UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amended Form 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934
NOVA ENERGY, INC.
(Exact Name of Registrant as Specified in its Charter)
Nevada |
| 98-0211769 |
(State or Other Jurisdiction of Incorporation or Organization) |
| (IRS Employer Identification No.) |
2050 Russet Way, Ste. 190
Carson City, NV 89703
775-720-9411
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class To Be so Registered |
| Name of Exchange on Which Each Class is to be Registered |
Common stock, par value $0.001 per share |
| Over the Counter Bulletin Board |
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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x
TABLE OF CONTENTS | Page | |
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ITEM 1: | DESCRIPTION OF BUSINESS | 3 |
ITEM 1A: | RISK FACTORS | 4 |
ITEM 2: | FINANCIAL INFORMATION | 7 |
ITEM 3: | PROPERTIES | 9 |
ITEM 4: | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 9 |
ITEM 5: | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS | 9 |
ITEM 6: | EXECUTIVE COMPENSATION | 10 |
ITEM 7: | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | 10 |
ITEM 8: | LEGAL PROCEEDINGS | 10 |
ITEM 9: | MARKET PRICE OF AND DIVIDENDS ON REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS | 10 |
ITEM 10: | RECENT SALE OF UNREGISTERED SECURITIES | 11 |
ITEM 11: | DESCRIPTION OF REGISTRANT’S SECURITIES TO BE REGISTERED | 11 |
ITEM 12: | INDEMNIFICATION OF OFFICERS AND DIRECTORS | 11 |
ITEM 13: | FINANCIAL STATEMENTS | 13 |
ITEM 14: | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURES | 23 |
ITEM 15: | EXHIBITS | 23 |
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Signatures |
| 24 |
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PART I
ITEM 1: DESCRIPTION OF BUSINESS
Business Development
Nova Energy, Inc. (“Nova” or “We”), was formerly known as MexTrans Seafood Consulting, Inc. and PCSupport.com, Inc. (PCSP), which was incorporated under the laws of the State of Nevada on April 7, 1999, for the purpose of engaging in the development and provision of notebook computer support services to end users through the Internet.
On October 19, 1999, PCSupport.com, Inc. filed a 10SB12g. On May 24, 2000, PCSupport.com, Inc. filed an SB-2 registering 7,291,331 common stock shares.
PCSupport.com, Inc. had been listed on the OTCBB exchange. On or about November 14, 2002, PCSupport.com, Inc. was de-listed from the OTCBB for not filing timely reports.
In December 2002, PCSupport.com, Inc. management decided that they were not going to be able to implement their business plan and resigned their respective positions as officers and directors, and simultaneously appointed Daymon Bodard, President, Secretary and sole director.
On May 12, 2005, we effectuated a 1:300 reverse split.
On May 30, 2005, we changed our name to Nova Energy, Inc.
On April 26, 2006, we filed a Form 15 voluntarily terminating our obligations pursuant to Rule 12(g) of the Securities Act of 1934.
Current Business Operation
Presently, we have operating working interests in wells located in Texas. This portfolio of working interests provides the Company with a foundation to execute its business plan by achieving growth through its investments. We will continue to seek known, proven, developed reserves of oil and natural gas that present long term, fundamentally sound economic opportunities for the Company and our shareholders.
The oil and natural gas industry have a history of demonstrated, long term, fundamental strength and viability. We expect to position the Company for expanded growth.
The Company’s strategic objectives continue to be:
- Research and identify known, proven, developed reserves that present low risk opportunities;
- Continue to review opportunities with potential joint venture partners with proven track records in the oil and gas sector; and
- To grow the Company and achieve exponential growth in order to build value per share.
We expect to continue to develop our business plan by locating, researching and investing in quality drilling targets. We believe that in-depth research of lease ownership, on-site visits as well as historical analysis of potential drilling targets are paramount. Combining new technology that is now available and being successfully used in the recovery of new deposits by other oil and gas companies, could help reduce the risks traditionally associated with the development of new or existing oil and gas reserves.. Based on current engineering reports, well logs, site visits and the history and long-term experiences of the operating company, Nova Energy, Inc. believes that key areas of Texas will continue to be commercially viable and provide new opportunities for Nova Energy, Inc. and will build long-term shareholder value.
Again, our focus is on generating only highly verified fields that were formerly validated by the drill bit, with primary focus on oil reserves; To apply the vast amount of new technology that has become available in the past few years in combination with industry standard testing methods to assist in our exploration and development of existing oil fields.
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Subsidiaries
We do not have any subsidiaries.
Patents and Trademarks
We do not own, either legally or beneficially, any patents or trademarks.
Key Employees
At June 30, 2008, the Company had one Director Officer and one employee, the Company’s President, Daymon Bodard.
ITEM 1A: RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this annual report before investing in our common stock. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.
If we do not obtain additional financing, our business will fail.
Our current operating funds are less than necessary to complete all intended exploration opportunities with REO Energy and others. Therefore, we will need to obtain additional financing in order to complete our business plan.
Our business plan calls for significant expenses in connection with the exploration with REO Energy. We will require additional financing to sustain our business operations if we are not successful in earning revenues once exploration is complete. We do not currently have any arrangements for financing and may not be able to find such financing if required. We anticipate that any additional financing requirements will be satisfied through the sale of our stock or director loans from Mr. Bodard’s personal and family funds. Obtaining additional financing would be subject to a number of factors, including the market price for oil and natural gas, investor acceptance of our property and general market conditions. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us.
We compete with large and small competitors to acquire oil and gas properties, enter into joint venture arrangements, hire and retain qualified personnel and service providers and obtain financing for our exploration programs, which may affect our ability to achieve commercial profitability.
Oil and gas exploration is intensely competitive and involves a high degree of risk. We cannot assure you that we will ever develop any of our properties into properties that produce sufficient quantities of oil and gas to be profitable. In our efforts to acquire properties, we compete with other companies that have greater resources. Many of these companies not only explore for and produce oil and gas, but also conduct refining and petroleum marketing operations on a worldwide basis.
Competition for producing properties, our ability to retain qualified personnel and our ability to complete our exploration programs will be affected by the amount of funds available to us, our ability to successfully identify oil and gas reserves, if any, and the actions of our competitors. We also may experience competition from development of alternative fuel sources.
Oil and gas exploration involves risks, which could adversely affect our profitability.
We cannot assure you that commercial quantities of hydrocarbons will be recovered by us in the future or that our exploration programs will lead to the discovery of any commercially viable reserves. The marketability of any oil and gas acquired or discovered will be affected by numerous factors beyond our control, which include oil and gas price fluctuations, proximity and capacity of oil and gas pipelines and processing equipment and government regulations (including regulations relating to royalties, allowable production, importing and exporting of oil and gas, and environmental protection). In addition, hazards such as unusual or unexpected formations, pressures or other conditions are involved in drilling and operating wells.
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The expiration of licenses and leases could cause us to lose our interests in our mineral property prior to achieving commercial profitability.
Our property is held in the form of working interests in licenses and leases. If we or the holder of the license or lease fails to meet the specific requirements of each license or lease, the license or lease may terminate or expire. We cannot assure you that any of the obligations required to maintain each license or lease will be met. The termination or expiration of our licenses or leases or the working interests relating to our licenses or leases may have a material adverse effect on our results of operation and business.
Potential conflicts of interest may divert the attention of our directors, officers and/or contractors from our business or affect their ability to dedicate their full attention to our business and exploration program.
Certain of our directors and officers are also directors, officers, contractors and/or employees of other companies engaged in oil and gas exploration. To the extent that such other companies may participate in ventures in which we may participate, our directors may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. In the event that such a conflict of interest arises at a meeting of our directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In appropriate cases, we will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict. From time to time several companies may participate in the acquisition, exploration of oil and gas properties thereby allowing for their participation in larger programs, permitting involvement in a greater number of programs and reducing financial exposure in respect of any one program. A particular company may assign all or a portion of its interest in a particular program to another of these companies due to the financial position of the company making the assignment.
Environmental regulation may increase the costs of production from our properties, which would affect our ability to earn a profit.
Hazards incident to the exploration of oil and gas properties such as accidental spills or leakage of petroleum liquids and other unforeseen conditions may be encountered by us. We may be subject to liability for pollution and other damages due to hazards which cannot be insured against due to prohibitive premium costs or for other reasons. Governmental regulations relating to environmental matters are subject to constant change and could increase the cost of exploration or require alteration or cessation of operations in certain areas.
Existing and possible future environmental legislation, regulations and actions could give rise to additional expense, capital expenditures, restrictions and delays in our activities, the extent of which cannot be predicted. Regulatory requirements and environmental standards are subject to constant evaluation and may be significantly increased, which could materially and adversely affect our business or our ability to develop and produce its properties on an economically feasible basis. The cost of compliance with changes in governmental regulations has the potential to reduce the profitability of operations.
We currently do not maintain a fund for restoring sites on which we drill wells or conduct production operations, which could require us to expend substantial resources in the future to restore these sites.
We do not maintain a fund for restoring production sites. Existing and possible future environmental legislation, regulations and actions could give rise to an obligation to restore the sites on which we drill wells or conduct production operations. The costs related to restoration or remediation efforts could be substantial and could have a material adverse affect on our business.
Fluctuation and volatility of oil and gas prices may affect the commercial feasibility of our mineral properties and our ability to raise future financing on acceptable terms.
As with most other companies involved in resource exploration, we may be adversely affected by future increases in the costs of conducting exploration, development and resource extraction that may not be fully offset by increases in the price received on sale of the petroleum or natural gas.
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Our revenues, profitability and future growth, if any, and the value of our oil and gas properties are substantially dependent on prevailing prices of oil and gas. Our ability to borrow and to obtain additional capital on attractive terms is also substantially dependent upon oil and gas prices. Prices for oil and gas are subject to large fluctuations in response to relatively minor changes in the supply of and demand for oil and gas, market uncertainty and a variety of additional factors beyond our control. These factors include economic conditions in the United States and the world in general, the actions of the Organization of Petroleum Exporting Countries, governmental regulation, political stability in the Middle East and elsewhere, the foreign supply of oil and gas, the price of foreign imports and the availability of alternate fuel sources. Any substantial and extended decline in the price of oil and gas would have an adverse effect on the value of our properties, borrowing capacity, revenues, profitability and cash flows from operations.
Over the last 2 years oil prices have fluctuated from US$45 to US$146 per barrel. In 2008, oil prices increased up to US$146 per barrel after experiencing a significant decline to a low of approximately US$45 per barrel in 2006 due to a variety of factors beyond our control. Oil and gas prices could be significantly impacted if/or when the Kyoto Protocol is enacted. The Kyoto Protocol requires Western countries, including the United States, to reduce the emission of hydrocarbons to below existing levels, increase the efficiency of the use of oil and its byproducts and reduce consumption. In the long term, we expect oil prices to increase with inflation, as well as with economic recovery in Asia and other parts of the world.
Volatile oil and gas prices make it difficult to estimate the value of producing properties for acquisition and often cause disruption in the market for oil and gas producing properties, as buyers and sellers have difficulty agreeing on such value. Price volatility also makes it difficult to budget for and project the return on acquisitions and development and exploitation projects.
Local, national and international economic conditions are beyond our control and may have a substantial adverse affect on our efforts. We cannot guard against the effects of these potential adverse conditions.
Resources properties are subject to risks, which may require us to defend, enforce or undertake certain curative work to perfect rights in our properties.
It is our practice in acquiring oil and gas leases or interests in oil and gas leases to undergo the expense of retaining lawyers to fully examine the title to the interest to be placed under lease or already placed under lease as title opinions are the requirement of our lenders in the property acquisition.
Prior to the drilling a well for oil and gas, it is the normal practice of the oil and gas industry for the person or company acting as the operator of the well to hire a lawyer to examine the title to the spacing unit within which the proposed oil and gas well is to be drilled. Frequently, as a result of such examination, certain curative work must be done to correct deficiencies in the marketability of the title, and the curative work entails expense. The work might include obtaining affidavits of heirship or causing an estate to be administered.
We depend on key personnel for our commercial success.
We depend on the expertise of our President, Daymon Bodard. His loss could have a material adverse effect on our business. We do not maintain key-person insurance policies on any of our executive officers.
Title to oil and gas properties.
The Company has taken and will continue to take all reasonable steps, in accordance with the laws and regulations of the jurisdictions in which its property is located, to ensure proper title of the property it may acquire in the future, either at the time of acquisition or prior to any major expenditures thereon. This, however, should not be construed as a guarantee of title. There are no assurances that the Company will obtain title. Both presently owned and after-acquired properties may be subject to prior unregistered agreements, transfers, land claims or other claims or interests and title may be affected by undetected defects. The Company will attempt to obtain clear title and obtain legal opinions commensurate to the intended level of expenditures required on areas that show promise. There can be no assurance, however, that the Company will be successful in doing so.
Government Regulation
The current and future operations of the Company, including development activities and commencement of production on properties the Company may acquire, require permits from various federal, provincial, and local governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, safety and other matters.
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Any oil and gas operations involving the Company may be subject to environmental regulations promulgated by government agencies from time to time. Environmental legislation often includes provisions relating to restrictions and prohibitions on spills, releases or emissions of various substances produced in association with oil and gas operations, which would result in environmental pollution. A breach of such legislation may result in imposition of fines and penalties. In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a manner which means stricter standards and enforcement, and fines and penalties for non-compliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with environmental legislation and changes in such legislation has a potential to reduce the profitability of operations below an acceptable level.
Stricter standards in environmental legislation may be imposed on the industry or the Company in the future, which could materially and adversely affect the business of the Issuer or its ability to develop its properties on an economic basis.
Permits and Licenses
The operations of the Company may require licenses and permits from various governmental authorities. There can be no assurance that the Company will be able to obtain all necessary licenses and permits that may be required to carry out exploration, development and resource extraction operations on its properties.
Uninsurable Risks
In the course of exploration, development and production of oil and gas properties, certain risks, and in particular, unexpected or unusual geological operating conditions including blow-outs, cave-ins, fires, flooding and earthquakes may occur. It is not always possible to fully insure against such risks and the Company may decide not to take out insurance against such risks as a result of high premiums or other reasons. Should such liabilities arise, they could reduce or eliminate any future profitability and result in increasing costs and a decline in the value of the securities of the Company.
ITEM 2. FINANCIAL INFORMATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-looking Statements
Statements made in this Registration Statement which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, (i) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words “may,” “would” “could,” “should,” “expects,” ”projects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,” “targets” or similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, general economic or industry conditions, nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our operations, products, services and prices.
Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
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Results Of Operations For Fiscal Year Ended June 30, 2007 and June 30, 2008
Liquidity and Capital Resources
During the transitional period ended June 30, 2008, $46,615 in revenues were generated by the Company as opposed to $116,811for the year ended 2007. Since its inception, the Company has had revenues of $276,599. For the year ended June 30, 2008, the Company incurred a loss of $762,654 as opposed to a loss of $190,201 for the year ended 2007. The basic and diluted loss per share for both the year ended 2008 and the year ended 2007 was ($.00). The increase in losses for the year ended 2008 is a result of the wells the Company initially invested in had suffered from severe highline pressure and essentially stopped producing oil or gas. The drilling operators required the Company to invest an additional $75,000 to refrac one of the wells or as an option, sell the both wells back to the operators. The Company made the business decision to sell the wells back to the operators rather than continuing to invest in non-producing wells. The stockholders’ equity for the year ended June 30, 2008 was $792,103 and $29,448 for the year ended 2007.
The general and administrative expenses for the year ended 2008 were $205,308 compared to $175,687 for the year ended 2007. Expenses are based on the accrual method and have included a $5,000/mo. salary due the Company’s President, Daymon Bodard, which is being deferred.
The Company expects to continue to incur substantial losses to explore the concession, and does not expect to attain profitability in the near future. Since its inception, the Company has funded operations through short-term borrowings and equity investments in order to meet its strategic objectives. The Company's future operations are dependent upon external funding and its ability to increase revenues and reduce expenses. Management believes that sufficient funding will be available from additional related party borrowings and private placements following its merger to meet its business objectives including anticipated cash needs for working capital, for a reasonable period of time. However, there can be no assurance that the Company will be able to obtain sufficient funds to continue the development of its software products and distribution networks.
The Company's financial statements have been prepared assuming that it will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles or GAAP in the United States. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.
Critical accounting policies are those that reflect significant judgments or uncertainties, and potentially result in materially different results under different assumptions and conditions. The Company believes that are our most critical accounting policies includes: recognition of transactions revenues and accounting for stock options and warrants.
Revenue Recognition
Revenues are recognized in accordance with Statement of Position 98-7 when: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the Company’s fee is fixed and determinable, and; (4) collectibility is probable.
Accounting for Stock-Based Compensation
The Company accounts for stock-based employee compensation arrangements in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and complies with the disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Under APB No. 25, compensation expense is recognized based on the difference, if any, on the date of grant between the estimated market value of the Company’s stock and the amount an employee must pay to acquire the stock. Compensation expense is recognized immediately for past services and ratably for future services over the option-vesting period. If the Company followed SFAS 123, it would recognize compensation expense using a fair value method, such as Black-Scholes, to estimate the cost of equity instruments as of the date these awards are granted to employees. Any differences between the expense as calculated under SFAS 123 and that computed under APB No. 25 is disclosed on a pro forma basis in the notes to the consolidated financial statements.
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ITEM 3. DESCRIPTION OF PROPERTY
In August 18, 2005, the Company completed a sales agreement to acquire a working interest from Lee Hansen, in a producing well in the State of North Dakota, the legal description being: Billings County North Dakota T144 R98 Sec. 28 NE 1/4 and Sec 21 SE 1/4. This production is unitized in a 320 acre spacing". This transaction did not involve a merger or change of control. The well was thought to be unproductive but we are now review the possibility of re-fracing the well.
Soon after we created a web site, www.novaenergyinc.com, for the benefit of our current shareholders and any potential interested parties.
After year end June 30, 2006, in July, $375,000 was raised by the Company for a net revenue working interest in the well known as Inglish 1H, in the Barnett Shale Prospect, Cooke County, Texas. Actual drilling on the Inglish #1H horizontal well began on June 29, 2006. This well is now in production and is commercially viable.
In August 2006, we acquired an additional working interest participation in an oil well in the Barnett Shale area known as the Inglish D1, Barnett Shale Prospect, Cooke County, Texas. As a result of a private transaction, the company received funds in the amount of $564,500, a portion of which was used to acquire the additional working interest participation as well as, to provide working capital for future development. The Inglish D1 is in full production and is also commercially viable.
ITEM 4. SECURITY OWNERSHIP FOR CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of our shares of common stock as of the date of this annual report by (i) each person known by us to be the beneficial owner of more than 10% of our outstanding shares of common stock, (ii) each of our directors, (iii) our executive officers, and (iv) by all of our directors and executive officers as a group. Each person named in the table, has sole voting and investment power with respect to all shares shown as beneficially owned by such person and can be contacted at our executive office address.
Name and Address of Beneficial Owner | Title of Class | Amount and Nature of Beneficial Ownership | Percentage |
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Daymon Bodard, President, CEO | Common | 1,352,643 | 39.5 |
and Director |
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2570 Myles Lake Rd. |
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Nanaimo, BC V9X1E7 |
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Netresolutions.com, Inc. | Common | 658,500 | 19 |
706 E. Bell Rd. |
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Phoenix, AZ 85022 |
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The percent of class is based on 3,442,382 shares of common stock issued and outstanding as of the date of this registration statement.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Name |
| Age |
| Position with Registrant |
Daymon Bodard |
| 55 |
| President, C.E.O., Secretary - Treasurer and director |
The following describes the business experience of our director and executive officer, including other directorships held in reporting companies:
Daymon Bodard, President and Board member, presently owns 1,352,643 shares, which represents 39.5% of the Company’s issued and outstanding common stock. Daymon Bodard, age 55, has a university degree in Business Administration and Management. In addition to being the President of Nova Energy, Inc., since 1994 he has been President of a private company, MSI Management Services, Inc., a general business management consulting services company which has provided general consulting services for private companies that are involved in the oil/gas energy sector.
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1990 - 1994 -
National Sales Manager for International Tobacco Company.
1982 - 1990 -
Independent business owner with operations in the natural resources industry.
ITEM 6. EXECUTIVE COMPENSATION
Summary Compensation Table
Name and Principal Position | Year or Period |
| Salary | Bonus | Stock Awards | Option Awards | Non Equity Incentive Plan Compensation | Nonqualified Deferred Compensation | All Other Compensation | Total Earnings |
Daymon Bodard, | 2007 & | $ | 5,000 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
President, Director | 2008 |
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* Salary has been deferred
ITEM 7: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None of our directors or officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to all of our outstanding shares, nor any promoter, nor any relative or spouse of any of the foregoing persons has any material interest, direct or indirect, in any transaction since our incorporation or in any presently proposed transaction which, in either case, has or will materially affect us.
Our management is involved in other business activities and may, in the future become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between our business and their other business interests. In the event that a conflict of interest arises at a meeting of our directors, a director who has such a conflict will disclose his interest in a proposed transaction and will abstain from voting for or against the approval of such transaction.
ITEM 8. LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding. To the knowledge of our management, no federal, state or local governmental agency is presently contemplating any proceeding against us. To the knowledge of our management, no director, executive officer or affiliate of ours or owner of record or beneficially of more than five percent of our common stock is a party adverse to us or has a material interest adverse to us in any proceeding.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company’s Common Stock is listed on www.pinksheets.com under the symbol "NVAE". The market for the Company’s Common Stock is limited, volatile and sporadic.
To the best of our knowledge there has been inconsistent trading in our common shares. We face a sporadic and potentially volatile trading market. Quotations for, and transactions in, the Securities are capable of rapid fluctuations, resulting from the influence of supply and demand on relatively thin volume. There may be buyers at a time when there are no sellers, and sellers when there are no buyers, resulting in significant variations of bid and ask quotations by market-making dealers, attempting to adjust changes in demand and supply. A sporadic market is also particularly vulnerable to short selling, sell orders by persons owning no shares of stock, but intending to drive down the market price so as to purchase the shares to be delivered at a price below the price at which the shares were sold short.
We have 253 shareholders of record as at the date of this report.
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The following table sets forth the high and low sales prices relating to the Company’s Common Stock for from year ended June 30, 2007 through third quarter ended June 30, 2008. These quotations reflect inter-dealer prices without retail mark-up, mark-down, or commissions, and may not reflect actual transactions.
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| June 30, 2007 |
| June 30, 2008 | ||||
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| High |
| Low |
| High |
| Low |
First Quarter | $ | 2.25 | $ | 1.55 | $ | 1.20 | $ | .45 |
Second Quarter | $ | 2.00 | $ | 1.50 | $ | .20 | $ | .20 |
Third Quarter | $ | 2.00 | $ | .41 | $ | .25 | $ | .15 |
Fourth Quarter | $ | 2.00 | $ | .75 | $ | .20 | $ | .10 |
Dividends
We have no intention to declare dividends at this time. There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends
ITEM 10: RECENT SALE OF UNREGISTERED SECURITIES
For the years ended 2007 and 2008, we have not engaged in any recent sales of unregistered securities.
ITEM 11: DESCRIPTION OF REGISTRANT’S SECURITIES TO BE REGISTERED
We are registering our common stock under this Registration Statement.
Common Stock
We are authorized to issue 52,000,000 shares of common stock, $0.001 par value per share. The holders of our common stock are entitled to one vote per share on each matter submitted to a vote at a meeting of our shareholders. There are no rights to cumulative voting in the election of directors or otherwise.
Our shareholders have no pre-emptive rights to acquire additional shares of our common stock or other securities. Our common stock is not subject to redemption rights and carries no subscription or conversion rights. In the event of our liquidation, the holders of our shares of common stock are entitled to share equally in corporate assets after satisfaction of all liabilities. All shares of our common stock now outstanding are fully paid and non-assessable.
ITEM 12: INDEMNIFICATION OF OFFICERS AND DIRECTORS
State Law
Under the amended Nevada statues, a corporation has the power to indemnify any person who is made a party to any civil, criminal, administrative or investigative proceeding, other than an action by or in the right of the corporation, by reason of the fact that such person was a director, officer, employee or agent of the corporation, against expenses, including reasonable attorneys’ fees, judgments, fines and amounts paid in settlement of any such actions; provided, however, in any criminal proceeding, the indemnified person shall have had no reason to believe the conduct committed was unlawful.
Amended and Restated Certificate of Incorporation
Our Articles of Incorporation states: “Directors of the corporation shall not be liable to either the corporation or its shareholders for monetary damages for a breach of fiduciary duties unless the breach involves (1) a directors duty of loyalty to t he corporation or its shareholders; (2) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (3) liability for unlawful payments of dividends or unlawful stock purchases or redemption by the corporation; or (4) a transaction from which the director derived an improper personal benefit.
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Bylaws
Our Bylaws states:
“Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she is or was a director or an officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith; provided, however, that, except as provided inithese Bylaws with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.” The Bylaws also includes provisions for the advancement of expenses by us; the right of the indemnitee to bring suit against us in the event a claim has been made and we have not responded within specific time periods; that the indemnification granted in not exclusive; a provision for insurance, at our election; and a provision for indemnification of our employees and agents, in the discretion of our Board of Directors.
12
ITEM 13: FINANCIAL STATEMENTS
Nova Energy, Inc.
(Exploration Stage Company)
Financial Statements
June 30, 2008
(Audited)
13
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Nova Energy, Inc.
(An Exploration Stage Company)
We have audited the accompanying balance sheets of Nova Energy, Inc. (An Exploration Stage Company) as of June 30, 2008 and June 30, 2007 and the related statements of operations, stockholders’ equity and cash flows for the years ended June 30, 2008, 2007 and since inception on December 31, 2002 through June 30, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conduct our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nova Energy, Inc. (An Exploration Stage Company) as of June 30, 2008 and June 30, 2007, and the related statements of operations, stockholders’ equity and cash flows for the years ended June 30, 2008, 2007 and since inception on December 31, 2002 through June 30, 2008, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the financial statements, the Company has a net loss of $1,306,706, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 4. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Moore & Associates, Chartered
Moore & Associates, Chartered
Las Vegas, Nevada
September 24, 2008
2675 S. Jones Blvd. Suite 109, Las Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501
14
Nova Energy, Inc.
(Exploration Stage Company)
Balance Sheets
(Audited)
|
| June 30, |
| June 30, |
|
| 2008 |
| 2007 |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
Cash | $ | 103,003 | $ | 127,470 |
Accounts Receivable |
| - |
| 2,705 |
Total Current Assets |
| 103,003 |
| 130,175 |
|
|
|
|
|
Fixed Assets |
|
|
|
|
Equipment |
| 84,924 |
| 84,924 |
Accumulated Depreciation |
| (48,123) |
| (31,139) |
Total Fixed Assets |
| 36,801 |
| 53,785 |
|
|
|
|
|
Other Assets |
|
|
|
|
Investment - Working Interest |
| - |
| 675,000 |
|
|
|
|
|
Total Assets | $ | 139,804 | $ | 858,960 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current Liabilities |
|
|
|
|
Accounts Payable | $ | 1,549 | $ | 1,318 |
Accrued Interest |
| 106,078 |
| 48,218 |
Accrued Salaries |
| 297,600 |
| 237,600 |
Shareholder Payable |
| - |
| 36,771 |
Convertible Note Payable - related party |
| 546,679 |
| 564,500 |
Total current liabilities |
| 931,906 |
| 888,407 |
|
|
|
|
|
Long Term Liabilities |
|
|
|
|
|
| - |
| - |
Total Long Term Liabilities |
| - |
| - |
|
|
|
|
|
Total Liabilities |
| 931,906 |
| 888,407 |
|
|
|
|
|
Stockholders' Equity |
|
|
|
|
|
|
|
|
|
Common Stock, authorized |
|
|
|
|
52,000,000 shares, par value |
|
|
|
|
$0.001, 3,422,400 and 3,433,301, |
|
|
|
|
respectively, issued and outstanding |
| 3,422 |
| 3,433 |
|
|
|
|
|
Paid in Capital |
| 511,182 |
| 511,171 |
|
|
|
|
|
Accumulated Deficit |
| (1,306,706) |
| (544,052) |
|
|
|
|
|
Total Stockholders' Equity |
| (792,103) |
| (29,448) |
|
|
|
|
|
Total Liabilities and Stockholders' Equity | $ | 139,804 | $ | 858,960 |
|
|
|
|
|
The accompanying notes are an integral part of these statements | ||||
15
Nova Energy, Inc.
(Exploration Stage Company)
Statements of Operations
(Audited)
|
|
|
|
|
| December 31 |
|
| For the year ended |
| 2002 (Inception) | ||
|
| June 30, |
| June 30, |
| to June 30, |
|
| 2008 |
| 2007 |
| 2008 |
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
Production Oil/Gas Sales | $ | 46,615 | $ | 116,811 | $ | 276,599 |
|
|
|
|
|
|
|
Cost of Goods Sold |
|
|
|
|
|
|
Production Expenses |
| 15,637 |
| 21,962 |
| 99,383 |
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
General and Administrative |
| 205,308 |
| 175,687 |
| 766,758 |
Professional Fees |
| 10,850 |
| 25,045 |
| 51,347 |
Consulting Fees |
| 13,025 |
| 36,100 |
| 54,825 |
|
|
|
|
|
|
|
Total Expenses |
| 229,183 |
| 236,832 |
| 872,930 |
|
|
|
|
|
|
|
Other Income/Expenses |
|
|
|
|
|
|
Gain/(Loss) on Sale of Assets |
| (506,589) |
| - |
| (506,589) |
Interest Income |
| - |
| - |
| 1,675 |
Interest Expense |
| (57,860) |
| (48,218) |
| (106,078) |
|
|
|
|
|
|
|
Total Other Income/Expenses |
| (564,449) |
| (48,218) |
| (610,992) |
|
|
|
|
|
|
|
Provision for Income Taxes |
| - |
| - |
| - |
|
|
|
|
|
|
|
Net Income/(Loss) | $ | (762,654) | $ | (190,201) | $ | (1,306,706) |
|
|
|
|
|
|
|
Basic and Diluted |
|
|
|
|
|
|
(Loss) per Share | $ | (.00) | $ | (.00) | $ | (.00) |
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
Number of Shares |
| 3,430,359 |
| 34,155,843 |
| 3,430,359 |
|
|
|
|
|
|
|
The accompanying notes are an integral part of these notes | ||||||
16
Nova Energy, Inc.
(Exploration Stage Company)
Statements of Stockholder’s Equity
(Audited)
| Common Stock |
| Paid in |
| Accumulated |
| Total | ||
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity |
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2004 | 17,000 | $ | 17 | $ | 153 | $ | (201,575) | $ | (201,405) |
|
|
|
|
|
|
|
|
|
|
Common Shares issued for services | 3,010,000 |
| 3,010 |
| 27,090 |
|
|
| 30,100 |
Shares issued for debt settlement | 300,000 |
| 300 |
| 2,700 |
|
|
| 3,000 |
Net (Loss) |
|
|
|
|
|
| (69,323) |
| (69,323) |
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2005 | 3,327,000 | $ | 3,327 | $ | 29,943 | $ | (270,898) | $ | (237,628) |
|
|
|
|
|
|
|
|
|
|
Net (Loss) | - |
| - |
| - |
| (82,953) |
| (82,953) |
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2006 | 3,327,000 | $ | 3,327 | $ | 29,943 | $ | (353,851) | $ | (320,581) |
|
|
|
|
|
|
|
|
|
|
July 2006, Paid in Capital | 50,000 |
| 50 |
| 374,950 |
| - |
| 375,000 |
Sept 2006, Paid in Capital | 56,450 |
| 57 |
| 564,443 |
| - |
| 564,500 |
Sept 2006, Conv. Promissory Note - D. Bodard | - |
| - |
| (458,100) |
| - |
| (458,100) |
Adjustment to agree with stock agent | (149) |
| (1) |
| 1 |
| - |
| - |
Net (Loss) | - |
| - |
| - |
| (71,442) |
| (71,442) |
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2006 | 3,433,301 | $ | 3,433 | $ | 511,237 | $ | (425,293) | $ | 89,378 |
|
|
|
|
|
|
|
|
|
|
Jan 2007, Stock Adjustment | - |
| - |
| (66) |
| - |
| (66) |
Net (Loss) | - |
| - |
| - |
| (31,029) |
| (31,029) |
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2007 | 3,433,301 | $ | 3,433 | $ | 511,171 | $ | (456,322) | $ | 58,283 |
|
|
|
|
|
|
|
|
|
|
Net (Loss) | - |
| - |
| - |
| (87,730) |
| (87,730) |
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2007 | 3,433,301 | $ | 3,433 | $ | 511,171 | $ | (544,052) | $ | (29,448) |
|
|
|
|
|
|
|
|
|
|
Net (Loss) | - |
| - |
| - |
| (51,027) |
| (51,027) |
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2007 | 3,433,301 | $ | 3,433 | $ | 511,171 | $ | (595,079) | $ | (80,475) |
|
|
|
|
|
|
|
|
|
|
Net (Loss) | - |
| - |
| - |
| (28,232) |
| (28,232) |
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007 | 3,433,301 | $ | 3,433 | $ | 511,171 | $ | (623,311) | $ | (108,707) |
|
|
|
|
|
|
|
|
|
|
Stock Adjustment | (10,901) | $ | (11) | $ | 11 | $ | - | $ | - |
Net (Loss) | - |
| - |
| - |
| (117,921) |
| (117,921) |
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2008 | 3,422,400 | $ | 3,422 | $ | 511,182 | $ | (741,232) | $ | (226,628) |
|
|
|
|
|
|
|
|
|
|
Net (Loss) | - |
| - |
| - |
| (565,474) |
| (565,474) |
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2008 | 3,422,400 | $ | 3,422 | $ | 511,182 | $ | (1,306,706) | $ | (792,102) |
| |||||||||
The accompanying notes are an integral part of these statements. The Stockholders’ Equity has been restated to reflect the stock split. | |||||||||
17
Nova Energy, Inc.
(Exploration Stage Company)
Statements of Cash Flows
(Audited)
|
| For the year |
| For the year |
| December 31, |
|
| ended |
| ended |
| 2002 (Inception) |
|
| June 30, |
| June 30, |
| to June 30, |
|
| 2008 |
| 2007 |
| 2008 |
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) | $ | (762,654) | $ | (190,201) | $ | (1,306,706) |
Depreciation |
| 16,985 |
| 16,985 |
| 48,123 |
Increase in Accounts Receivable |
| - |
| (2,705) |
| (2,705) |
Decrease in Accounts Receivable |
| 2,705 |
| - |
| 2,705 |
Increase in Accounts Payable |
| - |
| 1,319 |
| 1,549 |
Increase in Accrued Expenses |
| 117,860 |
| - |
| 403,678 |
Decrease in Accounts Payable |
| 230 |
| - |
| - |
Decrease in Accrued Expenses |
| - |
| (24,182) |
| - |
Decrease in Shareholder Payable |
| (74,593) |
| (46,657) |
| (37,822) |
|
|
|
|
|
|
|
Net Cash (Used) by Operating Activities |
| (699,467) |
| (245,441) |
| (891,178) |
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment - Working Interest |
| 675,000 |
| (675,000) |
| - |
Capital Expenditures |
| - |
| - |
| (84,924) |
|
|
|
|
|
|
|
Cash Provided by Investing Activities |
| 675,000 |
| (675,000) |
| (84,924) |
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Repurchase |
| - |
| (66) |
| (66) |
Convertible Notes Payable |
| - |
| 564,500 |
| 564,500 |
Proceeds from Contributed Capital |
| - |
| 480,337 |
| 480,337 |
Proceeds from Sale of Common Stock |
| - |
| 1,063 |
| 34,333 |
|
|
|
|
|
|
|
Cash Provided by Financing Activities |
| - |
| 1,045,834 |
| 1,079,104 |
|
|
|
|
|
|
|
Net Increase in Cash |
| (24,467) |
| 125,393 |
| 103,003 |
|
|
|
|
|
|
|
Cash, Beginning of Period |
| 127,470 |
| 2,077 |
| - |
|
|
|
|
|
|
|
Cash, End of Period | $ | 103,003 | $ | 127,470 | $ | 103,003 |
|
|
|
|
|
|
|
Supplemental Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Paid | $ | - | $ | - | $ | - |
Income Taxes Paid | $ | - | $ | - | $ | - |
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements | ||||||
18
NOTES TO AUDITED FINANCIAL STATEMENTS OF NOVA ENERGY, INC. (EXPLORATION STAGE COMPANY) FOR THE YEAR ENDING JUNE 30, 2008
NOTE 1 - BASIS OF PRESENTATION
The accompanying audited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
Management's Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments - The carrying amounts of financial instruments including other current assets, accounts payable and other current liabilities approximated fair value because of the immediate short-term maturity of these instruments.
Income Taxes - Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of deferred taxes related primarily to differences between the basis of certain assets and liabilities for financial and tax reporting and net operating loss-carry forwards. Deferred taxes represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.
The income tax benefit consists of taxes currently refundable due to net operating loss carry back provisions less the effects of accelerated depreciation for the federal government. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or the entire deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.
Earnings (Loss) Per Share - The Company reports earnings (loss) per share in accordance with Statement of Financial Accounting Standard (SFAS) No.128. This statement requires dual presentation of basic and diluted earnings (loss) with a reconciliation of the numerator and denominator of the loss per share computations. Basic earnings per share amounts are based on the weighted average shares of common outstanding. If applicable, diluted earnings per share assume the conversion, exercise or issuance of all common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Accordingly, this presentation has been adopted for the periods presented. There were no adjustments required to net income for the period presented in the computation of diluted earnings per share. There were no common stock equivalents (CSE) necessary for the computation of diluted loss per share.
Fixed Assets - Fixed assets are recorded at cost and include expenditures that substantially increase the productive lives of the existing assets. Maintenance and repair costs are expensed as incurred. Depreciation is provided using the straight-line method. Depreciation of property and equipment is calculated over the management prescribed recovery periods, which range from 5 years for equipment to 7 years for furniture and fixtures.
When a fixed asset is disposed of, its cost and related accumulated depreciation are removed from the accounts. The difference between un-depreciated cost and proceeds from disposition is recorded as a gain or loss.
Advertising Costs - Advertising costs are expensed as incurred. The Company does not incur any direct-response advertising costs. There has been no advertising costs since inception.
Revenue Recognition - Revenue is recognized on an accrual basis, when revenue is earned. Oil and Gas Revenues are received on a monthly basis subject to oil production and sales to refinery. Revenues can be effected by weather conditions and/or market deliveries.
Comprehensive Income (Loss) - The Company adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income", which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. There were no items of comprehensive income (loss) applicable to the Company during the year covered in the financial statements.
Long-Lived Assets - In accordance with Financial Accounting Standards Board Statement of Financial Accounting Standard No.121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, the carrying value of long-lived assets is reviewed by management on a regular basis for the existence of facts or circumstances, both internally and externally, that may suggest impairment. To date, no such impairment has been indicated. Should there be impairment in the future; the Company will recognize the amount of the impairment based on discounted expected consolidated future cash flows from the impaired assets.
19
Cash and Cash Equivalents - For purposes of the Statements of Cash Flows, the Company considers liquid investments with an original maturity of three months or less to be cash equivalents.
Recent Accounting Pronouncements - In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities". FIN No. 46 requires the consolidation of entities that cannot finance their activities without the support of other parties and that lack certain characteristics of a controlling interest, such as the ability to make decisions about die entity's activities via voting rights or similar rights. The entity that consolidates the variable interest entity is the primary beneficiary of the entity's activities. FIN No. 46 applies immediately to variable interest entities created after January 31,2003, and must be applied in the first period beginning after June 15, 2003 for entities in which an enterprise holds a variable interest entity that it acquired before February 1, 2003. The adoption of this standard did not have an impact on the Company's financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts-and interpretation of FASB Statement No. 60”. SFAS No. 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years. SFAS No. 163 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.
In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB’s amendments to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.
In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133. This standard requires companies to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company has not yet adopted the provisions of SFAS No. 161, but does not expect it to have a material impact on its consolidated financial position, results of operations or cash flows.
In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in developing an estimate of expected term of "plain vanilla" share options in accordance with SFAS No. 123 (R), Share-Based Payment. In particular, the staff indicated in SAB 107 that it will accept a company's election to use the simplified method, regardless of whether the company has sufficient information to make more refined estimates of expected term. At the time SAB 107 was issued, the staff believed that more detailed external information about employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies) would, over time, become readily available to companies. Therefore, the staff stated in SAB 107 that it would not expect a company to use the simplified method for share option grants after December 31, 2007. The staff understands that such detailed information about employee exercise behavior may not be widely available by December 31, 2007. Accordingly, the staff will continue to accept, under certain circumstances, the use of the simplified method beyond December 31, 2007. The Company currently uses the simplified method for “plain vanilla” share options and warrants, and will assess the impact of SAB 110 for fiscal year 2009. It is not believed that this will have an impact on the Company’s consolidated financial position, results of operations or cash flows.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51. This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Before this statement was issued, limited guidance existed for reporting noncontrolling interests. As a result, considerable diversity in practice existed. So-called minority interests were reported in the consolidated statement of financial position as liabilities or in the mezzanine section between liabilities and equity. This statement improves comparability by eliminating that diversity. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is prohibited. The effective date of this statement is the same as that of the related Statement 141 (revised 2007). The Company will adopt this Statement beginning March 1, 2009. It is not believed that this will have an impact on the Company’s consolidated financial position, results of operations or cash flows.
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In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business Combinations.’This Statement replaces FASB Statement No. 141, Business Combinations, but retains the fundamental requirements in Statement 141. This Statement establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The effective date of this statement is the same as that of the related FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements. The Company will adopt this statement beginning March 1, 2009. It is not believed that this will have an impact on the Company’s consolidated financial position, results of operations or cash flows.
In February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities—Including an Amendment of FASB Statement No. 115. This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. This option is available to all entities. Most of the provisions in FAS 159 are elective; however, an amendment to FAS 115 Accounting for Certain Investments in Debt and Equity Securities applies to all entities with available for sale or trading securities. Some requirements apply differently to entities that do not report net income. SFAS No. 159 is effective as of the beginning of an entities first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157 Fair Value Measurements. The Company will adopt SFAS No. 159 beginning March 1, 2008 and is currently evaluating the potential impact the adoption of this pronouncement will have on its consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this statement does not require any new fair value measurements. However, for some entities, the application of this statement will change current practice. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including financial statements for an interim period within that fiscal year. The Company will adopt this statement March 1, 2008, and it is not believed that this will have an impact on the Company’s consolidated financial position, results of operations or cash flows.
NOTE 2– SEGMENTS
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" requires companies to report information about operating segments in interim and annual financial statements. It also requires segment disclosures about products and services, geographic areas and major customers. The Company determined that it did not have any material, separately reportable operating segments as of June 30, 2008
NOTE 3-INCOME TAXES
The Company provides for income taxes under Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect currently.
SFAS No. 109 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In the Company’s opinion, it is uncertain whether they will generate sufficient taxable income in the future to fully utilize the net deferred tax asset. Accordingly, a valuation allowance equal to the deferred tax asset has been recorded. The total deferred tax asset is $ 196,106, which is calculated by multiplying a 15% estimated tax rate by the cumulative NOL of $ 1,306,706. Details for the last two years follow:
Year Ended June 30 | 2008 | 2007 |
Deferred Tax Asset | 114,331 | 28,530 |
Valuation Allowance Current Taxes Payable | 0 | 0 |
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Below is a chart showing the estimated corporate federal net operating loss (NOL) and the year in which it will expire.
2005 | $ | 270,898 | 2025 |
2006 |
| 82,953 | 2026 |
2007 |
| 190,201 | 2027 |
2008 |
| 762,654 | 2028 |
Total NOL | $ | 1,306,706 |
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NOTE 4 – GOING CONCERN
The accompanying financial statements have been prepared assuming that the company will continue as a going concern. The Company’s activities have been primarily supported by loans from the Company’s President and the acquisition of the aforementioned working interest in one of its wells. It has sustained losses in all previous reporting periods with an inception to date loss of $ 1,306,706 as of June 30, 2008. Management continues to seek funding from its shareholders and other qualified investors to pursue its business plan.
The company continues to seek viable drilling opportunities and highly verified fields for re-development. Our operator has repurchased our Cooke county interests. The company entered into a Letter of Intent to re-develop a drill bit verified former producing oil field south of Abilene, Taylor County Texas. The company continues to seek funding for all of the projects and operational requirements for the continuing fiscal year.
To assist our funding efforts on April 22, 2008 the Company effected a 1 for 10 reverse stock split.
To provide better access to information about the Company, management has created a webpage at www.novaeneryinc.com and will continue to maintain and update information about the Company as it occurs.
NOTE 5 - RELATED PARTY TRANSACTIONS
As a result of financial assistance provided the Company by Daymon Bodard, the Company executed a Convertible Promissory Note in the amount of $564,500 on August 26, 2006. The Note is unsecured and interest accrues annually at the statutory interest rate for the state of Nevada. There is no penalty for prepayments.
NOTE 6 – ACCRUED SALARIES
Salaries are being accrued for Daymon Bodard at $5,000 per month.
NOTE 7 – STATEMENT OF STOCKHOLDERS’ EQUITY
On April 22, 2008 the company effected a 1 for 10 reverse stock split. The Stockholders’ Equity has been restated since inception to reflect the stock split.
NOTE 8 – SUBSEQUENT EVENTS
On August 21, 2008 the company filed a Form 10 with the Securities and Exchange Commission as the first step in becoming a fully reporting company listed on the OTCBB exchange.
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ITEM 14: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURES
None and not applicable
ITEM 15: FINANCIAL STATEMENTS AND EXHIBITS
Exhibit |
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(3) | (i) Articles of Incorporation and (ii) By-laws |
3 (i) | Articles of Incorporation* |
3 (ii) | By-Laws* |
3.1 | Certificate of Good Standing for the Secretary State of Nevada on July 31, 2008 |
(10) | Material Contracts |
10.1 | Promissory Note between the Company and its President, Daymon Bodard, dated December 31, 2002 which correlates with the Employment Agreement between the Company and Daymon Bodard herein referenced and attached as Exhibit10.2 |
10.2 | Employment Agreement with the Company’s President, Daymon Bodard, which was formulated in December 2002 and executed on January 7, 2003 |
10.3 | Sales agreement with Lee Hansen to acquire a working interest in a well in North Dakota executed August 18, 2005. |
10.4 | Assignment of Working Interest with Diversified Consulting, LLC dated July 30, 2006 |
10.5 | Promissory Note between the Company and its President, Daymon Bodard, dated August 26, 2008 |
10.6 | Amendment to the Promissory Note between the Company and its President, Daymon Bodard dated October 23, 2007, which was originally executed August 26, 2006. |
14 | Code of Ethics, incorporated in the filing herein |
23.1 | Consent of Moore & Associates |
* Incorporated by reference to the Form 10-SB12(g) filed October 18, 1999.
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: October 8, 2008
/s/ Daymon Bodard
Daymon Bodard, President, CFO and Director
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