UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10–Q
(Mark
One)
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended February 28, 2009
OR
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from
to
KAL
ENERGY, INC.
(Exact
name of registrant as specified in its charter)
|
|
|
|
|
Delaware
|
333-97201
|
98-0360062
|
|
(State
or other jurisdiction of incorporation or organization)
|
(Commission
File Number)
|
(I.R.S.
Employer Identification No.)
|
|
|
|
|
World
Trade Center 14th Floor Jl. Jenderal Sudirman Kav. 29
-31Jakarta,
Indonesia
|
12920
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant
’
s telephone number, including area code:
(62)-21-5211110
|
|
|
(Former name, former address and
former fiscal year, if changed since
last
report)
|
Indicate by check mark whether the
registrant (1) has 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
req
uired 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 smalle
r
reporting company. See the definitions of “
large accelerated filer,”
“
accelerated filer”
and “
smaller reporting company”
in Rule 12b-2 of the Exchange
Act.
|
Large accelerated
Filer
¨
|
Accelerated
Filer
¨
|
|
|
|
|
Non-accelerated
Filer
¨
(Do not check if a
smaller reporting company)
|
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
Indicate the number of
shares outstanding of each
of the
issuer
’
s classes of common
stock, as of the latest practicable date:
189,287,010
shares of common stock
as of
April 16
,
2009
.
KAL
ENERGY, INC.
QUARTERLY
REPORT ON FORM 10-Q
FOR
THE
QUARTER ENDED FEBRUARY 28, 2009
TABLE
OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
Page No.
|
|
|
|
|
|
|
|
Part I.
|
|
Financial
Information
|
|
|
|
|
|
|
|
|
|
Item 1.
|
|
Financial
Statements
|
|
1
|
|
|
|
|
|
|
|
|
|
Consolidated
Balance Sheets (Unaudited) — February 28, 2009 and May 31,
2008
|
|
1
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Operations (Unaudited) — Three and Nine Month
Periods Ended February 28, 2009 and February 29, 2008 and the Period From
February 21, 2001 (Inception) to February 28, 2009.
|
|
2
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Cash Flows (Unaudited) — Nine Month Periods Ended
February 28, 2009 and February 29, 2008 and the Period From February 21,
2001 (Inception) to February 28, 2009.
|
|
3
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Stockholders’ Equity/(Deficit) (Unaudited) — From February
21, 2001 (Inception) to February 28, 2009.
|
|
4
|
|
|
|
|
|
|
|
|
|
Notes
to Consolidated Financial Statements (Unaudited )
|
|
5
|
|
|
|
|
|
|
|
Item 2.
|
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
|
17
|
|
|
|
|
|
|
|
Item 3.
|
|
Quantitative
and Qualitative Disclosures About Market Risk
|
|
19
|
|
|
|
|
|
|
|
Item 4T.
|
|
Controls
and Procedures
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Part II.
|
|
|
|
|
|
|
|
|
|
|
|
Item
1.
|
|
Legal
Proceedings
|
|
20
|
|
|
|
|
|
|
|
Item
1A
|
|
Risk
Factors
|
|
20
|
|
|
|
|
|
|
|
Item
2.
|
|
Unregistered Sales
of Equity Securities and Use of Proceeds
|
|
21
|
|
|
|
|
|
|
|
Item
3.
|
|
Defaults
Upon Senior Securities
|
|
21
|
|
|
|
|
|
|
|
Item
4.
|
|
Submission
of Matters to a Vote of Security Holders
|
|
21
|
|
|
|
|
|
|
|
Item
5.
|
|
Other
Information
|
|
21
|
|
|
|
|
|
|
|
Item
6.
|
|
Exhibits
|
|
22
|
|
|
|
|
|
|
|
Signatures
|
|
|
|
23
|
PART
I—FINANCIAL INFORMATION
Item
1. Financial Statements.
KAL
ENERGY, INC.
AND
SUBSIDIARIES
(A
n Exploration
Stage Company)
CONSOLIDATED
BALANCE SHEETS
|
|
|
FEBRUARY
28, 2009
|
|
|
MAY
31, 2008
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
30,496
|
|
|
$
|
1,944,567
|
|
|
Other
receivable
|
|
|
79,822
|
|
|
|
75,945
|
|
|
Prepaid
expenses and other current assets
|
|
|
178,375
|
|
|
|
123,307
|
|
|
Total
Current Assets
|
|
|
288,693
|
|
|
|
2,143,819
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
Plan and Equipment, net
|
|
|
100,613
|
|
|
|
-
|
|
|
Intangible
assets, net
|
|
|
6,347,611
|
|
|
|
6,613,326
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
6,736,917
|
|
|
$
|
8,757,144
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
1,094,293
|
|
|
$
|
597,459
|
|
|
Shares
to be issued
|
|
|
-
|
|
|
|
700,000
|
|
|
Total
Current Liabilities
|
|
|
1,094,293
|
|
|
|
1,297,459
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
Authorized:
|
|
|
|
|
|
|
|
|
|
500,000,000
voting common shares, par value $0.0001
|
|
|
|
|
|
|
|
|
|
Issued
and outstanding:
|
|
|
|
|
|
|
|
|
|
Treasury
shares - Common Stock 9,000,000 shares
|
|
|
(900
|
)
|
|
|
-
|
|
|
196,462,010
common shares issued and 187,462,010 outstanding on February 28, 2009
and 134,687,004 common shares issued and outstanding on May 31,
2008
|
|
|
19,646
|
|
|
|
13,469
|
|
|
Additional
paid-in capital
|
|
|
24,161,835
|
|
|
|
21,904,316
|
|
|
Subscription
receivable
|
|
|
(200,000
|
)
|
|
|
(40,000
|
)
|
|
Deficit
Accumulated During The Exploration Stage
|
|
|
(18,337,957
|
)
|
|
|
(14,418,100
|
)
|
|
Total
Stockholders' Equity
|
|
|
5,642,624
|
|
|
|
7,459,685
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
|
6,736,917
|
|
|
$
|
8,757,144
|
|
The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
KAL
ENERGY, INC.
AND
SUBSIDIARIES
(A
n Exploration
Stage Company)
CONSOLIDATED
STATEMENTS OF
OPERATIONS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
THE CUMULATIVE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
THE THREE MONTH
PERIODS
ENDED
|
|
|
FOR
THE NINE MONTH
PERIODS
ENDED
|
|
|
FEB
21, 2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(INCEPTION)
TO
|
|
|
|
|
FEB
28, 2009
|
|
|
FEB
29, 2008
|
|
|
FEB
28, 2009
|
|
|
FEB
29, 2008
|
|
|
FEB
28, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
expenditures
|
|
|
152,394
|
|
|
|
469,753
|
|
|
|
933,204
|
|
|
|
2,842,004
|
|
|
|
5,322,849
|
|
|
Stock
based compensation expense
|
|
|
43,750
|
|
|
|
1,512,381
|
|
|
|
1,022,727
|
|
|
|
4,591,022
|
|
|
|
7,207,158
|
|
|
General
and administrative expenditures
|
|
|
328,286
|
|
|
|
152,085
|
|
|
|
1,285,846
|
|
|
|
527,386
|
|
|
|
3,828,074
|
|
|
Professional
and consulting fees
|
|
|
129,443
|
|
|
|
399,712
|
|
|
|
860,863
|
|
|
|
1,251,403
|
|
|
|
2,283,995
|
|
|
Total
Operating Expenses
|
|
|
653,873
|
|
|
|
2,533,931
|
|
|
|
4,102,639
|
|
|
|
9,211,585
|
|
|
|
18,642,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
on settlement of debt
|
|
|
4,830
|
|
|
|
-
|
|
|
|
4,830
|
|
|
|
-
|
|
|
|
4,830
|
|
|
Consulting
services
|
|
|
100,000
|
|
|
|
-
|
|
|
|
159,745
|
|
|
|
-
|
|
|
|
231,625
|
|
|
Interest
income
|
|
|
5
|
|
|
|
18,671
|
|
|
|
18,207
|
|
|
|
40,580
|
|
|
|
67,664
|
|
|
Total
other income
|
|
|
104,835
|
|
|
|
18,671
|
|
|
|
182,782
|
|
|
|
40,580
|
|
|
|
304,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(549,038
|
)
|
|
$
|
(2,515,260
|
)
|
|
$
|
(3,919,857
|
)
|
|
$
|
(9,171,005
|
)
|
|
$
|
(18,337,957
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss Per Common Share, basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Basic
and Diluted Weighted Average Number Of Common Shares
Outstanding
|
|
|
137,792,340
|
|
|
|
98,962,772
|
|
|
|
139,134,882
|
|
|
|
98,276,590
|
|
|
|
|
|
*Weighted
average number of shares for dilutive securities has not been taken
since
the
effect of dilutive securities is anti- dilutive.
The accompanying notes are an integral
part of these unaudited consolidated financial statements.
KAL
ENERGY, INC.
AND
SUBSIDIARIES
(A
n Exploration
Stage Company)
CONSOLIDATED
STATEMENTS OF CASH
FLOWS
FOR
THE NINE MONTH PERIODS ENDED
FEBRUARY
28, 2009 AND FEBRUARY 29, 2008
AND
THE PERIOD FROM FEBRUARY 21, 2001
(INCEPTION) TO FEBRUARY 28,
2009
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
THE NINE MONTH PERIOD ENDED
|
|
|
FOR
THE
CUMULATIVE
PERIOD FROM
FEBRUARY
21, 2001
|
|
|
|
|
|
|
|
|
|
|
(INCEPTION)
TO
|
|
|
|
|
FEBRUARY
28, 2009
|
|
|
FEBRUARY
29,
2008
|
|
|
FEBRUARY
28, 2009
|
|
|
Cash
Flows In Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
$
|
(3,919,857
|
)
|
|
$
|
(9,171,005
|
)
|
|
$
|
(18,337,957
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
based compensation expense
|
|
|
1,022,727
|
|
|
|
4,591,022
|
|
|
|
7,207,158
|
|
|
Gain
on settlement of debt
|
|
|
(4,830
|
)
|
|
|
-
|
|
|
|
(4,830
|
)
|
|
Stock
issued for consulting services
|
|
|
-
|
|
|
|
-
|
|
|
|
261,250
|
|
|
Amortization
expense
|
|
|
271,207
|
|
|
|
265,714
|
|
|
|
743,587
|
|
|
Allowance
for bad debt-Note receivable
|
|
|
20,000
|
|
|
|
-
|
|
|
|
382,656
|
|
|
(Increase)
/ decrease in accounts receivable
|
|
|
(3,877
|
)
|
|
|
-
|
|
|
|
(79,822
|
)
|
|
Increase
in prepaid expenses and other current assets
|
|
|
(55,068
|
)
|
|
|
(15,407
|
)
|
|
|
(183,699
|
)
|
|
Increase
in accounts payable and accrued liabilities
|
|
|
761,734
|
|
|
|
935,994
|
|
|
|
1,077,098
|
|
|
Net
cash used in operating activities
|
|
|
(1,907,964
|
)
|
|
|
(3,393,681
|
)
|
|
|
(8,934,559
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows In Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
of acquired subsidiary
|
|
|
-
|
|
|
|
-
|
|
|
|
201,054
|
|
|
Cash
investment in subsidiary
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,000
|
)
|
|
Acquisition
of property, plant and equipment
|
|
|
(106,107
|
)
|
|
|
|
|
|
|
(106,107
|
)
|
|
Net
cash provided by (used in) investing activities
|
|
|
(106,107
|
)
|
|
|
-
|
|
|
|
84,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows In Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances
from shareholder
|
|
|
-
|
|
|
|
75,000
|
|
|
|
117,820
|
|
|
Payments
to shareholders
|
|
|
-
|
|
|
|
(75,000
|
)
|
|
|
(117,820
|
)
|
|
Issuance
of notes payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Debt
repayments
|
|
|
-
|
|
|
|
-
|
|
|
|
(198,000
|
)
|
|
Advances
on notes receivable
|
|
|
-
|
|
|
|
(50,000
|
)
|
|
|
(753,995
|
)
|
|
Proceeds
from issuance of common stock
|
|
|
100,000
|
|
|
|
4,502,999
|
|
|
|
9,832,103
|
|
|
Net cash provided by financing activities
|
|
|
100,000
|
|
|
|
4,452,999
|
|
|
|
8,880,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/(Decrease)
In Cash & cash equivalents
|
|
|
(1,914,071
|
)
|
|
|
1,059,318
|
|
|
|
30,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
And Cash Equivalents, Beginning Of Period
|
|
|
1,944,567
|
|
|
|
729,626
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
And Cash Equivalents, End Of Period
|
|
$
|
30,496
|
|
|
$
|
1,788,943
|
|
|
|
30,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure Of Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Income
Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Non Cash Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued to acquire subsidiary
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,400,000
|
|
|
Shares
returned by founders
|
|
$
|
900
|
|
|
$
|
-
|
|
|
$
|
900
|
|
|
Shares
issued to investors
|
|
$
|
6,080
|
|
|
$
|
-
|
|
|
$
|
6,080
|
|
|
Shares
issued for settlement of debt
|
|
$
|
260,069
|
|
|
$
|
-
|
|
|
$
|
260,069
|
|
The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
KAL ENERGY, INC. AND
SUBSIDIARIES
(A
n Exploration
Stage Company)
CONSOLIDATED STATEMENT OF
STOCKHOLDERS
’
EQUITY (DEFICIT)
FOR THE PERIOD FROM F
EBRUARY 21, 2001 (INCEPTION) TO
FEBRUARY 28
,
2009
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
ACCUMULATED
|
|
|
|
|
|
|
|
TREASURY
STOCK
|
|
|
COMMON
STOCK
|
|
|
|
|
|
DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADDITIONAL
|
|
|
|
|
|
DURING
THE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PAID-IN
|
|
|
SUBSCRIPTION
|
|
|
EXPLORATION
|
|
|
|
|
|
|
|
NUMBER
|
|
|
AMOUNT
|
|
|
NUMBER
|
|
|
AMOUNT
|
|
|
CAPITAL
|
|
|
RECEIVABLE
|
|
|
STAGE
|
|
|
TOTAL
|
|
|
Issuance
of common stock for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Founders’
shares
|
|
|
-
|
|
|
|
-
|
|
|
|
40,000,000
|
|
|
$
|
1,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,000.00
|
|
|
Initial
shares
|
|
|
-
|
|
|
|
-
|
|
|
|
6,875,272
|
|
|
|
3,688
|
|
|
|
47,877
|
|
|
|
-
|
|
|
|
-
|
|
|
|
51,565
|
|
|
Net
loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(35,809
|
)
|
|
|
(35,809
|
)
|
|
Balance,
May 31, 2001
|
|
|
-
|
|
|
|
-
|
|
|
|
46,875,272
|
|
|
|
4,688
|
|
|
|
47,877
|
|
|
|
-
|
|
|
|
(35,809
|
)
|
|
|
16,756
|
|
|
Net
income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,723
|
|
|
|
15,723
|
|
|
Balance,
May 31, 2002
|
|
|
-
|
|
|
|
-
|
|
|
|
46,875,272
|
|
|
|
4,688
|
|
|
|
47,877
|
|
|
|
-
|
|
|
|
(20,086
|
)
|
|
|
32,479
|
|
|
Net
loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,847
|
)
|
|
|
(16,847
|
)
|
|
Balance,
May 31, 2003
|
|
|
-
|
|
|
|
-
|
|
|
|
46,875,272
|
|
|
|
4,688
|
|
|
|
47,877
|
|
|
|
-
|
|
|
|
(36,933
|
)
|
|
|
15,632
|
|
|
Net
loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(18,846
|
)
|
|
|
(18,846
|
)
|
|
Balance,
May 31, 2004
|
|
|
-
|
|
|
|
-
|
|
|
|
46,875,272
|
|
|
|
4,688
|
|
|
|
47,877
|
|
|
|
-
|
|
|
|
(55,779
|
)
|
|
|
(3,214
|
)
|
|
Net
loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,544
|
)
|
|
|
(11,544
|
)
|
|
Balance,
May 31, 2005
|
|
|
-
|
|
|
|
-
|
|
|
|
46,875,272
|
|
|
|
4,688
|
|
|
|
47,877
|
|
|
|
-
|
|
|
|
(67,323
|
)
|
|
|
(14,758
|
)
|
|
Net
loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,348
|
)
|
|
|
(10,348
|
)
|
|
Balance,
May 31, 2006
|
|
|
-
|
|
|
|
-
|
|
|
|
46,875,272
|
|
|
|
4,688
|
|
|
|
47,877
|
|
|
|
-
|
|
|
|
(77,671
|
)
|
|
|
(25,106
|
)
|
|
Merger
with Thatcher Mining Pte. Ltd.
|
|
|
-
|
|
|
|
-
|
|
|
|
32,000,000
|
|
|
|
3,200
|
|
|
|
6,396,800
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,400,000
|
|
|
Stock
issued for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
17,615,000
|
|
|
|
1,762
|
|
|
|
3,501,239
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,503,000
|
|
|
Stock
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
1,112,500
|
|
|
|
111
|
|
|
|
222,389
|
|
|
|
-
|
|
|
|
-
|
|
|
|
222,500
|
|
|
Issuance
of shares under stock compensation plan
|
|
|
-
|
|
|
|
-
|
|
|
|
125,000
|
|
|
|
13
|
|
|
|
342,488
|
|
|
|
-
|
|
|
|
-
|
|
|
|
342,500
|
|
|
Stock
based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
958,872
|
|
|
|
-
|
|
|
|
-
|
|
|
|
958,872
|
|
|
Net
loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,693,152
|
)
|
|
|
(3,693,152
|
)
|
|
Balance,
May 31, 2007
|
|
|
-
|
|
|
|
-
|
|
|
|
97,727,772
|
|
|
|
9,773
|
|
|
|
11,469,664
|
|
|
|
-
|
|
|
|
(3,770,823
|
)
|
|
|
7,708,614
|
|
|
Stock
issued for cash*
|
|
|
-
|
|
|
|
-
|
|
|
|
34,957,600
|
|
|
|
3,496
|
|
|
|
5,473,042
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,476,528
|
|
|
Stock
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
55,000
|
|
|
|
6
|
|
|
|
38,745
|
|
|
|
-
|
|
|
|
-
|
|
|
|
38,750
|
|
|
Issuance
of shares under stock compensation plan
|
|
|
-
|
|
|
|
-
|
|
|
|
1,946,700
|
|
|
|
195
|
|
|
|
674,909
|
|
|
|
(40,000
|
)
|
|
|
-
|
|
|
|
635,104
|
|
|
Stock
options granted to employees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,247,957
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,247,957
|
|
|
Net
loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,647,276
|
)
|
|
|
(10,647,276
|
)
|
|
Balance,
May 31, 2008
|
|
|
-
|
|
|
|
-
|
|
|
|
134,687,072
|
|
|
|
13,469
|
|
|
|
21,904,316
|
|
|
|
(40,000
|
)
|
|
|
(14,418,100
|
)
|
|
$
|
7,459,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
38,729,167
|
|
|
|
3,873
|
|
|
|
996,127
|
|
|
|
(200,000
|
)
|
|
|
-
|
|
|
|
800,000
|
|
Stock
based compensation expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
970,833
|
|
|
|
97
|
|
|
|
1,022,630
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,022,727
|
|
|
Subscription
received
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
20,000
|
|
|
|
-
|
|
|
|
20,000
|
|
|
Subscription cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(20,000
|
)
|
|
|
20,000
|
|
|
|
-
|
|
|
|
-
|
|
|
Stocks
returned by the founders
|
|
|
9,000,000
|
|
|
|
(900
|
)
|
|
|
(9,000,000
|
)
|
|
|
-
|
|
|
|
900
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Shares
issued for settlement of debt
|
|
|
|
|
|
|
|
|
|
|
22,074,918
|
|
|
|
2,2
07
|
|
|
|
257,862
|
|
|
|
|
|
|
|
|
|
|
|
260,069
|
|
|
Net
loss for the nine month period ended February 28,
2009
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(
3,919,857
|
)
|
|
|
(3,919,857
|
)
|
|
Balance,
February 28, 2009
|
|
|
9,000,000
|
|
|
$
|
(900
|
)
|
|
|
1
87
,
46
2,010
|
|
|
$
|
19
,646
|
|
|
$
|
24,1
61
,835
|
|
|
$
|
(200,000
|
)
|
|
$
|
(
18,337,957
|
)
|
|
$
|
5,642
,624
|
|
*$700,000 of the total was
received during the year ended May 31, 2008.
The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
KAL ENERGY, INC.
AND SUBSIDIARIES
|
(A
n
Exploration
Stage
Company)
|
NOTES TO UNAUDITED
CONSOLIDAT
ED
FINANCIAL
STATEMENTS
1
.
NATURE OF OPERATIONS AND GOING
CONCERN
a) Organization and Change of
Name
KAL Energy, Inc. (formerly, Patriarch,
Inc.) (the
“
Company”
or “
we”
) was incorporated on February 21, 2001
in the State of Delaware. On November 14, 200
6, the Company
’
s stockholders voted to amend the
Company
’
s Certificate of Incorporation to change
the Company
’
s name to KAL Energy, Inc. This
amendment took effect on December 20, 2006. The Company was formed
for the purpose of acquiring and developing e
x
ploration stage natural resource
properties. The Company is in the exploration stage. The
Company
’
s operations are carried out by its
wholly owned subsidiary, Thatcher Mining Pte. Ltd, a corporation formed under
the laws of the Republic of Singapore on
June 8, 2006 (“
Thatcher”
) and acquired by the Company on
February 9, 2007. The Company formed PT Kubar Resources
(“
Kubar”
), a limited liability foreign
investment (PMA) company
incorporated
under the laws
of the Republic of Indonesia on April 12, 2007, an
d completed its registration on June 6,
2007. Kubar is owned 99% by Thatcher and 1% by the Company, making it
a wholly owned subsidiary of the Company. The Company acquired
Finchley Resources Pte. Ltd. (Finchley), a corporation formed under the laws of
t
he Republic of Singapore
,
on September 12,
2007.
b) Exploration
Activities
The Company has been in the exploration
stage since its formation and has not yet realized any revenues from its planned
operations. The Company is currently seeking opportunities
for profitable
operations. Costs related to locating coal deposits and determining
the extractive feasibility of such deposits
is
expensed as
incurred.
c) Going Concern
The Company
’
s interim financial statements have been
prepared on a going concern basi
s, which contemplate the realization of
assets and satisfaction of liabilities in the normal course of
business.
The accompanying financial statements
have been prepared assuming
that
the Company will continue as a going
concern. The Company incurred cumul
ative losses of $
18
,337
,
957
for the period from February 21, 2001
(inception) to
February
2
8
, 200
9
. In addition, the permits allowing
exploration activities on its mining concessions in Kalimantan expired on
September 14, 2008. Whilst applications for per
mit extensions have been submitted, and
while the original permits continue to be valid automatically for another twelve
months
from the original
expiration date
, there is
no assurance that a renewal will be granted. These factors raise substantial
doubt a
bout
the
Company
’
s ability to continue as a going
concern.
The interim financial statements do not
include adjustments relating to recoverability and classification of recorded
assets amounts, or the amounts and classification of liabilities that might
b
e necessary should the
Company be unable to continue as a going concern.
Recurring losses from operations and
operating cash constraints are potential factors, which, among others, may
indicate that the Company will be unable to continue as a going
concern
for a reasonable
period of time.
Management has taken the following steps
to revise its operating and financial requirements, which it believes are
sufficient to provide the Company with the
ability to continue as a going
concern. Management devoted co
nsiderable effort
from inception through the quarter ended
February 28,
2009
, towards
(i)
additional working capital through the
issuance of the Company
’
s equity securities, (ii) reduction of
its recurring operational costs, (iii) management of accrued exp
enses and accounts
payable, and (iv) the pursuit of
a
suitable strategic partner.
Management believes that the above
actions will allow the Company to continue
operations through the next fiscal
year.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of
presentation
The
accompanying interim condensed consolidated financial statements are prepared in
accordance with the rules and regulations promulgated by the Securities and
Exchange Commission (“SEC” or “Commission”) and should be read in conjunction
with the audited financial statements included in the Company's Form
10-KSB for the fiscal year ended May 31, 2008. In the opinion of the
Company’s management, all adjustments consisting of
normal recurring accruals have been made
to the financial statements. The results of operation for
the nine months ended February 28, 2009 are not necessarily indicative of the
results to be expected for the fiscal year ending May 31, 2009.
Principles
of consolidation
The
accompanying condensed consolidated financial statements include the accounts of
the Company, the accounts of its wholly owned subsidiaries, Thatcher, PT Kubar
and Finchley, and the accounts of the variable interest entities, PT Bunyut Bara
Mandiri and PT Graha Panca Karsa (see Note 8 herein). All
significant inter-company transactions and
accounts have been eliminated in consolidation.
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 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, and such
differences could affect the amounts of revenue and expenses reported in future
periods and such differences could be material.
Basic and
diluted net loss per share
Net loss
per share is calculated in accordance with the Statement of Financial Accounting
Standards No. 128 (SFAS No. 128), "Earnings per share". SFAS No. 128 superseded
Accounting Principles Board Opinion No.15 (APB 15). Net loss per share for all
periods presented has been restated to reflect the adoption of SFAS No. 128.
Basic net loss per share is based upon the weighted average number of common
shares outstanding. Diluted net loss per share is based on the
assumption that all dilutive convertible shares and stock options were converted
or exercised. Dilution is computed by applying the treasury stock
method. Under this method, options and warrants are assumed to be exercised at
the beginning of the period (or at the time of issuance, if later), and as if
funds obtained thereby were used to purchase common stock at the average market
price during the period.
Property, plant and
equipment
The Company capitalizes all assets that
have a useful life of over one year and
have an initial value
above $500. The assets are
dep
reciated using the
straight-line method of depreciation. The useful lives used for
depreciation are consistent with those used for US tax purposes and are as
follows:
Computer Equipment
–
5 Years
Furniture & Equipment
–
7 Years
Intangible Assets
The Compa
ny evaluates intangible assets, goodwill
and other long-lived assets for impairment at least on an annual basis and
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable from its estimated future cash flows.
R
ecoverability of intangible assets,
other long-lived assets and goodwill is measured by comparing their net book
value to the related projected undiscounted cash flows from these assets,
considering a number of factors including past operating results, bu
d
gets, economic projections, market
trends and product development cycles. If the net book value of the
asset exceeds the related undiscounted cash flows, the asset is considered
impaired, and a second test is performed to measure the amount of
impairment
loss. Potential impairment of
goodwill after July 1, 2002 is being evaluated in accordance with SFAS No.
142. The SFAS No. 142 is applicable to the financial statements of
the Company beginning July 1, 2002.
Recent
pronouncements
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51. This statement 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. This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest. This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. Based on current conditions, the Company does not
expect the adoption of SFAS 160 to have a significant impact on its results of
operations or financial position.
In March
2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities.” The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under
Statement 133; and how derivative instruments and related hedged items affect
its financial position, financial performance, and cash flows. Management is
currently evaluating the effect of this pronouncement on financial
statements.
In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. This
Statement replaces SFAS No. 141, “Business Combinations.” This Statement retains
the fundamental requirements in Statement 141 that the acquisition method of
accounting (which Statement 141 called the purchase method) be used for all
business combinations and for an acquirer to be identified for each business
combination. This Statement also 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. SFAS No.
141(R) will apply prospectively to business combinations for which the
acquisition date is on or after a company’s fiscal year beginning October 1,
2009. While the Company has not yet evaluated this statement for the
impact, if any, that SFAS No. 141(R) will have on its consolidated financial
statements, the Company will be required to expense costs related to any
acquisitions after September 30, 2009. Our management is currently evaluating
the effect of this pronouncement on financial statements.
In May of
2008, FASB issued SFASB No.162, “The Hierarchy of Generally Accepted Accounting
Principles”. The pronouncement mandates the GAAP hierarchy reside in the
accounting literature as opposed to the audit literature. This has the practical
impact of elevating FASB Statements of Financial Accounting Concepts in the GAAP
hierarchy. This pronouncement will become effective 60 days following SEC
approval. The Company does not believe this pronouncement will impact its
financial statements.
In May of
2008, FASB issued SFASB No. 163, “Accounting for Financial Guarantee Insurance
Contracts-an interpretation of FASB Statement No. 60”. The scope of the
statement is limited to financial guarantee insurance (and reinsurance)
contracts. The pronouncement is effective for fiscal years beginning after
December 31, 2008. The Company does not believe this pronouncement will impact
its financial statements.
On
December 30, 2008 FASB issued FIN 48-3, “Effective Date of FASB Interpretation
No. 48 for Certain Nonpublic Enterprises”. This FSP defers the effective date of
FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, for
certain non-public enterprises as defined in paragraph 289, as amended, of FASB
Statement No. 109, Accounting for Income Taxes, including non-public
not-for-profit organizations. However, non-public consolidated entities of
public enterprises that apply U. S. GAAP are not eligible for the deferral.
Nonpublic enterprises that have applied the recognition, measurement, and
disclosure provisions of Interpretation 48 in a full set of annual financial
statements issued prior to the issuance of this FSP also are not eligible for
the deferral. This FSP shall be effective upon issuance. The Company does not
believe this pronouncement will impact its financial statements.
On
January 12, 2009 FASB issued FSP EITF 99-20-01, “Amendment to the Impairment
Guidance of EITF Issue No. 99-20”. This FSP amends the impairment guidance in
EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on
Purchased Beneficial Interests and Beneficial Interests That Continue to be Held
by a Transferor in Securitized Financial Assets,” to achieve more consistent
determination of whether an other-than-temporary impairment has occurred. The
FSP also retains and emphasizes the objective of an other-than-temporary
impairment assessment and the related disclosure requirements in FASB Statement
No. 115, Accounting for Certain Investments in Debt and Equity Securities, and
other related guidance. The FSP is shall be effective for interim and annual
reporting periods ending after December 15, 2008, and shall be applied
prospectively. Retrospective application to a prior interim
or annual reporting period is not permitted. The Company does not
believe this pronouncement will impact its financial statements.
3.
OTHER RECEIVABLE
S
At
February 28, 2009
,
the Company had $
79,822
in other receivables.
The other receivable
is
comprised of $75,000 owing from a
contract signed with Indomines for an exclusive due diligence perio
d
(see Note 14 herein)
, and $4,822 for other
receivables.
At May 31, 2008, the Company had $75,945
of other
receivable
s
related to the outsourcing of
exploration personnel.
4.
NOTES RECEIVABLE
As of May 31, 2008, the Company had two
note receivables of
$150,000 and $175,000 from two unrelated
parties. The note receivables were both pledged by the shares to be purchased by
the notes, with an interest rate of twelve month LIBOR plus 5%, and due on
demand. The Company had accrued $37,656 of interest agains
t
this loan. Subsequent to the fiscal
year end, the Company did not receive confirmation from the holders of the
notes.
As such, the Company commenced a change
in the ownership of
PT
Graha Panca Karsa (“
PT
GPK”
) and PT Bunyut Bara
Mandiri (“
PT
BBM”
)
in acc
ordance with the terms of the share
pledge agreements. The Company is in the process of selling the notes to third
parties. Article 127 of
the
Indonesian
Company Law
of 1995
requires that a
ny time a company proposes to enter into
a transaction that
will
re
sult
in a
change of more than 50%
shareholding
,
a newspaper announcement
is required
, with closing
of such transaction
to occur no earlier than 30 days
following
the announcement. Up until the time the
notes are transferred, the Company is placing a reserv
e against the entire balance of the
notes. Once the transfer is completed and the notes are assumed by new parties,
the Company will reevaluate the value of the notes and the carrying amount of
the reserve, if any (see
N
ote 16
herein
)
.
As at
February 28,
2009
and May 31, 2008, the
Company
,
based upon its evaluation of the notes,
has provided an allowance for bad debts equal to full value of the
notes
receivable.
|
|
|
February 28,
2009
|
|
|
May
31, 2008
|
|
|
Loan
advances
|
|
|
325,000
|
|
|
|
325,000
|
|
|
Accrued
interest
|
|
|
50,410
|
|
|
|
37,656
|
|
|
Loan
balance
|
|
|
375,410
|
|
|
|
362,656
|
|
|
Reserve
|
|
|
(375,410
|
)
|
|
|
(362,656
|
)
|
|
Total
|
|
|
-
|
|
|
|
-
|
|
5.
PREPAID EXPENSES AND
DEPOSITS
Prepaid expenses
and deposits
are as follows:
|
|
|
February 28,
2009
|
|
|
May
31, 2008
|
|
|
Prepaid
expenses
|
|
$
|
154,694
|
|
|
$
|
111,542
|
|
|
Deposits
|
|
|
23,663
|
|
|
|
11,765
|
|
|
Total
Prepaid expenses
|
|
$
|
178,357
|
|
|
$
|
123,307
|
|
Prepaid
expenses as at
February 28,
2009
include $2,432 of prepaid insurance, $17,555 for employee advances,
$64,202 of withholding tax receivables, $30,456 for rental expenses, and $40,049
for other prepaid expenses.
Deposits
include $
18,768
in
rent deposit
s
and $4,895 in security
deposits.
Prepaid
expenses as at May 31, 2008 include $39,780 of prepaid insurance, $27,165 for
employee advances, $21,652 of withholding tax receivables, $18,281 in
prepayments for rental expenses, and $4,664 for other prepaid
expenses. Deposits include $11,765 for rental deposits.
6.
ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES
Accounts payable and accrued expenses
as
at
February 28, 20
09
and May 31, 2008
are as follows:
|
|
|
February 28,
2009
|
|
|
May
31, 2008
|
|
|
Accounts
payable
|
|
$
|
833,006
|
|
|
$
|
424,847
|
|
|
Accrued
expenses
|
|
|
263,287
|
|
|
|
172,612
|
|
|
Total
accounts payable and accrued expenses
|
|
$
|
1,094,293
|
|
|
$
|
597,459
|
|
As of
February 28, 2009
and May
31, 2008, the Company owed the following amounts to related parties for expenses
incurred in the normal course of business, included in the totals
above:
|
Officers
& Directors
|
|
February
28, 2009
|
|
|
May
31, 2008
|
|
|
Martin
Hurley
|
|
$
|
-
|
|
|
$
|
32,943
|
|
|
Jorge
Nigaglioni
|
|
|
64,735
|
|
|
|
3,154
|
|
|
William
Bloking
|
|
|
356
|
|
|
|
16,341
|
|
|
Andrew
Caminschi
|
|
|
778
|
|
|
|
-
|
|
|
Antonio
Varano
|
|
|
-
|
|
|
|
3,061
|
|
|
|
|
$
|
65,869
|
|
|
$
|
55,499
|
|
7.
PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment
as
at
February 28, 2009 and May 31, 2008
are as
follows:
|
|
|
|
|
|
|
|
|
|
|
February 28,
2009
|
|
|
May
31, 2008
|
|
|
Furniture
& equipment
|
|
$
|
95,380
|
|
|
$
|
-
|
|
|
Office
equipment
|
|
|
10,727
|
|
|
|
-
|
|
|
|
|
|
106,107
|
|
|
|
-
|
|
|
Less:
accumulated depreciation
|
|
|
(5,494
|
)
|
|
|
-
|
|
|
Net
property, plant and equipment
|
|
$
|
100,613
|
|
|
$
|
-
|
|
Furniture & equipment
contain
s
leas
ehold improvements on the
C
ompany
’
s primary offices.
8.
INTANGIBLE ASSETS
The Company entered
into two Investment and Cooperation
A
greements
, dated January 7,
2007,
with
PT GPK and
PT BBM
. Pursuant
to these agreements, the Company will provide mining se
rvices in exchange for
a share of revenues derived from any coal sales. The Company shall be
entitled to all net proceeds from the sale of minerals arising out of the
project, save for a 1% net smelter royalty. The Company has recorded
this asset at its
fair value, based on
the purchase method of accounting for acquisition, of $7,085,706 and is
amortizing it over 20 years.
The description of the
Investment
and Cooperation Agreements
is qualified in its
entirety by reference to the full text of such agre
ements , copies of
which are filed as Exhibits 10.3 and 10.4 to the Company
’
s Current Report on
Form 8-
K
filed with
the S
ecurities Exchange
Commission (the “
SEC”
)
on February 15, 2007
and are incorporated by reference into this Form 10-Q
.
|
|
|
February
28, 2009
|
|
|
May
31, 2008
|
|
|
Gross
Value of Agreements
|
|
$
|
7,085,706
|
|
|
$
|
7,085,706
|
|
|
Amortization
|
|
|
(738,095
|
)
|
|
|
(472,380
|
)
|
|
Net
Intangible assets
|
|
$
|
6,347,611
|
|
|
$
|
6,613,326
|
|
Amortization expense
s
for the Company
’
s intangible assets over the next five
years ending May 31, is esti
mated to be:
|
2009
|
|
$
|
177,144
|
|
|
2010
|
|
|
354,288
|
|
|
2011
|
|
|
354,288
|
|
|
2012
|
|
|
354,288
|
|
|
2013
|
|
|
354,288
|
|
|
After
|
|
|
4,
753
,
315
|
|
|
Total
|
|
$
|
6,
347
,
611
|
|
9.
RELATED PARTY
TRANSACTIONS
The Company use
d
the services of Mining House Ltd. for
IT and administrative services. Th
ese
costs
also include
expense
reimbursements for
travel and
other administrative expenses. One of the Company
’
s directors was a director of Mining
House Ltd. Additionally, our two previous chief executive officers
and Chairman were directors
of
Mining H
ouse Ltd. Payments for such
services during the nine month period ended
February 28, 2009
amounted to
$38,259. The Company terminated its contract with Mining House Ltd.
as of August 31, 2008.
The
Company had a rental and services agreements with PB Commodities (“PBC”) for
office space in Singapore. “PBC” is owned by Concord International
(“Concord”), a stockholder of the Company. Rental and service
payments for such
services during
the nine month period ended
February 28, 2009
amounted to
$15,776. The Company terminated its contract with PBC as of July 31,
2008.
The
Company used Asia Consultancy Group Pte Ltd. (“ACG”) for exploration consulting
services. These costs also include expense reimbursements for travel and
other administrative expenses. We terminated our contract with ACG in November
2007. ACG is owned by PBC. There were no payments to ACG for
the nine month period ended
February 28, 2009
.
The
Company raised an aggregate of $200,000 through three private placements to Mr.
William Bloking during February 2009. Mr. Bloking participated in three
individual placements; $60,000 on February 6th, $40,000 on February 24th, and
$100,000 on February 27th. Cash is not received at the end of February 28, 2009
and recorded as subscription receivable. See our Current Reports on
Form 8-K filed with the SEC on February 3, 2009 (the “Initial 8-K”) and March 2,
2009 (the “Subsequent 8-K” and together with the Initial 8-K the “Financing
8-K’s” ) for a further description of these transactions . A copy of
the subscription agreement is attached as Exhibit 99.1 to the Initial 8-K and is
incorporated by reference herein. A copy of the private placement agreement is
attached as Exhibit 99.1 to the Subsequent 8-K and is incorporated by reference
herein.
The
Company settled $156,000 of debts owing to Mr. William Bloking through a
debt–for–equity conversion on February 27, 2009. The shares were issued at
US$0.012 per share at the settlement date resulting in an aggregate of
13,000,000 shares. The Company recorded gain on settlement debt
amounting to $26,000 to additional paid in capital as Mr. Bloking is the
Company’s Executive Chairman and President. The Company settled
$60,000 of debts owing to Mr. Andrew Caminschi through a debt–for–equity
conversion on February 27, 2009. The shares were issued at US$0.012 per share at
the settlement date resulting in an aggregate of 5,000,000 shares. The Company
recorded gain on settlement debt amounting to $10,000 to additional paid in
capital as Mr. Caminschi is the Company’s CFO. See our Current
Report on Form 8-K filed with the SEC on February 24, 2009 for a further
description of these transactions (the “Settlement 8-K”). A copy of
the form settlement and release agreement is attached as Exhibit 99.1 to the
Settlement 8-K and is incorporated by reference herein.
The
Company settled $15,916.68 of debts owing to Mr. Tony Varano through a
debt–for–equity conversion on February 27, 2009. The shares were issued at
US$0.012 per share at the settlement date resulting in an aggregate of 1,326,390
shares. The Company recorded gain on settlement debt amounting to $2,653 to
additional paid in capital. Mr. Varano served as a Non Executive
Director of the Company, having resigned in December 2008.
The
Company settled $4,000 of debts owing to Mr. Attila Kovago through a
debt–for–equity conversion on February 27, 2009. The shares were issued at
US$0.012 per share at the settlement date resulting in an aggregate of 333,333
shares. The Company recorded gain on settlement debt amounting to $667 to
additional paid in capital as Mr. Kovoga is the Company’s VP of
Exploration.
10.
SHAREHOLDER
’
S EQUITY
During
the nine month period ended
February
28, 2009
, the Company issued
4,666,667 shares from funds received in May of 2008. These shares
were recorded as shares to be issued as at May 31, 2008. A further 30,000,000
shares were issued in February 2009 for $300,000 net in cash as part of a
private placement. A further 22,074,938 shares were issued in exchange for the
settlement of debt owed by the Company totaling $264,900.
During
the period ended February 28, 2009, Company issued 10,000,000 shares in a
private placement for $0.01 per share. Total cash received pursuant
to this transaction amounted to $100,000.
During
the period ended February 28, 2009, Company settled its debt to a non related
party amounting to $28,983. The Company issued 2,415,215 shares and recorded at
the fair market value at the settlement date. Gain on the settlement of debt
amounted to $4,830.
During
the fiscal year ended May 31, 2008, the Company issued 34,957,600 shares for
cash as part of a private placement and has 4,666,667 shares to be issued as of
May 31, 2008. For the year the Company raised $6,528,009 for a total of
39,624,233 shares. The Company incurred $351,471 in finder’s fees related to
this transaction, for a net raise of $6,176,538.
On June
10, 2007, the Company entered into Subscription Agreements (the “Prior
Agreements”) with three investors (the “Investors”). Subsequent to
the closing of this financing, a dispute arose between the Company and the
Investors as a result of administrative non-conformance relating to the Prior
Agreements (the “Dispute”). On June 17, 2008, the Company’s board of directors
agreed to resolve the Dispute by restructuring the terms of the June 2007
financing and entering into an Amended and Restated Subscription Agreement (the
“Restated Agreement”) with the Investors (the “Restructuring”). The Company
entered into the Restated Agreement with the Investors on June 26, 2008.
Pursuant to the Restructuring, the Company reduced the purchase price for the
shares of common stock issued in the June 2007 financing to $0.15 per share and
issued an aggregate of 4,062,500 additional shares of common stock to the
Investors, resulting in the sale and issuance of an aggregate total of 5,000,000
shares of common stock to the Investors. In addition, the Company and the
Investors agreed to cancel and terminate the warrants, which the Company agreed
to issue as part of this financing, but did not issue to the Investors. The
Restructuring did not change the gross proceeds of approximately
$750,000 received by the Company from this financing. A copy of the
form of the Restated Agreement can be found as Exhibit 10.1 to the Company’s
Form 8-K filed with the SEC on June 30, 2008 and is incorporated by reference
herein.
During
the fiscal year ended May 31, 2007, the Company issued 17,615,000 voting common
shares for a total of $3,523,000. The issuance is recorded net of the expenses
and payments of the fund raising expenses. The direct costs related to this
stock sale, including legal and professional fees, were deducted from the
related proceeds and the net amount in excess of par value was recorded as
additional paid-in capital. In conjunction with the completion of the private
placement offering, the Company paid legal expenses of $20,000 in cash. The
Company also issued 1,112,500 shares of restricted stock valued at $222,500 as
consulting fees.
The
Company also affected a 4-for-1 stock split on December 20, 2006. The
stock split resulted in an additional 35,341,454 voting common shares, resulting
in 46,875,272 post-split shares outstanding (11,718,818 pre-split shares). All
of the shares have been retroactively restated.
On
January 18, 2007, the board of directors approved an amendment to the Company’s
Certificate of Incorporation increasing the number of authorized shares of
common stock from 100,000,000 to 500,000,000. On January 19,
2007, shareholders of record holding a majority of the then currently issued and
outstanding common stock approved the amendment. The amendment became effective
on March 2, 2007.
On April
12, 2007, the board of directors approved the 2007 Stock Incentive Plan for
employees and outside contractors (the “SIP”). The Company authorized
12,000,000 shares for use in the SIP. As of February 28, 2009,
2,967,500 shares had vested under the SIP. The Company issued 970,833
shares from the SIP during the nine month period ended February 28,
2009.
11.
VARIABLE INTEREST
ENTITY
The Company has adopted FASB
Interpretation No. 46R "Consolidation of Variable Interest Entities" ("FIN
46R"), an Interpretation of Accounting Research Bullet
in No. 51. FIN 46R requires a Variable
Interest Entity (
“
VIE
”
) to be consolidated by a company if
that company is subject to a majority of the risk of loss for the VIE or is
entitled to receive a majority of the VIE's residual returns. VIEs are those
entit
ies in which the
Company, through contractual arrangements, bears the risks of, and enjoys the
rewards normally associated with
,
ownership of the entities, and
therefore the
C
ompany is the primary beneficiary of
these entities. Acquisitions of subsidiaries
or
VIEs
are accounted for using the purchase
method of accounting. The results of subsidiaries or
VIEs
acquired during the year are included
in the consolidated income statements from the effective date of
acquisition.
ACCOUNTING AFTER INITIAL
MEASUREMENT
OF VIE -
Subsequent accounting for the assets, liabilities, and non-controlling interest
of a consolidated
VIE
are accounted for as if the entity were
consolidated based on voting interests and the usual accounting rules for which
the VIE operates are app
lied as they would to a consolidated
subsidiary as follows:
·
carrying amounts of the VIE are
consolidated into the financial statements of the Company as the primary
beneficiary (referred to as "Primary Beneficiary" or "PB");
·
inter-company transactions
and balances, such as revenues and
costs, receivables and payables between or among the Primary Beneficiary and the
VIE(s) are eliminated in their entirety; and
·
because there is no direct ownership
interest by the Primary Beneficiary in the VIE, equity o
f the VIE is eliminated with an
offsetting credit to minority interest.
INITIAL MEASUREMENT OF VIE- The Company
initially measures the assets, liabilities, and non-controlling interests of the
VIEs at their fair values at the date of the acquisitions.
On
February 28, 2007, the Company provided
funds to two individuals for their purchase of 1,000 or 100% of the 1,000
outstanding shares of PT GPK and 1,000 or 100% of the 1,000 outstanding shares
of
PT BBM, exploration stage companies
involved in the explorat
ion
of coal concessions in East Kalimantan, Indonesia. The Company has
been the sole source of funding to the shareholders of PT GPK since 2006 to
acquire the shares in PT GPK through advances made under a loan agreement.
Such advances totaled $175,000
for the shareholders of PT GPK and
$150,000 for the shareholders of PT BBM, at February 29, 2008. The Company is
considered the
P
rimary
B
eneficiary
of each of PT GPK and PT BBM,
as it stands to absorb the
majority of the expected losses
of these VIEs
.
As
of
February 28, 2009
, the Company has consolidated PT
GPK
’
s
and PT BBM
’
s financial statements for the
nine
month period then ended in the
accompanying financial statements. PT GPK and PT BBM did not have any operations
through
February 28,
2009
.
12
.
EXPL
ORATION
EXPENDITURES
In 2006, Thatcher commenced exploration
in properties in Kalimantan, Indonesia. Exploration
activities
were performed by outside contractors,
who billed all resources used individually between manpower, travel, equipment
rentals, phone
and other
expenses. The bulk of all expenditures was manpower, including the
chief geologist, operations manager, site manager and site personnel from
various contractors,
who
were utilized to make preliminary
assessments of the properties to provide min
ing services and to conduct the Phase I
Drilling Program. Initial measurements of the quantity and quality of
coal seams were made on two properties in East Kalimantan, Indonesia as well as
studying the logistics for processing the coal on site and deliv
e
ring it to
customers. Additionally, the Company has performed due diligence
exploration in Mongolia on a property for potential
acquisition.
|
|
|
Three
months ended
February 28,
2009
(unaudited)
|
|
|
Nine
months ended
February 28,
2009
(unaudited)
|
|
|
Three
months ended
February 29,
2008
(unaudited)
|
|
|
Nine
months ended
February 29,
2008
(unaudited)
|
|
|
Manpower
|
|
$
|
128,460
|
|
|
$
|
763,045
|
|
|
$
|
320,400
|
|
|
$
|
1,333,284
|
|
|
Site
Expenses
|
|
|
3,185
|
|
|
|
81,230
|
|
|
|
34,802
|
|
|
|
641,768
|
|
|
Equipment
|
|
|
19,765
|
|
|
|
42,051
|
|
|
|
65,268
|
|
|
|
501,284
|
|
|
Travel
|
|
|
2,784
|
|
|
|
46,878
|
|
|
|
49,282
|
|
|
|
285,668
|
|
|
|
|
$
|
152,394
|
|
|
$
|
933,204
|
|
|
$
|
469,753
|
|
|
$
|
2,762,004
|
|
13.
STOCK BASED
COMPENSATION EXPENSE
Description of Stock-Based
Compensation
Plan
Stock Incentive Plan
(SIP). Effective April 27, 2007, we adopted the SIP. Under the
provisions of the SIP, the Company may grant stock options, stock appreciation
rights, restricted stock, restricted stock units and stock awards to our
officers, di
rectors and key
employees, as well as to consultants and other persons who provide services to
us. The SIP has a maximum contractual term of ten
years.
As of
February 28, 2009
, securities authorized and available
for issuance in connection with our SIP w
ere
8,902,501
. Under the terms of the SIP, in no
event shall the number of shares authorized for issuance in connection with the
SIP exceed 12 million shares.
A copy of the SIP can be found
at
Exhibit 10.1 of our
Current Report on Form 8-K filed with the
SEC
on March 8, 2007
and is incorporated by reference
herein.
Valuation
Assumptions
For all periods presented, the fair
value of stock-based compensation made under the SIP was estimated using the
Black-Scholes option pricing model. The weighted average a
ssumptions used for options granted,
ESPP purchases and the LTPP were as follows
:
|
|
|
|
|
|
|
Stock
Option Plan
|
|
|
|
|
|
Risk-free
interest rate
|
|
1.15
|
%
|
|
|
Dividend
yield
|
|
0
|
%
|
|
|
Volatility
|
|
117.2
|
%
|
|
|
Expected
life
|
|
10
years
|
|
|
|
|
|
|
|
We used a historical volatility
as
sumption to derive our
expected volatility assumption. We also considered that this is an
exploration phase enterprise and as such, the expected volatility should be
higher than that of established mining companies. The same
reasoning
applies to our assu
mption regarding the expected life of
our options. The early stage
status
of
the
Company makes us assume a conservative
position that it will take longer for the options to achieve their
value.
Stock-Based Payment Award
Activity
The
following tab
le summarizes
equity share-based payment award activity:
|
|
Granted
|
Cancelled
|
Expired
|
Exercised
|
SIP
Balance
|
Grant
Balance
|
|
Outstanding
at May 31, 2006
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Establishment
of SIP, April 27, 2007
|
|
|
|
|
12,000,000
|
12,000,000
|
|
Activity
from May 31, 2007 thru May 31, 2008
|
10,775,000
|
|
|
(250,000)
|
|
|
|
Outstanding
at May 31, 2007
|
10,775,000
|
-
|
-
|
(250,000)
|
11,750,000
|
1,225,000
|
|
|
|
|
|
|
|
|
|
Activity
from May 31, 2007 thru May 31, 2008
|
1,865,000
|
(2,606,667)
|
-
|
(1,876,666)
|
|
|
|
Outstanding
at May 31, 2008
|
12,640,000
|
(2,606,667)
|
-
|
(2,126,666)
|
9,873,334
|
1,966,667
|
|
|
|
|
|
|
|
|
|
Activity
from May 31, 2008 thru Feb 28, 2009
|
10,250,000
|
(9,052,500)
|
-
|
(970,833)
|
|
|
|
Outstanding
at Feb 28, 2009
|
22,890,000
|
(11,659,167)
|
-
|
(3,097,499)
|
8,902,501
|
769,167
|
With the exception of restricted stock
grants all outstanding stock
issued by the Company under the SIP
were
forfeited or cancelled during the
nine
month period ended
February 28, 2009
.
No stock options expired during the
nine
month period ended
February 28, 2009
.
For the period, new grants totaled
10,250,000 while cancellations and forfeitures totaled
9,052,500.
The Company has not received any cash
under the
SIP
. The Company recorded a net
expense of $
1,022
,
72
7 for the
nine
month period ended
February 28, 2009
, including a
onetime
credit of $343,485 for the
cancellations during the period.
14.
COMMITMENTS AN
D
CONTINGENCIES
Operating
Lease:
Office space is rented under a
non-cancelable operating
lease agreement
expiring
in
September 2009. Rent expense was
$
91,861
for the
nine
month period ended
February 28, 2009
.
Future minimum rental payments are as
follows:
|
Year
End
ing
May
3
1
, 2009
|
|
$
|
18,240
|
|
Executive
Employment Agreement:
On October 1, 2008 the
Company signed an employment agreement with Jorge Nigaglioni
(the “
Nigaglioni
Agreement”
)
to employ
Mr.
Nigaglioni
as
an
executive
.
Pursuant to the
terms of
the
Nigaglioni
A
greement
,
Mr. Nigaglioni
wa
s entitled to
receive
$180,000 annual
salary
and
to
participate in Incentive Bonus Plan.
Effective December 31,
2008,
Mr,
Nigaglion
i
resigned
from the
Company
.
A
copy of
the Nigaglioni
Agreement
is fi
led as Exhibit
10.2
to
the Company
’
s Current Report on
Form 8-K filed with the SEC on October 6, 2008
an
d is incorporated by
reference herein
.
On October 1, 2008, the Company signed
an employment agreement with Andrew Caminschi to employ Mr. Caminschi as an
Executive (the “Caminschi Agreement”). Pursuant to the terms of the Caminschi
Agreement, which, as detailed below, was amended on December 10, 2008, Mr.
Caminschi is entitled to receive $180,000 annual salary, to participate in an
Incentive Bonus Plan and to receive stock based compensation in accordance with
the terms and conditions of the SIP. The Caminschi Agreement is
effective from June 1, 2008 through June 1, 2010.
A copy of the Caminschi
Agreement is filed as Exhibit 10.3
to the
Company
’
s Curr
ent Report on Form 8-K
filed with the SEC on October 6, 2008 and is incorporated by reference
herein
.
On December 10,
2008, the Company entered into an
a
mendment to the
Caminschi
Agreement
(the
“
Amended
Caminschi Agreement”
)
to change
Mr.
Caminschi
’
s
comp
ensation for his
services as an officer of the Company.
Pursuant to the Amended
Caminschi Agreement, t
he Company
decrease
d
Mr.
Caminschi
’
s cash compensation
from $180,000 per annum to $120,000 per annum and
,
in
exchange
,
compensate
d
Mr.
Caminschi
for this
reduction
with a grant of shares
of the Company
’
s common stock equal in
value to the previous cash compensation at the prevailing market rate. The other
terms of
the
Caminschi
Agreement
have not
changed.
A copy of the
Amended Caminschi Agreement is fil
ed as Exhibit 10.1 to
the Company
’
s Current Report on
Form 8-K filed with the SEC on December 10, 2008 and is incorporated by
reference herein
.
On September 9, 2008, the Company and
William Bloking, President and Chairman of the Board of Directors, entered into
a Compensation Agreement (the “First Bloking Agreement”) that revised
Mr. Bloking’s compensation from $84,000 to $300,000 per annum in recognition of
his temporary move from a non-executive to and executive role. This change was
accounted for since June 1, 2008. This salary structure will revert to $84,000
per annum upon appointment of a new Chief Executive
Officer.
A copy of the First
Bloking Agreement is filed as Exhibit 10.2 to the Company
’
s Current Report on
Form 8-K filed with the SEC on Sept
ember 12, 2008 and is
incorporated by reference herein
.
On December 10, 2008,
the Company entered into a
new
Compensation
Agreement
(the “
Second
Bloking
Agreement”
)
with William Bloking
to change his compensation for his services.
Pursuant to
the
Second
Bloking Agreement,
t
he
Company decrease
d
Mr.
Bloking
’
s cash compensation
from $300,000 per annum to zero dollars per annum and
,
in
exchange
,
compensate
d
Mr.
Bloking
for this reduction
with a grant of shares
of the Company
’
s common stock equal in
value to
the previous cash
compensation at the prevailing market rate.
A copy of the Second
Bloking Agreement is filed as Exhibit 10.2 to the Company
’
s Current Report on
Form 8-K filed with the SEC on December 10, 2008 and is incorporated by
reference herein
.
No
n-Executive
Director Agreement:
On
September 1, 2008, the Company entered into a Non-Executive Director Fee
Agreement with Antonio Varano (the “Varano Agreement”) to appoint Mr. Varano as
a Non-Executive Director. Pursuant to the terms of the Varano Agreement, Mr.
Varano was entitled to receive $50,000 in annual salary and to receive stock
awards and/or stock options.
Effective December 31, 2008, Mr. Varano
resigned as a Non-Executive Director of the Company.
Royalty
Agreement:
On September 17, 2008, the Company
signed a royalty agreement, as amended on October 1, 2008 (the “Royalty
Agreement”) with Concord International Inc., a privately held company
incorporated in the Bahamas (“Concord”). Under to the Royalty
Agreement, the Company agreed to make certain royalty payments to Concord in
connection with the production of thermal coal by the Company pursuant to
certain mining concessions. The Company will make a one-time payment to Concord
of $15,000 within seven days of the first shipment of thermal coal, and this
amount is for a period of thirty-six months following the first shipment. After
thirty-six months following the first shipment, the Company will pay $0.20 per
metric ton of the product; however, any time that the sale price per metric ton
of the product equals or exceeds $40 at any time during the term of the Royalty
Agreement, the amount of the royalty payments due to Concord for such sale under
this agreement shall be correspondingly increased to the higher of $0.40 per
metric ton or 0.65% of the price per metric ton.
A
copy of
the Royalty Agreement
is filed as Exhibit 10.1 to the Company
’
s Current Report on
Form 8-K filed with the SEC on October 6, 2008
and is incorporated by
reference
herein
.
Joint
Venture Agreement:
On January 20, 2009, the Company signed
a Letter of Intent (“LOI”) with Indomines Ltd. (“IDO”) covering potential future
joint venturing on the Graha project. The LOI provided IDO with an exclusive due
diligence period in exchange for a series of payments totaling $100,000. On
February 24, IDO informed the Company that it would not proceed further with its
due diligence. Payments received from IDO to date have totaled $25,000 while the
remaining balance of $75,000 was recorded under other receivables. IDO has not
earned, nor has any ownership interest been created, in any of our projects as a
result of the payment under the LOI. See Note 15 herein for more
details.
A copy of the LOI is
filed as Exhibit 99.1 to the Company
’
s Current Report on
Form 8-K filed with the SEC on Janua
ry 26, 2009 and is
incorporated by reference herein
.
15. SUBSEQUENT
EVENT
S
On February 24, 2009, the Company,
in its
Current
R
eport on Form 8-K
, stated
that it is seeking alternate strategic
relationships after the termination of the
LOI
.
As of the date
of this report, the Company has not
achieved any definitive plans with any potential partner or funding
source.
As reported in a
Current Report on
Form 8-K
,
filed with the SEC on April 20, 2009,
the Company received $400,000 USD in funding pursuant to a
term loan facility.
Item
2. Management
’
s Discussion and Analysis of Financial
Condition and Results of Operations
The
following Management’s Discussion and Analysis of the Company’s Financial
Condition and Results of Operations for the three-and nine-month periods ended
February 28, 2009 and February 29, 2008, should be read in conjunction with the
Company’s Financial Statements and related footnotes included elsewhere in this
Quarterly Report on Form 10-Q. This discussion contains, in addition to
historical statements, forward-looking statements that involve risks and
uncertainties. Our actual results could differ significantly from the results
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include the factors discussed in the
section titled ITEM 1A – RISK FACTORS as well as other factors described in
our Annual Report on Form 10-KSB for the year ended May 31,
2008.
We obtained the market data and industry
information contained in this Quarter
ly Report from internal surveys,
estimates, reports and studies, as appropriate, as well as from market research,
publicly available information and industry publications. Although we believe
our internal surveys, estimates, reports, studies and market re
s
earch, as well as industry publications,
are reliable, we have not independently verified such information, and, as such,
we do not make any representation as to its accuracy.
Results of
Operations
Three-month period ended
February 28, 2009
compared to th
e three-month period ended
February 29, 2008
Revenue
We have not earned any revenue from our
operations from the date of our inception on February 21, 2001 through
February 28,
2009
. Our activities have
been financed from the proceeds of private placement
offerings of our common stock. We do not
anticipate earning any
operating
revenue until we have obtained
additional capital to fund early production from our coal
concessions.
Expenses
Exploration Expenses
Exploration expenses for the three month
period e
nded
February 28, 2009
decreased to $
152,394
as compared to $
933,204
for the three month period ended
February 29,
2008
. The decrease is
related to the
previously
high expenditure
rate from the initial work
program and delay in proceeding with
the Phase II
exploration phase of the PT Graha Panca
Karsa, or Graha, concession and the continued work on site.
Stock-based Compensation
Expense
Stock based compensation expense for the
three month period ended
February 28, 2009
decreased to $
43,750
as compared to
$1,55
2
,
381
for the three month period ended
February 29,
2008
. The decrease is due
primarily to the cancellation of stock option and restricted stock
grants.
General and Administrative
Expense
General and administrative expense for
the three month period
ended
February 28,
2009
in
creased to $
328
,
286
, as compared to $
152,085
for the three month period ended
February 2
9
, 200
8
. The
increase
is
mainly
to the result of
reductions in
the use of outsourcing (see below under
Professional and Consulting Fees).
Pr
ofessional and Consulting
Fees
Professional and consulting fees for the
three month period ended
February 28, 2009
de
creased to $
129,443
, as compared to $
399,715
for the three month period ended
February 29,
2008
. The
decrease
is due primarily to
reduced r
eliance on outsourcing and
greater
utiliz
ation of recently acquired
in-house
resources
.
Loss
Net loss for the three month period
ended
February 28,
2009
decreased to
$
5
49,038
as compared to a net loss of
$
2,515,260
for the three month period ended
February
2
9
,
200
8
.
The
decrease
in
loss
was due primarily to reductions in
exploration expenditures, reductions in our administrative costs and reductions
due to the cancellation of stock option and restricted stock grants issued under
our equity compensation plan
as described above. We have not
attained profitable operations and are dependent upon obtaining additional
financing to move from our exploration activities to our initial production. Our
proforma losses increased to $1
8,
337
,
95
7
) due primarily to continue
d spending on our exploration
programs.
Nine
-month period ended
February 28, 2009
compared to the
nine
-month period ended
February 29, 2008
Revenue
We have not earned any revenue from our
operations from the date of our inception on February 21, 2001 throu
gh
February 28, 2009
. Our activities have been financed from
the proceeds of private placement offerings of our common stock. We do not
anticipate earning any revenue until we have obtained additional capital to fund
early production from our coal concessi
ons.
Expenses
Exploration Expenses
Exploration expenses for the
nine
month period ended
February 28, 2009
were
$
933,204
, as compared to $
2,842,004
for the
nine
month period ended
February 29, 2008
. The decrease is related to the
relatively
high expenditure
rate from the completion of the Phase I
exploration phase of the Graha concession and the
de
l
ay in commencing
work on
the
Phase II
work program
. Our operations in 200
9
have focused on the initial exploration
work on the Bunyut concession and completion of
the aerial topography of the Graha
concession.
Stock-based Compensation
Expense
Stock based compensation expense for the
nine
month period ended
February 28, 2009
decreased to $
1,022,727
, as compared to $
4,591,022
for the
nine
month period ended
Februa
ry 29, 2008
. The decrease is due primarily to the
cancellation of stock option
s
and restricted stock grants since
February 29,
2008
. We recorded a
one
time credit of $343,585
during the
nine
month period ended
February 28, 2009
for unvested grants
cancelled
during the
period
.
General and Administrative
Expense
General and administrative expense for
the
nine
month period ended
February 28, 2009
increased to $
1,285,846
, as compared to $
527,386
for the
nine
month period ended
February 29, 2008
. The increase i
s due primarily to
decreased
outsourcing, increased
executive salaries and relocation costs related to the relocation of our
principal executive offices.
Professional and Consulting
Fees
Professional and consulting fees for the
nine
month period ended
Feb
ruary 28, 2009
decreased
to $
860
,
386
, as compared to $
1,251,403
for the
nine
month period ended
February 29, 2008
.
The
de
crease is due primarily to
reduced exploration
activities
, and moving
outsourced services in
-
house.
Loss
Net loss for the
nine
month p
eriod ended
February 28, 2009
de
creased to $(3,
9
19
,
85
7
), as compared to a ne
t loss of
$(
9,171,005
) for the
nine
month period ended
February 29, 2008
. The
de
crease in
loss
was due primarily to reductions in
exploration expenditures, reductions in the admini
strative costs of the company and the
reductions due to the cancellation of stock option and restricted stock grants
issued under our equity compensation plan as described above. We have not
attained profitable operations and are dependent upon obtaining
a
dditional financing to move from our
exploration activities to our initial production. Our proforma losses increased
to $(1
8,
337,957)
due primarily to
our
continued spending on exploration
programs
and efforts in
securing our economics interest in the mini
ng concessions
.
Capital Resources
; Liquidity
As of
February 28, 2009
, we had current assets of $
2
88,693
consisting of $
30,496 in
cash and cash equivalents,
$
79,822
in other receivables and $
178,375 in
prepaid expenses and deposits. This
represents a decrea
se of
$1,
8
55,126
from May 31, 2008.
We also had $200,000 in subscription
receivables.
We
have not completed our fundraising efforts and have used our cash reserves
during the quarter to fund our operations.
As reported in a Form 8-K filed with the
SEC o
n April 20,
2009,
on April 14,
2009
we received $400,000
USD in funding pursuant to a term loan facility. Despite this
infusion of capital, management believes that w
e
may
become insolvent in July
2009 unless we receive additional funds
to support our oper
ations.
Liabilities
As of
February 28, 2009
, we had liabilities of $1,
094
,
293
consisting of accounts payable and
accrued expenses of $
1,094,293
. This represents a decrease of
$
203,166
from May 31, 2008.
During the nine month period ended
February 28, 2009,
w
e issued $700,000
worth
of shares of our common
stock
that had been subscribed
for
prior to May 31, 2008
.
That was partially offset by an
increase in liabilities
of
$408,159
from operations
incurred during the
same
nine
month period.
Off-balance sheet a
rrangements
The Company does not have any
off-balance sheet arrangements.
Item 3. Quantitative and
Qualitative Disclosures About Market Risk
Pursuant to Item 305(e) of Regulation
S-K, we are not required to provide the information required by this Item
3.
Item 4
T
. Controls and
Procedures
Disclosure Controls and
Procedures
We maintain disclosure controls and
procedures that are designed to ensure that information required to be disclosed
in the reports that we file or submit under the Exchange Act is rec
orded, processed, summarized and
reported within the time periods specified in the Commission
’
s rules and forms, and that such
information is accumulated and communicated to our management, including our
principal executive officer and principal financial
officer, as appropriate, to allow timely
decisions regarding required disclosure. In designing and evaluating our
disclosure controls and procedures, our management recognized that any system of
controls and procedures, no matter how well designed and ope
r
ated, can provide only reasonable
assurance of achieving the desired control objectives, as ours are designed to
do, and management necessarily was required to apply its judgment in evaluating
the cost-benefit relationship of possible controls and procedu
r
es.
Our management, under the
supervision and with the participation of our principal executive officer and
our principal financial officer, evaluated the effectiveness of our disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) as of the end of the
period covered by this Quarterly Report on Form 10-Q. Based upon their
evaluation of our disclosure controls and procedures, our principal executive
officer and principal financial officer have concluded that our
disclo
s
ure controls and procedures were
effective as of the end of the period covered by this Quarterly Report on Form
10-Q to ensure that the information required to be disclosed by us in reports
that we file or submit under the Exchange Act is recorded, proces
s
ed, summarized and reported within the
time periods specified in the Commission
’
s rules and forms, and to ensure that
the information required to be disclosed by us in reports that we file or submit
under the Exchange Act is accumulated and communicated t
o
our management, including our principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure.
Changes in Internal Control over
Financial Reporting
Although we have recently had
executiv
e and director transitions
and we currently only have two
executive officers, who are also directors,
operating the business
t
here were no
material
changes in our internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d
-15(f)) that occurred
during the fiscal quarter ended
February 28, 2009
that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART II - OTHER
INFORMATION
Item 1.
Legal Proceedings.
We are
not a party to any material legal proceedings. Although, from time to
time, we are subject to possible legal proceedings, claims and litigation
arising in the normal course of business and while the outcome of these matters
is not determinable, we do not expect the resolution of any such matters to have
a material impact on our financial position.
Item 1A.
Risk Factors.
Our ability to continue as a going
concern is dependent on o
ur
ability to raise capital to
cover operating expenses. If we are unable
to secure adequate
financing,
it is likely
that we will face substantial liquidity pressures that we may not be able to
sustain. As such,
there is substantial doubt about our
ability to continue as a going concern.
This concern is greatly
increased by th
e fact that
today
’
s credit markets, coupled with our
status as an exploration stage company, make it unlikely that we could borrow
institutional funds to alleviate potential liquidity
pressures.
It is management
’
s position that w
e need to obtain additio
nal capital
during the early summer of
2009
in or
der to sustain our operations as they
are currently structured.
While it is possible that we will be
able to generat
e some of
the needed capital through
sales of our
securities
,
our continued ability to
meet our
obligations to employees and vendors in
a manner that avoids the disruption of our operations
may be dependent on our ability
obtain additional debt or
equity financing.
You should carefully consider the risks
and uncertainties described
herein
(and in our
Annual Report on Form
10-KSB for the fiscal year ended May 31, 2008
) and the other information in this
filing before deciding to purchase our common stock. If any of these
risks or uncertainties occurs, our business, financial condition or operating
resu
lts could be materially
harmed. In that case the trading price of our common stock could
decline and you could lose all or part of your investment. The risks
and uncertainties described below are not the only ones we may face, although
they reflect the
r
isks that management believes are
material at this time.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
document and the documents incorporated by reference herein contain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Also, our management may make forward-looking
statements orally or in writing to investors, analysts, the media and others.
Forward-looking statements express our expectations or predictions of future
events or results. They are not guarantees and are subject to many risks and
uncertainties. There are a number of factors that could cause actual events or
results to be significantly different from those described in the
forward-looking statements. Forward-looking statements might include statements
regarding one or more of the following:
·anticipated
financing activities;
·anticipated
strategic alliances or arrangements with exploration partners;
·anticipated
exploration results;
·projected
exploration and development timelines;
·descriptions
of plans or objectives of management for future exploration efforts, operations,
or strategic initiatives;
·forecasts
of future economic performance; and
·descriptions
or assumptions underlying or relating to any of the above items.
Forward-looking
statements can be identified by the fact that they do not relate strictly to
historical or current facts or events. They use words such as “anticipate”,
“estimate”, “expect”, “project”, “intend”, “opportunity”, “plan”, “potential”,
“believe” or words of similar meaning. They may also use words such as “will”,
“would”, “should”, “could” or “may”.
Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Moreover, we do not assume responsibility for the accuracy and
completeness of such statements. We do not intend to update any of the
forward-looking statements after the date of this report to conform such
statements to actual results except as required by law. Given these
uncertainties, you should not place undue reliance on these forward-looking
statements, which speak only as of the date of this report. For further
information you are encouraged to review our filings with the Securities and
Exchange Commission, including our Annual Report on Form 10-KSB for the fiscal
year ended May 31, 2008. We assume no continuing obligation to update
the information contained in this filing.
Item
2.
Unregistered Sales o
f Equity Securities and Use of
Proceeds.
As discussed above
,
during the quarter ended February 28,
2009, our unregistered sales of equity securities were reported on our Current
Reports on Form 8-K, which are included on our Exhibit list below and
incorpor
ated by reference
herein.
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.
The exhibits set forth below are filed
as part of this Quarter
ly
Report on Form 10-Q:
|
Exhibit
Number
|
Description
|
|
|
|
|
10.1+
|
$400,000
USD term loan facility dated April 14, 2009. (Previously filed
on a Current Report on Form 8-K, April 20, 2009.)
|
|
10.2+
|
Form
of Private Placement Agreement. (Previously filed on a Current
Report on Form 8-K, March 2, 2009.)
|
|
10.3+
|
Form
of Settlement and Release Agreement. (Previously filed on a
Current Report on Form 8-K, March 2, 2009.)
|
|
10.4+
|
Subscription
Agreement between the Company and William Bloking, dated February 2,
2009. (Previously filed on a Current Report on
Form 8-K, February 3, 2009.)
|
|
10.5+
|
Letter
of Intent between Indo Mines Ltd. and Indo Energy Pty Ltd and KAL Energy,
Inc. and Thatcher Mining Pte. Ltd. dated January 20, 2009. (Previously
filed on a Current Report on Form 8-K, January 26,
2009.)
|
|
31.1*
|
Certification
of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) under
the Securities Exchange Act of 1934.
|
|
31.2*
|
Certification
of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under
the Securities Exchange Act of 1934.
|
|
32.1*
|
Certification
of Principal Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) under
the Securities Exchange Act of 1934 and 18 U.S.C. Section
1350.
|
|
32.2*
|
Certification
of Principal Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) under
the Securities Exchange Act of 1934 and 18 U.S.C. Section
1350.
|
|
*
|
Filed
herewith
.
|
|
|
|
|
+
|
Previously
filed.
|
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.
|
|
|
KAL
ENERGY, INC.
|
|
|
|
|
|
Dated: April
20, 2009
|
|
//s//
William
Bloking
|
|
|
|
William
Bloking
President
and Chairman of the Board of Directors
(Principal
Executive Officer)
|
|
|
|
|
|
Dated:
April 20, 2009
|
|
//s//
Andrew Caminschi
|
|
|
|
Andrew
Caminschi
Chief
Financial Officer
(Principal
Financial and Accounting Officer)
|
KAL Energy (CE) (USOTC:KALG)
Historical Stock Chart
Von Nov 2024 bis Dez 2024
KAL Energy (CE) (USOTC:KALG)
Historical Stock Chart
Von Dez 2023 bis Dez 2024
