Filed Pursuant to Rule 424(b)(3)
Registration No. 333-143122
PROSPECTUS SUPPLEMENT NO. 4 DATED OCTOBER 14, 2008
TO PROSPECTUS DECLARED EFFECTIVE ON OCTOBER 16, 2007
(Registration No. 333-143122)
INTREPID TECHNOLOGY & RESOURCES, INC.
This prospectus supplement (this “Supplement”) dated October 14, 2008 supplements and amends the prospectus dated October 16, 2007 (the “Prospectus”) of Intrepid Technology & Resources, Inc., an Idaho corporation (the “Company” or “Intrepid”) relating to the resale by a selling stockholder (YA Global Investments) of up to 713,880 shares of the common stock of the Company. The selling stockholder may sell common stock from time to time in the principal market on which the stock is traded at the prevailing market price or in negotiated transactions. We supplemented and amended our prospectus dated October 16, 2007 with previousprospectus supplements dated January 4, 2008, February 14, 2008, and May 15, 2008. We refer to our prospectus dated October 16, 2007, as supplemented and amended to date, collectively as the " ;prospectus." This prospectus supplement includes our attached Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on October 14, 2008.
You should read this prospectus supplement in conjunction with the prospectus. This prospectus supplement is qualified by reference to the prospectus, except to the extent that the information contained in this prospectus supplement supersedes the information contained in the prospectus. This prospectus supplement is not complete without, and may not be utilized except in connection with, the prospectus, including any amendments or additional supplements thereto. Capitalized terms used in this prospectus supplement but not otherwise defined herein shall have the meanings given to such terms in the prospectus.
Our common stock is listed on the OTC Bulletin Board under the symbol "ITRP". The last reported sales price per share of our common stock, as reported by the OTC Bulletin Board on October 13, 2008 was $0.03.
THE SECURITIES OFFERED IN THE PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5 OF THE PROSPECTUS TO READ ABOUT FACTORS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES SET FORTH IN THE PROSPECTUS OR DETERMINED IF THE PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus Supplement is October 14, 2008.
1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED JUNE 30, 2008
COMMISSION FILE NUMBER 000-30065
INTREPID TECHNOLOGY & RESOURCES, INC., & SUBSIDIARIES
(Exact name of registrant as specified in its charter)
IDAHO 82-0230842 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 501 WEST BROADWAY, SUITE 200, IDAHO FALLS, IDAHO 83402 (Address of Principal Executive Offices) (Zip Code) |
Registrant's telephone number, including area code: (208) 529-5337
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.005-par value per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Check if no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is contained herein, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]
State Issuer's revenue for its most recent fiscal year ended June 30, 2008 was $97,148
At October 13, 2008 Registrant had 7,294,917 outstanding shares of its Common Stock. The aggregate market value of the Registrant's voting stock held by non-affiliates at this date was approximately $219,000, based on the closing price of $.030 per share, and is reported on the Over the Counter Bulletin Board Trading System. For purposes of the foregoing calculation, all directors and executive officers of the Registrant have been deemed to be affiliates, but the Registrant disclaims that any of such directors or executive officers is an affiliate.
Issuers involved in Bankruptcy Proceedings during the past Five Years. Not Applicable.
Documents Incorporated by Reference
Portions of the Proxy Statement for 2007 Annual Meeting of Stockholders. Part III
2
OFFICERS
John D. Haffey,Chief Executive Officer& Acting Chief Financial Officer
Dr. Jacob D. Dustin,President & Chief Operating Officer
Robert V. Searcy,Secretary & Treasurer
DIRECTORS
John W. Brockage, Board Member
Dr. Jacob D. Dustin, President & Chief Operating Officer
John D. Haffey,CEO & Acting Chief Financial Officer
Mitchell J. Hart,Board Member
David H. Hawk, Board Member
William R. Myers,Board Member
D. Lynn Smith,Chairman of the Board
COMMON STOCK
Par value .005
25,000,000 authorized
4,608,126 issued and outstanding at June 30, 2008
7,294,917 issued and outstanding at October 13, 2008
Intrepid Technology & Resources, Inc.’s common stock trades on the Bulletin Board under the symbol ITRP.
FINANCIAL REPORTS
A copy of Intrepid Technology & Resources, Inc.’s Financial Reports, filed with the Securities and Exchange Commission, may be obtained by writing to:
Intrepid Technology & Resources, Inc.
501 West Broadway
Suite 200
Idaho Falls, Idaho 83402
www.intrepid21.com
or at: The Securities and Exchange Commission office, Public Reference Room 450 Fifth Street, N.W., Washington D.C. 20549 or at the SEC web site address (http://www.sec.gov)
TRANSFER AGENT
Columbia Stock Transfer Company
601 E. Seltice Way Suite 202
Post Falls, ID 83854
Phone: 208-664-3544
Fax: 208-777-8998
AUDITOR
Jones Simkins, P.C.
1011 West 400 North, Suite 100
Logan, Utah 84323
435-752-1510
3
TABLE OF CONTENTS
Part I
Item | 1. | Business……………………………………………………………………………………….. | 4 |
Item | 2. | Properties…………………………………………………………………….………………... | 6 |
Item | 3. | Legal Proceedings……………………………………………………………………………... | 6 |
Item | 4. | Submission of Matters to a Vote of Security Holders……………………….………………... | 6 |
Part II
Item | 5. | Market of Registrants Common Equity and Related Stockholders Matters…………………... | 7 |
Item | 6. | Management’s Discussion and Analysis…………………………………….………………... | 7 |
Item | 7. | Financial Statements and Supplementary Data……………………………………………….. | 15 |
Item | 8. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure…………………………………………………………………….……………….. | 36 |
Item | 8A. | Controls and Procedures ……………………………………………………………………… | 36 |
Item | 8B. | Other Information ……..……………………………………………………………………… | 37 |
Part III
Item | 9. | Directors, Executive Officers, Promoters, Control Persons and Corporate Governance…..…. | 38 |
Item | 10. | Executive Compensation …………………………………………………………………….. | 41 |
Item | 11. | Security Ownership of Certain Beneficial Owners and Management & Related Stockholder Matters ……………………………………………………………………………………….. | 45 |
Item | 12. | Certain Relationships and Related Transactions, and Director Independence ……………….. | 47 |
Item | 13. | Exhibits, Financial Statement Schedules, and Reports on Form 8-K…………………………. | 48 |
Item | 14. | Principal Accountant Fees and Services……………………………………………………… | 52 |
|
| Signatures……………………………………………………………………………………... | 54 |
4
PART I
ITEM 1. BUSINESS
Intrepid Technology and Resources, Inc. specializes in developing, constructing, operating, and owning or co-owning a portfolio of projects in the Biofuels Production and Distribution area of the Renewable Energy sector. Biofuels are combustible fuels such as biogas (methane), biodiesel, ethanol and hydrogen that are produced from biomass -- i.e. plant-derived organic matter. The Company’s current primary focus is on biogas.
The Company has a staff of professional engineers and managers with experience in large construction projects, government service contracts, project and corporate management, and general design and engineering, giving the Company the tools and talents required to achieve its goals.
Those biofuels of primary interest to the Company are:
·
Biogas - methane, or "natural gas" derived from the anaerobic digestion (bacterial decomposition) of animal waste
·
Biodiesel – vegetable oil derived diesel fuel
·
Ethanol - gasoline additive/substitute derived from starch crops (e.g. corn) or cellulosic biomass materials (e.g. wood, straw, etc)
·
Hydrogen - as may be derived from biogas or ethanol or other biomass materials in the future (for use in fuel cells, vehicles, or similar applications)
The Company has chosen to place initial emphasis and resource on biogas production via anaerobic digestion of animal manure. Biogas is the least capital intensive, the quickest to bring to market and, significantly, can serve as a critical component to the success of each of the other three biofuels lines.
Mining and Mineral Rights
The Company had owned rights to precious metals properties in Montana. On September 13, 2004, the Company entered into an agreement with Cordoba Corporation (owner of the surface rights) to attempt to jointly sell the mineral and surface rights. A potential sale in FY 2005 failed to materialize. The Company subsequently divested itself of its interests in these rights on May 3, 2006. Under the terms of the divestiture Agreement, the Company holds a 1st lien on any minerals mined from the property until the amount owed to the Company is paid in full. The proceeds from any such sale of minerals would result in a gain to the Company, as the rights were previously written off as having no value. Such proceeds would be used to provide working capital for current projects and support the ongoing operations of the Company.
Customers
During fiscal year 2008 the Company completed the expansion of its Whitesides Plant and the construction of its larger WestPoint Plant, both located in south-central Idaho. The combined value of these two plants is over $10 million and both are 100% owned by the Company through its wholly-owned subsidiary, Intrepid Technology and Resources Biogas, LLC. The capital financing structure for these two plants consists of approximately 50% bond (debt) and 50% Company equity (profits from engineering service contracts and private placement sales of stock). Projected numbers indicate revenues generated from the sale of gas, digested fiber and carbon offset credits produced from these plants will be adequate to service the bond debt, pay operating expenses and generate acceptable profit percentages.
Markets
Renewable and Alternative Energy are those forms of energy that can be used as an alternative to fossil energy such as oil, natural gas and coal. Fossil energy is encumbered by significant environmental concerns and presents energy security issues as well. Over 60% of the oil used by the United States comes from foreign countries, much of it from the Middle East. Although natural gas is cleaner to burn than oil and coal, domestic supplies of natural gas are being quickly consumed causing prices to escalate and creating a significant problem for industrial plants that have energy intensive operations.
5
Quoting from the U.S. Department of Energy (DOE) 2008 Annual Energy Outlook Report: “A large proportion of the onshore lower 48 conventional natural gas resource base has been discovered. Discoveries of new conventional natural gas reservoirs are expected to be smaller and deeper, and thus more expensive and riskier to develop and produce. Accordingly, total lower 48 onshore conventional natural gas production declines in the AEO2008 reference case from 6.6 trillion cubic feet in 2006 to 4.4 trillion cubic feet in 2030. Incremental production of lower 48 onshore natural gas comes primarily from unconventional resources...”
While the DOE is looking primarily at those “unconventional resources” being coal-bed methane, tight sandstones, and gas shales, another DOE study estimates that worldwide, between 25 and 37 quadrillion BTU’s of methane is released into the atmosphere due to natural decomposition of organic material. This is equivalent to between 25 and 38 percent of all the energy used in the U.S. annually. The study went on to estimate that biogas production from farm waste, landfills and municipal sewage alone is approximately 3.5 quadrillion BTU’s of methane, one third of which (or about 1.25
quadrillion BTU’s) could feasibly be captured. This is equivalent to 6 percent of all the natural gas used in the U.S. each year.
In November 2004, thirteen countries joined the U.S. to formally create the “Methane to Markets Partnership”. The purpose of this Partnership is to advance international cooperation on the recovery and use of biogas-derived methane as a valuable and viable clean energy source, and in the process, increase energy security, improve environmental quality, and reduce greenhouse emissions throughout the world. Under the Partnership, members will work in coordination with the private sector to share and expand the use of technologies to capture methane emissions that are now wasted in the course of industrial and agricultural processes and use them as a new energy source.
The Company is confident that adequate economic incentives exist and that we have gained enough practical, hands-on experience to be poised to become a significant force in developing the “Methane to Markets” concept in the United States.
We have tested and refined both the technology and our business model though the design, construction and continuous operation of our commercial facilities at the Whitesides and WestPoint Dairies in Idaho. We have processed nearly 60 million gallons of manure through those facilities to date and are consistently producing 99.6% purity methane having a Btu content of over 1000 Btu/cubic foot of gas. Furthermore, we have undergone a rigorous independent third party quality testing protocol by the Gas Technology Institute in which our gas was found to meet all Federal Energy Regulatory Commission (FERC) standards necessary to qualify as “pipeline quality” natural gas. This supports our business plan.
Competition
There are many other providers that supply and build anaerobic digesters for animal operations. Among some of the more prominent companies are Microgy Co-Generations Systems (a subsidiary of Environmental Power Corp.), RCM Digester Systems, GHD, Inc. Environmental Services, and Cargill Environmental Finance. However, to the best of the Company’s knowledge, none of their systems produce the overall quality of biogas as does the proprietary system the Company employs, nor do they afford its flexibility and operability and maintainability advantages.
The Company believes that the principal competitive factors applicable to all areas of its business are:
§
exclusive access to proprietary technology;
§
ability to service much larger dairy/beef operations than previously feasible;
§
proximity to major dairy/beef operations (Idaho is the third largest dairy state in the US);
§
strong internal technical, management and scientific capabilities;
§
key strategic alliances;
§
breadth of “work for others” services offered;
§
dependability, technical proficiency and environmental integrity;
§
operational experience;
§
quality of working relationships.
Management believes the Company is, and will continue to be, competitive based on these factors.
6
ITEM 2. PROPERTIES
The Company’s property and equipment are well maintained, in good operating condition, and suitable for the Company’s current and projected needs. Company headquarters are located in Idaho Falls, Idaho in leased office space. The Company’s Biogas Plant #1 is on leased property in Rupert, Idaho and its Biogas Plant #2 is on leased property in Wendell, Idaho. The Idaho Falls office lease runs through May 2010, and the Biogas Plant leases through December 2024. The following table sets forth certain information regarding the principal operating facilities/properties owned or leased by the Company.
LOCATION | FUNCTION | SIZE | OWN/LEASE | UTILIZATION |
|
|
|
|
|
Idaho Falls, Idaho | Corporate Office | 5,500 sq. ft. | Lease | 100% |
|
|
|
|
|
Rupert, Idaho | Biogas Plant #1 | ½ acre | Lease | 100% |
|
|
|
|
|
Wendell, Idaho | Biogas Plant #2 | 1 acre | Lease | 100% |
ITEM 3. LEGAL PROCEEDINGS
The Company’s management is unaware of any pending legal proceedings or any contemplated against the Company by any federal, state, or local government agency.
Further, to the knowledge of management, no director or executive officer is a party to any action in which interest is adverse to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the Company’s security holders during the fourth quarter of 2007.
7
PART II
ITEM 5. MARKET FOR INTREPID TECHNOLOGY & RESOURCES, INC. COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Intrepid Technology & Resources, Inc. common stock is currently listed on the Bulletin Board System under the symbol ITRP. As of June 30, 2008, there were 1280 common stock holders of record. The common stock began trading in the 1st quarter of 2001. The high for that quarter was $5.50 and the low was $3.00. The high and low closing sales prices by quarter for the last two fiscal years are shown below. No dividends were paid per common share for any quarter in the last two years:
| 2008 | 2007 | Dividends Per Share | |||
Period | High | Low | High | Low | 2008 | 2007 |
|
|
|
|
|
|
|
1st Quarter | $5.010 | $3.900 | $7.900 | $4.500 | $ -- | $ -- |
2nd Quarter | 4.000 | 2.100 | 7.600 | 5.200 | -- | -- |
3rd Quarter | 2.200 | 1.000 | 7.100 | 5.600 | -- | -- |
4th Quarter | 1.000 | .213 | 6.300 | 5.000 | -- | -- |
ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements that involve known and unknown risks and uncertainties which may cause actual results in future periods to differ materially from those indicated herein as a result of a number of factors, including, but not limited to, those set forth under "Factors That May Affect Future Results," Notes to the Consolidated Financial Statements, Part I, Item 3., Legal Proceedings, and the discussion below. When the Company uses words like "may," "believes," "expects," "anticipates," "should," "estimate," "project," "plan," their opposites and similar expressions, the Company is making forward-looking statements. These expressions are most often used in statements relating to business plans, strategies, anticipated benefits or projections about the anticipated revenues, earnings or other aspects of our operating results. We make these statements in an effort to keep stockholders and the public informed about our business and have based them on our current expectations about future events. Such statements should be viewed with caution. These statements are not guarantees of future performance or events. As noted elsewhere in this report, all phases of our business are subject to uncertainties, risks and other influences, many of which the Company has no control over. Additionally, any of these factors, either alone or taken together, could have a material adverse effect on the Company and could change whether any forward-looking statement ultimately turns out to be true. The Company undertakes no obligation to publicly release updates or revisions to these statements. The following discussion should be read in conjunction with audited consolidated financial statements and the notes thereto for the years ending June 30, 2007 and June 30, 2008, included elsewhere in this Form 10-KSB.
2008 Financial Results Compared to 2007
The Company’s 2008 operating revenue was $97,148 compared to $254,560 for 2007. The Company’s gross profit/(loss) for the year ended June 30, 2008 was ($1,887,712) compared to ($47,705) for 2007. For the year ended June 30, 2008 the Company reported a net loss of $4,544,280 compared to a net loss for the year ended June 30, 2007, of $1,626,817.
Business Strategy
The following discussion provides an overview of the Company’s current business model and development plan.
8
Business Model
The fundamental aspects of the Company’s business model are to:
·
utilize cutting edge, but established, technology for the production of biogas, generation of carbon emissions reduction credits, and high quality horticultural fiber from large animal operations;
·
team with experienced companies for the marketing and distribution of products;
·
maintain equity positions in selected biogas-related projects;
·
begin operations in known territory (Idaho), and expand into other geographical locations as opportunities arise;
·
develop strategic financial partnerships.
Development Plan
The Company will design, construct and operate (and in select situations, own or co-own) production facilities consistent with the business model described above.
Our approach is to use superior technology and know-how to convert manure waste from dairy and feedlot operations into high BTU biogas and high quality horticultural-grade fiber. The biogas is further processed to produce (1) pipeline quality gas for sale to a gas utility or a marketing and distribution company; (2) combustion gas to fuel boilers for processing materials; (3) liquid natural gas for transportation fuel, peaking, and/or remote community service; and, eventually, (4) hydrogen to energize fuel cells for transportation and distributed or non-distributed energy sources. Our range of services include:
·
designing, building, and operating biofuels facilities;
·
performing value-added processing of raw biogas and residual products of digestion for various applications;
·
marketing, transportation and sales of those co-products.
ITR currently has a production plant in Rupert, Idaho that has been in operation for over three years and a second, larger plant in Wendell, Idaho that is in its first full year of operation. Both plants consistently produce 99+% purity natural gas (methane) with a heating value in excess of 1,000 BTU/cubic foot. The Rupert plant has been designed with special features that allow it to serve as a test platform for the Company to continue its research and development activities. The gas from both plants is under contract for sale to a local industrial customer on a purchase order basis and to the local gas utility via a 15-year Supply and Purchase Agreement. A small portion of the gas is used on-site for plant process heating and for heating water for dairy operations.
The Development Plan involves discrete projects that will ultimately bring 250,000 Magic Valley dairy cows under production to create the “Magic Valley Biogas Field” in the Magic Valley area of south-central Idaho. The first project is essentially complete with the two plants described above. The total combined capital investment for this project is $10 million and was financed via a combination of 50% debt (tax-exempt municipal revenue bond) and 50% equity (public shareholder). The second project will be phased and ultimately involve 60,000 cows.
Future projects will be financed through a combination of debt and equity. As with our first project, we anticipate that the debt portion will be financed through the sale of bonds. The equity will come from equity partners that will include dairymen, equity capital group(s), or other private investors and from retained earnings generated through building biogas plants for third parties. These funds will provide for anaerobic digester plants constructed at participating dairies, gas conditioning clean-up equipment for processing the raw biogas to pipeline quality standards, and a supporting gas line gathering system to transport the clean gas to the gas utility distribution system. A majority of the costs (approximately 70%) is for construction of the digesters.
Additional Information
At the present time the Company does not anticipate paying dividends, cash or otherwise, on it’s Common Stock in the foreseeable future. Future dividends will depend on earnings, if any, of the Company, its financial requirements and other factors. The Company believes that the terms of the Settlement Agreement relative to divestiture of its mining and mineral rights of the Garnett mine in Montana have the potential to provide moderate future working capital. The Company continues to seek other investment capital to support future projects and the existing and ongoing Company operations.
9
Results of Operations
Currently the Company's revenue results primarily from sale of gas, fiber, manure handling fees, and carbon emissions reduction credits.
In 2008, revenues of $35,789 were accrued for engineering services for others, $7,334 from gas sales, $3,330 from fiber sales, $50,695 for the handling of manure, and $0 for carbon emissions reduction credits.
The following table shows each element of the statement of operations as a percentage of revenue:
|
| Year Ended |
| Year Ended | ||
|
| June 30, 2008 |
| June 30, 2007 | ||
|
| Whole $ | % |
| Whole $ | % |
Revenue, net |
| 97,148 |
|
| 254,560 |
|
Direct operating costs | 1,984,860 | 2043% |
| 302,265 | 119% | |
|
|
|
|
|
|
|
Gross profit/(loss) |
| (1,887,712) | (1943%) |
| (47,705) | (19%) |
General and administrative | 817,195 | 841% |
| 1,204,277 | 473% | |
Research and development | -- | -- |
| 89,548 | 35% | |
Loss from operations | (2,704,907) | (2784%) |
| (1,341,530) | (527%) | |
|
|
|
|
|
| |
Interest income | 39,339 | 40% |
| 39,568 | 16% | |
Interest expense | (2,309,678) | (2378%) |
| (520,013) | (204%) | |
Loss on disposition of assets | (286,968) | (295%) |
| -- | -- | |
Gain on embedded derivative liability, net | 717,934 | 739% |
| 195,158 | 77% | |
|
|
|
|
|
|
|
Net loss before income taxes | (4,544,280) | (4678%) |
| (1,626,817) | (639%) | |
|
|
|
|
|
|
|
Income tax expense (benefit) | -- | -- |
| -- | -- | |
|
|
|
|
|
|
|
Net loss |
| (4,544,280) | (4678%) |
| (1,626,817) | (639%) |
|
|
|
|
|
|
|
Revenue
Revenue for 2008 decreased to $97,148 compared to $254,560 for 2007. This 62% decrease is a result of decreased engineering service “work for others” over the prior year, and limited revenues from product sales as the plants came on line and the Company develops biogas and biofiber markets. The Company’s first biogas plant in Rupert, Idaho, has been operational for over 3 years and is producing 99+% purity natural gas on a consistent basis. Its second plant came on line late in the fiscal year and is also producing 99+% purity natural gas on a consistent basis. The Company has a 15-year Supply and Purchase Agreement in place with the local gas utility for the balance of gas being produced at the plants. The utility is currently making necessary arrangements to receive this gas into their distribution system for commercial sale. Additionally, where and when possible, the Company is selling compressed natural gas to industrial propane u sers who are stranded from a natural gas pipeline.
10
Direct Operating Costs
For the year ending June 30, 2008, the Company had direct operating costs of $1,984,860 or 2043% of revenue as compared to $302,265 or 119% of revenue for the year ended June 30, 2007. The direct operating costs have increased largely due to bringing the two digester plants into full operations. Revenue and operating costs will both increase (though operating costs will decrease as a percentage of revenue) as the Company is able to increase sales of gas, horticultural fiber and carbon offset credits to the marketplace.
Gross Profit
The Company had a gross profit/(loss) of ($1,887,712) for the fiscal year ended June 30, 2008, compared to ($47,705) in fiscal year 2007. The decrease in gross profit for the year ending June 30, 2008 results from the direct operating costs associated with Company-owned production plants.
General and Administrative Expenses
General and administrative (G&A) expenses of $817,195 were 841% of revenue, a decrease of $387,082 or 32% from the year ending June 30, 2007. Total Company payroll was reduced during the year. Also, corporate overhead was allocated to the plant operations as part of plant manufacturing overhead cost of goods sold.
The Company has incurred large costs over the last two fiscal years for the construction, start-up and operations of the Company’s Whitesides Biogas Plant and the new WestPoint Biogas Plant. Only those costs allowed by generally accepted accounting principles have been capitalized in those efforts. All other costs have been expensed for establishing the biogas business operating plan, including research in the biofuels markets, development of operations and maintenance procedures, process improvement measures, and seeking investment capital and source financing. The shifting of in-house resources from engineering services work to plant design, construction and operations has left virtually all of the expenses for the Company to burden as manufacturing overhead and SG&A overhead.
General and administrative costs are characterized in the following format:
| 2008 | 2007 |
Salaries, labor, and employee benefits | 212,145 | 561,348 |
Accounting, consulting, and professional fees | 440,205 | 427,941 |
Insurance, depreciation, and computer | 50,110 | 40,231 |
Leases | 78,361 | 87,939 |
Equipment, office, and other | 27,624 | 34,970 |
Subcontract work, travel, fuel, and other | 8,750 | 51,848 |
Total General and Administrative Expense | 817,195 | 1,204,277 |
Research and Development
The Company expended $0 and $89,548 in fiscal years 2008 and 2007 respectively toward the research and development of biofuels.
Interest Revenue
For the year ended June 30, 2008 the Company accrued interest income of $39,339 compared to $39,568 for 2007.
Interest Expense
Interest expense for the year ended June 30, 2008 was $2,309,678 compared to $520,013 for the same period ending June 30, 2007. Virtually all of this expense was for interest accrued on the bond, Yorkville convertible debentures, amortization of recorded derivatives associated with the Yorkville convertible debentures, amortization of debt issuance costs, and the debt owing to the general contractor for construction of the two plants. Of the total interest expense, $1,295,145 represents accrued amortization that will not affect cash or issuances of stock.
11
Income Taxes
The Company has net operating loss carryforwards of approximately $14,660,000 which begin to expire in the year 2021. The amount of net operating loss carryforwards that can be used in any one year will be limited by significant changes in the ownership of the Company and by the applicable tax laws which are in effect at the time such carryforwards can be utilized.
Net Loss
The Company realized a net loss of $4,544,280 for the year ended June 30, 2008 compared to a loss of $1,626,817 for the year ended June 30, 2007.
Customers
In 2008, the Company provided consulting engineering services to Zuma Energy based in Montezuma, Georgia. The Company also received revenue for the handling of manure at the Whitesides Dairy. These contracts generated the majority of the Company’s revenue for 2008. The Company also received revenue for gas and fiber sales. In 2007, the Company managed engineering services contracts with the Oak Ridge Associated Universities (“ORAU”) based in Oak Ridge, Tennessee; and with 4D2 International. Each aforementioned entity provided more than ten percent of the total revenues in 2008 and 2007.
The Company expects to realize revenue streams from its biogas business in fiscal year 2009. This revenue will be generated from sales of gas and digested fiber product from the biogas plants, from sale of carbon emissions reduction credits, and from engineering fees related to development of additional biogas facilities.
Compliance with Applicable Laws and Regulations
The Company is in compliance with all current laws and regulations.
Changes in Laws and Regulations
None Applicable.
Exposure to Litigation
None.
New Technologies
None.
Access to Capital
The Company will make reasonable efforts to meet cash flow demands from ongoing operations. However, the Company believes that it will be necessary to supplement the cash flow from operations with the use of outside resources such as additional loans and investment capital. As discussed below, the Company entered into a now-expired Standby Equity Distribution Agreement with Cornell Capital Partners that provided working and equity capital to fund a large portion of the biogas projects described above. Additional working and equity capital has also been obtained through Convertible Debentures secured through Cornell Capital (now known as YA Global Investments, L.P.). Details of this debenture are discussed below. Management’s successful obtaining of bond financing under a State of Idaho approved bond inducement resolution in 2006 conclusively demonstrating its ability to attract outside investment capital for new digester projects. T he Company continues to seek other investment capital to support future projects and the existing and ongoing Company operations.
12
CAPITAL RESOURCES AND LIQUIDITY
As of June 30, 2008, the Company had a working capital deficit of $2,680,609 compared to a deficit of $11,269 for the previous year ending June 30, 2007. The current ratio at June 30, 2008 was 0.091 to 1 and 0.995 to 1 at June 30, 2007.
Standby Equity Distribution Agreement
On March 10, 2005, the Company entered into a new Standby Equity Distribution Agreement (SEDA) with Cornell Capital Partners, LP (Cornell). Pursuant to the SEDA, the Company could, at its discretion, periodically sell to Cornell shares of common stock for a total purchase price of up to $25 million. For each share of common stock purchased under the SEDA, Cornell paid the Company 99% of the lowest closing bid price of the common stock on the Over-the-Counter Bulletin Board or other principal market on which the Company's common stock is traded for the five days immediately following the notice date. Cornell retained 5% of each advance under the SEDA.
The Company went through several transitions from the original October 13, 2004 SEDA with Cornell Capital Partners LP to secure additional source financing. A full discussion of the chronology and evolution of this SEDA may be found in the Company’s FY 2005 SEC Form 10-KSB.
This SEDA expired in March 2007.
Debenture Debt
The Company has issued three separate debt instruments to YA Global Investments, L.P., a discussion of these are as follows:
On March 23, 2007, we entered into a Securities Purchase Agreement (the “March 2007 Purchase Agreement”) with YA Global Investments, L.P. (formerly Cornell Capital Partners, L.P.) pursuant to which YA Global Investments agreed to purchase $3,500,000 principal amount of our 9% secured convertible debentures (the “Debentures”), of which $2,500,000 was purchased on March 23, 2007 and $1,000,000 of which was purchased on May 21, 2007 ( the date of filing of this Registration Statement ) ..
The $2,500,000 principal amount of the Debentures mature on March 22, 2010 and $1,000,000 principal amount of the Debentures mature on May 20, 2010 and bear interest at the annual rate of 9% in cash, payable at maturity; provided, however, that at our option and subject to certain conditions regarding registration of the shares underlying the Debentures, the interest may be paid in shares of our common stock. YA Global Investments may convert, at any time, the outstanding principal amount of the Debentures into shares of our common stock at a conversion price per share equal to the lesser of $6.00 or 90% of the lowest volume weighted average price of our common stock during the 30 consecutive trading days immediately preceding the applicable conversion date. Under certain circumstances, including that the price of our common stock is trading at less than $6.00 and that a registration statement covering the shares issuable upon conversion of the Debentures is in effect and subject to certain exceptions, we may redeem a portion or the entire outstanding Debentures at a price equal to 110% of the amount being redeemed plus accrued interest. &nb sp;In addition, upon three trading days prior notice, we may require YA Global Investments to convert all of the outstanding principal amount of the Debentures into shares of our common stock over a 20 trading day period if the volume weighted average price of our common stock during the 20 consecutive trading days immediately preceding the date of such notice had exceeded $12.80.
On March 28, 2008, we entered into a Securities Purchase Agreement (the “March 2008 Purchase Agreement”) with YA Global Investments, L.P. pursuant to which YA Global Investments agreed to purchase $585,000 principal amount of our 11% secured convertible debentures (the “Debentures”), of which $585,000 was purchased on March 28, 2008 ( the date of filing of this Registration Statement ) ..
The $585,000 principal amount of the Debentures mature on March 28, 2010 and bear interest at the annual rate of 11% in cash, payable at maturity; provided, however, that at our option and subject to certain conditions regarding registration of the shares underlying the Debentures, the interest may be paid in shares of our common stock. YA Global Investments may convert, at any time, the outstanding principal amount of the Debentures into shares of our common stock at a conversion price per share equal to the lesser of $1.50 or 90% of the lowest volume weighted average price of our common stock during the 30 consecutive trading days immediately preceding the applicable conversion date. Under certain circumstances, including that the price of our common stock is trading at less than $1.50 and that a registration statement covering the shares
13
issuable upon conversion of the Debentures is in effect and subject to certain exceptions, we may redeem a portion or the entire outstanding Debentures at a price equal to 120% of the amount being redeemed plus accrued interest.
On June 17, 2008, we entered into a Securities Purchase Agreement (the “June 2008 Purchase Agreement”) with YA Global Investments, L.P. pursuant to which YA Global Investments agreed to purchase $375,000 principal amount of our 11% secured convertible debentures (the “Debentures”), of which $375,000 was purchased on June 17, 2008 ( the date of filing of this Registration Statement ) ..
The $375,000 principal amount of the Debentures mature on June 17, 2010 and bear interest at the annual rate of 11% in cash, payable at maturity; provided, however, that at our option and subject to certain conditions regarding registration of the shares underlying the Debentures, the interest may be paid in shares of our common stock. YA Global Investments may convert, at any time, the outstanding principal amount of the Debentures into shares of our common stock at a conversion price per share equal to the lesser of $0.30 or 90% of the lowest volume weighted average price of our common stock during the 30 consecutive trading days immediately preceding the applicable conversion date. Under certain circumstances, including that the price of our common stock is trading at less than $0.30 and that a registration statement covering the shares issuable upon conversion of the Debentures is in effect and subject to certain exceptions, we may redeem a portion or the entire outstanding Debentures at a price equal to 120% of the amount being redeemed plus accrued interest.
Warrants
In connection with the March 2007 Purchase Agreement, we also issued to YA Global Investments on March 23, 2007 warrants (the “March 2007 Warrants”) to purchase an aggregate 150,000 shares of our common stock, exercisable for a period of five years, at an exercise price of $5.50 per share. The Warrants are exercisable for cash unless we are in default under the Debentures or there is no registration statement in effect with respect to the Warrants. If the Warrants are exercised on a “cashless” basis, we will receive no proceeds from their exercise by YA Global Investments. The March 2007 Warrant exercise price was subsequently revalued to have an exercise price of $1.00 and the additional value associated with the revaluation was recognized. The March 2007 Warrants have been exercised.
In connection with the March 2008 Purchase Agreement, we also issued to YA Global Investments on March 28, 2008 a warrant to purchase 14,000 shares of the Company’s common stock with an exercise price of $1.50 per share, a warrant to purchase 14,000 shares of the Company’s common stock with an exercise price of $2.50 per share, and a warrant to purchase 14,000 shares of the Company’s common stock with an exercise price of $3.50 per share (the “March 2008 Warrants”). The Warrants are exercisable for cash unless we are in default under the Debentures or there is no registration statement in effect with respect to the Warrants. If the Warrants are exercised on a “cashless” basis, we will receive no proceeds from their exercise by YA Global Investments. The March 2008 Warrants expire on March 28, 2013. The exercises prices of these warrants were subsequently revalued to have an exercise price of $0.005. On September 2, 2008 the Com pany issued 40,092 shares of common stock as a result of the cashless exercise of the 42,000 warrants.
In connection with the June 2008 Purchase Agreement, we also issued to YA Global Investments on June 17, 2008 a warrant to purchase 145,000 shares of the Company’s common stock with an exercise price of $0.35 per share, a warrant to purchase 145,000 shares of the Company’s common stock with an exercise price of $0.38 per share, and a warrant to purchase 145,000 shares of the Company’s common stock with an exercise price of $0.40 per share (the “June 2008 Warrants”). The Warrants are exercisable for cash unless we are in default under the Debentures or there is no registration statement in effect with respect to the Warrants. If the Warrants are exercised on a “cashless” basis, we will receive no proceeds from their exercise by YA Global Investments. The June 2008 Warrants expire on June 17, 2018.
Material Commitments for Capital Expenditures
Construction of the Company’s two biogas production facilities at the Whitesides Dairy north of Rupert, Idaho and the WestPoint Dairy near Wendell, Idaho is complete. The Company owns and operates both facilities. It is anticipated that funds will be expended during fiscal year 2009 on the development and construction of new digester projects. Funding will be secured by a combination of outside investment capital and debt financing secured by co-product off-take contracts.
14
Risk Factors
Factors that are likely to cause our results to fluctuate include the following:
·
the gain or loss of significant customers;
·
the amount and timing of our operating expenses and capital expenditures;
·
the success or failure of the biofuels projects currently underway;
·
our ability to develop, complete, introduce and market biofuels and bring them to volume production in a timely manner;
·
the rate of adoption and acceptance of new industry standards in our target markets;
·
any other unforeseen activities or issues.
There is a limited public market for our common stock. Our common stock is listed on the OTC Bulletin Board, and there is a limited volume of sales, thus providing a limited liquidity into the market for our shares. As a result of the foregoing, stockholders may be unable to liquidate their shares.
We are subject to various risks associated with the development of the biofuels and alternative energy market place and if we do not succeed our business will be adversely affected.
Our success will largely depend on our ability to develop and implement the anaerobic digester biogas projects and generate energy and gas for sale. We will respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis however, we cannot predict if we will be effective or succeed in the development of the biofuels and renewable energy markets. If we are unable, for technical, legal, financial or other reasons, to adapt in a timely manner to develop and operate in the biofuels market, our business, results of operations and financial condition could be materially adversely affected.
If needed, we may not be able to raise further financing, or it may only be available on terms unfavorable to us or to our stockholders.
Available cash resources may not be sufficient to meet our anticipated working capital and capital expenditure requirements if the biogas facility(ies) does(do) not produce sufficient revenue for at least 12 months. It may become necessary to raise additional funds to respond to business contingencies, which could include the need to:
·
fund additional project expansion for the biofuels production;
·
fund additional marketing expenditures;
·
develop additional biofuels projects;
·
enhance our operating infrastructure;
·
hire additional personnel;
·
acquire other complementary businesses or technologies.
If we raise additional funds through the issuance of equity or convertible debt securities, the ownership of our current stockholders would be diluted, and these newly issued securities might have rights, preferences or privileges senior to those of existing stockholders. Additional financing might not be available on terms favorable to us, or at all. If adequate funds were not available or were not available on acceptable terms, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our products or otherwise respond to competitive pressures would be significantly limited.
Seasonal Changes
The Company’s operating revenue is generally not affected by seasonal changes.
Senior Management
The Board of Directors and Officers of the Company were duly elected by the shareholders during the 2007 Annual Shareholder Meeting held December 7, 2007.
15
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and
Board of Directors of
Intrepid Technology and Resources, Inc.
We have audited the accompanying consolidated balance sheets of Intrepid Technology and Resources, Inc., as of June 30, 2008 and 2007 and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with standards established by the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Intrepid Technology and Resources, Inc., as of June 30, 2008 and 2007 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred recurring losses, has negative working capital, and has negative cash flows from operations. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
JONES SIMKINS, P.C.
Logan, Utah
September 26, 2008
16
INTREPID TECHNOLOGY AND RESOURCES, INC. | ||||
CONSOLIDATED BALANCE SHEETS | ||||
June 30, 2008 and 2007 | ||||
|
|
|
|
|
|
| 2008 |
| 2007 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash | $ | 185,963 |
| 1,414,831 |
Restricted cash |
| 9 |
| 1,003,290 |
Accounts receivable, net |
| 19,789 |
| 18,546 |
Inventories |
| 47,280 |
| 24,647 |
Prepaid expenses |
| 11,806 |
| 11,483 |
Other assets |
| 3,626 |
| 3,380 |
|
|
|
|
|
Total current assets |
| 268,473 |
| 2,476,177 |
|
|
|
|
|
Property, plant, and equipment, net |
| 10,966,784 |
| 10,354,972 |
Debt issuance costs, net |
| 1,299,887 |
| 1,379,157 |
Restricted cash |
| 502,928 |
| 764,000 |
Other assets |
| 42,300 |
| 42,300 |
|
|
|
|
|
Total assets | $ | 13,080,372 |
| 15,016,606 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable | $ | 2,210,584 |
| 1,866,109 |
Accrued expenses |
| 738,498 |
| 621,337 |
|
|
|
|
|
Total current liabilities |
| 2,949,082 |
| 2,487,446 |
|
|
|
|
|
Long-term liabilities: |
|
|
|
|
Accrued interest payable |
| 382,445 |
| 69,904 |
Long-term debt |
| 9,589,425 |
| 8,149,163 |
Embedded derivative liability, net |
| 2,263,500 |
| 3,073,004 |
|
|
|
|
|
Total long-term liabilities |
| 12,235,370 |
| 11,292,071 |
|
|
|
|
|
Total liabilities |
| 15,184,452 |
| 13,779,517 |
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit): |
|
|
|
|
Common stock, $.005 par value; 25,000,000 shares |
|
|
|
|
authorized, 4,608,126 and 2,444,823 shares |
|
|
|
|
issued and outstanding, respectively. |
| 23,041 |
| 12,224 |
Additional paid-in capital |
| 12,352,146 |
| 11,005,508 |
Stock subscription receivable |
| (85,794) |
| (16,200) |
Deferred compensation |
| (84,750) |
| - |
Accumulated deficit |
| (14,308,723) |
| (9,764,443) |
|
|
|
|
|
Total stockholders' equity (deficit) |
| (2,104,080) |
| 1,237,089 |
|
|
|
|
|
Total liabilities and stockholders' equity (deficit) | $ | 13,080,372 |
| 15,016,606 |
| ||||
The accompanying notes are an integral part of these financial statements. |
17
INTREPID TECHNOLOGY AND RESOURCES, INC. | ||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Years Ended June 30, 2008 and 2007 | ||||
|
|
|
|
|
|
| 2008 |
| 2007 |
|
|
|
|
|
Revenues, net | $ | 97,148 |
| 254,560 |
Costs of revenues |
| 1,984,860 |
| 302,265 |
|
|
|
|
|
Gross loss |
| (1,887,712) |
| (47,705) |
|
|
|
|
|
Operating expenses: |
|
|
|
|
General and administrative |
| 817,195 |
| 1,204,277 |
Research and development |
| - |
| 89,548 |
|
|
|
|
|
Loss from operations |
| (2,704,907) |
| (1,341,530) |
|
|
|
|
|
Other income (expense): |
|
|
|
|
Interest income |
| 39,339 |
| 39,568 |
Interest expense |
| (2,309,678) |
| (520,013) |
Loss on disposition of assets |
| (286,968) |
| - |
Gain on embedded derivative liability, net |
| 717,934 |
| 195,158 |
|
|
|
|
|
Loss before provision for |
|
|
|
|
income taxes |
| (4,544,280) |
| (1,626,817) |
|
|
|
|
|
Provision for income taxes |
| - |
| - |
|
|
|
|
|
Net loss | $ | (4,544,280) |
| (1,626,817) |
|
|
|
|
|
Net loss per common share - |
|
|
|
|
basic and diluted | $ | (1.57) |
| (0.67) |
|
|
|
|
|
Weighted average common |
|
|
|
|
shares - basic and diluted |
| 2,889,000 |
| 2,419,000 |
|
|
|
|
|
The accompanying notes are an integral part of these financial statements. |
18
INTREPID TECHNOLOGY AND RESOURCES, INC. | ||||||||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||||||||
Year Ended June 30, 2007 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
| Additional |
| Stock |
|
|
|
|
| Stockholders' |
|
| Common Stock |
| Paid-in |
| Subscription |
| Deferred |
| Accumulated |
| Equity | ||
|
| Shares |
| Amount |
| Capital |
| Receivable |
| Compensation |
| Deficit |
| (Deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 1, 2006 |
| 2,301,010 | $ | 11,505 | $ | 10,322,892 | $ | (16,200) | $ | - | $ | (8,137,626) | $ | 2,180,571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
| 99,653 |
| 497 |
| 486,628 |
| - |
| - |
| - |
| 487,125 |
Services |
| 31,910 |
| 160 |
| 180,870 |
| - |
| - |
| - |
| 181,030 |
Stock options exercised - for cash |
| 9,750 |
| 49 |
| 16,801 |
| - |
| - |
| - |
| 16,850 |
Debt issuance costs |
| 2,500 |
| 13 |
| 14,487 |
| - |
| - |
| - |
| 14,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock offering costs |
| - |
| - |
| (24,500) |
| - |
| - |
| - |
| (24,500) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option compensation expense |
| - |
| - |
| 30,244 |
| - |
| - |
| - |
| 30,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants with convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
debenture |
| - |
| - |
| 654,000 |
| - |
| - |
| - |
| 654,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of warrants to liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
classification |
| - |
| - |
| (675,914) |
| - |
| - |
| - |
| (675,914) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| - |
| - |
| - |
| - |
| - |
| (1,626,817) |
| (1,626,817) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2007 |
| 2,444,823 |
| 12,224 |
| 11,005,508 |
| (16,200) |
| - |
| (9,764,443) |
| 1,237,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements. |
19
INTREPID TECHNOLOGY AND RESOURCES, INC. | ||||||||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||||||||
Year Ended June 30, 2008 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
| Additional |
| Stock |
|
|
|
|
| Stockholders' |
|
| Common Stock |
| Paid-in |
| Subscription |
| Deferred |
| Accumulated |
| Equity | ||
|
| Shares |
| Amount |
| Capital |
| Receivable |
| Compensation |
| Deficit |
| (Deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2007 |
| 2,444,823 |
| 12,224 |
| 11,005,508 |
| (16,200) |
| - |
| (9,764,443) |
| 1,237,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
| 36,696 |
| 183 |
| 11,857 |
| - |
| - |
| - |
| 12,040 |
Services |
| 79,311 |
| 397 |
| 143,682 |
| - |
| - |
| - |
| 144,079 |
Warrants exercised |
| 150,000 |
| 750 |
| 149,250 |
| - |
| - |
| - |
| 150,000 |
Stock options exercised - accrued expenses |
| 43,060 |
| 216 |
| 42,844 |
| - |
| - |
| - |
| 43,060 |
Accrued expenses |
| 1,856 |
| 9 |
| 2,970 |
| - |
| - |
| - |
| 2,979 |
Conversion of debenture |
| 1,095,370 |
| 5,477 |
| 673,123 |
| - |
| - |
| - |
| 678,600 |
Stock subscription receivable |
| 423,516 |
| 2,118 |
| 338,983 |
| (341,101) |
| - |
| - |
| - |
Prepaid expenses |
| 333,214 |
| 1,666 |
| 107,334 |
| - |
| (109,000) |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation earned |
| - |
| - |
| - |
| - |
| 24,250 |
| - |
| 24,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collection of stock subscription receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
through reduction of accounts payable |
| - |
| - |
| (173,363) |
| 271,507 |
| - |
| - |
| 98,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants with convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
debenture |
| - |
| - |
| 149,000 |
| - |
| - |
| - |
| 149,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of repricing warrants |
| - |
| - |
| 117,904 |
| - |
| - |
| - |
| 117,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affect on embedded derivative from conversions of debenture |
| - |
| - |
| 362,259 |
| - |
| - |
| - |
| 362,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affect on derivative discount from conversions of debenture |
| - |
| - |
| (344,472) |
| - |
| - |
| - |
| (344,472) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affect on embedded derivative from exercise of warrants |
| - |
| - |
| 242,111 |
| - |
| - |
|
|
| 242,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of removing discount on exercised warrants |
| - |
| - |
| (476,843) |
| - |
| - |
| - |
| (476,843) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in shares due to rounding on 1 for 100 reverse stock split |
| 280 |
| 1 |
| (1) |
| - |
| - |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| - |
| - |
| - |
| - |
| - |
| (4,544,280) |
| (4,544,280) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008 |
| 4,608,126 | $ | 23,041 | $ | 12,352,146 | $ | (85,794) | $ | (84,750) | $ | (14,308,723) | $ | (2,104,080) |
| ||||||||||||||
The accompanying notes are an integral part of these financial statements. |
20
INTREPID TECHNOLOGY AND RESOURCES, INC. | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
Years Ended June 30, 2008 and 2007 | ||||
|
|
|
|
|
|
| 2008 |
| 2007 |
Cash flows from operating activities: |
|
|
|
|
Net loss | $ | (4,544,280) |
| (1,626,817) |
Adjustments to reconcile net loss to net cash used in |
|
|
|
|
operating activities: |
|
|
|
|
Stock compensation expense |
| 168,329 |
| 211,274 |
Depreciation |
| 555,052 |
| 83,816 |
Loss on disposal of assets |
| 286,968 |
| - |
Amortization of debt issuance costs |
| 290,309 |
| 92,808 |
Accretion-debenture interest expense |
| 999,347 |
| 255,411 |
Common stock warrants-interest expense |
| 117,904 |
| - |
(Gain) on embedded derivative liability |
| (717,934) |
| (195,158) |
Provision for doubtful accounts |
| - |
| 17,209 |
(Increase) decrease in: |
|
|
|
|
Accounts receivable |
| (1,243) |
| 17,497 |
Inventories |
| (22,633) |
| (24,647) |
Prepaid expenses |
| (323) |
| (2,407) |
Other assets |
| (246) |
| (43,435) |
Increase (decrease) in: |
|
|
|
|
Accounts payable |
| 350,432 |
| (54,101) |
Accrued expenses |
| 358,646 |
| 324,652 |
|
|
|
|
|
Net cash used in operating activities |
| (2,159,672) |
| (943,898) |
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
Purchases of property, plant, and equipment |
| (526,294) |
| (5,557,751) |
Proceeds from sale of property and equipment |
| 3,772 |
| - |
Reduction of accounts payable for purchases of property, |
|
|
|
|
plant, and equipment |
| (671,709) |
| - |
|
|
|
|
|
Net cash used in investing activities |
| (1,194,231) |
| (5,557,751) |
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
Proceeds from long-term debt |
| 960,000 |
| 11,140,000 |
Payments on long term debt |
| - |
| (1,434,498) |
Debt issuance costs |
| (160,199) |
| (1,217,410) |
Reduction of accounts payable related to debt issuance costs |
| (101,159) |
| - |
Issuance of common stock |
| 162,040 |
| 503,975 |
Common stock offering costs |
| - |
| (24,500) |
|
|
|
|
|
Net cash provided by financing activities |
| 860,682 |
| 8,967,567 |
|
|
|
|
|
Net increase (decrease) in cash |
| (2,493,221) |
| 2,465,918 |
|
|
|
|
|
Cash, beginning of year |
| 3,182,121 |
| 716,203 |
|
|
|
|
|
Cash, end of year | $ | 688,900 |
| 3,182,121 |
|
|
|
|
|
The accompanying notes are an integral part of these financial statements. |
21
INTREPID TECHNOLOGY AND RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and 2007
Note 1 – Organization and Summary of Significant Accounting Policies
Organization
Intrepid Technology and Resources, Inc. (ITR) and its wholly owned subsidiaries, Intrepid Technology and Resources Biogas, LLC (ITR Biogas), Western Technology and Management, Inc. (WT&M), Intrepid Engineering Services, Inc., and WT&M’s wholly owned subsidiaries Idaho Nano Powders and Virtual Science Services, Inc. (collectively the Company), is a biofuels renewable and alternative energy development and operating company with strengths in engineering and technology. The Company’s primary business purpose is developing, constructing, and operating a portfolio of projects in the Renewable and Alternative Energy sector, with a special emphasis on production of biofuels - particularly, biogas (methane), biofiber for soil amendment and fertilizer, and greenhouse gas carbon credits. The Company's strategy is to provide the overall technical and integration management for planning, coordinating, developing, operating and implementing such projects. The Company's initial emph asis is on establishing several geographically dispersed complexes in the Southern Idaho region and then expanding to other locations within Idaho and the Western United States. The Company currently has two such sites, one located in Rupert, Idaho and one located in Wendell, Idaho.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents.
Concentration of Credit Risk
The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.
Accounts Receivable
Accounts receivable are amounts due on gas and fiber sales and are presented net of the allowance for doubtful accounts and are generally unsecured. Accounts receivable are carried at their estimated collectible amounts. Credit is generally extended on a short-term basis; thus accounts receivable do not bear interest although a finance charge may be applied to such receivables that are more than thirty days past due. Accounts receivable are periodically evaluated for collectibility based on past credit history with customers. Provisions for losses on accounts receivable are determined based on loss experience, known and inherent risk in the account balance, current economic conditions, and the financial stability of customers.
Inventories
The Company values its inventories are at the lower of cost or market, determined on the first-in first-out method. Inventories consist of finished biofiber, soil amendments, and supplies.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost less accumulated depreciation. Maintenance and repairs are charged to expense as incurred. Costs of major renewals or betterments are capitalized over the remaining useful lives of the related assets. Depreciation is computed by using the straight-line method. The cost of property disposed of and related accumulated depreciation is removed from the accounts at the time of disposal, and gain or loss is reflected in operations. Estimated useful lives are as follows:
Digester plants and equipment
10 to 39 years
Office furniture and fixtures and vehicles
3 to 7 years
22
INTREPID TECHNOLOGY AND RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and 2007
Note 1 – Organization and Summary of Significant Accounting Policies (continued)
Long-Lived Assets
The Company evaluates its long-lived assets in accordance with SFAS No. 144, “Accounting for the Impairment of Long-Lived Assets”. Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets and is recorded in the period in which the determination was made. The Company’s plant assets may be subject to significant asset impairments if the Company is not able to meet its cash flow projections.
Revenue Recognition
Revenue is recognized from biogas and fiber product sales upon delivery to the customer. The Company believes that revenues should be recognized at this time because ownership passes to the customer at this time. Management believes that this policy meets the criteria ofStaff Accounting Bulletin101 in that there is persuasive evidence of an existing contract or arrangement, delivery has occurred, the price is fixed and determinable and collectibility is reasonably assured.
Income Taxes
Deferred income taxes are provided in amounts sufficient to give effect to temporary differences between financial and tax reporting, principally related to net operating loss carryforwards.
Earnings Per Share
The computation of basic earnings per common share is based on the weighted average number of shares outstanding during each year.
The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the common stock equivalents which would arise from the exercise of stock options outstanding using the treasury stock method and the average market price per share during the period. Common stock equivalents are not included in the diluted earnings per share calculation when their effect is antidilutive. Common stock equivalents that could potentially dilute earnings per share are the common stock options and warrants.
Stock-Based Compensation
Effective July 1, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) 123R,Share-Based Payment, using the modified prospective method. The statement requires the Company to recognize compensation cost based on the grant date fair value of options granted. In 2007 the Company recognized $30,244 in compensation cost related to adoption of the statement.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
23
INTREPID TECHNOLOGY AND RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and 2007
Note 1 – Organization and Summary of Significant Accounting Policies (continued)
Principles of Consolidation
The consolidated financial statements include the accounts of ITR and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
Note 2 – Going Concern
As of June 30, 2008, the Company has incurred a loss, has negative working capital, and has negative cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
While the Company continues to obtain additional financing, there can be no assurance that such funds will be available to the Company or that these efforts will be successful (see Note 18).
Note 3 – Restricted Cash
Cash restricted in accordance with bond covenants is as follows:
2008
2007
Undistributed funds held for construction costs
$
9
725,000
Debt service reserve
502,928
764,000
Interest coverage reserve
-
278,290
502,937
1,767,290
Less current portion
(9)
(1,003,290)
$
502,928
764,000
Note 4 – Accounts Receivable
Accounts receivable consists of the following:
2008
2007
Trade receivables
$
40,991
31,636
Accrued interest receivable
645
4,119
Allowance for doubtful accounts
(21,847)
(17,209)
$
19,789
18,546
24
INTREPID TECHNOLOGY AND RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and 2007
Note 5 – Property, Plant, and Equipment
Property, plant, and equipment consist of the following:
2008
2007
Digester plants
$
11,473,302
10,040,976
Furniture
96,832
102,833
Vehicles
36,090
36,090
Equipment
14,176
247,182
Pumping station
-
64,500
Gas Pipeline
-
6,130
11,620,400
10,497,711
Less accumulated depreciation
(653,616)
(142,739)
$
10,966,784
10,354,972
Note 6 – Long-term Debt
Long-term debt consists of the following:
2008
2007
Solid Waste Disposal Revenue Bonds issued
through the Industrial Development Corporation
of Gooding County, Idaho. The bonds total
$7,640,000, accrue interest at 7.5%, are secured
by all assets of ITR Biogas and are due on
November 1, 2024. These bonds are currently in
default, see below for additional information.
$
7,640,000
7,640,000
Convertible debenture payable to YA Global
Investors, L.P. of $2,821,400 and $3,500,000,
respectively, bearing interest at 9%, due on March
22, 2010, net of warrants discount of $0 and
$594,722, respectively, and embedded derivative
discount of $1,212,799 and $2,396,115, respectively.
1,608,601
509,163
25
INTREPID TECHNOLOGY AND RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and 2007
Note 6 – Long-term Debt (continued)
Convertible debenture payable to YA Global
Investors, L.P. of $585,000 and $0, respectively,
bearing interest at 11%, due on March 28, 2010,
net of warrants discount of $28,000 and $0,
respectively, and embedded derivative discount
of $222,950 and $0, respectively.
334,050
-
Convertible debenture payable to YA Global
Investors, L.P. of $375,000 and $0, respectively,
bearing interest at 11%, due on June 17, 2010,
net of warrants discount of $114,887 and $0,
respectively, and embedded derivative discount
of $253,339 and $0, respectively.
6,774
-
9,589,425
8,149,163
Less current portion of long-term debt
-
-
$
9,589,425
8,149,163
Future maturities of long-term debt (excluding discounts) are approximately as follows:
Year ending
June 30,
2009
$
-
2010
4,046,400
2011
285,000
2012
305,000
2013
325,000
Thereafter
6,460,000
$
11,421,400
As stated above, the Solid Waste Disposal Revenue Bonds are currently in default. On May 1, 2008, an interest payment in the amount of $286,500 came due on the Solid Waste Disposal Revenue Bonds. Due to insufficient working capital, the Company was unable to pay that amount to the Trustee. As a violation of Section 4.1 of the Loan Agreement, this constitutes an event of default under both the loan agreement and the indenture. Section 514 of the loan agreement provides for interest and/or principal to be paid from the debt service reserve fund when there are insufficient deposits to make each payment in full. The bond trustee transferred $286,500 from the debt service reserve to the bond fund and paid the interest due as of May 1, 2008. The debt service reserve is required to be replenished with equal monthly payments not to exceed twelve months, however, the Company has been granted additional time. The Company has also been allowed to make the upcoming interest payment from the debt se rvice reserve.
26
INTREPID TECHNOLOGY AND RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and 2007
Note 7 – Convertible Debentures, Warrants, and Embedded Derivatives to YA Global Investments, L.P. (f/k/a Cornell Capital Partners, L.P.)
The Company has issued three separate debt instruments to YA Global Investments, L.P., a discussion of these are as follows:
March 23, 2007 Issuance
On March 23, 2007, the Company issued a Convertible Debenture (the March 2007 Debenture) to Cornell Capital Partners, L.P. The March 2007 Debenture accrues interest at 9%, is due on March 22, 2010, and is convertible into a variable number of shares (limited to no more than 4.99% of the Company’s issued and outstanding common stock). The per share conversion rate is defined as the lesser of (a) $6.00, or (b) ninety percent of the lowest volume weighted average price during the thirty trading days immediately preceding the conversion date. In connection with the March 2007 Debenture, the Company also issued a Warrant (the March 2007 Warrant) to purchase 150,000 shares of the Company’s common stock with an exercise price of $5.50 per share. The March 2007 Warrant expires on March 22, 2012. The March 2007 Warrant exercise price was subsequently revalued to have an exercise price of $1.00 and the additional value associated with the revaluation was recognized. The March 2007 Warra nts have been exercised.
Information related to the recognition of the March 2007 Debenture and March 2007 Warrant are as follows:
Embedded Derivative – March 2007 Debenture
The Company analyzed the March 2007 Debenture based on the provisions of EITF 00-19 and determined that the conversion option of the March 2007 Debenture qualifies as an embedded derivative.
The initial fair value of the embedded derivative associated with the conversion feature of the Debenture was in excess of the value assigned to the Debenture resulting in an initial loss of $504,188 on the embedded derivative. The initial fair value of the embedded derivative was determined to be $3,096,436 and was recorded as an embedded derivative liability. The embedded derivative is revalued at the end of each reporting period and any resulting gain or loss is recognized as a current period charge to the statement of operations. The fair value of the Company’s common stock was calculated to be $6.40 per share at the inception of the Debenture. The fair value was calculated using the Black-Scholes option pricing model with the following factors, assumptions and methodologies:
·
A volatility of 149% was calculated by using the Company’s closing stock prices since June 2002.
·
The exercise price was $5.60. This amount was determined based on the lesser of the fixed conversion price of $6.00, or 90% of the lowest daily volume weighted average trading price per share of the Company’s common stock during the 30 trading days immediately preceding March 23, 2007.
·
The estimated life was determined to be 3 years, which is equal to the contractual life of the embedded derivative.
·
The risk free interest rate was determined to be 4.5% based on the 3-year treasury rate.
Embedded Derivative – March 2007 Warrant
The Company analyzed the March 2007 Warrant based on the provisions of EITF 00-19 and determined that it initially qualified for equity classification, however, on May 21, 2007 the Company increased the March 2007 Debenture amount which then required derivative liability accounting for the March 2007 Warrant.
Note 7 – Convertible Debentures, Warrants, and Embedded Derivatives to YA Global Investments, L.P. (f/k/a Cornell Capital Partners, L.P.) (continued)
27
INTREPID TECHNOLOGY AND RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and 2007
March 23, 2007 Issuance (continued)
The initial fair value of the March 2007 Warrant was determined to be $885,000 and the assigned value was $654,000. The initial fair value was calculated using the Black-Scholes option pricing model with the following factors, assumptions, and methodologies:
·
The fair value of the Company’s common stock was calculated to be $6.40 per share on March 23, 2007.
·
A volatility of 149% was calculated by using the Company’s closing stock prices since June 2002.
·
The exercise price was $5.50.
·
The estimated life was determined to be 5 years, which is equal to the contractual life of the March 2007 Warrant.
·
The risk free interest rate was determined to be 4.5% based on the 5-year treasury rate.
On June 30, 2007, the fair value of the embedded derivative associated with the March 2007 Warrant was determined to be $675,914 and was recorded as an embedded derivative liability. The embedded derivative is revalued at the end of each reporting period and any resulting gain or loss is recognized as a current period change to the statement of operations. The fair value was calculated using the Black-Scholes option pricing model with the following factors, assumptions, and methodologies:
·
The fair value of the Company’s common stock was calculated to be $4.50 per share.
·
A volatility of 147% was calculated by using the Company’s closing stock prices since June 2002.
·
The exercise price was $.055.
·
The estimated life was determined to be 4.7 years, which is equal to the contractual life of the Warrant.
·
The risk free interest rate was determined to be 4.9% based on the 5-year treasury rate.
March 28, 2008 Issuance
On March 28, 2008, the Company issued a Convertible Debenture (the March 2008 Debenture) to YA Global Investments, L.P. The March 2008 Debenture accrues interest at 11%, is due on March 28, 2010, and is convertible into a variable number of shares (limited to no more than 4.99% of the Company’s issued and outstanding common stock). The per share conversion rate is defined as the lesser of (a) $1.50, or (b) ninety percent of the lowest volume weighted average price during the thirty trading days immediately preceding the conversion date. In connection with the March 2008 Debenture, the Company also issued a warrant to purchase 14,000 shares of the Company’s common stock with an exercise price of $1.50 per share, a warrant to purchase 14,000 shares of the Company’s common stock with an exercise price of $2.50 per share, and a warrant to purchase 14,000 shares of the Company’s common stock with an exercise price of $3.50 per share (the March 2008 Warrants). The March 20 08 Warrants expire on March 28, 2013. The exercises prices of these warrants were subsequently revalued to have an exercise price of $0.005 and the additional value associated with the revaluation was recognized. On September 2, 2008 the Company issued 40,092 shares of common stock as a result of the cashless exercise of the 42,000 warrants.
The Company analyzed the March 2008 Debenture and March 2008 Warrants based on the provisions of EITF 00-19 and determined that the conversion option of the March 2008 Debenture qualifies as an embedded derivative and the March 2008 Warrants qualify for equity classification. Information related to the recognition of the warrants and embedded derivative are as follows:
28
INTREPID TECHNOLOGY AND RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and 2007
Note 7 – Convertible Debentures, Warrants, and Embedded Derivatives to YA Global Investments, L.P. (f/k/a Cornell Capital Partners, L.P.) (continued)
March 28, 2008 Issuance (Continued)
March 2008 Warrants
The fair and assigned values of the warrants were determined to be $32,000. The fair value was calculated using the Black-Scholes option pricing model with the following factors, assumptions and methodologies:
·
The fair value of the Company’s common stock was calculated to be $1.00 per share on March 28, 2008.
·
A volatility of 125% was calculated by using the Company’s closing stock prices since March 2003.
·
The exercise price was $1.50, $2.50, and $3.50 for the three 14,000 warrants.
·
The estimated life was determined to be 5 years, which is equal to the contractual lives of the warrants.
·
The risk free interest rate was determined to be 2.51% based on the 5-year treasury rate.
Embedded Derivative – March 2008 Debenture
The initial fair value of the embedded derivative was determined to be $254,800 and was recorded as an embedded derivative liability. The embedded derivative is revalued at the end of each reporting period and any resulting gain or loss is recognized as a current period charge to the statement of operations. The fair value of the Company’s common stock was calculated to be $1.00 per share at the inception of the March 2008 Debenture. The fair value was calculated using the Black-Scholes option pricing model with the following factors, assumptions and methodologies:
·
A volatility of 92% was calculated by using the Company’s closing stock prices since April 2004.
·
The exercise price was $1.09. This amount was determined based on the lesser of the fixed conversion price of $1.50, or 90% of the lowest daily volume weighted average trading price per share of the Company’s common stock during the 30 trading days immediately preceding March 28, 2008.
·
The estimated life was determined to be 2 years, which is equal to the contractual life of the embedded derivate.
·
The risk free interest rate was determined to be 1.67% based on the 2-year treasury rate.
June 17, 2008 Issuance
On June 17, 2008, the Company issued a Convertible Debenture (the June 2008 Debenture) to YA Global Investments, L.P. The June 2008 Debenture accrues interest at 11%, is due on June 17, 2010, and is convertible into a variable number of shares (limited to no more than 4.99% of the Company’s issued and outstanding common stock). The per share conversion rate is defined as the lesser of (a) $0.30, or (b) ninety percent of the lowest volume weighted average price during the thirty trading days immediately preceding the conversion date. In connection with the June 2008 Debenture, the Company also issued a warrant to purchase 145,000 shares of the Company’s common stock with an exercise price of $0.35 per share, a warrant to purchase 145,000 shares of the Company’s common stock with an exercise price of $0.38 per share, and a warrant to purchase 145,000 shares of the Company’s common stock with an exercise price of $0.40 per share (the June 2008 Warrants). The June 2008 W arrants expire on June 17, 2018.
29
INTREPID TECHNOLOGY AND RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and 2007
Note 7 – Convertible Debentures, Warrants, and Embedded Derivatives to YA Global Investments, L.P. (f/k/a Cornell Capital Partners, L.P.) (continued)
June 17, 2008 Issuance (continued)
The Company analyzed the June 2008 Debenture and June 2008 Warrants based on the provisions of EITF 00-19 and determined that the conversion option of the June 2008 Debenture qualifies as an embedded derivative and the June 2008 Warrants qualify for equity classification. Information related to the recognition of the June 2008 Warrants and embedded derivative are as follows:
June 2008 Warrants
The fair values of the warrants were determined to be $132,000 and the assigned values were $117,000. The fair value was calculated using the Black-Scholes option pricing model with the following factors, assumptions and methodologies:
·
The fair value of the Company’s common stock was calculated to be $0.31 per share on June 17, 2008.
·
A volatility of 140% was calculated by using the Company’s closing stock prices since March 2003.
·
The exercise price was $0.35, $0.38, and $0.40 for the three 145,000 warrants.
·
The estimated life was determined to be 10 years, which is equal to the contractual lives of the warrants.
·
The risk free interest rate was determined to be 3.66% based on the 10-year treasury rate.
Embedded Derivative – June 2008 Debenture
The initial fair value of the embedded derivative was determined to be $265,900 and was recorded as an embedded derivative liability. The embedded derivative is revalued at the end of each reporting period and any resulting gain or loss is recognized as a current period charge to the statement of operations. The fair value of the Company’s common stock was calculated to be $0.31 per share at the inception of the June 2008 Debenture. The fair value was calculated using the Black-Scholes option pricing model with the following factors, assumptions and methodologies:
·
A volatility of 118% was calculated by using the Company’s closing stock prices since April 2004.
·
The exercise price was $0.28. This amount was determined based on the lesser of the fixed conversion price of $0.30, or 90% of the lowest daily volume weighted average trading price per share of the Company’s common stock during the 30 trading days immediately preceding June 17, 2008.
·
The estimated life was determined to be 2 years, which is equal to the contractual life of the embedded derivate.
·
The risk free interest rate was determined to be 2.94% based on the 2-year treasury rate.
Accretion expense related to all three warrant discounts and the embedded derivative discounts are as follows:
2008
2007
Warrant
$
123,992
59,278
Embedded derivatives
875,355
196,133
$
999,347
255,411
30
INTREPID TECHNOLOGY AND RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and 2007
Note 7 – Convertible Debentures, Warrants, and Embedded Derivatives to YA Global Investments, L.P. (f/k/a Cornell Capital Partners, L.P.) (continued)
June 17, 2008 Issuance (continued)
The embedded derivative liability related to all three debentures consists of the following:
2008
2007
Fair value at beginning of year
$
3,073,004
-
Fair value at inception of new embedded derivative
520,700
3,772,350
Reduction due to conversion of debt
(362,259)
-
Reduction due to exercise of warrants
(242,111)
-
Gain on period end revaluation
(725,834)
(699,346)
$
2,263,500
3,073,004
Note 8 – Operating Leases
The Company leases tube trailers under non-cancelable operating leases which expire in 2012 and 2013. Rental expense related to these operating leases for the years ended June 30, 2008 and 2007, was approximately $69,000 and $4,000, respectively.
The Company leases a vehicle under a non-cancelable operating lease which expires in 2009. Rental expense related to this operating lease for the years ended June 30, 2008 and 2007, was approximately $6,000 and $0, respectively.
The Company leases a truck under a non-cancelable operating lease which expires in 2012. Rental expense related to this operating lease for the years ended June 30, 2008 and 2007, was approximately $7,000 and $0, respectively.
Future minimum lease payments under the non-cancelable lease obligations are approximately as follows:
Years ending
June 30,
2009
$
120,000
2010
114,000
2011
110,000
2012
81,000
$
425,000
Note 9 – Income Taxes
The difference between income taxes at statutory rates and the amount presented in the financial statements is a result of the following:
2008
2007
Federal tax benefit at statutory rate
$
(1,342,000)
(553,000)
State tax net of federal benefit
(128,000)
(82,000)
Embedded derivative
98,000
21,000
Change in valuation allowance
1,372,000
614,000
$
-
-
31
INTREPID TECHNOLOGY AND RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and 2007
Note 9 – Income Taxes (continued)
Deferred tax assets are as follows:
2008
2007
Net operating loss carryforwards
$
4,984,000
3,614,000
Research and development credit carryforward
47,000
45,000
Valuation allowance
(5,031,000)
(3,659,000)
$
-
-
The Company has net operating loss carryforwards of approximately $14,660,000, which begin to expire in the year 2021. The amount of net operating loss carryforwards that can be used in any one year will be limited by significant changes in the ownership of the Company and by the applicable tax laws which are in effect at the time such carryforwards can be utilized.
Note 10 – Supplemental Cash Flow Information
Actual amounts paid for interest and income taxes are approximately as follows:
2008
2007
Interest
$
606,000
345,000
Income taxes
$
-
-
During the year ended June 30, 2008, the Company:
·
Acquired property, plant, and equipment in exchange for an increase in accounts payable of $838,164.
·
Increased debt issuance costs in exchange for accounts payable of $50,840.
·
Capitalized accrued interest of $114,116.
·
Sold property, plant, and equipment in exchange for a reduction of accounts payable of $20,970.
·
Issued 44,916 shares of common stock for a reduction in accrued expenses of $46,039.
·
Issued 333,214 shares of common stock for an increase in prepaid expenses of $109,000.
·
Issued 1,095,370 shares of common stock due to the conversion of $678,600 of convertible debenture. As a result of the conversion, the embedded derivative liability was decreased by $362,259, the embedded derivative discount was decreased by $344,472, and additional paid-in capital was increased by $17,787.
·
Issued 150,000 shares of common stock due to the exercise of warrants. As a result of the exercise, the embedded derivative liability was decreased by $242,111, the embedded derivative discount was decreased by $476,843, and additional paid-in capital was decreased by $234,732.
·
Recorded an embedded derivative liability of $520,700, discounts on convertible debentures of $512,800, and recognized a loss on the embedded derivate liability of $7,900.
32
INTREPID TECHNOLOGY AND RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and 2007
Note 10 – Supplemental Cash Flow Information (continued)
·
Recorded additional paid-in capital and a discount on a convertible debenture of $149,000 as a result of the issuance of common stock warrants.
·
Issued 423,516 shares of common stock in exchange for a stock subscription receivable of $341,101.
·
Reduced the stock subscription receivable by $271,507 in exchange for a reduction of accounts payable of $98,144 and a reduction of additional paid-in capital of $173,363.
During the year ended June 30, 2007, the Company:
·
Reclassified $57,000 of prepaid expense to property, plant and equipment.
·
Acquired property, plant, and equipment in exchange for an increase in the note payable of $878,234.
·
Acquired property, plant, and equipment in exchange for accounts payable of $1,631,911.
·
Increased capitalized debt issuance costs in exchange for accounts payable of $101,159.
·
Capitalized accrued interest of $95,500.
·
Issued 250,000 shares of common stock in exchange for debt issuance costs of $14,500.
·
Recorded additional paid-in capital and a discount on the convertible debenture of $654,000 as a result of the issuance of a common stock warrant.
·
Recorded an embedded derivative liability and a reduction of additional paid-in capital of $675,914 as a result of a required change in classification of a common stock warrant from equity to liability.
·
Recorded an embedded derivative liability of $3,096,436, recorded a discount on the convertible debenture of $2,592,248, and recognized a loss on the embedded derivative liability of $504,188.
·
Decreased the value of the embedded derivative liability and recognized a gain on the embedded derivative liability of $699,346.
Note 11 – Capital Stock
Preferred Stock
Effective March 31, 2008, the Company amended its articles of incorporation to eliminate the previously authorized shares of preferred stock, none of which were issued or outstanding.
Authorized Common Stock
Effective March 31, 2008, the Company amended its articles of incorporation to reduce the number of authorized shares of common stock to 25,000,000 shares.
33
INTREPID TECHNOLOGY AND RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and 2007
Note 12 – Reverse Stock Split
Effective March 31, 2008, the Company approved a 1-for-100 reverse stock split. All common share amounts and per share information have been retroactively adjusted to reflect this reverse common stock split in the accompanying financial statements.
Note 13 – Stock Options and Warrants
The Company has adopted a stock option plan (the Plan). Under the Plan, the Company may issue shares of the Company’s common stock or grant options to acquire the Company’s common stock from time to time to employees, directors, officers, consultants or advisors of the Company on the terms and conditions set forth in the Plan.
A schedule of the options and warrants outstanding is as follows:
Number of
Exercise Price
Warrants
Options
Per Share
Outstanding at July 1, 2006
50,000
183,751
1.00 - 5.90
Granted
150,000
5,900
5.50 - 5.90
Exercised
-
(9,750)
1.00 - 3.80
Canceled
-
(3,950)
3.50 - 6.80
Outstanding at June 30, 2007
200,000
175,951
$
1.00 - 5.90
Granted
477,000
-
.005 - .040
Exercised
(150,000)
(43,060)
1.00
Canceled
-
(6,000)
3.50 - 3.80
Outstanding at June 30, 2008
527,000
126,891
$
.005 - 5.90
Note 14 – Stock Based Compensation
The fair value of each option and warrant granted during 2008 and 2007 was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
2008
2007
Expected dividend yield
-
-
Expected stock price volatility
125% - 140%
130%
Risk-free interest rate
2.51% - 3.7%
4.5%
Expected life of options or warrants
5 - 10 years
5 years
The weighted average fair value of each option and warrant granted during 2008 and 2007 was approximately $.01 - .30 and $.05, respectively.
34
INTREPID TECHNOLOGY AND RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and 2007
Note 14 – Stock Based Compensation (continued)
The following table summarizes information about common stock options and warrants outstanding at June 30, 2008:
Outstanding |
| Exercisable | ||||||||
Exercise Price |
| Number Outstanding | Weighted Average Remaining Contractual Life (Years) |
| Weighted Average Exercise Price |
| Number Exercisable |
| Weighted Average Exercise Price | |
$.005 |
| 42,000 |
| 4.7 |
| $0.005 |
| 42,000 |
| $0.005 |
0.35 - 0.40 |
| 435,000 |
| 10.0 |
| 0.38 |
| 435,000 |
| 0.38 |
1.00 |
| 50,000 |
| 2.4 |
| 1.00 |
| 50,000 |
| 1.00 |
3.50 - 4.00 |
| 120,991 |
| 0.7 |
| 3.61 |
| 120,991 |
| 3.61 |
5.90 |
| 5,900 |
| 3.9 |
| 5.90 |
| 5,900 |
| 5.90 |
$0.005-5.90 |
| 653,891 |
| 7.3 |
| 1.05 |
| 653,891 |
| $1.05 |
Note 15 – Fair Value of Financial Instruments
The Company’s financial instruments consist of cash, receivables, payables, and notes payable. The carrying amount of these items approximates fair value because of their short-term nature and the notes payable bear interest at market interest rates.
Note 16 – Sales to Major Customers
The Company had revenues from major customers during the years ended June 30, 2008 and 2007, which exceeded ten percent of total revenues approximately as follows:
2008
2007
Company A
$
51,000
34,000
Company B
-
83,000
Company C
-
39,000
Note 17 – Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements (“SFAS No. 157”), which defines fair value, establishes guidelines for measuring fair value and expands disclosure regarding fair value measurements. SFAS No. 157 does not require new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, on a prospective basis. We do not expect the adoption of SFAS No. 157 to have a material effect on our financial statements.
35
INTREPID TECHNOLOGY AND RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008 and 2007
Note 17 – Recent Accounting Pronouncements (continued)
In February 2007, the FASB issued SFAS 159 “The Fair Value Option for Financial Assets and Financial Liabilities.” This statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This statement requires a business entity to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. An entity may decide whether to elect the fair value option for each eligible item on its election date, subject to certain requirements described in the statement. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are curren tly reviewing the requirements of SFAS 159 and, at this point in time, have not determined the impact, if any, that this statement may have on our results of operations and financial position.
In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.” SFAS 141(R) requires all business combinations completed after the effective date to be accounted for by applying the acquisition method (previously referred to as the purchase method). Companies applying this method will have to identify the acquirer, determine the acquisition date and purchase price and recognize at their acquisition-date fair values the identifiable assets acquired, liabilities assumed, and any noncontrolling interests in the acquiree. In the case of a bargain purchase the acquirer is required to reevaluate the measurements of the recognized assets and liabilities at the acquisition date and recognize a gain on that date if an excess remains. SFAS 141(R) becomes effective for fiscal periods beginning after December 15, 2008. The Company is currently evaluating the impact of SFAS 141(R).
Note 18 – Liquidity and Capital Resources
Since inception through June 30, 2008, the Company has generated an accumulated deficit of $14,308,723. In recent years, operations have been financed through the issuance of debt and common stock. During the year ended June 30, 2008, the Company incurred a net loss of $4,544,280. Recurring operating losses along with negative cash flows from operations have negatively impacted the Company’s liquidity. In view of these matters, realization of a major portion of the assets in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to meet its financing requirements and the success of future operations. Management believes that additional capital contributions through the sale of stock, combined with the issuance of debt will be needed to sustain operations in the future, however, at June 30, 2008, it was not possible to predict the business outcome of these efforts.
36
ITEM 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 8A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the required time periods and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. The effectiveness of any system of disclosure controls and procedures is subject to certain limitations, including the exercise of judgment in designing, implementing, and evaluating the controls and procedures, the assumptions used in identifying the likelihood of future events, and the inability to eliminate improper conduct completely. A controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. As a result, there can be no assurance that our disclosure controls and procedures will detect all errors or fraud.
As required by Rule 13a-15 under the Exchange Act, we have completed an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness and the design and operation of our disclosure controls and procedures as of June 30, 2008. Based upon this evaluation our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2008.
There has been no change in our internal controls and procedures over financial reporting (as defined in Rules 13a-15 and 15d-15 under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal controls and procedures over financial reporting during the fourth quarter ended June 30, 2008, and there were no significant deficiencies or material weaknesses.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our 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. Our internal control over financial reporting includes those policies and procedures that are intended to:
(1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
(2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
37
(3)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the preparation of this Annual Report on Form 10-KSB for the fiscal year ended June 30, 2008, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has assessed the effectiveness of our internal control over financial reporting based on the framework inInternal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the aforementioned framework, our management has concluded that there are deficiencies in the design and operation of our internal control over financial reporting as of June 30, 2008. Much of the deficiencies relate to the segregation of financial duties. Due to the small size of the Company’s administrative staff, it is impracticable to implement all the controls over segregation of duties that larger companies can. These and other deficiencies are compounded by limited resources t o pay for additional staff, continuing professional education, etc. However, to the extent practicable, mitigating controls have been established. There were no significant changes in our internal controls over financial reporting that occurred during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Commission that permit us to provide only management's report in this annual report.
ITEM 8b. OTHER INFORMATION.
None.
38
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS, AND CORPORATE GOVERNANCE.
CORPORATE GOVERNANCE RESPONSIBILITY
The Board of Directors is ultimately responsible for the Company's corporate governance. Good corporate governance ensures that the Company complies with federal securities laws and regulations, including those promulgated under the Sarbanes-Oxley Act of 2002. The Board of Directors has adopted a Code of Ethics for the Chief Executive Officer, President, Vice-President, Secretary, and Treasurer.
CODE OF ETHICS
On October 25, 2004, the Board of Directors adopted a written Code of Ethics designed to deter wrongdoing and promote honest and ethical conduct, full, fair and accurate disclosure, compliance with laws, prompt internal reporting and accountability to adherence to the Code of Ethics.
OFFICERS AND DIRECTORS
The following table sets forth the names, ages, and titles of each of our directors and executive officers and employees expected to make a significant contribution to Intrepid.
Name | Age | Title |
|
|
|
D. Lynn Smith | 57 | Chairman of the Board of Directors |
|
|
|
John D. Haffey | 63 | Chief Executive Officer, Director |
|
|
|
Dr. Jacob D. Dustin | 60 | President, Chief Operating Officer, Director |
|
|
|
William R. Myers | 65 | Director |
|
|
|
John W. Brockage | 69 | Director |
|
|
|
David H. Hawk | 63 | Director |
|
|
|
Mitchell J. Hart | 51 | Director |
|
|
|
Bradley J. Frazee | 47 | Vice President, Biomethane Operations |
|
|
|
Robert V. Searcy | 46 | Controller, Secretary, Treasurer |
|
|
|
Certain biographical information of our directors, officers, and key employees is set forth below.
D. Lynn Smith. Mr. Smith, a director since 2002, Vice Chairman of the Board of Directors since May 23, 2006, and Chairman of the Board of Directors since December 4, 2006, has over thirty years experience as a Certified Public Accountant, and is a partner in Galusha, Higgins & Galusha, P.C, of Idaho Falls, Idaho, a regional public accounting firm. His experience includes audit, tax, individual and business litigation support and individual and business planning with a special emphasis on agriculture and agribusiness.
John (Jack) D. Haffey. Mr. Haffey, Director since March 2008 and CEO since April 2008, has over 30 years of progressive leadership experience, including 15 years as a corporate officer and 6 years as an executive officer for a multi-billion dollar organization. As Executive Vice President and COO, he provided executive leadership to guide Montana Power through ongoing changes in the electric, natural gas, and telecommunication markets. Mr. Haffey maintained direct authority and responsibility for all aspects of the utility, including administrative, legal, finance, accounting, IT, operations, engineering, and marketing functions. He oversaw 1,000 employees while leading this $1 billion utility. In addition to his corporate experience, he has a strong record of civic and government leadership, including having served as a two-term state senator. Mr. Haffey holds an MBA from the University of Notre Dame and he completed the Advanced Management Program at Harvard Business School.
39
Jacob D. Dustin. Dr. Dustin has served as a director, Vice President, Secretary and Treasurer of the Company since 2002. On May 23, 2006, Dr. Dustin was appointed President and Chief Operating Officer and relinquished his position as Secretary. From 1999 to 2000, he was employed by Bechtel Corporation at the Idaho National Engineering and Environmental Laboratory. From 1995 to 1999, he was an employed by Parsons, an architectural and engineering firm. In 1995, he retired from the United States Air Force with the rank of Colonel. He brings thirty years of experience in operational and engineering leadership positions managing large, diverse groups of engineers, scientists and technicians and programs with annual budgets in excess of $100M.
William R. Myers. Mr. Myers, a director since 2002, has for the past six years been president of Myers Associates International, Inc., which provides technical and management consulting, business development and construction management for domestic and international firms. He has extensive business development and strategic planning background with architectural engineering, research and development, construction, environmental science and startup entrepreneurial firms in both national and international settings.
John W. Brockage. Mr. Brockage, a director since 2007 and a shareholder since 2004, has for the past six years been a Real Estate Property owner, builder, investor and property manager in California and Hawaii. Prior to that, he accumulated 28 years of similar business experience. At one time he was a licensed Real Estate Agent buying and selling commercial property. He has patented his own inventions and has past board experience serving on the boards of the Colby Computer Corporation and Rollerjet Corporation.
David H. Hawk. Mr. Hawk was appointed to the Board of Directors on March 26, 2007. He recently retired from his position as the Director of Energy Natural Resources of the J.R. Simplot Company in Boise, Idaho and was responsible for determining current and future company energy needs and identifying and managing the methods by which those needs are met. Mr. Hawk has experience with various energy projects, and has an extensive record of providing testimony to Canadian and U.S. federal and state regulatory bodies on natural gas pricing, pipeline and utility rate making, and avoided cost (PURPA) issues. He has been a frequent lecturer and keynoter at a variety of conferences on renewable and alternative energy resources along with traditional sources including conservation and efficiency. Mr. Hawk has also served as Chairman of the Board of Directors for Remington Oil and Gas Company, a publicly traded oil and gas explorat ion and production company headquartered in Dallas, Texas.
Mitchell J. Hart. Mr. Hart, a director since September 2007, has a degree in Mining Engineering from the University of Utah and is a licensed professional engineer. He currently serves as Vice President and Director of Terra Systems, Inc. As such, he led the Terra Systems team in the acquisition of Mountain Island Energy, LLC. That acquisition allowed Terra Systems to expand into energy-based and specialized development projects. He currently acts as that entity’s General Manager. Mr. Hart also directed the evaluation, permitting and development of advanced clean coal gasification power generating facilities, specialty carbon upgrading projects, wind energy and noble and precious metal extraction and processing projects. Prior to joining Terra Systems in 2005, Mr. Hart served with Monsanto for 19 years as a Sr. Specialist and Project Manager for the Idaho Phosphorus Plant and the Wyoming Coal Calciner. In these capacities he managed key phosphate and carbon based projects and operations including the permitting and development of a new $20+ million phosphate mining property and the $10 million environmental compliance project which went from technology selection to project startup in 11 months. He was also responsible for the procurement of raw materials, stockpile and inventory management, the optimization of manufacturing operations and marketing of process by-products. Mr. Hart began his career as a Sr. Engineer with Shell Oil Company where he worked in both engineering and operations designing short and long term plans and facilities, estimating and controlling costs, planning production and performing economic evaluations and creating business plans on numerous medium to large scale projects.
40
Bradley J. Frazee. Mr. Frazee has served as the Company’s Vice President, Biomethane Operations since 2006 and our Alternative Energy and Biofuels Division Manager since 2002. Mr. Frazee was appointed Secretary on May 23, 2006 and relinquished that office on January 1, 2008. He brings over 20 years of project and management and operations experience with corporations such as Westinghouse, Lockheed Martin, and Bechtel to the Company and has been instrumental over his career in brining major chemical and nuclear systems through construction and into production.
Robert V. Searcy. Mr. Searcy has served as the Company’s Controller since 2006. He was appointed Secretary and Treasurer on January 1, 2008. Prior to joining Intrepid, Mr. Searcy served for 17 years as the Chief Financial Officer of Idaho Pacific Holdings, Inc., one of the largest dehydrated potato food processors in North America. He holds a B.S. degree in Accounting and Business from Brigham Young University.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES.
During the year ended June 30, 2008, the Board of Directors held three face-to-face meetings and eleven formal telephone conference meetings. All of the directors attended at least 75% of the meetings of the Board, except for one member who missed four meeting due to scheduling conflicts. The members of the Board of Directors serve as the Executive Committee and Nominating Committee.
The Nominating Committee met once during 2007, recommending the seven directors and one additional shareholder to stand for election to fill seven board positions at the annual shareholders meeting in 2007.
The members of the Audit Committee are currently Messrs. D. Lynn Smith, William R. Myers, Mitchell J. Hart, David H. Hawk, and John W. Brockage. Mr. D. Lynn Smith serves as chairman. The Audit Committee reviews the proposed plan and scope of the Company’s annual audit as well as the results when it is completed. The Committee reviews the services provided by the Company’s independent auditors and their fees. The Committee meets with the Company’s financial officers to assure the adequacy of the Company’s accounting principles, financial controls and policies. The Committee is also charged with reviewing transactions that may present a conflict of interest on the part of management or directors. The Audit Committee meets at least quarterly to review the financial results, discuss the financial statements and make recommendations to the Board. Other items of discussion include the independent auditors’ recommendations for internal controls, adequacy of staff, and management’s performance concerning audit and financial controls. The Audit Committee met four times during fiscal year ended 2008.
The Compensation Committee current members are Messrs. William R. Myers, Mitchell J. Hart, and David H. Hawk. Mr. William R. Myers serves as chairman. The Compensation Committee met two times during the fiscal year for the purposes of approving management compensation and for developing a plan for paying the compensation certain key employees and officers voluntarily deferred over the past several years to help lessen cash flow burdens on the Company during its early development.
41
ITEM 10. EXECUTIVE COMPENSATION.
DIRECTORS’ COMPENSATION
Prior to November 2004, the Board members received no direct compensation. In September 2005, the Compensation Committee approved a Director’s Compensation Plan, retroactive to December 1, 2004. The Director’s Compensation Plan compensates each director $2,000 per face-to-face meeting (plus reasonable travel expenses) and $250 per formal conference call, or a minimum of $8,000 annually. Mr. Smith also received 2,000 options issued under the 2003 Stock Option Plan on January 13, 2005 with an exercise price of $3.80 (the fair market value on the date of grant) for the additional time he devoted as Chair of the Audit Committee. No other fees were accrued or paid to them. The following table shows, for the most recent fiscal year ended June 30, 2008, compensation awarded or paid to, or earned by the Company’s non-employee Directors.
Name | Fees Earned or Paid in Cash (1) | Stock Awards (2) | Option Awards | Non-Equity Incentive Plan Compensation | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation | Total |
|
|
|
|
|
|
|
|
D. Lynn Smith | $ (6,750) | $20,500 | $ 0 | $ 0 | $ 0 | $ 0 | $ 13,750 |
William R. Myers | $ 4,000 | $ 9,250 | $ 0 | $ 0 | $ 0 | $ 0 | $ 13.250 |
Steven Whitesides(6) | $ 0 | $ 10,000 | $ 0 | $ 0 | $ 0 | $ 0 | $ 10,000 |
David H. Hawk | $ 8,375 | $ 4,625 | $ 0 | $ 0 | $ 0 | $ 0 | $ 13,000 |
Mitchell J. Hart(3) | $ 1,500 | $ 2,50 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 4,000 |
John W. Brockage(4) | $ 3,500 | $ 2,25 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 5,750 |
Dennis D. Keiser(5) | $ 0 | $ 1,000 | $ 0 | $ 0 | $ 0 | $ 0 | $ 1,000 |
John D. Haffey(7) | $ 3,500 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 3,500 |
(1) Represents fees earned but not yet paid for the period from December 7, 2007 through June 30, 2008; except for D. Lynn Smith, who was prepaid $6,750 in the form of stock for the remainder of calendar 2008 in return for a cash private equity placement of $5,000. The Company expects that these director fees will be paid in stock. Fees for the period from January 1, 2007 through December 6, 2007 were paid in the form of stock; except for David Hawk, who was paid $4,625 in cash. See Note (2) below | |||||||
(2) Represents stock awards issued in lieu of cash fees for the period from December 31, 2006 through December 7, 2007 | |||||||
(3) Mr. Hart joined Board of Directors on September 10, 2007. | |||||||
(4) Mr. Brockage joined the Board on November 5, 2007. | |||||||
(5) Dr. Keiser resigned as CEO on December 31, 2007 and resigned from the Board on March 19, 2008. | |||||||
(6) Mr. Whitesides resigned from the Board on March 1, 2008. | |||||||
(7) Mr. Haffey joined the Board on March 1, 2008 and was appointed CEO on April 7, 2008. | |||||||
|
EXECUTIVE COMPENSATION
Compensation Committee
The Compensation Committee members are Messrs. William Myers, David Hawk, and Mitchell Hart. They are responsible for developing, and making decisions with respect to, the Company’s executive compensation policies. For the fiscal year 2008, the Committee reviewed and approved the Company’s compensation and benefits plans and continue to administer the key employee and executive officer 2003 Stock Option Plan and 2005 Stock Incentive Plan.
42
The Company believes that executive compensation should reflect value created for stockholders in furtherance of the Company’s strategic goals. The following objectives are among those utilized by the Compensation Committee:
1. Executive compensation should be meaningfully related to long-term and short-term value created for stockholders.
2. Executive compensation programs should support the long-term and short-term strategic goals and objectives of the Company.
3. Executive compensation programs should reflect and promote the Company’s overall value, business growth and reward individuals for outstanding contributions to the Company.
4. Short and long term executive compensation are critical factors in attracting and retaining well-qualified executives.
Base Salary
The Compensation Committee, in determining the appropriate base salaries of its executive officers, generally considers the level of executive compensation in similar companies in the industry. The Compensation Committee also considers (i) the performance of the Company and contributing roles of the individual executive officers, (ii) the particular executive officer’s specific experience and responsibilities, and (iii) the performance of each executive officer. It should be noted, as indicated in the Summary Compensation Table below, that the executive officers received a portion of their salary and the balance was deferred. The base salaries for 2008 were established by the Committee at levels believed to be at or somewhat below competitive amounts paid to executives of companies in the environmental industry with comparable qualifications, experience and responsibilities. Through his resignation on Dece mber 31, 2007, Dr. Dennis D. Keiser, the Chief Executive Officer of the Company, received a base salary of $104,000, which the Committee believed to be below average for the base salary of chief executive officers with comparable qualifications, experience and responsibilities of other companies in the engineering and mining industry. The base salary of Dr. Jacob D. Dustin, effective April 1, 2008, was $124,800 and is also below the industry average for his appointment as President and Chief Operating Officer. The base salary of Robert V. Searcy, CPA, effective April 1, 2008, was $93,600, and is also below the industry average for his appointment as Financial Controller, Secretary, and Treasurer. John D. Haffey, CEO since April 7, 2008, has been serving without salary.
The Company does not provide any retirement, pension, or 401(k) plan for any employees.
Annual Incentives
The bonus program provided for no bonuses in 2008. The Compensation Committee has not yet approved a management bonus plan for 2009.
Long-Term Incentives
The stock option program and employee incentive program are the Company’s long-term incentive plan for executive officers and key employees. The objectives of these programs are to align executive officer compensation and shareholder return, and to enable executive officers to develop and maintain a significant, long-term stock ownership position in the Company’s common stock. In addition, grants of stock options to executive officers and others are intended to retain and motivate executives to improve long-term corporate and stock market performance. Stock options are to be granted at no less than market values on the grant date, and will only have value if the Company’s stock price increases above the grant price.
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SUMMARY COMPENSATION TABLE
The following table shows, for each of the two most recent fiscal years ended, compensation awarded or paid to, or earned by the Company’s Chief Executive Officer and its other named most highly compensated executive officers and key employees at June 30, 2008 and the prior year in all capacities.
Name and Principal Position | Fiscal Year Ended | Salary | Bonus | Stock Awards | Option Awards | Non-Equity Incentive Plan Compen-sation | All Other Compen-sation | Total |
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Dr. Dennis D. Keiser (1) | 2008 | $ 52,000 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 52,000 |
Chief Executive Officer | 2007 | $ 104,000 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 104,000 |
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John D. Haffey (2) | 2008 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 |
Chief Executive Officer | 2007 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 |
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Dr. Jacob D. Dustin | 2008 | $ 109,200 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 109,200 |
President, Chief Operating Officer | 2007 | $ 104,000 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 104,000 |
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Donald J. Kenoyer (3) | 2008 | $ 109,200 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 109,200 |
Vice President, Biomethane Engineering/Construction Management | 2007 | $ 104,000 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 104,000 |
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Bradley J. Frazee | 2008 | $ 109,200 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 109,200 |
Vice President, Bio methane Operations and Secretary | 2007 | $ 104,000 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 104,000 |
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Robert V. Searcy (4) | 2008 | $ 77,400 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 77,400 |
Financial Controller, Secretary, Treasurer | 2007 | $ 42,000 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 42,000 |
(1)
Dr. Keiser resigned as CEO on December 31, 2007.
(2)
Mr. Haffey was appointed CEO on April 7, 2008, and currently serves without salary.
(3)
Mr. Kenoyer resigned July 3, 2008.
(4)
Mr. Searcy was appointed Secretary and Treasurer on January 1, 2008.
Stock Options
The Company, on a discretionary basis, may grant options to its executive officers, and key employees under the 2003 Stock Option Plan (the “Plan”). As of June 30, 2008, options to purchase 126,891 shares were outstanding with 6,000 shares remaining available for grant. There were no grants of options to the four named executive officers made in fiscal year 2008. In 2007, there were 5,900 options granted to Robert V. Searcy at an exercise price of $5.90. All options that expired December 20, 2007 were exercised before their expiration date. There were no exercises of options during 2007. The following table provides information concerning fiscal year 2008 outstanding equity awards to the Company’s executive officers and key employees.
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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| Option Awards | Stock Awards | |||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (1) | Number of Securities Underlying Unexercised Options Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested | Equity Incentive Plan Awards: Number of Unearned shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested |
J. Dustin | 20,000 | -0- | -0- | $3.50 | 31-Dec-2008 | -0- | $-0- | -0- | $-0- |
D. Kenoyer | 15,000 | -0- | -0- | $3.50 | 31-Dec-2008 | -0- | $-0- | -0- | $-0- |
B. Frazee | 15,000 | -0- | -0- | $3.50 | 31-Dec-2008 | -0- | $-0- | -0- | $-0- |
B. Frazee | 20,000 | -0- | -0- | $4.00 | 30-Aug-2009 | -0- | $-0- | -0- | $-0- |
B. Frazee | 7,541 | -0- | -0- | $3.80 | 13-Jan-2010 | -0- | $-0- | -0- | $-0- |
R. Searcy | 5,900 | -0- | -0- | $5.90 | 7-May-2012 | -0- | $-0- | -0- | $-0- |
(1) All options granted were exercisable as of the option grant dates, which were 5 years prior to Option Exercise Date. |
Stock Option Plan
The options issued will expire five years from the date of issue and were all vested 100% at the date of issue. The purchase price payable to exercise an option is set at the fair market value of the Common Stock on the date the option is granted. Payment in full for the number of shares purchased upon the exercise of options is required.
Type of Options: Two types of options may be granted under the Plan: (1) options intended to qualify as incentive stock options under the Internal Revenue Code, and (2) non-qualified stock options not specifically authorized or qualified for preferential federal income tax consequences. Generally, gains on the stock purchased through the exercise of incentive stock options are taxed to the recipient upon the sale of the stock. Gains in respect of non-qualified stock options are taxed upon the exercise of the option.
Administration:The Plan is administered by the Company’s Compensation Committee, which is comprised of directors who are also eligible to participate in the Plan.
Eligibility and Participation:
All employees, including employee directors, directors, and consultants of the Company are eligible to participate in the Plan.
Rights as a Stockholder: Except as expressly provided in the Plan, the recipient of an option has no rights as a stockholder (such as voting or dividends) with respect to shares covered by the recipient’s option until the date of issuance of a stock certificate for such shares.
Transferability: During the life of the option holder, any stock option will be exercisable only by the recipient, and will be transferable only by will or the laws of descent and distribution or pursuant to a qualified domestic relations order.
Duration of the Plan: The Plan is effective until all options have been granted under the Plan or ten years from December 6, 2002, the date the Plan was originally adopted.
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Purchase Price: The purchase price payable to exercise an option is set at the fair market value of the Common Stock on the date the option is granted. Payment in full for the number of shares purchased upon the exercise of options is required.
Basic Terms of Options: Each option is evidenced by a stock option agreement containing terms and conditions not inconsistent with the provisions of the Plan. The Compensation Committee has discretion to set vesting schedules for options. When vested, options are exercisable in whole or in part upon grant until the option terminates or expires. Vested Non-qualified Stock Options expire within five years of grant and terminate 2 months after termination of employment or one year following the death of the holder.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of October 7, 2008 concerning: (i) each person who is known by Intrepid to own beneficially more than 5% of Intrepid’s outstanding common stock; (ii) each of Intrepid’s executive officers, directors and key employees; and (iii) all executive officers and directors as a group. Common stock not outstanding but deemed beneficially owned by virtue of the right of an individual to acquire shares within 60 days is treated as outstanding only when determining the amount and percentage of common stock owned by such individual. Except as noted, each person or entity has sole voting and sole investment power with respect to the shares of common stock shown.
(Remainder of page intentionally blank)
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Name and Address | Total Number of Common Shares | Percent of Class(1) |
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Christopher Brecher 18749 Rio Vista Drive Tequesta, FL 33469 (13G filer) | 604,411(2) | 8.6% |
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Dr. Jacob D. Dustin 501 W. Broadway #200 Idaho Falls, Idaho 83402 | 81,811(3) | 1.2% |
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William R. Myers 501 W. Broadway #200 Idaho Falls, Idaho 83402 | 39,689(4) | 0.6% |
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D. Lynn Smith 501 W. Broadway #200 Idaho Falls, Idaho 83402 | 69,022(5) | 1.0% |
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John W. Brockage 4015 Rhoda Ave. Oakland, CA 94602 | 18,000(6) | 0.3% |
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David Hawk 501 W. Broadway #200 Idaho Falls, Idaho 83402 | 2,019 | 0.0% |
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Bradley J. Frazee 501 W. Broadway #200 Idaho Falls, Idaho 83402 | 48,814(7) | 0.7% |
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John D. Haffey 2101 Garfield Street Anaconda, MT 59711 | 76,786(8) | 1.1% |
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Robert V. Searcy 501 W. Broadway #200 Idaho Falls, Idaho 83402 | 38,837(9) | 0.6% |
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Mitchell J. Hart 501 W. Broadway #200 Idaho Falls, Idaho 83402 | 1,017(10) | 0.0% |
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All officers, directors and key employees as a group (nine individuals) | 375,995 (11) | 5.3% |
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__________________________
(1)
Applicable percentage of ownership is based on 7,022,640 shares of common stock outstanding as of October 7, 2008, together with securities exercisable or convertible into shares of common stock within 60 days of October 7, 2008, for each stockholder. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to securities exercisable or convertible into shares of common stock that are currently exercisable or exercisable within 60 days of October 7, 2008 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Note that affiliates are s ubject to Rule 144 and Insider trading regulations - percentage computation is for form purposes only.
(2)
Mr. Brecher’s,(13G filer not exercising influence or control) beneficial shares include 604,411 shares of common stock owned by him, and 0 shares subject to options exercisable within 60 days.
(3)
Dr. Dustin’s beneficial shares include 45,561 shares of common stock owned by him and his wife and 16,250 owned by his children, and 20,000 shares subject to options exercisable within 60 days.
(4)
Includes 36,839 shares of common stock owned by Mr. Myers and 2,850 shares subject to options exercisable within 60 days.
(5)
Includes 64,022 shares of common stock owned by Mr. Smith and 5,000 shares subject to options exercisable within 60 days.
(6)
Includes 18,000 shares of common stock owned by Mr. Brockage and 0 shares subject to options exercisable within 60 days.
(7)
Includes 6,273 shares of common stock owned by Mr. Frazee and 42,541 shares subject to options exercisable within 60 days.
(8)
Includes 76,786 shares of common stock owned by Mr. Haffey and 0 shares subject to options exercisable within 60 days.
(9)
Includes 32,937 shares of common stock owned by Mr. Searcy and 5,900 shares subject to options exercisable within 60 days.
(10)
Includes 1,017 shares of common stock owned by Mr. Hart and 0 shares subject to options exercisable within 60 days.
(11)
Includes 299,704 shares of common stock and 76,291 shares subject to options exercisable within 60 days.
There are no arrangements or understandings among the entities and individuals referenced above or their respective associates concerning election of directors or other any other matters which may require shareholder approval.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors and executive officers file reports with the Securities and Exchange Commission indicating the number of shares of any equity securities they owned when they became a director or officer and after that any changes in their ownership of common stock. Section 16(a) of the Securities Exchange Act of 1934 requires these reports. We have reviewed copies of these reports and based on a review of those reports we believe that during the year 2008 all Section 16 recording requirements applicable to our officers and directors were complied with.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None other than reported herein.
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ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
Financial Statements, Schedules and Exhibits
1. Financial statements and report of Jones Simkins, P.C.
Independent Auditors' Report Jones Simkins, P.C.
Consolidated Balance Sheets – June 30, 2008 and 2007
Consolidated Statements of Operations for the years ended June 30, 2008 and 2007
Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2008 and 2007
Consolidated Statements of Cash Flows for the years ended June 30, 2008 and 2007
Notes to Consolidated Financial Statements
Consent of Jones Simkins, P.C. for the year ended June 30, 2008
2. Financial statement schedules
Other schedules are omitted because they are not required or because the information is included in the financial statements or notes thereto.
3. Exhibits
Exhibit No. | Description | Incorporated by Reference from Registrant's |
3.1 | Articles of Incorporation. | Form 10SB Registration March 22, 2000 |
3.2 | Bylaws. | Form 10SB Registration March 22, 2000 |
3.3 | Amended Articles of Incorporation. | Form 10SB Registration March 22, 2000 |
3.4 | Amended Articles of Incorporation. | Form 10SB Registration March 22, 2000 |
4.1 | Specimen Stock Certificate. | Form 10SB Registration March 22, 2000 |
10.1 | Yellow Pines Resources Agreement. | Form 10SB Registration March 22, 2000 |
10.2 | American Diatomite Agreement. | Form 10SB Registration March 22, 2000 |
10.3 | American Diatomite Agreement. | Form 10-KSB October 20, 2000 |
10.4 | Agreement to Sell and Purchase Mineral Reserves, Real Property and Shares of Common Stock | Form 10-KSB October 15, 2001 |
10.5 | Addendum to Agreement to Sell and Purchase Mineral Reserves, Real Property and Shares of Common Stock | Form 10-KSB October 15, 2001 |
10.7 | 2003 Stock Option Plan | Form 14(a) October 24, 2002 |
10.8 | Sale of the Mineral Rights of the Garnet, Montana mine |
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10.9 | The sale of securities through Cornell Capital Partners LP and Newbridge Securities Corporation | Form SB-2 December 17, 2004 |
10.10 | The sale of securities through Cornell Capital Partners LP and Newbridge Securities Corporation | Form SB-2 March 11, 2005 |
10.11 | Issuance on securities under Form S-8 and the Stock Option Plan | Form S-8 June 23, 2005 |
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer |
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31.2 | Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer by President, Secretary and Treasurer |
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32 | Certification pursuant to 18 U.S.C. SECTION 1350by Chairman and Chief Executive Officer and President, Secretary and Treasurer |
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| Amended quarterly report for quarter ended March 31, 2006 | Form 10QSB/A July 14, 2006 |
| Amendment to registration statement with Cornell Capital Partners, LP | Form SB-2/A August 16, 2006 |
| Annual report for FYE June 30, 2006 | Form 10KSB September 12, 2006 |
| Schedule 14A information | Form DEF 14A October 13, 2006 |
| 2006 Consultants’ compensation plan | Form S-8 October 23, 2006 |
| Post-effective amendment #1 to SB-2 registration filing with Cornell Capital Partners, LP | Form POS AM November 11, 2006 |
| Quarterly report for quarter ended September 30, 2006 | Form 10QSB November 14, 2006 |
| Post-effective amendment #2 to SB-2 registration filing with Cornell Capital Partners, LP | Form SB-2/A December 13, 2006 |
| Amendment withdrawal request to post-effective amendment #2 to SB-2 registration filing with Cornell Capital Partners, LP | Form AW December 14, 2006 |
| Post-effective amendment #2 to SB-2 registration filing with Cornell Capital Partners, LP | Form POS AM December 14, 2006 |
| Notice of effectiveness | Form EFFECT December 13, 2006 |
| Quarterly report for quarter ended December 31, 2006 | Form 10QSB February 14, 2007 |
| Quarterly report for quarter ended March 31, 2007 | Form 10QSB May 15, 2007 |
| Form SB-2 registration statement with Cornell Capital Partners, LP | Form SB-2 May 21, 2007 |
| Pre-effective amendment #1 to SB-2 registration filing with YA Global Investments, LP | Form SB-2A August 28, 2007 |
| Annual report for FYE June 30, 2007 | Form 10KSB September 21, 2007 |
| Pre-effective amendment #2 to SB-2 registration filing with YA Global Investments, LP | Form SB-2/A October 2, 2007 |
| Request for acceleration of effectiveness of SB-2 registration filing with YA Global Investments, LP | Form CORRESP October 15, 2007 |
| Final prospectus for SB-2 registration filing with YA Global Investments, LP | Form 424B3 October 16, 2007 |
| Notice of effectiveness for SB-2 registration filing with YA Global Investments, LP | Form EFFECT October 16, 2007 |
| Preliminary 14A proxy statement | Form PRE 14A October 19, 2007 |
| Definitive 14A proxy statement | Form DEF 14A October 30, 2007 |
| Quarterly report for quarter ended September 30, 2007 | Form 10QSB November 13, 2007 |
| Prospectus supplement no. 1 | Form 424B3 January 4, 2008 |
| Quarterly report for quarter ended December 31, 2007 | Form 10QSB February 14, 2008 |
| Prospectus Supplement no. 2 | Form 424B3 February 14, 2008 |
| Form S-9 registration statement | Form S-8 March 25, 2008 |
| Quarterly report for quarter ended March 31, 2008 | Form 10QSB May 15, 2008 |
| Prospectus supplement no. 3 | Form 424B3 May 15, 2008 |
| 13G filing by stockholder | Form SC 13G August 13, 2008 |
| Notification of inability to timely file Form 10-K | Form NT 10-K September 30 |
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Reports on Form 8-K
During the fourth quarter ending June 30, 2008 the Company filed three (3) reports on Form 8-K
10.6 | Iron Mask Mining Company merger agreement with Intrepid Engineering Company and Western Technology and Management, Inc. | Form 8-K April 8, 2002 |
| Intrepid Technology and Resources, Inc. change of certifying accountants | Form 8-K May 24, 2002 |
| Amendment to report pro forma financial information on merger filed on Form 8-K April 8, 2002 | Form 8-K/A June 11, 2002 |
| Amendment, Item 7. Letter from accountant and Company correspondence | Form 8-K/A June 20, 2002 |
| Resignation of Registrant’s Directors and change in management | Form 8-K July 8, 2002 |
| Resignation of Registrant’s Directors | Form 8-K August 21, 2002 |
| Amendment to Form 8-K filed on May 24, 2002 for change of certifying accountants. Correction letter of predecessor accountant. | Form 8-K/A September 10, 2002 |
| Election of Lynn Smith to the Board of Directors and Chairman of the Audit Committee | Form 8-K September 13, 2002 |
| Letters of Notice to Cure a Default whereby a deed was not transferred for mineral rights purchased in the Iron Mask Mining Company merger | Form 8-K February 6, 2003 |
| Amendment to Form 8-K filed on April 8, 2002 for the merger with Iron Mask Mining Company. Change of Accounting acquirer | Form 8-K/A February 19, 2004 |
| Item 5. Other, that the Company will apply FASB 121 Impairment of Long Lived assets to those purchased in the merger of March 2002 | Form 8-K April 6, 2004 |
| The acquisition of the Wright Oil and Broadway Ford natural gas joint venture fueling station in Idaho | Form 8-K April 26, 2004 |
| The Company completed the Purchase Agreement for 33% of the Magic Valley Energy Coalition, now a wholly owned subsidiary | Form 8-K May 19, 2004 |
| Earnings Release for the quarter ending March 31, 2004 | Form 8-K May 19, 2004 |
| Amendment 4, to correct the income and include the transaction costs of the merged companies, IMKG, WTM, & IES | Form 8-K/A June 15, 2004 |
| Amended to include the historical, pro forma, and other required financial statements for the purchase of Wright Oil and Broadway Ford | Form 8-K/A July 16, 2004 |
| Entered a Standby Equity Distribution Agreement and a Securities Purchase Agreement with Cornell Partners LP | Form 8-K October 19, 2004 |
| Entered a Securities Purchase Agreement with Cornell Partners LP | Form 8-K December 13, 2004 |
| Amended Articles of Incorporation | Form 8-K December 21, 2004 |
| Appointment of a new director to the board | Form 8-K January 14, 2005 |
| Entered into a termination agreement with Cornell Capital Partners LP | Form 8-K January 28, 2005 |
| Entered into a termination agreement for the Standby Equity Distribution Agreement with Cornell Capital Partners LP and unregistered sales of securities thereto agreed | Form 8-K March 10, 2005 |
| Change of certifying public accountant | Form 8-K July 11, 2005 |
| Entry into a material definitive agreement – tax exempt bond issue | Form 8-K November 9, 2006 |
| Departure of a member of the board | Form 8-K December 6,2006 |
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| Entry into a material definitive agreement with Cornell Capital Partners LP | Form 8-K March 23, 2007 |
| Appointment of a new director to the board | Form 8-K March 27, 2007 |
| Entry into a material definitive agreement with Cornell Capital Partners LP | Form 8-K May 21, 2007 |
| Appointment of a new director to the board | Form 8-K September 11, 2007 |
| Waiver granted by YA Global Investments, LP | Form 8-K October 16, 2007 |
| John Brockage appointed to board | Form 8-K November 6, 2007 |
| Dennis Keiser resigns as CEO | Form 8-K November 6, 2007 |
| Appointment of officers | Form 8-K December 19, 2007 |
| Exercise of warrants by YA Global Investments, LP | Form 8-K January 4, 2008 |
| Amendment no. 1 to definitive agreement with YA Global Investments, LP | Form 8-K January 4, 2008 |
| Board resignation and appointment | Form 8-K March 3, 2008 |
| Keiser board resignation | Form 8-K March 21, 2008 |
| Articles of amendment & ticker symbol change | Form 8-K March 31, 2008 |
| Entry into material definitive agreement with YA Global Investments, LP | Form 8-K April 3, 2008 |
| Haffey appointed CEO | Form 8-K April 9, 2008 |
| Entry into material definitive agreement with YA Global Investments, LP | Form 8-K June 20, 2008 |
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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Committee
The Audit Committee of the Company is responsible for assisting the Board in monitoring the integrity of the financial statements of the Company. Management is responsible for the Company’s internal controls and the financial reporting process. The external auditor is responsible for performing an independent audit of the Company’s financial statements in accordance with generally accepted auditing standards and to issue a report thereon. The committee’s responsibility is to monitor and oversee these processes. As part of its activities, the committee:
1. reviewed and discussed with management the audited financial statements of the Company;
2. discussed with the independent auditors the matters required to be communicated under Statement and Auditing Standards No. 61 (Communications with Audit Committees);
3. received the written disclosures and letter from the independent auditors required by Independent Standards Board Standard No. 1 (Independent’s Discussion with Audit Committee); and
4. discussed with independent auditors their independence.
Based on the review and discussions referred to above, the committee recommended to the Board of Directors that the audited financial statements of the Company for the year end of June 30, 2007, be included in the Company’s annual report on Form 10-KSB filed with the Securities and Exchange Commission.
The Audit Committee of the Company consists of the following members:
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D. Lynn Smith, Chairman
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David Hawk
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William R. Myers
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Mitchell J. Hart
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John W. Brockage
Audit Fees
The Audit Committee of the Board of Directors has appointed Jones Simkins PC as independent auditors to audit the financial statements of the Company for the year ended June 30, 2008. Jones Simkins PC has also examined the financial statements of the Company for the fiscal year ended June 30, 2007.
The aggregate fees billed to us by Jones Simkins PC for the audit of our financial statements and all amendments for the fiscal years ended June 30, 2008 and 2007, and for reviews of financial statements included in our quarterly reports on Form 10-QSB and amendments thereto, for the fiscal years 2008 and 2007, respectively are shown in the table below:
| Audit Fees | Tax Fees | Consulting or Other Fees | |||
Auditor | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 |
Jones Simkins PC | $ 59,318 | $ 45,000 | -0- | -0- | $ 2,245 | $ 12,181 |
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CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference of our financial statement audit report dated September 26, 2008, appearing in this Annual Report on Form 10-KSB of Intrepid Technology and Resources, Inc. for the year ended June 30, 2008.
JONES SIMKINS, P.C.
Logan, Utah
October 13, 2008
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| INTREPID TECHNOLOGY & RESOURCES, INC. |
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Date: October 13, 2008 | By: /s/ John D. Haffey,Chief Executive Officer, Acting Chief Financial Officer
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Date: October 13, 2008 | By: /s/ Robert V. Searcy,Secretary and Treasurer |
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EXHIBIT 31.1
Intrepid Technology & Resources, Inc. and Subsidiaries, an Idaho Corporation
CERTIFICATION OF PRINCIPAL CHIEF EXECUTIVE OFFICER
Section 302 Certification
I, John D. Haffey, certify that:
1. I have reviewed this annual report for the year ended June 30, 2008 of Intrepid Technology & Resources, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) omitted;
(c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
Dated: October 13, 2008
/s/ John D. Haffey
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John D. Haffey
Chief Executive Officer
56
EXHIBIT 31.2
Intrepid Technology & Resources, Inc. and Subsidiaries, an Idaho Corporation
CERTIFICATION OF SECRETARY
Section 302 Certification
I, Robert V. Searcy, certify that:
1. I have reviewed this annual report for the year ended June 30, 2008 of Intrepid Technology & Resources, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) omitted;
(c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
Dated: October 13, 2008
/s/ Robert V. Searcy
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Robert V. Searcy
Controller, Secretary, Treasurer
57
EXHIBIT 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, John D. Haffey, Chief Executive Officer of Intrepid Technology & Resources, Inc., (the "Company") , do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
·
the Report on Form 10-KSB of the Company for the year ended June 30, 2008, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
·
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: October 13, 2008
/s/ John D. Haffey
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John D. Haffey
Chief Executive Officer
and,
I, Robert V. Searcy, Controller, Secretary, & Treasurer of Intrepid Technology & Resources, Inc., (the "Company"), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
·
the Report on Form 10-KSB of the Company for the year ended June 30, 2008, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
·
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: October 13, 2008
/s/ Robert V. Searcy
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Robert V. Searcy
Controller, Secretary, & Treasurer
58