EXHIBIT 99.3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Biosource America, Inc.
Houston, Texas
We have audited the accompanying balance sheet of Biosource America, Inc. as of January 31, 2006, and the related statements of operations, changes in shareholders’ equity, and cash flows for the period from inception (December 1, 2005) until January 31, 2006. These financial statements are the responsibility of the management of Biosource America, Inc. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). These standards require that we plan and perform the audit 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 accompanying consolidated financial statements present fairly, in all material respects, the financial position of Biosource America, Inc. as of January 31, 2006, and the results of its operations and cash flows for the period from inception (December 1, 2005) until January 31, 2006 in conformity with accounting principles generally accepted in the United States.
Malone & Bailey, PC
www.malone-bailey.com
Houston, Texas
February 28, 2006
F-1
BIOSOURCE AMERICA, INC.
(A Development Stage Entity)
Balance Sheet
January 31, 2006
ASSETS | | | |
Current assets | | | |
Cash | | $ | 296,020 | |
Escrow deposit | | 50,000 | |
| | | |
Total current assets | | 346,020 | |
| | | |
Total Assets | | $ | 346,020 | |
| | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| | | |
Current liabilities | | | |
Accrued expenses | | 11,498 | |
Accrued expenses to related parties | | 20,124 | |
| | | |
Total current liabilities | | 31,622 | |
| | | |
Stockholders’ Equity | | | |
Common Stock – no par value, 100,000,000 shares authorized, 60,000,000 issued and outstanding | | 350,000 | |
Deficit accumulated during development stage | | (35,602 | ) |
| | | |
Total stockholders’ equity | | 314,398 | |
| | | |
Total Liabilities and Stockholders’ Equity | | $ | 346,020 | |
See Summary of Significant Accounting Policies and Notes to the Financial Statements
F-2
BIOSOURCE AMERICA, INC.
Statement of Operations
For the Period from Inception (December 1, 2005) through January, 31, 2006
Expenses | | | |
Selling, general and administrative | | $ | 35,602 | |
| | | |
Net loss | | $ | (35,602 | ) |
| | | |
Net loss per share | | $ | (0.02 | ) |
| | | |
Weighted average shares outstanding | | 1,956,618 | |
See Summary of Significant Accounting Policies and Notes to the Financial Statements
F-3
BIOSOURCE AMERICA, INC.
Statement of Cash Flows
For the Period from Inception (December 1, 2005) through January, 31, 2006
Operating activities | | | |
Net loss | | $ | (35,602 | ) |
Adjustments to reconcile net loss to net | | | |
cash used in operating activities | | | |
Changes in | | | |
Accrued expenses | | 31,622 | |
| | | |
Net cash used in operating activities | | (3,980 | ) |
| | | |
Financing activities | | | |
Proceeds from the issuance of common stock | | 300,000 | |
| | | |
Net increase in cash and cash equivalents | | 296,020 | |
| | | |
Cash & cash equivalents | | | |
Beginning of period | | | |
| | | |
End of period | | $ | 296,020 | |
| | | |
Supplemental Disclosers of cash flow information: | | | |
Interest paid | | $ | | |
Income taxes paid | | $ | | |
| | | |
| | | |
See Summary of Significant Accounting Policies and Notes to the Financial Statements
F-4
BIOSOURCE AMERICA, INC.
Statements of Changes in Stockholders’ Deficit
For the Period from Inception (December 1, 2005) through January, 31, 2006
Description | | Common Shares | | Common Stock | | Deficit
Accumulated
During
Development
Stage | | Total | |
| | | | | | | | | |
Proceeds from the issuance of common stock | | 60,000,000 | | $ | 350,000 | | | | $ | 350,000 | |
| | | | | | | | | |
Net loss | | | | | | $ | (35,602 | ) | (35,602 | ) |
| | | | | | | | | |
Balance January 31, 2006 | | 60,000,000 | | $ | 350,000 | | $ | (35,602 | ) | $ | 314,398 | �� |
See Summary of Significant Accounting Policies and Notes to the Financial Statements
F-5
BIOSOURCE AMERICA, INC.
(A Development Stage Company)
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Biosource America, Inc. was incorporated in Texas on December 1, 2005. Since inception, Biosource America has primarily been involved in acquiring the assets of a bio-diesel engineering and design services company. Biosource America finalized the asset purchase on February 7, 2006 (see note 2 – subsequent events.)
Basis of presentation
This summary of significant accounting policies of the Biosource America is presented to assist in understanding its financial statements. The financial statements and notes are representations of the Biosource America’s management who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States and have been consistently applied in the preparation of the financial statements.
Use of Estimates
In preparing financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenue and expenses in the income statement. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, Bio Source America considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Income Taxes
Biosource America, Inc. recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. Biosource America, Inc. provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.
NOTE 2 – INCOME TAXES
The net operation loss carry-forward is approximately $35,602 at January 31, 2006 and will expire in the year 2026.
At January 31, 2006 deferred tax assets consisted of the following:
| | 2006 | |
Deferred tax assets | | $ | 12,105 | |
Less: valuation allowance | | 12,105 | |
| | | |
Net deferred tax asset | | $ | — | |
NOTE 2 – SUBSEQUENT EVENTS
On February 7, 2006, Biosource America entered into an asset purchase agreement with BIOsource Fuels, LLC for a sum of $6,000,000. The assets include intellectual property and a pilot plant. A good faith deposit was placed in escrow on or about September 29, 2005 and will be applied to the total purchase price. $1,000,000 was delivered by
F-6
Biosource America at closing. $1,250,000 is scheduled to be paid 45 days after closing, and a second payment in the amount of $700,000 is to be made on May 3, 2006. Two subsequent payments are scheduled to be made in the amount of $1,500,000 ea on October 1, 2006 and December 1, 2006.
As a result of the asset purchase Biosource America acquired a contract currently in effect with a governmental entity to design, build, deliver, startup and commission a bio-diesel production facility to be located near Camanche, Iowa. The total value of the contract is $5,755,633 and is expected to be completed by summer 2006.
The asset purchase will result in Biosource America assuming two leases, a lease for office space dated August 1, 2005 which expires on December 1, 2007. Monthly payments amount to $2,200.
A second lease for warehouse space expires on May 1, 2006. The monthly rental is $1,500 under this lease. Biosource America retained a security deposits under the leases amounting to $2,000.
Future minimum lease payments under non-cancelable operating leases are as follows:
Year Ending January, | | Amount | |
2006 | | $ | 30,900 | |
2007 | | 22,000 | |
| | | |
Total | | $ | 52,900 | |
On March 30, 2004, Bio Source America entered into a Share Exchange Agreement with Nova Oil Inc. (Nova Oil), a Nevada corporation, whereby each Biosource America stockholder would exchange three shares of common stock of Biosource America for two shares of common stock of Nova Oil. The Share Exchange closed on March 31, 2006 and, as a result, Nova Oil issued 40,000,000 shares of its common stock and Biosource America became a subsidiary of Nova Oil.
Nova Oil was a non-operating “Shell” as defined under the rules and regulations of the Securities and Exchange Act of 1933. This merger has been accounted for as a reverse merger of an operating corporation, Biosource America, with a non-operating Shell, Nova Oil.
F-7
