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EX-31.2 - EXHIBIT 31.2 - GLOBAL ENERGY INCexhibit_31-2.htm
EX-21.1 - EXHIBIT 21.1 - GLOBAL ENERGY INCexhibit_21-1.htm
EX-32.1 - EXHIBIT 32.1 - GLOBAL ENERGY INCexhibit_32-1.htm
EX-31.1 - EXHIBIT 31.1 - GLOBAL ENERGY INCexhibit_31-1.htm
EX-10.59 - EXHIBIT 10.59 - GLOBAL ENERGY INCexhibit_10-59.htm
EX-10.60 - EXHIBIT 10.60 - GLOBAL ENERGY INCexhibit_10-60.htm


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549

Form 10-K

FOR ANNUAL AND TRANSITION REPORTS
 PURSUANT TO SECTIONS 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-28025

GLOBAL ENERGY INC.
 (Exact Name of Registrant as Specified in its Charter)
   
Nevada
86-0951473
(State or Other Jurisdiction of
(IRS Employer
Incorporation or Organization)
Identification No.)
   
35 Shaul Hamelech Street, 5th Floor,
61181
Tel Aviv, Israel
(Zip Code)
(Address of Principal Executive Offices)
 

+1 (646) 673-8435
 (Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value

        Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:

Yes o     No x

        Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act:

Yes o     No x

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes x     No o

       Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes o     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
 
 
 

 
 
        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company:
 
  Large accelerated filer o
Non-accelerated filer o
 
Accelerated filer o
Smaller reporting company x

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes o     No x
 
         The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2009, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $1.182 million (based on the average bid and asked price for the registrant’s common stock on June 30, 2009 on the OTC Bulletin Board of $0.026 per share).

        At April 12, 2010, 141,284,673 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None
 
 
 
 

 

 
TABLE OF CONTENTS
     
PART I
     
1
11
12
12
12
 
   
12
PART II
     
 
12
16
 
16
18
18
 
19
19
19
     
PART III
     
20
22
 
26
 
28
30
     
PART IV
     
30
     
 
31
 
32
 
 

 
 
 

 

 
PART I

Item 1.  Business

        Certain statements in this Annual Report on Form 10-K are “forward-looking statements”. These statements involve a number of risks, uncertainties and other factors that could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors which could materially affect such forward-looking statements are incorporated herein by reference. Investors are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date hereof and we will undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

        References in this Annual Report on Form 10-K to “Global Energy,” the “Company,” “we,” “us” or “our” are to Global Energy Inc., a Nevada corporation, and its subsidiaries.

Description of the Business

Historical Information
 
        Our business address is 35 Shaul Hamelech Street, 5th floor, Tel Aviv, 61181, Israel, and our telephone number is 972-077-202-5444. 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 annual report.
  
        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.

        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 2.

Company Strategy

        Since June 2007, 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.
 
 
 
1

 

 
        With the above factors in mind, we 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, independently or 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 liters of synthetic diesel fuel per hour, or approximately 4,000,000 liters (approximately 1,000,000 gallons) of synthetic diesel fuel per year.

        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 we will be able to negotiate agreements under which we will collect tipping fees for taking and processing MSW. When these tipping fees are factored in, the net cost should be significantly lower.

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 has 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 high speed. 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, vapor 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 for CO2 and vapor.

        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.

 
 
2

 

 

        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 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 MSW is in abundant supply. Broadly defined, MSW may include plastic, rubber, paper, cardboard and various food wastes. It requires major financial and logistical resources to collect recycle and arrange 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 to be about $35 per ton in the U.S. and $60 per ton in Europe.

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 four 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

 
 
(3)
Incorporators’ agreement and articles of Alphakat-Global Energy GmbH, dated November 22, 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.
 
(4)
License agreement between AlphaKat - Global Energy GmbH and Alphakat GmbH, dated March 11, 2010 and effective as of February 6 2008, by which Alphakat GmbH granted to AlphaKat - Global Energy GmbH a license to commercialize, market, offer for sale, use and practice and make improvements to Alphakat GmbH's proprietary renewable diesel technology on a world-wide basis other than in Mexico, Spain, Bulgaria and Italy. 

     Under these four agreements, Alphakat GmbH has granted Alphakat-Global Energy GmbH, the equally-owned subsidiary of Alphakat GmbH and ourselves, the following rights:

(1)
The non-exclusive right to sell and market KDV technology 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 technology in the United States and China.

 
 
4

 


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. Alphakat GmbH is a company controlled by Dr. Koch and was licensed by him to utilize the KDV technology. Alphakat-Global Energy GmbH is a company equally owned by Alphakat GmbH and us. We consolidated Alphakat-Global Energy GmbH in accordance with FIN 46R “Consolidation of Variable Interest Entities, an interpretation of ARB no. 51” (“FIN 46R”). Covanta Holding Corporation is 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 through Alphakat-Global Energy GmbH on July 8, 2008. Covanta Energy Corp. should achieve “target final acceptance date” after 350 days from the second payment, the final acceptance date can be changed by change of delivery dates of agreed shipments and work schedule. 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 is obligated to order a total of 600 KDV500 units or equivalent units 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.

       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, and 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 be comprised of four board members, with each of Supercom and ourselves entitled to appoint two.

        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.

        As of December 31, 2009 and as of this day, no such KDV-based projects were initiated.
 
 
 
5

 

 
Memorandum of Understanding with Shaanxi ShenMu SanJian Coal Chemical Co. Ltd.

        On March 9, 2008, the Company entered into a Memorandum of Understanding (“MOU”) with Shaanxi ShenMu SanJian Coal Chemical Co. Ltd. (“Shaanxi”), a company located in the People’s Republic of China, to initiate the KDV project in that region. Completion of the transaction based on this MOU is subject to due diligence, further negotiation and testing.

Other Operations – Production of Crude Castor Oil in Ethiopia

        We invested approximately $2,300,000 in the cultivation of castor plants in Southern Ethiopia. Our activities were 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.

        We also implemented a research and development program to develop 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 with YA Global” section beginning below, we 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.

        On March 18, 2009, our subsidiary, Global N.R.G. Pacific Ltd., or Pacific, sold to Presaco Investments Ltd., or Presaco, a company registered in Cyprus, all the stock capital of Pacific’s subsidiary, Global Energy Ethiopia Ltd. as well as all of Pacific’s right, title, and interest in and to all its property and assets in connection with the business of community castor farming for oil and the development of governmental lands for castor oil in Ethiopia.

        Pursuant to the purchase agreement, Presaco paid an aggregate consideration of $700,000 in cash, of which the initial payment of $595,000 was paid at closing and deposited in escrow. The entire amount has since been released from escrow and the second payment of $105,000 was deposited at closing in escrow and is subject to release to Pacific on March 1, 2010.  On March 23, 2010, the amount of approximately $103,000 after reduction for escrow fees was released from the escrow to Pacific.

        For the five years following the closing, Pacific and our company have agreed not to carry on or hold an interest in any company, venture, entity or other business (other than a minority interest in a publicly traded company) which competes with Presaco’s business of castor operation (including, without limitation, as a shareholder).

        Pacific was formed as a joint venture with Yanai Man Projects Ltd., a company owned by Yanai Man. On April 5, 2009, Yanai Man Projects Ltd. transferred its remaining 5% interest in Pacific to the Company, and after such time the Company has held 100% of the issued and outstanding shares of Pacific.

Joint Venture Agreement with Waste 2 Oil GmbH

        On May 8, 2009, Alphakat – Global Energy GmbH entered into an agreement for service operation of a KDV 500 unit with Waste 2 Oil GmbH (“W2O”), a German company, by which W2O provided plant operations and testing services in Hoyerswerda, Germany, to Alphakat – Global Energy GmbH for three months. W2O is responsible for operating the KDV 500 unit, hiring and paying the qualified workers involved with its operation and paying all taxes by law. The aim was to produce and sell diesel fuel. Alphakat – Global Energy GmbH agreed to pay W2O a monthly fee for covering the costs for operating the KDV 500 unit as follows: (a) a monthly fee of 5,000 Euro and (b) a fee of 1,000 Euro for each day of actual operation, plus VAT.

On May 8, 2009, Alphakat – Global Energy GmbH, or AKGE, a 50% subsidiary of Global Energy Inc., entered into an agreement for service operation of a KDV 500 unit with Waste 2 Oil GmbH, or W2O, a German company, pursuant to which W2O provided plant operations and testing services in Hoyerswerda, Germany, to AKGE for a period of three months. W2O was  responsible for operating the KDV 500 unit, hiring and paying the qualified workers involved with its operation and paying all taxes by law.

        The aim was to produce and sell diesel fuel. All income from the sale of the product was to be equally divided between AKGE and W2O. AKGE agreed to pay W2O a monthly fee for covering the cost of operating the KDV 500 unit as follows: (a) a monthly fee of 5,000 Euro, and (b) a fee of 1,000 Euro for each day of actual operation, plus VAT. The agreement was to commence five days after W2O notifies AKGE that the system is operational and will have a three month term.

Following the end of the three months, the agreement was not renewed.

Financing Agreement with YA Global

Initial Agreement with YA Global
        
On July 10, 2007, October 23, 2007, and December 27, 2007, we issued 10% secured convertible debentures to YA Global Investments, L.P., 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.
 
 
 
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March 2008 Amendment to YA Agreement

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.

        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 debentures 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 continue 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.

July 2008 Amendment to YA Agreement

        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.

 September 2008 Amending and Restating Agreement with YA Global

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).

        In addition, the amending and restating agreement provides for the following, but only if (and when) we completed 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 Ethiopia , 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;

 
 
7

 

 
(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, and the Company Redemption Amount became dependent on the amount by which the total gross proceeds raised in the fall of 2008 private placement exceeded $2,200,000.
        
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.

        As a result of our closing the first stage of the private placement 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 four 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;

 
 
8

 

 
(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.

August 2009 Amending Agreement with YA Agreement

On August 7, 2009 the Company agreed to modifications to the Securities Agreement, existing Debentures, which as of the such date were in the aggregate amount of $4,386,965,and related documents and instruments. The modifications were to become effective subject to the completion by the Company of minimum private placements in the amount of $650,000, among other conditions.  The parties agreed that upon completion of the private placement(s), payment in cash by the Company of $50,000 of the amounts outstanding under the debentures since April 1, 2009 ($20,000 of which had already been paid) and satisfaction of other conditions, the following would become effective:

 
·
The Existing Debentures terms would be modified as follows:

 
o
Payments.  All payments of principal and interest by the Company under the existing Debentures were to be deferred for a period of one year from the Effective Date.  Commencing the month preceding the one year anniversary of the Effective Date, the monthly payments to YA Global in the amount of $225,000 each were to resume.
 
 
o
Redemption.  The Company would have the option to redeem up to $3,000,000 of the outstanding principal and unpaid interest owing under the existing Debentures at any time with 15 days’ prior written notice to the Buyer at a redemption price equal to 115% of the amount being redeemed in accordance with the Amended and Restated Debenture.
 
 
o
Conversion Price.  The Conversion Price of the existing Debentures was to be reduced to the effective price of the Common Stock issued in connection with the Offering.
 
 
·
Warrants. The exercise price of the Warrants was to be reduced to the effective price of the Common Stock issued in connection with the Offering.  The number of shares underlying the Warrants shall not be changed, provided that warrants or other Common Stock purchase rights are not issued in connection with the Offering.  If any warrants or other Common Stock purchase rights are issued in connection with the Offering then the Company shall issue new warrants to the Buyer such that the proportion of warrant shares to the amount of the Buyer’s initial investment is equal to proportion of warrant shares to the amount of the new investment in the Offering.   Any such new warrants shall have an exercise price equal to the price of the Common Stock issued in connection with the Offering

 
·
Buyer’s Lock up Provision. During any calendar month beginning with the month in which the Effective Date occurs and ending with the calendar month preceding the month in which the one-year anniversary of the Effective Date occurs, except for Excluded Sales (as defined below), the Buyer shall not sell shares of Common Stock for gross proceeds (measured by the quantity of shares sold multiplied by the sales price) of greater than (a) $50,000, or (b) 20% of the aggregate dollar traded volume traded during the preceding calendar month (as measured by multiplying the total volume traded in such month by the average price during such month according to Bloomberg LP).  For the purposes hereof the term “Excluded Sales” shall mean any sales by the Buyer at a price of five cents ($0.05) or more.

March 2010 Amending Agreement with YA Global
 
On March 8, 2010, we entered into a letter agreement (the "Amendment") with YA Global with respect to outstanding secured convertible debentures, which as of such date were in the aggregate amount of $4,675,116, and warrants to purchase 7,500,000 shares of our company’s common stock ( “Warrants”), updating and superseding the amending agreement between us and YA Global dated August 7, 2009 and referred to above  (the " April 2009 Agreement").
 
 
 
9

 

The April 2009 Agreement allowed us to, among others, defer certain principal and interest payments due under the Debentures so long as we raise at least $650,000 in private offerings and other conditions are met.

We entered into an investment transaction ("Transaction") with Mr. Yuval Ganot and Noam Elimelech Ltd., an Israeli private company fully owned by Mr. Ganot, for an aggregate offering amount of up to $1,500,000 over the course of sixteen months.  This Transaction did not meet the terms and conditions of an Offering under the April 2009 Agreement; however, we entered into the Amendment with YA Global pursuant to which YA Global has agreed to consent to the Transaction on the terms and condition set forth in the Amendment.

In connection with YA Global’s consent to the Transaction, the Amendment provided, among others, for the following:

Covenants by Global Energy:

 
·
Global Energy provided a cash flow projection budget in a form acceptable to the YA Global, demonstrating that the Global Energy will have sufficient cash flows to fund its operations for a period of at least 12 months.
 
 
·
Global Energy made a cash payment under the existing debentures of $30,000.
 
Issuance of Amended Debenture and Warrant Amendments:

 
·
Debentures.  Global Energy issued to YA Global two Secured Convertible Debentures (the “Amended and Restated Debentures”) in exchange for the existing debentures. The total principal amount of the Amended and Restated Debentures together is equal to the total amounts outstanding under the existing debentures.

 
-
Debenture I is in a principal amount of $3.17 million, bears interest at 8% per annum and has a maturity date of 36 months from issuance, with an extension to 48 months if a "second financing milestone" is reached.  No payments are due for first 18 months (24 months if the "first financing milestone" is reached, and 36 months if the "second financing milestone" is reached), with $150,000 per month thereafter.  Payments can be made in cash or stock at a 5% discount to market price, provided shares can be resold.  This debenture is convertible into common stock at $.05 per share, and 80,000,000 shares have initially been reserved for this debenture.  Global Energy can redeem this debenture at anytime with a 15% redemption premium.  A form of this debenture with the full terms and conditions is attached hereto as Exhibit 10.2.

 
-
Debenture II is in a principal amount of $1.5 million, bears interest at 8% per annum (6% if the "first financing milestone" is reached, and 4% if the "second financing milestone" is reached) and has a maturity date of 36 months from issuance.  No payments are due until maturity.  This debenture is convertible into common stock at $.01 per share, and 190,000,000 shares have initially been reserved for this debenture.  Global Energy cannot redeem this debenture prior to maturity without YA Global's consent.  A form of this debenture with the full terms and conditions is attached hereto as Exhibit 10.3.

 
·
Warrants. The exercise price of the Warrants was reduced to $0.01 per share and the number of shares underlying the Warrants remains unchanged.

 
·
YA Global’s Lock up.  Beginning on date of Agreement and ending on the earlier of (i) February 1, 2012 or (ii) upon an event of default, on any particular Trading Day, except for any sales by the YA Global at a price of seven and one half cents ($0.075) or more, YA Global may not sell such number of shares of Common Stock that would exceed 20% of the volume traded during such Trading Day, unless waived by Global Energy.
  
 
·
"First Financing Milestone" means the raising of at least $1.5 million in gross proceeds from (i) the Transaction or (ii) any financing transaction resulting in cash proceeds to Global Energy  (provided that (a) such transaction does not violate any provisions of the YA Global financing documents or (b) YA Global consents to such transaction) (an " Approved Transaction "), and " Second Financing Milestone " means the raising of at least $2 million in gross proceeds from (i) the Transaction or (ii) any other Approved Offering on or before March 1, 2012.
  
 As of December 31, 2009, we were not in material breach of any of our obligations under this amending and restating agreement

Competition

        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 may result in an increase in the costs of feedstock, plant construction and operating expenses, as well as to make it more difficult to attract and retain qualified engineers, chemists and other employees whose services could be key to our operations. 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.

 
 
10

 

Intellectual Property

        We do not own any intellectual property.  Our subsidiary, AlphaKat - Global Energy GmbH, is a party to a license agreement with Alphakat GmbH by which Alphakat GmbH granted to our subsidiary, AlphaKat - Global Energy GmbH, a license to commercialize, market, offer for sale, use and practice and make improvements to Alphakat GmbH's proprietary renewable diesel technology on a world-wide basis other than in Mexico, Spain, Bulgaria and Italy.  See – "Description of Business – Strategic Agreements."

Governmental Regulations

        Our business will be conducted in various countries, which have varying degrees of regulation. The following is a discussion of some U.S. regulations which may or may not apply to our operations.

        There are no readily apparent U.S. Environmental Protection Agency, or EPA, regulatory fuel certification requirements applicable to using the renewable diesel in a stationary source, such as industrial applications or home heating fuel, or in certain marine applications. There may, however, be requirements applicable to emissions from individual furnaces, boilers, etc. As a practical matter, market acceptance of the bio-fuel may be limited until we can demonstrate that (i) the renewable diesel is comparable to conventional fuels, from an energy content and emissions perspective, as well as handling and storage perspectives, and (ii) that the renewable diesel is compatible with existing heating systems or power generation systems and other combustion systems. To date, we have not demonstrated any of the foregoing in such commercially available systems. Initial testing done on the renewable-diesel in a laboratory indicated that the renewable diesel is high quality diesel fuel.

        We have evaluated whether the renewable diesel can be formulated to comply with the standards of the EPA to be classified as “diesel.” EPA standards mandate that the “diesel” comply with the specifications that the American Society for Testing and Materials (ASTM) requires that the fuel be comprised of. However, we are currently evaluating whether the ASTM standard can be broadened to include our fuel.

        In order to be legally marketable as a fuel for on-road motor applications, the bio-fuel must be registered with the EPA and comply with the EPA’s health effects regulations. Under these regulations, a company registering a fuel must either complete a literature review and possibly health effects testing, or submit an application with a group of other companies manufacturing similar fuels. The National Biodiesel Board has completed the required health effects testing on behalf of the bio-diesel industry, and provides the testing data to companies seeking to register their bio-diesel with the EPA. To fit under the NBB umbrella, and be considered “bio-diesel” for marketing purposes, the bio-fuel must meet the ATSM 6751 specifications for bio-diesel described above. European countries use similar standards. ASTM 6751 compliant bio-diesel is already registered with the EPA and also meets the clean diesel standards established by the California Air Resources Board (CARB) and certain other states. As of the date of this report, the current formulation of the bio-fuel does not comply with ASTM 6751. Because water is a component used in the manufacture of our bio-fuel, it is unlikely that we will be able to reformulate our fuel to meet this ASTM standard; accordingly, we would need to seek EPA approval as described above for our fuel to be used on on-road motor vehicle applications.

        We are evaluating the regulatory requirements for using our fuel in motor vehicle applications in our territory outside the United States.

        Environmental permitting of renewable diesel manufacturing facilities varies with the characteristics of individual plants. Our renewable diesel is manufactured using a process that is believed to yield little, if any wastes, emissions or discharges, although there may be some air emissions that could require us to obtain air emission permits to construct and operate any plants we may build or acquire.

        Being a mineral, the diesel does not require certification from car and engine manufacturers, provided it fulfills the EU standards. The KDV process produces a bio-diesel and therefore is eligible for tax benefits in certain countries.

Employees

        As of December 31, 2009, we had one full time employee and one part time employee. We believe our relationships with our employees are good.


        Not Applicable.
 

 
11

 
 

        Not Applicable.

Item 2.  Properties

        We have no properties in Israel, and we currently lease approximately 10 square meters of office space from Yuval Ganot in Tel Aviv, Israel.


        As of date of this annual report, 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.

Item 4. [Removed and Reserved].

PART II


Market for Common Equity

        Our common stock is quoted on the OTC Bulletin Board under the symbol “GEYI”. Trading in our common stock has occurred on a relatively inconsistent basis and the volume of shares traded has been limited.

        The following table shows the quarterly high and low reported bid prices per share for our common stock over the fiscal quarters for the last two fiscal years as quoted on the OTC Bulletin Board. The bid prices represent quotations by dealers without adjustments for retail mark-ups, mark-downs or commissions and may not represent actual transactions. Investors should not rely on historical prices of our common stock as an indication of its future price performance. The last sale price of our common stock on March 23, 2010, was $0.017 per share.          

 
 
12

 

 
   
Low
   
High
 
2008
           
             
First Quarter
  $0.30     $0.80  
Second Quarter
  $0.40     $0.72  
Third Quarter
  $0.10     $0.55  
Fourth Quarter
  $0.02     $0.48  
             
2009
           
             
First Quarter
  $0.01     $0.09  
Second Quarter
  $0.01     $0.041  
Third Quarter
  $0.014     $0.0295  
Fourth Quarter
  $0.01     $0.0395  

Holders

        As of April 12, 2010, there were 141,284,673 shares of our common stock issued and outstanding held by 80 stockholders of record.

In connection with the Securities Purchase Agreement, dated as of September 10, 2009, with Yuval Ganot, as amended (the "Agreement"), as of April 15, 2010, an aggregate of 123 million shares are being held by an escrow agent for release in installments to Noam Elimelech Ltd., an Israeli company wholly owned by Mr. Ganot ("Investor"), upon each payment to us by the Investor of the applicable installment of the purchase price each month under the terms of the Agreement.

Dividends

        We have not paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain future earnings, if any, to fund the development and growth of our business. Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon our financial condition, operating results, capital requirements, applicable contractual restrictions and other factors as the board of directors deems relevant.

Recent Sales of Unregistered Securities

        Throughout the 2009 fiscal year, we authorized the issuance of options to our directors and officers to acquire in the aggregate 750,000 shares of our common stock. For more information, see Item. 11 entitled “Executive Compensation”.

        On March 20, 2008, August 7, 2009 and March 8, 2010, we entered into amendments 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. For more information, see Item 1. entitled “ Business ” under “Financing Agreement with YA Global”.

         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.

 
 
13

 
 
        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 U.S. 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 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 U.S. person pursuant to the exemption from registration provided for under Rule 506 of Regulation D, promulgated under the Securities Act of 1933, as amended. For more information, see Item 1. titled “ Business ” under “Financing Agreements”.

        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 $45,000 and $82,750 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.

On January 5, 2009, we issued 1,228,070 shares of the Company to YA Global Investments, L.P. upon the conversion of  $35 thousand of the principal amount of  the Debenture (a conversion price of $0.0285 per share).  On March 5, 2009, we issued 1,052,632 shares of the Company to YA Global upon the conversion of  $10 thousand of the principal amount of  the Debenture (a conversion price of $0.0095 per share).    On July 6, 2009, we issued 884,956 shares of the Company to YA Global upon the conversion of  $10 thousand of the principal amount of  the Debenture (a conversion price of $0.0113 per share). On September 6, 2009, we issued an additional 675,676 shares of the Company to YA Global upon the conversion of $10 thousand of the principal amount of  the Debenture (a conversion price of $0.0148 per share).

On September 10, 2009, we entered into a Securities Purchase Agreement with Yuval Ganot, or a company on his behalf, an accredited investor. Subject to the terms of the Agreement, on the closing date and on the 15th day of each calendar month subsequent to the Closing Date, for a period of sixteen months (each such day, a “Subsequent Closing”), Mr. Ganot agreed to purchase a total aggregate amount of up to 150,000,000 but not less than 100,000,000 of our shares of Common Stock (the “Shares”) in exchange for an aggregate purchase price of up to $1,500,000. The effective purchase price under the Agreement is $0.01 per Share. Pursuant to the terms of the Agreement, Mr. Ganot may, at his sole and absolute discretion, elect not to purchase all or a part of the portion of the Shares scheduled to be purchased on the final Subsequent Closing (50,000,000 Shares).

 We also undertook to endeavor that Mr. Ganot (or its representative) is appointed to our Board of Directors. We further granted Mr. Ganot a right of first offer to participate in any subsequent equity financing that shall expire on the earliest of the first anniversary of the Agreement or the expiration of the right of first offer period. Mr. Ganot was further granted, subject to applicable law, a right to participate in any equity financing pursued by us in the two year period following the Closing Date, on the same terms and in such manner that will maintain its ownership in us. Mr. Ganot had the right, at any time prior to the Closing Date, to withdraw from the Agreement.

On December 23, 2009, we entered into an Amendment to the Securities Purchase Agreement with Yuval Ganot, pursuant to which the closing date of the investment (the “Investment”) contemplated by the Agreement would be December 23, 2009, and Noam Elimelech Ltd., an Israeli private company fully owned by Mr. Ganot, would be the investor (the “Investor”).  The Amendment provided that until the fulfillment of certain conditions set forth in the Amendment, the Investor would have the right to terminate the Agreement with written notice to us. It further provided that we would reimburse the Investor for all legal fees borne by the Investor in connection with the Investment.

Pursuant to the terms of the Agreement and the Amendment, on December 23, 2009 (the “Closing Date”), the Investment transaction was completed. We issued 15,263,700 shares in the aggregate to the Inventor during the fourth quarter of 2009 for payments of $152,637 in the aggregate. On each subsequent closing (which is to occur on the 15th day of each calendar month subsequent to the Closing Date), the Investor is to pay the applicable installment of the purchase price ($60,000) directly to us, and the escrow agent is to release to the Investor 5,400,000 shares subject to such payment, as contemplated by the Agreement.
 
On April 13, 2010, we signed an agreement with Messrs. Ori Ackerman and Amnon Dradik and Intarpina Ltd. providing for the terms of payment our brokers who introduced Mr. Ganot to us.  Under the terms of the agreement, we are to pay them an aggregate of $60,000 payable over 10 months and issue them options to acquire an aggregate of 5,000,000 shares at an exercise price of $.01 per share.
 
 
14

 

Use of Proceeds from Registered Securities

        None.

Issuer Purchases of Equity Securities

        None.

Equity Compensation Plan Information

(1)
Our board of directors adopted an equity compensation plan, the 2007 Share Option Plan, on May 15, 2007, under which a total of 8,500,000, shares of our common stock have been authorized for issuance, On March 31, 2009, our board of directors approved the increase of the number of shares reserved for issuance under the Plan from 8,500,000 shares to 12,150,000 shares. The following summary information is presented for stock options authorized for issuance on an aggregate basis as of December 31, 2009.

 
 
15

 

 
Plan Category
 
Number of Securities to be
 issued upon exercise of
 outstanding options,
 warrants and rights.
 (a)
   
Weighted average
 exercise price of
 outstanding options,
 warrants and rights.
 (b)
   
Number of securities
 remaining available
 for future issuance
 under equity
 compensation plans
 (excluding securities
 reflected in column (a)
 (c)
 
                   
Equity compensation plans
approved by security holders
    9,281,436       0.91       2,868,564  
                         
Equity compensation plans not
approved by security holders
                       

(1)     As of December 31, 2009, the following options have been issued and outstanding pursuant to an equity compensation plan: 5,055,021 options granted to Asi Shalgi pursuant to an option agreement dated April 30, 2007, 200,000 options with an exercise price of $0.01 granted to Dr. Irit Arbel , 226,415 options with an exercise price of $1.25 granted to Mr. Amir Elbaz for his services in YA Global transaction and 2,700,000 options with an average exercise price of $0.178 granted to officers and directors during 2008. During 2009, 750,000 options were issued to Mr. Alex Werber pursuant to option agreement with an exercise price of $0.175, and 1,000,000 options with an exercise price of $0.02 granted to Mr. David Zenker  for his services in the Private Placement with Yuval Ganot .

(2)     Options remaining available for future issuance under the share option plan, excluding securities reflected in column (a).

        The share option plan is administered by either our board of directors or a committee, consisting of such number of members (but no less than two (2)) as may be determined by our board of directors, to which the board of directors shall have delegated power to act on its behalf with respect to the share option plan. The administrator of the share option plan has full power and authority to select the individuals to whom awards will be granted, to make any combination of awards to participants, to accelerate the exercisability or vesting of any award, to provide substitute awards and to determine the specific terms and conditions of each award, subject to the provisions of the share option plan, our Articles of Association and any applicable law.

        The share option plan permits us to make grants of stock options to officers, employees, directors, consultants and other key persons. Stock options granted under the share option plan shall have an exercise price as determined by the administrator of the share option plan.

        In the event of a merger or sale of all or substantially all assets or shares of capital stock, the administrator at its sole discretion shall decide the treatment of the options in the sale event.


        Not applicable.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion in conjunction with our consolidated financial statements and related notes thereto. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences include those incorporated herein by reference. See “Risk Factors” in Item 1A in this Annual Report on Form 10-K.

Critical Accounting Policies

Going concern considerations

        As of December 31, 2009, we had negative working capital of approximately $5,920,000 and an accumulated capital deficiency of approximately $4,979,000. 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 December 31, 2009, 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.
 

 
16

 

 
        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 financial statements attached to this annual report 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 loans repayment of approximately $238,000 during the period between December 31, 2009 and December 31, 2010, as described in detail in Item. 1 entitled “Business ”under “ Financing Agreement ”.

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.  In addition, pursuant to a Securities Purchase Agreement with Yuval Ganot, as of December 31, 2009, we sold an aggregate of 15,263,700 of our shares of common stock for an aggregate purchase price of $120,000.  As of December 31, 2009, our cash and cash equivalents were $100,000 compared to $278,000 as of December 31, 2008, and we had a negative working capital of $5,920,000.
 
        We have committed to an installment payment schedule that requires us to make monthly payments in cash and shares on our outstanding debt to our senior secured lender.  See "Financing Agreement with YA Global" in Item 1. under the "Description of the Business" for more information.

        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.

Results of Operations for the Year ended December 31, 2009

        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 fiscal year ended December 31, 2009 and incurred a cumulative loss of $8,312,000  from July 7, 2005 through December 31, 2009.

Off-Balance Sheet Arrangements

        We do not currently have off-balance sheet arrangements.

Plan of Operation

         For the 12 months ending in December 2010, we estimate expending a total of approximately $720,000 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, 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
  $ 240,000  
Other Operations
  $ 480,000  
Total
  $ 720,000  

 
 
17

 

Newly Issued Accounting Pronouncements

 
1)
The Company adopted an accounting standard update regarding the determination of the useful life of intangible assets. As codified in ASC 350-30-35, this update amends the factors considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under intangibles accounting. It also requires a consistent approach between the useful life of a recognized intangible asset under prior business combination accounting and the period of expected cash flows used to measure the fair value of an asset under the new business combinations accounting (as currently codified under ASC 850). The update also requires enhanced disclosures when an intangible asset’s expected future cash flows are affected by an entity’s intent and/or ability to renew or extend the arrangement. The adoption did not have a material impact on the Company’s financial statements.

 
2)
The Company adopted a new accounting standard for subsequent events, as codified in ASC 855-10. The update modifies the names of the two types of subsequent events either as recognized subsequent events (previously referred to in practice as Type I subsequent events) or non-recognized subsequent events (previously referred to in practice as Type II subsequent events). In addition, the standard modifies the definition of subsequent events to refer to events or transactions that occur after the balance sheet date, but before the financial statements are issued (for public entities). The update did not result in significant changes in the practice of subsequent event disclosures, and therefore the adoption did not have a material impact on the Company’s financial statements.

 
3)
The Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.

 
4)
The Company adopted FASB ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820) (“ASU 2009-05”). ASU 2009-05 provided amendments to ASC 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain techniques. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. Adoption of ASU 2009-05 did not have a material impact on the Company’s results of operations or financial condition.


        Not applicable.

Item 8.  Financial Statements and Supplementary Data
 
 
18

 
 
GLOBAL ENERGY INC.
(A development stage company)

CONSOLIDATED FINANCIAL STATEMENTS

2009 ANNUAL REPORT

 
 

 
 
GLOBAL ENERGY INC.
(A development stage company)
 
2009 ANNUAL REPORT
 
TABLE OF CONTENTS
 
 
Page
   
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
F - 3
   
CONSOLIDATED FINANCIAL STATEMENTS  IN U.S. DOLLARS:
 
F - 4
F - 5
F - 6
F - 7
F - 8- F - 34

 
F - 2

 
 
REPORT OF REGISTERED INDEPENDENT AUDITORS

To the Board of Directors and Stockholders
of Global Energy, Inc. (a development stage company):

We have audited the accompanying balance sheet of Global Energy, Inc. and subsidiaries (a development stage company) as of December 31, 2009, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the year ended December 31, 2009. 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 audit. We did not audit the balance sheet as of December 31, 2008 and the statement of operation for the years ended December 31, 2008 and 2007 and the cumulative totals of the Company for the period from July 7, 2005 (date of inception) to December 31, 2008, which totals reflect a deficit of $6,892,000 accumulated during the development stage. Both, the statements and the cumulative totals before restatement were audited by other auditors whose report, dated May 18, 2009, expressed an unqualified opinion on those statements.

We also audited the adjustments described in Note 8 that were applied to restate the 2008 and 2007 financial statements. In our opinion, such adjustments are appropriate and have been properly applied.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of  Global Energy Inc. and subsidiaries as of December 31, 2009, and the results of its operations and its cash flows for the year ended December 31, 2009, 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 1 to the financial statements, the Company is in the development stage, and has not established any source of revenue to cover its operating costs. As such, it has incurred an operating loss since inception. Further, as of December 31, 2009, the cash resources of the Company were insufficient to meet its planned business objectives. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding these matters is also described in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Respectfully submitted,

/s/ Weinberg & Baer LLC

Weinberg & Baer LLC
Baltimore, Maryland
April 13, 2010

 
F - 3

 
 
GLOBAL ENEGY INC.
(A development stage company)
 
   
December 31
 
   
2009
   
2008
 
   
U.S dollars in thousands
 
A s s e t s
           
CURRENT ASSETS:
           
Cash and cash equivalents
  $ 100     $ 278  
Restricted cash
    510          
Advance to related party
    3,512       3,550  
Other accounts receivable
    47       146  
          T o t a l  current assets
    3,764       3,974  
LONG TERM DEPOSITS
            3  
ADVANCE TO MINORITY INTEREST SHAREHOLDER
    18       18  
PROPERTY PLANT AND EQUIPMENT, net of accumulated depreciation
    952       1,342  
          T o t a l  assets
  $ 4,734     $ 5,337  
                 
Liabilities net of capital deficiency
               
CURRENT LIABILITIES:
               
Accounts payables
  $ 133     $ 284  
Accrued expenses
    1,201       550  
Advance from third party
    3,512       3,550  
Short term loans
    138       321  
Short term loans from related parties
    100       552  
Debentures convertible into shares
    4,600       4,256 *
T o t a l  current liabilities
    9,684       9,513  
ACCRUED SEVERENCE AND VACATION
    11       5  
MINORITY INTEREST
    18       18  
T o t a l  liabilities
    9,713       9,536  
COMMITMENTS AND CONTINGENCIES
               
CAPITAL DEFICIENCY:
               
Share capital (Note 11) -
Common shares of $0.001 par value each:
Authorized: 750,000,000 and 250,000,000 shares at December 31, 2009 and 2008, respectively; Issued
and outstanding: 126,548,373 and 81,701,834 shares at December 31, 2009 and 2008, respectively
    127       82  
Additional paid-in capital
    2,064       1,469  
Warrants
    1,215       1,215  
Receivables in respect of shares issued
               
Accumulated deficit during development stage
    (8,312 )     (6,892 )*
Accumulated deficit before development stage
    (73 )     (73 )
T o t a l  capital deficiency
    (4,979 )     (4,199 )
T o t a l  liabilities net of capital deficiency
  $ 4,734     $ 5,337  
 
*After giving retroactive effect to the adoption of FASB ASC 470-20, as further described in note 8.
 
The accompanying notes are an integral part of the consolidated financial statements.
 
 
F - 4

 
 
GLOBAL ENERGY INC.
(A development stage company)
 
   
Year ended December 31
   
Cumulative from July 7,
2005 through
December 31,
 
   
2009
   
2008
   
2007
   
2009
 
   
U.S dollars in thousands, except share data
 
OPERATING EXPENSES -
                       
General and Administrative expenses (*)
  $ (1,373 )   $ (2,791   $ (1,547   $ (5,810 )
                                 
FINANCIAL EXPENSES - NET **
    (531 )     (1,180     (404     (1,786 )
NET (LOSS) FROM CONTINUING OPERATIONS FOR THE PERIOD
  $ (1,904 )   $ (3,971 )   $ (1,951 )   $ (7,596 )
DISCONTINUED OPERATION:
                               
   Loss from operations of discontinued component
    -       (1,157     (43     (1,200 )
Gain on sale of subsidiary
    484                       484  
NET LOSS
  $ (1,420 )   $ (5,128   $ (1,994   $ (8,312 )
                                 
NET LOSS PER SHARE, BASIC AND DILUTED
  $ (0.015   $ (0.075   $ (0.04      
                                 
WEIGHTED AVERAGE NUMBER OF
                               
SHARES USED IN COMPUTING BASIC
    91,837,656       67,669,862       48,206,454          
AND DILUTED NET LOSS PER SHARE
 
 
 
 
* In the year ended December 31, 2009 - includes $165 thousand share-based compensation (31.12.2008 - $150 thousand).

** After giving retroactive effect to the adoption of FASB ASC 470-20, as further described in note 8.
 
The accompanying notes are an integral part of the consolidated financial statements.

 
F - 5

 
 
GLOBAL ENERGY INC.
(A development stage company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (CAPITAL DEFICIENCY)
 
(U.S. dollars in thousands, except share and per share data)
 
                     
Deficit
   
Deficit
       
                     
accumulated
   
accumulated
       
         
Additional
         
during the
   
before the
   
Total
 
   
Share capital
   
paid-in
         
development
   
development
   
capital
 
   
Number
   
capital
   
Capital
   
warrants
   
stage
   
stage
   
deficiency
 
                                           
BALANCE AS OF JULY 7, 2005
    4,650,000     $ 5     $ 105                 $ (73 )   $ 37  
CHANGES DURING THE PERIOD FROM JULY 7, 2005 THROUGH DECEMBER 31, 2008:
                                                   
Issuance of shares - net of issuance expenses
    75,537,764       75       931     $ 843                     1,849  
Issuance of warrants
                            246                     246  
Issuance of shares and warrants - in relation with
   the debt extinguishment
    1,200,000       1       149       126                     276  
Issuance of shares - in relation with conversion of debentures
    314,070       1       24                             25  
Net loss for the period
                                  $ (6,892 ) *             (6,640 )
Issuance of options for services
                    260                               260  
BALANCE AT DECEMBER 31, 2008
    81,701,834       82       1,469       1,215       (6,892 )     (73     (4,199
CHANGES DURING THE YEAR ENDED
                                                       
December 31, 2009 :
                                                       
Issuance of shares- net of issuance expenses
    15,263,700       15       137                               152  
Issuance of shares to extinguish debt
    24,741,505       25       221                               246  
Share based compensation for services
    1,000,000       1       11                               12  
Issuance of shares - in relation
with conversion of debentures
    3,841,334       4       61                               65  
 Net loss for the period
                                    (1,420 )             (1,420 )
Issuance of options for services
                    165                               165  
BALANCE AT December 31, 2009
    126,548,373     $ 127     $ 2,064     $ 1,215     $ (8,312 )   $ (73 )   $ (4,979 )
 
*After giving retroactive effect to the adoption of FASB ASC 470-20, as further described in note 8.

The accompanying notes are an integral part of the consolidated financial statements.

 
F - 6

 
 
GLOBAL ENERGY INC.
(A development stage company)
 
         
Cumulative
 
         
from July 7,
 
         
2005 through
 
   
Year ended December 31
   
December 31,
 
   
2009
   
2008
   
2007
   
2009
 
   
U.S dollars in thousands
 
CASH FLOWS FROM OPERATING ACTIVITIES:
                       
Net loss for the period
  $ (1,420 )   $ (5,128 )   $ (1,994 )   $ (8,312 )
Adjustments required to reconcile net loss
to net cash used in operating activities:
                               
Depreciation
    10       35       2       47  
Gain from sale of subsidiary
    (484 )                     (484 )
Exchange differences on long term deposits
    3       (3 )                
Share based compensation expenses
    164       150       110       424  
Increase (decrease) accrued interest on Short term loan from related parties
    13                       19  
Increase (decrease) accrued interest on Short term loan
    39                       33  
Expenses in respect of the convertibles debentures
    449       1,009       403       1,532 *
                                 
Increase (decrease) Accrued severance and vacation
    6       5               11  
Decrease (increase) in other accounts receivable and advance from supplier
    67       (3,491 )     (187 )     (3,611 )
Increase (decrease) in advance to minority shareholder
            2       (2 )        
Increase in accounts payables
    37       101       173       311  
Increase (decrease) in accrued expenses and advance from supplier
    678       3,794       317       4,768  
Net cash used in operating activities
    (438 )     (3,526 )     (1,178 )     (5,571 )
CASH FLOWS FROM INVESTING ACTIVITIES:
                               
  Lease deposits
                    (18 )     (18 )
Proceeds from sale of subsidiary
    588                       588  
  Payment for purchasing of property and equipment
            (854 )     (525 )     (1,379 )
Net cash used in investing activities
     588       (854 )     (543 )     (809 )
CASH FLOWS FROM FINANCING ACTIVITIES:
                               
Issuance of shares - net of issuance expenses
    152       1,414       390       1,973  
Loans received from shareholders and related parties
            528               528  
Loans received from others
            316               316  
Debentures repaid
    (40 )                     (40 )
Proceeds from debt issuance
                            46  
Proceeds from issuance of convertible debentures and warrants net of issuance expenses
            930       2,790       3,720  
Loans repaid
    (440 )                     (440 )
Net cash provided by (used in) financing activities
    (328 )     3,188       3,180       6,103  
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    (178 )     (1,192 )     1,459       32  
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    278       1,470       11       68  
    CASH AND CASH EQUIVALENTS AT END OF PERIOD
  $ 100     $ 278     $ 1,470     $ 100  
NON-CASH TRANSACTION:
                               
Conversion of loans payable into shares
    246             $ 28          
Conversion of debentures into shares
          $ 25                  
Issuance of shares and warrants - in relation with debt extinguishment
    65     $ 276                  
 
*After giving retroactive effect to the adoption of FASB ASC 470-20, as further described in note 8.

The accompanying notes are an integral part of the consolidated financial statements.

 
F - 7

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
 
 
a.
Going concern considerations
 
The accompanying financial statements have been prepared assuming that Global Energy Inc. ("the Company") will continue as a going concern. As of December 31, 2009, the Company had approximately $100 thousand in cash and cash equivalents, approximately $5,920 thousand in negative working capital, a shareholders’ deficit of approximately $4,979 thousand and an accumulated deficit during development stage of approximately $8,312 thousand. Management anticipates that the Company will continue to generate significant losses from operations for the foreseeable future, and that it's business will require substantial additional investments that have not yet been secured. 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.

 
b.
General
 
The Company was incorporated under the laws of the State of Nevada on February 16, 1999.

On July 6, 2005, the Company completed the sale of all of its oil and gas assets for the sum of $50,000.

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. 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, 2009.

In May 2007 the Company established two subsidiaries in Israel: Global Fuel Israel Ltd. (“Fuel”) a wholly owned subsidiary and Global N.R.G. Pacific Ltd. (“Pacific”) which the Company owned 50.1%. In 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.
 
 
F - 8

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

 
b.
General (continued):
 
On October 8, 2008 the Company entered into an agreement with a related party, Yanai Man Projects Ltd. (“YMP”), with respect to the shares held by YMP in Pacific. The sole shareholder of YMP is also the CEO of 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 consideration of $150 thousand, payable by the Company over a period of one year through the payment of ten monthly installments of $15 thousand each starting January 30, 2009. The Company exercised this right of purchase on October 8, 2008 and therefore as of December 31, 2009 the Company holds 95% of Pacific's share capital. 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 a total of $50 thousand, payable by the Company 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 thousand, payable by the Company over a period of one year from the exercise of the right by the Company. On March 3, 2009 this agreement with YMP was amended and it was agreed that the 95% of the shares of Pacific will remain the Company's but the sum of $150 thousand will not be paid. According to this amendment the $150 thousand was not presented in these financial statements as a liability.

As to an agreement to issue to third party shares in Pacific constituting 44% of the outstanding shares of Pacific that was not fulfilled, see Note 5.
 
On March 18, 2009, Global Ethiopia was sold in consideration of $700 thousand. Immediately after the sale, Pacific's CEO resigned and YMP agreed to sell the remaining 5% of the share capital of Pacific to the Company in consideration for NIS 50 ($12).

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 converts hydrocarbon waste into diesel oil invented for that purpose by AlphaKat ("KDV machines"). As of December 31, 2009 the Company paid AlphaKat an amount of $931 thousand on account of a KDV500 plant that has yet to be ordered. This amount is presented in the financial statements as advance on account of acquisition of machinery as part of property plant and equipment. The total amount that the Company will have to pay for the KDV500 plant will be at least Euro 2.5 million (approximately $3.6 million).The final amount depends on the final configuration of the KDV500 and additional features that will be ordered.
 
 
F - 9

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

 
b.
General (continued):
 
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 10% sale 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 Company has consolidated AGEI. See item d, below.

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”), owner and operator of waste-to-energy and power generation projects. 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.

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 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 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.

On July 8, 2008, Covanta purchased a KDV500 unit through AGEI. Until December 31, 2009 Covanta had paid $3,550 thousand on account of the purchased KDV 500 unit, according to the payment schedule. This amount was advanced by AGEI to Alphakat and is presented in these financial statements as a liability to Covanta ("Advance from third party") and as an asset ("Advance to related party").

American Renewable Diesel ("American") is a special purpose company owned and managed by Trianon Partners. On February 6, 2008, AGEI and American executed an agreement granting to American the right to sell and use the KDV technology in five states in the U.S.: Texas, California, New York, New Jersey and Florida for all types of feedstocks, except for household waste. Similar to the business arrangement with Covanta, the Company has the right to fund and own up to 51% of each of American’s KDV-based projects.
 
As of December 31, 2009, no such KDV-based projects were initiated.
 
 
F - 10

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

 
b.
General (continued):
 
On November 11, 2008 the Company entered into a joint venture agreement with S.C. Supercom S.A. ("Supercom"), 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. ("Target"), a Romanian company. The Company and Supercom agreed to incorporate a legal entity in Romania under the name Super Energy S.A. ("Super Energy"), 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 be comprised of four board members, with each of Supercom and the Company entitled to appoint two.

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.

As of December 31, 2009 and as of the date of the approval of these financial statements, no such KDV-based projects were initiated.

On March 9, 2008, the Company entered into a Memorandum of Understanding ("MOU") with Shaanxi ShenMu SanJian Coal Chemical Co. Ltd. ("Shaanxi"), a company located in the People's Republic of China, to initiate the KDV project in that region. Completion of the transaction based on this MOU is subject to due diligence, further negotiation and testing.
 
 
c.
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. Most 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 (except AGEI which is EURO).
 
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 re-measured using the representative foreign exchange rate at the balance sheet date. Operational accounts and non-monetary balance sheet accounts are measured and recorded at the rate in effect at the date of transaction. The effects of foreign currency re-measurement are reported in current operations (as “financial expenses - net) and have not been material to date.
 
 
F - 11

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

 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 is a variable interest entity and the Company is the primary beneficiary.
 
Inter-company 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, plant and equipment

Property, plant 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 is 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. Tools and equipment are depreciated over five years. Furniture is depreciated over fourteen years.
 
                     g.               Impairment of long-lived assets

The Company's long-lived assets are reviewed for impairment 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, 2009, 2008 and 2007, no impairment losses have been identified.

 
F - 12

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):
 
                     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 may differ from those estimates.

 
 i.
Derivative financial instruments (“derivatives”)
 
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.

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.
 
                      j.               Share-based payments

The Company accounts for awards classified as equity awards 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 graded vesting attribution method.

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. The fair value of the options granted is revalued over the related service periods and recognized over the vesting period.
 
                     k.              Loss per share
 
 
Net loss per share, basic and diluted, is computed on the basis of the net loss for the period divided by the weighted average number of common shares outstanding during the period. Diluted net loss per share is based upon the weighted average number 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, 2009, and 2008, does not include common share equivalents, since such inclusion would be anti-dilutive.
 
                     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 bases of assets and liabilities under the applicable tax laws. Deferred tax balances are computed using the tax rates expected to be in effect when those differences reverse. A valuation allowance in respect of deferred tax assets is provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has provided a full valuation allowance with respect to its deferred tax assets.
 
                     n.               Comprehensive loss
 
The Company has no component of comprehensive income loss other than net loss.

 
F - 13

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

                     p.               Newly issued accounting pronouncements:

The Company adopted an accounting standard update regarding the determination of the useful life of intangible assets. As codified in ASC 350-30-35, this update amends the factors considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under intangibles accounting. It also requires a consistent approach between the useful life of a recognized intangible asset under prior business combination accounting and the period of expected cash flows used to measure the fair value of an asset under the new business combinations accounting (as currently codified under ASC 850). The update also requires enhanced disclosures when an intangible asset’s expected future cash flows are affected by an entity’s intent and/or ability to renew or extend the arrangement. The adoption did not have a material impact on the Company’s financial statements.

The Company adopted a new accounting standard for subsequent events, as codified in ASC 855-10. The update modifies the names of the two types of subsequent events either as recognized subsequent events (previously referred to in practice as Type I subsequent events) or non-recognized subsequent events (previously referred to in practice as Type II subsequent events). In addition, the standard modifies the definition of subsequent events to refer to events or transactions that occur after the balance sheet date, but before the financial statements are issued (for public entities). The update did not result in significant changes in the practice of subsequent event disclosures, and therefore the adoption did not have a material impact on the Company’s financial statements.

The Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.

The Company adopted FASB ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820) (“ASU 2009-05”). ASU 2009-05 provided amendments to ASC 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain techniques. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. Adoption of ASU 2009-05 did not have a material impact on the Company’s results of operations or financial condition.

 
F - 14

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - OTHER ACCOUNTS RECEIVABLE:
 
   
December 31
 
   
2009
   
2008
 
   
U.S dollars in thousands
 
Prepaid expenses
  $ 25     $ 69  
Governmental Institutions
    4       14  
Other receivable
    18       63  
    $ 47     $ 146  
 
NOTE 3 - PROPERTY AND EQUIPMENT:
 
   
December 31
 
   
2009
   
2008
 
   
U.S dollars in thousands
 
Cost:
           
        Advances on account of acquisition of machinery
  $ 931     $ 931  
Construction in progress
            194  
Tools and equipment
            128  
Motor Cycles
            32  
Computer software and electronic equipment
    6       42  
Furniture
    21       37  
Leasehold improvements
            15  
      958       1,379  
Less, accumulated depreciation and amortization
    6       37  
    $ 952     $ 1,342  
 
NOTE 4 – ACCRUED EXPENSES:
 
   
December 31
 
   
2009
   
2008
 
   
U.S dollars in thousands
 
Accrued expenses
  $ 1,130     $ 445  
Employees and payroll accruals
    69       102  
Government authorities
    2       3  
    $ 1,201     $ 550  
 
 
F - 15

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
NOTE 5 - SHORT TERM LOANS
 
   
December 31
 
   
2009
   
2008
 
   
U.S dollars in thousands
 
Loan from third party (a)
    88       216  
Loan from other third party (b)
    50       105  
    $ 138     $ 321  
 
 
 (a)
On October 26, 2008, Pacific entered into a Loan Agreement (the “Agreement”) with a third party ("the Lender"). The lender is the brother of one of the controlling shareholders of Carrigain Investment Ltd, which is the controlling shareholder of the Company. It was agreed that the Lender shall loan Pacific an aggregate of $400 thousand, with $300 thousand being transferred to Pacific in three equal installments during October and November 2008 and $100 thousand will remain on-call. The loan bears no interest. On May 2009 an amount of $128 thousand was repaid by Pacific.
 
 
 (b)
On July 9, 2008, Pacific entered into a term sheet for a loan with another third party ("term sheet"). It was agreed in the term sheet that the third party will loan Pacific an amount of $400 thousand in consideration for an ownership interest in the share capital of Pacific and collaborations in projects in Ethiopia and non competition understandings in some parts of Ethiopia. On July, 2008, the third party loaned Pacific an amount of $100 thousand to be repaid no later than November 30, 2008 and entitled the third party to 1% of the share capital of Pacific. Since it was not repaid, according to the term sheet, this amount bears a weekly interest rate of 1% from the repayment date until the actual date of repayment and entitles the third party to 2% of the share capital of Pacific.
 
 
F - 16

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 6 - SHORT TERM LOANS FROM RELATED PARTIES:
 
   
2009
   
2008
 
   
U.S dollars in thousands
 
Loan from a shareholder (a)
  $ 82     $ 178  
Loans from other shareholders (b)
    18       18  
Loan from a related party (c)
            156  
Loans from other related parties (c)
            200  
    $ 100     $ 552  
 
 
(a)
Loans to Pacific from a shareholder and a related party bear interest at an annual rate of 4% and were due on January 1, 2009. According to the terms of the agreement with the shareholder, since the loan was not repaid on January 1, 2009, the remaining loan bears interest at a monthly rate of 3% from that date.
 
 
(b)
The Company borrowed $18 thousand from four shareholders of the Company on May 4, 2006. The loans are unsecured, non-interest bearing and due on demand.

 
Loans received from related parties and were back to back with loans the related parties received from a bank. The bank loans were granted for one month and have revolved each month. The interest rate is variable and is determined each month by the bank. As of December 31, 2008, the interest rate was 7%.
 
NOTE 7 - ADVANCE TO MINORITY INTEREST SHAREHOLDER:

On July 10, 2007, the Company entered into an agreement with AlphaKat to incorporate and operate AGEI, see note 1b. According to the agreement the Company has provided a loan to the shareholders of AlphaKat. The terms of the loan has not yet been set.

 
F - 17

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
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. The last installment was received after a registration statement for the underlying shares was declared effective by the Securities and Exchange Commission ("SEC"). The Debentures bear interest at 10% per annum, the payments of the principals and interest was due to commence on July 31, 2008 and continuing on each successive month thereafter until October 2010. The Debentures are convertible, at the option of the investor at any time, into shares of the Company’s common Shares at a conversion price which is defined as the lower of an applicable conversion price of $2.2 per share or 95% of the lowest volume weighted average price during the 15 prior trading days. 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 these Debentures, 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 conditions as further set out in the Debentures Agreement.
 
On March 20, 2008, the Company signed an amendment to the Debentures Agreement. The Company agreed to amend certain sections of the agreement dated July 2007 as follows:
 
 
·
The private investor agreed to purchase the fourth installment of $1 million in two equal installments, the first installment was on the date of the amendment and the last $0.5 million was 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;
 
 
·
The applicable conversion price was reduced from $2.20 to $1.25 for all debentures outstanding;

 
·
The exercise prices of the warrants were reduced from $2.50 and $2.35 to $1.25.

 
F - 18

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
NOTE 8 - CONVERTIBLE DEBENTURES AND WARRANTS (continued):

On July 15, 2008, while the Company was seeking to raise additional financing by selling units of common stocks and warrants ("offering"), the Company entered into 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 of:
 
 
·
The Company issued the Investor 200,000 restricted shares of its common stock (the restriction is on their trade-ability for the first 180 days after registration):
 
 
·
The applicable conversion price was reduced from $1.25 to the price of shares that were to be issued in the offering, for all Debentures outstanding (since the offering eventually did not take place, the applicable conversion price was not reduced);
 
 
·
The exercise price of the warrants was reduced from $1.25 to the same exercise price of warrants that were to be issued in the offering. The amount of warrants was also adjusted (increased) according to the proportion between the exercise price before the offering and the exercise price afterwards (since the offering eventually did not take place, the exercise price and number of warrants was not changed).
 
On September 22, 2008, while the Company was seeking to raise additional financing by selling units of common stocks and warrants ("offering"), the Company entered into a third amendment with the Investor in order to defer certain principal and interest payments. The amendment became effective September 30, 2008. The Amendment allows the Company the following:

 
·
The applicable conversion price was further reduced to the price of shares that were to be issued in the offering, for all Debentures outstanding (since the shares were eventually sold in the offering at the price of $0.1 per share, the new applicable conversion price is $0.1);

 
·
The exercise price of the warrants was further reduced to the same exercise price of warrants that were to be issued in the offering. The amount of warrants were also adjusted (increased) according to the proportion between the exercise price before the offering and the exercise price after (since the shares were eventually sold in the offering at the price of $0.1 per share, the new exercise price is $0.1 and the warrants increased from 600,000 to 7,500,000);

 
F - 19

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
NOTE 8 - CONVERTIBLE DEBENTURES AND WARRANTS (continued):
 
 
·
The Company issued the Investor 1,000,000 restricted shares of its common stock (the restriction is on their tradeability for the first 180 days after registration);
 
 
·
The interest rate on the Debentures was increased from 10% to 12% as of that date;
 
 
·
The Company paid an amount of $180 thousand as interest directly from the proceeds of the offering (see Note 12a) to the debenture investors;

 
·
The repayment schedule of the Debentures was revised and commenced in November 2008.

In addition, it was also agreed in the third amendment 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.

In 2008 the Company analyzed the difference between the value of the Debentures using the original terms compared 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. Accordingly the Company recorded a gain from extinguishment of $867 thousand.

If any event of default occurred, the full unpaid principal amount of these Debentures, 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 Debentures does not meet all the conditions 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.

On December 5, 2008, $25 thousand of the principal amount of Debentures were converted into 314,070 shares of the Company (at a conversion price of $0.0796 per share).

On January 5, 2009, $35 thousand of the Principal amount of Debenture were converted into 1,228,070 shares of the Company (a conversion price of $0.0285 per share).

On March 5, 2009, $10 thousand of the Principal amount of Debenture were converted into 1,052,632 shares of the Company (a conversion price of $0.0095 per share).

On July 6, 2009, $10 thousand of the Principal amount of Debenture were converted into 884,956 shares of the Company (a conversion price of $0.0113 per share).

 
F - 20

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
On September 6, 2009, additional $10,000 of the principal amount of these debentures was converted into 675,676 shares of our common stock of our company (a conversion price of $0.0148 per share).

As to conversion of Debentures into shares after the balance sheet date, see Note 15a.

 
On August 7, 2009 the Company and YA Global Investment L.P. (YA) entered into an agreement whereby subject to our satisfaction of certain condition, YA has consented to our completion of a capital raise of at least $650,000 on or before September 3, 2009. In connection with this consent, the following agreements will become effective upon completion of the capital raise:

 
a.
All outstanding debentures with YA will be consolidated into a single debenture.
 
b.
The Company will make initial payment of $50,000 to YA, of which $20,000 has already been paid.
 
c.
Interest and principal payments to YA under the current Debentures will be deferred for one year.
 
d.
The Company will have the option to redeem up to $3 million of the debenture at 115% of the amount being redeemed with 5 days prior notice.
 
e.
After the first year, the monthly payment will be $225,000.
 
f.
Conversion price of the debentures and the exercise price of the warrants will be reduced to be equal to the price of stock issued in the capital raise.
 
g.
There will be a partial lockup for one year limiting the number of shares of the Company’s common stock that YA can sell at prices less than 5 cents in any particular month.
 
 
The notes are secured by a pledge on all of the Company's assets.
 
Effective January 1, 2009, the Company adopted FASB Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” codified in FASB ASC 470-20. The standard requires issuers to account separately for the liability and equity components of convertible debt instruments that may be settled in cash (including partial cash settlement), in a manner that reflects the issuer’s nonconvertible debt (unsecured debt) borrowing rate when interest cost is recognized. The standard requires bifurcation of a component of the debt, classification of that component in equity and accretion of the resulting discount on the debt to be recognized as part of interest expense in the consolidated statement of operations. The standard requires retroactive application to the terms of instruments as they existed for all periods presented. The retroactive application of this standard to the Company's convertible debentures and warrants resulted in an increase in the opening balance in 2009 of accumulated deficit during development stage of $252 thousand and resulted in an increase of $252 thousand in the financial expenses for the year ended December 31, 2008.
 
 
F - 21

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
NOTE 9 - COMMITMENTS AND CONTINGENCIES:

 
a.
Fuel currently leases office in Tel Aviv, Israel, under operating lease agreement, which expires at September 30, 2010. The monthly rent is approximately $1 thousand.

 
b.
The Company gave guarantees to all of Pacific's loans (approximately $650 thousand), see notes 5 and 6.

 
c.
Under the agreement signed with AlphaKat (see Note 1b) 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 up to 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 of €10 thousand to AlphaKat for consulting (until December 31, 2009, the Company paid AlphaKat an amount of $931 thousand on account of the first KDV500 turbine).
 
 
d.
Under a joint venture agreement signed with Supercom to engage in converting municipal solid waste into synthetic diesel fuel in Romania using the KDV technology, the Company is obligated to submit to Super Energy a detailed contract for the purchase of the KDV system ("the First System") which shall detail the price, payment terms, timetable and manufacturer guaranties. In addition, the Company will guaranty the supply of the necessary catalizator in connection with the First System for a period of at least ten years and AGEI will guarantee together with the producer of the equipment the good function of the installation to the established parameters, respectively processing municipal solid waste and proceeding 500 liters of diesel per hour.
 
 
e.
On June 15, 2009 The Company entered into an agreement with Cypress Partners LLC whereby Cypress was retained as the Company's financial advisor, placement agent, and arranger for debt and equity financing and business combinations. The Company paid Cypress a retainer of 500,000 shares of the Company's stock. The Company is required to pay Cypress a milestone fee of 1,500,000 shares of the Company's stock upon receipt of a term sheet from a potential purchaser and a fee of 8% of the transaction at closing and warrants to purchase Company stock with a value equal to the 8% fee. The agreement can be terminated after 15 days notice. The fee arrangement continues for 12 months after termination.

 
F - 22

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
NOTE 10 - SHARE CAPITAL:

 
a.
Common shares
 
The Company's shares are traded on the Over-The-Counter Bulletin Board.

Common stock confers on its investors 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.
 
On 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 thousand.
 
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 thousand.
 
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 thousand of which approximately $47 thousand was paid in cash, $28 thousand was paid by conversion of $28 thousand promissory note and approximately $327 thousand was paid via the issuance of non interest notes receivables having maturities up to one year. An amount of $150 thousand was collected in 2008, the rest was collected in previous years.
 
On July 15, 2008, the Company issued 200,000 restricted shares to the Debenture investors, see also Note 9.

On September 22, 2008, the Company issued an additional 1,000,000 restricted shares to the Debenture investors, see also Note 9.

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 thousand per unit for total consideration of $1,500 thousand. Each unit consists of 500,000 shares of common shares and 500,000 share purchase warrants exercisable at $0.10 for a period of five years. As finders fee, in connection with the securities purchase agreement, the Company paid $389 thousand, as well as issued 1,500,000 share purchase warrants fully vested exercisable at $0.10 to the placement agent.

The net 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 thousand and was based on the following assumptions: dividend yield of 0%; expected volatility of 206%; risk-free interest rate of 3.91%; and expected term of 5 years.

On November 4, 2008, as part of the brokered private placement that took place on September 30, 2008 (see above), the Company sold an additional 4 units at a purchase price of $50 thousand per unit for total consideration of $200 thousand. Each unit consists of 500,000 shares of common shares and 500,000 share purchase warrants exercisable at $0.10 for a period of five years. As finders fee, in connection with the securities purchase agreement, the Company paid $47 thousand, as well as issued 200,000 share purchase warrants fully vested exercisable at $0.10 to the placement agent.

 
F - 23

 

GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
NOTE 10 - SHARE CAPITAL (continued):

 
a.
Common shares (continued):
 
The net 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 $99 thousand and was based on the following assumptions: dividend yield of 0%; expected volatility of 209%; risk-free interest rate of 3.51%; and expected term of 5 years.

On December 5, 2008, $25 thousand of the principal amount of Debentures were converted into 314,070 shares of the Company

On January 5, 2009, $35 thousand of the Principal amount of Debenture were converted into 1,228,070 shares of the Company (a conversion price of $0.0285 per share).

On March 5, 2009, $10 thousand of the Principal amount of Debenture were converted into 1,052,632 shares of the Company (a conversion price of $0.0095 per share).

On July 6, 2009, $10 thousand of the Principal amount of Debenture were converted into 884,956 shares of the Company (a conversion price of $0.0113 per share).

On September 6, 2009, $10 thousand of the principal amount of debentures were converted into 675,676 shares of our common stock of the Company (a conversion price of $0.0148 per share).

As to the issuance of warrants, see Note 8.

As to issuance of shares after the balance sheet date, see Note 14a.

On September 10, 2009, the Company entered into a Securities Purchase Agreement (the “Agreement”) with Yuval Ganot, an accredited investor and Noam Elimelech Ltd. (the “Investor”). Subject to the terms of the Agreement, on the closing date (the “Closing Date”) and on the 15th day of each calendar month subsequent to the Closing Date, for a period of sixteen months (each such day, a “Subsequent Closing”), the Investor shall purchase a total aggregate amount of up to 150,000,000 but not less than 100,000,000 of the Registrant’s shares of Common Stock (the “Shares”) in exchange for an aggregate purchase price of up to $1,500,000. The effective purchase price is $0.01 per Share. The proceeds from the Agreement shall be used for general working capital. Pursuant to the terms of the Agreement, the Investor may, at his sole and absolute discretion, elect not to purchase all or a part of the portion of the Shares scheduled to be purchased on the final Subsequent Closing (50,000,000 Shares). The agreement with the Investor has been amended on March 15, 2010, see Note 14b. 150,000,000 shares have been placed in escrow pending receipt of the investment. During 2009 the investor invested $152,637 which entitles the investor to 15,263,700 shares from the shares held in escrow. Accordingly these 15,263,700 shares are reported as issued and outstanding.

On September 22, 2009, $247,415 of the principal amount of loans were converted into 24,741,505 shares of our common stock of the Company (at a conversion price of $0.01 per share).
 
On June 25, 2009, the Company entered into an agreement under which it issued 500,000 shares valued at $0.012 per share reflecting an aggregate value of $6,000 for consideration of financial advisor services provided.
 
On June 25, 2009, the Company issued 500,000 shares valued at $0.012 per share reflecting an aggregate value of $6,000 as a fee relating to a loan.

 
F - 24

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
NOTE 10 - SHARE CAPITAL (continued):

 
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 March 2009, the Company increased the total number of shares reserved for issuance under the share option plan to 12,150,000 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. 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.

Expected volatility was based on the average of similar companies in the market due to insufficient trade volume of the share of the Company. 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 do so. Risk-free interest rates 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
 
4.63%
   Dividend yields
 
0
   Volatility
 
250%
   Expected term (in years)
 
10
 
 
The fair value of the options granted to the CEO using the Black-Scholes model is $0.01 per option.

On May 7, 2007, the Company granted 400,000 stock options to a service provider for Investor Relations and Marketing Advisor services. 200,000 options were 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 service provider was not to give services to the company until May 1, 2008. The agreement with the service provider was terminated as of January 1, 2008, and at that date 50,000 options were forfeited, another 150,000 options were vested and exercisable at an exercise price of $0.01 per share until they were canceled three month after the termination of the agreement,
 
 
F - 25

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 10 - SHARE CAPITAL (continued):

The calculated fair value of the abovementioned warrants amounted to $92 thousand. This fair value was estimated using the following weighted average assumptions:

Risk free interest
 
3.34%
Dividend yields
 
0
Volatility
 
250%
Expected term (in years)
 
1 year

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. Two of the three directors have resigned on September 2008, their 700,000 options were forfeited and none were vested. The executive officer resigned on November 2008, his 1,150,000 were canceled and none were vested.

The fair value of the stock options grants was 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

The fair value of the options granted above using the Black-Scholes model is $0.55 per option.

On December 29, 2008, the Company reduced the exercise price of the remaining 350,000 from an exercise price of $2.2 per share to exercise prices ranging from $0.15 per share to $0.2 per share.

The fair value of the stock options that their exercise price was reduced, was estimated using the Black-Scholes option valuation model that used the following assumptions:

Risk free interest
 
1.45%
Dividend yields
 
0
Volatility
 
263%
Expected term (in years)
 
9.1

Since there is not material difference between the value of these modified options at the original grant date and at the modification date, no additional expense was recorded.
 
 
F - 26

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
NOTE 10- SHARE CAPITAL (continued):

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 was $85 thousand. On September 24, 2008, the Company announced the appointment of the consultant to its Board of Directors.

The fair value of the stock options grants was 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
 
On December 29, 2008, the Board of Directors of the Company resolved the granting of 2,350,000 options to four directors of the Company, exercisable for five years at an exercise prices ranging from $0.15 per share to $0.2 per share, to be vested on the second anniversary of grant. One of the four directors has resigned on December 2009, his 650,000 options were forfeited and none were vested.

The fair value of the stock options grants was estimated using the Black-Scholes option valuation model that used the following assumptions:

Risk free interest
 
1.45%
Dividend yields
 
0
Volatility
 
263%
Expected term (in years)
 
5

The fair value of the options granted above using the Black-Scholes model is $0.07 per option.

On January 1, 2009, the Board of Directors of the Company resolved the granting of 2,000,000 options to Pacific's CEO, exercisable for five years at an exercise prices ranging from $0.15 per share to $0.2 per share, to be vested at a rate of 25% per year commencing July 1, 2007 every subsequent July 1; Since the Officer has been reigned the options were forfeited.  On the same day, the Board of Directors of the Company resolved the granting of 750,000 options to the CFO exercisable for five years at exercise price ranging from $0.15 per share to $0.2 per share, to be vested at a rate of 2.083% per month commencing May 2007.

The fair value of the stock options grants was estimated using the Black-Scholes option valuation model that used the following assumptions:
 
Risk free interest
 
1.89%
Dividend yields
 
0
Volatility
 
357%
Expected term (in years)
 
5

On July 29, 2009 the Company granted 1,000,000 stock options to a service provider for his services in connection with the PIPE transaction. The options were exercisable immediately at an exercise price of $0.02 per share and exercisable for two years period.

The fair value of the stock options grants was estimated using the Black-Scholes option valuation model that used the following assumptions:
 
    Risk free interest
 
17%
Dividend yields
 
0
Volatility
 
407%
Expected term (in years)
 
2

 
F - 27

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 10 - SHARE CAPITAL (continued):

A summary of the status of the stock options granted to employees and directors as of December 31, 2009 and 2008, and changes during the year ended on those dates, is presented below:
 
   
Year ended December 31,
 
   
2009
   
2008
 
         
Weighted
         
Weighted
 
   
Number
   
average
   
Number
   
average
 
   
of
   
exercise
   
of
   
exercise
 
   
options
   
price
   
options
   
price
 
           $                
 
                           
Options outstanding at
       beginning of year
    7,755,021       0.01       5,055,021       0.01  
Changes during the year:                                
  Granted - at an exercise
       price above market price
    2,750,000       0.175       4,900,000       1.08  
Forfeited
    2,650,000       0.175       2,200,000       2.20  
Options outstanding at end
    of year
    7,855,021       0.07       7,755,021       0.07  
Options exercisable at end
     of year
    3,753,552               1,263,755          
Weighted average fair
     value of options granted
     during the year
   $ 0.01              $ 0.30          

Costs incurred in respect of stock based compensation for employees and directors, for the years ended December 31, 2009 and 2008 were $149 thousand and $150 thousand, respectively.

The following table presents summary information concerning the options outstanding as of December 31, 2009:
 
           
Weighted
             
           
Average
   
Weighted
       
Range of
         
Remaining
   
average
       
exercise
   
Number
   
Contractual
   
exercise
   
Aggregate
 
prices
   
outstanding
   
Life
   
price
   
intrinsic value
 
$            
Years
      $       $  
                         0.01       5,055,021       7.33       0.01       98,067  
0.15 to 0.20
      2,800,000       7.55       0.175       -  
          7,855,021       7.41       0.07       -  

 
F - 28

 
 
GLOBAL ENERGY INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 10 - SHARE CAPITAL (continued):

The following table presents summary information concerning the options exercisable as of December 31, 2009:
 
           
Weighted
             
           
Average
   
Weighted
       
Range of
         
Remaining
   
average
       
exercise
   
Number
   
Contractual
   
exercise
   
Aggregate
 
prices
   
exercisable
   
Life
   
price
   
intrinsic value
 
$            
Years
                                $                                $  
                          0.01       2,527,511       7.33       0.01       49,034  
                         0.175       1,226,042       6.89       0.175       -  
          3,753,552       7.19       0.064       -  
 
A summary of the status of the stock options granted to non-employees as of December 31, 2009 and 2008, and changes during the year ended on those dates, is presented below:
 
   
Year ended December 31
 
   
2009
   
2008
 
         
Weighted
         
Weighted
 
   
Number
   
average
   
Number
   
average
 
   
of
   
exercise
   
of
   
exercise
 
   
options
   
price
   
options
   
price
 
           $              
               $
 
 
                           
Options outstanding at
    beginning of year
    426,415       0.01       400,000       0.01  
Changes during the year -
   granted - at an exercise
        price above market price
    1,000,000       0.02       226,415       1.25  
Forfeited
                    200,000