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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 |
o | TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
NEVADA | 20-3240178 | |
(State or Other Jurisdiction of Incorporation Organization) | (I.R.S. Employer Identification No.) |
1070 Flynn Road, Camarillo, California (Address of Principal Executive Offices) | 93012 (Zip Code) |
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RECENT DEVELOPMENTS
Our Biodiesel Production Technology –Our Wilmington Plant
Risk Factors — Risks Related to the Contemplated Conduct of our Business
We have obtained substantially all of the permits and regulatory approvals necessary to commence groundbreaking and site work for its proposed flagship Wilmington, North Carolina biodiesel production plant. The remaining city approval is expected to be issued in May, 2008. The approvals received to date will allow an annual capacity in excess of 100 million gallons although the first stage is targeted for 33-50 million gallons of biodiesel production. We will start work on the facility as soon as we have obtained the approximately $25 million of necessary financing to build and operate the initial plant. We are continuing to actively pursue such financing and in order to be in a financial position to start construction within the next few months. We are focusing the use of our available cash resources on business activities that we believe will facilitate our obtaining the necessary financing.
John Philpott Employment Agreement
The Employment Agreement entered into in March 2007 between the Company and our Chief Financial Officer, John Philpott, expired in March 2008. On April 30, 2008 we entered into a new Executive Employment Agreement with Mr. Philpott. The term of the agreement is 12 months and the agreement provides that Mr. Philpott’s base salary will be $195,000 per year. Mr. Philpott will be eligible to earn performance-based bonuses of between $39,000 and $97,000 depending on the achievement of target performance goals for 2008 and 2009, as determined by the Compensation Committee of the Board of Directors. In continuation of our commitment to Mr. Philpott, we will reimburse to him up to $25,000 of tuition and expenses for the MBA program that he is pursuing.
Mr. Philpott was granted an option to purchase 175,000 shares of our common stock under the 2006 Plan at an exercise price of approximately $0.16 per share, the closing sales price of our common stock on April 30, 2008. Options to purchase 25,000 shares of common stock vested upon execution of the agreement. The remainder of the options vest in 12 equal installments of 12,500 each month beginning May 2008 and ending with April 2009. Should Mr. Philpott’s employment be terminated by us for Cause, by Mr. Philpott without Good Reason or on account of Mr. Philpott’s death or Disability (each capitalized term as defined in the agreement), all unvested options shall expire immediately effective the date of termination or death. If Mr. Philpott’s employment is terminated following a Change of Control (as defined in the agreement) by us Without Cause or by Mr. Philpott for Good Reason, all unvested options shall immediately vest and become exercisable effective the date of termination of employment.
Mr. Philpott was also granted 75,000 shares of restricted common stock under the 2006 Plan, which is subject to repurchase by the Company at the price of $0.01 per share should Mr. Philpott not be employed by us through the term of the Agreement other than due to: (1) his death or Disability; (2) the termination of his employment by us Without Cause; or (3) the termination of his employment by Mr. Philpott for Good Reason.
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Item 9. | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. |
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 | 65 | 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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• | oversee our auditing, accounting and control functions, including having primary responsibility for our financial reporting process; | ||
• | monitor the integrity of our financial statements to ensure the balance, transparency and integrity of published financial information; | ||
• | monitor our outside auditors independence, qualifications and performance; | ||
• | monitor our compliance with legal and regulatory requirements; and | ||
• | monitor the effectiveness of our internal controls and risk management system. |
• | independent” under NASDAQ independence standards; | ||
• | “non-employee directors” under Exchange Act Rule 16b-3; and | ||
• | “outside directors” under Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code. |
• | determine our compensation policy and all forms of compensation for our officers and directors; | ||
• | review bonus and stock and incentive compensation arrangements for our other employees; and | ||
• | administer our stock option and equity incentive plans. |
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• | available on our corporate website atwww.kreido.com; | ||
• | available in print to any stockholder who requests them from our corporate secretary; and | ||
• | certain of them are filed as exhibits to our securities filings with the SEC. |
Name and Principal | Stock | Option | All Other | |||||||||||||||||||||||||
Position | Year | Salary ($) | Bonus ($) | Awards ($)1 | Awards ($)2 | Compensation ($) | Total ($) | |||||||||||||||||||||
G.A. Ben Binninger3 | 2007 | 76,440 | 50,000 | 1,667 | 56,020 | 37,000 | 221,127 | |||||||||||||||||||||
Chief Executive Officer & Director | 2006 | — | — | — | — | 72,000 | 72,000 | |||||||||||||||||||||
Philip Lichtenberger4 | 2007 | 252,487 | 97,500 | 3,019 | 277,775 | — | 630,781 | |||||||||||||||||||||
Chief Operating Officer | 2006 | 180,604 | — | — | — | — | 180,604 | |||||||||||||||||||||
Alan McGrevy5 | 2007 | 182,500 | 97,500 | 3,030 | 306,277 | — | 589,307 | |||||||||||||||||||||
Vice President of Engineering | 2006 | 158,553 | — | — | — | — | 158,553 | |||||||||||||||||||||
Joel A. Balbien7 | 2007 | 189,615 | 212,750 | — | — | 1,000 | 403,365 | |||||||||||||||||||||
Chief Executive Officer and Director | 2006 | 33,333 | — | — | — | — | 33,333 |
(1) | We record the value of the restricted stock awards and stock awards based on the fair market value of the stock as of the date of grant. | |
(2) | We have recorded $33,000 of compensation expense in 2005 relating to stock awards and stock options, respectively, issued to officers. The per share weighted average fair value of stock options expensed for the year ended December 31, 2005 was $0.03 on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions in 2005: risk-free interest rate of 4.13%, expected life of 10 years and expected volatility of 0.01%. We have recorded $41,000 as compensation expense in 2006. The fair value of the options issued during the year ended December 31, 2006 was estimated using the Black-Scholes option-pricing model with the following assumptions: risk free interest rates between 4.45% and 5.18 %, expected life of five (5) years and expected volatility of 0.01%. We have recorded $768,000 as compensation expense in 2007. The fair value of the options issued during the year ended December 31, 2007 was estimated using the Black-Scholes option-pricing model with the following assumptions: risk free interest rates between 3.125% and 4.81%, expected life of six (6) years and expected volatility of 92%. |
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The expected stock price volatility assumption was based on the average volatility of similar public companies for the period prior to our reverse merger. The expected term assumption used in the option pricing model was based on the “safe harbor” approach under SEC Staff Accounting Bulletin (SAB) No. 107, (SAB 107), where the “expected term = ((vesting term + original contractual term) / 2).” The risk free interest rate assumption was based on the implied yield currently available on U.S. Treasury zero coupon issues with remaining term equal to the expected term. A projected dividend yield of 0% was used as the company has never issued dividends. | ||
(3) | Mr. Binninger became our Chief Executive Officer on July 27, 2007 and prior to that he was Chief Operating Officer of our company from January 12, 2007 to March 15, 2007. Mr. Binninger served as a consultant to Kreido Labs from 2003 to 2006. Other compensation includes amounts paid to Mr. Binninger as a consultant to our company. | |
(4) | Mr. Lichtenberger became an executive officer of our company on January 12, 2007. Mr. Lichtenberger has served as Executive Vice President and Chief Operating Officer of Kreido Labs since 1997. | |
(5) | Mr. McGrevy became our Vice President of Engineering on January 12, 2007 and prior to that he was Vice President of Engineering of Kreido Labs since April 2005. | |
(6) | Mr. Balbien joined Kreido Labs as Chief Executive Officer in November 2006 and served as our Chief Executive Officer until July 27, 2007. |
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||
Equity | Incentive | |||||||||||||||||||||||||||||||||||
Equity | Incentive | Plan | ||||||||||||||||||||||||||||||||||
Incentive | Plan | Awards: | ||||||||||||||||||||||||||||||||||
Plan | Awards: | Market or | ||||||||||||||||||||||||||||||||||
Awards: | Market | Number of | Payout Value | |||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Number of | Value of | Unearned | of Unearned | ||||||||||||||||||||||||||||||
Securities | Securities | Securities | Shares or | Shares or | Shares, Units or | Shares, Units | ||||||||||||||||||||||||||||||
Underlying | Underlying | Underlying | Units of | Units of | Other | or Other | ||||||||||||||||||||||||||||||
Unexercised | Unexercised | Unexercised | Option | Option | Stock That | Stock That | Rights That | Rights That | ||||||||||||||||||||||||||||
Options (#) | Options (#) | Unearned | Exercise | Expiration | Have Not | Have Not | Have Not | Have Not | ||||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | Options (#) | Price ($) | Date | Vested (#) | Vested ($) | Vested (#) | Vested ($) | |||||||||||||||||||||||||||
G.A. Ben Binninger | 33,848 | — | — | 0.09 | 7/1/09 | — | — | — | — | |||||||||||||||||||||||||||
100,000 | 25,000 | — | 0.44 | 7/26/17 | ||||||||||||||||||||||||||||||||
100,000 | 1,150,000 | — | 0.30 | 12/1/17 | ||||||||||||||||||||||||||||||||
Philip Lichtenberger | 240,694 | 30,087 | — | 0.09 | 4/17/10 | 10,752 | 1 | 5,376 | — | — | ||||||||||||||||||||||||||
308,125 | 271,875 | — | 1.18 | 4/4/17 | ||||||||||||||||||||||||||||||||
Alan McGrevy | 240,694 | 30,087 | — | 0.09 | 4/17/10 | 10,792 | 1 | 5,396 | — | — | ||||||||||||||||||||||||||
308,125 | 271,875 | — | 1.20 | 4/10/17 | ||||||||||||||||||||||||||||||||
Joel A. Balbien |
(1) | The Forfeiture Condition (as defined in the Stock Grant Agreements) lapsed on the date of grant with respect to 56% of the shares for Mr. Lichtenberger and 20% of the shares for Mr. McGrevy and will lapse with respect to an additional 2.2% of the remaining shares each month thereafter for each. |
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Fees | Non-Qualified | |||||||||||||||||||||||||||
Earned | Non-Equity | Deferred | ||||||||||||||||||||||||||
or Paid in | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||
Name | Cash ($) | Awards ($) | Awards ($) | Compensation ($) | Earnings ($) | Compensation ($) | Total ($) | |||||||||||||||||||||
Betsy Wood Knapp | 37,000 | — | — | — | — | — | 37,000 | |||||||||||||||||||||
David Mandel | 7,000 | 1,100 | — | — | — | — | 8,100 | |||||||||||||||||||||
David Nazarian | 7,000 | 1,100 | — | — | — | — | 8,100 | |||||||||||||||||||||
Richard Redoglia | 13,250 | 1,500 | — | — | — | — | 14,750 | |||||||||||||||||||||
Murli Tolaney | 14,500 | 1,500 | — | — | — | — | 16,000 |
Number of securities | ||||||||||||
Number of securities | remaining available for future issuance | |||||||||||
to be issued upon | Weighted-average | under equity | ||||||||||
exercise of | exercise price of | compensation plans | ||||||||||
outstanding options, | outstanding options, | (excluding securities | ||||||||||
Plan category | warrants and rights | warrants and rights | reflected in 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 in 2007. 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. After adoption of the 1997 program, 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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Shares Beneficially Owned | ||||||||
Percentage of | ||||||||
Number of Shares | Common Stock | |||||||
Name and Address of Beneficial Owner2 | Beneficially Owned | Outstanding1 | ||||||
David Nazarian3 | 17,453,587 | 33.1 | % | |||||
Wellington Management Company, LLP4 | 7,424,400 | 14.1 | % | |||||
Betsy Wood Knapp5 | 4,823,809 | 9.2 | % | |||||
David R. Fuchs6 | 4,234,646 | 8.0 | % | |||||
David Mandel7 | 3,750,549 | 7.1 | % | |||||
G.A. Ben Binninger8 | 1,073,183 | 2.0 | % | |||||
Philip Lichtenberger9 | 930,919 | 1.7 | % | |||||
Alan McGrevy10 | 796,082 | 1.5 | % | |||||
John M. Philpott11 | 100,000 | * | ||||||
Larry Sullivan12 | 87,500 | * | ||||||
Richard Redoglia13 | 15,000 | * | ||||||
Murli Tolaney13 | 15,000 | * | ||||||
Joel A. Balbien14 | 0 | * | ||||||
Executive Officers and Directors as a Group | 29,045,629 | 55.1 | % |
* | Less than 1%. | |
(1) | Based on 52,645,992 shares of Kreido Biofuels, Inc. stock issued and outstanding as of April 21, 2008. | |
(2) | Each of our directors and executive officers may be reached at 1070 Flynn Road, Camarillo, California 93012, telephone (805) 389-3499. |
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(3) | Includes shares to be held of record by (a) Smart Technology Ventures Advisors, LLC and its affiliates, Smart Technology Ventures III SBIC, L.P., Smart Technology Ventures III, L.P. and Smart Technology Ventures, II, LLC (the “STV Entities”), (b) the Y & S Nazarian Revocable Trust (the “Y&S Trust”), and (c) Younes Nazarian 2006 Annuity Trust (the “YN Trust,” collectively with the STV Entities and the Y&S Trust, the “STV Affiliates”). Includes 12,500 shares of common stock underlying options awarded under the 2006 Plan which are exercisable within 60 days of April 21, 2008 and 2,500 shares of restricted stock granted to David Nazarian as an outside director of our company. Also includes (i) 9,428,831 shares of common stock (which number includes 740,741 shares of common stock underlying warrants) beneficially owned by Smart Technology Ventures III SBIC, L.P., (ii) 2,087,854 shares of common stock beneficially owned by Smart Technology Ventures II, LLC (iii) 212,667 shares of common stock beneficially owned by Smart Technology Ventures II, LLC, (iv) 5,262,942 shares of common stock (which number includes 1,574,075 shares of common stock underlying warrants) beneficially owned by the Y&S Trust, (v) 427,204 shares of common stock (which number includes 213,604 shares of common stock underlying warrants) beneficially owned by the YN Trust, and (vi) 19,089 shares of common stock beneficially owned by the David and Angela Nazarian Family Trust. The address for the STV Affiliates is 1801 Century Park West, 5th Floor, Los Angeles, CA 90067. David Nazarian disclaims beneficial ownership of the shares held of record by the STV Affiliates. | |
(4) | Wellington Management, in its capacity as investment adviser, may be deemed to beneficially own 7,424,400 shares of our common stock which are held of record by clients of Wellington Management. Wellington’s address is 75 State Street, Boston, MA 02109. | |
(5) | Includes (a) 4,811,309 shares of common stock (which number includes 218,978 shares of common stock underlying warrants) beneficially owned by Betsy Wood Knapp and held of record by the Knapp Trust u/t/d 7/1/2004, of which Cleon T. Knapp and Betsy Wood Knapp are the trustees and (b) 12,500 shares of common stock underlying options awarded under the 2006 Plan which are exercisable within 60 days of April 21, 2008. | |
(6) | Includes (a) 3,223,167 shares of common stock (which number includes 95,645 shares of common stock underlying warrants) beneficially owned by Mr. Fuchs and (b) 1,011,479 shares of common stock (which number includes 123,333 shares of common stock underlying warrants) beneficially owned by the David R. Fuchs Charitable Remainder Trust. Mr. Fuch’s address is 1070 Flynn Road, Camarillo, California 93012. | |
(7) | Includes (a) 3,735,549 shares of common stock (which number includes 220,092 shares of common stock underlying warrants) beneficially owned by Mr. Mandel, (b) 12,500 shares of common stock underlying options awarded under the 2006 Plan which are exercisable within 60 days of April 21, 2008 and 2,500 shares of restricted stock granted to Mr. Mandel as an outside director of our company. | |
(8) | Includes (a) 33,848 shares of common stock underlying options awarded under the 1997 Program, (b) 226,835 shares of common stock underlying warrants, and (c) 712,500 shares of common stock underlying options awarded under the 2006 Plan, all of which are exercisable within 60 days of April 21, 2008 and 100,000 shares of restricted common stock awarded under the 2006 Plan. | |
(9) | Includes (a) 270,781 shares of common stock underlying options awarded under the 1997 Program, (b) 1,636 shares of common stock underlying warrants and (c) 362,500 shares of common stock underlying options awarded under the 2006 Plan, all of which are exercisable within 60 days of April 21, 2008 and 296,002 shares of restricted stock. |
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(10) | Includes, (a) 270,781 shares of common stock underlying options awarded under the 1997 Program, and (b) 362,500 shares of common stock underlying options awarded under the 2006 Plan, all of which are exercisable within 60 days of April 21, 2008 and 162,801 shares of restricted stock. | |
(11) | Includes 75,000 shares of common stock underlying options awarded under the 2006 Plan which are exercisable within 60 days of April 21, 2008. | |
(12) | Includes 87,500 shares of common stock underlying options awarded under the 2006 Plan which are exercisable within 60 days of April 21, 2008. | |
(13) | Each includes 12,500 shares of common stock underlying options awarded under the 2006 Plan which are exercisable within 60 days of April 21, 2008 and 2,500 shares of restricted stock granted to Messrs. Redoglia and Tolaney as outside directors of our company. |
• | STV III SBIC, a limited partnership that, together with its affiliates, Smart Technology Ventures, II, LLC, and Smart Technology Ventures, III, beneficially owns more than 5% of our issued and outstanding voting securities. David Nazarian, who is a member of our board of directors is a managing member of STV III SBIC; | ||
• | Betsy Wood Knapp, the Chairperson of our board of directors and a beneficial owner of more than 5% of our issued and outstanding voting securities; | ||
• | David Mandel, a member of our board of directors and a beneficial owner of more than 5% of our issued and outstanding voting securities; and | ||
• | David R. Fuchs, a beneficial owner of more than 5% of our issued and outstanding voting securities. |
Related Party | Shares | |||
STV III SBIC and affiliates | 3,774,522 | |||
Ms. Knapp | 1,279,289 | |||
Mr. Mandel | 1,281,640 | |||
Mr. Fuchs | 1,305,427 |
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Related Party | Shares | |||
STV III SBIC and affiliates | 1,025,249 | |||
Ms. Knapp | 348,998 | |||
Mr. Mandel | 349,819 | |||
Mr. Fuchs | 248,873 |
Related Party | Aggregate Principal Amount | Units in Offering | ||||||
Y & S Nazarian Revocable Trust | $ | 125,000 | 92,593 | |||||
Ms. Knapp | 42,000 | 30,864 | ||||||
Mr. Mandel | 42,000 | 30,867 | ||||||
Mr. Fuchs | 42,000 | 30,864 |
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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). |
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Exhibit No. | Description | Reference | ||
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). | ||
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 | Binding Term Sheet by and between Kreido Laboratories 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). | ||
10.10 | Amendment to Binding Term Sheet by and between Kreido Laboratories 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 | ||
10.11 | 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). | ||
10.12 | 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). | ||
10.13 | 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). | ||
10.14 | 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). | ||
10.15 | 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). | ||
10.16 | 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). | ||
10.17 | 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). | ||
10.18 | 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 | ||
10.19 | 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). | ||
10.20 | 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). | ||
10.21 | Employment Agreement, dated April 30, 2008, by and between Kreido Biofuels, Inc. and John M. Philpott.* | |||
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. | Incorporated by reference to Exhibit 21.1 to the Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008 (File No. 333-130606). | ||
23.1 | Consent of Vasquez & Company LLP. | Incorporated by reference to Exhibit 21.1 to the Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008 (File No. 333-130606). | ||
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.* |
* | Filed herewith |
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2007 | 2006 | |||||||
Audit fees | $ | 60,000 | $ | 70,000 | ||||
Audit-related fees* | $ | 88,000 | $ | 33,000 | ||||
Tax fees | $ | — | $ | — | ||||
Other fees | $ | — | $ | — | ||||
Total: | $ | 148,000 | $ | 103,000 |
* | Includes services rendered in filing the SB-2 registration statement and assistance in responding to the SEC comments. |
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KREIDO BIOFUELS, INC. | ||||
By: | /s/ G.A. Ben Binninger | |||
G.A. Ben Binninger, CEO and Director | ||||
(Principal Executive Officer) | ||||
Date: April 30, 2008 |
Signature | Title | Date | ||
/s/ G.A. Ben Binninger | Chief Executive Officer and Director (Principal Chief Executive) | April 30, 2008 | ||
/s/ John M. Philpott | Chief Financial Officer (Principal Accounting Officer) | April 30, 2008 | ||
/s/ Betsy Wood Knapp | Director | April 30, 2008 | ||
/s/ David Mandel | Director | April 30, 2008 | ||
/s/ David Nazarian | Director | April 30, 2008 | ||
/s/ Richard Redoglia | Director | April 30, 2008 | ||
/s/ Murli Tolaney | Director | April 30, 2008 |
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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 | Binding Term Sheet by and between Kreido Laboratories 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). | ||
10.10 | Amendment to Binding Term Sheet by and between Kreido Laboratories 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). | ||
10.11 | 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). | ||
10.12 | 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). | ||
10.13 | 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). |
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Exhibit No. | Description | Reference | ||
10.14 | 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). | ||
10.15 | 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). | ||
10.16 | 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). | ||
10.17 | 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). | ||
10.18 | 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). | ||
10.19 | 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). | ||
10.20 | 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). | ||
10.21 | Employment Agreement, dated April 30, 2008, by and between Kreido Biofuels, Inc. and John M. Philpott.* | |||
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). |
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Exhibit No. | Description | Reference | ||
21.1 | Subsidiaries of Kreido Biofuels, Inc. | Incorporated by reference to Exhibit 21.1 to the Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008 (File No. 333-130606). | ||
23.1 | Consent of Vasquez & Company LLP. | Incorporated by reference to Exhibit 21.1 to the Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008 (File No. 333-130606). | ||
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.* |
* | Filed herewith |
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1. | Executive’s Duties; Title; Location. As of the Effective Date, Executive is employed as Kreido’s Chief Financial Officer (“CFO”) under the terms and conditions below. Executive shall do and perform all services, acts and things necessary and advisable to manage and conduct the business of the Company that are normally associated with the position of CFO. At all times during his employment, Executive shall report to and be subject to the direction and policies that are established from time to time by the Company’s Board of Directors (the “Board”) and Chief Executive Officer (“CEO”). | |
2. | Term And Termination. Except as specifically provided herein, the Term of this Agreement shall commence as of the Effective Date. The Term shall continue through and including April 30, 2009 unless it is terminated earlier as provided herein below or extended by agreement of the parties. The expiration of this Agreement at the end of its Term shall not constitute a termination of the employment of Executive. | |
3. | Efforts; Location.Executive shall work at Kreido’s Camarillo, California office. Executive shall not be required routinely to provide services outside of a reasonable commuting distance from the current Camarillo office except when traveling on Kreido business. The nature of the Executive’s duties requires flexibility in the days and hours that the Executive must work. | |
4. | Compensation. |
4.1 | Cash Compensation. |
4.1.1 | Base Salary. Executive shall receive an annual base salary of $195,000 in accordance with Kreido’s regular payroll practices. Base salary shall be effective as of April 1, 2008. |
4.1.2 | Bonus.Executive shall be entitled to participate in a performance-based executive bonus plan (“Bonus Plan”), which shall be promulgated by the Compensation Committee of the Company’s board of directors each fiscal year. The Bonus Plan will set forth three levels of target performance goals “TPGs” for fiscal years 2008 and 2009 which, if achieved, will entitle the Executive to a bonus of between $39,000 and $97,500 depending upon the level of TPG achieved. The TPGs will consist of a combination of goals for the Executive’s individual performance and the Company’s overall performance in a ratio of 75% Company performance and 25% individual Executive performance. |
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Bonuses paid under the Bonus Plan, if any, will be paid annually within 60 days after the end of the fiscal year. The foregoing notwithstanding, so long as Executive’s employment under this Agreement is not terminated voluntarily by Executive Without Good Reason pursuant to Section 8.1 of this Agreement, Executive’s bonus shall be no less than $39,000. In the event Executive’s employment is terminated by Company Without Cause or by Executive with Good Reason prior to the end of the applicable fiscal year, Executive shall be entitled to receive a pro rata portion of the bonus for such fiscal year, subject to a $10,000 minimum if other executive officers of the Company receive bonuses for such fiscal year. |
4.2 | Stock Options.Executive shall be entitled to participate in the Kreido Biofuels 2006 Equity Incentive Plan (“Plan”). Executive’s participation in the Plan shall be governed by the terms and conditions set forth in the applicable Plan documents to the extent the Plan documents are not inconsistent with the terms of this Agreement except to the extent required by law. Capitalized words not defined in this Agreement but used in this Section shall have the meanings ascribed to them in the Plan. |
4.2.1 | Grant of Options.On the Effective Date, or the Execution Date, if later, the Company will grant Executive an option to purchase 175,000 shares of the Company’s common voting stock under the Plan (the “Options”). Subsequently, the Executive shall be eligible for such additional grants of options and other permissible grants (collectively “Awards”) under the Plan as the Compensation Committee of the board of directors of the Company shall determine in its absolute discretion. | ||
4.2.2 | Option Exercise Price; Term.The per share exercise price of the Options shall be the final closing price per share of Company common stock on the date of grant, that being the Execution Date. The Term of the Option shall be ten years from the date of grant. | ||
4.2.3 | Vesting and Exercise.The Options shall vest and be exercisable as follows: 25,000 options shall vest on the Effective Date, or the Execution Date if later; and an additional 12,500 options shall vest on the first day of each of the twelve months beginning with May, 2008 and ending with April, 2009 (each a “Monthly Vesting”). Each such Monthly Vesting shall remain exercisable for a period of ten years from the date of grant, subject to Section 4.2.5(iv). | ||
4.2.4 | Termination of Service; Accelerated Vesting. |
(i) | If the Executive’s employment is terminated by the Company for Cause as such term is defined below in Section 7.1.1, (1) all unvested Monthly Vestings shall expire immediately effective the date of termination, and; (2) all vested Monthly Vestings shall expire ten years following the date of the grant. | ||
(ii) | If the Executive’s employment is terminated voluntarily by the Executive without Good Reason as such term is defined below, all unvested Monthly Vestings shall immediately expire effective the date of termination of employment. Vested Monthly Vestings, to the extent unexercised, shall expire on the later of ten years after the date of grant or the expiration of the contractual Lock-Up Agreement. |
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(iii) | If the Executive’s employment terminates on account of death or Disability, as defined below, all unvested Monthly Vestings shall immediately expire effective the date of death or termination of employment and all vested Monthly Vestings to the extent unexercised, shall expire ten years after the date of the grant unless otherwise limited by applicable federal or state law. | ||
(iv) | If the Executive’s employment is terminated (A) in connection with a Change of Control as defined below, (B) by the Company without Cause, or (C) by the Executive for Good Reason, all unvested Monthly Vestings shall immediately vest and become exercisable effective the date of termination of employment, and, to the extent unexercised, shall expire ten years after the date of grant. |
4.2.5 | Payment.The full consideration for shares purchased by the Executive upon exercise of the Option shall be paid: (a) by delivery of a certified check payable to the order of the Company; (b) by delivery and attestation of Mature Shares (valued at their Fair Market Value on the date of delivery) or (c) by delivery of a properly executed exercise notice with irrevocable instructions to a broker to deliver to the Company the amount necessary to pay the exercise price from the sale of proceeds of a loan from the broker with respect to the sale of such award or a broker loan secured by Mature Shares. |
4.3 | Grant of Restricted Stock. On the Effective Date (or the Execution Date, if later), the Company will issue to Executive 75,000 shares of Company common stock under the 2006 Equity Incentive Plan, which shall be Restricted Stock in that it shall be subject to repurchase by the Company at the price of $0.01 per share if Executive shall not be in the employ of the Company through the Term of the Agreement other than due to: (1) the death or disability of Executive; (2) the termination of Executive’s employment by the Company Without Cause or due to a Change in Control; or (3) the termination of Executive’s employment by Executive for Good Reason. The certificate representing the Restricted Stock shall be held in the custody of the Company or its designee for the account of the Executive pending delivery to Executive upon the lapse of the restriction. The parties agree that the value of the Restricted Stock while subject to restriction is $0.01 per share. The Restricted Stock shall be subject to the restriction described herein and shall bear an appropriate legend with respect to the restriction. |
4.3.1 | Taxes. The Executive shall be liable for any and all taxes, including withholding taxes, arising out of this grant and the vesting of Restricted Stock hereunder. When the restriction on the Restricted Stock lapses, Executive may elect to satisfy Company’s withholding tax obligation by (1) remitting to Company the amount of Company’s minimum withholding obligation; (2) having Company retain that portion of the Restricted Stock having a fair market value equal to the Company’s minimum withholding obligation; (3) having the Company retain its minimum withholding obligation from payroll otherwise due and payable to Executive at the time the Restriction lapses; or (4) a combination of numbers 1 through 3. Executive shall notify Company of his election under this Section as soon as practicably possible after the restriction on the Restricted Stock has lapsed. |
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4.4 | Additional Benefits. |
4.4.1 | Welfare Benefit Plans. Executive shall at all times be entitled to participate in all benefit, 401(k) and other ERISA-qualified plans made available to senior management executives of Kreido under the same terms offered to other senior management executives, including without limitation, health benefit coverage for Executive’s spouse and dependant children, if any. | ||
4.4.2 | Expense Reimbursement. Kreido shall reimburse Executive for all ordinary and necessary expenses reasonably incurred by Executive on Kreido’s behalf (“Business Expenses”). Business Expenses (including travel costs) in excess of $500 individually or $2,500 in the aggregate shall be approved in advance except in case of emergency. Additionally, Kreido will reimburse Executive for all reasonable amounts paid as dues and related education expenses including qualified courses, conferences and related travel and lodging to maintain the Executive’s CPA status as active, provided such dues and expenses are approved in advance by the Chief Executive Officer of Kreido. Executive shall provide Kreido with documentation for all Business Expenses at the time reimbursement is requested. In the event it is necessary for Executive to travel on Kreido’s behalf, Executive shall be entitled to fly and have travel accommodations on the same level as Kreido’s other most senior management Executives. | ||
4.4.3 | Discretionary Time Off. During his employment hereunder, Executive shall be entitled to accrue Paid Time Off (“PTO”) in accordance with Kreido’s regular PTO policy for all employees, or at the rate of twenty days per calendar year, whichever is greater. Executive shall be entitled to additional PTO of no more than two days per month (four days per month through June 30, 2008) to attend classes and study in the Executive MBA Program at the Graduate School of Management at UCLA. Executive shall provide the Company with a report each month of those days on which he was absent from work to attend and/or prepare for class. A total of five business days between June 30 and July 16 that Executive is traveling to, in, through and from the Peoples Republic of China shall be charged as PTO vacation days while the remaining Company business days will be paid as qualified work days. | ||
4.4.4 | Tuition Reimbursement .Company shall reimburse Executive up to $25,000 of the cost of his tuition at the Executive MBA Program at the Graduate School of Management at UCLA in which he is currently enrolled so long as he is employed hereunder provided that he passes the coursework (“Tuition Reimbursements”) and subject to the Company obtaining additional financing. The foregoing notwithstanding, in the event that prior to April 30, 2009, Executive voluntarily terminates his employment without Good Reason as defined in Section 8.1 of this Agreement, or the Company terminates Executive’s employment before that date with Cause as defined in Section 7.1, then a pro rata share (based upon a 12 month amortization) of the Tuition Reimbursements shall be deemed to have been payroll advances to Executive (“Payroll Advances”). All such payroll advances shall be recoupable against any accrued payroll, accrued and minimum bonuses and/or accrued but unused Paid Time Off due to Executive at the time of the termination of his employment. If any balance remains thereafter on such Payroll Advances, Executive agrees to remit the balance to the Company within 10 days after the termination of his employment. |
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5. | Proprietary Covenants of Executive. |
5.1 | No Conflicts of Interest.Executive acknowledges that he is bound to use good judgment, to adhere to the highest ethical standards, and to avoid situations that create an actual, potential, or apparent conflict of interest. Executive warrants and represents to Kreido that he is currently unaware of any actual, potential, or apparent conflicts of interest. He also agrees to immediately disclose to the Chief Executive Officer or Chairperson of Kreido any and all actual, potential, or apparent conflicts of interest, should they later arise. In addition, Executive covenants that for so long as he is employed by the Company, he shall inform the Company of each and every business opportunity presented to the Executive that could be reasonably feasible for the Company to undertake that directly or indirectly relate to the alternative fuels or chemical processing fields or any other area of express interest to the Company. | ||
5.2 | Covenant Not to Use or Disclose Confidential Information. |
5.2.1 | Definition of Confidential Information.For purposes of this Agreement, the term Confidential Information means all and any confidential information and/or trade secrets of Kreido, including without limitation, scientific discoveries, recipes, formulations, information encompassed in all advertising and marketing plans, customer lists, costs, pricing information, information concerning software and all concepts or ideas, in or reasonably related to the business of Kreido. Confidential Information shall not include any Kreido information that has been voluntarily disclosed to the public by Kreido, independently developed and disclosed by others, information about Kreido that Executive did not obtain by virtue of his employment or fiduciary relationship with the Company, or information which otherwise enters the public domain through lawful means. | ||
5.2.2 | Non-disclosure of Confidential Information.Executive expressly acknowledges that in the performance of his duties and responsibilities with the Company prior to the execution of this Agreement, he has been exposed to Confidential Information and that he will continue to be exposed to the Confidential Information after the execution of this Agreement. During his employment and for three years thereafter, Executive shall regard and preserve as confidential all Confidential Information pertaining to Kreido and its affiliates that have been or may be obtained by Executive in any way by reason of Executive’s employment by Kreido. Executive shall not, without the prior and specific written consent of Kreido, or unless ordered to do so by court order or subpoena (i) use, publicize, release or disclose to others, either during or after the period of employment, Confidential Information or (ii) take, retain or copy any Kreido executive compensation plans, Executive benefit plans, business plans, customer lists, costs, pricing information, documents, reports, information encompassed in advertising and marketing plans, or other concepts or ideas, in or reasonably related to the business of Kreido. Executive agrees to notify Kreido’s Board of Directors within two (2) business days of receipt of any court order or subpoena which calls for information deemed Confidential under this Agreement and to give Kreido reasonable opportunity to contest the subpoena. The foregoing notwithstanding, nothing contained in this Section 5.2.2 shall be construed to prevent Executive from using or disclosing Confidential Information when it is necessary for him to do so in the course of conducting his regular employment duties. |
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5.3 | Covenant Not to Interfere With Kreido’s Business Relationships.During his employment and for a period of 12 months after the termination of his employment, executive shall not, whether for Executive’s own account or for the account of a third-party, solicit or endeavor to entice any employee or vendor of Kreido to end any business and/or contractual relationship with Kreido. In addition, Executive will not use any of Company’s Confidential Information in order to induce any client or customer of Kreido to end its relationship with the Company. | ||
5.4 | Ownership and Use of Materials. |
5.4.1 | Kreido Materials.Executive agrees that all information encompassed in all executive compensation plans, Executive benefit plans, business plans, advertising plans and marketing materials and other Confidential Information concerning Kreido, its Executives and shareholders, customer lists, costs, pricing information, documents, reports, plans, proposals or other items made or created by Executive or that come into Executive’s possession during the Term are the property of Kreido and shall not be used by Executive in any way after the Agreement is terminated. | ||
5.4.2 | Delivery of Materials. Upon termination of this Agreement, Executive shall promptly deliver to Kreido or destroy all of its executive compensation plans, Executive benefit plans, business plans, advertising plans and marketing materials and other Confidential Information concerning Kreido, its Executives and shareholders, customer lists, costs, pricing information, documents, reports, plans, proposals or other items made or created by Executive during the period of employment. |
6. | Termination Due to Death or Disability. If Executive dies during the employment, Executive’s employment shall automatically cease and terminate as of the date of Executive’s death. In the event of Executive’s disability for a period of 120 consecutive days during any 365-day period, Company shall thereafter have the right, upon written notice to Executive, to terminate this Agreement, in which case the date of termination shall be the date of such written notice to Executive. As used herein, “disability” shall have the meaning provided in the Company’s disability insurance policy. | |
In the event of the termination of Executive’s employment due to his death or Disability, Executive’s estate and/or Executive shall be entitled to receive: (i) a lump sum cash payment, payable within ten (10) business days after the date of death equal to the sum of any accrued but unpaid salary and bonus as of the date of death; and (ii) earned Executive benefits, perquisites and reimbursements described in Section 4 inclusive, if any, as to which Executive may be entitled hereunder or under Executive benefit plans, programs and arrangements of Kreido through the date of death. In the event of the termination of Executive’s employment due to Disability, Executive shall not be entitled to any severance pay. | ||
7. | Termination by Kreido. |
7.1 | Termination for Cause. |
7.1.1 | Definition of Cause.The term “Cause” for purposes of this Agreement means the following, which will constitute a material breach of this Agreement (“Material Breach”): Executive’s conviction of or plea of nolo contendere to any felony or any offense involving moral turpitude. | ||
7.1.2 | Entitlements Upon a Termination for Cause.In the event of the termination of the Executive’s employment hereunder due to a termination by the Company for Cause, on the date of termination Executive shall be entitled to receive: (i) a lump sum cash payment, payable immediately upon the termination of Executive’s employment, equal to the sum of any accrued but unpaid base salary and bonus as of the date of such termination plus any properly incurred but unpaid expense reimbursements and (ii) earned Executive benefits, as described in Section 4 of this Agreement, as to which Executive may be entitled hereunder or under Executive benefit plans, programs and arrangements of Kreido. |
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7.2 | Termination Without Cause. Kreido may terminate Executive’s employment hereunder without Cause at any time by providing Executive written notice of such termination. If Executive’s employment is terminated without Cause, the termination shall take effect on the effective date of written notice of such termination to Executive (pursuant to Section 11.10). |
7.2.1 | Entitlements Upon a Termination Without Cause.In the event of the termination of Executive’s employment hereunder due to a termination by Kreido without Cause (other than due to Executive’s death), Executive shall be entitled to: (i) a lump sum cash payment, payable immediately upon the termination of Executive’s employment, equal to the sum of any accrued but unpaid base salary and bonus as of the date of such termination plus any properly incurred but unpaid expense reimbursements; (ii) earned Executive benefits, as described in Section 4 of this Agreement, as to which Executive may be entitled hereunder or under Executive benefit plans, programs and arrangements of Kreido through the date of his termination; and (iii) severance pay on the date of the Termination without Cause equal to Executive’s then-current base salary for nine months. |
8. | Termination by Executive. |
8.1 | Termination Without Good Reason. Executive shall have the right to terminate Executive’s employment hereunder at any time without Good Reason (as defined below) upon written notice of such termination to Kreido. A voluntary termination by Executive in accordance with this Section 8.1 shall not be deemed a breach of this Agreement. Upon any voluntary termination of employment by Executive pursuant to this Section 8.1, Executive shall have the same entitlements as provided in Section 7.1.2 in the case of a termination by Kreido for Cause. | ||
8.2 | Termination With Good Reason.The following events constitute grounds for Executive to terminate his employment for good reason (“Good Reason”): |
(i) | removal of Executive from the position specified in Section 1 without Cause; | ||
(ii) | material diminution in Executive’s salary, duties or title; | ||
(iii) | assignment to Executive of duties that are materially inconsistent with his position or that materially impair his ability to perform his duties; |
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(iv) | Change of Control. For purposes of this Agreement, “Change of Control” means the occurrence of: (A) any consolidation or merger of the Company pursuant to which the stockholders of the Company immediately before the transaction do not retain immediately after the transaction, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the transaction, direct or indirect beneficial ownership of more than 50% of the total combined voting power of the outstanding voting securities of the surviving business entity; (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company other than any sale, lease, exchange or other transfer to any company where the Company owns, directly or indirectly, 100% of the outstanding voting securities of such company after any such transfer; (C) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than 50% of the voting stock of the Company; (D) any sale, lease, exchange or other transfer of stock (in one transaction or a series of transactions) which results in a single shareholder having more than 50% of the voting stock of the Company. |
(v) | the foregoing notwithstanding, i, ii, and iii above will not constitute Good Reason unless Executive first notifies Kreido in writing describing the event(s) that constitutes Good Reason (Executive’s Notice of Good Reason ) and unless Kreido thereafter fails to cure such event(s) within fifteen business days after Executive delivers Executive’s Notice of Good Reason to Kreido (“Kreido’s Cure Period”). It will be incumbent upon Executive to deliver Executive’s Notice of Good Reason to Kreido within fifteen business days after making a good faith determination that an event constituting Good Reason has occurred. |
8.2.1 | Entitlements Upon a Termination for Good Reason. Upon Executive’s termination of his employment hereunder for Good Reason in accordance with Section 8.2 hereof, Executive shall have the same entitlements as provided under Section 7.2 for a termination by Kreido Without Cause. |
9. | Right to Assign. This Agreement shall be assignable only by Kreido. | |
10. | Miscellaneous Terms. |
10.1 | Post-Termination Defense of Claims. In the event that Executive and/or Kreido are named as defendants in any legal proceeding arising from the operation of Kreido’s business, Kreido shall defend, indemnify and hold Executive harmless to the full extent required by law. Kreido shall provide Executive with defense counsel of Kreido’s choosing, but who is also reasonably acceptable to Executive. In the event Executive’s interests in the proceeding are adverse to Kreido’s interests, Kreido shall provide Executive with the reasonable costs and fees of an attorney of Executive’s choosing. |
10.2 | Alternative Dispute Resolution; Mediation Before Arbitration. |
10.2.1 | Arbitrable Disputes.To the fullest extent allowed by law, any controversy, claim, or dispute between Executive and Kreido (and/or any of its directors, shareholders, officers, Executives, representatives or agents) relating to or arising out of his employment or the termination of that employment (“Arbitrable Dispute”) will be submitted to final and binding arbitration in Ventura County, California. Executive agrees to execute the Mutual Agreement to Arbitrate attached hereto as Exhibit “A” and incorporated herein by reference. |
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10.2.2 | Mediation Before Arbitration.The foregoing provisions regarding Arbitration notwithstanding, before any Arbitrable Dispute is submitted to arbitration, the Parties agree to mediate such dispute in good faith with a professional mediator in Ventura County who is also a licensed attorney experienced in the area of employment law. If the parties cannot agree on the choice of a mediator, each party shall select a mediator, the two of whom will then select a third mediator who alone will conduct the mediation. In the event one party makes a demand on the other for mediation to which such party fails to respond for a period of thirty days, the party demanding mediation may then submit the dispute directly to Arbitration pursuant to the Mutual Agreement to Arbitrate. |
10.3 | Limitation of Claims. To the fullest extent allowed by law, every controversy, claim, or dispute between Executive and Kreido (and/or its directors, shareholders, officers, Executives, representatives and agents) relating to or arising out of his employment or the termination of that employment (“Claim”) shall be asserted in writing, with a specific demand first to mediate and then, if still necessary, to arbitrate the Claim, by the party asserting such Claim (“Claimant”) and delivered to the non-asserting party no later than twelve months after the Claimant knows or should have known of the existence of the Claim or the Claim will be forever barred. The foregoing notwithstanding, any such Claim that has a statutory limitations period shorter than twelve months will be subject to the shorter statutory limitations period. |
10.4 | Executive’s Fiduciary Duty to Company. No term contained herein is intended to nor shall be construed to limit or reduce Executive’s fiduciary duties to the Company. |
11. | General Terms and Conditions. |
11.1 | Waiver. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach; provided, however, that either party to this Agreement may waive any obligation owed to such party, if such waiver is in writing signed by an authorized signer. |
11.2 | Integration; Modification.This Agreement constitutes the entire understanding and agreement between Kreido and Executive regarding its subject-matter and supersedes all prior negotiations and agreements between them with respect to its subject-matter whether oral or written. This Agreement may not be modified except by a writing signed by Executive and the Chief Executive Officer or Chairperson of Kreido. |
11.3 | Enforceability; Severability. If any provision of this Agreement shall be deemed invalid or unenforceable in whole or in part, such provision shall be deemed to be modified or restricted to the extent and in the manner necessary to render the same valid and enforceable, or shall be deemed excised from this Agreement, as the case may require, and this Agreement shall be construed and enforced to the maximum extent permitted by law as if such provision had been originally incorporated herein as so modified or restricted, or as if such provision had not been originally incorporated herein, as the case may be. |
11.4 | Binding Effect.All the terms and conditions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. |
11.5 | Descriptive Headings.The paragraph and section headings in this Agreement are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. |
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11.6 | Counterparts and Facsimile Signatures.This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all such counterparts together shall constitute but one agreement. Facsimile signatures on this Agreement shall be treated as original signatures. |
11.7 | Third-Party Beneficiaries.No person shall be a third-party beneficiary of this Agreement and no person other than the parties hereto and their permitted successors and assigns shall receive any of the benefits of this Agreement. |
11.8 | Applicable Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to conflicts of laws principles. |
11.9 | Arms Length Agreement.This Agreement has been negotiated at arms length between persons knowledgeable in the matters dealt with herein. Accordingly, any rule of law or any statute, legal decision, or common law principle of similar effect that would require interpretation of any ambiguity in this Agreement against the party that drafted it is of no application and is hereby expressly waived. |
11.10 | Notices. All notices, statements and other documents that any party is required or desires to give to the other party hereunder shall be given in writing and shall be served in person, by express mail, by certified mail, by overnight delivery or by facsimile at the respective addresses of the parties as set forth below, or at such other addresses as may be designated in writing by such party in accordance with the terms of this Section 11.10. |
If to Kreido: | Kreido Biofuels, Inc. | |||
1070 Flynn Avenue | ||||
Camarillo, California 93012 | ||||
Attention: Betsy Knapp, Chair of the Board and | ||||
G.A. Ben Binninger, CEO | ||||
Fax: (805) 384-0989 | ||||
If to Executive: | John Philpott | |||
INFORMATION ON FILE |
Delivery shall be deemed conclusively made (i) at the time of service, if personally served, (ii) when deposited in the United States mail, properly addressed and postage prepaid, if delivered by express mail or certified mail, (iii) upon deposit with the private overnight deliverer, if served by overnight delivery, and (iv) at the time of electronic facsimile transmission (as confirmed in writing), provided a copy is mailed within twenty-four (24) hours after such transmission. |
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KREIDO BIOFUELS, INC., a Nevada corporation and KREIDO LABORATORIES, a California corporation | EXECUTIVE: | |||||||
By: | ||||||||
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MUTUAL AGREEMENT
TO
ARBITRATE CLAIMS
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KREIDO BIOFUELS, INC. | EXECUTIVE: | |||||||
By: | ||||||||
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/s/ G.A. Ben Binninger | ||||
G.A. Ben Binninger | ||||
Chief Executive Officer (authorized officer of registrant) |
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/s/ John M. Philpott | ||||
John M. Philpott | ||||
Chief Financial Officer (principal accounting officer) | ||||
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SECURITIES AND EXCHANGE COMMISSION
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
NEVADA | 20-3240178 | |
(State or Other Jurisdiction of Incorporation Organization) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices)
(Issuer’s telephone number, including area code)
Large accelerated filero | Accelerated filero | |||
Non-accelerated filer (Do not check if a smaller reporting company)o | Smaller reporting companyþ |
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(A Development Stage Company)
Condensed Consolidated Balance Sheets
March 31, | December 31, | |||||||
2008 | 2007 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 3,527,000 | $ | 6,470,000 | ||||
Other current assets | 70,000 | 56,000 | ||||||
Total current assets | 3,597,000 | 6,526,000 | ||||||
Property and equipment — net | 15,596,000 | 14,148,000 | ||||||
Patents, less accumulated amortization of $219,000 and $201,000 at March 31, 2008 and December 31, 2007, respectively, and a valuation reserve of $241,000 and $223,000 at March 31, 2008 and December 31, 2007, respectively | 418,000 | 421,000 | ||||||
Other assets | 437,000 | 437,000 | ||||||
Total assets | $ | 20,048,000 | $ | 21,532,000 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Current portion of capital leases | $ | 55,000 | $ | 57,000 | ||||
Accounts payable | 2,329,000 | 1,538,000 | ||||||
Accrued expenses | 255,000 | 250,000 | ||||||
Total current liabilities | 2,639,000 | 1,845,000 | ||||||
Capital leases, less current portion | 77,000 | 86,000 | ||||||
Total liabilities | 2,716,000 | 1,931,000 | ||||||
Stockholders’ equity | ||||||||
Preferred stock, $0.001 par value, authorized 10,000,000 shares; issued and outstanding were zero shares | — | — | ||||||
Common stock, $0.001 par value. Authorized 300,000,000 shares; issued and outstanding were 52,545,992 | 52,000 | 52,000 | ||||||
Restricted common stock, $0.001 par value; issued and outstanding were 100,000 | — | — | ||||||
Additional paid-in capital | 47,483,000 | 47,253,000 | ||||||
Deferred compensation | (25,000 | ) | (31,000 | ) | ||||
Deficit accumulated during the development stage | (30,178,000 | ) | (27,673,000 | ) | ||||
Net stockholders’ equity | 17,332,000 | 19,601,000 | ||||||
Total liabilities and stockholders’ equity | $ | 20,048,000 | $ | 21,532,000 | ||||
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(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months | Three Months | Period from January 13, | ||||||||||
Ended March 31, | Ended March 31, | 1995 (Inception) | ||||||||||
2008 | 2007 | to March 31, 2008 | ||||||||||
Operating expenses | ||||||||||||
Research and development | $ | 227,000 | $ | 20,000 | $ | 17,145,000 | ||||||
General and administrative | 1,596,000 | 704,000 | 10,601,000 | |||||||||
Loss on impairment of property and equipment | 716,000 | — | 716,000 | |||||||||
Loss on sale of property and equipment | — | — | 89,000 | |||||||||
Loss from retirement of assets | 5,000 | — | 326,000 | |||||||||
Loss from operations | (2,544,000 | ) | (724,000 | ) | (28,877,000 | ) | ||||||
Other income (expense) | ||||||||||||
Interest expense | — | — | (3,082,000 | ) | ||||||||
Interest income | 41,000 | 192,000 | 794,000 | |||||||||
Other income | — | — | 1,154,000 | |||||||||
Other expenses | — | — | (154,000 | ) | ||||||||
Total other income (expense) | 41,000 | 192,000 | (1,288,000 | ) | ||||||||
Loss before income taxes | (2,503,000 | ) | (532,000 | ) | (30,165,000 | ) | ||||||
Income tax expenses | 2,000 | 1,000 | 13,000 | |||||||||
Net loss | $ | (2,505,000 | ) | $ | (533,000 | ) | $ | (30,178,000 | ) | |||
Net loss per share — basic and diluted | $ | (0.05 | ) | $ | (0.01 | ) | $ | (0.57 | ) | |||
Shares used in computing net loss per share | 52,645,992 | 52,532,202 | 52,645,992 | |||||||||
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(A Development Stage Company)
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited)
Deficit | ||||||||||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||||||||
Restricted Common | Additional | During the | ||||||||||||||||||||||||||||||
Common Stock | Stock | Paid-In | Deferred | Development | Stockholders’ | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Compensation | Stage | Equity | |||||||||||||||||||||||||
Balance,January 1, 2008 | 52,545,992 | $ | 52,000 | 100,000 | $ | — | $ | 47,253,000 | $ | (31,000 | ) | $ | (27,673,000 | ) | $ | 19,601000 | ||||||||||||||||
Compensation expense | — | — | — | — | 230,000 | 6,000 | — | 236,000 | ||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (2,505,000 | ) | (2,505,000 | ) | ||||||||||||||||||||||
Balance,March 31, 2008 | 52,545,992 | $ | 52,000 | 100,000 | $ | — | $ | 47,483,000 | $ | (25,000 | ) | $ | (30,178,000 | ) | $ | 17,332,000 | ||||||||||||||||
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(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months | Three Months | Period from January 13, | ||||||||||
Ended March 31, | Ended March 31, | 1995 (Inception) | ||||||||||
2008 | 2007 | to March 31, 2008 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net Loss | $ | (2,505,000 | ) | $ | (533,000 | ) | $ | (30,178,000 | ) | |||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||
Depreciation and amortization | 76,000 | 44,000 | 1,699,000 | |||||||||
Loss on impairment of property and equipment | 716,000 | — | 716,000 | |||||||||
Loss on sale of assets | — | — | 89,000 | |||||||||
Patent write-down and reserve | 18,000 | — | 488,000 | |||||||||
Loss on retirement of assets | 5,000 | — | 326,000 | |||||||||
Noncash stock compensation | 236,000 | 11,000 | 1,845,000 | |||||||||
Amortization of convertible debt discount | — | — | 1,236,000 | |||||||||
Inducement to convert debt discount | — | — | 152,000 | |||||||||
Inducement to convert debt | — | — | 58,000 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Prepaid and other assets | (14,000 | ) | (57,000 | ) | (558,000 | ) | ||||||
Accounts payable and accrued expenses | 796,000 | 40,000 | 3,338,000 | |||||||||
Accrued interest on notes | — | — | 669,000 | |||||||||
Net cash used in operating activities | (672,000 | ) | (495,000 | ) | (20,120,000 | ) | ||||||
Cash flows from investing activities | ||||||||||||
Purchase and construction of property and equipment | (2,227,000 | ) | (1,554,000 | ) | (16,853,000 | ) | ||||||
Proceeds from sale of assets | — | — | 95,000 | |||||||||
Investments in patent application | (33,000 | ) | (32,000 | ) | (1,547,000 | ) | ||||||
Net cash used in investing activities | (2,260,000 | ) | (1,586,000 | ) | (18,305,000 | ) | ||||||
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 | |||||||||
Proceeds from the issuance of common stock | — | 23,044,000 | 22,849,000 | |||||||||
Proceeds from issuance of long-term debt | — | — | 14,381,000 | |||||||||
Principal repayment of long-term debt and capital leases | (11,000 | ) | (136,000 | ) | (1,077,000 | ) | ||||||
Net cash provided by (used in) financing activities | (11,000 | ) | 22,908,000 | 41,952,000 | ||||||||
Net increase (decrease) in cash and cash equivalents | (2,943,000 | ) | 20,827,000 | 3,527,000 | ||||||||
Cash and cash equivalents at beginning of period | 6,470,000 | 59,000 | — | |||||||||
Cash and cash equivalents at end of period | $ | 3,527,000 | $ | 20,886,000 | $ | 3,527,000 | ||||||
Supplemental disclosure of cash flow information | ||||||||||||
Cash paid during the period for: | ||||||||||||
Interest | $ | — | $ | 13,000 | $ | 354,000 | ||||||
Income taxes | 2,000 | 1,000 | 13,000 |
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(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months | Three Months | Period from January 13, | ||||||||||
Ended March 31, | Ended March 31, | 1995 (Inception) | ||||||||||
2008 | 2007 | to March 31, 2008 | ||||||||||
Supplemental disclosure of noncash investing and financing activities | ||||||||||||
Acquisition of property and equipment through capital leases | $ | — | $ | 73,000 | $ | 867,000 | ||||||
Additions to property and equipment through settlement of capital lease | — | — | 61,000 | |||||||||
Additions to property 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 into 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 Series A1 common stock | — | 3,628,000 | 3,628,000 | |||||||||
Conversion of Series B preferred stock into Series A1 common | — | 10,011,000 | 10,011,000 | |||||||||
Conversion of Kreido Laboratories common stock into common stock | — | 155,000 | 155,000 |
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(A Development Stage Company)
Notes to the Unaudited Condensed Consolidated Financial Statements
For the Three Months Ended March 31, 2008
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• | completing construction of the first plant (approximately $17 million), | ||
• | funding the purchase of starting raw materials and the start-up of plant operations (approximately $3.5 million), and | ||
• | supporting corporate operations and overhead through June 30, 2009 (approximately $4.5 million). |
2008 | 2007 | |||||||
Furniture and fixtures | $ | 150,000 | $ | 151,000 | ||||
Machinery and equipment | 846,000 | 857,000 | ||||||
Office equipment | 136,000 | 136,000 | ||||||
Leasehold improvements | 254,000 | 254,000 | ||||||
Spare plant parts and equipment | 515,000 | — | ||||||
Construction in progress | 14,297,000 | 13,301,000 | ||||||
Total | 16,198,000 | 14,699,000 | ||||||
Less accumulated depreciation and amortization | (602,000 | ) | (551,000 | ) | ||||
Net book value | $ | 15,596,000 | $ | 14,148,000 | ||||
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Period from | ||||||||
Inception | ||||||||
Three Months | (January 13, | |||||||
Ended | 1995) through | |||||||
March 31, 2008 | March 31, 2008 | |||||||
Weighted-average shares used to compute basic and diluted net loss per common share: | 52,645,992 | 52,645,992 | ||||||
Securities convertible into shares of common stock not used to compute net loss per share because the effect would be anti-dilutive: | ||||||||
Stock options under the 2006 Equity Incentive Plan | 3,289,150 | 3,289,150 | ||||||
Stock options under the 1997 Stock Compensation Program | 1,015,116 | 1,015,116 | ||||||
Stock associated with warrants arising from private placement of common stock | 18,498,519 | 18,498,519 | ||||||
Other stock associated with warrants | 437,355 | 437,355 | ||||||
23,240,140 | 23,240,140 | |||||||
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Number of | Weighted Average | |||||||
Options | Exercise Price | |||||||
Balance at December 31, 2007 | 4,385,384 | $ | 0.65 | |||||
Granted | 75,000 | 0.33 | ||||||
Exercised | — | — | ||||||
Cancelled | (156,118 | ) | 1.35 | |||||
Balance at March 31, 2008 | 4,304,266 | $ | 0.44 | |||||
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted-Average | ||||||||||||||||||||
Range of Exercise | Outstanding at | Remaining | Weighted-Average | Exercisable at | Weighted-Average | |||||||||||||||
Prices | March 31, 2008 | Contractual Life | Exercise Price | March 31, 2008 | Exercise Price | |||||||||||||||
$0.09 – 0.19 | 860,572 | 2.02 | $ | 0.10 | 845,529 | $ | 0.10 | |||||||||||||
$0.20 – 0.89 | 2,692,856 | 9.05 | 0.35 | 893,006 | 0.32 | |||||||||||||||
$0.90 – 1.85 | 750,725 | 9.02 | 1.17 | 750,725 | 1.17 | |||||||||||||||
$1.86 – 2.53 | 113 | 2.05 | 1.86 | 113 | 1.86 | |||||||||||||||
4,304,266 | 7.64 | $ | 0.44 | 2,489,373 | $ | 0.50 | ||||||||||||||
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• | hire additional manufacturing, production plant operations, sales, marketing and business development personnel; |
• | construct at least one company-owned production plant 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. |
• | completing construction of the Wilmington plant (approximately $17 million); | ||
• | funding the purchases of raw materials and the start-up of plant operations (approximately $3.5 million); and | ||
• | supporting corporate operations and overhead through June 30, 2009 (approximately $4.5 million). |
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• | Source of cash consisted of interest income of $41,000. | ||
• | Uses of cash consisted of plant development costs including purchases of fixed assets and construction of plant components and reactors of $2.2 million, operating expenses of $1.5 million (net of non-cash expenses such as loss on impairment of property and equipment, stock compensation, and depreciation and amortization), repayment of capital leases of $11,000 and investments in patents of $33,000 for a total use of cash of $3.7 million. | ||
• | The decrease in cash balance to $3.5 million results from net sources of $41,000 less uses of cash of $3.7 million plus an increase in the amounts due to vendors of $796,000 which will be paid in future periods. |
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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 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; | ||
• | 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; | ||
• | a change or announcement by relevant domestic and foreign government agencies related to incentives for alternative energy development programs, especially a reduction in the $1.00 excise tax credit. |
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• | 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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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). | ||
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). |
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Exhibit No. | Description | Reference | ||
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 | Binding Term Sheet by and between Kreido Laboratories 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). | ||
10.10 | Amendment to Binding Term Sheet by and between Kreido Laboratories 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). | ||
10.11 | 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). | ||
10.12 | 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). | ||
10.13 | 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). | ||
10.14 | 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). | ||
10.15 | 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). | ||
10.16 | 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 Amendment No. 3 to the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on June 21, 2007 (File No. 333-140718). |
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Exhibit No. | Description | Reference | ||
10.17 | 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). | ||
10.18 | Executive Employment Agreement dated July 27, 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 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 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 30, 2007 (File No. 333-130606). | ||
10.20 | 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, dated April 30, 2008, by and between Kreido Biofuels, Inc. and John M. Philpott. | Incorporated by reference to Exhibit 10.21 to the Amendment to the Annual Report on Form 10-KSB/A filed with the Securities and Exchange Commission on April 30, 2008 (File No. 333-130606). | ||
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/ John M. Philpott | |||
John M. Philpott, Chief Financial Officer | ||||
(Duly Authorized Officer and Principal Executive Officer) | ||||
Date: May 15, 2008 |
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Exhibit No. | Description | |||
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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/s/ G.A. Ben Binninger | ||||
G.A. Ben Binninger | ||||
Chief Executive Officer (authorized officer of registrant) |
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/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 |