UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




FORM 10-Q




[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended May 31, 2010or[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




Commission File Number 000-51198




GLOBAL GREEN SOLUTIONS INC.


(Exact name of registrant as specified in its charter)




NEVADA                                                                                     20-8616221


(State or other jurisdiction of incorporation or organization)                               (I.R.S. Employer Identification No.)




789 West Pender Street, Suite 1010


Vancouver, British Columbia


Canada V6C 1H2


(Address of principal executive offices)


(604) 408-0153


Toll Free (866) 408-0153




Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X]     NO [   ]




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


YES [  ]   NO [   ]




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.




Large Accelerated Filer
[   ]
Accelerated Filer
[   ]Non-accelerated Filer
[   ]
Smaller Reporting Company
[X](Do not check if a smaller reporting company)




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


YES [  ]    NO [X]




Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 47,286,099 as of July 8, 2010





PART I – FINANCIAL INFORMATION




ITEM 1.  FINANCIAL STATEMENTS.




GLOBAL GREEN SOLUTIONS INC.


(A Development Stage Company)




INTERIM CONSOLIDATED BALANCE SHEETS


(Unaudited)


(Stated in U.S. Dollars)


MAY 31
NOVEMBER 302010
2009ASSETSCurrentCash
$
137,307
$
41,956Amounts receivable

9,416

6,390Prepaid expenses

63,757

26,075210,480

74,421Equipment

6,584

5,006$
217,064
$
79,427LIABILITIESCurrentAccounts payable and accrued liabilities (Note 8)
$
2,728,056
$
1,860,372Convertible notes (Note 4)

869,605

684,419Loans payable (Note 5)

1,879,505

1,878,1275,477,166

4,422,918Project Funding Advances(Note 3(b))

5,351,138

1,386,98610,828,304

5,809,904Commitments And Contractual Obligations (Note 9)Subsequent Events (Note 13)STOCKHOLDERS’ DEFICIENCYCapital Stock(Note 7)Authorized:100,000,000 Common shares, par value $0.00001 per shareIssued and outstanding:47,286,099 common shares at May 31, 2010

473

46546,461,099 common shares at November 30, 2009Additional Paid-In Capital

20,234,358

20,017,711Shares To Be Issued (Note 7)

21,151

82,688Share Purchase Warrants

620,500

620,500Deferred Compensation

(19,900)

(114,800)Deficit Accumulated During The Development Stage

(31,356,696)

(26,337,041)Global Green Solutions Inc. Stockholders’ Deficiency

(10,500,114)

(5,730,477)Non-controlling Interests’ Deficiency (Note 6)

(111,126)

-Total Deficiency

(10,611,240)

(5,730,477)$
217,064
$
79,427 The accompanying condensed notes are an integral part of these interim consolidated financial statements.


F-1  1


GLOBAL GREEN SOLUTIONS INC.


(A Development Stage Company)




INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)


(Stated in U.S. Dollars)




CUMULATIVETHREE MONTHS

SIX MONTHS

PERIOD FROMENDED

ENDED

INCEPTIONMAY 31

MAY 31

JUNE 10, 2003 to2010

2009

2010

2009

MAY 31, 2010Revenue
$
-
$
-
$
-
$
-
$
-Operating ExpensesConsulting fees (Note 8)

131,853

254,153

266,539

510,772

4,069,088Finance charges

41,118

11,179

73,086

13,378

2,145,812Interest and bank charges

212,248

71,157

348,380

106,188

756,918Office and sundry (Note 8)

22,734

107,968

82,431

171,535

1,624,578Professional fees

24,011

89,412

95,209

97,214

931,233Project development expenses

2,721,271

458,375

4,146,169

760,101

11,460,174Stock-based compensation

43,561

87,539

129,167

339,101

7,656,5003,196,796

1,079,783

5,140,981

1,998,289

28,644,303Operating Loss,before Other Income (Expense) and Non-controlling Interests

(3,196,796)

(1,079,783)

(5,140,981)

(1,998,289)

(28,644,303)Other Income (Expense)Impairment of advances (Note 3 (a))

-

-

-

-

(2,837,160)Impairment of intangibles

-

-

-

-

(357,100)Interest income

-

-

-

1,041

60,049Loss Before Non-controlling Interests

(3,196,796)

(1,079,783)

(5,140,981)

(1,997,248)

(31,778,514)Net Income Attributable To Non-controlling Interests

6,017

5,100

13,910

10,200

314,402Net Loss Attributable to Global Green Solutions Inc.
$
(3,190,779)
$
(1,074,683)
$
(5,127,071)
$
(1,987,048)
$
(31,464,112)Basic And Diluted Loss Per Common Share
$
(0.07)
$
(0.02)
$
(0.11)
$
(0.04)Weighted Average Number Of Common Shares Outstanding

47,286,099

45,194,632

47,189,396

45,003,778






The accompanying condensed notes are an integral part of these interim consolidated financial statements.




F-2


2


GLOBAL GREEN SOLUTIONS INC.


(A Development Stage Company)




INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)


(Stated in U.S. Dollars)


CUMULATIVEPERIOD FROMSIX MONTHS ENDED


INCEPTIONMAY 31


JUNE 10, 2003 to2010


2009


MAY 31, 2010Cash Flows (Used In) Provided By:

Operating ActivitiesNet loss attributable to Global Green Solutions Inc.

$
(5,127,071
)

$
(1,987,048
)

$
(31,464,112
)Adjustments to reconcile net loss to net cash used by operating activitiesDepreciation


2,315



12,837



63,505Non-controlling interests in operations of consolidated subsidiaries


(13,910
)


(10,200
)


(314,402
)Non-cash finance charges


73,086



13,378



2,145,812Stock-based compensation


129,167



339,101



7,656,500Non-cash consulting services


64,851



54,851



1,008,408Non-cash license fee


-



-



165,000Non-cash settlement


-



-



7,178Non-cash project development expense recovery


-



-



(575,314
)Accrued interest


343,877



78,118



708,902Impairment of intangible assets


-



-



357,100Impairment of advances


-



-



2,837,160Changes to operating assets and liabilitiesAmounts receivable


(3,026
)


58,851



(128,416
)Prepaid expenses


(37,682
)


1,475



(63,757
)Accounts payable and accrued liabilities


743,893



240,252



2,475,178(3,824,500
)


(1,198,385
)


(15,121,258
)Investing ActivitiesAcquisition of equipment and intangible asset


(3,893
)


-



(70,189
)Pilot project facilities and equipment


-



-



(2,718,160
)(3,893
)


-



(2,788,349
)Financing ActivitiesIssue of share capital, net of issuance costs


-



-



7,907,588Net proceeds from convertible notes


148,100



421,655



2,484,632Advances from minority interest


10,200



10,200



114,192Loan advances (repayments) - net


21,378



285,218



2,474,650Project funding advances


3,744,066



402,672



5,065,8523,923,744



1,119,745



18,046,914Increase (Decrease) In Cash


95,351



(78,640
)


137,307Cash, Beginning Of Period


41,956



81,376



-Cash, End Of Period

$
137,307


$
2,736


$
137,307Supplemental InformationCash Activities:Interest paid

$
-


$
-Income taxes paid

$
-


$
-Non-Cash Investing and Financing Activities (Note 10)


The accompanying condensed notes are an integral part of these interim consolidated financial statements.


F-3  3
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




1.
NATURE OF OPERATIONS AND GOING CONCERN




Global Green Solutions Inc. (the “Company”) was incorporated June 10, 2003 in the State of Nevada, is a development stage company and is devoting substantially all of its present efforts to establishing a new business.  That business had primarily been focused on two areas: waste biomass combustion to generate industrial process steam and combined heat and power (“Greensteam”), and the production of algae biomass, principally for biofuel feedstock. In 2008, the Company restructured its operations to focus on its commercial stage Greensteam business. Since then, the Company had been evaluating alternative strategies for conducting ongoing development of the algae project, including working with new strategic partners. However, the Company has concluded that its interests are best served by focusing all of its efforts on its Greensteam business. Vertigro Algae Technologies LLC, a Texas corporation (“VAT”); is the entity through which the Company and its 50% partner, Valcent USA, Inc. (“VUI”) pursued development of the algae biomass project. The Company and VUI have now agreed to the wind-up and dissolution of VAT, as announced July 8, 2010.




The Company conducts a portion of its operations through certain subsidiaries. Global Greensteam LLC, a California corporation owned 100%, is developing its Greensteam process technology and projects that convert biomass (primarily wood and crop waste) to low-cost steam.  The steam can be used for industrial purposes or for combined heat and power applications. Global Green Solutions (SA) (Proprietary) Limited (“PTY”), a South African corporation owned 80%, is marketing and developing business opportunities in South and Southern Africa for Greensteam projects. Global Green Solutions Ltd, a United Kingdom corporation owned 100%, has no operations or activity other than through its 80% holding in PTY. Three other subsidiaries are inactive.




The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  As shown in the accompanying financial statements, the Company has incurred a net loss (before Non-controlling Interests) of $31,778,514 for the period from June 10, 2003 (inception) to May 31, 2010, has a stockholders’ deficiency, and has no revenue.  The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development and marketing of its biomass combustion projects.  The Company plans to continue as a going concern by actively developing and marketing its Greensteam projects.  It intends to raise additional capital for the development and marketing of its projects primarily through the issuance of common shares and/or the issuance of debt securities.  It may also raise additional capital by selling interests in its projects.  There can be no assurance that the Company will be successful in marketing and developing its projects or in securing financing.  These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.




The unaudited financial information furnished herein reflects all adjustments, which in the opinion of management are necessary to fairly state the Company’s financial position and the results of its operations for the periods presented. These statements should be read in conjunction with the Company’s financial statements and notes thereto for the fiscal year ended November 30, 2009. The Company assumes that users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. Accordingly, certain footnote disclosure, which would substantially duplicate the disclosure contained in the November 30, 2009 financial statements, has been omitted. The results of operations for the six month period ended May 31, 2010 are not necessarily indicative of results for the entire year ending November 30, 2010.




F-4


4
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




In June 2009, the Financial Accounting Standards Board (“FASB”) issued its final Statement of Financial Accounting Standards (“SFAS”) No. 168, “The “FASB Accounting Standards Codification” and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (“SFAS 168”).  SFAS 168 establishes the “FASB” Accounting Standards Codification” (“Codification”), which officially launched July 1, 2009, to become the source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by non-governmental entities, superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”), and related accounting literature.  Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants.  SFAS 168 recognizes the previously issued GAAP pronouncements into accounting topics and displays them using a consistent structure.  The subsequent issuances of new standards will be in the form of Accounting Standards Updates that will be included in the Codification.  SFAS 168 was effective for the Company as of the year ended November 30, 2009.  As the Codification was not intended to change or alter existing GAAP, it does not have an impact on the Company’s financial statements.  The only impact is that references to authoritative accounting literature are in accordance with the Codification.  The Company has included in its disclosures the Accounting Standards Codification (“ASC”) cross-reference along side the references to the accounting standards issued and adopted prior to the adoption of Codification.




The financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:




a)
Principles of Consolidation




The accompanying consolidated financial statements include the Company and its subsidiaries or entities consolidated in accordance with guidance originally issued in FASB Interpretation Number (“FIN”) 46, as revised, Consolidation of Variable Interest Entities (codified in ASC 810, Consolidation). All inter-company balances and transactions have been eliminated in consolidation and net earnings are reduced by the portion of the net earnings of subsidiaries applicable to non-controlling interests.




FIN 46R addresses the consolidation of certain business entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties ("variable interest entities").  Variable interest entities are required to be consolidated by their primary beneficiaries.




b)
Use of Estimates and Assumptions




Preparation of the Company’s financial statements in conformity with United States GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from those estimates.  The significant areas requiring management’s estimates and assumptions relate to determining the fair value of stock-based compensation, fair value of shares issued for services and the acquisitions, and useful lives of long-lived assets.




F-5











5
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




c)
Development Stage Company




The Company is a development stage company as defined by SFAS 7, Accounting and Reporting by Development Stage Enterprises (codified in ASC 915, Development Stage Entities).  The Company is devoting substantially all of its present efforts to establishing a new business.  All losses accumulated since inception have been considered as part of the Company’s development stage activities.




d)
Cash




Cash consists primarily of cash on deposit.




e)
Equipment and Depreciation




Equipment is recorded at cost less accumulated depreciation.  Depreciation is computed and recorded when equipment is put into use, using the straight line method over twenty-four months to allocate the cost of depreciable assets.




Major renewals and improvements are capitalized, while routine maintenance and repairs are expensed as incurred.  The Company assesses equipment for impairment whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable.




f)
Intangible Assets




The Company has adopted the provision of SFAS 142, Goodwill and Intangible Assets, (codified in ASC 350, Intangibles – Goodwill and Other) which revises the accounting for purchased goodwill and intangible assets.  Under SFAS 142, goodwill and intangible assets with indefinite lives are no longer amortized and are tested for impairment annually.  The determination of any impairment would include a comparison of estimated future operating cash flows anticipated during the remaining life with the net carrying value of the asset as well as a comparison of the fair value to book value of the Company.




g)
Impairment of Long-Lived Assets




In accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets(codified in ASC 360, Property, Plant, and Equipment), the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment.  The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset.  Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.




h)
Financial Instruments and Concentration of Risk




The fair values of financial instruments, which include cash, amounts receivable, accounts payable and accrued liabilities, convertible notes, and loans payable were estimated to approximate their carrying values due to the immediate or relatively short maturity of these instruments.  Management does not believe that the Company is subject to significant interest currency or credit risks arising from these financial instruments.




F-6


6
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




h)
Financial Instruments and Concentration of Risk (Continued)




The Company accounts for common stock purchase warrants at fair value in accordance with EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to and Practically Settled in, a Company’s Own Stock”, (codified in ASC 815, Derivatives and Hedging).  The Black-Scholes option pricing valuation method is used to determine fair value of these warrants.  Use of this method requires that the Company make assumptions regarding stock volatility, dividend yields, expected term of the warrants and risk-free interest rates.




i)
Basic and Diluted Net Income (Loss) Per Share




The Company computes net income (loss) per share in accordance with SFAS 128, Earnings per Share(codified in ASC 260, Earnings Per Share), which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement.  Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) before and after discontinued operations, by the weighted average number of common shares outstanding (denominator) during the period, including contingently issuable shares where the contingency has been resolved.  Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method.  In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.




j)
Foreign Currency Translation




The Company’s functional and reporting currency is the United States dollar.  Monetary assets and liabilities denominated in foreign currencies are translated in accordance with SFAS 52, Foreign Currency Translation(codified in ASC 830, Foreign Currency Matters), using the exchange rate prevailing at the balance sheet date.  Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars.  The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.




k)
Product Development Costs




Product development costs are expensed in the period they are incurred unless they meet specific criteria related to technical, market and financial feasibility, as determined by management, including but not limited to the establishment of a clearly defined future market for the product, and the availability of adequate resources to complete the project.  If all criteria are met, the costs are deferred and amortized over the expected useful life, or written off if a product is abandoned.  At May 31, 2010, the Company had no deferred product development costs.




F-7


7
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




l)
Comprehensive Loss




SFAS 130, Reporting Comprehensive Income, (codified in ASC 220, Comprehensive Income) establishes standards for the reporting and display of comprehensive loss and its components in the financial statements.  At May 31, 2010, the Company had no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.




m)
Common Share Non-Monetary Consideration




In situations where common shares are issued and the fair value of the goods or services received is readily determinable, the fair value of the common shares is used to measure and record the transaction.  The fair value of the common shares issued in exchange for the receipt of goods and services is based on the stock price as of the earliest of the date at which:




i)
the counterparty’s performance is complete;


ii)
a commitment for performance by the counterparty to earn the common shares is reached; or


iii)
the common shares are issued if they are fully vested and non-forfeitable at that date.




n)
Escrowed Shares




The fair value of escrowed shares is recognized as a charge to income at the time they are released from escrow, with a corresponding increase in share capital.




o)
Stock-Based Compensation




On December 1, 2005, the Company adopted the fair value recognition provisions of SFAS 123R, Share-Based Payment,(codified in ASC 718, Compensation-Stock Compensation).  The Company adopted SFAS 123R using the modified-prospective-transition method.  Under this method, compensation cost recognized for all periods prior to December 1, 2005 includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of November 30, 2005, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, and b) compensation cost for all share-based payments granted subsequent to November 30, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R.  In addition, deferred stock compensation related to non-vested options is required to be eliminated against additional paid-in capital upon adoption of SFAS 123R.  The results for periods prior to December 1, 2005 were not restated.




The Company accounts for equity instruments issued in exchange for the receipt of goods or services from parties other than employees in accordance with SFAS 123 and the conclusions reached by the Emerging Issues Task Force (“EITF”) in Issue No. 96-18, (codified in ASC 505, Equity).  Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable.  The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.




F-8


8
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




p)
Recent Accounting Pronouncements




The Company has adopted the provisions of ASC 810 (formerly SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements – an amendment of ARB No. 51”).  The revised guidance establishes new accounting, reporting and disclosure standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary.  Among other requirements, FASB ASC Topic 810 requires a company to clearly identify and present ownership interests in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section, but separate from the company’s equity.  It also requires that the net income to be reported include the amounts attributable to both the parent and the non-controlling interest.  The revised guidance will be applied prospectively as of the beginning of fiscal year 2010, except for the presentation and disclosure requirements which will be applied retrospectively for prior periods. Other than the change in presentation of non-controlling interests, this adoption did not have a material impact on these Interim Consolidated Financial statements.




In February 2010, FASB issued Accounting Standards Update (“ASU”) 2010-09 Subsequent Events (Topic 855) Amendments to Certain Recognition and Disclosure Requirements. ASU 2010-09 removes the requirement for an SEC filer to disclose a date in both issued and revised financial statements.  Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of GAAP. All of the amendments in ASU 2010-09 are effective upon issuance of the final ASU, except for the use of the issued date for conduit debt obligors. That amendment is effective for interim or annual periods ending after June 15, 2010. The Company adopted ASU 2010-09 in February, 2010 and it did not have a material impact on the Company’s interim financial statements.




In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures about Fair Value Measurements, amending ASC 820. ASU 2010-06 requires entities to provide new disclosures and clarify existing disclosures relating to fair value measurements.  The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The Company is currently evaluating the impact of ASU 2010-06, but does not expect its adoption to have a material impact on the Company’s financial position or results of operations.




In May, 2009, the FASB issued ASC 855, Subsequent Events. The new standard is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  This statement is effective for financial statements issued for interim or annual financial periods ending after June 15, 2009, which, for the Company, was the interim period ending August 31, 2009.  The adoption of ASC 855 did not have a material effect to the Company’s current practice.




F-9


9
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




3.
PROJECT DEVELOPMENT




a)
Algae Biofuel Project




On October 2, 2006, and as amended June 25, 2007 the Company entered into an agreement with Pagic LP, Valcent Products Inc. (“Valcent”), and West Peak Ventures of Canada Limited.  Under the terms of the agreement, Valcent and the Company agreed to jointly participate in the development of a patent pending, biomass system to produce biofuel feedstock while sequestering CO2, by growing certain algae.  The amended agreement was to be the basis for a definitive contract between the Company and Valcent and the governing document for the new venture.




The agreement required the Company to contribute up to $3 million to cover the estimated cost of the plant, with any further costs to be shared 50/50 with Valcent.  The method of recovering the $3 million initial start-up loan capital was to be determined in the final, definitive agreement.




In May, 2008, the Company and Valcent formalized an agreement to continue the development of the project through Vertigro Algae Technologies, LLC (“VAT”) of which the Company and Valcent USA, Inc. (a subsidiary of Valcent) (“VUI”) each own 50 percent.  Under that agreement, the Company was to receive $3 million on a priority basis from the net cash flow of VAT.  The Company was to receive 70% of any such net cash flow until it had received $3 million in excess of its percentage interest of such cash flow. As part of the agreement, assets acquired by the project prior to the commencement of operations of VAT were transferred to Valcent.




In connection with a license technology agreement entered into by VAT with Pagic LP, the Company agreed to issue 300,000 restricted common shares with a combined fair value of $165,000 as its share of a one-time license fee.  The amount was expensed during the year ended November 30, 2008 as part of project development costs and the shares were issued March 3, 2009. The preliminary carrying value of the advances totaling $2,718,160 at November 30, 2007 was deemed to be impaired owing to uncertainty that cash flow would result from the project and was charged to operations in 2007.




In September, 2008, the Company concluded an agreement (the “Agreement”) with VUI to sell the Company’s 50% ownership in VAT to VUI, contingent on VUI obtaining the necessary funding. VUI was unable to raise funding for the Agreement and it could not be completed. As a result, the Company began evaluating alternative strategies for conducting ongoing development, including working with new strategic partners. The Company has concluded that its interests are best served by focusing all of its efforts on its Greensteam business and has agreed with VUI to wind-up and dissolve VAT, as announced July 8, 2010. VAT’s technology license agreement with Pagic LP has been terminated.




Based on the cost sharing arrangement described above, the Company had recorded a payable of $575,314 to Valcent to May 31, 2009. However, in consideration of the difference in contributions to date, uncertainty that cash flow would result from the project and the fact that the project assets were transferred to Valcent, the companies agreed in August 2009 that no amounts were payable from the Company to Valcent or VUI in connection with project development costs. As a result, during the year ended November 30, 2009, $575,314 of project development expense was reversed. Valcent and the Company further agreed that until a strategy for conducting ongoing development was finalized, no further cost sharing was required.  Costs incurred in connection with algae biofuel development and charged to project development expenses totaled $18,191 during the six month period ended May 31, 2010 (2009: $142,354).






F-10


10
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




3.
PROJECT DEVELOPMENT (Continued)




b)
Waste Biomass Fueled Steam Generation Project




On February 20, 2007 the Company completed an acquisition agreement for Greensteam Development Inc., which resulted in Global Greensteam LLC (“Greensteam”), a venture with two other companies for the purpose of converting waste biomass into low cost steam for industrial applications.  The Company’s interest in the new venture initially was 57%, with the other two companies holding 38% and 5% respectively.  The Company’s ownership interest increased to 95% in December, 2007 and 100% in April, 2008 when it acquired first the 38% and then the 5% held by the two other companies.




600,000 shares of the Company to be issued to the initial 38% interest holder as contingent consideration will now be issued as follows:




i)
150,000 shares upon delivery of commercial steam generation from the first unit after successful experimental testing and operational permitting and accepted by the customer purchasing the steam as the steam production commencement date;




ii)
150,000 shares upon delivery of commercial steam generation from the fourth unit after successful operational testing and accepted by the customer purchasing the steam as the steam production commencement date;




iii)
150,000 shares upon delivery of commercial steam generation from the seventh unit after successful operational testing and accepted by the customer purchasing the steam as the steam production commencement date;




iv)
150,000 shares upon delivery of commercial steam generation from the tenth unit after successful operational testing and accepted by the customer purchasing the steam as the steam production commencement date.




In recognition of design, supply and support services to be contributed by the initial 5% partner, the Company was originally to issue 150,000 shares of restricted common stock in three amounts of 50,000 each after 5, 10, and then 15 steam generating units became operational.  As part of the agreement in April, 2008 for the Company to acquire the 5% of Greensteam, the 5% partner agreed to forego all entitlement to the 150,000 shares of the Company as originally contemplated.




During the year ended November 30, 2008, the Company concluded that $119,000 in advances it had made to the company that was the initial 5% partner were unlikely to be recovered due to ongoing financial difficulties experienced by that company. The full amount of the advances was therefore impaired.
















F-11


11
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




3.
PROJECT DEVELOPMENT (Continued)




b)
Waste Biomass Fueled Steam Generation Project (Continued)




The consideration to be paid by the Company to third parties in connection with the acquisition agreement is the issuance of 4 million shares as follows:




-
150,000 shares of restricted common stock upon execution of the definitive agreement (issued in the year ended November 30, 2007);


-
850,000 shares of restricted common stock upon execution of a steam supply contract or similar contract with a major oil company;


-
500,000 shares of restricted common stock if the initial steam generating unit achieves reasonably acceptable commercial production;


-
500,000 shares of restricted common stock upon the earlier of (a) the one year anniversary of the execution of a steam supply contract, or (b) commissioning of a 4th steam generating unit;


-
1,000,000 shares of restricted common stock upon the earlier of (a) the commissioning of the 10th steam generating unit or (b) the second anniversary of the steam supply contract;


-
1,000,000 shares of restricted common stock upon the earlier of (a) commissioning of the 15th steam generating unit or (b) the second anniversary of the execution of a steam supply contract.




Greensteam entered into a Program Agreement with Aera Energy LLC (“Aera”), an oil and gas company, on March 31, 2008, a First Amendment to the Program Agreement, effective October 22, 2008, and a Second Amendment to the Program Agreement effective November 24, 2009.  The Program Agreement provides for a test, or demonstration unit which will use Greensteam’s waste-to-steam process technology to burn waste biomass to create steam, to be built at a location of the oil and gas company.  The Program Agreement also provides that up to ten commercial scale units could be built, depending on the results of the demonstration unit.




The demonstration unit is approximately one-quarter the size of the commercial scale units and is expected to cost approximately $8 million, including extended testing.  Under the terms of the First Amendment, up to $3 million of this cost was to be contributed by Aera.  That amount was to be repaid through a discount on the price of steam to be sold to Aera from the commercial scale units in the Full Scale Period.  Depending on the completion date of the first commercial scale project, the amount of the discount ranged from $3.9 million to $5 million.




Effective November 24, 2009, Greensteam and Aera executed the Second Amendment to the Program Agreement which deleted and replaced the First Amendment in its entirety. Under the terms of the Second Amendment:




·
Aera will continue to contribute up to $3 million of the cost of the demonstration unit. An additional $5 million of payments has been included in Aera’s 2010 R&D budget. If the Aera Board of Directors approves the request, Aera will make payments to Greensteam for the demonstration unit up to a total of $8 million. If Aera’s Board does not approve the request, then the Program Agreement and any site-specific agreements shall be deemed terminated. Aera’s Board of Directors subsequently approved the budget request.




·
Payments from Aera are to be used exclusively for the management, design, engineering, permitting, construction (including materials), and operation of the demonstration unit.




F-12


12
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




3.
PROJECT DEVELOPMENT (Continued)




b)
Waste Biomass Fueled Steam Generation Project (Continued)




·
In return, if the demonstration unit meets the pre-agreed Specific Test Requirements and there is a Full Scale Period, Greensteam will be obligated to provide Aera with discount-priced steam.




·
If there is no Full Scale Period in which Greensteam can provide Aera with discount-priced Steam, Greensteam will grant Aera a perpetual, exclusive license to use Greensteam’s technology at any property owned or leased by Aera, and access to Greensteam’s intellectual property (collectively the “Exclusive License Grant”), subject to a royalty of 0.004 times the Incremental Energy Charge as defined in the Agreement if Aera proceeds with the Full Scale period on its own.




·
There are no longer any Early Termination Fees as had been included in the First Amendment. Those have been replaced in the Second Amendment by the obligation for Greensteam to grant Aera an Exclusive License Grant in the following circumstances:




1.
If the Test Unit fails to meet the pre-agreed Specific Test Requirements and either Party gives notice as provided;




2.
If the Test Unit meets the pre-agreed Specific Test Requirements, both Parties give notice that the pre-agreed Specific Test Requirements are met or that the test results are acceptable, Aera’s Board approves amending the Full Scale Period definition by replacing the language “five (5) years” with “ten (10) years”, and Greensteam is subsequently unable to (1) obtain the Full Scale Permit after diligent effort or (2) obtain financing for the first Project after diligent effort;




3.
If the Test Unit meets the pre-agreed Specific Test Requirements, both Parties give notice that the pre-agreed Specific Test Requirements are met or that the test results are acceptable, Greensteam subsequently obtains the Full Scale Permit, Greensteam obtains financing for the first Project, and Greensteam fails to implement the Full Scale Period Project(s).




Expenditures incurred in connection with the steam generation project and charged to project development costs in the six month period ended May 31, 2010 totaled $4,171,786 (2009: $593,112).




There is no longer a specific, total discount amount with a maximum ranging from $3.9 to $5 million to be paid to Aera, as was contemplated in the First Amendment. In its place, a revised pricing formula now includes a lower discount amount per volume of steam, but for the full term of the Agreement. The Company records the Aera advances and accretion thereon over the term to commencement of delivery of steam from the first commercial scale project to Aera.  Accretion is recorded using the effective interest method such that the balance of advances and accretion is equal to the estimated fair value of the future steam discount. As of May 31, 2010, $5,065,852 (November 30, 2009:$1,321,786) had been received from Aera under the terms of the Amendment and $285,286 (November 30, 2009: $65,200) had been recorded as the estimated accretion thereon.




Construction of the demonstration unit commenced in January, 2010, on Aera’s Belridge oilfield, near Bakersfield, California and was completed in June, 2010. Testing has now commenced.




F-13


13
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




4.
CONVERTIBLE NOTES




During the six month period ended May 31, 2010, the Company issued convertible notes (the “note” or “notes”) in the aggregate amount of $180,000 on January 29, 2010 ($80,000) and February 8, 2010 ($100,000) due and payable on November 24, 2011 ($20,000), December 22, 2011 ($10,000), January 29, 2012 ($50,000),and February 8, 2012 ($100,000), together with interest at the rate of 12% per annum compounded annually.  At the election of the holder, the notes and interest accrued thereon are convertible into units at a rate of $0.10 per unit.  Each unit is comprised of one restricted share of common stock and one share purchase warrant.  Each share purchase warrant entitles the holder to purchase an additional common share at $0.25 per share for a two year term from the date of conversion. To date, none of the notes or accrued interest has been converted into units.  In connection with these notes, the Company paid or accrued a total of $11,900 in finder’s fees.




During 2009, the Company issued convertible notes (the “note” or “notes”) in the aggregate amount of $847,405 on March 2, 2009 ($129,405), March 30, 2009 ($306,000), June 25, 2009 ($50,000), September 3, 2009 ($300,000), and October 23, 2009 ($62,000) due and payable respectively on March 2, 2011, March 30, 2011, June 25, 2011, September 3, 2011, and October 23, 2011 together with interest.  All other terms of the notes are identical to those issued in the six month period ended May 31, 2010. To date, none of the notes or accrued interest has been converted into units.  In connection with these notes, the Company paid a total of $35,873 in finder’s fees.




During 2008, the Company issued a convertible note (the “note”) in the aggregate amount of $100,000 due and payable on October 31, 2010 together with interest. All other terms of the note are identical to those issued in the six month period ended May 31, 2010.To date, none of the note or accrued interest has been converted into units.




In accordance with the provisions of EITF Issue No. 00-27 Application of Issue No. 98-5 to Certain Convertible Instruments (“EITF 00-27”), (codified in 470-20 of ASC 470, Debt) the Company recognized the value of the embedded beneficial conversion feature of $56,000 in connection with the 2010 notes, $250,843 in connection with the 2009 notes, and $29,412 in connection with the 2008 note.  The fair value of the embedded beneficial conversion feature was estimated to be the difference between the issue date fair value and face amount of the debt with the fair value of the debt being determined on a relative fair value basis, based on the underlying estimated fair values of the common shares and share purchase warrants issuable on conversion.  The embedded beneficial conversion feature was recorded as a charge to additional paid-in capital.  The resulting debt discount and finders’ fees are being accreted over the term of the note using the effective interest amortization method.  In the event of conversion of the note, the proceeds will be allocated proportionately to the share purchase warrants issued and to the common shares issued, consistent with the original allocations between their debt and equity components.  To May 31, 2010, the Company has recorded accretion of $126,228 (November 30, 2009: $53,142) and accrued interest of $124,583 (November 30, 2009: $61,004).




F-14


14
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




5.
LOANS PAYABLE




The Company was indebted as at May 31, 2010 for short term loans totaling $1,879,505 (November 30, 2009 - $1,878,127).




-
Of that total, $654,291 (November 30, 2009: $664,291) is unsecured, non-interest bearing and with no specific terms of repayment.


-
$25,000 (November 30, 2009: $20,000) is unsecured, with no specific terms of repayment but bears interest at 12% per annum,


-
$1,200,214 (November 30, 2009: $1,193,836) of the total is due to directors, officers and related parties, is also unsecured and with no specific terms of repayment, but bears interest of 10% per annum. Maturity dates have been reached and monthly compounding of interest has commenced on loans aggregating $945,214 (November 30, 2009: $938,836). These loans are considered to be due on demand. The balance of loans aggregating $255,000, have maturity dates ranging from October 30, 2010 to January 26, 2011, at which time compounding of interest will commence and the loans will be considered to be due on demand. To May 31, 2010, the Company has recorded accrued interest of $223,582 (November 30, 2009: $163,371).





6.
NON-CONTROLLING INTERESTS




For the six month period ended May 31, 2010, the Company has recorded a non-controlling interest share of loss of $13,910 (six month period ended May 31, 2009: $10,200).  Effective December 1, 2009, the Company adopted the new standards for presentation of non-controlling interests as a component of stockholders’ equity (See Note 2(p)).  The new standards also allow for the recording of previously unrecognized non-controlling interest debit balances.  In addition to the non-controlling interest share of loss recorded as noted above and non-controlling interest advances received in the period totaling $10,200, the Company recorded a non-controlling interest debit of $111,126 for previously unrecorded non-controlling interest share of losses.  These amounts were recorded as a direct charge to deficit during the period.




7.
CAPITAL STOCK




a)
Common Stock




During the six month period ended May 31, 2010, the Company:




i)
issued 750,000 shares with a fair value of $78,750 in connection with three consulting agreements , all of which was expensed in the year ended November 30, 2009 and recorded as Shares To Be Issued at that date.




ii)
issued 75,000 shares with a fair value of $8,438 in connection with a consulting agreement, $4,500 of which was expensed the period and $3,938 of which was expensed in the year ended November 30, 2009 and included in Shares To Be Issued at that date. A further 187,500 shares with a fair value of $21,151, which was expensed in the period, were issuable at May 31, 2010 and included in Shares To Be Issued.




F-15


15
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




7.
CAPITAL STOCK (Continued)




b)
Stock Options




The Company has a stock option plan that provides for the issuance of options to its directors, officers, employees and consultants.  The number, exercise price, term and vesting conditions of the options are determined by the board of directors.  The maximum number of shares of the Company available for grants of stock options under the current plan was initially 10,000,000 common shares.  To May 31, 2010, 4,249,850 options (November 30, 2009: 4,249,850) were issued under this plan, leaving 5,750,150 available to be issued.  Under a previous stock option plan, the maximum available 5,000,000 options were issued by November 30, 2007. During the six month period ended May 31, 2010, the Company recorded $129,167 (November 30, 2009: $512,640) in stock-based compensation expense for options granted.




During the six month period ended May 31, 2010, the Company did not grant any stock options.




During the year ended November 30, 2009, the Company had the following stock option activity:




The Company granted a total of 3,435,000 stock options at an exercise price of $0.20 per share. In accordance with SFAS 123R, (codified in ASC 718, Compensation-Stock Compensation), the Company expenses the fair value of these options, estimated to be $171,750.  This amount will be expensed on a straight-line basis over the related option vesting period or service contract period. To May 31, 2010, the Company has expensed $171,750 (November 30, 2009: $171,040) of this fair value and $Nil remains to be recorded on the future vesting of these options.




During the year ended November 30, 2008, the Company had the following stock option activity:




The Company granted a total of 999,850 stock options at exercise prices ranging from $0.00001 to $0.50 per share.  In accordance with SFAS 123R, (codified in ASC 718, Compensation-Stock Compensation), the Company expenses the fair value of these options, estimated to be $479,300.  Of this amount, $460,000 will be expensed on a straight-line basis, over the related option vesting period or service contract period and the remaining $19,300 was recorded as debt settlement consideration in connection with the settlement of $19,500 owing under a consulting agreement.




As of May 31, 2010, the Company has expensed $460,000 (November 30, 2009: $387,243) of this fair value and $Nil will be recorded on the future vesting of these options.




F-16


16
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




7.
CAPITAL STOCK (Continued)




b)
Stock Options (Continued)




The following table provides certain information with respect to the above stock options that are outstanding and exercisable at May 31, 2010:




STOCK
STOCK
WEIGHTEDOPTIONS
OPTIONS
AVERAGEEXERCISE
ISSUED AND
OUTSTANDING AND
REMAININGPRICE
OUTSTANDING
EXERCISABLE
CONTRACTUALLIFE$
0.20
2,760,000
2,735,000
1.64 years$
0.20
675,000
675,000
1.69 years$
0.50
15,000
15,000
0.13 years$
0.50
500,000
250,000
0.83 years$
0.50
300,000
150,000
0.92 years$
1.00
200,000
200,000
0.07 years4,450,000
4,025,000




The Company’s stock option activity for the six month period ended May 31, 2010 and the year ended November 30, 2009 is as follows:




WEIGHTEDWEIGHTED
AVERAGENUMBER
AVERAGE
REMAININGOF
EXERCISE
CONTRACTUALOPTIONS
PRICE
LIFEBalance outstanding, November 30, 2008
5,390,000

0.57
0.91 yearsGranted during the year
3,435,000

0.20Expired/Forfeited during the year
(3,275,000)

0.50Balance outstanding, November 30, 2009
5,550,000
$
0.39
1.58 yearsGranted during the period
-

-Expired/Forfeited during the period
(1,100,000)

0.77Balance outstanding May 31, 2010
4,450,000

0.29
1.43 years




As May 31, 2010, the aggregate intrinsic value (“AIV”) under the provisions of SFAS No. 123R ,(codified in ASC 718, Compensation-Stock Compensation) of all outstanding, vested stock options was $NIL.




F-17


17
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




7.
CAPITAL STOCK (Continued)




c)
Share Purchase Warrants




The Company’s share purchase warrant activity for the six month period ended May 31, 2010 and the year ended November 30, 2009 is as follows:


WEIGHTEDNUMBER OF
WEIGHTED
AVERAGESHARE
AVERAGE
REMAININGPURCHASE
EXERCISE
CONTRACTUALWARRANTS
PRICE
LIFEBalance, November 30, 2008
1,635,295
$
1.49
1.86 yearsExpired during the year
(308,824)

1.50Balance, November 30, 2009
1,326,471

1.49
1.13 yearsGranted, exercised or expired during the period
-

-Balance, May 31, 2010
1,326,471
$
1.49
0.63 years




The following table provides certain information with respect to the above share purchase warrants that are outstanding and exercisable at May 31, 2010:




SHARE PURCHASE
WEIGHTEDWARRANTS
AVERAGEOUTSTANDING
REMAININGEXERCISE
AND
CONTRACTUALPRICES
EXERCISABLE
LIFE$
1.40
150,000
1.42 years$
1.50
1,176,471
0.53 years1,326,471




F-18


18
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




7.
CAPITAL STOCK (Continued)




d)
Restricted Common Shares in Escrow




In accordance with the terms of the First Amendment to the Program Agreement with Aera Energy LLC (“Aera”) (see Note 3 b)), respecting the biomass fueled steam generation project, the Company issued twenty million of its restricted common shares, with Aera’s name as beneficial owner, to be held in escrow.  The shares, or some portion of the shares, were only to be released to Aera if Global Greensteam LLC failed to pay on a timely basis an early termination fee as defined in the Amendment, should it be required, and Aera exercised its option in those circumstances to take possession of the shares.  The Amendment and the escrow agreement provided for the eventual return to the Company of all of the shares placed in escrow in the event that no early termination fee is required.




Under the terms of the escrow agreement, neither the Company nor Aera have voting or dispositive powers for the shares while they are in escrow. Therefore the shares are not included in the total issued and outstanding shares presented or in the determination of the weighted average number of shares outstanding.




As detailed in Note 3 b), the First Amendment to the Program Agreement has been replaced and superseded in its entirety by a Second Amendment to the Program Agreement. The Second Amendment includes no requirement for shares of the Company to be held in escrow in connection with the Program Agreement or for any other purpose. Therefore the Company expects to reach agreement with Aera to cancel the escrow agreement, remove the 20 million shares from escrow and have them cancelled.




8.
RELATED PARTY TRANSACTIONS AND AMOUNTS OWING




During the six month period ended May 31, 2010, the Company carried out a number of transactions with related parties in the normal course of business.  These transactions were recorded at their exchange amount, which is the amount of consideration established and agreed to by the related parties. The following are related party transactions and amounts owing at May 31, 2010 that are not disclosed elsewhere in these financial statements:




-
During the six month period ended May 31, 2010, the Company paid and/or accrued consulting fees to directors and officers and other related parties of the Company in the amount of $268,988 (2009 - $372,496).




-
During the six month period ended May 31, 2010, the Company paid or accrued $34,134 (2009 - $58,191) in rent and administration fees to a company controlled by a significant shareholder of the Company.




-
$1,186,532 (November 30, 2009 - $1,013,782) was owing to related parties and is included in accounts payable and accrued liabilities.  These amounts are unsecured, non-interest bearing, and have no specific terms of repayment. See also Note 5.




F-19


19
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




9.
COMMITMENTS AND CONTRACTUAL OBLIGATIONS




Except as disclosed elsewhere in these consolidated financial statements, the Company had the following commitments and contractual obligations at May 31, 2010:




a)
The Company entered into the following agreements with officers, employees and consultants:




i)
Effective February 1, 2007, and having a five year term with a privately held company controlled by an officer of the Company, to provide services of a Chief Executive Officer, as well as office premises for the Company in Europe.  This agreement superseded an earlier agreement that was cancelled by mutual consent. The fees for providing the services are as follows:




·
Base compensation of $12,747 (8,500 Euros) per month;


·
Office rent of $1,800 (1,200 Euros) per month;


·
$2,999 (2,000 Euros) monthly for European Social costs.


·
An annual performance bonus of 1% of net profit;




In addition, the Company granted the right to buy 4,250,000 shares of the Company at $0.00001.  4,250,000 shares were issued by January 31, 2008.  The agreement may be terminated upon provision of 6 months notice by the Company or 60 days notice by the Chief Executive Officer.




ii)
On September 18, 2007, effective from May 1, 2007, for the services of a Chief Operating Officer.  The agreement has a five year term and includes base annual compensation of $96,000 plus $12,000 annually for providing a serviced office, and $48,000 annually for marketing and communication services.  All amounts are payable monthly.  The contract may be terminated upon six months notice.




iii)
Effective February 1, 2008, with a four year term for the provision of services of a Corporate Secretary by a consulting firm that is owned and controlled by a director of the Company.  The agreement includes base compensation of $6,500 per month, plus applicable Goods and Services Tax.  The agreement may be terminated by either party upon thirty days written notice.  In the event of termination upon a change of control, the consulting firm is entitled to severance compensation equal to twelve months of base compensation.  This replaced a previous agreement which had expired.




iv)
Effective February 1, 2008, with a four year term for the provision of services of a corporate consulting firm which is owned and controlled by a director of the Company.  The agreement includes base compensation of $2,500 per month, plus applicable Goods and Services Tax.  The agreement may be terminated by either party upon thirty days written notice.  In the event of termination upon a change of control, the consultant is entitled to severance compensation equal to twelve months of base compensation.  This replaced a previous agreement which had expired.




v)
Effective May 1, 2008, for the provision of services of a General Manager for its subsidiary, Global Green Solutions Pty Ltd. The agreement has a three year term ending April 30, 2011 and may be terminated on three months notice. Compensation under this agreement is comprised of a base fee of $81,600 annually, payable monthly, and an option to acquire 100,000 restricted common shares at $0.00001, vesting immediately. 100,000 shares were issued in the year ended November 30, 2008.




F-20


20
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




9.
COMMITMENTS AND CONTRACTUAL OBLIGATIONS (Continued)




vi)
Effective January 1, 2009, with a three year term for the services of a Chief Financial Officer. The agreement includes base compensation of $8,000 per month, plus applicable Goods and Services Tax. The agreement may be terminated upon six months notice by the Company.




b)
On January 29, 2009, the Company entered into an agreement for services, primarily for the raising of project equity and/or debt finance or credit arrangements for the provision of capital purchases, working capital, development and construction costs for the Company’s Greensteam project to be constructed near Bakersfield, California.  The agreement included a monthly fee of $8,723 (£6,000) and may be terminated on sixty days notice. The agreement also contained transaction related fees and success fees comprised of project equity percentages and warrants. By mutual agreement, the services and monthly fees were put on hold after October, 2009. The Company and the service provider are discussing the form in which the services and fees may be continued.




10.
NON-CASH INVESTING AND FINANCING ACTIVITIES




The Company recorded non-cash finance costs as follows:




Six MonthPeriod Ended May 312010
2009Amortization of the intrinsic value and/or beneficial conversion feature of the convertible notes
$73,086
$13,378




During the six month period ended May 31, 2010:




The Company recognized the value of the embedded beneficial conversion feature of $56,000 in respect of convertible notes totaling $180,000.




In connection with three consulting agreements, the Company issued 750,000 shares with a fair value of $78,750, all of which had been expensed in the year ended November 30, 2009 and recorded as Shares To Be Issued at that date.




The Company issued 75,000 shares with a fair value of $8,438 in connection with a consulting agreement, $4,500 of which was expensed in the period and $3,938 of which was expensed in the year ended November 30, 2009 and included in Shares To Be Issued at that date. A further 187,500 shares with a fair value of $21,151, which was expensed in the period, were issuable at May 31, 2010 and included in Shares To Be Issued.




During the six month period ended May 31, 2009 the Company:




i)
issued 150,000 shares with a fair value of $12,263 in connection with a consulting agreement, all of which was expensed in the period.  In addition, a further 37,500 common shares with a fair value of $3,188 were issuable as of May 31, 2009 and are included in Shares To Be Issued (issued June 5, 2009).


ii)
issued 300,000 shares previously recorded as issuable in connection with the Algae Biofuel Project as described in Note 3 a).


iii)
issued 117,000 shares with an estimated fair value of $7,126 in settlement of $7,126 of trade payables resulting in no gain or loss on settlement.


iv)
recognized the value of the embedded beneficial conversion feature of $148,216 in respect of convertible notes totaling $435,405.


F-21


21
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




11.
FAIR VALUE OF ASSETS AND LIABILITIES




Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. U.S. GAAP requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820-10 Fair Value Measurementsalso establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of the three levels. These levels are:




Level 1 - Valuation is based upon quoted prices for identical instruments traded in active markets. Level 1 assets and liabilities include debt and equity securities traded in an active exchange market, as well as U.S. Treasury securities.




Level 2 - Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.




Level 3 - Valuation is determined using model-based techniques with significant assumptions not observable in the market.




Assets and Liabilities Measured at Fair Value on a Recurring Basis




The Company has no assets or liabilities subject to recurring measurement.




Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis




For assets measured at fair value on a nonrecurring basis, the following table provides the fair value measures by level of valuation assumptions used:




Fair Value Measurement UsingLevel 1
Level 2
Level 3Project Funding AdvancesMay 31, 2010
$      -
$     -
$5,351,138November 30, 2009
$      -
$     -
$1,386,986




F-22


22
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




11.
FAIR VALUE OF ASSETS AND LIABILITIES (Continued)




Fair Value of Financial Instruments




The following table reflects the fair value of financial instruments:




May 31, 2010


November 30, 2009Carrying Amount


Estimated Fair Value


Carrying Amount


Estimated Fair ValueFinancial Assets:Cash

$
137,307


$
137,307


$
41,956


$
41,956Amounts receivable


9,416



9,416



6,390



6,390Financial Liabilities:Accounts payable and accrued liabilities


2,728,056



2,728,056



1,860,372



1,860,372Convertible notes


869,605



869,605



684,419



684,419Loans payable


1,879,505



1,879,505



1,878,127



1,878,127




Due to the relatively short term nature of cash, amounts receivable, accounts payable and accrued liabilities, and loans payable, the fair value of these instruments approximates their carrying value. Convertible notes are recorded at estimated fair value on issue and at amortized cost on an ongoing basis. The carrying amount of the Company’s convertible debt approximates the fair value.




12.
SEGMENT AND GEOGRAPHIC INFORMATION




The Company follows SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information, (codified in ASC 280, Segment Reporting) and currently has two reportable segments in the development of renewable energy technologies, being a biofuel feedstock pilot project (now terminated) and a biomass-fueled steam generation project.




a)
Algae Biofuel Project




This project was in the development stage and focused on the use of algae as a source for biofuel feedstock and other products. As described in Note 3 a), the Company concluded that its interests are best served by focusing all of its efforts on its Greensteam business and has agreed with its project partner to wind-up and dissolve the LLC through which the project had been pursued. All activity of the Company related to this project has been terminated.




b)
Waste Biomass – Fueled Steam Generation Projects




The Company’s efforts are now completely focused on its Greensteam project, which involves the development and marketing of its patent-pending combustion process that converts biomass (primarily wood and crop waste) to low-cost steam. The steam can be used for industrial process purposes or to generate combined heat and power.  One contract is in the early commercial stage in the United States as described in Note 3 b), and other project opportunities are being developed in Europe.




F-23


23
 GLOBAL GREEN SOLUTIONS INC.
 (A Development Stage Company)
  CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  MAY 31, 2010
 (Unaudited)
 (Stated in U.S. Dollars)




12.
SEGMENT AND GEOGRAPHIC INFORMATION (Continued)




Financial information for each segment is presented in the following table. The accounting policies of each reportable segment are the same as those of the consolidated company, as described in Note 2, Summary of Significant Accounting Policies. The Corporate and other category includes unallocated corporate costs related to being a publicly traded company and other head office costs.




Three Months Ended May 31
Six Months Ended May 312010
2009
2010
2009Operating LossAlgae biofuel project
$
13,767
$
67,451
$
18,191
$
142,354Waste biomass-fueled industrial process steam and combined heat and power generation projects

2,706,830

377,731

4,121,786

593,112Other

674

13,193

6,192

24,635Total reportable segments

2,721,271

458,375

4,146,169

760,101Corporate and other

475,525

621,408

994,812

1,238,188Total operating loss
$
3,196,796
$
1,079,783
$
5,140,981
$
1,998,289




The Company’s long-lived assets, including additions to equipment and depreciation, relate mainly to project design, computer and control systems which are predominately located in the United States.




13.
SUBSEQUENT EVENTS




Management has evaluated subsequent events and the impact on the reported results and disclosures and has concluded that no other significant events require disclosure as of the date the interim consolidated financial statements were issued.
















F-24




24


ITEM
2.                 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.




Forward Looking Statements.




This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” and the risks set out below, any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:




·
the uncertainty of future revenue and profitability based upon our current financial condition and history of losses;




·
risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our planned  projects;




·
other risks and uncertainties related to our business strategy.




This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements.




Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.




Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common stock” refer to the common shares in our capital stock.




As used in this annual report, the terms “we”, “us”, “our”, the “Company” and “Global Green” means Global Green Solutions Inc. and its subsidiaries, unless the context clearly requires otherwise.




Business Operations




Global Green Solutions Inc. is a development stage company and is devoting substantially all of its present efforts to establishing a new business. The Company’s efforts had been focused on two areas: biomass combustion to generate industrial process steam and electrical power (“Greensteam”), and the production of algae biomass for biofuel feedstock.




§
Greensteam uses a high thermal efficiency, low air emission technology to economically generate renewable steam from waste biomass, primarily wood and crop waste. The steam is to be sold under long term contract for industrial process steam, for distributed heat, or for electrical power co-generation. This is the Company’s core business. Greensteam’s patent-pending process technology is currently in the demonstration and early commercialization phase, with full commercialization expected in late 2011 when construction of the first full scale, commercial unit is planned to commence.




§
Vertigro Algae Technologies LLC (“VAT”) is the entity through which we and our 50% partner, Valcent USA, Inc. (“VUI”) pursued development of a joint project to use algae as a source for biofuel feedstock and other products. We restructured our operations in 2008 to focus on our commercial stage Global Greensteam business and were evaluating alternative strategies for conducting ongoing development of an algae initiative, including working with new strategic partners. The Company concluded that its interests are best served by focusing all of its efforts on its Greensteam business. Vertigro Algae Technologies LLC, a Texas corporation (“VAT”); is the entity through which the Company and its 50% partner, Valcent USA, Inc. (“VUI”) pursued development of the algae biomass project. The Company and VUI have now agreed to the wind-up and dissolution of VAT, as announced July 8, 2010.




25








Greensteam entered into a Program Agreement with Aera Energy LLC (“Aera”), a California oil and gas company on March 31, 2008, a First Amendment to the Program Agreement, effective October 22, 2008, and a Second Amendment to the Program Agreement effective November 24, 2009.  The Program Agreement provides for a test or demonstration unit which will use Greensteam’s waste-to-steam process technology to burn waste biomass to create steam, to be built in an Aera oilfield. Upon successful operation of the demonstration unit, the Program Agreement provides that up to ten commercial scale units could be built. Each of these units are expected to consume approximately 75 thousand tons of biomass per year and generate 80 MMBTU per hour.  If the demonstration unit and commercial scale units are successful Aera is expected to use the steam in its enhanced oil recovery operations, replacing an equivalent amount of natural gas fired steam generation.




The demonstration unit, construction of which was completed in June 2010, is approximately one-quarter the size of the commercial scale units and is expected to cost approximately $8 million, including extended testing.  Under the terms of the First Amendment, up to $3 million of this cost was to be contributed by Aera.




Effective November 24, 2009, Greensteam and Aera executed the Second Amendment to the Program Agreement which deleted and replaced the First Amendment in its entirety.




Under the terms of the Second Amendment:




·
Aera agreed to continue to contribute up to $3 million of the cost of the demonstration unit




·
An additional $5 million of payments has been included in Aera’s 2010 R&D budget, which has now been approved by the Aera Board of Directors. Aera will make payments to Greensteam for the demonstration unit up to a total of $8 million.




·
Payments from Aera are to be used exclusively for the management, design, engineering, permitting, construction (including materials), and operation of the Test Unit.




·
In return, if the demonstration unit meets the pre-agreed Specific Test Requirements and there is a Full Scale Period (as such term is defined in the agreement), Greensteam will be obligated to provide Aera with discount-priced steam for the full term of the agreement.




·
If there is no Full Scale Period in which Greensteam can provide Aera with discount-priced Steam, Greensteam will grant Aera a perpetual, exclusive license to use Greensteam’s technology at any property owned or leased by Aera, and access to Greensteam’s intellectual property (collectively the “Exclusive License Grant”), subject to a royalty of 0.004 times the Incremental Energy Charge as defined in the Agreement if Aera proceeds with the Full Scale period on its own.




·
There are no longer any Early Termination Fees as had been included in the First Amendment. Those have been replaced in the Second Amendment by the obligation for Greensteam to grant Aera an Exclusive License Grant in the following circumstances:




1.
If the Test Unit fails to meet the pre-agreed Specific Test Requirements and either Party gives notice as provided;




2.
If the Test Unit meets the pre-agreed Specific Test Requirements, both Parties give notice that the pre-agreed Specific Test Requirements are met or that the test results are acceptable, Aera’s Board approves amending the Full Scale Period definition by replacing the language “five (5) years” with “ten (10) years”, and Greensteam is subsequently unable to (1) obtain the Full Scale Permit after diligent effort or (2) obtain financing for the first Project after diligent effort;




3.
If the Test Unit meets the pre-agreed Specific Test Requirements, both Parties give notice that the pre-agreed Specific Test Requirements are met or that the test results are acceptable, Greensteam subsequently obtains the Full Scale Permit, Greensteam obtains financing for the first Project, and Greensteam fails to implement the Full Scale Period Project(s).




26


Construction of the demonstration unit commenced in January, 2010, on Aera’s Belridge oilfield, near Bakersfield, California. Construction was completed in June, 2010. Expenditures incurred in connection with the steam generation project and charged to project development costs in the six month period ended May 31, 2010 totaled $4,121,786 (2009: $593,112). As of May 31, 2010, $5,065,852 had been received from Aera under the terms of the Second Amendment.





The 1.25 MW electrical equivalent demonstration project will provide process and air emissions data to enable optimization for performance and final air emissions permit approval.  The commissioning and pre-testing phase will be completed in July leading to operational testing commencing in August. The operational testing phase is to prove Greensteam’s capability to safely and reliably generate oilfield quality steam with ultra-low air emissions.




The Greensteam process is designed to be precisely controlled. Individual plant parameters are synchronously controlled to precise tolerances, which is how we expect to achieve ultra-low emissions and high energy efficiencies. Individual plant systems and subsystems are being tested first, to be followed by Aera-specified performance tests and San Joaquin Valley Air Pollution Control District-specified air emissions tests. The Aera performance tests are scheduled to be complete by late summer, 2010.




Business Model




Greensteam’s business model is to license the technology and develop and operate projects directly or with strategic partners, enabling us to profit from a portfolio of economically and environmentally sustainable waste biomass-to-energy projects. We will provide technology, project development, and operational expertise to local project partners to support permitting, fuel supply contracting, off take contracting, green credits, engineering, construction, and operations. The renewable steam and or electrical energy will be sold under long-term off-take contracts.




Biomass to energy market outlook




Rapid renewable energy (RE) growth in Europe and North America is driven by government targets for RE electrical and heat production by 2020. Biomass to energy is an attractive RE solution because:


·
Sustainable and economical biomass supplies can provide the base load generation to meet the RE targets.


·
Biomass to energy technology currently available is proven for small to medium and large size generation capacity for industrial and commercial combined heat and power (CHP) facilities.


·
Distributed small-medium size biomass generation facilities built local to biomass supply sources are sustainable and economical.




Results of Operations




Three Months Ended May 31
Change2010

2009
Amount
PercentageRevenue
$
-
$
-
$
-
-Expenses
$
(3,196,796)
$
(1,079,783)
$
(2,117,013)
196%Net Income (Loss) - Non-controlling interests
$
6,017
$
5,100
$
917
18%Net Loss – Global Green Solutions
$
(3,190,779)
$
(1,074,683)
$
(2,116,096)
197%




Revenues




We recorded a net loss of $3,190,779 for the three month period ended May 31, 2010 and have an accumulated deficit of $31,356,696 since inception. We have had no operating revenues since our inception on June 10, 2003. We do not anticipate that we will generate any revenues during the period in which we are a development stage company. First revenues are expected in the first half of 2012, when the first of our commercial scale Greensteam units is expected to be completed, allowing us to commence selling steam to Aera Energy LLC under the terms of our agreement.








27





Balance Sheet at May 31, 2010 compared to November 30, 2009




Items with notable period-end differences are as follows:




May 31

November 30
Change2010

2009
Amount
PercentageCash
$
137,307
$
41,956
$
95,351
227%Prepaid expenses
$
63,757
$
26,075
$
37,682
145%Accounts payable and accrued liabilities
$
2,728,056
$
1,860,372
$
867,684
47%Convertible notes, net of discount
$
869,605
$
684,419
$
185,186
27%Project funding advances
$
5,351,138
$
1,386,986
$
3,964,152
286%APIC
$
20,234,358
$
20,017,711
$
216,647
1%Shares to be issued
$
21,151
$
82,688
$
(61,537)
(74%)




§
Cash increased primarily due to funding received in May in connection with Greensteam project expenses for the period ended May 31, 2010 that was not disbursed until shortly after that date, in early June, 2010.


§
Prepaid expenses increased due to insurance for the pilot project being acquired during Q1 2010 and pro-rated over the term of the policy.


§
Payables related to corporate overhead increased by approximately $260,000 due to incoming funding being less than expenses for the six months ended May 31, 2010; Greensteam project payables increased approximately $446,000 due to escalation in the pilot project build rate (construction commenced in Jan 2010) and timing of disbursements at the end of Q2 2010. Cash was received from Aera Energy at the end of the quarter but not all of it was disbursed to project vendors until after May 31, 2010. Convertible debt interest and loan interest increases were approximately $63,000 and $60,000 respectively.


§
The increase in Convertible Notes is due to new notes issued in the six months ended May 31, 2010.


§
Project funding advances received in the six months ended May 31, 2010 from Aera Energy LLC under the terms of our agreement with Aera to build a Greensteam demonstration unit totaled $3,744,066. Accretion of $220,086 on these advances was recorded during the six month period ended May 31, 2010.


§
Additional Paid In Capital increased approximately $87,000 as a result of 825,000 shares issued in the period ended May 31, 2010 for consulting services; increased $56,000 from recording the value of the embedded conversion feature in convertible notes that were issued in the same period, and increased approximately $73,000 due to the amortization of stock based compensation.


§
Shares To Be Issued decreased approximately $83,000 as we issued 787,500 shares recorded as issuable at November 30, 2009 in connection with consulting services. This change was partially offset by an increase of approximately $21,000 related to shares issuable at May 31, 2010 in connection with a consulting agreement.




Expenses – Three month period ended May 31, 2010 compared to the three month period ended May 31, 2009




Items with notable period over period differences are as follows:




Three Months Ended May 31
Change2010

2009
Amount
PercentageConsulting fees
$
131,853
$
254,153
$
(122,300)
(48%)Finance charges
$
41,118
$
11,179
$
29,939
268%Interest and bank charges
$
212,248
$
71,157
$
141,091
198%Office and sundry
$
22,734
$
107,968
$
(85,234)
(79%)Professional fees
$
24,011
$
89,412
$
(65,401)
(73%)Project development expenses
$
2,721,271
$
458,375
$
2,262,896
494%Stock based compensation
$
43,561
$
87,539
$
(43,978)
(50%)






28


§
Consulting fees decreased approximately $29,000 due to a consulting agreement that commenced in Q1 2009 being put on hold in late 2009; decreased approximately $51,000 due to the allocation of consulting fees to Greensteam project development in Q2 2010 but not in Q2 2009 when consulting fees for project management services were not yet fundable as part of the project; and decreased approximately $63,000 due to the end of three consulting arrangements in the year ended November 30, 2009. These decreases were partially offset by an allocation of approximately $15,000 in consulting fees to VAT in 2009 but none in 2010; miscellaneous consulting in Q2 2010 of approximately $2,000 versus $Nil in Q2 2009; and the impact of exchange rates on non-US dollar consulting fees resulting in an increase of approximately $2,000 in Q2 2010 versus Q2 2009.


§
The increase in Finance charges resulted from an increase in accretion of charges on convertible debt that was approximately $870,000 at the end of Q2 2010 compared to approximately $358,000 at the end of Q2 2009.


§
Interest and bank charges increased quarter over quarter approximately $21,000 as a result of the increase in convertible debt noted above, plus approximately $124,000 higher accretion on advances from Aera Energy, as project funding advances increased from roughly $403,000 at the end of Q2 2009 to roughly $5,066,000 at the end of Q2 2010.


§
Office and sundry decreased approximately $5K as a result of lower depreciation as many assets are now fully depreciated; decreased approximately $13K due to overall funding constraints; decreased approximately $38K due to foreign exchange expense that was higher in Q2 2009 than in Q2 2010; and decreased approximately $29K due to a reduced accrual for rent and administrative services as the contract for those services has expired and a new arrangement is under review.


§
Professional fees decreased quarter over quarter mainly due to timing of certain external accounting fees (approximately $59,000 in Q1 2010 versus $Nil in Q1 2009). There is a minimal difference in the year to date amounts. Legal fees decreased by a minor, random difference of approximately $3,000 quarter over quarter.


§
Project development costs increased due to the commencement of construction of the Greensteam pilot plant in January 2010. As construction ramped up, there was a corresponding increase in funding advances from Aera Energy which totaled approximately $2,330,000 in Q2 2010 compared to approximately $174,000 in Q1 2009.


§
Stock-based compensation was lower in Q2 2010 than Q2 2009 mainly due to the timing of the amortization of the fair value of certain options that were granted in 2007 (approximately $14,000) and 2008 (approximately $29,000).




Liquidity and Capital Resources




Our ability to generate adequate amounts of cash to meet our needs is entirely dependent on the issuance of shares, debt securities, loans, or the sale of project equity.




o
We estimate that our funding requirement for public company administration and maintenance, fund raising and investor relations, through May, 2011 will total approximately $1.4 million.


o
We estimate that we will require approximately $2.7 million through May 31, 2011 to complete the Greensteam demonstration project, the Greensteam process development and the engineering for the Aera full scale project.


o
$8 million is being contributed to the demonstration project costs by Aera Energy LLC.  Aera will recover that project funding via a discount on the price of steam to be sold to Aera from the commercial scale units.


o
Construction of the first of up to 10 full scale commercial units is planned to start in the second half of 2011. Capital costs for the ten full scale projects contemplated in our agreement with Aera are estimated to be $80 million. Project funding efforts are underway but no funding is currently in place for the first full scale project.




We are still a development stage company and have no cash flows from operations. We have no certainty that the cash flows necessary to meet the above requirements can be obtained from outside sources. We have a serious liquidity issue until major funding is obtained, sufficient to cover project capital costs and ongoing corporate operating expenses. First cash flows will be achieved when the first commercial scale Greensteam unit is completed and producing revenue, which is expected to be in the first half of 2012. We are pursuing funding initiatives through a variety of sources.




We believe that our Greensteam project is suitable for debt based financing, having tangible assets and a relatively short build time per unit, followed by an immediate cash flow as each unit comes on stream. Our expectation is that the first full scale project will be primarily funded by a combination of debt and project equity rather than equity in Global Green Solutions Inc.




29


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.




We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item.




ITEM 4.  CONTROLS AND PROCEDURES.




A. Disclosure Controls and Procedures




As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934, the Company’s principal executive officer and principal financial officer evaluated the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, these officers concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, these disclosure controls and procedures were adequate to ensure that the information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and include controls and procedures designed to ensure that such information is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.




B. Management’s Report on Internal Control over Financial Reporting




Management is responsible for establishing and maintaining adequate internal control over our financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in the Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.




Based on our evaluation under the framework in the Internal Control-Integrated Framework, our Chief Executive Officer and Chief Financial Officer concluded that our internal controls over financial reporting were effective as of May 31, 2010.




Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.




This Quarterly Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.




C. Changes in Internal Control over Financial Reporting.




There were no changes in the Company’s internal control over financial reporting during the quarter ended May 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.




30


PART II – OTHER INFORMATION




ITEM 1.                      LEGAL PROCEEDINGS




We are not a party to any current or pending legal proceedings as of the date of this quarterly report.




Item 1A.                      RISK FACTORS




There have been no material changes from the risk factors as previously disclosed in our annual report on Form 10-K for the year ended November 30, 2009.




Item 2.                      UNREGISTERED SALES OF EQUITY SECURITIES




We had no sales of unregistered securities in the quarter ended May 31, 2010 and subsequently, to the date of this report.




ITEM 6.                      EXHIBITS.




The following documents are included herein:




Exhibit No.
Document Description31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Executive Officer.32.2
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Financial Officer.






31


SIGNATURES




In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 15th day of July, 2010.




GLOBAL GREEN SOLUTIONS INC.(the “Registrant”)BY:
"Doug Frater"J. Douglas Frater, President and Principal Executive Officer,BY:
"Arnold Hughes"Arnold Hughes, Principal Accounting Officer, Principal Financial Officer and Treasurer




































































32


EXHIBIT INDEX






Exhibit No.
Document Description31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Executive Officer.32.2
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Financial Officer.