UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X.Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2009.
. Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 (No fee required) for the transition period from _____________ to _______________.
Commission file number: 000-27693
---------------
NOVA ENERGY, INC.
---------------
(Name of Registrant as Specified in its Charter)
Nevada |
| 98-0211769 |
(State of Incorporation) |
| (I.R.S. Employer |
|
| Identification No.) |
123 W. Nye Lane, Ste. 129
Carson City, NV 89706
----------------------------
(Address of principal executive offices) (Zip Code)
(775-720-9411)
------------------
(Issuer's telephone number)
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X.No .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer . Accelerated filer .
Non-accelerated filer . Smaller reporting company X.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes . No X.
Transitional Small Business Disclosure format (check one): Yes X. No .
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of September 30, 2009, the number of the Company's shares of par value $.001 common stock outstanding was 3,422,400.
TABLE OF CONTENTS
| Page |
|
|
PART I |
|
|
|
ITEM 1. CONDENSED FINANCIAL STATEMENTS |
|
|
|
Nova Energy, Inc. Condensed Consolidated Balance Sheets | 2 |
|
|
Nova Energy, Inc. Condensed Consolidated Statements of Operations (Unaudited) | 3 |
|
|
Nova Energy, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) | 5 |
|
|
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION | 11 |
|
|
PART II |
|
|
|
ITEM 1. LEGAL PROCEEDINGS | 12 |
|
|
ITEM 2. CHANGES IN SECURITIES | 12 |
|
|
ITEM 3. DEFAULTS UPON SENIOR SECURITIES | 12 |
|
|
ITEM 4. SUBMISSION TO A VOTE OF SECURITY HOLDERS | 12 |
|
|
ITEM 5. OTHER | 13 |
|
|
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K | 13 |
|
|
SIGNATURES | 14 |
1
Nova Energy, Inc.
(Exploration Stage Company)
Balance Sheets
|
|
| September 30, |
| June 30, |
|
|
| 2009 |
| 2009 |
|
|
| (Unaudited) |
| (Audited) |
|
|
|
|
|
|
ASSETS |
| ||||
|
|
|
|
|
|
Current Assets |
|
|
|
| |
| Cash | $ | 2,893 | $ | 13,706 |
| Accounts Receivable |
| - |
| - |
| Total Current Assets |
| 2,893 |
| 13,706 |
|
|
|
|
|
|
Fixed Assets |
|
|
|
| |
| Equipment |
| 84,924 |
| 84,924 |
| Accumulated Depreciation |
| (69,355) |
| (65,108) |
| Total Fixed Assets |
| 15,569 |
| 19,816 |
|
|
|
|
|
|
Other Assets |
|
|
|
| |
| Investment - Working Interest |
| - |
| - |
|
|
|
|
|
|
| Total Assets | $ | 18,462 | $ | 33,522 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
| ||||
|
|
|
|
|
|
Liabilities |
|
|
|
| |
Current Liabilities |
|
|
|
| |
| Accounts Payable | $ | 11,109 | $ | 4,196 |
| Accrued Interest |
| 178,403 |
| 163,938 |
| Accrued Salaries |
| 372,600 |
| 357,600 |
| Convertible Note Payable - related party |
| 485,641 |
| 489,846 |
| Total Current Liabilities |
| 1,047,753 |
| 1,015,580 |
|
|
|
|
|
|
Long Term Liabilities |
|
|
|
| |
|
|
| - |
| - |
| Total Long Term Liabilities |
| - |
| - |
|
|
|
|
|
|
| Total Liabilities |
| 1,047,753 |
| 1,015,580 |
|
|
|
|
|
|
Stockholders' Equity |
|
|
|
| |
|
|
|
|
|
|
| Common Stock, authorized |
|
|
|
|
| 52,000,000 shares, par value |
|
|
|
|
| $0.001, 3,422,400 and 3,422,400, |
|
|
|
|
| respectively, issued and outstanding |
| 3,422 |
| 3,422 |
|
|
|
|
|
|
| Paid in Capital |
| 511,182 |
| 511,182 |
|
|
|
|
|
|
| Retained Earnings |
| (1,543,896) |
| (1,496,663) |
|
|
|
|
|
|
| Total Stockholders' Equity |
| (1,029,292) |
| (982,059) |
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity | $ | 18,462 | $ | 33,522 | |
The accompanying notes are an integral part of these statements
2
Nova Energy, Inc.
(Exploration Stage Company)
Statements of Operations
|
|
|
|
|
|
| December 31 |
|
|
| For the Quarter Ended | 2002 (Inception) | |||
|
|
| September 30, |
| September 30, |
| September 30, |
|
|
| 2009 |
| 2008 |
| 2009 |
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
| |
| Production Oil/Gas Sales | $ | - | $ | - | $ | 276,599 |
|
|
|
|
|
|
|
|
Cost of Goods Sold |
|
|
|
|
|
| |
| Production Expenses |
| - |
| - |
| 99,383 |
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
| |
| General and Administrative |
| 28,318 |
| 30,184 |
| 837,458 |
| Professional Fees |
| 4,450 |
| 4,250 |
| 73,034 |
| Consulting Fees |
| - |
| - |
| 54,825 |
| Well Re-Development Expense |
| - |
| - |
| 72,478 |
|
|
|
|
|
|
|
|
| Total Expenses |
| 32,768 |
| 34,434 |
| 1,037,795 |
|
|
|
|
|
|
|
|
Other Income/Expense |
|
|
|
|
|
| |
| Gain/(Loss) on Sale of Assets |
| - |
| (506,589) |
| (506,589) |
| Interest Income |
| - |
| - |
| 1,675 |
| Interest Expense |
| (14,465) |
| (14,465) |
| (178,403) |
|
|
|
|
|
|
|
|
Net (Loss) | $ | (47,233) | $ | (48,899) | $ | (1,543,896) | |
|
|
|
|
|
|
|
|
Basic and Diluted |
|
|
|
|
|
| |
| (Loss) per Share |
| 0 |
| 0 |
| 0 |
|
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
|
|
|
| Number of Shares |
| 3,422,400 |
| 3,422,400 |
| 3,422,400 |
The accompanying notes are an integral part of these statements
3
Nova Energy, Inc.
(Exploration Stage Company)
Statements of Stockholder’s Equity
| Common Stock |
| Paid in |
| Accumulated |
| Total | ||
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity |
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2002 | 8,034 | $ | 8 | $ | - | $ | (201,575) | $ | (201,567) |
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2003 | 8,034 | $ | 8 | $ | - | $ | (201,575) | $ | (201,567) |
|
|
|
|
|
|
|
|
|
|
Common Shares issued for services | 8,966 | $ | 9 | $ | 153 | $ | - | $ | 162 |
|
|
|
|
|
|
|
|
|
|
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 |
| - |
| - |
Jan 2007, Stock Adjustment | - |
| - |
| (66) |
| - |
| (66) |
Net (Loss) | - |
| - |
| - |
| (190,201) |
| (190,201) |
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2007 | 3,433,301 | $ | 3,433 | $ | 511,171 | $ | (544,052) | $ | (29,448) |
|
|
|
|
|
|
|
|
|
|
Stock adjustment | (10,901) | $ | (11) | $ | 11 | $ | - | $ | - |
Net (Loss) | - |
| - |
| - |
| (762,654) |
| (762,654) |
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2008 | 3,422,400 | $ | 3,422 | $ | 511,182 | $ | (1,306,706) | $ | (792,102) |
|
|
|
|
|
|
|
|
|
|
Net (Loss) | - |
| - |
| - |
| (189,957) |
| (189,957) |
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2009 | 3,422,400 | $ | 3,422 | $ | 511,182 | $ | (1,496,663) | $ | (982,059) |
|
|
|
|
|
|
|
|
|
|
Net (Loss) | - |
| - |
| - |
| (47,233) |
| (47,233) |
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2009 | 3,422,400 | $ | 3,422 | $ | 511,182 | $ | (1,543,896) | $ | (1,029,292) |
The accompanying notes are an integral part of these statements. The Stockholders' Equity have been restated to reflect the stock splits.
4
Nova Energy, Inc.
(Exploration Stage Company)
Statements of Cash Flows
|
|
| For the quarter |
| For the quarter |
| December 31, |
|
|
| ended |
| ended |
| 2002 (Inception) |
|
|
| September 30, |
| September 30, |
| to September 30, |
|
|
| 2009 |
| 2008 |
| 2009 |
Operating Activities |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Net (Loss) | $ | (47,233) | $ | (47,233) | $ | (1,543,896) |
| Depreciation |
| 4,246 |
| 4,246 |
| 69,355 |
| Increase in Accounts Receivable |
| - |
| - |
| - |
| Increase in Accounts Payable |
| 6,914 |
| - |
| 11,109 |
| Increase in Accrued Expenses |
| 29,465 |
| 29,465 |
| 551,003 |
| Decrease in Accounts Receivable |
| - |
| - |
| - |
| Decrease in Accounts Payable |
| - |
| (1,224) |
| - |
| Decrease in Accrued Expenses |
| - |
| - |
| - |
| Increase in Shareholder Payable |
| - |
| - |
| - |
| Decrease in Shareholder Payable |
| (4,205) |
| (15,955) |
| (78,858) |
|
|
|
|
|
|
|
|
Net Cash (Used) by Operating Activities |
| (10,813) |
| (30,701) |
| (991,287) | |
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Investment - Working Interest |
| - |
| - |
| - |
| Capital Expenditures |
| - |
| - |
| (84,924) |
|
|
|
|
|
|
|
|
Cash Provided by Investing Activities |
| - |
| - |
| (84,924) | |
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Convertible Notes Payable |
| - |
| - |
| 564,500 |
| Proceeds from Contributed Capital |
| - |
| - |
| 480,271 |
| Proceeds from Sale of Common Stock |
| - |
| - |
| 34,333 |
|
|
|
|
|
|
|
|
Cash Provided by Financing Activities |
| - |
| - |
| 1,079,104 | |
|
|
|
|
|
|
|
|
Net Increase in Cash |
| (10,813) |
| (30,701) |
| 2,893 | |
|
|
|
|
|
|
|
|
Cash, Beginning of Period |
| 13,706 |
| 103,003 |
| - | |
|
|
|
|
|
|
|
|
Cash, End of Period | $ | 2,893 | $ | 72,302 | $ | 2,893 | |
|
|
|
|
|
|
|
|
Supplemental Information: |
|
|
|
|
|
| |
| Interest Paid | $ | - | $ | - | $ | - |
| Income Taxes Paid | $ | - | $ | - | $ | - |
The accompanying notes are an integral part of these statements
5
NOTES TO FINANCIAL STATEMENTS OF NOVA ENERGY, INC. (EXPLORATION STAGE COMPANY)
FOR THE QUARTER ENDED SEPTEMBER 30, 2009
NOTE 1 - GENERAL ORGANIZATION AND BUSINESS
Nova Energy, Inc. was incorporated in Nevada 1995, and is a publicly traded company presently listed on www.pinksheets.com, symbol “NVAE”. The Company is focused on the recovery of oil and gas reserves through acquisition and project development, specializing in mature and marginal field enhancement, developmental exploration drilling and low risk exploration opportunities in Texas and North Dakota regions.
NOTE 2 - 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.
Advertising Costs - Advertising costs are expensed as incurred. The Company does not incur any direct-response advertising costs. There haven’t been any 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 affected 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 SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated
useful life.
6
Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.
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 April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”). FSP FAS 157-4 provides guidance on estimating fair value when market activity has decreased and on identifying transactions that are not orderly. Additionally, entities are required to disclose in interim and annual periods the inputs and valuation techniques used to measure fair value. This FSP is effective for interim and annual periods ending after June 15, 2009. The Company does not expect the adoption of FSP FAS 157-4 will have a material impact on its financial condition or results of operation.
In October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active,” (“FSP FAS 157-3”), which clarifies application of SFAS 157 in a market that is not active. FSP FAS 157-3 was effective upon issuance, including prior periods for which financial statements have not been issued. The adoption of FSP FAS 157-3 had no impact on the Company’s results of operations, financial condition or cash flows.
In December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8, “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities.” This disclosure-only FSP improves the transparency of transfers of financial assets and an enterprise’s involvement with variable interest entities, including qualifying special-purpose entities. This FSP is effective for the first reporting period (interim or annual) ending after December 15, 2008, with earlier application encouraged. The Company adopted this FSP effective January 1, 2009. The adoption of the FSP had no impact on the Company’s results of operations, financial condition or cash flows.
In December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”). FSP FAS 132(R)-1 requires additional fair value disclosures about employers’ pension and postretirement benefit plan assets consistent with guidance contained in SFAS 157. Specifically, employers will be required to disclose information about how investment allocation decisions are made, the fair value of each major category of plan assets and information about the inputs and valuation techniques used to develop the fair value measurements of plan assets. This FSP is effective for fiscal years ending after December 15, 2009. The Company does not expect the adoption of FSP FAS 132(R)-1 will have a material impact on its financial condition or results of operation.
In September 2008, the FASB issued exposure drafts that eliminate qualifying special purpose entities from the guidance of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” and FASB Interpretation 46 (revised December 2003), “Consolidation of Variable Interest Entities − an interpretation of ARB No. 51,” as well as other modifications. While the proposed revised pronouncements have not been finalized and the proposals are subject to further public comment, the Company anticipates the changes will not have a significant impact on the Company’s financial statements. The changes would be effective March 1, 2010, on a prospective basis.
In June 2008, the FASB issued FASB Staff Position EITF 03-6-1,Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, (“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial Accounting Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. We are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have material effect on our consolidated financial positionand results of operations if adopted.
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.
7
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.
NOTE 3– 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 September 30, 2009.
NOTE 4 - 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 $231,584, which is calculated by multiplying a 15% estimated tax rate by the cumulative NOL of $ 1,543,896. Details for the last two years follow:
Year Ended June 30 | 2009 |
| 2008 |
Deferred Tax Asset | 28,389 |
| 114,331 |
Valuation Allowance |
|
|
|
Current Taxes Payable | 0 |
| 0 |
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 |
2009 | $ | 189,957 | 2029 |
2010 | $ | 47,233 | 2030 |
Total NOL | $ | 1,543,896 |
|
8
NOTE 5 – 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 $ 1,543,896 as of September 30, 2009. 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. However, the particular project involved is no longer available and the Letter of Intent is no longer valid. 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. Atwww.novaeneryinc.com and will continue to maintain and update information about the Company as it occurs.
NOTE 6 - 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 7 – PROPERTY AND EQUIPMENT
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.
NOTE 8 – ACCRUED SALARIES
Salaries are being accrued for Daymon Bodard at $60,000 per year.
NOTE 9 – STATEMENT OF STOCKHOLDERS’ EQUITY
Common Stock
Since December 31, 2002 the Company has received on-going capital contributions as necessary from its founder.
On May 13, 2005, the Company issued 3,010,000 post-split shares of its $0.001 par value restricted common stock in return for services to the founders of the Company.
On July 1, 2006, pursuant to a convertible promissory note, the Company issued Fifty Thousand common stock shares. In July 2006, the Company received Three Hundred Seventy Five Thousand Dollars in a private transaction in return for a working interest in the oil well known as the Inglish 1H.
On August 31, 2006, pursuant to a convertible promissory note, the Company issued Fifty Six Thousand Four Hundred and Fifty shares of common stock. On September 1, 2006, Daymon Bodard, the Company’s President loaned the Company $564,500.
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. On May 12, 2005, there was a 300 to 1 Stock Split.
9
NOTE 10 – INCOME (LOSS) PER SHARE INFORMATION
The following table sets forth the computation of basic and diluted net income (loss) per share applicable to common stockholders (in thousands):
|
| Year Ended |
| Year Ended |
|
| June 30, 2009 |
| June 30, 2008 |
Numerator: |
|
|
|
|
Net Loss |
| (1,497) |
| (1,307) |
Less: Preferred Stock Dividend |
| - |
| - |
Net Loss applicable to common shareholders |
| (1,497) |
| (1,307) |
Denominator: |
|
|
|
|
Weighted Average Common Shares and denominator for basic and diluted calculation |
| 3,422,400 |
| 3,422,400 |
Net Loss per share applicable to common shareholders - basic & diluted |
| (0.44) |
| (0.38) |
NOTE 11 – MANAGEMENT DISCUSSIONS
The company continues to evaluate oil and gas opportunities in North West Texas. The credit markets and the access to venture capital remain similar to the conditions in the last quarter. In May, 2009, the Company received a “no further comment letter” from the SEC with respect to their Form 10 filing. The Company has applied to be listed on the OTCBB with FINRA through Spartan Securities, the Company’s market maker.
10
Item 2. MANAGEMENT’S DISCUSSION FOR ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with the financial statements and notes of Our, Inc. (hereinafter referred to as, “Nova”, “our” or, “we”) thereto included elsewhere in this Form 10-QSB.
Except for the historical information contained herein, the discussion in this Form 10-QSB as amended contains certain forward looking statements that involve risks and uncertainties, such as statements of Our plans, objectives, expectations and intentions. The cautionary statements made in this Form 10-QSB should be read as being applicable to all related forward statements wherever they appear in this Form 10-QSB. Our actual results could differ materially from those discussed here.
Other than what has been disclosed herein and in the year end financial report for year 2009, filed on July 13, 2009, the Company is not aware of any immediate circumstances or trends which would have a negative impact upon future sales or earnings. There have been no material fluctuations in the standard seasonal variations of the Company business. The accompanying financial statements include all adjustments, which in the opinion of management are necessary in order to make the financial statements not misleading.
Nature of Business. We recently had a working interest in operating oil and gas wells located in the Barnett Shale area in central Texas. This portfolio of working interests provides the Company with a foundation to execute its business plan by achieving growth through its investments. The aforementioned wells developed severe highline pressure and essentially stopped producing oil or gas.
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.
BIOGRAPHIES
Daymon Bodard, President, director and CFO, 556years old, has a university degree in Business Administration and Management. In addition to being the President of Nova Energy, Inc., since 2002, 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. He presently owns 1,352,643 shares, which represents 39.5% of the Company’s issued and outstanding common stock.
Work History:
2002 – Current- President Nova Energy, Inc.
1990 - 1994 - National Sales Manager for International Tobacco Company.
1994 – Current- Independent business owner with operations in the natural resources industry.
I.
CAPITAL RESOURCES AND LIQUIDITY
During the quarter ended September 30, 2009, there were no issuances of the Company's common stock.
11
II.
RESULTS OF OPERATIONS
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. However, the Company has incurred a net loss of ($47,233) for the three-month period ended September 30, 2009, or, ($0.00) per share (basic and diluted) on no revenues compared to a loss of ($48,899) for the first quarter ended September 30, 2008. The loss in the first quarter of 2009 can be contributed to the fact the Company had no revenues yet still had administrative expenses. During the three month period ended September 30, 2009, the Company has used cash in the amount of $32,678 in its operating activities as opposed to $34,434 for the period ending September 30, 2008. The total liabilities and stockholder's deficit for the quarter ended September 30, 2009 was $18,462. The total liabilities and stockholder's deficit for the year ended June 30, 2009 was $33,522. These conditions raise substantial doubt about the Company's ability to contin ue as a going concern.
The Company's ability to continue as a going concern is dependent upon (i) raising additional capital to fund operations (ii) the further development of oil and gas lease interests which have been presented to the company by various oil and gas operators and, (iii) ultimately, the achievement of profitable operations. Management is currently contemplating several additional financing sources to fund operations until profitability can be achieved. However, there can be no assurance that additional financing can be obtained on conditions considered by management to be reasonable and appropriate, if at all. The financial statements do not include any adjustments that might arise as a result of this uncertainty.
During the first quarter ended September 30, 2009, the Company’s common stock was very thinly traded, trading at $.51 a share. One may construe this as a cautionary indication of the Company’s ability to continue as a going concern.
III.
RELATED PARTY TRANSACTIONS
There were no related party transactions during the period ended September 30, 2009.
ITEM 3. CONTROLS AND PROCEDURES.
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer who is Daymon Bodard, and Chief Financial Officer, who is also, Daymon Bodard, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-14(c). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost - -benefit relationship of possible controls and procedures.
An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule13a-14(c) under the Securities Exchange Act of 1934) as of September 30, 2009. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. No significant changes were made in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not aware of any legal proceedings involving Nova Energy, Inc., during the period ended September 30, 2009.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
12
ITEM 5. OTHER
On September 16, 2009, the Company filed an 8-K because on August 27, 2009, the PCAOB revoked the registration of Moore and Associates Chartered ("Moore"), the company's former auditor. Moore's registration was revoked because of their violations of PCAOB rules and auditing standards in auditing financial statements, PCAOB rules and quality controls standards, and section 10(b) of the Securities Exchange Act of 1934 and rule 10b-5 thereunder and, non-cooperation with a Board of Investigation.
The Company has yet to receive the Exhibit 16 letter from Moore
The Company has since engaged the services of Ronald R. Chadwick, P.C., Certified Public Accountant, 2851 South Parker Road (Ste) 720, Aurora, Colorado, Phone: (303) 306-967: Fax: (303) 306-1944, at act as the Company’s auditor.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Number |
| Description |
|
|
|
31.1 |
| Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act, promulgated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.1 |
| Certification by Chief Executive Officer and Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, promulgated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
99. |
| On September 16, 2009, the Company filed an 8-K because on August 27, 2009, the PCAOB revoked the registration of Moore and Associates Chartered ("Moore"), the company's auditor. Moore's registration was revoked because of their violations of PCAOB rules and auditing standards in auditing financial statements, PCAOB rules and quality controls standards, and section 10(b) of the Securities Exchange Act of 1934 and rule 10b-5 thereunder and, non-cooperation with a Board of Investigation. |
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized this 11th day of November 2009.
Nova Energy, Inc.
-----------------------------------
/s/ Daymon Bodard
President,
Director & CFO
14