SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2006
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[ ] 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 000-50944
Global Resource Corporation
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(Exact name of small business issuer as specified in its charter)
Nevada 84-1565820
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
219 Robwood Rd, Baltimore, MD 21222
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(Address of principal executive offices)
(410) 477-1328
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the issuer 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 shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 7,215,034 shares of common stock, par
value $0.001 were outstanding at August 9, 2006.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLOBAL RESOURCE CORPORATION
FINANCIAL STATEMENTS
JUNE 30, 2006
GLOBAL RESOURCE CORPORATION
BALANCE SHEETS
ASSETS
------
June 30, March 31,
2006 2006
(Unaudited)
------------ ------------
CURRENT ASSETS
Cash $ 4 $ 28
------------ ------------
TOTAL ASSETS $ 4 $ 28
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES
Accounts payable $ 2,767 $ 55,519
Accounts payable - related party -- 54,004
Wages payable -- 210,000
Accrued expense - related party -- 1,500
Accrued interest 16,953 14,906
Derivative liability, net of $18,591
debt discount at March 31, 2005 157,213 165,166
Convertible debentures 102,345 102,345
------------ ------------
Total Current Liabilities 279,278 603,440
------------ ------------
STOCKHOLDERS' DEFICIT
Preferred stock: 50,000,000 shares authorized
of $0.001 par value, no shares issued and
outstanding -- --
Common stock: 2,000,000,000 shares authorized,
of $0.001 par value, 7,215,000 shares
issued and outstanding 7,215 7,215
Additional paid-in capital 7,237,549 6,885,520
Accumulated deficit (7,472,843) (7,472,843)
Deficit accumulated during the development stage (51,195) (23,304)
------------ ------------
Total Stockholders' Deficit (279,274) (603,412)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 4 $ 28
============ ============
The accompanying notes are an integral part of these financial statements.
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GLOBAL RESOURCE CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
From Inception of the
development stage on -
For the three months ended January 1, 2006
June 30, through June 30, 2006
-------------------------- -----------------------
2006 2005
----------- -----------
REVENUES $ -- $ -- --
COST OF GOODS SOLD -- -- --
----------- ----------- -----------
GROSS PROFIT -- -- --
----------- ----------- -----------
OPERATING EXPENSES
Compensation 20,000 -- 40,000
Professional fees 10,000 -- 18,756
Rent 500 -- 1,000
General and administrative 21,044 18,925 21,147
----------- ----------- -----------
Total Operating Expenses 51,544 18,925 80,903
----------- ----------- -----------
LOSS FROM OPERATIONS (51,544) (18,925) (80,903)
----------- ----------- -----------
OTHER (INCOME) EXPENSES
Interest expense (2,047) (21,349) (4,065)
Gain/(Loss) on derivative 7,953 (97,094) 16,026
Gain on settlement of debt 17,747 - 17,747
Unrealized loss on investment -- (16,916) --
----------- ----------- -----------
Total Other (Income) Expense 23,653 (135,359) 29,708
----------- ----------- -----------
NET LOSS $ (27,891) $ (154,284) (51,195)
=========== =========== ============
BASIC LOSS PER SHARE
Continued operations $ (0.00) $ (0.02)
Discontinued operations -- --
----------- -----------
Total Loss per Share $ (0.00) $ (0.02)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 7,215,000 7,215,000
=========== ===========
The accompanying notes are an integral part of these financial statements.
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GLOBAL RESOURCE CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months ended From inception of the
June 30, development stage on-
-------------------------- January 1, 2006
2006 2005 through June 30, 2006
----------- ----------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITES
Net loss $ (27,891) $ (154,284) (51,195)
Adjustments to reconcile net loss to
net cash used by operating activities:
Unrealized loss on investment -- 16,916 --
(Gain)/Loss on derivative (7,953) 97,094 (16,026)
(Gain)/Loss on settlement of debt (17,747) - (17,747)
Contributed services 30,500 5,500 30,500
Interest expense on debt discount amortization -- 18,591 --
Changes in assets and liabilities:
Increase/ (Decrease) in accounts payable
and accounts payable - related party 21,020 13,425 29,776
Increase/(Decrease) in accrued expenses 2,047 2,758 24,565
----------- ----------- ---------
Net Cash Used by Operating Activities (24) -- (127)
----------- ----------- ---------
Net Cash Used by Investing Activities -- -- --
Net Cash Provided by Financing
Activities -- -- --
The accompanying notes are an integral part of these financial statements.
4
GLOBAL RESOURCE CORPORATION
STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
For the three months From inception of the
ended June 30, development stage on-
-------------------------- January 1, 2006
2006 2005 through June 30, 2006
----------- ----------- ----------------------
(Restated)
NET DECREASE IN CASH (24) -- (127)
CASH AT BEGINNING OF PERIOD 28 175 131
----------- ----------- ----------
CASH AT END OF PERIOD $ 4 $ 175 $ 4
=========== =========== ==========
CASH PAID FOR
Interest $ -- $ -- $ --
Income taxes $ -- $ -- $ --
SCHEDULE OF NON CASH FINANCING ACTIVITIES
Contributed capital by shareholders $ 30,500 $ 5,500 $ --
The accompanying notes are an integral part of these financial statements.
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GLOBAL RESOURCE CORPORATION
Notes to the Financial Statements
June 30, 2006
NOTE 1 - FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows at June 30, 2006 and for all periods
presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's March 31, 2006 audited
financial statements. The results of operations for the period ended June 30,
2006 are not necessarily indicative of the operating results for the full year.
On December 15, 2005, after a thorough review of the costs and potential
regulatory requirements of complying with the Investment Company Act of 1940,
the Board of Directors of the Company approved "Notification of Withdrawal" on
Form n-54C with the Securities and Exchange Commission to withdraw our election
to be subject to sections 55 through 65 of the Investment Company Act of 1940.
On December 19, 2005, our "Notification of Withdrawal" on Form n-54C was filed
with the Securities and Exchange Commission. As such, and with the transfer of
the Well Renewal, LLC interest, the Company has become a Development Stage
Company. Although we became a Development Stage Company on December 15, 2005,
the from inception disclosures on the Statement of Operations and the Statement
of Cash Flows will begin January 1, 2006.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using the accounting principles
generally accepted in the United States of America applicable to a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. However, the Company has had a
change in control and has changed its business plan and it has not generated any
revenues. The future of the Company is dependent upon its ability to obtain
financing and upon future profitable operations from the development of its new
business opportunities. Management plans to research possible acquisitions of
various entities and an officer of the Company has agreed to loan the Company
funds as needed to sustain business for a period of twelve months. However, the
Company is dependent upon its ability to secure equity and/or debt financing and
there are no assurances that the Company will be successful, without sufficient
financing it would be unlikely for the Company to continue as a going concern.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. These financial statements do not include any adjustments
that might arise from this uncertainty.
NOTE 3 - DERIVATIVES
Global Resource evaluated the application of SFAS 133 and EITF 00-19 for the
convertible debentures issued in fiscal 2005. Based on the guidance in SFAS 133
and EITF 00-19, Global Resource concluded all of these instruments were required
to be accounted for as derivatives. SFAS 133 and EITF 00-19 require Global
Resource to bifurcate and separately account for the conversion features of the
debentures as embedded derivatives. Pursuant to SFAS 133, Global Resource
bifurcated the conversion feature from the debentures because the economic
characteristics and risks of the conversion features were determined to not be
clearly and closely related to the economic characteristics and risks of the
debentures. In addition, because there was no explicit cap on the amount of
shares that might be required to be issued pursuant to the conversion features,
Global Resource determined that the conversion features met the attributes of a
liability and therefore recorded the fair value of the conversion features as
current liabilities. Global Resource is required to record the fair value of the
conversion features on its balance sheet at fair value with changes in the
values of these derivatives reflected in the statement of operations as "Gain
(loss) on derivative."
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The impact of the application of SFAS 133 and EITF 00-19 on the balance sheet as
of June 30, 2006 and the impact on the statements of operations as of June 30,
2006 and 2005 are as follows:
MARCH 31, JUNE 30, GAIN
2006 2006
------------ ------------ ------------
Derivative liability - debentures $ 165,166 $ 157,213 $ 7,953
MARCH 31, JUNE 30, GAIN
2006 2006
------------ ------------ ------------
Derivative liability - debentures $ 168,895 $ 265,989 $ (97,094)
NOTE 4 - RELATED PARTY TRANSACTIONS
During the quarter ended June 30, 2006, a shareholder of the Company maintained
office space and provided services that resulted in rent expense of $500.
NOTE 5 - MATERIAL EVENTS
On June 7, 2006 an unrelated third party purchased the convertible debenture
owned by Transnix Corporation. As of the date of purchase, the principal amount
due on the debenture was $102,345 and the accrued but unpaid interest was
$16,274. Subsequent to June 30, 2006, under the terms of the purchase agreement,
Transnix used a substantial part of the proceeds received from the debenture
purchaser to pay off the liabilities of the Company, other than the principal
and interest related to the debenture. The payments were accounted for on the
Company's books as a capital contribution. Transnix paid off $210,000 of wages
payable, $54,004 of accounts payable related party, $56,025 of accounts payable,
and accrued expenses of $1,500. A gain on the settlement of debt of $17,747 was
recognized by the Company. Accordingly, as of July 11, 2006, the Company has no
liabilities other than the debenture. In conjunction with the purchase of the
Transnix debenture, a change in control of the Company occurred. The then
directors and the then sole officer of the Company resigned, appointing Mary
Radomsky as the sole director and the sole officer.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
On July 26, 2006 the Company entered into a Plan and Agreement of Reorganization
with Carbon Recovery Corporation for the acquisition by the Company of
substantially all of the assets of Carbon Recovery Corporation in exchange for:
1. The assumption by the Company of nominal, if any, non-warrant
liabilities;
2. The issuance by the Company to Carbon Recovery Corporation for the
benefit of the shareholders of Carbon Recovery Corporation, of 50,000,000 shares
of the Company's Common Stock having a deemed value for purposes of the
transaction of $1.00 per share; and
3. The assumption by the Company of Carbon Recovery Corporation's
warrants (contractual commitments) and issuance by the Company, to Carbon
Recovery Corporation for the benefit of the holders of Carbon Recovery
Corporation's issued and outstanding warrants, of an equal number of the
Company's Common Stock Purchase Warrants having identical terms to Carbon
Recovery Corporation's issued and outstanding warrants as of the date of
Closing.
Carbon Recovery Corporation is a development stage company with a license for
proprietary technology and related custom software for the use of microwaves for
the breaking down of petroleum-based products, such as used tires, into their
component parts, capturing those components for resale. Closing is scheduled for
August 31, 2006 and, assuming that Closing occurs, a Form 8-K will be filed
providing information on the resulting company.
The transaction is intended to qualify as a so-called "C" Reorganization under
Section 368(a)(1)(C) of the Internal Revenue Code. Accordingly, following the
transaction Carbon Recovery Corporation will be dissolved. Carbon Recovery
Corporation will utilize a liquidating trust to hold the securities being
issued, pending the ability to distribute such shares pursuant to the
requirements of the securities laws. The Agreement provides for both piggyback
and demand registration rights for the securities being issued.
As a condition precedent to the Closing, the Company was required to declare a
reverse stock split of 100 to 1, or one share for each one hundred shares
currently held. As of the date of this filing the Company has approximately
7,215,034 shares issued and outstanding and after the reverse stock split will
have approximately 72,151 shares issued and outstanding. On July 27, 2006 the
Board of Directors declared a 100 to 1 reverse stock split, with a record date
of the close of trading on August 11, 2006 and an effective date of the opening
of trading on August 14, 2006.
The exercise price of the warrants to be issued by the Company on assumption of
the warrant liabilities of Carbon Recovery Corporation will likely be higher
than the anticipated public market price of the post-split shares and,
accordingly, are expected to have little, if any, value.
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ITEM 3. CONTROLS AND PROCEDURES.
1. As previously reported in both Form 10-KSB for the fiscal year ended March
31, 2006 and a Form 8-K, the Company is restating its financial statements
because of the reclassification and changed accounting for convertible
debentures. On July 3, 2006, the Company concluded that it was necessary to
restate its financial results for the fiscal year ended March 31, 2005 and for
the interim periods ended September 30 and December 31, 2004 and 2005 and for
the interim period ended June 30, 2005 to reflect additional non-operating gains
and losses related to the classification of and accounting for convertible
debentures issued in fiscal 2005. The Company had previously determined a
beneficial conversion feature, valued the conversion features at the intrinsic
value and classified the convertible instruments as equity. After further
review, the Company determined that these instruments should have been
classified as derivative liabilities and, therefore, the fair value of each
instrument should have been recorded as a derivative liability on the Company's
balance sheet. Changes in the fair values of these instruments result in
adjustments to the amount of the recorded derivative liabilities and the
corresponding gain or loss is recorded in the Company's statement of operations.
At the date of the conversion of each respective instrument or portion thereof,
the corresponding derivative liability will be classified as equity.
The restated financial statements for the fiscal year ended March 31, 2005 were
included in Form 10-KSB for the fiscal year ended March 31, 2006. The restated
interim financial statements for the quarters ended September 30 and December
31, 2004 and 2005 and for the quarter ended June 30, 2005 are being filed
concurrently with this report by amendment to the original filings..
2. Pursuant to rules adopted by the SEC as directed by Section 302 of the
Sarbanes-Oxley Act of 2002, the Company has performed an evaluation of its
disclosure controls and procedures (as defined by Exchange Act Rule 13a-15(e))
as of the end of the period covered by this report. The Company's disclosure
controls and procedures are designed to ensure (i) that information required to
be disclosed by the Company in the reports the Company files or submits under
the Exchange Act are recorded, processed, summarized, and reported within the
time periods specified in the SEC's rules and forms; and (ii) that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is accumulated and communicated to the Company's management,
including its principal executive and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure.
The Company has evaluated, with the participation of our CEO and CFO, the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as of June 30, 2006, pursuant to Exchange Act Rule 15d-15. Based
upon that evaluation, the CEO and CFO identified deficiencies that existed in
the design or operation of our internal control over financial reporting that it
considered to be "material weaknesses". The Public Company Accounting Oversight
Board has defined a material weakness as a "significant deficiency or
combination of significant deficiencies that results in more than a remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected."
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The material weaknesses identified relate to:
o As of June 30, 2006 there was a lack of accounting personnel
with the requisite knowledge of Generally Accepted Accounting
Principles in the US ("GAAP") and the financial reporting
requirements of the Securities and Exchange Commission.
o As of June 30, 2006 there were insufficient written policies
and procedures to insure the correct application of accounting
and financial reporting with respect to the current
requirements of GAAP and SEC disclosure requirements.
o As of June 30, 2006 there was a lack of segregation of duties,
in that we only had one person performing all
accounting-related duties.
Notwithstanding the existence of these material weaknesses in our internal
control over financial reporting, our management believes, including our Chief
Executive Officer and Chief Financial Officer that the financial statements
included in this report fairly present in all material respects our financial
condition, results of operations and cash flows for the periods presented.
The Company will continue to evaluate the effectiveness of internal controls and
procedures on an on-going basis. We anticipate that in the event of the
acquisition of another entity, that entity's management will design and
implement improvements in our internal control over financial reporting to
address the material weaknesses described above as well as to provide accounting
resources with the expertise need to assist us in the preparation of our
financial statements.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There is no litigation pending or threatened by or against us or any of our
former or current officers or directors, as such.
However, on June 17, 2005, while we were being regulated as a BDC, the Division
of Investment Management at the SEC ("Division") advised us that it was the view
of the Division that we could not rely on the exemption afforded by Regulation E
for our prior issuances, between September 27, 2004 through December 2, 2004, of
shares of our common stock. The Division also advised us that, in the view of
the Division, it appeared that our issuance of those shares violated the
registration requirements of Section 5 of the Securities Act of 1933, as amended
("Securities Act"). In response, we advised the Division that it was our view
that the issuance of the shares was exempt from registration under the
Securities Act under various available exemptions, including but not limited to
Regulation E and that our issuance of the shares had not violated Section 5 of
the Securities Act. At this time, neither the SEC nor any private party has
commenced any action against us alleging that we issued the shares in violation
of Section 5 of the Securities Act. Further, to the best of our knowledge, the
SEC has not commenced any formal or informal inquiry with respect to its
contention that the shares were issued in violation of Section 5 of the
Securities Act. In the event that any such action or inquiry is commenced, we
intend to defend against such allegations vigorously.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GLOBAL RESOURCE CORPORATION
By /s/ Mary K. Radomsky, President/CEO
-----------------------------------
Mary K. Radomsky, Pres/CEO
Date August 21, 2006
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