SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
(Amendment No. 1)
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CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO.: 0-50469
Date of Report: July 1, 2006
GS CLEANTECH CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 59-3764931
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(State of other jurisdiction of (IRS Employer
incorporation or organization Identification No.)
One Penn Plaza, Suite 1612, New York, NY 10119
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(Address of principal executive offices) (Zip Code)
(212) 994-5374
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(Registrant's telephone number including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
__ Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
__ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
__ Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
__ Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Amendment No. 1
This Amendment is being filed for the purpose of including the financial
statements.
ITEM 2.01 COMPLETION OF ACQUISITION OF ASSETS
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION
On July 1, 2006, Veridium Corporation acquired from its majority shareholder,
GreenShift Corporation, 100% of the outstanding capital stock of GS
EnviroServices, Inc. (f/k/a GreenWorks Corporation) and 100% of the outstanding
capital stock of GS CleanTech Ventures, Inc.
GS EnviroServices, Inc. owns an environmental engineering business called
Enviro-Sciences (of Delaware) Corporation. GS CleanTech Ventures holds equity
stakes in General Hydrogen Corporation, General Ultrasonics Corporation, Ovation
Products Corporation, and Aerogel Composite, Inc.
In exchange for the shares in GS EnviroServices and GS CleanTech Ventures,
Veridium assumed GreenShift's obligations under certain debentures in the
principal amount of $1,900,000. Veridium has also agreed to amend the Series D
Preferred Stock now held by GreenShift to increase the portion of Veridium's
equity represented by the Series D shares from 70% to 80%.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Financial Statements
Audited Financial Statements of GreenWorks Engineering Corporation
and Subsidiary as of December 31, 2005 and for the Years Ended
December 31, 2005 and 2004........................................... F-1
Pro Forma Combined Financial Statements of GS CleanTech
Corporation and Subsidiaries as of June 30, 2006 and for the Six
Months Ended June 30, 2006 and the Year Ended December 31, 2005..... F-15
Exhibits:
10-a Share Purchase Agreement dated May 25, 2006 between GreenShift Corporation
and Veridium Corporation - filed as an exhibit to the Current Report on
Form 8-K dated May 24, 2006 that was filed on June 1, 2006, and
incorporated herein by reference.
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 hereunto duly authorized.
Dated: September 5, 2006 GS CLEANTECH CORPORATION
By: /s/ Kevin Kreisler
------------------
Kevin Kreisler, Chief Executive
Officer
* * * * *
Independent Auditors' Report
To the Board of Directors and Stockholders of
Greenworks Engineering Corporation and Subsidiary
We have audited the combined balance sheets of Greenworks Engineering
Corporation and Subsidiary as of December 31, 2005, and the related combined
statements of income and retained earnings, and cash flows for the years ended
December 31, 2005 and 2004. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Greenworks Engineering
Corporation and Subsidiary as of December 31, 2005, and the combined results of
their operations and their cash flows for the years ended December 31, 2005 and
2004 in conformity with accounting principles generally accepted in the United
States of America
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As more fully discussed in
Note 1 to the financial statements, the Company has suffered recurring losses
from operations and has a working capital deficiency as of December 31, 2005.
These conditions raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey
March 10, 2006, except for Note 23 as to which the date is May 31, 2006
GREENWORKS ENGINEERING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2005
ASSETS:
Current assets:
Cash ........................................................ $ 60,073
Accounts receivable, net .................................... 590,225
Unbilled Revenues (Note 1) .................................. 560,076
Costs and estimated earnings in excess of billings
on uncompleted projects (Notes 1 & 12 ) .................... 20,035
Prepaid expenses and other current assets ................... 104,606
Assets to be disposed of (Notes 1 & 8) ..................... 75,174
-----------
Total current assets .................................... 1,410,189
Property and equipment, net (Note 3) ........................... 83,753
Other Assets:
Security and other deposits ................................. 27,126
Cost and estimated earnings in excess of billings
on uncompleted projects (Notes 1 & 12) ..................... 263,644
Property held for sale (Note 14 & 23) ...................... 59,298
-----------
Total Assets .............................................. $ 1,844,010
===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable ............................................ 887,814
Accrued salary costs ........................................ 193,254
Accrued other ............................................... 298,270
Payroll taxes payable (Note 6 & 23) ........................ 72,841
Line of Credit (Note 9) .................................... 1,196,972
Notes payable to non-affiliated parties (Note 5 ) ........... 85,375
Installment loans payable (Note 7) .......................... 48,755
Capital lease obligations (Note 16) ........................ 24,037
Deferred revenues (Note 13) ................................ 65,000
Liabilities to be disposed (Note 8) ........................ 435,817
-----------
Total current liabilities ............................ 3,308,135
Accrued employee benefits (Note 17) ......................... 41,702
Accrued other ............................................... 286,066
Convertible debenture - Parent (Note 22) .................... 57,752
Payroll taxes payable (Note 6 & 23) ......................... 181,902
Notes payable to non-affiliated parties (Note 5) ............ 175,767
Deferred revenues (Note 13) ................................. 483,165
-----------
Total liabilities: ...................................... 4,534,489
Stockholders' equity:
Common stock, $0.001 par value, 100,000,000 authorized;
1,859,800 shares issued ..................................... 18,598
Stock subscriptions receivable ............................. (1,000)
Additional paid-in capital ................................. 1,835,619
Accumulated deficit ........................................ (4,543,696)
-----------
Total stockholders' equity (impairment) ................. (2,690,479)
-----------
Total Liabilities & Stockholder's Equity $ 1,844,010
===========
The notes to the Consolidated Financial Statements are an integral
part of these statements.
GREENWORKS ENGINEERING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
12/31/05 12/31/04
---------- -----------
Revenues ....................................... $ 3,939,607 $ 2,571,845
Cost of revenues ............................ 2,258,099 1,474,871
----------- -----------
Gross profit .............................. 1,681,508 1,096,974
Selling, general & administrative expenses ..... 1,243,417 1,780,016
----------- -----------
Operating profit (loss) ........................ 438,091 (683,042)
Interest Expense ............................... (145,322) (136,694)
Gain on sale of fixed assets ................... 9,609
----------- -----------
4,845
Profit (Loss) from continuing operations ....... 302,378 (814,891)
Loss from discontinued operations .............. (69,555) (473,074)
----------- -----------
Net loss Operating Profit (Loss) before
taxes and extraordinary items ................ 232,823 (1,287,965)
Income from settlements ........................ 157,794 --
----------- -----------
Net Income (loss) before tax ................... 390,617 (1,287,965)
Provision for Federal & State Income Tax ....... --
----------- -----------
Net Income (loss) .............................. 390,617 (1,287,965)
Accumulated deficit) beginning of year ......... (4,934,313) (3,646,348)
----------- -----------
Accumulated deficit end of year ................ $ 4,543,696 $(4,934,313)
----------- -----------
The notes to the Consolidated Financial Statements are an integral
part of these statements.
GREENWORKS ENGINEERING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
12/31/05 12/31/04
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit (loss) from continuing operations .................................. $ 460,172 $(814,891)
Adjustments to reconcile net profit (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization .............................................. 81,894 116,725
Gain on sale or disposal of equipment ......................................... (9,609) (4,845)
Increase (decrease) in provision for doubtful accounts ........................ 10,000 (17,500)
(Increase) Decrease in assets:
Accounts receivable ...................................................... (220,476) 218,018
Unbilled revenues ........................................................ (388,620) (115,771)
Prepaid expenses and other current assets ............................ 81,372
Cost & estimated earnings in excess of billings on uncompleted projects 20,625 236
Security & other deposits .............................................. (265) 19,613
Increase (Decrease) in Liabilities:
Accounts payable, accrued and payroll taxes payable ................... 141,981 447,099
Accrued rent expense ...................................................... -- (9,465)
Billings in excess of costs and estimated earnings
on uncompleted projects .................................................... (83,306) 31,999
Deferred revenues
(66,923) 295,24
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Cash provided by continuing operations ........................................ 26,846 145,812
--------- ---------
Loss from discontinued operations ............................................. (69,555) (473,074)
(Increase) decrease in net assets of discontinued operations .................. (38,484) 198,955
--------- ---------
Cash used in discontinued operations .......................................... (108,039) (274,119)
--------- ---------
Net cash used in operating activities .................................... (81,193) (128,307)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property & equipment ................................. 9,609 52,483
Additions to and acquisition of property, plant and equipment .............. (9,247) (39,009)
--------- ---------
Net cash provided by investing activities ............................... 362 13,474
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from stockholders .................................................... -- 414,560
Loans to stockholders ..................................................... (1,000) --
Proceeds from installment loans ............................................ 127,327 213,908
Repayment of stockholder loans ............................................. -- (825)
Investment by parent ...................................................... -- 225,000
Loans from (to) Parent (net) .............................................. 236,677 (178,925)
Loans from non-affiliated parties .......................................... 11,190 3,388
Repayment of loans from non-affiliated parties ............................. (18,436) (100,000)
Repayment of credit line ...................................................... -- (153,028)
Repayment of installment loans and capital lease obligations ............... (214,854) (309,245)
--------- ---------
Net cash provided by financing activities ................................ 140,904 114,833
--------- ---------
Increase in cash .......................................................... 60,073 --
Cash at beginning of year ................................................. -- --
--------- ---------
Cash at end of year ....................................................... $ 60,073 $ --
========= =========
The notes to the Consolidated Financial Statements are an integral
part of these statements.
GREENWORKS ENGINEERING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
GreenWorks Engineering Corporation ("G.E.C.") is a holding company that owns
Enviro-Sciences (of Delaware), Inc. ("ESI"), a Delaware Corporation. In October
2004, G.E.C. acquired Enviro-Sciences, Inc ("ESI-NJ"), a New Jersey Corporation,
though ESI, acquiring substantially all of the assets of ESI-NJ. ESI is engaged
in the business of providing consulting, technical and engineering services to
alleviate the environmental problems of its clients. ESI's clients include
Fortune 100 and other industrial companies, commercial firms, engineering and
construction contractors, law firms, utilities, real estate developers and
government entities. G.E.C. is a wholly owned subsidiary of GreenShift
Corporation, a publicly traded company.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. All inter-company transactions and
balances have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions in
preparing financial statements. Those estimates and assumptions affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities and the reported amounts of revenues and expenses. Actual
results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Major renewals and betterments are
charged to the asset accounts; maintenance and minor repairs and replacements,
which do not improve or extend the life of the respective assets are expensed as
incurred. When properties are retired or otherwise disposed of, the asset and
accumulated depreciation accounts are adjusted accordingly, and the gain or
loss, if any, arising from their disposal, is credited or charged to earnings.
Depreciation is calculated using both straight line and accelerated methods over
the estimated useful lives of the assets.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes, as
applicable. Deferred taxes relate to the differences between financial reporting
and income tax carrying amounts of assets and liabilities. The deferred tax
assets and liabilities represent the future tax return consequences of those
differences, which will be either taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes also are recognized for
operating losses that are available to offset future federal and state income
taxes.
Through October 27, 2004, (prior to the acquisition of ESI) ESI had elected to
be taxed under the provisions of Subchapter S of the Internal Revenue Code and
State Regulations by consent of their shareholder. Under those provisions, ESI
did not pay federal and state corporate income taxes on income. Also, ESI did
not receive benefit of net operating losses. Instead, the shareholder was liable
for and received the benefit from ESI taxable income or operating loss on their
individual income tax returns.
REVENUE AND COST RECOGNITION
Revenues from fixed price projects are recognized on the
percentage-of-completion method, measured by management's estimates of the
progress made on each project. Accordingly, revenue is recognized in the ratio
that costs incurred bears to estimated total costs utilizing the most recent
estimates of costs and funding. Since many contracts extend over a long period
of time, revisions in cost and funding estimates during the progress of work
have the effect of adjusting earnings applicable in performance in prior periods
in the current period. When the current contract estimate indicates a loss, a
provision is made for the anticipated loss in the current period.
Revenues from cost-plus-fee projects (time and material jobs) are recognized at
billable hourly rates as the services are rendered.
Contract costs include all direct material and labor costs, subcontracting
costs, and those indirect costs related to contract performance, such as
supplies, tools, repairs, and depreciation costs. Selling, general and
administrative costs are charged to expenses as incurred. Provisions for
estimated losses on uncompleted contracts are made in the
GREENWORKS ENGINEERING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
REVENUE AND COST RECOGNITION (continued)
period in which such losses are determined. Changes in job performance, job
conditions, and estimated profitability, including those arising from contract
penalty provisions, and final contract settlements may result in revisions to
costs and income and are recognized in the period in which the revisions are
determined.
The asset "Costs and estimated earnings in excess of billings on uncompleted
projects" represents revenues recognized in excess of amounts billed on
fixed-price contracts. Revenues on time and material projects for services
rendered but not yet invoiced are shown as "Unbilled revenues." The liability
"Billings in excess of costs and estimated earnings on uncompleted projects"
represents billings in excess of revenues earned.
ADVERTISING
Advertising expenses are expensed as incurred and amounted to $4,350 and $655
for years ended December 31, 2005 and 2004 respectively.
LONG-LIVED ASSETS
The Company reviews for the impairment of long-lived assets whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized when estimated future
cash flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount. The Company has not identified any
such impairment losses.
GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. Although the Company earned a
profit of $ 390,617 during the year ended December 31, 2005, the Company lost $
(1,287,965) during the year ended December 31, 2004. Also, as of December 31,
2005, the Company's current liabilities from continuing operations exceeded
current assets by $1,627,303. Due to the current condition, the auditors have
issued a going concern note.
We believe that our implementation of strong cost management practices, our
increased focus on and success in business development and improved profit
margins associated with the growing consulting portion of our business will
allow us to operate profitably improve cash flow in 2006.
Management's plans to supplement cash flow from operations with loans and/or
investments from its parent corporation intended to accelerate the liquidation
of certain debts.
2. CONCENTRATIONS AND ACCOUNTS RECEIVABLE
At times through out the year the Company may have bank balances in excess of
Federal Deposit Insurance Corporation limits.
Concentration of credit risks with respect to accounts receivable is limited by
the imposition of retainers for new customers, the monitoring of credit balances
for all customers, and the withholding of data reports where payment appears in
jeopardy. An allowance for doubtful accounts of $35,000 was recorded as of
December 31, 2005.
A small number of customers will often account for a significant portion of
revenues, however, the specific customers and projects may change from year to
year. Two customers accounted for approximately 47% of the Company's revenues
(28% and 19%) for the twelve months ended December 31, 2005. Two customers
accounted for 28% of total revenue in 2004 (15% and 13%).At December 31, 2005,
four customers accounted for 55 percent of the outstanding accounts receivable
(16%, 14%, 13%, and 12% respectively).
GREENWORKS ENGINEERING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. EQUIPMENT
Major classes of equipment at December 31, 2005 are summarized below:
Useful Lives -
Years
---------------
Office and computer equipment . 3 - 7 $ 691,960
Field equipment ............... 5 - 10 314,664
Vehicles ...................... 5 102,787
Furniture and fixtures ........ 10 69,594
Leasehold improvements ........ 21 - 39 97,751
----------
1,276,756
Less: Accumulated depreciation (1,193,003)
----------
$ 83,753
==========
Depreciation and amortization expense was $ 81,894 and $ 116,725 for years ended
December 31, 2005 and 2004 respectively.
4. NOTES PAYABLE TO FORMER ESI-NJ SHAREHOLDERS
In accordance with an asset acquisition agreement entered into on June 3, 2004,
the former shareholders of ESI-NJ have agreed to convert their loans in ESI-NJ
in exchange for restricted shares of common stock of G.E.C. Any interest due on
the notes has been waived by the shareholders.
5 NOTES PAYABLE TO NON-AFFILIATED PARTIES
Notes payable to non-affiliated parties includes a loan of $125,000, which bears
interest of 3% commencing January 1, 2004. The note requires repayment of
principal and interest ($1,858) monthly commencing June 2005 through May 2008
with a final principal payment of $82,170 in June 2008. Interest in the amount
of $2,095 has been recognized for the twelve month period ended December 31,
2005.
In 2003, $225,000 of financing and $15,000 of accrued interest were provided by
an additional non-affiliated party. A promissory note was issued bearing
interest at 6% and requiring repayment of $100,000 on or before September 30,
2004. The balance of principal and interest payable were payable on or before
September 30, 2005. Subsequent to the payment of the $100,000 due September 30,
2004, there remained a balance due of $140,000. In December 2004, the
note-holder agreed to waive interest from January 2004 forward. In December
2005, the note-holder agreed to the remaining balance due of $131,420 could be
paid in consecutive monthly payments of $ 5,476 from January 2006 through
December, 2007.
Total maturities of Notes Payable to Non-Affiliated Parties are as follows:
Year ending December 31,
2006 $ 85,375
2007 $ 85,853
2008 $ 89,914
Total $261,142
GREENWORKS ENGINEERING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. FEDERAL PAYROLL TAXES PAYABLE
ESI, through its acquisition of ESI-NJ, assumed delinquent Federal 941 payroll
taxes totaling approximately $391,000 plus interest of approximately $20,000
from the first and second quarter of 2004 and the fourth quarter of 2003.
Included in these figures are liabilities associated with discontinued
operations of approximately $ 98,000 of taxes and $ 3,000 of interest. ESI
negotiated a payment plan with the IRS wherein the remaining taxes were payable
over several years based on monthly payments. As part of this negotiation, the
Company was able to obtain approval for the abatement of all penalties based on
full compliance with the terms of payment plan agreed to. The current taxes
payable represent the portion of the payment plan due within the following 12
month period, added to the current, non-delinquent taxes due. (See notes under
subsequent events).
7. INSTALLMENT LOANS
A summary of installment loans outstanding as of December 31, 2005 is as
follows:
Loans payable, secured by vehicles, construction equipment and computer equipment, 7,126
payable in monthly installments including interest at 4.8% to 9.75 %, due from
January 2006 to May 2006
Loans for financing of insurance premiums, payable in monthly
installments including interest varying from 6.95% to 8.5%, due within the next
fiscal year ........................................................................ 55,428
-------
Total .............................................................................. 62,554
Less: Balance included in liabilities of discontinued operations .................. (13,799)
-------
Loans payable - continuing operations 48,755
-------
8. DISCONTINUED OPERATIONS
During 2003, ESI-NJ discontinued the operations of its construction division.
The decision to dispose of this component was based on significant losses
incurred and a desire for a greater focus on its consulting division. Net sales
of the construction division for the twelve-month periods ended December 31,
2005 and December 31, 2004 were $ 290,098 and $ 458,285 respectively resulting
in losses from operations of $ 69,555 and $ 473,074 respectively.
Assets and Liabilities to be disposed of are comprised of the following at
December 31, 2005:
Cost and earnings in excess of billings ............................. $ 2,800
Accounts receivable ................................................. 65,558
Property and equipment (net) ........................................ 6,816
--------
$ 75,174
========
Accounts payable .................................................... $315.500
Accrued expense ..................................................... 49,844
Payroll taxes payable ............................................... 44,954
Current portion of long-term debt ................................... 13,799
Billing in excess of cost & estimated earnings on uncompleted 11,720
projects
--------
$435,817
========
GREENWORKS ENGINEERING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. LINE OF CREDIT AND OTHER DEBT FINANCINGS
Line of Credit - ESI has a credit line of $1,350,000 which bears interest at the
bank's base rate plus three-quarters of one percent. The line is secured by all
corporate assets of ESI and was subject to renewal on January 16, 2004. The line
remains orally extended since January 2004. As of December 31, 2005 there is a
balance of $ 1,196,972 drawn on the credit line.
The business loan agreement document underlying the credit line agreement has
the following required financial covenants, none of which is met as of December
31, 2005.
Tangible Net Worth - Minimum of $ 1,000,000
Net Worth Ratio - Minimum Ratio of 1.75 to 1
Working Capital - Minimum Ratio of $100,000
Current Ratio - Minimum Ratio of 1.25 to 1
Income - Minimum $ 250,000
Cash Flow Requirement - Minimum of $ 350,000
Fixed Charge Ratio - Minimum Ratio of 2 to 1
Other Ratio -Cash flow to Current maturity of LT Debt of 1.25 to 1
10. OPERATING LEASE COMMITMENTS
As part of the acquisition of ESI-NJ, the Company assumed leases on certain
office space and equipment under operating leases. In June 2004, ESI-NJ began
discussions with the managing agents for the Mt Arlington headquarters space
regarding the need to reduce the office rent expense in light of the reduced
revenue base and reduced staffing. In July, a revised lease was signed effective
August 1, 2004 through the end of the original lease term wherein ESI-NJ reduced
the space it occupied and received a corresponding reduction in the office rent
charged.
The following is a schedule of future minimum rental payments on office space
(exclusive of common area charges) required under current operating lease:
January 2006 - December 2006 82,896
January 2007 - December 2007 82,896
------------------
$165,792
Rent expense of $ 81,002 and $ 157,416 was recorded by the Company for the
year-ended December 31, 2005 and 2004 respectively. In addition to the base
rent, the Company also pays for utilities and for its share of increases in
operating costs over a base period. (See notes under subsequent events)
The following is a schedule of future minimum rental payments on operating
leases on office equipment that have initial or non-cancelable lease terms in
excess of one year as of December 31, 2005:
January 2006 - December 31, 2006 33,984
January 2007 - December 31, 2007 16,926
------------------
$ 50,910
------------------
The Company has been in negotiations with one lessor to terminate the lease
agreement signed by ESI-NJ and return all equipment in exchange for a payment of
a reduced settlement amount significantly less then the remaining stream of
lease payments due. The full remaining lease payments due, including all
payments in arrears, would be approximately $ 107,000. The Company has reached
an agreement (formally signed and executed in January 2006) wherein the Company
will pay the lessor 2 payments of $ 10,500 in February and March 2006 as
settlement of all past and future charges associated with this lease. A current
liability of $21,000 has been recorded for this lease.
The Company is also in negotiations with another lessor to terminate several
lease agreements for office equipment. All of the equipment under lease has been
returned to the lessor, in some cases prior to the expiration of the agreed
lease period. Approximately $ 30,000 is due on all operating leases with this
lessor thru the end of their respective terms. The Company is seeking to
negotiate a lower settlement amount but has recorded the full $ 30,000 under
current liabilities.
GREENWORKS ENGINEERING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OPERATING LEASE COMMITMENTS ( continued )
Further, the Company is in negotiations with this lessor to terminate a capital
lease which has an expiration date of December 2006. Again, the Company has
returned the equipment and is attempting to negotiate a settlement amount. The
payments due under the full lease agreement including those in arrears would be
approximately $25,000. The liability reflected under Capital leases payable as
of 12/31/05 includes approximately $ 24,000 (current & non-current) for this
lease based on the normal amortization of lease payments. An additional $ 5,000
has been accrued to cover the maximum payments due if no concession is received.
11. RETIREMENT PLAN
The Company has adopted a deferred compensation plan (401(k) plan) from ESI-NJ
under which eligible employees are permitted to elect the amount of their salary
deferrals, subject to certain statutory limitations. Currently, the Company
provides a 10% match on all eligible employee deferrals and at its option, may
add a profit share match. The gross 401(k) matching contribution expense (before
reductions from forfeitures) for the twelve month period ended December 31, 2005
and 2004 was $ 16,654 and $ 6,847 respectively.
12. UNCOMPLETED PROJECTS
Costs and billings on uncompleted projects as of December 31, 2005 are
summarized as follows:
Costs incurred on uncompleted projects ....................................... $ 1,994,473
Estimated earnings ( losses ) ................................................ (461,586)
-----------
Less: Billings to date ...................................................... 1,249,208
-----------
Totals .............................................................. $ 283,679
===========
Included in the accompanying balance sheets under the following captions:
Costs and estimated earnings (losses) in excess of billings on uncompleted $ 283,679
projects
-----------
Net .......................................................................... $ 283,679
===========
13. DEFERRED REVENUES
The total deferred revenues at December 31, 2005 were $548,165, of which $65,000
is shown as a current liability based on management's estimate of progress that
will be made in the next twelve months.
Deferred revenues at December 31, 2005 include $215,000 for a fixed price
project, and $333,165 for the remediation of the Northvale property (see Note
18).
14. PROPERTY HELD FOR SALE
ESI NJ purchased an industrial property in Cleveland, Ohio from its major
customer for $59,298. The site requires remediation costs before the property
can be sold. Management estimates the remediation liability to approximate the
cost of the property. As such, a remediation liability in the amount of $59,298
has been recorded and is included in "accrued other" on the balance sheet in the
accompanying financial statements. (See note under subsequent events).
15. RELATED PARTY TRANSACTIONS
As part of the acquisition of ESI-NJ, the Company acquired Northvale Properties,
Inc. ("Northvale") owned a building and land in Northvale, New Jersey, which has
an environmental contamination. Northvale was owned by ESI-NJ stockholders and
former employees.
The Northvale property was sold in 2001 for $1.8 million, of which $1.5 million
was paid at closing and applied to the amount owed to ESI-NJ. The $300,000
balance due from the buyer of the property was paid in August 2002 ($200,000)
and October 2002 ($100,000) as final payment for all remaining remediation
costs. The property may be eligible for the Brownfields rebate from the State of
New Jersey. The purchaser of the property has assigned the rights to these
rebates to the Company if in fact the property is eligible for the rebates.
However the amount and
GREENWORKS ENGINEERING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RELATED PARTY TRANSACTIONS (continued)
timing of any such rebates will depend on the ultimate use of the property.
Revenues recognized related to the Northvale project for professional services
for years ended December 31, 2005 and 2004 were $ 19,600 and $48,296
respectively.
During 2005, the Company entered into a Management Services Agreement with
GreenShift Corporation under which GreenShift agreed to provide management
assistance, financial support, and business development services. The agreement
is for a term of five years and provides for GreenShift to receive $150,000 per
year. During the year ended December 31, 2005, $75,000 of management fee expense
was incurred. In addition the company and Greenshift paid expenses on behalf of
one another. As of December 31, 2005 the remaining balance due of $57,752 was
converted into a convertible debenture. (See convertible debenture footnote)
16. CAPITAL LEASES
The Company assumed certain capital leases entered into by ESI - NJ leased
having lease expirations in various years through 2006. The assets and
liabilities under capital leases are recorded at the lower of the present value
of minimum lease payments or the fair values of the asset at the inception of
the lease. The assets are amortized over the lower of their related lease terms
or their estimated productive lives. One capital lease has not matured as of
December 31,2005 and as noted previously in Note 10 under Operating leases, the
leased equipment has been returned and negotiations are in progress to terminate
the lease based on a reduced payment of past and future lease payments due. The
asset has been fully amortized through expense based on the return of the
equipment.
17. MEDICAL BENEFITS PROGRAM
The Company self-insures a portion of their employee medical benefits. The
Company's exposure is limited on both an individual employee and aggregate
basis. Employees contribute a portion of the insurance costs and the program is
administered by a third party. Expenses for the company's portion of claims plus
insurance premiums for the years ended December 31, 2005 and 2004 were $191,520
and $245,440 net of amounts contributed by employees.
Accrued employee benefits of $41,703 at December 31, 2005, has been recorded for
the cost of the "tail" for the semi self-insured plan. This "tail" only becomes
payable when the current plan is terminated. Management has no immediate plans
to terminate the plan and therefore the liability has been recorded as
non-current.
GREENWORKS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. LEGAL MATTERS
ESI-NJ is the subject of several lawsuits, none of which the Company has assumed
responsibility for. It is, however, possible that the Company may, in certain
cases, be found to be responsible and may be required to make settlements with
the Plaintiffs.
ESI-NJ was a defendant in a lawsuit where a vendor was seeking damages for
non-payment in the amount of $251,291. This obligation was paid by the end-user,
a customer of the Company. The Company is in negotiations with the end-user to
reach a settlement on this matter. This amount is included in the $659,487
settlement discussed below. (See note under subsequent events).
ESI-NJ is a defendant in a lawsuit where a vendor is seeking payment for
trucking services in the amount of $56,591. A judgment has been entered against
ESI-NJ in this matter. Satisfaction of this obligation is expected to be paid by
the end-user. At this time the Company is in negotiations with the end user to
reach a settlement on this matter. This amount is included in the $659,487
settlement discussed below. If a settlement cannot be reached and the Company is
forced to make a payment, this could have a material impact on the Company's
financial statements. (See note under subsequent events).
ESI-NJ and a customer have outstanding claims against each other in connection
with remediation services, which were provided by ESI-NJ. No action has been
filed and both parties are in the process of executing a settlement whereby the
customer will make payments directly to the Company's third party vendors for
services provided on the customer's sites. The amount currently under
consideration is approximately $ 665,000, which has been offset against accounts
payable. The two lawsuits referenced above of $251,291 and $56,591 respectively
are included in the $665,000. In conjunction with the write off of the accounts
payables the Company has also written off over $4,000,000 of current assets
consisting accounts receivables and unbilled earned revenues. (See note under
subsequent events).
ESI-NJ is a defendant in an action that a customer filed claiming ESI-NJ was
negligent in its failure to recognize asbestos contamination in its Phase I
Environmental report and is seeking damages of $650,000. ESI-NJ's insurance
carrier is vigorously defending the matter and the amount appears to be within
policy limits. Additionally, the Company has accrued $25,000, which is the
maximum amount for which the Company would be responsible.
ESI-NJ is a defendant in this litigation where a third party is claiming
injuries at an ESI-NJ job site. The suit claims the injuries were the result of
ESI-NJ's staff's negligence. However the amount of damages has not yet been
determined. ESI-NJ's insurance carrier is vigorously defending the matter and
the amount appears to be within policy limits. (See note under subsequent
events).
ESI-NJ is a defendant in this litigation where the plaintiff is seeking to
recover a bankruptcy preference payment in the amount of $16,875. The Company
believes it will be required to pay this amount and therefore we have accrued
this in our financial statements.
ESI-NJ had received a judgment as a defendant in a litigation matter wherein a
former employee was seeking payment of approximately $9,000 in lieu of unused
vacation. ESI-NJ has settled this matter with a payment of $ 5,000 to the
plaintiff.
ESI-NJ is a plaintiff in this action where it seeks to recover $225,000 for
services performed. The customer filed a counter-claim for certain alleged
damages, which was dismissed with prejudice. A trial date has yet to be
determined. ESI-NJ believes there is a reasonable likelihood that it will be
successful in this litigation for the collection of the final contract payment
plus accrued interest earned in the trust accounts.
19. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The following is presented to supplement the statements of cash flows:
Cash paid during the period ended December 31, : 2005 2004
---------- ----------
Interest ................................................... $ 124,511 $ 132,524
Income taxes ............................................... $ -- $ --
Disclosure of non-cash investing and financing activities:
Shareholder debt converted to equity ..................... $ -- $1,628,217
GREENWORKS ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of current assets and current liabilities approximates fair
value because of the short maturity of these instruments. The fair value of the
Company's notes payables, capital lease obligations and convertible debentures
approximates its carrying value as it is based on or about the current rates
offered to the Company for debt of the same remaining maturities with similar
collateral requirements.
21. INCOME TAXES
The Company and its subsidiary file a consolidated federal income tax return
with its parent company commencing year ended December 31, 2005. No tax
provision was required for the Company and its subsidiary for the stub period
October 28, 2004 through December 31, 2004.
For the year ended December 31, 2005 the provision for income taxes consists of
the following:
Current
Federal $ 121,000
State $ 35,000
Deferred
Federal $(121,000)
State $ (35,000)
Net -
22. CONVERTIBLE DEBENTURE - PARENT
On December 31, 2005, the Company issued a 8% convertible note to GreenShift
Corporation in the exchange for the remaining balance due to Greenshift
Corporation of $57,752. The note is convertible at the fair market value at the
time of conversion.
23. SUBSEQUENT EVENTS
In March, 2006, a settlement was reached on the matter referred to in paragraph
6 under Litigation matters. The settlement was within the limits of the
Company's insurance.
In April, 2006, the Company decided to pay the balance of 941 delinquent tax
then due approximately $ 246,000. Interest of approximately $ 35,000 (awaiting
exact number from the IRS) remains due after the April 2006 payments. The
Company intends to pay this balance once a payoff number is issued.
GREENWORKS ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUBSEQUENT EVENTS (continued)
In April, 2006, the Company renegotiated its lease for office space at the Mount
Arlington office, which supercedes the former lease referred to in Note 10 under
Operating lease commitments starting April 1, 2006. The revised lease extends
the term through April 30, 2010. The following is a schedule of future minimum
rental payments on office space (exclusive of common area charges) required
under this new operating lease
April 1, 2006 - December 31, 2006 $ 85,082
January 1, 2007 - December 31, 2007 $ 116,395
January 1, 2008 - December 31, 2008 $ 120,191
January 1, 2009 - April 30, 2010 $ 41,750
In May, 2006, the settlement referred to in Note 18 (paragraphs one, two, and
three) under Litigation matters was finalized and executed. The final settlement
required ESI's client to pay $ 664,188 in vendor payments in exchange for
foregoing payment of approximately $4.0 million dollars of accounts receivables
and unbilled work progress. Further, as part of the settlement, ESI-NJ will
transfer the property referred to in Note 14 under Property held for sale, to
this former client (from whom the property was originally purchased) for one
dollar. The client can decline to take title to the property if notice is given
within the stated notice period.
1.
GS CLEANTECH CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 2006 (UNAUDITED)
GS GS
CleanTech, Enviro Services, Pro-Forma Pro-forma
Inc. Inc. Adjustments Combined
-------------------------------------------------------
ASSETS:
Current assets:
Cash ............................................. $ 2,758,142 $ 136,174 $ -- $ 2,894,316
Loans receivable-affiliate ....................... 48,739 -- -- 48,739
Accounts receivable, net ......................... 2,635,458 704,818 -- 3,340,276
Unbilled revenues ................................ -- 343,991 -- 343,991
Costs and estimated earnings in excess of billings
on uncompleted projects ........................ -- 127,438 -- 127,438
Miscellaneous receivable ......................... 3,000 -- -- 3,000
Inventories ...................................... 1,783,871 -- -- 1,783,871
Assets to be disposed of ......................... -- 76,539 -- 76,539
Prepaid expenses and other current assets ........ 85,128 26,398 -- 111,526
----------- ----------- ----------- -----------
Total current assets ..................... 7,314,338 1,415,358 -- 8,729,696
Property and equipment, net ......................... 1,317,933 57,873 -- 1,375,806
Other Assets:
Long term investments ............................ -- -- 2,329,771(1) 2,329,771
Deposits ......................................... 104,297 23,218 -- 127,515
Costs and estimated earnings in excess of billings
On uncompleted projects ........................ -- 240,447 -- 240,447
Property held for sale ........................... -- 59,298 -- 59,298
Permits, net ..................................... 184,071 -- -- 184,071
Deferred financing costs, net .................... 417,083 -- -- 417,083
Assets of discontinued operations ................ 7,500 -- -- 7,500
Goodwill ......................................... 4,010,303 -- -- 4,010,303
----------- ----------- ----------- -----------
Total other assets ............................. 4,723,254 322,963 2,329,771 7,375,988
----------- ----------- ----------- -----------
TOTAL ASSETS ........................................ $13,355,525 $ 1,796,194 $ 2,329,771 $ 7,481,490
GS CLEANTECH CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 2006 (UNAUDITED)
GS GS EnviroServices, Pro-Forma Pro-forma
CleanTech, Inc. Inc. Adjustments Combined
----------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Short term borrowings ......................................... $ 17,875 $ -- $ -- $ 17,875
Short term borrowings - related party ......................... 1,182,313 -- -- 1,182,313
Accounts payable .............................................. 3,475,952 832,938 -- 4,308,890
Accrued salary & benefit costs ................................ -- 248,971 -- 248,971
Payroll taxes payable ......................................... -- 8,187 -- 8,187
Accrued expenses .............................................. 988,524 389,530 -- 1,378,054
Current maturities of long-term debt .......................... 214,971 -- -- 214,971
Line of credit ................................................ -- 1,196,972 -- 1,196,972
Notes payable to non-affiliated parties ....................... -- 83,935 -- 83,935
Installment loan payments ..................................... -- 2,044 -- 2,044
Capital lease obligations ..................................... -- 24,038 -- 24,038
Deferred revenues ............................................. -- 100,000 -- 100,000
Federal & state income taxes payable .......................... -- 5,000 -- 5,000
Billings in excess of earnings ................................ 147,708 -- -- 147,708
Current portion of convertible debentures, net of discount .... 143,166 -- -- 143,166
Current convertible debentures - related party, net of discount 402,428 -- -- 402,428
Liabilities to be disposed ....................................... -- 282,108 -- 282,108
Liability for derivative instruments .......................... 7,414,236 -- 1,463,000(2) 8,877,236
Liabilities of discontinued operations, net of current ........ 561,592 -- -- 561,592
------------ ------------ ------------ ------------
Total current liabilities ................................... 14,548,765 3,173,723 1,463,000 19,185,488
Accrued employee benefits ..................................... -- 56,269 -- 56,269
Convertible debenture - related party ......................... -- 269,980 -- 269,980
Notes payable to non-affiliated parties ....................... -- 134,580 -- 135,580
Deferred revenues ............................................. -- 421,930 -- 421,930
Long-term debt, net of current maturities ........................ 309,167 -- -- 309,167
Convertible debentures, net of current portion
and net of discount ............................................ 366,667 -- 437,000 803,667
------------ ------------ ------------ ------------
Total long term liabilities: .................................. 675,834 882,759 437,000 1,995,593
------------ ------------ ------------ ------------
Total liabilities: ............................................ 15,224,599 4,056,482 1,900,000 21,181,081
Minority interest in consolidated subsidiary ..................... 775,000 -- -- 775,000
Stockholders' equity:
Convertible preferred stock, $0.001 par value:
Series A: 1,254,244 shares issued and outstanding ........... 1,254 -- -- 1,254
Series B: 438,650 shares issued and outstanding ............. 439 -- -- 439
Series D: 1,000,000 shares issued and outstanding ................ 1,000 -- -- 1,000
Common stock, $0.001 par value, 250,000,000
authorized; 249,828,213 issued and 249,828,213 outstanding .. 249,828 -- -- 249,828
Common stock, $0.001 par value, 100,000,000 authorized:
1,859,800 shares issued ..................................... -- 18,598 (18,598) --
Stock subscriptions receivable ................................... -- (1,000) 1,000 --
Additional paid-in capital .................................... 50,297,654 1,835,619 (3,666,136) 48,467,137
Accumulated deficit ........................................... (53,194,249) (4,113,505) 4,113,505 (53,194,249)
------------ ------------ ------------ ------------
Total stockholders' equity .................................. (2,644,074) (2,260,288) 429,771 (4,474,591)
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................... $ 13,355,525 $ 1,796,194 $ 2,329,771 $ 17,481,490
============ ============ ============ ============
F-15
GS CLEANTECH CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)
GS
GS CleanTech, EnviroServices, Pro-Forma Pro-forma
Inc. Inc. Adjustments Combined
----------------------------------------------------------------
Revenues ............................................... $ 6,878,467 $ 2,141,340 $ -- $ 9,019,807
Cost of revenues .................................... 5,181,467 1,145,060 -- 6,326,527
------------- ------------- ------------- -------------
Gross Profit ........................................... 1,697,000 996,280 -- 2,693,280
Operating expenses:
Selling expenses .................................... 607,245 -- -- 607,245
Stock based compensation ............................ 1,668,625 -- -- 1,668,625
Research and development ............................ 34,945 -- -- 34,945
General and administrative .......................... 2,138,600 470,518 -- 2,609,118
------------- ------------- ------------- -------------
Total operating expenses ............................... 4,449,415 470,518 -- 4,919,933
------------- ------------- ------------- -------------
Operating (loss) income ................................ (2,752,415) 525,762 -- (2,222,653)
Other income (expense)
Miscellaneous income ................................ 1,269 -- -- 1,269
Gain on forgiveness of interest expense ............. 125,485 -- -- 125,485
Gain/Loss on equipment disposal ........................ (40,802) -- -- (40,802)
Amortization of deferred financing costs ............ (37,916) -- -- (37,916)
Change in value of derivative instruments ........... (3,390,053) -- -- (3,390,053)
Interest expense .................................... (324,362) (64,935) -- (389,297)
------------- ------------- ------------- -------------
Total other income (expense), net ................. (3,666,379) (64,935) -- (3,731,314)
Income (loss) before provision for income taxes ..... (6,418,794) 460,827 -- (5,957,967)
Provision for income tax, net ....................... (4,309) (110,000) -- (114,309)
------------- ------------- ------------- -------------
Operating profit before taxes and extraordinary items (6,423,103) 350,827 -- (6,072,276)
Gain on marketable securities ....................... -- 105,645 -- 105,645
Income from settlements ............................. -- 7,479 -- 7,479
------------- ------------- ------------- -------------
Income (loss) from continuing operations ............... (6,423,103) 463,951 -- (5,959,152)
Discontinued Operations:
Income (loss) from discontinued operations .......... (11,053) (33,780) -- (44,833)
Gain on disposal, discontinued operations ........... 34,469 -- -- 34,469
------------- ------------- ------------- -------------
Total discontinued operations ..................... 23,416 (33,780) -- (10,364)
------------- ------------- ------------- -------------
Net income (loss) ...................................... (6,399,687) 430,171 -- (5,969,516)
Preferred dividend ..................................... (681,594) -- -- (681,594)
------------- ------------- ------------- -------------
Net loss attributable to shareholders .................. $ (7,081,281) $ 430,171 $ -- $ (6,651,110)
Income/(loss) per common share, basic and diluted
- continuing operations ............................ $ (0.04) $ -- $ -- $ (0.03)
Income/(loss) per common share, basic and diluted
- discontinued operations .......................... $ -- $ -- $ -- $ --
Income/(loss) per common share, basic and diluted ...... $ -- $ -- $ -- $ --
------------- ------------- ------------- -------------
- preferred dividends
Net income/(loss) per common share, basic and diluted .. $ (0.04) $ -- $ -- $ (0.03)
Weighted average shares of common stock outstanding .... 196,180,731 196,180,731 196,180,731 196,180,731
GS CLEANTECH CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
GS GS
CleanTech, EnviroServices, Pro-Forma Pro-forma
Inc. Inc. Adjustments Combined
------------------------------------------------------------
Revenue ................................................ $ 13,962,113 $ 3,939,607 $ -- $ 17,901,720
Cost of revenues .................................... 10,543,944 2,258,099 -- 12,802,043
------------ ------------ ------------ ------------
Gross Profit ........................................... 3,418,169 1,681,508 -- 5,099,677
Operating expenses:
Selling expenses .................................... 1,015,135 -- -- 1,015,135
Stock based compensation ............................ -- -- -- --
Research and development ............................ -- -- -- --
General and administrative .......................... 3,089,197 1,243,417 -- 4,332,614
Impairment of goodwill .............................. 532,088 -- -- 532,088
------------ ------------ ------------ ------------
Total operating expenses ............................... 4,636,420 1,243,417 -- 5,879,837
------------ ------------ ------------ ------------
Operating (loss) income ................................ (1,218,251) 438,091 -- (780,160)
Other income (expense)
Miscellaneous income ................................ 22,202 -- -- 22,202
Gain on forgiveness of interest expense ............. 66,200 -- -- 66,200
Gain/(Loss) on equipment disposal ................... 38,530 9,609 -- 48,139
Amortization of deferred financing costs ............ -- -- -- --
Change in value of derivative instruments ........... -- -- -- --
Gain on extinguishment of debt ...................... 7,248 -- -- 7,248
Interest expense and amort of debt discount ......... (744,295) (145,322) -- (889,617)
Interest Expense - related party .................... (17,697) -- -- (17,697)
------------ ------------ ------------ ------------
Total other income (expense), net ................. (627,812) (135,713) -- (763,525)
Income (loss) before provision for income taxes ..... (1,846,063) 302,378 -- (1,543,685)
Provision for income tax, net ....................... 19,165 -- -- 19,165
------------ ------------ ------------ ------------
Operating profit before taxes and extraordinary items (1,865,228) 302,378 -- (1,562,850)
Gain on marketable securities ....................... -- -- -- --
------------ ------------ ------------ ------------
Income (loss) from continuing operations ............... (1,865,228) 302,378 -- (1,562,850)
Discontinued Operations:
Income (loss) from discontinued operations .......... (3,877,671) (69,555) -- (3,947,226)
Gain on disposal, discontinued operations ........... 45,041 157,794 -- 202,835
------------ ------------ ------------ ------------
Total discontinued operations ..................... (3,832,630) 88,239 -- (3,744,391)
------------ ------------ ------------ ------------
Net income (loss) ...................................... (5,697,858) 390,617 -- (5,307,241)
Preferred dividend ..................................... (3,647,083) -- -- (3,647,083)
------------ ------------ ------------ ------------
Net loss attributable to shareholders .................. $ (9,344,941) $ 390,617 $ -- $ (8,954,324)
Income/(loss) per common share, basic and diluted
- continuing operations ............................ $ (0.04) $ 0.01 $ -- $ (0.03)
Income/(loss) per common share, basic and diluted
- discontinued operations .......................... $ (0.08) $ -- $ -- $ (0.08)
Income/(loss) per common share, basic and diluted ...... $ (0.08) $ -- $ -- $ (0.08)
------------ ------------ ------------ ------------
- preferred dividends
Net income/(loss) per common share, basic and diluted .. $ (0.20) $ 0.01 $ -- $ (0.19)
Weighted average shares of common stock outstanding .... 46,364,515 46,364,515 46,364,515 46,364,515
Note to the Pro Forma Combined Financial Statements
(1) Represents GS CleanTech Ventures investments in General Hydrogen of
$500,000, General Ultrasonics of $393,104, Ovation Products of $1,000,000,
and Aerogel Composites of $436,667.
(2) Represents the convertible debenture due to Cornell Capital Partners
assumed by GS CleanTech. Due to the variable nature of the conversion
feature, a derivative liability and a note discount of $1,463,000 were
recorded.