Note 5 - Property for Developing carbon assets | 3 Months Ended |
Mar. 31, 2013 |
Goodwill and Intangible Assets Disclosure [Abstract] | ' |
Property for developing Carbon Assets | ' |
Note 5 – Property for Developing Carbon Assets |
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The following table summarizes the movements in each group of property acquired for developing carbon assets during the period ended March 31, 2013 and December 31, 2012: |
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| | Property | | | Property Two | | | Total | |
One |
31-Dec-11 | | $ | - | | | $ | - | | | $ | - | |
Additions | | | 600,000,000 | | | | 173,875,000 | | | | 773,875,000 | |
Impairment expenses | | | (75,000,000 | ) | | | - | | | | (75,000,000 | ) |
Balance, December 31, 2012 | | $ | 525,000,000 | | | $ | 173,875,000 | | | $ | 698,875,000 | |
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Balance, March 31, 2013 | | $ | 525,000,000 | | | $ | 173,875,000 | | | $ | 698,875,000 | |
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| -1 | Purchase of Acquisition Agreement – Property One (1) | | | | | | | | | | |
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On March 30, 2012, the Company entered into a purchase of acquisition agreement (“Purchase of Acquisition Agreement”) with Global Environmental Investments Limited, a Belize corporation (“GEIL”), regarding the Property (as defined above), which at the date of the Purchase of Acquisition Agreement includes an additional 25,000 hectares so that it encompasses a total of approximately 135,000 hectares. On March 16, 2012, GEIL had entered into an acquisition agreement (the “Acquisition Agreement”) with Fundacion Nelson Velasco Aguirre, a foundation established pursuant to the law of Ecuador (“NVA”). In accordance with the Acquisition Agreement, NVA transferred control of the Property to GEIL. NVA held title and maintained legal ownership of the Property but permitted control over the Property to pass to GEIL through a voting trust agreement dated March 16, 2012 (the “Voting Trust Agreement”) among NVA, GEIL and Fred Nikoo, as voting trustee. Effective June 15, 2012, Amanda Miller replaced Fred Nikoo as Voting Trustee. |
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Therefore, in accordance with the terms and provisions of the Purchase of Acquisition Agreement, GEIL sold all of the rights and interests held by GEIL pursuant to the Acquisition Agreement to the Company in respect of the Property, which now consists of approximately 135,000 hectares. |
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In consideration of the assignment by GEIL to the Company, GEIL and/or its designees received 2,500,000 post-reverse split shares of restricted common stock of the Company representing approximately 75% of the total issued and outstanding shares of the Company, thus effecting a change in control. In accordance with ASC 805 (formerly FAS 141 (R)) the company recorded the value of the property for developing carbon assets, the Voting Trust over the Property (the “Assets”), on the transaction date, of March 30, 2012 (the “Valuation Date”), at the fair market value of the Company’s common stock based on a closing price of $240.00 per share, for a total value of $600,000,000. At the Valuation Date the Company considered several factors including (1) an appraisal report on the Property as prepared by M. Paúl Tufiño, a respected authority in the valuation of such environmentally based assets as the Property which provides for a minimum recoverable value of $5,000 USD per hectare or approximately $525,000,000; (2) a future discounted cash flow analysis prepared by management based on criteria applicable to the monetization of the Asset including certification allowing for the sale of VER and REDD carbon offsets, the carbon offset market and values realizable for the sale of carbon offsets globally, the Property’s available hectares, deforestation rate and the available carbon tax credits per hectare as considered acceptable by Industry. The discounted future cash flow analysis extends over a period of 25 years discounted at a rate of 10% and provides a minimum realizable value of approximately $540,000,000. As a result of this review, Management determined to impair the asset in order to reflect the value of the third party appraisal report received on the Property, and accordingly has provided for an impairment allowance of $75,000,000 on the Valuation Date, leaving a capitalized value of $525,000,000 which has been recorded on the balance sheet as Property for Developing carbon assets. |
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In further accordance with the terms and provisions of the Purchase of Acquisition Agreement, the Company entered into a three year consultant agreement (the “Mainland Consultant Agreement”) with Mainland Investment Ltd. (“Mainland”). The Mainland Consultant Agreement provides for Mainland to provide financial, advisory, marketing and investor relations services and the Company to pay to Mainland an annual compensation of $1,000,000 and grant 1,000,000 stock options exercisable at $1.00 per share for each year of the agreement for a total of 3,000,000 stock options. |
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Lastly, under the agreement the Company was required to: (i) cause the settlement of debt in the approximate amount of $60,000 due and owing to that certain creditors, as reflected on the financial statements of the Company as of September 30, 2011 (the “$60,000 Debt”) by the issuance of 833,333 post reverse split shares of common stock; and (ii) within ninety days, the Company is required to pay the approximate amount of $152,148 due and owing to Branislav Jovanovic, a former officer and director by a cash payment to Mr. Jovanovic. |
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During the year ended December 31, 2012, the Company issued the 2,500,000 post reverse split shares to GEIL, and 833,333 post reverse split shares to settle the $60,000 debt. The amount payable to Mr. Jovanovic is in dispute and has become the subject of a court action and therefore remains outstanding. |
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| -2 | Purchase of Acquisition Agreement – Property Two (2 ) | | | | | | | | | | |
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On June 27, 2012, the Company authorized the execution of that certain acquisition agreement (the “Acquisition Agreement”) between the Company and Ecuador Farms S.A., Develfarms, an Ecuadorian corporation (“Ecuador Farms S.A.”), regarding property known as Hacienda Forestal San Agustin (“The Property”) consisting of approximately 30,000 Hectares. |
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In accordance with the terms and provisions of the Acquisition Agreement, Ecuador Farms S.A. sells, conveys, assigns and transfers to the Company as follows: (i) 100% of Ecuador Farms S.A.’s rights, title and interest in and to the timber, substances and the rights to receive from the Property all benefits thereto, and associated with those rights associated for the use intended by the Company, namely for the development of the Property as a carbon development project for the purpose of generating carbon assets that may be traded on a public market. This includes, for greater certainty and any and all agricultural developments that may be produced from the Property including, without limitation, carbon assets; (ii) 100% of the right, title and interests of Ecuador Farms S.A.in all presently existing and pooling and/or communization agreements, declarations, and/or orders and the properties covered or included in the units (including, without limitation, units formed under orders, rules, regulations or other official acts of any federal, state or other authority having jurisdiction, voluntary unitization agreements, designations, and/or declarations, and any working interest units created under operating agreements or otherwise), which relate to the Property; (iii) 100% of the right, title and interests of Ecuador Farms S.A.. in all presently existing and valid agreements, including sales and sales related contracts, operating agreements and other agreement and contracts which relate to the Property or which relate to the exploration, development, operation or maintenance of the Property or the treatment, storage, transaction or marketing of production from or allocated to the Property; and (iv) 100% of the right, title and interests of Ecuador Farms S.A. in and to all materials, supplies, machinery, equipment, improvements and other personal property and fixtures relating to the Property, and all wells, wellhead equipment, pumping units, flow lines, tanks, buildings, injection facilities, salt water disposal facilities, compression facilities, fathering systems and other equipment, all easements, rights-of-way, surface leases and other surface rights, all permits and licenses and all other appurtenances, used or held for use in connection with or related to the exploration, development, operation or maintenance of any of the Property. |
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In exchange for the right of the Company to own the Property outright, the consideration shall be One hundred and Seventy Three Million, Eight Hundred and Seventy Five Thousand Dollars USD ($173,875,000), which payment shall be paid by the Company to Ecuador Farms S.A. and/or its designees through the issuance of 891,667 post reverse split shares of newly issued restricted common stock of the Company valued at the market value on the date of issue of $195.00 per share. The stock certificates shall be held in escrow by the Escrow Agent until the definitive transfer of the Property by Ecuador Farms S.A. to the Company shall occur and the Company shall provide its written authorization to the Escrow Agent to release the stock certificates to Ecuador Farms S.A. and/or its designees. In the event the Property is not definitively transferred by Ecuador Farms to the Company as set out in paragraph 5(g) subparagraphs (i), (ii), (iii) and (iv) of the Acquisition Agreement, the Escrow Agent shall return the share certificates to the transfer agent for cancellation and the 891,667 post reverse split shares shall be returned to treasury. In that event, the Agreement shall then be deemed null and void. The shares remain in escrow as of December 31, 2012 until the definitive transfer of the Property by Ecuador Farms S.A. occurs. |