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As
filed with the Securities and Exchange Commission on June 24, 2011
 Registration No. 333-
   UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM S-1
 REGISTRATION STATEMENTUNDER
THE SECURITIES ACT OF 1933
 
 Converted Organics Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    2873
    
    20-4075963(State or other jurisdiction of
    
    (Primary Standard Industrial
    
    (I.R.S. Employerincorporation or organization)
    
    Classification Code Number)
    
    Identification Number)
 137A Lewis Wharf
Boston, MA 02110
(617) 624-0111
 
 Edward J. Gildea
Chief Executive Officer
137A Lewis Wharf
Boston, MA 02110
(617) 624-0111
 
  Ralph V. De Martino, Esq.
Cavas S. Pavri, Esq.
Cozen OConnor
The Army & Navy Club Building
1627 I Street, NW, Suite 1100
Washington, DC 20006
(215) 665-5542
Facsimile: (215) 701-2478
 Approximate date of commencement of proposed sale to the public:
 þ
 o
 o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 
 CALCULATION OF REGISTRATION FEE
 Proposed
    
    
    Proposedmaximum
    
    
    maximumoffering
    
    
    aggregateAmount to be
    
    
    price per
    
    
    offering
    
    
    Amount ofTitle of each class of securities to be registered
    
    
    registered (1)
    
    
    security (2)
    
    
    price(2)
    
    
    registration feeCommon Stock, $0.001 par value (2)
    
    
    87,172,755 Shares of Common Stock
    
    
    $
    0.105
    
    
    
    $
    9,153,139.28
    
    
    
    $
    1,062.68
 
 (1)
    
    All of the shares are offered by the selling stockholder. This registration statement
includes an indeterminate number of additional shares of common stock issuable for no
additional consideration pursuant to any stock dividend, stock split, recapitalization or
other similar transaction effected without the receipt of consideration, which results in an
increase in the number of outstanding shares of our common stock. In the event of a stock
split, stock dividend or similar transaction involving our common stock, in order to prevent
dilution, the number of shares registered shall be automatically increased to cover the
additional shares in accordance with Rule 416(a) under the Securities Act of 1933.(2)
    
    Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c)
under the Securities Act of 1933, using the average of the high and low prices as reported on
the NASDAQ Capital Market on June 20, 2011, which was $0.105 per share. 
 The Registrant hereby amends this Registration Statement on such date or dates as may be
necessary to delay its effective date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to Section 8(a) , may
determine.




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87,172,755 Shares of Common Stock
    These are speculative securities. Investing in our securities involves significant risks. You
should purchase these securities only if you can afford a complete loss of your investment. See the
section entitled Risk Factors.
 Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.




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##### 



TABLE OF CONTENTS
 RISK FACTORS
    
    
    4SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
    
    
    11PRICE RANGE OF COMMON STOCK
    
    
    13MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    14BUSINESS
    
    
    32MANAGEMENT
    
    
    46RELATED PARTY TRANSACTIONS
    
    
    51SELLING STOCKHOLDER
    
    
    52PLAN OF DISTRIBUTION
    
    
    53DESCRIPTION OF CAPITAL STOCK
    
    
    55LEGAL MATTERS
    
    
    64EXPERTS
    
    
    64WHERE YOU CAN FIND MORE INFORMATION
    
    
    64EX-23.1




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PROSPECTUS SUMMARY
 The following summary highlights selected information contained in this prospectus. This
summary does not contain all the information that may be important to you. You should read the more
detailed information contained in this prospectus, including but not limited to, the section
entitled Risk Factors. Reference to we, us, our, Converted Organics or the Company
means Converted Organics Inc. and its subsidiaries.
 Our Company
   Organic Fertilizer
 Industrial Wastewater Treatment
 Vertical Farming
 Information contained
on our website does not constitute part of this prospectus.
 Recent Developments
  Private Placement of Notes and Warrants
  1




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2




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Shareholder Meeting
  
    
    the amendment of our Certificate of Incorporation to increase the number of shares
of common stock we are authorized to issue from 250,000,000 to 500,000,000;
    
    the authorization of the Board to further amend the Certificate of Incorporation to
effect a reverse split of the our common stock within a range of 1-for-2 and 1-for-10;
    
    the issuance of 20% or more of our common stock related to the note and Warrants
discussed above;
    
    the future adjustments of the exercise prices of both the Series A and Series C
Warrants discussed above below their floor prices; and
    
    the future adjustments of the exercise prices of certain of our currently
outstanding Class E and Class F Warrants.
 Reverse Split
  3




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RISK FACTORS
 If you purchase our securities, you will assume a high degree of risk. In deciding whether to
invest, you should carefully consider the following risk factors, as well as the other information
contained elsewhere in this prospectus. Any of the following risks, as well as other risks and
uncertainties discussed in this prospectus, could have a material adverse effect on our business,
financial condition, results of operations or prospects and cause the value of our securities to
decline, which could cause you to lose all or part of your investment.
 We could fail to remain a going concern. We will need to raise additional capital to
fund our operations through the near term, and we do not have any commitments for that capital.
     We expect that our common stock will be removed from listing from the NASDAQ Capital Market in the
near future and will begin trading on the OTC Bulletin Board.
  4




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We will need to obtain additional debt and equity financing to complete subsequent stages of
our business plan, including the funds required to expand our Fertilizer, Industrial Wastewater and
Vertical Farming businesses.
  If the National Organic Program changes its standards with respect to the use of corn steep liquor
in organic crop production, we may no longer be allowed to sell certain of our products into the
organic markets, which would materially lower our sales at our Gonzales facility.
  We expect to incur significant losses for some time, and we may never operate profitably.
  We have limited operating history, we have recently added new lines of unproven businesses, and our
prospects are difficult to evaluate.
  If we are unable to manage our transition to a diversified operating company effectively, our
operating results will be adversely affected.
  5




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We currently operate three businesses, only one of which is cash flow positive.
  We are exposed to risks from legislation requiring companies to evaluate internal control over
financial reporting.
  Our future success is dependent on our existing key employees and hiring and assimilating new key
employees; our inability to attract or retain key personnel in the future would materially harm our
business and results of operations.
  We may be unable to establish marketing and sales capabilities necessary to commercialize and
gain market acceptance for our products.
  Energy and fuel cost variations could adversely affect operating results and expenses.
  Successful infringement claims by third parties could result in substantial damages, lost
product sales and the loss of important proprietary rights.
  6




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Defects in our products or failures in quality control could impair our ability to sell our
products or could result in product liability claims, litigation and other significant events with
substantial additional costs.
  Changes in environmental regulations or violations of such regulations could result in
increased expense and could have a material negative effect on our financial performance.
  Our facilities will require certain permits to operate, which we may not be able to obtain at
all or obtain on a timely basis.
   The fertilizer industry is highly competitive, which may adversely affect our ability to
generate and grow sales.
  7




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Pressure by our customers to reduce prices and agree to long-term supply arrangements may
adversely affect our net sales and profit margins.
  Our High Temperature Liquid Composting, or HTLC ®, technology imposes obligations
on us related to infringement actions that may become burdensome.
 ®
 ® ®
 Our Gonzales and discontinued Woodbridge facilities, as well as future facility sites, may have
unknown environmental problems that could be expensive and time-consuming to correct.
   We have little or no experience in the fertilizer industry, which increases the risk of our
inability to build or license our facilities and operate our business.
  8




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The communities where our facilities may be located may be averse to hosting waste
handling and manufacturing facilities.
   We are dependent on a small number of major customers for our revenues and the loss of any of these
major customers would adversely affect our results of operations.
  The operation of our Concentrators will require routine ongoing maintenance, which we are
responsible for.
  Expansion of our IWR business is dependent upon our ability to secure project financing for the
building of new Concentrators.
  TerraSphere has a limited operating history and its prospects are difficult to
evaluate.
  TerraSpheres licensees are generally early stage companies and the failure of such licensees
to be successful may adversely affect TerraSpheres future revenues.
  9




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TerraSphere is dependent on a small number of major customers for its revenues.
  Sale of product produced from a TerraSphere facility will be subject to certain food safety
regulations.
  We have a significant number of warrants outstanding, and while these warrants are
outstanding, it may be more difficult to raise additional equity capital. Additionally, certain of
these warrants contain anti-dilution and price-protection provisions that may result in the
reduction of their exercise prices in the future.
  If we issue shares of preferred stock, your investment could be diluted or
subordinated to the rights of the holders of preferred stock.
  10




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Future issuances or sales, or the potential for future issuances or sales, of shares of our
common stock, the exercise of warrants to purchase our common stock, or the conversion of
convertible notes into our common stock, may cause the trading price of our securities to decline
and could impair our ability to raise capital through subsequent equity offerings.
  
 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
   
    
    consumer demand for our products;
    
    the availability of an adequate supply of food waste stream feedstock and the
competition for such supply;
    
    the unpredictable cost of compliance with environmental and other government
regulation;
    
    the time and cost of obtaining USDA, state or other product labeling designations;
    
    our ability to manage expenses;
    
    the demand for organic fertilizer and the resulting prices that customers are
willing to pay;
    
    supply of organic fertilizer products from the use of competing or newly developed
technologies;
    
    our ability to attract and retain key personnel;
    
    adoption of new accounting regulations and standards;
    
    adverse changes in the securities markets;
    
    our ability to comply with continued listing requirements of the NASDAQ Capital
Market; and
    
    the availability of and costs associated with sources of liquidity, including our
ability to obtain bond financing for future facilities.
   11




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USE OF PROCEEDS
   12




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PRICE RANGE OF COMMON STOCK
 Market Information
  2009
    
    High
    
    LowFirst Quarter
    
    $
    4.05
    
    
    $
    0.76Second Quarter
    
    $
    2.19
    
    
    $
    0.76Third Quarter
    
    $
    1.48
    
    
    $
    0.95Fourth Quarter
    
    $
    1.30
    
    
    $
    0.592010First Quarter
    
    $
    1.14
    
    
    $
    0.68Second Quarter
    
    $
    1.18
    
    
    $
    0.61Third Quarter
    
    $
    0.72
    
    
    $
    0.39Fourth Quarter
    
    $
    0.58
    
    
    $
    0.322011First Quarter
    
    $
    0.49
    
    
    $
    0.30Second Quarter (through June 20, 2011)
    
    
    $0.30
    
    
    $
    0.09
 Holders
  Dividends
  13




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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 The following discussion should be read in conjunction with the consolidated financial
statements and related notes to the financial statements included elsewhere in this prospectus.
 Introduction
   Organic
    
    Vertical
    
    Industrial
    
    Corporate andFertilizer
    
    Farming
    
    Wastewater
    
    Eliminations
    
    ConsolidatedRevenues
    
    $
    644,000
    
    
    $
    
    
    
    $
    95,176
    
    
    $
    
    
    
    $
    739,176Operating loss (1)
    
    
    (82,001
    )
    
    
    (599,441
    )
    
    
    (2,823
    )
    
    
    (1,635,338
    )
    
    
    (2,319,603
    )Depreciation and
amortization(2)
    
    
    105,089
    
    
    
    161,297
    
    
    
    5,556
    
    
    
    149,109
    
    
    
    421,051Interest expense(3)
    
    
    
    
    
    
    6,642
    
    
    
    
    
    
    
    2,267,820
    
    
    
    2,274,462Net loss
    
    
    (82,001
    )
    
    
    (381,080
    )
    
    
    (2,823
    )
    
    
    (1,334,568
    )
    
    
    (1,800,472
    )Total assets (4)
    
    
    3,744,506
    
    
    
    12,354,315
    
    
    
    2,108,468
    
    
    
    991,607
    
    
    
    19,198,896Goodwill
    
    
    
    
    
    
    1,667,957
    
    
    
    
    
    
    
    
    
    
    
    1,667,957Property and
equipment additions
    
    
    123,564
    
    
    
    2,255
    
    
    
    1,600,000
    
    
    
    
    
    
    
    1,725,819
 
 (1)
    
    Operating loss of the principal businesses exclude corporate compensation, marketing expense,
professional fees and other unallocated expenses.(2)
    
    Depreciation and amortization expense associated with property and equipment,
intangibles and deferred financing fees. Corporate amortization expense relates to intangible asset
technological know-how.(3)
    
    Corporate interest expense is primarily related to amortization of discounts on convertible
notes payable.(4)
    
    Total business assets are the owned or allocated assets used by each business. Corporate assets
consist of cash, prepaid expenses, certain other assets, and deferred financing costs. 14




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
    
    Converted Organics of California, LLC, a wholly-owned subsidiary of COIN, which
includes the operation of our Gonzales, California facility.
    
    Converted Organics of Woodbridge, LLC, a wholly-owned subsidiary of COIN, which
includes the discontinued operation of our Woodbridge, New Jersey facility.
    
    Converted Organics of Mississippi, LLC, a wholly-owned subsidiary of COIN,
established for the purpose of adding a poultry litter-based fertilizer product to the
Companys existing product lines.
    
    Converted Organics of Rhode Island, LLC, a 92.5% owned subsidiary of COIN , which
currently has no operating activity and which was originally established to include the
operation of a previously planned fertilizer facility in Rhode Island. On February 25,
2010, we signed a letter of intent with the non-controlling member in Converted
Organics of RI to sell substantially all of the assets and assign a limited select
amount of liabilities of Converted Organics of RI. This entity is currently inactive.
    
    TerraSphere Inc. (TerraSphere Inc), a Delaware C corporation and wholly owned
subsidiary of COIN, was established to hold COINs investment in TerraSphere Systems
LLC (Systems LLC) in which COIN acquired a 95% interest on November 12, 2010. Systems
LLC owns 85% of TerraSphere Canada, LLC and 100% of Pharmasphere LLC, which in turn
owns 100% of PharmaSphere Worcester, LLC. COINs acquisition of its interest in Systems
LLC was approved by our shareholders at a special meeting held on September 16, 2010.
    
    GoLocalProduceRI, LLC, a 83.34% owned subsidiary of COIN, which we acquired on
December 30, 2010 for the purpose of building and operating a TerraSphere facility.
 Organic Fertilizer Business
  Converted Organics of California, LLC  Gonzales Facility
 15




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®
   Industrial Wastewater Resources Business
 ® LM-HT
® ®
 ® LM-HT ®
  16




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Vertical Farming Business
    17




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For theQuarterEndedMarch 31,2010Revenue
    
    $
    2,544,009Net loss
    
    $
    (6,000,008
    )Net loss per share, basic and diluted
    
    $
    (0.11
    )Weighted average common shares outstanding
    
    
    56,389,068
 Recent Financing Activities
 December 17, 2010 and March 7, 2011 Notes and Warrants
     18




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April 1, 2011 Notes and Warrants
         19




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Future Development
    20




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Trends and Uncertainties Affecting our Operations
  Liquidity and Capital Resources
    21




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Results of Continuing Operations
 Results of OperationsComparison of Three Months Ending March 31, 2011 and 2010
 Revenue
      Cost of Goods Sold
    22




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General and Administrative Expenses
  Interest Expense
  Derivative gain (loss)
  Results of OperationsComparison of the Years Ended December 31, 2010 and 2009
 Summary of Comprehensive Loss from All Operations
  Twelve months ending December 31,2010
    
    
    2009Loss from Continuing Operations
    
    $
    16,039,025
    
    
    $
    7,642,304Loss from Discontinued Operations
    
    
    34,690,358
    
    
    
    13,463,484Non-Controlling Interest and Foreign Currency
    
    
    (167,047
    )
    
    
    Total Comprehensive Loss Attributable to Converted Organics, Inc
    
    
    50,562,336
    
    
    
    21,105,788
 23




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$
    1,400,000
    
    
    Increase in Sales$
    (440,000
    )
    
    Increase in Cost of Goods$
    (7,500,000
    )
    
    Increase in General and Administrative Expenses$
    340,000
    
    
    Decrease in R&D Expenses$
    (6,000,000
    )
    
    Decrease in Derivative Gains$
    3,800,000
    
    
    Decrease in Interest Expense$
    (8,400,000
    )
    
    Total Variance from Continuing Operations
    24




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25




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Results of Discontinued Operations  Comparison of the Years Ended December 31, 2010 and 2009
      26




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2010
    
    
    2009Revenue from discontinued operations
    
    $
    830,814
    
    
    $
    497,062Results from discontinued
operations including write downs to fair
value of $15.4 million in 2010 and $3.9
million in 2009
    
    $
    (25,352,449
    )
    
    $
    (13,463,484
    )Loss recognized on disposal
    
    
    (9,337,909
    )
    
    
    $
    34,690,358
    
    
    $
    13,463,484
   2010
    
    
    2009Accounts receivable, net
    
    $
    14,500
    
    
    $
    59,746Inventories
    
    
    
    
    
    
    272,396Prepaid expenses
    
    
    
    
    
    
    629,933Property and equipment, net
    
    
    
    
    
    
    17,935,216Deposits
    
    
    
    
    
    
    444,329Capitalized bond costs, net
    
    
    
    
    
    
    814,341Assets of discontinued operations
    
    $
    14,500
    
    
    $
    20,155,961
 27




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2010
    
    
    2009Term notes payable
    
    $
    
    
    
    $
    3,247,752Accounts payable
    
    
    837,606
    
    
    
    1,237,275Accrued expenses
    
    
    1,571,874
    
    
    
    950,782Other liabilities
    
    
    28,773
    
    
    
    40,575Bonds payable
    
    
    
    
    
    
    17,500,000Liabilities of discontinued operations
    
    $
    2,438,253
    
    
    $
    22,976,384
  For the Three Months EndedMarch 31,2011
    
    
    2010Revenue from discontinued operations
    
    $
    
    
    
    $
    147,949Loss from discontinued operations
    
    $
    (499
    )
    
    $
    (1,909,291
    )
  March 31,
    
    
    December2011
    
    
    31, 2010Accounts receivable, net
    
    $
    
    
    
    $
    14,500Assets of discontinued operations
    
    $
    
    
    
    $
    14,500
 28




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March 31,
    
    
    December2011
    
    
    31, 2010Accounts payable
    
    $
    828,712
    
    
    $
    837,606Accrued expenses
    
    
    77,874
    
    
    
    1,571,874Other liabilities
    
    
    28,773
    
    
    
    28,773Liabilities of discontinued operations
    
    $
    935,359
    
    
    $
    2,438,253
  Critical Accounting policies
  Revenue Recognition
   
    
    Persuasive evidence of a sales arrangement exists;
    
    Delivery of the product has occurred;
    
    The sales price is fixed or determinable; and
    
    Collectability is reasonably assured.
  29




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Share-Based Compensation
 Compensation 
Stock Compensation
 Long-Lived Assets
 Property, Plant and Equipment
 Goodwill
  Intangible Assets
 Intangibles  Goodwill and Other
 30




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Derivative Instruments
 Derivatives and Hedging,
 Discontinued Operations
  Fair Value Measurements
 Fair Value Measurements and Disclosures
 
    
    Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical
assets or liabilities that we have the ability to access.
    
    Level 2 inputs are inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly or indirectly. Level 2 inputs
may include quoted prices for similar assets and liabilities in active markets, as well
as inputs that are observable for the asset or liability (other than quoted prices),
such as interest rates, foreign exchange rates, and yield curves that are observable at
commonly quoted intervals.
    
    Level 3 inputs are unobservable inputs for the asset or liability which are
typically based on an entitys own assumptions, as there is little, if any, related
market activity.
  Income Taxes
 Income Taxes
 Off-Balance Sheet Transactions
  31




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BUSINESS
 General
   Organic Fertilizer.
 Industrial Wastewater Treatment.
 Vertical Farming.
  The Development of Our Company
  ®
  32




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Our Businesses
  Organic Fertilizer
   Technology. HTLC ®
 Operations.
   33




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Benefits of Our Fertilizer Products and Technology.
 
    
    Plant Nutrition.Historically, growers have focused on the nitrogen (N),
phosphorous (P) and potassium (K) content of fertilizers. As agronomists have gained a
better understanding of the importance of soil culture, they have turned their
attention to humic and fulvic acids, phytohormones, and other micronutrients and growth
regulators not present in petrochemical-based fertilizers. We believe that the presence
of such ingredients in our fertilizer may cause its use to have significant beneficial
effects on soil and plant health.
 
    
    Disease Suppression.Based on field trials using product produced using
our technology, we believe our products possess disease suppression characteristics
that may eliminate or significantly reduce the need for fungicides and other crop
protection products. The products disease suppression properties have been observed
under controlled laboratory conditions and in documented field trials. We also have
field reports that have shown the liquid concentrate to be effective in reducing the
severity of powdery mildew on grapes, reducing verticillium pressure on tomatoes, and
reducing scab in potatoes.
 
    
    Soil amendment.As a result of its slow-release nature, our dry fertilizer product
increases the organic content of soil, which improves granularity and water retention
and thus reduces NPK leaching and run-off.
 
    
    Pathogen-free.Due to high processing temperatures, our products are virtually
pathogen-free and have an extended shelf life.
  Competition.
 Organic Waste Stream Feedstock.
 Technology.
 
    
    Composting.Composting is a natural process of decomposition that can be
accelerated through the mounding of waste into windrows to retain the heat given off by
bacteria involved in the decomposition process. Given the difficulties in controlling
this process, the resulting compost is often inconsistent and generally would command a
lower market price than our product. Further, large-scale composting facilities require
significant amounts of land for operations, which, particularly in major metropolitan
areas, may either not be readily available or may be too costly.
 
    
    Digestion.Digestion may be either aerobic (requiring oxygen) like the HTLC
® process, or anaerobic (occurring without oxygen). Anaerobic digestion
generally takes longer and produces significantly more odor as a result of the
production of ammonia and methane, the latter of which
 34




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is also a greenhouse gas. The methane gas produced has some value as a source of
energy, but it is not readily transported and is thus generally limited to on-site
use.
 
    
    Hydrolysis.Hydrolysis is a chemical process by which water reacts with another
substance, and it is usually catalyzed through the introduction of an acid. This
reaction is used to convert cellulose present in the organic waste into sugars, which
in turn may be converted into ethanol.
 
    
    Thermal.Thermal technologies work by either completely or partially combusting
organic materials for the purpose of generating electricity. Partial combustion methods
may also lead to the production of useful and saleable byproducts, such as a variety of
gases (e.g. hydrogen, carbon monoxide, carbon dioxide) and organic liquids.
 End Products.
   Target Markets.
 
    
    Agribusiness.Conventional farms, organic farms, horticulture, hydroponics, and
aquaculture.
 
    
    Turf Management.Professional lawn care and landscaping, golf courses, and sod
farms, as well as commercial, government, and institutional facilities.
 
    
    Retail Sales.Home improvement outlets, garden supply stores, nurseries, Internet
sales, and shopping networks.
 Agribusiness.
 
    
    Consumer demand for safer, higher quality food;
 35




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
    
    The limitation on the use of certain synthetic products by government authorities,
including nutrients such as nitrogen and chemicals such as methyl bromide;
 
    
    Environmental concerns and the demand for sustainable technologies;
 
    
    Demand for more food for the growing world population.
  Turf Management.
 Retail Sales.
 Governmental Regulation.
   Future Development.
 SMART Units. ®
 36




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##### Table of Contents



Licensing.
 Mass Organics I.
 Industrial Wastewater Treatment
  Technology.
 Operations.
 Benefits of the Technology
 
    
    Fuel Source Flexibility.The LM-HT ® Concentrator can run on a
wide range of thermal energy options, from waste heat, to bio fuels, to conventional
fossil fuels.
    
    Reduced Carbon Emissions.Utilization of waste heat and renewable energy sources
results in a reduction of carbon emissions.
 37




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##### Table of Contents




    
    Simple to Run and Maintain.The equipment is robust, resistant to corrosion,
compact, easy to maintain, has no membranes or heat exchangers to foul, and has very
few moving parts.
    
    Portability.The equipment may be strategically placed, in locations such as
landfills, to significantly reduce transportation costs.
    
    Widely Applicable.The direct hot gas evaporation technology employed makes it
possible to treat a wide range of industrial waste waters, including IWs with a high
concentration of suspended solids.
    
    Clean Water Byproduct.The equipment may be fitted with a condenser to capture the
resultant water vapor and transform it into clean, non-potable water.
    
    Zero Liquid Discharge.The only by-products of the LM-HT ® process are
clean water vapor and the solidified contaminants present in the IW.
 Competition.
 
    
    Physical.The most simple of treatment methods, physical treatment of wastewater
includes both the coarse screening process and sedimentation. Coarse screening is an
active method that involves running the water through screens of various pore size to
filter out debris. Sedimentation (also called clarification) is a passive process by
which wastewater is held in tanks under quiescent conditions, allowing many of the
solids to settle to the bottom. Both methods are merely effective for removing the
larger and/or heavier solid contaminants. Other processes in this category include
filtering and skimming, the latter of which is useful for separating
floating/water-insoluble contaminants.
    
    Chemical.The addition of chemicals to wastewater is usually for the purpose of
either disinfection (typically by chlorination or oxidation) or neutralization of
acidic or basic wastewater. Chemical treatment can also consist of coagulation, where
the addition of a chemical forms an insoluble end-product with waste substances in the
water for the purpose of later removal.
    
    Solidification/Stabilization.This method involves curing the waste into solid
form to prevent it from leaching. This can be accomplished either through mixing in
cement or other inorganic setting material.
    
    Deep Well Injection.Drilling thousands of feet below the Earths surface allows
access to permeable areas of extreme salinity, which can absorb aqueous waste. These
areas are buffered by impermeable strata that can prevent the wastewater from reaching
and contaminating any aquifers.
    
    Reverse Osmosis.Reverse osmosis operates by separating two containers, one of
contaminated water and the other clean, by a semi-permeable membrane that allows free
flow of water (the solvent) but not elements dissolved in it (the solute). Applying
high pressure to the waste water side forces solvent across the membrane barrier and
results in separating water from waste. This process is dependent upon the proper
functioning of the selective membrane, and wastewater must often be pretreated to
remove any agents that are capable of fouling the membrane.
    
    Incineration.Wastewater sludge may be treated by incineration, but this method is
not as common due to the emissions produced, fuel required, and the difficulty in
burning this type of waste.
 Target Markets.
 38




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##### Table of Contents




    
    Quench water and boiler/scrubber blow-down wastewater;
    
    Process water from the manufacturing/processing of pharmaceuticals, metals, pulp and
paper, petrochemicals, foods, inks and paints; and
    
    Any other IWs where a zero-liquid discharge with an inside-the-fence option is
desirable.
 Government Regulation.
 Future Development.
 Vertical Farming
  Technology.
 Operations.
  
    
    Higher Productivity.Growing in three dimensions allows for a vastly more
efficient use of growing space, enabling more crops to be grown at once. Additionally,
growing in a highly-regulated environment enables greater yields as a result of the
absence of pests, disease, and variable weather/soil conditions. The ability to grow
crops year-round also increases productivity.
 39




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##### Table of Contents




    
    Lower Energy Costs.We believe that a TerraSphere facility will use less energy
than traditional agricultural methods.
    
    Controlled Environment.TerraSpheres closed-system method of growing plants
prevents the cross-contamination of products, eliminates the danger of water
contamination, and allows complete control of fertilizer type and quality.
    
    Versatility in Facility Placement and Products.With this system, crops may be
grown in any location, regardless of geography or climate, year round. Additionally,
the TerraSphere system is designed to be installed in existing structures, and is
compatible with any industrial/warehouse building with a minimum clearance of 25 feet.
    
    Extended Produce Shelf Life.The ability to locate facilities near end markets,
regardless of geography or climate, means that produce that is fresher for the consumer
and has a longer shelf life, which means less spoilage for the retailer.
    
    Lower Cleaning and Product Preparation Costs.By controlling growing conditions,
we can avoid exposing our plants to impurities and thus minimize cleaning and product
preparation costs during harvest. TerraSphere products are free from exposure to the
pesticides, fuel/oil leakage from machinery, and impurities from the soil and rain that
are associated with traditional field farming methods.
    
    Minimal Fertilizer and No Pesticides.As a result of our controlled growth
conditions, plants grown in the TerraSphere system require less fertilizer than plants
grown in the field or in a greenhouse, and pesticides are not required.
    
    Water Conservation.The TerraSphere system uses significantly less water than
traditional growing methods, and the watering injection system enables the recycling of
water and the generation of very little wastewater. Not only is wastewater a major
environmental concern, but water represents a significant cost for traditional farms
and greenhouses.
    
    Lessened Transportation Costs.Growing and selling locally will greatly
reduce the cost of transporting goods, as well as lessen the carbon footprint, of many
common crops.
 Competition.
 
    
    Field Agriculture.The overwhelming majority of the produce sold today is
still generated using traditional field agriculture methods, and the infrastructure
required is generally already in place and considerably less than that of the vertical
farms we envision. As such, the up-front cost of growing produce via traditional
methods is likely less than that of our method. Further, the rise in organic growing
standards has already presented consumers with a more naturally-grown and arguably
higher-quality product option, albeit at an often substantially higher cost. However,
field agriculture is limited by the availability of land that is suitable for growing
crops. Crop quality is also affected by a substantial number of variables, from weather
and temperature fluctuations to infestations of pests and disease. Field-grown produce
must also often travel to reach consumers, which reduces shelf life and increases
costs.
    
    Greenhouses/Hydroponic Growers.Some produce is already grown indoors, which
provides the advantage of being able to better regulate growing conditions through the
elimination of many environmental factors. However, building greenhouses large enough
to grow substantial amounts of produce is not incredibly cost-effective considering the
energy required to regulate the indoor environment versus the product yield. Further,
light exposure must be carefully monitored, and the location of a greenhouse is still a
very important factor if natural light is used instead of artificial light.
 40




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##### Table of Contents




    
    Other Urban Farming Technologies.There are a small number of other companies
who have developed or are in the process of developing technology that enables the
growing of crops in environments that lack available land or proper growing conditions.
This includes variations of our vertical farming method and other modes of controlled
indoor environment agriculture.
 Target Markets.
 Government Regulation.
 Future Development.
  PRO FORMA CONDENSED FINANCIAL INFORMATION FOR TERRASPHERE AND
GOLOCALPRODUCERI
(In thousands, except per share information)
  For the Year Ended December 31,2010
    
    2009Revenue
    
    $
    8,862,980
    
    
    $
    2,670,514Net loss
    
    $
    (48,629,191
    )
    
    $
    (22,321,742
    )Net loss per share, basic and diluted
    
    $
    (0.65
    )
    
    $
    (0.47
    )Weighted average common shares outstanding
    
    
    74,276,495
    
    
    
    47,094,769
 41




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##### Table of Contents



Properties
     Legal Proceedings
   42




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##### Table of Contents



Employees
  Our Website and Availability of SEC Reports and Other Information
 www.convertedorganics.com http://www.sec.gov ir.convertedorganics.com
 43




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##### Table of Contents



PRINCIPAL STOCKHOLDERS
  §
    
    each person or group of affiliated persons known by us to beneficially own more than
5% of our common stock;§
    
    each of our directors;§
    
    each of our named executive officers; and§
    
    all of our directors and executive officers as a group.
   Name of
    
    No. of SharesBeneficial
    
    BeneficiallyOwner(1)
    
    Owned
    
    Percent of Class(2)Edward J. Gildea
    
    
    3,409,815
    (3)
    
    
    2.7
    %David R. Allen
    
    
    710,417
    (4)
    
    
    *Robert E. Cell
    
    
    573,340
    (5)
    
    
    *John P. DeVillars
    
    
    573,340
    (5)
    
    
    *Marshal S. Sterman
    
    
    437,340
    (6)
    
    
    *Edward A. Stoltenberg
    
    
    578,208
    (7)(8)
    
    
    *All directors and officers as a group (six persons)
    
    
    6,282,460
    
    
    
    4.8
    %5% ShareholdersOppenheimerFunds, Inc.
    
    
    32,228,361
    (9)
    
    
    9.9
    %(9)
 44




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##### Table of Contents



*
    
    Less than 1%(1)
    
    The address of all persons named in this table, with the exception of Oppenheimer Funds, Inc.
is: c/o Converted Organics Inc., 137A Lewis Wharf, Boston, MA 02110.(2)
    
    Assumes 127,457,556 shares as of June 24, 2011.(3)
    
    Includes 1,400 Class B Warrants and options to purchase 1,260,178 shares.(4)
    
    Includes options to purchase 536,333 shares.(5)
    
    Includes options to purchase 388,670 shares.(6)
    
    Includes options to purchase 218,670 shares.(7)
    
    Includes options to purchase 378,670 shares.(8)
    
    Includes 2,965 shares beneficially owned and held in trust.(9)
    
    Consists of 7,769,798 shares of common stock and 13,281 shares of Series A Convertible
Preferred Stock that is convertible into 24,458,563 shares of common stock; provided that we are
not permitted to effect any conversion of the preferred stock, and the holder does not have the
right to convert any portion of the preferred stock, to the extent that, after giving effect to the
conversion the holder (together with any of holders affiliates would beneficially own in excess of
9.9% of the total issued and outstanding shares of our common stock. The business address of
OppenheimerFunds, Inc. is Two World Financial Center, 225 Liberty Street, New York, NY 10281. 45




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##### Table of Contents



MANAGEMENT
 Directors, Executive Officers and Key Employees
  Name
    
    Age
    
    PositionEdward J. Gildea
    
    59
    
    President, Chief Executive Officer, and Chairman of the BoardDavid R. Allen
    
    56
    
    Chief Financial Officer and Executive Vice-President of AdministrationRobert E. Cell
    
    42
    
    DirectorJohn P. DeVillars
    
    62
    
    DirectorMarshall S. Sterman
    
    79
    
    DirectorEdward A. Stoltenberg
    
    72
    
    Director
  Edward J. Gildea
 David R. Allen
 Robert E. Cell
 46




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##### Table of Contents



John P. DeVillars
 Marshall S. Sterman
 Edward A. Stoltenberg
  Board Independence
   47




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##### Table of Contents



Compensation Committee and Insider Participation
  Executive Compensation
  Summary Compensation Table  2010
 Nonqual.Name and
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Equity
    
    Deferred
    
    AllPrincipal
    
    Fiscal
    
    
    
    
    
    
    
    
    
    Stock
    
    Option Awards
    
    Incentive
    
    Comp.
    
    OtherPosition
    
    Year
    
    Salary ($)
    
    Bonus ($)
    
    Awards
    
    ($)(1)
    
    Plan Comp.
    
    Earnings
    
    Comp.
    
    Total ($)Edward J. Gildea,
    
    
    2010
    
    
    
    221,800
    
    
    
    
    
    
    
    
    
    
    
    256,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478,200President and Chief 
Executive Officer
    
    
    2009
    
    
    
    222,879
    
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    272,879David Allen,
    
    
    2010
    
    
    
    176,200
    
    
    
    
    
    
    
    
    
    
    
    128,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    304,400Chief Financial
Officer
    
    
    2009
    
    
    
    152,376
    
    
    
    15,000
    
    
    
    
    
    
    
    40,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    207,876
 
 (1)
    
    Represents the full grant date fair value of the option grant calculated in accordance
with FASB ASC Topic 718. For the purposes of making the option calculation, the assumptions set
forth in Note 12 of the Notes to Consolidated Financial Statements for the year ended December 31,
2010 were utilized; provided that we excluded the assumed forfeiture rate for the purposes of the
calculations in the table. 48




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##### Table of Contents



Outstanding Equity Awards at Fiscal Year End-2010
 Number of SecuritiesUnderlying Unexercised
    
    Option ExerciseOptions (#)
    
    Price
    
    Option ExpirationName
    
    Exercisable
    
    Unexercisable
    
    ($ per share)
    
    DateEdward J. Gildea
    
    
    100,000
    
    
    
    0
    
    
    $
    3.75
    
    
    June 15, 2011125,000
    
    
    
    0
    
    
    $
    5.02
    
    
    June 27, 2018500,000
    
    
    
    0
    
    
    $
    0.68
    
    
    January 4, 2020David R. Allen
    
    
    10,000
    
    
    
    0
    
    
    $
    3.75
    
    
    June 15, 201171,195
    
    
    
    0
    
    
    $
    5.02
    
    
    June 27, 201850,000
    
    
    
    0
    
    
    $
    1.10
    
    
    June 25, 2019250,000
    
    
    
    0
    
    
    $
    0.68
    
    
    January 4, 2020
 Stock Option Plan
    Employment Agreements
    49




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##### Table of Contents



Director Compensation  2010
  Fees Earned or PaidName
    
    in Cash
    
    Option Awards(1)
    
    TotalEdward A. Stoltenberg
    
    $
    68,500
    
    
    $
    76,920
    (2)
    
    $
    145,420Robert Cell
    
    $
    68,500
    
    
    $
    76,920
    (3)
    
    $
    145,420John DeVillars
    
    $
    59,250
    
    
    $
    76,920
    (4)
    
    $
    136,170Marshall Sterman
    
    $
    13,750
    
    
    $
    0
    (5)
    
    $
    13,750
 
 (1)
    
    Represents the full grant date fair value of the option grant calculated in accordance
with FASB ASC Topic 718. For the purposes of making the option calculation, the assumptions set
forth in Note 12 of the Notes to Consolidated Financial Statements for the year ended December 31,
2010 were utilized; provided that we excluded the assumed forfeiture rate for the purposes of the
calculations in the table.(2)
    
    As of December 31, 2010, Mr. Stoltenberg held options to purchase 194,000 shares of common
stock.(3)
    
    As of December 31, 2010, Mr. Cell held options to purchase 194,000 shares of common stock.(4)
    
    As of December 31, 2010, Mr. DeVillars held options to purchase 194,000 shares of common stock.(5)
    
    As of December 31, 2010, Mr. Sterman held no options to purchase shares of
common stock. 50




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RELATED PARTY TRANSACTIONS
     51




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##### Table of Contents



SELLING STOCKHOLDER
      Maximum NumberNumber of Shares
    
    of Shares of
    
    Number of Sharesof Common Stock
    
    Common Stock to
    
    of Common StockOwned Prior to
    
    be Sold Pursuant to
    
    Owned AfterName of Selling Stockholder
    
    Offering
    
    this Prospectus
    
    OfferingIroquois Master Fund, Ltd.
    
    
    6,245,420
    (1)(2)

    
    
    87,172,755
    
    
    
    10,965,294
    (1)
   52




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##### Table of Contents



PLAN OF DISTRIBUTION
   
    
    on any national securities exchange or quotation service on which the securities may
be listed or quoted at the time of sale;
    
    in the over-the-counter market;
    
    in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
    
    through the writing or settlement of options, whether such options are listed on an
options exchange or otherwise;
    
    ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers;
    
    block trades in which the broker-dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction;
    
    purchases by a broker-dealer as principal and resale by the broker-dealer for its
account;
    
    an exchange distribution in accordance with the rules of the applicable exchange;
    
    privately negotiated transactions;
    
    short sales made after the date the Registration Statement is declared effective by
the SEC;
    
    broker-dealers may agree with the selling stockholder to sell a specified number of
such shares at a stipulated price per share;
    
    a combination of any such methods of sale; and
    
    any other method permitted pursuant to applicable law.
  53




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##### Table of Contents



54




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##### Table of Contents



DESCRIPTION OF CAPITAL STOCK
 The following information describes our capital stock as well as certain provisions of our
certificate of incorporation and bylaws. This description is only a summary. You should also refer
to our certificate of incorporation and bylaws, which have been filed as exhibits to the
registration statement of which this prospectus is a part.
  Common Stock
  Preferred Stock
    55




---



##### Table of Contents



December 2010 Note and Warrant Offering
       56




---



##### Table of Contents



April 2011 Note and Warrant Offering
    57




---



##### Table of Contents



58




---



##### Table of Contents



Class B Warrants
 General
 No Redemption
 Exercise
 Class C Warrants and Class D Warrants
 General.
 Fundamental Transactions.
 59




---



##### Table of Contents



Class E Warrants and Class F Warrants
 General.
  Call Provision.
 Fundamental Transaction.
 Class G Warrants
 General.
 60




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##### Table of Contents



Fundamental Transactions
 Class H Warrants
 General.
 Exercise.
  Purchase Option Issued in October 2009 Offering
  IPO Underwriters Warrants
  61




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##### Table of Contents



Anti-Takeover Effects of Certain Provisions of Delaware Law and Our Certificate of Incorporation
and Bylaws
  Staggered Board
 Special Meetings
 Undesignated Preferred Stock
 Delaware Anti-Takeover Statute
 
    
    Prior to the date of the transaction, the board of directors of the corporation
approved either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder.
    
    Upon completion of the transaction that resulted in the stockholder becoming an
interested stockholder, the stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding for purposes
of determining the number of shares outstanding (1) shares owned by persons who are
directors and also officers and (2) shares owned by employee stock plans in which
employee participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer.
    
    On or subsequent to the date of the transaction, the business combination is
approved by the board and authorized at an annual or special meeting of stockholders,
and not by written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder.
  62




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Limitation of Officer and Director Liability
  
    
    for any breach of the officers or directors duty of loyalty to us or our
stockholders;
    
    for acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law;
    
    for unlawful payments of dividends or unlawful stock repurchases or redemptions as
provided in Section 174 of the DGCL; or
    
    for any transaction from which the officer or director derived an improper personal
benefit.
 Indemnification
  Transfer Agent, Warrant Agent and Registrar
  Listing
  63




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##### Table of Contents



LEGAL MATTERS
  
 EXPERTS
  
 WHERE YOU CAN FIND MORE INFORMATION
   64




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##### Table of Contents



CONVERTED
    ORGANICS INC.
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


F-2Consolidated Balance Sheets at December 31, 2010 and 2009


F-3Consolidated Statements of Operations for the years ended
    December 31, 2010 and 2009


F-4Consolidated Statements of Changes in Stockholders Equity
    for the years ended December 31, 2010 and 2009


F-5Consolidated Statements of Cash Flows for the years ended
    December 31, 2010 and 2009


F-6Notes to Consolidated Financial Statements


F-7  F-1




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            CCR
    LLP
   F-2




---



##### Table of Contents



Item 1.
    Financial
    Statements  CONVERTED
    ORGANICS INC.
  CONSOLIDATED BALANCE SHEETS
 DECEMBER 31, 2010 AND 2009
  2010


2009ASSETSCURRENTASSETSCash

$
3,039,941


$
10,708,807Restricted cash






613,162Accounts receivable, net


579,946



80,911Inventories


126,406



176,351Prepaid expenses and other assets


251,589



73,194Deferred financing costs, net


276,667



Current assets of discontinued operations


14,500



962,075Total current assets


4,289,049



12,614,500Deposits and other non-current assets


575,596



336,357Property and equipment, net


1,477,589



1,002,709Goodwill


1,667,957



Intangible assets, net


11,629,265



1,995,619Non-current assets of discontinued operations






19,193,886Total assets

$
19,639,456


$
35,143,071LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESTerm note payable

$
350,000


$
Note payables  related party


72,351



Accounts payable


2,393,388



552,057Accrued expenses


656,412



843,203Convertible notes payable, net of unamortized discount


306,404



355,164Obligation to issue shares


1,560,715



Derivative liabilities  current


5,199,572Liabilities of discontinued operations


2,438,253



4,475,303Total current liabilities


12,977,095



6,225,727Derivative liabilities


3,476,047



1,626,742Convertible note payable, net of current portion






17,767Non-current liabilities of discontinued operations






18,501,081Total liabilities


16,453,142



26,371,317COMMITMENTS AND CONTINGENCIES






STOCKHOLDERS EQUITYPreferred stock, $.0001 par value, authorized
    10,000,000 shares; 17,500 ($1,000 stated value) shares
    issued and outstanding


17,500,000



Common stock, $.0001 par value, authorized
    250,000,000 shares at December 31, 2010 and
    75,000,000 shares at December 31, 2009


8,547



3,777Additional paid-in capital


85,555,990



58,660,042Accumulated deficit


(100,453,292
)


(49,892,065
)Accumulated other comprehensive loss


(1,109
)


2,610,136



8,771,754Noncontrolling interests


576,178



Total stockholders equity


3,186,314



8,771,754Total liabilities and stockholders equity

$
19,639,456


$
35,143,071    F-3




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##### Table of Contents



CONVERTED
    ORGANICS INC.
  CONSOLIDATED STATEMENTS OF OPERATIONS AND
    COMPREHENSIVE LOSS
 FOR THE YEARS ENDED DECEMBER 31, 2010 AND
    2009
  2010


2009Revenues

$
3,525,325


$
2,136,720Cost of goods sold


2,522,305



2,079,740Gross income


1,003,020



56,980Operating expensesSelling, general and administrative expenses


14,625,568



7,123,603Research and development


287,550



626,652Amortization of intangibles


367,461



288,00715,280,579



8,038,262Loss from continuing operations


(14,277,559
)


(7,981,282
)Other income/(expenses)Other income


131,197



23,524Derivative gain (loss)


(166,712
)


5,766,035Interest expense


(1,725,951
)


(5,450,581
)(1,761,466
)


338,978Loss from continuing operations before provision for income taxes


(16,039,025
)


(7,642,304
)Provision for income taxes






Net loss from continuing operations


(16,039,025
)


(7,642,304
)Loss from discontinued operations


(34,690,358
)


(13,463,484
)Net loss


(50,729,383
)


(21,105,788
)Net loss attributable to noncontrolling interest


(168,156
)


Net loss attributable to Converted Organics Inc. before other
    comprehensive loss


(50,561,227
)


(21,105,788
)Other comprehensive loss:Foreign currency translation adjustment


(1,373
)


Comprehensive loss


(50,562,600
)


(21,105,788
)Comprehensive loss attributable to noncontrolling interest


(264
)


Comprehensive loss attributable to Converted Organics Inc.

$
(50,562,336
)

$
(21,105,788
)Net loss per share, basic and dilutedContinuing operations

$
(0.34
)

$
(0.39
)Discontinued operations


(0.74
)


(0.69
)$
(1.08
)

$
(1.08
)Weighted average common shares outstanding


46,838,001



19,569,853    F-4




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##### Table of Contents





CONVERTED
    ORGANICS INC.
  CONSOLIDATED STATEMENT OF CHANGES IN
    STOCKHOLDERS EQUITY
 FOR THE YEARS ENDED DECEMBER 31, 2010 AND
    2009
  Converted Organics Inc.Preferred Stock Series A


Common Stock











AccumulatedShares





Shares





Additional








Other





Non-


TotalIssued and





Issued and





Paid-in


Members


Accumulated


Comprehensive





Controlling


StockholdersOutstanding


Amount


Outstanding


Amount


Capital


Equity


Deficit


Loss


Total


Interests


EquityBalance, January 1, 2009, before cumulative effect of
    change in accounting principle





$




7,431,436


$
743


$
31,031,647


$
619,657


$
(26,605,115
)

$



$
5,046,932


$



$
5,046,932Cumulative effect of a change in accounting principle


















(2,936,250
)






(2,146,858
)






(5,083,108
)






(5,083,108
)Balance, January 1, 2009, after cumulative effect of change
    in accounting principle










7,431,436



743



28,095,397



619,657



(28,751,973
)






(36,176
)






(36,176
)Members contributions






















915,651











915,651







915,651Members distributions






















(201,630
)










(201,630
)






(201,630
)Deconsolidation of former variable interest entity






















(1,367,982
)










(1,367,982
)






(1,367,982
)Common stock issued to holders of convertible notes payable in
    connection with extension










200,000



20



561,980















562,000







562,000Common stock issued upon conversion of convertible notes payable










7,779,644



778



6,419,473















6,420,251







6,420,251Common stock issued as compensation for services










151,528



15



139,198















139,213







139,213Warrants issued in connection with release of restricted cash


















662,479















662,479







662,479Issuance of stock options


















222,064















222,064







222,064Common stock issued upon exercise of warrants










1,500,000



150



1,964,850















1,965,000







1,965,000Issuance of common stock










20,711,600



2,071



20,594,601















20,596,672







20,596,672Net income (loss)






















34,304



(21,140,092
)






(21,105,788
)






(21,105,788
)Balance, December 31, 2009










37,774,208



3,777



58,660,042







(49,892,065
)






8,771,754







8,771,754Issuance of stock options


















1,310,252















1,310,252







1,310,252Common stock issued upon conversion of convertible notes payable
    and accrued interest










646,500



65



413,894















413,959







413,959Common stock issued as compensation for services










650,811



66



441,974















442,040







442,040Issuance of common stock and warrants, net of
    fair value of derivatives issued of $968,096










2,400,000



240



1,398,024















1,398,264







1,398,264Issuance of common stock and warrants as
    payment of accounts payable










2,780,740



278



1,501,322















1,501,600







1,501,600Common stock issued upon exercise of employee stock options










50,000



5



33,995















34,000







34,000Issuance of common stock as payment to settle obligations of
    discontinued operations










21,619,837



2,162



11,752,588















11,754,750







11,754,750Issuance of common stock related to the acquisition of
    TerraSphere Systems, LLC










18,174,603



1,817



9,564,036















9,565,853



648,644



10,214,497Issuance of common stock related to the acquisition of
    GoLocalProduceRI, LLC










1,371,428



137



479,863















480,000



95,954



575,954Issuance of preferred stock as payment of bond obligation


17,500



17,500,000



























17,500,000







17,500,000Foreign currency translation adjustment






























(1,109
)


(1,109
)


(264
)


(1,373
)Net loss


























(50,561,227
)






(50,561,227
)


(168,156
)


(50,729,383
)Balance, December 31, 2010


17,500


$
17,500,000



85,468,127


$
8,547


$
85,555,990


$



$
(100,453,292
)

$
(1,109
)

$
2,610,136


$
576,178


$
3,186,314     F-5




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  CONSOLIDATED STATEMENTS OF CASH
    FLOWS
  Years Ended December 31,2010


2009CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(50,729,383
)

$
(21,105,788
)Adjustments to reconcile net loss to net cash used in operating
    activities:Amortization expense


1,210,580



374,218Depreciation and amortization expense of property and equipment


1,435,086



2,155,994Provision for losses on accounts receivable


2,457,478



81,000Amortization of discounts attributable to notes and warrants on
    private financing


360,359



2,870,313Interest expense in relation to issuance of convertible debt


1,368,695



1,475,678Loss on disposal of discontinued operations


9,337,909



Common stock issued for extension of convertible note payable






562,000Common stock issued as compensation


442,040



139,213Stock option compensation expense


1,310,252



222,064Loss on impairment of long lived assets


15,383,925



3,928,129Warrants issued in connection with release of restricted cash






662,479Obligations to issue shares revaluation


(123,214
)


Derivative loss (gain)


166,712



(5,766,035
)Changes in operating assets and liabilities:(Increase) decrease in:Accounts receivable


(104,792
)


19,784Inventories


322,342



(159,018
)Prepaid expenses and other current assets


(130,958
)


(239,261
)Deposits and other non-current assets


280,551



376,042Increase (decrease) in:Accounts payable


2,804,450



2,869,851Accrued expenses


2,705,381



714,900Net cash used in operating activities


(11,502,587
)


(10,818,437
)CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment


(656,095
)


(3,923,715
)Release of restricted cash


613,162



1,994,958Deconsolidation of variable interest entity






(596,170
)Patent costs


(1,106
)


Cash acquired in acquisitions


98,276



Purchase of other assets


(500,000
)


Net cash used in investing activities


(445,763
)


(2,524,927
)CASH FLOWS FROM FINANCING ACTIVITIES:Repayment of debt obligations


(1,542,753
)


(4,466,891
)Repayment of capital lease obligations


(11,802
)


(12,403
)Members contributions






230,983Members distributions






(201,630
)Advances from (payments to) related party


(10,000
)


Net proceeds from exercise of options


34,000



Net proceeds from stock offering


2,366,360



20,596,672Net proceeds from exercise of warrants






1,965,000Net proceeds from short-term notes


3,444,555



2,582,500Net cash provided by financing activities


4,280,360



20,694,231Net effect of exchange rate changes on cash


(876
)


NET INCREASE (DECREASE) IN CASH


(7,668,866
)


7,350,867Cash, beginning of year


10,708,807



3,357,940Cash, end of year

$
3,039,941


$
10,708,807Supplemental cash flow information:Cash paid during the period for:Interest

$
952,350


$
1,665,990Non-cash financing activities:Equipment acquired through assumption of capital lease

$



$
52,979Equipment acquired through assumption of term note






118,250Common stock issued upon conversion of convertible notes payable
    and accrued interest


413,959



6,420,251Fair value of derivatives issued in conjunction with debt and
    equity financing


6,882,165



3,827,686Common stock and warrants issued as payment for accounts payable


1,501,600



Fair value of contingent consideration in relation to acquisition


1,683,929



Issuance of common stock in conjunction with the acquisitions


10,045,853



Discount on convertible note issued in connection with financings


3,750,000



2,870,313Preferred stock issued in satisfaction of bonds payable


17,500,000



Common stock issued as settlement of discontinued operations
    obligations


11,754,750



Members contribution of convertible note






684,668Conversion of accounts payable into notes payable






4,663,039    F-6




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 1 
    NATURE OF OPERATIONS
    Organic Fertilizer:
  Industrial Wastewater Treatment:
  Vertical Farming:
             F-7




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 1 
    NATURE OF OPERATIONS  Continued
      NOTE 2 
    GOING CONCERN
         F-8




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 3 
    SIGNIFICANT ACCOUNTING POLICIES
  PRINCIPLES
    OF CONSOLIDATION AND BASIS OF PRESENTATION
      FOREIGN
    OPERATIONS
    CASH
    AND CASH EQUIVALENTS
    ACCOUNTS
    RECEIVABLE
    INVENTORIES
    GOODWILL
   F-9




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 3 
    SIGNIFICANT ACCOUNTING
    POLICIES  Continued
    INTANGIBLE
    ASSETS
  Intangibles  Goodwill and Other
  LONG-LIVED
    ASSETS
    PROPERTY
    AND EQUIPMENT
    Construction-in-progress
  CONVERTIBLE
    DEBT
   F-10




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 3 
    SIGNIFICANT ACCOUNTING
    POLICIES  Continued
  DERIVATIVE
    INSTRUMENTS
  Derivatives and Hedging
  DISCONTINUED
    OPERATIONS
    REVENUE
    RECOGNITION
  price-per-gallon
    
    Persuasive evidence of a sales arrangement exists;
    Delivery of the product has occurred;
    The sales price is fixed or determinable; and
    Collectability is reasonably assured.    SHIPPING
    AND HANDLING COSTS
   F-11




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 3 
    SIGNIFICANT ACCOUNTING
    POLICIES  Continued
  SHARE
    BASED COMPENSATION
  Compensation  Stock Compensations Equity
  RESEARCH
    AND DEVELOPMENT COSTS
    INCOME
    TAXES
  Income
    Taxes
    FAIR
    VALUE MEASUREMENTS
  Fair Value Measurements and
    Disclosures
     F-12




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 3 
    SIGNIFICANT ACCOUNTING
    POLICIES  Continued
    EARNINGS
    (LOSS) PER SHARE
    RECLASSIFICATIONS
    RECENTLY
    ADOPTED ACCOUNTING PRONOUNCEMENTS
  ASU
    No. 2010-17,
    Milestone Method of Revenue Recognition.
  ASU
    2010-28
    (Topic 350) When to Perform Step 2 of the Goodwill
    Impairment Test for Reporting Units with Zero or Negative
    Carrying Amounts 2010-28 2010-28 2010-29
  ASU
    2010-29,
    Business Combinations (Topic 805): Disclosure of Supplementary
    Pro Forma Information for Business Combinations 2010-29
 F-13




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 3 
    SIGNIFICANT ACCOUNTING
    POLICIES  Continued
  2010-29 2010-29
  NOTE 4 
    ACQUISITIONS
  TERRASPHERE
    SYSTEMS LLC ACQUISITION
      Milestone One Payment:
  Milestone Two Payment:
  Milestone Three Payment:
 F-14




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 4 
    ACQUISITIONS  Continued
  Milestone Four Payment:
      Election of Option One

$
2,961,000Election of Option Two


4,490,000Milestone one payment


1,403,000Milestone two payment


711,000Milestones three and four payments


1,684,000Anti-dilution provision


837,000$
12,086,000       Cash

$
41,679Accounts receivable


2,690,000Other assets


274,313Leasehold improvements


176,181Construction-in-process


97,306Patents and patent related costs


10,000,000Goodwill


1,193,600Assumption of liabilities


(1,738,435
)Noncontrolling interest


(648,644
)Total allocation of purchase price

$
12,086,000    F-15




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 4 
    ACQUISITIONS  Continued
      Obligations to issue shares (Milestones Three and Four)


1,684,000Derivative liability related to anti-dilution provision


837,000Equity


9,565,000Total

$
12,086,000   Distinguishing Liabilities from Equity
  GoLocalProduceRI,
    LLC ACQUISITION
        Cash

$
56,597Prepaid and other current assets


45,000Goodwill


474,357Noncontrolling interest


(95,954
)Total

$
480,000  F-16




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 4 
    ACQUISITIONS  Continued
    For the Year EndedDecember 31,2010

2009Revenue

$
8,862,980


$
2,670,514Net loss

$
(48,629,191
)

$
(22,321,742
)Net loss per share, basic and diluted

$
(0.65
)

$
(047
)Weighted-average shares


74,276,495



47,094,769   NOTE 5 
    DISCONTINUED OPERATIONS
         F-17




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 5 
    DISCONTINUED
    OPERATIONS  Continued
        2010


2009Revenue from discontinued operations

$
830,814


$
497,062Results from discontinued operations including write downs to
    fair value of $15.4 million in 2010 and $3.9 million
    in 2009

$
(25,352,449
)

$
(13,463,484
)Loss recognized on disposal


(9,337,909
)


$
34,690,358


$
13,463,484       2010


2009Accounts receivable, net

$
14,500


$
59,746Inventories






272,396Prepaid expenses






629,933Property and equipment, net






17,935,216Deposits






444,329Capitalized bond costs, net






814,341Assets of discontinued operations

$
14,500


$
20,155,961Term notes payable

$



$
3,247,752Accounts payable


837,606



1,237,275Accrued expenses


1,571,874



950,782Other liabilities


28,773



40,575Bonds payable






17,500,000Liabilities of discontinued operations

$
2,438,253


$
22,976,384    F-18




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 6 
    FINANCIAL MEASUREMENTS
  CONCENTRATIONS
    OF CREDIT RISK
        FAIR
    VALUE MEASUREMENTS
    Level of

BalanceHierarchy

2010

2009Derivative warrants and anti-dilution provision liabilities


Level 3


$
8,675,619


$
1,626,742     2010


2009Balance, beginning of year

$
(1,626,742
)

$
Cumulative effect of change in accounting principle






(5,083,108
)Settlements






1,518,017Issuances


(6,882,165
)


(3,827,686
)Net gains (losses)


(166,712
)


5,766,035Balance, end of year

$
(8,675,619
)

$
(1,626,742
)    F-19




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 7 
    INVENTORIES
    2010


2009Finished goods

$
104,690


$
137,027Raw materials


21,716



39,324Total inventories

$
126,406


$
176,351   NOTE 8 
    PROPERTY AND EQUIPMENT
    2010


2009Building and improvements

$
840,562


$
147,894Machinery and equipment


755,831



687,125Vehicles


42,570



42,570Office equipment and furniture


17,925



7,838Construction-in-progress


136,607



311,0461,793,495



1,196,473Less: Accumulated depreciation and amortization


(315,906
)


(193,764
)Property and equipment, net

$
1,477,589


$
1,002,709     2010


2009Continuing operations  cost of goods sold

$
104,158


$
96,241Continuing operations  operating expenses


17,984



11,511122,142



107,752Discontinued operations (See Note 5)


1,312,944



2,048,242Total depreciation and amortization expense


1,435,086



2,155,994     2010


2009Balance, beginning of year

$
1,934,324


$
405,250Additions


1,435,086



2,155,994Disposals


(3,053,504
)


(626,920
)Balance, end of year

$
315,906


$
1,934,324
)    F-20




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 8 
    PROPERTY AND
    EQUIPMENT  Continued
    NOTE 9 
    DEFERRED FINANCING COSTS
    NOTE 10 
    INTANGIBLE ASSETS
    14-20 years.
    2010


2009Definite-lived intangible assets:Existing customer relationships

$
2,030,513


$
2,030,513Technological know-how


271,812



271,812Patents and related patent costs


10,001,107



12,303,432



2,302,325Less: accumulated amortization


(902,355
)


(534,894
)Total


11,401,077



1,767,431Indefinite-lived intangible assets:Trade name


228,188



228,188Net intangibles assets

$
11,629,265


$
1,995,619    F-21




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 10 
    INTANGIBLE ASSETS  Continued
    NOTE 11 
    DEBT
  TERM
    NOTES
          NOTE PAYABLE 
    RELATED
    PARTY     F-22




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 11 
    DEBT  Continued
    BOND
    FINANCING
         F-23




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 11 
    DEBT  Continued
    CONVERTIBLE
    NOTES PAYABLE
           F-24




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 11 
    DEBT  Continued
      PRIVATE
    FINANCING
         F-25




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 11 
    DEBT  Continued
        PRIVATE
    FINANCING
      NOTE 12 
    DERIVATIVE INSTRUMENTS
  mark-to-market
 F-26




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 12 
    DERIVATIVE
    INSTRUMENTS  Continued
    mark-to-market
    fixed-for-fixed mark-to-market
  fixed-for-fixed mark-to-market
 F-27




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 12 
    DERIVATIVE
    INSTRUMENTS  Continued
        fixed-for-fixed mark-to-market
     F-28




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 12 
    DERIVATIVE
    INSTRUMENTS  Continued
          NOTE 13 
    STOCKHOLDERS EQUITY
  AUTHORIZED
    SHARES
      STOCK
    ISSUANCES
     F-29




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 13 
    STOCKHOLDERS
    EQUITY  Continued
              and/or
 F-30




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 13 
    STOCKHOLDERS
    EQUITY  Continued
                 F-31




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 13 
    STOCKHOLDERS
    EQUITY  Continued
        WARRANTS
             F-32




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 13 
    STOCKHOLDERS
    EQUITY  Continued
                   F-33




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 13 
    STOCKHOLDERS
    EQUITY  Continued
              WARRANT
    EXERCISE
     F-34




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 13 
    STOCKHOLDERS
    EQUITY  Continued
    Outstanding at











Outstanding at











Outstanding at


Excercisable atJanuary 1,











December 31,











December 31,


December 31,Warrants

Price


2009


Issued


Excercised


Canceled


2009


Issued


Excercised


Canceled


2010


2010Class B

$
11.00



2,648,029



2,284,409











4,932,438








*


(2,284,409
)


2,648,029



2,648,029Class C

$
1.00







885,000











885,000















885,000



885,000Class D

$
1.02







415,000











415,000















415,000



415,000May 19, 2009 Warrants

$
1.40







1,500,000



(1,500,000
)


























Class E

$
1.63







1,500,000











1,500,000















1,500,000



1,500,000Class F

$
1.25







585,000











585,000















585,000



585,000Class G

$
1.25







2,500,000











2,500,000















2,500,000



2,500,000Class H

$
1.30







17,250,000











17,250,000















17,250,000



17,250,000Class I

$
1.06























1,163,362











1,163,362



Class J

$
0.54























1,623,333











1,623,333



1,623,333Class K

$
0.54























1,157,407











1,157,407



1,157,407December 17, 2010 Series A

$
0.345























1,969,737











1,969,737



1,969,737December 17, 2010 Series B

$
0.345























3,939,474











3,939,474



3,939,474December 17, 2010 Series C

$
0.345























1,969,737











1,969,737



1,969,737     *
    
    On October 18, 2010, 2,284,409 Class B warrants were
    retired by the Bond holder (see Note 12).    STOCK
    OPTIONS
      Section 505-50.
 F-35




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 13 
    STOCKHOLDERS
    EQUITY  Continued
          Weighted


WeightedAverage


Average


AverageStock


Price per


Exercise


RemainingOptions


Share


Price


Life (Years)Outstanding and exercisable at January 1, 2009


1,256,735


$
4.50


$
4.50



9.5Granted


233,500



1.10Granted


100,000



.75Forfeited


(359,940
)


5.02Exercised






Outstanding and exercisable at December 31, 2009


1,230,295


$
3.54


$
3.54



8.5Granted


2,458,500



.68Granted


50,000



.97Forfeited


(45,000
)


.89Exercised


(50,000
)


.68Outstanding and exercisable at December 31, 2010


3,643,795


$
1.64


$
1.64



8.8      F-36




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 14 
    INCOME TAXES
      2010


2009Statutory federal income tax rate


34
%


34
%Statutory state income tax rate


6



6Valuation allowance on net deferred tax assets


(40
)


(40
)Effective tax rate



%



%     2010


2009Deferred tax assets:Net operating losses

$
33,255,000


$
13,470,000Accrued compensation


120,000



120,000Stock options


1,925,000



1,410,000Valuation allowance


(35,300,000
)


(15,000,000
)$



$
              F-37




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 15 
    SEGMENT REPORTING
      Organic

Vertical

Corporate andFertilizer

Farming

Eliminations

ConsolidatedRevenues

$
3,275,325


$
250,000


$



$
3,525,325Operating loss from continuing operations(1)


(1,279,055
)


(2,562,517
)


(12,197,453
)


(16,039,025
)Depreciation and amortization(2)


369,544



85,403



34,656



489,603Interest expense(3)






11,169



1,714,782



1,725,951Total assets net of discontinued operations(4)


2,973,568



12,618,892



4,032,496



19,624,956Goodwill






1,667,957







1,667,957Property and equipment additions


294,878



29,157







324,035     (1)
    
    Operating loss from continuing operations of the principal
    businesses exclude corporate compensation, marketing expense,
    professional fees and other unallocated expenses.(2)
    
    Depreciation and amortization expense associated with property
    and equipment and intangibles. Corporate amortization expense
    relates to intangible asset technological know-how.(3)
    
    Corporate interest expense is primarily related to a convertible
    note payable.(4)
    
    Total business assets are the owned or allocated assets used by
    each business. Corporate assets consist of cash, intangibles and
    certain other assets.      NOTE 16 
    RELATED PARTY TRANSACTIONS
       F-38




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 16 
    RELATED PARTY
    TRANSACTIONS  Continued
      NOTE 17 
    PROFIT
    SHARING PLAN    NOTE 18 
    COMMITMENTS
    AND CONTINGENCIES  LEASES
        Year ending December 31,2011

$
329,7722012


323,5322013


219,6812014


207,6312015


132,5042016 and thereafter


288,796$
1,501,916   LEGAL
    PROCEEDINGS
   F-39




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   NOTE 18 
    COMMITMENTS
    AND CONTINGENCIES  Continued       F-40




---



##### Table of Contents



CONVERTED
    ORGANICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 19 
    SUBSEQUENT EVENTS
               F-41




---



##### Table of Contents



INDEX
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    F-43Consolidated Balance Sheets as of March 31, 2011 (unaudited) and December 31, 2010
    
    
    F-43Consolidated Statements of Operations for the three month periods ended March 31,
2011 and 2010 (unaudited)
    
    
    F-44Consolidated Statement of Changes in Stockholders Equity for the three month
period ended March 31, 2011 (unaudited)
    
    
    F-45Consolidated Statements of Cash Flows for the three month periods ended March 31,
2011 and 2010 (unaudited)
    
    
    F-46Notes to Consolidated Interim Financial Statements (unaudited)
    
    
    F-47
 F-42




---



##### Table of Contents



Item 1. Financial Statements
 CONVERTED ORGANICS INC.

CONSOLIDATED BALANCE SHEETS
 March 31, 2011(Unaudited)
    
    
    December 31, 2010ASSETSCURRENT ASSETSCash
    
    $
    823,768
    
    
    $
    3,039,941Accounts receivable, net
    
    
    606,702
    
    
    
    579,946Inventories
    
    
    343,655
    
    
    
    126,406Prepaid expenses and other assets
    
    
    402,589
    
    
    
    251,589Deferred financing costs, net
    
    
    210,188
    
    
    
    276,667Current assets of discontinued operations
    
    
    
    
    
    
    14,500Total current assets
    
    
    2,386,902
    
    
    
    4,289,049Deposits and other non-current assets
    
    
    566,909
    
    
    
    575,596Property and equipment, net
    
    
    3,157,580
    
    
    
    1,477,589Goodwill
    
    
    1,667,957
    
    
    
    1,667,957Intangible assets, net
    
    
    11,419,548
    
    
    
    11,629,265Total assets
    
    $
    19,198,896
    
    
    $
    19,639,456LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESTerm note payable
    
    $
    
    
    
    $
    350,000Notes payable  related party
    
    
    72,351
    
    
    
    72,351Accounts payable
    
    
    2,796,512
    
    
    
    2,393,388Accrued expenses
    
    
    626,199
    
    
    
    656,412Convertible notes payable, net of unamortized discount
    
    
    247,717
    
    
    
    306,404Obligation to issue shares
    
    
    1,396,429
    
    
    
    1,560,715Derivative liabilities  current
    
    
    3,915,520
    
    
    
    5,199,572Liabilities of discontinued operations
    
    
    935,359
    
    
    
    2,438,253Total current liabilities
    
    
    9,990,087
    
    
    
    12,977,095Derivative liabilities
    
    
    3,038,233
    
    
    
    3,476,047Total liabilities
    
    
    13,028,320
    
    
    
    16,453,142COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    STOCKHOLDERS EQUITYPreferred stock, $.0001 par value ($1,000 stated value)
authorized 10,000,000 shares
    
    
    17,500,000
    
    
    
    17,500,000Common stock, $.0001 par value, authorized 250,000,000 shares
    
    
    9,784
    
    
    
    8,547Additional paid-in capital
    
    
    90,349,983
    
    
    
    85,555,990Accumulated deficit
    
    
    (102,192,769
    )
    
    
    (100,453,292
    )Accumulated other comprehensive loss
    
    
    (9,585
    )
    
    
    (1,109
    )5,657,413
    
    
    
    2,610,136Noncontrolling interests
    
    
    513,163
    
    
    
    576,178Total stockholders equity
    
    
    6,170,576
    
    
    
    3,186,314Total liabilities and stockholders equity
    
    $
    19,198,896
    
    
    $
    19,639,456
 The accompanying notes are an integral part of these consolidated financial statements.
 F-43




---



##### Table of Contents



CONVERTED ORGANICS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
 Three month periods endedMarch 31, 2011
    
    
    March 31, 2010Revenues
    
    $
    739,176
    
    
    $
    711,876Cost of goods sold
    
    
    504,467
    
    
    
    565,476Gross profit
    
    
    234,709
    
    
    
    146,400Operating expensesSelling, general and administrative expenses
    
    
    2,317,174
    
    
    
    3,843,704Research and development
    
    
    15,871
    
    
    
    61,850Amortization of intangible assets
    
    
    221,267
    
    
    
    72,0022,554,312
    
    
    
    3,977,556Loss from continuing operations
    
    
    (2,319,603
    )
    
    
    (3,831,156
    )Other income/(expenses)Other income
    
    
    171,309
    
    
    
    281Gain on settlement of debt
    
    
    225,000
    
    
    
    Derivative gain (loss)
    
    
    2,397,783
    
    
    
    (635,155
    )Interest expense
    
    
    (2,274,462
    )
    
    
    (4,373
    )519,630
    
    
    
    (639,247
    )Loss from continuing operations before
provision for income taxes
    
    
    (1,799,973
    )
    
    
    (4,470,403
    )Provision for income taxes
    
    
    
    
    
    
    Net loss from continuing operations
    
    
    (1,799,973
    )
    
    
    (4,470,403
    )Loss from discontinued operations
    
    
    (499
    )
    
    
    (1,909,290
    )Net loss
    
    
    (1,800,472
    )
    
    
    (6,379,693
    )Net loss attributable to noncontrolling interests
    
    
    (60,995
    )
    
    
    Net loss attributable to Converted Organics Inc.
before other comprehensive loss
    
    
    (1,739,477
    )
    
    
    (6,379,693
    )Other comprehensive loss:Foreign currency translation adjustment
    
    
    (10,496
    )
    
    
    Comprehensive loss
    
    
    (1,749,973
    )
    
    
    (6,379,693
    )Comprehensive loss attributable to noncontrolling interests
    
    
    (2,020
    )
    
    
    Comprehensive loss attributable to Converted Organics Inc.
    
    $
    (1,747,953
    )
    
    $
    (6,379,693
    )Net loss per share, basic and dilutedContinuing operations
    
    $
    (0.02
    )
    
    $
    (0.12
    )Discontinued operations
    
    
    (0.00
    )
    
    
    (0.05
    )$
    (0.02
    )
    
    $
    (0.17
    )Weighted average common shares outstanding
    
    
    92,804,595
    
    
    
    37,864,169
 The accompanying notes are an integral part of these consolidated financial statements.
 F-44




---



##### Table of Contents



CONVERTED ORGANICS INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2011
 (UNAUDITED)
 Preferred Stock Series A
    
    
    Common Stock
    
    
    
    
    
    
    
    
    
    
    AccumulatedShares Issued
    
    
    
    
    
    
    Shares Issued
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    Totaland
    
    
    
    
    
    
    and
    
    
    
    
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    
    
    
    
    Non-Controlling
    
    
    StockholdersOutstanding
    
    
    Amount
    
    
    Outstanding
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Loss
    
    
    Total
    
    
    Interests
    
    
    EquityBalance, December 31, 2010
    
    
    17,500
    
    
    $
    17,500,000
    
    
    
    85,468,127
    
    
    $
    8,547
    
    
    $
    85,555,990
    
    
    $
    (100,453,292
    )
    
    $
    (1,109
    )
    
    $
    2,610,136
    
    
    $
    576,178
    
    
    $
    3,186,314Common stock issued to settle convertible note obligations
    
    
    
    
    
    
    
    
    
    
    7,006,000
    
    
    
    701
    
    
    
    2,649,479
    
    
    
    
    
    
    
    
    
    
    
    2,650,180
    
    
    
    
    
    
    
    2,650,180Common stock issued as compensation
    
    
    
    
    
    
    
    
    
    
    2,165,000
    
    
    
    216
    
    
    
    800,834
    
    
    
    
    
    
    
    
    
    
    
    801,050
    
    
    
    
    
    
    
    801,050Issuance of common stock as payment to settle
obligations of discontinued operations
    
    
    
    
    
    
    
    
    
    
    3,200,000
    
    
    
    320
    
    
    
    1,343,680
    
    
    
    
    
    
    
    
    
    
    
    1,344,000
    
    
    
    
    
    
    
    1,344,000Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,476
    )
    
    
    (8,476
    )
    
    
    (2,020
    )
    
    
    (10,496
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,739,477
    )
    
    
    
    
    
    
    (1,739,477
    )
    
    
    (60,995
    )
    
    
    (1,800,472
    )Balance, March 31, 2011
    
    
    17,500
    
    
    $
    17,500,000
    
    
    
    97,839,127
    
    
    $
    9,784
    
    
    $
    90,349,983
    
    
    $
    (102,192,769
    )
    
    $
    (9,585
    )
    
    $
    5,657,413
    
    
    $
    513,163
    
    
    $
    6,170,576
 The accompanying notes are an integral part of these consolidated financial statements.
 F-45




---



##### Table of Contents



CONVERTED ORGANICS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three month periods endedMarch 31, 2011
    
    
    March 31, 2010CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (1,800,472
    )
    
    $
    (6,379,693
    )Adjustments to reconcile net loss to net cash
used in operating activities:Amortization of intangibles and other assets
    
    
    370,377
    
    
    
    83,919Depreciation and amortization of property and equipment
    
    
    50,674
    
    
    
    462,358(Reduction) provision for losses on accounts receivable
    
    
    (75,875
    )
    
    
    174,478Amortization of discounts attributable on notes payable
    
    
    1,998,924
    
    
    
    Interest expense in connection with issuance of convertible debt
    
    
    268,486
    
    
    
    Common stock issued as compensation
    
    
    801,050
    
    
    
    160,050Stock option compensation expense
    
    
    
    
    
    
    1,292,492Obligations to issue shares revaluation
    
    
    (164,286
    )
    
    
    Gain on settlement of debt
    
    
    (225,000
    )
    
    
    Derivative (gain) loss
    
    
    (2,397,783
    )
    
    
    635,155Changes in operating assets and liabilities:(Increase) decrease in:Accounts receivable
    
    
    63,619
    
    
    
    (529,271
    )Inventories
    
    
    (217,249
    )
    
    
    77,447Prepaid expenses and other current assets
    
    
    (148,037
    )
    
    
    (562,974
    )Deposits and other non-current assets
    
    
    9,195
    
    
    
    (19,733
    )Increase (decrease) in:Accounts payable
    
    
    (612,382
    )
    
    
    (336,870
    )Accrued expenses
    
    
    (180,250
    )
    
    
    (672,311
    )Net cash used in operating activities
    
    
    (2,259,009
    )
    
    
    (5,614,953
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    (725,819
    )
    
    
    (235,898
    )Release of restricted cash
    
    
    
    
    
    
    350,077Patent costs
    
    
    (11,551
    )
    
    
    Purchase of other assets
    
    
    
    
    
    
    (166,667
    )Net cash used in investing activities
    
    
    (737,370
    )
    
    
    (52,488
    )CASH FLOWS FROM FINANCING ACTIVITIES:Repayment of debt obligations
    
    
    (125,000
    )
    
    
    (925,155
    )Repayment of capital lease obligations
    
    
    
    
    
    
    (2,852
    )Net proceeds from short-term notes
    
    
    920,000
    
    
    
    Net cash provided by (used in) financing activities
    
    
    795,000
    
    
    
    (928,007
    )Net effect of exchange rate changes on cash
    
    
    (14,794
    )
    
    
    NET DECREASE IN CASH
    
    
    (2,216,173
    )
    
    
    (6,595,448
    )Cash, beginning of period
    
    
    3,039,941
    
    
    
    10,708,807Cash, end of period
    
    $
    823,768
    
    
    $
    4,113,359Supplemental cash flow information:Cash paid during the period for:Interest
    
    $
    4,378
    
    
    $
    756,719Non-cash financing activities:Equipment acquired through assumption of accounts payable
    
    $
    1,000,000
    
    
    $
    Common stock issued to settle convertible note obligations
    
    
    2,650,180
    
    
    
    97,343Fair value of derivatives issued in conjuction with debt and equity financing
    
    
    1,268,486
    
    
    
    Common stock issued as settlement of obligations of discontinued operations
    
    
    1,344,000
    
    
    
    
 The accompanying notes are an integral part of these consolidated financial statements.
 F-46




---



##### Table of Contents



CONVERTED ORGANICS INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 NOTE 1  BASIS OF PRESENTATION AND NATURE OF OPERATIONS
   NATURE OF OPERATIONS
  Organic Fertilizer:
 Industrial Wastewater Treatment:
 Vertical Farming:
     F-47




---



##### Table of Contents



CONVERTED ORGANICS INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 NOTE 1  BASIS OF PRESENTATION AND NATURE OF OPERATIONS (Continued)
 NATURE OF OPERATIONS (Continued)
    PRINCIPLES OF CONSOLIDATION
  RECLASSIFICATIONS
  F-48




---



##### Table of Contents



CONVERTED ORGANICS INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 NOTE 2  MANAGEMENTS PLAN OF OPERATIONS
    NOTE 3  NEW ACCOUNTING STANDARDS
 When to Perform Step 2 of the Goodwill Impairment Test for Reporting
Units with Zero or Negative Carrying Amounts
 F-49




---



##### Table of Contents



CONVERTED ORGANICS INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 NOTE 3  NEWLY ACCOUNTING STANDARDS (Continued)
 Business
Combinations (Topic 805)
 NOTE 4  ACQUISITIONS
 TERRASPHERE SYSTEMS LLC
  GoLocalProduceRI, LLC
   For the Three MonthsEnded March 31, 2010Revenue
    
    $
    2,544,009Net loss
    
    $
    (6,000,008
    )Net loss per share, basic and diluted
    
    $
    (0.11
    )Weighted-average shares
    
    
    56,389,068
 F-50




---



##### Table of Contents



CONVERTED ORGANICS INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 NOTE 5  DISCONTINUED OPERATIONS
  For the Three Months Ended March 31,2011
    
    
    2010Revenue from discontinued operations
    
    $
    
    
    
    $
    147,949Loss from discontinued operations
    
    $
    (499
    )
    
    $
    (1,909,291
    )
   March 31, 2011
    
    
    December 31, 2010Accounts receivable, net
    
    $
    
    
    
    $
    14,500Assets of discontinued operations
    
    $
    
    
    
    $
    14,500Accounts payable
    
    $
    828,712
    
    
    $
    837,606Accrued expenses
    
    
    77,874
    
    
    
    1,571,874Other liabilities
    
    
    28,773
    
    
    
    28,773Liabilities of discontinued operations
    
    $
    935,359
    
    
    $
    2,438,253
  NOTE 6  FAIR VALUE MEASUREMENTS
 ASC 820 Fair Value Measurements and Disclosures
  F-51




---



##### Table of Contents



CONVERTED ORGANICS INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 NOTE 6  FAIR VALUE MEASUREMENTS (Continued)
   BalanceLevel of Hierarchy
    
    March 31, 2011
    
    December 31, 2010Derivative
warrants and
anti-dilution
provision
liabilities
    
    Level 3
    
    $
    6,953,753
    
    
    $
    8,675,619
  Balance, beginning of period
    
    $
    (8,675,619
    )Settlements
    
    
    592,569Issuances
    
    
    (1,268,486
    )Net gains
    
    
    2,397,783Balance, end of period
    
    $
    (6,953,753
    )
  NOTE 7  INVENTORIES
  March 31, 2011
    
    
    December 31, 2010Finished goods
    
    $
    301,068
    
    
    $
    104,690Raw materials
    
    
    42,587
    
    
    
    21,716Total inventories
    
    $
    343,655
    
    
    $
    126,406
 F-52




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##### Table of Contents



CONVERTED ORGANICS INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 NOTE 8  DEBT
 TERM NOTES
  NOTE PAYABLES  RELATED PARTY
  CONVERTIBLE NOTES PAYABLE
    F-53




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##### Table of Contents



CONVERTED ORGANICS INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 NOTE 8  DEBT (Continued)
 CONVERTIBLE NOTES PAYABLE (Continued)
    NOTE 9  DERIVATIVE INSTRUMENTS
   F-54




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##### Table of Contents



CONVERTED ORGANICS INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 NOTE 9  DERIVATIVE INSTRUMENTS (Continued)
    Outstanding atClass/
    
    
    
    
    
    December 31,
    
    
    
    
    
    Excercised
    
    Outstanding at
    
    Excercisable at
    
    Fair Value atIssue Date
    
    Series
    
    Price
    
    2010
    
    Issued
    
    or Canceled
    
    March 31, 2011
    
    March 31, 2011
    
    March 31, 2011May 7, 2009
    
    Class C
    
    $
    1.00
    
    
    
    885,000
    
    
    
    
    
    
    
    
    
    
    
    885,000
    
    
    
    885,000
    
    
    $
    157,718May 7, 2009
    
    Class D
    
    $
    1.02
    
    
    
    415,000
    
    
    
    
    
    
    
    
    
    
    
    415,000
    
    
    
    415,000
    
    
    $
    73,552September 8, 2009
    
    Class G
    
    $
    1.25
    
    
    
    2,500,000
    
    
    
    
    
    
    
    
    
    
    
    2,500,000
    
    
    
    2,500,000
    
    
    $
    488,841April 22, 2010
    
    Class I
    
    $
    1.06
    
    
    
    1,163,362
    
    
    
    
    
    
    
    
    
    
    
    1,163,362
    
    
    
    
    
    
    $
    251,118December 17, 2010 *
    
    Series A
    
    $
    1.00
    
    
    
    1,969,737
    
    
    
    525,263
    
    
    
    
    
    
    
    2,495,000
    
    
    
    2,495,000
    
    
    $
    686,702December 17, 2010 *
    
    Series B
    
    $
    1.00
    
    
    
    3,939,474
    
    
    
    10,524,296
    
    
    
    
    
    
    
    14,463,770
    
    
    
    14,463,770
    
    
    $
    1,866,559December 17, 2010 *
    
    Series C
    
    $
    1.00
    
    
    
    1,969,737
    
    
    
    525,263
    
    
    
    
    
    
    
    2,495,000
    
    
    
    2,495,000
    
    
    $
    686,702
 
 *
    
    Includes warrants issued on March 7, 2011  Outstanding atDecember 31,
    
    
    
    
    
    Excercised
    
    Outstanding at
    
    Excercisable at
    
    Fair Value atIssue Date
    
    Price
    
    2010
    
    Issued
    
    or Canceled
    
    March 31, 2011
    
    March 31, 2011
    
    March 31, 2011December 17, 2010
    
    $
    1.00
    
    
    
    14,283,980
    
    
    
    
    
    
    
    6,426,174
    
    
    
    7,857,806
    
    
    
    7,857,806
    
    
    $
    1,437,262March 7, 2011
    
    $
    1.00
    
    
    
    
    
    
    
    3,344,281
    
    
    
    
    
    
    
    3,344,281
    
    
    
    3,344,281
    
    
    $
    611,699
  Risk free interest rate
    
    
    0.16% - 2.55
    %Dividend yield
    
    
    -0-Average Volatility
    
    
    113.20
    %Expected term
    
    3 months to 5 years
 F-55




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##### Table of Contents



CONVERTED ORGANICS INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 NOTE 9  DERIVATIVE INSTRUMENTS (Continued)
   NOTE 10  STOCKHOLDERS EQUITY
 STOCK ISSUANCES
    WARRANTS
   Outstanding at
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at
    
    Excercisable atWarrants
    
    Price
    
    December 31, 2010
    
    Issued
    
    Excercised
    
    Canceled
    
    March 31, 2011
    
    March 31, 2011Class B
    
    $
    11.00
    
    
    
    2,648,029
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,648,029
    
    
    
    2,648,029Class E
    
    $
    1.63
    
    
    
    1,500,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,500,000
    
    
    
    1,500,000Class F
    
    $
    1.25
    
    
    
    585,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    585,000
    
    
    
    585,000Class H
    
    $
    1.30
    
    
    
    17,250,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,250,000
    
    
    
    17,250,000Class J
    
    $
    0.54
    
    
    
    1,623,333
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,623,333
    
    
    
    1,623,333Class K
    
    $
    0.54
    
    
    
    1,157,407
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,157,407
    
    
    
    1,157,407
  F-56




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##### Table of Contents



CONVERTED ORGANICS INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 NOTE 10  STOCKHOLDERS EQUITY (Continued)
 STOCK OPTIONS
  NOTE 11  SEGMENT REPORTING
   Industrial
    
    Corporate andOrganic Fertilizer
    
    Vertical Farming
    
    Wastewater
    
    Eliminations
    
    ConsolidatedRevenues
    
    $
    644,000
    
    
    $
    
    
    
    $
    95,176
    
    
    $
    
    
    
    $
    739,176Operating loss (1)
    
    
    (82,001
    )
    
    
    (599,441
    )
    
    
    (2,823
    )
    
    
    (1,635,338
    )
    
    
    (2,319,603
    )Depreciation and
amortization(2)
    
    
    105,089
    
    
    
    161,297
    
    
    
    5,556
    
    
    
    149,109
    
    
    
    421,051Interest expense(3)
    
    
    
    
    
    
    6,642
    
    
    
    
    
    
    
    2,267,820
    
    
    
    2,274,462Net loss
    
    
    (82,001
    )
    
    
    (381,080
    )
    
    
    (2,823
    )
    
    
    (1,334,568
    )
    
    
    (1,800,472
    )Total assets (4)
    
    
    3,744,506
    
    
    
    12,354,315
    
    
    
    2,108,468
    
    
    
    991,607
    
    
    
    19,198,896Goodwill
    
    
    
    
    
    
    1,667,957
    
    
    
    
    
    
    
    
    
    
    
    1,667,957Property and
equipment additions
    
    
    123,564
    
    
    
    2,255
    
    
    
    1,600,000
    
    
    
    
    
    
    
    1,725,819
 
 (1)
    
    Operating loss of the principal businesses exclude
corporate compensation, marketing expense, professional
fees and other unallocated expenses.(2)
    
    Depreciation and amortization expense associated
with property and equipment, intangibles and deferred
financing fees. Corporate amortization expense relates
to deferred financing fees.(3)
    
    Corporate interest expense is primarily related to
amortization of discounts on convertible notes payable.(4)
    
    Total business assets are the owned or allocated
assets used by each business. Corporate assets consist
of cash, prepaid expenses, certain other assets and
deferred financing costs.As of March 31, 2010, the Company was a single reportable segment. F-57




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##### Table of Contents



CONVERTED ORGANICS INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 NOTE 12  LEGAL PROCEEDINGS
     F-58




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##### Table of Contents



CONVERTED ORGANICS INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 NOTE 13  SUBSEQUENT EVENTS
    F-59




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##### Table of Contents



You should rely only on the information contained in this prospectus. No dealer,
salesperson or other person is authorized to give information that is not contained in this
prospectus. This prospectus is not an offer to sell nor is it seeking an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted. The information contained
in this prospectus is correct only as of the date of this prospectus, regardless of the time of the
delivery of this prospectus or the sale of these securities.
 CONVERTED ORGANICS INC.
 87,172,755 Shares of Common Stock
 
 PROSPECTUS
 
 , 2011




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##### Table of Contents



PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
 Item 13. Other Expenses of Issuance and Distribution
  SEC Registration Fee
    
    $
    1,062.68Accounting fees and expenses
    
    $
    12,000Legal fees and expenses
    
    $
    10,000Total
    
    $
    23,062.68
 Item 14. Indemnification of Directors and Officers
     Item 15. Recent Sales of Unregistered Securities
   II-1




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II-2




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##### Table of Contents



Item 16. Exhibits and Financial Statement Schedules
 ExhibitNumber
    
    Description2.1
    
    Asset Purchase Agreement between the Registrant and United Organic Products,
LLC, dated January 21, 2008 (incorporated by reference to Exhibit 2.02 to our
current report on Form 8-K filed January 29, 2008)2.2
    
    Asset Purchase Agreement between the Registrant and Waste Recovery Industries,
LLC, dated January 21, 2008 (incorporated by reference to Exhibit 2.03 to our
current report on Form 8-K filed January 29, 2008)3.1
    
    Registrants Certificate of Incorporation (incorporated by reference to Exhibit
3.1 to our Registration Statement on Form SB-2 filed June 21, 2006)3.2
    
    Registrants Bylaws (incorporated by reference to Exhibit 3.2 to our
Registration Statement on Form SB-2 filed June 21, 2006)3.3
    
    Registrants Certificate of Amendment of Certificate of Incorporation
(incorporated by reference to Exhibit 3.3 to our Registration Statement on Form
S-1 filed September 15, 2009)3.4
    
    Certificate of Designation of Preferences, Rights and Limitations of Series A
Convertible Preferred Stock, dated October 18, 2010 (incorporated by reference
to Exhibit 3.4 to our Form 10-K for the year ended December 31, 2010)4.1
    
    Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to
our Form SB-2/A filed January 25, 2007)4.2
    
    Form of Class B Warrant (incorporated by reference to Exhibit B to Exhibit 4.5
on Post-Effective Amendment No. 1 to our Registration Statement on Form SB-2
filed February 20, 2007)4.3
    
    Form of Unit Certificate issued in initial public offering (incorporated by
reference to Exhibit 4.4 on Post-Effective Amendment No. 1 to our Registration
Statement on Form SB-2 filed February 20, 2007)4.4
    
    Class B Warrant Agreement between the Registrant and Computershare Shareholder
Services, Inc. and Computershare Trust Company N.A., dated February 16, 2007
(incorporated by reference to Exhibit 4.5 on Post-Effective Amendment No. 1 to
our Registration Statement on Form SB-2 filed February 20, 2007)4.5
    
    Form of Representatives Purchase Warrant issued in initial public offering
(incorporated by reference to Exhibit 4.6 to our Registration Statement on Form
SB-2 filed June 21, 2006)4.6
    
    Registration Rights Agreement between the Registrant and Professional Offshore
Opportunity Fund, Ltd., Professional Traders Fund, LLC and High Capital Funding,
LLC, dated January 24, 2008 (incorporated by reference to Exhibit 2.06 to our
current report on Form 8-K filed January 29, 2008)4.7
    
    Form of Class H Warrant (incorporated by reference to Exhibit 4.1 to our
Quarterly Report on Form 10-Q filed November 16, 2009)4.8
    
    Form of Unit Certificate issued in October 2009 offering (incorporated by
reference to Exhibit 4.2 to our Quarterly Report on Form 10-Q filed November 16,
2009)4.9
    
    Form of Warrant issued in May 2009 offering (incorporated by reference to
Exhibit 4.1 to our Form 8-K filed on May 20, 2009)4.10
    
    Form of Warrant issued in July 2009 offering (incorporated by reference to
Exhibit 4.1 to our Form 8-K filed on July 16, 2009)4.11
    
    Class G Common Stock Purchase Warrant (incorporated by reference to Exhibit 10.5
to our Form 8-K filed on September 14, 2009)4.12
    
    Class H Warrant Agreement between the Registrant and Computershare Trust Company
N.A., dated October 20, 2009 (incorporated by reference to Exhibit 10.3 to our
Form 8-K filed on October 21, 2009)4.13
    
    Unit Conversion Agreement between the Registrant and Computershare Trust Company
N.A., dated October 20, 2009 (incorporated by reference to Exhibit 10.2 to our
Form 8-K filed on October 21, 2009)
 II-3




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##### Table of Contents



ExhibitNumber
    
    Description*5.1
    
    Opinion of Cozen OConnor10.1
    
    Form of Bridge Loan Documents dated March 2, 2006 (incorporated by reference to
Exhibit 10.1 to our Registration Statement on Form SB-2 filed June 21, 2006)10.1A
    
    Form of Bridge Loan Documents dated April 11, 2006 (incorporated by reference to
Exhibit 10.1A to our Registration Statement on Form SB-2 filed June 21, 2006)10.2
    
    Amended and Restated 2006 Stock Option Plan and Form of Stock Option Agreement
(incorporated by reference to Exhibit 10.2 to Annex A of our Definitive Proxy
Statement filed March 5, 2008)10.3
    
    Service Agreement between the Registrant and ECAP, LLC, dated March 1, 2006
(incorporated by reference to Exhibit 10.3 to our Registration Statement on Form
SB-2 filed June 21, 2006)10.4
    
    Lease Agreement between the Registrant and Recycling
Technology Development, LLC, dated June 2, 2006
(incorporated by reference to Exhibit 10.4 to our
Registration Statement on Form SB-2 filed June 21,
2006)10.4A
    
    Amendment to the Lease Agreement between the
Registrant and Recycling Technology Development
dated January 18, 2007 (incorporated by reference to
Exhibit 10.4A to our Form SB-2/A filed January 25,
2007)10.4B
    
    Second Amendment to the Lease Agreement between the
Registrant and Recycling Technology Development
dated June 30, 2008 (incorporated by reference to
Exhibit 10.4B on Form 10-K filed on March 31, 2010)10.4C
    
    Third Amendment to the Lease Agreement between the
Registrant and Recycling Technology Development
dated March 31, 2009 (incorporated by reference to
Exhibit 10.4C on Form 10-K filed on March 31, 2010)10.5
    
    Employment Agreement between the Registrant and
Edward J. Gildea, dated March 2, 2006 (incorporated
by reference to Exhibit 10.5 to our Registration
Statement on Form SB-2 filed June 21, 2006)10.6
    
    Employment Agreement between the Registrant and John
A. Walsdorf, dated March 2, 2006 (incorporated by
reference to Exhibit 10.7 to our Registration
Statement on Form SB-2 filed June 21, 2006)10.7
    
    Agreement between the Registrant and Weston
Solutions, Inc., dated May 29, 2003 and modification
dated October 6, 2004 (incorporated by reference to
Exhibit 10.9 to our Registration Statement on Form
SB-2 filed June 21, 2006)10.8
    
    IBR Plant License Agreement between International
Bio Recovery Corporation and Mining Organics
Management LLC, dated July 15, 2003 (incorporated by
reference to Exhibit 10.10 to our Form SB-2/A filed
July 5, 2006)10.9
    
    Revision dated February 9, 2006 to IBR Plant License
Agreement dated July 15, 2003 (incorporated by
reference to Exhibit 10.11 to our Form SB-2/A filed
July 5, 2006)10.10
    
    Secured Convertible Promissory Note in favor of
United Organic Products, LLC, dated January 24, 2008
(incorporated by reference to Exhibit 2.04 to our
current report on form 8-K filed January 29, 2008)10.11
    
    Secured Promissory Note in favor of Waste Recovery
Industries, LLC, dated January 24, 2008
(incorporated by reference to Exhibit 2.05 to our
current report on form 8-K filed January 29, 2008)10.12
    
    New Jersey Economic Development Authority
$17,500,000 Solid Waste Facilities Revenue Bonds
(Converted Organics of Woodbridge, LLC  2007
Project), dated February 16, 2007 (incorporated by
reference to Exhibit 10.13 on Form 10-K filed March
30, 2009)10.13
    
    Subscription Agreement between Registrant and
Iroquois Master Fund Ltd. dated May 7, 2009
(incorporated by reference to Exhibit 10.1 on Form
8-K filed on May 13, 2009)10.14
    
    Security Agreement between Registrant and Iroquois
Master Fund Ltd dated May 7, 2009 (incorporated by
reference to Exhibit 10.2 on Form 8-K filed on May
13, 2009)10.15
    
    Security Agreement dated May 7, 2009 by and among
Converted Organics of California, LLC, Converted
Organics of Woodbridge, LLC and Iroquois Master Fund
Ltd (incorporated by reference to Exhibit 10.3 on
Form 8-K filed on May 13, 2009)10.16
    
    Secured Promissory Note dated May 7, 2009 payable to
Iroquois Master Fund Ltd (incorporated by reference
to Exhibit 10.4 on Form 8-K filed on May 13, 2009)10.17
    
    Class C Common Stock Purchase Warrant dated May 7,
2009 entitling Iroquois Master Fund Ltd the right to purchase 750,000 shares of Converted Organics Inc.s
common stock (incorporated by reference to Exhibit
10.5 on Form 8-K filed on May 13, 2009)
 II-4




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##### Table of Contents



ExhibitNumber
    
    Description10.18
    
    Class D Common Stock Purchase Warrant dated May 7,
2009 entitling Iroquois Master Fund Ltd. the right
to purchase 350,000 shares of Converted Organics
Inc.s common stock (incorporated by reference to
Exhibit 10.6 on Form 8-K filed on May 13, 2009)10.19
    
    Subsidiary Guaranty dated May 7, 2009 by Converted
Organics of California, LLC and Converted Organics
of Woodbridge, LLC for the benefit of Iroquois
Master Fund Ltd (incorporated by reference to
Exhibit 10.7 on Form 8-K filed on May 13, 2009)10.20
    
    Securities Purchase Agreement from May 2009 offering
between Registrant and Purchasers (incorporated by
reference to Exhibit 10.1 on Form 8-K filed on May
20, 2009)10.21
    
    Form of Amended Agreement dated May 26, 2009 (incorporated by
reference to Exhibit 10.1 on Form 8-K filed on May 27, 2009)10.22
    
    Securities Purchase Agreement dated July 15, 2009 between Registrant
and Purchasers (incorporated by reference to Exhibit 10.22 on Form
8-K filed on July 16, 2009)10.23
    
    Promissory Note by Converted Organics of Woodbridge, LLC in favor of
Recycling Technology Development, LLC dated March 31, 2009
(incorporated by reference to Exhibit 10.16 on Form 10-Q filed
August 14, 2009)10.24
    
    Promissory Note by Converted Organics of Woodbridge, LLC in favor of
Hatzel& Buehler Inc. dated June 19, 2009 (incorporated by reference
to Exhibit 10.15 on Form 10-Q filed August 14, 2009)10.25
    
    Promissory Note by Converted Organics of Woodbridge, LLC in favor of SNC Lavalin Project
Services Inc. dated June 16, 2009 (incorporated by reference to Exhibit 10.14 on Form 10-Q
filed August 14, 2009)10.26
    
    Subsidiary Guarantee dated September 14, 2009 by Converted Organics of California, LLC and
Converted Organics of Woodbridge, LLC for the benefit of Iroquois Master Fund Ltd
(incorporated by reference to Exhibit 10.6 on Form 8-K filed September 14, 2009)10.27
    
    Secured Convertible Promissory Note in favor of Iroquois Master Fund Ltd. dated September 14,
2009 (incorporated by reference to Exhibit 10.4 on Form 8-K filed September 14, 2009)10.28
    
    Security Agreement between Converted Organics of Woodbridge, LLC, Converted Organics of
California, LLC and Iroquois master Fund Ltd dated September 14, 2009 (incorporated by
reference to Exhibit 10.3 on Form 8-K filed September 14, 2009)10.29
    
    Security Agreement between Registrant and Iroquois Master Fund Ltd dated September 14, 2009
(incorporated by reference to Exhibit 10.2 on Form 8-K filed September 14, 2009)10.30
    
    Subscription Agreement between Registrant and Iroquois Master Fund Ltd dated September 14,
2009 (incorporated by reference to Exhibit 10.1 on Form 8-K filed September 14, 2009)10.31
    
    Class G Common Stock Purchase Warrant dated September 14, 2009 (incorporated by reference to
Exhibit 10.5 on Form 8-K filed September 14, 2009)10.32
    
    Promissory Note in favor of Airside, Inc. dated September 24, 2009 (incorporated by reference
to Exhibit 10.1 on Form 8-K filed September 28, 2010)10.33
    
    Form of Representatives Unit Purchase Option issued in October 2009 offering (incorporated by
reference to Exhibit 10.1 on Form 8-K filed on October 21, 2010)10.34
    
    Promissory Note in favor of Heartland Technology Partners, LLC dated March 23, 2010
(incorporated by reference to Exhibit 10.34 on Form 10-K filed on March 31, 2010)
 II-5




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##### Table of Contents



ExhibitNumber
    
    Description10.35
    
    Supply and License Agreement between Registrant and Heartland Technology Partners, LLC dated
March 23, 2010 (incorporated by reference to Exhibit 10.35 on Form 10-K filed on March 31,
2010)10.36
    
    Lease Agreement between Registrant and SWS Lewis Wharf, LLC dated November 24, 2009
(incorporated by reference to Exhibit 10.36 on Form 10-K filed on March 31, 2010)10.37
    
    Settlement Agreement in favor of Armistead Mechanical, Inc. dated November 19, 2009
(incorporated by reference to Exhibit 10.37 on Form 10-K filed on March 31, 2010)10.38
    
    Exchange Agreement dated October 18, 2010 between the Registrant and Oppenheimer Rochester
National Municipals and Oppenheimer New Jersey Municipal Fund (incorporated by reference to
Exhibit 3.4 to our Form 10-K for the year ended December 31, 2010)10.39
    
    Termination and Surrender Agreement dated October 15, 2010 between Converted Organics of
Woodbridge, LLC and Recycling Technology Development (incorporated by reference to Exhibit 3.4
to our Form 10-K for the year ended December 31, 2010)14.1
    
    Code of Ethics (incorporated by reference to Exhibit 14.1 on Form 10-K filed on March 31, 2010)21.1
    
    List of Subsidiaries (incorporated by reference to Exhibit 3.4 to our Form 10-K for the year
ended December 31, 2010)23.1
    
    Consent of CCR LLP*23.2
    
    Cozen OConnor Consent (included in Exhibit 5)
 
 *
    
    To be filed by amendment. Item 17. Undertakings
       II-6




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##### Table of Contents



II-7




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##### Table of Contents



SIGNATURES
  CONVERTED ORGANICS INC.By:
    
    /s/ Edward J. GildeaName:
    
    Edward J. GildeaTitle:
    
    Chairman, President and Chief Executive Officer
   Signature
    
    Title
    
    Date/s/ Edward J. Gildea
    
    Chairman, President and Chief
Executive Officer (Principal
Executive Officer)
    
    June 24, 2011Edward J. Gildea/s/ David R. Allen
    
    Chief Financial Officer,
Executive Vice President of
Administration (Principal Financial
Officer and Principal Accounting
Officer)
    
    June 24, 2011David R. Allen/s/ Marshall Sterman
    
    Director
    
    June 24, 2011Marshall Sterman/s/ Robert E. Cell
    
    Director
    
    June 24, 2011Robert E. Cell/s/ John P. DeVillars
    
    Director
    
    June 24, 2011John P. DeVillars/s/ Edward A. Stoltenberg
    
    Director
    
    June 24, 2011Edward A. Stoltenberg
 II-8




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description2.1
    
    Asset Purchase Agreement between the Registrant and United Organic Products,
LLC, dated January 21, 2008 (incorporated by reference to Exhibit 2.02 to our
current report on Form 8-K filed January 29, 2008)2.2
    
    Asset Purchase Agreement between the Registrant and Waste Recovery Industries,
LLC, dated January 21, 2008 (incorporated by reference to Exhibit 2.03 to our
current report on Form 8-K filed January 29, 2008)3.1
    
    Registrants Certificate of Incorporation (incorporated by reference to Exhibit
3.1 to our Registration Statement on Form SB-2 filed June 21, 2006)3.2
    
    Registrants Bylaws (incorporated by reference to Exhibit 3.2 to our
Registration Statement on Form SB-2 filed June 21, 2006)3.3
    
    Registrants Certificate of Amendment of Certificate of Incorporation
(incorporated by reference to Exhibit 3.3 to our Registration Statement on Form
S-1 filed September 15, 2009)3.4
    
    Certificate of Designation of Preferences, Rights and Limitations of Series A
Convertible Preferred Stock, dated October 18, 2010 (incorporated by reference
to Exhibit 3.4 to our Form 10-K for the year ended December 31, 2010)4.1
    
    Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to
our Form SB-2/A filed January 25, 2007)4.2
    
    Form of Class B Warrant (incorporated by reference to Exhibit B to Exhibit 4.5
on Post-Effective Amendment No. 1 to our Registration Statement on Form SB-2
filed February 20, 2007)4.3
    
    Form of Unit Certificate issued in initial public offering (incorporated by
reference to Exhibit 4.4 on Post-Effective Amendment No. 1 to our Registration
Statement on Form SB-2 filed February 20, 2007)4.4
    
    Class B Warrant Agreement between the Registrant and Computershare Shareholder
Services, Inc. and Computershare Trust Company N.A., dated February 16, 2007
(incorporated by reference to Exhibit 4.5 on Post-Effective Amendment No. 1 to
our Registration Statement on Form SB-2 filed February 20, 2007)4.5
    
    Form of Representatives Purchase Warrant issued in initial public offering
(incorporated by reference to Exhibit 4.6 to our Registration Statement on Form
SB-2 filed June 21, 2006)4.6
    
    Registration Rights Agreement between the Registrant and Professional Offshore
Opportunity Fund, Ltd., Professional Traders Fund, LLC and High Capital Funding,
LLC, dated January 24, 2008 (incorporated by reference to Exhibit 2.06 to our
current report on Form 8-K filed January 29, 2008)4.7
    
    Form of Class H Warrant (incorporated by reference to Exhibit 4.1 to our
Quarterly Report on Form 10-Q filed November 16, 2009)4.8
    
    Form of Unit Certificate issued in October 2009 offering (incorporated by
reference to Exhibit 4.2 to our Quarterly Report on Form 10-Q filed November 16,
2009)4.9
    
    Form of Warrant issued in May 2009 offering (incorporated by reference to
Exhibit 4.1 to our Form 8-K filed on May 20, 2009)4.10
    
    Form of Warrant issued in July 2009 offering (incorporated by reference to
Exhibit 4.1 to our Form 8-K filed on July 16, 2009)4.11
    
    Class G Common Stock Purchase Warrant (incorporated by reference to Exhibit 10.5
to our Form 8-K filed on September 14, 2009)4.12
    
    Class H Warrant Agreement between the Registrant and Computershare Trust Company
N.A., dated October 20, 2009 (incorporated by reference to Exhibit 10.3 to our
Form 8-K filed on October 21, 2009)4.13
    
    Unit Conversion Agreement between the Registrant and Computershare Trust Company
N.A., dated October 20, 2009 (incorporated by reference to Exhibit 10.2 to our
Form 8-K filed on October 21, 2009)*5.1
    
    Opinion of Cozen OConnor10.1
    
    Form of Bridge Loan Documents dated March 2, 2006 (incorporated by reference to
Exhibit 10.1 to our Registration Statement on Form SB-2 filed June 21, 2006)




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##### Table of Contents



ExhibitNumber
    
    Description10.1A
    
    Form of Bridge Loan Documents dated April 11, 2006 (incorporated by reference to
Exhibit 10.1A to our Registration Statement on Form SB-2 filed June 21, 2006)10.2
    
    Amended and Restated 2006 Stock Option Plan and Form of Stock Option Agreement
(incorporated by reference to Exhibit 10.2 to Annex A of our Definitive Proxy
Statement filed March 5, 2008)10.3
    
    Service Agreement between the Registrant and ECAP, LLC, dated March 1, 2006
(incorporated by reference to Exhibit 10.3 to our Registration Statement on Form
SB-2 filed June 21, 2006)10.4
    
    Lease Agreement between the Registrant and Recycling Technology Development, LLC, dated June 2, 2006 (incorporated by reference to
Exhibit 10.4 to our Registration Statement on Form SB-2 filed June 21, 2006)10.4A
    
    Amendment to the Lease Agreement between the Registrant and Recycling Technology Development dated January 18, 2007 (incorporated by
reference to Exhibit 10.4A to our Form SB-2/A filed January 25, 2007)10.4B
    
    Second Amendment to the Lease Agreement between the Registrant and Recycling Technology Development dated June 30, 2008 (incorporated
by reference to Exhibit 10.4B on Form 10-K filed on March 31, 2010)10.4C
    
    Third Amendment to the Lease Agreement between the Registrant and Recycling Technology Development dated March 31, 2009 (incorporated
by reference to Exhibit 10.4C on Form 10-K filed on March 31, 2010)10.5
    
    Employment Agreement between the Registrant and Edward J. Gildea, dated March 2, 2006 (incorporated by reference to Exhibit 10.5 to
our Registration Statement on Form SB-2 filed June 21, 2006)10.6
    
    Employment Agreement between the Registrant and John A. Walsdorf, dated March 2, 2006 (incorporated by reference to Exhibit 10.7 to
our Registration Statement on Form SB-2 filed June 21, 2006)10.7
    
    Agreement between the Registrant and Weston Solutions, Inc., dated May 29, 2003 and modification dated October 6, 2004 (incorporated
by reference to Exhibit 10.9 to our Registration Statement on Form SB-2 filed June 21, 2006)10.8
    
    IBR Plant License Agreement between International Bio Recovery Corporation and Mining Organics Management LLC, dated July 15, 2003
(incorporated by reference to Exhibit 10.10 to our Form SB-2/A filed July 5, 2006)10.9
    
    Revision dated February 9, 2006 to IBR Plant License Agreement dated July 15, 2003 (incorporated by reference to Exhibit 10.11 to our
Form SB-2/A filed July 5, 2006)10.10
    
    Secured Convertible Promissory Note in favor of United Organic Products, LLC, dated January 24, 2008 (incorporated by reference to
Exhibit 2.04 to our current report on form 8-K filed January 29, 2008)10.11
    
    Secured Promissory Note in favor of Waste Recovery Industries, LLC, dated January 24, 2008 (incorporated by reference to Exhibit 2.05
to our current report on form 8-K filed January 29, 2008)10.12
    
    New Jersey Economic Development Authority $17,500,000 Solid Waste Facilities Revenue Bonds (Converted Organics of Woodbridge, LLC 
2007 Project), dated February 16, 2007 (incorporated by reference to Exhibit 10.13 on Form 10-K filed March 30, 2009)10.13
    
    Subscription Agreement between Registrant and Iroquois Master Fund Ltd. dated May 7, 2009 (incorporated by reference to Exhibit 10.1
on Form 8-K filed on May 13, 2009)10.14
    
    Security Agreement between Registrant and Iroquois Master Fund Ltd dated May 7, 2009 (incorporated by reference to Exhibit 10.2 on
Form 8-K filed on May 13, 2009)10.15
    
    Security Agreement dated May 7, 2009 by and among Converted Organics of California, LLC, Converted Organics of Woodbridge, LLC and
Iroquois Master Fund Ltd (incorporated by reference to Exhibit 10.3 on Form 8-K filed on May 13, 2009)10.16
    
    Secured Promissory Note dated May 7, 2009 payable to Iroquois Master Fund Ltd (incorporated by reference to Exhibit 10.4 on Form 8-K
filed on May 13, 2009)10.17
    
    Class C Common Stock Purchase Warrant dated May 7, 2009 entitling Iroquois Master Fund Ltd the right to purchase 750,000 shares of
Converted Organics Inc.s common stock (incorporated by reference to Exhibit 10.5 on Form 8-K filed on May 13, 2009)




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##### Table of Contents



ExhibitNumber
    
    Description10.18
    
    Class D Common Stock Purchase Warrant dated May 7, 2009 entitling Iroquois Master Fund Ltd. the right to purchase 350,000 shares of
Converted Organics Inc.s common stock (incorporated by reference to Exhibit 10.6 on Form 8-K filed on May 13, 2009)10.19
    
    Subsidiary Guaranty dated May 7, 2009 by Converted Organics of California, LLC and Converted Organics of Woodbridge, LLC for the
benefit of Iroquois Master Fund Ltd (incorporated by reference to Exhibit 10.7 on Form 8-K filed on May 13, 2009)10.20
    
    Securities Purchase Agreement from May 2009 offering between Registrant and Purchasers (incorporated by reference to Exhibit 10.1 on
Form 8-K filed on May 20, 2009)10.21
    
    Form of Amended Agreement dated May 26, 2009 (incorporated by reference to Exhibit 10.1 on Form 8-K filed on May 27, 2009)10.22
    
    Securities Purchase Agreement dated July 15, 2009 between Registrant and Purchasers (incorporated by reference to Exhibit 10.22 on
Form 8-K filed on July 16, 2009)10.23
    
    Promissory Note by Converted Organics of Woodbridge, LLC in favor of Recycling Technology Development, LLC dated March 31, 2009
(incorporated by reference to Exhibit 10.16 on Form 10-Q filed August 14, 2009)10.24
    
    Promissory Note by Converted Organics of Woodbridge, LLC in favor of Hatzel& Buehler Inc. dated June 19, 2009 (incorporated by
reference to Exhibit 10.15 on Form 10-Q filed August 14, 2009)10.25
    
    Promissory Note by Converted Organics of Woodbridge, LLC in favor of SNC Lavalin Project Services Inc. dated June 16, 2009
(incorporated by reference to Exhibit 10.14 on Form 10-Q filed August 14, 2009)10.26
    
    Subsidiary Guarantee dated September 14, 2009 by Converted Organics of California, LLC and Converted Organics of Woodbridge, LLC for
the benefit of Iroquois Master Fund Ltd (incorporated by reference to Exhibit 10.6 on Form 8-K filed September 14, 2009)10.27
    
    Secured Convertible Promissory Note in favor of Iroquois Master Fund Ltd. dated September 14, 2009 (incorporated by reference to
Exhibit 10.4 on Form 8-K filed September 14, 2009)10.28
    
    Security Agreement between Converted Organics of Woodbridge, LLC, Converted Organics of California, LLC and Iroquois master Fund Ltd
dated September 14, 2009 (incorporated by reference to Exhibit 10.3 on Form 8-K filed September 14, 2009)10.29
    
    Security Agreement between Registrant and Iroquois Master Fund Ltd dated September 14, 2009 (incorporated by reference to Exhibit 10.2
on Form 8-K filed September 14, 2009)10.30
    
    Subscription Agreement between Registrant and Iroquois Master Fund Ltd dated September 14, 2009 (incorporated by reference to Exhibit
10.1 on Form 8-K filed September 14, 2009)10.31
    
    Class G Common Stock Purchase Warrant dated September 14, 2009 (incorporated by reference to Exhibit 10.5 on Form 8-K filed September
14, 2009)10.32
    
    Promissory Note in favor of Airside, Inc. dated September 24, 2009 (incorporated by reference to Exhibit 10.1 on Form 8-K filed
September 28, 2010)10.33
    
    Form of Representatives Unit Purchase Option issued in October 2009 offering (incorporated by reference to Exhibit 10.1 on Form 8-K
filed on October 21, 2010)10.34
    
    Promissory Note in favor of Heartland Technology Partners, LLC dated March 23, 2010 (incorporated by reference to Exhibit 10.34 on
Form 10-K filed on March 31, 2010)10.35
    
    Supply and License Agreement between Registrant and Heartland Technology Partners, LLC dated
March 23, 2010 (incorporated by reference
to Exhibit 10.35 on Form 10-K filed on March 31, 2010)




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##### Table of Contents



ExhibitNumber
    
    Description10.36
    
    Lease Agreement between Registrant and SWS Lewis Wharf, LLC dated November 24, 2009 (incorporated by reference to Exhibit 10.36 on
Form 10-K filed on March 31, 2010)10.37
    
    Settlement Agreement in favor of Armistead Mechanical, Inc. dated November 19, 2009 (incorporated by reference to Exhibit 10.37 on
Form 10-K filed on March 31, 2010)10.38
    
    Exchange Agreement dated October 18, 2010 between the Registrant and Oppenheimer Rochester National Municipals and Oppenheimer New
Jersey Municipal Fund (incorporated by reference to Exhibit 3.4 to our Form 10-K for the year ended December 31, 2010)10.39
    
    Termination and Surrender Agreement dated October 15, 2010 between Converted Organics of Woodbridge, LLC and Recycling Technology
Development (incorporated by reference to Exhibit 3.4 to our Form 10-K for the year ended December 31, 2010)14.1
    
    Code of Ethics (incorporated by reference to Exhibit 14.1 on Form 10-K filed on March 31, 2010)21.1
    
    List of Subsidiaries (incorporated by reference to Exhibit 3.4 to our Form 10-K for the year ended December 31, 2010)23.1
    
    Consent of CCR LLP*23.2
    
    Cozen OConnor Consent (included in Exhibit 5)
 
 *
    
    To be filed by amendment.