UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: January 31, 2009
¨TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number: 000-49870
Big Cat Energy Corporation
(Exact name of small business issuer as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
61-1500382
(IRS Employer Identification No.)
121 W Merino Street
Upton, WY 82730
(Address of principal executive offices)
(307) 468-9369
(Issuer’s telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesþNo¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | Accelerated filer |
| Non-accelerated filer | þ Smaller reporting company |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes¨Noþ
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 32,041,000 shares of common stock, $.0001 par value as of March 16, 2009
BIG CAT ENERGY CORPORATION INDEX
| Page | |||
| PART 1. | FINANCIAL INFORMATION | ||
| ITEM 1. | FINANCIAL STATEMENTS | ||
| Condensed Balance Sheets as of January 31, 2009(Unaudited) and April 30, 2008 | 3 | ||
| Condensed Statements of Operations for the three months ended January 31, 2009 | |||
| and 2008, for the nine months ended January 31, 2009 and 2008 and for the | |||
| cumulative period from June 19, 1997 (inception) through January 31, 2009 | |||
| (Unaudited) | 4 | ||
| Condensed Statement of Shareholders’ Equity for the nine months ended January | |||
| 31, 2009 and the cumulative period from inception (June 19, 1997) to January 31, | |||
| 2009 (Unaudited) | 5 | ||
| Condensed Statements of Cash Flows for the nine months ended January 31, 2009 | |||
| and 2008, and for the cumulative period from June 19, 1997 (inception) through | |||
| January 31, 2009(Unaudited) | 7 | ||
| Notes to Unaudited Condensed Financial Statements | 8 | ||
| ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of | ||
| Operations | 15 | ||
| ITEM 4T. CONTROLS AND PROCEDURES | 20 | ||
| PART II. | OTHER INFORMATION | 21 | |
| ITEM 1. | Legal Proceedings | 21 | |
| ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 21 | |
| ITEM 3. | Default Upon Senior Securities | 21 | |
| ITEM 4. | Submission of Matters to a Vote of Security Holders | 21 | |
| ITEM 5. | Other Information | 21 | |
| ITEM 6. | EXHIBITS | 21 | |
| SIGNATURES | 22 | ||
PART I.
ITEM 1. FINANCIAL STATEMENTS.
| BIG CAT ENERGY CORPORATION | ||||
| (A Development Stage Company) | ||||
| Condensed Balance Sheets | ||||
| January 31, | April 30, 2008 | |||
| 2009 | ||||
| (Unaudited) | ||||
| Assets | ||||
| Current assets: | ||||
| Cash | $ | 92,040 | $ | 4,796 |
| Certificates of deposit | 556,107 | -- | ||
| Marketable securities | 2,591 | 1,065,981 | ||
| Accounts receivable | 82,500 | 3,000 | ||
| Prepaid expenses and other current assets | 31,966 | 23,597 | ||
| Total current assets | 765,204 | 1,097,374 | ||
| Equipment, held for lease | 21,124 | 27,662 | ||
| Equipment, net | 20,093 | 8,745 | ||
| Other assets | 75,661 | 62,141 | ||
| Total Assets | $ | 882,082 | $ | 1,195,922 |
| Liabilities and Shareholders’ Equity | ||||
| Current liabilities: | ||||
| Accounts payable and accrued liabilities | $ | 79,117 | $ | 52,067 |
| Shareholders’ equity: | ||||
| Common stock, $.0001 par value; 100,000,000 shares authorized, | ||||
| 32,041,000 and 31,041,000 shares issued and outstanding | ||||
| at January 31, 2009 and April 30, 2008 respectively | 3,204 | 3,104 | ||
| Additional paid-in capital | 10,076,999 | 8,435,991 | ||
| Deficit accumulated during development stage | (9,277,238) | (7,295,240) | ||
| Total shareholders’ equity | 802,965 | 1,143,855 | ||
| Total Liabilities and Shareholders’ Equity | $ | 882,082 | $ | 1,195,922 |
| See accompanying notes to condensed financial statements. | ||||
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| BIG CAT ENERGY CORPORATION | ||||||||||
| (A Development Stage Company) | ||||||||||
| Condensed Statements of Operations | ||||||||||
| (Unaudited) | ||||||||||
| June 19, | ||||||||||
| 1997 | ||||||||||
| For the Three Months | For the Nine Months | (Inception) | ||||||||
| Ended | Ended | Through | ||||||||
| January 31, | January 31, | January 31, | ||||||||
| 2009 | 2008 | 2009 | 2008 | 2009 | ||||||
| (Restated) | (Restated) | |||||||||
| Lease revenues | $ | 13,750 | $ | 15,625 | $ | 56,875 | $ | 17,500 | $ | 96,875 |
| Costs and expenses: | ||||||||||
| Personnel costs (includes stock based | ||||||||||
| compensation of $397,108, $468,000, | ||||||||||
| $1,141,108, $1,388,000 and | ||||||||||
| $5,341,108 respectively) | 606,732 | 656,028 | 1,810,305 | 1,927,004 | 7,350,383 | |||||
| Professional fees | 45,316 | 40,762 | 134,214 | 144,962 | 568,701 | |||||
| General and administrative | 59,151 | 62,310 | 122,338 | 186,692 | 616,546 | |||||
| Total Expenses | 711,199 | 759,100 | 2,066,857 | 2,258,658 | 8,535,630 | |||||
| LOSS BEFORE OTHER INCOME | (697,449) | (743,475) | (2,009,982) | (2,241,158) | (8,438,755) | |||||
| OTHER INCOME (EXPENSE) | ||||||||||
| Interest income | 4,330 | 12,215 | 27,984 | 39,537 | 111,698 | |||||
| (Loss) on valuation from private | ||||||||||
| placement | -- | -- | -- | (433,000) | (433,000) | |||||
| Loss before discontinued operations | (693,119) | (731,260) | (1,981,998) | (2,634,621) | (8,760,057) | |||||
| Loss on discontinued operations of | ||||||||||
| Sterling Oil & Gas (net of minority | ||||||||||
| interest of $31,719, $40,269 and | ||||||||||
| $258,587 respectively) | -- | (63,449) | -- | (81,317) | (517,181) | |||||
| Net (Loss) | $ | (693,119) | $ | (794,709) | $ | (1,981,998) | $ | (2,715,938) | $ | (9,277,238) |
| Net loss per share from continuing | ||||||||||
| operations | $ | (0.02) | $ | (0.02) | $ | (0.06) | $ | (0.09) | ||
| Net loss per share-discontinued | ||||||||||
| operations | -- | $ | (0.00) | -- | $ | (0.00) | ||||
| Net loss per share, basic and dilutive | $ | (0.02) | $ | (0.03) | $ | (0.06) | $ | (0.09) | ||
| Weighted average number of | ||||||||||
| common shares outstanding-basic | ||||||||||
| and diluted | 32,041,000 | 30,041,000 | 32,037,377 | 29,754,768 | ||||||
| See accompanying notes to condensed financial statements. | ||||||||||
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| BIG CAT ENERGY CORPORATION | |||||||||
| (A Development Stage Company) | |||||||||
| CONDENSED STATEMENT OF SHAREHOLDERS’ EQUITY | |||||||||
| FOR THE NINE MONTHS ENDED JANUARY 31, 2009 | |||||||||
| AND THE CUMULATIVE PERIOD FROM INCEPTION (JUNE 19, 1997) TO JANUARY 31, 2009 | |||||||||
| (UNAUDITED) | |||||||||
| DEFICIT | |||||||||
| INCURRED | |||||||||
| COMMONSTOCK | ADDITIONAL | DURING | |||||||
| PAR VALUE | PAID-IN | DEVELOPMENT | |||||||
| SHARES | $.0001 | CAPITAL | STAGE | TOTAL | |||||
| Balance, at Inception (June 19, 1997) | |||||||||
| Stock issued for services upon inception | |||||||||
| at June 19, 1997 issued at par | 500,000 | $ | 50 | $ | – | $ | – | $ | 50 |
| Common stock cancelled March 2002 | (500,000) | (50) | – | – | (50) | ||||
| Sale of common stock at $0.10 per | |||||||||
| share, April 2002 | 1,114,000 | 111 | 111,289 | – | 111,400 | ||||
| Contributed services (January 2000 | |||||||||
| through April 2003) | – | – | 10,425 | – | 10,425 | ||||
| Cumulative net loss | – | – | – | (132,543) | (132,543) | ||||
| Balance, April 30, 2005 | 1,114,000 | 111 | 121,714 | (132,543) | (10,718) | ||||
| Sale of common stock March through | |||||||||
| April 2006 at $0.05 per share | 7,400,000 | 740 | 369,260 | – | 370,000 | ||||
| Sale of common stock at March 2006 at | |||||||||
| $0.01 per share | 2,500,000 | 250 | 24,750 | -- | 25,000 | ||||
| Common stock issued in exchange for | |||||||||
| assets | 12,450,000 | 1,245 | 22,745 | -- | 23,990 | ||||
| Net loss | – | – | – | (145,182) | (145,182) | ||||
| Balance, April 30, 2006 | 23,464,000 | 2,346 | 538,469 | (277,725) | 263,090 | ||||
| Sale of common stock (May through | |||||||||
| June 2006) at $0.50 per share | 4,065,000 | 407 | 2,032,093 | – | 2,032,500 | ||||
| Sale of common stock (January 2007) | |||||||||
| at $0.75 per share | 2,012,000 | 201 | 1,508,799 | – | 1,509,000 | ||||
| Offering costs | – | – | (21,752) | – | (21,752) | ||||
| Contributed capital | – | – | 22,582 | – | 22,582 | ||||
| Stock-based compensation (April 2007) | – | – | 1,840,000 | – | 1,840,000 | ||||
| Net loss | – | – | – | (2,639,221) | (2,639,221) | ||||
| Balance, April 30, 2007 | 29,541,000 | 2,954 | 5,920,191 | (2,916,946) | 3,006,199 | ||||
| Sale of common stock (October 2007) | |||||||||
| at $1.00 per share | 500,000 | 50 | 499,950 | -- | 500,000 | ||||
| Sale of units (April 2008) at $0.50 per | |||||||||
| unit | 1,000,000 | 100 | 499,900 | -- | 500,000 | ||||
| Spin off Sterling subsidiary | -- | -- | (844,050) | -- | (844,050) | ||||
| Stock-based compensation (April 2008) | -- | -- | 2,360,000 | -- | 2,360,000 | ||||
| Net loss | – | – | – | (4,378,294) | (4,378,294) | ||||
| Balance, April 30, 2008 | 31,041,000 | 3,104 | 8,435,991 | (7,295,240) | 1,143,855 | ||||
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| Sale of units (May 2008) at $0.50 per | |||||||||
| unit | 1,000,000 | 100 | 499,900 | -- | 500,000 | ||||
| Stock-based compensation | -- | -- | 1,141,108 | -- | 1,141,108 | ||||
| Net loss nine months ended January 31 | |||||||||
| 2009 | -- | -- | -- | (1,981,998) | (1,981,998) | ||||
| Balance January 31, 2009 | 32,041,000 | $ | 3,204 | $ | 10,076,999 | $ | (9,277,238) | $ | 802,965 |
See accompanying notes to condensed financial statements.
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| BIG CAT ENERGY CORPORATION | ||||||
| (A Development Stage Company) | ||||||
| Condensed Statements of Cash Flows | ||||||
| (Unaudited) | ||||||
| June 19, 1997 | ||||||
| (inception) | ||||||
| For the Nine Months Ended | Through | |||||
| January 31, | January 31, | |||||
| 2009 | 2008 | 2009 | ||||
| (Restated) | ||||||
| Cash Flows From Operating Activities: | ||||||
| Net Loss | $ | (1,981,998) | $ | (2,715,938) | $ | (9,277,238) |
| Adjustments to reconcile net loss to net cash used by | ||||||
| operating activities: | ||||||
| Depreciation | 1,829 | 1,469 | 4,391 | |||
| Stock based compensation | 1,141,108 | 1,388,000 | 5,341,108 | |||
| Contributed services and other | -- | -- | 10,425 | |||
| Cash flow from discontinued operations | -- | 423,531 | 833,369 | |||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | (79,500) | (82,500) | (82,500) | |||
| Trading securities | 507,283 | 23,510 | (558,698) | |||
| Prepaid and other | (8,369) | (27,803) | (31,967) | |||
| Payables | 27,050 | 93,922 | 79,117 | |||
| Net cash (used in) | ||||||
| operating activities | (392,597) | (895,809) | (3,681,993) | |||
| Cash flows from investing activities: | ||||||
| Purchase of unproven oil and gas properties | -- | -- | (1,794,231) | |||
| Equipment purchases | (6,639) | (20,728 | (45,608) | |||
| Other assets | (13,520) | (13,914) | (51,671) | |||
| Cash used in discontinued operations | -- | 155,542 | (133,757) | |||
| Net cash (used in) provided by | ||||||
| investing activities | (20,159) | 120,900 | (2,025,267) | |||
| Cash flows from financing activities: | ||||||
| Proceeds from related party advances | -- | -- | 51,618 | |||
| Repayment of related party advances | -- | -- | (29,036) | |||
| Proceeds from the sale of common stock | 500,000 | 500,000 | 5,547,901 | |||
| Payments for offering costs | -- | -- | (21,752) | |||
| Cash flow provided by discontinued operations | -- | 249,210 | 250,569 | |||
| Net cash provided by | ||||||
| financing activities | 500,000 | 749,210 | 5,799,300 | |||
| Net Increase in cash and | ||||||
| cash equivalents | 87,244 | (25,699) | 92,040 | |||
| Cash and cash equivalents: | ||||||
| Beginning of period | 4,796 | 52,744 | -- | |||
| End of period | $ | 92,040 | $ | 27,045 | $ | 92,040 |
| Noncash investing and financing transactions: | ||||||
| Forgiveness of debt by related party, accounted for as | ||||||
| Capital contributed | $ | -- | $ | -- | $ | 22,582 |
| Stock issued to related party for ARID technology | $ | -- | $ | -- | $ | 23,990 |
| Spin off of Sterling Oil and Gas | $ | -- | $ | -- | $ | 1,794,231 |
| See accompanying notes to condensed financial statements. | ||||||
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BIG CAT ENERGY CORPORATION
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
Note1: Presentation, Organization and Nature of Operations
Presentation
The accompanying unaudited financial statements of Big Cat Energy Corporation (the “Company”) at January 31, 2009 and 2008 have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial statements pursuant to, instructions to Form 10-Q, and Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended April 30, 2008. In management’s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation to make the Company’s financial statements not misleading have been includ ed. The results of operations for the periods ended January 31, 2009 and 2008 presented are not necessarily indicative of the results to be expected for the full year. The April 30, 2008 balance sheet has been derived from the Company’s audited financial statements included in the Company’s annual report on Form 10-K for the year ended April 30, 2008.
Description of Operations
Big Cat Energy Corporation (“Big Cat” or the “Company”), a Nevada corporation, owns the exclusive rights to a technology known as the Aquifer Recharge Injection Device (ARID) which allows Coal Bed Methane (“CBM”) operators to redistribute water produced from productive coal seams, within the same bore hole. The ARID tool moves contaminated water from the producing coal seam to depleted aquifers of similar water quality, without having to discharge the water on the surface. With the ARID tool and process in use, the production well will not require use of a separate re-injection well for any of the produced water. The produced water never leaves the well bore as it is redirected into different aquifer zones, identified from the geophysical logs.
On May 1, 2007, the Company formed a subsidiary, Sterling Oil & Gas Company (“Sterling”) and transferred its unevaluated oil and gas properties, consisting of various mineral leases and related costs to Sterling, in return for 10 million shares of Sterling restricted common stock. On April 2, 2008, the Company distributed the Sterling shares in a prorata distribution to Big Cat’s shareholders. All activity related to Sterling for 2008 has been reported as discontinued operations in the financial statements.
The Company is in the development stage in accordance with Statement of Financial Accounting Standards (‘SFAS”) No. 7. The Company has been in the development stage since inception and has yet to generate any significant revenue-producing operations. Activities since its inception have primarily involved its organization, development of the Company and more recently, its ARID initiative and the spin off of Sterling.
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Restated Condensed Statement of Operations-2008
The Loss on discontinued operations of Sterling Oil and Gas in the Condensed Statement of Operations for 2008 has been restated to reflect the non-cash contributed consulting fees from Big Cat to the discontinued operations of Sterling Oil and Gas Company, less the respective minority interest. For the three months ended January 31, 2008, was an increase of $11,000 and for the nine months ended January 31, 2008 the restatement was an increase to net loss of $24,266.
Note 2: Liquidity
Going Concern
As of January 31, 2009, the Company had working capital of approximately $686,087 and stockholders’ equity of $802,965. The Company has realized minimal revenues and has incurred significant losses from operations and used significant cash flow to fund operations for the periods presented in this Quarterly Report. Historically, Big Cat has relied upon outside investor funds to maintain its operations and develop its business. Big Cat’s plan for continuation anticipates continued funding from investors. This funding would be used for operations, for working capital, as well as business expansion during the upcoming fiscal year. The Company can provide no assurance that additional investor funds will be available on terms acceptable to the Company. These conditions raise substantial doubt about Big Cat’s ability to continue operations as a going concern.
Big Cat’s ability to continue as a going concern is dependent upon raising capital through debt or equity financing and ultimately by increasing revenue and achieving profitable operations. The Company can offer no assurance that it will be successful in its efforts to raise additional proceeds or achieve profitable operations. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business.
Note 3: Significant Accounting Policies:
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amount 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 periods. Actual results could differ from those estimates.
Certificates of deposit and Marketable Securities
The Company has purchased unsecured commercial paper (floating rate demand notes) of Ford Motor Credit Company classified as trading securities as well as fixed rate certificates of deposit from First Interstate Bank. These securities are stated at fair value based on interest rates that approximate market rates and the short term maturity of the notes. The income earned on these investments is included in interest income in the accompanying financial statements.
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Concentrations of Credit Risk
The Company’s cash equivalents and certificates of deposit are exposed to concentrations of credit risk. The Company manages and controls this risk by investing these funds with major financial institutions.
Off Balance Sheet Arrangements
From time-to-time, we enter into off-balance sheet arrangements and transactions that can give rise to off-balance sheet obligations. As of January 31, 2009, the off-balance sheet arrangements and transactions that we have entered into include operating lease agreements. The Company does not believe that these arrangements are reasonably likely to materially affect its liquidity or availability of, or requirements for, capital resources.
Income Taxes
The Company uses the asset and liability method of accounting for deferred taxes . Deferred tax assets and liabilities are determined based on the temporary differences between the financial statement and the tax basis of the assets and liabilities. Deferred tax assets or liabilities at the end of each period are determined using the tax rate in effect at that time. The Company adopted FASB Interpretation No. 48 (FIN 48),Accounting for Uncertainty in Income Taxes,effective May 1, 2008. FIN 48 requires that amounts recognized in the balance sheet related to uncertain tax positions be classified as current or noncurrent liability, based upon the expected timing of the payment to a taxing authority. The Company had no material uncertain tax positions as of Janua ry 31, 2009 or 2008.
Risks and Uncertainties
Historically, oil and gas prices have experienced significant fluctuations and have been particularly volatile in recent years. Price fluctuations can result from variations in weather, levels of regional or national production and demand, availability of transportation capacity to other regions of the country and various other factors. Increases or decreases in oil and gas prices could have a significant impact on future results as drilling activity determines the demand for the Company’s technology and ARID tool.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, investments, accounts receivable and accounts payable. The fair market value of these financial instruments approximates or is equal to the book value.
In the first quarter of fiscal year 2009, the Company adopted Statement of Financial Accounting Standard (SFAS) No. 157, “Fair Value Measurement” (SFAS No. 157) as amended by FASB Statement of Position (FSP) FAS 157-1 and FSP FAS 157-2. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and enhances fair value measurement disclosure. FSP FAS 157-2 delays, until the first quarter of fiscal year 2010, the effective date for SFAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).
The following table provides information regarding the source of data used by the Company to develop fair value measurements:
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| Fair Value Measurements at Reporting Date Using | |||||||
| Quoted Prices in | Significant Other | Significant | |||||
| Active Markets for | Observable Inputs | Unobservable | |||||
| Identical Assets | Inputs | ||||||
| Description | January 31, 2009 | (Level 1) | (Level 2) | (Level 3) | |||
| Certificates | |||||||
| of deposit | $ | 556,107 | $ | 550,000 | $ | 6,107 | |
| Trading securities | $ | 2,591 | $ | 2,591 | $ | -- | |
| Total | $ | 558,698 | $ | 552,591 | $ | 6,107 | |
Equity-Based Compensation
The Company accounts for equity-based compensation arrangements in accordance with SFAS No. 123R,,Accounting for Stock-Based Compensation, which permits entities to recognize as expense over the vesting period, the fair value of all stock-based awards on the date of grant. The Company recorded expense of stock-based compensation during the three months ended January 31, 2009, totaling $397,108 compared to $468,000 for the three months ended January 31, 2008. The Company has recorded stock-based compensation totaling $1,141,108 for the nine months ended January 31, 2009 compared to $1,388,000 for the nine months ended January 31, 2008.
Net Loss Per Share
Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Contingently issuable shares are included in the computation of basic net income (loss) per share when the related conditions are satisfied. Diluted net income (loss) per share is computed using the weighted average number of common shares and potentially dilutive securities outstanding during the period. Potentially dilutive securities consist of contingently issuable shares, the incremental common shares issuable upon conversion of preferred stock or convertible debt (using the “if converted” method) and shares issuable upon the exercise of stock options and warrants (using the “treasury stock” method). Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive.
As of January 31, 2009 the Company had outstanding 32,041,000 shares of common stock and options to purchase an additional 4,825,000 shares of common stock. At January 31, 2009, there were also warrants for the purchase of 2,000,000 shares of restricted common stock outstanding. At January 31, 2008, the Company had outstanding 30,041,000 shares of common stock and options to purchase an additional 1,550,000 shares of common stock. The options and warrants outstanding were excluded from the calculation of diluted earnings per share as their effect would have been anti dilutive.
Other Comprehensive Income
The Company does not have any other items of other comprehensive income for the nine months ended January 31, 2009 and 2008. Therefore, total comprehensive income (loss) is the same as net income (loss) for these periods.
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Revenue Recognition
The Company leases its ARID tool and process to its customers. Revenue is recognized equally over the term of lease. When the lease is executed the Company records deferred revenue, included in Other Current Liabilities for those amounts received for lease commitments for the next 12 months and a Long Term Obligation the portion of commitments in excess of 12 months. At January 31, 2009, the Company has recorded $75,625 as Other Current Liabilities for deferred revenue and $0 for Long Term Obligations.
Recently Issued Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
In May 2008, the FASB issued SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles.This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). We do not anticipate that the adoption of SFAS 162 will materially impact the Company.
In May 2008, the FASB issued SFAS No. 163Accounting for Financial Guarantee Insurance Contracts—an interpretation of FASB Statement No. 60.This Statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. This Statement requires expanded disclosures about fin ancial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements.
This Statement is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years, except for some disclosures about the insurance enterprise’s risk-management activities. We do not anticipate the adoption of SFAS 163 will have any effect on the Company’s future financial position or results of operations.
In September 2008 the FASB issued FSP FAS 133-1 and FIN 45-4Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161.The credit derivatives market has expanded significantly over the past few years. Financial statement users and others have expressed concerns that the current disclosure requirements for derivative instruments and certain guarantees do not adequately address the potential adverse effects of changes in credit risk on the financial position, financial performance, and cash flows of the sellers of credit derivatives and certain guarantees. This FSP amends FASB Statement No. 133,Accounting for Derivative Instruments and Hedging Activities,to require disclosures by sellers of credit derivatives, including credit derivatives embedded in a hybrid instrument. This FSP also amends FASB Interpretation No. 45,Guarantor’s
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Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,to require an additional disclosure about the current status of the payment/performance risk of a guarantee. Further, this FSP clarifies the Board’s intent about the effective date of FASB Statement No. 161,Disclosures about Derivative Instruments and Hedging Activities. We do not anticipate the adoption of this FSP will have a material effect on the Company’s future financial position or results of operations.
Note 4: Shareholders’ Equity
Private Offerings
During the three months ended October 31, 2007 the Company completed the private placement of 500,000 restricted shares of its common stock to an accredited investor. The Company received proceeds of $500,000 from the private placement. Following the above sale, the Company’s common stock increased to 30,041,000 shares issued and outstanding.
During April 2008, the Company completed a private placement of securities and raised gross proceeds of $500,000. The Company sold a total of 1,000,000 units to six (6) investors, each unit consisting of one (1) share of restricted common stock at $.50 per share and one (1) warrant for one (1) share of restricted common stock at $.75 per share. In accordance with EITF 00-19, “Accounting for Derivative Financial Instruments Indexed To, and Potentially Settled In a Company’s Own Stock,” (EITF 00-19) and the terms of the warrants and the transaction documents, the warrants were determined to represent an equity transaction and therefore the fair value of the warrants are contained within the equity section and not separately recorded apart from the common shares issued as part of the private placement. Following the above sale, the Company’s common stock increased to 31,041,000 shares is sued and outstanding.
During the nine months ended January 31, 2009 the Company completed the private placement of 1,000,000 units at $.50 per unit, each unit consisting of one restricted share of its common stock and one warrant to purchase one share of restricted common stock exercisable at $.75 per share. The offering began during the fourth quarter of the fiscal year ended April 30, 2008 and was completed during the first quarter of the current fiscal year. In accordance with EITF 00-19, “Accounting for Derivative Financial Instruments Indexed To, and Potentially Settled In a Company’s Own Stock,” (EITF 00-19) and the terms of the warrants and the transaction documents, the warrants were determined to represent an equity transaction and therefore the fair value of the warrants are contained within the equity section and not separately recorded apart from the common shares issued as part of the private place ment. As a result of sales during the first quarter, the Company received proceeds of $500,000 from the private placement. Following the above sale, the Company’s outstanding common stock increased to 32,041,000 shares.
The Company issued the foregoing shares of common stock as restricted securities pursuant to the exemptions from registration contained in Regulation S of the Securities Act of 1933 and section 4(2) of the Securities Act of 1933. Shares sold pursuant to Regulation S were sold to non U.S. persons outside the United States of America. Shares sold pursuant to section 4(2) of the Securities Act of 1933 were sold to persons who receive the same information that can be found in a Form SB-2 registration statement and were deemed sophisticated investors in that they understood our business and were able to read and understand financial statements.
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Note 5: Stock Option Plan
The Company has adopted the 2007 Nonqualified Stock Option Plan (the “Plan”), as amended, and reserved 5,000,000 shares of common stock for the plan. On April 27, 2007 options to purchase 1,550,000 shares were granted to directors and officers of the Company exercisable at $.50 per share, which was below the fair market value on that date. The 2007 options have a term of five years and have limits on the amounts exercisable over a three-year term. During Fiscal Year 2008, the Company granted options to purchase 1,860,000 shares to directors, officers, and key employees of the Company. Of the 1,860,000 options granted, 255,000 options were granted at $.50 per share, which was below the fair market value on the date of grant. The remaining options were granted at the market price on the date of grant, April 30, 2008. Of the options granted in Fiscal Year 2008, 10,000 are immediately exercisable a nd the balance becomes exercisable by April 30, 2009. An aggregate of 250,000 options were forfeited during the year ended April 30, 2008. During the three months ended January 31, 2009, the Board of Directors granted options to purchase 1,665,000 shares to directors, officers and key employees and consultants of the Company, effective December 31, 2008. The exercise price of the options was $0.12, the closing price of Company shares on December 31, 2008. The options grant on December 31, 2008 become exercisable on December 31, 2009 and expire on December 31, 2014.
As of April 30, 2008, and 2007 the options granted under the plan are fully vested, however, the agreement limits the number of options to be exercised each year through April 30, 2009. Due to the limitations on exercising the options, and the fact that they expire if the employee resigns or is terminated for cause, the Company has treated the options as if they vest over a two-year period. The Company expects to recognize approximately $1,600,000 in stock compensation expense ratably through April 30, 2009. There have been no options exercised under the terms of the Plan.
The Company uses the Black-Scholes option-pricing model to estimate the fair value of the options at the grant and vesting date. The Company granted 1,665,000 options to purchase common stock during the three months ended January 31, 2009. The fair values of options granted and vested were calculated using the following weighted-average assumptions:
| Three Months | |
| Ended | |
| January 31, 2009 | |
| Expected dividend yield | – |
| Expected price volatility | 125% |
| Risk free interest rate | 1.55% |
| Expected term of options (in years) | 6 years |
A summary of option activity under the Plan as of January 31, 2009 and changes during the period then ended is presented below:
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| Weighted | ||||||||
| Weighted | Average | |||||||
| Average | Remaining | Aggregate | ||||||
| Number | Exercise | Contractual | Intrinsic | |||||
| of Shares | Price | Term | Value | |||||
| Options outstanding – November 1, | ||||||||
| 2008 | 3,160,000 | $ | .56 | 3.54 | $ | 5,214,990 | ||
| Granted during period | 1,665,000 | $ | .12 | 5.00 | 172,150 | |||
| Exercised during period | – | – | – | -- | ||||
| Forfeited during period | – | – | – | – | ||||
| Expired during period | – | – | – | – | ||||
| Options outstanding –January 31, | ||||||||
| 2009 | 4,825,000 | $ | .42 | 5.00 | $ | 5,387,140 | ||
| Exercisable at January 31, 2009 | 655,000 | $ | 2.64 | |||||
The weighted average grant date fair value of options granted during the three months ended January 31, 2009 was $.11 per share. The weighted average remaining contractual term is five years for all options outstanding.
Included in the 1,665,000 options granted on December 31, 2008 were 100,000 options to a consultant. The exercise price of the options was $0.12, the closing price on the date of grant. The options become exercisable on December 31, 2009 and expire on December 31, 2014. The total expense was $11,000.
Note 6: Income Tax
The federal net operating loss (NOL) carryforward of approximately $3,100,000 as of January 31, 2009 expires on various dates through 2028. Internal Revenue Code Section 382 places a limitation on the amount of taxable income which can be offset by NOL carryforwards incurred before a change in control. “Change in control” for these purposes generally means greater than a 50% change in ownership of the corporation. After a change in control, a loss corporation cannot deduct NOL carryforwards existing at the time of the change in control in excess of the Section 382 limitations. Due to these “change in ownership” provisions, utilization of NOL carryforwards may be subject to an annual limitation in future periods. The Company has not performed a Section 382 analysis, however approximately ninety percent of the present NOL was incurred during the fiscal years beginning April 1, 2007 and thereafter which was consequently after a change in control of the Company in March, 2006.
Nonetheless, the Company has established a full valuation allowance against the deferred tax assets because, based on the weight of available evidence including our continued operating losses, it is more likely than not that all of the deferred tax assets will not be realized. Because of the full valuation allowance, no income tax expense or benefit is reflected on the statement of operations.
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This Quarterly Report includes certain statements that may be deemed to be “forward-looking statements that reflect our current views with respect to future events and financial performance. All statements include in this Quarterly Report, other than statements of historical facts, address matters that we reasonably expect, believe or anticipate will or may occur in the future. Forward-looking statements may relate to, among other things:
our future financial position, including working capital and anticipated cash flow;
the risks of the oil and gas industry, as they relate to demand for leasing the ARIDtool;
market demand;
risks and uncertainties involving geology of oil and gas deposits;
the uncertainty of estimates and projections relating to costs and expenses;
health, safety and environmental risks;
uncertainties as to the availability and cost of financing; and
the possibility that government policies or laws may change or governmentalapprovals may be delayed or withheld.
Other sections of this Quarterly Report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or to the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Our forward looking statements contained in this Quarterly Report are made as of the respective dates set forth in this Quarterly Report. Such forward-looking statements are based on the beliefs, expectations and opinions of management as of the date the statements are made. We do not intend to update these forward-looking statements, except as required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.
Plan of Operations
The plan of operations discussed below in this Quarterly Report, reflects the operations of our current business which is to lease or sell the ARID tool and process to oil and gas companies.
We are a development stage company and have realized minimal revenues from our current business operations.
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We are in the process of applying for permits with the DEQ to conduct pilot projects for the ARID tool and process, and we are continuing to refine and improve the field use of the ARID tool and process. Currently, we have leased eleven ARID tools, one of which is operating in CBM (coal bed methane) gas well bore in the Powder River Basin of Wyoming. The cost of research and development has been minimal and has been expensed as incurred.
We have amended our application for the trademark “ARID” with the United States Patent and Trademark Office. In approximately six months we should receive an examination report from the United States Patent and Trademark Office regarding the trademark application.
We are focusing all our resources for the next six months to establish and complete 3-4 pilot projects in the Powder River Basin of Wyoming, with these projects generating ARID tool leases in the last half of fiscal 2010.
During the nine months ended January 31, 2009 the Company completed the private placement of 1,000,000 units, at $.50 per unit, each unit consisting of one restricted share of its common stock and one warrant to purchase one share of restricted common stock at $.75 per share. In accordance with EITF 00-19, “Accounting for Derivative Financial Instruments Indexed To, and Potentially Settled In a Company’s Own Stock,” (EITF 00-19) and the terms of the warrants and the transaction documents, the warrants were determined to represent an equity transaction and therefore the fair value of the warrants are contained within the equity section and not separately recorded apart from the common shares issued as part of the private placement. The offering began during the fourth quarter of the fiscal year ended March 31, 2008 and was completed during the first quarter of the current fiscal year. As a result of sales during the first quarter, the Company received proceeds of $500,000 from the private placement. The private offering was made in reliance on an exemption from registration in the United States under Section 4(2) and/or Regulation D of the United States Securities Act of 1933, as amended. The Company relied upon exemptions from registration believed by it to be available under federal and state securities laws in connection with the offering. Following the above sale, the Company’s outstanding common stock increased to 32,041,000 shares.
Results of Operations
Three Months Ended January 31, 2009 Compared to Three Months Ended January 31, 2008
We reported a net loss for the three months ended January 31, 2009 of $693,119 compared with a net loss before discontinued operations of $731,260 and a net loss of $794,709 for the same period in 2008. The net loss for the three months ended January 31, 2009 included $397,108 attributable to non-cash consideration related to the issuance of stock options to management compared to $468,000 for the same period in 2008.
We recorded personnel costs of $606,732 during the three month period ended January 31, 2009, as compared to $656,028 during the same period in 2008. As noted above, we recorded a stock based compensation charge of $397,108 for the three month period ended January 31, 2009, compared with $468,000 for the same period in 2008.
We incurred professional fees of $45,316 during the three month period ended January 31, 2009, as compared to $40,762 during the same period in 2008 Most of the professional fees related to the cost of required SEC filings and to certain costs incurred for patent application that were considered duplicative to earlier capitalized costs.
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Our general and administrative costs were $59,151 during the three month period ended January 31, 2009, as compared to $62,310 during the same period in 2008. The major components of other general and administrative costs are insurance and advertising/marketing expenses in both years.
The Company recorded $63,449 for discontinued operations for the three months ended January 31, 2008, relating to the spin off of Sterling Oil & Gas Company. This amount reflects the Sterling loss for the three months ended January 31, 2008 of $95,168, which includes a non cash charge of $11,000 for contributed consulting fees, offset by a minority interest of $31,719.
Nine months ended January 31, 2009 Compared to Nine months ended January 31, 2008
We reported a net loss for the nine months ended January 31, 2009 of $1,981,998 compared with a net loss before discontinued operations of $2,634,621 and a net loss of $2,715,938 for the same period in 2008. The net loss for the nine months ended January 31, 2009 included $1,141,108 attributable to non-cash consideration related to the issuance of stock options to management compared to $1,388,000 for the same period in 2008. The 2008 loss before discontinued operations also contained a $433,000 non cash charge for the valuation loss on the Sterling Oil & Gas subsidiary, which was spun off in April 2008.
We recorded personnel costs of $1,810,305 during the nine month period ended January 31, 2009, as compared to $1,927,004 during the same period in 2008. We recorded a stock based compensation charge of $1,141,108 for the nine month period ended January 31, 2009, compared to $1,388,000 for the same period in 2008.
We incurred professional fees of $134,214 during the nine month period ended January 31, 2009 as compared to $144,962 during the same period 2008. Most of the professional fees related to the cost of required SEC filings and to certain costs incurred for patent application that were considered duplicative to earlier capitalized costs.
Our general and administrative costs were $122,338 during the nine month period ended January 31, 2009, as compared to $186,692 during the same period in 2008. The major components of other general and administrative expense are insurance and marketing/advertising costs.
The Company recorded a loss of $81,317 for discontinued operations for the nine months ended January 31, 2008, relating to the spin off of Sterling Oil & Gas Company. This amount reflects the Sterling loss for the nine months ended January 31, 2008 of $121,586, which includes a non cash charge of $30,800 for contributed consulting fees, offset by a minority interest of $40,269.
Liquidity and Capital Resources
As of January 31, 2009, we had working capital of approximately $686,087, and it is uncertain whether this amount will be sufficient to fund operations for the next year. Therefore, we may seek additional sources of capital for the coming year.
Cash used in operations was $392,597 for the nine months ended January 31, 2009, and compared to cash used in operations of $895,809 for the nine months ended January 31, 2008. In the nine month period ended January 31, 2009 cash provided by operations was principally attributed to our net loss offset by cash provided by trading securities and our non-cash compensation expense of $1,141,108. For the nine months ended January 31, 2008 cash used in operations was principally from our net loss and activities in trading securities offset by non-cash compensation expense of $1,388,000 and the effect of discontinued operations of $427,953.
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Cash flows used in investing activities were $20,159 for the nine months ended January 31, 2009, compared to cash provided by investing activities of $120,900 for the three months ended January 31, 2008, primarily from the discontinued operations of Sterling.
Cash flows from financing activities were $500,000 for the nine months ended January 31, 2009, and $749,210 for the nine months ended January 31, 2008. For the nine months ended January 31, 2009, cash from financing was principally from the private placement of our stock and for the nine months ended January 31, 2008 cash from financing was from a private placement and from the discontinued operations of Sterling.
During the nine months ended January 31, 2009 the Company completed the private placement of 1,000,000 units, each unit consisting of one restricted share of its common stock at $.50 per share and one warrant to purchase one share of restricted common stock at $.75 per share. In accordance with EITF 00-19, “Accounting for Derivative Financial Instruments Indexed To, and Potentially Settled In a Company’s Own Stock,” (EITF 00-19) and the terms of the warrants and the transaction documents, the warrants were determined to represent an equity transaction and therefore the fair value of the warrants are contained within the equity section and not separately recorded apart from the common shares issued as part of the private placement. The offering began during the fourth quarter of the fiscal year ended March 31, 2008 and was completed during the first quarter of the current fiscal year. As a result of sales during the first quarter, the Company received proceeds of $500,000 from the private placement. The private offering was made in reliance on an exemption from registration in the United States under Section 4(2) and/or Regulation D of the United States Securities Act of 1933, as amended. The Company relied upon exemptions from registration believed by it to be available under federal and state securities laws in connection with the offering. Following the above sale, the Company’s outstanding common stock increased to 32,041,000 shares.
During the nine months ended January 31, 2008 the Company completed the private placement of 500,000 restricted shares of its common stock to an accredited investor. The Company received proceeds of $500,000 from the private placement. The private offering was made in reliance on an exemption from registration for a sale in the United States under Section 4(2) and/or Regulation D of the United States Securities Act of 1933, as amended. The Company relied upon exemptions from registration believed by it to be available under federal and state securities laws in connection with the offering. Following the above sale, the Company’s common stock increased to 30,041,000 shares issued and outstanding.
Financial Instruments and Other Information
As of January 31, 2009 and January 31, 2008 we had cash, marketable securities, accounts payable and accrued liabilities, which are each carried at approximate fair value due to the short maturity date of those instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
Critical Accounting Polices and Estimates
Use of Estimates in the Preparation of Financial Statements
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of any oil and gas reserves, 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
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period. The Company bases its estimates on historical experience and on various assumptions it believes to be reasonable under the circumstances. Although actual results may differ from these estimates under different assumptions or conditions, the Company believes that its estimates are reasonable.
Equity Based Compensation
SFAS 123(R) requires companies to estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our statement of operations. Prior to the adoption of SFAS 123(R), we had no stock-based compensation awarded to employees and directors.
Recently Issued Accounting Pronouncements:
In May 2008, the FASB issued SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles.This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). We are currently evaluating the impact of adopting SFAS 160 on our results of operations and financial condition.
In May 2008, the FASB issued SFAS No. 163Accounting for Financial Guarantee Insurance Contracts—an interpretation of FASB Statement No. 60.This Statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. This Statement requires expanded disclosures about financ ial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements.
This Statement is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years, except for some disclosures about the insurance enterprise’s risk-management activities. We do not anticipate the adoption of SFAS 163 will have any effect on the Company’s future financial position or results of operations.
In September 2008 the FASB issued FSP FAS 133-1 and FIN 45-4Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161.The credit derivatives market has expanded significantly over the past few years. Financial statement users and others have expressed concerns that the current disclosure requirements for derivative instruments and certain guarantees do not adequately address the potential adverse effects of changes in credit risk on the financial position, financial performance, and cash flows of the sellers of credit derivatives and certain guarantees. This FSP amends FASB Statement No. 133,Accounting for Derivative Instruments and Hedging Activities,to require disclosures by sellers of credit derivatives, including credit derivatives embedded in a hybrid instrument. This FSP also amends FASB Interpretation No. 45,Guarantor’s
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Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,to require an additional disclosure about the current status of the payment/performance risk of a guarantee. Further, this FSP clarifies the Board’s intent about the effective date of FASB Statement No. 161,Disclosures about Derivative Instruments and Hedging Activities. We do not anticipate the adoption of this FSP will have a material effect on the Company’s future financial position or results of operations.
Off-Balance Sheet Arrangements
From time-to-time, we may enter into off-balance sheet arrangements and transactions that can give rise to off-balance sheet obligations. As of January 31, 2009 and January 31, 2008, there were no off –balance sheet arrangements.
ITEM 4T. CONTROLS AND PROCEDURES
The Company’s Chief Executive Officer and the Principal Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of January 31, 2009. Based on this evaluation, the Chief Executive Officer and Principal Financial Officer concluded that, as of January 31, 2009 the Company’s disclosure controls and procedures were effective.
There were no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended January 31, 2009, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. Legal ProceedingsNone
ITEM 2. Unregistered Sales of Equity Securities and Use of ProceedsNone
ITEM 3. Default Upon Senior SecuritiesNone
ITEM 4. Submission of Matters to a Vote of Security HoldersNone
ITEM 5. Other InformationNone
ITEM 6. EXHIBITS.
Exhibits Document Description
31.1 Section 302 Certification of Principal Executive Officer.
31.2 Section 302 Certification of Principal Financial Officer.
32.1 Section 906 Certification of Chief Executive Officer.
32.2 Section 906 Certification of Chief Financial Officer.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities and Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 12th day of March, 2009.
BIG CAT ENERGY CORPORATION
BY: TIMOTHY BARRITT
Timothy Barritt, President and Principal
Executive Officer
BY: RICHARD G. STIFEL
Richard G. Stifel, Principal Accounting Officer
and Principal Financial Officer
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