EXHIBIT 10.1
STOCK AND WARRANT PURCHASE AGREEMENT
THIS STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement") is made
---------
and entered into as of February 12, 2008, by and among The Quercus Trust
("Quercus" or the "Purchaser"), and WorldWater & Solar Technologies Corp., a
------- ---------
Delaware corporation (the "Company" or "WWAT").
------- ----
WHEREAS, the Purchaser desires to purchase from the Company, and the
Company desires to sell to Purchaser, shares of Series F Convertible Preferred
Stock (hereinafter described) and warrants exercisable into shares of Common
Stock (the "Warrants"), each on the terms set forth herein;
WHEREAS, Purchaser has provided a loan to the Company in the original
principal amount of $6,000,000, as evidenced by that certain Promissory Note,
dated January 25, 2008 (the "Promissory Note"); and
----------------
WHEREAS, the Company is offering the Series F Convertible Preferred
Stock pursuant to Rule 506 of Regulation D promulgated under the Securities Act
of 1933, as amended (the "Securities Act").
---------------
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
1. Sale of Shares.
-------------------------
1.1 Purchase and Sale of Shares and Warrants. The Company
-----------------------------------------------------
hereby agrees to issue to Quercus (i) twenty thousand (20,000) shares of its
Series F Convertible Preferred Stock ("Series F Preferred") at a price of
--------------------
$1,782.00 per share (the "Series F Purchase Price"), in the form, and containing
-----------------------
the rights, preferences and privileges set forth in Exhibit "A" and (ii) twenty
nine million (29,000,000) Warrants to purchase up to twenty nine million
(29,000,000) shares of Common Stock (subject to adjustment), at an exercise
price of $1.815 per Warrant in the form set forth in Exhibit "B." The Company
and Quercus agree that a portion of the Series F Purchase Price will be paid by
cancellation of the outstanding principal balance and all accrued and unpaid
interest under the terms of the Promissory Note (such amount, the "Note
Payoff").
1.2 The Closing. The sale and purchase of the Series F Preferred and the
------------
issuance of the Warrants shall take place at the offices of Salvo Landau Gruen &
Xxxxxx, 000 Xxxxxxxx Xxxx Xxxx, Xxxxx 000, Xxxx Xxxx, Xxxxxxxxxxxx 00000, or at
such other location as the Company and Quercus mutually agree, on or before
February ___, 2008 (the "Closing"). At the Closing, the Company shall deliver
-------
to Quercus a certificate representing the Series F Preferred (the "Preferred
---------
Certificate") and a certificate representing the Warrants (the "Warrant
----------- -------
Certificate") in the form(s) set forth on of Exhibits "C" and "D," respectively,
-----------
hereto against delivery to the Company of a check or wire transfer in the amount
of the Series F Purchase Price less the amount of the Note Payoff. The
obligation of Quercus to consummate the exchange at the Closing is subject to
the performance by the Company of the covenants set forth in Sections 2 below
and to the truth and accuracy of the representations and warranties of the
Company in Section 3 below.
2. Covenants of Company.
----------------------
2.1 Certificate of Designation. The Company agrees to file the
----------------------------
Certificate of Designation in the form of Exhibit "A" attached hereto with the
Delaware Secretary of State prior to the Closing.
2.2. Amendment to Certificate of Incorporation. Quercus and the Company
---------------------------------------------
agree and acknowledge that (i) the Company does not have currently authorized
sufficient shares of unissued Common Stock to allow for the conversion of the
Series F Preferred, (ii) the Company's board of directors (the "Board") has
-----
approved an amendment ("Amendment") to the Company's Certificate of
---------
Incorporation to increase the authorized number of Common Stock to four hundred
fifty million (450,000,000), which would authorize sufficient shares of Common
Stock to allow the conversion of the Series F Preferred in full, (iii) the Board
has approved the holding of a meeting of Shareholders to consider and approve
the Amendment, and has voted to recommend to Shareholders that the Amendment be
approved, and (iv) the Company has authorized "blank check" preferred stock with
respect to which the Board has the power to designate the rights, preferences
and privileges. In light of the foregoing, the Company agrees (x) to use best
efforts to cause the Amendment to be approved by Shareholders and filed with the
Delaware Secretary of State as soon as practicable, and to thereafter at all
times cause there to be sufficient authorized and unissued shares of Common
Stock and other securities to allow the Series F Preferred to be converted in
full and the Warrants to be exercised in full.
2.3 Filing Amendment. The Company agrees to use best efforts to obtain SEC
-----------------
approval of its proxy statement, to obtain shareholder approval of the Amendment
and to file the Amendment with the Delaware Secretary of State as soon as
practicable following the Closing.
3. Representations and Warranties of Company. Except for compliance
--------------------------------------------
with the requirements contained in Sections 2.1 and 2.3, the Company hereby
represents and warrants to Quercus that:
3.1 Organization, Good Standing and Qualification. The Company is a
------------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has full corporate power and
authority to own and hold its properties and to conduct its business. The
Company is duly licensed or qualified to do business, and in good standing, in
each jurisdiction in which the nature of its business requires licensing,
qualification or good standing, except for any failure to be so licensed or
qualified or in good standing that would not have a material adverse effect on
(i) the Company, (ii) its consolidated results of operations, assets, or
financial condition, (iii) its ability to perform its obligations under this
Agreement or (iv) the Series F Preferred (a "Material Adverse Effect").
------------------------
3.2 Consents and Approvals. No consent, approval, order or authorization
------------------------
of, or registration, qualification, designation, declaration or filing with, any
federal, regional, state or local governmental authority on the part of the
Company is required in connection with the consummation of the transactions
contemplated by this Agreement.
3.3 Authorization. The Company has full corporate power and authority
-------------
to execute, deliver and enter into this Agreement and to consummate the
transactions contemplated hereby. All action on the part of the Company
necessary for the authorization, execution, delivery and performance of this
Agreement by the Company, the authorization, sale, issuance and delivery of the
Series F Preferred, and the Common Stock issuable upon the conversion of the
Series F Preferred (the "Conversion Shares"), the Warrants and the Common Stock
-----------------
issuable upon exercise of the Warrants (the "Warrant Shares") and the
---------------
performance of the Company's obligations hereunder has been taken. The Series F
Preferred, the Conversion Shares, the Warrants and the Warrant Shares have been
duly authorized and, when issued and paid for in accordance with this Agreement,
will be validly issued, fully paid and non-assessable and will be free and clear
of all liens imposed by or through the Company other than restrictions imposed
by this Agreement and applicable securities laws. This Agreement has been duly
executed and delivered by the Company, and constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and by general equitable principles,
or (ii) as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
3.4 Compliance With Other Instruments.
------------------------------------
(a) The execution and delivery by the Company of this Agreement and the
consummation of the transactions contemplated hereby will not (i) result in the
violation of any provision of the Certificate of Incorporation or By-laws
of the Company, (ii) result in any violation of any law, statute, rule,
regulation, order, writ, injunction, judgment or decree of any court or
governmental authority to or by which the Company is bound, (iii) trigger the
increase in the rights of any holder of the Company's outstanding debt or equity
securities, including securities converted with such securities, (iv) conflict
with, or result in a breach or violation of, any of the terms or provisions of,
or constitute (with due notice or lapse of time or both) a default under, any
lease, loan agreement, mortgage, security agreement, trust indenture or other
agreement to which the Company is a party or by which it is bound or to which
any of its properties or assets is subject, nor result in the creation or
imposition of any lien upon any of the properties or assets of the Company, in
the cases of clauses (ii) and (iii) above, only to the extent such conflict,
breach, violation, default or lien reasonably could, individually or in the
aggregate, have or result in a Material Adverse Effect.
(b) No consent, approval, license, permit, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority remains to be obtained or is
otherwise required to be obtained by the Company in connection with the
authorization, execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby, including, without limitation the issue
and sale of the Series F Preferred, the Conversion Shares, the Warrants and the
Warrant Shares, except filings as may be required to be made by the Company with
(i) the United States Securities and Exchange Commission ("SEC") and (ii) state
"blue sky" or other securities regulatory authorities.
3.5 Material Adverse Changes. Since June 30, 2007, there has not
--------------------------
occurred any event or events which, singly or in the aggregate, have had or are
reasonably expected to have, a Material Adverse Effect upon the business,
operations or financial condition of the Company.
3.6 Issuance of Securities. Since September 28, 2007, the Company has not
------------------------
issued any capital stock, or any securities convertible into, or exchangeable
for, capital stock, or entered into any written or oral commitment with respect
thereto, except for the issuance to Quercus of the Series E Convertible
Preferred Stock of the Company under the terms of that certain Stock Exchange
Agreement dated January 25, 2008.
3.7 Litigation. There are no pending or overtly threatened actions, claims,
----------
orders, decrees, investigations, suits or proceedings by or before any
governmental authority, arbitrator, court or administrative agency which would
have a Material Adverse Effect, or which question the validity of this Agreement
or any action taken or to be taken by the Company in connection herewith, or
which might result in any impairment of the right or ability of the Company to
enter into or perform his obligations under this Agreement.
3.8 Reports; Financial Statements. WWAT's Annual Report on Form 10-KSB for
------------------------------
the years ended December 31, 2005 and December 31, 2006 and Quarterly Reports on
Form 10-QSB for the quarters ended March 31, 2007, June 30, 2007 and September
30, 2007 (the "Reports") have been filed with the SEC and the Reports complied
-------
in all material respects with the rules of the SEC applicable to such Reports on
the date filed with the SEC, and the Reports did not contain, on the date of
filing with the SEC, any untrue statement of a material fact, or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances in which they were made, not materially misleading. The Reports
have not been amended, nor as of the date hereof has WWAT filed any report on
Form 8-K since December 31, 2007 other than as set forth on Schedule 3.8 hereto.
------------
All of the consolidated financial statements included in the Reports (the "WWAT
----
Financial Statements"): (a) have been prepared from and on the basis of, and
---------------------
are in accordance with, the books and records of WWAT and with generally
accepted accounting principles applied on a basis consistent with prior
accounting periods; (b) fairly and accurately present in all material respects
the consolidated financial condition of WWAT as of the date of each such WWAT
Financial Statement and the results of its operations for the periods therein
specified; and (c) in the case of the annual financial statements, are
accompanied by the audit opinion of WWAT's independent public accountants.
Except as set forth in Schedule 3.8 or in the WWAT Financial Statements, as of
------------
the date hereof, WWAT has no liabilities other than (x) liabilities which are
reflected or reserved against in the WWAT Financial Statements and which remain
outstanding and undischarged as of the date hereof, (y) liabilities arising in
the ordinary course of business of WWAT since September 30, 2007, or (z)
liabilities incurred as a result of the transactions contemplated by the
Transaction Documents or which were not required by generally accepted
accounting principles to be reflected or reserved on the WWAT Financial
Statements. Since September 30, 2007, except as set forth on Schedule 3.8
------------
hereto, there has not been any event or change which has or will have a Material
Adverse Effect and WWAT has no knowledge of any event or circumstance that would
reasonably be expected to result in such a Material Adverse Effect.
3.9 Permits. The Company has all franchises, permits, licenses
-------
and similar authorizations necessary for the conduct of its business, and is not
in default of any such authorizations, where the absence or default of such
authorization could have a Material Adverse Effect.
3.10 Income Tax Returns. WWAT and each entity owned or
--------------------
controlled, directly or indirectly by WWAT or in which it has a fifty percent
(50%) or greater interest (each, a "Subsidiary") has filed all federal and state
----------
income tax returns which are required to be filed, and have paid, or made
provision for the payment of, all taxes which have become due pursuant to said
returns or pursuant to any assessment received by WWAT or any Subsidiary, except
such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided. WWAT has no knowledge of any pending
assessments or adjustments of the income tax payable of WWAT or its Subsidiaries
with respect to any year.
3.11 Environmental Matters. None of the operations of WWAT or any
---------------------
Subsidiary is the subject of any federal or state investigation evaluating
whether any remedial action involving a material expenditure is needed to
respond to a release of any toxic or hazardous waste or substance into the
environment. To WWAT's knowledge, neither WWAT nor any Subsidiary has received
notice of any actual or threatened claim, investigation, proceeding, order or
decree in connection with any release of any toxic or hazardous waste or
substance into the environment.
3.12 Offering. Subject in part to the truth and accuracy of each
--------
Investor's representations set forth in Section 4 of this Agreement, the offer,
---------
sale and issuance of the securities contemplated by this Agreement are exempt
from the registration requirements of the Securities Act, and the qualification
or registration requirements of the Act or other applicable blue sky laws.
Neither the Company nor any authorized agent acting on its behalf will take any
action hereafter that would cause the loss of such exemptions.
3.13 Patents and Trademarks. The Company possesses all patents,
------------------------
patent rights, trademarks, trademark rights, service marks, service xxxx rights,
trade names, trade name rights and copyrights (collectively, the "Intellectual
------------
Property") necessary for its business without, to its knowledge (but without
--------
having conducted any special investigation or patent search), any conflict with
or infringement of the valid rights of others and the lack of which could
materially and adversely affect the operations or condition, financial or
otherwise, of the Company, and the Company has not received any notice of
infringement upon or conflict with the asserted rights of others.
3.14 Insurance. The Company has in full force and effect fire and
---------
casualty insurance policies with such coverages in amounts (subject to
reasonable deductibles) customary for companies similarly situated.
3.15 Related Party Transactions. No existing contractual
----------------------------
obligation of WWAT or its Subsidiaries is with or for the direct benefit of (i)
any party owning, or formerly owning, beneficially or of record, directly or
indirectly, in excess of five percent (5%) of the outstanding capital stock of
WWAT, (ii) any director, officer or similar representative of WWAT, (iii) any
natural person related by blood, adoption or marriage to any party described in
(i) or (ii), or (iv) any entity in which any of the foregoing parties has,
directly or indirectly, at least a five percent (5%) beneficial interest (a
"Related Party"). Without limiting the generality of the foregoing, no Related
--------------
Party, directly or indirectly, owns or controls any material assets or material
properties which are used in WWAT's business and to the knowledge of WWAT, no
Related Party, directly or indirectly, engages in or has any significant
interest in or connection with any business which is, or has been within the
last two years, a competitor, customer or supplier of WWAT or has done business
with WWAT or which currently sells or provides products or services which are
similar or related to the products or services sold or provided in connection
with the Business.
3.16 No Anti-Dilution Rights. The transactions contemplated
-------------------------
hereby will not trigger any anti-dilution provisions contained in any existing
shareholder agreements.
3.17 Full Disclosure. No representation, warranty, schedule or certificate
----------------
of WWAT made or delivered pursuant to the Transaction Documents contains or will
contain any untrue statement of fact, or omits or will omit to state a material
fact the absence of which makes such representation, warranty or other statement
misleading.
4. Representations and Warranties of Quercus. Quercus hereby represents
-----------------------------------------
and warrants to, and agrees with, the Company that:
4.1 Restricted Securities. Quercus understands that (i) the Series F
----------------------
Preferred and the Conversion Shares are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering, (ii) under such laws
and applicable regulations such securities may be resold without registration
under federal and state securities laws only in certain limited circumstances,
and (iii) the Company may require a legal opinion of Quercus' counsel with
respect to unregistered transfers.
4.2 Accredited Investor. Quercus represents that it is an "accredited
--------------------
investor" within the meaning of Regulation D promulgated under the Securities
Act.
4.3 Legends. Quercus understands that the certificates evidencing the
-------
Series F Preferred Stock will bear substantially the following legends:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF
SUCH SECURITIES ACT.
4.4 Investment Purposes. The securities will be acquired for
--------------------
investment for Quercus' own account, not as a nominee or agent, an not with a
view to the public resale or distribution thereof within the meaning of the
federal or state securities laws, and Quercus has no present intention of
selling, granting any participation in, or otherwise distributing the same.
Quercus further represents that he or it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
securities.
4.5 Litigation. There are no claims before any governmental
----------
entity or arbitrator pending or, to such Purchaser's knowledge, currently
threatened against or with respect to such Purchaser relating to or affecting
the Series F Preferred or the Warrants, which question the validity of this
Agreement or any action taken or to be taken by such Purchaser in connection
herewith, or which might result in any impairment of the right or ability of
such Purchaser to enter into or perform its obligations under this Agreement.
4.6 Awareness of Company Performance. Purchaser acknowledges that (i) it
--------------------------------
has received and reviewed the Company's financial statements (a) as of and for
the year ended December 31, 2006 and (b) as of and for the nine-month period
ended September 30, 2007, (ii) it has received or has had full access to all the
information Purchaser considers necessary or appropriate to make an informed
decision with respect to the purchase of the Units pursuant to this Agreement,
and (iii) it has had an opportunity to ask questions and receive answers from
the Company regarding the Company's financial performance and to obtain
additional information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify any
information furnished to Purchaser or to which Purchaser had access.
5. Certain Covenants of WWAT. The provisions of Section 4 of that
----------------------------
certain Stock and Warrant Purchase Agreement between Quercus and the Company
dated September 28, 2007 (the "Purchase Agreement") are hereby incorporated by
------------------
reference and shall apply to the Conversion Shares.
6. Indemnification. The provisions of Section 5 of the Purchase Agreement
---------------
are hereby incorporated by reference and shall apply to the transactions
contemplated by this Agreement.
7. Survival of Representations and Warranties. All representations,
----------------------------------------------
warranties and agreements made by WWAT and Quercus in this Agreement or in any
certificate or other instrument delivered pursuant hereto shall survive the
Closing and any investigation and discovery by WWAT or by Quercus, as the case
may be, made at any time with respect thereto; provided, however, that, other
than with respect to Section 3.6 (for which there shall be no time limit),
neither Quercus nor WWAT shall have any liability to the other for any
misrepresentation, inaccuracy or omission in any representation or warranty, or
any breach of any representation or warranty, unless the party asserting a claim
with respect to any thereof gives to the other written notice of such claim on
or before the date which is two (2) years following the Closing Date.
8. Miscellaneous.
-------------
8.1 Entire Agreement. This Agreement contains the entire agreement
-----------------
among the parties with respect to the exchange contemplated hereby.
8.2 Governing Law. This Agreement shall be governed by and construed under
--------------
the laws of the State of Delaware.
8.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.4 Severability. The invalidity of any portion hereof shall not affect the
------------
validity, force, or effect of the remaining portions hereof. If it is ever held
that any restriction hereunder is too broad to permit enforcement of such
restriction to its fullest extent, the parties agree that a court of competent
jurisdiction may enforce such restriction to the maximum extent permitted by law
against those for whom it may be enforceable, and each party hereby consents and
agrees that such scope may be judicially modified accordingly in any proceeding
brought to enforce such restriction.
8.5 Further Assurances. The parties hereto shall, without additional
-------------------
consideration, execute and deliver or cause to be executed and delivered such
further instruments and shall take or cause to be taken such further actions as
are necessary to carry out more effectively the intent and purpose of this
Agreement.
8.6 Successors and Assigns. Except as otherwise provided herein, the terms
-----------------------
and conditions of Section 5 of this Agreement shall inure to the benefit of and
be binding upon the respective successors and assigns of the parties (including
transferees of any securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party, other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
8.7 Titles and Subtitles. The titles and subtitles used in this Agreement
----------------------
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
8.8 Notices. All notices required or permitted hereunder shall be in
-------
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
address as set forth on the signature page hereof or at such other address as
such party may designate by ten (10) days advance written notice to the other
parties hereto.
8.9 Finder's Fee. Each party represents that it neither is nor will be
-------------
obligated for any finders' fee or commission in connection with this
transaction. Quercus agrees to indemnify and to hold harmless the Company from
any liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which Quercus or any of its trustees, employees or
representatives is responsible. The Company agrees to indemnify and hold
harmless Quercus from any liability for any commission or compensation in the
nature of a finders' fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.
8.10 Expenses. The Company shall pay all costs and expenses that it incurs
--------
with respect to its negotiation, execution, delivery and performance of this
Agreement and, if the Closing is effected, shall pay the actual legal fees and
costs of Xxxxxxxxx Xxxxxxx Fields Claman & Machtinger LLP, counsel to Quercus,
in an amount not to exceed Five Thousand Dollars ($5,000). If any action at law
or in equity is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
8.11 Amendments and Waivers. Any term of this Agreement may be amended
----------------------
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and Quercus. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder of
any securities purchased under this Agreement at the time outstanding (including
securities for which Warrants are exercisable), and each future holder of all
such securities and the Company.
8.12 Aggregation of Stock. All shares of Common Stock held or acquired
--------------------
by affiliated entities or persons shall be aggregated together for the purpose
of determining the availability of any rights under this Agreement.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PURCHASER:
---------
THE QUERCUS TRUST
By: /s/ Xxxxx Xxxxxxx
------------------------
Name: Xxxxx Xxxxxxx
Its: Trustee
Address:
0000 Xxxxxxx Xxxx.
A109 - PMB 000
Xxxxx Xxxx, XX 00000
COMPANY:
-------
WORLDWATER & SOLAR TECHNOLOGIES CORP.
By: /s/ Xxxxxxx X. Xxxxx
-------------------------
Name: Xxxxxxx X. Xxxxx
-------------------------
Its: Chief Executive Officer
-----------------------
Address:
000 Xxxxxx Xxxxx
Xxxxx, Xxx Xxxxxx 00000
EXHIBIT "A"
CERTIFICATE OF DESIGNATION
EXHIBIT "B"
WARRANT TO PURCHASE COMMON STOCK
EXHIBIT "C"
PREFERRED CERTIFICATE
EXHIBIT "D"
WARRANT CERTIFICATE
SCHEDULE 3.8
The Company believes that non-cash expenses recorded in 2005 in the amount
of $3.8 million related to the issuance of a convertible debt instrument should
have been amortized over the life of the debt instrument rather than recorded as
an expense in 2005.
The Company is considering an amendment to the Annual Report on Form 10-KSB
for the year ended December 31, 2006 restating these non-cash expense items for
2005 and 2006. The result of the restatement in 2005 will be a reduction in
expenses of $3.8 million, and the result in 2006 will be an increase in expenses
of $2.8. The net effect to this restatement will be a positive effect on
stockholders equity of $1.0 million.
The effect of these changes on the profit and loss statements in the
Quarterly Reports on Form 10-QSB for the quarters ended March 31, 2007 and June
30, 2007 is approximately $30,000 per quarter and the Company also is
considering amendments to these reports.
The Company has not completed its investigation and review of the proposed
changes and these issues have not been proposed to the Board of Directors or the
Audit Committee.
The following report on Form 8-K has been filed by the Company since
December 31, 2007:
Report on Form 8-K filed January 31, 2008.
