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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended March 31, 2008
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ____________ to ____________.
Commission file number 1-11476
WORLD WASTE TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
CALIFORNIA 95-3977501
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
13500 EVENING CREEK DRIVE, SUITE 440,
SAN DIEGO, CALIFORNIA 92128
(Address of Principal Executive Offices)
(858) 391-3400
(Registrant's Telephone Number, Including Area Code)
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 90 days.
Yes |X| No |_|
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non- accelerated filer. See definition of
"accelerated filer and large accelerated filer" 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|
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: 27,596,491 shares issued and
outstanding as of May 1, 2008.
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WORLD WASTE TECHNOLOGIES, INC.
FORM 10-Q
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1 Condensed Financial Statements:
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Operations 2
Condensed Consolidated Statements of Stockholders' Equity (Deficit) 3
Condensed Consolidated Statements of Cash Flow 5
Condensed Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations 15
Item 4 Controls and Procedures 23
PART II OTHER INFORMATION 24
Item 1 Litigation 24
Item 1A Risk Factors 24
Item 6 Exhibits 24
SIGNATURES 25
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WORLD WASTE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2008 2007
----------------------------------
ASSETS: (UNAUDITED)
Current Assets:
Cash and cash equivalents $ 4,390,335 $ 2,711,200
Short-term investments 4,575,638 7,093,418
Prepaid expenses 351,567 336,726
Assets held for sale, less equipment sold to date 455,355 1,083,223
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Total Current Assets 9,772,895 11,224,567
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Fixed Assets:
Machinery, equipment net of accumulated depreciation of $23,607
on 3/31/08 and $23,358 on 12/31/07. 32,918 35,302
----------------------------------
Total Fixed Assets 32,918 35,302
Other Assets:
Deposit L/T 36,519 36,519
----------------------------------
TOTAL ASSETS $ 9,842,332 $ 11,296,388
==================================
LIABILITIES AND STOCKHOLDERS' (DEFICIT):
LIABILITIES:
Current Liabilities:
Accounts payable $ 474,418 $ 359,988
Accrued salaries payable 241,452 108,992
Capital lease S/T - 49,524
Accrued liabilities 257,557 -
Other liabilities 39,994 290,181
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Total Current Liabilities 1,013,421 808,685
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Long Term Liabilities:
Capital lease L/T - 30,826
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Total Long Term Liabilities - 30,826
----------------------------------
TOTAL LIABILITIES 1,013,421 839,511
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Convertible Redeemable preferred stock (See Note 5) 25,319,233 22,812,640
----------------------------------
Commitments and Contingencies (See Note 7)
STOCKHOLDERS' (DEFICIT):
Common Stock - $.001 par value: 100,000,000 shares
authorized, 27,596,491 and 27,576,046 shares
issued and outstanding at March 31, 2008 and December 31, 2007,
respectively. 27,595 27,575
Additional paid-in-capital 58,250,503 57,782,888
Deficit accumulated during development stage (74,223,123) (70,000,282)
Accumulated comprehensive income (loss) (545,297) (165,944)
----------------------------------
TOTAL STOCKHOLDERS' (DEFICIT) (16,490,322) (12,355,763)
----------------------------------
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' (DEFICIT) $ 9,842,332 $ 11,296,388
==================================
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
1
WORLD WASTE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the For the June 18, 2002
Quarter Ended Quarter Ended Inception to
March 31, 2008 March 31, 2007 March 31, 2008*
-----------------------------------------------------------------
GROSS REVENUE: $ - $ - $ 93,784
Disposal of rejects (65,526)
Plant operation cost (2,720,922)
Depreciation (1,843,615)
-----------------------------------------------------------------
Total cost of goods sold - - (4,630,063)
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Gross Margin - - (4,536,279)
G&A Expense
Research and development (16,359) (918,934) (3,438,582)
General and administrative (1,776,931) (983,491) (17,786,219)
Impairment of assets (Note 1) (18,191,450)
-----------------------------------------------------------------
Loss from operations (1,793,290) (1,902,425) (43,952,530)
-----------------------------------------------------------------
Interest income 69,737 130,490 679,007
Financing transaction expense - - (7,442,426)
Other income (expense) 24,940 (27,276) 1,969,073
-----------------------------------------------------------------
Net loss before provision for income tax (1,698,613) (1,799,211) (48,746,876)
-----------------------------------------------------------------
Income taxes - - -
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Net loss $ (1,698,613) $ (1,799,211) $ (48,746,876)
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Preferred stock dividend and amortization
of beneficial conversion feature, warrant discount
and offering costs (2,524,227) (3,703,640) (25,408,721)
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Net loss attributable to common shareholders $ (4,222,840) $ (5,502,851) $ (74,155,597)
=================================================================
BASIC AND DILUTED NET LOSS PER SHARE $ (0.15) $ (0.21) $ (3.72)
=================================================================
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING USED IN CALCULATION 27,587,529 25,830,809 19,919,679
=================================================================
*APPROXIMATELY $67,526 IN CONSULTING AND TRAVEL EXPENSES INCURRED PRIOR TO INCEPTION OF THE BUSINESS
ON JUNE 18, 2002 ARE NOT INCLUDED.
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
WORLD WASTE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Additional Accumulated
Paid in Common Stock Accumulated Comprehensive
Shares Dollars Capital Subscription Deficit * Income (Loss) Total
-------------------------------------------------------------------------------------
$ $ $ $ $ $
Preformation expenses (67,526) (67,526)
Formation - June 18, 2002 9,100,000 100 73,036 73,136
Net Loss - 2002 (359,363) (359,363)
------------------------------------------------------------------------------------
December 31, 2002 9,100,000 100 73,036 (426,889) (353,753)
====================================================================================
Additional paid in capital 100 100
Common stock subscribed 125,000 125,000
Net Loss - 2003 (804,605) (804,605)
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December 31, 2003 9,100,000 100 73,136 125,000 (1,231,494) (1,033,258)
====================================================================================
Merger with Waste Solutions, Inc. 7,100,000 63 2,137 2,200
Common stock subscriptions 125,000 1 124,999 (125,000) -
Common stock and warrants net of offering
cost prior to VPTI merger 3,045,206 31 3,952,321 3,952,352
Shares cancelled (500,000) (5) 5 -
Warrants issued 281,171 281,171
Merger with VPTI 1,200,817 21,062 (21,062) -
Conversion of promissory notes 1,193,500 12 1,193,488 1,193,500
Accrued Interest on notes forgiven 135,327 135,327
Common stock and warrants net of offering cost 1,460,667 1,461 2,865,462 2,866,923
Amortization of stock options and warrants to
employees and consultants 217,827 217,827
Net loss - 2004 (2,496,188) (2,496,188)
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December 31, 2004 22,725,190 22,725 8,824,811 (3,727,682) 5,119,854
====================================================================================
Common stock and warrants net of offering cost 1,961,040 1,961 3,072,116 3,074,077
Amortization of stock options and warrants to
employees and consultants 654,220 654,220
Dividend redeemable (Preferred Stock) 106,645 (671,769) (565,124)
Warrants issued 861,853 861,853
Bridge financing warrants 1,114,105 1,114,105
Beneficial conversion feature on redeemable
preferred stock 1,328,066 1,328,066
Amortization of beneficial conversion
feature, warrant discount and offering costs
on redeemable preferred stock (562,704) (562,704)
Net loss - December 2005 (3,078,917) (3,078,917)
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December 31, 2005 24,686,230 24,686 15,961,816 (8,041,072) 7,945,430
====================================================================================
3
Additional Accumulated
Paid in Common Stock Accumulated Comprehensive
Shares Dollars Capital Subscription Deficit * Income (Loss) Total
------------------------------------------------------------------------------------
Common stock and warrants net of offering
cost 262,851 263 9,561 9,824
Amortization of stock options and warrants to
employees and consultants 989,252 989,252
Dividend (Preferred Stock) 386,954 (2,920,893) (2,533,939)
Warrants issued preferred stock 1,647,250 1,647,250
Bridge financing warrants 787,500 787,500
Beneficial conversion feature - Series B 18,207,102 18,207,102
Conversion of Series B preferred stock 296,581 296 840,716 841,012
Series B Investor & placement warrants 7,922,663 7,922,663
Series A Investor warrants 3,065,931 3,065,931
Elimination of warrant liabilities 674,420 674,420
UAH stock for purchase of patent 167,000 167 697,833 698,000
Registration filing fees (11,529) (11,529)
Amortization of beneficial conversion
feature, warrant discount and offering costs
on redeemable preferred stock (5,717,378) (5,717,378)
Net loss - 2006 (24,956,520) (24,956,520)
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December 31, 2006 25,412,662 25,412 51,179,469 (41,635,863) 9,569,018
====================================================================================
Common stock for services 302,660 302 261,192 261,494
Warrant exercises
Amortization of stock options and warrants to
employees and consultants 1,638,128 1,638,128
Dividend (Preferred Stock) (3,173,396) (3,173,396)
Conversion of Series B preferred stock 1,860,724 1,861 4,704,099 4,705,960
Amortization of beneficial conversion
feature, warrant discount and offering costs
on redeemable preferred stock (9,838,354) (9,838,354)
Net loss - 2007 (15,352,669) (15,352,669)
Unrealized gain (loss) on short term
investments held for sale (165,944) (165,944)
------------------------------------------------------------------------------------
December 31, 2007 27,576,046 27,575 57,782,888 $ 0 (70,000,282) (165,944) (12,355,763)
====================================================================================
Amortization of stock options and warrants to
employees and consultants 450,001 450,001
Dividend (Preferred Stock) (789,854) (789,854)
Conversion of Series B preferred stock 20,445 20 17,614 17,634
Amortization of beneficial conversion
feature, warrant discount and offering costs
on redeemable preferred stock (1,734,374) (1,734,374)
Net loss - March 2008 (Unaudited) (1,698,613) (1,698,613)
Unrealized gain (loss) on short term
investments held for sale (379,353) (379,353)
------------------------------------------------------------------------------------
March 31, 2008 (Unaudited) 27,596,491 $27,595 $58,250,503 $ 0 $(74,223,123) $(545,297) $(16,490,322)
====================================================================================
* During 2002, the Company issued $67,526 of Convertible Promissory Notes payable for preformation funds received and
expended prior to Inception.
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
WORLD WASTE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
June 18, 2002
Quarter ended Quarter ended (Inception) to
March 31, 2008 March 31, 2007 March 31, 2008
--------------------------------------------------------------
Cash Flow from operating activities: $ $ $
Net loss (1,698,613) (1,799,211) (48,746,876)
Adjustments to reconcile net loss to net cash used in operating
activities:
Impairment of assets 18,191,450
Depreciation and amortization 2,384 340,579 3,019,179
Interest forgiveness 135,327
Warrant and common stock Issued for consulting 84,566
Amortization of warrants & options to employees 450,001 185,108 3,472,789
Fair value adjustment warrant liability (1,789,134)
Financial transaction expense 7,442,426
Amortization of offering cost 252,277
Changes in operating assets and liabilities:
Accounts receivable 12,517 -
Prepaid expenses/Emp. receivable (14,841) 30,545 (351,567)
Asset held for sale 627,868 - 284,020
Accounts payable 114,429 (98,463) 474,417
Accrued salaries 132,460 (51,438) 241,452
Accrued other liabilities 7,370 215,620 557,051
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Net Cash used in operating activities (378,942) (1,164,743) (16,732,623)
--------------------------------------------------------------
Cash flows from investing activities:
Construction in progress (4,043,205)
Leasehold improvements (94,679) (2,970,549)
Deposits on equipment (5,231,636)
Purchase machinery & equipment (80,350) (38,386) (8,333,759)
Patient license
Deposits (36,519)
(Purchase)sale of short-term investments 2,138,427 (5,120,934)
--------------------------------------------------------------
Net Cash provided by(used in)investing activities 2,058,077 (133,065) (25,736,602)
--------------------------------------------------------------
Cash flows from financing activities:
Capital Lease
Redeemable preferred stock 30,346,461
Senior secured debt 6,265,000
Repayment of senior secured debt
Senior secured debt offering cost (420,523)
Payment of senior secured debt (2,785,000)
Warrants, common stock and
Additional paid in capital 13,453,622
--------------------------------------------------------------
Net Cash provided by financing activities 0 0 46,859,560
--------------------------------------------------------------
Net increase in cash and cash equivalents 1,679,135 (1,297,808) 4,390,335
Beginning cash and cash equivalents 2,711,200 14,330,840
--------------------------------------------------------------
Ending cash and cash equivalents 4,390,335 13,033,032 4,390,335
==============================================================
Non-cash investing and financing activities:
Interest (Paid) Received $ 69,737 $ 130,490 $ 709,009
Income Taxes Paid -- -- --
*During 2002, the Company issued $67,526 of Convertible Promissory Notes payable for preformation funds received and expended
prior to Inception.
*The Company issued warrants to purchase 315,354 shares of common stock to the placement agent for services rendered in
connection with the fund raising effort.
*The Company issued warrants to purchase 50,000 shares of common stock for consulting services in 2004 and 100,000 shares of
common stock upon the exercise of a warrant in exchange for services rendered.
*The Company issued 1,193,500 shares of common stock upon conversion of the Convertible Promissory notes payable and accrued
interest of $135,327.
*The Company issued warrants to purchase 250,000 shares of its common stock for a modification to the technology license
agreement.
*During the quarter ended March 31, 2007, the Company issued 103,340 shares in exchange for services rendered in 2007.
*Short-term investments have been adjusted for unrealized losses of $545,297.
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
WORLD WASTE TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America.
The Company is a new enterprise in the development stage as defined by Statement
No. 7 of the Financial Accounting Standards Board, since it has not derived
substantial revenues from its activities to date.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
INTERIM FINANCIAL STATEMENTS
The accompanying consolidated financial statements include all adjustments
(consisting of only normal recurring accruals), which are, in the opinion of
management, necessary for a fair presentation. Operating results for the three
months ended March 31, 2008 are not necessarily indicative of the results to be
expected for a full year. December 31, 2007 balances were derived from audited
financial statements. The consolidated financial statements should be read in
conjunction with the Company's consolidated financial statements for the year
ended December 31, 2007.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations when incurred.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." In
accordance with SFAS No. 109, the Company records a valuation allowance against
net deferred tax assets if, based upon the available evidence, it is more likely
than not that some or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income and when temporary differences become deductible. The
Company considers, among other available information, uncertainties surrounding
the recoverability of deferred tax assets, scheduled reversals of deferred tax
liabilities, projected future taxable income, and other matters in making this
assessment.
The Company adopted FIN 48, Accounting for Uncertainty in Income Taxes - An
Interpretation of FASB Statement No. 109, on January 1, 2007. There was no
material impact on the Company's financial statements as a result of the
adoption.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased, which are not securing any corporate obligations,
to be cash equivalents.
6
SHORT TERM INVESTMENTS
The Company determines the appropriate classification of its investments at the
time of acquisition and reevaluates such determination at each balance sheet
date. All investments held at March 31, 2008 are short-term available for sale
securities. They are carried at quoted fair value, with unrealized gains and
losses reported in shareholders' equity as a component of accumulated
comprehensive income. At March 31, 2008, the Company had $5.1 million invested
at face value in auction rate securities. Due to the uncertainty in the
financial markets, auction rate securities have experienced liquidity
uncertainty. During the quarter ended March 31, 2008, the Company had all of
these securities for sale. However, the auctions failed and as of May 15, 2008
none of the securities had sold. The Company had not been required to liquidate
any of these investments for operating purposes and the failure to sell the
securities has not affected the Company's operations. The Company is working
with its investment advisor and closely monitoring the market in an effort to
reduce its risk and minimize any losses. The Company has evaluated the solvency
of the issuers of these securities as of May 15, 2008 and, as of this date, did
not believe that a further write-down or recognition of any losses other than
temporary was necessary in accordance with FSP 115-1 "The Meaning of
Other-Than-Temporary Impairment and its Application to Certain Investments." The
net unrealized loss of $545,297 recorded in shareholders' equity as of March 31,
2008 was comprised entirely of unrealized losses. Maturity dates of investments,
primarily auction rate securities, classified as available for sale securities
extend to 2050. There were no short-term securities on March 31, 2007.
CONCENTRATION OF CREDIT RISK
The Company maintains its cash balances at financial institutions. Cash balances
at the institution are insured by the Federal Deposit Insurance Corporation up
to $100,000.
FIXED ASSETS
Machinery and Equipment is stated at cost. Depreciation is computed on the
straight-line method over the estimated useful asset lives or for leasehold
improvements or equipment that was installed in the Anaheim plant, over the
remaining life of the lease, whichever is\was shorter. Due to the fact that at
the time the assets were placed into service the lease had 8 years and two
months remaining, all assets and leasehold improvements at the Anaheim facility
were being depreciated over a maximum of 8 years and two months on a straight
line basis. Maintenance and repairs were expensed as incurred. In accordance
with SFAS 144, the Company does not depreciate assets held for sale.
The assets at the Anaheim plant were comprised of two basic technologies; the
front half of the plant consisted of assets related to the Company's patented
technology related to "steam classification" and material separation and the
back half of the plant consisted of assets related to screening and cleaning of
the cellulose biomass material to prepare it for sale to paper mills. During the
plant start up phase, we confronted several issues, including an unexpected high
level of biological oxygen demand from organic waste in the wastewater from the
pulp screening and cleaning process. The Company decided not to make the capital
improvements necessary to the Anaheim plant's wetlap process, or "back half"
which the Company considered necessary in order to recover the carrying amount
of the wetlap plant assets through projected future undiscounted cash flow from
its operation. Consequently, the Company recorded a charge of $9,737,344 in 2006
which represented the net carrying value of the wetlap process (or "back half")
equipment.
The Company did not record an impairment charge for the steam classification
equipment (or "front half") of the plant at that time because the Company
intended to use that equipment in research and development activities as part of
its development of alternative back-end processes such as, but not limited to,
gasification and acid hydrolysis.
During the third quarter of 2007, the Company determined that any ongoing
research and development work, if necessary would more efficiently be carried
out at the location of Applied Power Concepts, the Company's research and
development partner, or at some other outsourced research and development
partner. Consequently, in order to reduce costs and focus management attention
and cash resources on the Company's renewable energy process, the Company
initiated conversations with Taormina regarding termination of the lease of the
Anaheim Facility and the cancellation of the associated recycling agreement. On
October 29, 2007, Taormina terminated the lease and the recycling agreement,
effective as of October 31, 2007. Consequently, the Company recorded a charge of
$8,454,106 in the third quarter of 2007 which represented the net carrying value
of the assets at the Anaheim plant, net of estimated fair value of the equipment
and estimated costs of the equipment removal and scrap. The estimated net
carrying value was reevaluated at March 31, 2008 and no adjustment was
considered necessary. As of May 15, 2008, all of the Anaheim assets had been
sold or scrapped. The proceeds from the sale of the equipment from the facility
has been credited against the Assets Held For Sale account.
The Company capitalizes leases in accordance with FASB 13, "Accounting for
Leases."
7
INTANGIBLES
Intangible assets are recorded at cost. On May 1, 2006, pursuant to a Patent
Assignment Agreement and a Patent Assignment, both dated as of May 1, 2007 (the
"Patent Assignment Agreement and a Patent Assignment"), we completed the
purchase of all right, title and interest in United States Patent No. 6,306,248
(the "Patent") and related intellectual property, subject to existing licenses,
from the University of Alabama in Huntsville for $100,000 and 167,000 shares of
our unregistered common stock valued at approximately $698,000, based on the
market price of the stock on the date issued, May 1, 2006.
During the fourth quarter of 2007, we determined that we would not use the
patented technology in our future facilities and consequently ceased
amortization of the patent and moved the unamortized intangible assets to assets
held for sale and stated at its book value, which was lower of fair value less
costs to sell or carrying value, in accordance with SFAS 144. In February of
2008, we entered into an agreement to, among other things, sell the patent and
all of its associated rights. As of May 15, 2008, the sale of the patent
pursuant to the agreement had not been consummated. The Company still believes a
sale will be completed within one year, as prescribed by the requirements in
SFAS 144, and therefore the Company has concluded that the "held for sale"
classification is appropriate.
REDEEMABLE CONVERTIBLE PREFERRED STOCK
Convertible Preferred Stock which may be redeemable for cash at the
determination of the holder is classified as mezzanine equity, in accordance
with FAS 150 "Accounting for Certain Financial Instruments with Characteristics
of Both Debt and Equity," EITF Topic D 98 and ASR 268, and is shown net of
discounts for offering costs, warrant values and beneficial conversion features.
STOCK-BASED COMPENSATION
As of March 31, 2008, the Company had two share-based compensation plans, which
are described below. The compensation cost that has been charged against income
for the plans was $450,001 and $185,108 for the quarters ended March 31, 2008
and March 31, 2007, respectively. Because the Company is in a net loss position,
no income tax benefit has been recognized in the income statement for
share-based compensation arrangements. As of March 31, 2008 and 2007, no
share-based compensation cost had been capitalized as part of inventory or fixed
assets.
The Company's 2004 Incentive Stock Option Plan (the 2004 Plan), which is
shareholder-approved, provides for the issuance by the Company of a total of up
to 2.0 million shares of common stock and options to acquire common stock to the
Company's employees, directors and consultants. The Company granted options to
acquire 475,000 shares under this Plan during the year ended December 31, 2007
to employees, members of the board of directors and consultants. At March 31,
2008, there were 1,812,000 options outstanding under the 2004 Plan.
In May of 2007 the board of directors approved the Company's 2007 Incentive
Stock Plan (the 2007 Plan), which is not shareholder-approved. The 2007 plan
provides for the issuance by the Company of a total of up to 6.0 million shares
of common stock and options to acquire common stock to the Company's employees,
directors and consultants. The Company granted options to acquire 2,856,000
shares during the year ended December 31, 2007 to employees, members of the
board of directors and consultants. During the quarter ended March 31, 2008 the
Company granted options to acquire 1,575,000 shares to employees and members of
the board of directors. At March 31, 2008 all such options remained outstanding.
In November of 2007 the board of directors approved the extension of the period
of time in which an optionee has to exercise vested options after termination of
employment from three months to three years. The Company's calculation of the
incremental expense resulting from this change in accordance with SFAS 123R
paragraph 51 was approximately $70,000.
The Company believes that such awards better align the interests of its
employees with those of its shareholders. Option awards are generally granted
with an exercise price equal to the market price of the Company's stock at the
date of grant; those option awards generally vest based on 2 to 4 years of
continuous service and have 10-year contractual terms. Certain option awards
provide for accelerated vesting if there is a change in control (as defined in
each Plan).
8
The fair value of each option award is estimated on the date of grant using the
Black-Scholes option valuation model that uses the assumptions noted in the
table below. Expected volatilities are based on the historical volatility of the
Company's common stock from August 24, 2004 through the date of the respective
grant. The Company uses historical data to estimate option exercise and employee
terminations within the valuation model. The expected term of options granted
was estimated using the simple method which the Company believes provides a
reasonable estimation of the period of time that options granted are expected to
be outstanding. The risk-free rate for periods within the contractual life of
the option is based on the LIBOR rate at the time of grant.
QUARTER ENDED YEAR ENDED
MARCH 31, 2008 DECEMBER 31, 2007
------------------- ------------------
Expected volatility 91.19 % 81.2 %
Expected dividends 0 % 0 %
Expected term (in years) 5.15 - 9.14 5.52 - 9.38
Risk-free rate 2.49 - 3.29% 3.52 - 3.97%
In an effort to provide certain employees and consultants with an incentive to
remain committed to the Company's business while it is evaluating its strategic
alternatives (as described below), on February 27, 2008, the Company's Board of
Directors granted an option to acquire up to 300,000 shares of its common stock
to John Pimentel, the Company's Chief Executive Officer, and an option to
acquire up to 75,000 shares of its common stock to David Rane, the Company's
former Chief Financial Officer (currently serving in a consulting capacity), in
each case pursuant to the Company's 2007 Plan. Each option has an exercise price
equal to $0.155 per share (the closing price of the Company's common stock on
the date of grant) and vests in 12 equal monthly installments commencing as of
March 27, 2008.
On February 27, 2008, the Company also announced that it has formed a Special
Committee of its Board of Directors to evaluate the Company's strategic
alternatives, and that the Special Committee plans to retain a financial advisor
to assist in this process. These alternatives may include, but are not limited
to, a sale or merger of the Company and/or a restructuring.
As compensation for serving on the Special Committee, each of the members
thereof is entitled to receive $5,000 per month for up to 6 months and was
granted an option to acquire up to 300,000, or a total of 1,200,000, shares of
common stock pursuant to the Company's 2007 Plan. Each option has an exercise
price equal to $0.155 per share (the closing price of WWT's common stock on the
date of grant) and vests in six equal monthly installments commencing as of
March 27, 2008.
EARNINGS PER SHARE
The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (SFAS No. 128). SFAS No. 128 provides for the calculation
of basic and diluted earnings per share.
Basic earnings per share includes no dilution and is computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution of securities that could share in the earnings of an entity, such as
stock options, warrants or convertible securities. Due to their anti-dilutive
effect, common stock equivalents of 30,238,926, consisting of employee options
of 6,418,000, non employment warrants of 6,829,827, Preferred Series A of
6,130,726 and Preferred Series B of 10,860,373, were not included in the
calculation of diluted earnings per share at March 31, 2008. Common stock
equivalents of 25,981,223, consisting of employee options of 1,987,000, non
employment warrants of 7,003,147, Preferred Series A of 5,663,842 and Preferred
Series B of 11,327,234, were not included in the calculation of diluted earnings
per share at March 31, 2007.
9
NOTE 2. GOING CONCERN
The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company had a net loss for
the quarter ended March 31, 2008 of $4,222,840 and an accumulated deficit
attributable to common shareholders of $74,223,123 at March 31, 2008. The
Company expects to incur substantial additional losses and costs and capital
expenditures before it can operate profitably. These issues raise substantial
doubt about the Company's ability to continue as a going concern. The ability to
operate profitably is subject to, among other things, developing products. The
Company's ability to accomplish this is dependent on successful research and
development, engineering and the obtaining additional funding. If the Company is
unsuccessful, it may be unable to continue as a going concern for a reasonable
period of time.
There can be no assurance that the Company's research and development and
engineering activities or any future efforts to raise additional debt and/or
equity financing will be successful. The consolidated financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
In addition to looking for traditional capital, the Company is looking for a
joint venture partner to assist in the development of its gasification strategy
and is also evaluating strategic alternatives, such as a merger or acquisition,
to help generate additional financing. In this regard, on May 19, 2008, the
Company entered into a definitive agreement to merge with Vertex Energy, Inc.
There can be no assurance that the transaction will be completed, and the
Company's continuation as a going concern remains dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis, to
obtain additional financing, and ultimately to attain successful operations.
NOTE 3. LICENSE AGREEMENT
On June 21, 2002, the Company entered into a U.S. technology sub-license
agreement with Bio-Products International, Inc. (BPI), an Alabama corporation,
with respect to certain intellectual property and patented methods and
processes. This agreement was amended on June 21, 2004 and again on August 19,
2006. The technology was designed to provide for the processing and separation
of material contained in Municipal Solid Waste (MSW).Through April 30, 2006, the
University of Alabama in Huntsville ("UAH") owned the patent for this
technology. On May 1, 2006, the Company acquired the patent from UAH for
$100,000 and 167,000 shares of the Company's unregistered common stock valued at
its fair value on the date of issuance of approximately $698,000. The patent
reverts to UAH in the event of bankruptcy of the Company. This patent is
licensed to BPI. The license to the patent in the United States was assigned to
the Company.
For the sub-license, the Company agreed to pay a one-time fee of $350,000,
payable in several installments. The Company recorded an intangible asset of
$350,000 at December 31, 2003 and recorded a payable for the outstanding balance
of $167,500 at December 31, 2003. The final installment of $167,500 was paid in
August 2004, two years after the signing of the agreement. The license was being
amortized over the remaining life of the license beginning when the Company's
plant first became operational.
During June 2004, the Company issued warrants to purchase 250,000 shares of its
common stock at $1.50 per share to the owners of BPI in consideration for their
assistance in obtaining certain modifications and amendments to the license
agreement. The fair value of the warrants of $206,605 was estimated at the date
of grant using the option valuation model. The value of the warrants was
estimated using the Black-Scholes option pricing model with the following
assumptions: average risk-free interest of 3.6%; dividend yield of 0%; average
volatility factor of the expected market price of the Company's common stock of
70%; and a term of 4 years. The Company recorded the fair value of the warrants
as an increase to the capitalized license.
In April 2007, the Company filed a lawsuit against BPI alleging, among other
things, breach of contract and negligence with respect to the construction of
the vessels.
10
During the fourth quarter of 2007, the Company determined it would not use the
technologies related to the intangible assets in its future plants.
Consequently, it reclassified the unamortized intangible assets to Assets Held
for Sale and accounted for at the lower of fair value less cost to sell (net
fair value) or carrying value. In March of 2008, the Company entered into a
definitive agreement to sell the intangible Assets, settle the lawsuit with BPI
and sell a significant amount of the assets which were used in the Anaheim plant
to exploit the patent, for a total of approximately $1.9 million. Because the
carrying value is less than the net fair value no adjustment was recorded. As of
May 15, 2008, completion of a portion of this transaction is still pending.
NOTE 4. TERMINATION OF SIGNIFICANT CONTRACT
In June 2003 the Company entered into a multi-year recycle agreement with
Taormina Industries, Inc. pursuant to which, among other things, Taormina agreed
to deliver residual municipal solid waste (MSW) to the Company for processing
and the Company agreed to lease a building for the related recycling facility on
Taormina's campus in Anaheim, California (the "Anaheim Facility"). The lease for
the Anaheim Facility was entered into in July 2004. The recycling agreement, as
amended, provided that the recycling agreement would terminate automatically
upon termination of the lease.
As previously disclosed, during early 2007 the Company began using the Anaheim
Facility to conduct research and development activities related to the
production of renewable energy from MSW. Recently the Company determined that
the ongoing research and development work, if necessary, would more efficiently
be carried out at the location of Applied Power Concepts, the Company's research
and development partner, or at some other outsourced research and development
partner. Consequently, in order to reduce costs and focus management attention
and cash resources on the Company's renewable energy process, the Company
initiated conversations with Taormina regarding termination of the lease of the
Anaheim Facility and the cancellation of the associated recycling agreement. On
October 29, 2007, Taormina terminated the lease and the recycling agreement,
effective as of October 31, 2007. On November 7, 2007, Taormina filed an
unlawful detainer action in the Superior Court of the State of California,
County of Orange (the "Action") against the Company as to the Anaheim Facility.
On March 5, 2008, Taormina and the Company entered into a stipulation for entry
of judgment in the Action (the "Stipulation"). The Stipulation provides for: (a)
the cancellation and forfeiture of the lease; (b) the Company to make a payment
of $192,217.57 (the "Payment") to Taormina; and (c) the Company to remain in
possession of the Anaheim Facility until June 30, 2008. The Company has made the
Payment to Taormina and, on May 8, 2008, vacated the premises.
The non-competition and right of first refusal provisions of the recycle
agreement will survive termination of such agreement through July 25, 2014 (the
date that the lease would have expired had it not been terminated).
NOTE 5. REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Company has outstanding two classes of Preferred Stock, Series A and Series
B. Holders of both series of preferred stock are entitled to receive cumulative
dividends, payable quarterly in additional shares of preferred stock, at the
rate of 8% per annum as and if declared by the Board of Directors. The holders
of a majority of each class of preferred shares have the option to require the
Company to redeem all outstanding shares on April 28, 2010. If all of the shares
that are outstanding at March 31, 2008 were outstanding and redeemed at April
28, 2010, the liability would be approximately $47 million. In the event the
holders do not exercise this redemption right, all shares of Series A and Series
B will automatically convert into shares of Common Stock on such date.
The warrant values, offering costs and beneficial conversion features of both
classes of preferred stock have been treated as discounts to the carrying value
of the preferred stock, and are being accreted through their redemption date
under an acceptable method in accordance with EITF Topic D-98. For the Series B
Preferred Stock the Company deemed the straight-line method was a preferable
method, giving rise to a more appropriate distribution of the dividend
recognition over the accretion period. The amortization costs are treated
consistent with the treatment of preferred stock dividends.
11
THE SUMMARY FOR THE SERIES A AND B IS AS FOLLOWS:
SERIES A SERIES B TOTAL
---------------- ---------------- ----------------
Gross proceeds $ 10,189,000 $ 28,488,800 $ 38,677,800
Cumulative in kind dividends 2,838,794 4,226,737 7,065,531
Converted to common stock -- (5,564,608) (5,564,608)
---------------- ---------------- ----------------
Total outstanding 13,027,794 27,150,929 40,178,723
Unamortized beneficial conversion feature (648,309) (8,162,673) (8,810,982)
Unamortized offering costs (763,570) (2,055,087) (2,818,657)
Unamortized warrant value (648,310) (2,581,541) (3,229,851)
---------------- ---------------- ----------------
Balance at March 31, 2008 $ 10,967,605 $ 14,351,628 $ 25,319,233
================ ================ ================
NOTE 6. CAPITAL LEASE OBLIGATION
Capital Lease obligation is comprised as follows:
MARCH 31, 2008 MARCH 31, 2007
-------------------- -------------------
Capital Lease for Front End Loader, 0 monthly $ 80,350
installments were remaining at March 31, 2008,
interest was imputed at 8.25%
Less: Current portion 49,524
-------------------- -------------------
$0 $ 30,826
==================== ===================
The capital lease was terminated in March of 2008.
NOTE 7. COMMITMENT AND CONTINGENCIES
On October 29, 2007 the lease for the Company's Anaheim plant was terminated
(see Note 4). Consequently, the Company has not included the future rent
obligations in the schedule below. The Company has an operating lease obligation
for its San Diego office space through September 2008 of approximately $26,059:
Less than 1 year $26,059
more than 1 less than 3 $ --
more than 3 less than 5 $ --
after 5 years $ --
12
NOTE 8. SUBSEQUENT EVENTS
On April 14, 2008, the Company entered into a Management Services Agreement with
ReEnergy Advisory Group LLC, ("ReEnergy"), a New York-based consulting firm
founded in late 2007 to provide expertise to parties with an interest in the
renewable energy, solid waste and waste-to-energy sectors. Pursuant to this
agreement, ReEnergy agreed to be responsible for implementing all activities
relating to the Company's biomass renewable energy business. The agreement
obligates the Company to pay ReEnergy a monthly retainer of $35,000 to be
applied against fees charged by ReEnergy's principals during each month (subject
to a total monthly fee cap of $60,000). The agreement, which can be terminated
by either party on 10 days' written notice to the other party, will expire on
May 31, 2008, unless the parties mutually agree to extend the term. The Company
has informed ReEnergy that it does not plan to seek an extension of the term and
that ReEnergy should cease its work under the agreement.
As previously disclosed, in March 2008, the Company entered into an agreement
with Clean Earth Solutions, Inc. ("CES"), pursuant to which the Company agreed
(i) to sell to CES specified assets relating to the "front end" process of the
Company's Anaheim Facility for a cash payment to us of $500,000 (the "First
Closing"), (ii) to settle a dispute arising from design issues related to the
steam classification vessels that the Company had intended to use in its
operations, in exchange for a payment to the Company of $640,000 (the "Second
Closing") and (iii) to sell to CES all of the Company's intellectual property
rights in the Company's pressurized steam classification process in exchange for
a payment to the Company of $800,000 (of which $236,000 was previously paid by
CES to the Company) (the "Third Closing"). On March 7, 2008, CES paid the
Company $500,000 and the First Closing was consummated. Pursuant to this
agreement, the Second and Third Closings are to occur on such dates as are
determined by CES, provided that the Second Closing must occur no later than May
1, 2008 and the Third Closing must occur no later than June 15, 2008. In late
April 2008, CES informed the Company that it would not be able to complete the
Second Closing within the required time frame and requested an extension of the
deadline. The Company and CES are currently in discussions regarding the terms
of any such extension and, as of the date of this Report, the Second Closing had
not occurred.
On May 15, 2008, the Company, entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Vertex Energy, LP, a Texas limited partnership ("Vertex
LP"), Vertex Energy, Inc., a Nevada corporation ("Vertex Nevada"), Vertex Merger
Sub, Inc., a California corporation and wholly owned subsidiary of Vertex
Nevada, and Ben Cowart, as agent for the shareholders of Vertex Nevada (the
"Agent"). On May 19, 2008, the Company, Vertex LP, Vertex Nevada and Vertex
Merger Sub, LLC., a California limited liability company and wholly owned
subsidiary of Vertex Nevada ("Merger Sub"), entered into an Amended and Restated
Merger Agreement (as so amended and restated, the "Merger Agreement").
Vertex LP is a Texas-based privately held limited partnership controlled by the
Agent. Vertex Nevada will acquire the Company following the transfer (the
"Transfer") to Vertex Nevada of certain of the assets of Vertex LP related to
the divisions of Vertex LP engaged in the following businesses: (i) aggregating
waste oil from third-party collectors and managing the transportation logistics
of delivering the waste oil to a refining facility; (ii) aggregating petroleum
waste streams from third-party collectors and managing the transportation
logistics of delivering the waste petroleum products; and (iii) implementing
certain proprietary re-refining technology being designed to convert aggregated
waste oil to higher value products, such as marine diesel oil and vacuum-gas
oil.
Immediately following the Merger and assuming no appraisal rights are exercised,
the existing partners of Vertex LP will hold approximately 45% of the
outstanding shares of Vertex Nevada (including 5% to be held by advisors and
consultants to Vertex LP, including Cagan McAfee Capital Partners, a firm at
which John Pimentel, the Company's chief executive officer, is associated), the
existing holders of the Company's common stock will hold approximately 20% of
the outstanding shares of Vertex Nevada, the existing holders of the Company's
Series A Preferred Stock will hold approximately 14% of the outstanding shares
of Vertex Nevada, and the existing holders of the Company's Series B Preferred
Stock will hold approximately 21% of the outstanding shares of Vertex Nevada (in
each case, treating as outstanding, shares issuable upon the exercise of
warrants to acquire shares of common stock at a nominal exercise price).
Immediately prior to the Merger, the Company will be required to make a cash
payment to the existing Vertex shareholders of $4.4 million.
The Merger Agreement contains customary and mutual representations, warranties,
covenants and indemnification provisions. Either party will have the right to
terminate the Merger Agreement if the Merger has not closed by December 31,
2008.
13
The obligation of each party to consummate the Merger is subject to the approval
of the Merger by the shareholders of the Company in accordance with California
law and the Company's charter documents, the exemption of the issuance of the
shares of Vertex Nevada to the Company's shareholders from the registration
requirements of the Securities Act of 1933, as amended (or the inclusion of such
shares on a registration statement declared effective by the SEC), and the
satisfaction or waiver (where permissible) of other customary closing conditions
set forth in the Merger Agreement.
The obligation of the Company to consummate the Merger is subject to the
satisfaction or waiver (where permissible) of the following additional closing
conditions:
o the Company shall have received a third-party opinion passing
on the fairness of the Merger to the Company and to each class
of the Company's shareholders;
o receipt by the Company of audited financial statements of
Vertex Nevada (which include the historical financial results
of the Vertex LP businesses being transferred to Vertex
Nevada) in form and substance satisfactory to the Company; and
o satisfactory completion by the Company of its due diligence
investigation of Vertex LP.
The obligation of Vertex to consummate the Merger is subject to the satisfaction
or waiver (where permissible) of the following additional closing conditions:
o the Company has no liabilities (except for up to $2.4 million
of permitted indebtedness);
o after taking into account the $4.4 million payment by the
Company to the Vertex shareholders, the Company has at least
$5.0 million of cash on hand (inclusive of the proceeds of the
up to $2.4 million of permitted indebtedness); and
o the Agent and certain members of his immediate family have
been removed as personal guarantors on certain indebtedness of
Vertex LP to be assumed by Vertex Nevada.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The following discussion, as well as information contained elsewhere in
this report, contain "forward-looking statements." These statements include
statements regarding the intent, belief or current expectations of us, our
directors or our officers with respect to, among other things: anticipated
financial or operating results, financial projections, business prospects,
future product performance and other matters that are not historical facts. The
success of our business operations is dependent on factors such as the impact of
competitive products, product development, commercialization and technology
difficulties, the results of financing efforts and the effectiveness of our
marketing strategies, and general competitive and economic conditions.
Forward-looking statements are not guarantees of future performance and
involve risks and uncertainties. Actual results may differ materially from those
projected in the forward-looking statements as a result of various factors,
including those described under "Item 1A - Risk Factors" in our annual report on
Form 10K for the year ended December 31, 2007.
COMPANY OVERVIEW
We are a development stage company formed to develop, design, build, own and
operate facilities which employ systems and technologies designed to profitably
convert municipal solid waste (MSW) and other waste streams, such as wood waste,
into usable commodities and products. These products are expected to include
renewable energy, recyclable commodities, fuel alcohols, and bio-fuels. We plan
to concentrate our efforts on producing renewable energy from waste materials
through the use of gasification technologies in order to meet the rapidly
growing demand for renewable power. We believe that this increased demand is
being driven, to a large extent, by the adoption of Renewable Portfolio
Standards in a number of states, which require or encourage utilities to have a
specific percentage of their electricity sales come from renewable sources.
To accelerate implementation of our renewable energy platform, we plan to pursue
the development of facilities in targeted markets where we believe we will be
able to earn a "tipping" fee for accepting wastes and a premium for the sale of
renewable energy products. In this regard, we were short-listed by two
California utilities on a total of four projects. We also plan to develop or
obtain the rights to use gasification technologies in demonstration applications
to gain operating experience with the unique aspects of gasifying biomass
derived from municipal solid waste and other waste streams, and to develop
detailed design criteria for larger-scale systems.
We anticipate that the development of projects using these technologies could
position us to generate three distinct revenue streams: (a) "tipping" fees
charged to the entities that supply us with MSW or other waste materials, (b)
recycling revenue from the sale of commodity recyclables (such as beverage
containers, aluminum, steel, plastics, and glass) that our process recovers and
which otherwise would be interred in landfills, and (c) revenue from the sale of
our end products, anticipated to be primarily renewable electricity, and
bio-fuels. We believe that our receipt of fees from waste generators or handlers
could provide us with a low cost fuel source which is an important and
beneficial characteristic of our business model.
In June 2003, we entered into a multi-year recycle agreement with Taormina
Industries, Inc., pursuant to which, among other things, Taormina agreed to
deliver MSW to us for processing and we agreed to lease a building for the
related recycling facility on Taormina's campus in Anaheim, California (the
"Anaheim Facility"). The lease for the Anaheim Facility was entered into in July
2004. The recycling agreement, as amended, provided that the recycle agreement
would terminate automatically upon termination of the lease.
15
As previously disclosed, during early 2007 we began using the Anaheim Facility
to conduct research and development activities related to the production of
renewable energy from MSW. In the third quarter of 2007, we determined that the
ongoing research and development work, if necessary, would more efficiently be
carried out at the location of Applied Power Concepts, our research and
development partner, or at some other outsourced research and development
partner. Consequently, in order to reduce costs and focus management attention
and cash resources on our renewable energy process, we initiated conversations
with Taormina regarding termination of the lease of the Anaheim Facility and the
cancellation of the associated recycle agreement. On October 29, 2007, Taormina
terminated the lease and the recycling agreement, effective as of October 31,
2007. On November 7, 2007, Taormina filed an unlawful detainer action against
us, and in March 2008, we entered into a stipulation for entry of judgment in
this action. The stipulation provided for: (a) the cancellation and forfeiture
of the lease; (b) a payment by us to Taormina of $192,217.57(which payment was
subsequently made by us); and (c) our right to remain in possession of the
Anaheim Facility until June 30, 2008. On May 8, 2008, we turned over physical
possession of the facility to Taormina and, on May 12, 2008 advised Taormina
that we had vacated and requested that Taormina dismiss the unlawful detainer
action.
In March 2008, we entered into an agreement with Clean Earth Solutions, Inc.
("CES"), pursuant to which we agreed (i) to sell to CES specified assets
relating to the "front end" process of our Anaheim Facility for a cash payment
to us of $500,000 (the "First Closing"), (ii) to settle a dispute arising from
design issues related to the steam classification vessels that we had intended
to use in our operations, in exchange for a payment to us of $640,000 (the
"Second Closing") and (iii) to sell to CES all of our intellectual property
rights in our pressurized steam classification process in exchange for a payment
to us of $800,000 (of which $236,000 was previously paid by CES to us) (the
"Third Closing"). On March 7, 2008, CES paid $500,000 to us, and the First
Closing was consummated. Pursuant to this agreement, the Second and Third
Closings are to occur on such dates as are determined by CES, provided that the
Second Closing must occur no later than May 1, 2008 and the Third Closing must
occur no later than June 15, 2008. In late April 2008, CES informed us that it
would not be able to complete the Second Closing within the required time frame
and requested an extension of the deadline. We are currently in discussions with
CES regarding the terms of any such extension and, as of the date of this
Report, the Second Closing had not occurred. In the event that CES is unable to
comply with its commitments as set forth in this Agreement, taking into account
any agreed-upon extensions, we would continue to pursue our rights with respect
to the dispute (unless it is otherwise resolved) and we would seek an
alternative buyer or licensee for our intellectual property rights, in addition
to any pursuing any other remedies we might be entitled to from CES.
In addition to pursuing our current business strategy, we have also been in the
process of evaluating strategic alternatives that may include, but are not
limited to, a sale or merger of our company (including with companies in
unrelated businesses) and/or a restructuring. In this regard, in February 2008
the Company formed a special committee of the Board. On May 19, 2008, the
Company entered into a definitive agreement to merge with Vertex Energy, Inc., a
Texas- based privately held company (the "Proposed Merger"). See note 8 to the
Company's unaudited consolidated financial statements.
MARKET OVERVIEW
We believe there is a large and growing market for the production and sale of
renewable energy in the United States, driven by: (1) high costs of hydrocarbon
based fuels; (2) high political and economic costs to obtain fossil fuels from
unstable foreign countries; (3) harder to reach (therefore more expensive)
locations for exploration and development of new oil and gas reserves; (4)
increasing competition from developing countries such as China and India for
finite amounts of hydrocarbon based energy; and (5) a growing public awareness
of the environmental damages brought on by increasing levels of greenhouse
gasses in the atmosphere created by carbon-based energy fuels which may be
contributing to global warming. These factors have led to state and federal
legislation. For example, the California Renewable Portfolio Standard
established in 2002 requires certain retail electricity sellers to have 20% of
their retail sales come from renewable energy sources by the year 2010.
Twenty-two other states have some form of Renewable Portfolio Standard and
popular support for such requirements appears to be growing.
16
ELECTRICITY OPPORTUNITIES
We plan to focus our efforts on the utilization of one or more gasification
technologies that will generate various renewable energy products from MSW and
other waste streams. We plan to seek to enter into strategic relationships with
companies that have developed gasification technologies, and to further
investigate the commercialization of our own technology. A process which we
believe has significant potential for successful commercialization involves
using a gasification technology to produce a synthetic gas (or "syngas") from
the cellulose biomass fraction of MSW derived from a materials' separation and
classification process. Wood waste, sewage sludge and other commercial waste
streams are also potential feedstocks. The resulting syngas would be used to
fire a boiler driving a steam turbine. We also believe that after a gas clean-up
process it may be possible to put the syngas directly into a gas-fired turbine.
In either case, we believe the process has the potential to produce a
significant amount of renewable electricity for sale to utilities.
We were short-listed in the selection process to provide renewable electric
power to two major California utilities for a total of four projects. Each of
the projects is expected to process residual MSW destined for landfills
resulting in the production of greater than 20 megawatts of electricity for sale
to utilities. We continue to work through the process of negotiating power
purchase agreements with respect to these projects (which are not expected to be
awarded until sometime in 2008, at the earliest.) If selected for these
projects, we would still need to raise significant additional financing and
accomplish many other tasks, including: completion of contracts for the supply
of municipal solid waste, establishment of site control, securing the necessary
permits, and designing, financing and constructing the facilities.
STRATEGY
Our goal is to develop and/or acquire full-scale commercial facilities which
profitably transform residual MSW, wood waste and other waste streams into
usable renewable energy or products, including electricity, synthetic gas and
bio-fuels.
Pursuit of this strategy entails work in the following areas:
REPLICATE AND ROLLOUT NEW FACILITIES WITH TECHNOLOGIES, PRODUCTS, AND FINANCING
TAILORED TO THE LOCATION
We anticipate using a suite of technologies, each of which would be specifically
applied on a site by site basis to profitably meet the needs of a particular
local market. We expect that these needs will change from market to market and
will be influenced by many factors, including the materials composition of
feedstock at that facility, local permitting and land use requirements, and
local political considerations. We plan to seek to develop facilities,
implementing the most profitable end product platforms on a site by site basis
in the most favorable locations within the United States. We also anticipate
exploring licensing opportunities to accelerate the rollout inside the U.S. We
plan to leverage experienced engineering and construction partners for the most
effective utilization of our resources. Also, we expect each project to operate
independently and to possibly have different financial partners and ownership
structures.
SEEK OUT POTENTIAL ACQUISITIONS WHICH STRENGTHEN OUR EFFORTS AND ACCELERATE
IMPLEMENTATION
As part of the implementation of our strategy, we may pursue acquisitions. In
general, we may seek acquisition candidates with characteristics that include:
(a) technology, strategy, or people which complement our focus, (b) projects
which will allow us to manage and control the feedstock for our renewable energy
generation facilities, (c) projects or companies which can be accelerated
through participation by us, or (d) projects or companies with established or
growing revenue and cash flow. In this regard, on May 19, 2008, we entered into
a definitive agreement to merge with Vertex LP. The consummation of this
transaction is subject to a number of closing conditions, certain of which are
outside of our control.
Our ability to implement these strategies will be dependent upon our ability to
raise significant additional capital. While the market demand for renewable
energy is high, there can be no assurance that we will be able to raise the
financing necessary to execute this business plan.
17
TRENDS IN OUR BUSINESS
The Resource Conservation and Recovery Act of 1991 requires landfills to install
expensive liners and other equipment to control leaching toxics. Due to the
increased costs and expertise required to run landfills under this Act, many
small, local landfills closed during the 1990's. Larger regional landfills were
built requiring increased logistics costs for the waste haulers.
In addition, state and federal governments have continued to increase the
pressure on the industry to improve their recycling percentages. California
currently mandates one of the highest standards in the United States by
requiring 50% of all incoming MSW to be diverted from landfills. We believe that
the trend in state law throughout the U.S. is to migrate toward this California
standard.
We expect that the resale price of our products, including renewable electricity
and bio-fuels will be tied to commodity markets. The market demand for these
materials can be volatile, which could significantly impact our results of
operations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's discussion and analysis of our financial condition and
results of operations are based on our consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires
management to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an ongoing basis, management evaluates its estimates,
including those related to impairment of long-lived assets, including finite
lived intangible assets, accrued liabilities and certain expenses. We base our
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ
materially from these estimates under different assumptions or conditions.
Our significant accounting policies are summarized in Note 1 to our
audited financial statements for the year ended December 31, 2007 and our
unaudited financial statements dated March 31, 2008. We believe the following
critical accounting policies affect our more significant judgments and estimates
used in the preparation of our consolidated financial statements:
BASIS OF PRESENTATION
The accompanying consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States of
America. The Company is a new enterprise in the development stage as defined by
Statement No. 7 of the Financial Accounting Standards Board, since it has not
derived substantial revenues from its activities to date.
INTERIM FINANCIAL STATEMENTS
The accompanying consolidated financial statements include all adjustments
(consisting of only normal recurring accruals), which are, in the opinion of
management, necessary for a fair presentation. Operating results for the three
months ended March 31, 2008 are not necessarily indicative of the results to be
expected for a full year. The consolidated financial statements should be read
in conjunction with the Company's amended consolidated financial statements for
the year ended December 31, 2007.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. We used estimates to perform the
undiscounted cash flow projections used in the impairment analysis of the
Anaheim plant assets (see Fixed Assets below). We also used estimates to
determine the employee stock-based compensation expense.
18
SHORT TERM INVESTMENTS
The Company determines the appropriate classification of its investments
at the time of acquisition and reevaluates such determination at each balance
sheet date. All investments held at March 31, 2008 are short-term available for
sale securities. They are carried at quoted fair value, with unrealized gains
and losses reported in shareholders' equity as a component of accumulated
comprehensive income.
FIXED ASSETS
Machinery and equipment is stated at cost. Depreciation is computed on the
straight-line method over the estimated useful asset lives or for leasehold
improvements or equipment installed in our Anaheim plant (no longer being used),
over the remaining life of the lease, whichever is shorter.
We completed the construction of our initial plant in Anaheim, California
early in the second quarter of 2006. We capitalized all costs directly
associated with developing the plant, including interest and labor, throughout
the construction period. We placed into service and began depreciating the
assets related to this facility in the second quarter of 2006.
Our policy regarding fixed assets is to review such fixed assets for
impairment whenever events or changes in circumstances indicate that their
carrying amount may not be recoverable. If the review indicates that intangible
assets are not recoverable (i.e. the carrying amounts are more than the future
projected undiscounted cash flows), their carrying amounts would be reduced to
fair value.
The assets at the Anaheim plant were comprised of two basic technologies;
the "front-half" of the plant consisted of assets related to our patented
technology related to "steam classification" and material separation and the
"back-half" of the plant consisted of assets related to screening and cleaning
of the cellulose biomass material to prepare it for sale to paper mills. During
the plant start up phase, we became aware of several issues, including the
creation of an unexpectedly high level of biological oxygen demand (BOD) from
organic wastes in the wastewater from the pulp screening and cleaning process,
and design issues related to the steam classification vessels. We decided not to
make the capital improvements necessary to the Anaheim plant's wetlap process,
or "back half," which we considered necessary in order to recover the carrying
amount of the wetlap plant assets through projected future undiscounted cash
flow from its operation. Consequently, in 2006, we recorded a charge of
$9,737,344 which represented the net carrying value of the wetlap process or
back half equipment. The charge was equal to the carry cost of the assets of the
wetlap process, net of accumulated depreciation. We did not record an impairment
charge for the steam classification equipment, or "front-half" of the plant, at
that time because we intended to use that equipment in research and development
activities as part of our development of alternative back end processes such as,
but not limited to, gasification and acid hydrolysis.
During the third quarter of 2007, we determined that our ongoing research
and development work, if necessary, would more efficiently be carried out at the
location of Applied Power Concepts, our research and development partner, or at
some other outsourced research and development partner. Consequently, in order
to reduce costs and focus management attention and cash resources on our
renewable energy process, we initiated conversations with Taormina regarding
termination of the lease of the Anaheim Facility and the cancellation of the
associated recycling agreement. On October 29, 2007, Taormina terminated the
lease and the recycling agreement, effective as of October 31, 2007.
Consequently, we recorded a charge of $8,454,106 in the third quarter of 2007
which represented the net carrying value of the assets at the Anaheim plant, net
of estimated fair value of the equipment and estimated costs of the equipment
removal and scrap. The estimated carrying value was evaluated and it was
determined no adjustment was required at March 31, 2007. In February 2008, we
sold the assets related to the "front-end" process of the facility. The proceeds
from the sale of equipment from the facility have been credit against the Assets
Held For Sale account. As of May 15, 2008, all assets related to the Anaheim
facility other than intellectual property rights had been sold or scrapped.
We capitalize leases in accordance with FASB 13.
19
INTANGIBLES
Intangible assets are recorded at cost. On May 1, 2006, pursuant to a
Patent Assignment Agreement and a Patent Assignment, both dated as of May 1,
2007 (the "Patent Assignment Agreement and a Patent Assignment"), we completed
the purchase of all right, title and interest in United States Patent No.
6,306,248 (the "Patent") and related intellectual property, subject to existing
licenses, from the University of Alabama in Huntsville for $100,000 and 167,000
shares of our unregistered common stock valued at approximately $698,000, based
on the market price of the stock on the date issued, May 1, 2006.
During the fourth quarter of 2007, we determined that we would not use the
patented technology in our future facilities and consequently ceased
amortization of the patent and moved the unamortized intangible assets to assets
held for sale and stated at its book value, which was lower of fair value less
costs to sell in accordance with SFAS 144. In February of 2008, we entered into
an agreement to, among other things, sell the patent and all of its associated
rights. Upon completion of the sale, the Company is expected to record a gain.
As of May 15, 2008, this sale had not been completed.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations when incurred.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."
In accordance with SFAS No. 109, the Company records a valuation allowance
against net deferred tax assets if, based upon the available evidence, it is
more likely than not that some or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income and when temporary differences become
deductible. The Company considers, among other available information,
uncertainties surrounding the recoverability of deferred tax assets, scheduled
reversals of deferred tax liabilities, projected future taxable income, and
other matters in making this assessment.
The Company adopted FIN 48 on January 1, 2007. There was no material
impact on the Company's financial statements as a result of this adoption.
REDEEMABLE CONVERTIBLE PREFERRED STOCK
Convertible preferred stock which may be redeemable for cash at the
determination of the holder is classified as mezzanine equity, in accordance
with FAS 150, EITF Topic D 98 and ASR 268, and is shown net of discounts for
offering costs, warrant values and beneficial conversion features.
STOCK-BASED COMPENSATION
During the fourth quarter of 2004, we adopted SFAS No. 123 entitled,
"Accounting for Stock-Based Compensation" retroactively to our inception.
Accordingly, we have expensed the compensation cost for the options and warrants
issued based on their fair value at their grant dates. During the quarter ended
March 31, 2006, we adopted SFAS No. 123R, "Share Based Payments."
20
RESULTS OF OPERATIONS
COMPARISON OF QUARTERS ENDED MARCH 31, 2008 AND 2007
REVENUES AND COST OF GOODS SOLD
During the plant start-up phase of our Anaheim plant, we confronted
several issues, including an unexpected high level of biological oxygen demand
from organic waste in the wastewater from the pulp screening and cleaning
process. In January 2007, we decided not to make the capital improvements
necessary to the Anaheim plant's wetlap process which the Company considered
necessary to operate the plant with the expectation of being profitable.
Therefore, beginning in January 2007, we began to operate the plant only as part
of research and development projects including but not limited to the
development of alternative back-end processes such as gasification and acid
hydrolysis for the production of ethanol. Consequently, we have not recognized
any revenue since. We essentially ceased utilizing the plant for any purpose in
the third quarter of 2007 and vacated the plant completely in May 2008.
EXPENSES
Research and development expense decreased to $16,000 during the quarter
ended March 31, 2008 from approximately $919,000 during the comparable quarter
in 2007, a decrease of $903,000. The decrease was primarily due to the closure
of the Anaheim plant. The research and development expense of $16,000 was for
research and development activities related to the pursuit of our gasification
strategy.
General and administrative expense increased to $1,777,000 during the
quarter ended, March 31, 2008 from $983,000 for the comparable period in 2007.
This $793,000 increase was primarily the result of an increase in employee stock
option expense of approximately $265,000, payroll expenses of $76,000 related to
severance incurred partially offset by a decrease in payroll expenses due to a
decrease in headcount, and professional and consulting fees of approximately
$435,000 primarily related to reviewing strategic alternatives and pursuing new
business opportunities. General and administrative expense for the quarter ended
March 31,2008 was comprised primarily of employee option expense of
approximately $450,000, compensation expense of approximately $495,000,
including severance of $238,538, business development expenses of approximately
$400,000, professional fees of approximately $289,000, and other expenses of
$143,000.
The Company's "cash burn" rate (net loss before depreciation, stock
compensation and accrued severance expense) decreased during the quarter ended
March 31, 2008 to approximately $1,057,000 from approximately $1,274,000 for the
quarter ended March 31, 2007.
Interest income of $69,737 and $130,490 for the first quarters of 2008 and
2007, respectively, represents the interest earned on the cash received for the
issuance of the Series B Preferred Stock in May of 2006.
Preferred stock dividend and amortization of beneficial conversion
feature, warrant discount and offering costs decreased to $2,524,227 in the
quarter ended March 31, 2008 from $3,703,640 during the comparable period in
2007 due to the amortization of beneficial conversion feature.
21
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2008, we had cash and cash equivalents on hand of
approximately $4.4 million and short-term investments of approximately $4.6
million, representing a decrease of $839,000 from our December 31, 2007 cash and
cash equivalents and short-term investments of totaling approximately $9.8
million.
During the quarter ended March 31, 2008, net cash used for operating
activities was approximately $379,000. The use of cash was primarily for general
and administrative expenses. During the quarter, approximately $80,000 was used
for the buyout of the Company's capital lease.
Cash and cash equivalents and short-term investments were also negatively
impacted during the quarter end March 31, 2008 due to the write-down of the
Company's auction rate securities (short-term investments) by $379,353, as
described below.
In March 2008, we received a payment from CES of $676,000 upon the sale of
assets relating to the front-end process of our facility. This payment was
accounted for as a reduction of the Company's assets held for sale. CES is
obligated to make additional payments to us aggregating $1.2 million in 2008
pursuant to our sale of certain intellectual property rights and the settlement
of an on going action with BPI. As described above, CES has requested additional
time in which to make the required additional payments, and we are in
discussions with CES regarding a possible extension. The failure of CES to make
the required payments would have a material adverse affect on our liquidity.
Approximately $4.6 million of our securities are in the form of auction
rate securities. These securities are stated at the lower of cost or market. The
face value of these securities is approximately $5.1 million. The securities
have been for sale during the quarter ended March 31, 2008. However, due to the
failure of the auctions, no securities have sold. The failure of the auctions
has not affected the Company's ability to meet its obligations in the normal
course of business. Management has evaluated the solvency of the issuers of
these securities and does not believe an additional reserve is necessary.
In order to close the Proposed Merger, the Company will need to have a
minimum of $9.4 million on hand, after satisfying all of its liabilities (other
than up to $2.4 million of permitted indebtedness). Assuming the Company is able
to secure the permitted indebtedness, and based on the Company's current "burn
rate" and estimate of transaction costs to close the Proposed Merger, the
Company believes it will have sufficient funds on hand. However, if the
transaction takes longer than anticipated to close, if the Company is unable to
liquidate its auction rate securities at or near their face amount, if the
Company is unable to secure the necessary borrowing, or if the transaction costs
exceed the Company's estimates, the Company might not have sufficient cash on
hand to satisfy this condition to the closing of the Proposed Merger, in which
case, absent a waiver of this closing condition by the other party to the
transaction, the Proposed Merger would not be consummated.
As of March 31, 2008, the Company had no long-term debt obligations,
capital lease obligations, operating lease obligations, purchase obligations, or
other similar long-term liabilities. The capital lease outstanding at December
31, 2007 was paid off in March 2008.
The holders of our preferred stock have the right to require our company
to redeem their shares on April 10, 2010, at a price equal to the original
issuance price (with accrued but unpaid dividends being treated as outstanding
for purposes of calculating the total redemption price), or a total of
approximately $47.3 million (assuming none of such shares of preferred stock are
converted to common stock prior to any such redemption). In the event that the
Proposed Merger with Vertex does not close, we will need to raise significant
additional capital or restructure the terms of our preferred stock in order to
meet this redemption obligation if and when it become due.
22
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the SEC and that such information is accumulated and communicated to the
Company's management, including the Chief Executive Officer and the Acting Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. As required by SEC Rule 13a-15(b), the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Chief Executive Officer and the Acting Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures as of the end of the period covered by this
report.
Based on the foregoing, the Company's Chief Executive Officer and Acting
Chief Financial Officer concluded that, as of the end of the period covered by
this report, the Company's disclosure controls and procedures were effective in
ensuring that the information required to be disclosed in reports that the
Company files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms and that such information is accumulated and communicated to the Company's
management, including the Chief Executive Officer and the Acting Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure.
There was no change in the Company's internal control over financial
reporting during the three months ended March 31, 2008 that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
23
PART II - OTHER INFORMATION
ITEM 1 - LITIGATION
As previously disclosed, during early 2007 we began using our Anaheim
Facility to conduct research and development activities related to the
production of renewable energy from MSW. In the third quarter of 2007, we
determined that the ongoing research and development work would more efficiently
be carried out at the location of Applied Power Concepts, our research and
development partner, or at some other outsourced research and development
partner. Consequently, in order to reduce costs and focus management attention
and cash resources on our renewable energy process, we initiated conversations
with Taormina regarding termination of the lease of the Anaheim Facility and the
cancellation of the associated recycle agreement. On October 29, 2007, Taormina
terminated the lease and the recycling agreement, effective as of October 31,
2007. On November 7, 2007, Taormina filed an unlawful detainer action against
us, and in March 2008, we entered into a stipulation for entry of judgment in
this action. The stipulation provided for: (a) the cancellation and forfeiture
of the lease; (b) a payment by us to Taormina of $192,217.57 (which payment was
subsequently made by us); and (c) our right to remain in possession of the
Anaheim Facility until June 30, 2008..
Pursuant to the Stipulation, we gave notice to Taormina of our intention
to vacate the premises on May 15, 2008. We engaged in discussions with Taormina
concerning the alterations and utility installations to be removed from the
premises prior to the return of the premises to Taormina. In connection with
those discussions, we entered into a letter agreement with Taormina concerning
the South Yard of the property, which letter agreement provided that we would
have no further obligation with respect to the turnover condition of the South
Yard, in exchange for our payment to Taormina of $29,096.09 and the release of
our rights to a refund of $30,903.91 of pre-paid rent. We made the $29,096.09
payment, and, on May 8, 2008,we turned over physical possession of the property
to Taormina. On May 12, 2008, we advised Taorimina that we had vacated the
property, and requested that Taormina dismiss the unlawful detainer action. The
matter is set for an order to show cause regarding dismissal in August 2008.
ITEM 1A - RISK FACTORS
There have not been any changes in the risk factors previously disclosed
in Form 10K for the year ended December 31, 2007.
ITEM 6. EXHIBITS
Exhibits
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act.
31.2 Certification of Acting Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act.
32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act
32.2 Certification of Acting Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act
10.1 Asset Purchase Agreement dated as of March 7, 2008 by and between Clear
Earth Solutions, Inc. and World Waste Technologies, Inc. (filed as
Exhibit 10.1 to the Company's Current Report on Form 8-K dated March
13, 2008.
10.2 Separation Agreement and General Release dated as of February 1, 2008,
between World Waste Technologies, Inc. and David Rane (filed as Exhibit
10.1 to the Company's Current Report on Form 8-K dated February 6,
2008.
10.3 Consulting Agreement dated as of February 4, 2008, between World Waste
Technologies, Inc. and Adam Shore (filed as Exhibit 10.2 to the
Company's Current Report on Form 8-K dated February 6, 2008.
10.4 Amended and Restated Agreement and Plan of Merger, dated as of May 19,
2008, by and among World Waste Technologies, Inc., Vertex Energy, LP,
Vertex Energy, Inc., Vertex Merger Sub, LLC and Ben Cowart.
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 19, 2008 WORLD WASTE TECHNOLOGIES, INC.
(Registrant)
By: /s/ David Rane
------------------------------
David Rane
Acting Chief Financial Officer
25
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act.
31.2 Certification of Acting Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act.
32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act
32.2 Certification of Acting Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act
10.1 Asset Purchase Agreement dated as of March 7, 2008 by and between Clear
Earth Solutions, Inc. and World Waste Technologies, Inc. (filed as
Exhibit 10.1 to the Company's Current Report on Form 8-K dated March
13, 2008.)
10.2 Separation Agreement and General Release dated as of February 1, 2008,
between World Waste Technologies, Inc. and David Rane (filed as Exhibit
10.1 to the Company's Current Report on Form 8-K dated February 6,
2008.)
10.3 Consulting Agreement dated as of February 4, 2008, between World Waste
Technologies, Inc. and Adam Shore (filed as Exhibit 10.2 to the
Company's Current Report on Form 8-K dated February 6, 2008.)
10.4 Amended and Restated Agreement and Plan of Merger, dated as of May 19,
2008, by and among World Waste Technologies, Inc., Vertex Energy, LP,
Vertex Energy, Inc., Vertex Merger Sub, LLC and Ben Cowart.
26