Revenues from services for the six months ended June 30, 2009 and 2008 were $2,000,000 and $0, respectively. Revenues arose solely from performing service work.
In the fourth quarter of fiscal 2008, we entered into a service contract with Nurmunai Petrogaz, LLC, pursuant to which we are to provide geological analysis related to the exploration of hydrocarbons. The services are to be performed in two phases: (1) zoning of territories for potential hydrocarbon anomalies; and (2) gas-geochemical survey of the territory. The total fee for the two phases is to be $2.4 million under the agreement. As of March 31, 2009, the service work for the first phase was completed, and we also delivered to the client the recommendations to perform the second phase. In November and December 2008, the client pre-paid a retainer for the first phase in the amount of $1,455,900 with the balance of $544,100 due.
In the third quarter of fiscal 2008, we entered into a service contract from which we anticipate generating $299,250 in revenues, of which $49,875 was prepaid in the fourth quarter of fiscal 2008. Due to recent economic conditions, the client has suspended its operations on its licensed territories, and the client may seek to discontinue remaining services under the agreement.
We anticipate that, subject to global economic conditions and willingness of potential clients to expand capital on exploration activities, during the next twelve months, if we achieve our capital raising goals of focusing on fee for service work, we will be engaged in joint ventures and internal resource projects. The purpose of focusing on internal resource projects is to generate reserves and to establish that the technology can increase the success rate in oil, gas and other mineral exploration projects. There can be no assurance that if we obtain the needed financing it will be successful in establishing the efficacy of our technology. We will also seek to find potential joint venture partners with whom the technology can be used to gain a participation interest in a project as well as fee for service revenue. There can be no assurance that we will be successful in finding such joint venture partners. Until we negotiate and enter into definitive agreements for ownership or royalty interests as compensation, we have no basis for predicting when or how much revenue could be generated from such ownership or royalty interests, or from the exploitation of our land leases, if and when drilling is commenced. Negotiations in connection with ownership or royalty positions often take longer than the negotiations for fee for service arrangements.
Current economic conditions may cause a decline in business and in exploration related spending which could adversely affect our business and financial performance. Our business and operating results are impacted by the health of exploration companies, domestic and international, engaged in oil and gas and other exploration activities. Our business and financial performance may be adversely affected by current and future economic conditions, such as a reduction in research and development and other spending by exploration companies.
Costs associated with revenue for the three months ended June 30, 2009 and 2008 were $0. Costs associated with revenue for the six months ended June 30, 2009 and 2008 were $1,355,000 and $0, respectively. Our fees payable to the Institute under our prior arrangement with The Institute of Geoinformational Analysis of the Earth were subject to negotiation on a per project basis and accordingly our costs may vary on a project basis. On April 27, 2009, we terminated our license and services arrangement with the Institute. Historically, our cost of revenues has consisted primarily of payments to the Institute. Based on our historical activities, we anticipate that our costs of revenue will ordinarily be approximately 60% of revenue.
Operating expenses for the three months ended June 30, 2009 and 2008 were $566,655 and $451,865, respectively. Because revenues were $0 for those periods, operating expenses as a percentage of revenues cannot be calculated.
Operating expenses for the three months ended June 30, 2009 consisted primarily of professional fees of approximately $120,806, management salaries and benefits of approximately $187,166, travel expenses of approximately $12,634, and stock based compensation of approximately $211,023. Operating expenses for the three months ended June 30, 2008 consisted primarily of professional fees of approximately $149,000, management salaries and benefits of $181,000, independent contractor fees of $15,000, and travel expenses of $16,000. The majority of the professional fees result from legal and accounting fees, and from the engagement of various consultants to assist us in marketing our business.
Operating expenses during the three months ended June 30, 2009 decreased in comparison to the three months ended June 30, 2008, because during the period we have focused primarily on identifying new technologies for potential acquisition, marketing and promotion of services, and on the development of projects, which resulted in decreases in professional fees, independent contractor fees, and travel expenses, offset by an increase in management salaries and benefits.
Operating expenses for the six months ended June 30, 2009 and 2008 were $3,011,143 (including stock based compensation of $2,419,195) and $1,338,592 (after write-off of oil and gas properties of $484,623), respectively. Operating expenses for the six months ended June 30, 2009 and 2008 were $591,948 (excluding stock based compensation of $2,419,195) and $853,969 (before write-off of oil and gas properties of $484,623), respectively. Operating expenses, excluding stock based compensation of $2,419,195, as a percentage of revenue was approximately 30% for the six months ended June 30, 2009. The $2,419,195 in stock based compensation includes $2,208,172 in expenses incurred during the three months ended March 31, 2009 related to stock options which were granted during the latter half of fiscal 2008 and which the executive elected to forfeit during the three months ended March 31, 2009. Operating expenses, including stock based compensation of $2,419,195, as a percentage of revenue was approximately 150% for the six months ended June 30, 2009. Because revenues were $0 for the six months ended March 31, 2008, operating expenses as a percentage of revenues cannot be calculated.
Operating expenses for the six months ended June 30, 2009 consisted primarily of professional fees of approximately $181,811, management salaries and benefits of approximately $274,941, and travel expenses of approximately $25,334, and stock based compensation of approximately $2,419,195, Operating expenses for the six months ended June 30, 2008 consisted primarily of professional fees of approximately $434,000, management salaries and benefits of $213,000, independent contractor fees of $55,000, and travel expenses of $28,000.
Operating expenses (excluding stock based compensation of $2,419,195) during the six months ended June 30, 2009 decreased in comparison to the six months ended June 30, 2008 because we have focused primarily on raising additional capital in the first half of fiscal 2009 and on the development of projects. This has decreased professional fees, independent contractor fees, and travel expenses, offset by an increase in management salaries and benefits. Operating expenses for the six months ended June 30, 2009 was significantly higher than the comparable period in 2008 primarily due to stock based compensation incurred in the six months ended June 30, 2009.
If we are successful in raising new capital or generating substantial service projects, we would expect our operating expenses to increase as we would have the capital to engage in various oil and gas and mining exploration projects. The increase in operating expenses could result from the hiring of geologists and other oil and gas professionals to assist us in carrying out the farm-in aspect of our business strategy. Travel related expenses could increase in the future, as many of our customers, and prospective customers and projects, and the territories for which our services are requested or utilized, are located in western United States and in foreign countries. Further, if sufficient funding were available, we would contemplate opening a Moscow technology office and a Houston service center which would decrease travel related expenses but would increase office expenses significantly.
Our employee compensation expenses may increase if we are successful in raising new capital. The increase could result from the hiring of geologists, consultants and other oil and gas professionals to assist the Company in carrying out the farm-in aspect of our business strategy. Travel related expenses could increase in the future, as many of our customers, and prospective customers and projects, and the territories for which our services are requested or utilized, are located in western United States and in foreign countries. Alternatively, if sufficient funding were available, we would contemplate opening a Houston office which would decrease travel and entertainment expenses but would increase office expenses significantly.
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Write-off of Oil and Gas Properties
During the six months ended June 30, 2008, we wrote-off an aggregate of $484,623 in soft development costs principally associated with the acquisition of the Bureau of Land Management land leases in Nevada of $1,662,571. A significant potion of these costs arose from previous payments to the Institute for its services.
Interest Expense
For the three months ended June 30, 2009 and 2008, the net interest expenses (income) were $2,080 and ($449), respectively. For the six months ended June 30, 2009 and 2008, the net interest expenses were $2,910 and $10,080, respectively.
Net Loss
The net losses for the three months ended June 30, 2009 and 2008 were $568,735 and $451,416, respectively. The decrease in net loss principally resulted from a decrease in operating expenses during the three months ended June 30, 2009 compared to the same period in 2008. For the three month ended June 30, 2009, our net loss per common share (basic and diluted) attributable to common shareholders was $0.01.
The net losses for the six months ended June 30, 2009 and 2008 were $2,369,053 (of which $2,419,195 relate to stock based compensation) and $1,348,592, respectively. The increase in net loss during the six months ended June 30, 2009 compared to the same period in 2008 principally resulted from an increase in operating expenses due to stock compensation expenses. Excluding stock based compensation expenses of $2,419,195 , we would have had net income of $50,142 during the six months ended June 30, 2009. For the six month ended June 30, 2009, our net loss per common share (basic and diluted) attributable to common shareholders was $0.03.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity have been proceeds generated by the sale of our common stock, convertible debentures, and preferred stock to private investors, and sales of noncontrolling interests in limited partnerships. During the six months ended June 30, 2009, our cash decreased by $668,550 to $31,451. Of the decrease in cash, $1,168,550 was used by operating activities and $500,000 was provided by financing activities.
Current economic conditions may cause a decline in business and consumer spending which could adversely affect our business and financial performance. Our operating results are impacted by the health of the North American economy as well as economies worldwide. Our business and financial performance may be adversely affected by current and future economic conditions, such as a reduction in the availability of credit, financial market volatility, recession, and the reluctance of potential clients to engage in exploration activities in light of recent economic conditions. Additionally, we may experience difficulties in scaling our operations to react to such economic pressures.
Operating Activities
Cash flows from operating activities resulted in deficit cash flows of $1,168,550 for the six months ended June 30, 2009, as compared with deficit cash flows of $529,514 for the six months ended June 30, 2008.
For the six months ended June 30, 2009, cash flows from operating activities resulted in deficit cash flows of $1,168,550, primarily due to a net loss of $2,369,053, plus non-cash charges of $2,463,657, adjustments for a decrease in deferred costs of $600,000, an increase in accounts receivable of $544,105, an increase in other assets of $76,161, an increase in accounts payable and other accrued expenses of $213,012, and a decrease in deferred revenues of $1,455,900. The most significant drivers behind the decrease in our non-cash working capital were charges for common stock and options issued to consultants of $43,000, amortization of consulting fees of $41,196 and charges for stock options issued to employees of $2,355,597.
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For the six months ended June 30, 2008, cash flows from operating activities resulted in deficit cash flows of $529,514 primarily due to a net loss of $1,348,672, plus non-cash charges of $763,057, an increase in liabilities of $178,920, and a decrease in accounts payable of $125,027. The most significant drivers behind the decrease in our non-cash working capital were charges for common stock issued for services of $101,250, charges for stock options issued to an officer of $138,238, and $484,623 in write-offs of oil and gas properties.
Investing Activities
Cash used for investing activities for the six months ended June 30, 2009 and 2008 was $0 and $2,208, respectively.
Depending on our available funds and other business needs, it is our intention to engage in fee for service activities, and engage in a farm-in strategy during the next twelve months in which we make small investments in the exploration projects of others. There is no assurance we will have the financing to pursue this strategy or if pursued that it will be successful in developing reserves of hydrocarbons.
Financing Activities
For the six months ended June 30, 2009, cash provided by financing activities was $500,000, from the sales of common stock and warrants to three investors. For the six months ended June 30, 2008, cash provided by financing activities was $498,888, comprised of a sale of preferred stock and warrants to an investor totaling $500,000, and repayment of a loan in the amount of $1,112.
Future Needs
Our management has concerns as to the ability of our company to continue as a going concern in the absence of raising additional equity capital, debt financing or obtaining significant new fee for service business. We believe that our available cash is inadequate to support our month-to-month obligations for the next twelve months. Establishing ownership or other interests in natural resource exploration projects will require significant capital resources.
Our current business plan for fiscal 2009 and 2010 calls for us to perform our exploration technology services to other companies and to farm-in on eight to twelve prospects. This business plan calls on our company to raise $3 to $5 million dollars. If we are unable to raise such funding, we will not be able to act on this business plan. To the extent we raise a lesser amount, we will only be able to act on a portion of our business plan.
Under our business model, we do not anticipate incurring significant research and development expenditures during the next twelve months; however, subject to available capital, we may seek to acquire certain innovative exploration technologies and build geochemical facilities.
We do not anticipate the sale of any significant property, plant or equipment during the next twelve months. Depending on our future business prospects and the growth of our business, and the need for additional employees, we may seek to lease new executive office facilities or to open offices in Moscow, Russia and in Texas.
As of June 30, 2009, we had six employees, including employees of corporate subsidiaries, of which two persons worked on a full-time basis. As of June 30, 2009, five employees were paid and others served without pay. In July 2009, we ceased paying our employees based in New York in order to conserve capital. In July 2009, we retained the services of 13 persons in connection with the establishment of an office in Moscow. Our future employment plans are uncertain given our working capital deficit and lack of revenues.
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We are seeking to raise $3 to $5 million to pursue development efforts during the next twelve months. We plan to use this money to engage in several farm-in projects. It is our intention to sell securities and incur debt when the terms of such transactions are deemed favorable to us and as necessary to fund our current and projected cash needs. While we have raised capital to meet our working capital and financing needs in the past, additional financing is required in order to meet our current and projected cash flow deficits from operations and farm-in on oil and gas properties to create a holding of 8 to 12 natural resource interests in U.S. oil and gas prospects. We are seeking financing, which may take the form of equity, convertible debt or debt, in order to provide the necessary working capital. At June 30, 2009, we had no commitments for financing.
There can be no assurance that we will be successful in obtaining such funding or, in the event it is successful, the terms of such funding will be on terms advantageous to us. Any additional equity financing may be dilutive to stockholders and such additional equity securities may have rights, preferences or privileges that are senior to those of our existing authorized shares of common or preferred stock. Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. However, if we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to us, this will have a material adverse effect on our business, results of operations, liquidity and financial condition, and we will have to delay our planned or proposed operations and development and continue to conduct activities on a limited scale.
INFLATION
We do not expect inflation to have a significant impact on our business in the future.
SEASONALITY
We do not expect seasonal aspects to have a significant impact on our business in the future.
OFF-BALANCE SHEET ARRANGEMENT
To date, we do not maintain off-balance sheet arrangements nor do we participate in non-exchange traded contracts requiring fair value accounting treatment.
GOING CONCERN MATTERS
The reports of the independent registered public accounting firms on our December 31, 2008 and 2007 financial statements included in our Annual Reports for the years ended December 31, 2008 and 2007 stated that our recurring losses from operations and net capital deficiency, raise substantial doubt about our ability to continue as a going concern. If we are unable to raise new investment capital, we will have to discontinue operations or cease to exist, which would be detrimental to the value of our common and preferred stock. We can make no assurances that our business operations will develop and provide us with significant cash to continue operations.
We have a working capital deficiency as a result of our large operational losses. We have been and are seeking financing, which may take the form of equity, convertible debt or debt, in order to provide the necessary working capital. There is no guarantee that we will be successful in consummating a financing transaction. Further, in the event we obtain an offer of private or public funding, there is no assurance that such funding would be on terms favorable to us. The failure to obtain such funding will threaten our ability to continue as a going concern.
Our ability to continue as a going concern is subject to our ability to develop profitable operations, and, in the absence of revenues from operations, to our ability to raise additional equity or debt capital and to develop profitable operations. We continue to experience net operating losses. During 2008 and the first half of fiscal 2009, we focused on restructuring our operations to reduce operating costs and in seeking capital.
The primary issues management will focus on in the immediate future to address the going concern issues include: seeking institutional investors for debt or equity investments in our Company, and initiating negotiations to secure short term financing through promissory notes or other debt instruments on an as needed basis.
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To improve our liquidity, our management has been actively pursing additional financing through discussions with investment bankers, venture capital firms and private investors. There can be no assurance that we will be successful in our effort to secure additional financing.
In fiscal 2008 and the first half of fiscal 2009, we focused on obtaining additional investment capital to restart our service and exploration efforts, and to create case studies demonstrating the value of the STeP technology. We plan to continue such efforts during the next twelve months, subject to the receipt of adequate financing. We intend to demonstrate the value of our licensed technology by pursuing (i) a fee for service business model with exploration companies, which may include seeking royalties on the exploration project and (ii) a farm-in strategy of investing in drilling projects when our STeP technology concurs with the available seismic studies on the projects. Our goal is to demonstrate a success rate which is better than industry averages and thereby establish the value of our technology while generating hydrocarbon reserves and internally generating cash flow to support our cost of operations.
Our goal continues to be to enter into agreements whereby we provide our services, such as providing site locations and depth locations, to natural resource exploration companies in exchange for royalties or ownership rights, and fees, with regard to a specific natural resource exploration property. We may also seek to finance or otherwise participate in the efforts to recover natural resources from such properties. While we have oil exploration experience, we need substantial additional capital to conduct oil exploration activities alone. We continue to seek joint ventures to develop our operations, including examining, drilling, operating and financing such activities. We will determine our plan for our existing leases and for future leases we acquire based on our ability to fund such projects.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2009, the Company adopted FSP No. FAS 141(R)-1, "Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies," (FSP FAS 141(R)-1), which was issued on April 1, 2009. FSP FAS 141(R)-1 applies to all assets acquired and liabilities assumed in a business combination that arise from certain contingencies as defined in this FSP and requires (i) an acquirer to recognize at fair value, at the acquisition date, an asset acquired or liability assumed in a business combination that arises from a contingency if the acquisition-date fair value of that asset or liability can be determined during the measurement period otherwise the asset or liability should be recognized at the acquisition date if certain defined criteria are met; (ii) contingent consideration arrangements of an acquiree assumed by the acquirer in a business combination be recognized initially at fair value; (iii) subsequent measurements of assets and liabilities arising from contingencies be based on a systematic and rational method depending on their nature and contingent consideration arrangements be measured subsequently in accordance with the provisions of SFAS 141(R); and (iv) disclosures of the amounts and measurement basis of such assets and liabilities and the nature of the contingencies.
In April 2009, the FASB issued FSP No. FAS 157-4, "Determining Fair Values When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly." This FSP provides guidance on (1) estimating the fair value of an asset or liability when the volume and level of activity for the asset or liability have significantly declined and (2) identifying transactions that are not orderly. The FSP also amends certain disclosure provisions of SFAS No. 157 to require, among other things, disclosures in interim periods of the inputs and valuation techniques used to measure fair value as well as disclosure of the hierarchy of the source of underlying fair value information on a disaggregated basis by specific major category of investment. For the Company, this FSP was effective prospectively beginning April 1, 2009. The adoption of this standard did not have a material impact on the Company's consolidated results of operations or financial condition.
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In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments" (FSP 115-2). This FSP modifies the requirements for recognizing other-than-temporarily impaired debt securities and changes the existing impairment model for such securities. The FSP also requires additional disclosures for both annual and interim periods with respect to both debt and equity securities. Under the FSP, impairment of debt securities will be considered other-than-temporary if an entity (1) intends to sell the security, (2) more likely than not will be required to sell the security before recovering its cost, or (3) does not expect to recover the security's entire amortized cost basis (even if the entity does not intend to sell). The FSP further indicates that, depending on which of the above factor(s) causes the impairment to be considered other-than-temporary, (1) the entire shortfall of the security's fair value versus its amortized cost basis or (2) only the credit loss portion would be recognized in earnings while the remaining shortfall (if any) would be recorded in other comprehensive income. FSP 115-2 requires entities to initially apply the provisions of the standard to previously other-than-temporarily impaired debt securities existing as of the date of initial adoption by making a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The cumulative-effect adjustment potentially reclassifies the noncredit portion of a previously other-than-temporarily impaired debt security held as of the date of initial adoption from retained earnings to accumulated other comprehensive income. For the Company, this FSP was effective beginning April 1, 2009. The adoption of this standard did not have a material impact on the Company's consolidated results of operations or financial condition.
In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, "Interim Disclosures about Fair Value of Financial Instruments." This FSP essentially expands the disclosure about fair value of financial instruments that were previously required only annually to also be required for interim period reporting. In addition, the FSP requires certain additional disclosures regarding the methods and significant assumptions used to estimate the fair value of financial instruments. This FSP was effective for the Company beginning April 1, 2009 on a prospective basis.
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events." This standard incorporates into authoritative accounting literature certain guidance that already existed within generally accepted auditing standards, with the requirements concerning recognition and disclosure of subsequent events remaining essentially unchanged. This guidance addresses events which occur after the balance sheet date but before the issuance of financial statements. Under SFAS No.165, as under previous practice, an entity must record the effects of subsequent events that provide evidence about conditions that existed at the balance sheet date and must disclose but not record the effects of subsequent events which provide evidence about conditions that did not exist at the balance sheet date. This standard added an additional required disclosure relative to the date through which subsequent events have been evaluated and whether that is the date on which the financial statements were issued. For the Company, this standard was effective beginning April 1, 2009.
In June 2009, the FASB issued SFAS No. 166, "Accounting for Transfers of Financial Assets-an amendment of FASB Statement No. 140," amending the guidance on transfers of financial assets to, among other things, eliminate the qualifying special purpose entity concept, include a new unit of account definition that must be met for transfers of portions of financial assets to be eligible for sale accounting, clarify and change the derecognition criteria for a transfer to be accounted for as a sale, and require significant additional disclosure. For the Company, this standard is effective for new transfers of financial assets beginning January 1, 2010. Because the Company historically does not have significant transfers of financial assets, the adoption of this standard is not expected to have a material impact on the Company's consolidated results of operations or financial condition.
In June 2009, the FASB issued SFAS No. 167, "Amendments to FASB Interpretation No. 46(R)," which revised the consolidation guidance for variable-interest entities. The modifications include the elimination of the exemption for qualifying special purpose entities, a new approach for determining who should consolidate a variable-interest entity, and changes to when it is necessary to reassess who should consolidate a variable-interest entity. For the Company, this standard is effective January 1, 2010. The Company is currently evaluating the impact of this standard, but would not expect it to have a material impact on the Company's consolidated results of operations or financial condition.
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In June 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162," and approved--the FASB Accounting Standards CodificationTM (Codification) as the single source of authoritative nongovernmental US GAAP. The Codification does not change current US GAAP, but is intended to simplify user access to all authoritative US GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered non-authoritative. For the Company, the Codification is effective July 1, 2009 and will require future references to authoritative US GAAP to coincide with the appropriate section of the Codification. Accordingly, this standard will not have an impact on the Company's consolidated results of operations or financial condition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Our management, with the participation of our Chief Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period ended June 30, 2009. Based on such evaluation, our Chief Executive Officer and Principal Financial Officer have concluded that, as of such date, our disclosure controls and procedures are effective in providing reasonable assurance that the information required to be disclosed in this report has been recorded, processed, summarized and reported, on a timely basis, as of the end of the period covered by this report, and that our disclosure controls and procedures are also effective to ensure that information required to be disclosed in the reports we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting during the quarter ended June 30, 2009 to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On or about December 11, 2008, Illinois National Insurance Company filed a complaint before the Civil Court of the City of New York, Case No. 74698/08, against Terra Insight Corporation, alleging failure to pay insurance premiums in the amount of $10,598. Terra Insight Corporation did not file an answer to the complaint. Terra Insight Corporation did not file an answer to the complaint.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Each of the issuance and sale of securities described below was deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act as transactions by an issuer not involving a public offering. No advertising or general solicitation was employed in offering the securities. All recipients either received adequate information about us or had access, through employment or other relationships, to such information.
On April 27, 2009, in connection with the termination of a license and services arrangement with The Institute of Geoinformational Analysis of The Earth, the Company issued 1,000,000 shares of the Company's common stock and warrants to purchase 1,000,000 shares of the Company's common stock, exercisable until April 27, 2012 at $0.05 per share.
On April 30, 2009, as the final installment of compensation due under a consulting agreement between the parties dated as of March 10, 2008, as amended, the Company issued 75,000 shares of common stock to Wall Street Edge Investor Relations for consulting services rendered.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
On April 27, 2009, Terra Insight Services, Inc., the Company, Terra Insight Technologies Corporation, and The Institute of Geoinformational Analysis of The Earth entered into an agreement, pursuant to which the Technology License Agreement and the Services Agreement, each dated as of December 15, 2008, between the Institute and Terra Insight Services were terminated. In connection therewith, the Company issued to the Institute 1,000,000 shares of the Company's common stock and warrants to purchase 1,000,000 shares of the Company's common stock, exercisable until April 27, 2012 at $0.05 per share.
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ITEM 6. EXHIBITS
Exhibit No. | | Description of Exhibit |
10.1* | | Termination Agreement with the Institute |
11 | | Statement re: computation of per share earnings is hereby incorporated by reference to "Financial Statements" of Part I - Financial Information, Item 1 – Financial Statements, contained in this Form 10-Q. |
31.1* | | Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a) |
31.2* | | Certification of Principal Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a) |
32.1* | | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 |
32.2* | | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 |
* Filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| TERRA ENERGY & RESOURCE TECHNOLOGIES, INC. |
| |
Dated: August 19, 2009 | By: /s/ Dmitry Vilbaum |
| Dmitry Vilbaum |
| Chief Executive Officer |
| |
Dated: August 19, 2009 | By: /s/ Alexandre Agaian |
| Alexandre Agaian |
| Principal Financial Officer |
| |
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