kreido Biofuels, Inc.* | |||||
23.1 | Consent of Vasquez & Company LLP.* | |||||
31.1 | Certification of the Chief Executive Officer, as required by Rule 13a-14(a) of the Securities Exchange Act of 1934.* | |||||
31.2 | Certification of the Chief Financial Officer, as required by Rule 13a-14(a) of the Securities Exchange Act of 1934.* | |||||
32.1 | Certification of the Chief Executive Officer provided pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | |||||
32.2 | Certification of the Chief Financial Officer provided pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
* | Filed herewith |
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KREIDO BIOFUELS, INC. | ||||
By: | /s/ G.A. Ben Binninger | |||
G.A. Ben Binninger, CEO and Director | ||||
(Principal Executive Officer) | ||||
Date: March 31, 2008 |
Signature | Title | Date | ||
/s/ G.A. Ben Binninger | Chief Executive Officer and Director (Principal Chief Executive) | March 31, 2008 | ||
/s/ John M. Philpott | Chief Financial Officer (Principal Accounting Officer) | March 31, 2008 | ||
/s/ Betsy Wood Knapp | Director | March 31, 2008 | ||
/s/ David Mandel | Director | March 31, 2008 | ||
/s/ David Nazarian | Director | March 31, 2008 | ||
/s/ Richard Redoglia | Director | March 31, 2008 | ||
/s/ Murli Tolaney | Director | March 31, 2008 |
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(Formerly Gemwood Productions, Inc.)
Page | ||
F-1 | ||
F-2 | ||
F-3 | ||
F-4 | ||
F-5 to F-6 | ||
F-7 to F-21 | ||
Table of Contents
Kreido Biofuels, Inc. and Subsidiaries
Camarillo, California
March 31, 2008
F-1
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(A Development Stage Company)
December 31 | ||||||||
2007 | 2006 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 6,470,000 | $ | 59,000 | ||||
Other current assets | 56,000 | — | ||||||
Total current assets | 6,526,000 | 59,000 | ||||||
Property and equipment — net (Note 4) | 14,148,000 | 322,000 | ||||||
Patents, less accumulated amortization of $201,000 and $278,000 in 2007 and 2006, respectively, and a valuation reserve of $223,000 at December 31, 2007 | 421,000 | 788,000 | ||||||
Other assets | 437,000 | 21,000 | ||||||
Total assets | $ | 21,532,000 | $ | 1,190,000 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (CAPITAL DEFICIT) | ||||||||
Current liabilities | ||||||||
Current portion of convertible notes payable, net of discount of $1,044,000 in 2006 (Note 10) | $ | — | $ | 5,637,000 | ||||
Current portion of capital leases (Note 9) | 57,000 | 50,000 | ||||||
Accounts payable | 1,538,000 | 346,000 | ||||||
Accrued expenses (Notes 10) | 250,000 | 951,000 | ||||||
Total current liabilities | 1,845,000 | 6,984,000 | ||||||
Capital leases, less current portion (Note 9) | 86,000 | 66,000 | ||||||
Total liabilities | 1,931,000 | 7,050,000 | ||||||
Kreido Labs Redeemable preferred stock (Note 11) | ||||||||
Series A1 convertible preferred stock, no par value. Authorized 549,474 shares; issued and outstanding were none and 549,474 shares as of December 31, 2007 and 2006, respectively; liquidation preference $4,945,000 in 2006 | — | 3,628,000 | ||||||
Series B1 convertible preferred stock, no par value. Authorized 13,783,783 shares; issued and outstanding were none and 10,011,355 shares as of December 31, 2007 and 2006, respectively; liquidation preference $10,011,000 in 2006 | — | 10,011,000 | ||||||
Total redeemable preferred stock | — | 13,639,000 | ||||||
Stockholders’ equity (capital deficit) (Notes 7 and 12) | ||||||||
Preferred stock, $0.001 par value authorized 10,000,000 shares in 2007; issued and outstanding were zero shares at December 31,2007 | — | — | ||||||
Common stock, $0.001 par value in 2007 and no par value in 2006. Authorized 300,000,000 shares in 2007 and 150,000,000 shares in 2006; issued and outstanding were 52,545,992 and 720,501 shares at December 31, 2007 and 2006, respectively | 52,000 | 103,000 | ||||||
Restricted common stock, $0.001 par value in 2007 and no par value in 2006; issued and outstanding were 100,000 shares at December 31, 2007 and 641,786 shares at December 31, 2006 | — | 64,000 | ||||||
Additional paid-in capital | 47,253,000 | 3,469,000 | ||||||
Deferred compensation | (31,000 | ) | (9,000 | ) | ||||
Deficit accumulated during the development stage | (27,673,000 | ) | (23,126,000 | ) | ||||
Net stockholders’ equity (capital deficit) | 19,601,000 | (19,499,000 | ) | |||||
Total liabilities and stockholders’ equity (capital deficit) | $ | 21,532,000 | $ | 1,190,000 | ||||
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(A Development Stage Company)
Period from | ||||||||||||
January 13, | ||||||||||||
Year Ended | Year Ended | 1995 (Inception) | ||||||||||
December 31, | December 31, | to December 31, | ||||||||||
2007 | 2006 | 2007 | ||||||||||
Revenue | ||||||||||||
Operating expenses | — | — | — | |||||||||
Research and development | $ | 1,082,000 | $ | 1,520,000 | $ | 16,918,000 | ||||||
General and administrative expenses | 4,153,000 | 1,004,000 | 9,005,000 | |||||||||
Loss on sale of property and equipment | — | 24,000 | 89,000 | |||||||||
Loss from retirement of assets | 3,000 | 43,000 | 321,000 | |||||||||
Loss from operations | (5,238,000 | ) | (2,591,000 | ) | (26,333,000 | ) | ||||||
Other income (expenses) | ||||||||||||
Interest expense | — | (828,000 | ) | (3,082,000 | ) | |||||||
Interest income | 689,000 | 3,000 | 753,000 | |||||||||
Other income | 3,000 | 149,000 | 1,154,000 | |||||||||
Other expenses | — | — | (154,000 | ) | ||||||||
Total other income (expenses) | 692,000 | (676,000 | ) | (1,329,000 | ) | |||||||
Loss before income taxes | (4,546,000 | ) | (3,267,000 | ) | (27,662,000 | ) | ||||||
Income tax expenses | 1,000 | 1,000 | 11,000 | |||||||||
Net loss | $ | (4,547,000 | ) | $ | (3,268,000 | ) | $ | (27,673,000 | ) | |||
Net loss per share — basic and diluted | $ | (0.09 | ) | $ | (2.40 | ) | $ | (0.53 | ) | |||
Shares used in computing net loss per share | 52,522,063 | 1,362,287 | 52,522,063 | |||||||||
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(A Development Stage Company)
Common Stock | Restricted Common Stock | Additional Paid-In | Deferred | Deficit Accumulated During | Stockholders’ Equity | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Compensation | the Development Stage | (Capital Deficit) | |||||||||||||||||||||||||
Issuance of common stock to founders | 750,000 | $ | 100,000 | — | $ | — | $ | — | $ | — | $ | $ | 100,000 | |||||||||||||||||||
Net loss | — | — | — | — | — | — | (67,000 | ) | (67,000 | ) | ||||||||||||||||||||||
Balance, December 31, 1995 | 750,00 | 100,000 | — | — | — | — | (67,000 | ) | 33,000 | |||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (130,000 | ) | (130,000 | ) | ||||||||||||||||||||||
Balance, December 31, 1996 | 750,00 | 100,000 | — | — | — | — | (197,000 | ) | (97,000 | ) | ||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (329,000 | ) | (329,000 | ) | ||||||||||||||||||||||
Balance, December 31, 1997 | 750,00 | 100,000 | — | — | — | — | (526,000 | ) | (426,000 | ) | ||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (292,000 | ) | (292,000 | ) | ||||||||||||||||||||||
Balance, December 31, 1998 | 750,00 | 100,000 | — | — | — | — | (818,000 | ) | (718,000 | ) | ||||||||||||||||||||||
Issuance of Series A preferred stock | — | — | — | — | 217,000 | — | — | 217,000 | ||||||||||||||||||||||||
Stock option issuances | — | — | — | — | 318,000 | (287,000 | ) | — | 31,000 | |||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (718,000 | ) | (718,000 | ) | ||||||||||||||||||||||
Balance, December 31, 1999 | 750,000 | 100,000 | — | — | 535,000 | (287,000 | ) | (1,536,000 | ) | 1,188,000 | ||||||||||||||||||||||
Retirement of common stock | (30,073 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||
Deferred compensation — options/warrants | — | — | — | — | 101,000 | (101,000 | ) | — | — | |||||||||||||||||||||||
Compensation expense | — | — | — | — | — | 88,000 | — | 88,000 | ||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (1,935,000 | ) | (1,935,000 | ) | ||||||||||||||||||||||
Balance, December 31, 2000 | 719,927 | 100,000 | — | — | 636,000 | (300,000 | ) | (3,471,000 | ) | (3,035,000 | ) | |||||||||||||||||||||
Common stock grant | 575 | 3,000 | — | — | — | — | — | 3,000 | ||||||||||||||||||||||||
Issuance of warrants in connection with convertible debt | — | — | — | — | 304,000 | — | — | 304,000 | ||||||||||||||||||||||||
Deferred compensation options | — | — | — | — | 259,000 | (259,000 | ) | — | — | |||||||||||||||||||||||
Compensation expense | — | — | — | — | — | 141,000 | — | 141,000 | ||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (3,308,000 | ) | (3,308,000 | ) | ||||||||||||||||||||||
Balance, December 31, 2001 | 720,502 | 103,000 | — | — | 1,199,000 | (418,000 | ) | (6,779,000 | ) | (5,895,000 | ) | |||||||||||||||||||||
Issuance of warrants in connection with convertible debt | — | — | — | — | 287,000 | — | — | 287,000 | ||||||||||||||||||||||||
Deferred compensation options | — | — | — | — | 61,000 | (61,000 | ) | — | — | |||||||||||||||||||||||
Compensation expense | — | — | — | — | — | 183,000 | — | 183,000 | ||||||||||||||||||||||||
Repricing of warrants | — | — | — | — | 131,000 | — | — | 131,000 | ||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (3,436,000 | ) | (3,436,000 | ) | ||||||||||||||||||||||
Balance, December 31, 2002 | 720,502 | 103,000 | 1,678,000 | (296,000 | ) | (10,215,000 | ) | (8,730,000 | ) | |||||||||||||||||||||||
Issuance of warrants in connection with convertible debt | — | — | — | — | 74,000 | — | — | 74,000 | ||||||||||||||||||||||||
Compensation expense | — | �� | — | — | — | — | 183,000 | — | 183,000 | |||||||||||||||||||||||
Buy back of fractional shares | (1 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (2,989,000 | ) | (2,989,000 | ) | ||||||||||||||||||||||
Balance, December 31, 2003 | 720,501 | 103,000 | — | — | 1,752,000 | (113,000 | ) | (13,204,000 | ) | (11,462,000 | ) | |||||||||||||||||||||
Issuance of consulting warrants and warrants in connection with convertible debt | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Issuance of warrants for Conversion of Series C preferred stock to Series B1 preferred stock | — | — | — | — | 709,000 | — | — | 709,000 | ||||||||||||||||||||||||
Compensation expense | — | — | — | — | — | 109,000 | — | 109,000 | ||||||||||||||||||||||||
Issuance of restricted stock | — | — | 641,786 | 64,000 | — | (64,000 | ) | — | — | |||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (3,456,000 | ) | (3,456,000 | ) | ||||||||||||||||||||||
Balance, December 31, 2004 | 720,501 | 103,000 | 641,786 | 64,000 | 2,461,000 | (68,000 | ) | (16,660,000 | ) | (14,100,000 | ) | |||||||||||||||||||||
Issuance of warrants in connection with convertible debt | — | — | — | — | 761,000 | — | — | 761,000 | ||||||||||||||||||||||||
Issuance of consulting warrants | — | — | — | — | 15,000 | — | — | 15,000 | ||||||||||||||||||||||||
Issuance of stock options | — | — | — | — | 4,000 | — | — | 4,000 | ||||||||||||||||||||||||
Compensation expense | — | — | — | — | — | 33,000 | — | 33,000 | ||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (3,198,000 | ) | (3,198,000 | ) | ||||||||||||||||||||||
Balance, December 31, 2005 | 720,501 | 103,000 | 641,786 | 64,000 | 3,241,000 | (35,000 | ) | (19,858,000 | ) | (16,485,000 | ) | |||||||||||||||||||||
Issuance of warrants in connection with convertible debt | — | — | — | — | 191,000 | — | — | 191,000 | ||||||||||||||||||||||||
Issuance of consulting warrants | 37,000 | 37,000 | ||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (3,268,000 | ) | (3,268,000 | ) | ||||||||||||||||||||||
Balance, December 31, 2006 | 720,501 | $ | 103,000 | 641,786 | $ | 64,000 | $ | 3,469,000 | $ | (9,000 | ) | $ | (23,126,000 | ) | $ | (19,499,000 | ) | |||||||||||||||
Conversion of notes, accrued interest payable and related warrants, on a net exercise basis, to common stock at the converted acquisition basis | 10,224,178 | 10,000 | — | — | 6,110,000 | — | — | 6,120,000 | ||||||||||||||||||||||||
Conversion of Kreido Labs Series A preferred stock to common stock at the converted acquisition basis | 619,946 | 1,000 | — | — | 3,627,000 | — | — | 3,628,000 | ||||||||||||||||||||||||
Conversion of Kreido Labs Series B preferred stock to common stock at the converted acquisition basis | 11,295,341 | 11,000 | — | — | 10,000,000 | — | — | 10,011,000 | ||||||||||||||||||||||||
Conversion of Kreido Labs common stock to common stock at the converted acquisition basis | 816,504 | 1,000 | (641,786 | ) | (64,000 | ) | 63,000 | — | — | — | ||||||||||||||||||||||
Conversion of consulting warrants on a net exercise basis to common stock at the converted acquisition basis | 1,587,213 | 2,000 | — | — | (2,000 | ) | — | — | — | |||||||||||||||||||||||
Common stock issued in connection with the acquisition of old Kreido Biofuels common stock | 8,750,000 | (94,000 | ) | — | — | 94,000 | — | — | — | |||||||||||||||||||||||
Common stock issued in connection with the $25 million January 2007 private placement offering | 18,498,519 | 18,000 | — | — | 23,080,000 | — | — | 23,098,000 | ||||||||||||||||||||||||
Stock award to new board of directors | 10,000 | — | — | — | 5,000 | 5,000 | ||||||||||||||||||||||||||
Compensation expense | 23,790 | — | 100,000 | — | 807,000 | (22,000 | ) | — | 785,000 | |||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (4,547,000 | ) | (4,547,000 | ) | ||||||||||||||||||||||
Balance, December 31, 2007 | 52,545,992 | $ | 52,000 | 100,000 | $ | — | $ | 47,253,000 | $ | (31,000 | ) | $ | (27,673,000 | ) | $ | (19,601,000 | ) | |||||||||||||||
F-4
Table of Contents
(A Development Stage Company)
Period from | ||||||||||||
January 13, | ||||||||||||
Year Ended | Year Ended | 1995 (Inception) | ||||||||||
December 31, | December 31, | to December 31, | ||||||||||
2007 | 2006 | 2007 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net Loss | $ | (4,547,000 | ) | $ | (3,268,000 | ) | $ | (27,673,000 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Depreciation and amortization | 254,000 | 162,000 | 1,623,000 | |||||||||
Loss on sale of assets | — | 24,000 | 89,000 | |||||||||
Loss on retirement of assets | 3,000 | 43,000 | 321,000 | |||||||||
Noncash stock compensation | 790,000 | 44,000 | 1,609,000 | |||||||||
Amortization of convertible debt discount | — | 319,000 | 1,236,000 | |||||||||
Inducement to convert debt discount | — | — | 152,000 | |||||||||
Inducement to convert debt | — | 18,000 | 58,000 | |||||||||
Patent write-down and reserve | 470,000 | — | 470,000 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Other assets | (472,000 | ) | (14,000 | ) | (544,000 | ) | ||||||
Accounts payable | 1,192,000 | 120,000 | 2,542,000 | |||||||||
Accrued expenses | 162,000 | 516,000 | 669,000 | |||||||||
Net cash used in operating activities | (2,148,000 | ) | (2,036,000 | ) | (19,448,000 | ) | ||||||
Cash flows from investing activities | ||||||||||||
Purchase of property and equipment | (13,885,000 | ) | (39,000 | ) | (14,626,000 | ) | ||||||
Proceeds from sale of assets | — | 10,000 | 95,000 | |||||||||
Investments in patent application | (195,000 | ) | (182,000 | ) | (1,514,000 | ) | ||||||
Net cash used in investing activities | (14,080,000 | ) | (211,000 | ) | (16,045,000 | ) | ||||||
�� | ||||||||||||
Cash flows from financing activities | ||||||||||||
Proceeds from the issuance of Series A convertible preferred stock | — | 938,000 | ||||||||||
Proceeds from the issuance of Series B convertible preferred stock | — | 1,500,000 | ||||||||||
Proceeds from the issuance of Series C convertible preferred stock | — | 2,424,000 | ||||||||||
Proceeds from the issuance of Series B1 preferred stock | — | 720,000 | ||||||||||
Proceeds from the issuance of common stock warrants | — | 217,000 | ||||||||||
Net proceeds from the issuance of common stock | 22,849,000 | 22,849,000 | ||||||||||
Proceeds from issuance of long-term debt | — | 1,370,000 | 14,381,000 | |||||||||
Principal repayment of long-term debt and capital leases | (210,000 | ) | (66,000 | ) | (1,066,000 | ) | ||||||
Net cash provided by financing activities | 22,639,000 | 1,304,000 | 41,963,000 | |||||||||
Net increase (decrease) in cash and cash equivalents | 6,411,000 | (943,000 | ) | 6,470,000 | ||||||||
Cash and cash equivalents at beginning of period | 59,000 | 1,002,000 | — | |||||||||
Cash and cash equivalents at end of period | $ | 6,470,000 | $ | 59,000 | $ | 6,470,000 | ||||||
Supplemental disclosure of cash flow information | ||||||||||||
Cash paid during the period for: | ||||||||||||
Interest | $ | 20,000 | $ | 8,000 | $ | 354,000 | ||||||
Income taxes | 1,000 | 1,000 | 11,000 |
F-5
Table of Contents
(A Development Stage Company)
Consolidated Statements of Cash Flows
Period from | ||||||||||||
January 13, | ||||||||||||
Year Ended | Year Ended | 1995 (Inception) | ||||||||||
December 31, | December 31, | to December 31, | ||||||||||
2007 | 2006 | 2007 | ||||||||||
Supplemental disclosure of noncash investing and financing activities | ||||||||||||
Purchase of property and equipment through capital leases | $ | 107,000 | $ | 122,000 | $ | 867,000 | ||||||
Additions to machinery and equipment through settlement of capital lease | — | — | 61,000 | |||||||||
Additions to machinery and equipment through issuance of common stock | — | — | 100,000 | |||||||||
Conversion of notes payable into Series A preferred stock | — | — | 1,180,000 | |||||||||
Conversion of notes payable into Series C preferred stock | — | — | 5,530,000 | |||||||||
Conversion of accounts payable into Series C preferred stock | — | — | 30,000 | |||||||||
Conversion of accrued interest into Series C preferred stock | — | — | 441,000 | |||||||||
Warrants issued in connection with convertible notes | — | — | 2,007,000 | |||||||||
Conversion of Series A preferred stock into Series A1 preferred stock | — | — | 2,118,000 | |||||||||
Conversion of Series B preferred stock into Series A1 preferred stock | — | — | 1,511,000 | |||||||||
Conversion of Series C preferred stock into Series B1 preferred stock | — | — | 8,414,000 | |||||||||
Conversion of notes payable in to Series B1 preferred stock | — | — | 850,000 | |||||||||
Conversion of accrued interest into Series B1 preferred stock | — | — | 18,000 | |||||||||
Conversion of notes payable into common stock | 5,257,000 | — | 5,257,000 | |||||||||
Conversion of accrued interest into common stock | 863,000 | — | 863,000 | |||||||||
Conversion of Series A preferred stock into common stock | 3,628,000 | — | 3,628,000 | |||||||||
Conversion of Series B preferred stock into common stock | 10,011,000 | — | 10,011,000 | |||||||||
Conversion of Kreido Laboratories common stock into common stock | 155,000 | — | 155,000 |
F-6
Table of Contents
F-7
Table of Contents
F-8
Table of Contents
F-9
Table of Contents
2007 | 2006 | |||||||
Furniture and fixtures | $ | 151,000 | $ | 43,000 | ||||
Machinery and equipment | 857,000 | 617,000 | ||||||
Office equipment | 136,000 | 115,000 | ||||||
Leasehold improvements | 254,000 | 47,000 | ||||||
Construction in progress | 13,301,000 | — | ||||||
Total | 14,699,000 | 822,000 | ||||||
Less accumulated depreciation and amortization | (551,000 | ) | (500,000 | ) | ||||
Net book value | $ | 14,148,000 | $ | 322,000 | ||||
F-10
Table of Contents
December 31, | December 31, | |||||||
2007 | 2006 | |||||||
Deferred tax assets: | ||||||||
Loss carryforwards | $ | 8,250,000 | $ | 6,654,000 | ||||
Stock-based compensation | 309,000 | — | ||||||
Start-up costs | 1,369,000 | 1,711,000 | ||||||
Other | 271,000 | 37,000 | ||||||
10,199,000 | 8,402,000 | |||||||
Less valuation allowance | (10,199,000 | ) | (8,402,000 | ) | ||||
Net deferred tax assets | $ | — | $ | — | ||||
F-11
Table of Contents
Weighted | ||||||||
Number of | Average Exercise | |||||||
Options | Price | |||||||
Balance at December 31, 2005 | 1,385,786 | $ | 0.34 | |||||
Granted | 57,471 | 0.09 | ||||||
Exercised | — | — | ||||||
Cancelled | (278,273 | ) | 0.09 | |||||
Balance at December 31, 2006 | 1,164,984 | $ | 0.33 | |||||
Granted | 4,425,784 | 0.93 | ||||||
Exercised | — | — | ||||||
Cancelled | (1,205,384 | ) | 1.35 | |||||
Balance at December 31, 2007 | 4,385,384 | $ | 0.65 | |||||
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted- | ||||||||||||||||||||
Outstanding at | Average | Weighted- | Exercisable at | Weighted- | ||||||||||||||||
Range of Exercise | December 31, | Remaining | Average Exercise | December 31, | Average Exercise | |||||||||||||||
Prices | 2007 | Contractual Life | Price | 2007 | Price | |||||||||||||||
$0.09 – 0.19 | 860,573 | 5.18 | $ | 0.09 | 800,399 | $ | 0.09 | |||||||||||||
$0.20 – 0.89 | 1,910,312 | 2.68 | 0.42 | 465,312 | 0.59 | |||||||||||||||
$0.90 – 1.85 | 1,561,100 | 4.22 | 1.16 | 776,425 | 1.17 | |||||||||||||||
$1.86 – 2.53 | 53,399 | 3.48 | 2.45 | 53,399 | 2.45 | |||||||||||||||
4,385,384 | $ | 0.65 | 2,095,535 | $ | 0.66 | |||||||||||||||
F-12
Table of Contents
Year Ending December 31, | Amount | |||
2008 | $ | 203,000 | ||
2009 | 209,000 | |||
2010 | 215,000 | |||
2011 | 221,000 | |||
2012 | 228,000 | |||
Thereafter | 1,136,000 | |||
$ | 2,212,000 | |||
Wilmington Plant
The Company expects to enter into a Lease Agreement with the State Port Authority for 3.80 acres of land for the Wilmington Plant. The lease agreement will be for a term of 15 years subject to two consecutive five year extension options exercisable by the Company and will provide for the Company to pay base rent plus a through put charge based on biodiesel delivered from the Wilmington Plant. The Company also expects to enter into a Terminal Agreement with Vopak Terminal Wilmington, Inc. for the use of four bulk storage tanks and the handling of through put by Vopak at its liquid storage tank terminal adjacent to the Wilmington Plant site. The Company will pay Vopak variable facility and service charges. The Terminal Agreement will be for an initial term of ten years subject to automatic five year renewal options. The Company expect that the base annual occupancy cost for the Wilmington Plant will be approximately $2,750,000. During the year ended December 31, 2007, the Company paid $205,000 to reserve the Wilmington Plant site and the Vopak bulk storage tanks as it pursues necessary permits.
Year Ending December 31, | Amount | |||
2008 | $ | 68,000 | ||
2009 | 53,000 | |||
2010 | 43,000 | |||
2011 | 2,000 | |||
2012 | 2,000 | |||
Total lease payments | 168,000 | |||
Less — interest | 25,000 | |||
Present value of lease payments | 143,000 | |||
Less — current portion | 57,000 | |||
$ | 86,000 | |||
F-13
Table of Contents
F-14
Table of Contents
Series A | Series B | Series C | Series A1 | Series B1 | Redeemable | |||||||||||||||||||||||||||||||||||||||
Convertible Stock | Convertible Stock | Convertible Stock | Convertible Stock | Convertible Stock | Preferred | |||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Stock | ||||||||||||||||||||||||||||||||||
Issuance of Series A preferred stock | 242,561 | $ | 1,480,000 | — | $ | — | — | $ | — | — | $ | — | — | $ | — | $ | 1,480,000 | |||||||||||||||||||||||||||
Balance, December 31, 1999 | 242,561 | 1,480,000 | — | — | — | — | — | — | — | — | 1,480,000 | |||||||||||||||||||||||||||||||||
Conversion of notes to Series A preferred stock | 106,925 | 637,000 | — | — | — | — | — | — | — | — | 637,000 | |||||||||||||||||||||||||||||||||
Retirement of common stock | — | — | 200,000 | 1,500,000 | — | — | — | — | — | — | 1,500,000 | |||||||||||||||||||||||||||||||||
Issuance of Series B preferred stock | — | — | — | 11,000 | — | — | — | — | — | — | 11,000 | |||||||||||||||||||||||||||||||||
Balance, December 31, 2000 | 349,486 | 2,117,000 | 200,000 | 1,511,000 | — | — | — | — | — | — | 3,628,000 | |||||||||||||||||||||||||||||||||
Balance, December 31, 2001 | 349,486 | 2,117,000 | 200,000 | 1,511,000 | — | — | — | — | — | — | 3,628,000 | |||||||||||||||||||||||||||||||||
Issuance of Series C preferred stock | — | — | — | — | 1,995,000 | 1,995,000 | — | — | — | — | 1,995,000 | |||||||||||||||||||||||||||||||||
Conversion of notes, accrued interest and accounts payable to Series C preferred stock | — | — | — | — | 5,255,785 | 5,256,000 | — | — | — | — | 5,256,000 | |||||||||||||||||||||||||||||||||
Balance, December 31, 2002 | 349,486 | 2,117,000 | 200,000 | 1,511,000 | 7,250,785 | 7,251,000 | — | — | — | — | 10,879,000 | |||||||||||||||||||||||||||||||||
Issuance of Series C preferred stock | — | — | — | — | 428,500 | 428,000 | — | — | — | — | 428,000 | |||||||||||||||||||||||||||||||||
Conversion of notes and accrued interest payable to Series C preferred stock | — | — | — | — | 744,510 | 745,000 | — | — | — | — | 745,000 | |||||||||||||||||||||||||||||||||
Buy back of fractional shares | (9 | ) | — | (3 | ) | — | (12 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Balance, December 31, 2003 | 349,477 | 2,117,000 | 199,997 | 1,511,000 | 8,423,783 | 8,424,000 | — | — | — | — | 12,052,000 | |||||||||||||||||||||||||||||||||
Issuance of Series B1 preferred stock | — | — | — | — | — | — | — | — | 720,000 | 720,000 | 720,000 | |||||||||||||||||||||||||||||||||
Conversion of notes and accrued interest payable to Series B1 preferred stock | — | — | — | — | — | — | — | — | 867,572 | 867,000 | 867,000 | |||||||||||||||||||||||||||||||||
Conversion of Series A preferred stock to Series A1 preferred stock | (349,477 | ) | (2,117,000 | ) | — | — | — | — | 349,477 | 2,117,000 | — | — | — | |||||||||||||||||||||||||||||||
Conversion of Series B preferred stock to Series A1 preferred stock | — | — | (199,997 | ) | (1,511,000 | ) | — | — | 199,997 | 1,511,000 | — | — | — | |||||||||||||||||||||||||||||||
Conversion of Series C preferred stock to Series B1 preferred stock | — | — | — | — | (8,423,783 | ) | (8,424,000 | ) | — | — | 8,423,783 | 8,424,000 | — | |||||||||||||||||||||||||||||||
Balance, December 31, 2004 | — | — | — | — | — | — | 549,474 | 3,628,000 | 10,011,355 | 10,011,000 | 13,639,000 | |||||||||||||||||||||||||||||||||
Balance, December 31, 2005 | — | — | — | — | — | — | 549,474 | 3,628,000 | 10,011,355 | 10,011,000 | 13,639,000 | |||||||||||||||||||||||||||||||||
Balance, December 31, 2006 | — | $ | — | — | $ | — | — | $ | — | 549,474 | $ | 3,628,000 | 10,011,355 | $ | 10,011,000 | $ | 13,639,000 | |||||||||||||||||||||||||||
Conversion of Kreido Labs preferred stocks to common stock at the converted acquisition basis | — | — | — | — | — | — | (549,474 | ) | (3,628,000 | ) | (10,011,355 | ) | (10,011,000 | ) | (13,639,000 | ) | ||||||||||||||||||||||||||||
Balance, December 31, 2007 | — | $ | — | — | $ | — | — | $ | — | — | $ | — | — | $ | — | $ | — | |||||||||||||||||||||||||||
F-15
Table of Contents
F-16
Table of Contents
F-17
Table of Contents
Number of Shares | Amount | |||||||
Common Stock | 1 | $ | 1.00 | |||||
Series A | 9 | 9.00 | ||||||
Series B | 3 | 3.00 | ||||||
Series C | 12 | 12.00 | ||||||
25 | $ | 25.00 | ||||||
F-18
Table of Contents
F-19
Table of Contents
Weighted Average | ||||||||
Number of Warrants | Exercise Price | |||||||
Balance at December 31, 2005 | 7,248,830 | $ | 0.87 | |||||
Granted | 602,011 | 1.00 | ||||||
Exercised | — | — | ||||||
Cancelled | — | — | ||||||
Balance at December 31, 2006 | 7,850,841 | 0.88 | ||||||
Granted | 18,498,519 | 1.85 | ||||||
Exercised | (7,279,506 | ) | 0.88 | |||||
Cancelled | — | — | ||||||
Balance at December 31, 2007 | 19,069,854 | $ | 1.81 | |||||
F-20
Table of Contents
F-21
Table of Contents
Exhibit No. | Description | Reference | ||||
2.1 | Agreement and Plan of Merger and Reorganization, dated as of January 12, 2007, by and among Kreido Biofuels, Inc., a Nevada corporation, Kreido Acquisition Corp., a California corporation and Kreido Laboratories, a California corporation. | Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
3.1 | Amended and Restated Articles of Incorporation of Kreido Biofuels, Inc. (f/k/a Gemwood Productions, Inc.). | Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on November 3, 2006 (File No. 333-130606). | ||||
3.3 | Amended and Restated Bylaws of Kreido Biofuels, Inc. | Incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on April 4, 2007 (File No. 333-130606). | ||||
4.1 | Form of Investor Warrant of Kreido Biofuels, Inc. | Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
4.2 | Form of Lock-Up Agreement by and between Tompkins Capital Group and each of the officers and directors of Kreido Biofuels, Inc., and certain stockholders of Kreido Laboratories. | Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
10.1 | Escrow Agreement, dated as of January 12, 2007, by and between Kreido Biofuels, Inc., Joel A. Balbien and Gottbetter & Partners, LLP. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
10.2 | Form of Subscription Agreement, dated as of January 12, 2007, by and between Kreido Biofuels, Inc. and the investors in the Offering. | Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
10.3 | Form of Registration Rights Agreement, dated as of January 12, 2007, by and between Kreido Biofuels, Inc. and the investors in the Offering. | Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). |
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Exhibit No. | Description | Reference | ||||
10.4 | Split-Off Agreement, dated as of January 12, 2007, by and among Kreido Biofuels, Inc., Victor Manuel Savceda, Kreido Laboratories and Gemwood Leaseco, Inc. | Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
10.5 | Form of Indemnity Agreement by and between Kreido Biofuels, Inc. and Outside Directors of Kreido Biofuels, Inc. | Incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
10.6 | 2006 Equity Incentive Plan. | Incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
10.7 | Form of Incentive Stock Option Agreement by and between Kreido Biofuels, Inc. and participants under the 2006 Equity Incentive Plan. | Incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
10.8 | Form of Non-Qualified Stock Option Agreement by and between Kreido Biofuels, Inc. and participants under the 2006 Equity Incentive Plan. | Incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2007 (File No. 333-130606). | ||||
10.9 | Employment Agreement, dated March 19, 2007, by and between Kreido Biofuels, Inc. and John M. Philpott. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 23, 2007 (File No. 333-130606). | ||||
10.10 | Binding Term Sheet by and between Kreido Labratories and Tompkins Capital Group dated as of September 1, 2006. | Incorporated by reference to Exhibit 10.12 to the Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on April 4, 2007 (File No. 333-130606). | ||||
10.11 | Amendment to Binding Term Sheet by and between Kreido Labratories and Tompkins Capital Group dated as of October 25, 2006. | Incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on April 4, 2007 (File No. 333-130606). |
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Exhibit No. | Description | Reference | ||||
10.12 | Form of Indemnity Agreement for officers and directors. | Incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on April 4, 2007 (File No. 333-130606). | ||||
10.13 | Employment Agreement, dated April 4, 2007, by and between Kreido Biofuels, Inc. and Philip Lichtenberger. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 10, 2007 (File No. 333-130606). | ||||
10.14 | Employment Agreement, dated April 10, 2007, by and between Kreido Biofuels, Inc. and Alan McGrevy. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2007 (File No. 333-130606). | ||||
10.15 | Employment Agreement, dated April 28, 2007, by and between Kreido Biofuels, Inc. and Larry Sullivan. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 2, 2007 (File No. 333-130606). | ||||
10.16 | Purchase Order Agreement, dated May 22, 2007, by and between Kreido Biofuels, Inc. and Certified Technical Services, L.P. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on June 6, 2007 (File No. 333-130606). | ||||
10.17 | Amendment No. 1 to Registration Rights Agreement, dated June 12, 2007, by and between Kreido Biofuels, Inc. and certain investors in the Offering. | Incorporated by reference to Exhibit 10.19 to the Registration Statement on Form SB-2/A filed with the Securities and Exchange Commission on June 22, 2007 (File No. 333-140718). | ||||
10.18 | Separation Agreement and General Release dated July 27, 2007 by and between Kreido Biofuels, Inc. and Joel Balbien. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 30, 2007 (File No. 333-130606). | ||||
10.19 | Kreido Biofuels, Inc. Outside Director Compensation Program adopted July 27, 2007. | Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 30, 2007 (File No. 333-130606). |
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Exhibit No. | Description | Reference | ||||
10.20 | Commercial Lease Agreement by and between Kreido Biofuels, Inc. and Acaso Partners, LLC effective August 1, 2007. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on September 12, 2007 (File No. 333-130606). | ||||
10.21 | Employment Agreement executed December 10, 2007 but effective December 1, 2007, by and between Kreido Biofuels, Inc. and G.A. Ben Binninger. | Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on December 13, 2007 (File No. 333-130606). | ||||
14.1 | Code of Ethics. | Incorporated by reference to Exhibit 14.1 to the Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on April 4, 2007 (File No. 333-130606). | ||||
21.1 | Subsidiaries of Kreido Biofuels, Inc.* | |||||
23.1 | Consent of Vasquez & Company LLP.* | |||||
31.1 | Certification of the Chief Executive Officer, as required by Rule 13a-14(a) of the Securities Exchange Act of 1934.* | |||||
31.2 | Certification of the Chief Financial Officer, as required by Rule 13a-14(a) of the Securities Exchange Act of 1934.* | |||||
32.1 | Certification of the Chief Executive Officer provided pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* | |||||
32.2 | Certification of the Chief Financial Officer provided pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
* | Filed herewith |
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Name | State of Organization | Ownership | ||
Kreido Laboratories | California | 100% | ||
Kreido Wilmington, LLC | Delaware | 100% | ||
Kreido Chicago, LLC | Delaware | 100% |
Table of Contents
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Kreido Biofuels, Inc. and Subsidiaries
Camarillo, California
We hereby consent to the incorporation by reference in the Prospectus constituting a part of the Registration Statements on Form SB-2/A (No. 333-140718) and on Form S-8 (No. 333-148829) of our report dated March 31, 2008 of Kreido Biofuels, Inc. and subsidiaries (the Company), a development stage company, relating to the consolidated balance sheets as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholders’ equity (capital deficit) and cash flows for each of the years in the two-year period ended December 31, 2007 and for the period from January 13, 1995 (inception) to December 31, 2007, which report is included in this Annual Report on Form 10-KSB. Our report contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.
/s/ Vasquez & Company LLP
Vasquez & Company LLP
Los Angeles, California
March 31, 2008
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/s/ G.A. Ben Binninger | ||||
G.A. Ben Binninger | ||||
Chief Executive Officer (authorized officer of registrant) | ||||
Table of Contents
/s/ John M. Philpott | ||||
John M. Philpott | ||||
Chief Financial Officer (principal accounting officer) | ||||
Table of Contents
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
By: | /s/ G.A. Ben Binninger | |||
G.A. Ben Binninger | ||||
Chief Executive Officer |
Table of Contents
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
By: | /s/ John M. Philpott | |||
John M. Philpott | ||||
Chief Financial Officer |