U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: February 28, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ______________ to ______________
Commission file number 0-32237
GALAXY INVESTMENTS, INC.
(Exact name of small business issuer as specified in its charter)
COLORADO 98-0347827
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1001 BRICKELL BAY DRIVE, SUITE 2202, MIAMI, FL 33131
(Address of principal executive offices)
(305) 373-5725
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed
since last report)
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
31,235,262 SHARES OF COMMON STOCK, $0.001 PAR VALUE, AS OF
FEBRUARY 28, 2003
Transitional Small Business Disclosure Format (check one): Yes No X
----- -----
GALAXY INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
ASSETS
FEBRUARY 28, 2003 NOVEMBER 30, 2002
(UNAUDITED)
CURRENT ASSETS
Cash $ 180,990 $ 41,320
Subscriptions receivable 450,000 -
Prepaids 18,000 -
--------------- --------------
Total Current Assets 648,990 41,320
--------------- --------------
UNDEVELOPED OIL & GAS PROPERTIES 1,137,880 873,797
--------------- --------------
FURNITURE AND EQUIPMENT 3,247 3,247
--------------- --------------
OTHER ASSETS
Due from Pannonian International Ltd. 25,000 25,000
Other 9,960 10,975
--------------- --------------
34,960 35,975
--------------- --------------
TOTAL ASSETS $ 1,825,077 $ 954,339
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable - trade $ 278,206 $ 425,032
Accounts payable - related 21,350 233,204
Property purchase payable 396,000 396,000
--------------- --------------
Total Current Liabilities 695,556 1,054,236
--------------- --------------
NOTE PAYABLE 50,000 50,000
--------------- --------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.001 par value
Authorized - 25,000,000 shares
Issued - none
Common stock, $.001 par value
Authorized - 100,000,000 shares
Issued and outstanding - 31,235,262 (2003) and
30,025,058 (2002) shares 31,235 30,025
Capital in excess of par value 2,166,968 960,144
Common stock subscribed 450,000 -
(Deficit) accumulated during the development stage (1,568,682) (1 ,140,066)
--------------- --------------
Total Stockholders' Equity (Deficit) 1,079,521 (149,897)
--------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 1,825,077 $ 954,339
=============== ==============
2
GALAXY INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED CUMULATIVE
FEBRUARY 28, TO
2003 2002 FEBRUARY 28, 2003
REVENUE $ - $ - $ -
------------- ------------ ---------------
OPERATING EXPENSES
General and administrative expenses 428,616 - 1,568,682
------------- ------------ ---------------
NET (LOSS) $ (428,616) $ - $ (1,568,682)
============= ------------ ===============
NET (LOSS) PER COMMON SHARE -
BASIC & DILUTED $ ( .01) $ - $ ( .05)
============= ============ ===============
WEIGHTED AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING -
BASIC AND DILUTED 30,409,322 - 28,741,453
============= ============ ===============
3
GALAXY INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED CUMULATIVE
FEBRUARY 28, TO
2003 2002 FEBRUARY 28, 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (428,616) $ - $ (1,568,682)
Adjustments to reconcile net (loss) to
net cash (used) by operating activities
Stock for services 90,000 - 290,000
Changes in assets and liabilities
Increase in accounts payable - trade (166,826) - 117,518
Increase in accounts payable - related 21,350 - 254,554
Other (16,985) - (26,945)
------------- ----------- --------------
Net cash (used) by operating activities (501,077) - (933,555)
------------- ----------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to oil and gas properties (244,083) - (595,966)
Purchase of furniture and equipment - - (2,793)
Advance to affiliate - - (25,000)
Cash received upon recapitalization and merger - - 2,974
------------- ----------- --------------
Net cash (used) by investing activities (244,083) - (620,785)
------------- ----------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock, net 884,830 - 1,735,330
------------- ----------- --------------
Net cash provided by financing activities 884,830 - 1,735,330
------------- ----------- --------------
NET INCREASE IN CASH 139,670 - 180,990
CASH, BEGINNING OF PERIOD
41,320 - -
------------- ----------- --------------
CASH, END OF PERIOD $ 180,990 $ - $ 180,990
============= =========== ==============
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Debt incurred for oil and gas properties $ - $ - $ 446,000
============= =========== ==============
Stock issued for services $ 90,000 $ - $ 290,000
============= =========== ==============
Stock issued for payable - related $ 233,204 $ - $ 233,204
============= =========== ==============
4
GALAXY INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 2003
The accompanying interim financial statements of Galaxy Investments,
Inc. are unaudited. In the opinion of management, the interim data includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results for the interim period. The results of
operations for the period ended February 28, 2003 are not necessarily indicative
of the operating results for the entire year.
We have prepared the financial statements included herein pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosure normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. We believe the
disclosures made are adequate to make the information not misleading and
recommend that these condensed financial statements be read in conjunction with
the financial statements and notes included in our Form 10-KSB for the year
ended November 30, 2002.
Galaxy Investments, Inc. (the "Company") was incorporated under the
laws of the State of Colorado on December 17, 1999, for the purpose of acquiring
and developing mineral properties. The Company is a public company that had no
operations. On November 13, 2002, the Company completed an agreement (the
"Agreement and Plan of Reorganization") whereby it issued 20,997,058 shares of
its common stock to acquire all of the shares of Dolphin Energy Corporation
("Dolphin"), a private corporation incorporated on June 18, 2002, under the laws
of the State of Nevada. Dolphin is an independent energy company engaged in the
exploration, development and acquisition of crude oil and natural gas reserves
in the western United States and is considered a development stage company as
defined by Statement of Financial Accounting Standards (SFAS) No. 7. Dolphin is
an exploration stage oil and gas company and has not earned any production
revenue, nor found proved resources on any of its properties. Dolphin's
principal activities have been raising capital through the sale of its
securities and identifying and evaluating potential oil and gas properties.
As a result of this transaction, Dolphin became a wholly owned
subsidiary of the Company. Since this transaction resulted in the former
shareholders of Dolphin acquiring control of the Company, for financial
reporting purposes the business combination was accounted for as an additional
capitalization of the Company (a reverse acquisition with Dolphin as the
accounting acquirer). The Company had no transactions or activity for the three
months ended February 28, 2002.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the Company
for the period from November 13, 2002 to November 30, 2002, and its
wholly owned subsidiary, Dolphin, for the period from June 18, 2002 to
November 30, 2002 and the three months ended February 28, 2003. All
significant intercompany transactions have been eliminated upon
consolidation.
5
GALAXY INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 2003
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OIL AND GAS PROPERTIES
The Company follows the full cost pool method of accounting for oil and
gas operations. Under this method all costs related to the exploration
for and development of oil and gas reserves are capitalized on a
country-by-country basis. Costs include lease acquisition costs,
geological and geophysical expenses, overhead directly related to
exploration and development activities and costs of drilling both
productive and non-productive wells. Proceeds from the sale of
properties are applied against capitalized costs, without any gain or
loss being recognized, unless such a sale would significantly alter the
rate of depletion and depreciation.
In applying the full cost pool method, the Company performs a ceiling
test whereby the carrying value of oil and gas properties and
production equipment, net of recorded future income taxes and the
accumulated provision for site restoration and abandonment costs, is
compared annually to an estimate of future net cash flow from the
production of proven reserves. Costs related to undeveloped oil and gas
properties are excluded from the ceiling tests. Discounted net cash
flow, utilizing a 10% discount rate, is estimated using year end
prices, less estimated future general and administrative expenses,
financing costs and income taxes. Should this comparison indicate an
excess carrying value, the excess is charged against earnings. At
February 28, 2003 there were no reserves. Costs of oil and gas
properties are considered unevaluated at February 28, 2003.
IMPAIRMENT
The Company has adopted SFAS 144, "Accounting for the Impairment and
Disposal of Long-Lived Assets," which requires that long-lived assets
to be held and used be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Oil and gas properties accounted for using the
full cost method of accounting, a method utilized by the Company, are
excluded from this requirement, but will continue to be subject to the
ceiling test limitations.
INCOME TAXES
The Company has adopted the provisions of SFAS 109, "Accounting for
Income Taxes." SFAS 109 requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of
events that have been included in the financial statements or tax
returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and
tax basis of assets and liabilities using enacted tax rates in effect
for the year in which the differences are expected to reverse.
6
GALAXY INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 2003
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
The oil and gas industry is subject, by its nature, to environmental
hazards and clean-up costs. At this time, management knows of no
substantial costs from environmental accidents or events for which the
Company may be currently liable. In addition, the Company's oil and gas
business makes it vulnerable to changes in wellhead prices of crude oil
and natural gas. Such prices have been volatile in the past and can be
expected to be volatile in the future. By definition, proved reserves
are based on current oil and gas prices and estimated reserves. Price
declines reduce the estimated quantity of proved reserves and increase
annual amortization expense (which is based on proved reserves).
(LOSS) PER COMMON SHARE
(Loss) per common share is computed based on the weighted average
number of common shares outstanding during the period.
NOTE 2 - NOTE PAYABLE
On March 6, 2003, the Company, Harbor Petroleum LLC ("Harbor") and
Florida Energy, Inc. ("Florida"), related parties, entered into an
agreement which formalized their understanding with respect to the
ongoing leasing program for acquisition of oil, gas and mineral leases
in the State of Texas. The agreement is effective retroactively with
commencement of the lease acquisitions by Harbor and Florida in 2002.
Under the terms of the agreement, Florida and Harbor will each retain a
1% overriding royalty interest in the acquired leases, including those
leases acquired as of the date of the agreement. The Company has agreed
to pay Florida a bonus of $50,000 for identifying the leases, payable
by a promissory note in the amount of $50,000 with interest at 7.5% per
annum, due March 7, 2004. The Company has recorded this obligation as
of November 30, 2002. The term of the agreement is for a period of one
year through March 6, 2004.
7
GALAXY INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 2003
NOTE 3 - COMMON STOCK
In February 2003, the Company completed the sale of 887,000 shares of
its common stock at a price of $1.00 per share in a private placement
exempt from registration with the Securities and Exchange Commission
pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 of
Regulation D promulgated thereunder.
On February 28, 2003, Resource Venture Management ("RVM"), an entity
owned by a founder of the Company, agreed to convert its outstanding
debt at November 30, 2002 in the amount of $233,204 plus management
fees for the period December 1, 2002 to February 28, 2003 in the amount
of $90,000, to 323,204 shares of the Company's common stock, valued at
$1.00 per share.
NOTE 4 - COMMON STOCK SUBSCRIBED
At February 28, 2003, the Company had received subscriptions for the
purchase of 450,000 shares of its common stock at $1.00 per share. The
Company received the proceeds from these subscriptions subsequent to
February 28, 2003.
NOTE 5 - SUBSEQUENT EVENT
In March and April 2003, 165,000 shares were subscribed and paid for,
at $1.00 per share.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
Effective November 13, 2002 an arrangement was completed between Galaxy
Investments and Dolphin Energy Corporation, a Nevada corporation, whereby the
shareholders of Dolphin Energy exchanged all of their common shares for
20,997,058 shares of Galaxy's common stock.
Following the acquisition the former shareholders of Dolphin Energy
held a majority of our total issued and outstanding common shares; Dolphin
Energy was thereby deemed to be the acquiror. Accordingly, the transaction has
been accounted for as a reverse takeover using the purchase method whereby the
assets and liabilities of Galaxy have been recorded at their fair market values
and operating results have been included in our financial statements from the
effective date of purchase. The fair value of the net assets acquired is equal
to their book values.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of
operations are based upon our condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosures of
contingent assets and liabilities. On an ongoing basis, we evaluate our
estimates, including those related to impairment of long-lived assets. We base
our estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions; however, we believe
that our estimates, including those for the above-described items, are
reasonable.
OIL AND GAS PROPERTIES
We follow the full cost method of accounting for oil and gas
operations. Under this method, all costs related to the exploration for and
development of oil and gas reserves are capitalized on a country-by-country
basis. Costs include lease acquisition costs, geological and geophysical
expenses, overhead directly related to exploration and development activities
and costs of drilling both productive and non-productive wells. Proceeds from
the sale of properties are applied against capitalized costs, without any gain
or loss being recognized, unless such a sale would significantly alter the rate
of depletion and depreciation.
Depletion of exploration and development costs and depreciation of
production equipment is provided using the unit-of-production method based upon
estimated proven oil and gas reserves. The costs of significant unevaluated
properties are excluded from costs subject to depletion. For depletion and
depreciation purposes, relative volumes of oil and gas production and reserves
are converted at the equivalent conversion based upon relative energy content.
9
In applying the full cost method, we perform a ceiling test whereby the
carrying value of oil and gas properties and production equipment, net of
recorded future income taxes and the accumulated provision for site restoration
and abandonment costs, is compared annually to an estimate of future net cash
flow from the production of proven reserves. Costs related to undeveloped oil
and gas properties are excluded from the ceiling tests. Discounted net cash
flow, utilizing a 10% discount rate, is estimated using year end prices, less
estimated future general and administrative expenses, financing costs and income
taxes. Should this comparison indicate an excess carrying value, the excess is
charged against earnings. At February 28, 2003, there were no reserves. Costs of
oil and gas properties are considered unevaluated at February 28, 2003.
IMPAIRMENT OF LONG-LIVED ASSETS.
Our long-lived assets include property and equipment. We assess
impairment of long-lived assets whenever changes or events indicate that the
carrying value may not be recoverable. In performing our assessment we must make
assumptions regarding estimated future cash flows and other factors to determine
the fair value of the respective assets. If these estimates change in the future
we may be required to record impairment charges against these respective assets.
STOCK BASED COMPENSATION.
Options granted to employees under the Company's Stock Option Plan are
accounted for by using the intrinsic method under APB Opinion 25, Accounting for
Stock Issued to Employees (APB 25). In October 1995, the Financial Accounting
Standards Board issued Statement No.123, Accounting for Stock-Based Compensation
(SFAS123), which defines a fair value based method of accounting for stock
options. The accounting standards prescribed by SFAS 123 are optional and the
Company has continued to account for stock options under the intrinsic value
method specified in APB 25.
RESULTS OF OPERATIONS
Dolphin Energy was incorporated on June 18, 2002. It has not yet
generated any revenues. For the three months ended February 28, 2003, we
incurred operating expenses of $428,616, primarily for legal expenses ($97,999),
travel and entertainment ($92,061), management fees ($90,000), payroll (67,923),
and investor relations ($46,125).
For the period from inception to November 30, 2002, we incurred
operating expenses of $1,140,066, primarily for contract services - Resource
Venture Management ($692,500), consulting fees and payroll ($125,265), legal
fees ($103,314), and travel and entertainment ($102,479). We expect operating
expenses to continue at that level due to our current activities. Travel and
entertainment expenses incurred since inception were related to the evaluation
of oil and gas properties and our private placement of common stock.
Accordingly, our accumulated deficit at February 28, 2003 was
$1,568,682.
10
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 2003, we had a working capital deficiency of $46,566,
as compared to a deficiency of $1,012,916 at November 30, 2002. The increase in
working capital was due to the receipt of proceeds from our private placement of
stock and subscriptions receivable. In addition, we reduced our accounts payable
to related parties by $233,204 by converting that liability into equity.
Included in current liabilities is a property purchase payable in the
amount of $396,000, due on or before August 28, 2003.
Since inception, we have funded our activities through the sale of our
common stock, raising net proceeds of $850,500 through the period ended November
30, 2002, and net proceeds of $884,830 for the three months ended February 28,
2003. For the three months ended February 28, 2003, we used cash of $501,077 for
our operating activities and $244,083 for our investing activities, which
consisted of additions to our oil and gas properties.
The report of our independent auditor on the financial statements for
the period ended November 30, 2002, includes an explanatory paragraph relating
to the uncertainty of our ability to continue as a going concern. We have
suffered losses from operations and require additional financing. We need to
obtain additional capital through the sale of our common stock or other
securities. Ultimately, we need to generate revenues and attain profitable
operations.
PLAN OF OPERATION
Since the end of the fiscal year, we have addressed our working capital
deficiency. From December 1, 2002 through February 28, 2003, we raised net
proceeds of $884,830 through the sale of our common stock. These proceeds have
been used for ongoing operations and to pay accrued trade payables. We are also
negotiating with some of our creditors to convert their debt into equity. At
February 28, 2003, Resource Venture Management, a related party, agreed to
convert its outstanding debt of $233,204, plus management fees for the three
months ended February 28, 2003 in the amount of $90,000, to 323,204 restricted
shares of our common stock.
Effective September 30, 2002, we entered into a lease acquisition and
drilling agreement with Pioneer Oil, a Montana limited liability company
("Pioneer"), which entitles us to earn a 100% working interest and a 78% net
revenue interest in leases covering 15,657 acres in the Powder River Basin, near
Lieter, Wyoming. To acquire the leases to this acreage, we were required to pay
and did pay $100,000 by January 31, 2003. We must pay $1,650,000 by May 15,
2003, deposit the estimated costs to drill and complete 30 pilot wells into an
escrow account by May 15, 2003, and drill at least 25 pilot wells by October 1,
2003. We may also acquire a 100% interest in five natural gas wells, for
$500,000, by May 15, 2003.
Effective October 1, 2002, we entered into a Coal Bed Methane
Participation Agreement with Horizon Exploitation, Inc., a Colorado corporation
("Horizon"), which provides funding for the development of our Pioneer leasehold
interests and establishes an area of mutual interests in the
11
Powder River Basin located in Wyoming and Montana for future projects on the
same terms as described below.
Under the terms of the agreement, Horizon may participate, subject to
funding, in the development of up to 120 wells and also includes the purchase of
the five existing wells from Pioneer. Horizon's commitment to participate in the
development is subject to an initial funding by Horizon of $100,000, a $500,000
payment for the purchase of the five existing wells, and the placement of
$1,650,000, plus the estimated amount to drill and complete 30 pilot wells, into
escrow as a partial payment for a 30-well pilot project on or before May 15,
2003. The estimated AFE cost per well is $150,000
Accordingly, our plan of operation currently depends upon the ability
of Horizon to fund the proposed 30-well pilot program. If Horizon is unable to
do so, we will need to raise the capital through the sale of our debt and/or
equity securities. We are currently engaging in these capital-raising efforts
should Horizon be unable to fund the payments due to Pioneer by May 15, 2003. In
March and April 2003, 165,000 shares were subscribed and paid for at $1.00 per
share, for gross proceeds of $165,000.
In addition to our obligations under the Pioneer lease acquisition and
drilling agreement, we are obligated to pay $396,000 by August 28, 2003 for our
leases in Sheridan County, Wyoming.
On November 15, 2002, we executed a letter of intent to acquire
Pannonian International, Ltd., a Colorado corporation, solely for 2,000,000
shares of our common stock. We plan to acquire Pannonian International by April
30, 2003. While the acquisition is to be implemented through the issuance of our
common stock, we anticipate that we will need approximately $200,000 of cash
during the remainder of the fiscal year ending November 30, 2003, to satisfy
Pannonian's trade payables in the ordinary course of business and cover the
additional overhead. Pannonian currently has 2 employees and an office in
Denver, Colorado.
FORWARD-LOOKING STATEMENTS
This report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included or incorporated by reference in this
report, including, without limitation, statements regarding our future financial
position, business strategy, budgets, projected costs and plans and objectives
of management for future operations, are forward-looking statements. In
addition, forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "intend,"
"project," "estimate," "anticipate," "believe," or "continue" or the negative
thereof or variations thereon or similar terminology. Although we believe that
the expectations reflected in such forward-looking statements are reasonable, we
cannot give any assurance that such expectations will prove to have been
correct. Important factors that could cause actual results to differ materially
from our expectations ("Cautionary Statements") include, but are not limited to,
our assumptions about energy markets, production levels, reserve levels,
operating results, competitive conditions, technology, the availability of
capital resources, capital expenditure obligations, the supply and
12
demand for oil and natural gas, the price of oil and natural gas, currency
exchange rates, the weather, inflation, the availability of goods and services,
drilling risks, future processing volumes and pipeline throughput, general
economic conditions (either internationally or nationally or in the
jurisdictions in which we are doing business), legislative or regulatory changes
(including changes in environmental regulation, environmental risks and
liability under federal, state and foreign environmental laws and regulations),
the securities or capital markets and other factors disclosed above under "Item
2. Management's Discussion and Analysis or Plan of Operation" and elsewhere in
this report. All subsequent written and oral forward-looking statements
attributable to us, or persons acting on our behalf, are expressly qualified in
their entirety by the cautionary statements. We assume no duty to update or
revise our forward-looking statements based on changes in internal estimates or
expectations or otherwise.
ITEM 3. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we conducted
an evaluation of the effectiveness of our disclosure controls and procedures as
defined in Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934
within 90 days of the filing date of this report. Based on their evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that the design
and operation of our disclosure controls and procedures were effective as of the
date of the evaluation.
There have been no significant changes (including corrective actions
with regard to significant deficiencies or material weaknesses) in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation referenced in the preceding paragraph.
13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings.
ITEM 2. CHANGES IN SECURITIES
During the three months ended February 28, 2003, the registrant sold
887,000 shares for gross proceeds of $887,000 to 30 accredited
investors, pursuant to the exemption from registration contained in
Rule 506 under Section 4(2) of the Securities Act of 1933. No
underwriters were used.
In addition, the registrant issued 323,204 shares of common stock in
exchange for payment of debt owed to an affiliate, pursuant to the
exemption from registration contained in Rule 506 under Section 4(2) of
the Securities Act of 1933. No underwriters were used.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
REGULATION
S-B NUMBER EXHIBIT
2.1 Agreement and Plan of Reorganization dated as of November
1, 2002, by and among Galaxy Investments, Inc., Dolphin
Acquisition Corporation, and Dolphin Energy Corporation
(1)
3.1 Articles of Incorporation (2)
3.2 Bylaws (2)
10.1 Escrow Instructions and Agreement dated as of August 28,
2002 (3)
14
REGULATION
S-B NUMBER EXHIBIT
10.2 Lease Acquisition and Drilling Agreement dated as of
September 30, 2002, as amended (3)
10.3 Coal Bed Methane Participation Agreement dated as of
October 1, 2002, as amended (3)
10.4 Letter agreement among Dolphin Energy Corporation, Harbor
Petroleum, LLC and Florida Energy, Inc. dated March 6,
2003 (3)
21 Subsidiaries of the registrant (3)
99.1 Certification of Principal Executive Officer Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
99.2 Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
----------------
(1) Incorporated by reference to the exhibits to the registrant's
current report on Form 8-K dated November 13, 2002, file number
0-32237.
(2) Incorporated by reference to the exhibits to the registrant's
registration statement on Form 10-SB, file number 0-32237.
(3) Incorporated by reference to the exhibits to the registrant's
annual report on Form 10-KSB for the fiscal year ended November 30,
2002, file number 0-32237.
(b) Reports on Form 8-K: A report on Form 8-K dated November 13, 2002
was filed on December 6, 2002, reporting, under Items 1, 2, 4, and 5, the
acquisition of Dolphin Energy Corporation. Financial statements of Dolphin
Energy Corporation and pro forma financial statements were filed with the
report.
15
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GALAXY INVESTMENTS, INC.
Date: April 21, 2003 By: /s/ Carmen J. Lotito
------------------------------------------
Carmen J. Lotito
Chief Financial Officer
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CERTIFICATIONS
I, Marc E. Bruner, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Galaxy
Investments, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: April 21, 2003
/s/ Marc E. Bruner
-----------------------------------------
Marc E. Bruner
President (Principal Executive Officer)
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I, Carmen Lotito, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Galaxy
Investment, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: April 21, 2003
/s/ Carmen J. Lotito
-------------------------------------------
Carmen J. Lotito
Chief Financial Officer
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