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     <!-- Control Number: 86206                                                            -->
     <!-- Rev Number:     1                                                                -->
     <!-- Client Name:    Global Energy Inc                                                -->
     <!-- Project Name:   S-1                                                              -->
     <!-- Firm Name:      Zadok-Keinan Ltd                                                 -->
     <TITLE>S-1</TITLE>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="4"><B>UNITED STATES
SECURITIES AND
<BR>EXCHANGE COMMISSION</B> </FONT>
<BR><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Washington, D.C. 20549</B> </FONT> </P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="4"><B>FORM S-1</B> </FONT> </H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933</B> </FONT> </H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="5"><B>GLOBAL ENERGY INC.</B> </FONT> </H1>




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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Exact name of registrant as specified in its charter) </FONT></P>


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     <TD WIDTH=33% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2"><B><U>Nevada</U></B> </FONT> </TD>
     <TD WIDTH=34% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2"><B><U>2860</U></B> </FONT> </TD>
     <TD WIDTH=33% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2"><B><U>86-0951473</U></B> </FONT> </TD></TR>
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     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>(State or other jurisdiction of</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>(Primary Standard Industrial</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>incorporation or organization)</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Classification Code Number)</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>(IRS. Employer Identification No.)</FONT></TD></TR>
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<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>415 Madison Avenue, 15th Floor, New York, NY 10017
</B><BR><U><B>+1.646.673.8435
</B></U><BR>(Address and telephone number of registrant's principal executive offices)
<BR><BR>
<BR><B>Global Energy Inc.
</B><BR><B>415 Madison Avenue, 15th Floor, New York, NY 10017
</B><BR><B>+1.646.673.8435
</B><BR>(Name, address and telephone number of agent for service)
<BR><BR>
<BR><B>Copy of communications to:
</B><BR><B>Clark Wilson LLP
</B><BR><B>Attn. Ethan Minsky
</B><BR><B>Barristers and Solicitors
</B><BR><B>Suite 800 - 885 West Georgia Street
<BR>Vancouver, British Columbia, Canada V6C 3H1
<BR>Telephone: 604.687.5700
<BR>Fax: 604.687.6314</B> </FONT>
</P>





<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> The sale of securities to the public will commence as soon as practicable after this Registration<BR>
Statement becomes effective.</B><BR>(Approximate date of commencement of proposed sale to the public)</FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If any of the securities being
registered on this Form are to be offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, as amended, check the following box: <FONT size="3" face="Wingdings">x
</font> </FONT></P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If this Form is filed to register
additional securities for an offering pursuant to Rule 462(b) under the Securities Act of
1933, please check the following box and list the Securities Act of 1933, as amended,
registration statement number of the earlier effective registration statement for the
same offering.  <FONT size="3" face="Wingdings">o
</font> </FONT></P>

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<font size=2></font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If this Form is a post-effective
amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the
following box and list the Securities Act of 1933, as amended, registration statement
number of the earlier effective registration statement for the same offering <FONT size="3" face="Wingdings">o
</font>  </FONT></P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of &#147;large accelerated filer,&#148; &#147;accelerated
filer&#148; and &#147;smaller reporting company&#148; in Rule 12b2 of the Exchange Act of
1934.  </FONT></P>











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     <TD WIDTH=25%><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Large accelerated filer</FONT></TD>
     <TD WIDTH=10%><FONT FACE="Times New Roman" SIZE=2> <FONT size="3" face="Wingdings">o</font>  </FONT></TD>
     <TD WIDTH=25%><FONT FACE="Times New Roman" SIZE=2>Accelerated filer</FONT></TD>
     <TD WIDTH=50%><FONT FACE="Times New Roman" SIZE=2> <FONT size="3" face="Wingdings">o</font> </FONT></TD></TR>
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     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2> <FONT size="3" face="Wingdings">&nbsp;</font> </FONT></TD></TR>
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     <TD><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-accelerated filer</FONT></TD>
     <TD><FONT FACE="Times New Roman" SIZE=2> <FONT size="3" face="Wingdings">o</font> </FONT></TD>
     <TD><FONT FACE="Times New Roman" SIZE=2>Smaller reporting company</FONT></TD>
     <TD><FONT FACE="Times New Roman" SIZE=2> <FONT size="3" face="Wingdings">x</font> </FONT></TD></TR>
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<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CALCULATION OF REGISTRATION FEE</B> </FONT></P>




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     <TH ><FONT FACE="Times New Roman" SIZE=1>Title of each class<BR>
of securities to be<BR>
registered</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE="1">Amount to be<BR>
registered <SUP>(1)</SUP> </FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Proposed maximum<BR>
offering price<BR>
per share</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Proposed maximum<BR>
aggregate offering<BR>
price (US$)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE="1">Amount of<BR>
registration fee <SUP>(2)</SUP> </FONT></TH></TR>
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     <TD WIDTH=20%><FONT FACE="Times New Roman" SIZE=2>Common stock of the Registrant issuable upon exercise of share purchase warrants.</FONT></TD>
     <TD WIDTH=20% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>18,700,000</FONT></TD>
     <TD WIDTH=20% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">$0.07<SUP>(3)</SUP> </FONT> </TD>
     <TD WIDTH=20% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$1,309,000</FONT></TD>
     <TD WIDTH=20% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$&nbsp;51.44 </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="Right"><FONT FACE="Times New Roman" SIZE="2"><B>Total</B> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>18,700,000</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2"><B>$51.44</B> </FONT></TD></TR>
</TABLE>
<BR>







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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(1)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Consists of shares of the registrant&#146;s common stock issuable upon the
          conversion of up to 18,700,000 share purchase warrants that have been issued to
          selling shareholders pursuant to a private placement offering as described in
          this prospectus. </FONT></TD>
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          <BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
accordance with Rule 416 under the <I>Securities Act of 1933</I>, as amended, this
registration statement on Form S-1 also registers an indeterminate number of shares of the
registrant&#146;s common stock to be offered pursuant to terms which provide for a change
in the amount of securities being offered or issued to prevent dilution resulting from
stock splits, stock dividends, or similar transactions. </FONT></TD>
</TR>
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<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
shares of the registrant&#146;s common stock issuable upon exercise of the share purchase
warrants held by our placement agent for the private offering of our common stock that
closed on September 30 and November 4, 2008, and/or &#147;associated persons&#148; of this
placement agent are subject to a 180 day lock-up agreement in accordance with the
requirements of Financial Industry Regulatory Authority Rule 5110(g)(1). </FONT></TD>
</TR>
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<BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(2)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Fee is calculated in accordance with Rule 457(c) under the <I>Securities Act of
          1933</I>, as amended. </FONT></TD>
          </TR>
          </TABLE>
          <BR>



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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(3)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Estimated solely for the purpose of
calculating the amount of the registration fee pursuant to Rule 457(c) under the
<I>Securities Act of 1933</I>, as amended, and based upon the average of the last reported
bid and asking price of the registrant&#146;s common stock as reported on the
Over-the-Counter Bulletin Board on December 31, 2008. </FONT></TD>
          </TR>
          </TABLE>
          <BR>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>THE REGISTRANT HEREBY AMENDS THIS
REGISTRATION STATEMENT ON THE DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION
8(A) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
THE DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE. </FONT></P>






<p align=center>
<font size=2>ii</font></p>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>PROSPECTUS</B> </FONT> </H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dated ___________,
200_, Subject to Completion </FONT></H1>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>GLOBAL ENERGY INC.</B> </FONT>
<BR><FONT FACE="Times New Roman, Times, Serif" SIZE="2">A NEVADA CORPORATION </FONT> </P>

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<P ALIGN="Center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18,700,000 SHARES OF THE COMMON STOCK OF GLOBAL ENERGY INC. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This prospectus relates to the resale
to the public by the selling shareholders named in the &#147;<I>Selling
Shareholders</I>&#148; section of this prospectus beginning on page 13, of up to
18,700,000 shares of our common stock, $0.001 par value, which may be issued upon the
exercise of up to 18,700,000 share purchase warrants issued to selling shareholders in a
private placement offering that closed in two tranches on September 30, 2008 and November
4, 2008, respectively. These share purchase warrants were sold in private transactions
that were exempt from the registration requirements of the <I>Securities Act of 1933</I>,
as amended. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Each share purchase warrant entitles
the holder to purchase one additional share of our common stock at an exercise price of
$0.10 per share for a period of five years from the respective closing date. </FONT></P>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our common stock is quoted on the OTC
Bulletin Board under the symbol &#147;GEYI.OB&#148;. It is expected that the selling
shareholders will sell the shares acquired upon exercise of the warrants at the applicable
market price on the OTC Bulletin Board as at the time of sale. On December 31, 2008, the
closing price (last sale on the date) for one share of our common stock on the OTC
Bulletin Board was $0.07. Based on this price, selling shareholders could be expected to
receive proceeds of up to $1,309,000. </FONT></P>






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<TR VALIGN="Bottom" BGCOLOR="Silver">
     <TH><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=2>Proceeds to Selling<BR>
Shareholders</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=55%><FONT FACE="Times New Roman" SIZE="2"><B>Per Share</B> </FONT></TD>
     <TD WIDTH=44% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0.07</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD><FONT FACE="Times New Roman" SIZE="2"><B>Maximum Total</B> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$1,309,000</FONT></TD></TR>
</TABLE>
<BR>









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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We will not receive any proceeds from
the resale of shares of our common stock by selling shareholders, although we may receive
proceeds of up to $1,870,000 if all of the share purchase warrants are exercised. We will
pay for all costs associated with this registration statement and prospectus. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>OUR BUSINESS IS SUBJECT TO MANY
RISKS AND AN INVESTMENT IN OUR COMMON STOCK WILL ALSO INVOLVE A HIGH DEGREE OF RISK. YOU
SHOULD INVEST IN OUR COMMON STOCK ONLY IF YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT.
YOU SHOULD CAREFULLY CONSIDER THE VARIOUS RISK FACTORS DESCRIBED BEGINNING ON PAGE 3
BEFORE INVESTING IN OUR COMMON STOCK.</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>NEITHER THE SECURITIES AND
EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>THE INFORMATION IN THIS PROSPECTUS
IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING SHAREHOLDERS MAY NOT SELL OR OFFER THESE
SECURITIES UNTIL THIS REGISTRATION STATEMENT IS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AND BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.</B> </FONT></P>




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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>THE DATE OF THIS
PROSPECTUS IS ______________, 200_. </FONT></H1>



<p align=center>
<font size=2>iii</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table of contents has
been designed to help you find important information contained in this prospectus. We
encourage you to read the entire prospectus. </FONT></P>





<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>TABLE OF CONTENTS</B> </FONT></P>


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     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
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     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
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     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
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     <TD WIDTH=95% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk101">PROSPECTUS SUMMARY</A></B> </FONT></TD>
     <TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>1&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;OUR COMPANY</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;THE PRIVATE PLACEMENT</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;THE OFFERING</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk102">RISK FACTORS</A></B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>3&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;RISKS RELATED TO OUR BUSINESS AND FINANCIAL CONDITION</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>3&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;RISKS ASSOCIATED WITH THIS OFFERING</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>10&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;RISK RELATED TO OUR COMMON STOCK</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>11&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk103">USE OF PROCEEDS</A></B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>12&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk104">DETERMINATION OF OFFERING PRICE</A></B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>12&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk105">SELLING SHAREHOLDERS</A></B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>13&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk106">PLAN OF DISTRIBUTION</A></B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>14&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk107">DESCRIPTION OF SECURITIES TO BE REGISTERED</A></B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>16&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk108">INTERESTS OF NAMED EXPERTS AND COUNSEL</A></B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>17&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk109">INFORMATION WITH RESPECT TO THE REGISTRANT</A></B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>17&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;DESCRIPTION OF THE BUSINESS</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>17&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;WHERE YOU CAN FIND MORE INFORMATION</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>26&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;LEGAL PROCEEDINGS</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>27&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED<BR> &nbsp;&nbsp;&nbsp; SHAREHOLDER MATTERS</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>27&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF<BR>&nbsp;&nbsp;&nbsp; OPERATIONS</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>28&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;CHANGE OF PRINCIPAL ACCOUNTANT</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>30&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;COMPANY MANAGEMENT</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>31&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;EXECUTIVE COMPENSATION</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>33&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>36&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>37&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>38&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;DIRECTOR INDEPENDENCE</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>39&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk110">OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION</A></B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>39&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk111">INDEMNIFICATION OF DIRECTORS AND OFFICERS</A></B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>40&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk112">RECENT SALES OF UNREGISTERED SECURITIES</A></B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>41&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk113">EXHIBITS AND FINANCIAL STATEMENTS AND SCHEDULES</A></B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>45&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk114">UNDERTAKINGS</A></B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>48&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk115">SIGNATURES</A></B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>50&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk116">CONSOLIDATED AUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDING DECEMBER 31, 2007</A></B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>F-1&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>F-2&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;CONSOLIDATED FINANCIAL STATEMENTS  IN U.S. DOLLARS</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>F-3&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk117">INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2008</A></B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE="2"><B>F-1&nbsp;</B> </FONT></TD></TR>
</TABLE>
<BR>




<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>You should rely only on the
information contained in this prospectus and in any accompanying prospectus supplement. We
have not, and selling shareholders have not, authorized anyone to provide you with
information different from the information contained in this prospectus. The information
in this prospectus is accurate only as of the date of this prospectus, regardless of when
this prospectus is delivered or when any sale of our common stock occurs.</B> </FONT></P>



<p align=center>
<font size=2>iv</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<a name=zk101></a>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PROSPECTUS SUMMARY </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As used in this prospectus, the terms
&#147;we&#148;, &#147;us&#148;, &#147;our&#148; and &#147;our company&#148; mean Global
Energy Inc. and our subsidiaries: Global N.R.G. Pacific Ltd., Global Energy Ethiopia PLC,
Alphakat-Global Energy GmbH and Global Fuel Israel Ltd., unless the context otherwise
indicates. The use of the symbol &#147;$&#148; in this prospectus refers to United States
dollars unless otherwise indicated. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our Company </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our company was organized on February
16, 1999, under the laws of the State of Nevada, as Global Smartcards Inc. On April 28,
2003, we changed our name to Global Energy Inc. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our business address is 415 Madison
Avenue, 15th Floor, New York, NY 10017, and our telephone number is (646) 673-8435. Our
registered agent is Rite, LLC., 1905 South Eastern Ave., Las Vegas, NV 89104. Our website
is http://www.global-nrg.biz. The information contained in our website is not incorporated
by reference into this prospectus. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are a development stage company
that intends to partner with local companies, generally operators of landfill sites and
recycling facilities, to acquire, build and operate facilities in various locations around
the world that will use a proprietary technology to produce and sell high quality
synthetic diesel fuel at a production cost well below the cost to produce regular diesel
fuel, and also to potentially earn additional revenues from garbage tipping fees and
through the recycling of waste. The technology may be used to produce high quality
synthetic diesel fuel utilizing a range of feedstocks such as municipal solid waste any
hydrocarbon-based material such as biomass, plastic, paper, wood, leather, textiles, or
waste oils. Additionally, through a subsidiary jointly owned with the owner and licensor
of the technology, we have obtained certain exclusive rights to market and sell this
technology. As of the date of this prospectus, we have entered into agreements with
several major waste facility operators and operators of waste-to-energy and power
generation projects in the United States, China, United Kingdom, and Romania to build and
develop factories that will use the technology to produce synthetic diesel fuel from
municipal waste and other hydrocarbon-based feedstocks. </FONT></P>




<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have expensed approximately
$2,300,000 in the cultivation of castor plants in Southern Ethiopia. Our activities are
based in Sodo, Ethiopia and in the regions of Waletia and Goma Gofa, Ethiopia. We engaged
a large number of local independent farmers who use a portion of their existing land to
cultivate the castor seeds, or clear additional land, and trained these farmers on new
agricultural techniques. The local independent farmers seeded approximately 4,000 hectares
of land commencing in April, 2008. In the fourth quarter of 2008, the farmers harvested
several hundred tons of castor crop. In early 2009, we expect to purchase the crop from
the farmers and to sell it to different clients.</FONT></P>





<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Private Placement </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to a confidential private
placement memorandum dated July 17, 2008, as subsequently amended and restated on October
23, 2008, we sold 34 units to 30 investors for gross proceeds of $1,700,000. Each unit
consists of 500,000 shares of our common stock, per $0.001, and 500,000 share purchase
warrants. Each share purchase warrant entitles the holder to purchase one additional share
of our common stock at an exercise price of $0.10 for a period of five years from the date
of issue. As part of the commission for the private placement, we issued 1,700,000 share
purchase warrants to a placement agent. The units were sold in private transactions exempt
from the registration requirements imposed by the <I>Securities Act of 1933</I>, as
amended. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Each investor purchased the units
under the terms of a securities purchase agreement between itself and our company, dated
as of the applicable closing date. Under a registration rights agreement dated July 6,
2008, we agreed to prepare this registration statement on Form S-1 to register the shares
which may be issued to the investors and the placement agent upon exercise of the share
purchase warrants issued to them in the private placement. </FONT></P>

<p align=center>
<font size=2>1</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under the terms of an agreement
between ourselves and our senior secured lender, we required the lender&#146;s consent to
engage in this private placement transaction at a price per share that was less than
ninety percent (90%) of the bid price of our common stock determined immediately prior to
its issuance. As a partial consideration for the consent to engage in the private
placement, we issued 1,200,000 shares of our common stock to our senior secured lender. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a result of the private placement,
and including the shares issued to our senior secured lender, the number of issued and
outstanding shares of our common stock increased from 63,187,764 to 81,387,764. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Offering </FONT></H1>


<!-- MARKER FORMAT-SHEET="Exhibit 15%" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> Securities offered</B> </FONT> </TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
            Up to  18,700,000  shares of our common  stock,  $0.001 par value,  issuable
 to                                    selling  shareholders  upon the exercise of the
share purchase  warrants,  which                                    were issued  directly
to selling  shareholders  in the  private  placement  that
                                   closed in two tranches on September 30 and November 4,
2008, respectively. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 3-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=25%>&nbsp;</TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Each
share purchase warrant entitles the holder to purchase one share of our common stock at an
exercise price of $0.10 per share for a period of five years from the respective closing
date. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 3-TNR" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=25%>&nbsp;</TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Selling
shareholders may offer and sell, from time to time, any or all of the common stock
registered under this registration statement. </FONT></TD>
</TR>
</TABLE>
<BR>




<!-- MARKER FORMAT-SHEET="Exhibit 15%" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> Selling Shareholders</B> </FONT> </TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                                   1.  </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Any
one or more of the 30 investors listed in the <I>"Selling
Shareholders"</I> section of this prospectus beginning on page 13,
who received 17,000,000 share purchase
warrants to purchase our common stock in a
private placement that closed in two tranches on September 30 and
November 4, 2008, respectively. </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 4-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=25%>&nbsp;</TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                                   2.  </FONT></TD>
<TD WIDTH=70%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
           A placement agent, who received 1,700,000 share purchase warrants to purchase
          our common stock as part of a commission we paid to it for its services
rendered           in connection with the private placement. </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Exhibit 15%" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> OTC Bulletin
Board symbol</B> </FONT> </TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      GEYI.OB </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Exhibit 15%" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> Selling Price</B> </FONT> </TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Market price on the OTC Bulletin
Board, where, as of December 31, 2008, the last trading price for one share of our common
stock was $0.07. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Exhibit 15%" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> Maximum Amount
of the Offering</B> </FONT> </TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based on the closing price of $0.07
for one share of our common stock on the OTC Bulletin Board on December 31, 2008, selling
shareholders may receive maximum proceeds of $1,309,000. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Exhibit 15%" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> Common stock
outstanding</B> </FONT> </TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>81,387,764 shares as of January 5,
2009, from the total authorized share capital of 250,000,000 shares. On November 4, 2008,
our controlling shareholder approved an amendment to our articles of incorporation
increasing the authorized share capital to 750,000,000. The amendment will take effect in
January, 2009 when we will file a certificate of amendment with the Nevada Secretary of
State. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>2</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Exhibit 15%" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> Use of
proceeds</B> </FONT> </TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                We will not  receive  any of the  proceeds  from the sale of
shares  by  selling                                    shareholders.  However,  we may
receive  proceeds of up to  $1,870,000 if all of                                    the
share  purchase  warrants are  exercised.  We plan to use these proceeds for
                                   working capital purposes. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Exhibit 15%" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> Risk factors</B> </FONT> </TD>
<TD WIDTH=75%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
                  The  offering  involves a high degree of risk.  Please refer to the
various risk                                    factors  described  beginning on page 3
of this  prospectus for a description of                                    the risk
 factors you should  consider in  relation to  investing  in our common
                                   stock. </FONT></TD>
</TR>
</TABLE>
<BR>


<a name=zk102></a>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RISK FACTORS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>You should carefully consider the
risks described below, together with all of the other information in this prospectus,
before deciding to invest in our common stock. We face numerous risks that may prevent us
from achieving our goals, including but not limited to the risks described herein.
Additional unknown risks may also impair our financial performance and business
operations. Our business, financial condition and/or results of operation may be
materially adversely affected by the nature and impact of these risks. In such case, the
market value of our securities could be detrimentally affected, and investors may lose all
or part of their investment. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If we do not successfully address any
one or more of the risks described below, there could be a material adverse effect on our
financial condition, operating results and business. We cannot assure you that we will
successfully address these risks. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risks Related to our
Business and Financial Condition </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We are a development
stage company with a limited operating history and a small employee base, which makes
investments speculative.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are a development stage company
with a limited operating history upon which to base an evaluation of our current business
and future prospects. We have to date been engaged in organizational activities including
developing a strategic operating plan and entering into contracts. We currently have only
three employees. Other than limited testing activities with respect to the synthetic
diesel fuel that we propose to produce, and the planting and harvesting of castor seeds in
Ethiopia, we have not conducted any operations. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accordingly, we have a limited
operating history upon which an evaluation of our performance and prospects can be made.
Our prospects must be considered in light of the inherent risks, expenses and difficulties
encountered by companies in the early stages of development, particularly companies in new
and evolving markets. These risks include, by way of example and not in limitation,
unforeseen capital requirements, unforeseen technical problems, failure of market
acceptance, failure to establish business relationships and competitive disadvantages
against larger and more established companies. We may not be able to successfully address
any of these risks or others. Failure to do so could seriously harm our business and cause
our operating results to suffer. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We have not generated any
revenues to date and may not be able to generate revenues in the future.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have not generated any revenues to
date and do not expect to generate any revenues until after we have successfully acquired,
built and operated one or more synthetic diesel fuel manufacturing plants or harvested and
delivered a successful crop of castor seeds and commenced commercial sales. Except with
respect to potential revenue from the sale of castor seeds, we do not currently anticipate
that any of this could occur until the first quarter of 2010 at the earliest, if at all.
Any start-up delays due to problems with physical plants, staffing, permitting or other
operational issues would negatively impact our business. Any planned manufacturing plants
may not achieve projected capacity. If they do not, we could continue to suffer losses
from operations and may never become profitable. If this were to occur, our business could
fail. </FONT></P>

<p align=center>
<font size=2>3</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>We will need substantial
additional funding to pursue our business plan and fund our proposed operations. If we are
unable to obtain the funds necessary to do so, we may be required to delay, scale back or
eliminate our business plans or we may be unable to continue our business.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We plan to acquire, build and operate
facilities to manufacture renewable synthetic diesel fuel. These plans require a
commitment of funds substantially in excess of funds we currently have available. As a
result of the proceeds raised in our private placement offering of units that closed in
two tranches on September 30, 2008 and November 4, 2008, respectively, we believe that we
have sufficient funds to satisfy our basic capital needs for approximately nine months.
However, most of these proceeds of the private placements will be used to fund our general
corporate overhead. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Future capital requirements may vary
significantly and will depend on certain factors, many of which are not within our
control. These include the ongoing development and testing of the proprietary technology
which we plan to use for production of synthetic diesel fuel, the nature and timing of
licensing and sublicensing activities, plant construction, commencement of sales, the
hiring of qualified management and employees, responding to competitive pressures,
regulatory requirements and the availability of financing. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We will need to raise substantial
additional capital to fund the expansion of our business. We cannot be certain that
additional financing will be available on acceptable terms, or at all, particularly in
light of the recent economic downturn and dislocations in the credit and capital markets,
which may or may not continue. To the extent that we raise additional capital through the
sale of equity securities, the ownership position of our existing stockholders could be
substantially diluted. If additional funds are raised through the issuance of debt
securities, these securities are likely to have rights, preferences and privileges senior
to our common stock. Fluctuating interest rates could also increase the costs of any debt
financing we may obtain. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Failure to successfully address
ongoing liquidity requirements will have a material adverse effect on our business. If we
are unable to obtain additional capital on acceptable terms when needed, we may be
required to take actions that harm our business and our ability to achieve cash flow in
the future, including the possible impairment of our relationship with Alphakat GmbH,
delay of expansion plans or curtailing or ceasing operations. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Our independent
registered public accounting firm has expressed doubt about our ability to continue as a going
concern, which may hinder our ability to obtain future financing.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our consolidated financial statements
as of December 31, 2007 have been prepared under the assumption that we will continue as a
going concern for the year ending December 31, 2008. Our independent registered public
accounting firm has issued a report that included an explanatory paragraph expressing
substantial doubt about our ability to continue as a going concern without raising capital
or generating revenues. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Our ability to produce
and distribute commercial quantities of synthetic diesel fuel is unproven, which could
have a detrimental effect on our ability to generate or sustain revenues.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Production of synthetic diesel fuel
from hydrocarbon-based materials using the proprietary KDV technology has never been
tested on a commercial basis. The synthetic diesel fuel produced using this technology,
while intended as a new class of fuel for transportation and power generation and as a
heating fuel, may never achieve technical or commercial viability. All of the tests
conducted to date with respect to the KDV technology have been performed in a limited
scale environment and the same or similar results may not be obtainable at competitive
costs on a large-scale commercial basis. We have never utilized the KDV technology under
the conditions or in the volumes that will be required for it to be profitable and cannot
predict all of the difficulties that may arise. The KDV technology, when used, may require
further research, development, regulatory approvals, environmental permits, design and
testing prior to commercialization. Accordingly, the KDV technology or the synthetic
diesel fuel produced using it may not perform successfully on a commercial basis and we
may never generate any revenues or become profitable. </FONT></P>

<p align=center>
<font size=2>4</font></p>
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<page>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We may not be able to
achieve the objectives set forth in our business plan.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are focused on building and
operating a series of facilities to produce synthetic diesel fuel from municipal solid
waste, oil residuals, refinery wastes and biomass. We have not yet commenced the design,
engineering, development or construction of any synthetic diesel fuel manufacturing
plants. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We intend to work with local
partners, including local partners that have the ability to supply large quantities of the
required waste. We intend to set up three to four first generation commercial plants in
countries where strategic partners able to supply the required waste have already been
identified, including the United States, China, Israel, Poland, and Romania. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We can give no assurance that we will
be able to identify the required local partners and negotiate acceptable agreements with
them, nor can it be assured that we can achieve the objectives listed above. In addition,
the local partners that we are already working with or that we may work with in the future
may decide not to proceed with their plans to build and operate fuel production
facilities. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Our business depends on
proprietary technology that we do not own, that we may not be able to protect, and
which may infringe on the intellectual property rights of others.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our success will depend, in part, on
the commercial viability of the KDV technology and on the strength of the intellectual
property rights relating to this technology. The KDV technology consists primarily of a
proprietary turbine and a catalyst, which, when used together, enable the operator to
convert waste into synthetic diesel fuel. The KDV turbine has been patented by its
inventor, Dr. Christian Koch, in Germany, the USA, and certain other countries. The
catalyst used in the KDV technology is not protected by patent, nor is it proprietary to
us, Dr. Koch, or Alphakat GmbH. Dr. Koch has licensed Alphakat GmbH, a German company that
Dr. Koch owns and controls, to market, manufacture and sell KDV turbines. Alphakat GmbH
has granted to Alphakat-Global Energy GmbH, an equally owned subsidiary of our company and
Alphakat GmbH, a right to market and sell KDV turbines in certain areas of the world. If a
third party were to claim that Dr. Koch&#146;s patents infringe on its proprietary rights,
there can be no assurance that Dr. Koch would defend the patents or, if he did attempt to
defend them, that he would be successful. Patent litigation can be very expensive and
protracted and Dr. Koch may not have the financial means to defend such a claim. If a
third party were to prove such an infringement, Alphakat-Global Energy GmbH might not be
able to find any buyers for or partners to use the KDV technology. Because the sales
commissions that Alphakat-Global Energy GmbH hopes to earn from sales of the KDV turbines
to end users is a proposed source of significant revenue, the inability to sell KDV
turbines would have an adverse effect on our potential revenue stream. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If a third party can prove that the
KDV technology infringes on its own intellectual property rights, we might not be able to
purchase, install or operate KDV turbines, or the cost to do so may increase to the point
where it would no longer be feasible to do so. Because we propose to generate the majority
of our revenue from the construction and operation of synthetic diesel fuel production
facilities using the KDV technology, such a result could have a material adverse effect on
our proposed operations. </FONT></P>

<p align=center>
<font size=2>5</font></p>
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<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition, any agreements with our
employees, consultants, advisors and strategic partners (or those of Alphakat GmbH or
Alphakat-Global Energy GmbH) restricting the disclosure and use of trade secrets,
inventions and confidential information relating to the KDV technology may not provide
meaningful protection in the event of unauthorized use or disclosure. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dr.
          Koch&#146;s patents may not protect against the possibility that third parties
          could independently develop substantially similar technology, nor will the
          patents protect against infringement by third parties in any country where the
          KDV technology has not been patented. Because we propose to generate the
          majority of our revenue from the construction and operation of fuel production
          facilities using the KDV technology, there can be no assurance that Dr.
          Koch&#146;s intellectual property rights can prevent third parties from
          competing with us. Increased competition could result in higher prices for us
          for the raw materials used in converting waste to fuel, lower prices for the
          fuel produced, and higher operating costs, any of which could have a material
          adverse effect on our proposed operations. For a more complete discussion about
          the risks of competition, please refer to the risk factor describing the risks
          we may face from competition included in the Risk Factor titled
          &#147;<I>Competition may impair our success</I>&#148; on page 7 of this
          prospectus. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Finally, if a third party were to sue
us for an alleged infringement of its proprietary rights, we could incur substantial costs
in defending ourselves. Any such claim against us, with or without merit, would likely be
time-consuming and expensive and there is a possibility that the plaintiff in such an
action may have greater resources than we do. We may not be able to afford to pay the fees
and costs required in order to mount a defense. Any adverse finding in such an action
could have a material adverse effect on our ability to conduct our proposed operations. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>An unrelated company is
offering KDV turbines for sale in territories where our subsidiary, Alphakat-Global
Energy GmbH, has been granted the exclusive right to market and sell the KDV technology.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>An entity that has no affiliation
with us is offering KDV turbines for sale in certain west coast states of the United
States. This is in direct conflict with Alphakat-Global Energy GmbH&#146;s exclusive right
to sell the KDV technology in the United States and the rights of Covanta Energy Corp.,
our strategic partner, as provided in the agreements with Alphakat-Global Energy GmbH and
Dr. Koch. Alphakat-Global Energy GmbH and Covanta Energy Corp. have informed this
unrelated party of their respective rights and have demanded that this third party cease
and desist from all marketing and sales activities in the United States in respect of the
KDV technology. The unrelated company has not responded to the foregoing demands and we,
Alphakat-Global Energy GmbH, or Covanta Energy Corp. may need to enforce our respective
rights by proceeding to litigation, which may prove costly and there can be no assurance
that we will prevail. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Alphakat GmbH may not
deliver KDV turbines on time, or at all, and Dr. Koch may breach his agreements with
our company.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are wholly dependent on Alphakat
GmbH and Dr. Koch to manufacture and deliver KDV turbines that may be ordered from
time-to-time by us and our local partners, or by purchasers of the turbines that purchase
them through Alphakat-Global Energy GmbH. Alphakat GmbH is in the development stage and
has not yet proved its capacity to build and timely deliver KDV turbines. Delay in
production or delivery could materially and adversely impair our operations and we could
be forced to discontinue our business. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition, in the event that Dr.
Koch grants rights to third parties with respect to the KDV technology in breach of our
agreements with Dr. Koch, or otherwise does not perform any material obligations that he
may owe to us, Alphakat-Global Energy GmbH or other purchasers or users of the KDV
technology, our business may experience a substantial setback and may fail. </FONT></P>

<p align=center>
<font size=2>6</font></p>
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<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Unanticipated problems in
our engineering and construction operations may harm our business.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash flow will depend on our ability
and the ability of our local partners to timely design, construct and complete synthetic
diesel fuel manufacturing plants. If engineering and construction operations are disrupted
and/or the economic integrity of these projects is threatened for unexpected reasons, our
business may experience a substantial setback. As a development stage company, we are
particularly vulnerable to these risks. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Completion of diesel fuel
manufacturing plants will not assure a profit on the investment or recovery of
construction costs. Also, environmental damage may greatly increase the cost of
construction and various other field operating conditions may adversely affect the
construction of synthetic diesel fuel manufacturing plants. These conditions include, but
are not limited to, delays in obtaining governmental approvals or consents, attracting and
retaining qualified employees, labor relations issues and adverse geological and
mechanical conditions. These uncertainties may have a material adverse effect on our
revenue and cash flow levels to varying degrees and may result in the impairment of our
business. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Our marketing and sales
subsidiary could lose its right to market and sell the KDV technology if certain sales
thresholds are not achieved.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If Alphakat-Global Energy GmbH does
not sell at least 10 units based on the KDV technology before December 2010, it could lose
the rights to market and sell the KDV technology. This could have a material adverse
effect on our proposed business. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Our business may suffer
if we are unable to attract and/or retain talented personnel.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our success will depend in large
measure on the abilities, expertise, judgment, discretion, integrity, and good faith of
our current personnel and management and on other personnel we may hire. We currently have
3 employees. The loss of a key individual or the inability to attract suitably qualified
replacements or additional staff could adversely impact our business. Our success depends
on the ability of our management and employees to interpret market and technical data
correctly, to respond to economic, market and other conditions, and to manage effectively
the production, marketing and sale of synthetic diesel fuel using the KDV technology.
Furthermore, no assurance can be given that key personnel will continue their employment
with us or that replacement personnel with comparable skills can or will be found. If we
are unable to attract and retain key personnel, our business may be adversely affected. We
do not maintain, nor do we currently intend to procure, any &#147;key man&#148; insurance. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Competition may impair
our success.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The market for the manufacture,
marketing and sale of renewable diesel (mineral and synthetic) and other alternative fuels
is highly competitive. According to the National Bio-diesel Board (NBB), as of January 25,
2008, there were at least 171 companies engaged in the development, manufacture and
marketing of bio-diesel fuel, with current production capacity estimated at 2.24 billion
gallons per year, with actual production for the 12-month period ended September 30, 2007
of 450 million gallons. The NBB further estimated that another 1.23 billion gallons of
annual plant capacity were under development. Competition could be intense and result in
increases in the costs of feedstock, plant construction and operating expenses, as well as
make it more difficult to attract and retain qualified engineers, chemists and other
employees whose services could be key to our operations as they develop. Larger companies
that are already engaged in this business may have access to greater financial and other
resources, making it difficult to compete with them in recruiting and retaining qualified
employees as well as in acquiring attractive locations for the construction and operation
of a producing plant. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Moreover, if production capacity in
the industry increases faster than demand for alternative fuels (including synthetic
diesel fuel), sale prices could be depressed. Falling oil prices may have a negative
effect on demand for alternative fuels such as the synthetic diesel fuel that we propose
to produce. In addition to competition from other companies engaged in producing
alternative fuel, we will compete with producers of petroleum fuels. </FONT></P>

<p align=center>
<font size=2>7</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Competition from other companies
producing alternative fuels may increase if energy prices on the commodities market,
including the price of oil and alternative fuel, rise. Additionally, new companies are
constantly entering the market, thus increasing the competition for capital. This could
have a negative impact on our ability to obtain additional capital from investors. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If we are unable to compete
effectively or adequately respond to competitive pressures, our results of operation and
financial condition may be materially adversely affected. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Our management has identified a
material weakness in internal control over financial reporting and we can provide no
assurance that additional material weaknesses will not be identified in the future. Our
failure to implement and maintain effective internal control over financial reporting
could result in material misstatements in our financial statements.</I></B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our Annual Report on Form 10-K for
the fiscal year ended December 31, 2007, we reported that our management had concluded
that, as of December 31, 2007, our small size and limited number of employees resulted in
an inherent material weakness in our internal control over financial reporting because the
segregation of duties may not provide reasonable assurance that our internal control over
financial reporting is reliable and may not prevent or detect misstatements. We can
provide no assurance that we can correct this material weakness or that additional
material weaknesses in our internal control over financial reporting will not be
identified in the future. Any failure to maintain required controls, or any difficulties
that may be encountered in the implementation of new or improved controls, could result in
additional material weaknesses, cause us to fail to meet our periodic reporting
obligations or result in material misstatements in our financial statements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We may not effectively
manage future growth.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If we achieve rapid growth, it will
place a significant strain on our financial, managerial, and operational resources. To
achieve and manage growth effectively, we must continue to improve and expand our
operational and financial management capabilities. Moreover, we will need to increase
staffing and effectively train, motivate and manage our employees. Failure to manage
growth effectively could harm our business. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Prices and markets for
alternative diesel (such as renewable synthetic diesel fuel) are unpredictable and
tend to fluctuate significantly.</I></B> </FONT> </P>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The price of fuel is determined based
on world demand, supply and other factors that impact the price of synthetic diesel fuel
as well as conventional and other alternative fuels, all of which are beyond our control.
World prices for fuel have fluctuated widely in recent years and we expect that prices
will continue to fluctuate. Price fluctuations will have a significant impact on revenue,
results of operations and our general financial condition. Price fluctuations for
synthetic diesel fuel and other fuel may also impact the investment market and our ability
to raise capital through the sale of debt or equity securities. Future decreases in the
price of competing fuels may have a material and adverse effect on our financial
condition. In addition, in the United States, demand for alternative fuels is affected by
certain federal and state tax benefits. Moreover, the synthetic diesel fuel may not be
eligible for tax incentives currently provided to the alternative fuels industry. </FONT></P>




<p align=center>
<font size=2>8</font></p>
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<page>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>As of December 31, 2008,
we have outstanding short and long term debt, which, if it not repaid when due, will
permit the holders of this debt to seek renegotiation or bankruptcy alternatives, the
result of which could terminate implementation of our business plan.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2008, we had
secured convertible debentures in the principal amount of $4,000,000 outstanding plus
approximately $257,400<B> </B>in outstanding interest thereon. We have pledged all of our
assets as security for this debt to our senior secured lender. From time to time, we may
also have trade debt and equipment financing outstanding. If we are unable to repay any of
our obligations when due, our creditors could foreclose on our assets, force us into
bankruptcy or force renegotiation of the terms of the outstanding debt to terms that may
be substantially less favorable to us. In either event, our ability to pursue our business
plan would be significantly impaired and our equity could become worthless. For more
information about the recent amendment to our agreement with our senior secured lender,
please see the &#147;<I>Financing Agreement</I>&#148; section of this prospectus beginning
on page 23. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Additionally, as of December 31,
2008, we have outstanding short term loans in the approximate amount of $840,000. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Our business may be
adversely affected by regulatory and environmental risks.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our operations will be subject to
environmental risks and hazards and to environmental regulation implemented and/or imposed
by a variety of international conventions as well as federal, state, provincial and
municipal laws and regulations. Environmental laws restrict and prohibit spills,
discharges and emissions of various substances produced in association with our proposed
synthetic diesel fuel manufacturing operations. Environmental laws also require that
manufacturing plants be operated, maintained and closed in such a way that satisfies
applicable regulatory authorities. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Compliance with environmental laws
can require significant expenditures and a violation may result in the imposition of fines
and penalties, some of which may be material. Environmental legislation is evolving in a
manner that could result in stricter standards and enforcement, larger fines and liability
and potentially increased capital expenditures and operating costs. Compliance with
environmental laws may cause us to limit production, significantly increase the costs of
our operations and activities or otherwise adversely affect our financial condition,
results of operations and/or prospects. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Insurance may be
inadequate to cover liabilities.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Manufacturing plant operations can
give rise to liability for pollution, property damage, personal injury or other hazards.
We do not currently carry a policy of liability insurance insuring against these risks.
Even if we obtain insurance to address such risks, insurance policies may have
prohibitively high deductible amounts and limitations on liability, such that coverage may
not be obtainable or sufficient to cover the full extent of the liabilities. Also, some
risks may not be insurable. If we suffer a significant event or occurrence that is not
fully covered by insurance, or if the insurer of such event is not solvent, this could
result in a material adverse effect on our company and our business. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Our business is subject
to local legal, political and economic factors.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We expect to operate in Europe,
Israel, North America, China, Africa and other countries. Not all of these areas have
stable legal, political and economic conditions. For the areas that do have stable legal,
political and economic conditions, there is a risk that these conditions will change.
These risks include, but are not limited to, terrorism, military repression, interference
with private contract rights, currency fluctuations, inflation, exchange controls and
other laws or policies affecting environmental issues (including land use and water use),
workplace safety, foreign investment, foreign trade, investment or taxation, restrictions
imposed on the alternative fuel industry (such as restrictions on production) and price
and export controls. Any changes in alternative fuel policies, financial incentives,
investment regulations or a shift in political attitudes about the business that we
propose to operate could adversely affect our business and future financial results. </FONT></P>

<p align=center>
<font size=2>9</font></p>
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<page>



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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Because most of our
officers and directors are located in non-U.S. jurisdictions, our shareholders may have
no effective recourse against them for misconduct and may not be able to enforce
judgments and civil liabilities against them. </I></B> </FONT> </P>





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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Only two of our
directors, Amir Elbaz and</I></B> </FONT> </P>




<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Hedy Ram, are U.S. residents. The
remainder of our directors and officers are nationals and/or residents of countries other
than the United States, and all or a substantial portion of their assets are located
outside the United States. As a result, it may be difficult for investors to enforce
within the United States any judgments obtained against these officers or directors,
including judgments predicated upon the civil liability provisions of the securities laws
of the United States or any U.S. state. </FONT></P>






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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We were late in filing
our income tax returns and we may be assessed for late filing penalties.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our company and our subsidiaries
first filed tax returns with the Internal Revenue Service on December 15, 2008. Because we
have never had any income from operations, we are confident that we do not owe any income
tax, but the tax authorities in certain jurisdictions could assess a penalty for late
filing. We are not able to assess whether any penalties will be assessed or, if so, the
amount thereof. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risks Associated with
this Offering </FONT></H1>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Exercise of warrants
issued pursuant to the private placements of units that closed on September 30, 2008
and November 4, 2008, respectively, will dilute equity interests in our company and could
result in a decline of the trading price of our common stock.</I></B> </FONT> </P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investors who purchased units
pursuant to our private placement offering that closed in two tranches on September 30,
2008 and November 4, 2008, respectively, may exercise the share purchase warrants that
formed part of such units to be issued shares of our common stock, thereby diluting the
equity interests represented by the outstanding shares of our common stock at the date of
the exercise. Specifically, these investors exercise up to 18,700,000 share purchase
warrants to be issued up to 18,700,000 shares of our common stock, thereby increasing our
total issued and outstanding shares from 81,387,764 as of January 5, 2009 to up to
100,087,764 upon exercise of the warrants. The issuance of such shares and the associated
dilution could result in a decline in the trading price of our common stock. </FONT></P>




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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Future sales of our
common stock could adversely affect its price and our future capital-raising activities
could involve the issuance of equity securities, which would dilute your investment and
could result in a decline in the trading price of our common stock.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We may sell securities in the public
or private equity markets if and when conditions are favorable, even if we do not have an
immediate need for additional capital at that time. Sales of substantial amounts of our
common stock, or the perception that such sales could occur, could adversely affect the
prevailing market price of our common stock and our ability to raise capital. We may issue
additional common stock in future financing transactions or as incentive compensation for
our executive management and other key personnel, consultants and advisors. Issuing any
equity securities would be dilutive to the equity interests represented by our
then-outstanding shares of common stock. The market price for our common stock could
decrease as the market takes into account the dilutive effect of any of these issuances.
Furthermore, we may enter into financing transactions at prices that represent a
substantial discount to the market price of our common stock. A negative reaction by
investors and securities analysts to any discounted sale of our equity securities could
result in a decline in the trading price of our common stock. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Investors in our common
stock will experience additional dilution upon the exercise of existing options and
warrants and the conversion of existing convertible debentures.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There are 11,081,436 shares of common
stock underlying options granted pursuant to our stock option plan. In addition,
approximately 66,200,000 shares of our common stock could be issued upon the conversion of
certain outstanding convertible debentures and exercise of share purchase warrants held by
our secured lender. If the holders of those securities convert or exercise, investors in
our common stock may experience dilution in the net tangible book value of their common
stock. </FONT></P>

<p align=center>
<font size=2>10</font></p>
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<page>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risk Related to our
Common Stock </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>There is a limited market
for our common stock which may make it more difficult investors in our common stock to
resell their stock.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our common stock is quoted on the OTC
Bulletin Board under the symbol &#147;GEYI.OB&#148;. There is a limited trading market for
our common stock. Accordingly, there can be no assurance as to the liquidity of any
markets that may develop for our common stock, the ability of holders of our common stock
to sell our common stock or the prices at which holders may be able to sell our common
stock. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>The market price of our
common stock is likely to be volatile.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The market price of our common stock
is likely to be highly volatile and could fluctuate widely in price in response to various
factors, many of which are beyond our control, including: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>technological
innovations or new products and services developed by us or our competitors;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>additions
or departures of key personnel;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>sales
of our common stock;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our
ability to integrate operations, technology, products and services;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our
ability to execute our business plan;</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>operating
results below expectations;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>loss
of any strategic relationship;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>industry
developments;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>economic
and other external factors; and</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>period-to-period
fluctuations in our financial results.</FONT></TD>
</TR>
</TABLE>
<BR>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Because we have a limited operating
history, any one of these factors may be material. Our stock price may fluctuate widely as
a result of any of the above listed factors. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition, the securities markets
have from time to time experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies. These market fluctuations
may also materially and adversely affect the market price of our common stock. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We have a concentration
of stock ownership and control, which may have the effect of delaying, preventing or
deterring a change of control.</I></B> </FONT> </P>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our common stock ownership is highly
concentrated. Through ownership of shares of our common stock, Carrigain Investment Ltd.,
a company controlled by Ariel Malik and Zeev Bronfeld of Israel, beneficially owns
approximately 51.6%<B> </B>of the total 81,387,764 issued and outstanding shares of our
common stock as of January 5, 2009. If all of the share purchase warrants issued pursuant
to the private placement offering of units that closed in two tranches on September 30,
2008 and November 4, 2008, respectively, are exercised, Carrigain will own approximately
42% of the total 100,087,764 issued and outstanding shares of our common stock. As a
result of the concentrated ownership of our stock, a relatively small number of
shareholders, acting together, will be able to control all matters requiring shareholder
approval, including the election of directors and approval of mergers and other
significant corporate transactions. This concentration of ownership may have the effect of
delaying, preventing or deterring a change in control of our company. It may also affect
the market price of our common stock. </FONT></P>






<p align=center>
<font size=2>11</font></p>
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<page>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>We have not paid
dividends in the past and do not expect to pay dividends in the future.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have never paid cash dividends on
our common stock and do not anticipate paying cash dividends in the foreseeable future.
The payment of dividends on our common stock will depend on our earnings, financial
condition and other business and economic factors affecting us at such time as the board
of directors may consider relevant. If we do not pay dividends, our common stock may be
less valuable because a return on investment will only occur if our stock price
appreciates. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Our common stock is
deemed to be &#147;penny stock&#148; with a limited trading market.</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our common stock is currently listed
for trading on the OTC Bulletin Board, which is generally considered to be a less
efficient market than markets such as NASDAQ or other national exchanges. This may cause
difficulty in conducting trades and difficulty in obtaining future financing. Further, our
securities are subject to the &#147;penny stock rules&#148; adopted pursuant to Section 15
(g) of the <I>Securities Exchange Act of 1934</I>, as amended. The penny stock rules apply
to non-NASDAQ companies whose common stock trades at less than $5.00 per share or which
have tangible net worth of less than $5,000,000 ($2,000,000 if a company has been
operating for three or more years). Such rules require, among other things, that brokers
who trade &#147;penny stock&#148; to persons other than &#147;established customers&#148;
complete certain documentation, make suitability inquiries of investors and provide
investors with certain information concerning trading in the security, including a risk
disclosure document and quote information under certain circumstances. Many brokers have
decided not to trade &#147;penny stock&#148; because of the requirements of the
&#147;penny stock rules&#148; and, as a result, the number of broker-dealers willing to
act as market makers in such securities is limited. In the event that we remain subject to
the &#147;penny stock rules&#148; for any significant period, there may develop an adverse
impact on the market, if any, for our securities. Because our securities are subject to
the &#147;penny stock rules&#148;, investors will find it more difficult to dispose of our
securities. Further, for companies whose securities are traded on the OTC Bulletin Board,
it is more difficult: (i) to obtain accurate quotations, (ii) to obtain coverage for
significant news events because major wire services, such as the Dow Jones News Service,
generally do not publish press releases about such companies, and (iii) to obtain needed
capital. </FONT></P>

<a name=zk103></a>


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>USE OF PROCEEDS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We will not receive any proceeds from
the resale of shares of our common stock by the selling shareholders under this
prospectus. However, we may receive proceeds of up to $1,870,000 if all of the 18,700,000
share purchase warrants are exercised by the selling shareholders. We expect to apply such
proceeds to general corporate purposes and operations, including payment of salaries and
other executive compensation as described in the &#147;<I>Executive Compensation</I>&#148;
section of this prospectus beginning on page 33 and payment of expenses associated with
this prospectus. </FONT></P>

<a name=zk104></a>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>DETERMINATION OF
OFFERING PRICE </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This prospectus relates to the resale by
selling shareholders of up to 18,700,000 shares of our common stock that may be issued to
them upon exercise of up to 18,700,000 share purchase warrants that we issued to them in a
private placement that closed in two tranches on September 30 and November 4, 2008,
respectively. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling shareholders may sell these
shares of our common stock in the public market or through privately negotiated
transactions or otherwise. Selling shareholders may sell these shares our common stock
through ordinary brokerage transactions, directly to market makers, or through any other
means described in the &#147;<I>Plan of Distribution</I>&#148; section of this prospectus
beginning on page 14. </FONT></P>

<p align=center>
<font size=2>12</font></p>
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<a name=zk105></a>


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SELLING SHAREHOLDERS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling Shareholders comprise two
categories of shareholders: </FONT></P>

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               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Any one or more of the 30 investors listed below who received 17,000,000 share
               purchase warrants to purchase our common stock in connection with investing in
               our company through the private placement that closed in two tranches on
               September 30 and November 4, 2008, respectively. </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               A placement agent, who received 1,700,000 share purchase warrants to purchase
               our common stock as part of a commission it paid to it for its services rendered
               in connection with the private placement. </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>None of the investors listed below
have held any position or office, or had any other material relationship with us or any of
our predecessors or affiliates over the past three years. </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=1 WIDTH=100%>
<TR VALIGN="Bottom" BGCOLOR="Silver">
     <TH><FONT FACE="Times New Roman" SIZE=1>Name</FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=1>Amount of<BR>
Securities Owned<BR>
by the Security<BR>
Holder Prior to<BR>
the Offering</FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=1>Amount of<BR>
Securities Offered<BR>
for Sale by the<BR>
Security Holder</FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=1>Amount of<BR>
Securities Owned<BR>
by the Security Holder<BR>
After the Offering</FONT></TH>
     <TH ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE="1">Percentage of our<BR>
Common Stock Owned<BR>
by the Security<BR>
Holder After the<BR>
Offering<SUP>(1),(2)</SUP> </FONT></TH></TR>
<TR VALIGN="Middle">
     <TD WIDTH=40% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Anthony A. Smalarz Revocable Trust DTD 10-03-2007<SUP>(3)</SUP></FONT></TD>
     <TD WIDTH="15%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(4)</SUP></FONT></TD>
     <TD WIDTH="15%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000<SUP>(5)</SUP></FONT></TD>
     <TD WIDTH="15%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000</FONT></TD>
     <TD WIDTH="15%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Ardron 2001 Revocable Trust<SUP>(6)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Arturo Martinez</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>4,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2,000,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2,000,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Ben Hasty MD</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Bernie &amp; Rita's Limited Partnership<SUP>(7)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Bryan K. Perkins</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>John F. Callahan</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>David W. Drezner</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Thomas Rutherford</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>3,500,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,750,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,750,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1.75%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Ed Dempsey</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>F. Alan Stamper</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Gardner Family Trust Dated 5.7.08<SUP>(8)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Gero Papst</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Gregg Dovolis</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Jose Melo MD</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Joy Ellen Pitterman Rev Trust U/A 5.9.03<SUP>(9)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Mary Grace Hess<SUP>(10)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Michael J. Julik</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Neel &amp; Martha Ackerman</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Noah Drezner</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Philip G. Meng Trust U/A 12.31.86<SUP>(11)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Rafael Penunuri</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Richard C. Matter</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>RLZS Holdings, LP<SUP>(12)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Robert Abrahamsen</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Robert J. Van Hyfte Sep<SUP>(10)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Robin M. Bell<SUP>(10)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Ronald Bova</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Suzanne L. &amp; Duane Edwin Crumb</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,000,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Wayne Freeland<SUP>(10)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>500,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>250,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>National Securities Corporation<SUP>(13)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,700,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1,700,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>Nil.</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>1.7%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="Right"><FONT FACE="Times New Roman" SIZE="2"><B>Total</B> </FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>35,700,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>18,700,000<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>17,000,000</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>17%</FONT></TD></TR>
</TABLE>
<BR>

<p align=center>
<font size=2>13</font></p>
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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(1)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Percentage is listed only if it is greater than 1%. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(2)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Assuming the exercise of all of the share purchase warrants held by selling
          shareholders and based on 100,087,764 issued and outstanding shares of our
          common stock. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(3)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Anthony Smalarz, sole trustee of Anthony A. Smalarz Revocable Trust DTD
          10-03-2007, has the voting and dispositive control over these securities. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(4)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Half of the stated amount are shares of our common stock that may be issued upon
          the exercise of the share purchase warrants held by the selling shareholder. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(5)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Shares of our common stock that may be issued upon the exercise of the share
          purchase warrants held by the selling shareholder. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(6)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Gerard Ardron, sole trustee of Ardron 2001 Revocable Trust, has the voting and
          dispositive control over these securities. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(7)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Bernie and Rita Petreccia, as the trustees for the Bernie &amp; Rita&#146;s
          Revocable Management Trust, the general partner in Bernie &amp; Rita&#146;s
          Limited Partnership, have the voting and dispositive control over these
          securities. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(8)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Dennis and Peggy Catherine Gardner, trustees of the Gardner Family Trust Dated
          5.7.08, have the voting and dispositive control over these securities. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(9)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Joy Ellen Pitterman, sole trustee of the Joy Ellen Pitterman Rev Trust U/A
          5.9.03, has the voting and dispositive control over these securities. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(10)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Securities are held in an Individual Retirement Account. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(11)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Philip G. Meng, sole trustee of Philip G. Meng Trust U/A 12.31.86, has the
          voting and dispositive control over these securities. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(12)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          K. Ray Shrum, manager of RLSZ Holdings GP, LLC, the general partner in RLZS
          Holdings, LP, has the voting and dispositive control over these securities. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(13)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          National Securities Corporation was our placement agent for the private
          placement. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PLAN OF DISTRIBUTION </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling shareholders, with respect to
the shares of our common stock that may be issued to them upon exercise of the share
purchase warrants and registered via this registration statement, and any of their donees,
pledgees, transferees or other successors-in-interest selling shares of our common stock
or interests in shares of our common stock received after the date of this prospectus from
a selling shareholder as a gift, pledge, partnership distribution or other transfer, may,
from time to time, sell, transfer or otherwise dispose of any or all of such shares or
interests in such shares on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These dispositions may be at fixed prices,
at prevailing market prices at the time of sale, at prices related to the prevailing
market price, at varying prices determined at the time of sale, or at negotiated prices. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling shareholders may use any one
or more of the following methods when disposing of shares or interests therein: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>block
trades in which the broker-dealer will attempt to sell the shares as agent, but may
position and resell a portion of the block as principal to facilitate the transaction; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;</FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>14</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>an
exchange distribution in accordance with the rules of the applicable exchange;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>privately
negotiated transactions;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>through
the writing or settlement of options or other hedging  transactions,  whether  through an
          options exchange or otherwise;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>by
agreement with  broker-dealers  may agree to sell a specified number of shares at a
stipulated           price per share; and</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
combination of any of the above.</FONT></TD>
</TR>
</TABLE>
<BR>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling shareholders, may from time
to time pledge or grant a security interest in some or all of such shares and, if they
default in the performance of their secured obligations, the pledgees or secured parties
may offer and sell such, from time to time, under this prospectus, or under an amendment
to this prospectus under Rule 424(b)(3) or other applicable provision of the <I>Securities
Act of 1933</I>, as amended, amending the list of selling shareholders to include the
pledgee, transferee or other successors-in-interest as selling shareholders under this
prospectus. Selling shareholders also may transfer their shares in other circumstances, in
which case the transferees, pledgees or other successors-in-interest will be the selling
beneficial owners for purposes of this prospectus. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Broker-dealers engaged by selling
shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers
may receive commissions or discounts from selling shareholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. Such commissions and discounts should not exceed what is customary in the
types of transactions involved. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling shareholders have agreed that
they will not use shares registered in prospectus to cover short sales of our common stock
issued to them upon exercise of the share purchase warrants made prior to the date on
which this registration statement is declared effective by the Securities and Exchange
Commission. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling shareholders may enter into
option or other transactions with broker-dealers or other financial institutions or the
creation of one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by this prospectus, which
shares such broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling shareholders will receive the
aggregate proceeds from the sale of the common stock sold pursuant to this prospectus. The
aggregate proceeds to selling shareholders from the sale of such shares will be the
purchase price of such shares less discounts or commissions, if any. Each of selling
shareholders reserves the right to accept and, together with their agents from time to
time, to reject, in whole or in part, any proposed purchase of such shares to be made
directly or through agents. We will not receive any of the proceeds from the sale of
shares by selling shareholders under this offering. We will receive proceeds from selling
shareholders who exercise their share purchase warrants and pay the applicable cash
exercise price in connection with those exercises. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling shareholders also may resell
all or a portion of our common stock issued to them upon exercise of the share purchase
warrants in open market transactions in reliance upon Rule 144 under the <I>Securities Act
of 1933</I>, as amended, provided that they meet the criteria and conform to the
requirements of that rule. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selling shareholders and any
underwriters, broker-dealers or agents that participate in the sale of the shares of our
common stock registered in this registration statement or interests therein may be
&#147;underwriters&#148; within the meaning of Section 2(11) of the <I>Securities Act of
1933</I>, as amended. Any discounts, commissions, concessions or profit they earn on any
resale of the shares may be underwriting discounts and commissions under the <I>Securities
Act of 1933</I>, as amended. Selling shareholders who are &#147;underwriters&#148; within
the meaning of Section 2(11) of the <I>Securities Act of 1933</I>, as amended, will be
subject to the prospectus delivery requirements of the<I> Securities Act of 1933</I>, as
amended. </FONT></P>

<p align=center>
<font size=2>15</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In order to comply with the
securities laws of some states, if applicable, the shares of our common stock registered
under this registration statement may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in some states, such shares may
not be sold unless they have been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied with. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We will make copies of this
prospectus (as it may be supplemented or amended from time to time) available to selling
shareholders for the purpose of satisfying the prospectus delivery requirements of the
<I>Securities Act of 1933</I>, as amended. Selling shareholders may indemnify any
broker-dealer that participates in transactions involving the sale of the shares
registered in this registration statement against certain liabilities, including
liabilities arising under the <I>Securities Act of 1933</I>, as amended. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We will pay all expenses incident to
registration other than commissions, fees and discounts of underwriters, brokers, dealers
and agents. We will pay for offering expenses including the registration fee required by
the Securities and Exchange Commission, accounting fees, legal fees, printing expenses and
other related miscellaneous expenses. We have agreed to indemnify selling shareholders
against liabilities, including liabilities under the <I>Securities Act of 1933</I>, as
amended, and state securities laws, relating to the registration of the shares offered by
this prospectus. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have agreed with selling
shareholders to keep this registration statement effective until the earlier of (1) such
time as all of the shares covered by this prospectus have been disposed of pursuant to and
in accordance with this registration statement, or (2) the date on which such shares may
be sold without restriction pursuant to Rule 144 of the <I>Securities Act of 1933</I>, as
amended. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>DESCRIPTION OF
SECURITIES TO BE REGISTERED </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are registering up to 18,700,000 shares
of our common stock that may be issued to selling shareholders upon exercise of up to
18,700,000 share purchase warrants held by 30 investors and one placement agent. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>General</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of January 5, 2009, our authorized
capital stock consists of 250,000,000 shares of common stock with a par value of $0.001
per share. On November 4, our controlling shareholder approved an amendment to our
articles of incorporation increasing the authorized share capital to 750,000,000. The
amendment will take effect in January, 2009 when we will file a certificate of amendment
with the Nevada Secretary of State. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of January 5, 2009, there were
81,387,764&nbsp;shares of our common stock issued and outstanding, held by 78 shareholders
of record, and an additional 76,931,436 shares of our common stock may be issued upon the
exercise of outstanding options and warrants including the shares that we are registering
on this Form S-1. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Common Stock</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The holders of our common stock are
entitled to one vote for each share of our common stock held by them on all matters
submitted to a vote of the stockholders. The holders of our common stock do not have any
cumulative voting rights. Holders of our common stock are entitled to receive
proportionally any dividends declared by our board of directors. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the event of our liquidation or
dissolution, holders of our common stock are entitled to share ratably in all assets
remaining after payment of all debts and other liabilities. Holders of our common stock
have no preemptive, subscription, redemption or conversion rights. </FONT></P>

<p align=center>
<font size=2>16</font></p>
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<page>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Nevada Anti-Takeover Laws</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nevada Revised Statutes Sections
78.378 to 78.379 provide state regulation over the acquisition of a controlling interest
in certain Nevada corporations unless the articles of incorporation or bylaws of the
corporation provide that the provisions of these sections do not apply. Our Articles of
Incorporation and Bylaws do not state that these provisions do not apply. The statute
creates a number of restrictions on the ability of a person or entity to acquire control
of a Nevada company by setting down certain rules of conduct and voting restrictions in
any acquisition attempt, among other things. The statute is limited to corporations that
are organized in the state of Nevada; have 200 or more stockholders, at least 100 of whom
are stockholders of record and residents of the State of Nevada; and do business in the
state of Nevada directly or through an affiliated corporation. Because of these
conditions, the statute currently does not apply to our company. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Transfer Agent</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The transfer agent and registrar for
our common stock is Worldwide Stock Transfer, LLC, 885 Queen Anne Road, Teaneck, NJ, USA
07666, telephone: (201) 357-8650 and fax: (201) 357-8648. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>INTERESTS OF NAMED
EXPERTS AND COUNSEL </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The consolidated financial statements
as of December 31, 2007 and for the year ended December 31, 2007 and, cumulatively, the
period from January 1, 2007 to December 31, 2007 included in this prospectus have been so
included in reliance on the report of Kesselman &amp; Kesselman, an independent registered
public accounting firm and the Israeli affiliate of PwC, given on the authority of said
firm as experts in auditing and accounting. </FONT></P>







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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The consolidated financial statements
as of December 31, 2006, for the two years in the period ended December 31, 2006, and the
cumulative period from July 5, 2005 (the date of becoming a development stage entity)
through December 31, 2006, included in this prospectus have been so included in reliance
on the report of Chang Lee LLP Chartered Accountants (formerly Vellmer &amp; Chang,
Chartered Accountants), an independent registered public accounting firm, given on the
authority of said firm as experts in auditing and accounting. </FONT></P>

<a name=zk109></a>


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>INFORMATION WITH
RESPECT TO THE REGISTRANT </FONT></H1>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Description of the
Business </FONT></H1>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Historical Information</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our business address is 415 Madison Avenue,
15th Floor, New York, NY 10017, and our telephone number is (646) 673-8435. Our registered
agent is Rite, Inc., 1905 South Eastern Ave., Las Vegas, NV 89104. We maintain a website
located at http://www.global-nrg.biz. The information contained in this website is not
incorporated by reference into this prospectus. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are a Nevada corporation that was
incorporated on February 16, 1999 as Global Smartcards Inc. We originally planned to
market plastic cards with embedded microprocessors. However, we were unable to complete
negotiations to market these cards and did not proceed with this business plan. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In early 2003, we decided to engage
in the business of acquiring, exploring and developing crude oil and natural gas
properties in the United States. On April 28, 2003, we changed our name to Global Energy
Inc., and on June 5, 2003, we purchased certain petroleum and natural gas producing
properties and commenced oil and gas operations. </FONT></P>

<p align=center>
<font size=2>17</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During April 2005, our management
decided to seek alternative business opportunities. Effective July 1, 2005, we entered
into and subsequently effected an agreement with Roxbury Capital Group Ltd. and Qwest
Capital Inc. pursuant to which we sold substantially all of our assets, then comprising
oil and gas lease interests, for the sum of $50,000. After the completion of that sale, we
continued to look for alternative business opportunities. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On April 30, 2007, in connection with
a private placement of our securities with one foreign investor, Asi Shalgi joined as our
President and Chief Executive Officer and we began to build our current business, focusing
on the production of alternative fuels. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are currently a development stage
company that intends to acquire, build and operate facilities in various locations around
the world that will use a proprietary technology, which is described below beginning on
page 19. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Company Strategy</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the past five years, we have
observed efforts in the United States and the European Community to develop facilities for
the production of renewable, alternative fuels &#150; primarily biofuels based on corn and
other feedstocks. We believe that the United States has focused primarily, on ethanol
while the European Community has focused primarily on biodiesel. Today, the production of
both ethanol and biodiesel has been constrained by price increases for their respective
primary feedstocks, corn and rapeseed (Canola). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Against this background, the emerging
alternative fuels industry has placed a high priority on developing and deploying new
technologies capable of utilizing abundant waste streams instead of corn and other
feedstocks for the production of alternative fuels. While we have noted that much
attention has been focused on high profile waste streams such as municipal solid waste
(&#147;<B>MSW</B>&#148;) and biomass waste derived from agriculture and forestry, we
believe that there are many other high volume industrial waste streams available to be
converted into alternative fuels. We have also determined that unlike traditional biofuels
based on corn and other food-based feedstocks, which must be purchased in order to be
converted into ethanol or biofuel, the utilization of waste streams as feedstocks to
produce alternative fuels also offers the potential of earning additional revenues from
garbage tipping fees and through the recycling of waste. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>With the above factors in mind, we
have developed our business plan to take advantage of these potential dual revenue streams
through the utilization of a patented technology known as the KDV process. The KDV process
has been developed during the past thirty years by a German scientist, Dr. Christian Koch.
The KDV process, which Dr. Koch describes as a catalytic de-polymerization, utilizes
hydrocarbon-based feedstocks such as biomass, wood and paper as well as plastic, rubber
and waste oils, to produce high quality synthetic diesel fuel, similar to diesel fuel
available at the pump today. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our strategy is to build, own and
operate, on our own and with strategic partners, industrial scale facilities that will
utilize this technology to produce synthetic diesel fuel from different types of
hydrocarbon-based waste. In each project, we plan to partner with local companies,
generally operators of landfill sites and recycling facilities, that have the ability
under long term contracts to supply large, consistent quantities of appropriate waste
feedstock as well as arrange off-take agreements for the diesel fuel. We also expect that
such local partners will have the requisite regulatory and technical expertise to obtain
necessary governmental approvals for the diesel fuel producing facilities based on this
technology. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based on the production capabilities
demonstrated by pilot projects utilizing this technology, we believe that a single KDV500
unit is capable of producing approximately 500 litres of synthetic diesel fuel per hour,
or approximately 4,380,000 litres (approximately 1,200,000 gallons) of synthetic diesel
fuel per year. </FONT></P>

<p align=center>
<font size=2>18</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are currently negotiating with
potential local partners to build plants in the United States, China, and Romania. We
anticipate that each plant should initially begin operations with one or more KDV500 units
with plans to subsequently expand to industrial scale facilities with the capacity to
produce approximately 15-20 million gallons per year of diesel fuel. We believe that at
optimal capacity, these facilities should be capable of producing synthetic diesel fuel at
a net cost of approximately $1.20 per gallon given a zero feedstock cost. In addition, we
believe that it will be able to negotiate agreements under which it will collect tipping
fees for taking and processing MSW. When these tipping fees are factored in, the net cost
should be significantly lower. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the next five years, and
assuming that we have sufficient capital, we plan to build 10-15 industrial scale
facilities worldwide with combined annual production capacity of approximately 200-300
million gallons of synthetic diesel fuel. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Description of the KDV
Technology</I></B> </FONT> </P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><U>KDV Process</U></I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The KDV process, which we believe
represents a major breakthrough in the quest for renewable energy sources, utilizes
proprietary technology developed by Dr. Koch, which he had licensed to his German company,
Alphakat GmbH. Dr Christian Koch is a distinguished scientist who during his long-standing
career at Siemens Corporation held several senior positions. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The core elements of the KDV process
are a catalyst and a patented turbine. Known technically as catalytic de-polymerization,
the KDV process takes long carbon chains (polymers) and breaks them into the shorter
carbon chains that comprise a high quality diesel fuel. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Catalysts are chemical compounds that
facilitate chemical reactions but, because they are not consumed in the process, can be
recovered and used again. In layman terms, Dr. Koch describes the KDV process catalyst as
a mixture of substances found in nature, which over millions of years converted organic
matter such as plants and micro-organisms into the primary fossil fuels such as oil, gas
and coal. The catalyst&#146;s primary ingredients are silicon, alumina and sodium, which
are among the most prevalent substances on Earth, therefore, we believe that the catalyst
will not be subject to any supply risks. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The patented turbine, which Dr. Koch
designed, is critical to the KDV process. According to Dr. Koch, the turbine creates the
conditions required for the catalyst to work efficiently. Each KDV500 unit has two
turbines, each of which is approximately 3&#146; long x 14&#148; wide x 14&#148; high.
Conceptually, the turbine is like a blender spinning at 3,000 RPM. The spinning of the
turbine creates friction and raises the temperature of the catalyst and feedstock, which
are suspended in a host oil at 545 degrees Fahrenheit. At this temperature, steam is
created and vented into a standard distillation column where it is condensed into
synthetic diesel fuel and water. We have observed that the only by-product or waste
associated with the process is a small amount of cake comprised of inorganic material or
ash, and no emissions are released to the atmosphere except CO<SUB>2</SUB> and steam. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We believe that the KDV process is an
improvement over gasification and pyrolysis, which are the two main types of processes
currently being developed by other companies as part of their efforts to find commercially
successful waste-to-fuel solutions. We believe that while different, both of these
processes share certain traits that make them less efficient and hence less economically
attractive than the KDV process. According to industry standards, these processes operate
at temperatures ranging from 800 to 1,800 degrees Fahrenheit, considerably higher than the
KDV process. As a result, the basic cost to build and operate these types of facilities is
greater than with the KDV process due to design issues, high energy consumption, and
environmentally hazardous by-products, which require special disposal, treatment or
further refining. </FONT></P>

<p align=center>
<font size=2>19</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>When describing alternative fuels,
&#147;net energy balance&#148; which measures energy input versus output, is an important
measure of efficiency. We believe that the KDV process requires 1 unit of energy input to
produce 7 to 8 units of energy, depending on the feedstock. In contrast, production of
corn-based ethanol requires 1 unit to produce 1.25 units, while biodiesel requires 1 unit
to produce 3.2 units. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><U>Feedstocks</U></I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>According to Dr. Koch, the KDV
process is capable of utilizing virtually any hydrocarbon-based waste stream to produce
synthetic diesel fuel. Depending on the particular feedstock, one KDV500 unit requires
approximately 5,760 to 13,200 tons of feedstock per year to produce approximately 1.2
million gallons of synthetic diesel fuel. We believe that the key commercial issue is
sourcing a reliable, consistent, long-term supply of waste feedstock for each project. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have determined that municipal
solid waste (&#147;<B>MSW</B>&#148;) is in abundant supply. Broadly defined, MSW may
include plastic, rubber, paper, cardboard and various food waste. It requires major
financial and logistical resources to collect, recycle and arrange final disposal.
Population growth and landfill constraints are placing greater financial and logistical
pressure on the waste management resources of municipalities. Therefore, environmentally
and fiscally acceptable waste-management practices are increasingly essential in order to
avoid damaging consequences, such as those due to toxic/hazardous waste, greenhouse-gas
emissions, water pollution, air pollution and noise/visual impact of recycling/waste
disposal facilities. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are (i) aware of three primary
types of municipal waste treatment technologies that are currently used today:
incineration/gasification, (ii) chemical decomposition, and (iii) landfill burying. These
technologies have substantial negative economic and environmental impacts, particularly
from production of hazardous byproducts such as toxic ash, toxic water, and noxious air
emissions. Due to the harm they pose to the environment, it is expensive to dispose of
these hazardous by-products. We believe that until now efforts to produce energy or fuel
from MSW and landfills has been limited to two options: (i) burning MSW in waste-to-energy
plants to produce steam to generate electricity or heat for buildings; and (ii) capturing
methane from landfills. The KDV process offers another option, which we believe avoids the
by-products of existing treatment technologies and as a result should be more cost
effective. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition to MSW, we believe the
KDV process can be applied to: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>refinery
residuals, such as petroleum coke, tar and paraffin, which cannot be used today, are
environmentally harmful and very expensive to neutralize </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>used
oil from engines, organic wastes, sewerage sludge and animal manures;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>all
types of waste biomass such as corn stover, sugar cane bagasse and other types of plant
stalks and parts such as peal and husks that are left over after harvesting edible
grains, juices and oils; and </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT> </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>glycerin.</FONT></TD>
</TR>
</TABLE>
<BR>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>While we believe that the KDV process
can utilize a broad range of feedstocks as outlined above, we plan to focus on projects
where we are able to sign long term contracts for waste feedstocks for which we will be
paid a tipping fee. We have estimated that tipping fees for MSW and non-hazardous waste
average about $35 per ton in the US and $60 per ton in Europe. </FONT></P>

<p align=center>
<font size=2>20</font></p>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Strategic Agreements</I></B> </FONT> </P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><U>Alphakat GmbH Agreements</U></I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our plan to set up a series of
worldwide waste-to-diesel production facilities is reflected by the terms of three
agreements with Dr. Koch&#146;s company Alphakat GmbH: </FONT></P>

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               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               &#147;Terms of agreement&#148; between us and Alphakat GmbH, dated May 2, 2007,
               agreeing to incorporate an equally-owned subsidiary which would be granted
               certain exclusive rights with respect to the KDV technology; </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               &#147;Shareholders&#146; Agreement&#148; between us and Alphakat GmbH, dated
               July 10, 2007, agreeing on the terms of operation of Alphakat-Global Energy GmbH
               and the scope of the rights with respect to the KDV technology granted to it;
               and </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               Incorporators&#146; agreement and articles of Alphakat-Global Energy GmbH, dated
               October 8, 2007, by which we and Alphakat incorporate Alphakat-Global Energy
               GmbH as equal shareholders, and by which Alphakat granted Alphakat-Global Energy
               GmbH certain rights with respect to the KDV technology. </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under these three agreements,
Alphakat GmbH has granted Alphakat-Global Energy GmbH, the equally-owned subsidiary of
Alphakat GmbH and ourselves, the following rights: </FONT></P>

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               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               The exclusive right to sell and market KDV500 units worldwide, subject to rights
               previously granted to third parties to sell the KDV units Bulgaria, Spain,
               Portugal, Italy, Mexico, and Canada, and to co-operate in establishing plants
               using the KDV technology in Spain and Mexico. </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               The exclusive right to sell and market KDV units based on turbines larger than
               350kW in the United States and China. </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><U>Business Development
Agreements</U></I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On February 6, 2008, each of Dr.
Koch, Alphakat GmbH, and Alphakat-Global Energy GmbH entered into agreements with Covanta
Energy Corp., a wholly owned subsidiary of Covanta Holding Corporation, an internationally
recognized owner and operator of waste-to-energy and power generation projects. Covanta
Holding&#146;s facilities convert municipal solid waste into renewable energy for numerous
communities, predominately in the United States. Under the terms of these agreements,
Covanta Energy Corp. has the exclusive right to purchase, use and make improvements to the
KDV technology in the United States for household waste feedstock, and non-exclusive
rights to use the technology in China, United Kingdom and the Republic of Ireland. In
accordance with the terms of this agreement, to preserve these rights, Covanta Energy
Corp. purchased a KDV500 unit though Alphakat-Global Energy GmbH on July 8, 2008, and will
begin its commissioning in the near future. Covanta Energy Corp. must try to complete
testing of the unit within the following six months. If Covanta Energy Corp.&#145;s tests
are positive, and it wishes to proceed further with its deployment of the KDV technology,
then it must order five additional KDV500 units within twelve months of the commissioning
date of the first KDV500 unit. Over a ten-year period, which begins on the commissioning
date of the first unit, Covanta Energy Corp. must order a total of 600 KDV500 units or
equivalent limits in terms of production capacity. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Covanta Energy Corp. has also granted
us the right to fund and own up to 35% of each of Covanta Energy Corp.&#145;s KDV-based
projects. In addition, Covanta Energy Corp. has agreed to pay us an amount equal to 10% of
the gross revenue of each of Covanta Energy Corp.&#145;s KDV-based projects, regardless of
whether we invest in these projects or not. </FONT></P>

<p align=center>
<font size=2>21</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On February 6, 2008, Alphakat-Global
Energy GmbH and American Renewable Diesel executed an agreement granting to American
Renewable Diesel the right to sell and use the KDV technology in five U.S. states: Texas,
California, New York, New Jersey and Florida. American Renewable Diesel is a special
purpose company owned and managed by Trianon Partners. Trianon Partners has extensive
international project development experience, has worked with Covanta Energy Corp. in
connection with various power projects, has facilitated the negotiation of the agreements
between Alphakat-Global Energy GmbH, us, and Covanta Energy Corp. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Similar to the business arrangement
with Covanta Energy Corp., we have the right to fund and own up to 51% of each of American
Renewable Diesel&#146;s KDV-based projects. Furthermore, under the terms of this
agreement, certain projects will be offered to Covanta Energy Corp. for development and we
will have the opportunity to receive royalties from such projects in accordance with our
agreement with Covanta Energy Corp. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><U>Joint Venture Agreement
with S.C. Supercom S.A</U></I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On November 11, 2008, we entered into
a Joint Venture Agreement with S.C. Supercom S.A., a Romanian company engaged in the
business of collecting (and landfilling) municipal solid waste in and around the City of
Bucharest, and S.C. Target Group S.R.L., a Romanian company. Our company and Supercom have
agreed to incorporate a legal entity in Romania under the name &#147;Super Energy
S.A.&#148;, to engage in converting municipal solid waste into synthetic diesel fuel in
Romania using the KDV technology. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The initial share capital of Super
Energy S.A. is to be 51% held by us and 49% held by Supercom, with each contributing 5% of
their shares to Target Group upon incorporation of Super Energy S.A. so that the share
capital of Super Energy S.A. would be held in the following manner: our company &#150;
46%, Supercom &#150; 44%, and Target Group &#150; 10%. Initially, the board of directors
of Super Energy S.A. will comprise four board members, with each of Supercom and ourselves
entitled to appoint two. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition, we agreed that Supercom
would purchase the first KDV system and install it by no later than April 30, 2009, with
Supercom transferring it to Super Energy S.A. upon demonstration of the economic
feasibility of this system, 30 days of continuous operation, and production at 75%
efficiency, all at the same cost and terms to which Supercom agreed in the agreement.
Alphakat-Global Energy GmbH is to guarantee, together with Alphakat GmbH, the performance
of the installation to the established parameters, specifically, processing municipal
solid waste and generating 500 litres of synthetic diesel per hour. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All projects undertaken under this
agreement are to be financed by Supercom providing 100% of the required equity via a
special purpose vehicle, and Super Energy S.A. reimbursing Supercom for investments made
on its behalf. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Finally, we agreed that Super Energy
S.A. would distribute to its shareholders at least 25% of all annual net profits after tax
and after repayment of shareholder loans, in the form of dividends or otherwise. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><U>Memorandums of
Understanding with Shaanxi ShenMu SanJian Coal Chemical Co. Ltd.</U></I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On March 9, 2008, we have entered
into a Memorandum of Understanding with Shaanxi ShenMu SanJian Coal Chemical Co. Ltd., a
company located in the People&#146;s Republic of China, involved in the field of
converting charcoal coal to oil and blue coal by pyrolysis. </FONT></P>

<p align=center>
<font size=2>22</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under the terms of this MOU, pending
completion of due diligence of the KDV technology, our company and Shaanxi plan to jointly
create a new subsidiary, in which we would 51% and Shaanxi would own 49% of the equity. If
Shaanxi is successful in bringing Sinopec Beijing Governmental Energy Company as an equity
partner, our interest in the new subsidiary would be 26%. The new entity would initially
build, own and operate a plant that will utilize the KDV technology to produce ten
thousand (10,000) liters of diesel per hour from tar oil. Shaanxi is a producer of blue
coal and generates significant quantities of tar oil as a byproduct. Shaanxi would provide
the new company with tar oil at a discount to the published market price for conversion
into high quality diesel fuel. This MOU provides for further development of the KDV
technology-based facilities after a successful trial run of the initial system. Under the
terms of the MOU, we would be entitled to royalties from the sale of diesel fuel produced
by this jointly owned subsidiary. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Completion of the transaction based
on this MOU is subject to due diligence and negotiation of final documentation. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Other Operations &#150;
Production of Crude Castor Oil in Ethiopia</I></B> </FONT> </P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have expensed approximately
$2,300,000 in the cultivation of castor plants in Southern Ethiopia. Our activities are
based in Sodo, Ethiopia and in the regions of Waletia and Goma Gofa, Ethiopia. We engaged
a large number of local independent farmers who use a portion of their existing land to
cultivate the castor seeds, or clear additional land, and trained these farmers on new
agricultural techniques. The local independent farmers seeded approximately 4,000 hectares
of land commencing in April, 2008. In the fourth quarter of 2008, the farmers harvested
several hundred tons of castor crop. In early 2009, we expect to purchase the crop from
the farmers and to sell it to different clients.</FONT></P>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have also implemented a research
and development program to achieve a new species of castor to improve future yields.
Pursuant to the amending and restating agreement with our senior secured lender dated
September 22, 2008, described in detail in the &#147;<I>Financing Agreement</I>&#148;
section of this prospectus beginning below, we have agreed to pay our senior secured
lender, towards the repayment of our debt, 50% of all cash flows generated by our
Ethiopian operations in excess of the first $700,000 of cash flow. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Financing Agreement</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On July 10, 2007, October 23, 2007,
and December 27, 2007, we issued 10% secured convertible debentures to our senior secured
lender for gross proceeds of $3,000,000, as a part of a private placement of up to
$4,000,000 of debentures. These debentures are secured against all of our assets. Prior to
the amendment to the securities purchase agreement on March 20, 2008, described below,
these debentures were convertible by the lender into shares of our common stock at a fixed
conversion price of $2.20 per share. In conjunction with the placement of these debentures
with our senior secured lender, on July 10, 2007, we also issued to the lender warrants to
purchase 300,000 shares of common stock exercisable for five years at an exercise price of
$2.35 and warrants to purchase additional 300,000 shares of our common stock exercisable
for five years at an exercise price of $2.50. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On March 20, 2008, we entered into an
amendment to the securities purchase agreement with our senior secured lender that amended
the terms of the convertible debentures issued July 10, 2007, October 23, 2007, and
December 5, 2007, as follows: </FONT></P>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               the amount of convertible debentures we agreed to issue prior to a registration
               statement registering the shares of our common stock to be issued on conversion
               of the convertible debentures becoming effective was changed from $3,000,000 to
               $3,500,000; </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               conversion price was changed from $2.20 to $1.25 for all debentures held by the
               lender; and </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               exercise price was changed from $2.50 and $2.35 to $1.25 for all warrants issued
               to the lender. </FONT></TD>
               </TR>
               </TABLE>
               <BR>

<p align=center>
<font size=2>23</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All of the other provisions of the
securities purchase agreement, pursuant to which debentures were issued to the lender on
July 10, 2007, October 23, 2007, and December 5, 2007, remained in full force and effect. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On March 20, 2008 and May 13, 2008,
we issued two more 10% secured convertible debentures to our senior secured lender for
gross proceeds of $1,000,000. These debenture mature on October 31, 2010 and, prior to the
amending and restating agreement dated September 22, 2008, described below, were
convertible by the lender into shares of our common stock at a fixed conversion price of
$1.25 per share, subject to further adjustment as further set out in the debenture. These
debentures, as the three previously issued to the lender, are secured against all of our
assets. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under the terms of the debenture
issued on May 13, 2008, amortizing payments of the outstanding principal amount of the
debenture and accrued interest at an annual rate equal to 10% were to commence on the
first business day on or after July 31, 2008, and were to continuing on the first business
day of each successive calendar month thereafter until the principal amount has been
repaid in full, whether by the payment of cash or by the conversion of the principal
amount and interest into Common Stock. Other terms of this debenture were the same as in
the debentures previously issued to our senior secured lender. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective July 15, 2008, we entered
into an amending agreement with our senior secured lender with respect to outstanding
secured convertible debentures in the aggregate principal amount of $4,000,000, and
warrants to purchase 600,000 shares of our common stock issued by our company to the
lender. The amendment allowed us to immediately defer certain principal and interest
payments due under these debentures.&nbsp;Specifically, under the terms of the July 15,
2008 amending agreement, interest payments accrued and due during the first three quarters
of the 2008 calendar year (approximately $267,000 as of July 31, 2008) were deferred
until&nbsp;approximately September 30, 2008.&nbsp;In addition, principal installments that
were due July 31, 2008 and August 31, 2008 were deferred until September 30, 2008, subject
to further deferment&nbsp;if certain conditions were met.&nbsp;In consideration of the
amendment, we agreed to issue to the lender 200,000 restricted shares of our common stock. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On September 22, 2008, prior to the
due date of the deferred principal and interest payments under the July 15, 2008 amending
agreement, which had not been paid to that date, we entered into an amending and restating
agreement with our senior secured lender on the following terms: </FONT></P>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               the lender agreed to defer payment of interest that had accrued on the
               $4,000,000 aggregate principal balance represented by the five secured
               convertible debentures held by it to a date as late as October 31, 2008, subject
               to further deferment, but only if we completed an offering of at least
               $1,500,000 in gross proceeds on or before October 31, 2008; </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               the lender agreed to defer payment of the principal installments that were due
               on July 31, August 31, and September 30, 2008 until October 31, 2008, subject to
               further deferment, but only if we completed an offering of at least $1,500,000
               in gross proceeds on or before October 31, 2008; </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               the rate of interest to be charged on the aggregate principal amount of
               $4,000,000 pursuant to the convertible debentures was increased from 10% to 12%;
               and </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               we agreed to issue 1,000,000 restricted shares of our common stock to the lender
               (in addition to the 200,000 shares issued under the July 15, 2008 amending
               agreement). </FONT></TD>
               </TR>
               </TABLE>
               <BR>

<p align=center>
<font size=2>24</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition, the amending and
restating agreement provides for the following, but only if (and when) we complete an
offering of at least $1,500,000 in gross proceeds on or before October 31, 2008: </FONT></P>

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               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               we would make a payment in the amount of $180,000 for interest accrued and
               unpaid on the aggregate principal amount of $4,000,000, to be paid directly from
               the gross proceeds of the offering, and a payment of an additional amount equal
               to 10% of the gross proceeds from the offering if we raised gross proceeds of
               between $2,200,000 and $3,900,000; </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               we would make payments on account of the indebtedness represented by the
               convertible debentures in an amount equal to 50% of all cash flows generated by
               our Ethiopian subsidiary, Global Energy Pacific Limited, in excess of the first
               $700,000 in cash flow, to be paid on each installment payment date set out on
               the revised installment payment schedule described in paragraph (5) below; </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               we would reduce the conversion price of all secured convertible debentures
               issued and outstanding to the lender from $1.25 to $0.10 per share, in each case
               as already required by the terms of those secured convertible debentures; </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               we would reduce the exercise price of all warrants held by the lender from $1.25
               to $0.10 per share, and an increase in the number of shares of our common stock
               to be issued upon exercise of those warrants from 600,000 to 7,500,000 shares of
               our common stock, in each case as already required by the terms of those
               warrants; and </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(5) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               we would revise the repayment schedule for the debentures issued to the lender
               to provide for the following: </FONT></TD>
               </TR>
               </TABLE>
               <BR>





<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="1" WIDTH="70%" ALIGN="Center">
<TR VALIGN="Bottom" BGCOLOR="Silver">
     <TH><FONT FACE="Times New Roman" SIZE=2>Installment Payment</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=2>Company Redemption Amount</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=2>Company Conversion Amount</FONT></TH></TR>
<TR VALIGN="Middle">
     <TD WIDTH=30% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>November 2008</FONT></TD>
     <TD WIDTH=55% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">$0 + Variable Redemption Amount ("<B>VAR</B>")<SUP>(1)</SUP> </FONT> </TD>
     <TD WIDTH=15% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$25,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>December 2008</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">$0 + VAR<SUP>(1)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$35,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>January 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">$10,000 + VAR<SUP>(1)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$50,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>February 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">$10,000 + VAR<SUP>(1)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$60,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>March 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">$10,000 + VAR<SUP>(1)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$70,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>April 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">$10,000 + VAR<SUP>(1)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$70,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>May 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">$10,000 + VAR<SUP>(1)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$70,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>June 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">$10,000 + VAR<SUP>(1)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$75,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>July 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">$10,000 + VAR<SUP>(1)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$75,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>August 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">$10,000 + VAR<SUP>(1)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$75,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>September 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">$10,000 + VAR<SUP>(1)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$75,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Each Month Thereafter</FONT></TD>
     <TD ALIGN=CENTER colspan=2><FONT FACE="Times New Roman" SIZE="2">$225,000<SUP>(2)</SUP> </FONT></TD></TR>
</TABLE>
<BR>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(1)</SUP></FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>          Under
the terms of this amending and restating agreement, the variable           redemption
amount equals to 4% of the amount by which the total gross proceeds           raised in
the fall of 2008 private placement exceed $2,200,000. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(2)</SUP> </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>         This
amount may be paid at our discretion as a combination of company redemption           and
company conversion amounts in accordance with the terms of the debentures           held
by the lender. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On September 30, 2008, we closed the
first stage of a private placement, selling 30 units at a price of $50,000 per unit,
raising an aggregate of $1,500,000 in gross proceeds. Each unit consisted of 500,000
shares of our common stock and 500,000 share purchase warrants with an exercise price of
$0.10 per share, exercisable for a period of five years. Detailed information regarding
this private placement may be found in the section entitled &#147;<I>The Private
Placement</I>&#148; beginning on page 1. </FONT></P>

<p align=center>
<font size=2>25</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a result of our closing the first
franchise of the private placement the offering on September 30, 2008, the provisions of
this amending and restating agreement conditional on raising at least $1,500,000 in the
private placement, as set out above, became effective, including the reduction of the
exercise price and conversion price of the warrants and convertible debentures held by our
senior secured lender, respectively, to $0.10, and the increase of the number of shares of
our common stock to be issued upon exercise of those warrants from 600,000 to 7,500,000. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On November 4, 2008, we closed the
second stage of our private placement, selling 4 units at a price of $50,000 per unit,
raising an aggregate of $200,000 in gross proceeds. Under the terms of this amending and
restating agreement, based on the total gross proceeds of $1,700,000 raised in the private
placement, we became obligated to pay the following amounts: </FONT></P>










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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               $180,000 for interest accrued and unpaid on the aggregate principal amount of
               $4,000,000, to be paid directly from the gross proceeds of the private
               placement; </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               on account of the indebtedness represented by the debentures held by the lender,
               an amount equal to 50% of all cash flows generated by our Ethiopian operations
               in excess of the first $700,000 in cash flow, to be paid on each installment
               payment date set out above; </FONT></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               monthly installment payments as follows: </FONT></TD>
               </TR>
               </TABLE>
               <BR>




<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="1" WIDTH="70%" ALIGN="Center">
<TR VALIGN="Bottom" BGCOLOR="Silver">
     <TH><FONT FACE="Times New Roman" SIZE=2>Installment Payment</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=2>Company Redemption Amount</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=2>Company Conversion Amount</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=30% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>November 2008</FONT></TD>
     <TD WIDTH=55% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0<SUP>(1)</SUP></FONT></TD>
     <TD WIDTH=15% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$25,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>December 2008</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">$0<SUP>(1)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$35,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>January 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$10,000<SUP>(1)</SUP></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$50,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>February 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$10,000<SUP>(1)</SUP></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$60,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>March 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$10,000<SUP>(1)</SUP></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$70,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>April 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$10,000<SUP>(1)</SUP></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$70,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>May 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$10,000<SUP>(1)</SUP></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$70,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>June 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$10,000<SUP>(1)</SUP></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$75,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>July 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$10,000<SUP>(1)</SUP></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$75,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>August 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$10,000<SUP>(1)</SUP></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$75,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>September 2009</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$10,000<SUP>(1)</SUP></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$75,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Each Month Thereafter</FONT></TD>
     <TD ALIGN=CENTER colspan=2><FONT FACE="Times New Roman" SIZE=2>$225,000<SUP>(2)</SUP></FONT></TD></TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(1)</SUP></FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>          Because
the total gross proceeds raised in the private placement were           $1,700,000, the
variable redemption amount, which under the terms of the           amending and restating
agreement equals 4% of the amount of gross proceeds           raised in the private
placement that exceed $2,200,000, is $0. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(2)</SUP></FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>          This
amount may be paid at our discretion as a combination of the company           redemption
and company conversion amounts in accordance with the terms of the           debentures
held by the lender. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2008, we are not
in material breach of any of our obligations under this amending and restating agreement. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Where You Can Find More
Information </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have filed with the Securities and
Exchange Commission a registration statement on Form S-1 under the <I>Securities Act of
1933</I>, as amended, with respect to the shares offered hereby. This prospectus, which is
part of the registration statement, does not contain all of the information in the
registration statement. Certain items of the registration statement are contained in
exhibits and schedules as permitted by the rules and regulations of the Securities and
Exchange Commission. Statements made in this prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete; you should
read any such contract, agreement or other document filed as an exhibit to the
registration statement for a more complete description of the matter involved. </FONT></P>

<p align=center>
<font size=2>26</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are subject to the informational
requirements of the <I>Securities and Exchange Act of 1934</I>, as amended, and file
reports and other information with the Securities and Exchange Commission. Reports and
other information which we file with the Securities and Exchange Commission, including the
registration statement on Form&nbsp;S-1 of which this prospectus is a part, may be
inspected and copied at the public reference facilities of the Securities and Exchange
Commission at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information
regarding the operation of the public reference room by calling the Securities and
Exchange Commission at 1-800-SEC-0330. In addition, the Securities and Exchange Commission
maintains a web site that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the Securities and Exchange
Commission at http://www.sec.gov. Our Internet address is http://www.global-nrg.biz.
Information contained in our website does not constitute a part of this prospectus. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Legal Proceedings </FONT></H1>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of January 5, 2009, we know of no
material, existing or pending legal proceedings against us, nor are we involved as a
plaintiff in any material proceeding or pending litigation. There are no proceedings in
which any of our directors, executive officers or affiliates, or any registered or
beneficial shareholder, is an adverse party or has a material interest adverse to our
interest. </FONT></P>




<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Market Price of and
Dividends on the Registrant&#146;s Common Equity and Related Shareholder Matters </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Market Information</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our stock is listed for quotation on the
OTC Bulletin Board under the symbol &#147;GEYI.OB&#148;. Trading in our common stock has
occurred on a relatively inconsistent basis and the volume of shares traded has been
limited. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table sets forth, for
the periods indicated, the high and low bid information for each quarter within the last
two fiscal years ended December 31, 2007, and each subsequent interim period as reported
by the quotation service operated by the OTC Bulletin Board. All quotations for the OTC
Bulletin Board reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.</FONT></P>







<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="1" WIDTH="70%" ALIGN="Center">
<TR VALIGN="Bottom" BGCOLOR="Silver">
     <TH><FONT FACE="Times New Roman" SIZE=2>Quarter Ended</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=2>Bid High</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=2>Bid Low</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=30% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>09/30/2008</FONT></TD>
     <TD WIDTH=55% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0.55</FONT></TD>
     <TD WIDTH=15% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0.10</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>06/30/2008</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0.72</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0.40</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>03/31/2008</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0.80</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0.30</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>12/31/2007</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0.99</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0.25</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>09/30/2007</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$1.75</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0.25</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>06/30/2007</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$2.00</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>03/31/2007</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>12/31/2006</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>09/30/2006</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>06/30/2006</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>03/31/2006</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0</FONT></TD></TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On December 31, 2008, the closing
price for our common stock as reported by the OTC Bulletin Board was $0.07.</FONT></P>

<p align=center>
<font size=2>27</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Holders</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of January 5, 2009, there were
81,387,764&nbsp;shares of our common stock issued and outstanding, held by 78 shareholders
of record, and 76,931,436 shares of our common stock were purchasable pursuant to
outstanding options and warrants, including the 18,700,000 shares that may be issued to 30
investors and a placement agent pursuant to warrants issued to them in a private placement
that closed in two tranches on September 30 and November 4, 2008, respectively. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of January 5, 2009, the total
authorized capital of our common stock is 250,000,000 shares. On November 4, our
controlling shareholder approved an amendment to our articles of incorporation increasing
the authorized share capital to 750,000,000. The amendment will take effect in January,
2009 when we will file a certificate of amendment with the Nevada Secretary of State. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The transfer agent and registrar for
our common stock is Worldwide Stock Transfer, LLC, 885 Queen Anne Road, Teaneck, NJ, USA
07666, telephone: (201) 357-8650, and fax: (201) 357-8648. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Dividends</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Since our inception, we have not
declared nor paid any cash dividends on our capital stock and we do not anticipate paying
any cash dividends in the foreseeable future. Our current policy is to retain any earnings
in order to finance the expansion of our operations. Our board of directors will determine
future declarations and payments of dividends, if any, in light of the then-current
conditions they deem relevant and in accordance with applicable corporate law. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There are no restrictions in our
articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada
Revised Statutes, however, do prohibit us from declaring dividends where, after giving
effect to the distribution of the dividend: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>we
would not be able to pay our debts as they become due in the usual course of
          business; or </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2)</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our
total assets would be less than the sum of our total liabilities plus the
          amount that would be needed to satisfy the rights of shareholders who have
          preferential rights superior to those receiving the distribution. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following discussion should be read
in conjunction with our audited and un-audited financial statements and the related notes
that appear elsewhere in this registration statement and prospectus. The following
discussion contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results could differ materially from those discussed in the forward
looking statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed below and elsewhere in this registration statement
and prospectus, particularly in the section entitled &#147;<I>Risk Factors</I>&#148;
beginning on page 3. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our audited and unaudited financial
statements are stated in United States dollars ($) and are prepared in accordance with
United States Generally Accepted Accounting Principles. </FONT></P>

<p align=center>
<font size=2>28</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Critical Accounting
Policies</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><U>Going concern
considerations</U></I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of September 30, 2008, we had
negative working capital of $3,228,000 and an accumulated capital deficiency of
approximately $1,928,000. Our ability to continue to operate as a going concern is
dependent on our ability to generate sufficient cash flows to meet our obligations on a
timely basis, to obtain additional financing and to ultimately attain profitability. As of
September 30, 2008, we have had no revenues and have incurred losses and an accumulated
deficit resulting from our activity as a development stage company and have a negative
cash flow from operating activities. In the event we are unable to successfully raise
capital and generate revenues, it is unlikely that we will have sufficient cash flows and
liquidity to finance our business operations as currently contemplated. </FONT></P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There can be no assurance that
additional funds will be available on terms acceptable to us, or at all. These conditions
raise substantial doubt about our ability to continue to operate as a going concern. The
audited and unaudited financial statements attached to this prospectus do not include any
adjustments to reflect the possible future effect on the recoverability and classification
of assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty. We are also currently committed to loan repayment of
$2,225,000 during the period between the December 31, 2008 and December 2009, as described
in detail in the &#147;<I>Financing Agreement</I>&#148; section of this prospectus
beginning on page 23. </FONT></P>



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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><U>Derivative financial
instruments</U></I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have adopted FAS 133, as amended,
which establishes accounting and reporting standards for derivatives, including certain
derivatives embedded in other contracts, and for hedging activities. Under FAS 133, all
derivatives are recognized on the balance sheet at their fair value. On the date that our
company enters into a derivative contract, it designates the derivative, for accounting
purposes, as: (1) hedging instrument, or (2) non-hedging instrument. Any changes in fair
value are to be reflected as current gains or losses or other comprehensive gains or
losses, depending upon whether the derivative is designated as a hedge and what type of
hedging relationship exists. Changes in fair value of non-hedging instruments are carried
to &#147;financial expenses-net&#148; on a current basis. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Liquidity and Capital
Resources</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the private placement offering of
our common stock that closed on September 30, 2008 and November 4, 2008, we sold 34 units
for an aggregate purchase price of $1,700,000, each unit comprising 500,000 shares of our
common stock and 500,000 share purchase warrants. As of September 30, 2008, our cash and
cash equivalents were $1,119,000 compared to $ $1,470,000 as of December 31, 2007, and we
had a negative working capital of $3,228,000. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of September 30, 2008, our cash
and cash equivalents were $1,119,000 compared to $1,470,000 as of December 31, 2007, and
we had a negative working capital of $3,228,000. </FONT></P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As described in the
&#147;<I>Financing Agreement</I>&#148; section of this prospectus beginning on page 23, we
have committed to an installment payment schedule that requires us to make monthly
payments on our outstanding debt to our senior secured lender. These payments increase on
a monthly basis, ranging from $25,000 in November 2008 to 225,000 in October 2009, and
every month thereafter. Pursuant to this installment payment schedule and other loans
received from related parties and shareholders, we are committed to payments of $2,225,000
during the period between the December 31, 2008 and December 2009. </FONT></P>






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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Furthermore, we are expecting to
continue to expend cash in our activities through payments of salaries, business
development activities, payments for services and other costs. We also plan to continue to
finance our operations through a combination of private placements, stock issuances, debt
issuances, mutual development agreements with possible milestone license payments and
research and development programs. We cannot assure, however, that we will be successful
in obtaining the adequate level of financing required for the long-term development and
commercialization of our planned products. </FONT></P>

<p align=center>
<font size=2>29</font></p>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Results of Operations For
the Year to September 30, 2008</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We initiated our activities during
the last six months of 2007, focusing our effort on building an infrastructure that would
support our future activities in the alternative energy field. We did not generate any
revenues in the nine month period ended September 30, 2008 and incurred a loss of
$2,768,000 during that period. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Off-Balance Sheet
Arrangements</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We do not currently have off-balance
sheet arrangements. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Plan of Operation</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the 12 months ending in December
2009, we estimate expending a total of approximately $6,850,000 million for our proposed
business activities. This amount includes the funds required to finance our marketing
activities, purchase KDV units, pay salaries of over employees, office and maintenance
costs, pay cost of cultivation, among others, in order to execute our plan of operations.
The following table provides our current estimate of the break down of costs for the
upcoming year of operations. </FONT></P>












<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="1" WIDTH="70%" ALIGN="Center">
<TR VALIGN="Bottom" BGCOLOR="Silver">
     <TH><FONT FACE="Times New Roman" SIZE=2>Estimated Funding Required During the Next 12 Months</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH="80%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>G&amp;A Salaries</FONT></TD>
     <TD WIDTH=20% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$350,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Other Operations</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$2,000,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Industrial Expenses</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$3,500,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="Right"><FONT FACE="Times New Roman" SIZE="2"><B>Total</B> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$6,850,000</FONT></TD></TR>
</TABLE>
<BR>



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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Change of Principal
Accountant </FONT></H1>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">On August 1<B>,</B> 2007, we decided
to engage new auditors as our independent accountants to audit our financial statements.
Our board of directors approved the change of accountants to Kesselman &amp; Kesselman
PricewaterhouseCoopers Israel (&#147;PwC Israel&#148;). Accordingly, we dismissed Vellmer
&amp; Chang, Chartered Accountants (now Chang Lee LLP Chartered Accountants), on August
1<B>,</B> 2007. </FONT> </P>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During our most recent fiscal year,
and any subsequent interim periods preceding the change in accountants, there were no
disagreements with Vellmer &amp; Chang on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope procedure. The report on the
financial statements prepared by Vellmer &amp; Chang, for the last fiscal year did not
contain an adverse opinion or a disclaimer of opinion, nor was it qualified or modified as
to uncertainty, audit scope or accounting principals except that Vellmer &amp; Chang,
expressed in their report substantial doubt about our ability to continue as a going
concern. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A letter from Vellmer &amp; Chang
confirming the above statement was provided to the Securities and Exchange Commission on
August 1, 2007. </FONT></P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have engaged PwC Israel as of
August 1, 2007. PwC Israel was not consulted on any matter relating to accounting
principles to a specific transaction, either completed or proposed, or the type of audit
opinion that might be rendered on our financial statements. </FONT></P>




<p align=center>
<font size=2>30</font></p>
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<page>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Company Management </FONT></H1>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Executive Officers,
Directors and Key Employees</I></B> </FONT> </P>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table sets forth
information regarding our directors, executive officers and key employees, including their
ages as of January 5, 2009. &nbsp; </FONT></P>







<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="1" WIDTH="100%" ALIGN="Center">
<TR VALIGN="Bottom" BGCOLOR="Silver">
     <TH><FONT FACE="Times New Roman" SIZE=2>Name</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=2>Age</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=2>Position</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE="2">Appointment Date<SUP>(1)</SUP> </FONT></TH></TR>
<TR VALIGN="Middle">
     <TD WIDTH="25%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Asi Shalgi</FONT></TD>
     <TD WIDTH=7% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>54</FONT></TD>
     <TD WIDTH=53% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>President, Chief Executive Officer, Secretary, and Director</FONT></TD>
     <TD WIDTH=15% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>April 5, 2007</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Alex Werber</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>53</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Treasurer and Chief Financial Officer</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>May 6, 2007</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">Avner Raanan<SUP>(2)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>58</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Director</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>December 6, 2007</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">Amir Elbaz<SUP>(3)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>32</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Director</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>September 24, 2008</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">Nissan Caspi<SUP>(4)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>51</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Director</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>September 24, 2008</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">Hezy Ram<SUP>(5)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>59</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Director</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>October 2008</FONT></TD></TR>
<TR VALIGN="Middle">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Yanai Man</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>49</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Chief Executive Officer of Global N.R.G. Pacific<BR> Chief
        Executive Officer of Global Energy Ethiopia</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>June 6, 2007<BR>
October 1, 2007</FONT></TD></TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(1)</SUP> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Our
directors are elected for an indeterminate term. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(2)</SUP> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Member
of the Audit Committee. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(3)</SUP>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>         Chair
of the Compensation Committee and member of the Audit Committee. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(4)</SUP> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>          Chair
of the Audit Committee </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(5)</SUP> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Member
of the Compensation Committee. </FONT></TD>
</TR>
</TABLE>
<BR>





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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Asi Shalgi</I> </FONT> </P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr.
          Shalgi has served as our President, Chief Executive Officer and director since
          April 2007. He has more than 20 years of experience and involvement in the
          private and public sector. He has served as general manager and director for
          industrial and agriculture companies with significant export activities. He was
          the Director General of the Israeli Ministry of Energy and Infrastructure.
          During his term with the Ministry, he was involved in the peace treaty
          negotiations with Jordan on the energy annex. He was responsible for new
          legislation regarding electricity in Israel that allowed involvement of
          Independent Power Producers and implementation of the Public Utility Authority
          that regulates the energy sector and prices in Israel. He has been involved in
          the power and water sector, mainly in developing and financing IPP projects.
          This experience has included developing, financing, building and operating the
          first private power plant in Israel, and the first private water desalination
          plant in Israel. He served in the Israeli Defence Forces and retired as a
          Lieutenant Colonel. Mr. Shalgi received an Engineering degree for industrial and
          management from the Tel Aviv University. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Alex Werber</I> </FONT> </P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr.
          Werber has served as our Treasurer and Chief Financial Officer since May 2007.
          He is a certified public accountant with over 15 years of financial management
          experience in private and public companies. He has served as controller and
          chief financial officer for several public companies since 1983. During the past
          decade, he specialized in the hi-tech sector, serving in managerial positions
          including controller, VP Finance, and Chief Financial Officer. He received a
          B.A. in Economics and Accounting from Tel Aviv University, where he completed
          post-graduate studies in Accounting. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Avner Raanan</I> </FONT> </P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr.
          Raanan has served as our director since December 2007. He has vast technical and
          managerial experience in venture capital investments, business consulting,
          managing multi-million dollar projects, developing airborne electronic warfare
          systems and air to air missiles. Mr. Raanan founded Avnan Enterprises Ltd., an
          investment company that invests in early stage start-up companies. Mr. Raanan is
          currently a Ph.D. candidate at Bar-Ilan University, Israel. He received an M.Sc.
          in Business Administration and a B.Sc. in Electronic and Computer Engineering
          from the Ben-Gurion University in Israel. </FONT></P>

<p align=center>
<font size=2>31</font></p>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Nissan Caspi</I> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush Lv 0- TNR" FSL="Workstation" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr.
          Nissan Caspi has served as our director since September 24, 2008. He has
          considerable experience in the public infrastructure projects sector and is an
          expert in the analysis and financing of infrastructure projects.&nbsp;Mr. Caspi
          owns his own accounting firm, Caspi Ben David and Co. CPA (Israel), and is
          currently Co-CEO of Eco Capital Ltd., an entity which he founded, and which
          develops independent power and water projects in Israel. Mr. Caspi was the CFO
          of Veolia Israel (formerly Vivendi), and also held a number of positions in
          various projects and companies owned by Veolia. In 2001-2002, he led the
          financing of VID Desalination Ltd., the largest Israeli sea water desalination
          project, which produces 100,000,000 cubic meters of fresh water per year. In
          2005, this project has received an award for the most successful BOT project in
          the world from the Association for Infrastructure Projects. Mr. Caspi was also
          formerly Chairman of INFRA (Insurance Fund for Natural Risks in Agriculture), an
          Israeli government-backed entity. Mr. Caspi was also a former head of the
          accounting department and accounting lecturer at the Hebrew University of
          Jerusalem. Mr. Caspi holds an MBA from the Hebrew University of Jerusalem, a
          B.A. degree in accounting and economics from the Hebrew University of Jerusalem,
          and a he is a CPA (Israel). </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Hezy Ram</I> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Hezy Ram has served as our director
since October 6, 2008. Mr. Ram is the founder of Ram Power Inc., a California based
company engaged in developing cutting-edge geothermal and solar thermal solutions. Prior
to founding Ram Power Inc., Mr. Ram led the North American Business Development Department
of Ormat Technologies, a global player in the development, manufacturing, marketing and
financing of innovative power systems. In this position, Mr. Ram was instrumental in
creating shareholder value of approximately $26 billion. While at Ormat, Mr. Ram initiated
and executed the aggressive North American acquisitions of geothermal plants which
provided the base for Ormat growth in this decade. Additionally, he was involved with
various financings at Ormat in the aggregate amount of almost a billion dollars and was
instrumental in the negotiation of power purchase agreements with some of the leading
electric utilities in North America. Mr. Ram earned a B.Sc. in Mechanical Engineering from
Ben-Gurion University, Israel in 1975, his MS in Mechanical Engineering from Ben Gurion
University in 1977, and his MBA from the Hebrew University in 1978. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Amir
Elbaz</I></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amir Elbaz has served as our director
since September 22, 2008. He specializes in corporate financing and strategic planning for
private and public companies. Mr. Elbaz has served as the Executive VP, CFO and director
of Lithium Technology Corporation since October 11, 2006. At Lithium Technology
Corporation, Mr. Elbaz oversees its finances, reporting and the planning of its business
ventures. Previously, Mr. Elbaz served as a director of Prime Capital Investments, BV, a
Dutch venture firm, where he played an active role in the management and business
development of two of its portfolio companies. Mr. Elbaz also served as VP of Corporate
Finance at Cornell Capital Partners, LP, where he sourced, structured and managed
investments in more than a dozen public and private companies. Prior to joining Cornell
Capital, Mr. Elbaz served for several years as an analyst with the Economic Department in
the Procurement Mission of the Israeli Ministry of Defence in New York. In that capacity,
Mr. Elbaz co-headed multi-million dollar negotiations with first tier technology companies
and was in charge of the financial aspects of the day-to-day operations. Mr. Elbaz holds a
B.A. from the University of Haifa, Israel, and an MBA in Finance &amp; Investments from
Bernard Baruch College, CUNY, New York. </FONT></P>

<p align=center>
<font size=2>32</font></p>
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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Yanai Man</I> </FONT> </P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr.
          Man has served as the Chief Executive Officer of Global N.R.G. Pacific Ltd.
          since June 6, 2007 and of Global Energy Ethiopia Corp. since October 1, 2007
          (both companies are our subsidiaries). Prior to that, Mr. Man served as the CEO
          of Ocean Rock Corporation, a factory located in the Dominican Republic, which
          produces fine jewelry (diamonds, platinum and gold), and is a subsidiary of Paul
          Winston Jewelry Ltd., New York. In 1997-2003, he founded and served as the CEO
          of Phytech Technologies Ltd, during which time he established three subsidiary
          companies that dealt with high-tech, mid-tech, and turnkey projects. He has
          founded and served as the CEO of Pollinating Service Yad-Mordechai, Environment
          Acoustic &#150; USA and Apiary Yad Mordechai (Michvarot Yad Mordechai). He
          served in the IDF and retired at the rank of Major. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Consultants</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conduct, and intend to continue to
conduct, some of our business through agreements with consultants. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Executive Compensation </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Compensation Discussion
and Analysis</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective May 6, 2007, we appointed
Alex Werber as our new Treasurer and Chief Financial Officer and entered into an
employment agreement, pursuant to which it was agreed that Mr. Werber should be employed
on a part-time basis and paid a monthly salary, payable immediately upon receipt of his
invoice, at a gross monthly rate of $2,500, to be paid in NIS translated pursuant to the
official representative rate of exchange of the $USD as published by the Bank of Israel on
the payment date. Under the employment agreement, we agreed to open and maintain a study
fund for Mr. Weber. We agreed to contribute to the fund an amount equal to 7.5% of each
monthly salary payment up to the maximum amount recognized for tax benefits purposes, and
Mr. Werber agreed to contribute to the fund an amount equal to 2.5% of each monthly salary
payment up to the maximum amount recognized for tax purposes pursuant. In addition, we
agreed to provide Mr. Werber (including his heirs, executors and administrators) with
coverage under a standard directors&#146; and officers&#146; liability insurance policy at
our expense. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On December 1, 2007, Mr.
Werber&#146;s employment agreement was amended, pursuant to which his salary was increased
to a gross monthly salary of $5,000. All other terms of the employment agreement remain
unchanged and in full force and effect. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On April 30, 2007, we appointed Asi
Shalgi as our new President and CEO and entered into an employment agreement with him.
Under the terms of this agreement, Mr. Shalgi is being paid a monthly base salary of
$10,000. In addition, on April 30, 2007, we granted to Mr. Shalgi 5,055,021 stock options,
exercisable within the next ten years, at an exercise price of $0.01 per share. Mr. Shalgi
has also been appointed to our board of directors, as is described in more detail below in
the &#147;<I>Compensation of Directors</I>&#148; section beginning on page 35. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On November 2, 2007, we appointed
Yehuda Eliraz and Yair Aloni to serve on our board of directors. On November 20, 2007, Mr.
Eliraz resigned from our board of directors. Mr. Aloni resigned from our board of
directors effective September 25, 2008. Our directors are entitled to compensation in
accordance with our director compensation policy described in the &#147;<I>Compensation of
Directors</I>&#148; section beginning on page 35. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On November 21, 2007, we appointed
Yossi Raz as our new VP for Project Development and Chief Technology Officer and entered
into an employment agreement with him effective November 1, 2007. Mr. Raz resigned from
his position on November 1, 2008. Mr. Raz was a key employee of our company. Under the
terms of the employment agreement, the total monthly cost incurred by our company in
connection with the employment of Mr. Raz was $15,000. </FONT></P>

<p align=center>
<font size=2>33</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition, pursuant to an amendment
to the employment agreement effective January 31, 2008, we issued Mr. Raz options to
purchase 1,150,000 shares of our common stock at an exercise price of $2.20 per share to
vest at the rate of 25% per year, beginning on January 11, 2008, and in each of the three
years thereafter, provided that he continues to be employed by us at the applicable date
of vesting. We issued the options to Mr. Raz, a non-U.S. person (as that term is defined
in Regulation S of the <I>Securities Act of 1933</I>), in an offshore transaction relying
on Regulation S and/or Section 4(2) of the <I>Securities Act of 1933</I>, as amended. </FONT></P>




<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to an employment agreement
dated May 7, 2007, we engaged Mr. Yanai Man to be the CEO of our Global N.R.G. Pacific
subsidiary. Under the terms of the employment agreement, Mr. Man is paid a monthly salary
of NIS45,000 and an annual performance-based bonus not to exceed four times his gross
salary. We agreed to contribute an amount equivalent to 13.33% of Mr. Man&#146;s gross
monthly salary to a managers insurance policy. We also agreed to open and maintain a study
fund, to which we would contribute an amount equal to 7.5% of each monthly salary payment
up to the maximum amount recognized for tax benefit purposes, and Mr. Man agreed to
contribute an amount equal to 2.5% of each monthly salary payment up to the maximum amount
recognized for tax purposes. </FONT></P>




<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The table set forth below summarizes
the annual and long-term compensation for services payable to our executive officers
during the fiscal years ended December 31, 2008, 2007 and 2006. </FONT></P>











<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=1 WIDTH=100%>
<TR VALIGN="Bottom" BGCOLOR="Silver">
     <TH colspan=10><FONT FACE="Times New Roman" SIZE=2>SUMMARY COMPENSATION TABLE</FONT></TH></TR>
<TR VALIGN=Bottom BGCOLOR="Silver">
     <TH><FONT FACE="Times New Roman" SIZE=1>Name And
Principal
Position</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Year</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Salary
($)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Bonus
($)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Stock
Awards<BR>
($)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Option
Awards<BR>
($)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Non-Equity
Incentive<BR>
Plan<BR>
Compensation<BR>
($)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Nonqualified
Deferred
Compensation
Earnings
($)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>All other
Compensation
($)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Total
($)</FONT></TH></TR>




<TR VALIGN=Bottom>
     <TD WIDTH="19%" ALIGN="CENTER" ROWSPAN="3" VALIGN="Top"><FONT FACE="Times New Roman" SIZE=2>Asi Shalgi<BR> President, CEO, and <BR>Director</FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>2008</FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">147,394</FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>17,903<SUP>(2)</SUP></FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>165,297</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD  ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>2007</FONT></TD>
     <TD  ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">115,259<SUP>(1)</SUP> </FONT></TD>
     <TD  ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD  ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD  ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>17,552<SUP>(2)</SUP></FONT></TD>
     <TD  ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD  ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD  ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD  ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>132,811</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2006</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN="CENTER" ROWSPAN="3" VALIGN="Top"><FONT FACE="Times New Roman" SIZE="2">Alex Werber<BR> Treasurer and CFO<SUP>(3)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>2008</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>78,000</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>78,000</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>2007</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>30,000</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>30,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2006</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN="CENTER" ROWSPAN="3" VALIGN="Top"><FONT FACE="Times New Roman" SIZE="2">Christopher Kape<BR> Former President, CEO, CFO, Secretary and Director<SUP>(4)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>2008</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>2007</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>63,195</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>63,195</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2006</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>19,080<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>19,080</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN="CENTER" ROWSPAN="3" VALIGN="Top"><FONT FACE="Times New Roman" SIZE=2>Yossi Raz<BR> VP for Project Development and CTO</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>2008</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>168,427</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">20,302<SUP>(7)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>188,729</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>2007</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>108,667<SUP>(6)</SUP></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>108,667</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2006</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN="CENTER" ROWSPAN="3" VALIGN="Top"><FONT FACE="Times New Roman" SIZE=2>Yanai Man,<BR> CEO of Global N.R.G. Pacific Lt. and Global Energy Ethiopia</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>2008</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>145,000</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>145,000</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>2007</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>88,865</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>88,865</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2006</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>-</FONT></TD></TR>
</TABLE>
<BR>






<!-- MARKER FORMAT-SHEET="Para (List) Hang Lv 0-TNR" FSL="Workstation" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(1)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Including social benefits. Mr. Shalgi did not receive any compensation as a
          director of our company. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

<p align=center>
<font size=2>34</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(2)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          5,055,021 options were issued to Mr. Shalgi on April 30, 2007. The monetary
          value of these options is computed in accordance with U.S. Generally Accepted
          Accounting Principles. These options did not begin vesting until April 30, 2008. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(3)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Mr. Werber was appointed as our treasurer and CFO effective May 6, 2007. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(4)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Elected as director and appointed as President, CEO, Secretary and Treasurer on
          April 5, 2005. Resigned as the President on April 30, 2007, as the treasurer and
          CFO on May 6, 2007, and as a director on November 5, 2007. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(5)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Paid to Jamco Capital Partners Inc., a private company owned by Mr. Kape, for
          office, secretarial and accounting services. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(6)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          Mr. Raz was appointed as VP for Project Development and CTO on November 1, 2007.
          Mr. Raz resigned from these positions on November 1, 2008. </FONT></TD>
          </TR>
          </TABLE>
          <BR>



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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(7)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr. Raz received $20,302 as a success fee. </FONT></TD>
          </TR>
          </TABLE>
          <BR>





<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Outstanding Equity Awards
at the End of Fiscal Year Ended December 31, 2008</I></B> </FONT> </P>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=1 WIDTH=100%>
<TR VALIGN="Bottom" BGCOLOR="Silver">
     <TH colspan=6><FONT FACE="Times New Roman" SIZE=2>OPTION AWARDS</FONT></TH>
     <TH colspan=4><FONT FACE="Times New Roman" SIZE=2>STOCK AWARDS</FONT></TH></TR>
<TR VALIGN=Bottom BGCOLOR="Silver">
     <TH><FONT FACE="Times New Roman" SIZE=1>Name</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Number of Securities Underlying Unexercised Options (#) Exercisable</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Number of Securities Underlying Unexercised Options (#) Unexercisable</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Option Exercise Price ($)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Option Expiration Date</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Number of Shares or Units of Stock That Have Not Vested ($)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Market Value of Shares or Units of Stock That Have Not Vested ($)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#)</FONT></TH></TR>
<TR VALIGN="Middle">
     <TD WIDTH="19%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">Asi Shalgi <SUP>(1)</SUP> <BR>President, CEO and Director </FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>1,263,755</FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>3,791,266</FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>$0.01</FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>April 30, 2017</FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD WIDTH=9% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD></TR>
<TR VALIGN="Middle">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Alex Werber<BR> Treasurer and CFO</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD></TR>
<TR VALIGN="Middle">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Yossi Raz<BR> VP for Project Development and CTO</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD></TR>
<TR VALIGN="Middle">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Yanai Man,<BR> CEO of Global N.R.G. Pacific Lt. and Global Energy Ethiopia</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Hang Lv 0-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(1)</SUP> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Mr. Shalgi was
granted 5,055,021 stock options on April 30, 2007 to vest at a rate of 25% per year
beginning April 30, 2008. The options have an exercise price of $0.01 and expire on
April 30, 2017. The grant date fair value of the common shares underlying the options
granted on April 30, 2007 was $0.01. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Compensation of Directors</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On November 2, 2007, we adopted a
director compensation policy for all directors pursuant to which we: </FONT></P>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               authorized the issuance to each of our directors of 200,000 options at an
               exercise price of $0.56 per share, and </FONT></TD>
               </TR>
               </TABLE>
               <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang LV 1-TNR" FSL="Workstation" -->
          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
               <TR VALIGN=TOP>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
               <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>
               <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
               agreed to pay a fee of US$750 per meeting for each quarterly board meeting
               attended, and a fee of US$600 per month for all other meetings attended or
               consented to in writing by the entire board of directors. </FONT></TD>
               </TR>
               </TABLE>
               <BR>

<p align=center>
<font size=2>35</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On November 18, 2007, the
compensation policy was amended such that each director would be authorized to receive
350,000 options at an exercise price of $2.20 per share, rather than 200,000 options at an
exercise price of $0.56 per share. On January 31, 2008, the director compensation policy
was further amended to provide for payment of $1,000 per month to each director as
compensation, rather than a fee of $750 per meeting. </FONT></P>




<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On November 2, 2007, we elected
Yehuda Eliraz and Yair Aloni to serve on our board of directors. On November 20, 2007, Mr.
Eliraz resigned from our board of directors. Effective September 25, 2008, Mr. Aloni
resigned from our board of directors. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On December 6, 2007, we appointed
Josef Neuhaus and Avner Raanan to our board of directors. On January 31, 2008, pursuant to
the director compensation policy, we issued to each of Josef Neuhaus, Yair Aloni, and
Avner Raanan options to purchase 350,000 shares of our common stock at an exercise price
of $2.20 per share. The stock options were issued in accordance with the terms of the
share option plan adopted in May 2007. Mr. Raanan&#146;s options are exercisable until
December 6, 2017. Mr. Aloni resigned as a director effective September 25, 2008 and Mr.
Neuhaus resigned as director effective September 22, 2008. Their options terminated on
their respective dates of resignation. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We issued the stock options to
Messrs. Neuhaus, Aloni and Raanan, who are non-U.S. persons (as that term is defined in
Regulation S of the <I>Securities Act of 1933</I>), in an offshore transaction relying on
Regulation S and/or Section 4(2) of the <I>Securities Act of 1933</I>, as amended. </FONT></P>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=1 WIDTH=100%>
<TR VALIGN="Bottom" BGCOLOR="Silver">
     <TH colspan=8><FONT FACE="Times New Roman" SIZE=2>Director Compensation for the Fiscal Year Ended December 31, 2008</FONT></TH></TR>
<TR VALIGN=Bottom BGCOLOR="Silver">
     <TH><FONT FACE="Times New Roman" SIZE=1>Name</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Fees Earned or Paid in Cash ($)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Stock Awards ($)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Option Awards ($)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Non-Equity Incentive Plan Compensation <BR>($)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Change in Pension<BR> Value and Non-Qualified<BR> Deferred Compensation Earnings ($)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>All Other Compensation<BR> ($)</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Total ($)</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=16% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Josef Neuhaus</FONT></TD>
     <TD WIDTH=12% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>9,000</FONT></TD>
     <TD WIDTH=12% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD WIDTH=12% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">Nil<SUP>(1)</SUP> </FONT></TD>
     <TD WIDTH=12% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD WIDTH=12% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD WIDTH=12% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD WIDTH=12% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>9,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Avner Raanan</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>12,000</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">11,704 <SUP>(2)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>23,704</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Yair Aloni</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>9,000 </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">Nil <SUP>(3)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>9,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Hezy Ram</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>3,000</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>3,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Amir Elbaz</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>3,000</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>3,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Nissan Caspi</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>3,000</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>3,000</FONT></TD></TR>


</TABLE>
<BR>

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     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(1)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          350,000 options were granted on January 31, 2008 and were to begin vesting on
          December 6, 2008. Mr. Neuhaus resigned from our board of directors effective
          September 22, 2008 and his unvested options terminated on that date. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang Lv 0-TNR" FSL="Workstation" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><SUP>(2)</SUP> </FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>350,000 options were
granted on January 31, 2008 and began vesting on December 6, 2008. The options have an
exercise price of $2.20 per share and expire on December 6, 2017. The grant date fair
value of the common shares underlying the options granted on January 31, 2008 was
$0.55 per common share. </FONT></TD>
          </TR>
          </TABLE>
          <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Hang Lv 0-TNR" FSL="Default" -->
     <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
          <TR VALIGN=TOP>
          <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(3)</SUP></FONT></TD>
          <TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
          350,000 options were granted on January 31, 2008 and were to begin vesting on
          November 18, 2008. Mr. Aloni resigned from our board of directors effective
          September 25, 2008 and his unvested options terminated on that date. </FONT></TD>
          </TR>
          </TABLE>
          <BR>



<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Compensation Committee
Interlocks and Insider Participation </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the fiscal year ended December
31, 2007, our compensation committee comprised the following members: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Yair
Aloni, director, as the Chairman of the committee; and </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2) </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Avner
Ranaan, director, as a member of the committee. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>36</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Security Ownership of
Certain Beneficial Owners and Management </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The table below discloses information
regarding shares of our common stock beneficially owned by any person who owns more than
5% of such shares, and by our directors and executive officers as of January 5, 2009.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The determination of beneficial
ownership in the following table was made in accordance with Rule 13d-3 of the
<I>Securities Exchange Act of 1934</I>, as amended, based on information provided to us by
our controlling shareholder, executive officers, and directors, and this information does
not necessarily indicate beneficial ownership for any other purpose. In determining the
number of shares of our common stock beneficially owned by a person and the percentage
ownership of that person, we include any shares as to which the person has sole or shared
voting power or investment power, as well as any shares subject to warrants or options
held by that person that are currently exercisable or exercisable within 60 days after
January 5, 2009. </FONT></P>







<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=1 WIDTH=100%>
<TR VALIGN="Bottom" BGCOLOR="Silver">
     <TH><FONT FACE="Times New Roman" SIZE=1>Name and Address of Beneficial Owner of Shares of our Common Stock</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE="1">Amount and nature of beneficial ownership<SUP>(1)</SUP> </FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE="1">Percent of class<SUP>(2)</SUP> (%) </FONT></TH></TR>
<TR VALIGN="Middle">
     <TD WIDTH="60%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">Carrigain Investment Ltd.<SUP>(3)</SUP> <BR>Jasmine Court, Regent Street<BR> Belize City, Belize. </FONT> </TD>
     <TD WIDTH=20% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>42,000,000</FONT></TD>
     <TD WIDTH=20% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>51.6</FONT></TD></TR>
<TR VALIGN="Middle">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">YA Global Investments L.P. <BR>101 Hudson Street, Suite 3700, Jersey City, NJ 07302, United States </FONT> </TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>8,700,000<SUP>(4)</SUP></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>9.79</FONT></TD></TR>
<TR VALIGN="Middle">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">Asi Shalgi<BR> President, CEO, Secretary, and Director </FONT> </TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>1,263,755<SUP>(5)</SUP></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>1.53</FONT></TD></TR>
<TR VALIGN="Middle">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">Alex Werber<BR> Treasurer and CFO </FONT> </TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD></TR>
<TR VALIGN="Middle">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">Avner Raanan <BR>Director </FONT> </TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">87,500<SUP>(6)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>0.11</FONT></TD></TR>
<TR VALIGN="Middle">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">Amir Elbaz <BR>Director </FONT> </TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">Nil<SUP>(7)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD></TR>
<TR VALIGN="Middle">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">Nissan Caspi <BR>Director </FONT> </TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">Nil<SUP>(8)</SUP> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD></TR>
<TR VALIGN="Middle">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">Hezy Ram <BR>Director </FONT> </TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE="2">Nil<SUP>(9)</SUP> </FONT> </TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD></TR>
<TR VALIGN="Middle">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Yanai Man <BR> CEO of Global N.R.G. Pacific and Global Energy Ethiopia</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Nil</FONT></TD></TR>
<TR VALIGN="Middle">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>Directors and Executive Officers as a Group</B> </FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>1,351,255</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>1.64</FONT></TD></TR>
</TABLE>
<BR>








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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(1)</SUP>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>         Beneficial
ownership is determined in accordance with Rule 13d-3 under the           Exchange Act of
1934 and generally includes voting or investment power with           respect to
securities and any rights under which a holder be issued securities           within 60
days of the date of this registration statement. Except as otherwise           indicated,
we believe that the beneficial owners of shares of our common stock           listed
above, based on information furnished by such owners, have sole           investment and
voting power with respect to such shares, subject to community           property laws
where applicable. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(2)</SUP>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>         Applicable
percentages are based on 81,387,764 shares of common stock           outstanding on
January 5, 2009, calculated taking into account the holder&#146;s           options
exercisable within 60 days of the date of this registration statement. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(3) </SUP>  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        Carrigain
Investment Ltd. is controlled jointly by Ariel Malik and Zeev Bronfeld           each
holding 50% of its common shares. Effectively, therefore, each of Mr. Malik           and
Mr. Bronfeld beneficially owns 25.8% of our common stock. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(4)</SUP> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>          Comprises
200,000 shares issued to YA Global Investments, L.P. under the           amending
agreement dated July 15, 2008; 1,000,000 shares issued to YA Global           under the
amending and restating agreement dated September 22, 2008; and           warrants to
purchase 7,500,000 shares at an exercise price of $0.10, as agreed           between us
and YA Global under the amending and restating agreement dated           September 22,
2008. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(5) </SUP> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>         Mr.
Shalgi was granted 5,055,021 options on April 30, 2007, to be vested in him           at
rate of 25% per year beginning on April 30, 2008. As of the date of this
          registration statement, 1,263,755 of these options have vested in Mr. Shalgi
but           none have been exercised. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(6)</SUP>   </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>        Mr.
Raanan was granted 350,000 options on January 31, 2008, to vest at the rate           of
25% per year beginning on December 6, 2008. As of January 5, 2009, 87,500 of
          these options have vested but none have been exercised. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(7) </SUP> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>         None
of the 226,415 shares granted to Mr. Elbaz on May 22, 2008 are exercisable
          within 60 days of this registration statement. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(8) </SUP>    </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      None
of the 650,000 shares granted to Mr. Caspi on November 9, 2008 are           exercisable
within 60 days of this registration statement. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(9)</SUP> </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>          None
of the 650,000 shares granted to Mr. Ram on November 9, 2008 are           exercisable
within 60 days of this registration statement. </FONT></TD>
</TR>
</TABLE>
<BR>

















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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Transactions with
Related Persons, Promoters and Certain Control Persons </FONT></H1>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Transactions with Related
Persons</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On May 15, 2007, our directors approved
a share option plan, authorizing the issue of a total of 8,500,000 shares of our common
stock. Information regarding compensation contracts with our directors and officers,
including the grant of options under the share option plan, is described above in the
section &#147;<I>Executive Compensation</I>&#148; beginning on page 33 of this prospectus. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the year ended December 31,
2007, we paid approximately $40,000<B> </B>for accounting and administrative services
performed by a company controlled by our former president. During the comparable period in
2006, no such fees were paid. As of December 31, 2007, no amounts were due and payable in
respect of such accounting and administrative services. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the year ended December 31,
2006, we were charged $19,144 for accounting and administration fees. These fees were paid
to Jamco Capital Partners Inc., a company controlled by our former president, Mr.
Christopher Kape. As of December 31, 2007, no amount remained unpaid for past fees and
disbursements incurred on behalf of our company. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>YA Global Investments, L.P. is a
related person of our company because it is beneficial owner of over 5% of our common
stock, as described in the section &#147;<I>Security Ownership of Certain Beneficial
Owners and Management</I>&#148; beginning on page 37 of this prospectus. It is also our
senior secured lender, it is also our senior secured lender. Over the past year, we have
entered into two transactions with YA Global, which are described in detail in the section
&#147;<I>Financing Agreement</I>&#148; beginning on page 23 of this prospectus. </FONT></P>

<p align=center>
<font size=2>38</font></p>
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<page>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Transactions with our
Controlling Shareholder</I></B> </FONT> </P>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On February 7, 2007, we issued
12,000,000 shares to our controlling shareholder, Carrigain Investment Ltd. At the time of
this issue, this comprised approximately 52.14% of our total issued and outstanding
shares. We are informed that Carrigain Investment Ltd. is controlled by Ariel Malik and
Zeev Bronfeld. On April 11, 2007, Carrigain Investment Ltd. entered into a subscription
agreement with us pursuant to which it acquired 30,000,000 additional shares of our common
stock for an aggregate acquisition consideration of $300,000. Carrigain Investment Ltd.
currently holds 51.6% of our common stock based on 81,387,764 total issued and outstanding
shares of our common stock as of January 5, 2009. </FONT></P>





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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Transaction with Our
Stockholders.</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the year ended December 31,
2006, we borrowed $18,000 from four of our significant shareholders. The loans do not bear
interest and are repayable upon demand by the respective creditors. As of December 31,
2007, the loans are still outstanding. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Indebtedness of Directors
and Executive Officers</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>None of the directors or executive
officers of our company or any associate or affiliate of our company during the last two
fiscal years, is or has been indebted to our company by way of guarantee, support
agreement, letter of credit or other similar agreement or understanding currently
outstanding. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Policy for Approval of
Transactions with Related Persons</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As we are a small, development stage
company, we do not currently have a policy in place for approval of transactions with
related persons. However, prior to filing our quarterly and annual reports, we review all
transactions to identify and properly report any related party transaction that we have
entered into in the respective reporting period. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director Independence </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We currently act with five directors:
Asi Shalgi, Avner Raanan, Amir Elbaz, Nissan Caspi, and Hezy Ram. We have determined that
Avner Raanan, Amir Elbaz, Nissan Caspi, and Hezy Ram are &#147;independent directors&#148;
as that term defined in NASDAQ Marketplace Rule 4200(a)(15). </FONT></P>

<a name=zk110></a>


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>OTHER EXPENSES OF
ISSUANCE AND DISTRIBUTION </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table sets forth the
costs and expenses payable by us in connection with the issuance and distribution of the
securities being registered under this registration statement. No expenses shall be borne
by the selling shareholders. All of the amounts shown are estimates, except for the
Securities and Exchange Commission Registration Fees: </FONT></P>



<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="1" WIDTH="70%" ALIGN="Center">
<TR VALIGN="Bottom" BGCOLOR="Silver">
     <TH><FONT FACE="Times New Roman" SIZE=2>Expense</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE="2">Amount ($) <SUP>(1)</SUP> </FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=85% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>SEC registration fees</FONT></TD>
     <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>51</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Printing and engraving expenses</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>5,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Accounting fees and expenses</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>3,500</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Legal fees and expenses</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>35,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Transfer agent and registrar fees</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,500</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Miscellaneous</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>10,000</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN="Right"><FONT FACE="Times New Roman" SIZE="2"><B>Total</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>56,051</FONT></TD></TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><SUP>(1)</SUP></FONT></TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> We
have estimated these amounts.  </FONT></TD>
</TR>
</TABLE>
<BR>






<p align=center>
<font size=2>39</font></p>
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<page>

<a name=zk111></a>


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>INDEMNIFICATION OF
DIRECTORS AND OFFICERS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nevada corporation law provides that: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
corporation may indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right of the
corporation, by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses, including attorneys&#146; fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a
corporation may indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against expenses,
including amounts paid in settlement and attorneys&#146; fees actually and reasonably
incurred by him in connection with the defense or settlement of the action or suit if he
acted in good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for any claim,
issue or matter as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation
or for amounts paid in settlement to the corporation, unless and only to the extent that
the court in which the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the circumstances of the
case, the person is fairly and reasonably entitled to indemnity for such expenses as the
court deems proper; and </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><FONT SIZE="2" FACE="Wingdings 2">&#151;</FONT></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>to
the extent that a director, officer, employee or agent of a corporation has been
successful on the merits or otherwise in defense of any action, suit or proceeding, or in
defense of any claim, issue or matter therein, the corporation shall indemnify him
against expenses, including attorneys&#146; fees, actually and reasonably incurred by him
in connection with the defense. </FONT></TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our Articles of Incorporation, in
accordance with Section 78.138 (7) of the Nevada Revised Statutes, provide that no
director or officer of our company shall be personally liable to our company or to any of
our stockholders for damages for breach of fiduciary duty as a director or officer
involving any act or commission of any such director or officer provided, however, that
the foregoing provision shall not eliminate or limit the liability of a director or
officer for acts of omissions which involve intentional misconduct, fraud or a knowing
violation of law, or the payment of dividends in violation of Section 78.300 of the Nevada
Revised Statutes. Any repeal or modification of this Article by the stockholders shall be
prospective only, and shall not adversely affect any limitation on the personal liability
of a director or officer of our company for acts or omissions prior to such repeal or
modification. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our Bylaws provide that every person
who was or is a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative, by reason of
the fact that he or a person for whom he is the legal representative is or was a director
or officer of the corporation or is or was serving at the request of our company or for
our benefit as a director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise, shall be indemnified and held
harmless to the fullest extent legally permissible under the General Corporation Law of
the State of Nevada from time to time against all expenses, liability and loss (including
moneys&#146; fees. judgments, fines and amounts paid or to be paid in settlement)
reasonably incurred or suffered by him in connection therewith. The expenses of officers
and directors incurred in defending a civil or criminal action, suit or proceeding must be
paid by the corporation as they are incurred and in advance of the final disposition of
the action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the corporation. Such
right of indemnification shall be a contract right which may be enforced in any manner
desired by such person. Such right of indemnification shall not be exclusive of any other
right which such directors, officers or representatives may have or hereafter acquire and,
without limiting the generality of such statement, they shall be entitled to their
respective rights of indemnification under any bylaw, agreement, vote of stockholders,
provision of law or otherwise, as well as their rights under this Article. </FONT></P>

<p align=center>
<font size=2>40</font></p>
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<page>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our board of directors may cause the
corporation to purchase and maintain insurance on behalf of any person who is or was a
director or officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability asserted
against such person and incurred in any such capacity or arising out of such status,
whether or not the corporation would have the power to indemnify such person. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our board of directors may from time
to time adopt further Bylaws with respect to indemnification and may amend these and such
Bylaws to provide at all times the fullest indemnification permitted by the General
Corporation Law of the State of Nevada. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On January 31, 2008, our board of
directors approved an indemnification agreement with Josef Neuhaus, pursuant to which we
have agreed to provide for the indemnification and advancing of expenses to the indemnitee
to the maximum extent permitted by law, pursuant to a formula set out in the agreement and
subject to certain conditions, including that no indemnity will be provided if it is
determined that the indemnitee would not be permitted to be indemnified under applicable
law. Mr. Neuhaus resigned as a director of our company effective September 22, 2008. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Insofar as indemnification for
liabilities arising under the <I>Securities Act of 1933</I>, as amended, may be permitted
to directors, officers and controlling persons of our company under Nevada law or
otherwise, we have been advised that the opinion of the Securities and Exchange Commission
is that such indemnification is against public policy as expressed in the <I>Securities
Act of 1933</I>, as amended, and is, therefore, unenforceable. In the event a claim for
indemnification against such liabilities (other than payment by us for expenses incurred
or paid by a director, officer or controlling person of our company in successful defense
of any action, suit, or proceeding) is asserted by a director, officer or controlling
person in connection with the securities being registered, we will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction, the question of whether such indemnification by it is against
public policy in the <I>Securities Act of 1933</I>, as amended, and will be governed by
the final adjudication of such issue. </FONT></P>

<a name=zk112></a>


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RECENT SALES OF
UNREGISTERED SECURITIES </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the past three years, we have sold
and issued the following unregistered securities: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On October 24, 2006, we issued a
total of 1,331,764 shares of our common stock at a price per share of US$0.01 for an
aggregate consideration of $13,317.64. We issued the securities to ten non-U.S. persons
(as that term is defined in Regulation S of the <I>Securities Act of 1933</I>, as amended)
in an offshore transaction relying on Regulation S and/or Section 4(2) of the<I>
Securities Act of 1933</I>, as amended. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On February 7, 2007, we issued a
total of 17,031,000 shares of our common stock at a price per share of US$0.01 to 21
investors for an aggregate consideration of $170,310 of which $40,910 was paid in cash and
$129,400 was paid by the issuance of notes with maturities ranging from 90 days to one
year. We issued the securities to the investors who are non-U.S. persons (as that term is
defined in Regulation S of the <I>Securities Act of 1933</I>, as amended) in an offshore
transaction relying on Regulation S and/or Section 4(2) of the <I>Securities Act of
1933</I>, as amended. </FONT></P>

<p align=center>
<font size=2>41</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On April 30, 2007, we issued
40,175,000 shares of our common stock to 12 investors at a purchase price per share of
US$0.01 for an aggregate consideration of $401,750 of which approximately $47,000 was paid
in cash, approximately $28,000 was by redemption of promissory notes, and approximately
$327,000 was paid by the issuance of notes having maturities up to one year. As of
December 31, 2007, an amount of $150,000 has not been collected yet. We issued the
securities to investors who are non-U.S. persons (as that term is defined in Regulation S
of the <I>Securities Act of 1933</I>, as amended) in an offshore transaction relying on
Regulation S and/or Section 4(2) of the <I>Securities Act of 1933</I>, as amended. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On April 30, 2007, we granted
5,055,021 stock options (of our common stocks) exercisable for five years at an exercise
price of $0.01 per share to Asi Shalgi, our new President. Effective January 31, 2008, the
expiration date of the options was extended to April 30, 2017 and such options began to
vest at a rate of 25% per year on April 30, 2008. We issued these stock options to a
non-U.S. person (as that term is defined in Regulation S of the <I>Securities Act of
1933</I>, as amended) in an offshore transaction relying on Regulation S and/or Section
4(2) of the <I>Securities Act of 1933</I>, as amended. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On May 1, 2007, pursuant to the terms
of an employment agreement, we granted options to purchase 400,000 shares of our common
stock exercisable for five years at an exercise price of $0.01 per share to Dr. Irit
Arbel, who we hired to be our Investor Relations and Marketing Advisor. Dr. Arbel&#146;s
employment agreement was terminated as of January 1, 2008 and 50,000 options were
forfeited upon the termination. We issued these stock options to a non-U.S. person (as
that term is defined in Regulation S of the <I>Securities Act of 1933</I>, as amended) in
an offshore transaction relying on Regulation S and/or Section 4(2) of the <I>Securities
Act of 1933</I>, as amended. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On May 22, 2008, we granted up to
226,415 stock options exercisable for four years at an exercise price of $1.25 per share
to Mr. Elbaz, pursuant to a separate arrangement. We issued the securities to one US
person pursuant to the exemption from registration provided for under Rule 506 of
Regulation D, promulgated under the <I>Securities Act of 1933</I>, as amended. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On July 10, 2007, we issued a 10%
secured convertible debenture, for gross proceeds of $500,000, as a part of a private
placement of up to $4,000,000 of debentures to YA Global Investments, L.P. In conjunction
with this financing, we issued warrants to purchase 300,000 shares of common stock
exercisable for five years at an exercise price of $2.35 and warrants to purchase
additional 300,000 shares of common stock exercisable for five years at an exercise price
of $2.50. We paid a cash commission of $35,000 and a structuring fee of $20,000 to
Yorkville Advisors, LLC, the investment manager of YA Global Investments, L.P., in
connection with this issuance. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The 10% secured convertible
debentures, which, as amended, mature on October 31, 2010, were, prior to the amendment to
the securities purchase agreement of March 20, 2008, described below, to be convertible by
the debenture holder into common shares at a fixed conversion price of $2.20 per share.
The debentures are secured against all our assets. The debentures were issued pursuant to
the exemption from registration under the <I>Securities Act of 1933</I>, as amended,
provided by Section 4(2), Section 4(6) and/or Rule 506 of Regulation D promulgated under
the <I>Securities Act of 1933</I>, as amended, to the investors and brokers who are
&#147;accredited investors&#148; within the respective meanings ascribed to that term in
Rule 501(a) under the <I>Securities Act of 1933</I>, as amended. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On October 23, 2007, we issued an
additional 10% secured convertible debenture for an aggregate consideration of $1,500,000.
The debenture matures on October 31, 2010 and, prior to the amendment to the securities
purchase agreement of March 20, 2008, described below, was to be convertible by the
debenture holder into common shares at a fixed conversion price of $2.20 per share subject
to further adjustment as set out in the debenture. The debenture is secured against all
our assets. We paid a commission of $105,000 and a due diligence fee of $30,000 to
Yorkville Advisors, LLC, the investment manager of YA Global Investments, L.P., in
connection with this issuance. The debenture was issued pursuant to the exemption from
registration under the <I>Securities Act of 1933</I>, as amended, provided by Section
4(2), Section 4(6) and/or Rule 506 of Regulation D promulgated under the Securities Act of
1933, as amended, to the investors and brokers who are &#147;accredited investors&#148;
within the respective meanings ascribed to that term in Rule 501(a) under the
<I>Securities Act of 1933</I>, as amended. </FONT></P>



<p align=center>
<font size=2>42</font></p>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On December 5, 2007 we issued a 10%
secured convertible debenture for gross proceeds of $1,000,000. The debenture matures on
October 31, 2010 and prior to the amendment to the securities purchase agreement of March
20, 2008, described below, was to be convertible by the debenture holder into common
shares at a fixed conversion price of $2.20 per share subject to further adjustment as set
out in the debenture. The debenture is secured against all our assets. We paid a
commission of $70,000 to Yorkville Advisors, LLC, the investment manager of YA Global
Investments, L.P., in connection with this issuance. The debenture was issued pursuant to
the exemption from registration under the<I> Securities Act of 1933</I>, as amended,
provided by Section 4(2), Section 4(6) and/or Rule 506 of Regulation D promulgated under
the <I>Securities Act of 1933</I>, as amended, to the investors and brokers who are
&#147;accredited investors&#148; within the respective meanings ascribed to that term in
Rule 501(a) under the <I>Securities Act of 1933</I>, as amended. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Throughout the 2007 fiscal year, we
authorized the issuance of options to our directors and officers to acquire in the
aggregate 2,200,000 shares of our common stock. For more information, see the section
<I>&#147;Executive Compensation</I>&#148;<I> </I>beginning on page 33 of this registration
statement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On March 20, 2008, we entered into an
amendment to the securities purchase agreement with YA Global Investments, L.P. that
amended the terms of the convertible debentures issued July 10, 2007, October 23, 2007 and
December 5, 2007. &#147;<I>Financing Agreementt</I>&#148; section of this prospectus
beginning on page 23. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On March 20, 2008, we issued a fourth
10% secured convertible debenture for gross proceeds of $500,000. The debenture matures on
October 31, 2010 and is convertible by the debenture holder into common shares at a fixed
conversion price of $1.25 per share, subject to further adjustment as further set out in
the debenture. The debenture is secured against all of our assets. We paid a commission of
$35,000 to Yorkville Advisors, LLC, the investment manager of YA Global Investments, L.P.,
in connection with this issuance. The debenture was issued pursuant to the exemption from
registration under the <I>Securities Act of 1933</I>, as amended, provided by Section
4(2), Section 4(6) and/or Rule 506 of Regulation D promulgated under the<I> Securities Act
of 1933</I>, as amended, to the investors and brokers who are &#147;accredited
investors&#148; within the respective meanings ascribed to that term in Rule 501(a) under
the <I>Securities Act of 1933</I>, as amended. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On May 13, 2008, we sold a 10%
Secured Convertible Debenture to YA Global Investments, L.P., for gross proceeds of
$500,000. The debenture matures on October 31, 2010 and is convertible by the holder into
common shares at a fixed conversion price of $1.25 per share subject to further adjustment
as further set out in the debenture. The debenture is secured against all our assets.
Amortizing payments of the outstanding principal amount of the debenture and accrued
interest at an annual rate equal to 10% was to commence on the first business day on or
after July 31, 2008, and continuing on the first business day of each successive calendar
month thereafter until the principal amount has been repaid in full, whether by the
payment of cash or by the conversion of the principal amount and interest into common
stock. Other terms are the same as in prior debentures held by YA Global Investments, L.P.
We paid a commission of $35,000 to Yorkville Advisors, LLC, the investment manager of YA
Global Investments, L.P., in connection with this issuance. The debenture was issued
pursuant to the exemption from registration under the <I>Securities Act of 1933</I>, as
amended, provided by Section 4(2), Section 4(6) and/or Rule 506 of Regulation D
promulgated under the 1933 Act to the investors and brokers who are &#147;accredited
investors&#148; within the respective meanings ascribed to that term in Rule 501(a) under
the 1933 Act. No advertising or general solicitation was employed in offering the
securities. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On July 25, 2008, we issued 200,000
shares of our common stock pursuant to our amending agreement dated July 15, 2008 with YA
Global Investments, L.P. We issued the securities to one US person pursuant to the
exemption from registration provided for under Rule 506 of Regulation D, promulgated under
the <I>Securities Act of 1933</I>, as amended. </FONT></P>

<p align=center>
<font size=2>43</font></p>
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<page>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On September 22, 2008, we entered
into an amending and restating agreement with YA Global Investments, L.P. with respect to
outstanding secured convertible debentures in the aggregate principal amount of
$4,000,000, and warrants to purchase 600,000 shares of our company&#146;s common stock
owned by YA Global Investments, L.P. Pursuant to this agreement, we issued 1,000,000
restricted shares of our common stock to YA Global Investments, L.P. We issued the
securities to a US person pursuant to the exemption from registration provided for under
Rule 506 of Regulation D, promulgated under the <I>Securities Act of 1933</I>, as amended.
Details of this agreement are provided in the &#147;<I>Financing Agreement</I>&#148;
section of this prospectus beginning on page 23. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On September 30, 2008, we sold 30
units to 27 investors in a brokered private placement, at a purchase price of $50,000 per
unit, raising gross proceeds of $1,500,000. Each unit comprised 500,000 shares of our
common stock and 500,000 share purchase warrants exercisable at $0.10 for a period of five
years. All the investors were accredited investors, and in selling these units we relied
on the exemption from the registration requirements of the <I>Securities Act of 1933</I>,
provided by Rule 506 of Regulation D promulgated thereunder. In connection with this
private placement, we paid a registered broker-dealer that acted as our agent in the sale
of these securities aggregate cash placement agent compensation of $150,000 and issued it
placement agent warrants to purchase an aggregate of 1,500,000 shares of common stock.
Each placement agent warrant entitles the holder to purchase one share of common stock of
our company at an exercise price of $0.10 for a period of five years on terms which are
identical to the warrants included in the units. In addition, we paid the broker-dealer a
non-accountable expense allowance of $22,500 and $75,000 towards the fees and expenses of
its attorneys. The broker-dealer is licensed with Financial Industry Regulatory Authority
and a U.S. person and, in issuing the placement agent warrants we relied on the exemption
from the registration requirements of the <I>Securities Act of 1933</I>, as amended,
provided by Rule 506 of Regulation D promulgated thereunder. Pursuant to the terms of a
registration rights agreement between our company and each investor in this private
placement, we have agreed to register for resale by the investors and the agent all of the
shares of our common stock issuable upon exercise of the warrants and the agent&#146;s
warrants that we issued in this private placement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On November 4, 2008, we sold four
more units to four investors as part of the brokered private placement described above. We
realized gross proceeds of $200,000. All the investors were accredited investors, and in
selling these units we relied on the exemption from the registration requirements of the
<I>Securities Act of 1933</I>, provided by Rule 506 of Regulation D promulgated
thereunder. In connection with this private placement, we paid a registered broker-dealer
that acted as our agent in the sale of these securities aggregate cash placement agent
compensation of $20,000 and issued it placement agent warrants to purchase an aggregate of
200,000 shares of common stock. Each placement agent warrant entitles the holder to
purchase one share of common stock of our company at an exercise price of $0.10 for a
period of five years on terms which are identical to the warrants included in the units.
In addition, we paid the broker-dealer a non-accountable expense allowance of $6,000 and
$5,583 towards the fees and expenses of its attorneys. The broker-dealer is licensed with
Financial Industry Regulatory Authority and a U.S. person and, in issuing the placement
agent warrants we relied on the exemption from the registration requirements of the
<I>Securities Act of 1933</I>, as amended, provided by Rule 506 of Regulation D
promulgated thereunder. Pursuant to the terms of a registration rights agreement between
our company and each investor in this private placement, we have agreed to register for
resale by the investors and the agent all of the shares of common stock issuable upon
exercise of the warrants and the agent&#146;s warrants that we issued in this private
placement. </FONT></P>




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<a name=zk113></a>


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>EXHIBITS AND FINANCIAL
STATEMENTS AND SCHEDULES </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following audited financial
statements pertaining to our company are filed as part of this registration statement: </FONT></P>





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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN="Bottom">
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Exhibit <BR><U>Number</U></B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Description</B></U> </FONT> </TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.1  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Articles
of Incorporation, as amended (attached as an exhibit to our quarterly report on Form
10-QSB/A filed on April 14, 2004). </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.2  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bylaws
(attached as an exhibit to our current report on Form 8-K filed on July 12, 2005)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.3  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certificate
of Amendment to Articles of Incorporation filed with the Secretary of State of the State
of Nevada on March 22, 2007 (attached as an exhibit to our current report on Form 8-K
filed on March 26, 2007 </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.1*  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Opinion
of Clark Wilson LLP</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.1  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Assignment
and Bill of Sale Agreement dated June 5, 2003 (attached as an exhibit to our current
report on Form 8-K filed on June 19, 2003) </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.2  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Affiliate
Stock Purchase Agreement dated as of March 8, 2005 between DNG Capital Corp. (USA) and
each              of Ultimedia Sales Inc., Mirelis InvesTrust SA, Altshuler Shaham Ltd.,
Rolfe Investment Ltd., Zonbit              Ltd. and Ariel Malik (attached as an exhibit
to our current report on Form 8-K filed on April 6, 2005)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.3  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Assignment
and bill of sale agreement dated July 1, 2005 between the Registrant and Roxbury Capital
Group Ltd. and Qwest Capital Inc (attached as an exhibit to our current report on Form
8-K filed on July 12, 2005) </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.4  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form
of Promissory Note (attached as an exhibit to our current report on Form 8-K filed on
September 11, 2006) </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.5  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form
of Subscription Agreement (attached as an exhibit to our current report on Form 8-K filed
on              October 30, 2006)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.6  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form
of Subscription Agreement (attached as an exhibit to our current report on Form 8-K filed
on              February 9, 2007)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.7  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment
Agreement with Asi Shalgi (attached as an exhibit to our current report on Form 8-K filed
on May 2, 2007). </FONT></TD>
</TR>
</TABLE>


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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.8  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form
of Subscription Agreement (attached as an exhibit to our current report on Form 8-K filed
on May 2, 2007) </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.9  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consulting
Service Agreement with Yossi Raz (attached as an exhibit to our current report on Form
8-K filed on May 11, 2007) </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.10  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment
Agreement with Dr. Irit Arbel (attached as an exhibit to our current report on Form 8-K
             filed on May 11, 2007).</FONT></TD>
</TR>
</TABLE>



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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.11  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment
Agreement with Alex Werber (attached as an exhibit to our current report on Form 8-K
filed on May 15, 2007). </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.12  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock
Option Plan (attached as an exhibit to our current report on Form 8-K filed on May 21,
2007). </FONT></TD>
</TR>
</TABLE>


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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.13  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>DeMonte
Associates Investor Relations Agreement (attached as an exhibit to our current report on
Form 8-K filed on May 30, 2007). </FONT></TD>
</TR>
</TABLE>


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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.14  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Term
sheet with Cornell Capital Partners, LP (attached as an exhibit to our current report on
Form 8-K filed on June 1, 2007). </FONT></TD>
</TR>
</TABLE>


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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.15  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Securities
Purchase Agreement with Cornell Capital Partners, L.P. (attached as an exhibit to our
             current report on Form 8-K filed on July 12, 2007).</FONT></TD>
</TR>
</TABLE>



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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.16  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Secured
Convertible Debenture No. GEYI-1-1 (attached as an exhibit to our current report on Form
8-K              filed on July 12, 2007).</FONT></TD>
</TR>
</TABLE>



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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.17  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Warrant
Certificate No. GEYI-1-1 (attached as an exhibit to our current report on Form 8-K filed
on              July 12, 2007).</FONT></TD>
</TR>
</TABLE>



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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.18  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Warrant
Certificate No. GEYI-1-2 (attached as an exhibit to our current report on Form 8-K filed
on              July 12, 2007).</FONT></TD>
</TR>
</TABLE>


<p align=center>
<font size=2>45</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN="Bottom">
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Exhibit <BR><U>Number</U></B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Description</B></U> </FONT> </TD>
</TR>
</TABLE>
<BR>


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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.19  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Registration
Rights Agreement dated July 6, 2007 (attached as an exhibit to our current report on Form
8-K filed on July 12, 2007). </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.20  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Security
Agreement dated July 6, 2007 (attached as an exhibit to our current report on Form 8-K
filed on July 12, 2007) </FONT></TD>
</TR>
</TABLE>


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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.21  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shareholder
Agreement with Alphakat GMBH (attached as an exhibit to our current report on Form 8-K
filed on July 13, 2007). </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.22  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Term
sheet with Alphakat GMBH (attached as an exhibit to our current report on Form 8-K filed
on July 13, 2007). </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.23  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shareholders
Agreement and Term Sheet with Yanai Man Projects Ltd. (attached as an exhibit to our
             current report on Form 8-K filed on July 25, 2007).</FONT></TD>
</TR>
</TABLE>



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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.24  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Land
Lease Agreement with Southern Nations Nationalities People&#146;s Regional State, Gamo
Gofa Zone and Global Energy Ethiopia PLC (attached as an exhibit to our current report on
Form 8-K filed on October 12, 2007) </FONT></TD>
</TR>
</TABLE>


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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.25  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Land
Lease Agreement with Southern Nations Nationalities People&#146;s Regional State, Gamo
Gofa Zone and Global Energy Ethiopia PLC (attached as an exhibit to our current report on
Form 8-K filed on October 12, 2007) </FONT></TD>
</TR>
</TABLE>


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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.26  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amended
and Restated Secured Convertible Debenture No. GEYI-1-1 (attached as an exhibit to our
             current report on Form 8-K filed on October 26, 2007)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.27  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Secured
Convertible Debenture No. GEYI-1-2 (attached as an exhibit to our current report on Form
8-K              filed on October 26, 2007)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.28  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consulting
Agreement dated October 20, 2007 between Global Energy Inc. and Trianon Partners
(attached              as an exhibit to our quarterly report on Form 10-QSB filed on
November 19, 2007)</FONT></TD>
</TR>
</TABLE>



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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.29  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employment
Agreement dated November 21, 2007 with Yossi Raz (attached as an exhibit to our current
report on Form 8-K filed on November 29, 2007). </FONT></TD>
</TR>
</TABLE>


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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.30  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Secured
convertible debenture no. GEYI-1-3 (attached as an exhibit to our current report on Form
8-K              filed on December 13, 2007).</FONT></TD>
</TR>
</TABLE>



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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.31  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Business
and Royalty Agreement, dated as February 6, 2008, between Global Energy Inc. and Covanta
             Energy Corporation (portions omitted pursuant to a request for confidential
treatment). (attached as              an exhibit to our current report on Form 8-K filed
on February 12, 2008).</FONT></TD>
</TR>
</TABLE>



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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.32  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>License
Agreement, dated as of February 6, 2008, between AlphaKat &#150; Global Energy GmbH and
Covanta Energy Corporation (portions omitted pursuant to a request for confidential
treatment). (attached as an exhibit to our current report on Form 8-K filed on February
12, 2008). </FONT></TD>
</TR>
</TABLE>


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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.33  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Business
and Development Agreement, dated as February 6, 2008, between Global Energy Inc. and
Renewable Diesel, LLC. (attached as an exhibit to our current report on Form 8-K filed on
February 12, 2008). </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.34  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>License
Agreement, dated as of February 6, 2008, between AlphaKat &#150; Global Energy GmbH and
American Renewable Diesel, LLC (portions omitted pursuant to a request for confidential
treatment). (attached as an exhibit to our current report on Form 8-K filed on February
12, 2008). </FONT></TD>
</TR>
</TABLE>


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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.35  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Irrevocable
Transfer Agent Instructions &#150; Exhibit D to Securities Purchase Agreement (attached
as an exhibit to our current report on Form 8-K/A filed on February 26, 2008). </FONT></TD>
</TR>
</TABLE>


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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.36  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Secured
Convertible Debenture No. GEYI-1-4 (attached as an exhibit to our current report on Form
8-K              filed on March 26, 2008).</FONT></TD>
</TR>
</TABLE>



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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.37  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amendment
to the Securities Purchase Agreement, dated March 20, 2008 (attached as an exhibit to our
current report on Form 8-K filed on March 26, 2008). </FONT></TD>
</TR>
</TABLE>


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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.38  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amendment
No. 1 to Amended and Restated Secured Convertible Debenture (GEYI-1-1) and Amendment No.
1              to Warrant (attached as an exhibit to our current report on Form 8-K filed
on March 26, 2008).</FONT></TD>
</TR>
</TABLE>



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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.39  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amendment
No. 1 to Secured Convertible Debenture (GEYI 1-2) and Amendment No. 1 to Warrant
(attached              as an exhibit to our current report on Form 8-K filed on March 26,
2008)</FONT></TD>
</TR>
</TABLE>



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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.40  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amendment
no. 1 to Secured Convertible Debenture No. GEYI-1-3 (attached as an exhibit to our
current              report on Form 8-K filed on March 26, 2008)</FONT></TD>
</TR>
</TABLE>



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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.41  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Business
and Royalty Agreement with Covanta Energy Corporation (attached as an exhibit to our
annual report on Form 10-K filed on March 31, 2008) </FONT></TD>
</TR>
</TABLE>

<p align=center>
<font size=2>46</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN="Bottom">
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Exhibit <BR><U>Number</U></B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Description</B></U> </FONT> </TD>
</TR>
</TABLE>
<BR>



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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.42  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>License
Agreement between AlphaKat-Global Energy GmbH and Covanta Energy Corporation (attached as
an exhibit to our annual report on Form 10-K filed on March 31, 2008) </FONT></TD>
</TR>
</TABLE>


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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.43  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Business
and Development Agreement with Renewable Diesel, LLC (attached as an exhibit to our
annual report on Form 10-K filed on March 31, 2008) </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.44  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>License
Agreement between AlphaKat-Global Energy GmbH and American Renewable Diesel, LLC
(attached as an exhibit to our annual report on Form 10-K filed on March 31, 2008) </FONT></TD>
</TR>
</TABLE>


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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.45  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Business
and Royalty Agreement with Covanta Energy Corp. (attached as an exhibit to our current
report on Form 8-K/A filed with the Securities and Exchange Commission on April 8, 2008;
note that portions of the agreement have been omitted pursuant to a request for
confidential treatment). </FONT></TD>
</TR>
</TABLE>


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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.46  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>License
Agreement between AlphaKat-Global Energy GmbH and Covanta Energy Corp. (attached as an
exhibit to our current report on Form 8-K/A filed with the Securities and Exchange
Commission on April 8, 2008; note that portions of the agreement have been omitted
pursuant to a request for confidential treatment ). </FONT></TD>
</TR>
</TABLE>


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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.47  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Business
and Development Agreement with Renewable Diesel, LLC (attached as an exhibit to our
current report on Form 8-K/A filed with the Securities and Exchange Commission on April
8, 2008). </FONT></TD>
</TR>
</TABLE>


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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.48  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>License
Agreement between AlphaKat-Global Energy GmbH and American Renewable Diesel, LLC
(attached as an exhibit to our current report on Form 8-K/A filed with the Securities and
Exchange Commission on April 8, 2008; note that portions of the agreement have been
omitted pursuant to a request for confidential treatment). </FONT></TD>
</TR>
</TABLE>


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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.49  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amended
and Restated Irrevocable Transfer Agent Instructions dated March 20, 2008. (attached as
an              exhibit to our registration statement on Form S-1/A filed on April 14,
2008)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.50  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Due
diligence report of Dr. Richard J. Harley, dated October 12, 2007 (attached as an exhibit
to our              registration statement on Form S-1/A filed on April 14, 2008)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.51  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amended
and Restated Irrevocable Transfer Agent Instructions dated March 20, 2008. (attached as
an              exhibit to our registration statement on Form S-1 filed on May 1, 2008)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.52  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Due
diligence report of Dr. Richard J. Harley, dated October 12, 2007 (attached as an exhibit
to our              registration statement on Form S-1 filed on May 1, 2008)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.53  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Secured
Convertible Debenture No. GEYI-1-5 (attached as an exhibit to our current report filed on
             Form 8-K on May 15, 2008)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.54  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consulting
Agreement with the Resultz Media Group Corp. dated May 22, 2008 (attached as an exhibit
to              our current report filed on Form 8-K on May 30, 2008)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.55  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consulting
Services, Compensation Agreement and Non Circumvent Agreement with Amir Elbaz dated May
22, 2008 (attached as an exhibit to our current report filed on Form 8-K on May 30, 2008) </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.56  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Terms
of Agreement, dated June 2, 2008, between Global Energy Inc. and S.C. Supercom S.A.
(attached              as an exhibit to our current report filed on Form 8-K on June 19,
2008)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.57  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Letter
Agreement with YA Global Investments, L.P., dated July 15, 2008  (attached as an exhibit
to              our quarterly report on Form 10-Q filed on November 19, 2008 )</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.58  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Letter
Agreement with YA Global Investments, L.P., dated September 22, 2008 (attached as an
exhibit              to our quarterly report on Form 10-Q on November 19, 2008).</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.59  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Letter
Agreement, dated October 8, 2008, between Global Energy, Inc. and Yanai Man Projects Ltd.
             (attached as an exhibit to our current report filed on Form 8-K on October
14, 2008)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.60  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Terms
of Loan Agreement between Global N.R.G. Pacific Ltd. and Mr. Aviram Malik and Global
Energy,              Inc. (attached as an exhibit to our current report filed on Form 8-K
on October 30, 2008)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.61  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Joint
Venture Agreement between Global Energy, Inc. and S.C. Supercom S.A. and S.C. Target
Group              S.R.L. (attached as an exhibit to our current report filed on Form 8-K
on November 20, 2008)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.62*  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form
of Securities Purchase Agreement used in connection with the private placement offering
of              Global Energy Inc. that closed in two tranches on September 30, 2008 and
October 4, 2008</FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.63*  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Form of Registration Rights Agreement
used in connection with the private placement offering of Global Energy Inc. that closed
in two tranches on September 30, 2008 and October 4, 2008 </FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16.1  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Letter
from Moore Stephens Ellis Foster Ltd. regarding change in independent accountant
(attached as              an exhibit to our current report on Form 8-K filed on August
15, 2005)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16.2  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Letter
dated January 24, 2006 from Ernst &amp; Young, Chartered Accountants regarding change in
independent accountant (attached as an exhibit to our current report on Form 8-K filed on
January 25, 2006) </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16.3  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Letter
from Vellmer &amp; Chang regarding change in certifying accountant (attached as an
exhibit to our current report on Form 8-K filed on August 2, 2007) </FONT></TD>
</TR>
</TABLE>


<p align=center>
<font size=2>47</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN="Bottom">
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Exhibit <BR><U>Number</U></B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><B>Description</B></U> </FONT> </TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21.1  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Global
Fuel Israel Ltd., a wholly owned subsidiary incorporated under the laws of the State of
Israel.</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21.2  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Global
N.R.G. Pacific Ltd., a 50.1% owned subsidiary incorporated under the laws of the State of
Israel. </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21.3  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Global
Energy Ethiopia PLC, a 99.9% owned subsidiary of Global N.R.G. Pacific Ltd. incorporated
under              the laws of Ethiopia.</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21.4  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AlphaKat
- Global Energy GMBH, a 50% owned subsidiary incorporated under the laws of Germany</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23.1*  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent
of Clark Wilson LLP (included in Exhibit 5.1).</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23.2*  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent
of Kesselman &amp; Kesselman (PWC Israel)</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23.3*  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent
of Chang Lee LLP chartered accountants</FONT></TD>
</TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24.1  </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Power
of Attorney (included on signature page)</FONT></TD>
</TR>
</TABLE>
<BR>



<a name=zk114></a>



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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>UNDERTAKINGS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The undersigned registrant hereby
undertakes: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To
file, during any period in which offers or sales are being made, a
          post-effective amendment to this registration statement: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a.</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To
include any prospectus required by Section 10(a)(3) of the <I>Securities Act           of
1933</I>;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b.</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To
reflect in the prospectus any facts or events which, individually or           together,
represent a fundamental change in the information in the registration
          statement; and Notwithstanding the forgoing, any increase or decrease in volume
          of securities offered (if the total dollar value of securities offered would
not           exceed that which was registered) and any deviation From the low or high
end of           the estimated maximum offering range may be reflected in the form of
prospectus           filed with the Securities and Exchange Commission pursuant to Rule
424(b) if, in           the aggregate, the changes in the volume and price represent no
more than a 20%           change in the maximum aggregate offering price set forth in the
<I>&#147;Calculation of Registration Fee&#148;</I> table in the effective
          registration statement; and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>c.</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To
include any additional or changed material information on the plan of
          distribution.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2)</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>That,
for the purpose of determining any liability under the <I>Securities Act           of 1933</I>,
each such post-effective amendment shall be treated as a new           registration
statement relating to the securities offered therein, and the           offering of such
securities at that time shall be deemed to be the initial <I>bona fide </I>offering
thereof. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3)</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To
remove from registration by means of a post-effective amendment any of the
          securities being registered which remain unsold at the termination of the
          offering. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4)</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Insofar
as indemnification for liabilities arising under the <I>Securities Act           of 1933</I>,
as amended, may be permitted to directors, officers and controlling           persons of
the small business issuer pursuant to the foregoing provisions, or           otherwise,
the small business issuer has been advised that in the opinion of the
          Securities and Exchange Commission such indemnification is against public
policy           as expressed in the Act and is, therefore, unenforceable. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>48</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(5)</FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
the event that a claim for indemnification against such liabilities (other           than
the payment by the small business issuer of expenses incurred or paid by a
          director, officer or controlling person of the small business issuer in the
          successful defense of any action, suit or proceeding) is asserted by such
          director, officer or controlling person in connection with the securities being
          registered, the small business issuer will, unless in the opinion of its
counsel           the matter has been settled by controlling precedent, submit to a court
of           appropriate jurisdiction the question whether such indemnification by it is
          against public policy as expressed in the <I>Securities Act of 1933</I>, as
          amended, and will be governed by the final adjudication of such issue. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses filed in reliance
on Rule 430A, shall be deemed to be part of and included in the registration statement as
of the date it is first used after effectiveness. Provided, however, that no statement
made in a registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement will, as
to a purchaser with a time of contract of sale prior to such first use, supersede or
modify any statement that was made in the registration statement or prospectus that was
part of the registration statement or made in any such document immediately prior to such
date of first use. </FONT></P>

<p align=center>
<font size=2>49</font></p>
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<page>

<a name=zk115></a>


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SIGNATURES </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to the requirements of the
<I>Securities Act of 1933</I>, as amended, the registrant has duly caused this
registration statement on Form S-1 to be signed on our behalf by the undersigned,
thereunto duly authorized in the City of __________, _______________ on January 5, 2009. </FONT></P>


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<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>GLOBAL ENERGY INC.</B><BR><BR>
<BR>By: /s/ Asi Shalgi<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Asi Shalgi<BR>President, Chief Executive Officer<BR>
                                                                  and Director</FONT></TD>
</TR>
</TABLE>
<BR>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We, the undersigned directors and/or
officers of Global Energy Inc. (the &#147;Company&#148;), hereby severally constitute and
appoint Asi Shalgi and Alex Werber, and each of them singly, our true and lawful
attorneys, with full power to any of them, and to each of them singly, to sign for us and
in our names in the capacities indicated below the registration statement on Form&nbsp;S-1
filed herewith, and any and all pre-effective and post-effective amendments to said
registration statement, and any registration statement filed pursuant to Rule&nbsp;462(b)
under the <I>Securities Act of 1933</I>, as amended, in connection with the registration
under the <I>Securities Act of 1933</I>, as amended, of equity securities of the Company,
and to file or cause to be filed the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting unto said
attorneys, and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as each of them might or could do in person, and hereby ratifying and
confirming all that said attorneys, and each of them, or their substitute or substitutes,
shall do or cause to be done by virtue of this Power of Attorney. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to the requirements of
the<I> Securities Act of 1933</I>, as amended, this registration statement has been signed
by the following persons in the capacities and on the dates indicated: </FONT></P>








<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH ALIGN="Left"><FONT FACE="Times New Roman" SIZE="2"><U>Signature</U> </FONT></TH>
     <TH ALIGN="Left"><FONT FACE="Times New Roman" SIZE="2"><U>Title</U> </FONT></TH>
     <TH ALIGN="Left"><FONT FACE="Times New Roman" SIZE="2"><U>Date</U> </FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=top>
     <TD WIDTH=30% ALIGN=LEFT VALIGN=Bottom><FONT FACE="Times New Roman" SIZE=2>By: /s/ Asi Shalgi<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>Asi Shalgi</FONT></TD>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>President, Chief Executive Officer &amp; Director (principal executive officer)</FONT></TD>
     <TD WIDTH=20% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>January 5, 2009</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=top>
     <TD ALIGN=LEFT VALIGN=Bottom><FONT FACE="Times New Roman" SIZE=2>By: /s/ Alex Werber<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>Alex Werber</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Treasurer &amp; Chief Financial Officer (principal financial officer and principal accounting officer)</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>January 5, 2009</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=top>
     <TD ALIGN=LEFT VALIGN=Bottom><FONT FACE="Times New Roman" SIZE=2>By: /s/ Avner Raanan<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>Avner Raanan</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Director</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>January 5, 2009</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=top>
     <TD ALIGN=LEFT VALIGN=Bottom><FONT FACE="Times New Roman" SIZE=2>By: /s/ Amir Elbaz<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>Amir Elbaz</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Director</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>January 5, 2009</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=top>
     <TD ALIGN=LEFT VALIGN=Bottom><FONT FACE="Times New Roman" SIZE=2>By: /s/ Nissan Caspi<BR>&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>Nissan Caspi</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Director</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>January 5, 2009</FONT></TD></TR>
</TABLE>
<BR>

<p align=center>
<font size=2>50</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<PAGE>

<a name=zk116></a>



<!-- MARKER FORMAT-SHEET="Para Flush Lv 1-TNR" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH="100%" ALIGN="Center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CONSOLIDATED AUDITED
FINANCIAL <BR>STATEMENTS FOR THE PERIOD ENDING <BR>DECEMBER 31, 2007</B> </FONT>
</TD>
</TR>

</TABLE>
<BR>





<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>GLOBAL ENERGY INC. </FONT>
<BR><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(A development stage company) </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CONSOLIDATED FINANCIAL
STATEMENTS </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center-TNR" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007 ANNUAL REPORT </FONT></P>







<TABLE CELLPADDING=3 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Page</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=92% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B><a href="#zk201">REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS</A></B> </FONT></TD>
     <TD WIDTH=8% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>F-2-F-3</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>CONSOLIDATED FINANCIAL STATEMENTS IN U.S. DOLLARS:</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#zk202">Balance Sheets</A></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>F-4</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#zk203">Statements of operations</A></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>F-5</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#zk204">Statements of changes in shareholders' equity (capital deficiency)</A></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>F-6</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#zk205">Statements of cash flows</A></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>F-7</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#zk206">Notes to financial statements</A></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>F-8 - F-19</FONT></TD></TR>
</TABLE>
<BR>


<p align=center>
<font size=2>F - 1</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


<a name=zk201></a>




<TABLE BORDER="0" CELLPADDING="3" CELLSPACING="0" WIDTH="100%">
<TR VALIGN="TOP">
     <TD COLSPAN="2" STYLE="border:SOLID BLACK 0.5PT; border-right:NONE; border-top:NONE; border-left:NONE;"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><IMG SRC="pwc.jpg"></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD WIDTH="70%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD WIDTH="30%" STYLE="border:SOLID BLACK 0.5PT; border-bottom:NONE; border-top:NONE; border-right:NONE;"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR>
<B>&nbsp;Kesselman &amp; Kesselman</B><BR>
&nbsp;Certified Public Accountants<BR>
&nbsp;Trade Tower, 25 Hamered Street<BR>
&nbsp;Tel Aviv 68125 Israel<BR>
&nbsp;P.O Box 452 Tel Aviv 61003<BR>
&nbsp;Telephone +972-3-7954555<BR>
&nbsp;Facsimile +972-3-7954556 </FONT>
</TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Report of Independent
Registered Public Accounting Firm </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To the shareholders of Global Energy
Inc. (a development stage company): </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have audited the accompanying
consolidated balance sheets of Global Energy Inc. and its subsidiaries (a development
stage enterprise) as of December 31, 2007, and the related consolidated statement of
operations, changes in shareholders&#146; equity (capital deficiency) and cash flows for
the year ended December 31, 2007 and, cumulatively, the period from January 1, 2007 to
December 31, 2007 (not separately presented herein). These financial statements are the
responsibility of the Company&#146;s management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the cumulative
totals of the Company for the period from July 5, 2005 (date of inception) to December 31,
2006, which totals reflect a deficit of $98,998 accumulated during the development stage.
Those cumulative totals were audited by other auditors whose report, dated February 9,
2007, expressed an unqualified opinion on the cumulative amounts. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). 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. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, the December 31, 2007
consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Global Energy Inc. and its subsidiaries (a development
stage enterprise) at December 31, 2007, and the results of their operations and their cash
flows for the year then ended and, cumulatively, for period from January 1, 2007 to
December 31, 2007 (not separately presented herein), in conformity with accounting
principles generally accepted in the United States of America. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As
discussed in Note 1c to the financial statements, the Company has suffered recurring
losses from operations, has limited capital resources and has a net capital deficiency
that raise substantial doubt about its ability to continue as a going concern.
Management&#146;s plans in regard to these matters are also described in Note 1c. The
financial statements do not include any adjustments that might result from the outcome of
this uncertainty. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Kesselman &amp; Kesselman </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tel Aviv, Israel </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=2>March 31, 2008 </FONT></P>


<p align=center>
<font size=2>F - 2</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>



<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="100%"><FONT FACE="Times New Roman, Times, Serif" SIZE="5"><B><I>Chang Lee LLP</I></B> </FONT> </TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B><I>Chartered Accountants</I></B> </FONT> </TD></TR>
<TR VALIGN="TOP">
     <TD><HR SIZE=1 NOSHADE WIDTH=100% ALIGN=LEFT></TD></TR>
<TR VALIGN="TOP">
     <TD align=right>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>505 - 815 Hornby Street <BR>
Vancouver, B.C, V6Z 2E6 <BR>
Tel: 604-687-3776 <BR>
Fax: 604-688-3373 <BR>
E-mail: info@changleellp.com</I> </FONT>
</TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN="Center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To the Board of
Directors and Stockholders of </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold-TNR" FSL="Workstation" -->
<p ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>GLOBAL ENERGY INC.</B> </FONT> <BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">(A development stage company) </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have audited the balance sheets of
<B>Global Energy Inc. </B>(&#147;the Company&#148;) (a development stage company) as at
December 31, 2006 and 2005 and the related statements of operations, stockholders&#146;
equity, and cash flows from July 7, 2005 (date of becoming a development stage company) to
December 31, 2006 and statements of operations, stockholders&#146; equity, and cash flows
for the years ended December 31, 2006 and 2005. These financial statements are the
responsibility of the Company&#146;s management. Our responsibility is to express an
opinion on these financial statements based on our audits. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform an audit to obtain reasonable assurance 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 audit provides a reasonable basis for our
opinion. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, the financial
statements referred to above present fairly, in all material respects, the financial
position of the Company as at December 31, 2006 and 2005 and the results of their
operations and their cash flows for the years ended December 31, 2006 and 2005 and for the
period from July 7, 2005 (date of becoming a development stage company) to December 31,
2006 in conformity with generally accepted accounting principles in the United States of
America. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Lv 0-TNR" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As
discussed in Note 1, the Company has incurred operating losses. These factors, among
others, raise substantial doubt about the Company&#146;s ability to continue as a going
concern. Management&#146;s plans in regard to these matters are described in Note 1. The
financial statements do not include any adjustments that might result from the outcome of
this uncertainty. </FONT></P>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=49% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Vancouver, Canada</FONT></TD>
     <TD WIDTH=51% ALIGN=CENTER><IMG SRC="clark2.jpg"></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>February 9, 2007</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>Chartered Accountants</FONT></TD></TR>
</TABLE>
<BR>



<p align=center>
<font size=2>F - 3</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<a name=zk202></a>





<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CONSOLIDATED FINANCIAL STATEMENTS IN U.S. DOLLARS</B> </FONT></P>


<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>CONSOLIDATED BALANCE
SHEETS</I></B> </FONT> </P>








<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>December 31</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>In thousands</FONT></TH>
</TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="73%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A s s e t s</B> </FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>CURRENT ASSETS:</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  1,470</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     11</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Other accounts receivable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>187</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T o t a l&nbsp;&nbsp;current assets</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,657</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>11</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>LONG TERM DEPOSITS</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>18</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>BALANCE WITH MINORITY INTEREST SHAREHOLDER</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>20</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>PROPERTY AND EQUIPMENT,</B> net of accumulated depreciation </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>523</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T o t a l&nbsp;&nbsp;assets</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  2,218</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     11</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Liabilities net of capital deficiency</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="Left" COLSPAN="7"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;CURRENT LIABILITIES:</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Accounts payables</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    183</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     10</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable - other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>317</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Demand loans payable - related parties</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>18</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>18</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Promissory note payable</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>28</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Debentures convertible into shares</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,618</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T o t a l&nbsp;&nbsp;current liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>3,136</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>56</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;MINORITY INTEREST</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>18</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="Left" COLSPAN="7"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;CAPITAL DEFICIENCY:</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Share capital (Note 9) -</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common shares of $0.001 par value each:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorized: 250,000,000 shares and 25,000,000 at</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31, 2007 and December 31, 2006, respectively;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issued and outstanding: 63,187,764 shares and 5,981,764 shares at</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31, 2007 and December 31, 2006, respectively</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>63</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>6</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>742</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>117</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Warrants</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>246</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>



<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Share subscription received</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>



<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Receivables in respect of shares issued</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(150</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit during development stage</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,764</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(99</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit before development stage</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(73</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(73</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T o t a l&nbsp;&nbsp;capital deficiency</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(936</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(45</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T o t a l&nbsp;&nbsp;liabilities net of capital deficiency</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2,218</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     11</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>











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<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>The accompanying notes are an integral part of the consolidated financial statements.</B> </FONT></P>



<p align=center>
<font size=2>F - 4</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<a name=zk203></a>




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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>CONSOLIDATED STATEMENTS
OF OPERATIONS</I></B> </FONT> </P>






<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman" SIZE=1>Year ended December 31</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN="3" ROWSPAN="2"><FONT FACE="Times New Roman" SIZE=1>Cumulative <BR>from
July 7,<BR>
2005 through<BR>
December 31,<BR>
2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2005</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=12><FONT FACE="Times New Roman" SIZE=1>In thousands, except share data</FONT></TH>
</TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="54%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;OPERATING EXPENSES -</B> </FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses (*)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>      (1,589</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>         (69</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>         (62</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>      (1,688</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;OPERATING LOSS</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,589</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(69</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(62</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,688</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;FINANCIAL EXPENSES - NET</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(76</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(76</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="Left" COLSPAN="13"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;NET LOSS FROM CONTINUING</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OPERATIONS</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,665</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(69</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(62</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,764</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;NET INCOME FROM DISCONTINUED</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OPERATION (NET OF TAX)</B> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>68</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>NET INCOME (LOSS)</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>      (1,665</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>         (69</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>           6</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>      (1,764</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>NET INCOME (LOSS)</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SHARE, BASIC AND DILUTED:</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="Left" COLSPAN="13"><FONT FACE="Times New Roman" SIZE="2"><B>NET LOSS PER SHARE FROM</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CONTINUING OPERATIONS</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       (0.03</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       (0.01</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       (0.01</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>NET INCOME PER SHARE FROM</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DISCONTINUING OPERATIONS</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>        0.01</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="Left" COLSPAN="13"><FONT FACE="Times New Roman" SIZE="2"><B>NET LOSS PER SHARE FOR</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THE YEAR</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       (0.03</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       (0.01</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>**</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD></TR>


<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>WEIGHTED AVERAGE NUMBER OF</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SHARES USED IN COMPUTING</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BASIC AND DILUTED NET LOSS</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PER SHARE</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>48,206,454</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4,901,758</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4,650,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD></TR>
</TABLE>
<BR>





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<TR VALIGN=TOP>
<TD WIDTH=20%>&nbsp;</TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
* In
the year ended December 31, 2007 &#150; includes $100 share-based compensation. </FONT></TD>
</TR>
</TABLE>


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<TR VALIGN=TOP>
<TD WIDTH=20%>&nbsp;</TD>
<TD WIDTH=80%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
** Representing an amount less than $0.01 </FONT></TD>
</TR>
</TABLE>
<BR>

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<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>The accompanying notes are an integral part of the consolidated financial statements.</B> </FONT></P>





<p align=center>
<font size=2>F - 5</font></p>
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<page>

<a name=zk204></a>









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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>STATEMENTS OF CHANGES IN
SHAREHOLDERS&#146; EQUITY (CAPITAL DEFICIENCY)</I></B> </FONT> </P>
















<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>Share capital</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN="3" ROWSPAN="2"><FONT FACE="Times New Roman" SIZE=1>Additional<BR>
paid-in<BR>
capital </FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 ROWSPAN="2"><FONT FACE="Times New Roman" SIZE=1>Warrants</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>

     <TH COLSPAN=3 ROWSPAN="2"><FONT FACE="Times New Roman" SIZE=1><BR>
Share<BR>
Subscription<BR>
received </FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 ROWSPAN="2" > <FONT FACE="Times New Roman" SIZE=1>Receivables<BR>
in respect of<BR>
shares issued </FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 ROWSPAN="2"><FONT FACE="Times New Roman" SIZE=1>Deficit<BR>
accumulated<BR>
during the<BR>
development<BR>
stage </FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 ROWSPAN="2"><FONT FACE="Times New Roman" SIZE=1>Deficit<BR>
accumulated<BR>
before the<BR>
development<BR>
stage </FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 ROWSPAN="2"><FONT FACE="Times New Roman" SIZE=1>Total</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Number</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Amount</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=24><FONT FACE="Times New Roman" SIZE=1>I n &nbsp;&nbsp; t h o u s a n d s</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="26%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="1"><B>BALANCE AT JANUARY 1, 2005</B> </FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>4,650,000</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>           5</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>         105</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>         (109</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>           1</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="1"><B>CHANGES DURING THE YEAR,<BR>&nbsp;&nbsp;&nbsp;&nbsp;ENDED DECEMBER 31, 2005</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>






<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss) for the year</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp; </FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1> (30</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>36</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>6</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>


<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>




<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="1"><B>BALANCE AT DECEMBER 31, 2005</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>4,650,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>5</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>105</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>(30</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>(73</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>7</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" COLSPAN="28"><FONT FACE="Times New Roman" SIZE="1"><B>CHANGES DURING THE YEAR,</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" COLSPAN="28"><FONT FACE="Times New Roman" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;ENDED DECEMBER 31, 2006</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;Issuance of shares</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>1,331,764</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>12</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>           4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>17</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;Net loss for the year</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>(69</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>(69</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="1"><B>BALANCE AT DECEMBER 31, 2006</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>5,981,764</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>6</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>117</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>(99</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>(73</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>(45</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" COLSPAN="28"><FONT FACE="Times New Roman" SIZE="1"><B>CHANGES DURING THE YEAR</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="Left" COLSPAN="28"><FONT FACE="Times New Roman" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;ENDED DECEMBER 31, 2007:</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;net of</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;Issuance of warrants</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>       246</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>246</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;Issuance of shares</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>57,206,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>57</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>515</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>(4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>(150</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>418</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;Net loss for the year</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>(1,665</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>(1,665</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;Share based compensation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>110</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=1>110</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="1"><B>BALANCE AT DECEMBER 31, 2007</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>63,187,764</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>          63</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>         742</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>       246</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>           -</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>     (150</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>      (1,764</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>          (73</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=1>        (936</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=1>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>











<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B> The accompanying notes are an integral part of the consolidated financial statements.</B> </FONT></P>

<p align=center>
<font size=2>F - 6</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<a name=zk205></a>





<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>CONSOLIDATED STATEMENTS OF CASH FLOWS</I></B> </FONT> </P>













<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman" SIZE=1>Year ended December 31</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN="3" ROWSPAN="2"><FONT FACE="Times New Roman" SIZE=1>Cumulative<BR>
from July 7,<BR>
2005 through<BR>
December 31,<BR>
2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>

<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2005</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
     <TH COLSPAN=12><FONT FACE="Times New Roman" SIZE=1>In thousands</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="58%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;CASH FLOWS FROM OPERATING ACTIVITIES:</B> </FONT> </TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B></B> </FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B></B> </FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B></B> </FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE="2"><B></B> </FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss) for the period</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> (1,665</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>         (69</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     6</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> (1,764</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="Left" COLSPAN="13"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjustments required to reconcile net income (loss)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="Left" COLSPAN="13"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to net cash used in operating activities:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital gain of disposal of property and equipment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(38</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share based compensation expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>110</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>110</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2></FONT></TD></TR>

<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expenses in respect of the convertibles debentures</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>74</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>74</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease (Increase) in other accounts receivable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(187</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>16</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(187</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in balance with minority shareholder</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(2</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(2</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in accounts payables</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>173</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>173</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase (decrease) in other accounts payable-other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>317</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(8</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(12</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>296</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) operating activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(1,178</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(77</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(27</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(1,298</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="Left" COLSPAN="13"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;CASH FLOWS FROM INVESTING ACTIVITIES:</B> </FONT> </TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net proceeds from sale of petroleum and natural<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;gas resource properties</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>50</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lease deposits</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(18</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(18</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payment for purchasing of property and equipment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(525</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(525</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(543</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>50</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(543</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;CASH FLOWS FROM FINANCING ACTIVITIES:</B> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuance of shares</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>390</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>17</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>407</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from debt issuance</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>46</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>

     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>46</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="Left" COLSPAN="13"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from issuance of convertible debentures and</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;warrants net of issuance expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,790</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,790</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>3,180</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>63</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>3,243</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="Left" COLSPAN="13"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;INCREASE (DECREASE) IN CASH AND CASH</B> </FONT> </TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EQUIVALENTS</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,459</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(14</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>23</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,402</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;CASH AND CASH EQUIVALENTS AT</B> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BEGINNING OF PERIOD</B> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>11</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>25</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>68</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=2></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="Left" COLSPAN="13"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;CASH AND CASH EQUIVALENTS AT END OF</B> </FONT> </TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>PERIOD</B> </FONT> </TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,470</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>          11</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    25</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  1,470</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NON-CASH TRANSACTION -</B> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conversion of promissory note into shares, see note 10a</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     28</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT>&nbsp;</TD><TD></TD></TR>
</TABLE>
<BR>






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<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>The
accompanying notes are an integral part of the consolidated financial statements.</B> </FONT></P>



<p align=center>
<font size=2>F - 7</font></p>
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<a name=zk206></a>



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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS</I></B> </FONT> </P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I><U>NOTE 1 &#150; SIGNIFICANT
ACCOUNTING POLICIES:</U></I> </FONT> </P>



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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>a.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>General</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Global
Energy Inc. (&#147;the Company&#148;) was incorporated under the laws of the State of
Nevada on February 16, 1999. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
July 6, 2005, the Company completed the sale all of its oil and gas assets for the sum of
$50,000. The sale of these oil and gas assets was completed on July 6, 2005. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Subsequent
to the disposal of the Company&#146;s principal operation &#150; petroleum and natural
gas resource properties, the Company is considered as a development stage enterprise
since July 7, 2005, as defined by Statement of Financial Accounting Standards (&#147;SFAS&#148;)
No. 7 &#150; &#147;Accounting and Reporting by Development Stage Enterprise&#148;. The
accompanying financial statements have disclosed cumulative amounts in the statements of
operations and cash flows since July 7, 2005, inception of becoming a development stage
company, until December 31, 2007. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
During
May 2007 the Company established two subsidiaries in Israel: Global Fuel Israel Ltd (&#147;Fuel&#148;)
a fully owned and Global N.R.G. Pacific Ltd. (&#147;Pacific&#148;) which the Company own
50.1%. On October, 2007, Pacific established a subsidiary in Ethiopia named Global Energy
Ethiopia PLC (&#147;Global Ethiopia&#148;). Pacific and its consolidated company are
acting as the agriculture arm of the Company&#146;s activities in the Bio Diesel field. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
May 2, 2007 the Company entered into an agreement with AlphaKat GmbH (&#147;AlphaKat&#148;)
in order to cooperate in commercialization of AlphaKat&#146;s technology of producing
mineral diesel oil from municipal waste using machines which converts hydrocarbon waste
into diesel oil invented for that purpose by AlphaKat (&#147;KDV machines&#148;). As to
commitments of the Company to Alphakat, see note 9b. In July 10, 2007 the Company entered
into an agreement with AlphaKat to incorporate and operate a company, named AlphaKat
&#150; Global Energy GmbH (&#147;AGEI&#148;). Each party holds 50% of the shares of AGEI.
AGEI is to provide worldwide marketing and sales of KDV machines in consideration of 10%
sale commission. The Company is responsible to finance AGEI, if such financing will be
required AlphaKat has the right to object to any sale of KDV machines. The Company has
consolidated AGEI in accordance with FIN 46R &#147;Consolidation of Variable Interest
Entities, an interpretation of ARB no. 51&quot;. See d, below. After the balance sheet
date AGEI entered into its first agreement, see note 13a. </FONT></TD>
</TR>
</TABLE>
<BR>



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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>b.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Functional
Currency</B> </FONT></TD>
</TR>
</TABLE>
<BR>




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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
currency of the primary economic environment in which the operations of the Company are
conducted is the U.S dollar (&#147;$&#148; or &#147;dollar). <BR><BR> Most of the Company&#146;s
expenses are incurred in dollars. A significant part of the Company&#146;s external
financing is in dollars. The Company holds most of its cash and cash equivalents in
dollars. Thus, the functional currency of the Company is the dollar. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Since
the dollar is the primary currency in the economic environment in which the Company
operates, monetary accounts maintained in currencies other than the dollar are remeasured
using the representative foreign exchange rate at the balance sheet date. Operational
accounts and nonmonetary balance sheet account are measured and recorded at the rate in
effect at the date of transaction. The effects of foreign currency remeasurement are
reported in current operations (as &#147;financial EX- net) and have not been material to
date. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>c.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Going
concern considerations</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
of December 31, 2007, the Company had negative working capital of $1,479 thousands and an
accumulated deficit of approximately $1,837 thousands. The Company&#146;s ability to
continue to operate as a going concern is dependent on its ability to generate sufficient
cash flows to meet its obligations on a timely basis, to obtain additional financing and
to ultimately attain profitability. The Company has no revenues and has incurred losses
and an accumulated deficit resulting from the Company&#146;s activity as a development
stage company and has a negative cash flow from operating activities. In the event the
Company is unable to successfully raise capital and generate revenues, it is unlikely
that the Company will have sufficient cash flows and liquidity to finance its business
operations as currently contemplated. There can be no assurance that additional funds
will be available on terms acceptable to the Company, or at all. These conditions raise
substantial doubt about the Company&#146;s ability to continue to operate as a going
concern. The accompanying financial statements do not include any adjustments to reflect
the possible future effect on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from the outcome of this
uncertainty. </FONT></TD>
</TR>
</TABLE>
<BR>



<p align=center>
<font size=2>F - 8</font></p>
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<page>


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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>d.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Principles
of consolidation</B> </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The consolidated financial
statements include the accounts of the Company and its subsidiaries mentioned above, and
the accounts of the 50% owned entity (AGEI) which according to FIN 46R is a variable
interest entity and the Company is the primary beneficiary.  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Intercompany balances and
transactions have been eliminated upon consolidation.  </FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>e.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Cash
equivalents</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash equivalents are short-term
highly liquid investments which include short term bank deposit (up to three months from
date of deposit), that are not restricted as to withdrawals or use that are readily
convertible to cash with maturities of three months or less as of the date acquired.  </FONT></P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>f.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Property
and equipment</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Property
and equipment are stated at cost, less accumulated depreciation. Assets are depreciated
using the straight-line method over their estimated useful lives. The annual depreciation
set as follows: leasehold improvements are amortized over the term of the lease which is
shorter than the estimated useful life of the improvements. Computers, software and
electronic equipment are depreciated over three years.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>g.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Impairment
of long-lived assets</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s long-lived assets
are reviewed for impairment in accordance with Statement of Financial Accounting Standard
No. 144, &#147;Accounting for the Impairment or Disposal of Long-Lived Assets&#148;
(&#147;SFAS No. 144&#148;) whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of the assets to the future
undiscounted cash flows expected to be generated by the assets. If such assets are
considered to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds their fair value. During the years ended
December 31, 2007, 2006 and 2005, no impairment losses have been identified. </FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>h.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Use
of estimates</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ from those
estimates. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>i.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Derivative
financial instruments (&#147;derivatives&#148;)</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company has adopted FAS 133, as amended, which establishes accounting and reporting
standards for derivatives, including certain derivatives embedded in other contracts, and
for hedging activities. Under FAS 133, all derivatives are recognized on the balance
sheet at their fair value. On the date that the Company enters into a derivative
contract, it designates the derivative, for accounting purposes, as: (1) hedging
instrument, or (2) non-hedging instrument. Any changes in fair value are to be reflected
as current gains or losses or other comprehensive gains or losses, depending upon whether
the derivative is designated as a hedge and what type of hedging relationship exists.
Changes in fair value of non-hedging instruments are carried to &#147;financial
expenses-net&#148; on a current basis. To date, the Company did not have any contracts
that qualify for hedge accounting under FAS 133. </FONT></TD>
</TR>
</TABLE>
<BR>



<p align=center>
<font size=2>F - 9</font></p>
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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company entered into convertible debentures agreement in which a derivative instrument is
&#147;embedded&#148;. Embedded derivative is separated from the host contract and carried
at fair value when (1) the embedded derivative possesses economic characteristics that
are not clearly and closely related to the economic characteristics of the host contract
and (2) a separate, stand-alone instrument with the same terms would qualify as a
derivative instrument. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
to embedded derivatives arising from the issuance of convertible debentures, see note 8.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>j.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Share-based
payment</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company implements Statement of Financial Accounting Standards No.&nbsp;123 (revised
2004) &#147;Share-based Payment&#148; (&#147;FAS 123(R)&#148;). FAS 123(R) requires
awards classified as equity awards be accounted for using the grant-date fair value
method. The fair value of share-based payment transactions is recognized as expense over
the requisite service period, net of estimated forfeitures. The Company recognizes
compensation cost for an award with only service conditions that has a graded vesting
schedule using the accelerated method based on multiple options awarded approach. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company accounts for equity instruments issued to third party service providers
(non-employees) in accordance with the fair value based on an option-pricing model,
pursuant to the guidance in EITF 96-18 &#147;Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or
Services&#148;. The fair value of the options granted is revalued over the related
service periods and recognized over the vesting period. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>k.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Income loss
per share</B> </FONT></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Net
income (loss) per share, basic and diluted, is computed on the basis of the net income
(loss) for the period divided by the weighted average number of shares of common shares
outstanding during the period. Diluted net loss per share is based upon the weighted
average number of shares of common shares and of common shares equivalents outstanding
when dilutive. Common shares equivalents include: (i)&nbsp;outstanding stock options
under the Company&#146;s Long-Term Incentive Plan and warrants which are included under
the treasury share method when dilutive, and (ii)&nbsp;Common shares to be issued under
the assumed conversion of the Company&#146;s outstanding convertible Debentures, which
are included under the if-converted method when dilutive. The computation of diluted net
loss per share for the years ended December&nbsp;31, 2007, 2006, and 2005 does not
include common share equivalents, since such inclusion would be antidilutive. Disclosures
required by SFAS&nbsp;128, Earnings per Share, have been included in Note 11. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>l.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Deferred
income taxes</B></FONT></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Deferred
taxes are determined utilizing the asset and liability method based on the estimated
future tax effects of differences between the financial accounting and tax basis of asset
and liabilities under the applicable tax laws. Deferred tax balances are computed using
the tax rates expected to be in effect when these differences are reversed. A full
valuation allowances is provided for, since based upon the weight of available evidence,
it is more likely than not that all of the deferred tax assets will not be realized. See
note&nbsp;10. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 10</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>m.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Uncertainty
in income taxes</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
of January&nbsp;1,&nbsp;2007, the Company adopted FASB Interpretation No. 48, &#147;Accounting
for Uncertainty in Income Taxes &#150; an Interpretation of FASB Statement No. 109&#148; (&#147;FIN
48&#148;). FIN 48 specifies how tax benefits for uncertain tax positions are to be
recognized, measured and derecognized in financial statements; requires certain
disclosures of uncertain tax positions; specifies how reserves for uncertain tax
positions should be classified on the balance sheet; and provides transition and
interim-period guidance, among other provisions. On May&nbsp;2,&nbsp;2007, the FASB
issued FASB Staff Position No. FIN 48-1, &#147;Definition of Settlement in FASB
Interpretation No. 48-1&#148; (&#147;FSP FIN 48-1&#148;). FSP FIN 48-1 provides guidance
regarding how an entity should determine whether a tax position is effectively settled
for the purpose of recognizing previously unrecognized tax benefits. The Company adopted
FSP FIN 48-1 as of January&nbsp;1,&nbsp;2007. The adoption of FIN 48 did not result in
any adjustment to the Company&#146;s financial statements. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>n.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Comprehensive
income (loss)</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company has no component of comprehensive income (loss) other than net income (loss).  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>o.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Newly
issued accounting pronouncements</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
December 2007, the FASB issued Statement of Financial Accounting Standards           No.
141 (revised 2007), &#147;Business Combinations&#148; (&#147;SFAS           141(R)&quot;.
SFAS 141(R) changes the accounting for business combinations,           including the
measurement of acquirer shares issued in consideration for a           business
combination, the recognition of contingent consideration, the           accounting for
contingencies, the recognition of capitalized in-process research           and
development, the accounting for acquisition-related restructuring cost
          accruals, the treatment of acquisition related transaction costs and the
          recognition of changes in the acquirer&#146;s income tax valuation allowance
and           income tax uncertainties. SFAS 141(R) applies prospectively to business
          combinations for which the acquisition date is on or after the beginning of the
          first annual reporting period beginning on or after December 15, 2008 . Early
          application is prohibited. The Company will be required to adopt SFAS 141(R) on
          January 1, 2009.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
December 2007, the FASB issued FAS No.&nbsp;160, &#147;Noncontrolling           Interests
in Consolidated Financial Statements &#150; an amendment of Accounting           Research
Bulletin No.&nbsp;51&#148; (&#147;FAS No.&nbsp;160&#148;). FAS           No.&nbsp;160
establish accounting and reporting standards for non-controlling           interests in a
subsidiary and deconsolidation of a subsidiary. Early adoption is           not
permitted. As applicable to the Company, these statements will be effective           as
of the year beginning January&nbsp;1, 2009. The Company is currently           evaluating
the potential impact, if any, the adoption of FAS No.&nbsp;160 would           have on
its consolidated financial statements.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
September 2006, the FASB&nbsp;issued&nbsp;Statement of Financial Accounting
          Standards No.&nbsp;157, &#147;Fair Value Measurements&#148; (&#147;SFAS
          157&#148;). SFAS 157 defines fair value, establishes a framework and gives
          guidance regarding the methods used for measuring fair value, and expands
          disclosures about fair value measurements. SFAS&nbsp;157 is effective for
          financial statements issued for fiscal years beginning after November&nbsp;15,
          2007, and interim periods within those fiscal years (January 1, 2008, for the
          Company). The Company is currently assessing the impact that SFAS 157 may have
          on its results of operations and financial position.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
February&nbsp;2007, the&nbsp;FASB issued&nbsp;Statement of Financial           Accounting
Standards No.&nbsp;159, &#147;The Fair Value Option for Financial           Assets and
Financial Liabilities&#150;Including an amendment of FASB Statement           No.&nbsp;115&#148; (&#147;SFAS
159&#148;). SFAS 159 is expected to expand the           use of fair value accounting but
does not affect existing standards which           require certain assets or liabilities
to be carried at fair value. The objective           of SFAS 159 is to improve financial
reporting by providing companies with the           opportunity to mitigate volatility in
reported earnings caused by measuring           related assets and liabilities
differently without having to apply complex hedge           accounting provisions. Under
SFAS 159, a company may choose, at its initial           application or at other
specified election dates, to measure eligible items at           fair value and report
unrealized gains and losses on items for which the fair           value option has been
elected in earnings at each subsequent reporting date.           SFAS&nbsp;159 is
effective for financial statements issued for fiscal years           beginning after
November&nbsp;15, 2007, and interim periods within those fiscal           years (January
1, 2008, for the Company). If the Company is to elect the fair           value option for
its existing assets and liabilities, the effect as of the           adoption date, shall
be reported as a cumulative-effect adjustment to the           opening balance of
retained earnings. The Company is currently assessing the           impact that SFAS 159
may have on its financial position.  </FONT></TD>
</TR>
</TABLE>
<BR>



<p align=center>
<font size=2>F - 11</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5) </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
December 2007, the FASB ratified EITF Issue No. 07-01, &#147;Accounting for
          Collaborative Arrangements&#148; (&#147;EITF 07-01&#148;). EITF 07-01 defines
          collaborative arrangements and establishes reporting requirements for
          transactions between participants in a collaborative arrangement and between
          participants in the arrangement and third parties. EITF 07-01 also establishes
          the appropriate income statement presentation and classification for joint
          operating activities and payments between participants, as well as the
          sufficiency of the disclosures related to these arrangements. EITF 07-01 is
          effective for fiscal years beginning after December 15, 2008 (January 1, 2009,
          for the Company). EITF 07-01 shall be applied using modified version of
          retrospective transition for those arrangements in place at the effective date.
          An entity should report the effects of applying this Issue as a change in
          accounting principle through retrospective application to all prior periods
          presented for all arrangements existing as of the effective date, unless it is
          impracticable to apply the effects the change retrospectively. The Company is
          currently assessing the impact that EITF 07-01 may have on its results of
          operations and financial position.  </FONT></TD>
</TR>
</TABLE>
<BR>




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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>NOTE 2 &#150; OTHER
ACCOUNTS RECEIVABLE:</I></B> </FONT> </P>










<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>December 31,<BR>
2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>In thousands</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">

     <TD WIDTH="5%"> </TD>
     <TD WIDTH="80%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Other receivable</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 120</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Governmental Institutions</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>21</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Prepaid expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>46</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 187</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>





<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>NOTE 3 &#150; PROPERTY
AND EQUIPMENT:</I></B> </FONT> </P>










<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>December 31,<BR>
2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>In thousands</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="5%"> </TD>
     <TD WIDTH="80%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Cost:</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Advances on account of</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;acquisition of Machinery</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 488</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Computer software and electronic equipment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>24</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Leasehold improvements</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>13</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>525</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Less, accumulated depreciation and amortization</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 523</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>



<p align=center>
<font size=2>F - 12</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>NOTE 4 &#150; ACCOUNTS PAYABLE
&#150; OTHER:</I></B> </FONT> </P>







<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>December 31,<BR>
2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>In thousands</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT>&nbsp;</TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="5%"> </TD>
     <TD WIDTH="80%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Accrued expenses</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 234</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Employees and payroll accruals</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>80</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Government authorities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>3</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 317</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>





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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>NOTE 5 &#150; BALANCE
WITH MINORITY SHAREHOLDER</I></B> </FONT> </P>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
July 10, 2007 the Company entered into an agreement with AlphaKat to incorporate and
operate AGEI see note 1a. According to the agreement the Company has provided a loan to
the shareholders of the AlphaKat. The terms of the loan has not yet been set.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>NOTE 6 &#150; DEMAND LOAN
PAYABLE &#150; RELATED PARTIES</I></B> </FONT> </P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company borrowed $18,000 from four shareholders of the Company on May 4, 2006. The loans
are unsecured, non-interest bearing and due on demand.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>NOTE 7 &#150; FINANCIAL
EXPENSE (INCOME)</I></B> </FONT> </P>










<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>December 31,<BR>
2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>In thousands</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="5%"> </TD>
     <TD WIDTH="80%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Interest on convertible debentures (see note 8)</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  160</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Income from evaluating the conversion option</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;fair value of the (see note 8)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(86</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   76</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>


<p align=center>
<font size=2>F - 13</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>



<!-- MARKER FORMAT-SHEET="Head Left-TNR" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>NOTE 8 &#150; CONVERTIBLE
DEBENTURES AND WARRANTS</I></B> </FONT> </P>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
July 2007, the Company entered into an agreement to issue in four different installments,
as set in the agreement, $4 million aggregate principal amount of convertible debentures (&#147;Debentures&#148;)
in a private placement. As of December 31, 2007 three installments in the sum of $3
million principal were issued for consideration of $2.8 million. The last installment is
due after a registration statement for the underlying shares is declared effective by the
SEC. The Debentures bear interest at 10% per annum, the payments of the principals and
interest will commence on July 31, 2008 and continuing on each successive month
thereafter until October 2010. The Debentures are convertible, at the option of the
holder at any time, into shares of the Company&#146;s Common Stock at a conversion price
of $2.2 per share. The Company has the right to redeem a portion or all amounts
outstanding prior to maturity date, provided that (1) the closing Bid price is less than
the conversion price, (2) the underlying shares registration statement is effective and
(3) no event of default has occurred.<BR><BR> If any event of default occurred, the full unpaid
Principal amount of this Debenture, together with interest shall become at the investor&#146;s
election, immediately due and payable in cash. In conjunction with this financing, the
Company issued to the private investor 300,000 warrants to purchase 300,000 common shares
of the Company, exercisable for five years at an exercise price of $2.35 and 300,000
warrants to purchase 300,000 common shares of the Company, exercisable for five years at
an exercise price of $2.50. The conversion of the debentures and the exercise of the
warrants are subject to further adjustments and condition as further set out in the
Debenture Agreement. The conversion option included within each of the Company&#146;s
convertible debenture does not meet all the conditions of EITF 00-19 &#147;Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company&#146;s
Own Stock&#148; related to equity classification and therefore should be bifurcated from
the debt host contract. In addition the put option and call option are considered as
embedded derivatives that require bifurcation, therefore these instruments are evaluated
each reporting period and the difference in fair value is recorded as financial income or
expense, see note 7 above. The Company measured the fair value of the embedded
derivatives features on the issuance date at approximately $1,032 thousands. The amount
attributed to the warrants was $246 thousands, the remaining $1,425 thousands was
allocated to the debentures.  </FONT></TD>
</TR>
</TABLE>
<BR>





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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
of December 31, 2007, none of the warrants were exercised and none of the debentures were
converted into share. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Following
are the details of the convertible debentures:  </FONT></TD>
</TR>
</TABLE>
<BR>







<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>December 31,<BR>
2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>In thousands</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="5%"> </TD>
     <TD WIDTH="80%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Principal</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 1,426</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Accrued interest</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>160</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Conversion option</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,032</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Put option</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>*</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Call option</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>*</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> 2,618</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*
Representing an amount less than $1,000 </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
notes are secured by a pledge on all of the Company&#146;s assets. </FONT></P>


<p align=center>
<font size=2>F - 14</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>NOTE 9 &#150; COMMITMENTS
AND CONTINGENCIES:</I></B> </FONT> </P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>a.</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>               Fuel
currently leases office in Tel Aviv, Israel, under operating lease
               agreement, which expire at 2009. The monthly rent is approximately $3,800. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>b.</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>               Under
the agreement signed with Alphakat with regard to commercialization of
               AlphaKat technology of producing mineral diesel oil from municipal waste
the                Company agreed to: 1) Provide financial support for the project, 2)
Purchase                three KDV 500 turbines for implementation in Poland, the United
States and                Israel, 3) Start a regulatory process, including filing of
permit applications                and 4) Monthly payments Euro &#128;10,000 to AlphaKat
for consulting. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>c.</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>               On
October 5, 2007, Global Ethiopia, entered into lease agreements with the
               Southern Nations Nationalities People&#146;s Regional State, Ethiopia, or
SNRS,                for a 50 year lease of 20,000 hectares of rural land located in the
Gamo Gofa                zone in the SNRS for the purpose of cultivating castor seeds and
15 hectares of                land located in the Gamu Gofa zone, Kucha Woreda, in the
SNRS for the purpose of                operating an oil crushing plant through an
existing facility on the property.                The agreements are subject to, among
other things, the following conditions: (i)                Global Ethiopia must pay SNRS
a rental fee of Birr 47 (approximately US$5) or                Birr 78 (approximately
US$8.50) per hectare per year, depending on whether the                leased land is
defined as second or first class land, respectively; (ii) Global                Ethiopia
must completely develop the 20,000 hectares leased to it within eight
               years of the execution date of the agreement, including planting and
maintaining                trees or other oil producing crops. If no development process
is carried out                within a period of four (4) years from the date of
execution of the agreement,                then the undeveloped land may be repossessed
by SNRS by giving six (6) months                advance written notice to abandon the
land; (iii) Global Ethiopia must                completely develop the 15 hectares leased
to it within three years of the                execution date of the agreement; (iv)
Global Ethiopia must perform a survey on                the 20,000 hectares within 24
months of the execution date of the agreement;                <BR><BR>Global Ethiopia has also an
option to lease additional farmland from the SNRS                during the term of the
lease agreement (up to an additional 100,000 hectares of                farmland) on the
same terms as the lease agreement for the 20,000 hectares; and                Global
Ethiopia is not required to make any rental payments on its 20,000                hectare
lease agreement until the fourth year of the agreement. During the term                of
the lease agreements, SNRS may cancel the lease due to failure of Global
               Ethiopia to discharge its material obligations under the lease agreements,
               provided, however, that Global Ethiopia is given one year prior notice and
fails                to cure such failure within such one year period. As
of December 31, 2007, none of the conditions were met.  </FONT></TD>
</TR>
</TABLE>
<BR>





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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>d.</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
October 20, 2007 the Company entered into an agreement for consulting
               services with Trianon Partners (&#147;Trianon&#148;) and as of October 24,
2007                the Company entered into a Joint Development Agreement with Trianon.
In                consideration of the consulting services to be provided by Trianon, the
Company                agreed to pay Trianon a fixed fee of $250 thousands which is to be
paid in                $10,000 monthly installments once the Company determines to
commence the                construction of the plant with the balance to be paid upon
mechanical completion                of the plant. In the consideration of the Joint
Development the Company agreed                to grant an exclusive license to Trianon,
throughout the states of Texas, New                York and New Jersey to be formed with
AlphaKat, to market systems that use a                proprietary biodiesel
technology for the conversion of waste to biodiesel. The aforementioned agreement was
terminated in the Company executed a business and development agreement with
(&#147;Renewable&#148;), an affiliate of Trianon and of American Renewable Diesel, LLC
(&#147;American&#148;), see also note 13a.</FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>F - 15</font></p>
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<page>



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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>NOTE 10 &#150; SHARE
CAPITAL:</I></B> </FONT> </P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>a.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Common
shares</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Common
stock confers on its holders the right to receive notice to participate and vote in
general meetings of the Company, the right to a share in the excess of assets upon
liquidation of the Company, and the right to receive dividends, if declared. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
October 24, 2006, the Company issued 1,331,764 common shares at a price per share of $0.01
for an aggregate consideration of $13,000. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
February 7, 2007, the Company issued 17,031,000 common shares at a price per share of
$0.01 for consideration of approximately $170 thousands. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
April 30, 2007, the Company issued a total of 40,175,000 common shares at a price per
share of $0.01 for consideration of approximately $402 thousands of which approximately
$47,000 was paid in cash, $28,000 was paid by conversion of $28,000 promissory note and
approximately $327 thousands was paid via the issuance of non interest notes receivables
having maturities up to one year. As at December 31, 2007, $150 thousands have not been
yet collected. </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
to the issuance of warrants, see note 8.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>b.</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Stock
option plan</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2007,
the Company established the 2007 share option plan, which provides for the issuance of up
to 8,500,000 of the Company&#146;s common shares. </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
April 2007 the Company granted 5,055,021 stock options exercisable for ten years at an
exercise price of $0.01 per share, to the CEO, the options vest in four equal batched
over a period of four years from the date of the option, provided that the CEO is still
the Company&#146;s employee. No option was vested as to year end. The Company estimates
the fair value of stock options granted using the Black-Scholes option-pricing model. The
option-pricing model requires a number of assumptions, of which the most significant are,
expected stock price volatility, and the expected option term. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>NOTE 10 &#150; SHARE
CAPITAL (continued):</I></B> </FONT> </P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Expected
volatility was based on the average of similar companies in the market due to
insufficient trade volume. The expected option term represents the contractual period of
the stock options as defined in the option agreement. The Company has historically not
paid dividends and has no foreseeable plans to issue dividends. Risk-free interest rates,
which are based on quoted H15 report of the Federal Reserve Board. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The fair value of the Company&#146;s stock options granted to the CEO was estimated using the
following weighted average assumptions: </FONT></TD>
</TR>
</TABLE>
<BR>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="15%"> </TD>
     <TD WIDTH="70%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Risk free interest</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4.6</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>3%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Dividend yields</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Volatility</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>250</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Expected term (in years)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>10</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>


<p align=center>
<font size=2>F - 16</font></p>
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<page>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The fair value of the options granted
to the CEO using the Black&amp;scholes model is $0.01 per option. </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
May 7, 2007 the Company granted 400,000 warrants to a service provider for Investor
Relations and Marketing Advisor services. 200,000 warrants are exercisable immediately at
an exercise price of $0.01 per share. 200,000 additional options were intended to vest
effective May 1, 2008, on a pro rata basis in the event the employment agreement
terminated before May 1, 2008. The agreement with the service provider was terminated as
of January 1, 2008, and as of the December 31, 2007, 350,000 warrants were vested and
exercisable at an exercise price of $0.01 per share, the market value of the share we
used in the calculation of the fair value as of the year end was $0.6. The fair value of
the abovementioned warrants calculated amounted to $92,000. This fair value was estimated
using the following weighted average assumptions: </FONT></TD>
</TR>
</TABLE>
<BR>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="25%"> </TD>
     <TD WIDTH="55%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Risk free interest</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>3.3</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>4%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Dividend yields</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Volatility</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>250</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Expected term (in years)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>Less than a year</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2></FONT></TD></TR>
</TABLE>
<BR>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2007 no options or
warrants were exercised. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December31, 2007, there were
$33 thousands of total unrecognized compensation expenses related to unvested share based
compensation arrangement granted under the plan. </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As to options granted after balance sheet date, see note 13b.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>NOTE 11 &#150; INCOME
TAXES</I></B> </FONT> </P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
2007 and 2006 the Company incurred net operating loss for tax purposes and recognized a
full tax valuation against deferred taxes. Accordingly, no provision or benefit for
income taxes has been recorded in the accompanying financial statements.  </FONT></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The tax effect of net operating loss carry forward as of December 31, 2007 and 2006 was as
follows:  </FONT></TD>
</TR>
</TABLE>
<BR>





<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">

     <TD WIDTH="10%"> </TD>
     <TD WIDTH="64%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Deferred tax assets:</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Net operating loss carry-forward</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  484</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   60</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Valuation allowance</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(484</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(60</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>    0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>





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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company is primarily subject to U.S.&nbsp;federal income tax. For all years presented
effective income tax rate is zero. The difference between the Company&#146;s effective
income tax rate and the statutory rate of 35% is attributable to an increase in the
deferred tax valuation allowance. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s policy is to recognize interest and penalties related to income tax
matters in income tax expense. As of January 1 and December&nbsp;31, 2007, the Company
had no accruals for interest or penalties related to income tax matters. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
of December&nbsp;31, 2007, the Company had available for tax purposes unused net
operating loss carry-forwards of $1,412. $1,101 will expire in various years from 2019 to
2027. </FONT></TD>
</TR>
</TABLE>
<BR>



<p align=center>
<font size=2>F - 17</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>NOTE 12 &#150; NET LOSS
PER SHARE DATA</I></B> </FONT> </P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s basic net loss per share amounts has been computed by dividing net loss by
the weighted average number of Common outstanding. In 2007, 2006, and 2005, the Company
reported net losses; therefore, no common stock equivalents were included in the
computation of diluted net loss per share since such inclusion would have been
antidilutive. The calculations of basic and diluted net loss per share are as follows: </FONT></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman" SIZE=1>December 31</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
</TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2006</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2005</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="5%"> </TD>
     <TD WIDTH="60%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Net loss, in thousands (Numerator)</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  1,665</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     69</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     (6</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Weighted-average shares, in thousands (Denominator)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>48,206</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4,902</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>4,650</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Basic and diluted net loss per share</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   0.03</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   0.01</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   0.00</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD> </TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>







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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
shares issuable upon the exercise of options, and conversion of convertible debentures
and warrants, which have been excluded from the diluted per share amounts because their
effect would have been antidilutive, include the following:  </FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>December 31,<BR>
2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH> </TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH></TR>


<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="5%"> </TD>
     <TD WIDTH="80%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Options:</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>

<TR VALIGN="BOTTOM">
     <TD WIDTH="5%"> </TD>
     <TD WIDTH="80%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Weighted average number, in thousands</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>3,370</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Weighted average exercise price</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     0.01</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" >
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Warrants:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Weighted average number, in thousands</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>542</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" >
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Weighted average exercise price</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     0.81</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN="Left" COLSPAN="4"><FONT FACE="Times New Roman" SIZE=2>Convertible Debt:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" >
     <TD> </TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Weighted average number, in thousands</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>263</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom BGCOLOR="#cceeff">
     <TD> </TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Conversion price</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>      2.2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>





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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>NOTE 13 &#150; SUBSEQUENT
EVENTS:</I></B> </FONT> </P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>a.</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>                    In February 6, 2008, The Company entered into a business and royalty
agreement           with Covanta Energy Corporation (&#147;Covanta&#148;), under which
the Company           granted to Covanta certain rights, both exclusive and
non-exclusive, for the           use, practice, and improvement of the KDV technology for
the purpose of           converting waste materials containing hydrocarbons into diesel
oil in countries           including the US, the UK, China and the Republic of Ireland.&nbsp; The
Company           has certain rights to pursue specified small scale projects using the
          technology. Covanta will have the option to invest in, as well as the Company
          retention of the right to invest 10% &#150; 35% of the equity in projects
          initiated by Covanta. Covanta agreed to pay the Company a royalty equal to 10%
          of the gross revenues derived from the sale of diesel oil from each project for
          a period of 20 years from the date the applicable project achieves commercial
          operation.&nbsp; Under the agreement, Covanta shall also be responsible for
          financing 100% of the costs of erection of a demonstration plant, which it may
          disassemble and make available for pick up by us, at no cost to us, upon
Covanta           terminating its rights to the technology.&nbsp;</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
the same day, the Company entered into a license agreement with Covanta under which the
Company granted it a right to sell systems based on the technology to governmental
organizations subject to certain pre-conditions regarding the purchase of a minimum
number of systems based on the technology. Covanta&#146;s rights under both the license
agreement and the business and royalty agreement shall be non-exclusive until it has (i)
issued a purchase order for a demonstration plant, and (ii) placed purchase orders for
five additional systems. AlphaKat-Global Energy GmbH will receive a 10% commission from
the sale of all systems, part of which shall be payable to American, subject to the
business and development agreement described below.  </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 18</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
February 6, 2008, the Company executed a business and development agreement with
Renewable, an affiliate of Trianon and of American, under which both Renewable and the
Company shall have the right to identify and develop certain projects to convert
feedstock to diesel using the KDV technology in New York, California and Texas, as well
as Florida and New Jersey under certain conditions.&nbsp; If the Company identifies a
project, Renewable shall be entitled to invest up to 25% of the total required equity. If
Renewable identifies a project, the Company shall be entitled to invest up to 51% and
Covanta will be entitled to invest up to 24% of the total required equity. In all
projects, Renewable shall manage the projects and shall be entitled to development fees
in the amount of $100 thousands for each KDV500, up to a maximum total of $2,000,
according the number of KDV 500 system included in the project. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
connection with the business and development agreement described above, AlphaKat-Global
Energy GmbH executed a license agreement with Renewable granting certain exclusive rights
to market and sell systems based on the technology in the territory of California, New
York and Texas, as well as New Jersey and Florida, subject to the satisfaction of minimum
sales requirements. The territory may be reduced and/or exclusive rights may become
non-exclusive rights, depending on whether minimum sale requirements are satisfied.&nbsp;American
is to receive a commission on all sales in the territory. Systems sold to Covanta shall
be credited to American, regardless of whether such systems are for use inside or outside
the territory. </FONT></TD>
</TR>
</TABLE>
<BR>




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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>b.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
January 31, 2008 the Board of Directors approved the following options
               grants:<B></B>1,150,000 to three directors (350,000 options each) pursuant
to                the Company director compensation plan, at an exercise price of US $2.2
per                share, and 1,150,000 incentive options granted to executive officer
pursuant to                an employment agreement effective November 1, 2007. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>c.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On
March 20, 2008, the Company signed an amendment to the debentures agreement
               described in note 8. The Company agreed to amend certain sections of the
               agreement dated July 2007 as follows: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="wingdings 2" SIZE=2>&#151;</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
private investor agreed to purchase $0.5 million of convertible debentures prior to a
registration statement for the underlying shares is declared effective by the SEC and the
additional $0.5 million once it become effective;  </FONT></TD>
</TR>
</TABLE>
<BR>






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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="wingdings 2" SIZE=2>&#151;</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
conversion price has been changed from $2.20 to $1.25 for all debentures outstanding; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="wingdings 2" SIZE=2>&#151;</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
exercise price has been changed from $2.50 and $2.35 to $1.25 for all warrants granted. </FONT></TD>
</TR>
</TABLE>
<BR>






<p align=center>
<font size=2>F - 19</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<PAGE>

<a name=zk117></a>



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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>INTERIM CONSOLIDATED<BR>
FINANCIAL STATEMENTS AS OF<BR> SEPTEMBER 30, 2008 </FONT></H1>




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<P ALIGN="Center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>IN U.S. DOLLARS </FONT></P>


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<P ALIGN="Center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>UNAUDITED </FONT></P>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TABLE OF CONTENTS </FONT></P>





<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1>Page</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=90% ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:</B> </FONT></TD>
     <TD WIDTH=10% ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#zk301">Balance sheets as of September 30, 2008 and December 31, 2007</A></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>F-2</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#zk302">Statements of operations for the three months and the nine months ended September 30, 2008</A></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#zk302">and 2007; and for the period from July 7, 2005 through September 30, 2008</A></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>F-3</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#zk303">Statements of changes in capital deficiency for the period of nine months ended</A></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#zk303">September 30, 2008; and for the period from July 7, 2005 through December 31, 2007</A></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>F-4</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#zk304">Statements of cash flows for the three months and the nine months ended September 30, 2008</A></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#zk304">and 2007; and for the period from July 7, 2005 through September 30, 2008</A></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>F-5</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#zk305">Notes to interim financial statements</A></FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>F-6 - F-15</FONT></TD></TR>
</TABLE>
<BR>




<p align=center>
<font size=2>F - 1</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<a name=zk301></a>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>CONDENSED
CONSOLIDATED BALANCE SHEETS</I></B> <BR>(U.S. dollars in
thousands) </FONT> </P>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>September 30<BR>
2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>December 31<BR>
2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Unaudited</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Audited</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="74%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>A s s e t s</B> </FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>CURRENT ASSETS:</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  1,119</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  1,470</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Advance to supplier (refer to note 5a)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,773</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Other accounts receivable</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>119</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>187</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T o t a l&nbsp;&nbsp;current assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>3,011</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,657</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>LONG TERM DEPOSITS</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>21</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>18</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>ADVANCE TO MINORITY INTEREST SHAREHOLDER</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>20</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>20</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>PROPERTY AND EQUIPMENT, net</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,290</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>523</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T o t a l&nbsp;&nbsp;assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  4,342</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2,218</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=7><FONT FACE="Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Liabilities net of capital deficiency</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>CURRENT LIABILITIES:</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Accounts payables</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    401</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    183</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable - other</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>746</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>335</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Advance from third party (refer to note 5a)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    1,773</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    &nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Advance from third party (refer to note 10)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>100</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Short term loan from related parties</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 224</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    &nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Short term loan from share holder</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>176</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Short term loans</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> 186</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    &nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Debentures convertible into shares</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,633</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,618</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T o t a l&nbsp;&nbsp;current liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>6,239</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>3,136</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>LIABILITY FOR EMPLOYEE RIGHTS UPON</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;<B>RETIREMENT, NET</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>13</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>MINORITY INTEREST</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>18</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>18</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>CAPITAL DEFICIENCY:</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=7><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Share capital - Common shares of $0.001 par value each:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorized: 250,000,000 shares at September 30, 2008 and December 31, 2007</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issued and outstanding: 79,387,764 shares and 63,187,764 shares at September 30, 2008</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and December 31, 2007, respectively</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>79</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>63</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,482</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>742</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Warrants</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,116</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>246</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Receivables in respect of shares issued</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(150</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit during development stage</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(4,532</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(1,764</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit before development stage</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(73</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(73</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T o t a l&nbsp;&nbsp;capital deficiency</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(1,928</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(936</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;T o t a l&nbsp;&nbsp;liabilities net of capital deficiency</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  4,342</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  2,218</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>


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<P ALIGN="Center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>The accompanying notes are an
integral part of the consolidated financial statements.</B> </FONT></P>


<p align=center>
<font size=2>F - 2</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<a name=zk302></a>










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<P ALIGN="Center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS</I></B><BR>(U.S.
          dollars in thousands, except share and per share data) </FONT> </P>















<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>Nine months ended<BR>
September 30</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>Three months ended<BR>
September 30</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 rowspan=2><FONT FACE="Times New Roman" SIZE=1>Cumulative<BR>
from July 7,<BR>
2005 through<BR>
September 30,<BR>
2008 (see note 1)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="38%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>OPERATING EXPENSES -</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>General and administrative expenses*</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>       3,208</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>         800</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>         855</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>         529</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>       4,896</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>FINANCIAL EXPENSES (INCOME), net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>427</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>148</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(80</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>13</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>503</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>INCOME RELATED TO THE EXTINGUISHMENT</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;OF THE CONVERTIBLE DEBENTURES</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(867</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(867</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(867</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>NET LOSS (PROFIT) FOR THE  PERIOD</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       2,768</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>         948</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>         (92</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>         542</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       4,532</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>BASIC AND DILUTED NET</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;LOSS PER SHARE</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>        0.04</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>        0.02</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>           0</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>        0.01</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=16><FONT FACE="Times New Roman" SIZE=2>WEIGHTED AVERAGE NUMBER OF</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=16><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;SHARES USED IN COMPUTING</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=16><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;BASIC AND DILUTED NET LOSS</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;PER SHARE</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>63,280,465</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>43,157,808</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>63,463,851</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>63,187,764</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>      * </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
the Nine month period ended September 30, 2008 includes $239 thousands share-based
compensation and in the Three month period ended September 30, 2008 includes $18
thousands share-based compensation. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD ALIGN="Center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B>The
accompanying notes are an integral part of the consolidated financial statements.</B> </FONT></TD>
</TR>
</TABLE>
<BR>



<p align=center>
<font size=2>F - 3</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<a name=zk303></a>




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<P ALIGN="Center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>STATEMENTS OF CHANGES IN
SHAREHOLDERS&#146; EQUITY (CAPITAL DEFICIENCY)</I></B> <BR>(U.S.
          dollars in thousands, except share and per share data)</FONT> </P>

















<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>Share capital</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 rowspan=2><FONT FACE="Times New Roman" SIZE=1>Additional<BR>
paid-in<BR>
Capital</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 rowspan=2><FONT FACE="Times New Roman" SIZE=1>Warrants</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 rowspan=2><FONT FACE="Times New Roman" SIZE=1>Receivables<BR>
in respect of<BR>
Shares issued</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 rowspan=2><FONT FACE="Times New Roman" SIZE=1>Deficit<BR>
accumulated<BR>
during the<BR>
development<BR>
stage</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 rowspan=2><FONT FACE="Times New Roman" SIZE=1>Deficit<BR>
accumulated<BR>
before the<BR>
development<BR>
stage</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 rowspan=2><FONT FACE="Times New Roman" SIZE=1>Total<BR>capital<BR>deficiency</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Number</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Capital</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=21><FONT FACE="Times New Roman" SIZE=1>I n&nbsp;&nbsp;t h o u s a n d s</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="26%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>BALANCE AS OF JULY 7, 2005</B> (unaudited) </FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>4,650,000</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>         5</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    105</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       (73</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     37</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>CHANGES DURING THE PERIOD FROM JULY 7, 2005 THROUGH DECEMBER 31, 2007 (audited):</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Issuance of shares</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>58,537,764</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>58</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>527</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>      (150</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>435</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Issuance of warrants</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>       246</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>246</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Net loss for the period</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    (1,764</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,764</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;Share based compensation expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>110</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>110</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>BALANCE AT DECEMBER 31, 2007</B> (audited) </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>63,187,764</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>63</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>742</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>246</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(150</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,764</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(73</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(936</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>CHANGES DURING THE PERIOD OF NINE</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>MONTHS ENDED SEPTEMBER 30, 2008</B> (unaudited): </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Issuance of shares to shareholder</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>150</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>150</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Issuance of shares - in relation with the debt extinguishment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,200,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>149</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>150</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Issuance of shares- net of issuance expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>15,000,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>15</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>352</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>744</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,111</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Issuance of warrants - in relation with the debt extinguishment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>126</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>126</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss for the period</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(2,768</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(2,768</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Share based compensation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>239</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>239</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2">&nbsp;<B>BALANCE AT SEPTEMBER 30, 2008</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>79,387,764</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>        79</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  1,482</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>     1,116</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>   -</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    (4,532</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>       (73</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2> (1,928</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>








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<P ALIGN="Center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>The accompanying notes are an
integral part of the consolidated financial statements.</B> </FONT></P>



<p align=center>
<font size=2>F - 4</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

<a name=zk304></a>




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<P ALIGN="Center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS</I></B> <BR>(U.S.
          dollars in thousands)</FONT> </P>














<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>Nine months ended<BR>
September 30</FONT><HR WIDTH=96% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>Three months ended<BR>
September 30</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3 rowspan=2><FONT FACE="Times New Roman" SIZE=1>Cumulative from<BR>
July 7, 2005 through<BR>
September 30,<BR>
2008 (see note 1)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2007</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>(Unaudited)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="53%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>CASH FLOWS FROM OPERATING ACTIVITIES:</B> </FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Profit (Net loss)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> (2,768</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   (948</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     92</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>   (542</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2> (4,532</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=16><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjustments required to reconcile net loss</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=16><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to net cash used in operating activities:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>24</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>10</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>26</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exchange differences on long term deposits</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(3</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(3</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share based compensation expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>239</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>100</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>18</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>26</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>349</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=16><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expenses (income) in respect of the</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;convertibles debentures</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>228</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>148</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(277</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>148</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>302</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income in relation with the debt  extinguishment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(867</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(867</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(867</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Liability for employee rights upon retirement</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>13</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>3</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>13</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in other accounts receivable and advance to supplier</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(1,705</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(44</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(1,791</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(40</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(1,892</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in balance with minority  shareholder</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(2</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in accounts payables</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>218</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>51</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>198</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>30</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>401</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=16><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in other accounts payable accrued expenses and</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;advances from third parties</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,284</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>92</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,160</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>12</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,616</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in operating activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(2,337</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(601</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(453</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(366</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(3,589</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=16><FONT FACE="Times New Roman" SIZE="2"><B>CASH FLOWS FROM INVESTING ACTIVITIES:</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lease deposits</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(18</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(18</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(18</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payment for purchasing of fixed assets</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(791</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(195</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(202</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(195</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(1,316</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(791</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(213</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(202</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(213</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(1,334</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=16><FONT FACE="Times New Roman" SIZE="2"><B>CASH FLOWS FROM FINANCING ACTIVITIES:</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuance of shares - net of issuance expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,261</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>343</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,111</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>28</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,668</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans received from shareholder</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>176</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>176</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>176</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loan received from related parties</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>224</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>224</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>224</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans received</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>186</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>186</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>186</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from issuance of convertible</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>debentures and warrants net of issuance expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>930</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>481</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>481</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>3,720</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>2,777</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>824</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,697</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>509</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>5,974</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(351</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>10</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,042</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(70</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>1,051</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE="2"><B>CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD</B> </FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>1,470</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>11</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>77</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>91</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>68</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE="2"><B>CASH AND CASH EQUIVALENTS AT END OF PERIOD</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  1,119</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     21</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  1,119</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>     21</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  1,119</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>



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<P ALIGN="Center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>The accompanying notes are an
integral part of the consolidated financial statement</B> </FONT></P>





<p align=center>
<font size=2>F - 5</font></p>
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<a name=zk305></a>





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<P ALIGN="Center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>NOTES TO CONDENSED
FINANCIAL STATEMENTS (unaudited)</I></B> </FONT> </P>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>NOTE 1</I></U> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I> &#150;</I> </FONT> </TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>
<U>GENERAL</U></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>a.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Global
Energy Inc. ("the Company") was incorporated under the laws of the State of Nevada on
February             16, 1999.</FONT></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company has been considered a development stage enterprise since July 7, 2005, as defined
by the Statement of Financial Accounting Standards (&#147;SFAS&#148;) No. 7 &#150;&#147;Accounting
and Reporting by Development Stage Enterprise&#148;. The accompanying financial
statements have disclosed cumulative amounts in the statements of operations and cash
flows since the July 7, 2005 inception of becoming a development stage company until
September 30, 2008. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>b.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During
May 2007, the Company established two subsidiaries in Israel: Global Fuel Israel Ltd.
("Fuel"),             a fully owned subsidiary, and Global N.R.G. Pacific Ltd.
("Pacific"), of which the Company owns a             50.1% interest. In October, 2007,
Pacific established a subsidiary in Ethiopia named Global Energy             Ethiopia PLC
("Global Ethiopia"). Pacific and its consolidated company act as the agricultural arm of
            the Company's activities in the Bio-Diesel field.</FONT></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
May 2, 2007, the Company entered into an agreement with AlphaKat GmbH (&#147;AlphaKat&#148;)
in order to cooperate in commercialization of AlphaKat&#146;s technology of producing
mineral diesel oil from municipal waste using machines that convert hydrocarbon waste
into diesel oil invented for that purpose by AlphaKat (the &#147;KDV machines&#148;). On
July 10, 2007, the Company entered into an agreement with AlphaKat to incorporate and
operate a company named AlphaKat &#150; Global Energy GmbH (&#147;AGEI&#148;). Each party
holds 50% of the shares of AGEI. AGEI is to provide worldwide marketing and sales
services of KDV machines in consideration of a 10% sales commission. The Company is
responsible to finance AGEI if such financing is required; AlphaKat has the right to
object to any sale of KDV machines. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
consolidated financial statements include the accounts of the Company and its
subsidiaries mentioned above, and the accounts of the 50% owned entity (AGEI) which
according to FIN 46R is a variable interest entity and the Company is the primary
beneficiary. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 6</font></p>
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<page>











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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>NOTE 2</I></U> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I> &#150;</I> </FONT> </TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>
<U>INTERIM FINANCIAL STATEMENTS</U></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
accompanying unaudited interim consolidated financial statements as of September 30, 2008
and for the nine months then ended, have been prepared in accordance with accounting
principles generally accepted in the United States relating to the preparation of
financial statements for interim periods. Accordingly, they do not include all the
information and footnotes required for annual financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the nine
months ended September 30, 2008 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2008. The December&nbsp;31, 2007 Condensed
Balance Sheet data was derived from audited financial statements, but do not include all
disclosures required by accounting principles generally accepted in the United States of
America. These financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Company&#146;s Annual Report on Form 10-K
for the year ended December&nbsp;31, 2007.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>NOTE 3</I></U> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>&#150;</I> </FONT> </TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>
<U>GOING CONCERN</U></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
accompanying financial statements have been prepared assuming that the Company will
continue as a going concern. As of September 30, 2008, the Company had approximately
$1,119 thousands in cash and cash equivalents, approximately $3,228 thousands in negative
working capital, a stockholders&#146; deficit of approximately $1,928 thousands and an
accumulated deficit of approximately $4,532 thousands. Management anticipates that the
Company will continue to generate significant losses from operations for the foreseeable
future, and that their business will require substantial additional investment that have
not yet been secured. The Company and its subsidiaries anticipate that the existing cash,
rose in a private placement and loans received during third quarter in 2008, will not be
sufficient to continue its operations through the next 12 months. The Company is also
committed to repay the loans in a period less than a year. Management is continuing in
the process of fund raising in the private equity markets as the Company will need to
finance future activities and general and administrative expenses. These conditions raise
substantial doubt about the Company&#146;s ability to continue as a going concern.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
These
financial statements do not include any adjustments that may be necessary should the
Company be unable to continue as a going concern. The Company&#146;s continuation as a
going concern is dependent on its ability to obtain additional financing as may be
required and ultimately to attain profitability.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>NOTE 4</I></U> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>&#150;</I> </FONT> </TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>
<U>NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS:</U></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>a. </B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In
May&nbsp;2008, the FASB issued SFAS 162, &#147;The Hierarchy of Generally Accepted
Accounting Principles&#148;. SFAS &nbsp; 162 identifies the sources of accounting
principles and the framework for selecting the principles used in the preparation of
financial statements of nongovernmental entities that are presented in conformity with
GAAP in the United States. Any effect of applying the provisions of SFAS 162 shall be
reported as a change in accounting principle in accordance with SFAS 154, &#147;Accounting
Changes and Error Corrections&#148;. SFAS 162 is effective 60&nbsp;days following
approval by the Securities and Exchange Commission of the Public Company Accounting
Oversight Board amendments to AU Section&nbsp;411, The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles. Management does not anticipate
that the adoption of SFAS 162 will have a material impact on the Company&#146;s financial
statements. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 7</font></p>
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<page>





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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>b.</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In
April&nbsp;2008, the FASB issued FASB Staff Position (&#147;FSP&#148;) FAS 142-3,
Determination of the Useful Life of Intangible Assets. This FSP amends the factors that
should be considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS 142, Goodwill and Other
Intangible Assets. The intent of this FSP is to improve the consistency between the
useful life of a recognized intangible asset under SFAS 142 and the period of expected
cash flows used to measure the fair value of the asset under SFAS 141R, and other
generally accepted accounting principles (&#147;GAAP&#148;). This FSP is effective for
fiscal years beginning after December&nbsp;15, 2008. Early adoption is prohibited. The
Company is required to adopt FSP FAS 142-3 for the fiscal year beginning January&nbsp;1,
2009. Management does not anticipate that the adoption of this FSP will have a material
impact on the Company&#146;s financial statements. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>c.</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In
December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, &#147;Noncontrolling
Interests in Consolidated Financial Statements, an Amendment of ARB No.&nbsp;51&#148; (&#147;SFAS
160&#148;). SFAS 160 amends ARB 51 to establish accounting and reporting standards for
the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.
Ownership interests in subsidiaries held by parties other than its parent company are
required to be presented in the consolidated statement of financial position within
equity, but separate from the parent company&#146;s equity. SFAS 160 requires that
changes in a parent company&#146;s ownership interest while the parent company retains
its controlling financial interest in its subsidiary should be accounted for in a manner
similar to the accounting treatment of equity transactions. When a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former subsidiary
should be initially measured at fair value, with any gain or loss recognized in earnings. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
SFAS
160 requires consolidated net income to be reported in amounts that include the amounts
attributable to both the parent company and the noncontrolling interest. It also requires
disclosure, on the face of the consolidated income statement, of the amounts of
consolidated net income attributable to both parent companies and the noncontrolling
interests.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
SFAS
160 is effective for fiscal years (including interim periods within those fiscal years)
beginning on or after December 15, 2008. Earlier adoption is prohibited. SFAS 160 is
required to be applied prospectively as of the beginning of the fiscal year in which it
is initially applied, except for the presentation and disclosure requirement which shall
be applied retrospectively for all periods presented. The Company is required to adopt
SFAS 160 as of January 1, 2009. The Company is currently assessing the impact that SFAS
160 may have on its results of operations and financial position.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>d.</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In
May&nbsp;2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting
Principles. SFAS 162 identifies the sources of accounting principles and the framework
for selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with GAAP in the United States.
Any effect of applying the provisions of SFAS 162 shall be reported as a change in
accounting principle in accordance with SFAS 154, Accounting Changes and Error
Corrections. SFAS 162 is effective November&nbsp;15, 2008. Management does not anticipate
that the adoption of SFAS 162 will have a material impact on the Company&#146;s financial
statements. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>e.</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In
April&nbsp;2008, the FASB issued FASB Staff Position (&#147;FSP&#148;) FAS 142-3,
Determination of the Useful Life of Intangible Assets. This FSP amends the factors that
should be considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS 142, Goodwill and Other
Intangible Assets. The intent of this FSP is to improve the consistency between the
useful life of a recognized intangible asset under SFAS 142 and the period of expected
cash flows used to measure the fair value of the asset under SFAS 141R, and other
generally accepted accounting principles (&#147;GAAP&#148;). This FSP is effective for
fiscal years beginning after December&nbsp;15, 2008. Early adoption is prohibited. The
Company is required to adopt FSP FAS 142-3 for the fiscal year beginning January&nbsp;1,
2009. Management does not anticipate that the adoption of this FSP will have a material
impact on the Company&#146;s financial statements. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 8</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>f.</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In
March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, &#147;Disclosures
about Derivative Instruments and Hedging Activities&#148;(&#147;SFAS 161&#148;). SFAS 161
is intended to improve financial reporting regarding derivative instruments and hedging
activities by requiring enhanced disclosure to enable investors to better understand the
effects of such derivative instruments and hedging activities on a company&#146;s
financial position, financial performance and cash flows. SFAS 161 is effective for
financial statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged (January 1, 2009, for the Company). SFAS 161
also improves transparency regarding the location and amounts of derivative instruments
in a company&#146;s financial statements; how derivative instruments and related hedged
items are accounted for under Statement of Financial Accounting Standards No. 133 &#147;Accounting
for Derivative Instruments and Hedging Activities&#148;; and how derivative instruments
and related hedged items affect a company&#146;s financial position, financial
performance and cash flows. The Company is currently evaluating the effect SFAS 161 will
have on its financial statement presentations. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>g.</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> In
June 2008, the EITF reached a consensus on EITF Issue No. 07-5, &#147;Determining Whether
an Instrument (or Embedded Feature) Is Indexed to an Entity&#146;s Own Stock&#148; (&#147;EITF
07-5&#148;). EITF 07-5 addresses the determination of whether an equity linked financial
instrument (or embedded feature) that has all of the characteristics of a derivative
under other authoritative U.S. GAAP accounting literature is indexed to an entity&#146;s
own stock and would thus meet the first part of a scope exception from classification and
recognition as a derivative instrument. Nortel plans to adopt the provisions of EITF 07-5
on January 1, 2009. The Company is currently assessing the impact of the adoption of EITF
07-5, if any, on its results of operations and financial condition. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>NOTE 5</I></U> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>&#150;</I> </FONT> </TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>
<U>TRANSACTIONS WITH THIRD PARTIES</U></I> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>a.</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On
February 6, 2008 each of Alphakat and its President, Dr. Koch and AGEI entered into
agreements, which were amended on July 8, 2008, with Covanta Energy Corporation, a wholly
owned subsidiary of Covanta Holding Corporation (&#147;Covanta&#148;), an internationally
recognized owner and operator of waste-to-energy and power generation projects. Covanta&#146;s
facilities convert municipal solid waste into renewable energy for numerous communities,
predominately in the United States. Under the terms of these agreements, Covanta has the
exclusive right to purchase, use and make improvements to the KDV technology in the
United States for household waste feedstock, and non-exclusive rights to use the KDV
process in China, UK and the Republic of Ireland. Covanta must try to complete its
testing of the first unit within period agreed. If Covanta&#146;s tests on its first unit
are positive and it wishes to proceed further with its deployment of the KDV process then
it must begin by ordering five additional KDV 500 units within twelve months of the
commissioning date of the first KDV 500 unit. Over a ten-year period, which begins on the
commissioning date of its first unit, Covanta must order a total of 600 KDV 500 units or
the equivalent in terms of production capacity. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Covanta
also granted the Company the right to fund and own up to 35% of each of Covanta&#146;s
KDV-based projects. In addition, Covanta has agreed to pay to the Company an amount equal
to 10% of the gross revenue of each of Covanta&#146;s KDV-based projects, regardless of
whether the Company invests in these projects or not. </FONT></TD>
</TR>
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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
of September 30, 2008 no such KDV-based projects were initiated.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>b.</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> American
Renewable Diesel (&#147;American&#148;) is a special purpose company owned and managed by
Trianon Partners. On February 6, 2008 AGEI and American Renewable Diesel executed an
agreement granting to American Renewable Diesel the right to sell and use the KDV
technology in five states in the U.S.: Texas, California, New York, New Jersey and
Florida. Similar to the business arrangement with Covanta, the Company has the right to
fund and own up to 51% of each of American Renewable Diesel&#146;s KDV-based projects. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 9</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
of September 30, 2008 no such KDV-based projects were initiated.  </FONT></TD>
</TR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>c.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On
June 2, 2008, the Company entered into a letter of understanding with S.C. Supercom S.A.,
a             Romanian company engaged in the business of collecting municipal solid
waste. In the letter of             understanding, the parties have agreed to work
together to structure a joint company in Romania.</FONT></TD>
</TR>
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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>NOTE 6</I></U> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>&#150;</I> </FONT> </TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>
<U>SHORT TERM LOANS:</U></I> </FONT> </TD>
</TR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>a.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loan
received from related parties</FONT></TD>
</TR>
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<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
During
the third quarter of 2008, the Company received a loan from a major shareholder and
Senior Management in the amount of 739 thousands New Israeli Shekels (&#147;NIS&#148;),
(approximately USD$ 224 thousands). The loan bears annual interest of 8.5% and is due on
January 1, 2009. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>b.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loans
received from third parties</FONT></TD>
</TR>
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<BR>

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<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
During
the third quarter of 2008, the Company received two loans from third parties in the total
amount of $186 thousands. The loans bear a weighted average annual interest of 5%. $150
thousands are due on January 1, 2009 and $36 thousands are due on October 31, 2008 and
were paid on that date. The Company is not committed to give any additional rights to the
lenders. </FONT></TD>
</TR>
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<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>c.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loans
received from shareholder</FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
During
the third quarter of 2008, the Company received a loan from shareholder in the amount of
$176 thousands. The loan bears annual interest of 4% and is due on January 1, 2009. </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>NOTE 7</I></U> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>&#150;</I> </FONT> </TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>
<U>STOCK OPTIONS:</U></I> </FONT> </TD>
</TR>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>a.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Options
to Directors and Employees</FONT></TD>
</TR>
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<BR>

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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
January 31, 2008 the Board of Directors approved the following option grants under the
2007 Plan: 1,050,000 options to three directors (350,000 options each), and 1,150,000
options to executive officer at an exercise price of US $2.2 per share. Two of the three
directors have resigned by the end of September, their 700,000 options were canceled and
none were vested. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
fair value of the stock options grants were estimated using the Black-Scholes option
valuation model that used the following assumptions: </FONT></TD>
</TR>
</TABLE>
<BR>






<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
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     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="80%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Risk free interest</FONT></TD>
     <TD WIDTH="10%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>3.93%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Dividend yields</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>0</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Volatility</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>230%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Expected term (in years)</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>10</FONT></TD></TR>
</TABLE>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%> <FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>b.</B> </FONT> </TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Options
to consultant</FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
May 21, 2008 the Company granted options to a consultant to purchase 226,415 of the
Company&#146;s common shares of $ 0.001 par value, the options were immediately vested
and exercisable at an exercise price of $1.25 per share. The fair value of the options
granted is $85 thousands. On September 24, 2008, the Company announced the appointment of
the consultant to its Board of Directors. </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 10</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
fair value of the stock options grants were estimated using the Black-Scholes option
valuation model that used the following assumptions: </FONT></TD>
</TR>
</TABLE>
<BR>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
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     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
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<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
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<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
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<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="10%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="80%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Risk free interest</FONT></TD>
     <TD WIDTH="10%" ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>2.66%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Dividend yields</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>0</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Volatility</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman" SIZE=2>208%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Expected term (in years)</FONT></TD>
     <TD ALIGN=CENTER><FONT FACE="Times New Roman" SIZE=2>4</FONT></TD></TR>
</TABLE>
<BR>


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<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
of September 30, 2008 no options were exercised.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=10%>&nbsp;</TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
of September 30, 2008, there were $ 687 thousands of total unrecognized compensation
expenses related to unvested share based compensation arrangement granted under the plan. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>NOTE 8</I></U> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#150;</FONT></TD>
<TD WIDTH=88%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>CONVERTIBLE DEBENTURES AND WARRANTS</I></U> </FONT> </TD>
</TR>
</TABLE>
<BR>





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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
July 2007, the Company entered into an agreement to issue in four different installments,
as set in the agreement, $4 million aggregate principal amount of convertible debentures (&#147;Debentures&#148;)
in a private placement. In March 20, 2008 the Company signed an amendment to the
debentures agreement which stated the following: (1) The private investor (&#147;Investor&#148;)
agreed to purchase the forth installment of $1 million in two equal installments, the
first installment was on the date of the amendment and the last installment of $0.5
million is due after a registration statement for the underlying shares is declared
effective by the SEC. On May 13, 2008 the registration statement was declared effective,
and the Investor purchased the last installment (2) The conversion price was changed from
$2.20 to $1.25 for all Debentures outstanding and (3) The exercise price of the warrants
granted in conjunction of this private placement was changed from $2.50 and $2.35 to
$1.25.  </FONT></TD>
</TR>
</TABLE>
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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
July 15 2008 the Company entered to amended agreement with the Investor,&nbsp;the
agreement amends the agreement dated July 6, 2007 between the Company and the Investor.
The amendment allows the Company to immediately defer certain principal and interest
payments due under the Debentures agreement. In consideration the Company issued the
Investor 200,000 restricted shares of its common stock. On September 22, 2008, the
Company entered into a third amendment with the Investor in order to defer certain
principal and interest payments, the amendment was become effective as of September 30,
2008. The Amendment allows the Company the following:  </FONT></TD>
</TR>
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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
exercise price of the warrants was reset to $0.10 per share and the total number of
shares underlying the warrants was increased from 600,000 to 7,500,000 shares. Prior to
the change the warrants were exercisable at a price of $1.25 per share. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
conversion price of the Debentures was reset to $0.10, prior to the change the conversion
price was $1.25. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Company issued the Investor 1,000,000 restricted shares of its common stock.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
interest rate on the face amount of $4 million Debentures&nbsp;increased from 10% to 12%.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Wingdings 2" SIZE="2">&#151;</FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
repayment schedule of the Debentures was revised and will commence November 2008.  </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 11</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>




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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company analyzed the difference between the value of the Debentures using the original
terms compare to the value of the Debentures using the new terms under EITF Issue No.
96-19,&nbsp;&#147;Debtor&#146;s Accounting for a Modification or Exchange of Debt
Instruments&#148;, and found this difference is greater than 10%, therefore it was
determined to account this transaction as debt extinguishment, and to record the
Debentures under the new terms at fair value, and the new equity instruments the Investor
received at fair value against statement of operation.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
According
to the third amendment, in the event the Investor elects not to convert the Company may
elect to repay the Investor in cash or in Company&#146;s shares.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
If
any event of default occurred, the full unpaid Principal amount of this Debenture,
together with interest shall become at the Investor&#146;s election, immediately due and
payable in cash. The conversion option included within each of the Company&#146;s
convertible debenture does not meet all the conditions of EITF 00-19 &#147;Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company&#146;s
Own Stock&#148; related to equity classification and therefore should be bifurcated from
the debt host contract. In addition the call option is considered as embedded derivative
that require bifurcation, therefore this instrument is evaluated each reporting period
and the difference in fair value is recorded as financial income or expense.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
September 30 2008 the Company measured the fair value of the embedded derivatives
features at approximately $2,445 thousands. The Company also measured the fair value of
warrants at approximately $372 thousands; and the fair value of the debentures at
approximately $188 thousands.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Following
are the details of the convertible debentures:  </FONT></TD>
</TR>
</TABLE>
<BR>











<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>September 30,</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>In thousands</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="78%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Principal</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>188</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Conversion option</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,506</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Call option</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(61</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,633</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>





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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
notes are secured by a pledge on all of the Company&#146;s assets.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
of September 30, 2008, none of the warrants were exercised and none of the debentures
were converted into share.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>NOTE 9</I></U> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#150;</FONT></TD>
<TD WIDTH=88%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>STOCK HOLDERS&#146; EQUITY</I></U> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s shares are traded on the Over-The-Counter Bulletin Board.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On
September 30, 2008, the Company entered into a Securities Purchase Agreement with
twenty-seven accredited investors for the sale of 30 units at a purchase price of $50
thousands per unit for total consideration of $1,500 thousands. Each unit consists of
500,000 shares of common stock and 500,000 share purchase warrants exercisable at $0.10
for a period of five years.  </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 12</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
finders fee, in connection with the securities purchase agreement, the Company paid $389
thousands, as well as issued 1,500,000 share purchase warrants exercisable at $0.10 to
the brokers.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
consideration was allocated to the shares and warrants issued based on relative fair
value. The value allocated to all warrants estimated by using the Black Scholes
option-pricing model is $744 thousands and was based on the following assumptions:
dividend yield of 0%; expected volatility of 206%; risk-free interest rates of 3.91%; and
expected term of 5 years.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>NOTE 10</I></U> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#150;</FONT></TD>
<TD WIDTH=88%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>ADVANCE FROM THIRD PARTY</I></U> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
During
the third quarter of 2008, the Company received an advance of $100 thousands from a third
party, whom the Company is negotiating on joint transaction in Ethiopia.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>NOTE 11</I></U> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#150; </FONT></TD>
<TD WIDTH=88%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>FAIR VALUE OF FINANCIAL ASSETS</I></U> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
 Adoption
of Statement of Financial Accounting Standards No. 157  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In
September&nbsp;2006, the Financial Accounting Standards Board (&#147;FASB&#148;) issued
SFAS 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework
for measuring fair value in accordance with accounting principles generally accepted in
the United States, and expands disclosures about fair value measurements.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company adopted the provisions of SFAS 157 as of January&nbsp;1, 2008, for financial
instruments.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Although
the adoption of SFAS 157 did not materially impact the Company&#146;s financial
condition, results of operations, or cash flows, the Company is now required to provide
additional disclosures as part of its financial statements.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
SFAS
157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in
measuring fair value. The three tiers are Level 1, defined as observable inputs such as
quoted prices in active markets; Level 2, defined as inputs other than quoted prices in
active markets that are either directly or indirectly observable; and Level 3, defined as
unobservable inputs in which little or no market data exists, therefore requiring an
entity to develop its own assumptions.  </FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>F - 13</font></p>
<HR SIZE="1" NOSHADE  STYLE="margin-top: -2px"><HR SIZE="4" NOSHADE  STYLE="margin-top: -10px">
<page>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company&#146;s assets that are measured at fair value on a recurring basis, and subject
to the disclosure requirements of SFAS 157 at September 30, 2008, were as follows:  </FONT></TD>
</TR>
</TABLE>
<BR>






















<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=9><FONT FACE="Times New Roman" SIZE=1>Fair value measurements at reporting date using</FONT><HR WIDTH=98% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Description</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Fair value at<BR>
September 30,<BR>
2008</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Quoted prices in<BR>
active markets<BR>
for identical<BR>
assets</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Significant<BR>
other<BR>
observable<BR>
inputs</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Significant<BR>
unobservable<BR>
inputs</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>(Level 1)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>(Level 2)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>(Level 3)</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="49%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Embedded derivative:</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Conversion option</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2,506</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2,506</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Call option</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    (61</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    (61</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
</TABLE>
<BR>





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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Company held no Level 1 and Level 2 Financial assets during the three and nine months
ended September 30, 2008.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Embedded Derivatives &#150; conversion option and call option included in Level 3 above
was valued using information provided by the Company&#146;s appraiser.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%>&nbsp;</TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Changes
in the Embedded Derivative &#150; conversion option and call option included in Level 3
above during the three and nine months ended September 30, 2008 were as follows:  </FONT></TD>
</TR>
</TABLE>
<BR>






<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>Level 3</FONT><HR WIDTH=95% SIZE=1 COLOR=BLACK NOSHADE></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1>&nbsp;</FONT></TH>
     <TH COLSPAN=3><FONT FACE="Times New Roman" SIZE=1></FONT></TH></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD WIDTH="85%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Balance, January 1, 2008</FONT></TD>
     <TD WIDTH="1%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH="1%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>  1,032</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Gain from updating the conversion option fair value</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(917</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=4><FONT FACE="Times New Roman" SIZE=2>Gain from eliminating the conversion option fair value</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;due to debt extinguishment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(115</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>New conversion option due to debt extinguishment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,506</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Call option due to debt extinguishment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(61</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Balance, September 30, 2008</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2,445</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Balance, July 1, 2008</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>    950</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Gain from updating the conversion option fair value</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>(835</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT" colspan=4><FONT FACE="Times New Roman" SIZE=2>Gain from eliminating the conversion option fair value</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;&nbsp;due to debt extinguishment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(115</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>New conversion option due to debt extinguishment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>2,506</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN="BOTTOM" BGCOLOR="#cceeff">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>Call option due to debt extinguishment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN="RIGHT"><FONT FACE="Times New Roman" SIZE=2>(61</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=1></TD><TD></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>Balance, September 30, 2008</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>$</FONT></TD><TD ALIGN=RIGHT><FONT FACE="Times New Roman" SIZE=2>  2,445</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=3></TD>
     <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE COLOR=#808080 SIZE=3></TD><TD></TD></TR>
</TABLE>
<BR>



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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>NOTE 12</I></U> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#150;</FONT></TD>
<TD WIDTH=88%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>RESTRICTION PLACED IN RESPECT OF LIABILITY</I></U> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
According
to the third amendment between the Company and the Investor to the Debentures agreement,
dated September 20, 2008, (refer to note 7), it was agreed that the Company has to comply
with an approved budget. Any violation of this covenant shall be deemed an event of
default, and the full unpaid Principal amount of this Debenture, together with interest
shall become at the Investor&#146;s election, immediately due and payable in cash.  </FONT></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>F - 14</font></p>
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<page>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>NOTE 13</I></U> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#150;</FONT></TD>
<TD WIDTH=88%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>SUBSEQUENT EVENTS:</I></U> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>a.</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On
October 8, 2008 the Company entered into agreement with Yanai Man Projects Ltd. (&#147;YMP&#148;),
with respect to the shares held by YMP in Pacific. YMP holds 49.9% interest of Pacific.
Pursuant to the agreement, the parties agreed that the Company would have the right at
any time to purchase from YMP 449 ordinary shares in Pacific, constituting 90% of YMP&#146;s
holdings in Pacific, for a consideration of $150 thousands, payable by Global over a
period of one year through the payment of ten installments of $15 thousands each starting
January 30, 2009. The Company exercised this right of purchase on October 8, 2008.
Additionally, during the first two years following the effective date of the agreement,
YMP has the right to require the Company to purchase an additional 25 ordinary shares in
Pacific held by YMP per year, for an additional consideration of $50 thousands, payable
by Global over a period of one year from the exercise of the right by YMP. The parties
also agreed that at all times, the Company has the right to purchase the 50 remaining
shares of Pacific held by YMP for an additional consideration of $100 thousands, payable
by the Company over a period of one year from the exercise of the right by Global. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=9%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>NOTE 13</I></U> </FONT> </TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#150;</FONT></TD>
<TD WIDTH=88%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U><I>SUBSEQUENT EVENTS (continued):</I></U> </FONT> </TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>b.</B></FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2> On
October 26, 2008, Pacific entered into a Loan Agreement (the &#147;Agreement&#148;) with
third party. It was agreed that the Lender shall loan Pacific an aggregate of US$ 400
thousands, with US$ 300 thousands being transferred to Pacific in three equal
installments during October and November 2008. The loan is to be fully repaid to the
Lender by May 1, 2009 and will not bear interest. In the case of a default, the debt
shall be transferred to the Company, and the Lender shall be entitled to 1,000,000 shares
of the Company at no cost. In addition, the Company shall give a corporate guarantee for
the repayment of the loan. In addition Pacific will issue to the Lender shares in Pacific
constituting 44% of the outstanding shares of Pacific. Also, upon acquisition of
additional 5% of the shares in Pacific held by YMP (see a above), the Company shall
transfer said 5% shares to the Lender, no later than November 1, 2010. It was also agreed
that upon achievement of milestones of annual castor seeds production of 30,000, 40,000,
50,000, 60,000 or 70,000 tons of castor seeds, respectively, during any calendar year,
then the Company will be entitled to a share of 55%, 60%, 65%, 70% and 75%, respectively,
of all dividends distributed by Pacific with respect to such year. As of to date Pacific
has received $120 thousands from the Lender. </FONT></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>F - 15</font></p>
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[{"type": "S-1", "sequence": "1", "filename": "zk86206.htm", "secsgml_size_bytes": 857338}]
{"company-data": {"conformed-name": "GLOBAL ENERGY INC", "cik": "0001090967", "assigned-sic": "2860", "irs-number": "860951473", "state-of-incorporation": "NV", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-156598", "film-number": "09510404"}, "business-address": {"street1": "415 MADISON AVENUE", "street2": "15TH FLOOR", "city": "NEW YORK", "state": "X1", "zip": "10017", "phone": "646.673.8435"}, "mail-address": {"street1": "415 MADISON AVENUE", "street2": "15TH FLOOR", "city": "NEW YORK", "state": "X1", "zip": "10017"}, "former-company": {"former-conformed-name": "GLOBAL SMARTCARDS INC", "date-changed": "19990716"}}
S-1
UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
GLOBAL ENERGY INC.
(Exact name of registrant as specified in its charter)
Nevada
2860
86-0951473
(State or other jurisdiction of
(Primary Standard Industrial
incorporation or organization)
Classification Code Number)
(IRS. Employer Identification No.)
415 Madison Avenue, 15th Floor, New York, NY 10017
+1.646.673.8435
(Address and telephone number of registrant's principal executive offices)
Global Energy Inc.
415 Madison Avenue, 15th Floor, New York, NY 10017
+1.646.673.8435
(Name, address and telephone number of agent for service)
Copy of communications to:
Clark Wilson LLP
Attn. Ethan Minsky
Barristers and Solicitors
Suite 800 - 885 West Georgia Street
Vancouver, British Columbia, Canada V6C 3H1
Telephone: 604.687.5700
Fax: 604.687.6314
The sale of securities to the public will commence as soon as practicable after this Registration
Statement becomes effective.
(Approximate date of commencement of proposed sale to the public)
If any of the securities being
registered on this Form are to be offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, as amended, check the following box:
x
If this Form is filed to register
additional securities for an offering pursuant to Rule 462(b) under the Securities Act of
1933, please check the following box and list the Securities Act of 1933, as amended,
registration statement number of the earlier effective registration statement for the
same offering.
o
If this Form is a post-effective
amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the
following box and list the Securities Act of 1933, as amended, registration statement
number of the earlier effective registration statement for the same offering
o
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated
filer" and "smaller reporting company" in Rule 12b2 of the Exchange Act of
1934.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
x
CALCULATION OF REGISTRATION FEE
Title of each class
of securities to be
registered
Amount to be
registered
(1)
Proposed maximum
offering price
per share
Proposed maximum
aggregate offering
price (US$)
Amount of
registration fee
(2)
Common stock of the Registrant issuable upon exercise of share purchase warrants.
18,700,000
$0.07
(3)
$1,309,000
$ 51.44
Total
18,700,000
$51.44
(1)
Consists of shares of the registrant's common stock issuable upon the
          conversion of up to 18,700,000 share purchase warrants that have been issued to
          selling shareholders pursuant to a private placement offering as described in
          this prospectus.
In
accordance with Rule 416 under the
Securities Act of 1933
, as amended, this
registration statement on Form S-1 also registers an indeterminate number of shares of the
registrant's common stock to be offered pursuant to terms which provide for a change
in the amount of securities being offered or issued to prevent dilution resulting from
stock splits, stock dividends, or similar transactions.
The
shares of the registrant's common stock issuable upon exercise of the share purchase
warrants held by our placement agent for the private offering of our common stock that
closed on September 30 and November 4, 2008, and/or "associated persons" of this
placement agent are subject to a 180 day lock-up agreement in accordance with the
requirements of Financial Industry Regulatory Authority Rule 5110(g)(1).
(2)
Fee is calculated in accordance with Rule 457(c) under the
Securities Act of
          1933
, as amended.
(3)
Estimated solely for the purpose of
calculating the amount of the registration fee pursuant to Rule 457(c) under the
Securities Act of 1933
, as amended, and based upon the average of the last reported
bid and asking price of the registrant's common stock as reported on the
Over-the-Counter Bulletin Board on December 31, 2008.
THE REGISTRANT HEREBY AMENDS THIS
REGISTRATION STATEMENT ON THE DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION
8(A) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
THE DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
ii
PROSPECTUS
Dated ___________,
200_, Subject to Completion
GLOBAL ENERGY INC.
A NEVADA CORPORATION
18,700,000 SHARES OF THE COMMON STOCK OF GLOBAL ENERGY INC.
This prospectus relates to the resale
to the public by the selling shareholders named in the "
Selling
Shareholders
" section of this prospectus beginning on page 13, of up to
18,700,000 shares of our common stock, $0.001 par value, which may be issued upon the
exercise of up to 18,700,000 share purchase warrants issued to selling shareholders in a
private placement offering that closed in two tranches on September 30, 2008 and November
4, 2008, respectively. These share purchase warrants were sold in private transactions
that were exempt from the registration requirements of the
Securities Act of 1933
,
as amended.
Each share purchase warrant entitles
the holder to purchase one additional share of our common stock at an exercise price of
$0.10 per share for a period of five years from the respective closing date.
Our common stock is quoted on the OTC
Bulletin Board under the symbol "GEYI.OB". It is expected that the selling
shareholders will sell the shares acquired upon exercise of the warrants at the applicable
market price on the OTC Bulletin Board as at the time of sale. On December 31, 2008, the
closing price (last sale on the date) for one share of our common stock on the OTC
Bulletin Board was $0.07. Based on this price, selling shareholders could be expected to
receive proceeds of up to $1,309,000.
Proceeds to Selling
Shareholders
Per Share
$0.07
Maximum Total
$1,309,000
We will not receive any proceeds from
the resale of shares of our common stock by selling shareholders, although we may receive
proceeds of up to $1,870,000 if all of the share purchase warrants are exercised. We will
pay for all costs associated with this registration statement and prospectus.
OUR BUSINESS IS SUBJECT TO MANY
RISKS AND AN INVESTMENT IN OUR COMMON STOCK WILL ALSO INVOLVE A HIGH DEGREE OF RISK. YOU
SHOULD INVEST IN OUR COMMON STOCK ONLY IF YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT.
YOU SHOULD CAREFULLY CONSIDER THE VARIOUS RISK FACTORS DESCRIBED BEGINNING ON PAGE 3
BEFORE INVESTING IN OUR COMMON STOCK.
NEITHER THE SECURITIES AND
EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS
IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING SHAREHOLDERS MAY NOT SELL OR OFFER THESE
SECURITIES UNTIL THIS REGISTRATION STATEMENT IS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AND BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
THE DATE OF THIS
PROSPECTUS IS ______________, 200_.
iii
The following table of contents has
been designed to help you find important information contained in this prospectus. We
encourage you to read the entire prospectus.
TABLE OF CONTENTS
PROSPECTUS SUMMARY
1
OUR COMPANY
1
THE PRIVATE PLACEMENT
1
THE OFFERING
2
RISK FACTORS
3
RISKS RELATED TO OUR BUSINESS AND FINANCIAL CONDITION
3
RISKS ASSOCIATED WITH THIS OFFERING
10
RISK RELATED TO OUR COMMON STOCK
11
USE OF PROCEEDS
12
DETERMINATION OF OFFERING PRICE
12
SELLING SHAREHOLDERS
13
PLAN OF DISTRIBUTION
14
DESCRIPTION OF SECURITIES TO BE REGISTERED
16
INTERESTS OF NAMED EXPERTS AND COUNSEL
17
INFORMATION WITH RESPECT TO THE REGISTRANT
17
DESCRIPTION OF THE BUSINESS
17
WHERE YOU CAN FIND MORE INFORMATION
26
LEGAL PROCEEDINGS
27
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
28
CHANGE OF PRINCIPAL ACCOUNTANT
30
COMPANY MANAGEMENT
31
EXECUTIVE COMPENSATION
33
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
36
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
37
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
38
DIRECTOR INDEPENDENCE
39
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
39
INDEMNIFICATION OF DIRECTORS AND OFFICERS
40
RECENT SALES OF UNREGISTERED SECURITIES
41
EXHIBITS AND FINANCIAL STATEMENTS AND SCHEDULES
45
UNDERTAKINGS
48
SIGNATURES
50
CONSOLIDATED AUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDING DECEMBER 31, 2007
F-1
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
F-2
CONSOLIDATED FINANCIAL STATEMENTS  IN U.S. DOLLARS
F-3
INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2008
F-1
You should rely only on the
information contained in this prospectus and in any accompanying prospectus supplement. We
have not, and selling shareholders have not, authorized anyone to provide you with
information different from the information contained in this prospectus. The information
in this prospectus is accurate only as of the date of this prospectus, regardless of when
this prospectus is delivered or when any sale of our common stock occurs.
iv
PROSPECTUS SUMMARY
As used in this prospectus, the terms
"we", "us", "our" and "our company" mean Global
Energy Inc. and our subsidiaries: Global N.R.G. Pacific Ltd., Global Energy Ethiopia PLC,
Alphakat-Global Energy GmbH and Global Fuel Israel Ltd., unless the context otherwise
indicates. The use of the symbol "$" in this prospectus refers to United States
dollars unless otherwise indicated.
Our Company
Our company was organized on February
16, 1999, under the laws of the State of Nevada, as Global Smartcards Inc. On April 28,
2003, we changed our name to Global Energy Inc.
Our business address is 415 Madison
Avenue, 15th Floor, New York, NY 10017, and our telephone number is (646) 673-8435. Our
registered agent is Rite, LLC., 1905 South Eastern Ave., Las Vegas, NV 89104. Our website
is http://www.global-nrg.biz. The information contained in our website is not incorporated
by reference into this prospectus.
We are a development stage company
that intends to partner with local companies, generally operators of landfill sites and
recycling facilities, to acquire, build and operate facilities in various locations around
the world that will use a proprietary technology to produce and sell high quality
synthetic diesel fuel at a production cost well below the cost to produce regular diesel
fuel, and also to potentially earn additional revenues from garbage tipping fees and
through the recycling of waste. The technology may be used to produce high quality
synthetic diesel fuel utilizing a range of feedstocks such as municipal solid waste any
hydrocarbon-based material such as biomass, plastic, paper, wood, leather, textiles, or
waste oils. Additionally, through a subsidiary jointly owned with the owner and licensor
of the technology, we have obtained certain exclusive rights to market and sell this
technology. As of the date of this prospectus, we have entered into agreements with
several major waste facility operators and operators of waste-to-energy and power
generation projects in the United States, China, United Kingdom, and Romania to build and
develop factories that will use the technology to produce synthetic diesel fuel from
municipal waste and other hydrocarbon-based feedstocks.
We have expensed approximately
$2,300,000 in the cultivation of castor plants in Southern Ethiopia. Our activities are
based in Sodo, Ethiopia and in the regions of Waletia and Goma Gofa, Ethiopia. We engaged
a large number of local independent farmers who use a portion of their existing land to
cultivate the castor seeds, or clear additional land, and trained these farmers on new
agricultural techniques. The local independent farmers seeded approximately 4,000 hectares
of land commencing in April, 2008. In the fourth quarter of 2008, the farmers harvested
several hundred tons of castor crop. In early 2009, we expect to purchase the crop from
the farmers and to sell it to different clients.
The Private Placement
Pursuant to a confidential private
placement memorandum dated July 17, 2008, as subsequently amended and restated on October
23, 2008, we sold 34 units to 30 investors for gross proceeds of $1,700,000. Each unit
consists of 500,000 shares of our common stock, per $0.001, and 500,000 share purchase
warrants. Each share purchase warrant entitles the holder to purchase one additional share
of our common stock at an exercise price of $0.10 for a period of five years from the date
of issue. As part of the commission for the private placement, we issued 1,700,000 share
purchase warrants to a placement agent. The units were sold in private transactions exempt
from the registration requirements imposed by the
Securities Act of 1933
, as
amended.
Each investor purchased the units
under the terms of a securities purchase agreement between itself and our company, dated
as of the applicable closing date. Under a registration rights agreement dated July 6,
2008, we agreed to prepare this registration statement on Form S-1 to register the shares
which may be issued to the investors and the placement agent upon exercise of the share
purchase warrants issued to them in the private placement.
1
Under the terms of an agreement
between ourselves and our senior secured lender, we required the lender's consent to
engage in this private placement transaction at a price per share that was less than
ninety percent (90%) of the bid price of our common stock determined immediately prior to
its issuance. As a partial consideration for the consent to engage in the private
placement, we issued 1,200,000 shares of our common stock to our senior secured lender.
As a result of the private placement,
and including the shares issued to our senior secured lender, the number of issued and
outstanding shares of our common stock increased from 63,187,764 to 81,387,764.
The Offering
Securities offered
Up to  18,700,000  shares of our common  stock,  $0.001 par value,  issuable
 to                                    selling  shareholders  upon the exercise of the
share purchase  warrants,  which                                    were issued  directly
to selling  shareholders  in the  private  placement  that
                                   closed in two tranches on September 30 and November 4,
2008, respectively.
Each
share purchase warrant entitles the holder to purchase one share of our common stock at an
exercise price of $0.10 per share for a period of five years from the respective closing
date.
Selling
shareholders may offer and sell, from time to time, any or all of the common stock
registered under this registration statement.
Selling Shareholders
1.
Any
one or more of the 30 investors listed in the
"Selling
Shareholders"
section of this prospectus beginning on page 13,
who received 17,000,000 share purchase
warrants to purchase our common stock in a
private placement that closed in two tranches on September 30 and
November 4, 2008, respectively.
2.
A placement agent, who received 1,700,000 share purchase warrants to purchase
          our common stock as part of a commission we paid to it for its services
rendered           in connection with the private placement.
OTC Bulletin
Board symbol
GEYI.OB
Selling Price
Market price on the OTC Bulletin
Board, where, as of December 31, 2008, the last trading price for one share of our common
stock was $0.07.
Maximum Amount
of the Offering
Based on the closing price of $0.07
for one share of our common stock on the OTC Bulletin Board on December 31, 2008, selling
shareholders may receive maximum proceeds of $1,309,000.
Common stock
outstanding
81,387,764 shares as of January 5,
2009, from the total authorized share capital of 250,000,000 shares. On November 4, 2008,
our controlling shareholder approved an amendment to our articles of incorporation
increasing the authorized share capital to 750,000,000. The amendment will take effect in
January, 2009 when we will file a certificate of amendment with the Nevada Secretary of
State.
2
Use of
proceeds
We will not  receive  any of the  proceeds  from the sale of
shares  by  selling                                    shareholders.  However,  we may
receive  proceeds of up to  $1,870,000 if all of                                    the
share  purchase  warrants are  exercised.  We plan to use these proceeds for
                                   working capital purposes.
Risk factors
The  offering  involves a high degree of risk.  Please refer to the
various risk                                    factors  described  beginning on page 3
of this  prospectus for a description of                                    the risk
 factors you should  consider in  relation to  investing  in our common
                                   stock.
RISK FACTORS
You should carefully consider the
risks described below, together with all of the other information in this prospectus,
before deciding to invest in our common stock. We face numerous risks that may prevent us
from achieving our goals, including but not limited to the risks described herein.
Additional unknown risks may also impair our financial performance and business
operations. Our business, financial condition and/or results of operation may be
materially adversely affected by the nature and impact of these risks. In such case, the
market value of our securities could be detrimentally affected, and investors may lose all
or part of their investment.
If we do not successfully address any
one or more of the risks described below, there could be a material adverse effect on our
financial condition, operating results and business. We cannot assure you that we will
successfully address these risks.
Risks Related to our
Business and Financial Condition
We are a development
stage company with a limited operating history and a small employee base, which makes
investments speculative.
We are a development stage company
with a limited operating history upon which to base an evaluation of our current business
and future prospects. We have to date been engaged in organizational activities including
developing a strategic operating plan and entering into contracts. We currently have only
three employees. Other than limited testing activities with respect to the synthetic
diesel fuel that we propose to produce, and the planting and harvesting of castor seeds in
Ethiopia, we have not conducted any operations.
Accordingly, we have a limited
operating history upon which an evaluation of our performance and prospects can be made.
Our prospects must be considered in light of the inherent risks, expenses and difficulties
encountered by companies in the early stages of development, particularly companies in new
and evolving markets. These risks include, by way of example and not in limitation,
unforeseen capital requirements, unforeseen technical problems, failure of market
acceptance, failure to establish business relationships and competitive disadvantages
against larger and more established companies. We may not be able to successfully address
any of these risks or others. Failure to do so could seriously harm our business and cause
our operating results to suffer.
We have not generated any
revenues to date and may not be able to generate revenues in the future.
We have not generated any revenues to
date and do not expect to generate any revenues until after we have successfully acquired,
built and operated one or more synthetic diesel fuel manufacturing plants or harvested and
delivered a successful crop of castor seeds and commenced commercial sales. Except with
respect to potential revenue from the sale of castor seeds, we do not currently anticipate
that any of this could occur until the first quarter of 2010 at the earliest, if at all.
Any start-up delays due to problems with physical plants, staffing, permitting or other
operational issues would negatively impact our business. Any planned manufacturing plants
may not achieve projected capacity. If they do not, we could continue to suffer losses
from operations and may never become profitable. If this were to occur, our business could
fail.
3
We will need substantial
additional funding to pursue our business plan and fund our proposed operations. If we are
unable to obtain the funds necessary to do so, we may be required to delay, scale back or
eliminate our business plans or we may be unable to continue our business.
We plan to acquire, build and operate
facilities to manufacture renewable synthetic diesel fuel. These plans require a
commitment of funds substantially in excess of funds we currently have available. As a
result of the proceeds raised in our private placement offering of units that closed in
two tranches on September 30, 2008 and November 4, 2008, respectively, we believe that we
have sufficient funds to satisfy our basic capital needs for approximately nine months.
However, most of these proceeds of the private placements will be used to fund our general
corporate overhead.
Future capital requirements may vary
significantly and will depend on certain factors, many of which are not within our
control. These include the ongoing development and testing of the proprietary technology
which we plan to use for production of synthetic diesel fuel, the nature and timing of
licensing and sublicensing activities, plant construction, commencement of sales, the
hiring of qualified management and employees, responding to competitive pressures,
regulatory requirements and the availability of financing.
We will need to raise substantial
additional capital to fund the expansion of our business. We cannot be certain that
additional financing will be available on acceptable terms, or at all, particularly in
light of the recent economic downturn and dislocations in the credit and capital markets,
which may or may not continue. To the extent that we raise additional capital through the
sale of equity securities, the ownership position of our existing stockholders could be
substantially diluted. If additional funds are raised through the issuance of debt
securities, these securities are likely to have rights, preferences and privileges senior
to our common stock. Fluctuating interest rates could also increase the costs of any debt
financing we may obtain.
Failure to successfully address
ongoing liquidity requirements will have a material adverse effect on our business. If we
are unable to obtain additional capital on acceptable terms when needed, we may be
required to take actions that harm our business and our ability to achieve cash flow in
the future, including the possible impairment of our relationship with Alphakat GmbH,
delay of expansion plans or curtailing or ceasing operations.
Our independent
registered public accounting firm has expressed doubt about our ability to continue as a going
concern, which may hinder our ability to obtain future financing.
Our consolidated financial statements
as of December 31, 2007 have been prepared under the assumption that we will continue as a
going concern for the year ending December 31, 2008. Our independent registered public
accounting firm has issued a report that included an explanatory paragraph expressing
substantial doubt about our ability to continue as a going concern without raising capital
or generating revenues. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Our ability to produce
and distribute commercial quantities of synthetic diesel fuel is unproven, which could
have a detrimental effect on our ability to generate or sustain revenues.
Production of synthetic diesel fuel
from hydrocarbon-based materials using the proprietary KDV technology has never been
tested on a commercial basis. The synthetic diesel fuel produced using this technology,
while intended as a new class of fuel for transportation and power generation and as a
heating fuel, may never achieve technical or commercial viability. All of the tests
conducted to date with respect to the KDV technology have been performed in a limited
scale environment and the same or similar results may not be obtainable at competitive
costs on a large-scale commercial basis. We have never utilized the KDV technology under
the conditions or in the volumes that will be required for it to be profitable and cannot
predict all of the difficulties that may arise. The KDV technology, when used, may require
further research, development, regulatory approvals, environmental permits, design and
testing prior to commercialization. Accordingly, the KDV technology or the synthetic
diesel fuel produced using it may not perform successfully on a commercial basis and we
may never generate any revenues or become profitable.
4
We may not be able to
achieve the objectives set forth in our business plan.
We are focused on building and
operating a series of facilities to produce synthetic diesel fuel from municipal solid
waste, oil residuals, refinery wastes and biomass. We have not yet commenced the design,
engineering, development or construction of any synthetic diesel fuel manufacturing
plants.
We intend to work with local
partners, including local partners that have the ability to supply large quantities of the
required waste. We intend to set up three to four first generation commercial plants in
countries where strategic partners able to supply the required waste have already been
identified, including the United States, China, Israel, Poland, and Romania.
We can give no assurance that we will
be able to identify the required local partners and negotiate acceptable agreements with
them, nor can it be assured that we can achieve the objectives listed above. In addition,
the local partners that we are already working with or that we may work with in the future
may decide not to proceed with their plans to build and operate fuel production
facilities.
Our business depends on
proprietary technology that we do not own, that we may not be able to protect, and
which may infringe on the intellectual property rights of others.
Our success will depend, in part, on
the commercial viability of the KDV technology and on the strength of the intellectual
property rights relating to this technology. The KDV technology consists primarily of a
proprietary turbine and a catalyst, which, when used together, enable the operator to
convert waste into synthetic diesel fuel. The KDV turbine has been patented by its
inventor, Dr. Christian Koch, in Germany, the USA, and certain other countries. The
catalyst used in the KDV technology is not protected by patent, nor is it proprietary to
us, Dr. Koch, or Alphakat GmbH. Dr. Koch has licensed Alphakat GmbH, a German company that
Dr. Koch owns and controls, to market, manufacture and sell KDV turbines. Alphakat GmbH
has granted to Alphakat-Global Energy GmbH, an equally owned subsidiary of our company and
Alphakat GmbH, a right to market and sell KDV turbines in certain areas of the world. If a
third party were to claim that Dr. Koch's patents infringe on its proprietary rights,
there can be no assurance that Dr. Koch would defend the patents or, if he did attempt to
defend them, that he would be successful. Patent litigation can be very expensive and
protracted and Dr. Koch may not have the financial means to defend such a claim. If a
third party were to prove such an infringement, Alphakat-Global Energy GmbH might not be
able to find any buyers for or partners to use the KDV technology. Because the sales
commissions that Alphakat-Global Energy GmbH hopes to earn from sales of the KDV turbines
to end users is a proposed source of significant revenue, the inability to sell KDV
turbines would have an adverse effect on our potential revenue stream.
If a third party can prove that the
KDV technology infringes on its own intellectual property rights, we might not be able to
purchase, install or operate KDV turbines, or the cost to do so may increase to the point
where it would no longer be feasible to do so. Because we propose to generate the majority
of our revenue from the construction and operation of synthetic diesel fuel production
facilities using the KDV technology, such a result could have a material adverse effect on
our proposed operations.
5
In addition, any agreements with our
employees, consultants, advisors and strategic partners (or those of Alphakat GmbH or
Alphakat-Global Energy GmbH) restricting the disclosure and use of trade secrets,
inventions and confidential information relating to the KDV technology may not provide
meaningful protection in the event of unauthorized use or disclosure.
Dr.
          Koch's patents may not protect against the possibility that third parties
          could independently develop substantially similar technology, nor will the
          patents protect against infringement by third parties in any country where the
          KDV technology has not been patented. Because we propose to generate the
          majority of our revenue from the construction and operation of fuel production
          facilities using the KDV technology, there can be no assurance that Dr.
          Koch's intellectual property rights can prevent third parties from
          competing with us. Increased competition could result in higher prices for us
          for the raw materials used in converting waste to fuel, lower prices for the
          fuel produced, and higher operating costs, any of which could have a material
          adverse effect on our proposed operations. For a more complete discussion about
          the risks of competition, please refer to the risk factor describing the risks
          we may face from competition included in the Risk Factor titled
          "
Competition may impair our success
" on page 7 of this
          prospectus.
Finally, if a third party were to sue
us for an alleged infringement of its proprietary rights, we could incur substantial costs
in defending ourselves. Any such claim against us, with or without merit, would likely be
time-consuming and expensive and there is a possibility that the plaintiff in such an
action may have greater resources than we do. We may not be able to afford to pay the fees
and costs required in order to mount a defense. Any adverse finding in such an action
could have a material adverse effect on our ability to conduct our proposed operations.
An unrelated company is
offering KDV turbines for sale in territories where our subsidiary, Alphakat-Global
Energy GmbH, has been granted the exclusive right to market and sell the KDV technology.
An entity that has no affiliation
with us is offering KDV turbines for sale in certain west coast states of the United
States. This is in direct conflict with Alphakat-Global Energy GmbH's exclusive right
to sell the KDV technology in the United States and the rights of Covanta Energy Corp.,
our strategic partner, as provided in the agreements with Alphakat-Global Energy GmbH and
Dr. Koch. Alphakat-Global Energy GmbH and Covanta Energy Corp. have informed this
unrelated party of their respective rights and have demanded that this third party cease
and desist from all marketing and sales activities in the United States in respect of the
KDV technology. The unrelated company has not responded to the foregoing demands and we,
Alphakat-Global Energy GmbH, or Covanta Energy Corp. may need to enforce our respective
rights by proceeding to litigation, which may prove costly and there can be no assurance
that we will prevail.
Alphakat GmbH may not
deliver KDV turbines on time, or at all, and Dr. Koch may breach his agreements with
our company.
We are wholly dependent on Alphakat
GmbH and Dr. Koch to manufacture and deliver KDV turbines that may be ordered from
time-to-time by us and our local partners, or by purchasers of the turbines that purchase
them through Alphakat-Global Energy GmbH. Alphakat GmbH is in the development stage and
has not yet proved its capacity to build and timely deliver KDV turbines. Delay in
production or delivery could materially and adversely impair our operations and we could
be forced to discontinue our business.
In addition, in the event that Dr.
Koch grants rights to third parties with respect to the KDV technology in breach of our
agreements with Dr. Koch, or otherwise does not perform any material obligations that he
may owe to us, Alphakat-Global Energy GmbH or other purchasers or users of the KDV
technology, our business may experience a substantial setback and may fail.
6
Unanticipated problems in
our engineering and construction operations may harm our business.
Cash flow will depend on our ability
and the ability of our local partners to timely design, construct and complete synthetic
diesel fuel manufacturing plants. If engineering and construction operations are disrupted
and/or the economic integrity of these projects is threatened for unexpected reasons, our
business may experience a substantial setback. As a development stage company, we are
particularly vulnerable to these risks.
Completion of diesel fuel
manufacturing plants will not assure a profit on the investment or recovery of
construction costs. Also, environmental damage may greatly increase the cost of
construction and various other field operating conditions may adversely affect the
construction of synthetic diesel fuel manufacturing plants. These conditions include, but
are not limited to, delays in obtaining governmental approvals or consents, attracting and
retaining qualified employees, labor relations issues and adverse geological and
mechanical conditions. These uncertainties may have a material adverse effect on our
revenue and cash flow levels to varying degrees and may result in the impairment of our
business.
Our marketing and sales
subsidiary could lose its right to market and sell the KDV technology if certain sales
thresholds are not achieved.
If Alphakat-Global Energy GmbH does
not sell at least 10 units based on the KDV technology before December 2010, it could lose
the rights to market and sell the KDV technology. This could have a material adverse
effect on our proposed business.
Our business may suffer
if we are unable to attract and/or retain talented personnel.
Our success will depend in large
measure on the abilities, expertise, judgment, discretion, integrity, and good faith of
our current personnel and management and on other personnel we may hire. We currently have
3 employees. The loss of a key individual or the inability to attract suitably qualified
replacements or additional staff could adversely impact our business. Our success depends
on the ability of our management and employees to interpret market and technical data
correctly, to respond to economic, market and other conditions, and to manage effectively
the production, marketing and sale of synthetic diesel fuel using the KDV technology.
Furthermore, no assurance can be given that key personnel will continue their employment
with us or that replacement personnel with comparable skills can or will be found. If we
are unable to attract and retain key personnel, our business may be adversely affected. We
do not maintain, nor do we currently intend to procure, any "key man" insurance.
Competition may impair
our success.
The market for the manufacture,
marketing and sale of renewable diesel (mineral and synthetic) and other alternative fuels
is highly competitive. According to the National Bio-diesel Board (NBB), as of January 25,
2008, there were at least 171 companies engaged in the development, manufacture and
marketing of bio-diesel fuel, with current production capacity estimated at 2.24 billion
gallons per year, with actual production for the 12-month period ended September 30, 2007
of 450 million gallons. The NBB further estimated that another 1.23 billion gallons of
annual plant capacity were under development. Competition could be intense and result in
increases in the costs of feedstock, plant construction and operating expenses, as well as
make it more difficult to attract and retain qualified engineers, chemists and other
employees whose services could be key to our operations as they develop. Larger companies
that are already engaged in this business may have access to greater financial and other
resources, making it difficult to compete with them in recruiting and retaining qualified
employees as well as in acquiring attractive locations for the construction and operation
of a producing plant.
Moreover, if production capacity in
the industry increases faster than demand for alternative fuels (including synthetic
diesel fuel), sale prices could be depressed. Falling oil prices may have a negative
effect on demand for alternative fuels such as the synthetic diesel fuel that we propose
to produce. In addition to competition from other companies engaged in producing
alternative fuel, we will compete with producers of petroleum fuels.
7
Competition from other companies
producing alternative fuels may increase if energy prices on the commodities market,
including the price of oil and alternative fuel, rise. Additionally, new companies are
constantly entering the market, thus increasing the competition for capital. This could
have a negative impact on our ability to obtain additional capital from investors.
If we are unable to compete
effectively or adequately respond to competitive pressures, our results of operation and
financial condition may be materially adversely affected.
Our management has identified a
material weakness in internal control over financial reporting and we can provide no
assurance that additional material weaknesses will not be identified in the future. Our
failure to implement and maintain effective internal control over financial reporting
could result in material misstatements in our financial statements.
In our Annual Report on Form 10-K for
the fiscal year ended December 31, 2007, we reported that our management had concluded
that, as of December 31, 2007, our small size and limited number of employees resulted in
an inherent material weakness in our internal control over financial reporting because the
segregation of duties may not provide reasonable assurance that our internal control over
financial reporting is reliable and may not prevent or detect misstatements. We can
provide no assurance that we can correct this material weakness or that additional
material weaknesses in our internal control over financial reporting will not be
identified in the future. Any failure to maintain required controls, or any difficulties
that may be encountered in the implementation of new or improved controls, could result in
additional material weaknesses, cause us to fail to meet our periodic reporting
obligations or result in material misstatements in our financial statements.
We may not effectively
manage future growth.
If we achieve rapid growth, it will
place a significant strain on our financial, managerial, and operational resources. To
achieve and manage growth effectively, we must continue to improve and expand our
operational and financial management capabilities. Moreover, we will need to increase
staffing and effectively train, motivate and manage our employees. Failure to manage
growth effectively could harm our business.
Prices and markets for
alternative diesel (such as renewable synthetic diesel fuel) are unpredictable and
tend to fluctuate significantly.
The price of fuel is determined based
on world demand, supply and other factors that impact the price of synthetic diesel fuel
as well as conventional and other alternative fuels, all of which are beyond our control.
World prices for fuel have fluctuated widely in recent years and we expect that prices
will continue to fluctuate. Price fluctuations will have a significant impact on revenue,
results of operations and our general financial condition. Price fluctuations for
synthetic diesel fuel and other fuel may also impact the investment market and our ability
to raise capital through the sale of debt or equity securities. Future decreases in the
price of competing fuels may have a material and adverse effect on our financial
condition. In addition, in the United States, demand for alternative fuels is affected by
certain federal and state tax benefits. Moreover, the synthetic diesel fuel may not be
eligible for tax incentives currently provided to the alternative fuels industry.
8
As of December 31, 2008,
we have outstanding short and long term debt, which, if it not repaid when due, will
permit the holders of this debt to seek renegotiation or bankruptcy alternatives, the
result of which could terminate implementation of our business plan.
As of December 31, 2008, we had
secured convertible debentures in the principal amount of $4,000,000 outstanding plus
approximately $257,400
in outstanding interest thereon. We have pledged all of our
assets as security for this debt to our senior secured lender. From time to time, we may
also have trade debt and equipment financing outstanding. If we are unable to repay any of
our obligations when due, our creditors could foreclose on our assets, force us into
bankruptcy or force renegotiation of the terms of the outstanding debt to terms that may
be substantially less favorable to us. In either event, our ability to pursue our business
plan would be significantly impaired and our equity could become worthless. For more
information about the recent amendment to our agreement with our senior secured lender,
please see the "
Financing Agreement
" section of this prospectus beginning
on page 23.
Additionally, as of December 31,
2008, we have outstanding short term loans in the approximate amount of $840,000.
Our business may be
adversely affected by regulatory and environmental risks.
Our operations will be subject to
environmental risks and hazards and to environmental regulation implemented and/or imposed
by a variety of international conventions as well as federal, state, provincial and
municipal laws and regulations. Environmental laws restrict and prohibit spills,
discharges and emissions of various substances produced in association with our proposed
synthetic diesel fuel manufacturing operations. Environmental laws also require that
manufacturing plants be operated, maintained and closed in such a way that satisfies
applicable regulatory authorities.
Compliance with environmental laws
can require significant expenditures and a violation may result in the imposition of fines
and penalties, some of which may be material. Environmental legislation is evolving in a
manner that could result in stricter standards and enforcement, larger fines and liability
and potentially increased capital expenditures and operating costs. Compliance with
environmental laws may cause us to limit production, significantly increase the costs of
our operations and activities or otherwise adversely affect our financial condition,
results of operations and/or prospects.
Insurance may be
inadequate to cover liabilities.
Manufacturing plant operations can
give rise to liability for pollution, property damage, personal injury or other hazards.
We do not currently carry a policy of liability insurance insuring against these risks.
Even if we obtain insurance to address such risks, insurance policies may have
prohibitively high deductible amounts and limitations on liability, such that coverage may
not be obtainable or sufficient to cover the full extent of the liabilities. Also, some
risks may not be insurable. If we suffer a significant event or occurrence that is not
fully covered by insurance, or if the insurer of such event is not solvent, this could
result in a material adverse effect on our company and our business.
Our business is subject
to local legal, political and economic factors.
We expect to operate in Europe,
Israel, North America, China, Africa and other countries. Not all of these areas have
stable legal, political and economic conditions. For the areas that do have stable legal,
political and economic conditions, there is a risk that these conditions will change.
These risks include, but are not limited to, terrorism, military repression, interference
with private contract rights, currency fluctuations, inflation, exchange controls and
other laws or policies affecting environmental issues (including land use and water use),
workplace safety, foreign investment, foreign trade, investment or taxation, restrictions
imposed on the alternative fuel industry (such as restrictions on production) and price
and export controls. Any changes in alternative fuel policies, financial incentives,
investment regulations or a shift in political attitudes about the business that we
propose to operate could adversely affect our business and future financial results.
9
Because most of our
officers and directors are located in non-U.S. jurisdictions, our shareholders may have
no effective recourse against them for misconduct and may not be able to enforce
judgments and civil liabilities against them.
Only two of our
directors, Amir Elbaz and
Hedy Ram, are U.S. residents. The
remainder of our directors and officers are nationals and/or residents of countries other
than the United States, and all or a substantial portion of their assets are located
outside the United States. As a result, it may be difficult for investors to enforce
within the United States any judgments obtained against these officers or directors,
including judgments predicated upon the civil liability provisions of the securities laws
of the United States or any U.S. state.
We were late in filing
our income tax returns and we may be assessed for late filing penalties.
Our company and our subsidiaries
first filed tax returns with the Internal Revenue Service on December 15, 2008. Because we
have never had any income from operations, we are confident that we do not owe any income
tax, but the tax authorities in certain jurisdictions could assess a penalty for late
filing. We are not able to assess whether any penalties will be assessed or, if so, the
amount thereof.
Risks Associated with
this Offering
Exercise of warrants
issued pursuant to the private placements of units that closed on September 30, 2008
and November 4, 2008, respectively, will dilute equity interests in our company and could
result in a decline of the trading price of our common stock.
Investors who purchased units
pursuant to our private placement offering that closed in two tranches on September 30,
2008 and November 4, 2008, respectively, may exercise the share purchase warrants that
formed part of such units to be issued shares of our common stock, thereby diluting the
equity interests represented by the outstanding shares of our common stock at the date of
the exercise. Specifically, these investors exercise up to 18,700,000 share purchase
warrants to be issued up to 18,700,000 shares of our common stock, thereby increasing our
total issued and outstanding shares from 81,387,764 as of January 5, 2009 to up to
100,087,764 upon exercise of the warrants. The issuance of such shares and the associated
dilution could result in a decline in the trading price of our common stock.
Future sales of our
common stock could adversely affect its price and our future capital-raising activities
could involve the issuance of equity securities, which would dilute your investment and
could result in a decline in the trading price of our common stock.
We may sell securities in the public
or private equity markets if and when conditions are favorable, even if we do not have an
immediate need for additional capital at that time. Sales of substantial amounts of our
common stock, or the perception that such sales could occur, could adversely affect the
prevailing market price of our common stock and our ability to raise capital. We may issue
additional common stock in future financing transactions or as incentive compensation for
our executive management and other key personnel, consultants and advisors. Issuing any
equity securities would be dilutive to the equity interests represented by our
then-outstanding shares of common stock. The market price for our common stock could
decrease as the market takes into account the dilutive effect of any of these issuances.
Furthermore, we may enter into financing transactions at prices that represent a
substantial discount to the market price of our common stock. A negative reaction by
investors and securities analysts to any discounted sale of our equity securities could
result in a decline in the trading price of our common stock.
Investors in our common
stock will experience additional dilution upon the exercise of existing options and
warrants and the conversion of existing convertible debentures.
There are 11,081,436 shares of common
stock underlying options granted pursuant to our stock option plan. In addition,
approximately 66,200,000 shares of our common stock could be issued upon the conversion of
certain outstanding convertible debentures and exercise of share purchase warrants held by
our secured lender. If the holders of those securities convert or exercise, investors in
our common stock may experience dilution in the net tangible book value of their common
stock.
10
Risk Related to our
Common Stock
There is a limited market
for our common stock which may make it more difficult investors in our common stock to
resell their stock.
Our common stock is quoted on the OTC
Bulletin Board under the symbol "GEYI.OB". There is a limited trading market for
our common stock. Accordingly, there can be no assurance as to the liquidity of any
markets that may develop for our common stock, the ability of holders of our common stock
to sell our common stock or the prices at which holders may be able to sell our common
stock.
The market price of our
common stock is likely to be volatile.
The market price of our common stock
is likely to be highly volatile and could fluctuate widely in price in response to various
factors, many of which are beyond our control, including:
—
technological
innovations or new products and services developed by us or our competitors;
—
additions
or departures of key personnel;
—
sales
of our common stock;
—
our
ability to integrate operations, technology, products and services;
—
our
ability to execute our business plan;
—
operating
results below expectations;
—
loss
of any strategic relationship;
—
industry
developments;
—
economic
and other external factors; and
—
period-to-period
fluctuations in our financial results.
Because we have a limited operating
history, any one of these factors may be material. Our stock price may fluctuate widely as
a result of any of the above listed factors.
In addition, the securities markets
have from time to time experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies. These market fluctuations
may also materially and adversely affect the market price of our common stock.
We have a concentration
of stock ownership and control, which may have the effect of delaying, preventing or
deterring a change of control.
Our common stock ownership is highly
concentrated. Through ownership of shares of our common stock, Carrigain Investment Ltd.,
a company controlled by Ariel Malik and Zeev Bronfeld of Israel, beneficially owns
approximately 51.6%
of the total 81,387,764 issued and outstanding shares of our
common stock as of January 5, 2009. If all of the share purchase warrants issued pursuant
to the private placement offering of units that closed in two tranches on September 30,
2008 and November 4, 2008, respectively, are exercised, Carrigain will own approximately
42% of the total 100,087,764 issued and outstanding shares of our common stock. As a
result of the concentrated ownership of our stock, a relatively small number of
shareholders, acting together, will be able to control all matters requiring shareholder
approval, including the election of directors and approval of mergers and other
significant corporate transactions. This concentration of ownership may have the effect of
delaying, preventing or deterring a change in control of our company. It may also affect
the market price of our common stock.
11
We have not paid
dividends in the past and do not expect to pay dividends in the future.
We have never paid cash dividends on
our common stock and do not anticipate paying cash dividends in the foreseeable future.
The payment of dividends on our common stock will depend on our earnings, financial
condition and other business and economic factors affecting us at such time as the board
of directors may consider relevant. If we do not pay dividends, our common stock may be
less valuable because a return on investment will only occur if our stock price
appreciates.
Our common stock is
deemed to be "penny stock" with a limited trading market.
Our common stock is currently listed
for trading on the OTC Bulletin Board, which is generally considered to be a less
efficient market than markets such as NASDAQ or other national exchanges. This may cause
difficulty in conducting trades and difficulty in obtaining future financing. Further, our
securities are subject to the "penny stock rules" adopted pursuant to Section 15
(g) of the
Securities Exchange Act of 1934
, as amended. The penny stock rules apply
to non-NASDAQ companies whose common stock trades at less than $5.00 per share or which
have tangible net worth of less than $5,000,000 ($2,000,000 if a company has been
operating for three or more years). Such rules require, among other things, that brokers
who trade "penny stock" to persons other than "established customers"
complete certain documentation, make suitability inquiries of investors and provide
investors with certain information concerning trading in the security, including a risk
disclosure document and quote information under certain circumstances. Many brokers have
decided not to trade "penny stock" because of the requirements of the
"penny stock rules" and, as a result, the number of broker-dealers willing to
act as market makers in such securities is limited. In the event that we remain subject to
the "penny stock rules" for any significant period, there may develop an adverse
impact on the market, if any, for our securities. Because our securities are subject to
the "penny stock rules", investors will find it more difficult to dispose of our
securities. Further, for companies whose securities are traded on the OTC Bulletin Board,
it is more difficult: (i) to obtain accurate quotations, (ii) to obtain coverage for
significant news events because major wire services, such as the Dow Jones News Service,
generally do not publish press releases about such companies, and (iii) to obtain needed
capital.
USE OF PROCEEDS
We will not receive any proceeds from
the resale of shares of our common stock by the selling shareholders under this
prospectus. However, we may receive proceeds of up to $1,870,000 if all of the 18,700,000
share purchase warrants are exercised by the selling shareholders. We expect to apply such
proceeds to general corporate purposes and operations, including payment of salaries and
other executive compensation as described in the "
Executive Compensation
"
section of this prospectus beginning on page 33 and payment of expenses associated with
this prospectus.
DETERMINATION OF
OFFERING PRICE
This prospectus relates to the resale by
selling shareholders of up to 18,700,000 shares of our common stock that may be issued to
them upon exercise of up to 18,700,000 share purchase warrants that we issued to them in a
private placement that closed in two tranches on September 30 and November 4, 2008,
respectively.
Selling shareholders may sell these
shares of our common stock in the public market or through privately negotiated
transactions or otherwise. Selling shareholders may sell these shares our common stock
through ordinary brokerage transactions, directly to market makers, or through any other
means described in the "
Plan of Distribution
" section of this prospectus
beginning on page 14.
12
SELLING SHAREHOLDERS
Selling Shareholders comprise two
categories of shareholders:
(1)
Any one or more of the 30 investors listed below who received 17,000,000 share
               purchase warrants to purchase our common stock in connection with investing in
               our company through the private placement that closed in two tranches on
               September 30 and November 4, 2008, respectively.
(2)
A placement agent, who received 1,700,000 share purchase warrants to purchase
               our common stock as part of a commission it paid to it for its services rendered
               in connection with the private placement.
None of the investors listed below
have held any position or office, or had any other material relationship with us or any of
our predecessors or affiliates over the past three years.
Name
Amount of
Securities Owned
by the Security
Holder Prior to
the Offering
Amount of
Securities Offered
for Sale by the
Security Holder
Amount of
Securities Owned
by the Security Holder
After the Offering
Percentage of our
Common Stock Owned
by the Security
Holder After the
Offering
(1),(2)
Anthony A. Smalarz Revocable Trust DTD 10-03-2007
(3)
500,000
(4)
250,000
(5)
250,000
-
Ardron 2001 Revocable Trust
(6)
1,000,000
(4)
500,000
(5)
500,000
-
Arturo Martinez
4,000,000
(4)
2,000,000
(5)
2,000,000
2%
Ben Hasty MD
1,000,000
(4)
500,000
(5)
500,000
-
Bernie & Rita's Limited Partnership
(7)
1,000,000
(4)
500,000
(5)
500,000
-
Bryan K. Perkins
2,000,000
(4)
1,000,000
(5)
1,000,000
1%
John F. Callahan
500,000
(4)
250,000
(5)
250,000
-
David W. Drezner
500,000
(4)
250,000
(5)
250,000
-
Thomas Rutherford
3,500,000
(4)
1,750,000
(5)
1,750,000
1.75%
Ed Dempsey
1,000,000
(4)
500,000
(5)
500,000
-
F. Alan Stamper
1,000,000
(4)
500,000
(5)
500,000
-
Gardner Family Trust Dated 5.7.08
(8)
1,000,000
(4)
500,000
(5)
500,000
-
Gero Papst
500,000
(4)
250,000
(5)
250,000
-
Gregg Dovolis
1,000,000
(4)
500,000
(5)
500,000
-
Jose Melo MD
2,000,000
(4)
1,000,000
(5)
1,000,000
1%
Joy Ellen Pitterman Rev Trust U/A 5.9.03
(9)
1,000,000
(4)
500,000
(5)
500,000
-
Mary Grace Hess
(10)
500,000
(4)
250,000
(5)
250,000
-
Michael J. Julik
500,000
(4)
250,000
(5)
250,000
-
Neel & Martha Ackerman
2,000,000
(4)
1,000,000
(5)
1,000,000
1%
Noah Drezner
500,000
(4)
250,000
(5)
250,000
-
Philip G. Meng Trust U/A 12.31.86
(11)
2,000,000
(4)
1,000,000
(5)
1,000,000
1%
Rafael Penunuri
1,000,000
(4)
500,000
(5)
500,000
-
Richard C. Matter
1,000,000
(4)
500,000
(5)
500,000
-
RLZS Holdings, LP
(12)
1,000,000
(4)
500,000
(5)
500,000
-
Robert Abrahamsen
500,000
(4)
250,000
(5)
250,000
-
Robert J. Van Hyfte Sep
(10)
500,000
(4)
250,000
(5)
250,000
-
Robin M. Bell
(10)
500,000
(4)
250,000
(5)
250,000
-
Ronald Bova
1,000,000
(4)
500,000
(5)
500,000
-
Suzanne L. & Duane Edwin Crumb
1,000,000
(4)
500,000
(5)
500,000
-
Wayne Freeland
(10)
500,000
(4)
250,000
(5)
250,000
-
National Securities Corporation
(13)
1,700,000
(5)
1,700,000
Nil.
1.7%
Total
35,700,000
(4)
18,700,000
(5)
17,000,000
17%
13
(1)
Percentage is listed only if it is greater than 1%.
(2)
Assuming the exercise of all of the share purchase warrants held by selling
          shareholders and based on 100,087,764 issued and outstanding shares of our
          common stock.
(3)
Anthony Smalarz, sole trustee of Anthony A. Smalarz Revocable Trust DTD
          10-03-2007, has the voting and dispositive control over these securities.
(4)
Half of the stated amount are shares of our common stock that may be issued upon
          the exercise of the share purchase warrants held by the selling shareholder.
(5)
Shares of our common stock that may be issued upon the exercise of the share
          purchase warrants held by the selling shareholder.
(6)
Gerard Ardron, sole trustee of Ardron 2001 Revocable Trust, has the voting and
          dispositive control over these securities.
(7)
Bernie and Rita Petreccia, as the trustees for the Bernie & Rita's
          Revocable Management Trust, the general partner in Bernie & Rita's
          Limited Partnership, have the voting and dispositive control over these
          securities.
(8)
Dennis and Peggy Catherine Gardner, trustees of the Gardner Family Trust Dated
          5.7.08, have the voting and dispositive control over these securities.
(9)
Joy Ellen Pitterman, sole trustee of the Joy Ellen Pitterman Rev Trust U/A
          5.9.03, has the voting and dispositive control over these securities.
(10)
Securities are held in an Individual Retirement Account.
(11)
Philip G. Meng, sole trustee of Philip G. Meng Trust U/A 12.31.86, has the
          voting and dispositive control over these securities.
(12)
K. Ray Shrum, manager of RLSZ Holdings GP, LLC, the general partner in RLZS
          Holdings, LP, has the voting and dispositive control over these securities.
(13)
National Securities Corporation was our placement agent for the private
          placement.
PLAN OF DISTRIBUTION
Selling shareholders, with respect to
the shares of our common stock that may be issued to them upon exercise of the share
purchase warrants and registered via this registration statement, and any of their donees,
pledgees, transferees or other successors-in-interest selling shares of our common stock
or interests in shares of our common stock received after the date of this prospectus from
a selling shareholder as a gift, pledge, partnership distribution or other transfer, may,
from time to time, sell, transfer or otherwise dispose of any or all of such shares or
interests in such shares on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These dispositions may be at fixed prices,
at prevailing market prices at the time of sale, at prices related to the prevailing
market price, at varying prices determined at the time of sale, or at negotiated prices.
Selling shareholders may use any one
or more of the following methods when disposing of shares or interests therein:
—
ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers;
—
block
trades in which the broker-dealer will attempt to sell the shares as agent, but may
position and resell a portion of the block as principal to facilitate the transaction;
—
purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
14
—
an
exchange distribution in accordance with the rules of the applicable exchange;
—
privately
negotiated transactions;
—
through
the writing or settlement of options or other hedging  transactions,  whether  through an
          options exchange or otherwise;
—
by
agreement with  broker-dealers  may agree to sell a specified number of shares at a
stipulated           price per share; and
—
a
combination of any of the above.
Selling shareholders, may from time
to time pledge or grant a security interest in some or all of such shares and, if they
default in the performance of their secured obligations, the pledgees or secured parties
may offer and sell such, from time to time, under this prospectus, or under an amendment
to this prospectus under Rule 424(b)(3) or other applicable provision of the
Securities
Act of 1933
, as amended, amending the list of selling shareholders to include the
pledgee, transferee or other successors-in-interest as selling shareholders under this
prospectus. Selling shareholders also may transfer their shares in other circumstances, in
which case the transferees, pledgees or other successors-in-interest will be the selling
beneficial owners for purposes of this prospectus.
Broker-dealers engaged by selling
shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers
may receive commissions or discounts from selling shareholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. Such commissions and discounts should not exceed what is customary in the
types of transactions involved.
Selling shareholders have agreed that
they will not use shares registered in prospectus to cover short sales of our common stock
issued to them upon exercise of the share purchase warrants made prior to the date on
which this registration statement is declared effective by the Securities and Exchange
Commission.
Selling shareholders may enter into
option or other transactions with broker-dealers or other financial institutions or the
creation of one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by this prospectus, which
shares such broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
Selling shareholders will receive the
aggregate proceeds from the sale of the common stock sold pursuant to this prospectus. The
aggregate proceeds to selling shareholders from the sale of such shares will be the
purchase price of such shares less discounts or commissions, if any. Each of selling
shareholders reserves the right to accept and, together with their agents from time to
time, to reject, in whole or in part, any proposed purchase of such shares to be made
directly or through agents. We will not receive any of the proceeds from the sale of
shares by selling shareholders under this offering. We will receive proceeds from selling
shareholders who exercise their share purchase warrants and pay the applicable cash
exercise price in connection with those exercises.
Selling shareholders also may resell
all or a portion of our common stock issued to them upon exercise of the share purchase
warrants in open market transactions in reliance upon Rule 144 under the
Securities Act
of 1933
, as amended, provided that they meet the criteria and conform to the
requirements of that rule.
Selling shareholders and any
underwriters, broker-dealers or agents that participate in the sale of the shares of our
common stock registered in this registration statement or interests therein may be
"underwriters" within the meaning of Section 2(11) of the
Securities Act of
1933
, as amended. Any discounts, commissions, concessions or profit they earn on any
resale of the shares may be underwriting discounts and commissions under the
Securities
Act of 1933
, as amended. Selling shareholders who are "underwriters" within
the meaning of Section 2(11) of the
Securities Act of 1933
, as amended, will be
subject to the prospectus delivery requirements of the
Securities Act of 1933
, as
amended.
15
In order to comply with the
securities laws of some states, if applicable, the shares of our common stock registered
under this registration statement may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in some states, such shares may
not be sold unless they have been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied with.
We will make copies of this
prospectus (as it may be supplemented or amended from time to time) available to selling
shareholders for the purpose of satisfying the prospectus delivery requirements of the
Securities Act of 1933
, as amended. Selling shareholders may indemnify any
broker-dealer that participates in transactions involving the sale of the shares
registered in this registration statement against certain liabilities, including
liabilities arising under the
Securities Act of 1933
, as amended.
We will pay all expenses incident to
registration other than commissions, fees and discounts of underwriters, brokers, dealers
and agents. We will pay for offering expenses including the registration fee required by
the Securities and Exchange Commission, accounting fees, legal fees, printing expenses and
other related miscellaneous expenses. We have agreed to indemnify selling shareholders
against liabilities, including liabilities under the
Securities Act of 1933
, as
amended, and state securities laws, relating to the registration of the shares offered by
this prospectus.
We have agreed with selling
shareholders to keep this registration statement effective until the earlier of (1) such
time as all of the shares covered by this prospectus have been disposed of pursuant to and
in accordance with this registration statement, or (2) the date on which such shares may
be sold without restriction pursuant to Rule 144 of the
Securities Act of 1933
, as
amended.
DESCRIPTION OF
SECURITIES TO BE REGISTERED
We are registering up to 18,700,000 shares
of our common stock that may be issued to selling shareholders upon exercise of up to
18,700,000 share purchase warrants held by 30 investors and one placement agent.
General
As of January 5, 2009, our authorized
capital stock consists of 250,000,000 shares of common stock with a par value of $0.001
per share. On November 4, our controlling shareholder approved an amendment to our
articles of incorporation increasing the authorized share capital to 750,000,000. The
amendment will take effect in January, 2009 when we will file a certificate of amendment
with the Nevada Secretary of State.
As of January 5, 2009, there were
81,387,764 shares of our common stock issued and outstanding, held by 78 shareholders
of record, and an additional 76,931,436 shares of our common stock may be issued upon the
exercise of outstanding options and warrants including the shares that we are registering
on this Form S-1.
Common Stock
The holders of our common stock are
entitled to one vote for each share of our common stock held by them on all matters
submitted to a vote of the stockholders. The holders of our common stock do not have any
cumulative voting rights. Holders of our common stock are entitled to receive
proportionally any dividends declared by our board of directors.
In the event of our liquidation or
dissolution, holders of our common stock are entitled to share ratably in all assets
remaining after payment of all debts and other liabilities. Holders of our common stock
have no preemptive, subscription, redemption or conversion rights.
16
Nevada Anti-Takeover Laws
Nevada Revised Statutes Sections
78.378 to 78.379 provide state regulation over the acquisition of a controlling interest
in certain Nevada corporations unless the articles of incorporation or bylaws of the
corporation provide that the provisions of these sections do not apply. Our Articles of
Incorporation and Bylaws do not state that these provisions do not apply. The statute
creates a number of restrictions on the ability of a person or entity to acquire control
of a Nevada company by setting down certain rules of conduct and voting restrictions in
any acquisition attempt, among other things. The statute is limited to corporations that
are organized in the state of Nevada; have 200 or more stockholders, at least 100 of whom
are stockholders of record and residents of the State of Nevada; and do business in the
state of Nevada directly or through an affiliated corporation. Because of these
conditions, the statute currently does not apply to our company.
Transfer Agent
The transfer agent and registrar for
our common stock is Worldwide Stock Transfer, LLC, 885 Queen Anne Road, Teaneck, NJ, USA
07666, telephone: (201) 357-8650 and fax: (201) 357-8648.
INTERESTS OF NAMED
EXPERTS AND COUNSEL
The consolidated financial statements
as of December 31, 2007 and for the year ended December 31, 2007 and, cumulatively, the
period from January 1, 2007 to December 31, 2007 included in this prospectus have been so
included in reliance on the report of Kesselman & Kesselman, an independent registered
public accounting firm and the Israeli affiliate of PwC, given on the authority of said
firm as experts in auditing and accounting.
The consolidated financial statements
as of December 31, 2006, for the two years in the period ended December 31, 2006, and the
cumulative period from July 5, 2005 (the date of becoming a development stage entity)
through December 31, 2006, included in this prospectus have been so included in reliance
on the report of Chang Lee LLP Chartered Accountants (formerly Vellmer & Chang,
Chartered Accountants), an independent registered public accounting firm, given on the
authority of said firm as experts in auditing and accounting.
INFORMATION WITH
RESPECT TO THE REGISTRANT
Description of the
Business
Historical Information
Our business address is 415 Madison Avenue,
15th Floor, New York, NY 10017, and our telephone number is (646) 673-8435. Our registered
agent is Rite, Inc., 1905 South Eastern Ave., Las Vegas, NV 89104. We maintain a website
located at http://www.global-nrg.biz. The information contained in this website is not
incorporated by reference into this prospectus.
We are a Nevada corporation that was
incorporated on February 16, 1999 as Global Smartcards Inc. We originally planned to
market plastic cards with embedded microprocessors. However, we were unable to complete
negotiations to market these cards and did not proceed with this business plan.
In early 2003, we decided to engage
in the business of acquiring, exploring and developing crude oil and natural gas
properties in the United States. On April 28, 2003, we changed our name to Global Energy
Inc., and on June 5, 2003, we purchased certain petroleum and natural gas producing
properties and commenced oil and gas operations.
17
During April 2005, our management
decided to seek alternative business opportunities. Effective July 1, 2005, we entered
into and subsequently effected an agreement with Roxbury Capital Group Ltd. and Qwest
Capital Inc. pursuant to which we sold substantially all of our assets, then comprising
oil and gas lease interests, for the sum of $50,000. After the completion of that sale, we
continued to look for alternative business opportunities.
On April 30, 2007, in connection with
a private placement of our securities with one foreign investor, Asi Shalgi joined as our
President and Chief Executive Officer and we began to build our current business, focusing
on the production of alternative fuels.
We are currently a development stage
company that intends to acquire, build and operate facilities in various locations around
the world that will use a proprietary technology, which is described below beginning on
page 19.
Company Strategy
During the past five years, we have
observed efforts in the United States and the European Community to develop facilities for
the production of renewable, alternative fuels – primarily biofuels based on corn and
other feedstocks. We believe that the United States has focused primarily, on ethanol
while the European Community has focused primarily on biodiesel. Today, the production of
both ethanol and biodiesel has been constrained by price increases for their respective
primary feedstocks, corn and rapeseed (Canola).
Against this background, the emerging
alternative fuels industry has placed a high priority on developing and deploying new
technologies capable of utilizing abundant waste streams instead of corn and other
feedstocks for the production of alternative fuels. While we have noted that much
attention has been focused on high profile waste streams such as municipal solid waste
("
MSW
") and biomass waste derived from agriculture and forestry, we
believe that there are many other high volume industrial waste streams available to be
converted into alternative fuels. We have also determined that unlike traditional biofuels
based on corn and other food-based feedstocks, which must be purchased in order to be
converted into ethanol or biofuel, the utilization of waste streams as feedstocks to
produce alternative fuels also offers the potential of earning additional revenues from
garbage tipping fees and through the recycling of waste.
With the above factors in mind, we
have developed our business plan to take advantage of these potential dual revenue streams
through the utilization of a patented technology known as the KDV process. The KDV process
has been developed during the past thirty years by a German scientist, Dr. Christian Koch.
The KDV process, which Dr. Koch describes as a catalytic de-polymerization, utilizes
hydrocarbon-based feedstocks such as biomass, wood and paper as well as plastic, rubber
and waste oils, to produce high quality synthetic diesel fuel, similar to diesel fuel
available at the pump today.
Our strategy is to build, own and
operate, on our own and with strategic partners, industrial scale facilities that will
utilize this technology to produce synthetic diesel fuel from different types of
hydrocarbon-based waste. In each project, we plan to partner with local companies,
generally operators of landfill sites and recycling facilities, that have the ability
under long term contracts to supply large, consistent quantities of appropriate waste
feedstock as well as arrange off-take agreements for the diesel fuel. We also expect that
such local partners will have the requisite regulatory and technical expertise to obtain
necessary governmental approvals for the diesel fuel producing facilities based on this
technology.
Based on the production capabilities
demonstrated by pilot projects utilizing this technology, we believe that a single KDV500
unit is capable of producing approximately 500 litres of synthetic diesel fuel per hour,
or approximately 4,380,000 litres (approximately 1,200,000 gallons) of synthetic diesel
fuel per year.
18
We are currently negotiating with
potential local partners to build plants in the United States, China, and Romania. We
anticipate that each plant should initially begin operations with one or more KDV500 units
with plans to subsequently expand to industrial scale facilities with the capacity to
produce approximately 15-20 million gallons per year of diesel fuel. We believe that at
optimal capacity, these facilities should be capable of producing synthetic diesel fuel at
a net cost of approximately $1.20 per gallon given a zero feedstock cost. In addition, we
believe that it will be able to negotiate agreements under which it will collect tipping
fees for taking and processing MSW. When these tipping fees are factored in, the net cost
should be significantly lower.
During the next five years, and
assuming that we have sufficient capital, we plan to build 10-15 industrial scale
facilities worldwide with combined annual production capacity of approximately 200-300
million gallons of synthetic diesel fuel.
Description of the KDV
Technology
KDV Process
The KDV process, which we believe
represents a major breakthrough in the quest for renewable energy sources, utilizes
proprietary technology developed by Dr. Koch, which he had licensed to his German company,
Alphakat GmbH. Dr Christian Koch is a distinguished scientist who during his long-standing
career at Siemens Corporation held several senior positions.
The core elements of the KDV process
are a catalyst and a patented turbine. Known technically as catalytic de-polymerization,
the KDV process takes long carbon chains (polymers) and breaks them into the shorter
carbon chains that comprise a high quality diesel fuel.
Catalysts are chemical compounds that
facilitate chemical reactions but, because they are not consumed in the process, can be
recovered and used again. In layman terms, Dr. Koch describes the KDV process catalyst as
a mixture of substances found in nature, which over millions of years converted organic
matter such as plants and micro-organisms into the primary fossil fuels such as oil, gas
and coal. The catalyst's primary ingredients are silicon, alumina and sodium, which
are among the most prevalent substances on Earth, therefore, we believe that the catalyst
will not be subject to any supply risks.
The patented turbine, which Dr. Koch
designed, is critical to the KDV process. According to Dr. Koch, the turbine creates the
conditions required for the catalyst to work efficiently. Each KDV500 unit has two
turbines, each of which is approximately 3' long x 14" wide x 14" high.
Conceptually, the turbine is like a blender spinning at 3,000 RPM. The spinning of the
turbine creates friction and raises the temperature of the catalyst and feedstock, which
are suspended in a host oil at 545 degrees Fahrenheit. At this temperature, steam is
created and vented into a standard distillation column where it is condensed into
synthetic diesel fuel and water. We have observed that the only by-product or waste
associated with the process is a small amount of cake comprised of inorganic material or
ash, and no emissions are released to the atmosphere except CO
2
and steam.
We believe that the KDV process is an
improvement over gasification and pyrolysis, which are the two main types of processes
currently being developed by other companies as part of their efforts to find commercially
successful waste-to-fuel solutions. We believe that while different, both of these
processes share certain traits that make them less efficient and hence less economically
attractive than the KDV process. According to industry standards, these processes operate
at temperatures ranging from 800 to 1,800 degrees Fahrenheit, considerably higher than the
KDV process. As a result, the basic cost to build and operate these types of facilities is
greater than with the KDV process due to design issues, high energy consumption, and
environmentally hazardous by-products, which require special disposal, treatment or
further refining.
19
When describing alternative fuels,
"net energy balance" which measures energy input versus output, is an important
measure of efficiency. We believe that the KDV process requires 1 unit of energy input to
produce 7 to 8 units of energy, depending on the feedstock. In contrast, production of
corn-based ethanol requires 1 unit to produce 1.25 units, while biodiesel requires 1 unit
to produce 3.2 units.
Feedstocks
According to Dr. Koch, the KDV
process is capable of utilizing virtually any hydrocarbon-based waste stream to produce
synthetic diesel fuel. Depending on the particular feedstock, one KDV500 unit requires
approximately 5,760 to 13,200 tons of feedstock per year to produce approximately 1.2
million gallons of synthetic diesel fuel. We believe that the key commercial issue is
sourcing a reliable, consistent, long-term supply of waste feedstock for each project.
We have determined that municipal
solid waste ("
MSW
") is in abundant supply. Broadly defined, MSW may
include plastic, rubber, paper, cardboard and various food waste. It requires major
financial and logistical resources to collect, recycle and arrange final disposal.
Population growth and landfill constraints are placing greater financial and logistical
pressure on the waste management resources of municipalities. Therefore, environmentally
and fiscally acceptable waste-management practices are increasingly essential in order to
avoid damaging consequences, such as those due to toxic/hazardous waste, greenhouse-gas
emissions, water pollution, air pollution and noise/visual impact of recycling/waste
disposal facilities.
We are (i) aware of three primary
types of municipal waste treatment technologies that are currently used today:
incineration/gasification, (ii) chemical decomposition, and (iii) landfill burying. These
technologies have substantial negative economic and environmental impacts, particularly
from production of hazardous byproducts such as toxic ash, toxic water, and noxious air
emissions. Due to the harm they pose to the environment, it is expensive to dispose of
these hazardous by-products. We believe that until now efforts to produce energy or fuel
from MSW and landfills has been limited to two options: (i) burning MSW in waste-to-energy
plants to produce steam to generate electricity or heat for buildings; and (ii) capturing
methane from landfills. The KDV process offers another option, which we believe avoids the
by-products of existing treatment technologies and as a result should be more cost
effective.
In addition to MSW, we believe the
KDV process can be applied to:
—
refinery
residuals, such as petroleum coke, tar and paraffin, which cannot be used today, are
environmentally harmful and very expensive to neutralize
—
used
oil from engines, organic wastes, sewerage sludge and animal manures;
—
all
types of waste biomass such as corn stover, sugar cane bagasse and other types of plant
stalks and parts such as peal and husks that are left over after harvesting edible
grains, juices and oils; and
—
glycerin.
While we believe that the KDV process
can utilize a broad range of feedstocks as outlined above, we plan to focus on projects
where we are able to sign long term contracts for waste feedstocks for which we will be
paid a tipping fee. We have estimated that tipping fees for MSW and non-hazardous waste
average about $35 per ton in the US and $60 per ton in Europe.
20
Strategic Agreements
Alphakat GmbH Agreements
Our plan to set up a series of
worldwide waste-to-diesel production facilities is reflected by the terms of three
agreements with Dr. Koch's company Alphakat GmbH:
(1)
"Terms of agreement" between us and Alphakat GmbH, dated May 2, 2007,
               agreeing to incorporate an equally-owned subsidiary which would be granted
               certain exclusive rights with respect to the KDV technology;
(2)
"Shareholders' Agreement" between us and Alphakat GmbH, dated
               July 10, 2007, agreeing on the terms of operation of Alphakat-Global Energy GmbH
               and the scope of the rights with respect to the KDV technology granted to it;
               and
(3)
Incorporators' agreement and articles of Alphakat-Global Energy GmbH, dated
               October 8, 2007, by which we and Alphakat incorporate Alphakat-Global Energy
               GmbH as equal shareholders, and by which Alphakat granted Alphakat-Global Energy
               GmbH certain rights with respect to the KDV technology.
Under these three agreements,
Alphakat GmbH has granted Alphakat-Global Energy GmbH, the equally-owned subsidiary of
Alphakat GmbH and ourselves, the following rights:
(1)
The exclusive right to sell and market KDV500 units worldwide, subject to rights
               previously granted to third parties to sell the KDV units Bulgaria, Spain,
               Portugal, Italy, Mexico, and Canada, and to co-operate in establishing plants
               using the KDV technology in Spain and Mexico.
(2)
The exclusive right to sell and market KDV units based on turbines larger than
               350kW in the United States and China.
Business Development
Agreements
On February 6, 2008, each of Dr.
Koch, Alphakat GmbH, and Alphakat-Global Energy GmbH entered into agreements with Covanta
Energy Corp., a wholly owned subsidiary of Covanta Holding Corporation, an internationally
recognized owner and operator of waste-to-energy and power generation projects. Covanta
Holding's facilities convert municipal solid waste into renewable energy for numerous
communities, predominately in the United States. Under the terms of these agreements,
Covanta Energy Corp. has the exclusive right to purchase, use and make improvements to the
KDV technology in the United States for household waste feedstock, and non-exclusive
rights to use the technology in China, United Kingdom and the Republic of Ireland. In
accordance with the terms of this agreement, to preserve these rights, Covanta Energy
Corp. purchased a KDV500 unit though Alphakat-Global Energy GmbH on July 8, 2008, and will
begin its commissioning in the near future. Covanta Energy Corp. must try to complete
testing of the unit within the following six months. If Covanta Energy Corp.'s tests
are positive, and it wishes to proceed further with its deployment of the KDV technology,
then it must order five additional KDV500 units within twelve months of the commissioning
date of the first KDV500 unit. Over a ten-year period, which begins on the commissioning
date of the first unit, Covanta Energy Corp. must order a total of 600 KDV500 units or
equivalent limits in terms of production capacity.
Covanta Energy Corp. has also granted
us the right to fund and own up to 35% of each of Covanta Energy Corp.'s KDV-based
projects. In addition, Covanta Energy Corp. has agreed to pay us an amount equal to 10% of
the gross revenue of each of Covanta Energy Corp.'s KDV-based projects, regardless of
whether we invest in these projects or not.
21
On February 6, 2008, Alphakat-Global
Energy GmbH and American Renewable Diesel executed an agreement granting to American
Renewable Diesel the right to sell and use the KDV technology in five U.S. states: Texas,
California, New York, New Jersey and Florida. American Renewable Diesel is a special
purpose company owned and managed by Trianon Partners. Trianon Partners has extensive
international project development experience, has worked with Covanta Energy Corp. in
connection with various power projects, has facilitated the negotiation of the agreements
between Alphakat-Global Energy GmbH, us, and Covanta Energy Corp.
Similar to the business arrangement
with Covanta Energy Corp., we have the right to fund and own up to 51% of each of American
Renewable Diesel's KDV-based projects. Furthermore, under the terms of this
agreement, certain projects will be offered to Covanta Energy Corp. for development and we
will have the opportunity to receive royalties from such projects in accordance with our
agreement with Covanta Energy Corp.
Joint Venture Agreement
with S.C. Supercom S.A
On November 11, 2008, we entered into
a Joint Venture Agreement with S.C. Supercom S.A., a Romanian company engaged in the
business of collecting (and landfilling) municipal solid waste in and around the City of
Bucharest, and S.C. Target Group S.R.L., a Romanian company. Our company and Supercom have
agreed to incorporate a legal entity in Romania under the name "Super Energy
S.A.", to engage in converting municipal solid waste into synthetic diesel fuel in
Romania using the KDV technology.
The initial share capital of Super
Energy S.A. is to be 51% held by us and 49% held by Supercom, with each contributing 5% of
their shares to Target Group upon incorporation of Super Energy S.A. so that the share
capital of Super Energy S.A. would be held in the following manner: our company –
46%, Supercom – 44%, and Target Group – 10%. Initially, the board of directors
of Super Energy S.A. will comprise four board members, with each of Supercom and ourselves
entitled to appoint two.
In addition, we agreed that Supercom
would purchase the first KDV system and install it by no later than April 30, 2009, with
Supercom transferring it to Super Energy S.A. upon demonstration of the economic
feasibility of this system, 30 days of continuous operation, and production at 75%
efficiency, all at the same cost and terms to which Supercom agreed in the agreement.
Alphakat-Global Energy GmbH is to guarantee, together with Alphakat GmbH, the performance
of the installation to the established parameters, specifically, processing municipal
solid waste and generating 500 litres of synthetic diesel per hour.
All projects undertaken under this
agreement are to be financed by Supercom providing 100% of the required equity via a
special purpose vehicle, and Super Energy S.A. reimbursing Supercom for investments made
on its behalf.
Finally, we agreed that Super Energy
S.A. would distribute to its shareholders at least 25% of all annual net profits after tax
and after repayment of shareholder loans, in the form of dividends or otherwise.
Memorandums of
Understanding with Shaanxi ShenMu SanJian Coal Chemical Co. Ltd.
On March 9, 2008, we have entered
into a Memorandum of Understanding with Shaanxi ShenMu SanJian Coal Chemical Co. Ltd., a
company located in the People's Republic of China, involved in the field of
converting charcoal coal to oil and blue coal by pyrolysis.
22
Under the terms of this MOU, pending
completion of due diligence of the KDV technology, our company and Shaanxi plan to jointly
create a new subsidiary, in which we would 51% and Shaanxi would own 49% of the equity. If
Shaanxi is successful in bringing Sinopec Beijing Governmental Energy Company as an equity
partner, our interest in the new subsidiary would be 26%. The new entity would initially
build, own and operate a plant that will utilize the KDV technology to produce ten
thousand (10,000) liters of diesel per hour from tar oil. Shaanxi is a producer of blue
coal and generates significant quantities of tar oil as a byproduct. Shaanxi would provide
the new company with tar oil at a discount to the published market price for conversion
into high quality diesel fuel. This MOU provides for further development of the KDV
technology-based facilities after a successful trial run of the initial system. Under the
terms of the MOU, we would be entitled to royalties from the sale of diesel fuel produced
by this jointly owned subsidiary.
Completion of the transaction based
on this MOU is subject to due diligence and negotiation of final documentation.
Other Operations –
Production of Crude Castor Oil in Ethiopia
We have expensed approximately
$2,300,000 in the cultivation of castor plants in Southern Ethiopia. Our activities are
based in Sodo, Ethiopia and in the regions of Waletia and Goma Gofa, Ethiopia. We engaged
a large number of local independent farmers who use a portion of their existing land to
cultivate the castor seeds, or clear additional land, and trained these farmers on new
agricultural techniques. The local independent farmers seeded approximately 4,000 hectares
of land commencing in April, 2008. In the fourth quarter of 2008, the farmers harvested
several hundred tons of castor crop. In early 2009, we expect to purchase the crop from
the farmers and to sell it to different clients.
We have also implemented a research
and development program to achieve a new species of castor to improve future yields.
Pursuant to the amending and restating agreement with our senior secured lender dated
September 22, 2008, described in detail in the "
Financing Agreement
"
section of this prospectus beginning below, we have agreed to pay our senior secured
lender, towards the repayment of our debt, 50% of all cash flows generated by our
Ethiopian operations in excess of the first $700,000 of cash flow.
Financing Agreement
On July 10, 2007, October 23, 2007,
and December 27, 2007, we issued 10% secured convertible debentures to our senior secured
lender for gross proceeds of $3,000,000, as a part of a private placement of up to
$4,000,000 of debentures. These debentures are secured against all of our assets. Prior to
the amendment to the securities purchase agreement on March 20, 2008, described below,
these debentures were convertible by the lender into shares of our common stock at a fixed
conversion price of $2.20 per share. In conjunction with the placement of these debentures
with our senior secured lender, on July 10, 2007, we also issued to the lender warrants to
purchase 300,000 shares of common stock exercisable for five years at an exercise price of
$2.35 and warrants to purchase additional 300,000 shares of our common stock exercisable
for five years at an exercise price of $2.50.
On March 20, 2008, we entered into an
amendment to the securities purchase agreement with our senior secured lender that amended
the terms of the convertible debentures issued July 10, 2007, October 23, 2007, and
December 5, 2007, as follows:
(1)
the amount of convertible debentures we agreed to issue prior to a registration
               statement registering the shares of our common stock to be issued on conversion
               of the convertible debentures becoming effective was changed from $3,000,000 to
               $3,500,000;
(2)
conversion price was changed from $2.20 to $1.25 for all debentures held by the
               lender; and
(3)
exercise price was changed from $2.50 and $2.35 to $1.25 for all warrants issued
               to the lender.
23
All of the other provisions of the
securities purchase agreement, pursuant to which debentures were issued to the lender on
July 10, 2007, October 23, 2007, and December 5, 2007, remained in full force and effect.
On March 20, 2008 and May 13, 2008,
we issued two more 10% secured convertible debentures to our senior secured lender for
gross proceeds of $1,000,000. These debenture mature on October 31, 2010 and, prior to the
amending and restating agreement dated September 22, 2008, described below, were
convertible by the lender into shares of our common stock at a fixed conversion price of
$1.25 per share, subject to further adjustment as further set out in the debenture. These
debentures, as the three previously issued to the lender, are secured against all of our
assets.
Under the terms of the debenture
issued on May 13, 2008, amortizing payments of the outstanding principal amount of the
debenture and accrued interest at an annual rate equal to 10% were to commence on the
first business day on or after July 31, 2008, and were to continuing on the first business
day of each successive calendar month thereafter until the principal amount has been
repaid in full, whether by the payment of cash or by the conversion of the principal
amount and interest into Common Stock. Other terms of this debenture were the same as in
the debentures previously issued to our senior secured lender.
Effective July 15, 2008, we entered
into an amending agreement with our senior secured lender with respect to outstanding
secured convertible debentures in the aggregate principal amount of $4,000,000, and
warrants to purchase 600,000 shares of our common stock issued by our company to the
lender. The amendment allowed us to immediately defer certain principal and interest
payments due under these debentures. Specifically, under the terms of the July 15,
2008 amending agreement, interest payments accrued and due during the first three quarters
of the 2008 calendar year (approximately $267,000 as of July 31, 2008) were deferred
until approximately September 30, 2008. In addition, principal installments that
were due July 31, 2008 and August 31, 2008 were deferred until September 30, 2008, subject
to further deferment if certain conditions were met. In consideration of the
amendment, we agreed to issue to the lender 200,000 restricted shares of our common stock.
On September 22, 2008, prior to the
due date of the deferred principal and interest payments under the July 15, 2008 amending
agreement, which had not been paid to that date, we entered into an amending and restating
agreement with our senior secured lender on the following terms:
(1)
the lender agreed to defer payment of interest that had accrued on the
               $4,000,000 aggregate principal balance represented by the five secured
               convertible debentures held by it to a date as late as October 31, 2008, subject
               to further deferment, but only if we completed an offering of at least
               $1,500,000 in gross proceeds on or before October 31, 2008;
(2)
the lender agreed to defer payment of the principal installments that were due
               on July 31, August 31, and September 30, 2008 until October 31, 2008, subject to
               further deferment, but only if we completed an offering of at least $1,500,000
               in gross proceeds on or before October 31, 2008;
(3)
the rate of interest to be charged on the aggregate principal amount of
               $4,000,000 pursuant to the convertible debentures was increased from 10% to 12%;
               and
(4)
we agreed to issue 1,000,000 restricted shares of our common stock to the lender
               (in addition to the 200,000 shares issued under the July 15, 2008 amending
               agreement).
24
In addition, the amending and
restating agreement provides for the following, but only if (and when) we complete an
offering of at least $1,500,000 in gross proceeds on or before October 31, 2008:
(1)
we would make a payment in the amount of $180,000 for interest accrued and
               unpaid on the aggregate principal amount of $4,000,000, to be paid directly from
               the gross proceeds of the offering, and a payment of an additional amount equal
               to 10% of the gross proceeds from the offering if we raised gross proceeds of
               between $2,200,000 and $3,900,000;
(2)
we would make payments on account of the indebtedness represented by the
               convertible debentures in an amount equal to 50% of all cash flows generated by
               our Ethiopian subsidiary, Global Energy Pacific Limited, in excess of the first
               $700,000 in cash flow, to be paid on each installment payment date set out on
               the revised installment payment schedule described in paragraph (5) below;
(3)
we would reduce the conversion price of all secured convertible debentures
               issued and outstanding to the lender from $1.25 to $0.10 per share, in each case
               as already required by the terms of those secured convertible debentures;
(4)
we would reduce the exercise price of all warrants held by the lender from $1.25
               to $0.10 per share, and an increase in the number of shares of our common stock
               to be issued upon exercise of those warrants from 600,000 to 7,500,000 shares of
               our common stock, in each case as already required by the terms of those
               warrants; and
(5)
we would revise the repayment schedule for the debentures issued to the lender
               to provide for the following:
Installment Payment
Company Redemption Amount
Company Conversion Amount
November 2008
$0 + Variable Redemption Amount ("
VAR
")
(1)
$25,000
December 2008
$0 + VAR
(1)
$35,000
January 2009
$10,000 + VAR
(1)
$50,000
February 2009
$10,000 + VAR
(1)
$60,000
March 2009
$10,000 + VAR
(1)
$70,000
April 2009
$10,000 + VAR
(1)
$70,000
May 2009
$10,000 + VAR
(1)
$70,000
June 2009
$10,000 + VAR
(1)
$75,000
July 2009
$10,000 + VAR
(1)
$75,000
August 2009
$10,000 + VAR
(1)
$75,000
September 2009
$10,000 + VAR
(1)
$75,000
Each Month Thereafter
$225,000
(2)
(1)
Under
the terms of this amending and restating agreement, the variable           redemption
amount equals to 4% of the amount by which the total gross proceeds           raised in
the fall of 2008 private placement exceed $2,200,000.
(2)
This
amount may be paid at our discretion as a combination of company redemption           and
company conversion amounts in accordance with the terms of the debentures           held
by the lender.
On September 30, 2008, we closed the
first stage of a private placement, selling 30 units at a price of $50,000 per unit,
raising an aggregate of $1,500,000 in gross proceeds. Each unit consisted of 500,000
shares of our common stock and 500,000 share purchase warrants with an exercise price of
$0.10 per share, exercisable for a period of five years. Detailed information regarding
this private placement may be found in the section entitled "
The Private
Placement
" beginning on page 1.
25
As a result of our closing the first
franchise of the private placement the offering on September 30, 2008, the provisions of
this amending and restating agreement conditional on raising at least $1,500,000 in the
private placement, as set out above, became effective, including the reduction of the
exercise price and conversion price of the warrants and convertible debentures held by our
senior secured lender, respectively, to $0.10, and the increase of the number of shares of
our common stock to be issued upon exercise of those warrants from 600,000 to 7,500,000.
On November 4, 2008, we closed the
second stage of our private placement, selling 4 units at a price of $50,000 per unit,
raising an aggregate of $200,000 in gross proceeds. Under the terms of this amending and
restating agreement, based on the total gross proceeds of $1,700,000 raised in the private
placement, we became obligated to pay the following amounts:
(1)
$180,000 for interest accrued and unpaid on the aggregate principal amount of
               $4,000,000, to be paid directly from the gross proceeds of the private
               placement;
(2)
on account of the indebtedness represented by the debentures held by the lender,
               an amount equal to 50% of all cash flows generated by our Ethiopian operations
               in excess of the first $700,000 in cash flow, to be paid on each installment
               payment date set out above;
(3)
monthly installment payments as follows:
Installment Payment
Company Redemption Amount
Company Conversion Amount
November 2008
$0
(1)
$25,000
December 2008
$0
(1)
$35,000
January 2009
$10,000
(1)
$50,000
February 2009
$10,000
(1)
$60,000
March 2009
$10,000
(1)
$70,000
April 2009
$10,000
(1)
$70,000
May 2009
$10,000
(1)
$70,000
June 2009
$10,000
(1)
$75,000
July 2009
$10,000
(1)
$75,000
August 2009
$10,000
(1)
$75,000
September 2009
$10,000
(1)
$75,000
Each Month Thereafter
$225,000
(2)
(1)
Because
the total gross proceeds raised in the private placement were           $1,700,000, the
variable redemption amount, which under the terms of the           amending and restating
agreement equals 4% of the amount of gross proceeds           raised in the private
placement that exceed $2,200,000, is $0.
(2)
This
amount may be paid at our discretion as a combination of the company           redemption
and company conversion amounts in accordance with the terms of the           debentures
held by the lender.
As of December 31, 2008, we are not
in material breach of any of our obligations under this amending and restating agreement.
Where You Can Find More
Information
We have filed with the Securities and
Exchange Commission a registration statement on Form S-1 under the
Securities Act of
1933
, as amended, with respect to the shares offered hereby. This prospectus, which is
part of the registration statement, does not contain all of the information in the
registration statement. Certain items of the registration statement are contained in
exhibits and schedules as permitted by the rules and regulations of the Securities and
Exchange Commission. Statements made in this prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete; you should
read any such contract, agreement or other document filed as an exhibit to the
registration statement for a more complete description of the matter involved.
26
We are subject to the informational
requirements of the
Securities and Exchange Act of 1934
, as amended, and file
reports and other information with the Securities and Exchange Commission. Reports and
other information which we file with the Securities and Exchange Commission, including the
registration statement on Form S-1 of which this prospectus is a part, may be
inspected and copied at the public reference facilities of the Securities and Exchange
Commission at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information
regarding the operation of the public reference room by calling the Securities and
Exchange Commission at 1-800-SEC-0330. In addition, the Securities and Exchange Commission
maintains a web site that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the Securities and Exchange
Commission at http://www.sec.gov. Our Internet address is http://www.global-nrg.biz.
Information contained in our website does not constitute a part of this prospectus.
Legal Proceedings
As of January 5, 2009, we know of no
material, existing or pending legal proceedings against us, nor are we involved as a
plaintiff in any material proceeding or pending litigation. There are no proceedings in
which any of our directors, executive officers or affiliates, or any registered or
beneficial shareholder, is an adverse party or has a material interest adverse to our
interest.
Market Price of and
Dividends on the Registrant's Common Equity and Related Shareholder Matters
Market Information
Our stock is listed for quotation on the
OTC Bulletin Board under the symbol "GEYI.OB". Trading in our common stock has
occurred on a relatively inconsistent basis and the volume of shares traded has been
limited.
The following table sets forth, for
the periods indicated, the high and low bid information for each quarter within the last
two fiscal years ended December 31, 2007, and each subsequent interim period as reported
by the quotation service operated by the OTC Bulletin Board. All quotations for the OTC
Bulletin Board reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
Quarter Ended
Bid High
Bid Low
09/30/2008
$0.55
$0.10
06/30/2008
$0.72
$0.40
03/31/2008
$0.80
$0.30
12/31/2007
$0.99
$0.25
09/30/2007
$1.75
$0.25
06/30/2007
$2.00
$0
03/31/2007
$0
$0
12/31/2006
$0
$0
09/30/2006
$0
$0
06/30/2006
$0
$0
03/31/2006
$0
$0
On December 31, 2008, the closing
price for our common stock as reported by the OTC Bulletin Board was $0.07.
27
Holders
As of January 5, 2009, there were
81,387,764 shares of our common stock issued and outstanding, held by 78 shareholders
of record, and 76,931,436 shares of our common stock were purchasable pursuant to
outstanding options and warrants, including the 18,700,000 shares that may be issued to 30
investors and a placement agent pursuant to warrants issued to them in a private placement
that closed in two tranches on September 30 and November 4, 2008, respectively.
As of January 5, 2009, the total
authorized capital of our common stock is 250,000,000 shares. On November 4, our
controlling shareholder approved an amendment to our articles of incorporation increasing
the authorized share capital to 750,000,000. The amendment will take effect in January,
2009 when we will file a certificate of amendment with the Nevada Secretary of State.
The transfer agent and registrar for
our common stock is Worldwide Stock Transfer, LLC, 885 Queen Anne Road, Teaneck, NJ, USA
07666, telephone: (201) 357-8650, and fax: (201) 357-8648.
Dividends
Since our inception, we have not
declared nor paid any cash dividends on our capital stock and we do not anticipate paying
any cash dividends in the foreseeable future. Our current policy is to retain any earnings
in order to finance the expansion of our operations. Our board of directors will determine
future declarations and payments of dividends, if any, in light of the then-current
conditions they deem relevant and in accordance with applicable corporate law.
There are no restrictions in our
articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada
Revised Statutes, however, do prohibit us from declaring dividends where, after giving
effect to the distribution of the dividend:
(1)
we
would not be able to pay our debts as they become due in the usual course of
          business; or
(2)
our
total assets would be less than the sum of our total liabilities plus the
          amount that would be needed to satisfy the rights of shareholders who have
          preferential rights superior to those receiving the distribution.
Management's
Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read
in conjunction with our audited and un-audited financial statements and the related notes
that appear elsewhere in this registration statement and prospectus. The following
discussion contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results could differ materially from those discussed in the forward
looking statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed below and elsewhere in this registration statement
and prospectus, particularly in the section entitled "
Risk Factors
"
beginning on page 3.
Our audited and unaudited financial
statements are stated in United States dollars ($) and are prepared in accordance with
United States Generally Accepted Accounting Principles.
28
Critical Accounting
Policies
Going concern
considerations
As of September 30, 2008, we had
negative working capital of $3,228,000 and an accumulated capital deficiency of
approximately $1,928,000. Our ability to continue to operate as a going concern is
dependent on our ability to generate sufficient cash flows to meet our obligations on a
timely basis, to obtain additional financing and to ultimately attain profitability. As of
September 30, 2008, we have had no revenues and have incurred losses and an accumulated
deficit resulting from our activity as a development stage company and have a negative
cash flow from operating activities. In the event we are unable to successfully raise
capital and generate revenues, it is unlikely that we will have sufficient cash flows and
liquidity to finance our business operations as currently contemplated.
There can be no assurance that
additional funds will be available on terms acceptable to us, or at all. These conditions
raise substantial doubt about our ability to continue to operate as a going concern. The
audited and unaudited financial statements attached to this prospectus do not include any
adjustments to reflect the possible future effect on the recoverability and classification
of assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty. We are also currently committed to loan repayment of
$2,225,000 during the period between the December 31, 2008 and December 2009, as described
in detail in the "
Financing Agreement
" section of this prospectus
beginning on page 23.
Derivative financial
instruments
We have adopted FAS 133, as amended,
which establishes accounting and reporting standards for derivatives, including certain
derivatives embedded in other contracts, and for hedging activities. Under FAS 133, all
derivatives are recognized on the balance sheet at their fair value. On the date that our
company enters into a derivative contract, it designates the derivative, for accounting
purposes, as: (1) hedging instrument, or (2) non-hedging instrument. Any changes in fair
value are to be reflected as current gains or losses or other comprehensive gains or
losses, depending upon whether the derivative is designated as a hedge and what type of
hedging relationship exists. Changes in fair value of non-hedging instruments are carried
to "financial expenses-net" on a current basis.
Liquidity and Capital
Resources
In the private placement offering of
our common stock that closed on September 30, 2008 and November 4, 2008, we sold 34 units
for an aggregate purchase price of $1,700,000, each unit comprising 500,000 shares of our
common stock and 500,000 share purchase warrants. As of September 30, 2008, our cash and
cash equivalents were $1,119,000 compared to $ $1,470,000 as of December 31, 2007, and we
had a negative working capital of $3,228,000.
As of September 30, 2008, our cash
and cash equivalents were $1,119,000 compared to $1,470,000 as of December 31, 2007, and
we had a negative working capital of $3,228,000.
As described in the
"
Financing Agreement
" section of this prospectus beginning on page 23, we
have committed to an installment payment schedule that requires us to make monthly
payments on our outstanding debt to our senior secured lender. These payments increase on
a monthly basis, ranging from $25,000 in November 2008 to 225,000 in October 2009, and
every month thereafter. Pursuant to this installment payment schedule and other loans
received from related parties and shareholders, we are committed to payments of $2,225,000
during the period between the December 31, 2008 and December 2009.
Furthermore, we are expecting to
continue to expend cash in our activities through payments of salaries, business
development activities, payments for services and other costs. We also plan to continue to
finance our operations through a combination of private placements, stock issuances, debt
issuances, mutual development agreements with possible milestone license payments and
research and development programs. We cannot assure, however, that we will be successful
in obtaining the adequate level of financing required for the long-term development and
commercialization of our planned products.
29
Results of Operations For
the Year to September 30, 2008
We initiated our activities during
the last six months of 2007, focusing our effort on building an infrastructure that would
support our future activities in the alternative energy field. We did not generate any
revenues in the nine month period ended September 30, 2008 and incurred a loss of
$2,768,000 during that period.
Off-Balance Sheet
Arrangements
We do not currently have off-balance
sheet arrangements.
Plan of Operation
For the 12 months ending in December
2009, we estimate expending a total of approximately $6,850,000 million for our proposed
business activities. This amount includes the funds required to finance our marketing
activities, purchase KDV units, pay salaries of over employees, office and maintenance
costs, pay cost of cultivation, among others, in order to execute our plan of operations.
The following table provides our current estimate of the break down of costs for the
upcoming year of operations.
Estimated Funding Required During the Next 12 Months
G&A Salaries
$350,000
Other Operations
$2,000,000
Industrial Expenses
$3,500,000
Total
$6,850,000
Change of Principal
Accountant
On August 1
,
2007, we decided
to engage new auditors as our independent accountants to audit our financial statements.
Our board of directors approved the change of accountants to Kesselman & Kesselman
PricewaterhouseCoopers Israel ("PwC Israel"). Accordingly, we dismissed Vellmer
& Chang, Chartered Accountants (now Chang Lee LLP Chartered Accountants), on August
1
,
2007.
During our most recent fiscal year,
and any subsequent interim periods preceding the change in accountants, there were no
disagreements with Vellmer & Chang on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope procedure. The report on the
financial statements prepared by Vellmer & Chang, for the last fiscal year did not
contain an adverse opinion or a disclaimer of opinion, nor was it qualified or modified as
to uncertainty, audit scope or accounting principals except that Vellmer & Chang,
expressed in their report substantial doubt about our ability to continue as a going
concern.
A letter from Vellmer & Chang
confirming the above statement was provided to the Securities and Exchange Commission on
August 1, 2007.
We have engaged PwC Israel as of
August 1, 2007. PwC Israel was not consulted on any matter relating to accounting
principles to a specific transaction, either completed or proposed, or the type of audit
opinion that might be rendered on our financial statements.
30
Company Management
Executive Officers,
Directors and Key Employees
The following table sets forth
information regarding our directors, executive officers and key employees, including their
ages as of January 5, 2009.
Name
Age
Position
Appointment Date
(1)
Asi Shalgi
54
President, Chief Executive Officer, Secretary, and Director
April 5, 2007
Alex Werber
53
Treasurer and Chief Financial Officer
May 6, 2007
Avner Raanan
(2)
58
Director
December 6, 2007
Amir Elbaz
(3)
32
Director
September 24, 2008
Nissan Caspi
(4)
51
Director
September 24, 2008
Hezy Ram
(5)
59
Director
October 2008
Yanai Man
49
Chief Executive Officer of Global N.R.G. Pacific
Chief
        Executive Officer of Global Energy Ethiopia
June 6, 2007
October 1, 2007
(1)
Our
directors are elected for an indeterminate term.
(2)
Member
of the Audit Committee.
(3)
Chair
of the Compensation Committee and member of the Audit Committee.
(4)
Chair
of the Audit Committee
(5)
Member
of the Compensation Committee.
Asi Shalgi
Mr.
          Shalgi has served as our President, Chief Executive Officer and director since
          April 2007. He has more than 20 years of experience and involvement in the
          private and public sector. He has served as general manager and director for
          industrial and agriculture companies with significant export activities. He was
          the Director General of the Israeli Ministry of Energy and Infrastructure.
          During his term with the Ministry, he was involved in the peace treaty
          negotiations with Jordan on the energy annex. He was responsible for new
          legislation regarding electricity in Israel that allowed involvement of
          Independent Power Producers and implementation of the Public Utility Authority
          that regulates the energy sector and prices in Israel. He has been involved in
          the power and water sector, mainly in developing and financing IPP projects.
          This experience has included developing, financing, building and operating the
          first private power plant in Israel, and the first private water desalination
          plant in Israel. He served in the Israeli Defence Forces and retired as a
          Lieutenant Colonel. Mr. Shalgi received an Engineering degree for industrial and
          management from the Tel Aviv University.
Alex Werber
Mr.
          Werber has served as our Treasurer and Chief Financial Officer since May 2007.
          He is a certified public accountant with over 15 years of financial management
          experience in private and public companies. He has served as controller and
          chief financial officer for several public companies since 1983. During the past
          decade, he specialized in the hi-tech sector, serving in managerial positions
          including controller, VP Finance, and Chief Financial Officer. He received a
          B.A. in Economics and Accounting from Tel Aviv University, where he completed
          post-graduate studies in Accounting.
Avner Raanan
Mr.
          Raanan has served as our director since December 2007. He has vast technical and
          managerial experience in venture capital investments, business consulting,
          managing multi-million dollar projects, developing airborne electronic warfare
          systems and air to air missiles. Mr. Raanan founded Avnan Enterprises Ltd., an
          investment company that invests in early stage start-up companies. Mr. Raanan is
          currently a Ph.D. candidate at Bar-Ilan University, Israel. He received an M.Sc.
          in Business Administration and a B.Sc. in Electronic and Computer Engineering
          from the Ben-Gurion University in Israel.
31
Nissan Caspi
Mr.
          Nissan Caspi has served as our director since September 24, 2008. He has
          considerable experience in the public infrastructure projects sector and is an
          expert in the analysis and financing of infrastructure projects. Mr. Caspi
          owns his own accounting firm, Caspi Ben David and Co. CPA (Israel), and is
          currently Co-CEO of Eco Capital Ltd., an entity which he founded, and which
          develops independent power and water projects in Israel. Mr. Caspi was the CFO
          of Veolia Israel (formerly Vivendi), and also held a number of positions in
          various projects and companies owned by Veolia. In 2001-2002, he led the
          financing of VID Desalination Ltd., the largest Israeli sea water desalination
          project, which produces 100,000,000 cubic meters of fresh water per year. In
          2005, this project has received an award for the most successful BOT project in
          the world from the Association for Infrastructure Projects. Mr. Caspi was also
          formerly Chairman of INFRA (Insurance Fund for Natural Risks in Agriculture), an
          Israeli government-backed entity. Mr. Caspi was also a former head of the
          accounting department and accounting lecturer at the Hebrew University of
          Jerusalem. Mr. Caspi holds an MBA from the Hebrew University of Jerusalem, a
          B.A. degree in accounting and economics from the Hebrew University of Jerusalem,
          and a he is a CPA (Israel).
Hezy Ram
Hezy Ram has served as our director
since October 6, 2008. Mr. Ram is the founder of Ram Power Inc., a California based
company engaged in developing cutting-edge geothermal and solar thermal solutions. Prior
to founding Ram Power Inc., Mr. Ram led the North American Business Development Department
of Ormat Technologies, a global player in the development, manufacturing, marketing and
financing of innovative power systems. In this position, Mr. Ram was instrumental in
creating shareholder value of approximately $26 billion. While at Ormat, Mr. Ram initiated
and executed the aggressive North American acquisitions of geothermal plants which
provided the base for Ormat growth in this decade. Additionally, he was involved with
various financings at Ormat in the aggregate amount of almost a billion dollars and was
instrumental in the negotiation of power purchase agreements with some of the leading
electric utilities in North America. Mr. Ram earned a B.Sc. in Mechanical Engineering from
Ben-Gurion University, Israel in 1975, his MS in Mechanical Engineering from Ben Gurion
University in 1977, and his MBA from the Hebrew University in 1978.
Amir
Elbaz
Amir Elbaz has served as our director
since September 22, 2008. He specializes in corporate financing and strategic planning for
private and public companies. Mr. Elbaz has served as the Executive VP, CFO and director
of Lithium Technology Corporation since October 11, 2006. At Lithium Technology
Corporation, Mr. Elbaz oversees its finances, reporting and the planning of its business
ventures. Previously, Mr. Elbaz served as a director of Prime Capital Investments, BV, a
Dutch venture firm, where he played an active role in the management and business
development of two of its portfolio companies. Mr. Elbaz also served as VP of Corporate
Finance at Cornell Capital Partners, LP, where he sourced, structured and managed
investments in more than a dozen public and private companies. Prior to joining Cornell
Capital, Mr. Elbaz served for several years as an analyst with the Economic Department in
the Procurement Mission of the Israeli Ministry of Defence in New York. In that capacity,
Mr. Elbaz co-headed multi-million dollar negotiations with first tier technology companies
and was in charge of the financial aspects of the day-to-day operations. Mr. Elbaz holds a
B.A. from the University of Haifa, Israel, and an MBA in Finance & Investments from
Bernard Baruch College, CUNY, New York.
32
Yanai Man
Mr.
          Man has served as the Chief Executive Officer of Global N.R.G. Pacific Ltd.
          since June 6, 2007 and of Global Energy Ethiopia Corp. since October 1, 2007
          (both companies are our subsidiaries). Prior to that, Mr. Man served as the CEO
          of Ocean Rock Corporation, a factory located in the Dominican Republic, which
          produces fine jewelry (diamonds, platinum and gold), and is a subsidiary of Paul
          Winston Jewelry Ltd., New York. In 1997-2003, he founded and served as the CEO
          of Phytech Technologies Ltd, during which time he established three subsidiary
          companies that dealt with high-tech, mid-tech, and turnkey projects. He has
          founded and served as the CEO of Pollinating Service Yad-Mordechai, Environment
          Acoustic – USA and Apiary Yad Mordechai (Michvarot Yad Mordechai). He
          served in the IDF and retired at the rank of Major.
Consultants
We conduct, and intend to continue to
conduct, some of our business through agreements with consultants.
Executive Compensation
Compensation Discussion
and Analysis
Effective May 6, 2007, we appointed
Alex Werber as our new Treasurer and Chief Financial Officer and entered into an
employment agreement, pursuant to which it was agreed that Mr. Werber should be employed
on a part-time basis and paid a monthly salary, payable immediately upon receipt of his
invoice, at a gross monthly rate of $2,500, to be paid in NIS translated pursuant to the
official representative rate of exchange of the $USD as published by the Bank of Israel on
the payment date. Under the employment agreement, we agreed to open and maintain a study
fund for Mr. Weber. We agreed to contribute to the fund an amount equal to 7.5% of each
monthly salary payment up to the maximum amount recognized for tax benefits purposes, and
Mr. Werber agreed to contribute to the fund an amount equal to 2.5% of each monthly salary
payment up to the maximum amount recognized for tax purposes pursuant. In addition, we
agreed to provide Mr. Werber (including his heirs, executors and administrators) with
coverage under a standard directors' and officers' liability insurance policy at
our expense.
On December 1, 2007, Mr.
Werber's employment agreement was amended, pursuant to which his salary was increased
to a gross monthly salary of $5,000. All other terms of the employment agreement remain
unchanged and in full force and effect.
On April 30, 2007, we appointed Asi
Shalgi as our new President and CEO and entered into an employment agreement with him.
Under the terms of this agreement, Mr. Shalgi is being paid a monthly base salary of
$10,000. In addition, on April 30, 2007, we granted to Mr. Shalgi 5,055,021 stock options,
exercisable within the next ten years, at an exercise price of $0.01 per share. Mr. Shalgi
has also been appointed to our board of directors, as is described in more detail below in
the "
Compensation of Directors
" section beginning on page 35.
On November 2, 2007, we appointed
Yehuda Eliraz and Yair Aloni to serve on our board of directors. On November 20, 2007, Mr.
Eliraz resigned from our board of directors. Mr. Aloni resigned from our board of
directors effective September 25, 2008. Our directors are entitled to compensation in
accordance with our director compensation policy described in the "
Compensation of
Directors
" section beginning on page 35.
On November 21, 2007, we appointed
Yossi Raz as our new VP for Project Development and Chief Technology Officer and entered
into an employment agreement with him effective November 1, 2007. Mr. Raz resigned from
his position on November 1, 2008. Mr. Raz was a key employee of our company. Under the
terms of the employment agreement, the total monthly cost incurred by our company in
connection with the employment of Mr. Raz was $15,000.
33
In addition, pursuant to an amendment
to the employment agreement effective January 31, 2008, we issued Mr. Raz options to
purchase 1,150,000 shares of our common stock at an exercise price of $2.20 per share to
vest at the rate of 25% per year, beginning on January 11, 2008, and in each of the three
years thereafter, provided that he continues to be employed by us at the applicable date
of vesting. We issued the options to Mr. Raz, a non-U.S. person (as that term is defined
in Regulation S of the
Securities Act of 1933
), in an offshore transaction relying
on Regulation S and/or Section 4(2) of the
Securities Act of 1933
, as amended.
Pursuant to an employment agreement
dated May 7, 2007, we engaged Mr. Yanai Man to be the CEO of our Global N.R.G. Pacific
subsidiary. Under the terms of the employment agreement, Mr. Man is paid a monthly salary
of NIS45,000 and an annual performance-based bonus not to exceed four times his gross
salary. We agreed to contribute an amount equivalent to 13.33% of Mr. Man's gross
monthly salary to a managers insurance policy. We also agreed to open and maintain a study
fund, to which we would contribute an amount equal to 7.5% of each monthly salary payment
up to the maximum amount recognized for tax benefit purposes, and Mr. Man agreed to
contribute an amount equal to 2.5% of each monthly salary payment up to the maximum amount
recognized for tax purposes.
The table set forth below summarizes
the annual and long-term compensation for services payable to our executive officers
during the fiscal years ended December 31, 2008, 2007 and 2006.
SUMMARY COMPENSATION TABLE
Name And
Principal
Position
Year
Salary
($)
Bonus
($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive
Plan
Compensation
($)
Nonqualified
Deferred
Compensation
Earnings
($)
All other
Compensation
($)
Total
($)
Asi Shalgi
President, CEO, and
Director
2008
147,394
Nil
Nil
17,903
(2)
Nil
Nil
Nil
165,297
2007
115,259
(1)
Nil
Nil
17,552
(2)
Nil
Nil
Nil
132,811
2006
-
-
-
-
-
-
-
-
Alex Werber
Treasurer and CFO
(3)
2008
78,000
Nil
Nil
Nil
Nil
Nil
Nil
78,000
2007
30,000
Nil
Nil
Nil
Nil
Nil
Nil
30,000
2006
-
-
-
-
-
-
-
-
Christopher Kape
Former President, CEO, CFO, Secretary and Director
(4)
2008
-
-
-
-
-
-
-
-
2007
63,195
Nil
Nil
Nil
Nil
Nil
Nil
63,195
2006
Nil
Nil
Nil
Nil
Nil
Nil
19,080
(5)
19,080
Yossi Raz
VP for Project Development and CTO
2008
168,427
Nil
Nil
Nil
Nil
Nil
20,302
(7)
188,729
2007
108,667
(6)
Nil
Nil
Nil
Nil
Nil
Nil
108,667
2006
-
-
-
-
-
-
-
-
Yanai Man,
CEO of Global N.R.G. Pacific Lt. and Global Energy Ethiopia
2008
145,000
Nil
Nil
Nil
Nil
Nil
Nil
145,000
2007
88,865
Nil
Nil
Nil
Nil
Nil
Nil
88,865
2006
-
-
-
-
-
-
-
-
(1)
Including social benefits. Mr. Shalgi did not receive any compensation as a
          director of our company.
34
(2)
5,055,021 options were issued to Mr. Shalgi on April 30, 2007. The monetary
          value of these options is computed in accordance with U.S. Generally Accepted
          Accounting Principles. These options did not begin vesting until April 30, 2008.
(3)
Mr. Werber was appointed as our treasurer and CFO effective May 6, 2007.
(4)
Elected as director and appointed as President, CEO, Secretary and Treasurer on
          April 5, 2005. Resigned as the President on April 30, 2007, as the treasurer and
          CFO on May 6, 2007, and as a director on November 5, 2007.
(5)
Paid to Jamco Capital Partners Inc., a private company owned by Mr. Kape, for
          office, secretarial and accounting services.
(6)
Mr. Raz was appointed as VP for Project Development and CTO on November 1, 2007.
          Mr. Raz resigned from these positions on November 1, 2008.
(7)
Mr. Raz received $20,302 as a success fee.
Outstanding Equity Awards
at the End of Fiscal Year Ended December 31, 2008
OPTION AWARDS
STOCK AWARDS
Name
Number of Securities Underlying Unexercised Options (#) Exercisable
Number of Securities Underlying Unexercised Options (#) Unexercisable
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)
Option Exercise Price ($)
Option Expiration Date
Number of Shares or Units of Stock That Have Not Vested ($)
Market Value of Shares or Units of Stock That Have Not Vested ($)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#)
Asi Shalgi
(1)
President, CEO and Director
1,263,755
3,791,266
Nil
$0.01
April 30, 2017
Nil
Nil
Nil
Nil
Alex Werber
Treasurer and CFO
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Yossi Raz
VP for Project Development and CTO
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Yanai Man,
CEO of Global N.R.G. Pacific Lt. and Global Energy Ethiopia
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
(1)
Mr. Shalgi was
granted 5,055,021 stock options on April 30, 2007 to vest at a rate of 25% per year
beginning April 30, 2008. The options have an exercise price of $0.01 and expire on
April 30, 2017. The grant date fair value of the common shares underlying the options
granted on April 30, 2007 was $0.01.
Compensation of Directors
On November 2, 2007, we adopted a
director compensation policy for all directors pursuant to which we:
(1)
authorized the issuance to each of our directors of 200,000 options at an
               exercise price of $0.56 per share, and
(2)
agreed to pay a fee of US$750 per meeting for each quarterly board meeting
               attended, and a fee of US$600 per month for all other meetings attended or
               consented to in writing by the entire board of directors.
35
On November 18, 2007, the
compensation policy was amended such that each director would be authorized to receive
350,000 options at an exercise price of $2.20 per share, rather than 200,000 options at an
exercise price of $0.56 per share. On January 31, 2008, the director compensation policy
was further amended to provide for payment of $1,000 per month to each director as
compensation, rather than a fee of $750 per meeting.
On November 2, 2007, we elected
Yehuda Eliraz and Yair Aloni to serve on our board of directors. On November 20, 2007, Mr.
Eliraz resigned from our board of directors. Effective September 25, 2008, Mr. Aloni
resigned from our board of directors.
On December 6, 2007, we appointed
Josef Neuhaus and Avner Raanan to our board of directors. On January 31, 2008, pursuant to
the director compensation policy, we issued to each of Josef Neuhaus, Yair Aloni, and
Avner Raanan options to purchase 350,000 shares of our common stock at an exercise price
of $2.20 per share. The stock options were issued in accordance with the terms of the
share option plan adopted in May 2007. Mr. Raanan's options are exercisable until
December 6, 2017. Mr. Aloni resigned as a director effective September 25, 2008 and Mr.
Neuhaus resigned as director effective September 22, 2008. Their options terminated on
their respective dates of resignation.
We issued the stock options to
Messrs. Neuhaus, Aloni and Raanan, who are non-U.S. persons (as that term is defined in
Regulation S of the
Securities Act of 1933
), in an offshore transaction relying on
Regulation S and/or Section 4(2) of the
Securities Act of 1933
, as amended.
Director Compensation for the Fiscal Year Ended December 31, 2008
Name
Fees Earned or Paid in Cash ($)
Stock Awards ($)
Option Awards ($)
Non-Equity Incentive Plan Compensation
($)
Change in Pension
Value and Non-Qualified
Deferred Compensation Earnings ($)
All Other Compensation
($)
Total ($)
Josef Neuhaus
9,000
Nil
Nil
(1)
Nil
Nil
Nil
9,000
Avner Raanan
12,000
Nil
11,704
(2)
Nil
Nil
Nil
23,704
Yair Aloni
9,000
Nil
Nil
(3)
Nil
Nil
Nil
9,000
Hezy Ram
3,000
Nil
Nil
Nil
Nil
Nil
3,000
Amir Elbaz
3,000
Nil
Nil
Nil
Nil
Nil
3,000
Nissan Caspi
3,000
Nil
Nil
Nil
Nil
Nil
3,000
(1)
350,000 options were granted on January 31, 2008 and were to begin vesting on
          December 6, 2008. Mr. Neuhaus resigned from our board of directors effective
          September 22, 2008 and his unvested options terminated on that date.
(2)
350,000 options were
granted on January 31, 2008 and began vesting on December 6, 2008. The options have an
exercise price of $2.20 per share and expire on December 6, 2017. The grant date fair
value of the common shares underlying the options granted on January 31, 2008 was
$0.55 per common share.
(3)
350,000 options were granted on January 31, 2008 and were to begin vesting on
          November 18, 2008. Mr. Aloni resigned from our board of directors effective
          September 25, 2008 and his unvested options terminated on that date.
Compensation Committee
Interlocks and Insider Participation
During the fiscal year ended December
31, 2007, our compensation committee comprised the following members:
(1)
Yair
Aloni, director, as the Chairman of the committee; and
(2)
Avner
Ranaan, director, as a member of the committee.
36
Security Ownership of
Certain Beneficial Owners and Management
The table below discloses information
regarding shares of our common stock beneficially owned by any person who owns more than
5% of such shares, and by our directors and executive officers as of January 5, 2009.
The determination of beneficial
ownership in the following table was made in accordance with Rule 13d-3 of the
Securities Exchange Act of 1934
, as amended, based on information provided to us by
our controlling shareholder, executive officers, and directors, and this information does
not necessarily indicate beneficial ownership for any other purpose. In determining the
number of shares of our common stock beneficially owned by a person and the percentage
ownership of that person, we include any shares as to which the person has sole or shared
voting power or investment power, as well as any shares subject to warrants or options
held by that person that are currently exercisable or exercisable within 60 days after
January 5, 2009.
Name and Address of Beneficial Owner of Shares of our Common Stock
Amount and nature of beneficial ownership
(1)
Percent of class
(2)
(%)
Carrigain Investment Ltd.
(3)
Jasmine Court, Regent Street
Belize City, Belize.
42,000,000
51.6
YA Global Investments L.P.
101 Hudson Street, Suite 3700, Jersey City, NJ 07302, United States
8,700,000
(4)
9.79
Asi Shalgi
President, CEO, Secretary, and Director
1,263,755
(5)
1.53
Alex Werber
Treasurer and CFO
Nil
Nil
Avner Raanan
Director
87,500
(6)
0.11
Amir Elbaz
Director
Nil
(7)
Nil
Nissan Caspi
Director
Nil
(8)
Nil
Hezy Ram
Director
Nil
(9)
Nil
Yanai Man
CEO of Global N.R.G. Pacific and Global Energy Ethiopia
Nil
Nil
Directors and Executive Officers as a Group
1,351,255
1.64
(1)
Beneficial
ownership is determined in accordance with Rule 13d-3 under the           Exchange Act of
1934 and generally includes voting or investment power with           respect to
securities and any rights under which a holder be issued securities           within 60
days of the date of this registration statement. Except as otherwise           indicated,
we believe that the beneficial owners of shares of our common stock           listed
above, based on information furnished by such owners, have sole           investment and
voting power with respect to such shares, subject to community           property laws
where applicable.
(2)
Applicable
percentages are based on 81,387,764 shares of common stock           outstanding on
January 5, 2009, calculated taking into account the holder's           options
exercisable within 60 days of the date of this registration statement.
(3)
Carrigain
Investment Ltd. is controlled jointly by Ariel Malik and Zeev Bronfeld           each
holding 50% of its common shares. Effectively, therefore, each of Mr. Malik           and
Mr. Bronfeld beneficially owns 25.8% of our common stock.
(4)
Comprises
200,000 shares issued to YA Global Investments, L.P. under the           amending
agreement dated July 15, 2008; 1,000,000 shares issued to YA Global           under the
amending and restating agreement dated September 22, 2008; and           warrants to
purchase 7,500,000 shares at an exercise price of $0.10, as agreed           between us
and YA Global under the amending and restating agreement dated           September 22,
2008.
(5)
Mr.
Shalgi was granted 5,055,021 options on April 30, 2007, to be vested in him           at
rate of 25% per year beginning on April 30, 2008. As of the date of this
          registration statement, 1,263,755 of these options have vested in Mr. Shalgi
but           none have been exercised.
(6)
Mr.
Raanan was granted 350,000 options on January 31, 2008, to vest at the rate           of
25% per year beginning on December 6, 2008. As of January 5, 2009, 87,500 of
          these options have vested but none have been exercised.
(7)
None
of the 226,415 shares granted to Mr. Elbaz on May 22, 2008 are exercisable
          within 60 days of this registration statement.
(8)
None
of the 650,000 shares granted to Mr. Caspi on November 9, 2008 are           exercisable
within 60 days of this registration statement.
(9)
None
of the 650,000 shares granted to Mr. Ram on November 9, 2008 are           exercisable
within 60 days of this registration statement.
Transactions with
Related Persons, Promoters and Certain Control Persons
Transactions with Related
Persons
On May 15, 2007, our directors approved
a share option plan, authorizing the issue of a total of 8,500,000 shares of our common
stock. Information regarding compensation contracts with our directors and officers,
including the grant of options under the share option plan, is described above in the
section "
Executive Compensation
" beginning on page 33 of this prospectus.
During the year ended December 31,
2007, we paid approximately $40,000
for accounting and administrative services
performed by a company controlled by our former president. During the comparable period in
2006, no such fees were paid. As of December 31, 2007, no amounts were due and payable in
respect of such accounting and administrative services.
During the year ended December 31,
2006, we were charged $19,144 for accounting and administration fees. These fees were paid
to Jamco Capital Partners Inc., a company controlled by our former president, Mr.
Christopher Kape. As of December 31, 2007, no amount remained unpaid for past fees and
disbursements incurred on behalf of our company.
YA Global Investments, L.P. is a
related person of our company because it is beneficial owner of over 5% of our common
stock, as described in the section "
Security Ownership of Certain Beneficial
Owners and Management
" beginning on page 37 of this prospectus. It is also our
senior secured lender, it is also our senior secured lender. Over the past year, we have
entered into two transactions with YA Global, which are described in detail in the section
"
Financing Agreement
" beginning on page 23 of this prospectus.
38
Transactions with our
Controlling Shareholder
On February 7, 2007, we issued
12,000,000 shares to our controlling shareholder, Carrigain Investment Ltd. At the time of
this issue, this comprised approximately 52.14% of our total issued and outstanding
shares. We are informed that Carrigain Investment Ltd. is controlled by Ariel Malik and
Zeev Bronfeld. On April 11, 2007, Carrigain Investment Ltd. entered into a subscription
agreement with us pursuant to which it acquired 30,000,000 additional shares of our common
stock for an aggregate acquisition consideration of $300,000. Carrigain Investment Ltd.
currently holds 51.6% of our common stock based on 81,387,764 total issued and outstanding
shares of our common stock as of January 5, 2009.
Transaction with Our
Stockholders.
During the year ended December 31,
2006, we borrowed $18,000 from four of our significant shareholders. The loans do not bear
interest and are repayable upon demand by the respective creditors. As of December 31,
2007, the loans are still outstanding.
Indebtedness of Directors
and Executive Officers
None of the directors or executive
officers of our company or any associate or affiliate of our company during the last two
fiscal years, is or has been indebted to our company by way of guarantee, support
agreement, letter of credit or other similar agreement or understanding currently
outstanding.
Policy for Approval of
Transactions with Related Persons
As we are a small, development stage
company, we do not currently have a policy in place for approval of transactions with
related persons. However, prior to filing our quarterly and annual reports, we review all
transactions to identify and properly report any related party transaction that we have
entered into in the respective reporting period.
Director Independence
We currently act with five directors:
Asi Shalgi, Avner Raanan, Amir Elbaz, Nissan Caspi, and Hezy Ram. We have determined that
Avner Raanan, Amir Elbaz, Nissan Caspi, and Hezy Ram are "independent directors"
as that term defined in NASDAQ Marketplace Rule 4200(a)(15).
OTHER EXPENSES OF
ISSUANCE AND DISTRIBUTION
The following table sets forth the
costs and expenses payable by us in connection with the issuance and distribution of the
securities being registered under this registration statement. No expenses shall be borne
by the selling shareholders. All of the amounts shown are estimates, except for the
Securities and Exchange Commission Registration Fees:
Expense
Amount ($)
(1)
SEC registration fees
51
Printing and engraving expenses
5,000
Accounting fees and expenses
3,500
Legal fees and expenses
35,000
Transfer agent and registrar fees
2,500
Miscellaneous
10,000
Total
56,051
(1)
We
have estimated these amounts.
39
INDEMNIFICATION OF
DIRECTORS AND OFFICERS
Nevada corporation law provides that:
—
a
corporation may indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right of the
corporation, by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful;
—
a
corporation may indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against expenses,
including amounts paid in settlement and attorneys' fees actually and reasonably
incurred by him in connection with the defense or settlement of the action or suit if he
acted in good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for any claim,
issue or matter as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation
or for amounts paid in settlement to the corporation, unless and only to the extent that
the court in which the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the circumstances of the
case, the person is fairly and reasonably entitled to indemnity for such expenses as the
court deems proper; and
—
to
the extent that a director, officer, employee or agent of a corporation has been
successful on the merits or otherwise in defense of any action, suit or proceeding, or in
defense of any claim, issue or matter therein, the corporation shall indemnify him
against expenses, including attorneys' fees, actually and reasonably incurred by him
in connection with the defense.
Our Articles of Incorporation, in
accordance with Section 78.138 (7) of the Nevada Revised Statutes, provide that no
director or officer of our company shall be personally liable to our company or to any of
our stockholders for damages for breach of fiduciary duty as a director or officer
involving any act or commission of any such director or officer provided, however, that
the foregoing provision shall not eliminate or limit the liability of a director or
officer for acts of omissions which involve intentional misconduct, fraud or a knowing
violation of law, or the payment of dividends in violation of Section 78.300 of the Nevada
Revised Statutes. Any repeal or modification of this Article by the stockholders shall be
prospective only, and shall not adversely affect any limitation on the personal liability
of a director or officer of our company for acts or omissions prior to such repeal or
modification.
Our Bylaws provide that every person
who was or is a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative, by reason of
the fact that he or a person for whom he is the legal representative is or was a director
or officer of the corporation or is or was serving at the request of our company or for
our benefit as a director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise, shall be indemnified and held
harmless to the fullest extent legally permissible under the General Corporation Law of
the State of Nevada from time to time against all expenses, liability and loss (including
moneys' fees. judgments, fines and amounts paid or to be paid in settlement)
reasonably incurred or suffered by him in connection therewith. The expenses of officers
and directors incurred in defending a civil or criminal action, suit or proceeding must be
paid by the corporation as they are incurred and in advance of the final disposition of
the action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the corporation. Such
right of indemnification shall be a contract right which may be enforced in any manner
desired by such person. Such right of indemnification shall not be exclusive of any other
right which such directors, officers or representatives may have or hereafter acquire and,
without limiting the generality of such statement, they shall be entitled to their
respective rights of indemnification under any bylaw, agreement, vote of stockholders,
provision of law or otherwise, as well as their rights under this Article.
40
Our board of directors may cause the
corporation to purchase and maintain insurance on behalf of any person who is or was a
director or officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability asserted
against such person and incurred in any such capacity or arising out of such status,
whether or not the corporation would have the power to indemnify such person.
Our board of directors may from time
to time adopt further Bylaws with respect to indemnification and may amend these and such
Bylaws to provide at all times the fullest indemnification permitted by the General
Corporation Law of the State of Nevada.
On January 31, 2008, our board of
directors approved an indemnification agreement with Josef Neuhaus, pursuant to which we
have agreed to provide for the indemnification and advancing of expenses to the indemnitee
to the maximum extent permitted by law, pursuant to a formula set out in the agreement and
subject to certain conditions, including that no indemnity will be provided if it is
determined that the indemnitee would not be permitted to be indemnified under applicable
law. Mr. Neuhaus resigned as a director of our company effective September 22, 2008.
Insofar as indemnification for
liabilities arising under the
Securities Act of 1933
, as amended, may be permitted
to directors, officers and controlling persons of our company under Nevada law or
otherwise, we have been advised that the opinion of the Securities and Exchange Commission
is that such indemnification is against public policy as expressed in the
Securities
Act of 1933
, as amended, and is, therefore, unenforceable. In the event a claim for
indemnification against such liabilities (other than payment by us for expenses incurred
or paid by a director, officer or controlling person of our company in successful defense
of any action, suit, or proceeding) is asserted by a director, officer or controlling
person in connection with the securities being registered, we will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction, the question of whether such indemnification by it is against
public policy in the
Securities Act of 1933
, as amended, and will be governed by
the final adjudication of such issue.
RECENT SALES OF
UNREGISTERED SECURITIES
During the past three years, we have sold
and issued the following unregistered securities:
On October 24, 2006, we issued a
total of 1,331,764 shares of our common stock at a price per share of US$0.01 for an
aggregate consideration of $13,317.64. We issued the securities to ten non-U.S. persons
(as that term is defined in Regulation S of the
Securities Act of 1933
, as amended)
in an offshore transaction relying on Regulation S and/or Section 4(2) of the
Securities Act of 1933
, as amended.
On February 7, 2007, we issued a
total of 17,031,000 shares of our common stock at a price per share of US$0.01 to 21
investors for an aggregate consideration of $170,310 of which $40,910 was paid in cash and
$129,400 was paid by the issuance of notes with maturities ranging from 90 days to one
year. We issued the securities to the investors who are non-U.S. persons (as that term is
defined in Regulation S of the
Securities Act of 1933
, as amended) in an offshore
transaction relying on Regulation S and/or Section 4(2) of the
Securities Act of
1933
, as amended.
41
On April 30, 2007, we issued
40,175,000 shares of our common stock to 12 investors at a purchase price per share of
US$0.01 for an aggregate consideration of $401,750 of which approximately $47,000 was paid
in cash, approximately $28,000 was by redemption of promissory notes, and approximately
$327,000 was paid by the issuance of notes having maturities up to one year. As of
December 31, 2007, an amount of $150,000 has not been collected yet. We issued the
securities to investors who are non-U.S. persons (as that term is defined in Regulation S
of the
Securities Act of 1933
, as amended) in an offshore transaction relying on
Regulation S and/or Section 4(2) of the
Securities Act of 1933
, as amended.
On April 30, 2007, we granted
5,055,021 stock options (of our common stocks) exercisable for five years at an exercise
price of $0.01 per share to Asi Shalgi, our new President. Effective January 31, 2008, the
expiration date of the options was extended to April 30, 2017 and such options began to
vest at a rate of 25% per year on April 30, 2008. We issued these stock options to a
non-U.S. person (as that term is defined in Regulation S of the
Securities Act of
1933
, as amended) in an offshore transaction relying on Regulation S and/or Section
4(2) of the
Securities Act of 1933
, as amended.
On May 1, 2007, pursuant to the terms
of an employment agreement, we granted options to purchase 400,000 shares of our common
stock exercisable for five years at an exercise price of $0.01 per share to Dr. Irit
Arbel, who we hired to be our Investor Relations and Marketing Advisor. Dr. Arbel's
employment agreement was terminated as of January 1, 2008 and 50,000 options were
forfeited upon the termination. We issued these stock options to a non-U.S. person (as
that term is defined in Regulation S of the
Securities Act of 1933
, as amended) in
an offshore transaction relying on Regulation S and/or Section 4(2) of the
Securities
Act of 1933
, as amended.
On May 22, 2008, we granted up to
226,415 stock options exercisable for four years at an exercise price of $1.25 per share
to Mr. Elbaz, pursuant to a separate arrangement. We issued the securities to one US
person pursuant to the exemption from registration provided for under Rule 506 of
Regulation D, promulgated under the
Securities Act of 1933
, as amended.
On July 10, 2007, we issued a 10%
secured convertible debenture, for gross proceeds of $500,000, as a part of a private
placement of up to $4,000,000 of debentures to YA Global Investments, L.P. In conjunction
with this financing, we issued warrants to purchase 300,000 shares of common stock
exercisable for five years at an exercise price of $2.35 and warrants to purchase
additional 300,000 shares of common stock exercisable for five years at an exercise price
of $2.50. We paid a cash commission of $35,000 and a structuring fee of $20,000 to
Yorkville Advisors, LLC, the investment manager of YA Global Investments, L.P., in
connection with this issuance.
The 10% secured convertible
debentures, which, as amended, mature on October 31, 2010, were, prior to the amendment to
the securities purchase agreement of March 20, 2008, described below, to be convertible by
the debenture holder into common shares at a fixed conversion price of $2.20 per share.
The debentures are secured against all our assets. The debentures were issued pursuant to
the exemption from registration under the
Securities Act of 1933
, as amended,
provided by Section 4(2), Section 4(6) and/or Rule 506 of Regulation D promulgated under
the
Securities Act of 1933
, as amended, to the investors and brokers who are
"accredited investors" within the respective meanings ascribed to that term in
Rule 501(a) under the
Securities Act of 1933
, as amended.
On October 23, 2007, we issued an
additional 10% secured convertible debenture for an aggregate consideration of $1,500,000.
The debenture matures on October 31, 2010 and, prior to the amendment to the securities
purchase agreement of March 20, 2008, described below, was to be convertible by the
debenture holder into common shares at a fixed conversion price of $2.20 per share subject
to further adjustment as set out in the debenture. The debenture is secured against all
our assets. We paid a commission of $105,000 and a due diligence fee of $30,000 to
Yorkville Advisors, LLC, the investment manager of YA Global Investments, L.P., in
connection with this issuance. The debenture was issued pursuant to the exemption from
registration under the
Securities Act of 1933
, as amended, provided by Section
4(2), Section 4(6) and/or Rule 506 of Regulation D promulgated under the Securities Act of
1933, as amended, to the investors and brokers who are "accredited investors"
within the respective meanings ascribed to that term in Rule 501(a) under the
Securities Act of 1933
, as amended.
42
On December 5, 2007 we issued a 10%
secured convertible debenture for gross proceeds of $1,000,000. The debenture matures on
October 31, 2010 and prior to the amendment to the securities purchase agreement of March
20, 2008, described below, was to be convertible by the debenture holder into common
shares at a fixed conversion price of $2.20 per share subject to further adjustment as set
out in the debenture. The debenture is secured against all our assets. We paid a
commission of $70,000 to Yorkville Advisors, LLC, the investment manager of YA Global
Investments, L.P., in connection with this issuance. The debenture was issued pursuant to
the exemption from registration under the
Securities Act of 1933
, as amended,
provided by Section 4(2), Section 4(6) and/or Rule 506 of Regulation D promulgated under
the
Securities Act of 1933
, as amended, to the investors and brokers who are
"accredited investors" within the respective meanings ascribed to that term in
Rule 501(a) under the
Securities Act of 1933
, as amended.
Throughout the 2007 fiscal year, we
authorized the issuance of options to our directors and officers to acquire in the
aggregate 2,200,000 shares of our common stock. For more information, see the section
"Executive Compensation
"
beginning on page 33 of this registration
statement.
On March 20, 2008, we entered into an
amendment to the securities purchase agreement with YA Global Investments, L.P. that
amended the terms of the convertible debentures issued July 10, 2007, October 23, 2007 and
December 5, 2007. "
Financing Agreementt
" section of this prospectus
beginning on page 23.
On March 20, 2008, we issued a fourth
10% secured convertible debenture for gross proceeds of $500,000. The debenture matures on
October 31, 2010 and is convertible by the debenture holder into common shares at a fixed
conversion price of $1.25 per share, subject to further adjustment as further set out in
the debenture. The debenture is secured against all of our assets. We paid a commission of
$35,000 to Yorkville Advisors, LLC, the investment manager of YA Global Investments, L.P.,
in connection with this issuance. The debenture was issued pursuant to the exemption from
registration under the
Securities Act of 1933
, as amended, provided by Section
4(2), Section 4(6) and/or Rule 506 of Regulation D promulgated under the
Securities Act
of 1933
, as amended, to the investors and brokers who are "accredited
investors" within the respective meanings ascribed to that term in Rule 501(a) under
the
Securities Act of 1933
, as amended.
On May 13, 2008, we sold a 10%
Secured Convertible Debenture to YA Global Investments, L.P., for gross proceeds of
$500,000. The debenture matures on October 31, 2010 and is convertible by the holder into
common shares at a fixed conversion price of $1.25 per share subject to further adjustment
as further set out in the debenture. The debenture is secured against all our assets.
Amortizing payments of the outstanding principal amount of the debenture and accrued
interest at an annual rate equal to 10% was to commence on the first business day on or
after July 31, 2008, and continuing on the first business day of each successive calendar
month thereafter until the principal amount has been repaid in full, whether by the
payment of cash or by the conversion of the principal amount and interest into common
stock. Other terms are the same as in prior debentures held by YA Global Investments, L.P.
We paid a commission of $35,000 to Yorkville Advisors, LLC, the investment manager of YA
Global Investments, L.P., in connection with this issuance. The debenture was issued
pursuant to the exemption from registration under the
Securities Act of 1933
, as
amended, provided by Section 4(2), Section 4(6) and/or Rule 506 of Regulation D
promulgated under the 1933 Act to the investors and brokers who are "accredited
investors" within the respective meanings ascribed to that term in Rule 501(a) under
the 1933 Act. No advertising or general solicitation was employed in offering the
securities.
On July 25, 2008, we issued 200,000
shares of our common stock pursuant to our amending agreement dated July 15, 2008 with YA
Global Investments, L.P. We issued the securities to one US person pursuant to the
exemption from registration provided for under Rule 506 of Regulation D, promulgated under
the
Securities Act of 1933
, as amended.
43
On September 22, 2008, we entered
into an amending and restating agreement with YA Global Investments, L.P. with respect to
outstanding secured convertible debentures in the aggregate principal amount of
$4,000,000, and warrants to purchase 600,000 shares of our company's common stock
owned by YA Global Investments, L.P. Pursuant to this agreement, we issued 1,000,000
restricted shares of our common stock to YA Global Investments, L.P. We issued the
securities to a US person pursuant to the exemption from registration provided for under
Rule 506 of Regulation D, promulgated under the
Securities Act of 1933
, as amended.
Details of this agreement are provided in the "
Financing Agreement
"
section of this prospectus beginning on page 23.
On September 30, 2008, we sold 30
units to 27 investors in a brokered private placement, at a purchase price of $50,000 per
unit, raising gross proceeds of $1,500,000. Each unit comprised 500,000 shares of our
common stock and 500,000 share purchase warrants exercisable at $0.10 for a period of five
years. All the investors were accredited investors, and in selling these units we relied
on the exemption from the registration requirements of the
Securities Act of 1933
,
provided by Rule 506 of Regulation D promulgated thereunder. In connection with this
private placement, we paid a registered broker-dealer that acted as our agent in the sale
of these securities aggregate cash placement agent compensation of $150,000 and issued it
placement agent warrants to purchase an aggregate of 1,500,000 shares of common stock.
Each placement agent warrant entitles the holder to purchase one share of common stock of
our company at an exercise price of $0.10 for a period of five years on terms which are
identical to the warrants included in the units. In addition, we paid the broker-dealer a
non-accountable expense allowance of $22,500 and $75,000 towards the fees and expenses of
its attorneys. The broker-dealer is licensed with Financial Industry Regulatory Authority
and a U.S. person and, in issuing the placement agent warrants we relied on the exemption
from the registration requirements of the
Securities Act of 1933
, as amended,
provided by Rule 506 of Regulation D promulgated thereunder. Pursuant to the terms of a
registration rights agreement between our company and each investor in this private
placement, we have agreed to register for resale by the investors and the agent all of the
shares of our common stock issuable upon exercise of the warrants and the agent's
warrants that we issued in this private placement.
On November 4, 2008, we sold four
more units to four investors as part of the brokered private placement described above. We
realized gross proceeds of $200,000. All the investors were accredited investors, and in
selling these units we relied on the exemption from the registration requirements of the
Securities Act of 1933
, provided by Rule 506 of Regulation D promulgated
thereunder. In connection with this private placement, we paid a registered broker-dealer
that acted as our agent in the sale of these securities aggregate cash placement agent
compensation of $20,000 and issued it placement agent warrants to purchase an aggregate of
200,000 shares of common stock. Each placement agent warrant entitles the holder to
purchase one share of common stock of our company at an exercise price of $0.10 for a
period of five years on terms which are identical to the warrants included in the units.
In addition, we paid the broker-dealer a non-accountable expense allowance of $6,000 and
$5,583 towards the fees and expenses of its attorneys. The broker-dealer is licensed with
Financial Industry Regulatory Authority and a U.S. person and, in issuing the placement
agent warrants we relied on the exemption from the registration requirements of the
Securities Act of 1933
, as amended, provided by Rule 506 of Regulation D
promulgated thereunder. Pursuant to the terms of a registration rights agreement between
our company and each investor in this private placement, we have agreed to register for
resale by the investors and the agent all of the shares of common stock issuable upon
exercise of the warrants and the agent's warrants that we issued in this private
placement.
44
EXHIBITS AND FINANCIAL
STATEMENTS AND SCHEDULES
The following audited financial
statements pertaining to our company are filed as part of this registration statement:
Exhibit
Number
Description
3.1
Articles
of Incorporation, as amended (attached as an exhibit to our quarterly report on Form
10-QSB/A filed on April 14, 2004).
3.2
Bylaws
(attached as an exhibit to our current report on Form 8-K filed on July 12, 2005)
3.3
Certificate
of Amendment to Articles of Incorporation filed with the Secretary of State of the State
of Nevada on March 22, 2007 (attached as an exhibit to our current report on Form 8-K
filed on March 26, 2007
5.1*
Opinion
of Clark Wilson LLP
10.1
Assignment
and Bill of Sale Agreement dated June 5, 2003 (attached as an exhibit to our current
report on Form 8-K filed on June 19, 2003)
10.2
Affiliate
Stock Purchase Agreement dated as of March 8, 2005 between DNG Capital Corp. (USA) and
each              of Ultimedia Sales Inc., Mirelis InvesTrust SA, Altshuler Shaham Ltd.,
Rolfe Investment Ltd., Zonbit              Ltd. and Ariel Malik (attached as an exhibit
to our current report on Form 8-K filed on April 6, 2005)
10.3
Assignment
and bill of sale agreement dated July 1, 2005 between the Registrant and Roxbury Capital
Group Ltd. and Qwest Capital Inc (attached as an exhibit to our current report on Form
8-K filed on July 12, 2005)
10.4
Form
of Promissory Note (attached as an exhibit to our current report on Form 8-K filed on
September 11, 2006)
10.5
Form
of Subscription Agreement (attached as an exhibit to our current report on Form 8-K filed
on              October 30, 2006)
10.6
Form
of Subscription Agreement (attached as an exhibit to our current report on Form 8-K filed
on              February 9, 2007)
10.7
Employment
Agreement with Asi Shalgi (attached as an exhibit to our current report on Form 8-K filed
on May 2, 2007).
10.8
Form
of Subscription Agreement (attached as an exhibit to our current report on Form 8-K filed
on May 2, 2007)
10.9
Consulting
Service Agreement with Yossi Raz (attached as an exhibit to our current report on Form
8-K filed on May 11, 2007)
10.10
Employment
Agreement with Dr. Irit Arbel (attached as an exhibit to our current report on Form 8-K
             filed on May 11, 2007).
10.11
Employment
Agreement with Alex Werber (attached as an exhibit to our current report on Form 8-K
filed on May 15, 2007).
10.12
Stock
Option Plan (attached as an exhibit to our current report on Form 8-K filed on May 21,
2007).
10.13
DeMonte
Associates Investor Relations Agreement (attached as an exhibit to our current report on
Form 8-K filed on May 30, 2007).
10.14
Term
sheet with Cornell Capital Partners, LP (attached as an exhibit to our current report on
Form 8-K filed on June 1, 2007).
10.15
Securities
Purchase Agreement with Cornell Capital Partners, L.P. (attached as an exhibit to our
             current report on Form 8-K filed on July 12, 2007).
10.16
Secured
Convertible Debenture No. GEYI-1-1 (attached as an exhibit to our current report on Form
8-K              filed on July 12, 2007).
10.17
Warrant
Certificate No. GEYI-1-1 (attached as an exhibit to our current report on Form 8-K filed
on              July 12, 2007).
10.18
Warrant
Certificate No. GEYI-1-2 (attached as an exhibit to our current report on Form 8-K filed
on              July 12, 2007).
45
Exhibit
Number
Description
10.19
Registration
Rights Agreement dated July 6, 2007 (attached as an exhibit to our current report on Form
8-K filed on July 12, 2007).
10.20
Security
Agreement dated July 6, 2007 (attached as an exhibit to our current report on Form 8-K
filed on July 12, 2007)
10.21
Shareholder
Agreement with Alphakat GMBH (attached as an exhibit to our current report on Form 8-K
filed on July 13, 2007).
10.22
Term
sheet with Alphakat GMBH (attached as an exhibit to our current report on Form 8-K filed
on July 13, 2007).
10.23
Shareholders
Agreement and Term Sheet with Yanai Man Projects Ltd. (attached as an exhibit to our
             current report on Form 8-K filed on July 25, 2007).
10.24
Land
Lease Agreement with Southern Nations Nationalities People's Regional State, Gamo
Gofa Zone and Global Energy Ethiopia PLC (attached as an exhibit to our current report on
Form 8-K filed on October 12, 2007)
10.25
Land
Lease Agreement with Southern Nations Nationalities People's Regional State, Gamo
Gofa Zone and Global Energy Ethiopia PLC (attached as an exhibit to our current report on
Form 8-K filed on October 12, 2007)
10.26
Amended
and Restated Secured Convertible Debenture No. GEYI-1-1 (attached as an exhibit to our
             current report on Form 8-K filed on October 26, 2007)
10.27
Secured
Convertible Debenture No. GEYI-1-2 (attached as an exhibit to our current report on Form
8-K              filed on October 26, 2007)
10.28
Consulting
Agreement dated October 20, 2007 between Global Energy Inc. and Trianon Partners
(attached              as an exhibit to our quarterly report on Form 10-QSB filed on
November 19, 2007)
10.29
Employment
Agreement dated November 21, 2007 with Yossi Raz (attached as an exhibit to our current
report on Form 8-K filed on November 29, 2007).
10.30
Secured
convertible debenture no. GEYI-1-3 (attached as an exhibit to our current report on Form
8-K              filed on December 13, 2007).
10.31
Business
and Royalty Agreement, dated as February 6, 2008, between Global Energy Inc. and Covanta
             Energy Corporation (portions omitted pursuant to a request for confidential
treatment). (attached as              an exhibit to our current report on Form 8-K filed
on February 12, 2008).
10.32
License
Agreement, dated as of February 6, 2008, between AlphaKat – Global Energy GmbH and
Covanta Energy Corporation (portions omitted pursuant to a request for confidential
treatment). (attached as an exhibit to our current report on Form 8-K filed on February
12, 2008).
10.33
Business
and Development Agreement, dated as February 6, 2008, between Global Energy Inc. and
Renewable Diesel, LLC. (attached as an exhibit to our current report on Form 8-K filed on
February 12, 2008).
10.34
License
Agreement, dated as of February 6, 2008, between AlphaKat – Global Energy GmbH and
American Renewable Diesel, LLC (portions omitted pursuant to a request for confidential
treatment). (attached as an exhibit to our current report on Form 8-K filed on February
12, 2008).
10.35
Irrevocable
Transfer Agent Instructions – Exhibit D to Securities Purchase Agreement (attached
as an exhibit to our current report on Form 8-K/A filed on February 26, 2008).
10.36
Secured
Convertible Debenture No. GEYI-1-4 (attached as an exhibit to our current report on Form
8-K              filed on March 26, 2008).
10.37
Amendment
to the Securities Purchase Agreement, dated March 20, 2008 (attached as an exhibit to our
current report on Form 8-K filed on March 26, 2008).
10.38
Amendment
No. 1 to Amended and Restated Secured Convertible Debenture (GEYI-1-1) and Amendment No.
1              to Warrant (attached as an exhibit to our current report on Form 8-K filed
on March 26, 2008).
10.39
Amendment
No. 1 to Secured Convertible Debenture (GEYI 1-2) and Amendment No. 1 to Warrant
(attached              as an exhibit to our current report on Form 8-K filed on March 26,
2008)
10.40
Amendment
no. 1 to Secured Convertible Debenture No. GEYI-1-3 (attached as an exhibit to our
current              report on Form 8-K filed on March 26, 2008)
10.41
Business
and Royalty Agreement with Covanta Energy Corporation (attached as an exhibit to our
annual report on Form 10-K filed on March 31, 2008)
46
Exhibit
Number
Description
10.42
License
Agreement between AlphaKat-Global Energy GmbH and Covanta Energy Corporation (attached as
an exhibit to our annual report on Form 10-K filed on March 31, 2008)
10.43
Business
and Development Agreement with Renewable Diesel, LLC (attached as an exhibit to our
annual report on Form 10-K filed on March 31, 2008)
10.44
License
Agreement between AlphaKat-Global Energy GmbH and American Renewable Diesel, LLC
(attached as an exhibit to our annual report on Form 10-K filed on March 31, 2008)
10.45
Business
and Royalty Agreement with Covanta Energy Corp. (attached as an exhibit to our current
report on Form 8-K/A filed with the Securities and Exchange Commission on April 8, 2008;
note that portions of the agreement have been omitted pursuant to a request for
confidential treatment).
10.46
License
Agreement between AlphaKat-Global Energy GmbH and Covanta Energy Corp. (attached as an
exhibit to our current report on Form 8-K/A filed with the Securities and Exchange
Commission on April 8, 2008; note that portions of the agreement have been omitted
pursuant to a request for confidential treatment ).
10.47
Business
and Development Agreement with Renewable Diesel, LLC (attached as an exhibit to our
current report on Form 8-K/A filed with the Securities and Exchange Commission on April
8, 2008).
10.48
License
Agreement between AlphaKat-Global Energy GmbH and American Renewable Diesel, LLC
(attached as an exhibit to our current report on Form 8-K/A filed with the Securities and
Exchange Commission on April 8, 2008; note that portions of the agreement have been
omitted pursuant to a request for confidential treatment).
10.49
Amended
and Restated Irrevocable Transfer Agent Instructions dated March 20, 2008. (attached as
an              exhibit to our registration statement on Form S-1/A filed on April 14,
2008)
10.50
Due
diligence report of Dr. Richard J. Harley, dated October 12, 2007 (attached as an exhibit
to our              registration statement on Form S-1/A filed on April 14, 2008)
10.51
Amended
and Restated Irrevocable Transfer Agent Instructions dated March 20, 2008. (attached as
an              exhibit to our registration statement on Form S-1 filed on May 1, 2008)
10.52
Due
diligence report of Dr. Richard J. Harley, dated October 12, 2007 (attached as an exhibit
to our              registration statement on Form S-1 filed on May 1, 2008)
10.53
Secured
Convertible Debenture No. GEYI-1-5 (attached as an exhibit to our current report filed on
             Form 8-K on May 15, 2008)
10.54
Consulting
Agreement with the Resultz Media Group Corp. dated May 22, 2008 (attached as an exhibit
to              our current report filed on Form 8-K on May 30, 2008)
10.55
Consulting
Services, Compensation Agreement and Non Circumvent Agreement with Amir Elbaz dated May
22, 2008 (attached as an exhibit to our current report filed on Form 8-K on May 30, 2008)
10.56
Terms
of Agreement, dated June 2, 2008, between Global Energy Inc. and S.C. Supercom S.A.
(attached              as an exhibit to our current report filed on Form 8-K on June 19,
2008)
10.57
Letter
Agreement with YA Global Investments, L.P., dated July 15, 2008  (attached as an exhibit
to              our quarterly report on Form 10-Q filed on November 19, 2008 )
10.58
Letter
Agreement with YA Global Investments, L.P., dated September 22, 2008 (attached as an
exhibit              to our quarterly report on Form 10-Q on November 19, 2008).
10.59
Letter
Agreement, dated October 8, 2008, between Global Energy, Inc. and Yanai Man Projects Ltd.
             (attached as an exhibit to our current report filed on Form 8-K on October
14, 2008)
10.60
Terms
of Loan Agreement between Global N.R.G. Pacific Ltd. and Mr. Aviram Malik and Global
Energy,              Inc. (attached as an exhibit to our current report filed on Form 8-K
on October 30, 2008)
10.61
Joint
Venture Agreement between Global Energy, Inc. and S.C. Supercom S.A. and S.C. Target
Group              S.R.L. (attached as an exhibit to our current report filed on Form 8-K
on November 20, 2008)
10.62*
Form
of Securities Purchase Agreement used in connection with the private placement offering
of              Global Energy Inc. that closed in two tranches on September 30, 2008 and
October 4, 2008
10.63*
Form of Registration Rights Agreement
used in connection with the private placement offering of Global Energy Inc. that closed
in two tranches on September 30, 2008 and October 4, 2008
16.1
Letter
from Moore Stephens Ellis Foster Ltd. regarding change in independent accountant
(attached as              an exhibit to our current report on Form 8-K filed on August
15, 2005)
16.2
Letter
dated January 24, 2006 from Ernst & Young, Chartered Accountants regarding change in
independent accountant (attached as an exhibit to our current report on Form 8-K filed on
January 25, 2006)
16.3
Letter
from Vellmer & Chang regarding change in certifying accountant (attached as an
exhibit to our current report on Form 8-K filed on August 2, 2007)
47
Exhibit
Number
Description
21.1
Global
Fuel Israel Ltd., a wholly owned subsidiary incorporated under the laws of the State of
Israel.
21.2
Global
N.R.G. Pacific Ltd., a 50.1% owned subsidiary incorporated under the laws of the State of
Israel.
21.3
Global
Energy Ethiopia PLC, a 99.9% owned subsidiary of Global N.R.G. Pacific Ltd. incorporated
under              the laws of Ethiopia.
21.4
AlphaKat
- Global Energy GMBH, a 50% owned subsidiary incorporated under the laws of Germany
23.1*
Consent
of Clark Wilson LLP (included in Exhibit 5.1).
23.2*
Consent
of Kesselman & Kesselman (PWC Israel)
23.3*
Consent
of Chang Lee LLP chartered accountants
24.1
Power
of Attorney (included on signature page)
UNDERTAKINGS
The undersigned registrant hereby
undertakes:
(1)
To
file, during any period in which offers or sales are being made, a
          post-effective amendment to this registration statement:
a.
To
include any prospectus required by Section 10(a)(3) of the
Securities Act           of
1933
;
b.
To
reflect in the prospectus any facts or events which, individually or           together,
represent a fundamental change in the information in the registration
          statement; and Notwithstanding the forgoing, any increase or decrease in volume
          of securities offered (if the total dollar value of securities offered would
not           exceed that which was registered) and any deviation From the low or high
end of           the estimated maximum offering range may be reflected in the form of
prospectus           filed with the Securities and Exchange Commission pursuant to Rule
424(b) if, in           the aggregate, the changes in the volume and price represent no
more than a 20%           change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee"
table in the effective
          registration statement; and
c.
To
include any additional or changed material information on the plan of
          distribution.
(2)
That,
for the purpose of determining any liability under the
Securities Act           of 1933
,
each such post-effective amendment shall be treated as a new           registration
statement relating to the securities offered therein, and the           offering of such
securities at that time shall be deemed to be the initial
bona fide
offering
thereof.
(3)
To
remove from registration by means of a post-effective amendment any of the
          securities being registered which remain unsold at the termination of the
          offering.
(4)
Insofar
as indemnification for liabilities arising under the
Securities Act           of 1933
,
as amended, may be permitted to directors, officers and controlling           persons of
the small business issuer pursuant to the foregoing provisions, or           otherwise,
the small business issuer has been advised that in the opinion of the
          Securities and Exchange Commission such indemnification is against public
policy           as expressed in the Act and is, therefore, unenforceable.
48
(5)
In
the event that a claim for indemnification against such liabilities (other           than
the payment by the small business issuer of expenses incurred or paid by a
          director, officer or controlling person of the small business issuer in the
          successful defense of any action, suit or proceeding) is asserted by such
          director, officer or controlling person in connection with the securities being
          registered, the small business issuer will, unless in the opinion of its
counsel           the matter has been settled by controlling precedent, submit to a court
of           appropriate jurisdiction the question whether such indemnification by it is
          against public policy as expressed in the
Securities Act of 1933
, as
          amended, and will be governed by the final adjudication of such issue.
Each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses filed in reliance
on Rule 430A, shall be deemed to be part of and included in the registration statement as
of the date it is first used after effectiveness. Provided, however, that no statement
made in a registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement will, as
to a purchaser with a time of contract of sale prior to such first use, supersede or
modify any statement that was made in the registration statement or prospectus that was
part of the registration statement or made in any such document immediately prior to such
date of first use.
49
SIGNATURES
Pursuant to the requirements of the
Securities Act of 1933
, as amended, the registrant has duly caused this
registration statement on Form S-1 to be signed on our behalf by the undersigned,
thereunto duly authorized in the City of __________, _______________ on January 5, 2009.
GLOBAL ENERGY INC.
By: /s/ Asi Shalgi
——————————————
Asi Shalgi
President, Chief Executive Officer
and Director
We, the undersigned directors and/or
officers of Global Energy Inc. (the "Company"), hereby severally constitute and
appoint Asi Shalgi and Alex Werber, and each of them singly, our true and lawful
attorneys, with full power to any of them, and to each of them singly, to sign for us and
in our names in the capacities indicated below the registration statement on Form S-1
filed herewith, and any and all pre-effective and post-effective amendments to said
registration statement, and any registration statement filed pursuant to Rule 462(b)
under the
Securities Act of 1933
, as amended, in connection with the registration
under the
Securities Act of 1933
, as amended, of equity securities of the Company,
and to file or cause to be filed the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting unto said
attorneys, and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as each of them might or could do in person, and hereby ratifying and
confirming all that said attorneys, and each of them, or their substitute or substitutes,
shall do or cause to be done by virtue of this Power of Attorney.
Pursuant to the requirements of
the
Securities Act of 1933
, as amended, this registration statement has been signed
by the following persons in the capacities and on the dates indicated:
Signature
Title
Date
By: /s/ Asi Shalgi
——————————————
Asi Shalgi
President, Chief Executive Officer & Director (principal executive officer)
January 5, 2009
By: /s/ Alex Werber
——————————————
Alex Werber
Treasurer & Chief Financial Officer (principal financial officer and principal accounting officer)
January 5, 2009
By: /s/ Avner Raanan
——————————————
Avner Raanan
Director
January 5, 2009
By: /s/ Amir Elbaz
——————————————
Amir Elbaz
Director
January 5, 2009
By: /s/ Nissan Caspi
——————————————
Nissan Caspi
Director
January 5, 2009
50
CONSOLIDATED AUDITED
FINANCIAL
STATEMENTS FOR THE PERIOD ENDING
DECEMBER 31, 2007
GLOBAL ENERGY INC.
(A development stage company)
CONSOLIDATED FINANCIAL
STATEMENTS
2007 ANNUAL REPORT
Page
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
F-2-F-3
CONSOLIDATED FINANCIAL STATEMENTS IN U.S. DOLLARS:
Balance Sheets
F-4
Statements of operations
F-5
Statements of changes in shareholders' equity (capital deficiency)
F-6
Statements of cash flows
F-7
Notes to financial statements
F-8 - F-19
F - 1
Kesselman & Kesselman
Certified Public Accountants
Trade Tower, 25 Hamered Street
Tel Aviv 68125 Israel
P.O Box 452 Tel Aviv 61003
Telephone +972-3-7954555
Facsimile +972-3-7954556
Report of Independent
Registered Public Accounting Firm
To the shareholders of Global Energy
Inc. (a development stage company):
We have audited the accompanying
consolidated balance sheets of Global Energy Inc. and its subsidiaries (a development
stage enterprise) as of December 31, 2007, and the related consolidated statement of
operations, changes in shareholders' equity (capital deficiency) and cash flows for
the year ended December 31, 2007 and, cumulatively, the period from January 1, 2007 to
December 31, 2007 (not separately presented herein). 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 did not audit the cumulative
totals of the Company for the period from July 5, 2005 (date of inception) to December 31,
2006, which totals reflect a deficit of $98,998 accumulated during the development stage.
Those cumulative totals were audited by other auditors whose report, dated February 9,
2007, expressed an unqualified opinion on the cumulative amounts.
We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). 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 December 31, 2007
consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Global Energy Inc. and its subsidiaries (a development
stage enterprise) at December 31, 2007, and the results of their operations and their cash
flows for the year then ended and, cumulatively, for period from January 1, 2007 to
December 31, 2007 (not separately presented herein), in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As
discussed in Note 1c to the financial statements, the Company has suffered recurring
losses from operations, has limited capital resources and has a net capital deficiency
that 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 1c. The
financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
Kesselman & Kesselman
Tel Aviv, Israel
March 31, 2008
F - 2
Chang Lee LLP
Chartered Accountants
505 - 815 Hornby Street
Vancouver, B.C, V6Z 2E6
Tel: 604-687-3776
Fax: 604-688-3373
E-mail: info@changleellp.com
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of
Directors and Stockholders of
GLOBAL ENERGY INC.
(A development stage company)
We have audited the balance sheets of
Global Energy Inc.
("the Company") (a development stage company) as at
December 31, 2006 and 2005 and the related statements of operations, stockholders'
equity, and cash flows from July 7, 2005 (date of becoming a development stage company) to
December 31, 2006 and statements of operations, stockholders' equity, and cash flows
for the years ended December 31, 2006 and 2005. 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 the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform an audit to obtain reasonable assurance 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 audit provides 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 the Company as at December 31, 2006 and 2005 and the results of their
operations and their cash flows for the years ended December 31, 2006 and 2005 and for the
period from July 7, 2005 (date of becoming a development stage company) to December 31,
2006 in conformity with generally accepted accounting principles in the United States of
America.
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As
discussed in Note 1, the Company has incurred operating losses. These factors, among
others, raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are described in Note 1. The
financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
Vancouver, Canada
February 9, 2007
Chartered Accountants
F - 3
CONSOLIDATED FINANCIAL STATEMENTS IN U.S. DOLLARS
CONSOLIDATED BALANCE
SHEETS
December 31
2007
2006
In thousands
A s s e t s
CURRENT ASSETS:
Cash and cash equivalents
$
1,470
$
11
Other accounts receivable
187
T o t a l  current assets
1,657
11
LONG TERM DEPOSITS
18
BALANCE WITH MINORITY INTEREST SHAREHOLDER
20
PROPERTY AND EQUIPMENT,
net of accumulated depreciation
523
T o t a l  assets
$
2,218
$
11
Liabilities net of capital deficiency
CURRENT LIABILITIES:
Accounts payables
$
183
$
10
Accounts payable - other
317
Demand loans payable - related parties
18
18
Promissory note payable
28
Debentures convertible into shares
2,618
T o t a l  current liabilities
3,136
56
MINORITY INTEREST
18
CAPITAL DEFICIENCY:
Share capital (Note 9) -
Common shares of $0.001 par value each:
Authorized: 250,000,000 shares and 25,000,000 at
December 31, 2007 and December 31, 2006, respectively;
Issued and outstanding: 63,187,764 shares and 5,981,764 shares at
December 31, 2007 and December 31, 2006, respectively
63
6
Additional paid-in capital
742
117
Warrants
246
Share subscription received
4
Receivables in respect of shares issued
(150
)
Accumulated deficit during development stage
(1,764
)
(99
)
Accumulated deficit before development stage
(73
)
(73
)
T o t a l  capital deficiency
(936
)
(45
)
T o t a l  liabilities net of capital deficiency
$
2,218
$
11
The accompanying notes are an integral part of the consolidated financial statements.
F - 4
CONSOLIDATED STATEMENTS
OF OPERATIONS
Year ended December 31
Cumulative
from
July 7,
2005 through
December 31,
2007
2007
2006
2005
In thousands, except share data
OPERATING EXPENSES -
General and administrative expenses (*)
$
(1,589
)
$
(69
)
$
(62
)
$
(1,688
)
OPERATING LOSS
(1,589
)
(69
)
(62
)
(1,688
)
FINANCIAL EXPENSES - NET
(76
)
(76
)
NET LOSS FROM CONTINUING
OPERATIONS
(1,665
)
(69
)
(62
)
(1,764
)
NET INCOME FROM DISCONTINUED
OPERATION (NET OF TAX)
68
NET INCOME (LOSS)
$
(1,665
)
$
(69
)
$
6
$
(1,764
)
NET INCOME (LOSS)
SHARE, BASIC AND DILUTED:
NET LOSS PER SHARE FROM
CONTINUING OPERATIONS
$
(0.03
)
$
(0.01
)
$
(0.01
)
NET INCOME PER SHARE FROM
DISCONTINUING OPERATIONS
$
0.01
NET LOSS PER SHARE FOR
THE YEAR
$
(0.03
)
$
(0.01
)
**
WEIGHTED AVERAGE NUMBER OF
SHARES USED IN COMPUTING
BASIC AND DILUTED NET LOSS
PER SHARE
48,206,454
4,901,758
4,650,000
* In
the year ended December 31, 2007 – includes $100 share-based compensation.
** Representing an amount less than $0.01
The accompanying notes are an integral part of the consolidated financial statements.
F - 5
STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (CAPITAL DEFICIENCY)
Share capital
Additional
paid-in
capital
Warrants
Share
Subscription
received
Receivables
in respect of
shares issued
Deficit
accumulated
during the
development
stage
Deficit
accumulated
before the
development
stage
Total
Number
Amount
I n    t h o u s a n d s
BALANCE AT JANUARY 1, 2005
4,650,000
$
5
$
105
$
(109
)
$
1
CHANGES DURING THE YEAR,
ENDED DECEMBER 31, 2005
Net income (loss) for the year
$
(30
)
36
6
BALANCE AT DECEMBER 31, 2005
4,650,000
5
105
(30
)
(73
)
7
CHANGES DURING THE YEAR,
ENDED DECEMBER 31, 2006
Issuance of shares
1,331,764
1
12
$
4
17
Net loss for the year
(69
)
(69
)
BALANCE AT DECEMBER 31, 2006
5,981,764
6
117
4
(99
)
(73
)
(45
)
CHANGES DURING THE YEAR
ENDED DECEMBER 31, 2007:
net of
Issuance of warrants
$
246
246
Issuance of shares
57,206,000
57
515
(4
)
(150
)
418
Net loss for the year
(1,665
)
(1,665
)
Share based compensation
expenses
110
110
BALANCE AT DECEMBER 31, 2007
63,187,764
$
63
$
742
$
246
$
-
$
(150
)
$
(1,764
)
$
(73
)
$
(936
)
The accompanying notes are an integral part of the consolidated financial statements.
F - 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31
Cumulative
from July 7,
2005 through
December 31,
2007
2007
2006
2005
In thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) for the period
$
(1,665
)
$
(69
)
$
6
$
(1,764
)
Adjustments required to reconcile net income (loss)
to net cash used in operating activities:
Depreciation
2
1
2
Capital gain of disposal of property and equipment
(38
)
Share based compensation expenses
110
110
Expenses in respect of the convertibles debentures
74
74
Decrease (Increase) in other accounts receivable
(187
)
16
(187
)
Increase in balance with minority shareholder
(2
)
(2
)
Increase in accounts payables
173
173
Increase (decrease) in other accounts payable-other
317
(8
)
(12
)
296
Net cash provided by (used in) operating activities
(1,178
)
(77
)
(27
)
(1,298
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of petroleum and natural
gas resource properties
50
Lease deposits
(18
)
(18
)
Payment for purchasing of property and equipment
(525
)
(525
)
Net cash used in investing activities
(543
)
50
(543
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of shares
390
17
407
Proceeds from debt issuance
46
46
Proceeds from issuance of convertible debentures and
warrants net of issuance expenses
2,790
2,790
Net cash provided by financing activities
3,180
63
3,243
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
1,459
(14
)
23
1,402
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD
11
25
2
68
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
1,470
$
11
$
25
$
1,470
NON-CASH TRANSACTION -
Conversion of promissory note into shares, see note 10a
$
28
The
accompanying notes are an integral part of the consolidated financial statements.
F - 7
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 – SIGNIFICANT
ACCOUNTING POLICIES:
a.
General
Global
Energy Inc. ("the Company") was incorporated under the laws of the State of
Nevada on February 16, 1999.
In
July 6, 2005, the Company completed the sale all of its oil and gas assets for the sum of
$50,000. The sale of these oil and gas assets was completed on July 6, 2005.
Subsequent
to the disposal of the Company's principal operation – petroleum and natural
gas resource properties, the Company is considered as a development stage enterprise
since July 7, 2005, as defined by Statement of Financial Accounting Standards ("SFAS")
No. 7 – "Accounting and Reporting by Development Stage Enterprise". The
accompanying financial statements have disclosed cumulative amounts in the statements of
operations and cash flows since July 7, 2005, inception of becoming a development stage
company, until December 31, 2007.
During
May 2007 the Company established two subsidiaries in Israel: Global Fuel Israel Ltd ("Fuel")
a fully owned and Global N.R.G. Pacific Ltd. ("Pacific") which the Company own
50.1%. On October, 2007, Pacific established a subsidiary in Ethiopia named Global Energy
Ethiopia PLC ("Global Ethiopia"). Pacific and its consolidated company are
acting as the agriculture arm of the Company's activities in the Bio Diesel field.
In
May 2, 2007 the Company entered into an agreement with AlphaKat GmbH ("AlphaKat")
in order to cooperate in commercialization of AlphaKat's technology of producing
mineral diesel oil from municipal waste using machines which converts hydrocarbon waste
into diesel oil invented for that purpose by AlphaKat ("KDV machines"). As to
commitments of the Company to Alphakat, see note 9b. In July 10, 2007 the Company entered
into an agreement with AlphaKat to incorporate and operate a company, named AlphaKat
– Global Energy GmbH ("AGEI"). Each party holds 50% of the shares of AGEI.
AGEI is to provide worldwide marketing and sales of KDV machines in consideration of 10%
sale commission. The Company is responsible to finance AGEI, if such financing will be
required AlphaKat has the right to object to any sale of KDV machines. The Company has
consolidated AGEI in accordance with FIN 46R "Consolidation of Variable Interest
Entities, an interpretation of ARB no. 51". See d, below. After the balance sheet
date AGEI entered into its first agreement, see note 13a.
b.
Functional
Currency
The
currency of the primary economic environment in which the operations of the Company are
conducted is the U.S dollar ("$" or "dollar).
Most of the Company's
expenses are incurred in dollars. A significant part of the Company's external
financing is in dollars. The Company holds most of its cash and cash equivalents in
dollars. Thus, the functional currency of the Company is the dollar.
Since
the dollar is the primary currency in the economic environment in which the Company
operates, monetary accounts maintained in currencies other than the dollar are remeasured
using the representative foreign exchange rate at the balance sheet date. Operational
accounts and nonmonetary balance sheet account are measured and recorded at the rate in
effect at the date of transaction. The effects of foreign currency remeasurement are
reported in current operations (as "financial EX- net) and have not been material to
date.
c.
Going
concern considerations
As
of December 31, 2007, the Company had negative working capital of $1,479 thousands and an
accumulated deficit of approximately $1,837 thousands. The Company's ability to
continue to operate as a going concern is dependent on its ability to generate sufficient
cash flows to meet its obligations on a timely basis, to obtain additional financing and
to ultimately attain profitability. The Company has no revenues and has incurred losses
and an accumulated deficit resulting from the Company's activity as a development
stage company and has a negative cash flow from operating activities. In the event the
Company is unable to successfully raise capital and generate revenues, it is unlikely
that the Company will have sufficient cash flows and liquidity to finance its business
operations as currently contemplated. There can be no assurance that additional funds
will be available on terms acceptable to the Company, or at all. These conditions raise
substantial doubt about the Company's ability to continue to operate as a going
concern. The accompanying financial statements do not include any adjustments to reflect
the possible future effect on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from the outcome of this
uncertainty.
F - 8
d.
Principles
of consolidation
The consolidated financial
statements include the accounts of the Company and its subsidiaries mentioned above, and
the accounts of the 50% owned entity (AGEI) which according to FIN 46R is a variable
interest entity and the Company is the primary beneficiary.
Intercompany balances and
transactions have been eliminated upon consolidation.
e.
Cash
equivalents
Cash equivalents are short-term
highly liquid investments which include short term bank deposit (up to three months from
date of deposit), that are not restricted as to withdrawals or use that are readily
convertible to cash with maturities of three months or less as of the date acquired.
f.
Property
and equipment
Property
and equipment are stated at cost, less accumulated depreciation. Assets are depreciated
using the straight-line method over their estimated useful lives. The annual depreciation
set as follows: leasehold improvements are amortized over the term of the lease which is
shorter than the estimated useful life of the improvements. Computers, software and
electronic equipment are depreciated over three years.
g.
Impairment
of long-lived assets
The Company's long-lived assets
are reviewed for impairment in accordance with Statement of Financial Accounting Standard
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS No. 144") whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of the assets to the future
undiscounted cash flows expected to be generated by the assets. If such assets are
considered to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds their fair value. During the years ended
December 31, 2007, 2006 and 2005, no impairment losses have been identified.
h.
Use
of estimates
The
preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ from those
estimates.
i.
Derivative
financial instruments ("derivatives")
The
Company has adopted FAS 133, as amended, which establishes accounting and reporting
standards for derivatives, including certain derivatives embedded in other contracts, and
for hedging activities. Under FAS 133, all derivatives are recognized on the balance
sheet at their fair value. On the date that the Company enters into a derivative
contract, it designates the derivative, for accounting purposes, as: (1) hedging
instrument, or (2) non-hedging instrument. Any changes in fair value are to be reflected
as current gains or losses or other comprehensive gains or losses, depending upon whether
the derivative is designated as a hedge and what type of hedging relationship exists.
Changes in fair value of non-hedging instruments are carried to "financial
expenses-net" on a current basis. To date, the Company did not have any contracts
that qualify for hedge accounting under FAS 133.
F - 9
The
Company entered into convertible debentures agreement in which a derivative instrument is
"embedded". Embedded derivative is separated from the host contract and carried
at fair value when (1) the embedded derivative possesses economic characteristics that
are not clearly and closely related to the economic characteristics of the host contract
and (2) a separate, stand-alone instrument with the same terms would qualify as a
derivative instrument.
As
to embedded derivatives arising from the issuance of convertible debentures, see note 8.
j.
Share-based
payment
The
Company implements Statement of Financial Accounting Standards No. 123 (revised
2004) "Share-based Payment" ("FAS 123(R)"). FAS 123(R) requires
awards classified as equity awards be accounted for using the grant-date fair value
method. The fair value of share-based payment transactions is recognized as expense over
the requisite service period, net of estimated forfeitures. The Company recognizes
compensation cost for an award with only service conditions that has a graded vesting
schedule using the accelerated method based on multiple options awarded approach.
The
Company accounts for equity instruments issued to third party service providers
(non-employees) in accordance with the fair value based on an option-pricing model,
pursuant to the guidance in EITF 96-18 "Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or
Services". The fair value of the options granted is revalued over the related
service periods and recognized over the vesting period.
k.
Income loss
per share
Net
income (loss) per share, basic and diluted, is computed on the basis of the net income
(loss) for the period divided by the weighted average number of shares of common shares
outstanding during the period. Diluted net loss per share is based upon the weighted
average number of shares of common shares and of common shares equivalents outstanding
when dilutive. Common shares equivalents include: (i) outstanding stock options
under the Company's Long-Term Incentive Plan and warrants which are included under
the treasury share method when dilutive, and (ii) Common shares to be issued under
the assumed conversion of the Company's outstanding convertible Debentures, which
are included under the if-converted method when dilutive. The computation of diluted net
loss per share for the years ended December 31, 2007, 2006, and 2005 does not
include common share equivalents, since such inclusion would be antidilutive. Disclosures
required by SFAS 128, Earnings per Share, have been included in Note 11.
l.
Deferred
income taxes
Deferred
taxes are determined utilizing the asset and liability method based on the estimated
future tax effects of differences between the financial accounting and tax basis of asset
and liabilities under the applicable tax laws. Deferred tax balances are computed using
the tax rates expected to be in effect when these differences are reversed. A full
valuation allowances is provided for, since based upon the weight of available evidence,
it is more likely than not that all of the deferred tax assets will not be realized. See
note 10.
F - 10
m.
Uncertainty
in income taxes
As
of January 1, 2007, the Company adopted FASB Interpretation No. 48, "Accounting
for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109" ("FIN
48"). FIN 48 specifies how tax benefits for uncertain tax positions are to be
recognized, measured and derecognized in financial statements; requires certain
disclosures of uncertain tax positions; specifies how reserves for uncertain tax
positions should be classified on the balance sheet; and provides transition and
interim-period guidance, among other provisions. On May 2, 2007, the FASB
issued FASB Staff Position No. FIN 48-1, "Definition of Settlement in FASB
Interpretation No. 48-1" ("FSP FIN 48-1"). FSP FIN 48-1 provides guidance
regarding how an entity should determine whether a tax position is effectively settled
for the purpose of recognizing previously unrecognized tax benefits. The Company adopted
FSP FIN 48-1 as of January 1, 2007. The adoption of FIN 48 did not result in
any adjustment to the Company's financial statements.
n.
Comprehensive
income (loss)
The
Company has no component of comprehensive income (loss) other than net income (loss).
o.
Newly
issued accounting pronouncements
1)
In
December 2007, the FASB issued Statement of Financial Accounting Standards           No.
141 (revised 2007), "Business Combinations" ("SFAS           141(R)".
SFAS 141(R) changes the accounting for business combinations,           including the
measurement of acquirer shares issued in consideration for a           business
combination, the recognition of contingent consideration, the           accounting for
contingencies, the recognition of capitalized in-process research           and
development, the accounting for acquisition-related restructuring cost
          accruals, the treatment of acquisition related transaction costs and the
          recognition of changes in the acquirer's income tax valuation allowance
and           income tax uncertainties. SFAS 141(R) applies prospectively to business
          combinations for which the acquisition date is on or after the beginning of the
          first annual reporting period beginning on or after December 15, 2008 . Early
          application is prohibited. The Company will be required to adopt SFAS 141(R) on
          January 1, 2009.
2)
In
December 2007, the FASB issued FAS No. 160, "Noncontrolling           Interests
in Consolidated Financial Statements – an amendment of Accounting           Research
Bulletin No. 51" ("FAS No. 160"). FAS           No. 160
establish accounting and reporting standards for non-controlling           interests in a
subsidiary and deconsolidation of a subsidiary. Early adoption is           not
permitted. As applicable to the Company, these statements will be effective           as
of the year beginning January 1, 2009. The Company is currently           evaluating
the potential impact, if any, the adoption of FAS No. 160 would           have on
its consolidated financial statements.
3)
In
September 2006, the FASB issued Statement of Financial Accounting
          Standards No. 157, "Fair Value Measurements" ("SFAS
          157"). SFAS 157 defines fair value, establishes a framework and gives
          guidance regarding the methods used for measuring fair value, and expands
          disclosures about fair value measurements. SFAS 157 is effective for
          financial statements issued for fiscal years beginning after November 15,
          2007, and interim periods within those fiscal years (January 1, 2008, for the
          Company). The Company is currently assessing the impact that SFAS 157 may have
          on its results of operations and financial position.
4)
In
February 2007, the FASB issued Statement of Financial           Accounting
Standards No. 159, "The Fair Value Option for Financial           Assets and
Financial Liabilities–Including an amendment of FASB Statement           No. 115" ("SFAS
159"). SFAS 159 is expected to expand the           use of fair value accounting but
does not affect existing standards which           require certain assets or liabilities
to be carried at fair value. The objective           of SFAS 159 is to improve financial
reporting by providing companies with the           opportunity to mitigate volatility in
reported earnings caused by measuring           related assets and liabilities
differently without having to apply complex hedge           accounting provisions. Under
SFAS 159, a company may choose, at its initial           application or at other
specified election dates, to measure eligible items at           fair value and report
unrealized gains and losses on items for which the fair           value option has been
elected in earnings at each subsequent reporting date.           SFAS 159 is
effective for financial statements issued for fiscal years           beginning after
November 15, 2007, and interim periods within those fiscal           years (January
1, 2008, for the Company). If the Company is to elect the fair           value option for
its existing assets and liabilities, the effect as of the           adoption date, shall
be reported as a cumulative-effect adjustment to the           opening balance of
retained earnings. The Company is currently assessing the           impact that SFAS 159
may have on its financial position.
F - 11
5)
In
December 2007, the FASB ratified EITF Issue No. 07-01, "Accounting for
          Collaborative Arrangements" ("EITF 07-01"). EITF 07-01 defines
          collaborative arrangements and establishes reporting requirements for
          transactions between participants in a collaborative arrangement and between
          participants in the arrangement and third parties. EITF 07-01 also establishes
          the appropriate income statement presentation and classification for joint
          operating activities and payments between participants, as well as the
          sufficiency of the disclosures related to these arrangements. EITF 07-01 is
          effective for fiscal years beginning after December 15, 2008 (January 1, 2009,
          for the Company). EITF 07-01 shall be applied using modified version of
          retrospective transition for those arrangements in place at the effective date.
          An entity should report the effects of applying this Issue as a change in
          accounting principle through retrospective application to all prior periods
          presented for all arrangements existing as of the effective date, unless it is
          impracticable to apply the effects the change retrospectively. The Company is
          currently assessing the impact that EITF 07-01 may have on its results of
          operations and financial position.
NOTE 2 – OTHER
ACCOUNTS RECEIVABLE:
December 31,
2007
In thousands
Other receivable
$
120
Governmental Institutions
21
Prepaid expenses
46
$
187
NOTE 3 – PROPERTY
AND EQUIPMENT:
December 31,
2007
In thousands
Cost:
Advances on account of
acquisition of Machinery
$
488
Computer software and electronic equipment
24
Leasehold improvements
13
525
Less, accumulated depreciation and amortization
2
$
523
F - 12
NOTE 4 – ACCOUNTS PAYABLE
– OTHER:
December 31,
2007
In thousands
Accrued expenses
$
234
Employees and payroll accruals
80
Government authorities
3
$
317
NOTE 5 – BALANCE
WITH MINORITY SHAREHOLDER
In
July 10, 2007 the Company entered into an agreement with AlphaKat to incorporate and
operate AGEI see note 1a. According to the agreement the Company has provided a loan to
the shareholders of the AlphaKat. The terms of the loan has not yet been set.
NOTE 6 – DEMAND LOAN
PAYABLE – RELATED PARTIES
The
Company borrowed $18,000 from four shareholders of the Company on May 4, 2006. The loans
are unsecured, non-interest bearing and due on demand.
NOTE 7 – FINANCIAL
EXPENSE (INCOME)
December 31,
2007
In thousands
Interest on convertible debentures (see note 8)
$
160
Income from evaluating the conversion option
fair value of the (see note 8)
(86
)
Other
2
$
76
F - 13
NOTE 8 – CONVERTIBLE
DEBENTURES AND WARRANTS
In
July 2007, the Company entered into an agreement to issue in four different installments,
as set in the agreement, $4 million aggregate principal amount of convertible debentures ("Debentures")
in a private placement. As of December 31, 2007 three installments in the sum of $3
million principal were issued for consideration of $2.8 million. The last installment is
due after a registration statement for the underlying shares is declared effective by the
SEC. The Debentures bear interest at 10% per annum, the payments of the principals and
interest will commence on July 31, 2008 and continuing on each successive month
thereafter until October 2010. The Debentures are convertible, at the option of the
holder at any time, into shares of the Company's Common Stock at a conversion price
of $2.2 per share. The Company has the right to redeem a portion or all amounts
outstanding prior to maturity date, provided that (1) the closing Bid price is less than
the conversion price, (2) the underlying shares registration statement is effective and
(3) no event of default has occurred.
If any event of default occurred, the full unpaid
Principal amount of this Debenture, together with interest shall become at the investor's
election, immediately due and payable in cash. In conjunction with this financing, the
Company issued to the private investor 300,000 warrants to purchase 300,000 common shares
of the Company, exercisable for five years at an exercise price of $2.35 and 300,000
warrants to purchase 300,000 common shares of the Company, exercisable for five years at
an exercise price of $2.50. The conversion of the debentures and the exercise of the
warrants are subject to further adjustments and condition as further set out in the
Debenture Agreement. The conversion option included within each of the Company's
convertible debenture does not meet all the conditions of EITF 00-19 "Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's
Own Stock" related to equity classification and therefore should be bifurcated from
the debt host contract. In addition the put option and call option are considered as
embedded derivatives that require bifurcation, therefore these instruments are evaluated
each reporting period and the difference in fair value is recorded as financial income or
expense, see note 7 above. The Company measured the fair value of the embedded
derivatives features on the issuance date at approximately $1,032 thousands. The amount
attributed to the warrants was $246 thousands, the remaining $1,425 thousands was
allocated to the debentures.
As
of December 31, 2007, none of the warrants were exercised and none of the debentures were
converted into share.
Following
are the details of the convertible debentures:
December 31,
2007
In thousands
Principal
$
1,426
Accrued interest
160
Conversion option
1,032
Put option
*
Call option
*
$
2,618
*
Representing an amount less than $1,000
The
notes are secured by a pledge on all of the Company's assets.
F - 14
NOTE 9 – COMMITMENTS
AND CONTINGENCIES:
a.
Fuel
currently leases office in Tel Aviv, Israel, under operating lease
               agreement, which expire at 2009. The monthly rent is approximately $3,800.
b.
Under
the agreement signed with Alphakat with regard to commercialization of
               AlphaKat technology of producing mineral diesel oil from municipal waste
the                Company agreed to: 1) Provide financial support for the project, 2)
Purchase                three KDV 500 turbines for implementation in Poland, the United
States and                Israel, 3) Start a regulatory process, including filing of
permit applications                and 4) Monthly payments Euro €10,000 to AlphaKat
for consulting.
c.
On
October 5, 2007, Global Ethiopia, entered into lease agreements with the
               Southern Nations Nationalities People's Regional State, Ethiopia, or
SNRS,                for a 50 year lease of 20,000 hectares of rural land located in the
Gamo Gofa                zone in the SNRS for the purpose of cultivating castor seeds and
15 hectares of                land located in the Gamu Gofa zone, Kucha Woreda, in the
SNRS for the purpose of                operating an oil crushing plant through an
existing facility on the property.                The agreements are subject to, among
other things, the following conditions: (i)                Global Ethiopia must pay SNRS
a rental fee of Birr 47 (approximately US$5) or                Birr 78 (approximately
US$8.50) per hectare per year, depending on whether the                leased land is
defined as second or first class land, respectively; (ii) Global                Ethiopia
must completely develop the 20,000 hectares leased to it within eight
               years of the execution date of the agreement, including planting and
maintaining                trees or other oil producing crops. If no development process
is carried out                within a period of four (4) years from the date of
execution of the agreement,                then the undeveloped land may be repossessed
by SNRS by giving six (6) months                advance written notice to abandon the
land; (iii) Global Ethiopia must                completely develop the 15 hectares leased
to it within three years of the                execution date of the agreement; (iv)
Global Ethiopia must perform a survey on                the 20,000 hectares within 24
months of the execution date of the agreement;
Global Ethiopia has also an
option to lease additional farmland from the SNRS                during the term of the
lease agreement (up to an additional 100,000 hectares of                farmland) on the
same terms as the lease agreement for the 20,000 hectares; and                Global
Ethiopia is not required to make any rental payments on its 20,000                hectare
lease agreement until the fourth year of the agreement. During the term                of
the lease agreements, SNRS may cancel the lease due to failure of Global
               Ethiopia to discharge its material obligations under the lease agreements,
               provided, however, that Global Ethiopia is given one year prior notice and
fails                to cure such failure within such one year period. As
of December 31, 2007, none of the conditions were met.
d.
In
October 20, 2007 the Company entered into an agreement for consulting
               services with Trianon Partners ("Trianon") and as of October 24,
2007                the Company entered into a Joint Development Agreement with Trianon.
In                consideration of the consulting services to be provided by Trianon, the
Company                agreed to pay Trianon a fixed fee of $250 thousands which is to be
paid in                $10,000 monthly installments once the Company determines to
commence the                construction of the plant with the balance to be paid upon
mechanical completion                of the plant. In the consideration of the Joint
Development the Company agreed                to grant an exclusive license to Trianon,
throughout the states of Texas, New                York and New Jersey to be formed with
AlphaKat, to market systems that use a                proprietary biodiesel
technology for the conversion of waste to biodiesel. The aforementioned agreement was
terminated in the Company executed a business and development agreement with
("Renewable"), an affiliate of Trianon and of American Renewable Diesel, LLC
("American"), see also note 13a.
F - 15
NOTE 10 – SHARE
CAPITAL:
a.
Common
shares
Common
stock confers on its holders the right to receive notice to participate and vote in
general meetings of the Company, the right to a share in the excess of assets upon
liquidation of the Company, and the right to receive dividends, if declared.
In
October 24, 2006, the Company issued 1,331,764 common shares at a price per share of $0.01
for an aggregate consideration of $13,000.
On
February 7, 2007, the Company issued 17,031,000 common shares at a price per share of
$0.01 for consideration of approximately $170 thousands.
On
April 30, 2007, the Company issued a total of 40,175,000 common shares at a price per
share of $0.01 for consideration of approximately $402 thousands of which approximately
$47,000 was paid in cash, $28,000 was paid by conversion of $28,000 promissory note and
approximately $327 thousands was paid via the issuance of non interest notes receivables
having maturities up to one year. As at December 31, 2007, $150 thousands have not been
yet collected.
As
to the issuance of warrants, see note 8.
b.
Stock
option plan
In 2007,
the Company established the 2007 share option plan, which provides for the issuance of up
to 8,500,000 of the Company's common shares.
In
April 2007 the Company granted 5,055,021 stock options exercisable for ten years at an
exercise price of $0.01 per share, to the CEO, the options vest in four equal batched
over a period of four years from the date of the option, provided that the CEO is still
the Company's employee. No option was vested as to year end. The Company estimates
the fair value of stock options granted using the Black-Scholes option-pricing model. The
option-pricing model requires a number of assumptions, of which the most significant are,
expected stock price volatility, and the expected option term.
NOTE 10 – SHARE
CAPITAL (continued):
Expected
volatility was based on the average of similar companies in the market due to
insufficient trade volume. The expected option term represents the contractual period of
the stock options as defined in the option agreement. The Company has historically not
paid dividends and has no foreseeable plans to issue dividends. Risk-free interest rates,
which are based on quoted H15 report of the Federal Reserve Board.
The fair value of the Company's stock options granted to the CEO was estimated using the
following weighted average assumptions:
Risk free interest
4.6
3%
Dividend yields
0
Volatility
250
%
Expected term (in years)
10
F - 16
The fair value of the options granted
to the CEO using the Black&scholes model is $0.01 per option.
In
May 7, 2007 the Company granted 400,000 warrants to a service provider for Investor
Relations and Marketing Advisor services. 200,000 warrants are exercisable immediately at
an exercise price of $0.01 per share. 200,000 additional options were intended to vest
effective May 1, 2008, on a pro rata basis in the event the employment agreement
terminated before May 1, 2008. The agreement with the service provider was terminated as
of January 1, 2008, and as of the December 31, 2007, 350,000 warrants were vested and
exercisable at an exercise price of $0.01 per share, the market value of the share we
used in the calculation of the fair value as of the year end was $0.6. The fair value of
the abovementioned warrants calculated amounted to $92,000. This fair value was estimated
using the following weighted average assumptions:
Risk free interest
3.3
4%
Dividend yields
0
Volatility
250
%
Expected term (in years)
Less than a year
As of December 31, 2007 no options or
warrants were exercised.
As of December31, 2007, there were
$33 thousands of total unrecognized compensation expenses related to unvested share based
compensation arrangement granted under the plan.
As to options granted after balance sheet date, see note 13b.
NOTE 11 – INCOME
TAXES
In
2007 and 2006 the Company incurred net operating loss for tax purposes and recognized a
full tax valuation against deferred taxes. Accordingly, no provision or benefit for
income taxes has been recorded in the accompanying financial statements.
The tax effect of net operating loss carry forward as of December 31, 2007 and 2006 was as
follows:
2007
2006
Deferred tax assets:
Net operating loss carry-forward
$
484
$
60
Valuation allowance
(484
)
(60
)
$
0
$
0
The
Company is primarily subject to U.S. federal income tax. For all years presented
effective income tax rate is zero. The difference between the Company's effective
income tax rate and the statutory rate of 35% is attributable to an increase in the
deferred tax valuation allowance.
The
Company's policy is to recognize interest and penalties related to income tax
matters in income tax expense. As of January 1 and December 31, 2007, the Company
had no accruals for interest or penalties related to income tax matters.
As
of December 31, 2007, the Company had available for tax purposes unused net
operating loss carry-forwards of $1,412. $1,101 will expire in various years from 2019 to
2027.
F - 17
NOTE 12 – NET LOSS
PER SHARE DATA
The
Company's basic net loss per share amounts has been computed by dividing net loss by
the weighted average number of Common outstanding. In 2007, 2006, and 2005, the Company
reported net losses; therefore, no common stock equivalents were included in the
computation of diluted net loss per share since such inclusion would have been
antidilutive. The calculations of basic and diluted net loss per share are as follows:
December 31
2007
2006
2005
Net loss, in thousands (Numerator)
$
1,665
$
69
$
(6
)
Weighted-average shares, in thousands (Denominator)
48,206
4,902
4,650
Basic and diluted net loss per share
$
0.03
$
0.01
$
0.00
The
shares issuable upon the exercise of options, and conversion of convertible debentures
and warrants, which have been excluded from the diluted per share amounts because their
effect would have been antidilutive, include the following:
December 31,
2007
Options:
Weighted average number, in thousands
3,370
Weighted average exercise price
$
0.01
Warrants:
Weighted average number, in thousands
542
Weighted average exercise price
$
0.81
Convertible Debt:
Weighted average number, in thousands
263
Conversion price
$
2.2
NOTE 13 – SUBSEQUENT
EVENTS:
a.
In February 6, 2008, The Company entered into a business and royalty
agreement           with Covanta Energy Corporation ("Covanta"), under which
the Company           granted to Covanta certain rights, both exclusive and
non-exclusive, for the           use, practice, and improvement of the KDV technology for
the purpose of           converting waste materials containing hydrocarbons into diesel
oil in countries           including the US, the UK, China and the Republic of Ireland.  The
Company           has certain rights to pursue specified small scale projects using the
          technology. Covanta will have the option to invest in, as well as the Company
          retention of the right to invest 10% – 35% of the equity in projects
          initiated by Covanta. Covanta agreed to pay the Company a royalty equal to 10%
          of the gross revenues derived from the sale of diesel oil from each project for
          a period of 20 years from the date the applicable project achieves commercial
          operation.  Under the agreement, Covanta shall also be responsible for
          financing 100% of the costs of erection of a demonstration plant, which it may
          disassemble and make available for pick up by us, at no cost to us, upon
Covanta           terminating its rights to the technology.
On
the same day, the Company entered into a license agreement with Covanta under which the
Company granted it a right to sell systems based on the technology to governmental
organizations subject to certain pre-conditions regarding the purchase of a minimum
number of systems based on the technology. Covanta's rights under both the license
agreement and the business and royalty agreement shall be non-exclusive until it has (i)
issued a purchase order for a demonstration plant, and (ii) placed purchase orders for
five additional systems. AlphaKat-Global Energy GmbH will receive a 10% commission from
the sale of all systems, part of which shall be payable to American, subject to the
business and development agreement described below.
F - 18
In
February 6, 2008, the Company executed a business and development agreement with
Renewable, an affiliate of Trianon and of American, under which both Renewable and the
Company shall have the right to identify and develop certain projects to convert
feedstock to diesel using the KDV technology in New York, California and Texas, as well
as Florida and New Jersey under certain conditions.  If the Company identifies a
project, Renewable shall be entitled to invest up to 25% of the total required equity. If
Renewable identifies a project, the Company shall be entitled to invest up to 51% and
Covanta will be entitled to invest up to 24% of the total required equity. In all
projects, Renewable shall manage the projects and shall be entitled to development fees
in the amount of $100 thousands for each KDV500, up to a maximum total of $2,000,
according the number of KDV 500 system included in the project.
In
connection with the business and development agreement described above, AlphaKat-Global
Energy GmbH executed a license agreement with Renewable granting certain exclusive rights
to market and sell systems based on the technology in the territory of California, New
York and Texas, as well as New Jersey and Florida, subject to the satisfaction of minimum
sales requirements. The territory may be reduced and/or exclusive rights may become
non-exclusive rights, depending on whether minimum sale requirements are satisfied. American
is to receive a commission on all sales in the territory. Systems sold to Covanta shall
be credited to American, regardless of whether such systems are for use inside or outside
the territory.
b.
In
January 31, 2008 the Board of Directors approved the following options
               grants:
1,150,000 to three directors (350,000 options each) pursuant
to                the Company director compensation plan, at an exercise price of US $2.2
per                share, and 1,150,000 incentive options granted to executive officer
pursuant to                an employment agreement effective November 1, 2007.
c.
On
March 20, 2008, the Company signed an amendment to the debentures agreement
               described in note 8. The Company agreed to amend certain sections of the
               agreement dated July 2007 as follows:
—
The
private investor agreed to purchase $0.5 million of convertible debentures prior to a
registration statement for the underlying shares is declared effective by the SEC and the
additional $0.5 million once it become effective;
—
The
conversion price has been changed from $2.20 to $1.25 for all debentures outstanding;
—
The
exercise price has been changed from $2.50 and $2.35 to $1.25 for all warrants granted.
F - 19
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS AS OF
SEPTEMBER 30, 2008
IN U.S. DOLLARS
UNAUDITED
TABLE OF CONTENTS
Page
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Balance sheets as of September 30, 2008 and December 31, 2007
F-2
Statements of operations for the three months and the nine months ended September 30, 2008
and 2007; and for the period from July 7, 2005 through September 30, 2008
F-3
Statements of changes in capital deficiency for the period of nine months ended
September 30, 2008; and for the period from July 7, 2005 through December 31, 2007
F-4
Statements of cash flows for the three months and the nine months ended September 30, 2008
and 2007; and for the period from July 7, 2005 through September 30, 2008
F-5
Notes to interim financial statements
F-6 - F-15
F - 1
CONDENSED
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in
thousands)
September 30
2008
December 31
2007
Unaudited
Audited
A s s e t s
CURRENT ASSETS:
Cash and cash equivalents
$
1,119
$
1,470
Advance to supplier (refer to note 5a)
1,773
Other accounts receivable
119
187
T o t a l  current assets
3,011
1,657
LONG TERM DEPOSITS
21
18
ADVANCE TO MINORITY INTEREST SHAREHOLDER
20
20
PROPERTY AND EQUIPMENT, net
1,290
523
T o t a l  assets
$
4,342
$
2,218
Liabilities net of capital deficiency
CURRENT LIABILITIES:
Accounts payables
$
401
$
183
Accounts payable - other
746
335
Advance from third party (refer to note 5a)
1,773
Advance from third party (refer to note 10)
100
Short term loan from related parties
224
Short term loan from share holder
176
Short term loans
186
Debentures convertible into shares
2,633
2,618
T o t a l  current liabilities
6,239
3,136
LIABILITY FOR EMPLOYEE RIGHTS UPON
RETIREMENT, NET
13
MINORITY INTEREST
18
18
CAPITAL DEFICIENCY:
Share capital - Common shares of $0.001 par value each:
Authorized: 250,000,000 shares at September 30, 2008 and December 31, 2007
Issued and outstanding: 79,387,764 shares and 63,187,764 shares at September 30, 2008
and December 31, 2007, respectively
79
63
Additional paid-in capital
1,482
742
Warrants
1,116
246
Receivables in respect of shares issued
(150
)
Accumulated deficit during development stage
(4,532
)
(1,764
)
Accumulated deficit before development stage
(73
)
(73
)
T o t a l  capital deficiency
(1,928
)
(936
)
T o t a l  liabilities net of capital deficiency
$
4,342
$
2,218
The accompanying notes are an
integral part of the consolidated financial statements.
F - 2
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(U.S.
          dollars in thousands, except share and per share data)
Nine months ended
September 30
Three months ended
September 30
Cumulative
from July 7,
2005 through
September 30,
2008 (see note 1)
2008
2007
2008
2007
(Unaudited)
(Unaudited)
(Unaudited)
OPERATING EXPENSES -
General and administrative expenses*
$
3,208
$
800
$
855
$
529
$
4,896
FINANCIAL EXPENSES (INCOME), net
427
148
(80
)
13
503
INCOME RELATED TO THE EXTINGUISHMENT
OF THE CONVERTIBLE DEBENTURES
(867
)
(867
)
(867
)
NET LOSS (PROFIT) FOR THE  PERIOD
$
2,768
$
948
$
(92
)
$
542
$
4,532
BASIC AND DILUTED NET
LOSS PER SHARE
$
0.04
$
0.02
$
0
$
0.01
WEIGHTED AVERAGE NUMBER OF
SHARES USED IN COMPUTING
BASIC AND DILUTED NET LOSS
PER SHARE
63,280,465
43,157,808
63,463,851
63,187,764
*
In
the Nine month period ended September 30, 2008 includes $239 thousands share-based
compensation and in the Three month period ended September 30, 2008 includes $18
thousands share-based compensation.
The
accompanying notes are an integral part of the consolidated financial statements.
F - 3
STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (CAPITAL DEFICIENCY)
(U.S.
          dollars in thousands, except share and per share data)
Share capital
Additional
paid-in
Capital
Warrants
Receivables
in respect of
Shares issued
Deficit
accumulated
during the
development
stage
Deficit
accumulated
before the
development
stage
Total
capital
deficiency
Number
Capital
I n  t h o u s a n d s
BALANCE AS OF JULY 7, 2005
(unaudited)
4,650,000
$
5
$
105
$
(73
)
$
37
CHANGES DURING THE PERIOD FROM JULY 7, 2005 THROUGH DECEMBER 31, 2007 (audited):
Issuance of shares
58,537,764
58
527
$
(150
)
435
Issuance of warrants
$
246
246
Net loss for the period
$
(1,764
)
(1,764
)
Share based compensation expenses
110
110
BALANCE AT DECEMBER 31, 2007
(audited)
63,187,764
63
742
246
(150
)
(1,764
)
(73
)
(936
)
CHANGES DURING THE PERIOD OF NINE
MONTHS ENDED SEPTEMBER 30, 2008
(unaudited):
Issuance of shares to shareholder
150
150
Issuance of shares - in relation with the debt extinguishment
1,200,000
1
149
150
Issuance of shares- net of issuance expenses
15,000,000
15
352
744
1,111
Issuance of warrants - in relation with the debt extinguishment
126
126
Net loss for the period
(2,768
)
(2,768
)
Share based compensation
239
239
BALANCE AT SEPTEMBER 30, 2008
79,387,764
$
79
$
1,482
$
1,116
$
-
$
(4,532
)
$
(73
)
$
(1,928
)
The accompanying notes are an
integral part of the consolidated financial statements.
F - 4
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(U.S.
          dollars in thousands)
Nine months ended
September 30
Three months ended
September 30
Cumulative from
July 7, 2005 through
September 30,
2008 (see note 1)
2008
2007
2008
2007
(Unaudited)
(Unaudited)
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit (Net loss)
$
(2,768
)
$
(948
)
$
92
$
(542
)
$
(4,532
)
Adjustments required to reconcile net loss
to net cash used in operating activities:
Depreciation
24
10
26
Exchange differences on long term deposits
(3
)
1
(3
)
Share based compensation expenses
239
100
18
26
349
Expenses (income) in respect of the
convertibles debentures
228
148
(277
)
148
302
Income in relation with the debt  extinguishment
(867
)
(867
)
(867
)
Liability for employee rights upon retirement
13
3
13
Increase in other accounts receivable and advance to supplier
(1,705
)
(44
)
(1,791
)
(40
)
(1,892
)
Increase in balance with minority  shareholder
(2
)
Increase in accounts payables
218
51
198
30
401
Increase in other accounts payable accrued expenses and
advances from third parties
2,284
92
2,160
12
2,616
Net cash used in operating activities
(2,337
)
(601
)
(453
)
(366
)
(3,589
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Lease deposits
(18
)
(18
)
(18
)
Payment for purchasing of fixed assets
(791
)
(195
)
(202
)
(195
)
(1,316
)
Net cash used in investing activities
(791
)
(213
)
(202
)
(213
)
(1,334
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of shares - net of issuance expenses
1,261
343
1,111
28
1,668
Loans received from shareholder
176
176
176
Loan received from related parties
224
224
224
Loans received
186
186
186
Proceeds from issuance of convertible
debentures and warrants net of issuance expenses
930
481
481
3,720
Net cash provided by financing activities
2,777
824
1,697
509
5,974
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(351
)
10
1,042
(70
)
1,051
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
1,470
11
77
91
68
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
1,119
$
21
$
1,119
$
21
$
1,119
The accompanying notes are an
integral part of the consolidated financial statement
F - 5
NOTES TO CONDENSED
FINANCIAL STATEMENTS (unaudited)
NOTE 1
–
GENERAL
a.
Global
Energy Inc. ("the Company") was incorporated under the laws of the State of Nevada on
February             16, 1999.
The
Company has been considered a development stage enterprise since July 7, 2005, as defined
by the Statement of Financial Accounting Standards ("SFAS") No. 7 –"Accounting
and Reporting by Development Stage Enterprise". The accompanying financial
statements have disclosed cumulative amounts in the statements of operations and cash
flows since the July 7, 2005 inception of becoming a development stage company until
September 30, 2008.
b.
During
May 2007, the Company established two subsidiaries in Israel: Global Fuel Israel Ltd.
("Fuel"),             a fully owned subsidiary, and Global N.R.G. Pacific Ltd.
("Pacific"), of which the Company owns a             50.1% interest. In October, 2007,
Pacific established a subsidiary in Ethiopia named Global Energy             Ethiopia PLC
("Global Ethiopia"). Pacific and its consolidated company act as the agricultural arm of
            the Company's activities in the Bio-Diesel field.
On
May 2, 2007, the Company entered into an agreement with AlphaKat GmbH ("AlphaKat")
in order to cooperate in commercialization of AlphaKat's technology of producing
mineral diesel oil from municipal waste using machines that convert hydrocarbon waste
into diesel oil invented for that purpose by AlphaKat (the "KDV machines"). On
July 10, 2007, the Company entered into an agreement with AlphaKat to incorporate and
operate a company named AlphaKat – Global Energy GmbH ("AGEI"). Each party
holds 50% of the shares of AGEI. AGEI is to provide worldwide marketing and sales
services of KDV machines in consideration of a 10% sales commission. The Company is
responsible to finance AGEI if such financing is required; AlphaKat has the right to
object to any sale of KDV machines.
The
consolidated financial statements include the accounts of the Company and its
subsidiaries mentioned above, and the accounts of the 50% owned entity (AGEI) which
according to FIN 46R is a variable interest entity and the Company is the primary
beneficiary.
F - 6
NOTE 2
–
INTERIM FINANCIAL STATEMENTS
The
accompanying unaudited interim consolidated financial statements as of September 30, 2008
and for the nine months then ended, have been prepared in accordance with accounting
principles generally accepted in the United States relating to the preparation of
financial statements for interim periods. Accordingly, they do not include all the
information and footnotes required for annual financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the nine
months ended September 30, 2008 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2008. The December 31, 2007 Condensed
Balance Sheet data was derived from audited financial statements, but do not include all
disclosures required by accounting principles generally accepted in the United States of
America. These financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 2007.
NOTE 3
–
GOING CONCERN
The
accompanying financial statements have been prepared assuming that the Company will
continue as a going concern. As of September 30, 2008, the Company had approximately
$1,119 thousands in cash and cash equivalents, approximately $3,228 thousands in negative
working capital, a stockholders' deficit of approximately $1,928 thousands and an
accumulated deficit of approximately $4,532 thousands. Management anticipates that the
Company will continue to generate significant losses from operations for the foreseeable
future, and that their business will require substantial additional investment that have
not yet been secured. The Company and its subsidiaries anticipate that the existing cash,
rose in a private placement and loans received during third quarter in 2008, will not be
sufficient to continue its operations through the next 12 months. The Company is also
committed to repay the loans in a period less than a year. Management is continuing in
the process of fund raising in the private equity markets as the Company will need to
finance future activities and general and administrative expenses. 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 may be necessary should the
Company be unable to continue as a going concern. The Company's continuation as a
going concern is dependent on its ability to obtain additional financing as may be
required and ultimately to attain profitability.
NOTE 4
–
NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS:
a.
In
May 2008, the FASB issued SFAS 162, "The Hierarchy of Generally Accepted
Accounting Principles". SFAS   162 identifies the sources of accounting
principles and the framework for selecting the principles used in the preparation of
financial statements of nongovernmental entities that are presented in conformity with
GAAP in the United States. Any effect of applying the provisions of SFAS 162 shall be
reported as a change in accounting principle in accordance with SFAS 154, "Accounting
Changes and Error Corrections". SFAS 162 is effective 60 days following
approval by the Securities and Exchange Commission of the Public Company Accounting
Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles. Management does not anticipate
that the adoption of SFAS 162 will have a material impact on the Company's financial
statements.
F - 7
b.
In
April 2008, the FASB issued FASB Staff Position ("FSP") FAS 142-3,
Determination of the Useful Life of Intangible Assets. This FSP amends the factors that
should be considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS 142, Goodwill and Other
Intangible Assets. The intent of this FSP is to improve the consistency between the
useful life of a recognized intangible asset under SFAS 142 and the period of expected
cash flows used to measure the fair value of the asset under SFAS 141R, and other
generally accepted accounting principles ("GAAP"). This FSP is effective for
fiscal years beginning after December 15, 2008. Early adoption is prohibited. The
Company is required to adopt FSP FAS 142-3 for the fiscal year beginning January 1,
2009. Management does not anticipate that the adoption of this FSP will have a material
impact on the Company's financial statements.
c.
In
December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, "Noncontrolling
Interests in Consolidated Financial Statements, an Amendment of ARB No. 51" ("SFAS
160"). SFAS 160 amends ARB 51 to establish accounting and reporting standards for
the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.
Ownership interests in subsidiaries held by parties other than its parent company are
required to be presented in the consolidated statement of financial position within
equity, but separate from the parent company's equity. SFAS 160 requires that
changes in a parent company's ownership interest while the parent company retains
its controlling financial interest in its subsidiary should be accounted for in a manner
similar to the accounting treatment of equity transactions. When a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former subsidiary
should be initially measured at fair value, with any gain or loss recognized in earnings.
SFAS
160 requires consolidated net income to be reported in amounts that include the amounts
attributable to both the parent company and the noncontrolling interest. It also requires
disclosure, on the face of the consolidated income statement, of the amounts of
consolidated net income attributable to both parent companies and the noncontrolling
interests.
SFAS
160 is effective for fiscal years (including interim periods within those fiscal years)
beginning on or after December 15, 2008. Earlier adoption is prohibited. SFAS 160 is
required to be applied prospectively as of the beginning of the fiscal year in which it
is initially applied, except for the presentation and disclosure requirement which shall
be applied retrospectively for all periods presented. The Company is required to adopt
SFAS 160 as of January 1, 2009. The Company is currently assessing the impact that SFAS
160 may have on its results of operations and financial position.
d.
In
May 2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting
Principles. SFAS 162 identifies the sources of accounting principles and the framework
for selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with GAAP in the United States.
Any effect of applying the provisions of SFAS 162 shall be reported as a change in
accounting principle in accordance with SFAS 154, Accounting Changes and Error
Corrections. SFAS 162 is effective November 15, 2008. Management does not anticipate
that the adoption of SFAS 162 will have a material impact on the Company's financial
statements.
e.
In
April 2008, the FASB issued FASB Staff Position ("FSP") FAS 142-3,
Determination of the Useful Life of Intangible Assets. This FSP amends the factors that
should be considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS 142, Goodwill and Other
Intangible Assets. The intent of this FSP is to improve the consistency between the
useful life of a recognized intangible asset under SFAS 142 and the period of expected
cash flows used to measure the fair value of the asset under SFAS 141R, and other
generally accepted accounting principles ("GAAP"). This FSP is effective for
fiscal years beginning after December 15, 2008. Early adoption is prohibited. The
Company is required to adopt FSP FAS 142-3 for the fiscal year beginning January 1,
2009. Management does not anticipate that the adoption of this FSP will have a material
impact on the Company's financial statements.
F - 8
f.
In
March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, "Disclosures
about Derivative Instruments and Hedging Activities"("SFAS 161"). SFAS 161
is intended to improve financial reporting regarding derivative instruments and hedging
activities by requiring enhanced disclosure to enable investors to better understand the
effects of such derivative instruments and hedging activities on a company's
financial position, financial performance and cash flows. SFAS 161 is effective for
financial statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged (January 1, 2009, for the Company). SFAS 161
also improves transparency regarding the location and amounts of derivative instruments
in a company's financial statements; how derivative instruments and related hedged
items are accounted for under Statement of Financial Accounting Standards No. 133 "Accounting
for Derivative Instruments and Hedging Activities"; and how derivative instruments
and related hedged items affect a company's financial position, financial
performance and cash flows. The Company is currently evaluating the effect SFAS 161 will
have on its financial statement presentations.
g.
In
June 2008, the EITF reached a consensus on EITF Issue No. 07-5, "Determining Whether
an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock" ("EITF
07-5"). EITF 07-5 addresses the determination of whether an equity linked financial
instrument (or embedded feature) that has all of the characteristics of a derivative
under other authoritative U.S. GAAP accounting literature is indexed to an entity's
own stock and would thus meet the first part of a scope exception from classification and
recognition as a derivative instrument. Nortel plans to adopt the provisions of EITF 07-5
on January 1, 2009. The Company is currently assessing the impact of the adoption of EITF
07-5, if any, on its results of operations and financial condition.
NOTE 5
–
TRANSACTIONS WITH THIRD PARTIES
a.
On
February 6, 2008 each of Alphakat and its President, Dr. Koch and AGEI entered into
agreements, which were amended on July 8, 2008, with Covanta Energy Corporation, a wholly
owned subsidiary of Covanta Holding Corporation ("Covanta"), an internationally
recognized owner and operator of waste-to-energy and power generation projects. Covanta's
facilities convert municipal solid waste into renewable energy for numerous communities,
predominately in the United States. Under the terms of these agreements, Covanta has the
exclusive right to purchase, use and make improvements to the KDV technology in the
United States for household waste feedstock, and non-exclusive rights to use the KDV
process in China, UK and the Republic of Ireland. Covanta must try to complete its
testing of the first unit within period agreed. If Covanta's tests on its first unit
are positive and it wishes to proceed further with its deployment of the KDV process then
it must begin by ordering five additional KDV 500 units within twelve months of the
commissioning date of the first KDV 500 unit. Over a ten-year period, which begins on the
commissioning date of its first unit, Covanta must order a total of 600 KDV 500 units or
the equivalent in terms of production capacity.
Covanta
also granted the Company the right to fund and own up to 35% of each of Covanta's
KDV-based projects. In addition, Covanta has agreed to pay to the Company an amount equal
to 10% of the gross revenue of each of Covanta's KDV-based projects, regardless of
whether the Company invests in these projects or not.
As
of September 30, 2008 no such KDV-based projects were initiated.
b.
American
Renewable Diesel ("American") is a special purpose company owned and managed by
Trianon Partners. On February 6, 2008 AGEI and American Renewable Diesel executed an
agreement granting to American Renewable Diesel the right to sell and use the KDV
technology in five states in the U.S.: Texas, California, New York, New Jersey and
Florida. Similar to the business arrangement with Covanta, the Company has the right to
fund and own up to 51% of each of American Renewable Diesel's KDV-based projects.
F - 9
As
of September 30, 2008 no such KDV-based projects were initiated.
c.
On
June 2, 2008, the Company entered into a letter of understanding with S.C. Supercom S.A.,
a             Romanian company engaged in the business of collecting municipal solid
waste. In the letter of             understanding, the parties have agreed to work
together to structure a joint company in Romania.
NOTE 6
–
SHORT TERM LOANS:
a.
Loan
received from related parties
During
the third quarter of 2008, the Company received a loan from a major shareholder and
Senior Management in the amount of 739 thousands New Israeli Shekels ("NIS"),
(approximately USD$ 224 thousands). The loan bears annual interest of 8.5% and is due on
January 1, 2009.
b.
Loans
received from third parties
During
the third quarter of 2008, the Company received two loans from third parties in the total
amount of $186 thousands. The loans bear a weighted average annual interest of 5%. $150
thousands are due on January 1, 2009 and $36 thousands are due on October 31, 2008 and
were paid on that date. The Company is not committed to give any additional rights to the
lenders.
c.
Loans
received from shareholder
During
the third quarter of 2008, the Company received a loan from shareholder in the amount of
$176 thousands. The loan bears annual interest of 4% and is due on January 1, 2009.
NOTE 7
–
STOCK OPTIONS:
a.
Options
to Directors and Employees
In
January 31, 2008 the Board of Directors approved the following option grants under the
2007 Plan: 1,050,000 options to three directors (350,000 options each), and 1,150,000
options to executive officer at an exercise price of US $2.2 per share. Two of the three
directors have resigned by the end of September, their 700,000 options were canceled and
none were vested.
The
fair value of the stock options grants were estimated using the Black-Scholes option
valuation model that used the following assumptions:
Risk free interest
3.93%
Dividend yields
0
Volatility
230%
Expected term (in years)
10
b.
Options
to consultant
On
May 21, 2008 the Company granted options to a consultant to purchase 226,415 of the
Company's common shares of $ 0.001 par value, the options were immediately vested
and exercisable at an exercise price of $1.25 per share. The fair value of the options
granted is $85 thousands. On September 24, 2008, the Company announced the appointment of
the consultant to its Board of Directors.
F - 10
The
fair value of the stock options grants were estimated using the Black-Scholes option
valuation model that used the following assumptions:
Risk free interest
2.66%
Dividend yields
0
Volatility
208%
Expected term (in years)
4
As
of September 30, 2008 no options were exercised.
As
of September 30, 2008, there were $ 687 thousands of total unrecognized compensation
expenses related to unvested share based compensation arrangement granted under the plan.
NOTE 8
–
CONVERTIBLE DEBENTURES AND WARRANTS
On
July 2007, the Company entered into an agreement to issue in four different installments,
as set in the agreement, $4 million aggregate principal amount of convertible debentures ("Debentures")
in a private placement. In March 20, 2008 the Company signed an amendment to the
debentures agreement which stated the following: (1) The private investor ("Investor")
agreed to purchase the forth installment of $1 million in two equal installments, the
first installment was on the date of the amendment and the last installment of $0.5
million is due after a registration statement for the underlying shares is declared
effective by the SEC. On May 13, 2008 the registration statement was declared effective,
and the Investor purchased the last installment (2) The conversion price was changed from
$2.20 to $1.25 for all Debentures outstanding and (3) The exercise price of the warrants
granted in conjunction of this private placement was changed from $2.50 and $2.35 to
$1.25.
On
July 15 2008 the Company entered to amended agreement with the Investor, the
agreement amends the agreement dated July 6, 2007 between the Company and the Investor.
The amendment allows the Company to immediately defer certain principal and interest
payments due under the Debentures agreement. In consideration the Company issued the
Investor 200,000 restricted shares of its common stock. On September 22, 2008, the
Company entered into a third amendment with the Investor in order to defer certain
principal and interest payments, the amendment was become effective as of September 30,
2008. The Amendment allows the Company the following:
—
The
exercise price of the warrants was reset to $0.10 per share and the total number of
shares underlying the warrants was increased from 600,000 to 7,500,000 shares. Prior to
the change the warrants were exercisable at a price of $1.25 per share.
—
The
conversion price of the Debentures was reset to $0.10, prior to the change the conversion
price was $1.25.
—
The
Company issued the Investor 1,000,000 restricted shares of its common stock.
—
The
interest rate on the face amount of $4 million Debentures increased from 10% to 12%.
—
The
repayment schedule of the Debentures was revised and will commence November 2008.
F - 11
The
Company analyzed the difference between the value of the Debentures using the original
terms compare to the value of the Debentures using the new terms under EITF Issue No.
96-19, "Debtor's Accounting for a Modification or Exchange of Debt
Instruments", and found this difference is greater than 10%, therefore it was
determined to account this transaction as debt extinguishment, and to record the
Debentures under the new terms at fair value, and the new equity instruments the Investor
received at fair value against statement of operation.
According
to the third amendment, in the event the Investor elects not to convert the Company may
elect to repay the Investor in cash or in Company's shares.
If
any event of default occurred, the full unpaid Principal amount of this Debenture,
together with interest shall become at the Investor's election, immediately due and
payable in cash. The conversion option included within each of the Company's
convertible debenture does not meet all the conditions of EITF 00-19 "Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's
Own Stock" related to equity classification and therefore should be bifurcated from
the debt host contract. In addition the call option is considered as embedded derivative
that require bifurcation, therefore this instrument is evaluated each reporting period
and the difference in fair value is recorded as financial income or expense.
In
September 30 2008 the Company measured the fair value of the embedded derivatives
features at approximately $2,445 thousands. The Company also measured the fair value of
warrants at approximately $372 thousands; and the fair value of the debentures at
approximately $188 thousands.
Following
are the details of the convertible debentures:
September 30,
2008
In thousands
Principal
188
Conversion option
2,506
Call option
(61
)
2,633
The
notes are secured by a pledge on all of the Company's assets.
As
of September 30, 2008, none of the warrants were exercised and none of the debentures
were converted into share.
NOTE 9
–
STOCK HOLDERS' EQUITY
The
Company's shares are traded on the Over-The-Counter Bulletin Board.
On
September 30, 2008, the Company entered into a Securities Purchase Agreement with
twenty-seven accredited investors for the sale of 30 units at a purchase price of $50
thousands per unit for total consideration of $1,500 thousands. Each unit consists of
500,000 shares of common stock and 500,000 share purchase warrants exercisable at $0.10
for a period of five years.
F - 12
As
finders fee, in connection with the securities purchase agreement, the Company paid $389
thousands, as well as issued 1,500,000 share purchase warrants exercisable at $0.10 to
the brokers.
The
consideration was allocated to the shares and warrants issued based on relative fair
value. The value allocated to all warrants estimated by using the Black Scholes
option-pricing model is $744 thousands and was based on the following assumptions:
dividend yield of 0%; expected volatility of 206%; risk-free interest rates of 3.91%; and
expected term of 5 years.
NOTE 10
–
ADVANCE FROM THIRD PARTY
During
the third quarter of 2008, the Company received an advance of $100 thousands from a third
party, whom the Company is negotiating on joint transaction in Ethiopia.
NOTE 11
–
FAIR VALUE OF FINANCIAL ASSETS
Adoption
of Statement of Financial Accounting Standards No. 157
In
September 2006, the Financial Accounting Standards Board ("FASB") issued
SFAS 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework
for measuring fair value in accordance with accounting principles generally accepted in
the United States, and expands disclosures about fair value measurements.
The
Company adopted the provisions of SFAS 157 as of January 1, 2008, for financial
instruments.
Although
the adoption of SFAS 157 did not materially impact the Company's financial
condition, results of operations, or cash flows, the Company is now required to provide
additional disclosures as part of its financial statements.
SFAS
157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in
measuring fair value. The three tiers are Level 1, defined as observable inputs such as
quoted prices in active markets; Level 2, defined as inputs other than quoted prices in
active markets that are either directly or indirectly observable; and Level 3, defined as
unobservable inputs in which little or no market data exists, therefore requiring an
entity to develop its own assumptions.
F - 13
The
Company's assets that are measured at fair value on a recurring basis, and subject
to the disclosure requirements of SFAS 157 at September 30, 2008, were as follows:
Fair value measurements at reporting date using
Description
Fair value at
September 30,
2008
Quoted prices in
active markets
for identical
assets
Significant
other
observable
inputs
Significant
unobservable
inputs
(Level 1)
(Level 2)
(Level 3)
Embedded derivative:
Conversion option
$
2,506
$
2,506
Call option
$
(61
)
$
(61
)
The
Company held no Level 1 and Level 2 Financial assets during the three and nine months
ended September 30, 2008.
The
Embedded Derivatives – conversion option and call option included in Level 3 above
was valued using information provided by the Company's appraiser.
Changes
in the Embedded Derivative – conversion option and call option included in Level 3
above during the three and nine months ended September 30, 2008 were as follows:
Level 3
Balance, January 1, 2008
$
1,032
Gain from updating the conversion option fair value
(917
)
Gain from eliminating the conversion option fair value
due to debt extinguishment
(115
)
New conversion option due to debt extinguishment
2,506
Call option due to debt extinguishment
(61
)
Balance, September 30, 2008
$
2,445
Balance, July 1, 2008
$
950
Gain from updating the conversion option fair value
(835
)
Gain from eliminating the conversion option fair value
due to debt extinguishment
(115
)
New conversion option due to debt extinguishment
2,506
Call option due to debt extinguishment
(61
)
Balance, September 30, 2008
$
2,445
NOTE 12
–
RESTRICTION PLACED IN RESPECT OF LIABILITY
According
to the third amendment between the Company and the Investor to the Debentures agreement,
dated September 20, 2008, (refer to note 7), it was agreed that the Company has to comply
with an approved budget. Any violation of this covenant shall be deemed an event of
default, and the full unpaid Principal amount of this Debenture, together with interest
shall become at the Investor's election, immediately due and payable in cash.
F - 14
NOTE 13
–
SUBSEQUENT EVENTS:
a.
On
October 8, 2008 the Company entered into agreement with Yanai Man Projects Ltd. ("YMP"),
with respect to the shares held by YMP in Pacific. YMP holds 49.9% interest of Pacific.
Pursuant to the agreement, the parties agreed that the Company would have the right at
any time to purchase from YMP 449 ordinary shares in Pacific, constituting 90% of YMP's
holdings in Pacific, for a consideration of $150 thousands, payable by Global over a
period of one year through the payment of ten installments of $15 thousands each starting
January 30, 2009. The Company exercised this right of purchase on October 8, 2008.
Additionally, during the first two years following the effective date of the agreement,
YMP has the right to require the Company to purchase an additional 25 ordinary shares in
Pacific held by YMP per year, for an additional consideration of $50 thousands, payable
by Global over a period of one year from the exercise of the right by YMP. The parties
also agreed that at all times, the Company has the right to purchase the 50 remaining
shares of Pacific held by YMP for an additional consideration of $100 thousands, payable
by the Company over a period of one year from the exercise of the right by Global.
NOTE 13
–
SUBSEQUENT EVENTS (continued):
b.
On
October 26, 2008, Pacific entered into a Loan Agreement (the "Agreement") with
third party. It was agreed that the Lender shall loan Pacific an aggregate of US$ 400
thousands, with US$ 300 thousands being transferred to Pacific in three equal
installments during October and November 2008. The loan is to be fully repaid to the
Lender by May 1, 2009 and will not bear interest. In the case of a default, the debt
shall be transferred to the Company, and the Lender shall be entitled to 1,000,000 shares
of the Company at no cost. In addition, the Company shall give a corporate guarantee for
the repayment of the loan. In addition Pacific will issue to the Lender shares in Pacific
constituting 44% of the outstanding shares of Pacific. Also, upon acquisition of
additional 5% of the shares in Pacific held by YMP (see a above), the Company shall
transfer said 5% shares to the Lender, no later than November 1, 2010. It was also agreed
that upon achievement of milestones of annual castor seeds production of 30,000, 40,000,
50,000, 60,000 or 70,000 tons of castor seeds, respectively, during any calendar year,
then the Company will be entitled to a share of 55%, 60%, 65%, 70% and 75%, respectively,
of all dividends distributed by Pacific with respect to such year. As of to date Pacific
has received $120 thousands from the Lender.
F - 15