GeoBio Energy 10Q 2009 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number :

333-67174

	GEOBIO ENERGY, INC.
(Exact name of registrant as specified in its charter)

Colorado		84-1153946
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1100 Dexter Avenue North, Suite 100, Seattle, Washington		98109
(Address of principal executive offices)		(Zip Code)

	206-838-9715
(Registrant’s telephone number, including area code)

	Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety (90) days. Yes  No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer  Accelerated filer  Non-accelerated filer  Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No x

As of August 1, 2010, 10,573,807,619 shares of the registrant’s common stock were outstanding.

GEOBIO ENERGY, INC.

(A DEVELOPMENT STAGE COMPANY)

FORM 10-Q

INDEX

Part I	Financial Information		Page
	Item 1	Unaudited Financial Statements:
		Condensed Consolidated Balance Sheets as of June 30, 2009 (unaudited) and
		September 30, 2008…………………………………………………………………………………………………............	3
		Condensed Consolidated Statements of Operations
		(unaudited) for the three months and nine months ended
		June 30, 2009 and 2008 and for the period from inception
		to June 30, 2009……………………………………………………………………………...……….………......................	4
		Condensed Consolidated Statement of Stockholders’ Equity (Deficit) (unaudited)
		for the period from inception to June 30, 2009……………………………………..………............................................	5
		Condensed Consolidated Statements of Cash Flows (unaudited) for the nine
		months ended June 30, 2009 and 2008 and for the
		period from inception to June 30, 2009…………………………………………………………......................................	7
		Notes to Condensed Consolidated Financial Statements (unaudited) ……...................................................................	9
	Item 2	Management’s Discussion and Analysis of Financial Condition
		and Results of Operations………………………………………………………………………………………...............	22
	Item 4	Controls and Procedures…………………………………………………………………………………………….............	25

Part II	Other Information
	Item 1	Legal Proceedings……………………………………………………………………………………………........................	25
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds…………………………….……….................................	25
	Item 3	Defaults Upon Senior Securities………………………………………………………………………………....................	25
	Item 4	Submission of Matters to a Vote of Security Holders…………………………………………………............................	25
	Item 5	Other Information…………………………………………………………………………………………….……................	25
	Item 6	Exhibits………………………………………………………………………………………………………………………...	25

Signatures……………………………………………………………………………………………………………………………………….......			26

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GEOBIO ENERGY, INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30,			September 30,
	2009			2008
	(in thousands, except share amounts)
ASSETS
Current Assets
Cash	$	55		$	-
Total current assets		55			-
Total assets	$	55		$	-

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued expenses	$	579		$	937
Notes payable, current portion		134			134
Advances payable to related parties		70			91
Total current liabilities		783			1,162

Notes payable, long-term, net of discount of $404 and $0, respectively		223			-

Commitments and contingencies
Stockholders' Equity (Deficit)
Preferred stock and additional paid-in capital, $0.001 par value; 100,000,000 shares
authorized; 5,000,000 and none issued and outstanding at June 30, 2009
and September 30, 2008, respectively		20			-
Common stock and additional paid-in capital, $0.001 par value;
5,000,000,000 shares authorized: 595,807,619 and 41,107,619 issued
and outstanding at June 30, 2009 and September 30, 2008, respectively		20,947			20,160
Deficit accumulated during the development stage		(21,918	)		(21,322	)
Total stockholders' equity (deficit)		(951	)		(1,162	)
Total liabilities and stockholders' equity (deficit)	$	55		$	-

See notes to condensed consolidated financial statements

GEOBIO ENERGY, INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	For the three months ended June 30,						For the nine months ended June 30,
	2009			2008			2009			2008			From Inception (November 1, 2004) Through June 30, 2009
	(in thousands, except share and per share amounts)
Sales	$	-		$	-		$	-		$	-		$	12
Cost of sales, including inventory write-down		-			-			-			21			54
Gross profit (loss)		-			-						(21	)		(42	)

Operating Expenses
Selling and marketing		-			-			-			-			193
Research and development		16			-			16			-			88
General and administrative		117			57			371			16,625			19,390
Depreciation and amortization		-			-			-			30			185
Impairment		-			-			-			1,585			1,585
Total operating expenses		133			57			387			18,240			21,441
Loss from operations		(133	)		(57	)		(387	)		(18,261	)		(21,483	)
Interest expense		(135	)		(28	)		(209	)		(83	)		(435	)
Net loss	$	(268	)	$	(85	)	$	(596	)	$	(18,344	)	$	(21,918	)
Net loss per common share - basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.54	)
Shares used in computing net loss per share -
basic and diluted		268,637,656			41,107,619			119,731,184			34,111,571

See notes to condensed consolidated financial statements

GEOBIO ENERGY, INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

	Preferred Stock and Additional Paid-in Capital				Common Stock and Additional Paid-In Capital					Deficit Accum.
	Shares		Amount		Shares			Amount		During the Devel. Stage			Total
	(in thousands, except share and per share amounts)
At inception November 1, 2004		-	$	-		2,000,000		$	-	$	-		$	-
Sale of common stock at $0.50 per pre-split share		-		-		75,000			-		-			-
Net loss		-		-		-			-		(1	)		(1	)
Balance December 31, 2004		-		-		2,075,000			-		(1	)		(1	)
Sale of common stock at $0.50 per pre-split share		-		-		75,000			-		-			-
Net loss		-		-		-			-		(51	)		(51	)
Balance December 31, 2005		-		-		2,150,000			-		(52	)		(52	)
Sale of common stock at $0.50 per pre-split share		-		-		12,500			-		-			-
Return and cancellation of common stock in exchange for two former subsidiaries		-		-		(162,500	)		-		-			-
Common stock share from reverse split		-		-		1			-		-			-
Issuance of common stock upon conversion of note payable		-		-		1,500,000			507		-			507
Common stock issued to former Member of Domestic Energy Partners LLC (DEP) in														-
exchange for cash and property contributed to DEP		-		-		5,250,000			291		-			291
Issuance of common stock in merger		-		-		21,750,000			-		-			-
Net loss		-		-		-			-		(422	)		(422	)
Balance September 30, 2006		-		-		30,500,001			798		(474	)		324
Issuance of common stock warrants and related repricing per agreement		-		-		-			48		-			48
Discount for beneficial conversion feature		-		-		-			14		-			14
Sale of units in private placement, net		-		-		377,500			679		-			679
Issuance of units in exchange for goods and services		-		-		67,500			135		-			135
Issuance of warrants for consulting services and director compensation		-		-		-			576		-			576
Net loss		-		-		-			-		(2,367	)		(2,367	)
Balance September 30, 2007		-		-		30,945,001			2,250		(2,841	)		(591	)
Issuance of common stock on conversion of note payable		-		-		44,000			220		-			220
Common stock received from DEP in exchange for property and liabilities		-		-		(14,255,500	)		-		-			-
Issuance of common stock and warrants to consultants for services		-		-		17,330,000			15,690		-			15,690
Issuance of common stock for extension of due-date for note payable		-		-		125,000			75		-			75
Issuance of common stock to an employee for amounts owed		-		-		200,000			60		-			60
Issuance of common stock to a former note holder in settlement of a dispute		-		-		450,000			135		-			135
Issuance of common stock for acquisition of GeoAlgae Technology Inc.		-		-		5,875,000			1,469		-			1,469
Issuance of common stok to a consultant for services		-		-		100,000			30		-			30
Issuance of common stock in settlement of accounts payable to a consultant for financial
advisory services fees		-		-		294,118			50		-			50

Issuance of warrants to officer	-		-	-		130		-			130
Issuance of warrants for services and placement fees in connection with private placement	-		-			51		-			51
Net loss	-		-	-		-		(18,481	)		(18,481	)
Balance September 30, 2008	-		-	41,107,619		20,160		(21,322	)		(1,162	)
Issuance of common stock and warrants to consultant for services	-		-	1,000,000		53		-			53
Beneficial conversion feature of convertible liabilities	-		-	-		598		-			598
Stockholder payment of expenses on behalf of the Company	-		-	-		22		-			22
Issuance of preferred stock in settlement of accounts payable	5,000,000		20	-		-		-			20
Issuance of common stock on conversion of liabilities	-		-	549,200,000		114		-			114
Issuance of common stock pursuant to cashless exercise of warrant	-		-	4,500,000		-		-			-
Net loss	-		-	-		-		(596	)		(596	)
Balance June 30, 2009	5,000,000	$	20	595,807,619	$	20,947	$	(21,918	)	$	(951	)

See notes to condensed consolidated financial statements

GEOBIO ENERGY, INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended June 30, 2009			For the Nine Months Ended June 30, 2008			From Inception (November 1, 2004) through June 30, 2009
	(in thousands)
Cash Flows From Operating Activities
Net loss	$	(596	)	$	(18,344	)	$	(21,918	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		-			30			193
Amortization of debt discount		194			9			273
Non-cash stock-based compensation related to consulting, director fees and other expenses		53			16,096			16,813
Non-cash expense for bad debt reserve and write-down of inventory		-			25			59
Loss of assets due to fire		-			-			50
Non-cash extension fee on note payable		-			-			75
Impairment of assets		-			1,585			1,585
Changes in operating assets and liabilities, excluding assets and liabilities from acquisitions and dispositions:
Accounts receivable		-			-			(5	)
Inventory		-			-			(79	)
Prepaid expenses		-			58			-
Employee advances		-			1			(6	)
Deposits		-			20			(6	)
Accounts payable and accrued expenses		239			356			1,478
Net cash used in operating activities		(110	)		(164	)		(1,488	)
Cash Flows From Investing Activities:
Purchases of property and equipment		-			-			(477	)
Net cash used in investing activities		-			-			(477	)
Cash Flows From Financing Activities
Advances from related parties for company expenses and related accrued interest, net		-			66			317
Stockholder payment of expenses on behalf of the Company		22			-			22
Borrowings on notes payable		143			-			426
Proceeds from sale of units in private placement		-			-			755
Borrowings on related party notes payable		-			-			500
Net cash provided by financing activities		165			66			2,020
Net Change In Cash		55			(98	)		55
Cash, beginning of period		-			98			-
Cash, end of period	$	55		$	-		$	55

Supplemental Cash Flow Information:
Cash paid for interest	$	-		$	-		$	-
Cash paid for income taxes	$	-		$	-		$	-
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Conversion of advances payable to related party to accounts payable	$	23		$	-		$	23
Shares issued on conversion of liabilities	$	114		$	50		$	164
Conversion of accounts payable to notes payable	$	484		$	-		$	484
Beneficial conversion feature of convertible liabilities	$	598		$	-		$	598
Contribution of airplane and other assets by related party	$	-		$	-		$	139
Conversion of related party note payable and accrued interest to common stock	$	-		$	-		$	507
Conversion of contributions of cash and airplane by related party to common stock	$	-		$	-		$	291
Accrued financing fees for private placement	$	-		$	-		$	(76	)
Issuance of warrants as financing fee on private placement	$	-		$	-		$	(66	)
Contribution of inventory and assets in exchange for units	$	-		$	-		$	47
Non-cash adjustment of assets and liabilities due to disposition:
Disposition of inventory	$	-		$	36		$	36
Disposition of advances	$	-		$	6		$	6
Disposition of deposits	$	-		$	6		$	6
Disposition of property and equipment	$	-		$	409		$	409
Settlement of payroll obligations	$	-		$	(261	)	$	(261	)
Settlement of related party payable and interest payable	$	-		$	(80	)	$	(80	)

Conversion of note payable and related accrued interest to common stock	$	-	$	(220	)	$	(220	)
Issuance of common stock for note payable extension fee	$	-	$	(75	)	$	(75	)
Preferred shares issued for the payment of accounts payable	$	20	$	-		$	20
Conversion of Tatum, LLC accounts payable to note payable	$	-	$	28		$	28

See notes to condensed consolidated financial statements

GEOBIO ENERGY, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended June 30, 2009 and 2008 and for the period from inception to June 30, 2009 (Unaudited)

Note 1. Business and Organization

GeoBio Energy, Inc. (“GeoBio” or the “Company”) formerly known as Better Biodiesel, Inc., was incorporated in Colorado in November 1990. The Company was known as Mountain State Holdings, Inc., (“MSH”) until September 2006, when it was renamed in anticipation of a merger in September 2006, when it acquired all of the Member Units of Domestic Energy Partners, LLC, (“DEP”), a Utah limited liability corporation. The previous assets and liabilities of MSH were spun off to two stockholders in August 2006 in exchange for the return of common shares. At the time of the acquisition of DEP, the Company had no assets and no liabilities and 2,000,001 shares of common stock issued and outstanding carried at nil.

The merger of the Company and DEP was accounted for as a reverse merger. The assets and liabilities of DEP are presented in the consolidated balance sheet at book value. The historical operations presented in our consolidated statements of operations are those of DEP. On December 20, 2007, the Company entered into and closed an Asset Purchase, Settlement and Mutual Release Agreement with the former Members of DEP and effectively disposed of their interest in DEP. See Note 5.

In March 2008, we completed our Share Exchange with GeoAlgae Technologies, Inc. (“GeoAlgae”) and acquired GeoAlgae as a wholly owned subsidiary. GeoAlgae was a recently formed company and its net assets at the date of acquisition were nil. The entire purchase price was allocated to intangible assets which in total constituted a business plan. The intangible assets were subsequently deemed to be impaired. See Note 4.

On July 14, 2010, we entered into an amendment to our Stock Purchase Agreement with Collins Construction, Inc. (“Collins”), dated March 30, 2010, previously amended on June 1, 2010 (the “Collins Stock Purchase Agreement”), for the purchase of 100% of the issued and outstanding capital stock of Collins (the “Amendment”).

The closing was originally scheduled to take place on or before June 1, 2010 (the “Closing Date”), with GeoBio having the right and option to extend the Closing Date until July 1, 2010 (the “Extended Closing Date”), in exchange for an additional, non-refundable down payment (the “Down Payment”) of $50,000. Under the June 1, 2010 amendment, we agreed, in exchange for extending the Closing Date to July 16, 2010, that the Down Payment would be treated as an additional payment of consideration, raising the total purchase price of Collins from (i) $8,000,000 in cash and (ii) a Five (5) year, 8% Subordinated Promissory Note in the amount of $2,500,000 to (i) $8,050,000 in cash and (ii) a Five (5) year, 8% Subordinated Promissory Note in the amount of $2,500,000. Under the July 14, 2010 A mendment, the parties agreed to extend the Closing Date to September 15, 2010.

Collins, based in Colorado, is a civil construction company that primarily constructs sites and platforms for drilling and reclamation of the site locations following the drilling phase, as well as access roads to and from wells, reserve pits and production facility pads, in the Piceance Creek Basin. Its construction services occur primarily during the site construction and site completion or restoration life cycles of natural gas fields and oil wells.

We are also currently seeking to acquire New Mexico based H&M Precision Products, Inc. (“H&M”), as detailed in our Form 8-Ks filed May 27, 2010 and July 1, 2010. H&M sells proprietary chemical blends used to maintain, clean and improve the operating efficiency of natural gas and oil wells. The purchase price is to be determined by the formula of the product of (i) H&M’s 12-month trailing cumulative, “adjusted” earnings before interest, taxes, depreciation and amortization as of the closing date multiplied by (ii) 2.99, with a maximum Purchase Price of $8,410,000.

Additionally, on July 14, 2010, we announced our entry into a letter of intent to purchase Magna Energy Services (“Magna”), a New Mexico Limited Liability Company (LLC). Magna is also a chemical treatment and services company focused on oil and natural gas production improvement in the San Juan Basin shale play area of New Mexico. The proposed purchase price is $3,200,000. The form and terms of payment will be determined under a definitive stock purchase agreement, which the parties are currently negotiating.

We expect to complete the acquisitions of Collins and H&M during September 2010, but not later than September 15, 2010, and Magna shortly thereafter, all subject to receipt of financing for the purchases.

Note 2: Going Concern

We have prepared our condensed consolidated financial statements assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As of June 30, 2009, we had a deficit accumulated during the development stage of approximately $21.9 million, negative cash flows from operations since inception and expect to incur additional losses in the future as we continue to develop and grow our business. We have funded our losses primarily through sales of common stock and warrants in private placements and borrowings from related parties and other investors. The further development of our business will require capital. At June 30, 2009, we had a working capital deficit (current assets less current li abilities) of approximately $0.7 million and $55,000 in cash. These conditions raise substantial doubt about our ability to continue as a going concern.

We have funded our losses primarily through sales of common stock and warrants in private placements and borrowings from related parties and other investors. The further development of our business will require capital. We are still in the early stages of executing our business strategy. Our current cash levels are not sufficient to enable us to execute our business strategy, which includes the acquisitions of Collins and H&M, both of which require significant cash payments. We require additional financing to execute our business strategy and to satisfy our near-term working capital requirements. Our operating expenses will also consume a material amount of our cash resources. Company management intends to raise additional debt and equity financing to fund future operations and t o provide additional working capital. However, there is no assurance that such financing will be obtained in sufficient amounts necessary to meet our needs. In the event that we cannot obtain additional funds, on a timely basis or our operations do not generate sufficient cash flow, we may be forced to curtail or cease our activities, which would likely result in the loss to investors of all or a substantial portion of their investment. We are actively seeking to raise additional capital through the sale of shares of our capital stock to institutional investors and through strategic investments, including convertible bridge loans. If management deems necessary, we might also seek additional loans from related parties or others. However, there can be no assurance that we will be able to consummate any of these transactions, or that these transactions will be consummated on a timely basis or on terms favorable to us. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.

Note 3. Summary of Critical Accounting Policies

Basis of Preparation — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by U.S. generally accepted accounting principles for complete financial statements. The accompanying unaudited financial information should be read in conjunction with the audited financial statements, including the notes thereto, as of and for the year ended September 30, 2008, included in our 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”). The information furnished in this report reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows for each period presented. The results of operations for the interim periods ended June 30, 2009 are not necessarily indicative of the results for the year ending September 30, 2009 or for any future period.

Use of Estimates—The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The more significant accounting estimates inherent in preparation of our financial statements include estimates as to valuation of equity related instruments issued and valuation allowance for deferred income tax assets.

Net loss per common share —Basic and diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share excludes the effect of common stock equivalents (convertible notes, stock options and warrants) since such inclusion in the computation would be anti-dilutive. The following numbers of shares have been excluded (in thousands) as of June 30:

	2009		2008
Warrants		2,395		2,700
Options		33		33
Convertible debentures		8,080,037		37
Total		8,082,465		2,770

In March 2008, we entered into a note payable with Tatum, LLC (“Tatum”) in settlement of approximately $28,000 then owed to Tatum for employment related consulting services previously recorded in accounts payable. The note payable is convertible at any time into shares of our common stock at the lesser of $0.75 per share or the 10-day volume weighted average of the closing bid and ask prices of our common stock. We have stated the amount in the table above at a conversion price of $0.75 per share.

On December 31, 2008, accounts payable due to Otto Law Group, a related party, were assigned to certain other parties, and we entered into convertible promissory notes in aggregate principal amount of $160,000, convertible into shares of our common stock at the lesser of a conversion price of $0.0001 per share or the over the counter bulletin board price of our common stock on the date of conversion, bearing interest at 10% per annum from the interest accrual date of the notes, which were dated from January 7, 2010 to February 17, 2010. The notes were dated with an effective date of December 31, 2008 and were convertible as of that date and thus have been included in notes payable on the condensed consolidated balance sheet as of June 30, 2009. The intrinsic value (the market value of the stock less the conversion price multip lied by the number of shares to be issued upon conversion) of the conversion feature was well in excess of the principal balance of the liability. However, the amount of the beneficial conversion feature to be recorded is limited to the principal amount of the liability, and thus, the beneficial conversion feature recorded was$160,000. Principal and interest are due, if not previously converted by the holders, on or before December 31, 2011. Upon event of default, as defined in the promissory note agreement, the default interest rate is 18% per annum commencing on August 14, 2008, payable upon demand. In addition, at the holders’ option, the holders may accelerate the amounts due under the promissory notes. During the three months ended March 31, 2010, all of these convertible notes were converted into 1.6 billion shares of our common stock at their stated conversion rate. See Note 12, Subsequent Events. The amounts in the table above are sta ted at the stated conversion price of $0.0001.

On December 31, 2008, accounts payable due to Otto Law Group, a related party, were assigned to certain other related parties, and we entered into convertible promissory notes in aggregate principal amount of $324,000, convertible into shares of our common stock at the lesser of a conversion price of $0.00005 per share or the over the counter bulletin board price of our common stock on the date of conversion, bearing interest at 10% per annum from the interest accrual date of the notes, which were dated from April 6, 2010 to June 22, 2010. The notes were dated with an effective date of December 31, 2008 and were convertible as of that date thus have been included in notes payable on the condensed consolidated balance sheet as of June 30, 2009. The intrinsic value (the market value of the stock less the conversion price multipl ied by the number of shares to be issued upon conversion) of the conversion feature was well in excess of the principal balance of the liability. However, the amount of the beneficial conversion feature to be recorded is limited to the principal amount of the liability, and thus, the beneficial conversion feature recorded was $324,000. Principal and interest are due, if not previously converted by the holders, on or before December 31, 2011. Upon event of default, as defined in the promissory note agreement, the default interest rate is 18% per annum commencing on August 14, 2008, payable upon demand. In addition, at the holders’ option, the holders may accelerate the amounts due under the promissory notes. During May through July 2010, certain of these convertible notes were converted into approximately 6.3 billion shares of our common stock at their stated conversion rate. See Note 12, Subsequent Events. The amounts in the table above are s tated at the stated conversion price of $0.00005.

See further discussion regarding warrants at Notes 7 and 8.

Fair Value of Financial Instruments — The carrying value of cash, accounts payable and accrued expenses, current notes payable, and advances payable - related parties approximate their fair value because of the short-term nature of these instruments. The carrying value of the BNA Holdings note payable approximates its fair value because the interest rate of the note approximates market interest rates. The fair value of the other long-term notes payable is not determinable due to the unique nature of the terms associated with the notes.

Reclassifications — Certain reclassifications have been made to prior period financial statements in order to conform to the current period’s presentation.

Note 4. GeoAlgae Transaction

In March 2008, we completed our Share Exchange with GeoAlgae, pursuant to the terms of the Amendment and as a result we acquired GeoAlgae as a wholly owned subsidiary. We issued 5,875,000 shares of our common stock, valued at $0.25 per share based on an average of closing market price for our common stock for three days before and three days after the effective date of March 18, 2008, to shareholders of GeoAlgae for a total purchase price of approximately $1,469,000. GeoAlgae was a recently formed company and its net assets at the date of acquisition were nil. The entire purchase price was allocated to intangible assets which in total constituted a business plan. In 2008, the intangible assets related to the GeoAlgae acquisition were deemed to be entirely impaired and an impairment loss of $1,469,000 was recorded. The imp airment was a result of the inability to conclude that there would be any future positive cash flow and therefore fair value, to be assigned to the business plan. No pro forma results of operations were presented related to this business acquisition as GeoAlgae had no operations prior to the acquisition.

Note 5. Impairment on DEP Disposition

As a result of our belief that the proprietary technology acquired in the September 2006 Exchange Agreement with DEP would not be ready for large-scale commercial use in the near term, we recorded an impairment charge in accordance with our long-lived asset policy in the amount of $116,000, which represented the net realizable value as negotiated under the December 2007 Asset Purchase, Settlement and Mutual Release Agreement with the former Members of DEP. The following table sets forth the calculation of this impairment loss in 2008 (in thousands):


Inventory	$	36
Employee advances		6
Deposits		6
Property and equipment		409
Accrued payroll		(261	)
Cash advance payable to former CEO, including interest		(80	)

Net impairment loss related to DEP	$	116

In connection with the transaction described above, in December 2007, the Members of DEP returned 14,255,500 shares of our common stock which were held by such Members. No value was assigned for these shares, which had no value assigned at the time of original issuance, and we cancelled the shares upon receipt.

At June 30, 2009 and September 30, 2008, we have no inventory, property and equipment or intangible assets.

Note 6. EnviroPlastics Share Exchange Agreement

In March 2009, we entered into a share exchange agreement with EnviroPlastics Corporation (“EnviroPlastics”). Enviroplastics was established in 2008 to capitalize on the growing market to supply recycled commercial plastic to businesses, which use or want to use recycled plastics in their products, such as the automotive and consumer products industries. Under the share exchange agreement, EnviroPlastics would have exchanged 100% of its issued and outstanding shares of common stock in exchange for: (i) 90% of the issued and outstanding shares of common stock of GeoBio at the time of the closing of the Share Exchange and (ii) GeoBio’s promise to successfully facilitate a capital financing of EnviroPlastics of not less than $500,000 (the “Financing”). The Share Exchange provided for a closing date w ithin 90 days of the date of execution (the “Closing Date”), conditioned upon the parties’ mutual satisfaction with customary due diligence investigations, and may be cancelled and unwound if we do not obtain the Financing within 90 days following the Closing Date. On June 24, 2009, we and EnviroPlastics amended our share exchange agreement to extend the formal closing by up to an additional ninety (90) days (the “Closing Date”), placing the Closing Date on September 3, 2009 unless otherwise closed sooner. The purpose of this extension was to provide additional time to facilitate the parties reporting, capitalization and other compliance requirements. On September 10, 2009, we and EnviroPlastics terminated our share exchange agreement as amended June 24, 2009.

Note 7. Notes Payable

Baer (formerly Sausalito) Note Payable

In November 2006, we received an advance of $100,000 from Sausalito Capital Partners (a shareholder of the Company) in anticipation of negotiating and executing a promissory note. In February 2007, a note payable was executed, and the note was subsequently assigned to Henry Baer (“Baer”). The interest rate on the note payable is 6% per annum. Principal and accrued interest were due at the earlier of February of 2008 or within two days of the Company completing a private placement of at least $3.0 million. Warrants to purchase 5,000 shares of our common stock were issued to the investor in connection with the execution of the note. The warrants were granted with an initial exercise price of $5.00 per share and expired in February of 2009. The exercise price of the warrant may be adjusted downward if we issue common stock or securities convertible or exchangeable into common stock at a lower price. The warrants were valued utilizing the Black-Scholes model with the following assumptions: volatility of 192%, risk-free interest rate of 4.8%, expected life of two years and 0% dividend yield resulting in a value of $4.17 per warrant. The value of the warrants was recorded as a $17,000 discount on the note payable and was expensed over the life of the note payable as interest expense. The discount was determined based on the relative fair value of the warrants and the note payable. During May and June 2007, we issued shares and warrants that triggered a revaluation, lowering the exercise price to $2.00 per warrant resulting in an increase in valuation of approximately $1,000, which was expensed as interest expense.

In February 2008, Baer granted a nine-month extension of the due date in exchange for 125,000 shares of our common stock, valued at $75,000. The extension fee was expensed as interest expense during the twelve months ended September 30, 2008. The note is currently in default.

Tatum Convertible Note Payable

In March 2008, we entered into a note payable with Tatum, LLC (“Tatum”) as settlement of approximately $28,000 then owed to Tatum for employment-related consulting services previously recorded in accounts payable. The note payable is due at the earlier of one year or a financing of at least $1.5 million and carries an interest rate of 10% compounded annually and payable upon maturity. At the election of Tatum, the note payable is convertible at any time into shares of our common stock at the lesser of $0.75 per share or the 10 day volume weighted average of the closing bid and ask prices. The note is currently in default and is subject to a default interest rate of 13.5% per annum.

National Convertible Debenture

In December 2006, we received an advance of $200,000 from National Real Estate Solutions Group (“National”) in anticipation of negotiating and executing a debt agreement. In February 2007, pursuant to a subscription agreement between National and the Company, a convertible debenture was executed in exchange for the advance. Both the subscription agreement and the debenture provided that, at maturity, we had the option to convert the debenture and accrued interest into shares of our common stock at a share price which is the greater of either $5.00 or 75% of the most current 10-day trailing average bid price. We valued the beneficial conversion feature at $14,000 and recorded a discount on the debenture. Warrants to purchase 3,125 shares of our common stock at an init ial exercise price of $8.00 and an exercise period of three years were issued to the holder. The exercise price of the warrant may be adjusted downward if we issue common stock or securities convertible or exchangeable into common stock at a lower price. The warrants were valued utilizing the Black-Scholes model with the following assumptions: volatility of 192%, risk-free interest rate of 4.7%, expected life of three years and 0% dividend yield resulting in a value of $4.44 per warrant. The valuation was recorded as a $13,000 discount on the debenture. The discount was determined based on the relative fair value of the warrants and note.

Placement fees of $18,000 were paid to an outside party. In addition, warrants were issued to that party to purchase 3,200 shares of our common stock with an initial exercise price of $5.00 with an exercise period of five years for placement services. The exercise price of the warrant may be adjusted downward if we issue common stock or securities convertible or exchangeable into common stock at a lower price. The warrants were valued utilizing the Black-Scholes model with the following assumptions: volatility of 192%, risk-free interest rate of 4.7%, expected life of five years and 0% dividend yield resulting in a value of $4.86 per warrant. The valuation of $16,000 and the placement fee of $18,000 were recorded as an additional discount on the debenture, all of which has been fully amortized t o interest expense. The discount was determined based on the relative fair value of the warrants and debenture. During May and June 2007, we issued shares and warrants that triggered a revaluation lowering the exercise price to $2.00 per warrant associated with the debenture resulting in an increase in valuation of $1,000. All of the change was expensed as interest expense.

In November 2007, we issued National 44,000 shares of our common stock. In March 2008, we issued National an additional 450,000 shares of our common stock in settlement of disputed amounts due under this agreement.

Other Convertible Notes Payable

On December 31, 2008, accounts payable due to Otto Law Group, a related party, were assigned to certain other parties, and we entered into convertible promissory notes in aggregate principal amount of $160,000, convertible into shares of our common stock at the lesser of a conversion price of $0.0001 per share or the over the counter bulletin board price of our common stock on the date of conversion, bearing interest at 10% per annum from the interest accrual date of the notes, which were dated from January 7, 2010 to February 17, 2010. The notes were dated with an effective date of December 31, 2008 and were convertible as of that date thus have been included in notes payable on the condensed consolidated balance sheet as of June 30, 2009. The intrinsic value (the market value of the stock less the conversion price multiplied by the number of shares to be issued upon conversion) of the conversion feature was well in excess of the principal balance of the liability. However, the amount of the beneficial conversion feature to be recorded is limited to the principal amount of the liability, and thus, the beneficial conversion feature recorded was $160,000. During the three and nine months ended June 30, 2009, we recorded amortization of the beneficial conversion feature of $13,000 and $26,000, respectively, as interest expense. Principal and interest are due, if not previously converted by the holders, on or before December 31, 2011. Upon event of default, as defined in the promissory note agreement, the default interest rate is 18% per annum commencing on August 14, 2008, payable upon demand. In addition, at the holders’ option, the holders may accelerate the amounts due under the promissory notes. During the three months ended March 31, 2010, all of these converti ble notes were converted into 1.6 billion shares of our common stock at their stated conversion rate. See Note 12, Subsequent Events.

On December 31, 2008, accounts payable due to Otto Law Group, a related party, were assigned to certain other related parties, and we entered into convertible promissory notes in aggregate principal amount of $324,000, convertible into shares of our common stock at the lesser of a conversion price of $0.00005 per share or the over the counter bulletin board price of our common stock on the date of conversion, bearing interest at 10% per annum from the interest accrual date of the notes, which were dated from April 6, 2010 to June 22, 2010. The notes were dated with an effective date of December 31, 2008 and were convertible as of that date and thus have been included in notes payable on the condensed consolidated balance sheet as of June 30, 2009. The intrinsic value (the market value of the stock less the conversion price multiplied by the number of shares to be issued upon conversion) of the conversion feature was well in excess of the principal balance of the liability. However, the amount of the beneficial conversion feature to be recorded is limited to the principal amount of the liability, and thus, the beneficial conversion feature recorded was $324, 000. During the three and nine months ended June 30, 2009, we recorded amortization of the beneficial conversion feature of $27,000 and $54,000, respectively. Principal and interest are due, if not previously converted by the holders, on or before December 31, 2011. Upon event of default, as defined in the promissory note agreement, the default interest rate is 18% per annum commencing on August 14, 2008, payable upon demand. In addition, at the holders’ option, the holders may accelerate the amounts due under the promissory notes. During May through July 2010, certain of these convertible notes were converted into approximatel y 6.3 billion shares of our common stock at their stated conversion rate. See Note 12, Subsequent Events.

BNA Holdings, LLC Convertible Bridge Loan

In April 2009, we entered into an agreement with BNA Holdings, LLC, pursuant to which BNA Holdings, LLC was to loan us up to an aggregate of $500,000, payable after five years and bearing interest at a rate of 10% per annum. During the three months ended June 30, 2009, we received an aggregate of $143,000 from BNA Holdings, LLC pursuant to the terms of this agreement. We received an additional aggregate of $80,000 from BNA Holdings, LLC in July 2009 pursuant to the terms of this agreement (See Note 12, Subsequent Events). The Company has the right to call for conversion of unpaid principal and accrued interest into shares of our common stock at $0.50 per share beginning April 7, 2010.

Note 8. Stockholders’ Equity (Deficit)

Preferred Stock

On June 9, 2009, we amended our articles of incorporation to increase the number of authorized shares of preferred stock from 5,000,000 shares of no par value preferred stock to 100,000,000. This class of stock is a “blank check” class in that the rights of such stock would be established at the time of its issuance.

On June 9, 2009, 10,000,000 shares of our preferred stock were designated as Series A Convertible Preferred Stock, par value of $0.001 per share. The holders of the Series A Convertible Preferred Stock are entitled to 1,000 votes per one (1) share of stock held. The Series A Convertible Preferred Stock is convertible at the stockholder’s option into shares of our common stock on the basis of 1:1. Holders of the Series A Convertible Preferred Stock have liquidation preference over holders of common stock in the event of liquidation, dissolution or winding up.

On June 8, 2009, $10,000 of the accounts payable outstanding to The Otto Law Group, a related party, was assigned to a member of our board of directors, David M. Otto, who then presented the debt to the Company for the purposes of cancelling the debt in exchange for the purchase of 2,500,000 shares of our Series A Preferred Stock. In addition, on June 8, 2009, $10,000 of accounts payable to our former CEO, Mr. Gary De Laurentiis, was also converted into 2,500,000 shares of our Series A Preferred Stock.

Common Stock

On March 31, 2009, we amended our articles of incorporation to increase the number of authorized shares of common stock from 200,000,000 shares to 500,000,000 shares. Then, on June 9, 2009, we further amended our articles of incorporation to increase the number of authorized shares of common stock from 500,000,000 to 5,000,000,000. On January 25 ,2010, we further amended our articles of incorporation to increase the number of authorized shares of common stock from 5,000,000,000 to 25,000,000,000.

Common Stock Issuances — As of the effective date of inception (November 1, 2004), the Company, then operating as MSH, had 4,000,000 shares of our common stock issued and outstanding. In August 2006, two former stockholders of MSH exchanged a total of 325,000 common shares for two former subsidiaries of MSH, which comprised all of the assets and liabilities of MSH. The remaining common stock shares of MSH were then subject to a two-for-one reverse split, resulting in 2,000,001 shares of its common stock issued and outstanding at the time of merger. These stockholders, combined with the new shares issued in the merger, comprise the 30,500,001 shares of our common stock issued and outstanding at September 30, 2006.

During May and June 2007, we sold 377,500 units in a private placement. The units consist of 377,500 shares of common stock and warrants to purchase 377,500 share of common stock at $2.65 per share. The units were sold at $2.00 per unit. Gross proceeds totaled $755,000. The common shares have “piggy back” registration rights and demand registration rights after 90 days, subject to limitations for additional financing being sought and limitations under current SEC regulations. The warrants vest immediately, expire in five years and may be exercised for cash or on a cashless basis. A value of approximately $370,000 was ascribed to the warrants. We also issued 28,491 warrants as a placement fee with an exercise price of $2.65, expiring in five years that can be exercised as cash or cashless. The fair value of the warrants of $66,000 was recorded as a reduction to the proceeds from the private placement. The warrants were valued under the Black- Scholes model utilizing the following assumptions: volatility of 184%, risk-free rate of 5.1%, expected life of five years and dividend yield of 0%.

In June 2007, we issued 67,500 units consisting of 67,500 shares of our common stock and warrants to purchase 67,500 shares of our common stock valued at $2.00 per unit. The terms and conditions are the same as the private placement, excluding placement fees. In exchange, we received $11,000 of inventory, $36,000 of property and equipment and $88,000 of services and other. The $135,000 was allocated 51% to common stock and 49% to additional paid in capital.

In June 2007, we issued 200,000 warrants with an exercise of $2.65 per warrant and a five-year expiration to a company in exchange for consulting services. The warrants were valued utilizing the Black-Scholes model with the following assumptions: 184% volatility, risk-free rate of 5.1%, expected life of five years and dividend yield of 0%, resulting in a value of $482,000 which was immediately expensed.

We also issued 11,325 warrants during 2007 associated with our notes payable. See Note 7 – Notes Payable.

In November 2007, we issued 44,000 shares of common stock to National per the terms of the subscription agreement and subordinated convertible debenture (the “Securities Agreement”). The issuance of these 44,000 shares at $5.00 per share were accounted for as a conversion of the $220,000 note payable and related accrued interest to National into shares of our common stock. In March 2008, we issued an additional 450,000 shares of common stock to National as part of a settlement. See Note 7 – Notes Payable.

As discussed previously, in December 2007, the Members of DEP returned 14,255,500 shares of our common stock which were held by such Members. No value was assigned for these shares, which had no value assigned at the time of original issuance, and we cancelled the shares upon receipt.

In January 2008, we entered into nine individual consulting agreements for professional services in exchange for an aggregate of 17,330,000 shares of our common stock and 300,000 warrants to purchase of shares of our common stock at an exercise price of $1.00 per share. The closing price our common stock on the over the counter bulletin board on January 16, 2008 was $0.89. We recorded the value of the shares at $15,424,000. The fair value of the warrants was $266,000. The warrants were valued using the Black Scholes model with the following assumptions: volatility of 192%, risk-free interest rate of 3.74%, expected term of ten years and dividend yield of 0% resulting in a value of $0.888 per warrant. The values recorded to equity were expensed as general and administrative expense at the time the securities were issued. & #160;

In May 2008, our former CFO, Allen Perron was granted 1,000,000 warrants at an exercise price of $0.13. The five day volume adjusted weighted average closing price of the shares on May 16, 2008 was $0.13. We have computed the fair value of the warrants utilizing the Black Scholes model using the following assumptions: estimated life of 10 years, volatility 214%, risk-free interest rate of 3.83% and 0% dividend rate, for a fair value of $0.13 per warrant or $130,000. The $130,000 was charged to general and administrative expense in 2008.

In February 2008, we obtained an extension of the Baer note payable in exchange for 125,000 shares of our common stock valued at $0.60 per share totaling $75,000. See Note 7 – Notes Payable.

In March 2008, we issued 200,000 shares of common stock to a former employee in settlement of all amounts owed to either party by the other. The shares were valued at $0.30 per share totaling $60,000.

In March 2008, we completed our acquisition of GeoAlgae in exchange for 5,875,000 shares of our common stock. The shares were valued at $0.25 per share for a total value of $1,469,000. The entire purchase price was allocated to intangible assets which in total constituted a business plan. The intangible assets were subsequently deemed to be impaired.

In March 2008, we issued 100,000 shares of our common stock to a consultant. The shares were valued at $0.30 per share for a total of $30,000 which was expensed as general and administrative expense in 2008.

In March 2008, we issued 294,118 shares of our common stock to Thomas Lloyd Capital in settlement of a placement and advisory services agreement (see further discussion at Note 11 - Commitments and Contingencies – Thomas Lloyd). The shares were valued at $0.17 per share for a total of $50,000. We also issued 715,627 warrants to purchase shares of our common stock at an exercise price of $0.17 per share, which were valued at $0.17 per warrant. The common stock was valued at the 10 day trailing volume weighted average closing price immediately prior to May 10, 2008 (the settlement agreement date) which was $0.17. The warrants were valued utilizing the Black-Scholes model with the following assumptions: exercise price of $0.17, volatility of 213%, a risk-free interest rate of 2.99%, expected term of five years an d 0% dividend yield, resulting in a value of $0.17 per warrant. We recorded approximately $51,000 to general and administrative expenses in the twelve months ended September 30, 2008 related to the fair value of warrants to purchase 300,000 shares of our common stock, which was determined to be for consulting services. The fair value of approximately $71,000 related to the remaining warrants to purchase 415,627 shares of our common stock was determined to relate to placement services and was recorded to common stock and additional paid in capital in the twelve months ended September 30, 2008.

In July 2008, the board of directors appointed Alan Chaffee as interim Chief Financial Officer. Mr. Chaffee served the Company in that capacity as an independent contractor and not as an employee of the Company. In October 2008, we entered into an agreement with Alan Chaffee with respect to his position as consulting CFO. Pursuant to the terms of the consulting agreement, we were to issue Mr. Chaffee shares of our common stock equal to the greater of 2.5% of the issued and outstanding common stock of the Company or shares of our common stock with a cumulative market value (as defined in the agreement) at issuance of $100,000. Such stock was to be issued within 10 days following the next event of recapitalization that is subsequent to the agreement, and such stock issuable in connection with the agreement will vest upon filing of the Company’s next quarterly report. The term of the agreement was through October 14, 2009, unless otherwise terminated in accordance with the terms of the agreement. On April 2, 2009, Mr. Chaffee resigned from his position as director of the Company. Mr. Chaffee had served as a director of the Company since January 2008. Accordingly, the agreement terminated in accordance with its terms and no shares became issuable under the terms of the agreement.

In November 2008, we entered into an agreement with 18KT – TV Communications, whereby we issued 18KT – TV Communications 1,000,000 shares of our common stock, valued at $0.009 per share, which was expensed as general and administrative expense in the first quarter of fiscal 2009. In addition, we granted 18KT – TV Communications a five-year warrant to purchase 5,000,000 shares of our common stock at an exercise price of $0.002 per share, in exchange for the cancellation of the 10-year warrant to purchase 300,000 shares of our common stock at an exercise price of $1.00 per share previously issued to the consultant in January 2008. The fair value of approximately $44,000 related to the warrants was recorded to general and administrative expense in the first quarter of fiscal 2009. In July 2010, we entered into an additional agreement with Vitello Capital Ltd., the successor in interest to 18KT-TV Communications, whereby we issued Vitello Capital Ltd. 600,000,000 shares of our common stock, valued at $0.0001 per share, for prior investor relations services.

In January 2009, $11,000 of accounts payable due to a related party was converted into 2,500,000 shares of our common stock pursuant to an agreement at a conversion rate of $0.0045. The intrinsic value (the market value of the stock less the conversion price multiplied by the number of shares to be issued upon conversion) of the conversion feature was well in excess of the principal balance of the liability. However, the amount of the beneficial conversion feature to be recorded is limited to the principal amount of the liability, and thus, the beneficial conversion feature recorded related to the convertible liability of $11,000 was recorded as interest expense in the three months ended March 31, 2009.

In February 2009, $12,000 of accounts payable due to a related party was converted into 2,500,000 shares of our common stock pursuant to an agreement at a conversion rate of $0.005. The intrinsic value (the market value of the stock less the conversion price multiplied by the number of shares to be issued upon conversion) of the conversion feature was well in excess of the principal balance of the liability. However, the amount of the beneficial conversion feature to be recorded is limited to the principal amount of the liability, and thus, the beneficial conversion feature recorded related to the convertible liability of $12,000 was recorded as interest expense in the three months ended March 31, 2009.

During the three months ended March 31, 2009, an additional aggregate of approximately $1,500 of accounts payable due to Otto Law Group, PLLC, a related party, were assigned to related parties and was converted to 15,333,334 shares of our common stock pursuant to an agreement at a conversion rate of $0.0001. The intrinsic value (the market value of the stock less the conversion price multiplied by the number of shares to be issued upon conversion) of the conversion feature was well in excess of the principal balance of the liability. However, the amount of the beneficial conversion feature to be recorded is limited to the principal amount of the liability, and thus, the beneficial conversion feature recorded related to the convertible liability of $1,500 was recorded as interest expense in the three months ended Mar ch 31, 2009.

In May and June 2009, we issued an aggregate of 15,000,000 shares of our common stock upon conversion of accounts payable to related parties of $15,000 pursuant to an agreement at a conversion rate of $0.001 and 55,000,000 shares of our common stock upon conversion of accounts payable to related parties of approximately $28,000 pursuant to an agreement at a conversion rate of $0.0005. The intrinsic value (the market value of the stock less the conversion price multiplied by the number of shares to be issued upon conversion) of the conversion feature was well in excess of the principal balance of the liability. However, the amount of the beneficial conversion feature to be recorded is limited to the principal amount of the liability, and thus, the beneficial conversion feature recorded related to the convertible liability in th e aggregate amount of $43,000 was recorded as interest expense in the three months ended June 30, 2009.

During the three months ended June 30, 2009, an additional aggregate of $46,000 of accounts payable due to related parties was converted to 458,866,666 shares of our common stock pursuant to an agreement at a conversion rate of $0.0001. The intrinsic value (the market value of the stock less the conversion price multiplied by the number of shares to be issued upon conversion) of the conversion feature was well in excess of the principal balance of the liability. However, the amount of the beneficial conversion feature to be recorded is limited to the principal amount of the liability, and thus, the beneficial conversion feature recorded related to the convertible liability of $46,000 was recorded as interest expense in the three months ended June 30, 2009.

Stock Incentive Plans — In August 2002, we established the 2002 Equity Incentive Plan (the “Equity Incentive Plan”), authorizing 1,250,000 shares of our common stock for the grant of incentive and non-qualified stock options stock options, as well as restricted stock awards.

Stock Options — Stock options to purchase shares of our common stock are granted under our existing stock-based incentive plan to certain employees and consultants, at prices at or above the fair market value on the date of grant.

At June 30, 2009, there were options to purchase up to 33,333 shares of our common stock outstanding and 1,150,000 shares were available for future grants or awards under our Equity Incentive Plan. There was no option activity during the three and nine months ended June 30, 2009 or 2008. There are a total of 33,333 vested options outstanding, with a weighted average exercise price of $2.65 per share and grant date fair value of $2.65 per share.

Non-cash compensation expense is recognized on a straight-line basis over the applicable vesting periods, based on the fair value on the grant date. The vesting period is deemed to be the requisite service period. Certain option and share awards provide for accelerated vesting if there is a change in control (as defined in the applicable plan and certain employment agreements we have with key officers).

As of June 30, 2009, we had nil of total unrecognized compensation cost related to unvested stock options. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.

The intrinsic value of stock options outstanding and exercisable was nil at June 30, 2009, based on the $0.002 closing market price of our common stock on that date. There were no options which vested during the three and nine months ended June 30, 2009.

Warrants —As discussed above, in November 2008, we granted 18KT – TV Communications a five-year warrant to purchase 5,000,000 shares of our common stock at an exercise price of $0.002 per share, in exchange for the cancellation of the 10-year warrant to purchase 300,000 shares of our common stock at an exercise price of $1.00 per share previously issued to the consultant in January 2008. The warrants were valued at approximately $44,000 under the Black-Scholes model with the following weighted average assumptions: stock price of $0.009, 5 year expected term, volatility of 192%, risk-free rate of 2.06% and expected dividend yield of 0.0%, and recorded to general and administrative expense during the first quarter of fiscal 2009. The result of accounting for the modification was immaterial. We issued 4,500,000 shares of our common stock in January 2009 pursuant to the cashless exercise of these warrants. In February 2009, a warrant to purchase 5,000 shares of our common stock previously issued in connection with the Sausalito note payable described in Note 7, Notes Payable, expired unexercised.

The following table summarizes warrant activity during the nine months ended June 30, 2009:

Warrants outstanding, September 30, 2008		2,700,443
Warrants expired		(5,000	)
Warrants exercised		(5,000,000	)
Warrants issued		5,000,000
Warrants cancelled		(300,000	)
Warrants outstanding, June, 30, 2009		2,395,443

Weighted average exercise price	$	0.83

Note 9. Related Party Transactions

David M. Otto, a principal at The Otto Law Group, PLLC, was a director of the Company through July 15, 2009. We recorded approximately $99,000 (including finance charges of $7,000) and nil in legal fees to The Otto Law Group, PLLC for the three months ended June 30, 2009 and 2008, respectively, and approximately $273,000 (including finance charges of $33,000), $193,000 and $816,000 for the six months ended June 30, 2009 and 2008, and for the period from inception to June 30, 2009, respectively, as general and administrative expenses. At June 30, 2009 and September 30, 2008, approximately $53,000 and $463,000 in fees were unpaid, respectively.

On December 31, 2008, accounts payable due to The Otto Law Group were assigned to certain other parties, and we entered into convertible promissory notes in aggregate principal amount of $160,000, convertible into shares of our common stock at the lesser of a conversion price of $0.0001 per share or the over the counter bulletin board price of our common stock on the date of conversion, bearing interest at 10% per annum from the interest accrual date of the notes, which were dated from January 7, 2010 to February 17, 2010. The effective date of the notes was December 31, 2008 and thus they have been included in notes payable on the condensed consolidated balance sheet as of June 30, 2009. On December 31, 2008, additional accounts payable due to The Otto Law Group were assigned to certain other parties, and we entered into conv ertible promissory notes in aggregate principal amount of $324,000, convertible into shares of our common stock at the lesser of a conversion price of $0.00005 per share or the over the counter bulletin board price of our common stock on the date of conversion, bearing interest at 10% per annum from the interest accrual date of the notes, which were dated from April 6, 2010 to June 22, 2010. The effective date of the notes was December 31, 2008 and thus they have been included in notes payable on the condensed consolidated balance sheet as of June 30, 2009. See Note 7, Notes Payable.

As of June 30, 2009, related party advances and accrued interest totaled approximately $70,000. In the year ended September 30, 2008, a director had advanced us a net amount of approximately $4,000 and two other parties related to a director advanced us an aggregate amount of approximately $86,000 in order to pay our expenses. All of these related party advances bear interest at 8% per annum and together with the related accrued interest of approximately $3,000 are included in advances payable. We intend to repay the advances. In December 2008, $23,000 of these advances were converted to accounts payable to other parties. The accounts payable subsequently became convertible into shares of our common stock at a conversion price of $0.005 per share, pursuant to an agreement with the Company in Ja nuary 2009. See Note 8.

In March 2008, we issued our former consulting CFO, Allen Perron, a ten-year warrant to purchase 1,000,000 shares of our common stock at an exercise price of $0.13 per share. The warrants were valued utilizing the Black-Scholes model with the following assumptions: volatility of 214%, risk free interest rate of 3.83%, dividend yield of 0%, expected term of 10 years, stock price of $0.13, resulting in a value of $130,000, which was recorded as general and administrative expense during the three months ended March 31, 2008. In addition, Mr. Perron has delayed payment of $53,000, which has been included in accounts payable and accrued expenses at June 30, 2009 and September 30, 2008 until we have a financing of $100,000 or more.

Note 10. Income Taxes

We continue to record a valuation allowance in the full amount of deferred tax assets since realization of such tax benefits has not been determined by our management to be more likely than not. At the end of each interim period, we make our best estimate of the effective tax rate expected to be applicable for the full fiscal year, and the rate so determined is used in providing for income taxes on a current year-to-date basis. The difference between the expected provision or benefit computed using the statutory tax rate and the recorded provision or benefit of zero, is primarily due to the estimated change in valuation allowance more likely to result due to taxable losses anticipated for the applicable fiscal year.

Note 11. Commitments and Contingencies

TanOak Litigation

On May 11, 2010, we filed a complaint against our former accountants, TanOak Partners, LLC, Chris Wain and Paul Spencer (collectively, “TanOak”), in King County Superior Court (Geobio Energy, Inc. v. TanOak Partners, LLC, Chris Wain and Paul Spencer, Case Number 10-2-17135-5 SEA), for breach of TanOak’s engagement contract, breach of the covenant of good faith and fair dealing, violation of fiduciary duties, self-dealing and fraudulent misrepresentation/inducement. TanOak filed an answer and counterclaim on June 3, 2010, claiming fraud, breach of contract and breach of the covenant of good faith and fair dealing. Neither Geobio nor TanOak specified damages in their complaint or counterclaim, and both sides moved for monetary damages as well as for declaratory judgment regarding the validity of employment agreements of Chris Wain and Paul Spencer. The case is currently in discovery and the trial date is set for October 24, 2011. We intend to pursue the lawsuit vigorously. We have not made any accrual related to future litigation outcomes as of June 30, 2009 or September 30, 2008.

Thomas Lloyd Capital

We had engaged Thomas Lloyd Capital, LLC (“Thomas Lloyd”) as a placement agent to assist us in our financing activities and for financial advisory services. Under our original agreement with Thomas Lloyd, we accrued a cash placement fee of $75,500 and recorded $65,523 representing the value of warrants issuable to Thomas Lloyd to purchase 200,000 shares of our common stock, during May through July 2007. In May 2008, we negotiated a settlement, whereby we agreed to issue to Thomas Lloyd (i) 294,118 shares of our common stock valued at $50,000 based on the 10-day trailing volume-weighted average closing price of our common stock of $0.17 per share, for financial advisory services rendered, (ii) five-year immediately exercisable warrants to purchase an additional 300,000 shares of our common stock at $0.17 per share for fi nancial advisory services, (iii) five-year immediately exercisable warrants to purchase an additional 415,627 shares of our common stock at an exercise price of $0.17 per share as placement fees in connection with our 2007 Private Placement transaction and (iv) $53,679 payable in cash upon closing a placement in excess of $2,000,000. We valued the additional warrants to purchase 300,000 shares of our common stock at $51,000, utilizing the Black-Scholes model with the following assumptions: stock price of $0.17, exercise price of $0.17, volatility of 213%, a risk-free rate of 2.99%, expected term of 5 years and a dividend yield of 0%. The value of the warrants was recorded to general and administrative expense during 2008. The additional warrants to purchase 415,627 shares of our common stock were also valued using the same assumptions, resulting in $70,657 recorded as an increase and deduction to additional paid in capital as placement fees during 2008. The $ 53,679 in contingent cash fees is not reflected as a payable in our accompanying condensed consolidated financial statements as of December 31, 2008 or September 30, 2008 as the closing of such financing was not probable at such date. The agreement also provided for, at Thomas Lloyd’s election and dependent on our receipt of such election notice, a one-time reset of the common stock value per share and warrant exercise price to a per-share price equal to the lower of (i) the 10-day trailing volume-weighted average closing price at the closing of a placement in excess of $5,000,000 or (ii) the 10-day trailing volume-weighted average closing price six-months after the agreement. Such reset provision expired in November 2008 without notice by Thomas Lloyd.

Note 12 — Subsequent Events

On January 25, 2010, we further amended our articles of incorporation to increase the number of authorized shares of common stock from 5,000,000,000 to 25,000,000,000.

As discussed in Note 5, on December 31, 2008, accounts payable due to Otto Law Group, a related party, were assigned to certain other related parties, and we entered into convertible promissory notes in aggregate principal amount of $160,000. During the three months ended March 31, 2010, all of these notes were converted to 1.6 billion shares of our common stock at their stated conversion price of $0.0001 per share.

As discussed in Note 5, on December 31, 2008, accounts payable due to Otto Law Group, a related party, were assigned to certain other related parties, and we entered into convertible promissory notes in aggregate principal amount of $324,000. During May through July 2010, certain of these convertible notes were converted into approximately 6.3 billion shares of our common stock at their stated conversion rate.

During the three months ended September 30, 2009, certain accounts payable due to Otto Law Group, a related party, was assigned to certain other related parties and was converted into approximately 853,000,000 shares of our common stock. The value of the accounts payable and related conversion price is currently being finalized by these related parties. During the six months ended June 30, 2010, an additional approximately $118,000 of accounts payable due to Otto Law Group, a related party, was assigned to certain other related parties and was converted into 630,000,000 shares of our common stock.

BNA Holdings, LLC Convertible Bridge Loan

We received an additional aggregate of $80,000 from BNA Holdings, LLC in July 2009 pursuant to the terms of this agreement (See Note 5).

Goodrich Capital, LLC

In January 2010, we entered into an agreement with Goodrich Capital, LLC, for strategic planning, financial and management consulting services in exchange for a non-refundable cash fee of $50,000, creditable against cash fees earned upon closing a transaction as follows: a cash fee of $1.6 million based upon the total capital raise with respect to all financing transactions of $20 million, with the minimum amount payable for all financing transactions being $400,000 (assuming a $5.0 million capital raise). In addition, warrants are issuable to Goodrich Capital in the form of an equity closing fee, fully vested at the time of issuance, to purchase a number of shares of our common stock equal to 5% of the equity issued in such transaction, determined on an as-converted basis. The strike price of the warrants will be equal to the share price of the instruments issued in the transaction and have a term of 10 years from the date of issuance. Under the terms of the agreement, we paid Goodrich Capital $30,000 in the second quarter of 2010. In March 2010, the agreement with Goodrich Capital, LLC was amended. The remaining obligation under the amended agreement, which was terminated pursuant to the amendment, represents $13,500 in fees and expenses.

Related Party Promissory Note

In March 2010, we entered into a promissory note with David M. Otto, the principal of Otto Law Group, LLC, a related party, in the principal amount of $20,000 at an interest rate of 8% per annum, due on or before March 23, 2011. The default rate of interest is 10%.

CKNS Capital Group, LLC Convertible Bridge Loan

In May 2010, we entered into an agreement with CKNS Capital Group, LLC, pursuant to which CKNS Capital Group, LLC purchased two units, at a purchase price of $25,000 per unit, each consisting of (i) a six-month 10% convertible debenture in the principal amount of $25,000 convertible into the principal securities sold in our next capital financing (the “Principal Securities”) defined as a capital financing as not less than $14 million (“Capital Financing”). The Principal Securities will be issued at a conversion price equal to 50% of the per share price of the Principal Securities sold in such Capital Financing; and (ii) a 3-year warrant for common stock for every two Principal Securities acquired by the inve stor (50% warrant coverage) in connection with the conversion of the convertible debenture. Each warrant will have a strike price equal to 50% of the conversion price or 25% of the price of the Principal Securities sold in the Capital Financing. The convertible debenture automatically converts upon the completion of the sale of the Principal Securities in the Capital Financing, or if not automatically converted, has a maturity date that is six months following the execution of the convertible debenture. In the event that the convertible debenture is repaid, the warrants will be cancelled. In July 2010, we received an aggregate of $150,000 from two additional investors under the same terms as CKNS Capital Group, LLC.

In July 2010, we received an aggregate of approximately $24,000 under the terms of a convertible promissory note. The terms are currently unspecified.

Agreement for the Stock Purchase of Collins Construction, Inc.

The closing was originally scheduled to take place on or before June 1, 2010 (the “Closing Date”), with GeoBio having the right and option to extend the Closing Date until July 1, 2010 (the “Extended Closing Date”), in exchange for an additional, non-refundable down payment (the “Down Payment”) of $50,000. Under the June 1, 2010 amendment, we agreed, in exchange for extending the Closing Date to July 16, 2010, that the Down Payment would be treated as an additional payment of consideration, raising the total purchase price of Collins from (i) $8,000,000 in cash and (ii) a Five (5) year, 8% Subordinated Promissory Note in the amount of $2,500,000 to (i) $8,050,000 in cash and (ii) a Five (5) year, 8% Subordinated Promissory Note in the amount of $2,500,000. Under the July 14, 2010 Amendment, the parties agreed to extend the Closing Date to September 15, 2010.

Additionally, the Collins Stock Purchase Agreement requires us to either purchase, pay off or otherwise refinance the then remaining principal balances associated with the loan and financing agreements totaling approximately $105,000 and assume the debt obligations owed under certain equipment lease agreements totaling approximately $457,000.

The Collins Stock Purchase Agreement is subject to the customary representations and due diligence procedures, and is also conditioned upon Collins having working capital of $1,000,000 at closing. Any deficiencies in working capital shall be deducted in equivalent amount from the Collins Cash Consideration. Any surplus of working capital shall be distributed to Collins at the Collins Closing Date.

Under the Collins Stock Purchase Agreement, Collins, its principals and management pledge and agree that they shall not compete with the business of Collins, as acquired by us, nor compete within Collins’ industry anywhere in the following states for a period of five (5) years following the Collins Closing Date: Colorado; Utah; Arizona; New Mexico; and Wyoming.

Upon the closing of the Collins Stock Purchase Agreement, the current principals of Collins shall enter into Consulting Agreements with us for a period of one hundred twenty days in order to assist with the transition of the management of Collins.

Agreement for the Stock Purchase of H&M Precision Products, Inc.

We are also currently seeking to acquire New Mexico based H&M Precision Products, Inc. (“H&M”), as detailed in our Current Reports on Form 8-K filed May 27, 2010 and July 1, 2010. H&M sells proprietary chemical blends used to maintain, clean and improve the operating efficiency of natural gas and oil wells. The purchase price is to be determined by the formula of the product of (i) H&M’s 12-month trailing cumulative, “adjusted” earnings before interest, taxes, depreciation and amortization as of the closing date multiplied by (ii) 2.99, with a maximum Purchase Price of $8,410,000.

Engagement of I-Banker’s, Inc.

In March 2010, concurrent with entry into the Collins Stock Purchase Agreement, we engaged the financial advisory services of I-Bankers Securities, Inc. (“I-Bankers”) to assist in raising financing for the implementation of our financial strategy (an “Offering”), including strategic planning, acquisitions of businesses in the natural gas and oil services industry and business development, such as the Collins Stock Purchase Agreement and H&M Stock Purchase Agreement, set forth above.

We shall pay to I-Bankers compensation including:

(i)	a cash placement fee (the “Cash Placement Fee”) equal to 8% of the aggregate gross proceeds raised from the sale of securities in an I-Banker’s facilitated Offering, but in no event shall the Cash Placement Fee (net of the Retainer Fee) be less than $500,000;

(ii)

a non-cash placement fee (the “Non-Cash Placement Fee”) in the form of a warrant exercisable for shares of our common stock in an amount equal to 4% of the shares of common stock issued in an Offering or issuable upon conversion of the securities issued therein at an exercise price equal to the effective issue price of such common stock in such offering;

(iii)

an initial Placement Agent retainer fee of $35,000, which shall not be credited against the Cash Placement Fee.

Employment Agreements

Lance Miyatovich - On September 23, 2009, we appointed Lance Miyatovich as President and Chief Executive Officer and as a director of the Company. We also entered into a 36-month employment agreement with Mr. Miyatovich for $240,000 per year.

John Sams – On March 31, 2010, we entered into an employment letter with John Sams pursuant to which Mr. Sams accepted the position of Chief Executive Officer of the Company at an annual salary of $300,000, commencing on the effective date of March 31, 2010. He will also be entitled to an annual target bonus of 50% of his annual base salary, up to a maximum of two times the target bonus, at the discretion of the compensation committee of the board of directors based on his and the Company’s performance over the year. Mr. Sams will also be entitled to an incentive option grant, representing not less than 6.5% of the fully diluted shares at the time of capitalization, issuable upon the completion of the Company’s contemplated reverse stock spli t, conversion of preferred stock, and approximately $20 million financing. Of the total issuable, 25% will be issuable and vest upon completion of the Company’s contemplated reverse stock split, conversion of preferred stock, and approximately $20 million financing, with the remaining 75% issued the month following the completion of the Company’s contemplated reverse stock split, conversion of preferred stock, and approximately $20 million financing and vesting over a 36-month period. The options have a 7 year term, commencing on the completion of the $20 million financing. The strike price of the options will be set at fair market value, or the price of the $20 million financing.

Joseph Titus – On March 31, 2010, we entered into an employment letter with Joseph Titus pursuant to which Mr. Titus accepted the position of Chief Operating Officer of the Company at an annual salary of $225,000, commencing on the effective date of March 31, 2010. He will also be entitled to an annual target bonus of 50% of his annual base salary, up to a maximum of two times the target bonus, at the discretion of the compensation committee of the board of directors based on his and the Company’s performance over the year. Mr. Titus will also be entitled to an incentive option grant, representing not less than 2.5% of the fully diluted shares at the time of capitalization, issuable upon the completion of the Company’s contemplated reverse st ock split, conversion of preferred stock, and approximately $20 million financing. Of the total issuable, 25% will be issuable and vest upon completion of the Company’s contemplated reverse stock split, conversion of preferred stock, and approximately $20 million financing, with the remaining 75% issued the month following the completion of the Company’s contemplated reverse stock split, conversion of preferred stock, and approximately $20 million financing and vesting over a 36-month period. The options have a 7 year term, commencing on the completion of the $20 million financing. The strike price of the options will be set at fair market value, or the price of the $20 million financing.

Douglas Daniel – On March 31, 2010, we entered into an employment letter with Douglas Daniel pursuant to which Mr. Daniels accepted the position of Senior Vice President Corporate Development of the Company at an annual salary of $225,000, commencing on the effective date of March 31, 2010. He will also be entitled to an annual target bonus of 50% of his annual base salary, up to a maximum of two times the target bonus, at the discretion of the compensation committee of the board of directors based on his and the Company’s performance over the year. Mr. Daniel will also be entitled to an incentive option grant, representing not less than 2.5% of the fully diluted shares at the time of capitalization, issuable upon the completion of the Company’s contemp lated reverse stock split, conversion of preferred stock, and approximately $20 million financing. Of the total issuable, 25% will be issuable and vest upon completion of the Company’s contemplated reverse stock split, conversion of preferred stock, and approximately $20 million financing, with the remaining 75% issued the month following the completion of the Company’s contemplated reverse stock split, conversion of preferred stock, and approximately $20 million financing and vesting over a 36-month period. The options have a 7 year term, commencing on the completion of the $20 million financing. The strike price of the options will be set at fair market value, or the price of the $20 million financing.

Shelver Consulting Agreement

In January 25, 2010, we entered into a 12-month consulting services contract with a member of our board of directors, Clayton Shelver, and in July 2010, we issued 25,000,000 fully paid, vested and non-assessable shares of our common stock to Mr. Shelver as payment under the consulting services contract. The value of the shares of $2,500 was recorded to general and administrative expense in July 2010.

Vitello Capital Ltd. Consulting Agreement

In July 2010, we entered into an additional agreement with Vitello Capital Ltd., the successor in interest to 18KT-TV Communications, whereby we issued Vitello Capital Ltd. 600,000,000 shares of our common stock, valued at $0.0001 per share, for prior investor relations services.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements contained herein may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, an amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to future events or our financial performance, and involve certain known and unknown risks, uncertainties and other factors, including those identified below, which may cause our or our industry’s actual or future results, levels of activity, performance or achievements to differ materially from those expressed or implied by any forward-looking statements or from historical results. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The following factors, among others, could cause our or our industry’s future results to differ materially from historical results or those anticipated: 1) our limited operating history; (2) our ability to pay down existing debt; (3) our ability to obtain contracts with suppliers of raw materials (for our production of biodiesel fuel) and distributors of our biodiesel fuel product; (4) the risks inherent in the mutual performance of such supplier and distributor contracts (including our production performance); (5) our ability to protect and defend our proprietary technology; (6) our ability to secure and retain management capable of managing growth; (7) our ability to raise necessary financing to execute our business plan; (8) potential litigation with our shareholders, creditors and/or former or curre nt investors; (9) our ability to comply with all applicable federal, state and local government and international rules and regulations; and (10) other factors over which we have little or no control. As a result of these and other factors, we may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect our business, financial condition, operating results and stock price. As a result of these and other factors, we may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect our business, financial condition, operating results and stock price. Additional factors that would cause actual results to differ materially from those projected or suggested in any forward-looking statements are contained in our filings with the Securities and Exchange Commission, including those factors discussed under the caption “Forward-Looking Inf ormation” in our most recent Annual Report on Form 10-K, as may be supplemented or amended from time to time, which we urge investors to consider. We have no duty to update, supplement or revise any forward-looking statements after the date of this report or to conform them to actual results, new information, future events or otherwise. The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and notes appearing elsewhere in this Report.

Overview

The closing was originally scheduled to take place on or before June 1, 2010 (the “Closing Date”), with GeoBio having the right and option to extend the Closing Date until July 1, 2010 (the “Extended Closing Date”), in exchange for an additional, non-refundable down payment (the “Down Payment”) of $50,000. Under the June 1, 2010 amendment, we agreed, in exchange for extending the Closing Date to July 16, 2010, that the Down Payment would be treated as an additional payment of consideration, raising the total purchase price of Collins from (i) $8,000,000 in cash and (ii) a Five (5) year, 8% Subordinated Promissory Note in the amount of $2,500,000 to (i) $8,050,000 in cash and (ii) a Five (5) year, 8% Subordinated Promissory Note in the amount of $2,500,000. Under the July 14, 2010 Amendment, the parties agreed to extend the Closing Date to September 15, 2010.

Liquidity, Capital Resources and Going Concern

We have prepared our condensed consolidated financial statements assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As of June 30, 2009, we had a deficit accumulated in the development stage of approximately $21.9 million, negative cash flows from operations since inception and expect to incur additional losses in the future as we continue to develop and grow our business. We have funded our losses primarily through sales of common stock and warrants in private placements and borrowings from related parties and other investors. The further development of our business will require capital. At June 30, 2009, we had a working capital deficit (current assets less current liabilities) of ap proximately $0.7 million and $55,000 in cash. Our operating expenses will consume a material amount of our cash resources. These conditions raise substantial doubt about our ability to continue as a going concern.

We are dependent on existing cash resources and external sources of financing to meet our working capital needs. Current sources of liquidity are insufficient to provide for budgeted and anticipated working capital requirements. We will therefore be required to seek additional financing to satisfy our working capital requirements. No assurances can be given that such capital will be available to us on acceptable terms, if at all. In addition to equity financing and strategic investments, we may seek additional related party loans. If we are unable to obtain any such additional financing, or if such financing cannot be obtained on terms acceptable to us, we may be required to delay or scale back our operations, including the acquisitions of Collins and H&M in September and the pro posed acquisition of Magna shortly thereafter, which would adversely affect our ability to generate future revenues and may force us to curtail or cease our operating activities

Discussion of Cash Flows

We used cash of approximately $110,000 and $164,000 in our operating activities in the nine months ended June 30, 2009 and 2008, respectively. Cash used in operating activities relates primarily to funding net losses, partially offset by share-based payments of consulting, director fees, and other expenses and the net change in operating assets and liabilities. We expect to use cash for operating activities in the foreseeable future as we continue our operating activities.

Our investing activities used no cash in the nine months ended June 30, 2009 and 2008, respectively.

Our financing activities provided cash of approximately $165,000 and $66,000 in the nine months ended June 30, 2009 and 2008, respectively. Changes in cash from financing activities are proceeds from related party advances, stockholder contributions to capital, and proceeds from issuance of notes payable.

Recent Financing Activities

In April 2009, we entered into an agreement with BNA Holdings, LLC, pursuant to which BNA Holdings, LLC was to loan us up to an aggregate of $500,000, payable after five years and bearing interest at a rate of 10% per annum. During the three months ended June 30, 2009, we received an aggregate of $143,000 from BNA Holdings, LLC pursuant to the terms of this agreement. In July 2010, we received an additional $80,000 from BNA Holdings, LLC pursuant to the terms of this agreement. The Company has the right to call for conversion of unpaid principal and accrued interest into shares of our common stock at $0.50 per share beginning April 7, 2010.

Going Concern

In our Annual Report on Form 10-K for the year ended September 30, 2008, our independent registered public accounting firm included an explanatory paragraph in its report relating to our consolidated financial statements for the years ended September 30, 2008 and 2007, which states that we have experienced recurring losses from operations and have a substantial accumulated deficit. These conditions give rise to substantial doubt about our ability to continue as a going concern. Our ability to expand operations and generate additional revenue and our ability to obtain additional funding will determine our ability to continue as a going concern. Our condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Summary

We are dependent on existing cash resources and external sources of financing to meet our working capital needs. Current sources of liquidity are insufficient to provide for budgeted and anticipated working capital requirements. We will therefore be required to seek additional financing to satisfy our working capital requirements. No assurances can be given that such capital will be available to us on acceptable terms, if at all. In addition to equity financing and strategic investments, we may seek additional related party loans. If we are unable to obtain any such additional financing or if such financing cannot be obtained on terms acceptable to us, we may be required to delay or scale back our operations, which would adversely affect our ability to generate future revenues and ma y force us to curtail or cease our operating activities.

Comparison of the Three and Nine Months Ended June 30, 2009, to the Three and Nine Months Ended June 30, 2008

In the three months ended June 30, 2009 and 2008, we incurred net losses of approximately $268,000 and $85,000. In the nine months ended June 30, 2009 and 2008, we incurred net losses of approximately $596,000 and $18,344,000, respectively.

Revenues. We had no revenues in the three and nine months ended June 30, 2009 and 2008.

Cost of Sales. Cost of sales was nil in the three months ended June 30, 2009 and 2008. Cost of sales was nil for the nine months ended June 30, 2009 and $21,000 for the nine months ended June 30, 2008 as a result of inventory adjustments to the carrying value for unsalvageable fuel to net realizable value of nil.

Operating Expenses. Operating expenses increased to $133,000 in the three months ended June 30, 2009, from $57,000 in the three months ended June 30, 2008, due primarily to approximately $99,000 (including finance charges of $7,000) in legal fees recorded in the current year three month period as compared to no legal fees recorded in the prior year three month period. Operating expenses decreased to $387,000 in the nine months ended June 30, 2009, from $18,240,000 in the nine months ended June 30, 2008, due to non-recurring general and administrative expenses in 2008 related to shares issued to consultants for investor and market communications services valued at $9.3 million, shares issued to consultants for services for the implementation of our revised busi ness plan, valued at $6.4 million, and shares issued for settlement of prior disagreements, valued at approximately $236,000. In addition, in response to management’s belief that the proprietary technology acquired in the September 2006 Exchange Agreement with Domestic Energy Partners, LLC (“DEP”) would not be ready for large-scale use in the near term, we recorded a loss from impairment of the assets related to such technology by adjusting their value to zero. We subsequently entered into an Asset Purchase, Settlement, and Mutual Release Agreement with the former Members of DEP for them to assume the technology and related assets. These former members also agreed to assume certain related liabilities, which reduced the overall impairment loss to $116,000. The following table sets forth the calculation of the impairment loss for the first quarter of fiscal 2008:


Inventory	$	36
Employee advances		6
Deposits		6
Property and equipment		409
Accrued payroll		(261	)
Cash advance payable to former CEO, including interest		(80	)

Net impairment loss related to DEP	$	116

In March 2008, we completed our Share Exchange with GeoAlgae, pursuant to the terms of the Amendment and as a result we acquired GeoAlgae as a wholly owned subsidiary. We issued 5,875,000 shares of our common stock, valued at $0.25 per share based on an average of closing market price for our common stock for three days before and three days after the effective date of March 18, 2008, to shareholders of GeoAlgae for a total purchase price of approximately $1,469,000. GeoAlgae was a recently formed company and its net assets at the date of acquisition were nil. The entire purchase price was allocated to intangible assets which in total constituted a business plan. In 2008, the intangible assets related to the GeoAlgae acquisition were deemed to be entirely impaired and an imp airment loss of $1,469,000 was recorded. The impairment was a result of the inability to conclude that there would be any future positive cash flow and therefore fair value, to be assigned to the business plan. In 2008, the intangible assets related to the GeoAlgae acquisition were deemed to be entirely impaired and an impairment loss of $1,469,000 was recorded.

At September 30, 2008 and June 30, 2009, we have no inventory, property and equipment or intangible assets and as a result, during the three and nine months ended June 30, 2009 we had no depreciation or amortization expense. Depreciation and amortization expense during the nine months ended June 30, 2008 was $30,000.

Interest Expense. Interest expense increased from $28,000 and $83,000 in the prior year three and six month periods, respectively, to $135,000 and $209,000 in the current year three and six month periods, respectively, with the increase due to additional interest expense related to amortization of the beneficial conversion feature related to convertible liabilities.

Off-Balance Sheet Arrangements

As of June 30, 2009, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

ITEM 4. CONTROLS AND PROCEDURES.

(a) Disclosure Controls and Procedures. As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of senior management, including Mr. Miyatovich, our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our CEO/CFO concluded that our disclosure controls and procedures were not effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we f ile or submit under the Exchange Act. As previously reported under Item 9A(T) in our Annual Report on Form 10-K for the year ended September 30, 2008 (the “Annual Report”), we had numerous deficiencies in our disclosures controls as of September 30, 2008. In the Annual Report we described the remediation efforts we have begun to undertake in order to correct such deficiencies. As of June 30, 2009, the deficiencies described in the Annual Report still existed since the remediation efforts had not yet been fully implemented as of such date.

(b) Internal Control over Financial Reporting. There have been no changes in our internal controls over financial reporting or in other factors during the fiscal quarter ended June 30, 2009 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting subsequent to the date we carried out our most recent evaluation. As previously reported in Item 9A(T) of the Annual Report, we had numerous material weaknesses in our internal control over financial reporting as of September 30, 2008. In the Annual Report we described the remediation efforts we have begun to undertake in order to correct such material weaknesses. As of June 30, 2009, the material weaknesses described in the Annual Report still existed since the remediation efforts had not yet been fully implemented a s of such date.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On May 11, 2010, the Company filed a complaint against its former accountants, TanOak Partners, LLC, Chris Wain and Paul Spencer (collectively, “TanOak”), in King County Superior Court (Geobio Energy, Inc. v. TanOak Partners, LLC, Chris Wain and Paul Spencer, Case Number 10-2-17135-5 SEA), for breach of TanOak’s engagement contract, breach of the covenant of good faith and fair dealing, violation of fiduciary duties, self-dealing and fraudulent misrepresentation/inducement. TanOak filed an answer and counterclaim on June 3, 2010, claiming fraud, breach of contract and breach of the covenant of good faith and fair dealing. Neither Geobio nor TanOak specified damages in their complaint or counterclaim, and both sides moved for monetary damages as well as for declaratory judgment regarding the validity of employment agreements of Chris Wain and Paul Spencer. The case is currently in discovery and the trial date is set for October 24, 2011. The Company intends to pursue the lawsuit vigorously.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In May and June 2009, we issued an aggregate of 15,000,000 shares of our common stock upon conversion of accounts payable of $15,000 pursuant to an agreement at a conversion rate of $0.001 and 55,000,000 shares of our common stock upon conversion of accounts payable to related parties of approximately $28,000 at a conversion rate of $0.0005.

During the three months ended June 30, 2009, an additional aggregate of $46,000 of accounts payable was converted to 458,866,666 shares of our common stock pursuant to an agreement at a conversion rate of $0.0001.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters have been submitted to our security holders for a vote, through the solicitation of proxies or otherwise, during the periods ended June 30, 2009.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The exhibits required by this item are listed on the Exhibit Index attached hereto.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: August 19, 2010 GEOBIO ENERGY, INC.

By: /s/ Lance Miyatovich

Lance Miyatovich

Chief Executive Officer, Chief Financial Officer,

and Principal Accounting Officer

EXHIBIT INDEX


Exhibit No.		Description of Exhibit
31.1		Certification of our Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of our Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	H.S. sophomore Avg

GeoBio Energy (GBOE) Inactive 10-Q2009 Q3 Quarterly report

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